Real Estate New York

Market Update January 2010
4 Months Left to Use $6,500-$8,000 Buyer Tax Credit information

Our Exclusive Real Estate New York Stimulus

Buy any home through any Real Estate New York agent and receive 10% of our entire commission in cash at closing up to $1,000.*

You do not have to be a first time home buyer!

Example: Sale Price: $400,000 rebate: $1,000

Example: Sale Price: 275,000 rebate: $687.50

Example: Sale Price $550,000 rebate: $1,000

*This in addition to the available $8,000 First Time Home Buyer Federal Tax Credit and the $1,500 yearly average tax credit from New York State. Or, for those who already own a home that they have lived in for at least five years a $6,500 Federal Tax Credit is also available.

Questions?

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Secrets for Timing the Real Estate Market

Beating the Market by Timing Home Buying / Selling

It's likely that billionaire real estate tycoons such as New York's Donald Trump, Chicago's Sam Zell and Santa Barbara's Tom Barrack would collectively agree that nobody can time the real estate market, not even them. This may leave you wondering: If the pros can't time the market, how can you?

For starters, you can employ the same techniques that have worked for many who live by the creed: Buy low and sell high. The first step is to determine the type of real estate market that exists in your town.

Although there are many variations and twists, basically real estate markets fall into three categories:

• Buyer's markets
  Buyer's markets exist when there is more inventory, meaning houses for sale, than buyers. Because buyers have many homes to choose from, not every home for sale will sell. Most experts agree that if six months or more of inventory is on the market, it is a buyer's market. Also note that in buyer's markets, fewer numbers of buyers will result in fewer sales, which can skew median prices.

• Seller's markets
  Conversely, in seller's markets, there are more buyers than available inventory. Because there are fewer homes for buyers to choose among, almost every home will sell. Typically, there is much less than six months of inventory in a seller's market. In extreme seller's markets, there is less than two months of inventory in reserve.

• Neutral markets
  Neutral markets are balanced. Typically, interest rates are affordable and the number of buyers and sellers in the marketplace are equalized. The scales don't tip in either direction, meaning the market is normal without experiencing volatile swings. Inventory is generally around four months, give or take.

• Note that good buys exist in neutral markets, but there are no overall indications that favor buyers over sellers or vice versa.

Buying in a Buyer's Market

If you are going to buy a home and can afford to wait for primo conditions, a buyer's market is it; there is no better timing. Here are a few advantages to buying in a buyer's market:

• Lower sales price
  Sellers are more willing to wheel and deal because they know if they refuse to accept your purchase offer, they might not receive another. When fewer homes are selling, prices typically fall.

• Buyers can command concessions
  Buyers can ask sellers to pay their closing costs, providing their lender will allow the credit. Buyers can also expect sellers will pay for special reports such as pest inspections or roof certifications and a home warranty.

• Contingent offers are more acceptable
  Sellers are generally more agreeable to accepting a contingent offer that is dependent on the buyer selling the buyer's existing home. An offer in the hand is better than no offer at all.

• Request for repairs easily negotiated
  If the home is in need of repairs or updating its systems, sellers will often credit the buyer for the repairs or fix the problem(s) noted by a home inspector.

• Buyers control the transaction
  Buyers can ask for longer inspection periods, extend closing deadlines and ask for early possession -- terms that would be automatically rejected in a seller's market.

Read More from Elizabeth Weintraub

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Architecture Coach: Judging a Project's Worthiness

The rules of the remodeling and decorating game are different, given the tougher economy. There’s no guarantee that a costly chef-inspired kitchen, luxurious master bathroom, or landscaped deck will offer the financial payback most home owners historically have come to expect.

The amount of dollars and effort invested now needs to be carefully considered, particularly because of today’s surplus of inventory at reduced prices.

Sometimes another resource—a design pro—should be called in once you have narrowed their choices. Depending on the type of work needed, they may find it helpful to hire an architect, decorator, landscape architect, contractor, or other specialist. Many won’t charge because they hope to win the job if a purchase is made. Architect Michael J. Malone, AIA, of WKMC Architects in Dallas offers his help gratis for an initial meeting and estimate, but charges once plans are requested so work can be bid out to contractors.

Others may bill from the get-go with an hourly rate or flat fee if they think the consultation will entail considerable time. St. Louis designer Caryn Burstein of CLB Interiors charges because she visits possible purchases and asks potential clients to fill out and go over a detailed questionnaire. Kitchen designer Jennifer Gilmer of Jennifer Gilmer Designs in Washington, D.C., also charges because of the time needed to view and measure a space and estimate costs. “Most home owners underestimate labor,” she says.

Below are six questions that design pros recommend asking. Home owners waffling on whether to stay put and make changes or look for another home can use the same analysis:

Who should you call?

Allan J. Grant, AIA, of Grant Architects in Chicago advises calling in an architect when an addition is being considered or major interior work is to be tackled, such as moving walls, stairs, or windows. He and Malone find it useful to have a contractor offer input regarding materials and labor costs for these major undertakings. A designer may be the best person to call if the work is more cosmetic, such as changing wall colors, tiles, or countertops, Grant says. A specialist such as a structural engineer might be best for advice relating to specific problems like a cracked foundation, Malone says. The most reputable design pros will also advise home owners when it’s smart not to proceed, even though that may mean no job. Sometimes, they still get the work. Malone discouraged a couple from adding on to their existing home because he felt it would take 10 years or longer for neighboring houses to play catch up to the home’s increased value. “They loved the neighborhood, and proceeded,” he says. He did the work.

How much will the project cost?

Most pros have done enough projects to estimate the final price tag, based on square footage, materials, appliances, level of finish, custom cabinets or stock, and labor, says architect Stuart Cohen, AIA, with Cohen & Hacker in Evanston, Ill. The best experts also know to tell home buyers to set aside funds for unforeseen problems such as decaying joists, which Gilmer recently found in an old house.

How long will you stay?

The cost of changes becomes more sensible if they’re amortized over a longer time frame, and buyers stay at least five years. One of Burstein’s clients was willing to spend $100,000 but wanted to remain just two to three years. “I advised them that that wasn’t long enough to recoup their money, especially since they weren’t putting it into spaces that appeal to most buyers—a kitchen and master bathroom—but spending on lower-level and third-floor changes. I urged them to ask their salesperson for guidance. They’re now looking for another home,” she says.

Are the costs justified in terms of the area?

Here’s where your expertise as a salesperson knowledgeable about comps is invaluable. Buyers need to know that the improvements they make are warranted for the house because of the value of neighboring homes. Salesperson Jennifer Ames of Coldwell Banker Residential Brokerage in Chicago says she often advises buyers on which enhancements will add the most value because of neighborhood prices. Investments also should be made only when area prices are stable or appreciating, says Cohen.

How much are you willing to be inconvenienced?

Camping out and using a makeshift kitchen in a basement is fun only for so long. Buyers should decide how willing they are to be inconvenienced if they plan to stay put during construction, says William Bronchick, a Denver attorney and author of How to Sell a House Fast in a Slow Real Estate Market (Wiley, 2008), who has flipped dozens of homes.

Is the project the best use of funds?

Before you proceed, suggest they be honest about whether the changes are where they truly want to invest their funds, or if they’d rather buy the house, avoid changes, and spend discretionary dollars on vacations or squirrel them away for retirement, Bronchick says.

Read more from The National Association of Realtors

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Latest Home Price Data Is Good News for Buyers

Homes are now cheap.

No, not everywhere in the country (more about that later). And, even after the latest Case-Shiller data, it's anyone's guess when they might actually turn around and start rising steadily again. It could be years.

But if you've been thinking of buying a home to live in, the current meltdown is a big opportunity.

You might not know it from the coverage of the latest data. Too many, as usual, are focused on the trees instead of the forest. The 10 and 20-city composite indexes were unchanged between September and October. And the numbers were lower than a year ago, but the rate of decline seems to have slowed: Two facts that are both obvious and practically useless. Indeed the latest survey contains a whole truckload of information for all those who prefer data to knowledge.

But long-term fundamentals are more important than the short-term noise. And it's generally a mistake to pay too much attention to doomsayers or to overthink these things.

Here's some home truths.

Real estate prices in the Case-Shiller 10-city index have now fallen by a stunning 30% from their 2005 peak. Nothing like it has been seen since the Great Depression–and, according to some sources, not then either. Obviously for anyone who bought a home at the peak of the market this has been a disaster. But for those thinking of buying a home now this is exceptionally good news.

And at the same time, mortgage rates have also plummeted. In 2006 you had to pay an average of about 6.4% on a 30-year fixed loan, according to the Federal Reserve. Right now you can get deals for about 5%.

Read more from The Wall Street Journal

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Another Big Gain in Existing-Home Sales as Buyers Respond to Tax Credit

Existing-home sales rose again in November as first-time buyers rushed to close sales before the original November 30 deadline for the recently extended and expanded tax credit, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4 percent to a seasonally adjusted annual rate1 of 6.54 million units in November from 6.09 million in October, and are 44.1 percent higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.

Lawrence Yun, NAR chief economist, said the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”

An NAR practitioner survey2 shows first-time buyers purchased 51 percent of homes in November, compared with an upwardly revised 50 percent of transactions in October.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.88 percent in November from 4.95 percent in October; the rate was 6.09 percent in November 2008. Last month’s mortgage interest rate was the second lowest on record after bottoming at 4.81 percent in April 2009.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said conditions are optimal for buyers in the current market. “Inventories have steadily declined and are closer to balanced levels, which indicate home prices in many areas are either stabilizing or could soon stabilize and return to normal appreciation patterns,” she said. “This means buyers still have good choices but are purchasing near the bottom of the price cycle with historically low mortgage interest rates. Throw a tax credit on top and it really doesn’t get any better for buyers with secure jobs and long-term ownership plans.”

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2009 Cost versus Value Report

Judicious home remodeling is still worth the investment, according to Remodeling magazine's annual "Cost vs. Value Report."

Uncertainty and restraint are the order of the day in this economy, and that sense of caution is reflected in home owners’ return on their investment in remodeling projects, according to REALTORS® in 80 metropolitan markets surveyed by Remodeling magazine for this year’s Cost vs. Value Report.

The majority of the 10 remodeling projects with the best return on investment nationally are a testament to pragmatism. Six of the 10 projects—siding and window replacement using a variety of materials—involve home maintenance that costs less than $14,000.

Two more—adding an attic bedroom or a wood deck—reinforce the notion that boosting the amount of livable space in and around your home will attract buyers who are increasingly looking for more room for their buck. In past years, converting an attic into a bedroom was a project that landed squarely in the middle of the rankings, but this year it leapfrogged over other categories into third place. It’s an admittedly pricey project, with an average national cost of nearly $50,000, but it generates an average national return of 83.1 percent and a better-than-100 percent return on investment, according to REALTORS® in 14 of the 80 cities surveyed. Adding a wood deck is much more economical, with an average national cost of slightly more than $10,000. Its average national return is 80.6 percent, but in six cities, its return is estimated at 100 percent or greater.

The six siding and window home maintenance projects in the top 10, combined with the project with the biggest return on investment—a mid-range entry door replacement—prove something that every sales associate tells sellers throughout the country: First impressions count. A mid-range entry door replacement, a project new to the survey this year, is the only home remodeling project that REALTORS® expect to generate a full return for the money nationally. It’s the least expensive of the 33 projects included in the analysis, yet it brings a whopping average national return on investment of 128.9 percent. It generates a better-than-100 percent return in 48 of the 80 cities, according to REALTORS® surveyed, and in several cities, its return is estimated at more than double its cost.

Additional data prove the value of restraint. Upgrading kitchens and baths is still a smart bet. However, home owners will recoup the greatest share of their costs by foregoing super-deluxe projects in favor of mid-range kitchen and bath remodels. A mid-range kitchen remodel brings an average 72.1 percent return on investment, while an upscale kitchen re-do returns only an average of 63.2 percent of the money invested. A mid-range bathroom project has an average 71 percent cost recovery, but the average recovery on an upscale bathroom project is nearly 10 points lower, at 61.6 percent.

The only upscale projects that cracked the top 10 were the home maintenance projects of fiber-cement siding replacement and vinyl window replacement. The average cost of fiber-cement siding is more than $13,000, but its return on investment reached 83.6 percent, placing it squarely in second place in the survey. The average cost of vinyl window replacement is nearly $14,000, and it generates an average return of 76.5 percent, or tenth place in the survey. Of the 12 upscale projects, nine landed in the bottom half.

Overall, home owners recouped an average of 63.8 percent of their investment in 33 different home improvement projects, according to REALTORS® who responded to the survey. The expected cost recoup was generally down from previous years in line with the drop in home prices nationally (see page 23). The return on home owners’ investment in remodeling projects has declined an average of 3.5 percentage points between 2008 and 2009. That’s down from the 2.7 point drop between 2007 and 2008 and much less than the 5.5 point drop between 2006 and 2007 and the 10.5 point drop from 2005 to 2006.

Read more by G.M. Filisko of the National Association of Realtors

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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

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.

December sales figures show a slight reversal back towards buyer territory. For the moment, the market is well balanced in what we call a Realtor's Market, neither wholly favoring buyers or sellers

*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 January 1, 2010

Average Sale & List Prices for Albany, Schenectady, Rensselaer, Saratoga Counties

The average list and sale prices for the month of December 2009 show a leveling out in both average list and sale prices. However, both the list prices and sale prices remain below levels seen in past years.

The average asking price to sale price has decreased slightly from 96.82% in November to 96.53% for December. The number of sales at 481 is down from 559 last month as is typical for this time of year.

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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

Archives

We've been asked to again include links to past market updates. But since our stories link to other web sites over which we have no control we only want to link to our most recent issues. Otherwise, the article links may fail to work as they once did.