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Jan 11

Federal Reserve in Recovery Mode

by Mary Teresa Fowler
Federal Reserve and Housing Market

When it comes to promoting economic recovery, the Federal Reserve is not acting in a 'reserved' manner. The U.S. Federal Reserve Bank has a definite plan and defining purpose.

Plan

The FOMC (committee responsible for setting monetary policy) plans to purchase $600 billion in Treasury securities.

Purpose

Encourage economic growth and keep long-term interest rates at a low level.

Reason

The Federal Reserve wants to speed up the process of economic recovery. No doubt, there have been sure signs of improvement. During the third quarter of 2010, consumer spending rose at an annual rate of 2-1/2%.

More businesses also invested in new software and equipment towards year-end. Of course, the statistics have to be looked at in a realistic light. Spending and investment is 'up' compared to the activity in recent 'down' periods.

Yet small gains can be indication of big things in the future. Issues like high unemployment, however, do not disappear from the radar overnight. It could take four or five years for employment rates to return to a normal scale.

Only 103,000 U.S. jobs were created in December 2010 – less than the 150,000 expected for that period. With its pending bond purchase by the end of the second quarter in 2011, the Federal Reserve hopes to encourage economic growth. In fact, a drop in the jobless rate is expected – almost 9% by the end of 2011 – but it will stay above 8% throughout 2012.

Housing Market

On January 7, 2011, Chairman Ben S. Bernanke gave his report (The Economic Outlook and Monetary and Fiscal Policy) before the Committee on the Budget in the U.S. Senate. The overall message in the report was that the economy would be somewhat stronger in 2011. Yet Bernanke referred to challenges in the housing market.

"However, the housing sector remains depressed, as the overhang of vacant houses continues to weigh heavily on both home prices and construction, and nonresidential construction is also quite weak," says Chairman Ben S. Bernanke before the Committee on the Budget, U.S. Senate, Washington, D.C.

The Federal Reserve has reason to worry about the state of the housing market. Three main factors can cause an economic recovery to lose steam. Damage to the credit market and regulatory and tax uncertainty problems can pose danger to an economy on the rebound. As well, problems in the housing market are stumbling blocks in a recovering economy.

Cautious Optimism

Yet there has been an increase in pending and new home sales. The rise amounted to 3.5% in November. These figures were influenced by a flurry of sales (18.2%) in the West. The National Association of Realtors chief economist, Lawrence Yun, explained how 2,000,000 jobs and just a moderate increase in mortgage rates would influence home sales.

"If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," says Lawrence Yun, National Association of Realtors chief economist.

If lenders returned to safe underwriting standards for credit-worthy buyers, there would be a greater rise in home sales.

Real Estate Outlook: Federal Reserve Promoting Recovery

Do You Agree With The Federal Reserve Plan to Buy $600 Billion In Bonds?

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Jan 8

Rounding Up the Best Real Estate Advice

by Mary Teresa Fowler
Real Estate Advice for 2011

The beginning of the New Year revolves around the 'annual' resolutions – at least according to the media. Whether people choose to follow a set plan or just play it by air, you can bet that they will be bombarded by all kinds of advice - on television, in print, and at online sites. The professional (or other) advice will cover every topic from routine to resorts to real estate.

You have to separate the great advice from the inaccurate, silly, or even foolhardy suggestions. Real estate is one area where it pays to resolve to learn more during the coming year. Even if you are not buying or selling now, chances are that you will at some point. As well, renters need to know the score. It pays to get a feel for the topic and arm yourself with knowledge.

As you delve through the mounds of real estate advice, you can find 'real' golden nuggets of information from reputable sources. Often the best pieces of advice are simple suggestions that make the most sense. Yet often, consumers overlook the simple solution because they perceive real estate as a complicated matter. Truthfully, real estate is a complex issue, but knowing the basics makes it less of a challenge.

Rounding Up the Best Real Estate Advice

"Get your home into selling shape." ~ Ilyce Glink, Real Estate Matters, Chicago Tribune

Ilyce Glink, author of Real Estate Matters, emphasizes preparing to sell your home. Part of her wise advice – get rid of items - unless you need or use them. Interior and exterior cleaning, repairs, and touch-ups are also suggestions as well as the possibility of hiring a stager.

Read More...

"Make a sensible valuation." ~ Tanya Ashreena, Financial Times

This sensible statement was written for London readers but it is relevant on a global level. Sellers have to be certain that their asking prices reflect the present market – not yesterday's value or tomorrow's prediction. The Financial Times focuses on the reality of what will happen if you ignore this piece of advice. Failure to do so will lower your chances of selling a home.

"Always get a home inspection." ~ US News

Now this bit of advice might seem boring if you've just found the perfect house – or so you think at the time. Potential buyers need to complete a 'checklist' before they decide on that dream home. The state of the foundation and the electrical system as well as water damage – all these matters (and more) have to be explored before you buy a home. Keep in mind that potential buyers can keep an eye out for types of damage and disrepair but they still need the professional help of a home inspector.

Read more...

Federal Reserve issues tips for mortgage loan shopping

Money Saving Tips for Your Apartment

What Is The Best Real Estate Advice For First-Time Buyers?

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Jan 5

Home Buying Incentives:Good Deal-Bad Plan

by Mary Teresa Fowler
Home Buying Incentives

Tempting incentives for home buyers – especially first-timers – seem to be the 'in' thing. At one point or another, governments, builders, and property groups will offer enticing incentives to encourage home purchases. This practice is widespread in a troubled or recovering economy. Yet these offers are around to a certain degree in every real estate market.

Government initiatives have been shown to benefit home buyers. These programs assist buyers who meet the qualifications. The plans might offer a credit (as the expired Federal First-Time Homebuyers' Credit) or access to RRSP savings (Canada's 2009 Expansion of the Home Buyers' Plan).

Yet numerous builders and property groups also make offers to home buyers. Should potential buyers take the bait or resist the temptation? What types of incentives are being put on the table?

Huge Incentives

Australia

Home buyers can find all kinds of offers out there in the marketplace. Sometimes builders and a property group combine to offer huge incentives. The Satterley Property Group and 17 builders in Australia are making a concerted effort to provide affordable housing in specific estates.

With their campaign named "The Lot," offers of cash rebates, bonuses, and incentives can add up to $30,000 savings per home. Satterley provides cash rebates up to $10,000 plus landscaping, fencing, and other attractions. Builders’ bonuses include free pools, kitchen and bathroom upgrades, as well as home entertainment packages, and reverse cycle air-conditioning. Nigel Satterley, spokesman for The Lot, explained the reasoning behind the offers.

“People have been wary of interest rates and in retail, as well as in land and housing, buyers have become cautious. And research shows that a large percentage of young people are pessimistic about 2011," says Nigel Satterly, spokesman for Satterly Property Group.

$30,000 incentives to first-home buyers

US

Of course, Australia builders are not the only ones adding on incentives. U.S. home buyers can also receive offers of new pools with a home purchase. In fact, home buyers might be enticed with free vacations, free entertainment centers, or even free cars (leases). Check out a current incentive in Fort Myers, Florida.

The Background of Builders' Incentives

Before buyers accept builders' incentives, they should inform themselves about the practice. The most important point to remember is that builders are in business to make a profit. An incentive should make sense for a home buyer in the long term. Usually, offers come in with a catch.

What could the free vacation cost the home buyer? Is a quick purchase required to claim the vacation? Does the buyer have to make a substantial non-refundable "earnest money deposit"? This deposit is not to be confused with a down payment. When buyers execute a purchase contract, the agreement specifies an amount to secure the contract or "show good faith."

The free vacation or the free product sounds great but the builder will be getting it at a discount. It might make more sense for buyers to shop later for affordable holidays or special sales on products. When buyers factor in required conditions, the 'free' stuff might not seem like such a good deal.

Good Deal or Bad Plan

Indeed, accepting the incentives might be a bad plan. Home buyers do not have to stay away from all builders offering incentives. Yet buyers must understand the builders' goal.

The home purchase – a long-term commitment – must be the buyer's priority. The thrill of a tropical vacation cannot compare to finding the perfect home at the best price. Skip the incentives - if it means that you sacrifice your dream.

Incentives for Home Buyers

Would You Accept Home Buying Incentives?

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Jan 3

Foreign Investors Favor US

by Mary Teresa Fowler

Foreign real estate investment

According to the results of the 19th Annual Survey released by the Association of Foreign Investment in Real Estate (AFIRE), international buyers favor US property. As foreign investors notice a recovering economy, they are expressing a renewed interest in U.S. real estate. In the latter part of 2010, this real estate survey was conducted among association members. The James A. Graaskamp Center for Real Estate at the Wisconsin School of Business handled the project.

19th AFIRE Survey

Industry leaders are bound to pay close attention to this latest survey by AFIRE with its 180 members representing 21 countries. The survey received responses from members holding more than $627 billion in global real estate and $265 billion in U.S. property. More than 60% of responses named the US as the best potential for capital appreciation. At least 72% of foreign buyers revealed that they plan to increase their US investments in 2011 compared to 2010 transactions.

AFIRE's 19th Annual Survey holds significant weight. The numbers reflect the opinions and plans of an influential group holding a considerable stake in global and regional assets. The 2010 results are far more encouraging than previous dismal numbers.

In 2006, only 26% of international investors saw potential in US property. Now more foreign buyers recognize the chance for capital appreciation in this country. Actually, the 2010 survey showed the strongest faith in this nation's real estate in the past decade.

Leading U.S. Cities

Two US cities – New York City and Washington – outshone other global cities in this recent AFIRE survey. In fact, New York City replaced London as the number one choice for foreign investors in real estate during 2011. Since 2001, London has held either first or second place. With the latest AFIRE results, London dropped to third place – behind the Big Apple and Washington – just before Paris in fourth position. Ian Hawksworth, AFIRE chairman, is not surprised by London's drop in rank.

"...In the last downturn, London was the first market to recover, and whilst investment in the UK Capital is still very active, it is not surprising that London has dropped to third place as investors expand their search to higher yielding markets such as U.S. gateway cities that offer attractive risk adjusted returns," says Ian Hawksworth, chairman of Foreign Investment in Real Estate.

NYC tops London for real estate investors

The popularity of NYC and Washington real estate is not a big surprise. Check out our 2010 articles – Inside New York Hotels – and - Moving To Washington. NYC, Washington, and Boston came in as the top three U.S. cities for foreign investment. New York City and Washington received four times more votes than third-place Boston. Yet in 2010, Boston has moved up from its fourth place position in the previous year. Take a look back at our 2010 analysis of Boston Real Estate – Better & Brighter Market.

U.S. Cities Lead Way for Global Foreign Real Estate Investment

Surprising statistics came to light about preferred U.S. property types for investment in 2011. Multi-family homes, apartments, retail, and hotels are the top four favorites among foreign investors. Offices ranked lower and industrial spaces showed up as the least favorite. Usually, offices are the top pick of institutional investors.

The drop in popularity of office space might be tied to high unemployment rates. Although there is growth in employment numbers, buyers could be feeling somewhat uncertain about investing in offices and industrial property. Yet foreign investors have overall confidence in the U.S. real estate market. Investors interested in U.S. cities quadruple the number of foreign buyers wanting to invest in the UK.

Are You Feeling Confident About The U.S. Real Estate Market?

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Jan 1

Real Estate Levels 2011

by Mary Teresa Fowler
Real estate value predictions for 2011

Home buyers and sellers, as well as investors, are trying to figure out the future of real estate in the coming year. Depending on their position, interested parties are exploring different areas of real estate. Individuals and organizations focus on everything from property value levels to interest rates to REIT (Real Estate Investment Trust) debt levels.

Commercial Real Estate

Real-estate fund managers have expressed confidence in the future of commercial real estate. According to portfolio managers, recovery is underway in the current market. The improvement is spurred on by low interest rates, favorable cash flows, and increased demand.

This group analyzes national and regional trends. Using this data, they decide on the most promising property sections and regions. Sectors such as apartments with short leases suffered in the economic downturn but they are expected to rebound in this recovery stage. As corporate travelers return to the road, hotels are attracting the attention of investors.

REIT Debt Level

With regards to REITs, industry experts pay attention to debt level compared to their earnings before taxes, interest, depreciation, and amortization.

Up, Up And Away

UK Business Property

In 2011, UK business property is also expected to be supported by low interest rates. Industry leaders believe that the Bank of England will not change the base rate until later in the year. On December 9th, the Monetary Policy Committee voted to maintain current levels.

Business property boosted by low interest rates in 2011?

Residential Property Value Levels

During 2011, home owners (and potential buyers) will be keeping an eye to property value levels. Within the past week, home owners in Victoria, British Columbia, Canada, were told about a slight increase in their property value assessments. During 2010, B.C. Assessment had frozen property values at 2007/2008 levels.

Of course, home owners are concerned about higher taxes associated with increased assessments. According to Cameron Muir, chief economist for the B.C. Real Estate Board, the increase in property values, however, may not result in a significant tax increase. Muir points out the positive aspect of higher property value assessments in a region.

"The increase would reflect stronger economic conditions and a healthier real estate market," said Cameron Muir, chief economist for the B.C. Real Estate Board, representing 12 real estate boards and almost 18,000 Realtors.

Residential housing sales in British Columbia should rise slightly in 2011. The province's economy is showing improvement with more employment and a larger population. Metro Vancouver is one popular area where home buyers can find affordable houses. Most likely, property prices will continue to rise in the coming year. Yet Metro Vancouver is still expected to be popular with home buyers especially with first-timers.

Greater Victoria property values buoyed by economic recovery

Will The Real Estate Market Level Out In 2011?

If people have an interest in real estate on any level, they should track market statistics. At present, the industry is experiencing a recovery. Yet there will be continued speculation about whether the market will level out or climb to new heights. Real estate predictions – even on a local scale - are not an exact science. A regional market can be affected by varied factors including external influences.

What Are Your Predictions For The Real Estate Market In 2011?

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Dec 29

Global Real Estate Trends

by Mary Teresa Fowler
Global Real Estate Trends in 2010

As the current year winds down and 2011 approaches, readers can expect reports and articles about real estate trends to pop up everywhere. With so much trend-related content out there, our eyes can sometimes glaze over and we tend to ignore the latest list. Yet we should rethink our reaction to the barrage of year-end statistics.

Tracking Trends

Examining trends helps us to zone in on where we've been, gives us an idea of where we're going, and arms us with the knowledge to navigate the system. Real estate revolves around statistics. It is worth consumers' time and effort to examine the numbers and keep up-to-date about real estate trends.

Global Real Estate Trends

The Global Real Estate Trends report released by Canada's Scotiabank tracks housing markets in 12 major economies. The December report states that global residential property markets in 2010 experienced a modest but uneven recovery.

Australia

Australia fared the best with its housing demand and low unemployment. Slower sales and price appreciation, however, are expected for this thriving market in the coming months.

Japan

Meanwhile, Japan’s twenty-year property slump continued in the past year. In 2011, Japan's economy is expected to experience a further slowdown.

US

Stability is returning to U.S. markets. Housing demand is expected to rise with increasing employment numbers and continued low interest rates. Yet the Global Real Estate Trends report warns that housing demand might not translate into home sales. Within a recovering economy with a high unemployment rate (although shrinking), individuals and lenders are feeling uncertain and cautious about major financial commitments.

Canada

Despite a volatile market in 2010, Canada ranked high in the Global Real Estate Trends report.

Read about all 12 housing markets in the Global Real Estate Trends report.

Local Real Estate Trends

Potential home buyers and sellers should keep informed about state and local trends. Varied media (print or online) across the US and elsewhere publish information regularly about the latest real estate trends. The Washington Post tracks housing sales and prices in the Washington area. Each Saturday, the results are posted in their 'Real Estate' section. Information is collected for every residential zip code and the data is compared to the numbers during the corresponding period in the previous year.

Green Building Trends

'Green building' trends will make a noticeable difference to the real estate industry in the coming year. Regardless of uncertain economies, 'green building' is expected to rebound in 2011. New commercial start-ups will opt for green alternatives. Existing businesses will be making energy-efficient improvements.

This decision makes sense on many levels for businesses. Besides being environmentally-friendly choices, green businesses impress the modern customer. As well, residential buildings will follow this trend. Home owners want to live in a safe and healthy environment.

Parents and educators will also be advocating for 'green' schools. As part of the LEED system, the number of Certified Green Schools should increase as more people embrace the health and educational benefits of these buildings. By the middle of 2010, certified schools made up almost 40% of all new LEED projects in the US. In 2011 and beyond, the real estate industry will be seeing more 'green' buildings in all areas - commercial, educational, and residential buildings.

Green Building’s Top Ten Trends for 2011

What Do You Think Will Be The Top Real Estate Trends in 2011?

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Dec 17

Confusing Real Estate Statistics

by Mary Teresa Fowler
Real Estate Statistics

Many people find it difficult to sort through the barrage of real estate statistics. After all, there are real estate numbers released on a quarterly, monthly, bi-weekly, and even weekly basis. Potential home buyers and home sellers must wade though scores of information before making a final decision.

Confusing Stats

It is not surprising that real estate numbers can be a confusing lot. After all, real estate is full of statistics. Remember Mark Twain's classic quote.

"There are three kinds of lies: lies, damned lies, and statistics." ~ Mark Twain.

No doubt, statistics have a questionable reputation. Generally, they are not 'lies' but Mark Twain (and others who have used this quote or a similar version) was probably referring to the persuasive power of numbers. Statistics can be used to bolster weak arguments. On the other hand, they might be dismissed by people on the opposing side of the statistics.

In addition, there is the odd journalist who goes out of their way to make an extraordinary headline out of ordinary statistics. Writers need to grab the readers' attention. Shocking or scary statistics are bound to garner interest and publications are not blind to that fact.

If there were 4,000 home sales in October and 3,800 home purchases in November, readers can expect the headline – Home Sales in Definite Decline. The journalist has published correct information. In this fictional example, home sales declined in November but the article might leave out a few important numbers. The author might not refer to the 5,200 sales in September or the 3,700 home purchases in August.

Statistics show the facts but they can hide the 'ebb and flow' of events. Long-term effects can be influenced by several external factors. A short-term statistic shows a more narrow perspective. They represent the "here and now."

Long-Term Commitment

Home buyers and sellers are facing decisions with long-term effects. They have to take a look at today's statistics but they must also examine tomorrow's outlook and future possibilities. A long term commitment requires exploring a broader range of statistics than this week's numbers. Home buyers and sellers must decipher overall trends and year-to-year comparisons.

They should view and review real estate statistics. Buying a house is a serious decision because you are buying "your home." Even if you are just looking at a home purchase as an investment, it requires commitment. If you hold on to the house for the long term, it can be a worthwhile investment – no matter which shocking statistics appear in the interim.

Through extensive research, individuals can get a better feel for the real estate market. Buyers and sellers need to ignore all the hype and stick with the basics. For example, a home buyer should be able to answer 'yes' to a few basic questions before they decide on home ownership.

Basic Questions for Home Buyers

  • Do you have a good credit score? 
  • Do you have a steady job or career? 
  • Do you have a stable income? 
  • Do you plan on being in this location for more than 4 years? 
  • If you own a home, have you owned it for longer than 5 years?

WHAT DO THESE TORONTO REAL ESTATE NUMBERS MEAN, ANYWAY?

Are You Ever Confused By Real Estate Statistics?

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Dec 14

US and UK Home Sellers - Chilly Sales

by Mary Teresa Fowler
End of Year Slowdown in Home Sales

Unless you are in a hot climate, November and December can be chilly months. This year, parts of the US and the UK are living through an early winter. Home sellers in these countries have also been experiencing a chilly period.

Los Angeles

Although Los Angeles might have warm temperatures, there has been a cooling down period in the housing market. During November 2010, the Los Angeles County housing market saw quite a slowdown. Home sales fell 21% compared to purchases in 2009. Condos sales had even a worse showing. Last year, 4,315 homes had sold in this region throughout November. Only 3,423 homes were purchased during the same period in the current year.

Sales were down 9% from October. Often home sales will decline somewhat in late autumn as the market heads towards winter. Yet the median price in Los Angeles County did not show much movement. In fact, median price was at almost the same place as in summer.

In a November 23 report, the California Association of Realtors suggested that the average home seller is not prepared for these chilly times. The housing market is in the midst of change. People must be willing to participate in a different game on an unfamiliar playing field. Leslie Appleton-Young, association chief economist, explains the "new reality."

"We're really seeing two different housing markets: one at the lower end driven by first-time buyers and investors, which is keeping prices stable, and one with nostalgic sellers who set unrealistic asking prices," says Leslie Appleton-Young, chief economist of the California Association of Realtors.

As well, Michael Nourmand, president of residential brokerage Nourmand & Associates, has noticed that buyers and sellers are finding it hard to adjust to a new market. Home sellers tend to think about the previous popularity of an area or earlier neighborhood prices. Yet sellers must think in the "here and now." In uncertain times, affordable options (such as fixer-uppers) are a big draw.

November Ushers In a Big Chill for Home Sellers

UK

In the UK, home sellers cut asking prices by 3% in December. These figures represent the worst December performance for home sale prices in three years. The statistics show the steepest decline since the 3.2% drop in 2007. Home purchase prices have now fallen during five of the past six months in all regions of England and Wales. The West Midlands saw the worst fall at 5% but Wales escaped with a mere 1.3% decline.

Despite a demand for homes and interest in quality homes and popular neighborhoods, dreams do not always translate into actual sales. Negative factors can come in to play to outweigh positive circumstances. Miles Shipside, director of Rightmove, explains part of the problem in the current UK housing market.

"The fact that many would-be buyers do not have the ability to proceed, and some homeowners find themselves in a position where they are forced to sell, drives prices down," states Miles Shipside, director of Rightmove.

Rightmove believes national home sales prices will at least remain flat in 2011. In fact, they predict the worst scenario could be a 5% decline because many homeowners are facing repossessions.

Home Sellers Forced To Slash Asking Prices

Are Home Sale Prices Experiencing A Chill In Your Neighborhood?

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Boston Real Estate Market

With its home values increasing by almost $11 billion in 2010, the Boston housing market is going in the opposite direction of the national trend. According to Zillow.com, Boston real estate is a better and brighter market. Since the city is now in a more favorable position than the rest of the country, its market will enter 2011 in great shape.

Home Values

As the housing market stabilizes, Boston should continue as a bright spot. Keep in mind that the city's current home values are an impressive lot. After all, U.S. home values are expected to lose $1.7 trillion this year. That decrease is 63% more than the $1 trillion decline in 2009. The latest figures confirm that total value lost since the 2006 market peak has been $9 trillion.

Home values had been appreciating from 2003 to 2005 (and in certain instances, during 2006). When subprime mortgages became popular, home owners believed that their houses would continue to increase in value. The rate was unsustainable, however, even with the help of government interventions such as the expired Federal Homebuyers' Tax Credit.

The market referred to as the 'Boston Metropolitan Statistical Area' was just one of two shining lights in the recent statistics. San Diego also showed an increase of $10.2 billion in home values.

Surprising Statistics

Now the Boston statistics were a bit of a surprise – at least to Robert Murphy, an economist at Boston College. He referenced the S&P/Case-Shiller Home Price Index (a measure for the U.S. residential housing market). Murphy believed that they reported home values in Greater Boston had not fallen as far as in other U.S. regions.

Yet despite his surprise at the latest statistics, this economist had to admit that Boston is enjoying a positive economy. Murphy pointed to two main industries (health care and education) stabilizing the Boston housing market as well as employment sectors. He reminds everyone, however, that Boston home values are still down $105 billion from their peak in 2005.

"The state’s unemployment rate is 8 percent, vs. 10 percent nationwide, so we’ve done better in that sense too,” says Robert Murphy, Boston economist, explaining the city's encouraging economy.

Foreclosure Effect

Is it possible that foreclosures are affecting recent statistics about Boston home values? Probably not! Yet Boston has seen its share of foreclosures.

There were 11,334 foreclosures from January-October in Massachusetts – an increase of 7,710 from 2009. Median prices for single-family homes, however, have increased since July. It will take six months (or even longer) though for downward pressure on median home prices to be felt in the market.

Hub home values up by $11B

Falling Home Values

New York City had the biggest decline at $103 billion and Chicago experienced $48 billion in losses. The value of homes in the Chicago metropolitan area is expected to fall 7.1% (to $625.8 billion) this year compared to 2009. The predicted loss of $48 billion is a better showing than the 2009 $66.7 billion loss. A local real-estate agent believes that Chicago home values will decline another 2%-3% during 2011. That fall would be a result of increased foreclosures and short sales.

Chicago’s home values dropping — but 2010 better than 2009

What Is The State Of Home Values In Your Area?

Dec 8

The Falling Prices of Foreclosures

by Mary Teresa Fowler
Home Foreclosure Bargains

Home buyers might expect to purchase a foreclosure for a bargain. Yet probably few buyers would be hoping for a 45% discount. According to Realty Trac, however, sales prices for Ohio foreclosures reached that low point in the third quarter of 2010.

Falling Prices

Purchase prices for foreclosures did not fall to that extent in every state. Yet foreclosures sold on the average for 32% less than non-foreclosure sales. In the second quarter, foreclosures sold for just 26% less than other homes. They could be purchased for 29% less in 2009. Realty Trac CEO, James Saccacio, said that he had never seen such disparity in prices of foreclosures and non-foreclosures since 2005.

The overall best deals went to buyers who picked up REOs (real estate owned by the bank after repossession). REOs were selling 41% lower than non-foreclosures in the summer and early autumn of the current year. That percentage means that a $300,000 foreclosure was selling for $177,000. A huge discount!

Distressed Properties

Of course, REOs may not be in prime condition. That factor is at play in the discount prices for certain foreclosure sales. Home buyers must always be realistic about purchasing distressed properties. These homes will need extra tender loving care – an investment of time, effort, and money. Home buyers must understand the implications of buying homes in less-than-mint condition.

If buyers are willing to take on the challenge, however, they will be getting a good deal in the current market. While the average price of homes rose 6.4% from the second to third quarter in 2010, distressed property prices fell 2.5%. Non-foreclosure sale prices rose to an average of $250,000 and foreclosure purchase prices fell to $170,000.

Behind the Scene

Home sales had dropped after the end of the Federal Homebuyers' Tax Credit. As well, more foreclosures came on the market. Buyers had plenty of choices. If homes were not set at favorable prices, they could just sit on the market for an indefinite period.

Getting Rid of REOs

REOs have been returned to lenders but they are still eager to get rid of the properties. REOs come with a cost for bankers. Actually, lenders would prefer to take a low price rather than carry the cost of the home for months.

Buy A Foreclosure - Save 30% On The Price

REO Statistics

Even with the deeply-discounted prices, however, REO sales dropped during the third quarter. Since home sales also fell, foreclosures still occupy the same share of the market. Yet REOs remained popular with many home buyers.

Nevada had the highest percentage (54%) of REO sales in the third quarter of this year. Yet these figures were 2% lower than sales for the second quarter. Other states also showed high numbers of foreclosure sales. In Arizona, foreclosures accounted for 47% of home sales. Foreclosures within California made up 40% of all home purchases.

In Massachusetts, more than one third of home sales during July-September were foreclosures. The fourth quarter statistics will be released in the new year. These figures will reflect the impact of the robo-signing fiasco.

Already dirt cheap, foreclosure prices dive

Will You Be Taking Advantage Of The Falling Prices Of Foreclosures?

Image courtesy of blog.foreclosure.com

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