Happy New Year to everyone. I’ve gathered a few articles from Real Estate experts discussing what happened last year and their predictions for this year. I hope you find this helpful.

A Year of Contrasts in Real Estate

This has been a year of real estate contrasts: While many consumers have taken advantage of historic buying opportunities and the market has seen a gradual stabilization of sales and prices, other challenges facing the nation have led some to question the value of home ownership for families, communities, and the country.

“People are passionate about the American dream of home ownership, and this passion underscores how important home ownership is to our nation,” says National Association of REALTORS® President Ron Phipps. “Owning a home has long-standing government support in this country because home ownership benefits individuals and families, strengthens our communities, and is integral to our economy. As we begin a new year, REALTORS® remain committed to ensuring that our public policies promote responsible, sustainable home ownership for all of our futures.”

In the first half of the year, the extended $8,000 first-time home buyer tax credit and expanded home $6,500 tax credit for repeat buyers helped encourage sales and stabilize home prices. Home buyers in 2010 have also benefited from historic affordability levels, with the combination of record low mortgage rates coupled with rising household incomes. The NAR Housing Affordability Index currently shows that a median-income family with a down payment of 20 percent has 184.2 percent of the income required to purchase a median-priced home.

“Low interest rates mean real money for today’s home buyers,” Phipps says. “Buyers who purchased a median-priced home five years ago with an FHA mortgage requiring a 3 percent down payment would have a monthly mortgage payment of $1,650. With today’s interest rates and median home prices, that same buyer would pay $1,150 per month — a $500 savings. That’s a savings of $6,000 per year.”

Despite record affordability and buyer incentives, rising foreclosure rates and concerns about proper foreclosure procedures led some to question whether owning a home was a good personal decision.

“Home ownership didn’t create the foreclosure crisis — Wall Street greed and irresponsible lending practices did,” Phipps says. “The decision to own a home is a very personal one, but over the long term, owning a home is one of the best ways to build long-term wealth, in addition to providing numerous social benefits that include reduced crime rates, improved childhood education, and increased stability. After all, a fixed-rate mortgage might last 15 to 30 years; renting is forever.”

Government support of programs and initiatives that encourage home ownership have also been called into question. The deductibility of mortgage interest is one example, with critics suggesting that the mortgage interest deduction primarily benefits the wealthy, while in fact, the MID benefits primarily middle- and lower income families — almost two-thirds of those who claim the MID are middle-income earners. Sixty-five percent of families who claim the MID earn less than $100,000 per year, and 91 percent who claim the benefit earn less than $200,000 annually.

“The ability to deduct the interest paid on a mortgage can mean significant savings at tax time,” Phipps says. “For example, a family who bought a home this year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year. That’s money they could use to pay down other debts, supplement their children’s college savings account, or put into savings themselves.”

Despite current economic challenges, most Americans still aspire to the dream of home ownership. According to a survey conducted earlier in the year by Bankrate.com, 90 percent of respondents said they had no regrets buying their current home. And just this month, a Fannie Mae survey found that most Americans — both those who currently own their homes and those who rent — aspire to own a home and to maintain home ownership.

“We believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream, and looking forward, REALTORS® will continue to engage policymakers and industry leaders on behalf of consumers in pursuit of that goal,” Phipps says.

Source: Daily Real Estate News, 12-27-10


Predictions for Housing in 2011

Will housing values increase in 2011? Fortune.com offers both a bullish and a bearish prediction.

The bulls say: Affordability is at its highest level. Billionaire Warren Buffet is among those who believe this is a sign the slump is about to end. Buffet writes: “Prices will remain far below ‘bubble’ levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits.”

The bears say: It’s not over yet. Housing is still overpriced and inventories are enormous, says Daryl Jones, an analyst at investment research firm Hedgeye. Jones warns that home prices could fall another 15 percent to 30 percent because no one is buying.

Source: Fortune.com, Nin-Hai Tseng (12/27/2010)


Pending Home Sales Continue Recovery

Pending home sales rose again in November, with the broad trend over the past five months indicating a gradual recovery into 2011, according to the NATIONAL ASSOCIATION OF REALTORS ® .

The Pending Home Sales Index, a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.”

The PHSI in the Northeast increased 1.8 percent to 72.6 in November but is 6.2 percent below November 2009. In the Midwest the index declined 4.2 percent in November to 78.3 and is 7.7 percent below a year ago. Pending home sales in the South slipped 1.8 percent to an index of 91.4 and are 7.2 percent below November 2009. In the West the index jumped 18.2 percent to 123.3 and is 0.4 percent above a year ago.

“If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume,” Yun said. “Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy.”

The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3 percent around the end of 2011; at the same time, unemployment should drop to 9.2 percent.

For perspective, Yun said that the U.S. has added 27 million people over the past 10 years. “However, the number of jobs is roughly the same as it was in 2000 when existing-home sales totaled 5.2 million, which appears to be a sustainable figure given the current level of employment,” he explained. “All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.”

Existing-home sales are projected to rise about 8 percent to 5.2 million in 2011 from 4.8 million in 2010, with an additional gain of 4 percent in 2012. The median existing-home price could rise 0.6 percent to $173,700 in 2011 from $172,700 in 2010, which was essentially unchanged from 2009.

“As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun said. New-home sales are estimated to rise 24 percent to 392,000 in 2011, but would remain well below historic averages, while housing starts are forecast to rise 21 percent to 716,000.

Yun sees Gross Domestic Product growing 2.5 percent in 2011, and the Consumer Price Index rising 2.3 percent.

Source: NAR


5 Reasons to Buy a Home in 2011

Michele Lerner, author of Homebuying: Tough Times, First Time, Any Time, offers reasons why real estate is likely to improve in 2011. Here are five reasons she thinks consumers should consider a home purchase next year:

  • Mortgage rates will stay low. Even with rates climbing — maybe to as high as 6 percent by 2012 — they are still well below where they have been historically.
  • Tax cuts could help. Extending the tax cuts could encourage a more rapid recovery for the economy.
  • Americans want to be home owners. A recent Fannie Mae survey showed that Americans still believe a home is a safe and desirable investment.
  • Builders are about to begin building. Home builders have been sitting on the sidelines. This year, they think pent-up demand will create an appetite for new homes.
  • Homes are shrinking. Homes are getting smaller, which has made them more affordable.

Source: Investopedia, Michele Lerner (12/24/2010)