C21AGVoices

Photo by Chris Bernard Courtesy of Creativecommons.org

That’s the magic question.

Wouldn’t it be nice to know when the stock market was about to rebound? Most of us would probably buy, buy, buy and watch the values rise as others say I should have purchased at those rock bottom prices! The problem here is that we never know when we hit bottom until it is often to late. Only after values rise for some time, can we then pinpoint the “bottom.”

So what indicators can we look to in an attempt to predict the “bottom”? For starters, you need to realize that real estate is a local commodity. Different areas have varying trends. Once you pinpoint a “local’ market, I suggest taking a look at the monthly listing to sale ratio. If the ratio is moving downward…in other words sales in comparison to new inventory is falling, the market is likely still moving downward. Each month there is a growing total inventory and therefore buyers can be more selective. Prices may fall as the more motivated sellers settle for less. However, if the ratio is rising this is an indication that monthly rollover inventory is depleting. Less choices for buyers will likely lead to appreciation in values. As my high school economics teacher Mr. McMacken (West Catholic ’89) would say…as supply diminishes and demand increases, prices will rise.

Here is an interesting fact about the Philadelphia listing to sale ratio. It has been on the rise each month in 2008 as reported in Trend, our local Multiple Listing Service. In January 2008, 2835 residential homes were placed on the market for sale. That same month there were 869 sales for a 30.6% listing to sale ratio. In June 2008 there were 2545 residential homes placed on the market compared to 1226 sales – a 48.2% listing to sale ratio. Now since the ratio is still below 100% there are carryover listings. But you can clearly see the increase. This is why many real estate investors are buying now in Philadelphia. They anticipate increases in value and have data to support a turnaround.

I believe that Philadelphia’s “bottom” was the first quarter of 2008. Buy now and enjoy the bargains before you look back and wish you did! Below are the actual numbers as reported in Trend. Happy Investing!

Month         Units Sold        Units Listed           Ratio

June           1225                 2545                      48.2%

May            1195                 2506                      47.7%

April           1128                 2994                     37.6%

March         1055                 2821                     37.4%

Feb              880                  2484                     35.4%

Jan               869                  2835                     30.6%

Investors have turned their attention back to the U.S. economy this morning, causing yesterday’s mortgage rate improvements to unwind a bit.

Rates had fallen Monday after the Federal Reserve and U.S. Treasury’s joint announcement in support of Fannie Mae and Freddie Mac.  Tuesday, it’s the data that was taking center stage.

Most notably, the U.S. Dollar was trading at an all-time low versus the Euro and other currencies. 

This is a negative for active home buyers because American homeowners repay their mortgage interest in U.S. dollars.  When the dollar loses value, so does the value of those interest payments so mortgage rates end up increasing in order to attract new investors.

Another reason why mortgage rates were higher Tuesday morning is that June’s Producer Price Index registered much higher than was expected, posting its largest one-month gain since November 2007. 

PPI is a lot like the Cost of Living index, except that it measures operating costs for businesses instead.  When business costs are increasing, they are often passed onto consumers and this is why rising PPI is thought to be inflationary and inflation — like a weakening dollar — pressures mortgage rates to rise.

So, while Monday’s rate improvements haven’t completely erased, Tuesday’s action reminds us that mortgage markets wait for no one and yesterday’s mortgage rates rarely carry forward.

Especially when inflation is in the mix. 

(Image courtesy: The Wall Street Journal)

“Economic uncertainty” is turning into a 2008 buzzword and there’s a lot of good reasons why.

On the one hand, there are precursors to inflation in the economy:

• Rising oil costs
• Rising food prices
• Higher Cost of Living

On the other hand, there are precursors to recession in the economy, too:

• Mounting job losses
• Less access to credit and/or loans
• Falling consumer confidence data

The pie chart at right illustrates just how uncertain the “experts” are about the state of the U.S. economy.  They’re evenly split, right down the middle.

This isn’t good news or bad news for Americans, per se, but it does legitimize the idea that the economy’s future direction is in doubt.  This is one of the biggest reasons why there’s been no clear direction for mortgage rates or stock markets since the start of the year, and that can impact the housing markets, too. With the so-called experts confused, consumers are waiting for a clear direction to move forward. In the mean time, buyers and sellers who need to move, are moving, and we’re seeing some activity even during this normally slow summertime.

Until the picture gets more clear, we can expect the volatility to continue.

(Image courtesy: Wall Street Journal)

Picture courtesy of ResPres

Many real estate agents and mortgage lenders will ask the following…”What are you considering purchasing?” This is a good question. However, when asked what they want, many buyers will often respond with something they may not be able to afford. I suggested to Beth that she needs to sit down and prepare a budget. What are her present bills? What additional expenses can she expect after purchasing a home? What is her monthly income? (Please do not budget for raises unless you are 100% confident when they will arrive.) What are her tax liabilities? What does she want to set aside for a rainy day fund and how much for retirement? The answers to these questions are critical to determine how much you can afford.

Beth did the exercise and shortly thereafter sat down with me to discuss getting pre-approved for a mortgage. I was so proud of her. She laid out a budget even more detailed than I suggested. She was in control of her situation. We determined what she could afford by estimating interest rates, property taxes and insurances. She is now beginning her search.

I spoke to Beth’s mortgage lender today. He was happy to announce that Beth was now preapproved for her desired price range. He mentioned that Beth could afford to spend more. I laughed and respectfully disagreed. Most lending institutions determine affordability simply by calculating your current income to debt ratios. Only Beth knows her goals, aspirations and lifestyle. I am confident that Beth will find a house that she can be proud of and stay within HER budget!

Okay, maybe I am overly focused on food, but it happens to be a community magnet, so maybe I’m not the only one. After telling you about the Glenside Farmer’s Market last week, I couldn’t help but think about another community staple, this one in the Mt. Airy section of Philadelphia. (What is it about food that gets people together?)

There is a grocery store in Mt. Airy that is unlike any supermarket you will go to. The first difference: it is owned by the customers. When the store makes a profit, the customer-owners get money back. What a concept! The second difference: it is staffed by customers. This part might be a little hard for some people to swallow, but one of the member/owner requirements is to work (unpaid) for 6 hours per person per year. The work requirement accomplishes a couple great outcomes. Not only does it help the store stay in the black, but it helps the members get to know each other. Imagine going to the supermarket and seeing not only neighbors, but co-workers and friends. Grocery shopping would double as a social activity.

Another difference is the food itself. Lately I have been starting to pay attention to where my food comes from. It’s interesting, when you go to the supermarket at the height of this area’s strawberry season, and yet all the strawberries have been shipped to your store from California. Or, it’s the height of apple season in PA, but all the apples at the supermarket have been flown in from Washington. Why does this happen? Well, my simplistic explanation is that companies exist to make a profit, and they make a better profit by buying from the same bulk vendors all year round rather than switching vendors and buying from local farms in smaller quantities. But, the Weaver’s Way Co-op does not exist to make a profit. It exists to serve the needs of the community. It has its own local farm which it buys produce from, and also supports numerous other local farmers (and bakers, and soupmakers, etc.) In fact, you can even do your work requirement on the farm, if you like. (I did!)

As a part-owner, you also can have a little clout in the store. You have benefits like ordering in bulk at a discount, influencing what products are carried, and even running for board and being involved in the various aspects of running the store. Right now, Weaver’s Way is a bit of a rarity; there aren’t that many grocery co-ops around. For me, it’s another reason why I love living in this area. But the movement seems to be growing, with a Glenside co-op currently in the planning stages.

Photo from creativecommons.org courtesy of Baum5651

2008 was my second year coordinating our Walk With Me team. Starting in April and continuing until the week of the event agents, family and friends showed their support by joining and sponsoring the Advantage Gold Team. Thanks to every one’s efforts our team raised over $4,000.

The event took place  at the Rocky Steps of the Art Museum, Advantage Gold had it’s own table filled with bright t-shirts, balloons and a team waiting to show their support. One of the biggest surprises of the morning was the appearance of the “Advantage Gold Stilt Clown”  agent William Ward of the Robbinsville Office.

Our team Walked 1-3 miles along Boat House Row with other supporters of Easters Seals. A the end of the event Advantage Gold particpated in a check presentation showing $129,000 had been raised for Easter Seals!

Last week, Forbes Magazine published a Top 10 list that should grab the attention of housing market bottom-feeders.

The Top 10 list of Increasingly Affordable U.S. Housing Markets shows that falling home prices and steady mortgage rates are providing a support floor in some of the country’s most beat-up regions.

The report’s methodology is simple:

• Take citywide income data as reported by HUD
• Match it against purchase prices from court records
• Run the math using “prevailing interest rates” from Wells Fargo

A city is considered “more affordable” if increasing numbers of “average families” can afford “average homes”.  It’s not surprising, therefore, that the Forbes list is dominated by cities in which home prices have plummeted over the last year, and in which he economy is relatively sound. 

This may suggest that a housing rebound is already underway in several of the cities listed as Increasingly Affordable U.S. Housing Markets, including:

• San Diego, CA
• Orlando, FL
• Riverside, CA
• Phoenix, AZ
• Las Vegas, NV

Read the complete study and its results at Forbes.com.

(Image courtesy: Memorable San Diego Vacations)

It’s a terrific time to buy a home, but not because homes happen to be affordable, or because values in Philadelphia are maintaining a positive direction.

It’s a terrific time to buy because the variety of mortgage products available to home buyers looks poised to shrink.

Monday, Alt-A mortgage lender IndyMac Bank stopped accepting mortgage applications and it’s likely that other Alt-A lenders will likely follow suit.   

Alt-A loans are ones in which borrowers can’t (or won’t) verify one of two major underwriting criteria:

• Evidence of income
• Evidence of assets

Since the Credit Crunch began last July, Alt-A mortgages have been a steady source of funds for “in-between” borrowers — those that are not quite prime, and not quite sub-prime.  IndyMac was among the largest lenders of its type and had outlasted many of its peers. 

Its position as a market leader and subsequent exit from lending means that the remaining Alt-A lenders will likely make one of two choices in the coming weeks:

1. Raise rates and fees because of greater Alt-A mortgage risk, or
2. Follow IndyMac’s lead and exit mortgage lending altogether

Both outcomes would be harsh for home buyers of all types because when any large bank takes mortgage-related losses like IndyMac just did, it tends to create major risk aversion in the market.

Risk aversion impacts everyone — even the “good” borrowers. 

Banks have been nervous about lending for several months and so they’d rather pass on an “average” mortgage application rather than risk getting stuck with a potentially “bad” one.  IndyMac’s exit may cause fewer mortgages to get approved.

In other words, buyers eligible for financing today may be ineligible tomorrow. 

Therefore, if you’re a home buyer and you know your credit profile is less-than-ideal, consider writing a purchase contract sooner rather than later.  Your mortgage options may be thinning, and the ones you have may be getting more expensive. To find out what options may be available to you, contact one of our real estate professionals ,

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly, it’s called the “jobs report”.

The jobs report is a sector-by-sector look into the U.S. economy and whether businesses are hiring — or firing — workers. This is one of the reasons why its release is so hotly anticipated each month — the jobs report can reveal a lot about the state of the U.S. economy.

Last month, the economy shed 62,000 jobs.

Now, many people will assume that job losses like this are terrible for the U.S. economy. Sometimes, that’s true.

This month, it’s not.

Given the ongoing tug-o-war between inflation and recession, markets are somewhat pleased with the June job loss figures because job losses reduce the likelihood of inflation in the U.S. economy.

Inflation is considered by many — Ben Bernanke included — to be among the top threats to the U.S. economy — it devalues the dollar and leads to increases in the Cost of Living.

Inflation also threatens home affordability because mortgage rates tend to rise when inflation is present.

June’s job losses — while bad for those impacted — is helping to relieve inflationary pressures on the economy and that is boosting markets performance this morning. Stocks are slightly up, and mortgage rates are slightly down. Whenever mortgage rates trend down, the amount of house a buyer can afford increases, and in a time of stable prices, that means more house for your dollars.Publish Post

(Image courtesy: The Wall Street Journal)

A Home Equity Line of Credit is bank product that grants homeowners access to the equity in their home at anytime, usually using checks.

Often called a HELOC, these equity-based credit lines function very much like credit cards:

• The rate is adjustable, tied to Prime Rate
• There is a minimum monthly payment
• There is a pre-set spending/credit limit

But different from credit cards is that a HELOC is “guaranteed” by real estate and with real estate values in question nationwide, many banks are exercising a little-known clause in the HELOC contract.  Remember that banks are the custodians of their depositors funds, and are in business to make a profit. And Bankers read the papers and watch television and are as impacted by the negative media regarding real estate values in many parts of the country. Comdine this with a swing towards a more conservative approach in the banking industry and you have a growing concern on their part.

With alarming frequently, banks are reducing the pre-set spending limits on their active equity lines.  Via USPS, lenders are notifying homeowner with $100,000 HELOCs that their new HELOC limit is $25,000, for example. 

And the banks aren’t being discriminate based on payment history or local real estate conditions, either — it’s happening everywhere with equal force.

The good news is that banks will accept appeals on HELOC reductions on a case-by-case basis. 

One way to appeal a HELOC reduction is:

1. Call your lender’s Customer Service line.  Do not send an email.
2. Politely ask why the HELOC limit was reduced.  Listen carefully to explanation.
3. Explain why you would like your HELOC reinstated.  Acceptable reasons may include home improvement projects or improper home valuation by the lender.
4. Be prepared to write a formal letter, if asked.  Address the issues explained in #2.

Banks will typically not reinstate a HELOC if a borrower has been delinquent on payments, or lives in a severely depressed neighborhood.  However, because lenders rely on computer models to assess risk, it’s always a good idea to ask.

Sometimes the Human Element of an appeal can work in your favor.