Why it's a Great Idea to Buy or Sell before the end of 2013!!

The Fed's just announced last week that they will not be winding down their bond buying program right now.  What does that mean for you?

The Fed’s purchase of these bonds over the last few years has driven mortgage rates to historic lows. The assumption that there would be a reduction in bond purchases has caused 30 year mortgage rates to spike upward over the last few months.

       

"The Fed could have caused rates to shoot up this week if it had announced the tapering of its bond-purchasing program.   For now, borrowers have dodged another spike in rates. The Fed's announcement might even cause rates to drop in coming days, says Paul Edelstein, director of financial economics at IHS Global Insight.
‘Mortgage rates should fall back -- not massively, but to some extent,’ he says.
That doesn't mean homebuyers and homeowners should wait for lower rates, mortgage professionals say.
Eventually, once the Fed lets the mortgage market and the economy start walking on their own, rates will probably head back to the 5 percent or 6 percent range, says Scott Schang, manager for Broadview Mortgage Katella in Orange, Calif." (Bankrate.com)

Federal Reserve policy makers decided this week that the economy isn't in the right place for them to start winding down their bond-buying program.  By the time they meet in December, it might be.

Don't wait until the Fed's make the announcement that they will wind down their bond-buying program, by then it will be too late!!


Another Great Reason to Sell now, especially if you are upside down in your mortgage!

On January 1, 2013, Congress passed an extension of the Mortgage Debt Relief Act.
This was set to expire on December 31, 2012, however their extension could be very helpful to you.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2013. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.  It's a good opportunity to walk away from a home you can no longer afford.  There are many reasons for this.  If you want to know if you qualify just contact your local realtor for more information.

So Many Great Reasons to Buy a Home!

Here are just a few of the reasons why American Family's are still buying homes!

There are many opinions voiced by real estate gurus as to why the dream of home ownership is so important to most Americans. However, study after study reveals the same five reasons families decide to buy a home. They…

 

1. Want a good place to raise children
2. Want a place where their family feels safe
3. Want more living space
4. Want control of that living space
5. Realize that owning makes better financial sense than does renting

 

If you are considering purchasing a home, look at the five reasons mentioned above. If any of them apply to you and your family, perhaps it is time for you to take the plunge. With both prices and interest rates rising, waiting will only increase your monthly cost.

How has the cost of buying a house changed in the last few years?

The cost of a home is determined mainly by two components: price and mortgage rate.
How has the price of a home purchase changed over the last twelve months?  How might it change over the next twelve months?

LAST YEAR

The median priced home in the country was selling for $187,800. The 30-year fixed mortgage rate was at 3.5%. Here is what it would cost to buy a home last year:

TODAY

The median priced home in the country is selling for $213,500. The 30-year fixed mortgage rate is at 4.5%. Here is what it would cost a purchaser to buy a home today:



The monthly cost increased by: $190.78!

 

Next Year's Projections: 

Projecting into the future in real estate can be rather tricky. Future pricing was based on a survey taken by 100 housing experts (Home Price Expectation Survey) who called for an approximate appreciation rate of 5% over the next twelve months. The interest rate is based on the projections from the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae.
Here is what these experts project will be the approximate cost of a home a year from now:



The monthly cost will increase by about: $97.32!

Bottom Line

From a financial perspective, why wait if you are thinking about buying?

How Housing is helping to Rebuild the Economy

Housing drives the economy in three ways:

Demand for Housing Will Drive Employment

Increased demand for housing will help stimulate new single-family and multifamily construction and boost home sales. We expect starts to hover just below one million over the second half of the year. This also helps other industries such as appliances, services, and furnishings.


Rising Prices = Increased Family Wealth = Increased Spending  

With housing being the biggest asset of most American households, rising house prices directly affect the balance sheet of homeowners. Home equity is the largest component of net wealth for many families. As wealth rises, households generally increase their consumption spending. They may even tap into their equity through a home-equity loan, using the proceeds for either consumption or investment spending. Some evidence that home equity lending has picked up was found in Freddie Mac’s Refinance Report for the second quarter, which saw $9.5 billion in home-equity cashed-out as part of a refinance, up from a year ago.   

Small Business Development is Funded through Home Equity 

Rising house prices will help the economic recovery by spurring small business formation, as a business owner’s home often serves as collateral for a start-up. 


As you can see from the graph, Massachusetts comes in fourth in the country for strong economic growth directly related to home sales. 
 



*Housing’s contribution to the economy, while muted in recent years, remains strong. What’s more, housing’s role in the economy will only expand as modest price growth and stronger sales volume boost agent incomes, new construction puts more workers back to work with expanding incomes, and stronger sales and rising prices result in robust follow-on spending.

Real Estate’s New Reality

The real estate industry has been going through a major transition for a number of years, yet many agents haven’t adjusted to these changes.   Not long ago, real estate agents were in the business of providing information.  The only value we thought we had was giving information, such as what’s for sale, what’s on the market, what’s the price of similar homes etc.   Back then, to protect our value, we locked away this information in MLS, and if you were in the business long enough, you may even remember the blue book of MLS!  This is how real estate has been done for over a hundred years!

            This is not how real estate is done now.  The information you used to be hired for, the information people turned to you for, is all over the Internet.  Anyone can access it.  Anyone can use it. 

            How does this change redefine the role of the real estate agent?  There is a large gap between information and the use of the information to get the best outcome.  Let’s take for instance a CMA, which essentially tells a consumer what houses used to sell for and are currently selling for now.  Can’t you just look up that information yourself online? However what good is that information without the ability to analyze what that information really means? 

The agents who don’t evolve into what the consumer now demands will not survive!

            Clients no longer need us for information regarding which homes are for sale.  They really want us to

·      Analyze the available information

·      Connect the dots and let them know if now is a good time to buy or the right time to sell

·      Take the time to explain their options – simply and effectively. 

           

People are yearning for expert advice. 

            An expert doesn’t mean you are going to give perfect advice, but you will give excellent advice.   You can’t give buyers or sellers perfect advice because you can’t know the future.  You can give excellent advice based on the information and situation at hand, guide them through the process and help them make the necessary changes along the way.

Give Excellent Advice

            In order to give excellent advice you need to make sure your knowledge inspire confidence and certainty and that your knowledge takes away the clients concerns.

Ask yourself these two questions, do I know what is truly happening in the market and do I know why it’s happening? You not only have to analyze the information well enough to understand it yourself, you also have to understand it so well that you can simply and effectively communicate it to buyers and sellers.  You shouldn’t be trying to convince someone to do something (that’s what salespeople do); instead, you should be helping them discover what their options are, explaining the pros and cons of each of those options, and then letting them make the decision that is best for them and their families. 

Technology Today

            Go Mobile.  The best times to educate the consumers are during the informal times such as a children’s athletic event, the supermarket or any other chance meeting.  The information that consumers want; how’s the market, should I wait to sell my house or is now the right time to buy?  Having that information on hand, such as on your smartphone or tablet and pull out graphs and charts and other visual information that helps explain what you want that person to understand.   The key to doing a better job at these pre-appointment appointments is becoming mobile with your real estate information and tools. 

For most families, buying or selling a home is the most important personal decision and possibly the largest financial decision they’ll ever make.  They are looking for a true professional to help them through this process.  Make sure they get one when you walk into their lives.

5 Demands to Make on Your Real Estate Agent

Are you thinking of selling your home? 
Are you dreading having to deal with strangers walking through the house? 
Are you concerned about getting the paperwork correct? 

Hiring a professional real estate agent can take away most of the challenges of selling. A great agent is always worth more than the commission they charge just like a great doctor or great accountant. You want to deal with one of the best agents in your marketplace. To do this, you must be able to distinguish the average agent from the great one.

1. Tell us the truth about the price

Too many agents just take the listing at any price and then try to the ‘work the seller’ for a price correction later. Demand that the agent prove to you that they have a belief in the price they are suggesting. Make them show you their plan to sell the house at that price – TWICE! Every house in today’s market must be sold two times – first to a buyer and then to the bank.

The second sale may be more difficult than the first. The residential appraisal process has gotten tougher. It has become more difficult to get the banks to agree on the contract price. A red flag should be raised if your agent is not discussing this with you at the time of the listing.

2. Understand the timetable with which my family is dealing

You will be moving your family to a new home. Whether the move revolves around the start of a new school year or the start of a new job, you will be trying to put the move to a plan. This can be very emotionally draining. Demand from your agent an appreciation for the timetables you are setting. I am not suggesting that your agent can pick the exact date for your move. You just want the agent to exert any influence they can.

3. Remove as many of the challenges as possible

It is imperative that your agent know how to handle the challenges that will arise. An agent’s ability to negotiate is critical in this market.

 Remember: If you have an agent who was weak negotiating with you on the parts of the listing contract that were most important to them (commission, length, etc.), don’t expect them to turn into Superman when they are negotiating for you with your buyer.

4. Help with the relocation

If you haven’t yet picked your new home, make sure the agent is capable and willing to help you. The coordination of the move is crucial. You don’t want to be without a roof over your head the night of the closing. Likewise, you don’t want to end up paying two housing expenses (whether it is rent or mortgage). You should, in most cases, be able to close on your current home and immediately move into your new residence.

5. Get the house SOLD!

There is a reason you are putting yourself and your family through the process of moving. You are moving on with your life in some way. The reason is important or you wouldn’t be dealing with the headaches and challenges that come along with selling. Do not allow your agent to forget these motivations. Constantly remind them that selling the house is why you hired them. Make sure that they don’t worry about your feelings more than they worry about your family. If they discover something needs to be done to attain your goal (i.e. price correction, repair, removing clutter), insist they have the courage to inform you.

Good agents know how to deliver good news. Great agents know how to deliver tough news. In today’s market, YOU NEED A GREAT AGENT!

Selling a House? Don’t Overprice It!!!

Don't get carried away
seeing Dollar Signs!!

There is no doubt that the housing market is coming back nicely. What, if anything, could slow down the current momentum? We believe it may be sellers’ over exuberance when it comes to pricing. There is little doubt that house prices have appreciated over the last twelve months in most regions of the country. However, with both the inventory of homes for sale and interest rates increasing, we have to be careful to not over judge what the market can bare.



Trulia just reported that asking prices have jumped dramatically and the increase is accelerating:

• Year-Over-Year prices jumped 10.7%
• Quarter-Over-Quarter prices jumped 4.1% (16.4% annualized)
• Month-Over-Month prices jumped 1.5% (18% annualized)

No expert is expecting home prices to shoot up 18% in the next twelve months. If anything, price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and the first-time buyers expected to take their place will be working within a pre-set budget in many cases.

Buyers’ Purchasing Power

Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).

The Impact on Prices

This decrease in buyers’ purchasing power will have an impact on home values going forward. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.

If you are thinking about selling your home, don’t get carried away with current headlines about home price increases that have taken place over the last twelve months.  
Instead, call a local real estate professional. They will be best prepared to explain where prices are headed over the next six months.