The inside track on finding hidden gems in this hot market:

How to Find ‘Hidden Gems’ in Real Estate

 Ilyce Glink | CBS Money Watch | June 19, 2013 | link

The watchword in the real estate world comes in triplicate: location, location, location.

That adage can really work against you as a home buyer, particularly in today’s seller’s market. Homes in the most desirable locations in any city are snapped up within days of going on the market — and at increasingly high prices.

“We’re already seeing multiple offers coming in,” says Chicago-area ReMax agent Karen Lippoldt. “People are overbidding and putting in blind offers. That hasn’t happened in years.”

Sales are moving at a breakneck speed in many markets, where bidding wars and all-cash offers are quickly becoming the norm. On top of that, home prices are up 17 percent nationally, according to recently released data from real estate firm RedFin.

Regular and first-time buyers that need conventional financing are starting to get squeezed out, forced to compromise on what they really want.

So how do you beat other buyers in such a frenzied market and find the home of your dreams? You change your location.

There’s a lot of action in the market right now, so by shifting your search to an area of lesser activity, you can save a lot of time, hassle and, most importantly, money. You’ll get the home you want at the price you want. On top of that, if you hit on an up-and-coming market, your home will be worth more when you sell it than if you buy in an established neighborhood.

To find these kinds of hidden gem homes, keep these three rules in mind:

Avoid areas with a lot of name recognition

Frequently, you will wind up paying more money for a house simply because of the reputation of its location.

Naples, Fla., for example, is well known as a ritzy enclave along Florida’s Gulf Coast. You’ll pay a lot more for a home there than you will just north in Bonita Springs, a community offering similar amenities, but homes there cost an average of $51 per square foot less, according to Coldwell Banker.

Identify your favorite places, then look for comparable areas

Almost every neighborhood or suburb is going to have a sister city of sorts that offers similar amenities, lifestyles and homes. Think about why you want to live in the places on you list among your favorites — good schools, walkable neighborhood, great nightlife — and use that to guide your search for comparable areas. You generally want to find a neighborhood or suburb that has a similar feel, but with a lower median list price.

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Home prices are up, but why? Some academic perspectives

Why Are Home Prices Back on the Rise?

Chris Kissell | Bankrate.com | June 17, 2013 | link

After many years of falling, home prices appear to be back on the rise. Meanwhile, mortgage rates are near historic lows. Do you have any thoughts about what is driving the price increases, and whether the rising trend is likely to continue?

Ping Cheng

Ping Cheng

Associate professor
College of Business
Florida Atlantic University in Boca Raton, Fla.

 

Associate professor
College of Business
Florida Atlantic University in Boca Raton, Fla.The rising price is a good sign, and it is probably going to continue next year if interest rates remain low. I think the recent sales increase is mainly driven by low interest rates, rising rents and an influx of cash buyers from overseas, coupled with very few new constructions on the supply side. The absorption of foreclosed properties also helps reduce the supply, and it pushes up prices.

The long-term trend is difficult to tell, as the data (are) still too short.

Karen M. Gibler

Karen M. Gibler

Associate professor
J. Mack Robinson College of Business
Georgia State University in Atlanta

The drivers behind rising prices may vary in different parts of the country.

 

Associate professor
J. Mack Robinson College of Business
Georgia State University in AtlantaHowever, one general contributor is the supply side. When the recession hit, single-family housing construction halted, so we have experienced several years of very minimal construction of new units. Thus, existing houses do not have to compete with so many vacant new houses in the market. Also, some vacant single-family houses have been converted to rentals and currently are not competing in the owner-occupied market and reducing available for-sale supply.

A second general contributor is consumer sentiment. When companies cut jobs and employees — not only those who lost their jobs, but also their friends and co-workers and those who just saw the news reports on the television and in newspapers — took precautionary measures, such as delaying homebuying or moving up.

People remained living with relatives or renting rather than taking on the financial burden of buying a house. Some of those wanting to move up were afraid they would be unable to sell their current home. Over time, some of this pent-up demand has been released as people decide it is worth the risk to buy houses at current prices.

As more people move into the market, inventory is being removed, competition is increasing and prices are being bid up.

In some traditionally high-priced housing areas, residents with sufficient savings and credit are using the recession as an opportunity to buy in a market they previously could not afford.

And a few markets are starting to experience new job creation, which always leads to population migration and new households adding to local demand and bidding up house prices.

Michael J. Highfield

New homes selling like hotcakes!

New Home Construction Hits Highest Pace in 5 Years

Christopher Rugaber | The Associated Press | Dec 18th 2013 | link
U.S. Home Construction Hits Highest Pace in 5 Years
Justin Sullivan/Getty Images

WASHINGTON — U.S. builders broke ground on homes at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates.

The Commerce Department said Wednesday that developers began construction on houses and apartments in November at a seasonally adjusted annual rate of 1.09 million. That’s 23 percent more than October’s pace of 889,000 and the fastest since February 2008, just a few months after the recession began.

Construction of single-family homes jumped 21 percent to an annual pace of 727,000, also the highest in more than five years. Apartment construction soared 26 percent to a 354,000 annual pace.

Permits for future building slipped 3 percent to just over 1 million, down from 1.04 million in October. The drop reflected a decline in apartments, which can be volatile.

Permits for single-family homes rose, a sign that builders have plans for even more homes in the coming months.

Housing has been improving steadily since early last year, but construction had leveled off this summer after first reaching a 1 million annual pace in March. Last month’s surge comes as mortgage rates remain about a percentage point higher than they were in the spring. That suggests home building will boost economic growth in the final three months of the year.

The average rate on a 30-year mortgage fell to 4.42 percent last week. That’s down from a peak of 4.6 percent in August.

Rates jumped by more than a full percentage point after Federal Reserve Chairman Ben Bernanke first suggested in May that the Fed would pull back on its $85 billion bond-buying program before the end of the year. The Fed concludes a two-day meeting Wednesday, but most economists expect it won’t start reducing its purchases until January or March.

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Home building hopeful for 2014…

Home Builders End the Year More Upbeat

Daily Real Estate News | Wednesday, December 18, 2013

Home builders are getting more optimistic over the single-family home market, specifically over current sales conditions, sales expectations, and prospective buyer traffic, according to the December reading of the National Association of Home Builders/Wells Fargo Housing Market Index.

“Following a two-month pause in the index, this uptick is due in part to release of the pent-up demand caused by the uncertainty generated by the October government shutdown,” says David Crowe, the NAHB’s chief economist. “We continue to look for a gradual improvement in the housing recovery in the year ahead.”

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Party homes in demand!

Pitching Houses With Entertaining Spaces

With the market perking up, more homes across the country are pitched as ‘perfect for entertaining’

Sanette Tanaka | Wall Street Journal | December 5, 2013 | link

Nearly 2% of homes on the market are described as “perfect for entertaining.” Getty Images

Home buyers want to have fun again.

In the years immediately following the housing bust in late 2007, real-estate agents focused on functionality and facts, like the square footage and condition of the house, to convince buyers that they were getting a good deal. Now with the market improving, sellers are seeking to establish an emotional connection with buyers by focusing on lifestyle features instead.

As a result, nearly 2% of homes on the market are described as “perfect for entertaining”—or one out of every 64 homes, according to an analysis by real-estate brokerage ZipRealty. ZIPR -0.19% That is a 15% increase over the past year. ZipRealty examined listings in 24 major metro areas from the first quarter to the third quarter of 2013 compared with the same period in 2012.

The top party-ready city is Los Angeles, which has the most listings with the phrase “perfect for entertaining” in ZipRealty’s analysis. The city’s buzzing entertainment industry and warm weather make it ideal for entertaining, says Carol Bird, a real-estate broker with Westside Estate Agency in Malibu, Calif., in Los Angeles County. Ms. Bird, who often references entertaining in her listings, says her clients look for open floor plans, few walls and lots of outdoor amenities, like summer kitchens and swim-up bars. “We’d rather be outside than inside,” she says.

The definition of what makes an entertaining space has evolved over time. The top features in perfect-for-entertaining homes are outdoor spaces, like courtyards and decks, according to ZipRealty’s analysis. The emphasis on outdoor space reflects the rise of more casual entertaining, Ms. Bird adds. “Entertaining used to mean formal, sit-down dinners, but now entertaining could be sitting by the pool or the fire pit,” she says.

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This means us!

Smaller Housing Markets Nearing ‘Normal’ Faster

Daily Real Estate News | Friday, December 06, 2013 | link

The nationwide housing market is inching closer to “normal” levels and is operating at 85 percent of normal economic and housing activity, according to the the National Association of Home Builders/First American Leading Markets Index.

Nearly 16 percent – or 55 out of 350 metro areas – already have returned to or exceeded their last normal levels of housing and economic activity, according to the November index reading.

The LMI evaluates 350 metro areas to gauge how close the markets are to approaching or exceeding their previous normal levels of economic and housing activity. The index factors in average permits, home prices, and employment levels for the past 12 months.

“This index shows that most housing markets across the nation are continuing a slow, gradual climb back to normal levels,” says NAHB Chairman Rick Judson.

Smaller metros accounted for the majority of markets that are at or above normal levels, says David Crowe, NAHB’s chief economist.

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Home prices peaking?

Nearly Half of States Within Reach of Peak Home Prices

Daily Real Estate News | December 04, 2013 | link

Twenty-three states are within 10 percent of their 2006 home price peaks, CoreLogic reports in its latest housing data report reflecting October data.

Home prices have increased 12.5 percent year-over-year. However, prices had a more modest month-over-month gain of 0.2 percent from September to October. CoreLogic’s Home Price Index also reflects distressed sales.

“In terms of home price appreciation, the housing market appears to be catching its breath as we head into the final months of 2013,” says Anand Nallathambi, president and CEO of CoreLogic. “The deceleration in month-on-month trends was anticipated as strong gains in home prices over the spring and summer slow in line with normal seasonal patterns and the impact of higher mortgage interest rates.”

The following five states have seen the highest home price appreciation year-over-year:

  • Nevada: +25.9%
  • California: +22.4%
  • Georgia: +14.2%
  • Michigan: +14.1%
  • Arizona: +14%

The only state in the CoreLogic index that has seen prices fall is New Mexico, where home prices fell 0.5 percent year-over-year.

Soaring home prices are allowing more states to catch up to their home price peaks in 2006. Sixteen states are all within 5 percent or less of their peak home prices: Arkansas, Colorado, District of Columbia, Iowa, Louisiana, Nebraska, Montana, New York, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, Vermont, Wyoming, and Alaska.

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The best stocking stuffer this season? A new home!

Making the Most of Your Buyers’ Winter Search

Daily Real Estate News |  December 03, 2013 | link

The holidays are the perfect time of year for some home buyers to purchase a house and snag a great year-end deal — but limited inventory may be the Scrooge.

After a challenging home-buying season in the spring and summer, many buyers say they plan to reignite their home search during the winter, according to a recent realtor.com® survey. They’re hoping for less competition from all-cash buyers and fewer bidding wars during that time.

However, winter often brings about limited inventories of homes for sale, so buyers will likely find fewer choices. It seems that buyers expect that: 45 percent of those surveyed in the realtor.com® Winter Home Buyer Report say they believe they’ll be up against inventory challenges again during the winter months.

Some real estate agents are grappling with that issue by finding homes that aren’t officially on the market to increase their buyers’ choices. They are even drumming up “old expires” — homes that were listed several years ago but never sold — to see if the owner will reconsider selling. Some brokers are also sending letters to home owners in their buyer’s preferred neighborhood to motivate a home owner to consider selling.

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Getting back on your feet faster…

Springboard helps formerly distressed borrowers get back on track

Firm qualifies as HUD-approved housing counselor for innovative program

Kerri Ann Panchuk |Housing Wire | November 19, 2013 2:30PM | link

Borrowers who suffered significant financial hardships in recent years are not completely ‘out’ when it comes to trying to buy homes again, says Heather Shanahan, a representative with housing counseling agency Springboard.

In fact, she says her company is playing a key role in helping qualified borrowers move through the Federal Housing Administration’s Back-to-Work program, which shortens the waiting period for once-distressed or first-time homebuyers who want to get back into properties.

All future homeowners have to show is that they’ve recovered from a financial hardship and received counseling from a HUD-approved agency. If they meet these qualifications, the borrowers can buy properties once again in as little as a year.

Luckily for Springboard, which is fully known as Springboard Nonprofit Consumer Credit Management, the agency is a HUD-approved counselor, which allows it to participate in these initiatives.

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Are are you insured against negative equity? Now you can be.

Underwater insurance, as millions of homeowners emerge for air

| CNBC Real Estate | November 21, 2013 | link
Millions of homeowners are still underwater on their mortgages. CNBC’s Diana Olick reports on a new insurance product designed to protect against negative equity.

Fast-rising home prices brought more borrowers up from underwater in the third quarter of this year than at any time since the housing recovery began. In the quarter, 1.4 million borrowers came into a positive equity position, and nearly 5 million have recovered since the crash.

“We should feel good that we’re moving in the right direction, and at a fast clip,” said Zillow Chief Economist Stan Humphries.

We are not, however, out of the woods. Twenty-one percent of all homeowners with a mortgage, or nearly 11 million borrowers, still owe more on their loans than their homes are worth, though that is down from a peak of 31 percent early last year, according to Zillow.

And at 39 percent, the “effective” negative equity rate—borrowers who have less than 20 percent equity in their homes—is still staggering. To buy a new house, most homeowners need at least 20 percent equity to pay all the needed expenses, including today’s high down payments.

“Negative equity will remain a factor for years to come and must be considered part of the new normal in the housing market,” Humphries said. “Short sales will remain a persistent feature of the market as many homeowners remain too far underwater for reasonable price appreciation alone to help.”

Peter Gridley | Getty Images

Negative equity has been one of the greatest barriers to a full and robust housing recovery. Sale inventories are painfully low nationwide because so many homeowners don’t have the equity to move up (or even down). That lack of listings has depressed sales and pushed prices higher—good for the equity dilemma but bad for potential buyers.

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