June Home Sales Slow But Up From Last Year

Portions of this article taken from Realty Times

With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of REALTORS^®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.

Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. "June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months," he said.

"Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74 percent in June from 4.89 percent in May; the rate was 5.42 percent in June 2009.

The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.

A parallel NAR practitioner survey shows first-time buyers purchased 43 percent of homes in June, down from 46 percent in May. Investors accounted for 13 percent of sales in June, little changed from 14 percent in May; the remaining purchases were by repeat buyers. All-cash sales were at 24 percent in June compared with 25 percent in May.

Total housing inventory at the end of June rose 2.5 percent to 3.99 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.3-month supply in May.

"The supply of homes on the market is higher than we'd like to see. But home prices are still holding their ground because prices had already overcorrected in many local markets," Yun said. Raw unsold inventory remains 12.7 percent below the record of 4.58 million in July 2008.

Single-family home sales fell 5.6 percent to a seasonally adjusted annual rate of 4.70 million in June from a level of 4.98 million in May, but are 8.5 percent above the 4.33 million pace in June 2009. The median existing single-family home price was $184,200 in June, up 1.3 percent from a year ago.

Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in June in comparison with June 2009. In addition, existing single-family home sales rose in 12 of the 19 areas from a year ago while two were unchanged.

Existing condominium and co-op sales slipped 1.5 percent to a seasonally adjusted annual rate of 670,000 in June from 680,000 in May, but are 20.5 percent higher than the 556,000-unit pace in June 2009. The median existing condo price was $180,100 in June, which is 1.4 percent below a year ago.

Existing-home sales in the Midwest dropped 7.5 percent in June to a pace of 1.23 million but are 11.8 percent higher than a year ago. The median price in the Midwest was $155,900, down 0.1 percent from June 2009.

So What Should We Expect?

As the economy slowly recovers, we look to 2011 with eager anticipation. 2010 is the benchmark year in the housing slump. Why? Because it is the year when we finally hit the bottom. Generally the housing market follows a year or so behind the stock and commodities markets which turned the corner in October 2008, so this recovery is really taking its' time. The main focus is job creation/growth/sustainability which will lead to consumer confidence not only in segments such as retail, manufacturing and durable goods, but in the housing market as well. If (and that's a big if) jobs are protected and created within the next few months we should see a slight upswing in prices for existing homes and stability returning to the housing market.

There are a few issues that worry me outside of jobs and those are: simple supply and demand economics, and interest rates. As I am writing this we currently have about a 8 1/2 to 9 month inventory of homes in Southeastern Wisconsin (still a strong buyer's market). When there is too much inventory (homes on the market) and not enough demand (buyers in the marketplace), home prices fall. As a real estate agent, I try to educate my sellers that in this market we have to look at their competition...the other houses that are on the market currently. If my sellers home is comparable to the others but their home is $5,000 more expensive, buyers will purchase the less expensive home. The problem is everybody's doing it. And home prices have fallen. Until we either have too many buyers for the properties that are for sale now, or if those properties drop out of the market, we will continue to see home prices fall. The second component is the interest rates. All signs point to rising interest rates, which will slow the number of buyers entering the market. So even if houses fall off the market and interest rates rise, we may continue to see falling prices.

That's the "glass is half empty" scenario. I am optimistic that what is going to happen this fall and into 2011 is we will see a lot of homes drop off of the market and interest rates holding between 5-6% will spur more buyers into the market...especially first-time homebuyers. This will be the best case scenario because that will lead to more of a "neutral" market (which is normal, and will end the buyer's market). My glass ball is saying prices will hold stable in 2011 and will actually start increasing in 2012. There is still a lot that can go wrong as previously stated, but we have to have courage and faith that we will get through this recession and have a prosperous 2011.

Housing Market Forecast: What you need to know NOW

Portions of this article were taken from: Nancy F. Smith and Ilyce Glink

Surveying the wreckage of the residential real estate market, it's hard to remember that as recently as mid-2006, the conventional wisdom was that housing prices nationwide couldn't go down. At that time, homeowners were sitting atop a five-year, 66% appreciation in home values and a $6.5 trillion mother lode of home equity. Americans were so confident that their perceived new wealth was real that they extracted $1.2 trillion of it between 2001 and 2006, according to Alicia H. Munnell, director of the Center for Retirement Research at Boston College. Then, between 2006 and 2009, the median sale price fell 32% and $4 trillion evaporated from owner's net worth.

PRICES ARE GOING NOWHERE FOR AT LEAST SEVEN YEARS

Economists and real estate pundits quibble over exactly when prices will begin to rise, but everyone agrees it won't be soon. And, of course, some markets will do better than others. Even after the market does bottom out, most economists foresee several years of stagnant prices as people who've been holding back put their houses on the market and builders who've been sidelined begin to add new construction to the inventory. "House prices will probably negative this year, zero next year, and then mostly stagnant for about five years," says David W. Berson, chief economist with mortgage insurers PMI Group. "After that, the inventory of unsold homes should be worked off enough to go back to the historic rate of appreciation- a little bit more than inflation, or about 4% a year."

Why such a pessimistic forecast? Pick any measure of the housing market's health, and you'll find powerful and persistent headwinds.

• Foreclosures are at historic levels: More than 1.7 million homes were repossessed between the peak in 2006 and the first quarter of 2009. This year, another 3.1 million households will fall into some phase of foreclosure. In a normal market, about 1% of loans are in foreclosure. In today's market, it's about 4%. These properties sell at about 25%-30% of their nominal market price, and they are a big percentage of total sales (45% in April according to the National Association of Realtors). With about one in five mortgages under water, "foreclosures will be with us at significant levels for at least a couple of years," says Andrew LaPage, analyst with MDA DataQuick, a real estate information service. "It's going to take a while to burn through all the inventory".
• Defaults on jumbo mortgages will soon surge: The next shoe to drop is likely to be houses at the high end, where jumbo mortgages reside (any amount above $417,000 in Wisconsin). "Conforming mortgages have benefited from an unprecedented loosening of credit by the Federal Reserve through Fannie Mae, Freddie Mac, Ginnie Mae, and FHA," Berson says. "Not so the jumbo market. It's completely moribund." Jumbo-loan originations have dropped 71% in the first three quarters of 2008, the lowest level in five years. Many adjustable rate mortgages will reset this year, and without financing, there's not a lot the owner can do, that's where the next round of foreclosures will come from.
• There are too many houses for sale: More than 10 months' worth of houses were waiting to sell in April, according to the National Association of Realtors. A healthy market would be about 6 months. Distant suburbs have an especially abundant backlog. "These were growth areas where builders offered all kinds of creative financing to get people into their newly built houses," says LePage. The farther out they are, the less attractive they are to new buyers. "People can get past a lot of concerns about the long drive to work, for example, or how sterile the neighborhood is if they feel they've made an investment that will pay off." Those incentives are now gone, and-with gas prices going up again- the exurbs will be hurting for years.
• Unemployment is too high: Until recently, subprime mortgages drove foreclosures. For the second half of the year, joblessness will be the driving force. As long as the unemployment numbers remain high, foreclosures will keep coming.

So what can you do now? Take action! If you are a seller, get realistic about what you can get for your house. With so little upside in the foreseeable future, you may be better off to sell (even at a loss) since you will be able to get back into a similar house at a much lower price...or buy a larger home for what you are paying for your smaller home now. If you are thinking of buying, remember that the benefits of homeownership will be what they always were- tax breaks, a hedge against rising interest rates and inflation, the stability of owner-occupied neighborhoods- but they won't include the kind of massive run-up in equity that characterized the past few years.

FIRST TIME HOMEBUYERS AND INVESTORS WILL MAKE OUT LIKE BANDITS!

This may be the best opportunity first-time home buyers will have for decades! Prices are attractive and interest rates are hovering at or around 5% (which will go up at years end to over 6%), which is the lowest in 40 years! In many markets, you can buy cheaper than you can rent. With 5% down and a 30-year fixed-rate mortgage on a $150,000 home, your monthly payment would be $805, easily competitive with rents for a similarly sized house in most places.

Speculating in the foreclosure market is far from a sure thing, but some real estate investment firms and a hardy band of investors are taking advantage of the suddenly reduced prices. Most are responding to sharp declines in sale prices relative to rents, which creates a very good opportunity to buy rental properties. The demand for rentals has grown as more homeowners sell or are forced from their homes. Between 2005 and 2007 when the housing market really started showing signs of collapse, we saw an increase of 1.6 million single-family homes and condos occupied by renters. There's a very good chance that the value of these properties will rise at some future point, and buyers will get a good return on their investments.

So what do you do? First-time buyers, save enough for a down payment of at least 10%, but shoot for 20%. You want to be in the best possible situation where you put a bid in on a house and actually get your mortgage financing. Without a decent FICO score, it's hard to get a loan even if you are willing to pay a higher interest rate. Follow the Golden Rules of Homeownership: Buy when you feel secure in your job and you plan to stay in the house for at least five years. Allocate a maximum of 28% of your pretax income to your mortgage payment (including taxes and insurance).

PROPERTY TAXES WILL GO UP!

It's a straightforward formula, Wisconsin (and most other states) are swimming in red ink. Since legislatures hate to raise taxes, many are faced with draconian cuts to their budgets. The single largest item on most budgets is school aid. Ergo, school districts are going to be scrambling to make up the lost money, and they have only one significant source of revenue: property taxes. Research states that local governments will raise taxes 25 cents for every dollar of state aid that is lost. The cuts in state aid to local governments will be greater than they've been in many years, and that puts pressure on property taxation.

With assessed values currently falling, local governments will be forced to raise tax rates. "When home prices were climbing, rising assessments kept rates in check," says Andrew Reschovsky, economist at the University of Wisconsin. "And most people paid their taxes. The big question now is whether citizens will push back against rapidly rising tax rates. No one really knows."

Property taxes have two components: the tax rate and the assessed value of your property. You have some control over the latter. Make sure that it's in line with the current value of your home. If it's too high, challenge it. Locking in a lower assessment right now will reduce your taxes in years to come. Only 5% of homeowners appeal their assessments, according to the National Taxpayers Union, despite the fact that as many as 60% of taxable property in the US is over-assessed, and most of those who do appeal get some kind of relief.

To respond to this blog with questions or comments, please email me at bkrull@firstweber.com.

For Sale By Owner? Why It's So Hard To Sell Your Home

Some people are able to sell their own home without the services of a real estate agent. Some of these successful do-it-yourselfers are very experienced home sellers. Others are transferring ownership of their home to a child, co-worker or a tenant who's already living in the home. These circumstances are the exception, not the norm. For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards. Here are some of the reasons why:

1) FSBO's can't list their home in the Multiple Listing Service (MLS). FSBO's aren't permitted to put their home into MLS because these industry membership organizations are open only to licensed real estate brokers and agents. FSBO's are also locked out of many home search engines and web sites, including FirstWeber.com and BrendonKrull.com. Sure, a determined FSBO can put a "for sale" sign in his or her front yard and run a tiny advertisement in the local paper, but the home won't receive as much exposure as it would through the MLS.

2) Agents sometimes avoid showing FSBO homes. In a typical home sale, the buyer's agent will be compensated for his or her services, unless the buyer has signed a buyer agency agreement that specifically provides for such compensation (and usually comes from the home seller). Most agents find FSBO transactions to be too much work as opposed to a typical transaction with a property that is already listed with a broker. That means the pool of potential buyers for FSBO homes is limited primarily to unrepresented and probably unqualified prospects.

3) FSBO's usually overprice their home. Like most homeowners, most FSBO's honestly believe their own home is worth more than comparable homes in the same neighborhood. Usually, they're wrong. A real estate agent can provide an update on market conditions, an assessment of the likely selling price of the home and tips for improving the home's buyer appeal. Overpricing a for sale home is a sure way to deter potential buyers because they will never step foot through the door!

4) Buyers will feel intimidated. Potential buyers will spend less time in a FSBO home if the owner is present during the showing (this goes for certain limited service listings as well), and they'll be shy about discussing the pros and cons with their own agent if the owner is within earshot. Buyers will also be less inclined to make an offer they know will be negotiated directly with the seller.

5) Buyers will negotiate a lower price immediately. Potential buyers know that the FSBO seller is not paying any commission to a listing agent and can cut the price immediately by 4-7 percent along with the typical 10 percent reduction that most buyers take to start their negotiation, that leads to an offer that is almost 20 percent under the listing price. Buyers know about issue #3 (described above) and really hold most of the cards when coming into a negotiation strategy.

6) FSBO's are likely to stumble into legal trouble. Real estate transactions are fraught with potential liablility for unwary sellers, particularly in Wisconsin because of the extensive disclosure requirements. A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.

Avoid the hassle of selling your home on your own. You may have negotiated a few hundred dollars off on your last car purchase, but that does not make you an experienced negotiator. Rely on someone who has the knowledge and experience of negotiating hundreds of real estate transactions, all on your behalf. If you have any questions regarding this post, please feel free to contact me at any of my contact points listed to the right of this article.

The 7 Most Common Mistakes Sellers Make

This was taken from an article written by M. Anthony Carr. I have updated and changed some of the information as it pertains to local real estate.

Mistake #1: Putting your home on the market before it is ready. Most times this happens because the seller gets impatient or procrastinates and has pushed themselves up against a moving deadline without getting the pre-sale work done. So it comes on the market with the horrible carpet (that gets replaced during the marketing of the home); or they are painting it while it goes on the market. Presentation is everything...so get the work done before marketing the property.

Mistake #2: Over improving the home for the neighborhood. This happens with additions, bump outs, and upgrades that make the home stick out from among its competitors so much that it's an anomoly, instead of a nice addition to the community. Generally the cost of overdoing improvements will NEVER be recovered.

Mistake #3: Pricing the home based on what the seller wants to net. This pricing strategy always ends in failure. Sellers can control the "asking" price, but they don't control the "sales" price. The market does. A home is only worth what buyers are willing to pay for it!

Mistake #4: Hiring an agent based on non-business factors. Make sure you are hiring a professional with a proven track record. It might be nice to hand over your largest asset to your nephew who just got his real estate license, but make sure (at least) that he is being mentored by an experienced agent.

Mistake #5: Getting emotionally involved in the sale of the home. This is one of the biggest challenges home sellers face when putting their house on the market. Once you decide to sell your house, it's no longer a home, but a commodity, and priced as a commodity. It doesn't matter what you "want", only what the market can bear on pricing. People are going to come in to kick the tires, so to speak, and you can't get emotional about how they may or may not appreciate the nuances of your home of seven years.

Mistake #6: Trying to cover up problems, or not disclosing them. Let potential buyers know upfront what is wrong and you can (hopefully) avoid lengthy lawsuits later.

Mistake #7: Not getting your ducks lined up before trying to sell. This would involve financing, reading the fine print on your current mortgage to ensure no pre-payment penalties, not listening to the particulars of your local market, etc. If your local market is dictating lower home prices, then lower it early, not later...as it will cost you MUCH more in the long run. If the local market dictates selling your home first, then buying second, do it in that order (or vice versa).

Avoiding these mistakes is not that difficult. I am here to help you sell your home and I will do everything in my power to get your home sold quickly for the most amount of money. It is up to you to do your part!

Open Houses (Sunday, March 7, 2010)

20880 Hawthorne Ridge Court, Brookfield $289,000

11:00 AM-12:30 PM

N64W14379 Mill Road, Menomonee Falls $289,000

1:00 -2:30 PM

3240 N. Knoll Terrace, Wauwatosa $200,000

3:00 -4:30 PM

*For additional information on these great properties, please go to BrendonKrull.com or call, email or text me for information.

I hope to see you on Sunday!

Great Turnout!

We had a fantastic turnout for the open houses on Sunday! It was exciting to meet a few people who are in the market for a home. With all the doom and gloom that you hear about in the news, the facts are:

• There are still buyers out there looking for a new home
• Not everyone is going through foreclosure
• House prices have stabilized
• People have heard about and are utilizing the homebuyer's tax credit

Even if you are afraid that you won't make back what you have put into your home, and are thinking about buying a new home, you are in great shape! You may lose a little on the sale of your current home but you can gain so much more in the purchase of your new home! 5 years ago, homes that would have cost $300,000 are now priced around $250,000! You will get so much more home now!

Buy low and sell high. Even moving up, you will be buying low and you will be able to recoup your investment money down the road. We have hit bottom and are on our way back up, don't wait too long or you will have missed out on the best buying market in the history of real estate!

And don't hesitate to call me with any questions you may have. I am here to help!

A Few Updates & Housecleaning

Realtor Home & Garden Show

If anyone would like tickets to the Home & Garden show being held in March, please let me know. They are free to anyone who responds to this post and can be used at anytime during the run of the show.

My Open Houses for Sunday, February 28, 2010

N85W17230 Lee Place, Menomonee Falls $189,900

1:00-2:30PM

N86W17709 Main Street, Menomonee Falls $229,000 (recent reduction from $250k)

3:00-4:30PM

Hope you can make it out to take a look at two unbelievable properties in Menomonee Falls that are priced really well for the amenities and condition of the homes. Call me ahead of time to let me know that you are coming!

{Hawthorne Ridge, Brookfield} Price Reduction

After some time on the market, we have decided to lower the price of this fantastic home to $289,000. Most homes that are similar on the market right now are older, don't have a lower level walk-out, need major updating, and aren't on a cul-de-sac with the low Town of Brookfield taxes. And most of those similar homes are priced HIGHER than this fantastic home.

Call today for a private showing appointment to see your new home!

WOW! New Listing in Milwaukee...NOT your average property!

This new property was a difficult one to get a handle on. Once in a while a property comes onto the market that defies commonality of an area. This property feels like it is in the middle of Richfield, and the wildlife that accompanies this piece of land is something that you would normally only find in northern Wisconsin. What makes this estate so special is that it is in Milwaukee County, close to the interstate and to all the fine dining, shopping and events that make city living so great.

The property is split into a few different parcels (and pricing for each). I will describe each of them in as much detail as possible.

The House

Totally custom 4 bedroom, 3 1/2 bath built in 2004 by Matt Hall & Son Custom Home Builder. No expense was spared on design, build and materials for this home. Top of the line Hickory hardwood flooring throughout the lower level foyer, kitchen and morning room with the dining room sporting Brazilian Cherry hardwood flooring. Huge windows in all levels allow you to enjoy the private woodlands with full efficiency and full natural light. Natural fireplace with gas ignition in the Living Room is perfect on cool mornings or long winter nights. There also is a main floor laundry room and a nice sized pantry off of the butler's pantry. The upper level has a huge Master Suite with a glass-surround shower and heated whirlpool soaking tub, spacious walk-in closet with an entrance to the gigantic art studio. The studio could be used as a formal home office because it has it's own entrance with it's own doorbell. There is a 3 car garage that is attached to the home and it has it's own staircase to the studio, and another staircase that leads to the basement. The basement has another 2 1/2 car garage that can be reached from the rear of the home as it is a full walk-out lower level. One of the nicest features of the lower level is the guest quarters/in-law apartment. It has a full kitchen, dinette, living room with gas fireplace, huge bedroom with it's own bathroom and laundry. There also is an exercise room in the basement. This home has a three zone heating/cooling system controlling the home, apartment, and art studio.

All of this sits on its own one acre parcel on Lynx Avenue and can be purchased on it's own, or with the other parcels of land in any combination. Please see pricing below.

5 Acre Parcel

City of Milwaukee recorded easement for road access to both parcels. This lot is on the eastern edge of the overall estate and can be split into buildable lots. It is heavily wooded and could be a fantastic development for any builder or real estate investor...or for someone who wants to build their own dream home on a huge lot in the city.

3 Acre Parcel

The same as above but only on the western edge of the overall estate.

Pricing

1. House on 1 Acre.............. $540,000
2. House with all 9 Acres...... $745,000
3. 5 Acre parcel................... $120,000
4. 3 Acre parcel................... $85,000