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Each month, the National Association of Realtors^® releases a study called the Existing Home Sales report. It’s a detailed look at “used” home sales data from all four regions of the country.

One of the key findings in each Existing Home Sales report is something called the “median sales price”, the statistical price point at which half of the homes in the U.S. sold for more, and half sold for less.

Last month, the median sales price in the United States fell to $215,100, off 6.1 percent from a year ago.

But, just because the median sales price is falling doesn’t mean that housing is necessarily in the doldrums. Real estate is tied to local markets and the national statistics rarely make sense when applied to any given city.

For example, the $215,100 median sales price for the nation is as outrageously inappropriate as a sales price to New York City as it is to Minot, North Dakota. In fact, it’s the very definition of “median” that discounts its ability to reflect the health of the national housing market.

If large numbers of homes are sold and the price tags are high, the median sales price will trend higher. Conversely, if large numbers of homes are sold and the price tags are low, the median sales price will trend lower.

The median is just the middle point.

The falling median home sales price in June may indicative of first-time home buyers outnumbering luxury ones, or banks successfully unloading homes in foreclosure. And this idea may be supported by the data which shows that the West and Northeast led the decline.

So if you’re trying to gauge the health of your local real estate market, consider asking a local real estate agent for help. A skilled agent’s analysis will be infinitely more practical and useful than the national data pumped out by the industry trade group.

(Image courtesy: The Wall Street Journal Online)

Fannie Mae announced a new risk-based pricing model and additional mortgage delivery fees this week, adding to the cost of buying a home.

Risk-based pricing was first introduced by Fannie Mae this past April. It added new, mandatory loan fees for high-risk borrowers while rewarding a small group of low-risk borrowers with fee credits.

In the updated model, even 720 credit scores with a 20 percent downpayment won’t protect mortgage applicants from the risk-based fees and they can range as high as 2.750 percent, depending on credit scores and downpayment size. 

Fannie Mae will continue the practice of rewarding high-downpayment borrowers with fee credits.

Fannie Mae’s second pricing change involves the Adverse Market Delivery Charge and it is not risk-based — it applies to all applicants equally. 

First introduced in December 2007, Adverse Market Delivery Charges are mandatory surcharges on all conforming mortgages.  The fee was initially a quarter-percent.  It’s now doubled to 0.500 percent.

Combining risk-based pricing and delivery fees, mortgage applicants have two choices to pay them:

1. As a one-time fee, paid at closing, payable to the lender
   
2. As an interest rate increase, payable month-after-month to the lender

The one-time fee is calculated by multiplying to fee amount by the applicant’s loan size and dividing by 100.  The interest rate increase is calculated as a general rule, where each 0.500 percent in fees can be substituted for a 0.125 percent increase to a mortgage rate.

The fees become “official” October 1, 2008, but lenders are expected to deploy them much sooner.

When home sellers accepts a contract on MLS-listed property, the property’s official status changes from “Active” to “Pending”.

By measuring the number of “Pending” homes nationwide, the National Association of Realtors^® publishes its once-monthly Pending Homes Sales Index.

The real estate industry group positions the report as a predictor of future home sales activity, stating that 80 percent of homes under contract will “close” within 60 days, and most others will close within 120 days.

But, although using the Pending Home Sales report as a crystal ball may be its intended use, it may not its best use. 

This is because of the index’s methodology:

1. It doesn’t measure new construction homes
   
2. It doesn’t track For Sale By Owner properties
   
3. Its sample set covers just 20 percent of MLS transactions

In addition, in a tough mortgage climate such as the one we’re in now, a greater percentage of pending sales will fail to close at all because of lack of financing.

The Pending Home Sales Index still has its place, however — it’s a terrific look at the buy-side demand for homes. 

When the Pending Home Sales Index is rising, we can infer that more buyers in the market for homes and this is a signal of market strength.  After all, pending sales can’t happen unless there are buyers out there.  And with more buyers competing for homes, home prices tend to rise.

This is why the June’s Pending Home Sales report is so intriguing. 

In June — for the second time in three months — the Pending Home Sales Index posted a large gain even as economists were calling for a loss.  The inference here is that buyers are not only finding good value in all four regions of the country, but are willing to make bids on homes listed for sale.

Now, again, the uptick doesn’t mean that the pending sales will necessarily close, but it does tell us that more home buyers are finding “now” to be a good time to buy real estate.

That sort of insight is what make the Pending Home Sales Index worth tracking.  When buyer demand is rising, the real estate market isn’t usually far behind.

Any plumber will tell you — toilets are among the least efficient appliances in a person’s home.  20 percent of them leak up to 200 gallons of water per day — the equivalent of an 80-minute shower.

At an average cost of $2 per 1,000 gallons, the EPA estimates that homeowners literally flush $146 of water down the drains each year.

But toilets also waste money by overfilling with water; even low-flush varieties waste 32 ounces per flush.  Because of overfills, an average household of 4 people with 2 toilets squanders an additional 6,575 gallons of water in a calendar year, or $13.15.

Enter the $15 HydroClean toilet valve.

Built by a plumber, the HydroClean product prevents toilet overfills, detects leaks, and cleans the toilet tank for you.  It installs in 5 minutes and the Web site says no special skills are needed.

Within the next 5 years, 36 states expect to suffer water shortage.  Using HydroClean, you can help conserve water and conserve dollars.

HydroClean is available at retail stores and online.

Source
Drinking Water Costs and Federal Funding
EPA.gov, June 2004

Conforming mortgage guidelines are the Home Loan Rule Book, delineating between applicants that approved for a mortgage and those that do not.

Effective today, the rule book just got a little bit tougher.

According to Fannie Mae, homeowners converting their primary residence into a second home or investment property will be subject to additional underwriting scrutiny. Fannie Mae is leery of lending to people that may be over-extended.

The complete underwriting update is available at the Fannie Mae Web site but some of the more important points are summarized below, divided into Second Home and Investment Property.

Second Home Guideline Changes

• Without 30 percent equity in the second home, mortgage applicants must have 6 months worth of PITI reserves for both properties in their bank accounts.
• With 30 percent equity, the PITI reserve can be reduced to 2 months.

Previously, there was no minimum reserve requirement.

Investment Property Guideline Changes

• With 30 percent equity in an investment property, 75% of the monthly rental income can be applied toward the applicant’s monthly household income.
• Without 30 percent equity, rental income may not be applied to the applicant’s monthly household income and 6 months PITI is required for both properties.

Previously, 75% of the rental income was allowable regardless of equity, and minimum reserve requirements were 2 months.

Even though just a small percentage of Americans own second homes or investment properties, the conforming mortgage guideline changes impacts homeowners everywhere.

This is because more restrictive guidelines lead to two separate, but concurrent, outcomes:

1. The demand for homes reduces because fewer buyers qualify for mortgages
2. The supply of homes increases because fewer sellers can refinance into more affordable home loan

Less demand and more supply places downward pressure on home prices.

Now, remember that mortgage guidelines continuously evolve and what’s accurate as August 1, 2008, may not be accurate six months down the road. In other words, confirm what you’re reading about mortgages online with your loan officer before making any real estate-related decisions.

Monday, President Bush signed the Housing and Economic Recovery Act of 2008 into law and the press jumped on the obvious storylines:

• First-time home buyers get a $7,500 purchase “credit”
• Conforming loan limits move to $625,000
• Delinquent homeowners get a lifeline from the FHA
• Local governments get federal money for buying and restoring foreclosed homes

However, tucked away on the last few pages of the text, in a section called “Revenue Offsets”, there’s an important tax implication. The new housing law changes the way in which capital gains exclusions are calculated on the sale of a residence.

Under the old system, a taxpayer was entitled up to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided he lived in the residence for at least 2 of the preceding 5 calendar years.

Savvy homeowners exploited this verbiage, moving from home-to-home every 2 years to avoid paying capital gains.

The new law thwarts this tactic.

Capital gains exclusions are now calculated by taking the capital gains on the sale of the home and multiplying it by a ratio of how long a person has lived in a home, by how long that person owned the home.

In the example above, a person living in a home for 2 of 5 years would be entitled to 40 percent of tax-free gains on a home sale instead of all of it. Therefore the impact on home buyers who are not planning on relatively short term moves (under 5 years) will be minimal. Like many other of the bill’s provisions, the lawmakers attempted to direct this bill to relief for the home buyer who is trying to find a place for their family, and not the real estate investor or “flipper”. As always, however, it’s best to talk with a qualified accountant about how tax code changes may impact you personally.

The new capital gains rules go into effect starting January 1, 2009.

Photo Courtesy of Creativecommons.org & EricSkiff

I’ve worked for Macy’s Roosevelt Mall store for over a year now, next to Black Friday the store’s busiest day is the “Shop for a Cause” event. This day is about supporting local charities and bringing the community together.

The store provides entertainment, booths and refreshments for all of its customers. Last year’s event included salsa lessons in the fragrance department, a rock band in the juniors department and snacks and chair massages in the house wares department. It’s a fun way to feed your shopping addiction, have fun with your family and support a great cause.

To participate in this year’s Shop for a Cause day, CENTURY 21 Advantage Gold is selling $5 Macy’s Department store shopping passes which will provide consumers with a 10-20% discount on most store items. Every dollar raised goes directly to Easter Seals. Coupons are good for Saturday, September 20 at any Macy’s. Each shopping pass also provides the consumer an opportunity to win a $500 Macy’s gift card.

If you wish to purchase shopping passes please contact the Marketing Department: mary.bauman@c21ag.com.

Photo courtesy of acodring at creative commons.org

OK- you’re an experienced agent with 3 or more years in the business and you aren’t being mentored anymore. You’re staying positive because you know that the media has our local market all wrong, but you’re not as active as you want and you can’t figure out what to do.

You’ve gone back to the basics, you’ve contacted your friends and family as well as your past customers and clients. You’ve continued your regular monthly marketing, but you’re not getting the same results that you got before and you’re getting concerned, maybe starting to believe some of the media hype… so you ask yourself WHAT SHOULD I DO?

There is always a way to get things back on track. Don’t start thinking of a change of scenery. The problem isn’t where you are physically, it’s where you are mentally. When was the last time you stepped out of your business and worked on it, not in it?

Being a Real Estate Salesperson is very similar to being a professional athlete in at least these two ways;

• You must have your head in the game, it’s 85% mental.
• You must work on your game on a regular basis, not when it’s convenient to you. “We Talkin’ Bout Practice!” – (Thanks Allen Iverson, I miss you still!) Most athletes will tell you that their mental state is way more important then their physical state.
• Practice your skill sets. Every athelete practices to perfect their skills when they’re not playing. Why should you expect to succeed if you aren’t doing the same thing?

So what does this mean? How do I sharpen My Axe? Using systems that have proven themselves to be effective is what I do. I am a proud graduate of the Floyd Wickman Master Sales Academy a student of the Floyd Wickman Starmaker Program. and a practitioner of the By Referral Only System created by Joe Stumpf. By concentrating on the different facets of these different Systems daily, keeping myself accountable for results, and working on mastering different aspects of these Systems, I practice my skills everyday. And that practice means that I’m improving my abilities through this constant training thereby sharpening my axe!

Photo Courtesy of Creativecommons.org

The President signed into law the Landmark housing legislation Wednesday. The law is designed to help the housing industry and the credit industry recover from the mortgage melt-down of the past year, and provide stability in the financial markets. Those portions of the bill are important, but some sections of the law impact first time home buyers in a manner they will immediately feel.

One part of the bill does impact “the average buyer” immediately in an important manner. This portion provides a tax credit of up to $7,500 for first time home buyers, whose individual incomes are less then $75,000 or married couples who earn less than $150,000 jointly. The tax credit can be used for homes purchased between April 9, 2008 and July 1, 2009, and should stimulate home buying, reduce excess supply in housing markets and shore up home prices.

The Tax Credit is based the purchase price of the property, being 10% of the purchase price, up to $7,500 (meaning that for most first time home buyers , the credit will be $7,500).

A comprehensive lists of questions and answers about the tax credit program can be found at the National Association of Home Builder’s web site www.federalhousingtaxcredit.com.

So if you are a renter, and you’ve been thinking about buying, or if you haven’t owned a home for three years or more, now is the best possible time to look for that home to help your family build financial stability, on the government’s dime!

Photo Courtesy of Creative Commons and jbelluch

One of our agents brought me an offer on a listing of mine. The price was very low and she was very apologetic but said the buyer just wouldn’t make a higher offer.

I presented it to my seller knowing that they wouldn’t be happy. I suggested they make a counter offer slightly less then the asking price,since the ability of the buyer to purchase and the terms of the agreement were good. We were $30,000 apart. The seller’s thought about it and made a counter offer $1,000 less than their asking price.

The buyers came up $5,000 from their initial offer which was better, but still too low for the sellers. Again the sellers reduced the price by an additional $2,000 in a counter offer. The buyer’s wouldn’t budge any further in their price. I suggested that their agent take them out to see other properties.

I figured they had only seen a few homes and possibly didn’t understand the value of this property. At the same time, I was talking to the seller about the values in the area, the fact that they had priced their house slightly higher than the market indicated. I suggested that they might reconsider what they felt was the right sale price for their home.

All of this took 10 days. Another week went by with continued showings but no new offers, even though several buyers looked at the property more then once. The buyers made a new offer increasing the sale price $7,000 and entering the price range I had discussed with the owners when the home was listed. I have presented this to the sellers and are waiting for their response. Stay tuned for the final episode, as the sellers make their next decision.

Patience in this market will eventually make a transaction work for everyone. Sellers and Buyers need to think about the other parties position in the most positive manner and work through the issues, slowly, steadily and persistently, until everyone’s a winner!