John Beckett's Real Estate Blog

This weeks quotes are from some hilarious people from the past:

A dog is the only thing on earth that loves you more than you love yourself.
Josh Billings

A friend doesn’t go on a diet because you are fat.
Erma Bombeck

A government that robs Peter to pay Paul can always depend on the support of Paul.
George Bernard Shaw

A lot of people are afraid of heights. Not me, I’m afraid of widths.
Steven Wright

Between two evils, I always pick the one I never tried before.
Mae West

The question this week was how home values are determined, so here are a few ways to estimate a homes value:

BPO: Broker Price Opinion

CMA: Comparative Market Analysis

Appraisal: 1).  A ”defensible” and carefully documented opinion of value most commonly derived using recent sales of comparable properties by a licensed, professional appraiser. 2).   A statement of value or estimation of the value of a property as of a certain date conducted by a disinterested person with suitable qualifications.  Generally, value for single family properties is based upon a review of recent market activity using sales of comparable properties as a basis and then making value adjustments based upon the comparison of comparable property to the subject property.

Value Analysis: The estimation of the present worth of the future benefits to be derived from a investment in property.

Whew! For the first time in three years, home prices finally climbed out of the gutter in February, rising 0.6% compared with February 2009. But, of course, whether the year-over-year increase is here to stay is still up in the air. Eleven of the 20 cities tracked by the closely watched Standard & Poor’s/Case-Shiller home price indexes still showed annual declines, and all but one showed decreases in home prices from January to February. “These data point to a risk that home prices could decline further before experiencing any sustained gains,” said David Blitzer, chairman of S&P’s index committee. “It is too early to say that the housing market is recovering.”  Well, it seemed worth rejoicing for at least a New York minute. Ah, but then there’s New York, which along with Portland, Ore., was one of the latest markets to fall to a new low in February, joining frequent low-record setters Charlotte, Va.; Las Vegas; Seattle; and Tampa, Fla. Meanwhile, home prices month-over-month in Charlotte and Cleveland both have declined for seven months straight, closely followed by Atlanta, Boston, Denver, New York and Tampa with six straight months. And the 20-city index itself showed a 0.9% decrease from January.  To top that off, the average home prices in February were similar to levels in summer/early autumn of 2003, with prices still down 30.3% from the peak in June/July 2006. It could be worse: From the peak to the bottom in April 2009, prices had fallen 32.6%. And it’s not all bad, especially if you’re in San Diego, the one city where prices increased from January. It might have been only a 0.4% increase, but it looks a lot better when you also consider its 7.6% increase from February 2009. Other cities with significant annual gains include San Francisco with 11.9%, Los Angeles with 5.3%, Washington with 5%, Denver with 3.6%, Cleveland with 3.2% and Minneapolis with 3%.  I should note here that Standard & Poor’s has asked its clients to use only the figures that haven’t been seasonally adjusted, for the time being, because it appears that distressed sales and the effects of government programs such as the $8,000 tax credit have skewed the results of its seasonally adjusted numbers. Indeed, the impact of both is hard to ignore, with the National Association of Realtors saying the credit is largely responsible for the 6.8% increase in existing-home sales for March, which seems even more likely after it was followed by the whopping 27% increase in new-home sales the same month. But since the S&P/Case-Shiller indexes are a month behind, guess we’ll have to wait and see if the spring surge also increased demand for homes enough to improve prices even more. Will the good news stick around? To receive  the tax credit, a homebuyer must be in contract for a home by April 30 and the deal must close by June 30. It’s likely sales will continue to increase through June, but unless the market is able to correct itself in the meantime, it’s possible there will be a steep drop-off after the incentives expire.

What do you see in your crystal ball for the future of home prices?

Read at: http://realestate.msn.com/blogs/listedblogpost.aspx?post=1747735&_blg=1,1747735

Is the housing market on the verge of recovering? Is it recovering already? If you’re not sure whether you believe the economists and pundits who think they can see the future, here are some tools that will help you make up your own mind.

1. Pending home sales

According to the National Association of Realtors, pending home sales, or the number of homes that are under contract and in the process of selling, rose by 8.2% in February (the most recent month for which data are available). The index is also an encouraging 17.3% over what it was a year ago. Pending home sales are considered a leading indicator, meaning that they can forecast the direction in which the economy is headed. Leading indicators cannot truly predict the future, though, so they should be taken with a grain of salt. The increase in pending home sales could be less indicative of a genuine improvement in the housing market, however, and more indicative of the pending expiration of the homebuyer tax credit, which requires homes to be under contract by April 30.

2. Housing starts

Housing starts are an important leading indicator of not just the housing market, but the economy as a whole, because people are more likely to start residential construction projects when things are looking good. Housing starts don’t look promising right –now; the U.S. Census Bureau reported that privately owned housing starts in February were 5.9% below January and 0.2% above February 2009.

3. New and existing-home sales

New home sales reached a record low of 308,000 in February, according to the National Association of Home Builders. In 2005, 1.28 million new homes were sold per month on average. The good news is that new home sales increased by 20.8% in the West, one of the regions hardest hit by the housing crisis. More good news comes from statistics on existing-home sales. About 5 million existing homes were sold in February, up from about 4.7 million a year ago.

4. Home inventory

Home inventory is another leading economic indicator. A greater supply of homes for sale indicates weak market conditions. The NAHB reported that as of February, 236,000 new homes were on the market, a 9.2-month supply and the worst number since May 2009. There was also an 8.6-month supply of existing homes on the market, the worst number since August 2009. However, these numbers are better than those from a year ago, when the supply was 11.1 months for new homes and 9.7 months for existing homes.

5. Housing affordability

The National Association of Realtors reports that in February, the median price of an existing home in the United States was $164,300 and the average mortgage rate was 4.99%. With median family income at $60,498, a family’s housing payment would be only 14.2% of its income, well below the 25% cap that many financial experts recommend for keeping the monthly budget under control. Compare these figures to 2007 averages, when a house cost $217,900, mortgage rates were 6.52% and median incomes were about the same at $61,173. While falling home prices aren’t good, improved home affordability could help the recovery by putting homeownership within reach for more families, especially the first-time buyers who have historically helped end housing slumps. However, credit is still difficult to obtain, and unlike investors, most families can’t buy homes without a mortgage. What’s more, despite how far prices have fallen, plenty of people in high-cost-of-living cities still can’t afford to buy anything.

6. Mortgage applications

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey reports on the number of people applying to borrow money to buy a house. For the week ending April 9, mortgage applications declined by 9.6% over the previous week. The four-week moving average, which is helpful in smoothing out the ups and downs of the weekly figures, was down 6.2%. The MBA stated that an increase in mortgage insurance premiums for Federal Housing Administration loans, which are attractive to buyers because of their low down-payment requirements, may have contributed to this decline.

7. Mortgage interest rates

For the week ending April 9, the MBA reported that the average contract rate on a 30-year fixed-rate mortgage was 5.17%. Mortgage rates have been at historic lows for months, wavering between 5% and 6%. Low mortgage rates help entice buyers, but they can’t fix a bad housing market on their own. The Consumer Confidence Index, a survey of how optimistic or pessimistic people feel about the economy, has been up and down in 2010, and consumers still feel pessimistic about the job market. The thousands of Americans who are unemployed couldn’t get a mortgage even if rates were 1%.

8. Real-estate mutual funds

According to Morningstar, real-estate mutual funds returned 9.4% in the first quarter of 2010, one of the highest returns of any mutual fund category. Over the last year, they have also led all mutual funds, with a gain of 105.3%. Shares of Vanguard’s REIT ETF (VNQ), which invests in a wide range of real-estate companies, gained 10% in the first quarter of 2010 and more than 69% in the last year. These returns show investor confidence in the overall real-estate market.

Mixed signals

Major indicators are giving mixed signals about how the housing market is doing. High unemployment rates, the continued difficulty of obtaining credit and the pending expiration of the homebuyer tax credit make it hard to tell where the housing market is headed. Keep an eye on these indicators and wait for clear and consistent signals to emerge before you consider the housing market to truly be recovering.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=23976438

Today’s quotes comes from the great historian George Bancroft:

By common consent gray hairs are a crown of glory; the only object of respect that can never excite envy.

Dishonesty is so grasping it would deceive God himself, were it possible.

The fears of one class of men are not the measure of the rights of another.

Conscience is the mirror of our souls, which represents the errors of our lives in their full shape.