Real Estate Buying Opportunities

Unless you haven’t followed real estate at all this last year, you know quite well that the $8000 tax credit for first time home buyers is about to expire. On November 30, if your purchase is not closed, you lose your chance at the tax credit. This has motivated quite a few buyers in the lower end of the price ranges lately. Given the new financing rules, it would be good to have your offer accepted by mid-October to reasonably expect to close in time. If the house you like happens to be a short sale, you might want to factor into your offer in the likelihood that your closing will occur after November 30th.

Over the last few months, I’ve noticed increasing reluctance among some buyer’s agents to show and sell short sale homes. A reason for this is short sales can take an extremely long time to get approved by the banks. For example, I wrote an offer on a house for a client in February, and it just closed on the last day of September.

The flip side of this reluctance to sell short sale homes is this creates an opportunity for buyers willing to be patient as there is less buying competition for these properties. After all, the offer I wrote in February that just closed DID CLOSE, right? If that’s the main objective, to buy a house at a good price, and a little patience can get you there, then it can be worth the wait.
People may wonder if there are still decent short sale homes to write offers on, and well, there are. Take for example if you would like to live in Lake Oswego or West Linn, here is a map of all the short sale homes currently on the market. Yeah, there are some to choose from. Call or email me if you’re interested in how best to move forward.

--Ward Spears

Admittedly, it’s been awhile since I’ve typed an entry into this blog…way too long, really. This means that a market update is in order. “What’s going on with the market” is always the first thing on everyone’s mind anyway.

As we all know, the housing market for sellers has not been exactly easy for the past several years now. It’s a little difficult to pinpoint when exactly the buyer’s market started, but in any case we are a good couple years into the downtrend at this point.

Anyway, I think we all know that, and the question now is, has the bottom of the market occurred or is it still to come? Well, the only way to know that for sure is hindsight, we’ll know the bottom of the market after it’s arrived. So, what is the current situation?

From personal observation, one thing that has made the market so difficult in the past couple years is determining the value of a property. When there are few sales, and each sale has such a variety of motivations behind it (such as impending foreclosure), the value of a property can be really difficult to determine. Normally, an agent will want to suggest a list price that is pretty close to the current market value of a property. When values are hard to predict, this is when you have extended market times and a closing price that is far below the original list price. This is seen in the following graph.


September 20, 2009

As you can see, the predictability of values has dropped off since about August of 2007 (with slight declines before that) and has begun to improve again this summer. If people know what their properties are worth, they can plan accordingly and the health of the market improves. Likewise, if buyers feel confident in the value of the property they are interested in, they are more likely to make a reasonable offer, which is good for the overall health of the market.

There is another important factor influencing the market right now, and that is the impact of the $8000 tax credit for first time buyers that will be expiring at the end of November. This incentive has brought a lot of new buyers into the market, particularly into the lower end of the market. This activity has increased quite a bit in the past couple months, skewing the normal statistics. With so many active first time buyers, the average price has dropped substantially in the last month or so as people rush to take advantage of the $8000 incentive.



This drastic looking drop off must be due to the government interference in the market ($8000 tax credit). Once the interference expires, that should finally allow the market to find it’s own natural value and we should be back to normal again. In other words, for a buyer, it would be good to take advantage of today’s low rates and incentives to make a move. For homeowners who would like to sell, the market looks like it has improved enough to be able to plan for the future. Call or email me today and let’s put a plan together.

Ward Spears
(503) 522-8269
wspears@equitygroup.com

Avoid Foreclosure

Well, this is a fun subject for people, NOT! As I’m sure you’ve heard, homeowners are coming under increasing difficulty. Fortunately, by far the majority of homeowners are perfectly fine, thank you very much. In fact, just the other day I heard that about 30% of homeowners actually own their homes free-and-clear, which actually sounds like a nice idea right now. I’ll have to remember where that source is and link to it.

Another positive that should limit stressed homeowner’s problems is that they do have options. One option is that it may be possible to modify your loan. Lenders actually do this, and it can work quite well. Another option is called short sale. Short sale simply means that more is owed on the home than it’s worth, and as a result the bank needs to agree to the sale in order for it to occur. The bank is willing to do this because they *really* do not want to own the house, although if you mess around they will foreclose, which is by far worse than a short sale. A short sale results in a few missed payments which can be cleaned up in a relatively short period of time, while a foreclosure results in a blemished credit report which could haunt you for years.

Due to the increasing problem of decreasing equity, I’ve taken the time to become a Certified Short-Sale Professional. This means that I’ve spent hours studying the approaches that will maximize your chances of a successful short sale, and will minimize your chances of foreclosure or continuing to owe money after the sale has concluded, although there are no guarantees. Most agents are learning how to do short sales by trial and error, but do you really want to be someone else’s trial, or worse yet, their error? To most agents, short sales still contain mysterious elements, I’ve decided eliminating the mystery is critical for my clients.

Does this mean I have the attitude “No Equity, No Problem”? Definitely not. Having no equity or negative equity isn’t fun for anyone and is always stressful. My goal is that being as professional and knowledgeable as possible on the subject will help alleviate my client’s stress.

--Ward Spears

Help with Foreclosures

We are announcing that we are going to be including in our services help to people who are in foreclosure. In the past, we have helped a number of people avoid foreclosure through short sale, and we think we can do a better job than other agents who are specializing in this area. One thing we’ve run into with a number of the agents who specialize in this, is it is very difficult to get decent communication, even returned calls. Well, we think we can do better than that.

Another important factor that will set us apart from other agents who help people with short sales is we have a commitment to always keep learning, to stay on top of the new things that are happening. With all that’s going on in the financial industry, it is critical to stay up-to-date with new laws and regulations, and how that may affect people who are having difficulty paying their mortgages.

If you or someone you know is having trouble paying their mortgage and would like a free consultation on the process, please call or email anytime. Soon we’ll be adding more detail to our website too, check back for that.

For many people having trouble paying their mortgage, a short sale can be a great way to limit the damage to their credit, and to most easily move on with life. For others, loan modification may be a possibility… look for an announcement on this subject soon.


--Ward Spears

Fed Lowers Mortgage Rates

Normally, the Fed doesn’t directly influence mortgage rates at all, the rates go up and down based on the market. Sometimes when they lower “the rate” meaning the Fed Funds rate, mortgage rates actually go up if the market fears more inflation. However, to boost the real estate market, the Fed has recently begun buying mortgages to directly influence mortgage rates, and the result has been rates as low as 4.75% today.

Everyone knows that a lower rate results in a lower payment as long as the loan balance stays the same. However, did you know that the amount going towards principle actually goes up, not just the percentage of the payment but the actual amount? For example, when rates were languishing around 6.25% (still a pretty darn good rate) a $300,000 30 year loan would have resulted in a payment of about $1847 with about $285 of the first month payment going toward principle. With rates now down at 4.75% the payment would drop to $1565 with $377 going to pay down the loan. The result is actually the same as getting the house for a lower price, in fact a little better. If you’re able to look into the future five years, with 6.25% the balance will be $280,012 while at 4.75% the balance will be $274,495. In that same five years you’ve also saved nearly $17,000 in payments (actually $16,933) for a total savings of $22,450 in five years.

It would probably be a good idea to take advantage of this.

How did the Fed buy mortgages? They actually bought mortgage backed securities, in particular, those issued by FNMA and FHLMC, these two Government Sponsored agencies buy and securitize mortgages, packaging loans into securities to sell to investors. In this case, the Fed was an investor, thereby increasing demand for the securities, pushing down the mortgage rates. It’s difficult to imagine they could keep this up forever, this feels like a special opportunity for home buyers.

12/8
Ron with Dave Ramsey wrap up

On day two, Dave shared some of his personal experiences, including how it is that his company has been named Nashville’s best place to work. There is a high degree of motivation and teamwork within his company, which employs about 200 people. That’s a pretty impressive number considering Dave started by himself selling his books out of the trunk of a car.

Overall, Ron had a great experience over the two days in Nashville and returned with a lot of great business ideas we can use. As most people know, this market has its share of challenges, so being linked to a guy like Dave Ramsey with his record of success is pretty nice!

--Ward Spears

Dinner at Dave's Table

Day 1, Evening – Ron with Dave Ramsey in Nashville

Yesterday, for dinner, Dave Ramsey held a banquet for all the real estate agents from around the country attending his conference. With assigned seating, Dave and his wife Sharon actually had Ron sit at their table! Very cool. Dave wanted to talk about the tv show that he filmed in Wilsonville several years ago at one of our listings. It was before Dave really had too much tv exposure, so it was kind of a big deal in the organization. Dave said the fact that the house sold in only a few days actually gave Dave quite a bit of credibility with CBS, the network that was considering the show. Anyway, the show never aired, but the whole event still seems pretty fresh in the mind with most people in the organization.

Otherwise, Ron had lots of time to meet with the other real estate agents that are attending, and is getting a lot of great ideas. His visit to Nashville is going to help get our ’09 off to a great start!

--Ward Spears