Is it time to think about buying? An article from Growing Wealth Magazine.

Many savvy real estate investors have made excellent returns by moving against the trend with careful market timing. The thought process is simple: When everybody is buying, it’s time to sell. And, when everyone is selling, it’s time to consider buying.

Here are five market conditions that have investors thinking today just might be the perfect time to buy real estate.

No. 1 – Low prices
Prices are down in most real estate markets across the country. In fact, the national median existing home price for all housing types was down 7.7 percent from a year ago, to $200,700 in March from $217,400 during the same month last year, according to the National Association of Realtors® (NAR). In many markets, the drop is even more substantial, especially when you compare with 2006 prices.

Greed is one of the biggest culprits keeping buyers on the sidelines. They are hesitant to buy now because prices may continue to drop. No one wants to buy a $210,000 home and see its value drop to $190,000 in six to 12 months.

Though this is a valid concern, it can be minimized with careful research of a specific market. You can further ensure your investment will hold value by making an offer that is 10 percent to 15 percent below the current market value.

The days of bidding wars and escalation clauses are gone. Homes are no longer selling for more than market value, and sellers are lucky to get the list price. Now is the time to invest in a real bargain.

No. 2 – Great selection
The housing inventory is on the rise, meaning there are more homes available for sale. According to NAR, it will take more than nine months to sell the national inventory of homes at the current sales pace. In some markets, such as South Florida, there is more than a 16-month supply of homes.

In addition to lower prices, this large inventory means a greater selection for buyers. As an investor, you can look for a home with the features, amenities, and favorable location you desire. By getting in the market now, you can afford to be particular and take your time finding exactly what you want.

No. 3 – Motivated sellers
When faced with the possibility that their house could sit on the market for a year or more, sellers become motivated to work with prospective buyers. Not to mention the fact that the already sodden market is being further deluged with an increase in foreclosures, short sales, and bank-owned properties, providing sellers even more motivation to be flexible so they can sell their properties.

Seller motivation extends far beyond accepting a lower offer. Sellers today will consider owner financing, where the buyer makes payments to the seller over time for all or a portion of the purchase price. Sellers are also more likely to agree to repairs or improvements requested by a buyer or recommended by a property inspector.

No longer in the driver’s seat, sellers are now agreeable to covering a portion of closing costs, buying down the rate, accepting a trade for the down payment, or throwing in new appliances and even furniture in the sale. In short, sellers will now negotiate.

No. 4 – Favorable interest rates
Interest rates are down, making housing more affordable. With the national average rate for a 30-year conventional fixed-rate mortgage at around 6 percent, a buyer can save thousands over time. For example, a $200,000 loan amortized over 30 years at 5.9 percent interest will carry a monthly principal and interest payment of $1,186.27.

Let’s say you’re waiting for the price to drop, however, and you buy the property for $190,000. Sure, you’ve saved $10,000 initially, but in the meantime the interest rate climbs to 7 percent, and your monthly payment increases to $1,264.07. By missing out on the lower interest rate today, you pay an extra $28,008 over the 30-year life of the loan.

In case it bears repeating, now is the time to obtain a fixed-rate amortized loan. There is no reason to take on the risk of an adjustable rate mortgage when interest rates are at historical lows. Also keep in mind that lenders are going back to more traditional underwriting requirements in light of increased delinquencies. This means tougher restrictions on the amount of the down payment, proof of income, and credit scores will make obtaining a loan more difficult. Federal Housing Administration (FHA) loans, seller financing, and lease options are on the increase as alternative financing options to conventional loans.

No. 5 – Rental opportunities
As overblown real estate prices begin to deflate, investors will find they can begin collecting rents that cover all their monthly expenses. It was difficult to find and purchase a rental property that would cash flow at the previously over-inflated prices, but today’s bargains can make a cash-flowing rental realistic once again.

Further, tenant demand for rental properties is on the rise. And with foreclosure filings up 57 percent and bank repossessions up 129 percent over last year, according to RealtyTrac, the rental demand is likely to increase further as people who have lost their homes to foreclosure look for alternative places to live.

And most people who find themselves in this situation will be forced to rent for five to seven years before they can qualify for bank financing to purchase their own home again.

Making the decision
Although there are compelling reasons to consider buying real estate now, it is always important to weigh
the pros against the cons.

To help alleviate indecision, follow these rules:

1. Look at values in the local area to see if they’ve stabilized or if they still appear to be in a downward spiral. Only buy in stable areas.

2. If you’re buying a personal home, be sure to plan on living in the house for at least the next three to five years.

3. When buying real estate as an investment, be certain the property cash flows, with rental income exceeding expenses such as the mortgage, taxes, insurance, and other costs.

4. Finally, analyze your economic stability and only buy what you can comfortably afford. Keep at least three months of living expenses in reserve in preparation for that fabled rainy day.

With a little common sense and thorough homework, you’ll likely find that now is a great time to consider buying real estate. Markets are cyclical, and the current combination of low prices, high inventory, low rates, motivated sellers, and increasing rental demand make it a buyer’s market for bargain shoppers

SOURCE: GROWING WEALTH MAGAZINE

Mortgage scam

This is a story from Bloomberg about a big time mortgage scam in Las Vegas. The principals are criminals and need serious jail time.

http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=aGYlBrRCgtq0

This time is different....not so much...

Brokers through out New York City claimed that foreign buyers would keep NYC insulated from the real estate pull back. The link below leads to a article from the Real Deal that says otherwise....

http://ny.therealdeal.com/articles/foreign-apartment-buyers-grow-scarce

Fear and liquidity

Today's question from Commodore's customer base: Short term rate are very low, there is talk that the Fed may drop rates again..so why are mortgage rates staying high?

This is a question that we have been getting a lot lately. Both from clients who are looking to purchase and those looking to refi. Most people who are not in finance do not realize that interest rates in general (LIBOR, Fed funds rate, prime rate), do not always correlate with mortgage rates.

When the Fed lowers the discount rate for example, there is no mandate that dictates that mortgage rates will follow. In the current environment, lenders and both Fannie and Freddie, are very cautious about lending, and they are requiring a higher premium for the money that they do lend. So even though cheap money is available to them, they inflate their mortgage rates in order to be compensated for the perceived risk in the market place. In other words, they want more vig to cover their behinds.

In a more normal credit environment, the yield on the 10yr gov't bond is fair proxy for Freddie and Fannie rates. Today though, there is a disconnect. There is an artificial floor on rates based on fear and liquidity. Until the credit pendulum swings back the other way, rates will stay higher than they should.

Who is buying real estate New York City?

There seems to be a more and more inventory hitting the New York City real estate market. New York magazine has an article is this week's edition that speaks to the glut of new condos in some neighborhoods. If you check out StreetEasy you will see more and more apts that are staying longer and longer on the market. However, there are people who are buying....mainly first time buyers who have been on the side line waiting for a pull back. Most of the clients that I am working with have saved some cash for down-payments or they have a parent who is willing to help. And if a buyer has been preparing to look at coops and not condos, they realized that they will need strong credit and ample reserves to make it past the coop board. On the other-hand, buyers who can’t buy before they sell their existing property are having a tougher time. So, for a change...the little guy is catching a break.

How does a boutique NYC real estate firm compete?

Hello RORE Readers! It has been a a very long time since my last post. Let's see...what has the world been up to....stock market crash, several banks being bought, un-qualified VP candidate...whatever one's world view, there is no way to say that things have been dull!

My business has both contracted and expanded. On the one hand, our mortgage business, Commodore Mortgage Group, has taken a hit. We have lost several banks (IndyMac, WAMU, Citi, GMAC, to name a few), jumbo pricing has gone through the roof, and underwriting standards have become overly tough. On the upside though, our real estate brokerage, Commodore Property Group, is starting to gain traction. Fortunately for us, there is still activity in the NYC marketplace. First time buyers with cash and investors with liquidity are still part of the mix. We have a couple of deals under our belt and a couple more in the pipeline.

Which leads me to the question: Why choose to work w/ a boutique NYC based real estate firm? I was having coffee yesterday w/ a friend and referal source who works for a private client money manager. We have know each other for a couple of years, and he has been a good source of mortgage business. I was somewhat taken aback though when he asked me how CPG can compete with the larger New York real estate brokers. It also made me realize that if I had not done a good job communicating our competitive advantage and strategy to him, I must also be missing the boat w/ others.

As a member of REBNY (Real Estate Board of New York), we have access to all of the listings in NYC. All REBNY members are required to post their exclusive listings with in 24 hours of receiving the business. This means that we have access to the inventory of Corcoran, Halstead, Elliman and all of the others. So for example, when I am assiting a client who would like t buy a property, I log onto the REBNY data base, type my client's criteria (such as number of bedrooms, sq footage, price range and neighborhood), and within in seconds the data base will return all of the listings that meet my search criteria. The same is true when I am working with a seller, only in reverse. I enter in the seller's data to the REBNY system, and within moments, thousands of brokers in NYC have access to my listing. On a qualitative note, clients who work w/ a smaller firm tend to get a much more personalized experience. Because we work w/ fewer clients, we are able to provide a much more focused approach than our larger competitors.

So I guess that time will tell how the New York real estate market ultimately fares. But at least in the short run, for those w/ cash and vision, there are many opportunities to be had.