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Brought to you by: KW Research Commentary 2 The Numbers That Drive Real Estate 3 Recent Government Action 9 Topics for Home Buyers, Sellers, and Owners 11 Released: June 7, 2010

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Page 1: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Brought to you by:

KW Research

Commentary 2

The Numbers That Drive Real Estate 3

Recent Government Action 9

Topics for Home Buyers, Sellers, and Owners 11

Released:

June 7, 2010

Page 2: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

The housing sector continues to show signs of recovery.

Together the tax credit (which expired at the end of

April), the more upbeat consumer confidence, and

favorable market conditions all contributed to

bolstering April’s sales activity - with existing home

sales increasing for the second straight month.

Commentary

KW Research 2

The return of buyer confidence with much of the home price correction believed to be

over, encouraging economic developments and historically low mortgage rates, will

provide the stepping stone for further market stabilization.

Meanwhile, stagnant job growth and elevated levels of foreclosure continue to be

cause for concern. The government is now taking proactive steps to restructure the

mortgage industry with risk-management measures seen by experts as a “huge cut in

red tape” that would ultimately benefit consumers.

Page 3: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Brought to you by:

KW Research

Home Sales 4

Home Price 5

Inventory 6

Mortgage Rates 7

Affordability 8

The Numbers That

Drive Real Estate

Page 4: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Home SalesIn Millions

Existing home sales strengthened in April to 5.77 million, up 8.7% from March and

22.8%from last April. This is the tenth consecutive month of year-over-year increases.

According to Lawrence Yun, NAR chief economist, although part of the uptick was

expected from the tax credit, there’s also been a return of buyer confidence, for those

who remained on the sideline last year. The return of confidence is a result of

stabilized prices, an improved economy, and continued advantageous interest rates. In

March, 49% of sales were from first-time buyers.

Impact of Tax

KW Research 4

4.7

5.14

6.49

5.77

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Latest Data Release: May 24, 2010

Source: National Association of Realtors

Seasonally Adjusted Home Sales - In Millions

Impact of Tax

Credit Deadline

Page 5: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Home PriceIn Thousands

The median price for an existing home was $173,100 in April, up 2.1% from a year ago and

4% from March. Distressed homes, accounting for a third of last month’s sales, continued

skewing prices downward slightly as they typically are discounted 15% compared to typical

home sales. Overall, prices this past year showed increased stability over the previous year.

KW Research 5

$167

$182

$165

$173

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Home Price - In ThousandsIncreased

Stability

Latest Data Release: May 24, 2010

Source: National Association of Realtors

Page 6: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Inventory -In Millions

Total housing inventory rose slightly to 4.04 million in March, representing slightly less

than an eight-and-a-half month supply of sales (if homes continue to sell at the

current pace consistently and no new homes come on the market). Compared to the

previous year, there are now 3% more homes on the market. Although this is the first

rise in twenty consecutive months of decline when compared to the previous year,

NAR’s chief economist believes this increase can be attributed to the summer selling

season and that home prices are back on track.

Number of homes available for sale

3% more

KW Research 6

3.94

3.92

3.53

4.04

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Number of Homes Available for Sale - In Millions

3% more

homes on

market

Latest Data Release: May 24, 2010

Source: National Association of Realtors

Page 7: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

11-Jun

5.59

Mortgage Rates30-Year Fixed

Mortgage rates dipped back below 5% this month due largely in part to the European

debt crisis. As confidence in the value of the Euro eroded, more investors chose the U.S.

dollar instead. With more demand for dollars, the cost of debt (interest rate) dropped.

This event has also shown the global recovery is not free-and-clear of roadblocks to

complete recovery. However, experts still anticipate rates will increase to between 6%

and 6.5% by the end of the year. As the recovery gains increasing traction, the Federal

Reserve will need to increase rates to prevent inflation.

KW Research 7

7-May

4.84

5.59

13-Aug

5.29

8-Oct

4.87

3-Dec

4.71

31-Dec

5.14

8-Apr

5.21

27-May

4.78

Source: Freddie Mac

Average Weekly Mortgage Rates

One-Year

Average 5.05%

Page 8: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Affordability -Percentage of Income

Affordability remains advantageous, supported by some of the lowest

mortgage rates in decades as well as less expensive home prices. The home

price-to-income ratio continues to remain well below the historical average of

25%. The ratio now stands at 14.9%.

The percentage of a median family’s income required

to make mortgage payments on a median-priced home

Historical Standard: 25%

KW Research 8

18.9% 19.8% 18.4% 18.7% 22.0% 23.7% 22.2% 19.0% 13.6% 14.9%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Affordability as of April every year. Calculations assume a 20% down payment.

Source: National Association of Realtors

Page 9: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Brought to you by:

KW Research

Recent

Government ActionFHA Turns to Lenders to

Monitor Brokers10

Page 10: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

FHA Turns to Lenders to Monitor Brokers

As the Federal Housing Administration (FHA), the government agency that insures home loans, saw its market share rise to about one-third of the mortgage market last year, up from 2% in 2006, the number of brokers seeking to arrange FHA-backed loans has mushroomed to 9,043 at the end of 2009 from 5,759 just two years earlier.

The agency, finding itself inadequately equipped to monitor its brokers, is shifting the responsibility to its lenders.

FHA

-Insures home loans

-Certifies and

oversee lenders

Lenders

KW Research 10

The FHA expects the new policies to result in better risk management, and the cut in red tape should produce better rates for consumers.

As of May 20, the FHA no longer certifies mortgage brokers or tracks the performance of brokers’ loans. Instead, lenders are now required to sponsor brokers and assume responsibility for loans they originate, including losses from fraud or mistakes in underwriting. In addition to revamping broker insight, the agency also beefed up oversight of its lenders by increasing net-worth requirements to $1 million from $250,000. The change is in effect for one year for existing lenders.

Source: The Wall Street Journal

Borrowers

Brokers -Make mortgage

loans

-Sponsor and

oversee brokers

-Underwrite

mortgages

-Act as middlemen

between lenders

and borrowers

Page 11: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Brought to you by:

KW Research

Topics for Home Buyers,

Sellers, and OwnersMyths about Distressed

Properties – Debunked!12

Page 12: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Myths about Distressed Properties –

Debunked!Distressed properties – foreclosures and short sales alike – represent potentially great value for

prospective buyers. However, common misconceptions about the time and money investment

involved with buying such properties may keep many from inquiring further into this market.

KW Research survey findings, taken from more than 2,500 KW associate respondents who

have worked with distressed properties, can help steer clear of concerns as you make your way

to homeownership.

It’s going to take forever to

find one I want

3 out of 5 REO buyers and 1 in

every 2 short sale buyers spent

less than one month searching for

a home before writing an offer.

KW Research 12Have questions or want to learn more about distressed properties in your local area,

just ask your local Keller Williams associate!

find one I want a home before writing an offer.

How many offers do I have to

write before one gets accepted?

10? 20?

7 out of 10 distressed

property buyers wrote

three or fewer offers

before one was accepted.

I know I am getting a good deal

but will the cost of repairs eat

up the savings?

Half of REO buyers and

almost one-third of short

sale buyers spent less

than $5,000 in repairs.

Page 13: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

Although it is important to stay informed about what is going on in the

national economy and housing market, many different factors impact the real

estate market in your own area.

Talk to your KW associate for assistance interpreting the

Your Local Market

KW Research 13

Talk to your KW associate for assistance interpreting the

conditions in your local market.

KW associates are equipped with the knowledge and information to help you

navigate through the home-buying or selling process in this challenging

market.

Page 14: Commentary 2 Released: June 7, 2010images.kw.com/kw/user_uploads/TMIREJunUS2010.pdf · Myths about Distressed Properties – Debunked! Distressed properties – foreclosures and short

About Keller Williams Realty

Founded in 1983, Keller Williams Realty, Inc., is an international real estate

company with more than 77,000 associates and 677 offices across the United

States and Canada. The company began franchising in 1991 and, after years of

phenomenal growth and success, became the third-largest U.S. residential real

estate firm in 2009.

The company has succeeded by treating its associates as partners and sharing

its knowledge, policy control, and company profits on a system-wide basis.

KW Research 14

By focusing on helping associates realize their fullest potential, Keller Williams

Realty is known as an industry leader in its family culture, unmatched

education, profit sharing business model, phenomenal coaching program, and

technology offerings.

www.kw.com