The Direction of the Housing Industry – Up or Down?

With the constant news of the housing industry on every media outlet, homeowners and real-estate brokers continue to wonder when the market will stabilize. According to the Miami Herald, the mortgage rates and housing prices have fallen once again. Mortgage rates dropped for a third consecutive week – a direct result of the progressively weakening economy and its influence on the financial markets. As for housing prices, the median cost of a home dropped almost 17% from last year’s median cost. This was significantly higher than the nationwide median, which dropped only 9%. The culmination of these issues leads to more insecurity and worry on the part of those involved with the housing industry.

Here are links to some of the home prices throughout Florida:

• Single-Family Homes: http://media.miamiherald.com/smedia/2008/11/18/12/REL08Q3T.source.prod_affiliate.56.pdf
• Condos: http://media.miamiherald.com/smedia/2008/11/18/12/REL08Q3CT.source.prod_affiliate.56.pdf

While these issues are not a good sign of the direction of the market, it can be said that potential home buyers with solid financial security are experiencing the best time to purchase homes right now. Homes are reaching “rock bottom prices” and are leaving brokers and banks with the incentive to provide great deals to prospective homeowners. Many experts claim that stabilizing the housing industry is important to revitalizing the American financial markets. If this approach to fixing the economy becomes a trend, the incoming presidential administration may place their funding and support behind this problem before any other issue is dealt with.

Do Real Estate Auctions Work in this Market?

 

real estate auctions

Has the Home auction trend started?  Todays buyers are looking for the best deal and now that they can get it. 

Auction is the new “buzz” word in the real estate industry as market conditions require more intense marketing and specific timelines in order to sell properties quicker.  For Developers this can be a great alternative to turning a lot of inventory in a short period of time.  If you have tried the conventional methods of real estate sales and home inventory remains on the market, consider an auction.

Cayon Development sold 23 homes, at $123,990 each, for a total of over $2.85 Million in sales. Creative Mindworks provided consulting and marketing services to Canyon Development through a division of the company, known as Disposition Trust, LLC. This division assists builders, developers, banks, and other institutions in selling and marketing their real estate assets using the most effective strategies that maximize revenues in expedient fashion. 

 

Current Market Value
A real estate auction is the purest way to determine the current market value of your home. Once a competitive bidding environment has been created, buyers will bid up to what they are willing to pay. Auctions are attractive to buyers because they are always looking for the “deal”. However, competitive bidding will drive the price up. Sellers look to the Auction method when they are highly motivated to sell, wish to sell quickly because of circumstances or wish to liquidate to re-enter the market as buyers. Whenever a quick sale is desired, auctions should be considered.

Cost Considerations
Auction does not necessarily mean losing money. Consider what it cost to hold the property, (mortgage, maintenance, taxes and insurance) for say six (6) months vs. auctioning your home for slightly less right now. Consider the selling cost to sell it the conventional way, using a real estate brokerage (typically a 6% commission, repair costs, your closing cost and, in a buyer’s market as we are in today, the seller would most likely pay the buyer’s closing cost also). With auction, you may not pay any commission. More than likely, you, as the seller, will pay the expense of marketing your property and your selling cost would consist of only your closing costs.

No Contingencies
Auctioned properties are generally sold, “as is,” and without any contingencies, such as inspections which can result in repairs the seller would be expected to pay for. “As is” does not mean you do not have to disclose all things known about the property to the buyer. In fact, the buyer should get inspections and/or appraisals before the auction in order to know what he/she is buying, “as-is.” Since there are no contingencies, including the buyer’s ability to get financing, usually auctions close within 30 days with cash or financing already in place. Auctions bring “ready” buyers

The Current State of Real-Estate Foreclosure

The current housing market in the US faces serious issues with the continued growth in foreclosure rates across the nation. The foreclosure crisis has steadily increased over the last year, reaching rates that are more than 70% greater than the previous year’s state. It has become a major focus in the private sector as well as the public sector, with reators looking for solutions and the government attempting to bring assistance to the crisis.

The Federal Depertment of Treasury originally stated that it would use part of the $700 Billion bailout plan to purchase troubled assets from banks across the country. Now, Treasury Secretary, Henry Paulson, has stated that such an endeavor would take too long and allow the current situation to worsen. As an alternative, the Treasury wants to buy stakes in the banks in order to promote regular lending practices and prevent a credit crunch in the housing market.

Florida is currently preparing to recieve over $160 million in federal grant aid to stimulate the housing market. This should help stunt the recent spike in foreclosures in counties, like Miami-Dade and Broward, where rates ranged from a 9% increase (Broward) to a 159% increase (Miami-Dade). With Florida having two cities in the nation’s top foreclosure list, in Miami and Orlando, there is hope that this aid will help aleviate the recent struggles felt throughout the state.

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First Time Home-Buyers Up Slightly

First Time Home-Buyers Up Slightly

• First-time home buyers have risen in market share – to 41% of transations from 39% last year – and plan to own their homes for 10 years, up from seven years in 2007.
• The median age of first-time buyers is 30, down from 31 in 2007, and the median income was $60,600. The typical first-time buyer purchased a home costing $165,000.
• The typical repeat buyer is 47 years old, earned $88,200, purchased a home costing $236,000 and has plans to stay in that home for 10 years.

Downpayments on the Rise

• The median downpayment by first-time buyers was four percent, up from two percent in 2007.
• The number of buyers purchasing with no money down fell from 45% in 2007 to 34% in the current survey.
• Among first-time buyers who made a downpayment, 69% used savings and 26% received a gift from a friend or relative, typically from their parents. Another seven percent received a loan from a relative or friend, while 16% tapped into a 401(k) fund, stocks or bonds.
• 92% of buyers chose a fixed-rate mortgage.
• Repeat buyers made a median downpayment of 15% , but 10% paid cash for their property.

Buyers and Sellers Use Agents

• 81% of home buyers and 84% of sellers used a real-estate professional, comparable to 2007.
• Nearly nine out of 10 home buyers and sellers would definitely or probably use the same agent again or recommend him or her to others, consistent with 2007 .
• 38% of sellers found their agent as a result of a referral, while 26% used the agent in a previous home purchase. Similarly, 43% of buyers relied on referrals to find an agent, while 18% of repeat buyers used an agent from a previous transaction.
• Only one percent of sellers chose an agent based on his or her commission.
• 46% report that the real estate agent initiated a discussion of compensation, while 24% of sellers brought up the topic and the agent was willing to negotiate the commission or fee.
• 13% percent of sellers did not know commissions and fees are negotiable.
• The level of ‘for-sale-by-owner’ transactions was 13%, up slightly from a record-low market share of 12% in both 2007 and 2006. The level of homes sold without professional representation has trended lower since reaching a cyclical peak of 18% in 1997.
• Factoring out properties that were never placed on the open market, the actual number of homes sold without professional assistance is seven percent. This matches the results in the 2007 study and marks a downtrend from 10% sold on the open market in 2004.
• The median home price for sellers who used an agent was $211,000 vs. $153,000 for a home sold directly by an owner, though unassisted sellers were more likely live in rural areas or small towns where sellers are more likely to know potential buyers.
• The most difficult tasks reported by unrepresented sellers are selling within the planned length of time, getting the right price, preparing the home for sale, and understanding and performing paperwork.

Foreclosure Purchases Higher

• The percentage of buyers who purchased a home in foreclosure jumped to six percent of transactions in the 2008 survey, from one percent in 2007.
• Another 38% of buyers considered purchasing of a home in foreclosure but did not, primarily because they could not find the right home.

Features and Incentives Up

• Environmentally friendly features were cited as desirable by 90% of buyers. Heating and cooling costs were of primary importance, followed by energy efficient appliances and energy efficient lighting
• 42% of sellers offered incentives to attract buyers, such as assistance with closing costs or home warranty policies.

Additional Demographic Information

• The median age of home sellers was 47 and median income was $91,000.
• 61% of buyers are married couples, 20% are single women, 10% single men, 7% unmarried couples and two percent fall into other categories.
• 26% of buyers are non-white, nine percent were born outside of the US, and four percent primarily speak a language other than English.
• 78% of all respondents purchased a detached single-family home, 9 percent a condo, 8 percent a townhouse or rowhouse, and 5 percent some other kind of housing.
• 55% of all homes purchased were in a suburb or subdivision, 17% were in an urban area, 16% in a small town, 10% in a rural area and two percent in a resort or recreation area. The median distance from the previous residence was 12 miles.
• The typical home sold for 96% of the listing price, and 86% of sellers were satisfied with the selling process.
• 52% of sellers were trading up to a larger home, while 22% were downsizing.
• Overall, buyers searched a median of 10 weeks and viewed 10 homes.
• Nearly nine out of 10 people consider their home a good investment, and almost half see it as a better investment than stocks.
• 15% of buyers own two or more homes.

About the study: The 2008 National Association of Realtors Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, marketing, preferences and experiences of home buyers and sellers. NAR mailed an eight-page questionnaire in August 2008 to a national sample of 133,000 home buyers and sellers who purchased their homes between July 2007 and June 2008, according to county records. There were 10,053 usable responses and the adjusted response rate was 7.9%. All information is characteristic of the 12-month period ending in June 2008 with the exception of income data, which are for 2007. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100 percent.

First Stop for Home Buyers – Internet Agents

An overwhelming majority (87%) of recent home buyers in the US say they used the internet as an information resource during their home-buying process, and nearly one-third say they first learned about their newly purchased home from an online channel, according to a study from the National Association of Realtors (NAR), writes MarketingCharts.

Though the internet was the most popular source, buyers also cited information from real-estate agents (85%), yard signs (62%), open houses (48%) and print or newspaper ads (47%). Fewer buyers relied on home books or magazines, home builders, television, billboards and relocation companies, the study said.

When asked where they first learned about the home they purchased, 34% of buyers said a real-estate agent; 32% cited the internet; 15% said from yard signs; 7% said from a friend, neighbor or relative; 7% said home builders; 3% said from a print or newspaper ad; 2% learned directly from the seller; and 1% from a home book or magazine.