Real Estate New York
Market Update April 2009
U.S. Home prices rise for first time in a year, FHFA says
By Rex Nutting , MarketWatch Last update: 11:14 a.m. EDT March 24, 2009
WASHINGTON (MarketWatch) -- U.S. home prices rose 1.7% in January compared with December, the Federal Housing Finance Agency reported Tuesday. It was the first monthly increase in a year.
The "unexpected rise" in January was partially due to stronger sales in some markets, FHFA said. The FHFA index attempts to control for such changes in sales patterns, but the adjustment is not perfect, the agency said. The agency warned that its estimate was uncertain and subject to large revisions.
December's index, originally reported as a 0.1% increase, was revised down to a 0.2% decline. "While this is certainly good news, in our view it is too soon to call a turnaround in the cycle," wrote Charmaine Buskas, a senior economist for TD Securities. "We will have to see several consecutive months of improved prices before a true turnaround can be called, and a significant inventory overhang remains."
Prices rose or were flat in eight of nine regions in January; only the Pacific states registered a decline, down 0.9%. Prices rose 3.9% in the East North Central region, which includes most of the Great Lakes states. Prices rose 3.6% in the South Atlantic region (from Delaware to Florida).
Falling home values have helped to plunge the global financial system into chaos because of mortgage-backed securities. Homeowners have lost trillions of dollars of wealth.
Nationally home prices are down 6.3% in the past year and are down 9.6% from the peak in April 2006, the agency said. In December, the year-over-year decline was 8.8%.
Video: Stephann Cotton of Cotton & Co. explains that a recent survey on buyer confidence shows that 34% of those polled expect a housing-market bottom within six months and 65% see a bottom within 12 months. Kelsey Hubbard reports. (March 23)
Read more from Market Watch and view video
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For those who want to be first to know about the best new listings getting free cell phone alerts may well be the answer.
Effective Immediately, Real Estate New York is offering free cell phone notifications of listings that match user search profile the moment they are listed. (voice &/or text)
To receive this free service on your cell phone click here.You will need to supply your cell phone number and carrier plus times that it is okay to receive alerts.
You will need to have an active First Look profile that stores your requirements such as number of bedrooms, baths, price range, style, location, etc. To open a free First Look account or to modify an existing search profile click here.
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NEW: Birds Eye Views
Another new innovation here at Real Estate New York is the new Bird's Eye view available on all First Look listings. Simply right-click the map on the right to switch to the bird's eye view.
This is in addition to our regular Street View from Google which can be accessed for any address in most Capital Region neighborhoods: Google Street Views
Both features provides a view of the locale that may not be presented by the seller's agent in their pictures.
Architectural Coach: Money Grows on Trees
Well-maintained trees can add value to a property, while poorly maintained ones can pose a liability. An arborist can help you ensure the trees remain a home's valuable asset.
Trees offer countless benefits. They enhance curb appeal, increase real estate values, provide fruit and flowers, curtail energy consumption, improve air quality, and camouflage unsightly views. But like any living, breathing organism, they should be selected properly and tended to regularly.
For example, if planted in the wrong size or spot, a tree may block views. If not cared for, they may become susceptible to disease, and hurt a property's looks, damage a home's structure, and even injure family members.
But when trees are properly cared for, they offer an important incentive: An increase in a home's value by as much as 20 percent, says certified arborist Mark Chisolm, co-owner of Aspen Tree Expert Co. in Jackson, N.J.
Many buyers will take note of a listing with a tall, healthy tree boasting a green canopy of leaves or even those graceful, smaller trees lined up in a stately row. Unfortunately, they'll also recall trees that look diseased—with dangling branches, rotted trunks, and few or no leaves—since those may signal major work and expense.
“I've been in situations where I've pointed out that [home owners] might have to spend $10,000 immediately or I've had to tell them their trees may have suffered from prior construction work that the average eye won't spot for years,” says certified arborist Ed Milhous, president of Trees Please in Haymarket, Va., who's also president of the American Society of Consulting Arborists, an association based in Rockville, Md.
So how can you ensure a home's trees hold value and don't hamper it?
What to Look for in a Tree Specialist
A tree specialist—or arborist—can help revive your trees and keep them in good condition. Arborists can help advise home owners on how much food, water, and mulch the trees need, when and where to prune, what lighting to add for safety and decoration, how to protect trees during construction or whether transplanting them is possible, and what new trees are best to plant and where in a yard.
Consider the following when hiring an arborist.
1. Are they certified? While many landscape designers, architects and tree-service companies can offer tree care recommendations, a certified arborist has field experience and has passed an examination that covers everything from tree biology to tree bracing and transplanting. Arborists can be found through recommendations from nurseries and landscape professionals and by going online to the main association Web sites: www.tcia.org (The Tree Care Industry Association); www.treesaregood.com (International Society of Arboriculture); and www.asca-consultants.org (the American Society of Consulting Arborists).
2. Do they have insurance? Ask to see copies of the company's certificate of insurance to prove they're adequately covered for any personal and property damages. Also, request to see their workmen's compensation insurance. Home owners can be held responsible for damages or injuries caused by uninsured tree companies.
3. What services will they provide? Find out how the arborist plans to get the job done, if he has the right equipment to do it, and how they will clean up the property afterwards. You might also want to ask about specific chemicals they plan to use and any potential impact on the environment.
4. Do they have strong references? Visit past jobs the arborist did to view the quality of the work. You might also want to contact references to ask if the arborist completed the job on time and also whether he did any damage to the house, wires or lawn while completing the job.
5. How much will it cost? Make sure you ask for them to provide a written estimate so you know how much it will cost. Prices vary, depending on the area of the country, number of trees, and their condition. Generally, home owners should expect to pay between $100 and $300 an hour for an assessment, says Chisholm R.J. Laverne, manager of training and education at The Davey Tree Expert Co. in Kent, Ohio. It's not unheard of to spend $10,000 to remove a tree if it's located in a difficult-to-access spot and if a crane will be needed to remove tree parts over the top of a house, he adds.
Get it all in writing: Before they start working, you'll want to have a written proposal or contract from the arborist that includes details of what the work will entail, a timeline for completion, and the cost of the work.
Mortgages Hit Another New Low
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.85 percent with an average 0.7 point for the week ending March 26, 2009, down from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 5.85 percent. The 30-year FRM has not been lower in the life of Freddie Mac's weekly survey, which dates back to 1971 for the 30-year FRM.
The 15-year FRM this week averaged 4.58 percent with an average 0.7 point, down from last week when it averaged 4.61 percent . A year ago at this time, the 15-year FRM averaged 5.34 percent. The 15-year FRM has never been lower in the life of Freddie Mac's weekly survey, which dates back to 1991 for the 15-year FRM.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.96 percent this week, with an average 0.7 point, down from last week when it averaged 4.98 percent . A year ago, the 5-year ARM averaged 5.67 percent. The 5-year ARM has never been lower in the life of Freddie Mac's weekly survey, which dates back to 2005 for the 5-year ARM.
One-year Treasury-indexed ARMs averaged 4.85 percent this week with an average 0.6 point, down from last week when it averaged 4.91 percent. At this time last year, the 1-year ARM averaged 5.24 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
“The Federal Reserve's announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Rates for 30-Yr FRMs peaked last year at 6.63 percent on July 24th. With this week's 30-Yr FRM, the interest rate difference is almost 2 percentage points, which amounts to a savings of about $225 in monthly mortgage payments for a $200,000 loan.
“And potential homebuyers are taking notice of these historically low mortgage rates. Both new and existing home sales rose 5 percent in February. First-time homebuyers accounted for half of all existing home sales, according to the National Association of Realtors®. In addition, mortgage applications for home purchases consecutively rose over the first three weeks in March, based on figures published by the Mortgage Bankers Association.”
How to Buy a Home With Bad Credit
If you've sold your home on a short sale or gone through a foreclosure and watched your FICO score fall, you may believe that you can't buy a home with bad credit.
Some people blame the rising number of foreclosures on the appreciation explosion — the wheeling-dealing, home-buying frenzy of the past five years — and say that lots of home buyers got in over their heads by taking out loans they didn't understand and didn't qualify for, or that the market has turned so soft that home owners are finding themselves upside down, owing more on the mortgage than their home is worth. But the reasons don't matter because they can't be undone.
What does matter is whether individuals who have lost a home through foreclosure, filed bankruptcy or, for whatever reason, have discovered their credit is now less than stellar, can still buy a home. Bad credit alone isn't enough of a deterrent to some mortgage lenders and, for some buyers, it's probably not as bad as they may imagine. If you are considering buying with bad credit, you have choices. You just need to know your options and where to look. . . .
read more about Buying With Bad Credit .
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No Property Tax Reform in State Budget
The state budget plan introduced this week eliminates a rebate portion of STAR, saving the state $1.5 billion in expenses.
The budget agreement was reached by Gov. David Paterson, Assembly Speaker Sheldon Silver (D-Manhattan) and Senate Majority Leader Malcolm Smith (D-Queens) over the weekend. The three said they intended to address property taxes “soon,” possibly before the current legislative session ends on June 22.
State legislators are expected to vote on the $131.8 billion budget this week, and they could do so as soon as Tuesday night.
Last year, Paterson and Silver offered competing proposals for how to suppress the state's property taxes, which are the highest in the nation—79 percent above the national average.
Paterson has backed the concept of a tax cap, the recommendation that a state tax commission made last year. It's a plan that the main business lobbies in the state pushed hard last year.
The proposed cap would limit annual increases in school property taxes to 4 percent, or 120 percent of the consumer price index, whichever is lower. A super majority of a school district's voters can vote to override that limit.
Continued from The Business Review
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Consumers in Smaller Cities Have Better Credit
Banks are taking more risks in midsize cities such as Albany, Schenectady, Troy, and Saratoga, than they are in metropolitan areas or rural towns, according to an analysis by The Wall Street Journal of data provided by Moody's Economy.com and Equifax Inc.
In some small cities, consumer-loan balances rose by more than 8 percent in 2008.
The lending patterns are the result of more economic discipline, smarter economic-development plans and lower costs, says Ross DeVol, director of regional economics at the Milken Institute, a California think-tank.
Consumers appear to be doing better when they live in areas that avoided the real estate bubble and where there is a lot of government spending.
Read more from Moody's Economy.com
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Mortgage Rates and Trends
The link to up to the minute New York State mortgage information seems to work better than presenting the actual graph.
Click for up to the minute mortgage rate information
Buyers' versus Sellers' Market Report
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The graph above shows the number of sales in a given month divided by the number of homes on the market in the four main counties of the Capital Region. After a brief dip into seller territory in July the market has once again returned to favor buyers though not nearly as strongly as last month.
March's sales figures show a sudden reversal of direction towards a neutral or seller's market after touching into uncharted buyer territory in February.
*This ratio can be used to determine whether we are in a buyers' or sellers' market as indicated in Dennis Maier's article on Market Timing featured in eZine Real Estate. In general, if it would (theoretically) take less than 6 1/2 months to sell the current inventory it's a sellers' market. If it would take more than 9 months to sell all the homes on the market it's a buyers' market.
Market Statistics as of April 1, 2009
This graph represents average sale versus list prices 
The average list and sale prices for the month of April 2009 show a typical rebound as the spring buying season gets underway, although both the list prices and sale prices remain below levels seen in past years.
However, the average asking price to sale price has risen from 95.37% in February to
96.17%
for March. The number of sales at 320 is also up.
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Mortgage Rates and Trends
The link to up to the minute New York State mortgage information seems to work better than presenting the actual graph.
Click for up to the minute mortgage rate information
Frequently Asked Questions
Here are our best answers to the four most commonly asked questions.
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1. Why are the prices of homes dropping substantially in today's market?
Prices are dropping because of the anomaly that occurred during the market boom. Professor Karl Case of Wellesley College and contributing author of the Case-Schiller Home Prices Indices, a quarterly nominal housing price report, looked closely at the appreciation of median home value over five-year increments dating back to 1980. His research shows that home values appreciated 26.5 percent on average for the 20-year period from 1980 through 2000.
In the six years that followed, average appreciation was 89 percent. Prices are now adjusting to the inconsistent and unsustainable growth that occurred during the first six years of this decade. In other words, the market is not on the decline. Rather, it is moving toward stability, which will mean healthier markets in the future.
2. How do I determine the direction of prices in my market?
Although there are no steadfast rules to determine future pricing, months' supply of inventory (total inventory divided by the number of houses sold per month) is a great guideline. A normalized or balanced market has five to six months of inventory. If 100 houses sell a month, there should be 500 to 600 houses in active inventory.
Based on this principle, if you have one to two months of inventory, double-digit appreciation is likely to occur. Lack of supply will cause potential buyers to clamor over the few homes that are for sale, which in turn drives prices higher. On the other end of the spectrum—where many markets are right now—there is a seven- to eight-month inventory. With this abundance of supply, there simply aren't enough buyers to support the number of homes for sale.
At Real Estate New York we have been tracking this indicator since October 2002 (see above: Buyer's versus Seller's Market)
Current economic conditions will also have an effect on the direction of pricing, as pricing is directly connected to average income. Traditionally, the national average sales price of a home is two-and-a-half times the average household income. Through the boom years of 2004, 2005, and even into 2006, that ratio was distorted, reaching up to four times the average income. We're now getting much closer to the 2.5 ratio. However, with unemployment rising, prices may have to drop further to stay in line with the average American family income
3. Is now a good time to buy?
Any investment consideration, whether it be real estate, gold, or fine art, follows a predictable cycle with nine stages. Let's start with optimism, the period in which many people are excited about buying a home. When the market is strong, people's purchases quickly increase in value, which leads to euphoria, which can lead to rash decision making.
From euphoria starts a downward cycle. As prices start to fall, buyers go into denial, with statements such as "I'll be in the house a few years, so this won't be a challenge." After denial comes fear, as prices continue to fall, followed by panic, despondency, and depression. After depression comes hope and then optimism (back to stage one).
The point of maximum risk for any investment is during the euphoria stage. The point of maximum opportunity is at the lowest point, between despondency and depression. That's exactly where we are in many real estate markets today. Clients who are motivated and qualified to buy will be able to look at the market cycle chart and understand why now is the best time to invest in real estate.
4. Is homeownership still a good way to build wealth?
According to the National Association of Realtors home values appreciate 4.5 percent annually on average. That's a great return; however, very few buyers pay in cash. Most try to put as little cash down as possible. The amount of cash buyers put into their home determines their return on equity, which is the total return on the cash they initially invested. So the return on equity can be astronomical. It's easy to see that real estate isn't just a good investment; it's a great investment.
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