Real Estate News & Commentary by Chris McLaughlin, March 25, 2009
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New home sales on the rise
It was reported that new home sales rose 4.7% to a seasonally adjusted annual rate of 337,000 in February from a revised 322,000 in January. It was the first increase since July. Economists were expecting a sales rate of 300,000, according to consensus estimates compiled by Briefing.com. The report also showed that the median sale price of new houses in February was $200,900, down 18% from $245,300 a year ago. Are we starting to scrape the bottom?
Mortgage applications jump
U.S. mortgage applications jumped last week as record low interest rates spurred a surge in demand for home refinancing loans, data from the Mortgage Bankers Association showed on Wednesday. The MBA said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5 percent of all applications. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.63 percent, down 0.26 percentage point from the previous week, reaching a record low, the MBA said.
Approval rates fall
Most people who apply for loans still receive them, with the pull-through rate – the percentage of applicants whose loans are approved – running about 60%, but that’s significantly lower than the pull-through rate the Mortgage Bankers Association recorded during the height of the housing boom. In 2003 nearly 79% got their loans. Borrowers with scores of 750 or above accounted for 38% of loans issued during the second quarter of 2008, compared with just 23% just two years earlier, according to the MBA. Those with low credit scores of 650 or less represented only 15% of loans during the first three months of 2008, compared with 28% during the first quarter of 2006.
Debt? What debt?
President Obama used a prime-time news conference last night to defend his $3.6 trillion budget plan (or $9.3 trillion in debt over the next 10 years, if the non-partisan Congressional Budget Office can be believed) , digging in on his ambitious spending and tax proposals one day before the plan begins to move in Congress. Obama says the government should spend now on renewable-energy development, education and a health-insurance overhaul that would put the economy on a sounder footing once it recovers. However, a lot of people wonder how a “sounder footing” will come about by creating a system that will almost certainly create an inflationary bubble and demand high taxation on the middle class to maintain. Just because it’s “the rich” today doesn’t mean it won’t be you tomorrow.
Markets up
Stocks jumped this morning after better-than-expected reports on durable goods orders and new home sales. The Dow Jones gained 180 points, or 2.4%, 35 minutes into the session, and seems to be hanging onto its gains as of the time of this writing. The S&P 500 index rose 19 points, or 2.4%, and the Nasdaq composite added 37 points, or 2.4%. The Census Bureau reported that durable goods orders – an important gauge in measuring manufacturing – rose 3.4% in February. Orders were expected to decline 2.5%, according to a consensus of estimates from Briefing.com.
Now on to our real estate investing education section…
Luxury Short Sale Homes – Bargain or Big Mistake?
If short sale real estate represents a buying opportunity for most Americans than luxury home short sales should really big a big bargain; after all, the relative decline for homes above the median sales price are typically experiencing even more dramatic declines than the housing market as a while. So, should investors and homebuyers take advantage of these once in a lifetime buying opportunities or pass due to the current economic climate? Here to help you sort through the clutter and confusion are the facts about buying luxury short sale homes including who should buy and who should think twice.
- Define Luxury. The first step is to actually define what luxury means to you; after all, luxury – like beauty – is often in the eye of the beholder. Many builders and real estate brokers attempt to make a home sound luxurious by mentioning upgrades like appliances, granite countertops and so forth. However, amenities alone do not make a luxury home. Neighborhood is a critical consideration as is the financial aspect. Typically speaking, a luxury home is one that is above the non-conforming limits and appeals to no more than the top 10 percent of income earners in the area.
- Negotiate Amenities. Standard home buyers searching for a home with luxury amenities and upgrades can save substantial sums on the cost of a home by discounting upgrades. This was previously covered in-depth on the shortsalesriches.com/blog in an article about Hedonic Pricing. Suffice to say, many upgrades simply aren’t worth what they used to be –especially those that require high maintenance and associated fees. Always go with the builder’s model pricing when possible.
- Shrinking Options. Thanks to the financial melt-down in the stock market, many retirees and upper middle income earners have watched savings and investments dwindle to nothing. This means very real buying opportunities for those interested in a true luxury home or condo. While the price of affordable housing may have declined by as little as 10 to 15 percent in many areas, luxury homes are selling at 30, 40 and even 50 percent from their former highs. Tight credit and dwindling investment portfolio’s mean a lack of liquidity for many would be former buyers. Those in the position to buy now are likely to realize tremendous savings whether buying their dream home or investing in the future.
- Keep Your Options Open. If you have always wanted to improve the lifestyle of your entire family now is the time to take action. Imagine purchasing a million dollar home for half that amount or a $750,000 home for only $375,000…it’s possible if you know where to look and how to structure the offer. A lifestyle formerly unavailable could suddenly be available to you and your children thanks to the current economic crisis – but it won’t last forever. Be sure you have the staying-power to avoid joining the ranks of sellers attempting to avoid foreclosure then consider searching for homes that may have formerly been out of your reach.
See you at the top!
Chris McLaughlin
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Copyright Loss Mitigation Institute 2009.
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid flipping of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 agents, uniquely
positioning him to help thousands of investors
make money in the biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
* On twitter: http://twitter.com/mclaughlinchris
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