Positive Angles

What are real estate professionals saying to homebuyers and sellers about current market
conditions? The successful brokers and sales associates are talking about the strengths that exist in the market. Below are positive angles that appeared recently in the media and underscore why it is a good time to buy real estate.

Karl Case: Buying a House Now Can Make a Lot of Sense
In a New York Times Op-Ed, Karl Case, professor emeritus of economics at Wellesley and cocreator of Standard & Poor’s Case-Shiller housing index, provided his perspective on the U.S. housing market. In this excerpt, he explains why now may be a good time to buy a house. “For people with a more realistic version of the American dream, buying a house now can make a lot of sense. Think of it as an investment. The return or yield on that investment comes in two forms.

“First, it provides what is called “net imputed rent from owner-occupied housing.” Youlive in the house and so it provides you with a real flow of valuable services. This part ofthe yield is counted as part of national income by the Commerce Department. It is the equivalent of about a 6% return on your investment after maintenance and repair, and it is constant over time in real terms.

“The second part of the yield on investment in a house is the capital gain you receive if it
appreciates and you sell the house. Gains are excluded from taxation if the property is a
primary residence and the gain is less than $250,000 for a single filer or $500,000 for a
married couple filing jointly.

“Do the math. Four years ago, the monthly payment on a $300,000 house with 20% down and a mortgage rate of about 6.6% was $1,533. Today that $300,000 house would sell for $213,000 and a 30-year fixed-rate mortgage with 20% down would carry a rate of about 4.2% and a monthly payment of $833. In addition, the down payment would be $42,600 instead of $60,000.”
-- “A Dream House After All,” by Karl Case, New York Times, Sept. 1, 2010.

NAHB Index Shows Near-Record Affordability in Real Estate
The share of homes that families making the national median income could afford to buy remained above 70% for the sixth quarter in a row, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). Nationally, the HOI was at 72.3% in the second quarter, unchanged from the same time period last year and close to the index's record-high 72.5% set in first-quarter 2009. “Homeownership is within reach of more households than it has been for almost a generation," said Bob Jones, the building association's chairman.

“Interest rates continue to hover at historic low levels, the economy is beginning to rebound, and
with house prices starting to stabilize, conditions are beginning to draw homebuyers back into the market, which is a positive step on the path to recovery.”
-- “Near-Record Affordability in Real Estate,” by Andrea V. Brambila, Inman News

Low Mortgage Rates Boost Purchase Mortgage Applications
The housing market showed a few signs of life last week, with near-record low mortgage rates boosting new home-purchase applications by 6.3% from the previous week. The increase came as average rates on 30-year fixed-rate loans stood at 4.5%, up slightly from 4.43% during the previous week but at their second lowest level since the Mortgage Bankers Association began its tally in 1990. The effective rate decreased, however, because the average points paid fell to 0.96%, down from 1.34%, during the prior week. Purchase applications hit their highest level since the end of May, but home-buying activity is still way off of levels seen earlier this year, when tax credits juiced sales.
-- “Purchase Mortgage Applications Post Largest Rise Since May,” by Nick Timiraos, Wall Street Journal,

Economic and Housing Numbers Turn Positive in September
Kenneth R. Harney, author of a nationally syndicated column on housing and real estate, wrote the following about current economic and housing market statistics:
“After a few weeks in August where the economic and housing outlooks have been a little sobering - the numbers at the beginning of September are looking increasingly positive.
“The latest Commerce Department study finds that consumer spending is on the upswing, and
just registered the biggest pickup in four months.
“The Institute for Supply Management reported a one point gain in its manufacturing index for
the latest month (a key factor for future employment growth)
“Pending home sales, which had been sliding since the phase-out of the tax credits last
spring, rose by 5.2%, according to the National Association of Realtors.
“The Standard and Poor's /Case-Shiller index reported that home prices in the top-20
metropolitan areas gained 4.2% year over year. Prices were up in 15 of the 20, including
some big gains in California and elsewhere.
“Freddie Mac’s latest home value index measured a 3.1% average gain from the first quarter
of this year through the second quarter ending June 30.
-- “Real Estate Outlook: Consumer Confidence,” by Kenneth R. Harney, Realty Times, Sept. 6, 2010.

Regional Update: News from Markets around the Nation Miami/Dade County, FL
Pending home sales were up 33.7% in Miami-Dade County in August compared to the same month last year, according to data released by Miami Realtors. Pending sales – signed contracts that have not yet closed – were up to 10,119 last month, compared to 7,570 in August of last year in Miami-Dade County. Month-over-month, pending sales were up 0.6%. For condos, 5,759 pending sales represented a 49.7% increase over the same month last year. For single-family homes, last month's 4,360 signed contracts represented an increase of 17.1% compared to last August.
-- “Miami-Dade Sees Boost in Pending Home Sales,” Toluse Olorunnipa, Miami Herald, Sept. 4, 2010.

Hudson Valley, N.Y.
Better Homes and Gardens Rand Realty announced that the Hudson Valley has had its most
successful real estate sales quarter in nearly two years, with astronomical increases. According to the Better Homes and Gardens Rand Realty Second Quarter 2010 Real Estate Market Report, the real estate market in the Hudson Valley surged in the second quarter, with a 46.4% increase in sales from last year and a 64.9% increase from the first quarter. Transactions were up from last year in every county in the area, and the regional 3,283 sales marked the highest number of quarterly transactions in almost two years.
-- “Hudson Valley Real Estate Sales Surge in the Second Quarter 2010,” RISMedia, Sept. 9, 2010.