Epain Homes

I’ll have an all time one month record for closed unit sales this month of November (assuming all my pending contracts close as scheduled). This is highly unusual as my unit sales volume is greatest every year in April, May or June. It is just one illustration of how unique each year, month and day of the real estate market really is.

This second half of the year has been moved by lower asking prices, lower mortgage interest rates and Uncle Sam’s first time buyers’ credit. The opportunity to buy a primary long term home or well located condo has been a reality to many, not a sales pitch. Although I still managed to have my average number of sales units thus far, the first half was slower than the third quarter and the attitude full of trepidation. Now people are happy and excited to make a home purchase they feel good about.

Here are a couple stories sent to me by my brokerage showing some positive local and national movement in the market along with analysis for what’s coming around the corner.

More positive news on new-home sales

By Alby Gallun, Nov. 02, 2009

(Crain’s) — After enduring a three-year freefall, local homebuilders have nowhere to go but up — or at least sideways.

Chicago-area new-home sales rose for the third quarter in a row on a seasonally adjusted annualized basis, according to housing consultant Tracy Cross & Associates Inc., another sign that the worst is over for homebuilders.

Yet where the market goes from here will depend on the broader economy and job market, which isn’t likely to surge back anytime soon.

“You can’t get blood out of a turnip, and that’s where the problem is,” says Tracy Cross, president of the Schaumburg-based firm.

On a seasonally adjusted annualized basis, local residential developers sold 4,666 homes in the third quarter, up 15% from a rate of 4,054 in the second quarter, according to a recent report published by the firm. The market bottomed out at 2,786 sales in fourth-quarter 2008.

The bad news is that 2009 will likely go down as the worst year for homebuilders since World War II. Even with the recent pickup, the beginning of the year was so bad that Mr. Cross expects developers to sell just 3,700 homes this year, down 42% from 6,374 in 2008 and 89% from the peak of 33,287 in 2005.
Sales in the city bounced back in the third quarter, as developers lured buyers by slashing prices by as much as 35%. Chicago builders sold 1,967 units at a seasonally adjusted annualized rate, nearly triple the 674-unit pace in the second quarter.

Chicago condo developers are still sitting on several thousand unsold units, ensuring that the discounting will continue. The developer of the 168-unit Park Monroe recently reduced prices on several condos in the project at 65 E. Monroe St.; one-bedroom, one-bathroom condos there now are listed at $299,500 down 25% from $399,900 previously, according to the development’s Web site.

The quarter was tougher on the suburban market, where seasonally adjusted annualized sales fell 20% from the second quarter, to 2,699 units. One reason: The $8,000 federal tax credit for first-time homebuyers boosted suburban demand in the first half of the year, but sales petered out in the third quarter because the credit is set to expire Nov. 30, Mr. Cross says.

Because of the time it takes to build a new home, suburban buyers who signed contracts in the third quarter wouldn’t have been able to close on the purchases until after the deadline, removing the sense of urgency to buy, he says. Tracy Cross records a sale when a purchase contract is signed, not at closing.

The tax credit has been less of a factor in the city because new homes there, with an average price of $587,158 in the third quarter, are beyond the means of many first-time buyers, Mr. Cross says.

Congress is considering extending and expanding the homebuyer credit, possibly until April 30, but that won’t be enough to ensure a recovery in the U.S. housing market.

Even if the credit is extended, “home demand and prices will deteriorate again once the credit eventually expires — especially if job creation does not materialize in light of further anticipated increases in housing inventory as mortgage delinquencies and foreclosures rise,” CreditSights Inc., a New York-based research firm, writes in a recent report.

The other key factor is the availability of mortgage financing. Condo developers continue to gripe that lenders have tightened their underwriting standards so much that creditworthy borrowers can no longer get a loan to finance a new condo purchase. And mortgage rates are rising again, fueling concerns that higher borrowing costs could stall a market recovery.

Though he’s written off 2009, Mr. Cross expects new home sales to rise about 20% in 2010, rising ultimately to about 22,000 units annually.
“We don’t see Chicago ever coming back to what we saw in ’04 and ’05,” he says.

CNN reports on sales

RWF Mortgage loan officer Ken Dickerson sent a brief blurb regarding the state of the $8000 tax credit extension. Email Ken at Kenneth.B.Dickerson@rwfmortgage.com

Vote on Extending Homebuyer Tax Credit Delayed Over TARP Issue
Bloomberg, By Brian Faler and Ryan J. Donmoyer

October 30, 2009

The U.S. Senate won’t vote until next week at the earliest on proposals to extend both an $8,000 tax credit for first-time homebuyers and unemployment benefits for the nation’s jobless.
Senate action was delayed by a Republican demand that a vote be allowed on an amendment to end the Treasury Department’s Troubled Asset Relief Program at the end of this year.

Senate Majority Leader Harry Reid, a Nevada Democrat, balked yesterday at the demand by Senate Minority Leader Mitch McConnell, a Kentucky Republican. Reid also took procedural steps to end debate and schedule Senate action on extending the homebuyer tax credit and the unemployment benefits.

Lawmakers announced plans earlier this week to attach the tax-credit proposal to a pending bill on the unemployment benefits. The $8,000 tax credit, enacted earlier this year as part of the $787 billion economic stimulus package, is set to expire at the end of November.

The lawmakers want to extend it until April 30. Their proposal would also expand it to allow higher-income Americans and some who already own homes to qualify for the break.

Homebuyers who have lived in their prior residences for at least five years may receive a $6,500 credit under the plan, said Senate Finance Committee Chairman Max Baucus. Also, couples earning as much as $225,000 and individuals as much as $125,000 would qualify for the extended break, Baucus said. That’s up from a $75,000 limit for individuals and $150,000 for couples.

Let’s buy two!

I was watching CNN from my home office (kitchen) and they have reported this afternoon on a Senate “tentative agreement” to extend and even expand the first time home buyer’s credit through June/July of 2010.

Read the Wall Street Journal report here

The $8,000 will remain for “first time buyers” and we may even see $6,500 for “second time buyers” (I’m still out).

Congress will have to vote of course, but I can’t see them denying something tangible to their constituents. The credit has been given “credit” for moving housing, which is important to John Q. Public.

The lowest closing price was about $625,000 for a three bedroom, one and one-half bath (ouch) renovated four square on a 25×120 lot. The highest price closing was… well, if you have to ask you can’t afford it, if you know what I mean.

Since the process of obtaining an appraisal for a residential real estate transaction has changed earlier this year – it has caused some aggravation and unnecessary grief to home owners, Realtors, and some loan officers. Since the Home Valuation Code of Conduct (HVCC) now has a track record, the market is beginning to question the new policy’s effectiveness.

Because of these questions that are being asked by homeowners, Realtors, and bankers – Congressional members are beginning to discuss options and if the new Home Valuation Code of Conduct (HVCC) is set up correctly. The attached link raised the questions from Congressional legislators – is the cost of obtaining an appraisal today higher and are today’s appraisals less accurate under the new HVCC policies?

The current policy of the HVCC states no person tied to the real estate transaction can order or speak to (influence) the appraiser within residential real estate transactions. Therefore – the Loan Officer, Loan Processor, Loan Underwriter, etc… can not select the appraiser, speak to the appraiser regarding values or comparable properties, nor challenge directly the appraiser on the value or any errors on the report. Instead all concerns and/or errors must go through an appraisal management company – which initially accepts the order for the appraisal, selects the appraiser, and accepts the appraisal report from the appraiser.

If the initial report turned in is inaccurate, presents a low value, or has any errors – the Loan Officer and parties involved with the transaction must go through the management company to contest the appraisal report for changes. This process has been viewed to cause the appraisal reports to come back inaccurate and at a higher cost. The HVCC also prohibits the use of one appraisal report to be used by multiple lenders – which in the end may still be a good thing.

In my opinion – it’s perfectly fine to have this system of checks and balances in place. But it should not cause more appraisal inaccuracies nor drive up the cost of appraisals for the consumers and lenders involved.

More importantly, impediments in the appraisal process can hurt area small business if they can’t refinance, sell or acquire real estate. Not to mention, it hurts business in general for all parties involved if appraisals impede transactions.

Attached is a great article and how some Congressional legislation may come into affect to change this recent adjustment to the residential lending industry. Which will have an affect on today’s Small Business community as well.

From CNBC Could HVCC Be History??

For more questions on appraisals and lending please contact Brian Cumpton of RWF Mortgage. Just click the link.