Real Estate News

Earlier this year, President Obama signed a one year extension to the law known as the Mortgage Debt Relief Act, which was intended to help homeowners faced with an underwater mortgage. These toxic loans resulted from the housing crisis of the last few years. These homeowners typically owe more on the mortgage than the house is worth on the market. Even though we are seeing a significant percentage of owners elevated from this situation with the escalating home prices this year. For many the fact remains if they sold the property, they would still owe money to the lender. Many owners are working with their lenders to adjust the mortgage to reflect the property’s current market value. Before the relief law was passed in 2007, the IRS treated the amount of the mortgage forgiven or written off by a lender as income for the owner. Under the current law, qualified homeowners can avoid that problem. The applies to only primary residences, and the amount is limited to $2 million. If you think you might qualify, consult your real estate advisor and a tax professional before filing the paperwork. This program is only being made available until the end of the year and will not be extended any further, so act now or forever hold your peace.

The luxury real estate market is showing healthy signs of growth compared to one year ago. For the first time since the Institute for Luxury Home Marketing began tracking upper tier market trends in 2008, its Market Action Index hit the threshold that separates buyer’s and seller’s markets earlier this month. The highest tier of homes for sale, has been the last part of the market to feel the effects of the housing recovery. On June 2, the ILHM reported its Market Action Index had reached 30 for the first time and in subsequent weekly reports the index has maintained its position. The Market Action Index (MAI) illustrates the balance between supply and demand using a statistical function of the current rate of sale versus current inventory. An MAI value greater than 30 typically indicates a “Seller’s Market” (a.k.a. “Hot Market”) because demand is high enough to quickly consume available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a “Buyer’s Market” (a.k.a. “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall.

Only a year ago all the conversation was doom and gloom. Next we hear about the reviving housing market with talk of “green shoots”. Now it has become apparent that the real estate market is in a full upswing, with a rebound of 20% since the bottom of the downturn. However lately I have begun to hear talk of a housing bubble. Really, a housing bubble? Today’s market is driven by a shortage of supply, pent up demand and low interest rates. Not the abundant listings and lax lending standards as before. Lending standard remain stringent, and in the future the lack of easy money will act to temper any fever that may develop as prices rise. We tend to forget that real estate is cyclical. The market goes up and the market goes down. Right now the market is going up and should continue for several more years. Exactly how long is anybody’s guess.

This is the year renovations make a come back according to the second annual Houzz & Home survey, which gathered more than 100,000 responses from Houzz’s 14 million monthly unique visitors. Moving forward with decorating and redecorating projects has increased by 12 percent compared to this time last year. While improving the look and feel of a space is still the key driver for recently completed home design projects (83 percent said so), the number of homeowners who have or will make improvements to increase their home’s value rose 7 percent, to 54 percent, up from 47 percent.  Most homeowners don’t plan to tackle home design projects alone. Among those planning projects in the next two years, 58 percent are planning to hire professional help. And where will the money go? The most popular areas where homeowners undertake projects year after year are bathrooms and kitchens. During the past five years, homeowners spent an average of $28,030 on kitchen remodels. Meanwhile, they spent $10,422 on average on bathroom renovations.

The Federal Reserve’s is buying mortgage-backed securities to keep mortgage rates low and that may be bolstering upper tier home values rather than helping to make homeownership more affordable for entry-level buyers. For decades home buying demand has reflected mortgage interest rates, but no more. One question that has baffled policy makers for six year is: Why haven’t housing markets responded to historically low mortgage rates? In fact, record low rates have had an impact, according to a new analysis by three contributing editors of Home Value Forecast, just not the impact that the Fed anticipated. Affordability definitely improves when mortgage rates are lower and yet the beneficiaries of these more attractive mortgage rates are not evenly distributed among households of all incomes and wealth. It is very likely that the top tiers of the owner occupied housing market are the ones benefiting the most from lower mortgage rates as this group has been less affected by credit score downgrades or more restrictive underwriting,” the economists said.

The percentage of home buyers writing offers in January increased by 12 percentage points according to Redfine and 23 percent of Americans think it is a good time to sell compared to 11 percent the same time last year, according to Fannie Mae’s January 2013 National Housing Survey results. The increase in homebuyer demand seen in January paired with a nation-wide inventory shortage has created an extreme seller’s market, bidding wars involving multiple offers have become increasingly common. There are two factors affecting upward trend in the share of home owners who say it’s a good time to sell. First, home prices are improving. Second, the number of homeowners who are underwater is declining, this eliminates a barrier for those owners who need to sell their home in order to buy.

Going into 2013, home prices are expected to rise 6 percent driven by steady demand, lower bank-owned (REO) sales, and lower inventory of unsold homes. This is according to CoreLogic’s latest report. The CoreLogic Home Price Index (HPI) increased 6.3 percent in 2012, the largest increase and highest level since 2006. And year-over-year home price increases were more widespread. The two major drivers of improvement in the market have been the decline of real estate owned (REO) sales and less available inventory. The decline in REOs drove a sharp turnaround in home prices, but the impact of the decline will be less prominent in 2013. The major factor driving the market in 2013 is the lack of inventory. Current owners need to sell at prices high enough to extinguish their debt and provide equity for the next home purchase. Until home prices began to rebound in 2012, these borrowers had been effectively locked out and unable to list their homes for sale. The lock-out phenomenon, combined with the rise in investors converting foreclosures into rentals, led to a lack of for-sale inventory. These factors will continue to drive home prices rising in 2013

2012 will clearly go down as a record year for favorable housing affordability conditions and a great year for buyers. According to the National Association of REALTORS® national Housing Affordability Index stood at 198.2 in November, With 11 months of data reported.  This is up from 186 in 2011, which was the previous record. The Housing Affordability Index is based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power. A window of opportunity remains open for buyers who can qualify for a mortgage.

{Infograpic} Southen Californians might be worried about their tax rates going up, but at least they don’t need to worry about mortgage rates going up any time soon.We hit the all-time low interest rate for a 30-year fixed mortgage, reached in the week  ending Thursday, according to Freddie Mac. The average 15-year  rate slipped to 2.65 percent, also a record. Home prices are rising, in part  because of reduced interest rates. Low borrowing costs have made refinancing  more appealing and helped the housing market recover by making purchases  more affordable. Check out this cool infographic.

The real estate market is recovering but problems with a sizeable share of real estate appraisals also are holding back home sales. Recent surveys by the National Association of Realtors showed 15 percent of Realtors had a contract renegotiated to a lower sales price as a result of a low valuation, while 11 percent said they had a contract cancelled because a home’s appraised value came in below the negotiated price. Another 9 percent reported that a contract was delayed by a low valuation. An aggravating factor is that low inventory can reduce the number of  comparables because there are fewer sales. In this case, an appraiser might  need to look at comparable sales from neighboring areas to get a sense of  current market value. Previously, three comparable homes were the norm for most appraisals.  In many cases there simply aren’t enough apples-to-apples comps to comply with the excessive demands by lenders, so discounted distressed homes are sometimes used in valuating traditional homes in good condition without appropriate adjustments. HOUSE HUNTING TIP: Make sure you work with a resourceful real estate  agent who will do the homework necessary to help the appraiser do an accurate  job. Agents should not tell appraisers how to do their business, or what price  to put on the appraisal. But, it’s useful to the appraiser to have detailed  information on comparables your agent thinks are the most valid given the  current market.