Lennox's Real Estate Blog

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Archive for the ‘Homeownership’ Category

The Key To Housing Sustainability

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With the expiration of the Federal Housing Tax Credit we must ensure a continual stabilization of the housing and building industries, the engine that has pulled the U.S. economy out of every recession over the last 60 years. The benefits of a strong housing market are many, but unless we ensure that responsible first time homebuyers have access to the American Dream, we will continue to see a slowdown in this sector. In order to avoid a downturn, and the subsequent economic fallout, we must establish a responsible Federal Down Payment Assistance program.

Click here to read a White Paper that outlines the benefits of an effective DPA Program.

Thanks for reading,

Lennox

Written by Lennox

June 30, 2010 at 10:57 am

The New “Normal” In A Post-Boom Era

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As we look back at the real estate boom, it’s clear that many of us got used to the idea of quick home price appreciation. Real estate speculation became a game not just for investors, but for anyone with some equity and the desire to move. As we become accustomed to the post-boom market, our expectations for home price appreciation need to evolve as well.

From 1980 through 2010 (including six months forecasted for this year), home values appreciated on average 25% every five years. This average appreciation rate incorporates the post recession boom of the late 80s, the housing downturn of the early 90s, and the more recent boom and financial crisis of the past decade. The years since 2000 have been anything but normal. As a nation, we experienced extremely high real estate appreciation rates between 2002 and 2007, which were followed by historic price declines over the past three years. Though these appreciation and depreciation rates vary depending on area and price range, what seems to be true for all price points and regions is that homes are once again places of shelter—not get-rich-quick investments.

From this point forward, most homeowners will want to stay in their homes for three to five years to build up enough equity to make selling and moving a sound financial decision. This is because most major real estate economists anticipate that we will not see moderate appreciation in home value appreciation until 2011 and very gradual year-over-year improvement into the next decade.

The multi-year recoup period is historically normal: annual appreciation rates averaged 4.6 percent (compounded) per year since 1980, despite the many ups and downs over the past 30 years.  

Since they will most likely want to stay in their next home for at least three to five years, today’s buyers need to consider their near-and long-term plans as they shop. Growing families, retirement, children going off to college, or any other factor that could affect their budget or the amount of space they’ll need over the next several years should be taken into account.

Many homeowners and would-be buyers are wondering if it is a good time to sell or buy. We have seen valuations stabilizing in many areas and price points, and since current historically low interest rates equal greater purchasing power, sellers and buyers need to consider their individual situations carefully.

As normal appreciation rates return and become more familiar, we must realize that while real estate is still a good long-term investment, a home is about far more than money—there are many personal riches that come with owning a home, including those that fuel a healthier family and community.

Written by Lennox

June 24, 2010 at 1:53 pm

Mr. Scott Goes To Washington (D.C.)

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This week I am in Washington D.C. attending the National Association of REALTORS’ Midyear Legislative Meetings and today I had the privilege of speaking on a panel with an esteemed group of people that represent varying areas of the housing industry. In attendance was NAR’s current president, Vicki Cox Golder; Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies; and Phyllis Caldwell, chief, U.S. Department of the Treasury’s Homeownership Preservation Office. Other panelists included Alfred DelliBovi, president and CEO, Federal Home Loan Bank of New York; and Jack Shakett, executive, Credit Loss Mitigation Strategies, Bank of America. It was a very informative discussion and we all walked away in agreement that restoring balance to our mortgage finance system is key to stabilizing the housing market. For more information see the press release below. You can also watch streaming video of the Town Hall Meeting online. As always, thanks for reading.

Improving Liquidity, Reducing Inventory Critical for Stabilization, Say Realtors®

Washington, May 11, 2010

Restoring balance in the U.S. mortgage finance system is essential to stabilizing the real estate market, according to Realtors®, public policy officials and others gathered at the “Realtor® Town Hall Meeting: Strengthening and Stabilizing the U.S. Mortgage System” session today. The session is part of a three-day summit during the Realtors® Midyear Legislative Meetings & Trade Expo here this week.

According to the 2010 NAR Member Profile, 34 percent of Realtors® reported that the most important factor in limiting their clients’ ability to buy a home was difficulty in obtaining a mortgage. Panelists and participants at the session agreed that fixing the current mortgage finance system will be necessary for a meaningful housing recovery.

“As the leading advocate for homeownership, the National Association of Realtors® works to make sure that everyone who wants to own a home and is able to afford one can do so,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “A big part of that is ensuring access to safe, affordable mortgages.

Panelists offered their perspectives on the current state of the real estate market, mortgage financing, and what needs to happen to ensure a recovery. Veteran broadcast journalist Forest Sawyer moderated the session.

Panelists agreed that the balance of public-private involvement in the mortgage financing process is an issue that must be addressed.

“The best thing about the market today is that it’s not the market yesterday,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “But I’m not quite ready to say the market is recovering, because it’s still being supported by the government. In the first quarter of 2010, 90 percent of mortgages were backed by the government.”

Retsinas remarked that Realtors® have the opportunity to match up first-time buyers with distressed properties, but many Realtors® expressed frustration with the cumbersome foreclosure and short sales process.

Phyllis Caldwell, chief, U.S. Department of the Treasury’s Homeownership Preservation Office, agreed that this is an important issue. “What we’ve learned through the Home Affordable Modification Program is that modifications are very hard. Modifications may not be for everyone, and we’re looking at other ways we can help homeowners avoid foreclosure,” she said. Caldwell noted that, with labor mobility at an all-time low, more must be done to help people sell their homes in a short sale, if necessary, to allow them to move to areas where more jobs are available.

“Realtors® need to concentrate on policies that help the entire American economy grow,” said James Glassman, former undersecretary of state for Public Diplomacy. “If we want markets to work, we have to let them work. Once prices come down to the level they need to, buyers will return to the market.”

“The home buyer tax credit was a compelling call to action, and it did what it was supposed to do – it produced sales activity,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Now it’s time to determine what we need to do to ensure sustainability, moving forward. We need to bring integrity back to the mortgage business.”

Other panelists included Alfred DelliBovi, president and CEO, Federal Home Loan Bank of New York; and Jack Shakett, executive, Credit Loss Mitigation Strategies, Bank of America.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.realtor.org. News releases are posted in the Web site’s “News Media” section in the NAR Media Center.

Written by Lennox

May 11, 2010 at 11:03 pm

What a Ride . . .

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As many of you know, April 30 marks the expiration of the U.S. Federal Housing Tax Credit. What has commonly become known as “the tax credit” originally kicked off on February 17, 2009 when President Barack Obama signed into law the American Recovery and Reinvestment Act which included an $8,000, non-repayable tax credit for first time homebuyers. This tax credit was intended to help support the housing market  as an integral part of the overall recovery of the U.S. economy.

In the weeks following the passage of the tax credit, interest rates fell below 5% and mortgage applications nearly doubled. There was an immediate uptick in home sales in the “more affordable*” price ranges throughout the nation. What we soon discovered was that the tax credit – combined with low interest rates and adjusted home prices – provided buyers with a compelling reason to buy.

As we transitioned into Fall 2009 and the expiration of the tax credit drew closer, real estate professionals everywhere reported a frenzy of first-time buyers trying to close on homes before November 30. Meanwhile, the Federal Government decided to extend the tax credit. On November 6, 2009 President Obama signed into law the updated Federal Tax Credit, which not only saw the extension of the existing $8,000 tax credit for first-time buyers, but also a new $6,500 tax credit for eligible repeat buyers.

Unarguably, the tax credit has bolstered home sales over the past 16 months, proving to be most effective with first-time buyers who don’t have an existing home to sell. The National Association of REALTORS® projects the credit will spark 900,000 such purchases this year, on top of two million last year. In addition, 2010 is expected to see 1.5 million repeat purchasers. According to Moody’s Economy.com, when the previous tax credit was due to expire last fall, existing-home sales peaked at a 6.5 million annual rate. This spring, they’re expected to peak at a 5.7 million rate in May. The National Association of REALTORS® recently stated that existing-home sales rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March from February.

The positive effects of the tax credit were first felt in the “more affordable” price ranges, which represent about 50% of all home sales, and then started making their way up the price points. The $6,500 tax credit motivated many repeat buyers to jump off the fence and make their move to a new home. As a result, the mid price ranges saw an uptick in sales, followed by slight increases in the upper end.

For many generations, homeownership has been considered one of the fundamental components of a healthy American economy. This is the very reason that my Scottish, immigrant grandfather went into the real estate business nearly 80 years ago.

What it comes down to is that the tax credit did what it was designed to do; it helped with efforts to stabilize the U.S. economy. What can we expect to happen in the wake of the expiration of the tax credit? Stay tuned for my next blog entry and I will give you my thoughts.

*More affordable refers to those homes that are priced at – or – below the median home price in a specific market.

Written by Lennox

April 30, 2010 at 3:09 am

The Social Benefits of Homeownership

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The benefits of being a homeowner are great in number. Of course there are the financial benefits of building equity and developing one’s own economic foundation for their family’s future. And then there are the personal riches that come with owning a home, including those that fuel a healthier family and community. It is these intangible benefits that people often forget about when one buys or owns a home, but they are certainly worth taking note of.

A few years ago the National Association of REALTORS® authored a report entitled “The Social Benefits of Homeownership and Stable Housing,” which discussed evidence regarding the personal gains that come with homeownership. This report did not focus on the financial aspects, but rather it directed its attention to the social advantages that result from being in an owner-occupied home.

The report provided further support to theories that are already well-founded in American culture. It suggested that homeownership fosters household stability, social involvement, environmental awareness, local political participation, good health, low crime, and favorable community traits.

Homeownership has long been associated with strong neighborhoods and communities. As the research indicates, homeowners are generally more committed to their neighborhoods, therefore they are more likely to make friendships with neighbors, and are more likely to participate in voluntary and political activities that go towards developing a sense of community.

The NAR research reported findings that conclude that homeownership is particularly beneficial to children. It stated that children of homeowners are more likely to perform higher on academic achievement tests and finish high school; these children also report fewer behavioral problems in school. Considerable evidence suggests that homeowners are typically more satisfied with their homes; therefore they are more likely to stay in their homes for longer periods of time. All in all this imparts a sense of security that ultimately impacts the members of that household, including children.

Buying a home is likely the most important financial and emotionally filled decision of a person’s life, but as research and history have shown, the pay-off goes far beyond tax breaks and equity—it leads to happier, healthier families, and communities.

Written by Lennox

April 28, 2010 at 2:06 pm

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