The risks involved in purchasing this type of property involve paying for inspections and appraisal while there is no written commitment from the lender that they will agree to the sale.  If they do not close on the property then you will not be able to recover any out of pocket expenses.  Additionally if you are not an investor and you are planning to move into the property you may be changing your plans at the last minute.  This is perhaps easier for a single person who is currently renting than it would be for a family with small children that has already agreed to sell their current home.

The reward from the purchase of a short sale is achieved only if you purchase the property below current market value or of you really want that particular piece of property.  As stated above a short sale simply indicates that the bank is discounting the amount they are owed in order to facilitate the sale.  A property could be worth $90,000 and the seller owes $100,000 and the lender discounts $5,000.  It is considered a short sale even if you just paid $5,000 more than the property is worth.  If you purchase the same property for $85,000 then you just made $5,000 in equity for taking the risk.

Your real estate professional can help you minimize the risk and maximize the reward by including proper provisions in the purchase offer and by providing a market analysis of the property before you begin the process.

That means you have a perhaps once in a lifetime (certainly a once in a long-time) opportunity to buy a home at a discount and finance that home at an extremely low interest rate.  It’s known as Buying Power and today’s first time buyers have it.

Savvy buyers and investors are taking advantage of this buying opportunity.  We are already seeing multiple offers on properties that are priced well or below the market.  Take for example a property that sold for 168,000 just 2 years ago.  It was recently listed at $137,500 by the lender that foreclosed on the property.  There were competing offers.  The property needed clean-up and painting totaling approximately $3,500.  That’s a $27,000 discount from the market high of 2 years ago (more if you don’t mind painting).  Factor a low interest rate on the mortgage and there is additional savings.  If you have seen an increase in your earnings in the past 2 years you can factor that in the equation as well.  Keep in mind that this is just one example and not the normal discount you should expect in the Metro St. Louis market but I used this one to illustrate the opportunities that are available.

The truth about whether a home is a good investment.

Overnight Real Estate Rates Sink Further Inman News

Latest Housing Forecast from National Association of REALTORS

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Search the Metro St. Louis MLS database.  Tip: look for properties with reduced prices.

Do I qualify for a mortgage given the tightening guidelines?

The REGREEN Guidelines provide resources and tools to make home remodeling projects more environmentally friendly and energy efficient. The guidelines are organized into the 10 most common remodeling projects.
“Consumers overwhelmingly want greener homes, and the REGREEN Guidelines will help by showing them how,” Michelle Moore, senior vice president of the U.S. Green Building Council, said in a public statement. “The REGREEN Guidelines empower people with practical information about how to green projects ranging from kitchen and bath renovations to deep energy upgrades.”

The REGREEN guidelines include the major elements of any green renovation project, such as the site of the home, water efficiency, materials and resources, and indoor environmental quality.

“You can start greening your home without spending a lot of money just by getting informed,” Moore said. “Weatherization projects can save energy and lower your utility bills, which also reduce your Carbon footprint. Similarly, choosing low-VOC paints, flooring, and adhesives eliminates bad-smelling toxins and creates a healthier home.”

To access the guidelines visit www.regreenprogram.org or www.thegreenhomeguide.org.

— REALTOR magazine online and American Society of Interior Designers

“NAR is proud of USA Today’s recognition of Lawrence Yun and his economic forecast accuracy. He is a highly regarded economist, and the housing and real estate industry have come to rely heavily on his economic analyses,” says Dale Stinton, NAR executive vice president and chief executive officer. “This acknowledgement contributes greatly to NAR’s reputation as the leading innovator in housing-related research.”

Yun was named NAR’s chief economist and senior vice president of research in November 2007. He has been with the association since 2000, previously serving as vice president and senior economist. He pioneered the development of the Commercial Leading Index after helping develop the residential Pending Home Sales Index.

“I’m honored to be recognized among some of the best economists in the country,” says Yun. “The economy and housing industry are facing many challenging issues at this time, which makes this an interesting and stimulating position.”

USA Today enlisted the help of the Federal Reserve Bank of Atlanta to determine the most accurate forecasters among the economists surveyed in the newspaper’s quarterly survey on the U.S. economy.

The economists, whose identities were unknown to those gathering the data, received four scores — one for each quarterly survey — and were ranked on the average of those four scores. FRBA used statistical methods to assess the joint accuracy of the predictions rather than assessing the accuracy of each forecast variable separately, as is commonly done.

Before joining NAR, Yun worked as an economic consultant to the U.S. Department of Veterans Affairs and the U.S. Department of Education. As a research associate at the University of Maryland, Yun developed the graduate economics curriculum for and taught free-market economics in the former Soviet Union as that country transitioned from communism to a free-market system.

Yun received his Ph.D. in economics from the University of Maryland in 1995. He received a B.S. degree in mechanical engineering from Purdue University in 1987.

— REALTOR® magazine online

The effort — the latest attempt to stabilize prices of bonds backed by residential loans as delinquencies continue to escalate and home prices tumble — will provide financing for JPMorgan Chase & Co.’s acquisition of Bear Stearns Cos. for approximately $270 million, or about $2 per share.

Meanwhile, the central bank could reduce the interest rate affecting consumers and businesses to 2 percent at its March 18 meeting, marking a decline of a full percentage point.

Source: Dallas Morning News (03/17/08)

Here are three smart ways to invest in today’s housing market.

Trade up. Now’s the time to buy a larger home in a better neighborhood at what will almost certainly be a good price. To be sure, buyers will have to sell their old home at a modest price. Still this could be an excellent time to improve quality of life at a bargain rate.

Buy a vacation home. Buyers, especially those who are a few years away from retirement, could find this is the perfect time to buy a place that will be more than a vacation home down the road.

Help offspring go from renters to owners. This is a great time to give the kids an advance on their eventual inheritance so they will have enough money for a down payment.

Source: The Wall Street Journal, Jonathan Clements (03/12/2008)

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.  “This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity.” Yun said.  “Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.”

The PHSI in the West jumped 13.0 percent in January to 93.8 but remains 12.7 percent below a year ago.  In the Midwest, the index rose 0.6 percent to 85.2 but is 13.3 percent lower than January 2007.  The index in the Northeast declined 4.1 percent in January to 69.6 and is 28.0 percent below a year ago.  In the South, the index fell 6.1 percent in January to 89.5 and is 23.8 percent below January 2007.

Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half.  With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.60 million in 2009.  The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009. 

A pattern of disparate price performance continues around the country with a roughly even split between up and down markets.  Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J.  At the same time, many areas that have lost jobs are showing price declines.

“Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace,” Yun said.  NAR’s housing affordability index is forecast to rise 14 percentage points to 127.0 in 2008.

New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009.  Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009. 

“As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half,” Yun said.  “That will permit a quicker return to balanced market conditions in many local areas.”  The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.

The 30-year fixed-rate mortgage, which has moved erratically in recent weeks, is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009.

Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009.  The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year. 

Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009.  Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

(1) The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months.  There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for February will be released March 24; the next Forecast / Pending Home Sales Index will be released April 8.

National Association of REALTORS reprinted with permission

“The year-over-year increase this February was significantly higher than the 19 percent year-over-year increase in February 2007, indicating we have still not reached the peak of foreclosure activity in this cycle,” says James J. Saccacio, CEO of RealtyTrac, which markets foreclosed properties.

The 10 states with the highest foreclosure rates were, in order, Nevada, California, Florida, Arizona, Colorado, Michigan, Ohio, Georgia, Indiana, and Tennessee.

The 10 states with the most foreclosures were, in order, California, Florida, Texas, Michigan, Ohio, Arizona, Illinois, Georgia, Colorado, and Nevada.

Source: RealtyTrac (03/13/2008)

Is housing about to enjoy a spring thaw or will it remain in the deep freeze? Some observers are optimistic.

“I think this is the best buyer’s market that has existed in a decade, maybe longer,” says Russell Shaw, in his 30th year with John Hall & Associates real estate in Phoenix. “There is tons of inventory, great interest rates, and the prices are back in line. If people have a good track record of paying their bills, the loans are there.”

Likewise, Floyd Scott, president of Century 21 Arizona Foothills, which has 10 offices and 460 associates in Phoenix, says: “If I would have described this whole process as a hurricane coming through Phoenix, I would tell everybody that for the last month I’ve been taking the shutters off the windows because I think the eye of the storm and most of it is behind us. Now we’re in the process of picking up the debris.”

Others are having trouble seeing beyond the roadblocks.

“We have this continuing battle with tightening lending standards and it’s going to be tough for prospective buyers, even though they want the homes — that’s going to be an obstacle,” says Young Kim, an economist at Stone & McCarthy Research Associates in Princeton, N.J.

Source: Reuters News, Lynn Adler (02/25/08)

Yale Professor Robert Shiller, whose Case-Shiller 20-city home price index has become an industry standard, says people shouldn’t fear gradually falling home prices.

“There’s nothing troubling about a gradual correction of home prices. If we keep our incomes at the current level and home prices go down we are richer, we can buy more housing,” Shiller says.

But if home prices fall suddenly, Shiller says that could undermine housing as well as consumer confidence and the economy.

There has been a misperception that houses will constantly appreciate, Shiller says. “Sometimes people will try to imagine that we can have both high home prices and affordable housing. But I can tell you that doesn’t add up,” he says.

“You either have high home prices or lower home prices. And lower home prices are what we want, and people shouldn’t be afraid of that,” Shiller says. “Most of us care about our children and grandchildren, and these people have to buy houses so why would we want high home prices? We want economic growth, we don’t want high home prices.”