A report by the National Association of Realtors also claimed that distressed homes made up 32 percent of sales in December of 2011, meaning that 68% of the sales were not! This bodes well for owners who need to sell their homes.

The number of investors in the market remains high, indicating that there are still many bargains to be had, and investors accounted for around 20% of all existing home sales during the past several months. Thirty-one percent of existing home sales in December were all cash sales and 29% of all existing home sales were all cash in November, another indicator of a high level of investor activity.

The NAR report also pointed out that the housing inventory has been declining and indicated that in December, it had fallen to the lowest level since March of 2005.  Mr. Yun concluded that, “The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future.”

Another reason that we may see the housing crisis end or at least start to turn around this year is due to loosening credit. According to the analytics firm Capital Economics, the average credit score to attain a mortgage loan is 700. These and other factors point to a stabilizing of mortgage lending standards and also to a loosening of credit availability.

While the facts indicate that credit conditions may have loosened slightly, some potential home buyers are still having problems meeting the credit requirements. Capital Economics reports that in November of 2010, 8 percent of all contract cancellations were due to potential buyers not being able to qualify for a loan. This should improve going forward, as the economy improves generally.

The loan-to-ratios (LTV) has also improved. That is the ratio that lenders will loan in relationship with the appraised value of the property. It has increased from a low in mid-2010 of 74 percent to the current level of 82 percent LTV.

All of the above factors, including the reduction in inventory, seem to be evident in our local real estate market. With good financing available, credit conditions loosened, prices at their lowest level in years and a positive outlook for the future of the market, this is a great time to be a buyer. We have builders locally who are building brand new single family homes for around $100,000 in good neighborhoods. This is far below what it was just a few years ago.

For investors, this is also a good time to be a buyer, for all of the above reasons plus the fact that the rental market locally continues to be very strong and single family homes and duplexes continue to be the preferred housing for renters.

First of all, Freddie Mac economist are optimistic that the housing market and the economy will both improve in the second half of this year, 2011. They are also predicting that the current historically low mortgage rates will continue in the 4.5 to 5% range for the rest of the year.

In addition, even though prices will begin to move up, there will still be many bargain priced properties on the market. For those who can qualify, there has never been a better time to buy!

The rental market is getting better and better for those investor buyers wanting to get into an investment property. The increase in foreclosures has contributed to what can only be described as a “boom” in the rental market. As vacancies are shrinking, many property managers are increasing the prices of their rentals, and they are generally not having a problem finding takers at the higher prices.

Single family homes and duplexes continue to be sought after as rentals for many people. If you are considering purchasing a rental property, now may be the best of times to make the move.

Real Estate is doing better so far this year in the Twin Falls area. It appears that with the long road to recovery this current market may be the “New Normal.” Investors are coming back into the real estate market in many areas and getting some great deals. There are local lenders offering financing for investors, and for parents wanting to help their children get into a home, that are better than we have seen in years! If you are thinking of investing in real estate this is a great time to buy. Interest rates are still low and prices are the lowest they have been in years.

Some people still think we haven’t hit bottom yet. I think we have, or at least we are very close. We are seeing a leveling of prices and slowing in new listings. Often if you wait until the market shows an increase to determine that the bottom has actually been reached, you may miss your window of opportunity. It is better to buy and have prices go down a few points before it starts up than to wait until the increase has already started. You will probably be in a solid position to profit from the rise.

There will be more bank owned properties coming on the market over the next several months, and even years, which is just a sign of the times. Remember that just because the bank owns them doesn’t mean they are going to be cheap. For the banks it is all about the dollars and cents. The bottom line is “How much of a loss they will take?” As more and more investors get into the market, and more first time buyers try to purchase these homes, the loss the banks are taking is becoming less and less. Remember, the banks generally won’t accept your offer or reject it like a normal buyer, but will use it as “bait” to bring in other offers. They then come back to you and ask for “your best offer.” I have seen these “bidding wars” produce sale prices far higher than the properties were worth in this market.

There are strategies that can help work around these bank strategies. Call for more information and to set up an appointment to structure a purchase plan based on your personal situation. 208-420-2345

Looking for homes that are lender owned and really priced well? HUD may have the answer for you if you are in the market for a nice home to live in or you just want a property as a good investment.

HUD also has financing available for these homes and for owner occupied properties, very little cash is required to buy one of these. Prices right now in the Twin Falls / Magic Valley area range from starter homes for $40,000 up to higher end homes for $169,000.

All of these homes are available for viewing and offers are made electronically. These homes range from condos up to four units and the condition of the properties varies. HUD is good about spelling out whatever issues there are with the properties that they are aware of from their inspections. So, normally there are no surprises.

When a new HUD listing comes out it is deemed an “Exclusive Listing” and is available only for buyers who intend to occupy the property, government agencies or nonprofits for a 10 day period of time. On the 11th day HUD looks at all the offers that have come in and takes the one with the highest net for HUD. If no acceptable offer comes in, the property becomes an “Extended Listing” and is available to all buyers, including investors. Once that happens HUD takes offers on a daily basis and will make decisions on a daily basis.

HUD bases the asking price of their homes on an independent appraisal of the property in the property’s current condition. They tend to reduce the prices of their listings after they have been on the market for a short period of time. Offers can be made for less than the appraised values, and offers below the appraised values are often accepted.

HUD does not provide financing on the properties they offer for sale. Buyers who intend to live on the property, and who qualify, can use an FHA 30 year fixed loan, which today is at 4.750%. The borrower needs to put down 3.5%, but it can come from a gift. The current requirement is for a credit score of only 640. If your credit score is lower than that, there are some ways to get it to that level. Give us a call and we’ll tell you about it.

Investor loans are also available with 20% down at very reasonable rates. To view HUD homes available anywhere in the United States, go to www.HUDhomestore.com and enter the required information to view them. All HUD properties are sold through real estate brokers who are registered with HUD to sell their listings. The rates are a little higher but still very good at 5.375% as of this week. The lenders like to see six months in reserves for investors, but that can be in a CD or other investment.

This is a great way to get into an entry level investment property or to get a real bargain on a home for your family. For more information, give us a call or write. Also, go on line and look at the available properties at: www.HUDhomestore.com.

Lee

Naturally, I was very interested in his analysis of the real estate market. Housing has led the way out of every recession in the past, but not this time. Normally during a recession housing values will drop from 7 to 10%. This time, in some areas, housing values have dropped 50% and the bottom hasn’t been seen yet.

Dr. Ed (as he is called) attributes this to a number of factors, including the fact that investor spending in the housing market slowed substantially, unscrupulous mortgage brokers were out in abundance in response to the insane mortgage market where anyone could qualify for anything, the big insurers of the mortgage-backed securities were gambling with the packages they were insuring, and maybe most important of all, mortgage options were expanded and some of them were unsustainable when the market prices dropped in value.

Let’s look a little closer at the last cause, the expansion into mortgages that were unsustainable during down real estate markets. Here are some examples of the mortgage options that were available to buyers during this period of time. They were available because of government intervention allowing for a lack of documentation to prove that a borrower could afford a particular mortgage product. Here is an example of those options and what they meant in terms of paying off a loan of approximately $200,000.

MORTAGE OPTION                                                     MO PAYMENT             PAYMENT % OF FRM*

Standard Fixed 30 year                                               $1079.00                     100%

30 year ARM (29 mo. Adjustment)                             $903.50                       83.7%

Interest Only 30 Year ARM                                         $663.00                       61.4%

40 Year ARM                                                               $799.40                       74.1%

Negative Amortized ARM                                           $150.00                       13.9%

Pay-Option ARM                                                         <$150.00                     <13.9%

*FRM = Fixed Rate Mortgage

Here is how they worked:

The standard fixed rate 30 year loan is the one we are all familiar with and the “standard” in the industry. It is a fully amortized loan, meaning that it completely pays off the loan in equal installments over a period of time (in this case 30 years).

The 30 year ARM is a 30 year loan with an adjustable rate. In this example, the rate is determined by a specific index, and adjusts every 29 months. The payment percentage of the FRM (fixed rate mortgage) used in this example is an average.

The Interest Only 30 Year ARM is similar to the regular 30 year ARM with one major exception. None of the payment is applied to the principal balance. It is ALL interest. This loan, and every loan described below this one depend on a robust increase in the market value of real property, and at some point, a refinance to a less dangerous mortgage option.

The 40 Year ARM is just as the description suggest. It is like a 30 year arm, but the payment schedule is spread out over 40 years instead of 30 years as with a standard ARM.

The Negative Amortized ARM is similar to the standard ARM, only worse. In this scenario the monthly payment is less than the interest owed each month. Because of that fact, the balance on this one is going up substantially each month.

The Pay-Option ARM is the worst of them all. In this case, the borrower selects the monthly payment he can afford. In our example, above, he has chosen a payment less than $150 per month. Even at a 5% interest rate, I don’t need to tell you where this one is going.

When property was going up it was possible to “stay afloat” with even the worst of these options, at least for a little while. Borrowers were convinced by some sales people that things were “different” now and that property values would continue to rise without end. When property values began to go down, borrowers were quickly in the position where they owed substantially more than their homes were worth, with no chance of ever catching up. This quickly led to defaults and foreclosures and the end of the “American Dream” for many.

While you are contemplating what all this means, remember that while this was going on, FNMA and Freddie MAC, both U.S. government backed organizations, at the bidding of Barney Franks and other career politicians, were buying up these loans by the truck load. Now you know why they had to go to the taxpayers for their bailouts, estimated at over one-hundred ten billion dollars.

I won’t take the time to outline AIG and the other mega-insurers were happily insuring the mortgage backed securities which contained these disastrous mortgage packages. Not only that, they were insuring the same properties multiple times. It doesn’t take a mathematical genius to figure out that their actions were not a very good bet. Suffice to say that this one cost the taxpayers over one- hundred- twenty-seven billion dollars in bail out money. We paid because of their bad judgment.

There were four states that have been hit the hardest by the drop in the real estate market. You won’t be surprised to know that they also saw some of the highest rises in property values in the nation. They are Arizona, California, Nevada and Florida, commonly known as the “sand” states. In each of these, values dropped by as much as 50% and in some cases even more. It is doubtful that the bottom has been found yet in these states. Experts tell us that there will be more foreclosures this year than in 2010 in these areas.

How does this relate to the market in the Twin Falls area? First, we have not seen the huge decreases in property values or foreclosures that other areas have experienced. One of the main reasons is that the conservative outlook of the people in this area caused them to generally spurn the loans that were not fully amortized 30 year mortgages.

A second reason is that the property values went up, but not in an irrational manner, so the reductions has been substantially less. For example, the average price of a single family home in 2008 at the beginning of the recession, was, according to statistics from the Intermountain Multiple Listing Service, $159,773. In February of 2011, the average price was $128,412. So, worst scenario, prices have dropped about 20%. Not great news, but better than most areas. Other factors have helped to lower the average price, including builders who focus on the low end of the market, selling some new homes for around 100k. Add to that the low interest rates, lower prices and seller paid closing costs and you have an incentive for many former renters to get into the market for a first home.

So, what is the bottom line? Prices here are stabilizing, they are lower than they were two years ago, interest rates remain low, sellers are paying the closing costs for buyers, and it is a great opportunity for first time buyers to get into the market with little or no cash on hand.

Dr. Ed left us with one factor that he says is for sure, and that is the fact that interest rates are going to go up in the very near future. You only have to look at the signs of inflation in our economy to see that he is right. If you are thinking about buying, this might be your time.

Buy your next home or property of any kind through DeVore and Associates Real Estate and receive a 20% refund of the selling office commission.

This applies to any listed property in the Intermountain Region of Idaho.

For example, on a property selling for $200,000 with a 3% commission to the selling office, the buyer would receive a refund of $1,200.

Please call Lee DeVore at (208) 420-2345 or contact us here.

If you have friends or family who might benefit from this special offer, please share this post on Facebook, Twitter or via email. Thank you!

For instance, even within the State of Idaho, there are distinct differences in the markets. The Boise market, for example, is flooded with foreclosures and real estate owned properties, while the Twin Falls market is not. The reason? A more conservative population in the Twin Falls/Magic Valley area did not purchase many homes that were more than they could afford, counting on appreciation to get them out of trouble. For the same reason, they did not sign up for near as many adjustable mortgages, interest only mortgages or other high risk leveraging devices that were used heavily in other areas.

Consequently, sellers here are not competing against a market that is almost exclusively “bank owned” properties, and values have not dropped to the level that they have in of some areas of our nation. There are still not a lot of buyers out there, but they are starting to get back into the market and if the trend continues, we will have a pretty good spring and summer. Please take a look below at the article by Nin-Hai Tseng from CNNMoney.Com.

CNNMoney.Com

Bull vs. Bear: Will housing rebound?

Posted by Nin-Hai Tseng, writer-reporter

December 27, 2010 3:00 am

It’s a question many Americans want answered: Will the value of my home rise or fall next year? Smart minds fall in both camps — here are both sides of the coin on real estate.

One of the most closely watched sectors in 2011 will continue to be real estate – a wildly emotional and divisive topic that’s puzzled investors and economists since the housing bubble burst around 2007. Earlier this year, many observers thought the market would turn around in a big way as federal tax credits spurred home purchases and the economy added jobs following hundreds of billions of dollars of government stimulus spending.

As the end of the year approaches, the prospects of a real recovery look much dimmer. For one, it’s become clear that we won’t see a true rebound until we have job growth. With unemployment showing few signs of improvement so far, the bullish take on housing seems hard to swallow, especially when many experts say home prices still have room to fall before hitting bottom.

But a bullish take doesn’t necessarily mean that prices would significantly rise. These are unprecedented times, and even the more cheery views fall short of predicting a steady surge in home values.

Here’s a bullish and bearish look at real estate for 2011.

Bull: Buy real estate!

One of the most vocal bulls on housing for 2011 has been Bill Ackman, founder and CEO of hedge fund Pershing Square Capital Management. At the Value Investing Congress in November, Ackman made a bold presentation called “How To Make A Fortune,” highlighting why it’s the right time to invest in real estate.

Ackman laid out several reasons but some key points include: With the fall in home prices and mortgage rates still relatively low, affordability is at its highest level in decades. What’s more, while there’s clearly still a glut in the supply of unoccupied homes, it will start to decline given that the rate of home construction is at historic lows.

Some of Ackman’s points sound similar to the reasons billionaire investor Warren Buffett gave earlier this year for his prediction that the real estate slump would end by about 2011.

Of course, this doesn’t mean he thinks home prices will return to their 2007 peak. In Buffett’s annual letter to shareholders of his Berkshire Hathaway (BRKA), which owns real-estate brokerage and manufacturer Clayton Homes, he predicted that demand for homes would catch up with supply following a period where the glut of unsold property caused home construction to dramatically fall.

In 2009, housing starts (the supply side) were 554,000 – by far the lowest number in the 50 years for which Berkshire could date. “Paradoxically, this is good news,” Buffett wrote.

And with home prices falling, he said families who couldn’t afford to buy a few years ago would finally be able to afford to do so. Buffett put it this way: “Prices will remain far below ‘bubble’ levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits.”

It’s anyone’s guess if Buffett’s position on housing will change much in his letter to shareholders next year. It also remains to be seen if Ackman will continue to trump his “How to Make a Fortune” pitch with the recent rise in mortgage rates. For now, at least, both investors see promise in housing.

Bear: What bottom?

While home prices have for the most part stopped their freefall, some economists believe they haven’t hit bottom yet.

Rick Sharga, a senior vice president at RealtyTrac, an online marketplace for foreclosure properties, recently told The Wall Street Journal that foreclosures for 2011 could top the estimated 1.2 million bank repossessions this year, which reflected an increase of 900,000 from 2009. This is partly due to the so-called “robosigning” mess that forced some lenders to stall a flurry of foreclosures.

While Sharga predicts that home prices nationally could still fall by about 5%, others say they could drop much more at about 10%.

Some might argue that further declines coupled with relatively low mortgage rates might just spur a flurry of home purchases, but Daryl Jones, an analysts at investment research firm Hedgeye says that’s unlikely given that credit standards at virtually all major lenders are much higher and typically require larger down payments that would actually add to costs. Jones also thinks that home prices could fall another 15% to 30%, which means homes are actually still overpriced and might not attract more buyers as Ackman argues.

And while home construction is at all-time lows, Hedgeye says the trend is probably not as promising as Buffett and Ackman might think. The supply of housing is still very high – the firm estimated in November that there’s still 11 months of supply on the market to absorb, which is close to levels seen in 2009.

With so many variables working against the housing market, the bearish takes becomes all the more convincing. But one can always hope they’re wrong.

The National Association of Realtors puts out a brochure that outlines the advantages of home ownership. During this time when the wisdom of home ownership is being questioned by some, the information in this brochure is very relevant. Home ownership really is an important aspect of the American life and is one of the things that separates us from so many other countries. The fact that we just went through a period where we have been dealing with the aftermath of unscrupulous lenders and misguided legislators, doesn’t change that fact. Here are the advantages they list:

TO PEOPLE….

• Home owners are happier and healthier and enjoy a greater feeling of control over their lives.
• Owning a home is one of the best ways to build long-term wealth. Historically, a home owner’s net worth has ranged from 31 to 46 times that of a renter.
• Home owners are free to redecorate, renovate, and modify their homes as they wish.
• Most home owners enjoy stable housing costs—A fixed-rate mortgage payment might not change for 15 to 30 years while rent typically increases 3% per year.
• Home owners can typically deduct mortgage interest and property taxes on their federal individual income tax return.

TO COMMUNITIES….

• People who own homes vote more, volunteer more and contribute more to their neighborhoods.
• Home owners do not move as frequently as renters, providing more neighborhood stability. In turn, this stability helps reduce crime and supports neighborhood upkeep.
• Children of home owners do better in school, stay in school longer, are more likely to participate in organized activities and spend less time in front of the television.

TO AMERICA….

• 67% OF American households are owner-occupied. America is a nation of home-owners.
• Homeowners pay 80 to 90% of federal individual income taxes, contributing to federal programs that benefit all Americans
• Every home purchased pumps $60,000 into the economy for furniture, home improvements and related items.
• Housing accounts for more than 15% of the national Gross Domestic Product, a key driver of our national economy.
• For these reasons and more, home ownership is the American dream!

Source

Is there any good news in the Twin Falls real estate market for buyers wanting to buy and sellers wanting to sell? The answer is definitely yes. Does that mean that we have somehow missed the downturn in the real estate market in this area? Are things different here than in other locations? Let’s look at the facts and see.

First of all, the national real estate down turn is definitely being felt in Twin Falls, but to a lesser degree than is the case in many other areas. Prices are down, the volume of sales are down and unless a property is really priced right, it will be difficult, if not impossible to sell. The average time to sell a home has risen substantially from an average of 74 days in 2009, to an average of 99 days in 2010. The average sales price dropped 5.6% in 2010, so far, compared to 2009. The average price of a single family home has gone down 21.13% from 2007.

Now, let’s look at the positive side of the equation. While prices are definitely down, the volume of sales is down and the average time for a single family home to sell has increased.  None of the statistics for this area is anywhere near as bad as in many other parts of the country.

Is this a good time to sell your home or other property? That depends on why you are selling. If you are holding an investment property and want to sell it to generate cash, this is probably not the best time to accomplish that, and you should probably wait until things get better—and—they will.

If on the other hand you want to sell your home and buy another one, this might be a great time to make the move. Here is why:

• Everything is relative. If you are selling your property for 21% less than you would have in 2007, you can also buy at 21% less, and you might be able to do even better. If you are moving up, consider this: A home previously valued at $150,000 sold for a 21% reduction would sell for $118,500, $31,500 less than you could have gotten in 2007. If you are buying a home previously valued at $200,000, you would be able to purchase it for $158,000, which is $42,000 less than you would have paid in 2007.
• There are many owners who have to sell because of the financial situations they find themselves in and these sellers are often willing to sell for much less than the market dictates even at today’s prices.
• There are still a number of short sales and repossessed properties being offered at even deeper discounts.
• Interest rates are at historic rates, lower than they have been in 50 years. Wells Fargo Home Loan’s rate on a 30 year fixed mortgage is currently at 4.625%, and you can get a 15 year fixed mortgage for 3.875%.

Based on the above information, you could very possibly move up to another home in a better neighborhood and have a payment that is the same or maybe even a little less than you are paying now, depending on the interest rate you have. Have a great week.

Send us an email or post a comment below:

DeVore and Associates Real Estate is pleased to announce the launch of our new website http://www.devorerealestate.com.  After taking a good hard look at our old site, we decided it was time for an upgraded site with a fresh new design, social media links and a Real Estate News blog.

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Sincerely,

Lee DeVore