Serving your Central Florida Real Estate Needs!Friday morning's monthly employment report is almost sure to be bleak, with cuts in the hundreds of thousands—again.
From Corus Bankshares and Motorola to Kraft and Sara Lee, Chicago-area companies have been reporting financial numbers that foreshadow still more job losses ahead.
Quick, somebody: How about some good news for a change?
Look no farther than North Carolina, where James F. Smith, chief economist at Parsec Financial, sees better times right around the corner.
Monday Feb 09, 2009
Five reasons to buy a home this year
By Amy Hoak, MarketWatch
Last update: 12:15 a.m. EST Feb. 6, 2009
Affordability returns to housing, and buyers have loads of negotiating power
CHICAGO (MarketWatch) -- People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime
Ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of the authors of the book "Your First Home." When the market starts improving, your negotiating power starts to diminish, he added.
"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, the purchase makes sense for your situation and you're prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:
1. Affordability is better than ever
According to the National Association of Realtors' housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income. John and Julie Chilman, for example, recently have been able to stretch their dollars in the
"Our Realtor was like 'Yeah, pipe dream. Like they're going to take that,'" John Chilman said. "And all they did was counter $255,000... and they're paying all closing costs." The home had lingered on the market, and was listed for $310,000 just six months ago, he said.
In
A report from Moody's Economy.com, released this week, predicted that house prices will stabilize by the end of this year, even though the Case-Shiller house price index will fall another 11% from the fourth quarter of 2008. By the end of the real-estate downturn, prices will have fallen by double digits, from peak to trough, in almost 62% of the nation's 381 metro areas, according to the report. In 10% of the areas, declines will be more than 30%.
Not all markets have experienced huge drops, however, so it's wise to take a look at how far prices have fallen in your area. The Office of Federal Housing Enterprise Oversight's Web site has a house price calculator that can help. Visit the calculator.
2. You have a large inventory to choose from
In many places it is taking months to sell a home, creating loads of inventory -- from new homes to existing homes to foreclosures. There was a 12.9-month supply of inventory in December given that month's sales pace, according to NAR.
A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture.
It's fair to say that home sellers have become "increasingly desperate," Papasan said. "People who have had for-sale signs in the yard for six months are starting to become in tune with the reality of the situation," he said. Buyers can take advantage.
But if you put off a purchase until inventory shrinks substantially, you might not get as good a price, said Eddie Fadel, author of the book "Don't Rent, Buy!" And be forewarned: It's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll make a killing.
"You buy for quality of life... don't buy on speculation," said Duane Andrews, CEO of Clear Capital. "I wouldn't buy a home expecting the housing market to rebound quickly in the next 10 years," he said, adding that he expects moderate gains in values when the turnaround does happen.
Historically, real estate appreciates about 5% a year over the long term, said
3. Builders are offering big discounts
Home builders are getting even more aggressive with their pricing.
In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances, he said.
"[Builders] want to save their credit, save their brand, save their reputation and clear out inventory," he said. "They can go buy cheap land today with that cash." His advice: Walk in with a preapproval for a mortgage, make an offer, then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away. Read more on the outlook for home builders in the spring sales season.
4. Mortgage rates are historically low
It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac. (The current limit is $417,000, although that can rise as high as $625,500 in high-cost markets.)
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks. This week, the 30-year fixed-rate mortgage averaged 5.25%, according to Freddie Mac's weekly mortgage survey. See full story.
More mortgage help could also be on the way. Last week, President Obama said that his new economic plan, which Treasury Secretary Timothy Geithner is set to unveil Monday, would help lower the cost of mortgages for home buyers, although he did not give specifics.
But low rates don't mean lenders are handing out mortgages easily. You'll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates, if you can qualify at all.
5. You can get a federal tax credit
There's currently a federal credit of up to $7,500 for home buyers who haven't owned a home in at least three years. The credit needs to be paid back, although the repayment feature is removed in the economic stimulus plan that passed in the House of Representatives.
That extra cash will come in handy: The average first-time home buyer spends about $6,000 in the first six months of owning a home, said Flint-Budde.
The National Home Builders Association is pushing for more help for home buyers, including an even bigger tax credit -- the Senate in its version of the economic stimulus bill is proposing a $15,000 credit. And both NAHB and the National Association of Realtors want the incentive to help all buyers, not only those who are becoming homeowners for the first time.
Waiting for further federal developments, however, might sap a buyer's negotiating power, as more people get back into the market and competition returns, Fadel said.
"The more
Amy Hoak is a MarketWatch reporter based in
Posted at 10:41AM Feb 09, 2009 by Christine Selzler in B. Archives |
Sunday Feb 08, 2009
Foreclosure fix: Obama's options
By Tami Luhby, CNNMoney.com senior writer
Last Updated: February 7, 2009: 5:27 PM ET
Administration officials are racing to find a way to use bailout funds to help homeowners. Stopping the foreclosure plague won't be easy.
NEW YORK (CNNMoney.com) -- This much we know -- the Obama administration wants to set aside between $50 billion and $100 billion to address the foreclosure crisis. But how exactly officials plan to address this bear of a problem remains to be seen.
Treasury Secretary Timothy Geithner is expected to lay out on Monday plans for the $350 billion remaining in the financial industry bailout package.
It is unclear if Geithner will unveil a specific plan for tackling foreclosures Monday. But the administration has said for weeks that it will devote more resources to helping homeowners than its predecessor.
"We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners," wrote Larry Summers, director of Obama's National Economic Council, to congressional leaders last month.
Finding a foreclosure fix is daunting, experts said. It eluded the Bush administration, which preferred to try to entice mortgage services to voluntarily modify loans without committing government funds.
Obama faces similar hurdles.
"It's been a real challenge," said Scott Talbott, senior vice president for government affairs for the Financial Services Roundtable. "To come up with a widespread approach is very difficult."
Potential plans
Obama's plan may expand on the Federal Deposit Insurance Corp.'s streamlined loan modification program, which serves as a model for workouts being conducted by several banks and by Fannie Mae and Freddie Mac.
The FDIC's program, which is underway at failed lender IndyMac, calls for making monthly payments more affordable by reducing interest rates, lengthening loan terms or deferring principal. Servicers aim to reduce payments to no more than 31% of a borrower's monthly income. So far, more than 10,000 delinquent loans have been modified, and offers have been made to another 20,000 borrowers.
Summers has said that banks that receive bailout funds will be required to implement foreclosure prevention programs.
The Obama administration is expected to put some money behind the modification efforts. It's likely any modification plan will come with incentives for servicers and with some type of backstop in case the borrower defaults again. FDIC Chairman Sheila Bair unveiled a $24.4 billion plan in November that offered servicers $1,000 and provided a guarantee to cover 50% of any losses in case of redefault. The proposal, which she estimates will help 1.5 million people avoid foreclosure, has gone nowhere so far.
Congressional lawmakers would require the president to develop a loan modification plan under the stimulus bill currently under debate in the Senate.
"Stemming the tide of foreclosures, which are at the heart of this economic crisis, must be one of our top priorities," said Senator Chris Dodd, D-CT, in a statement late Friday night after the Senate approved his amendment to the stimulus plan that would require the Treasury Department to spend at least $50 billion in funds from the bank bailout on a loan modification program.
"By providing the Treasury with the authority and funds to design and implement a loan modification program, we can help nearly 2 million families nationwide...avoid losing their home," Dodd added.
A major problem confronting the Obama administration, however, is what to do with the rising number of foreclosures stemming from unemployment. Loan modifications don't work for these borrowers.
The only viable solution for these delinquent homeowners is to get the economy moving again so they can get jobs, experts said.
Along those lines, Shaun Donovan, the Secretary of the Department of Housing and Urban Development, said in an interview on CNN Saturday morning that creating jobs was the top way to address the foreclosure problem.
"What is really driving the foreclosure crisis right now is that people are losing their jobs. And so job number one is to pass a recovery bill that will add three to four million jobs in this country," Donovan said.
Beyond bailout
To be sure, the administration's efforts will go beyond the bailout package. Already, it's likely the massive stimulus package will contain measures to spur homebuying, including a $15,000 tax credit for those purchasing a home. On deck is controversial legislation to allow bankruptcy judges to modify loans on primary residences.
Congressional Democrats are also looking to revamp the troubled Hope for Homeowners program, which was designed to refinance struggling borrowers into government-backed Federal Housing Administration loans. Few borrowers have signed up for the program, in part because of its high fees. Lawmakers hope to make it more attractive by easing the terms and providing incentives for servicers to participate.
In his statement late Friday, Dodd said his amendment would reform the program by reducing the upfront and annual premiums for borrowers, lowering the percentage of future equity that homeowners must share with the government and adding incentive payments to servicers.
Whatever the administration chooses to do, it should implement it quickly, experts said. Foreclosures continue to rise, with a new one started every 13 seconds, according to the Center for Responsible Lending.
"Every minute they delay someone is going to lose their home," said Kathleen Day, the center's spokeswoman. "The government was waited too long to act."
First Published: February 7, 2009: 8:44 AM ET
Posted at 08:13AM Feb 08, 2009 by Christine Selzler in B. Archives |
Saturday Feb 07, 2009
Economist predicts downturn will end May 15, at the latest
Housing will rebound first, then vehicle sales, consumer confidence, says James F. Smith
Within a few months, Smith believes, the economy will be bouncing back. Housing will rebound first, then vehicle sales, consumer confidence and small-business optimism.
The job outlook will lag, but even that will improve after a few more months as credit markets unclench and stocks take off again. By the time commercial real estate finally recovers, the rest of the economy will be humming.
Growth will resume "no later than May 15," he said, confidently. "At the latest."
That optimism puts Smith at odds with most, if not practically all, of his fellow mainstream economists.
The prevailing view has become increasingly pessimistic as the recession has intensified: Hard times will be harder and last longer than almost anyone expected a year ago, as reflected in ever-more-downbeat forecasts.
Smith attributes such gloom to "herd instinct." For evidence, he said, check out the latest report from the International Monetary Fund, which cut its outlook sharply from three months earlier, saying the global economy will come to "a virtual standstill" in 2009.
"No one can remember such a dire thing," Smith said, suggesting that its doomsaying reflects an effort to get a step ahead as other economists revise their outlooks ever lower.
Smith brings 30-plus years of forecasting experience to his lonely position. He spent years in Chicago at Sears, Roebuck and Co., back when the retailer had one of the top credit and finance operations around.
His career includes stints as a senior economist at the Federal Reserve in Washington, D.C., and as a finance professor at the University of North Carolina in Chapel Hill.
Having plenty of experience does help to keep even the scariest times in perspective, noted William Testa, a veteran economist at the Chicago Fed. "I was here in 1982, and people thought the economy would never turn around," he said. "People think jobs are never coming back, but they do."
Still: A recovery starting May 15?
It's already February.
Smith has strong opinions about how economies react to a panic, which in the current case is "about over," he said. "After every one of these episodes, the economies affected usually come back stronger than before and more rapidly than we expect. The deeper they fall, the quicker the rebound."
He points to trillions of dollars on the market sidelines, pent-up consumer demand and the likely stimulus package being championed by President Barack "Catastrophe" Obama—which the U.S. doesn't need, Smith contended.
The biggest economic risk Smith sees is overheating. Inflation will become a serious threat unless the Fed pulls away the proverbial punch bowl well before all sectors are growing again. He's worried about tax cuts expiring, too, and Medicare costs spinning out of control.
But that's another story.
The job outlook will lag, but even that will improve after a few more months as credit markets unclench and stocks take off again. By the time commercial real estate finally recovers, the rest of the economy will be humming.
Growth will resume "no later than May 15," he said, confidently. "At the latest."
That optimism puts Smith at odds with most, if not practically all, of his fellow mainstream economists.
The prevailing view has become increasingly pessimistic as the recession has intensified: Hard times will be harder and last longer than almost anyone expected a year ago, as reflected in ever-more-downbeat forecasts.
Smith attributes such gloom to "herd instinct." For evidence, he said, check out the latest report from the International Monetary Fund, which cut its outlook sharply from three months earlier, saying the global economy will come to "a virtual standstill" in 2009.
"No one can remember such a dire thing," Smith said, suggesting that its doomsaying reflects an effort to get a step ahead as other economists revise their outlooks ever lower.
Smith brings 30-plus years of forecasting experience to his lonely position. He spent years in Chicago at Sears, Roebuck and Co., back when the retailer had one of the top credit and finance operations around.
His career includes stints as a senior economist at the Federal Reserve in Washington, D.C., and as a finance professor at the University of North Carolina in Chapel Hill.
Having plenty of experience does help to keep even the scariest times in perspective, noted William Testa, a veteran economist at the Chicago Fed. "I was here in 1982, and people thought the economy would never turn around," he said. "People think jobs are never coming back, but they do."
Still: A recovery starting May 15?
It's already February.
Smith has strong opinions about how economies react to a panic, which in the current case is "about over," he said. "After every one of these episodes, the economies affected usually come back stronger than before and more rapidly than we expect. The deeper they fall, the quicker the rebound."
He points to trillions of dollars on the market sidelines, pent-up consumer demand and the likely stimulus package being championed by President Barack "Catastrophe" Obama—which the U.S. doesn't need, Smith contended.
The biggest economic risk Smith sees is overheating. Inflation will become a serious threat unless the Fed pulls away the proverbial punch bowl well before all sectors are growing again. He's worried about tax cuts expiring, too, and Medicare costs spinning out of control.
But that's another story.
Posted at 07:49AM Feb 07, 2009 by Christine Selzler in B. Archives |
