NATIONAL NEWS We are finally beginning to get some more positive news on the real estate market.  The growth is better than expected and the trend appears to be more than seasonal, in part due to pent up demand as consumers believe that home prices have bottomed.  Source:  Radar Logic's RPX Monthly Housing Market Report 7/29/09.  The inventory of new homes has dropped dramatically and of existing homes erratic, but down.  Click here to view the New Home Sales graph and click here to view the Existing Home Sales graph.   The last four months of improvement are the first time we have seen increases in home prices in 34 months.  This could be an indication that price declines are stabilizing, but we have a way to go before we see sustained home price appreciation.  Source:  Micro Markets 7/28/09.  To see the change in home prices from January 2000 to May 2009, click here to view the House Prices graph.   If you are interested in purchasing a home but are waiting for the perfect timing, you may be about to miss it.  The following trends will affect your ability to purchase a home: Mortgage rates are rising and are expected to continue upward.  To see a graph of mortgage rates for 2009, click here to view the Mortgage Rates graph.  The projected bottom for housing prices is May 2010.   Click here to view the Case Shiller Future Prices graph.  However, if prices come down another 10% but interest rates increase by 1%, your monthly payment would be the same. Though pricing is expected to continue downward, 2009 has begun to see some stabilization. The housing affordability index is on a downward trend.  Click here to view the Housing Affordability graph.  The norm for the index is 125.  If you are interested in selling your home, keep the following trends in mind: Over the next year, Fiserv forecasts that national home prices will drop another 11% and bottom out in early 2010.  Source:  Fiserv 7/23/09. To sell your home fast, you need to go 10-15% below what comparable homes recently sold for.  Source:  Money Magazine 6/30/09. An influx in foreclosures is likely to depress house prices further.  Source:  Housing Wire 7/24/09. As the short sale/foreclosure market affects buyers and sellers, let's take a more in-depth look at the issues at hand.  To date, the Obama administration's foreclosure mitigation plan has not had a meaningful impact.  Source:  Moody's Investors Services 7/14/09.  Over 30% of delinquent borrowers lift themselves up to current payments without a modification.  Thus, 30% of the money spent on modification is wasted.   The second cost comes from re-default.  About 40-50% of all modifications fall back into delinquency within six months – simply a postponement of default.  Source:  Boston Federal Reserve Bank 7/09.   Now banks are beginning to understand that modifications are not working.  Thus, short sales completed jumped 208% during the first quarter of this year compared with the same period in 2008.  Source:  Office of Thrift Supervision & of the Comptroller 6/09.  Research from Clayton Holdings Inc. indicates that lenders lose only 19% of the loan amount on average with a short sale, compared to 40% on a traditional foreclosure sale.     A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner's commission.  The seller is unwilling or unable to cover the difference.  Some short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.   Mortgage defaults are being used as a strategy by some.  More than 25% of loan defaults are strategic, i.e., homeowners who default are walking away from their homes even if they can afford to make the payments.  They are motivated to walk when their home values have fallen by more than 15%.  Source:  NW Univ. Kellogg School of Mgmt, U of Chicago Booth School of Business & European Univ. Institute 7/09.  To see how this negative equity was a major cause of foreclosures, click here to view the Causes of Mortgage Foreclosures chart.   Currently, unemployment is a leading factor in the delinquency cycle.  To see the effect of unemployment on delinquencies, click here to view the Affect of Unemployment graph.  Delinquencies are rising rapidly, as demonstrated here on the Serious Delinquencies graph.  Unemployment has also affected the high end market – jumbo prime loans.  Jumbo foreclosure rates are up 580% since January 2008.  Source:  Lending Processing Services 7/29/09.   Here are some notable statistics: Existing home sales rose 7.2% in July, the largest monthly gain since 1999. First-time home buyers purchased 30% of homes in July. Distressed homes accounted for 31% of transactions. Total housing inventory rose 7.3% in July, representing a 9.4 month supply. The national median existing home price for all housing types was $178,000 in July, which is 15.1% lower than July 2008. Sales of newly built single-family homes rose 11% in June. Source:  Daily Real Estate News 8/21/09 & 7/28/09 Deterrents to continued improvement in the real estate market other than unemployment, rising interest rates and foreclosures are a severe lack of credit, low appraisals and the expiration of the $8000 first-time home buyer tax credit.  Banks tightened their standards for all types of loans in the second quarter and are expected to maintain the strict standards until the second half of 2010.  Source:  Daily Real Estate News 8/18/09.   HVCC, the Home Valuation Code of Conduct, has adversely affected the time until closing and the ability to obtain accurate appraisals to support the mortgage required.  In an NAR member survey, 76% had experienced an increase in appraisal time and 71% noted an increase in the use of appraisers who were not from the local area.  However, recently, Fannie Mae & Freddie Mac issued guidance that lenders should (not mandated) use appraisers who have clear experience in the geographic area and appraisers are not prohibited from talking to real estate agents.  Source:  NAR 7/09.   The first-time home buyer tax credit ends December 1st.  Thus, one would need to be under contract in October to assure closing prior to that date.  If you have children, friends or family who would like to take advantage of this "free" $8000, please have them call me promptly.  I have been working with several clients in this category.   WILMINGTON Wilmington-area home sales rose for the third straight month in July, but remained below levels of a year ago. Sales of single-family homes rose to 435 in July from 416 in June, but were 17% below the 524 sold in July 2008. The average price of a home sold in July rose to $274,832 from $256,616 in June and $246,437 in July 2008. Source:  Star News 8/19/09 Dr. William Hall, Senior Economist at UNCW, presented a mid-year update on the local economy on 7/14/09. The economic growth of Brunswick, New Hanover and Pender counties was 3% in 2007 and 0.75% in 2008.  Growth is forecast to be 1% in 2009 and 3% in 2010. Retail sales growth rates were -3 to -4% from 4Q08 to 1Q09. ILM air passenger traffic growth rates showed a positive gain from 1Q09-2Q09, the first time since 6/08. He predicts that the housing sector of the local economy will stabilize by late 2009. To see the month's supply of your particular home, click here to view the New Hanover County Absorption Report and look under the resales category for your price range.  I think you will see that we still have a lot of inventory to sell before reaching the norm of 6 months supply.   In January 2005, Intracoastal Realty launched the Teacher's Fund, a non-profit organization to award public and private elementary school teachers grants in order to buy books, supplies and other educational tools needed.  Intracoastal agents donate to this and you can support it by giving directly or linking your Food Lion MVP card or Harris Teeter Vic card to the Teacher's Fund.  The Teacher's Fund has awarded over $175,000 to 748 classrooms, benefiting almost 69,000 students as of June 2009.   I want to thank my friends that have referred a potential client to me.  Please let me know if a friend, family member or neighbor needs a competent real estate professional to help in buying or selling, or in locating a reputable agent in another city.   I truly appreciate your friendship and referrals.  Enjoy this issue of Keeping Current!