As the cold temperatures become a distant memory, and the spring selling season gains momentum, consumers have come to agree on one thing—now’s a good time to get off the fence and into the real estate market. This is the overall theme in the latest American Express Spending and Saving Tracker survey, a monthly survey that tracks the spending and saving habits of consumers in order to get an indication of what’s happening in the market. “This month’s Spending and Saving Tracker provided an up-to-date look at various consumer trends and gave us the opportunity to assess how consumers are feeling about the current market in addition to gauging homeowner confidence,” says Leah Gerstner, vice president of public affairs at American Express.

“This month’s survey points to the fact that consumers overwhelmingly feel that we are in the midst of a buyer’s market,” she adds. The data also points to the fact that a seller’s market is at least a year away, which is certainly positive news. While homeowners aren’t necessarily willing to settle for less than the asking price when selling their home, two of the biggest areas of interest in the latest survey deal with homeowners including home improvement projects on their to-do list, as well as the willingness to include concessions to get their home sold.

Home Improvements
“In looking at the results of our latest Spending and Saving Tracker survey, our thinking was that if consumers overwhelmingly view today’s market as a buyer’s market—which they do—they are likely to have plans to put more money into their home,” adds Gerstner. In fact, the survey found that about 64 percent of homeowners currently have home improvement projects on their to-do list for 2011. While the plans are in place, the amount that homeowners are budgeting to spend has gone down quite a bit from last year. “Homeowners are looking for better ways to stretch their dollars, and many are looking toward energy-efficient home improvements that will pay off in the long run.” The survey shows that among homeowners who are looking to go green, the most common items homeowners would spend their money on include energy-efficient windows and doors, insulation, roofing, heating and cooling systems as well as alternative energy systems.

Concessions
Another finding that stood out in the latest survey had to do with whether or not sellers were willing to make concessions to get their homes sold, especially in today’s market. While 44 percent of sellers were willing to give away appliances during a sale—the biggest concession among young professionals and affluent homeowners—another 28 percent said they would take care of requested repairs in order to get their home sold. “While a large majority of sellers are willing to make concessions to get their home off the market, the willingness to make concessions is down among young professionals when compared with the 2010 survey,” says Gerstner. “This is an important finding as it shows that young professionals are more confident in their ability to sell their homes today.”

“Homeowner confidence in today’s market has increased compared to last year,” says Gerstner. “In fact, the survey shows that the confidence level is pretty evenly split—42 percent of homeowners are confident they will get their asking price in today’s market, while 47 percent of homeowners aren’t that confident.” Even though home values continue to be on the low side, young professionals and affluent homeowners are seemingly more confident in today’s market.

Bill Schramm and Bethany Siwicki scoured property listings for three months before agreeing to see a home in Round Lake Beach, even though its online pictures didn’t look promising.

“It looked like a piñata blew up in there,” Schramm said. Every room was a different color, and the only way to tell the carpet once had been white was looking at the furniture marks.

But the home they visited bore little resemblance to the pictures. The walls were white, new carpet had been installed, and repairs made. The recently engaged couple immediately submitted an offer and are waiting to close on their first home purchase.

Sprucing up a home to sell it faster and for more money is a strategy frequently advocated by real estate agents. In this case, though, the seller is Wells Fargo Bank, and the home Schramm and Siwicki are buying is a foreclosure.

There are still plenty of dilapidated foreclosures on the market marred by water damage, mold, broken windows and missing plumbing fixtures, properties that hold little appeal except to investors and professional rehabbers.

But as the quality of foreclosures and the communities where they are located has improved, so, too, has interest in them by consumers. To entice those buyers and lessen their inventory of real estate owned foreclosed homes, commonly known as REOs, banks are spending thousands of dollars on some foreclosures. In addition to new paint and carpet, floors are being refinished, old windows are being replaced, and leaky roofs are being repaired.

The strategy benefits the banks and home buyers, who otherwise would have trouble securing mortgages on homes that a lender could term “uninhabitable” because of needed repairs. At the same time, it helps the broader real estate market because while the foreclosures still sell at a discount, it is not at the fire sale prices of unlivable properties.

For traditional home sellers, the trend of banks plowing money into foreclosures means they will have to be more realistic in their pricing, because the foreclosure for sale down the street may look a lot more inviting to prospective buyers.

“Foreclosures used to be fewer and far between,” said Ray Millington, an agent at Century 21 Roberts & Andrews. “The problem is, we say we’ll concede that sale, but what happens when another one pops up. It becomes an ongoing thing. It’s not like you have only one in the subdivision anymore.”

Real estate agents say they are having the same conversation with banks that they have with any seller, and it starts by identifying the target customer for a property. If the answer is an owner-occupant, agents recommend fixes that can range from a few thousand dollars of paint to $25,000 of kitchen upgrades. In the past, banks rejected such suggestions, viewing them as throwing good money after bad, but now some are heeding the advice.

Last month within the city of Chicago, 207 of the 472 single-family detached homes that sold were foreclosed properties. An additional 62 were short sales, transactions in which the homeowner sells the home, with the lender’s permission, for less than the amount owed on the mortgage. Combined, distressed properties in February accounted for 57% of all single-family detached sales and 46% of all condos, according to the Chicago Association of REALTORS®.

Fannie Mae repossessed more than 262,000 single-family homes nationally last year, and as of Dec. 31, its inventory of single-family REOs was almost 163,000.

Under its “first look” program that began in September 2009, Fannie Mae will only consider offers from owner-occupants or buyers like nonprofits during the first 15 days a home is on the market. Fannie sold nearly 29,000 homes to consumers under that program during its first year.

Buyers are jumping on the best REOs, and keen interest can lead to multiple offers. “The ones that are in good shape, people are snapping those up,” said Mike Stodola, an agent at Koenig & Strey Real Living. “The ones that are left are ones that need major work.”

Despite about $30,000 in improvements, the house Schramm and Siwicki will buy for $125,000 still needs work. The couple’s first project is to remodel the kitchen. “It’s probably the most hideous livable house you’ll see, but I can fix it,” Schramm said. “Nothing even comes close to this house in terms of value per dollar. There’s a ton of houses out there that cost less than $125,000. Do I want to buy them and move into them? No.”

It’s not just the house and the neighborhood that help lenders decide whether to make presale investments. It’s also the potential risk of vandalism. “There’s no sense of putting a furnace in there if it’s going to walk away the next day,” said Abe Rabah, of Great Street Properties.

In Barrington Hills, Ill., down the street from one well-appointed home listed for $890,000, is another property, a foreclosure that went on the market at $525,000. The Tudor-style home attracted some foot traffic but no serious consideration.

The house was removed from the market and almost $20,000 of updates and repairs are being made before it’s relisted. “We’re doing everything that is going to make the property look better, but also make it financeable,” said Connie Ritchie, an agent at RE/MAX Suburban. “When you walk in now, you say this is nice and clean. This is something I can work with.”

As I stated last month we have a tricky and rocky road ahead of us but we must never forget that our market is also very finite and we will sooner than later run out of foreclosed homes and short sales.  Again, some 50% of all homes are either free & clear or have very low loan balances. Let’s jump to the numbers and see what story the market is telling us.

January-March 2005 the market closed 780 homes in the first 60 days of the New Year.  Now fast forward to the first quarter of 2008 and we closed a mighty 372 homes! Q1 2009 and we saw 558 homes close escrow. Q1 2010 and we see 769 homes close escrow with the help of the buyer assistance program executed in 2009 pushing traffic.  So what about 2011 with no government help to push sales? January-March 2011 we saw 775 closed sales.  ONLY 5 LESS THAN 2005!

Pardon my sense of sarcasm but seriously, I am told every day by moneyed and knowledgeable people that we are hopelessly mired in our own manure.  I beg to differ with such knowledgeable people.

As of this writing there are 1,854 homes in the Reno/Sparks market for sale, which used to be nearly 3,000 when the “market adjustment” started.  But wait, how many homes are in escrow right now?  1,408 homes are pending sales.  Now before I go on I said we have a tricky and rocky road ahead of us, and we do.  Nowhere are prices stabilizing or even having a hint of growth but real estate is a long term product and never was and is not now going to show short term results.  Today’s buyers must buy for the long term (i.e. five years or more) and that should be the rule forever more, but sooner than later the tough lessons learned will be forgotten and we will see another day of runaway prices but not in this decade we can be certain of that.

Our inventory is no longer the hulking monster it once was.  Today when I show homes, my real issue is that the good homes are now really hard to find.  If a buyer wants to just buy a house and not a home, we have inventory but if you want a home, well get ready for a surprise. I could have said the exact same thing in 1990 or 1995, good homes are always in short supply. 

Buyers are starting to find that if they want value, location, amenities and good condition they need to be more realistic about what they want as the number of great cheap homes is dropping.  Short sales and foreclosures are alive and well, don’t fret, and we are not going to run out of either so if you have your heart set on a foreclosure or a short sale we have plenty.  

We have agents scrambling to find rentals in the better areas today, 18 months ago that was easy, but not today.  Before I go any further if the home is overpriced it is still overpriced.  Our market has zero tolerance for anything but priced on the money.  Have great value, location and amenities or the buyers will not even seriously look.  I need to say that before sellers start saying “how come no one is looking at my home if the numbers are getting better?”  Just a quick guesstimate but probably 70% of the non-distressed homes listed for sale today are overpriced and have about a 5% chance to sell at the sellers’ price.  Those are pretty awful numbers but that is not because of the market that is because sellers five years later do not want to give up on what once was.

If the trends continue, and it appears they will, 2011 can be our pivotal year.  2011 can be the year we turn the corner and opening the door to stabilize our market so in 2013 we can rack up an average growth of .05%-1.5% and possible by 2014 a possible 2+% growth.  Ok, ok, yes I know about the phantom inventory the banks have, I know about the current default numbers, yes I know about our short sales and yes, if you still believe that we are going to sit in the basement and the manure is going to get deeper, you are probably right.

I like the numbers we are seeing. Most people will not even read about these positive changes for six more months due to the lag in national real estate reporting.  And face it, bad news sells better than good news. I like the real numbers we are seeing of people moving to our area, I like the offers flowing into my office that say buyers are buying.  That I can work with, and so can you.

The next 60 days are going to be very important to all of us.  Sales need to keep pace with inventory or we will slide backwards. Let’s keep up the good work! 

Have a great spring!

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the February 2011 edition of the Obama Administration’s Housing Scorecard. The latest housing figures show increased existing home sales as home affordability remains high, but officials caution that the market remains fragile, as prices are unsettled.

“In the face of the deepest economic recession and housing crisis in decades, the Obama Administration has taken unprecedented action to promote stability in the market—keeping millions of families in their homes and helping millions more to save money by refinancing. But the data clearly show that the market remains extremely fragile,” said HUD Assistant Secretary Raphael Bostic. “While we cannot stop every foreclosure, we know that many responsible homeowners are still fighting to make ends meet. Through the broad range of programs this Administration has put in place, we can put help in reach to those homeowners as early as possible.”

“Our housing market remains fragile. We know this from the data, but homeowners across the country can feel it too. That’s why this Administration remains committed to helping eligible homeowners avoid foreclosure where it makes economic sense to do so,” said acting Assistant Secretary for Financial Stability Tim Massad. “Every month, HAMP continues to help tens of thousands of additional families in a cost-effective manner. And by setting affordability standards and developing a framework for how mortgage servicers provide assistance to struggling families, HAMP has established critical protections for homeowners and has catalyzed improvements in modifications industry-wide.”

The February Housing Scorecard features key data on the health of the housing market including:

-The housing market remains fragile as data through January 2011 paint a mixed picture of recovery. Existing home sales ticked upward in January, but remained below levels seen in the first half of 2010. Mortgage delinquencies continued a downward trend compared to early 2010 and foreclosure starts and completions remain below peak. However, as lenders review internal procedures related to foreclosure processing, many foreclosure actions have been delayed. The decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months.

-Administration efforts have been effective in blunting the effects of the deepest economic crisis since the Great Depression. Since April 2009, record low mortgage rates have helped more than 9.5 million homeowners to refinance, resulting in $18.1 billion in total borrower savings. However, home prices remain unsettled at this fragile stage of the recovery. More than 4.2 million modification arrangements were started between April 2009 and the end of January 2011—including nearly 1.5 million HAMP trial modification starts, more than 730,000 FHA loss mitigation and early delinquency interventions and more than two million proprietary modifications under HOPE Now. While some homeowners may have received help from more than one program, the number of agreements offered was more than double the number of foreclosure completions for the same period (1.8 million).

Given the current fragility and recognizing that recovery will take place over time, the Administration remains committed to its efforts to prevent avoidable foreclosures and stabilize the housing market.

For more information, visit www.hud.gov.

The form is called the Sellers Energy Consumption Evaluation Form.  It is four pages of very detailed information about the sellers’ energy usage and disclosure of any energy efficient appliances such as, furnaces, hot water heaters, light bulbs or lack thereof.

In the long run, it is probably a very good idea to highlight energy efficiency as homeowners become more aware of energy costs.  Unfortunately, the form is an information gathering device, given to a buyer who does not know how to interpret the information let alone know how to apply it to their purchase. 

It is up to the buyer to determine if the home they are buying is competitive with other homes in terms of energy efficiency.  I think it is only reasonable as the form becomes more common and is used more, that sooner or later one can reasonably expect to see a variance in property values (added or subtracted) based on their “greenness”.

The form makes no distinction whether Grandma has been living in the home, along with her four grandchildren, all under age 12 (imagine keeping Grandma’s room really warm and doing the laundry every day); compared to a similar home with just one couple that travels and works long hours and spend their weekends at their lake home (i.e. very little energy usage).   

It is suggested to all homeowners to start making changes now, while and when affordable, to start making those all-important energy efficiency upgrades.  For homeowners with homes over 15 years of age, I know that your HVAC (heating & cooling) systems work just fine, it may be well worth a serious look into the new hot water tanks or tank less systems,  as well as the new furnaces that are on the market today. Keep an eye out for the Energy Star label as an indicator of an energy efficient appliance.

Going green benefits all of us but with the new law it would be a shame to lose value in your home only because you did not know about the new law and its reasonable future effects on the market.  True, it may never affect a homes’ value but based on past experience, as buyers become more aware, it is reasonable to expect them to become much more sensitive to the age of HVAC systems, hot water tanks, appliances, lighting etc.

Questions?  Call me at 775-828-3292 or email me at david@dmorris.com and I can send you a copy of the new form.

QUOTE OF THE WEEK…“We would like to live as we once lived, but history will not permit it.”–John F. Kennedy

INFO THAT HITS US WHERE WE LIVE…Things do keep changing, but we all hope that by and large those changes mean progress. We certainly saw evidence of that in the housing market last week, as Existing Home Sales headed up in January for the third month in a row. They’ve now reached a 5.36 million annual rate, close to the long-term trend of 5.5 million and up over 5% from a year ago. This, as Martha Stewart says, is “a good thing,” since the supply of existing homes has now dropped to 7.6 months, close to the 6-month ideal, which favors neither buyers nor sellers.

The Case-Shiller home price index for the 20 largest metros was down in December, its sixth straight monthly decline since the tax credit ended. The media seemed thrilled to announce a “double dip” in housing prices, probably because they’ve been unable to use their “double dip” catch phrase for anything else. The facts, as usual, tell another story. Case-Shiller was down just 2.4% for the year, its smallest drop since the 2006 price peak. And some observers anticipate modest price gains this year. New Home Sales did fall 12.6% in January, which may have been due to the bad weather, though sales were up in the Northeast and Midwest and down in the West and South. Go figure. Inventories are now at their lowest level since 1967.

Quote of the week… “I’ve been blamed for just about everything that’s wrong with this country.”–Elvis Presley

We who work in the real estate and mortgage industries know exactly how Elvis felt. The same people who unfairly blamed us totally for the recession now look to us alone for signs the economic recovery has taken hold. They might want to remember the health of the housing market is directly dependent on the health of the jobs market, which is not under our control. In any case, everyone felt better last week when January Housing Starts were UP a surprising 14.6%. Even though starts are down 2.6% from a year ago, this still shows builders are more hopeful going forward. The boost came from multi-family units, though single-family starts were off a mere 1% for the month.

A lot of home buying activity is due to the affordability now out there. The National Association of Home Builders (NAHB) and a major bank reported their index shows home affordability in Q4 of 2010 at its highest level in 20 years. Their measure found that 73.9% of the new and existing homes sold in Q4 were affordable to families making the national median income of $64,400.

Business tip of the week… A big part of success is not giving up. Studies show that one trait shared by all very successful people is perseverance. They are persistent, determined, tenacious, pursuing a goal far beyond the point where the average person gets discouraged.

There’s good news in the latest housing market forecast for 2011 from the National Association of Realtors (NAR). After dipping 4.8% last year, sales of existing homes are predicted to grow 7.9%  this year, to 5.3 million. The gain for 2012 is forecast to be a little less, up 4.5%, to 5.53 million. The existing home median price went up 0.3% in 2010, a nice recovery from the 12.9% price drop of 2009. For 2011, the NAR sees it rising 0.5%, to $173,000, then another 2.4%, to $177,900, in 2012.

New home sales are forecast to come back more briskly, up 17.7% in 2011, following their 15.5% drop in 2010. The 2012 projection is for a strong 51.1% sales gain, to 565,000 homes. The median price for new homes, which gained 2.2% last year, should go up another 1.8% in 2011, to $224,700, then 1.9% in 2012, to $229,000. The NAR’s chief economist says this rebound in home sales does depend on an improvement in the jobs market. Affordability also matters and in Q4 of 2010 housing was the most affordable on record, according to NAR numbers going back to 1971. The NAR feels the current situation of low home prices along with low interest rates should continue.

Nevada homeowners should be aware that property deeds and supporting documents can be obtained from the local county recorder’s office where these documents were originally filed for much less than the service being advertised.

“Consumers must be aware that official documents can be obtained from federal, state or local sources for little or no cost by applying directly to the agency involved,” said Attorney General Catherine Cortez Masto. “Many companies offer to supply documents and papers for a fee, taking advantage of unsuspecting or uninformed consumers.”

Before sending money to a company offering services dealing with goverment agencies, consumers should always contact the government agency named first. Consumers will often find the services can be obtained directly from that agency with little or no cost. In addition, the Better Business Bureau maintains a website, www.bbb.org, that provides information concerning companies doing business around the United States. Be cautious when dealing with a company not listed with the Better Business Bureau. In addition, entering the company’s name in Google, Bing or Yahoo search will often reveal information that the company is operating in a fraudulent or dishonest manner. When dealing with a non-local company, it is wise to do your internet search homework first.

While no determination has been made regarding the legitimacy of Title Compliance, any advertisement that urges quick action raises red flags. Questions regarding this matter can be addressed to the Nevada Attorney General’s Bureau of Consumer Protection at 775-684-1169.

*This type of fraudulent business practice may also be applied to companies advertising guaranteed results with loan modification. Please be very cautious with this type of service as well. The David Morris Group is available to help if you are interested in seeing the deed on your home. We can help obtain a copy for you, at no cost, through our local title companies. Please call us any time at 775-828-3292.

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury has released the August edition of the Obama Administration’s Housing Scorecard (www.hud.gov/scorecard), a comprehensive report on the nation’s housing market. In July, housing prices remained level after 30 straight months of decline, while some price predictions have improved. In addition, historic low interest rates continued to promote home affordability and refinancing options for the nation’s families. However, the market remains fragile with foreclosure starts showing a slight increase and serious delinquencies continuing to work through the pipeline.

“While there has been some stabilization in the housing market, it remains clear that we have more work ahead,” said HUD Assistant Secretary Raphael Bostic. “Through the Obama Administration’s efforts over the past 16 months, we have seen increased price stabilization and improved home affordability for prospective, qualified homebuyers. At the same time, we know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation’s hardest hit neighborhoods.”

The August Housing Scorecard features key data on the health of the housing market including:

• Stabilizing housing prices drive improving expectations in some regions. After 30 straight months of decline, home prices have leveled off in the past year; futures indices have shifted upward since January 2009 as signs of recovery continue, although overall housing outlook measures remain mixed.

• More than twice as many modification arrangements begun compared to foreclosure completions. More than 3.15 million modification arrangements were done from April 2009 through the end of June 2010. This includes more than 1.3 million trial Home Affordable Modification Program (HAMP) modifications started, over 472,000 Federal Housing Administration (FHA) loss mitigation and early delinquency interventions, and 1.4 million proprietary modifications under HOPE Now. The number of agreements offered continues to more than double foreclosure completions for the same period (1.24 million).

• More than 4.2 million families have benefited from housing counseling since April 2009. Working with a HUD-approved housing counselor can help borrowers manage debts apart from a mortgage – car payments, credit cards and personal loans, for example – and help them avoid falling into default.

• More than 37,000 homeowners received a HAMP permanent modification in July. While the pace of program entry has slowed due to upfront documentation requirements in place since June 1, this policy change streamlines the process to help more eligible homeowners convert to a permanent modification. Homeowners in permanent modifications are experiencing a median payment reduction of 36 percent, or more than $500 per month.

“HAMP, which represents just one, targeted piece of the Administration’s larger efforts on housing, has so far offered more than a million and half responsible homeowners the chance to modify their mortgages. This program has helped to stabilize a housing market that remains fragile and has redefined the modification standard for the industry – both of which are delivering real benefits to struggling homeowners in communities across the country,” said Treasury Assistant Secretary for Financial Stability Herb Allison. “Currently servicers are working through their pending modifications, and while Making Home Affordable works for a number of homeowners, many others are offered other means of avoiding foreclosure. As careful stewards of the scarce resources of the American taxpayer, we see this as prudent progress – and we will keep working to help the Americans hardest hit by this crisis.”

Data in the scorecard show that the recovery in the housing market continues to remain fragile, with some measures suggesting recovery will take place over time. For example, foreclosure starts went up slightly in July from the previous month, but remain well below July 2009 levels.

Foreclosure completions also inched upward as the volume of serious delinquencies continues to work through the pipeline.

Each month, the Housing Scorecard incorporates key housing market indicators and highlights the impact of the Administration’s unprecedented housing recovery efforts, including assistance to homeowners through the FHA and HAMP.