June 2011 - Monthly Indicators & Housing Supply

You may have noticed some "noise" lately about where the market is heading. Some accounts are optimistic while others, well, aren't. The good news is that local data provides a more reliable tone than national sound bites can offer. When it comes to hearing the market's true message, it may not necessarily be from the expected indicators, it may not be heard evenly across all segments and it may arrive in disjointed bursts. Let's listen.

The rate of inventory absorption in the CMLS region slowed as Months Supply of Inventory was up 28.2 percent to 15.3 months. New Listings decreased 0.8 percent to 1,539. Pending Sales were up 19.7 percent to 688. Inventory levels shrank 3.3 percent to 8,209 units, but even choosy buyers can still find top-notch homes.

Prices were more or less stable. The Median Sales Price increased 0.8 percent to $146,130. Days on Market increased 19.9 percent to 117 days. Affordability also improved.

On the national front, the interest rate dropped to 4.79 percent on a 30-year fixed conventional and 4.44 percent for FHA. The unemployment rate has been stable around 9.0 percent and initial unemployment claims have continued to fall. Wages and payroll jobs are also improving slowly. Debt ceiling negotiations and other background noises persist, while prolonged job growth is still the missing verse in the recovery song.

Article courtesy of CMLS.

Should I Buy a Home Now or Wait?

Everybody wants to know how to best time the market when buying a home. It's just natural. Especially if you're thinking about buying in a down market where homes prices are declining. You wonder how low they will go and whether you should wait, right?

Some Home Buyers Should Buy Immediately

You're probably thinking: "Of course, she would say that. She's a Realtor, and agents always say 'Now is the best time to buy'." Well, here is why:

  • If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall.

  • If you can arrange for alternate housing, a smart strategy is sell now, wait a few months, then buy your new home.

  • If you sell and buy simultaneously, you'll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale.

    Consider the "Loss" on Selling Your Present Home

    For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must reduce your price by 10%. So, instead of receiving $300,000, you would get $270,000 and "lose" $30,000.

    Consider Your Real Profit

    Now, consider this. Say you bought this home 10 years ago and paid $100,000. You're still ahead $170,000, less costs of sale, aren't you? (This ignores monthly payments, but you would make those if you were renting, too.)

    Consider the "Savings" on Buying Your New Home

    If you are planning to move up to a $500,000 house, which is located in the same distressed market, you could probably buy that house at that same 10% discount or $450,000. This would mean you had saved $50,000.

    Review of Selling and Buying Numbers

    1. So you "lost" $30,000 on the sale of your home
    2. But you "made" $50,000 on the purchase of your new home
    3. Doesn't that put you $20,000 ahead?

    Don't Forget the Impact of Interest Rates

    Which way are interest rates moving? Are they moving up or moving down? If interest rates are near an all-time low and beginning to inch upwards, waiting could cost you more than you would think. You might not be able to afford to buy a home at any price. Following is what happens if you're looking for a loan around $400,000.

  • FACT: Each 1/2 point increase in your interest rate gives you $25,000 less in purchasing power.

  • FACT: Each 1 point increase in your interest rate gives you $50,000 less in purchasing power.

  • FACT: Each 2 point increase in your interest rate gives you $100,000 less in purchasing power.

    Look at the Differences Among Purchase Prices versus Interest Rates

    If you put down 20% and qualify for an 80% loan, here are your principal and interest payments on the following purchase prices:

    • $425,000 sales price, at 8.25% interest, your payment is $2,554.
    • $450,000 sales price, at 7.75% interest, your payment is $2,579.
    • $475,000 sales price, at 7.25% interest, your payment is $2,592.
    • $500,000 sales price, at 6.75% interest, your payment is $2,594.
    • $525,000 sales price, at 6.25% interest, your payment is $2,586.
    The payments are almost identical. However, the home you can afford to buy a 8.25% is $100,000 less than the home you can afford to buy at 6.25%. If you wait for prices to further decline, the perceived value could be lost due to higher rates.
    A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don't panic over newspaper headlines. Make an informed decision. Run your own numbers.

  • Sources: Ask.com