Is Now The Time To Sell Your Home?

A seller’s ability to sell their home in ANY real estate market will be determined by the supply of homes for sale and the demand for that housing. In real estate, supply is represented by the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

• As of today there are 11,199 properties listed on the MLS in Palm Beach County.
• Sales reported last month in Palm Beach County were 2771
• That translates into an absorption rate based upon the above figures of a little over 4 months…

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:

• Under 5 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Prices usually rise in this scenario.
• 5-7 months’ supply creates a balanced market. Historically home values appreciate at about the rate of inflation.
• Over 7 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

So…what is happening right now?

In most parts of the country, supply is dropping like a rock. According to the National Association of Realtors, total housing inventory is below a five months’ supply. This is well below inventory numbers of just a year ago and at levels we haven’t seen since 2005.

Here in Palm Beach County, supply is also at one of the lowest points that I have ever seen! 

Based on the guidelines above, we can see that the supply/demand ratio is showing a sellers’ market where prices normally  appreciate. This has created positive movement in housing values here as well as in most parts of the country.

Sellers have a great opportunity right now….and there is no guarantee that this confluence of events is likely to last. Historically, inventory increases dramatically as we approach summer. Selling now, while demand is high and supply is low, should garner you your best price.

If you’re in the process of interviewing agents to enable you to select the one to best represent you…make sure your agent knows the macro trend..but they also need to understand and know the figures as they apply, not only to your particular community…but the absorption rate/supply of competitive homes ‘in your price range’. You need to overlay all three of these to get an accurate depiction of the market for YOUR home.

Thanks for reading.

Steve Jackson…561.602.1258

Lantana investor special

I am sure that all of you investors know how difficult it is to find (and successfully get under contract) decent single family properties in the ‘under $150,000’ market.

I now have access to a package of 10 single family homes in east Lantana…fully leased…NO HOA…owner stated rental income of $106,200/yr..

They are not, and will not be listed on the MLS and are sold as 1 complete package.

The price is $1,050,000

Call me quickly at 561.602.1258 or email me at Investors@thejacksonteam.com (please include your proof of funds with your email).

Steve Jackson

How Santa refuels his sleigh

Did you purchase your home in 2012?

Don’t forget to file for your Homestead exemption and get a  $50,000 (or more, depending upon which exemptions you qualify for) reduction in your assessed value for 2013.

click anywhere on the image below

 

If you have any questions…give me a call at 561…602.1258

Steve Jackson

 

Z.I.R.P. and mortgage rates

Below is an excerpt from a recent article by Barry Habib of MBS Highway

Quite possibly you have heard of the Federal Reserves ZIRP or Zero Interest Rate Policy…below is a good explanation of how it works and the tangential effect on mortgage rates.

Imagine that you are a Money Manager, managing a $100 Million Dollar portfolio. You can borrow at very low rates that are close to the Fed Funds Rate. Call it a 0 .5% cost to borrow. You can buy mortgage bonds that pay 3% . It looks like a nice profit spread of 2 .5% . But the real magic happens when you use leverage. You can buy those bonds with only 10% cash . So you can take your $100 Million and buy $1 Billion worth of bonds, by borrowing the other $900 Million at a cost of only 0 .5% . The 2 .5% profit on the $1Billion is equal to a whopping 25% on your $100 Million dollar portfolio...making you a great money manager, and a heck of a lot of fees. This is called "The Carry Trade". But one sure way to lose money on this trade is to have your borrowing cost rise. So, as the data begins to approach the Fed's targets, managers will be less willing to buy mortgage bonds and begin to unwind their holdings. This selling of mortgage bonds will cause mortgage rates to rise, and perhaps at a surprising pace. We will need to be on guard about this in the months ahead.

The above is important to buyers and sellers alike…for buyers, it is quite obvious how interest rates have an effect on the purchase of a home. an increase in rates from 4% to 5% has the following effect on a $250,000 loan.

Principal and interest payment of $250,000 at 4% is $1,194/mon

Principal and interest payment on $250,000 at 5% is $1,342/mon…that is a 12% increase in payment and can have a significant effect on the size of the loan you can qualify for.

If the rates go to 6% you would be at almost $1,500/mon

So, if you are a buyer, you have try to predict the future of interest rates and home prices (we’re here to help you with that!). Should you buy now at the lowest rates in history, or gamble that home prices will fall if interest rates rise? Can you chart out the ‘rates vs. price’ so you are aware of the optimum rate/price relationship?

And, as a seller, are you up for the gamble? Are you on the side of the “we’ve hit bottom” and it’s all up from here crowd or, after reading the above, do you think that now may be an opportune time to “get while the getting is good”?

 

We are not your typical real estate agents. We’ll help you decipher all of the ‘noise’ relating to the housing market and what decision is in YOUR best interests. You won’t get ‘objection handling techniques’, you won’t get ‘memorized dialogs’…in short, you won’t get a salesman that tries to influence and steer you in one direction or another. You’ll get honest advice tailored to your specific needs, goals and situation.

Call me directly at 561.602.1258 if you’d like to discuss anything real estate related.

And, as always, thanks for reading

Is housing going to get pushed over the cliff too?

There’s been non-stop chatter about the “fiscal cliff” lately. So I thought that I should discuss the housing component of the ‘fall from the cliff’.

The two major issues that will have an effect on housing: capping the amount of mortgage interest some can deduct from their taxable income, and eliminating the tax exemption on debt forgiven when a bank agrees to forgive the debt on the loss they take on a home being sold for less than the mortgage amount, either through a short sale or foreclosure sale.

Also, a tax deduction on mortgage insurance is set to expire at the end of this year. Mortgage insurance is generally required of borrowers who make down payments of less than 20%, so eliminating the insurance deduction could raise costs for millions.

One more issue, not directly related to “the cliff” but on the same timeline, is the Federal Reserves “Operation Twist”, whereby the Fed (kind of) ‘trades’ short term securities for long term ones in an effort to keep long term rates, such as mortgage rates, extremely low.  If this comes to an end, especially in concert with the other fiscal cliff possibilities, it could be a disastrous combo for the tenuous housing recovery.

The National Association of Realtor (NAR) has made a clear call for help to sustain the housing market's progress in their Call for Action: Do No Harm to Housing. As stated on their website, "NAR's position is that the mortgage interest deduction is vital to the stability of the American housing market and economy and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest". A few days ago Speaker of the House John A. Boehner offered a potential path to compromise in year-end budget negotiation, as NAR spoke out that struggling homeowners need mortgage debt relief.

If the mortgage interest deduction is not eliminated, but scaled back to coincide with the current conforming loan limits for high-cost areas, (so rather than a million-dollar maximum limit, it might be scaled back to $625,000, for example, and interest on a mortgage higher than that figure would no longer be deductible), it may not have a major impact on the majority of housing markets.

But, the failure to renew the Mortgage Forgiveness Debt Relief Act could have a disastrous impact on short sales, and subsequently an increase in foreclosed homes, which always leads to reduced home values. Michelle J. Adams, an attorney in Rockville, Md., with a large practice assisting distressed borrowers, said that "for some homeowners the amount forgiven is a couple of hundred thousand dollars." If Congress lets the provision lapse, "the amount (owed in taxes) will be so prohibitive that many owners will walk away" - or file for bankruptcy, she said. Under the tax code, most forms of forgiven debt are treated as ordinary income – (with the temporary exception granted by Mortgage Forgiveness Debt Relief Act on principal residences) - unless the borrower is insolvent.

Concerned for the potential impact on economic recovery, Zillow pointed to the fiscal cliff in late November, saying, “The housing market has found real momentum of its own, but is not immune from shocks to the broader economy,” said Zillow Chief Economist Dr. Stan Humphries. ”If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains – and, as a result, falling negative equity rates – could stall.”

Like I have been advising my seller clients for months…I believe that the current strong housing indicators are temporary…and if you are on the market or thinking about selling, I suggest you get it done soon!

If you’d like to discuss your situation with me, call me directly at 561.602.1258

Thanks for reading…Steve Jackson

 

Happy Thanksgiving to all !

Recent email I received:

"This guy at work says that Bank of America is paying homeowners to do a short sale through some new program called an HIN Incentive. I Googled HIN Incentive and couldn't really find any information on this program. Do you know what it is?

Answer: There are so many short sale programs similar to the HIN Incentive but none quite like it. It's a program initiated by Bank of America for certain preapproved short sales and works best if you don't have more than 1 loan on your home. Second lien holders often object to the cash payments.

The HIN Incentive is an enhanced cash payment incentive, paid directly to the seller at the time of closing if certain conditions are met.

How Does the HIN Incentive Work?

Let's say you have a first mortgage with Bank of America at $300,000, and your property today has fallen in value to $180,000. The HIN incentive is based on the sales price of the property, says Bank of America. The bank does not share its calculation formula.

One such seller qualified to receive almost $6,700. The enhanced relocation assistance or the HIN incentive was almost $4,200. The seller received her check at closing. It is subject to a 1099 for the existing tax year, which means the following year she will pay taxes on that payment because it is considered income for tax purposes. Still, free is free.

How Do you Apply for the HIN Incentive?

You can call Bank of America to see if you qualify for the HIN Incentive. However, you will receive a customer service representative. I hate to say this but the odds are about 50 / 50 that a person who answers the phone will have answers to your questions.

You can also ask us to open a file in Equator for you. That is the easiest and most pain-free way to begin the process. You will need to sign a third-party authorization. Once the file is opened in Equator, we will receive email confirmation. That email will be followed by another regarding borrower outreach.

BofA borrower Outreach means it is time for you to call the customer service number and discuss your foreclosure alternative options with Bank of America. One of those options is the non-government sponsored enterprise type of HAFA short sale program. Another is a GSE HAFA such as a Fannie Mae HAFA or a Freddie Mac HAFA. The qualifications for these programs vary.

Unlike the HAFA short sale, there is generally not much paperwork required for the Cooperative Short Sale program, apart from standard bank documents. By extension, there is little paperwork associated with the HIN incentive.

What Else Do You Need to Know About the HIN Incentive?

It's a fairly straight-forward process. After Bank of America qualifies the homeowner based on select investor guidelines, the bank will order a BPO (poor-mans appraisal) to establish fair market value. After market value has been established and the suggested selling/listing price has been given to us by the bank, we then list your home as a preapproved short sale. This means both you and the property qualifies for a short sale. Here are some other interesting bits of information about the HIN Incentive:

• Payments vary between $5,000 and $30,000.
• Homeowners can use the money to pay liens or outstanding bills or fund a trip to Las Vegas.
• You cannot submit an offer/contract until you are preapproved for the HIN Incentive.
• The home does not need to be owner-occupied; it can be vacant
• The short sale must close by September 26, 2013.
• VA loans and FHA loans are not eligible for the HIN Incentive.
• If you do not qualify for the HIN Incentive, you might still qualify for the Cooperative Short Sale program or one of the HAFA programs.

If you think that you may be in a position to benefit from a short sale..give me a call today. All calls are strictly confidential.

My direct line is 561.602.1258…Steve Jackson

An alternate analysis on the accuracy of the call of a bottom in housing

Below are excerpts from an article by Michael Panzner of Panzner Insights,

There’s plenty of debate about—and money riding on—the question of whether we are in the midst of a sustainable recovery in the housing market. Nobody knows for sure, of course, but there are plenty of reasons to be pessimistic.

For one thing, the supply of homes, in terms of what is currently on the market and what is potentially for sale whether or not prices rebound further—the so-called shadow inventory—remains significant relative to demand, even though data from the National Association of Realtors (NAR) shows that inventories of existing homes are back to where they were eight years ago.

Aside from the question of whether developments that have occurred since then—including the fact that their are more ways to sell property than by going through a broker—have distorted the inventory calculation, the composition of sales has changed from what it was. Nowadays, a much greater share of transactions are in the “distressed” category than before the bubble burst. Given that more than 20 percent (about 30% so far in 2012 here in Palm Beach County) of sales are foreclosures and short sales makes the current ratio look healthier than it is in comparable terms.

Needless to say, shadow inventory is far greater than it was during the go-go years, when people were happy to remain long despite a booming market. With prices having fallen sharply since then, we now have a situation akin to those seen in other post-collapse markets: Holders can turn seller on a heartbeat as prices move closer to what they paid or owe on their mortgages. Given that more than 20 percent of mortgagees are underwater (about 45% here in Palm Beach County), that represents a sizable overhang.

The tide of past, present, and future foreclosures—actual and de facto—has also left lenders with substantial holdings of “real estate owned” (REO) properties that will undoubtedly be offered for sale at some point. These are not voluntary investments being held for the long-term; they are unwanted assets that are costing money by the day to finance and maintain. According to HousingWire, nearly half of mortgage giant Fannie Mae’s REO holdings are unable to reach the market at present. (I would add that there can only be one reason for such a huge number of properties with loans in default that "can't" reach the market -- the federal government doesn't want them to reach the market. Might that have something to do with an upcoming election? Banks file foreclosure and/or get a short sale application but they cannot get approval from Fannie/Freddie and so nothing gets done. Here in Palm Beach County thousands of homes are occupied by owners who haven’t made a mortgage/tax/insurance payment for years).

(This does not even take into account all of the currently delinquent loans…recent stats reveal that, in this market, when a homeowner gets 90 days past due, there is less than a 5% cure rate…those other 95% have to eventually end up as short sale, deeds-in lieu, or bank owned…all negatively impacting the market)

It’s not just about supply, however. Demand is significantly less than it used to be for a variety of reasons, most notably because it is much harder to get financing now than it was when the property market was booming. Despite some recent loosening of credit conditions and ultra-low mortgage rates, anecdotal and other reports make it clear that lenders are generally unwilling to grant loans except on stringent terms to the highest quality borrowers.

But even if you discount the fact that traditional home buyers are having a difficult time borrowing the money they need to buy a home, it’s apparent that other factors, including societal shifts, are undermining demand—and will likely continue doing so for the foreseeable future.

Number one among them are economic conditions in the post-crisis era, which are having an adverse affect on prospective homeowners’ willingness and ability to take the plunge. A structurally weak employment market, (especially here in South Florida) where temporary and low-paid services jobs comprise the lion’s share of the jobs being created and where the odds of finding another, better paying, and more secure opportunity are low, is not the catalyst for people to step up and make what could be the biggest investment of their lives.

Perspectives about what really matters are evolving as well, especially among the younger generation. Whereas in the past the milestones of getting married, buying a car, and acquiring a home represented the natural progression of things when children reached adulthood, priorities have changed. A recent Bloomberg report noted that 4G wireless telephones trumped V-8 cars for the 80 million U.S. consumers born from 1981 to 2001. Meanwhile, the still-ailing post-crisis economy has convinced a growing number of young people to embrace “the age of frugality.”

In addition to shifting preferences, many of those who are at the lower end of the demographic scale already have a big financial burden hanging around their necks, which precludes them from taking on other big commitments like a mortgage—that is, student loans. Aside from the fact that, for many graduates, these obligations are far higher than they were, proportionally speaking, even a decade ago, the prospect of being in the hole for as far as the eye can leave a lasting impression on impressionable individuals…

Lastly and perhaps most importantly, demand is being undermined by broader-scale mood swings. People are beginning to accept that it isn’t necessary to own your own home, nor is it necessarily a long-term goal. That might seem like heresy in a country where property ownership has been viewed as a God-given right, but when you consider that in economic powerhouse Germany the share of residential property accounted for by rentals is more than 60 percent in most states and 90 percent in the capital, Berlin, it’s not all that strange.

In sum, while it is easy to focus on the traditional indicators of supply and demand and start believing that the long-awaited recovery in the property market has arrived at last, the fact is that much has changed in the wake of the events of the past decade, a development that is likely to weigh on prices for many years to come.

In a related article from Reuters, on October 5th, Federal Reserve Board Governor Elizabeth Duke said “The housing bust has saddled the United States with an "extraordinary" level of abandoned properties that inflict heavy costs on the wider community and government aid may be needed to tackle the problem…Duke noted that although unsold home inventory levels have declined as real estate has picked up, the number of abandoned homes remains stubbornly high.

Quoting Census Bureau data, Duke said vacant homes for sale had fallen to 1.6 million in the second quarter of 2012…but pointed out there were still 2-1/2 times as many vacant homes out there, they are just not for sale.

If you’ve read this far…I congratulate you! If you are contemplating buying or selling…we should talk, soon.

Thanks for reading…Steve Jackson

561.602.1258

Palm Beach County housing showing ‘green shoots’?

It’s all over the news…The housing crisis is over! In todays Palm Beach Post is this headline: Florida home prices bottomed earlier than previously thought, according to one study…and the article goes on to state that they just realized that the bottom was in 2009!

The bottom has been reached and it’s all up from here…Green shoots are everywhere!

Not so fast…There’s a good chance those green shoots will get swamped by the coming wave of distressed home sales!

I have been following (and charting…see below) the number of Lis Pendens filed with the Palm Beach County Clerk since 2010.

Here’s another tidbit from a recent Sun Sentinel article: It takes an average of 861 days for a lender to repossess a property in Florida, says RealtyTrac Inc., a California foreclosure listing firm.

Lenders are whole heartedly resuming foreclosures following the “robosigning” scandal in which bank employees admitted using faulty paperwork and fake signatures to take back homes.

Prices have rebounded in South Florida and across the state in recent months. But those gains could easily reverse when the coming wave of foreclosures hits the market.

As we all know by now, bank-owned homes and short sales typically sell for less than a similar home would sell for if not a distressed sale, thereby hurting the values of nearby properties…and specifically creating potential for nightmare scenarios with the  appraisals of non-distress-sale homes.

All the recent news stories are reporting that prices are on the upswing and have benefited from a change in the mix of homes sold with distressed properties – bank-owned homes and short sales -- accounting for only 22% of total sales, down from 31% last August.

Below is a graph of the median home price index charting back to January 2008. You’ll see, even with all of the excitement in the media the past few months, that we’re still below summer of 2009 prices. And all the the bumps in prices…they are ALL the summer buying season.

In Quarter one of 2013, when they are charting median sales prices for Oct-Nov-Dec 2012, what do you think the graph will look like?

So, to wrap up this cheery post…my take on all of the recent reports by the experts. They are wrong, period.

If  there have been over 10,000 foreclosure actions started so far in 2012, and a total of over 22,000 in the past 20 months and it takes, on average, over 800 days from start to finish, it looks like we are clearly in for a very large number of distressed sales…either as short sales or bank-owned sales.

As of today, there are 11,910 properties listed for sale in Palm Beach County in our MLS system…single family/townhomes and condos. Almost exactly TWICE AS MANY properties have had a foreclosure action initiated since 1/11 than are currently for sale!

Just for fun, lets say that 50% of those in foreclosure somehow resolve the foreclosure. That still leaves over 11,000 short sales or bank-owned homes going to hit the market in the not-to-distant future…and that is just the stats if they stop filing foreclosures today! (which is not going to happen)

The short sales may hit the market sooner, unless the owners are trying to stay as long as possible. But there is no doubt that there will be new downward pressure coming.

For about 6 months now I have been counseling my customers and clients that we are in a ‘mini-bubble’ that may last a few months longer. If you have equity…now may be your best chance for a while to sell.

As always, thank for reading…Steve Jackson…561.602.1258

If you have any comments on this post, or would like to suggest a post topic…send me a text or an email.

If we don’t sell it…we’ll buy it!

Once again, I have started to see this being promoted recently by mail, in the Neighborhood News and on the radio.

"If we don't sell your house in___days...WE'LL BUY IT!"

Sounds great...especially in this market. Worth checking out? That's what the agent is hoping you'll think. Get the agents phone to ring...but they'll never discuss the details over the phone..."much to complicated and need to see your home to see if it qualifies"...get the foot in the door. But there is NEVER a free lunch; there is always a cost associated.

But, particularly in this type of market, it would be "good business" if the agent NEVER bought any homes, or if they did, that they were purchased at such a drastic discount that the could quickly ‘flip’ the home and make some money. 

I have gone to several seminars where they promoted this (tactic/gimmick) and the dialog you will hear starts out something like this: " Mr./Mrs. homeowner, a big dilemma when making your move is deciding whether to buy 1st or sell 1st. Either way is risky as you could end up with 2 homes (or no home). Our unique/innovative/etc Guaranteed Sale Program solves this dilemma...you get our personal guarantee that if we don't sell your home in BLANK (30/60/90/120) days, we will buy it at a price acceptable to you. Now, WE take all the risk from you and you can immediately place a confident offer on another home". The Devil? it’s in the details:The hidden details usually follow some or all of these general guidelines:

• Must purchase one of the agents listings...or at least buy a 'full commission' home with them
• Seller must still pay a full commission on the 'guaranteed' sale
• Quite often an 'upfront' fee or guaranteed sale program fee of anywhere from $295 to fees in the thousands
• "Agreed upon" price well below appraisal/market value...could be as low as the 80% range, then subtract commissions, fees, closing costs etc.
• Original list price 5% below  sale prices of comparable homes
• May be a an additional fee involved
• Seller may be required to continually lower the asking price during the guarantee period...for example: 100%  for 1st 30 days, 95% day 30-60, 90% day 60-90, and so on until the “buy-out price is reached.
• Sign the listing agreement first...then the guaranteed purchase details come later
• There may be a maximum allowable program price
• Restrictions on home condition
• Use the language "I'll buy it for 'list' price", but fail to say that the 'list' price is the 80% ENDING list price

Now if they'll come right in and buy it for the price that they agree to list it for...

then that's putting their money where their dog and pony show is!

Think about these few points:

• With as difficult as it is to get a mortgage now, COULD your agent actually perform on their guarantee? And what will happen if they CAN’T perform? Ask to speak with their mortgage lender...do your due diligence as with any other buyer.
• If they don't need a mortgage and have a few million sitting around to buy homes that don't sell in 90 days, why are they a real estate agent?
• Are they "flipping" the purchase option to an investor? Are they going to list the home for the investor once they buy it?
• Can they assign the guaranteed sale price (as in a wholesaler)?

Good, solid, cutting-edge marketing, a detailed understanding of the local and national economic factors affecting home values, subdivision level market knowledge, ability to analyze trends...trust and mutual respect...THIS is what is needed today. Not MORE GIMMICKS!

Thanks for reading…Steve Jackson

561.602.1258