Archive | April, 2010

New Home Sales Bounce Almost 27% Higher in March 2010

28 Apr

Sales of new homes broke out of a four-month winter slump with a bang in March 2010, soaring 26.9% over February, the government recently said, evidence that federal tax incentives for buyers due to expire next week are giving the housing market a boost.

The March figures were meager by historical standards, bouncing off an all-time low in February, and analysts said job creation was paramount for the momentum to sustain itself.

“It shows that the tax credit still has some punch, and we will probably see some better sales numbers for April,” said Mark Zandi, chief economist for Moody’s But “if we don’t get more jobs, the housing market is going nowhere.”

The news came after a report showed that sales of previously owned homes rose 6.8% in March. Although new-home sales make up a much smaller share of home-buying activity, economists are watching the data carefully as an indicator of whether the beleaguered construction industry will begin to add jobs in substantial numbers.

Home builders’ stocks climbed, with the Standard & Poor’s index of 12 major builders increasing nearly 11%.

Last year, housing was a drag on economic growth, but that could turn this year, said David Crowe, chief economist for the National Association of Homebuilders. Housing should contribute positively to the nation’s first-quarter growth when the government’s report on gross domestic product is released, he said.

New-home sales in March jumped the most in markets hit by February’s winter storms. They rose 43.5% in the South, 35.7% in the Northeast, 5.7% in the West and 4.3% in the Midwest.

The data are estimates based on surveys and are reported as an annual sales pace adjusted to take seasonal variations into account. The March sales pace hit an annual rate of 411,000 homes.

February’s revised annual rate of 324,000 was the lowest since the government began tracking such statistics in 1963. That made it easy for March figures to show a surge.

Zandi estimated that, stripping out the effects of February’s inclement weather and the influence of the tax credit, last month’s sales pace was closer to 350,000.

“The one thing to keep in mind is that these are still really horrible numbers,” said Patrick Newport, U.S. economist for the consultancy IHS Global Insight. “The only reason they look good is because February’s were the worst numbers ever.”

Sales are likely to fall once the tax credit expires but will recover later this year if the economy picks up steam, he said.

Newport was encouraged that about a third of homes bought in March had not begun construction, which suggests the shoppers, who were unlikely to close their sales in time to qualify for the government’s tax credit, were tempted by factors such as cheap prices and low interest rates.

Richard Voith, a real estate expert at the consulting firm Econsult Corp. in Philadelphia, predicted that the momentum would continue. “It will be a decent summer,” he said.

Inventory declined to levels not seen since March 1971, with the seasonally adjusted estimate of new houses for sale at the end of last month standing at 228,000. That represents a supply of 6.7 months at the current sales rate. The median sales price of new houses sold in March was $214,000.

Builders have suffered significantly from the recession, the credit crunch and competition from bank-owned properties. As a result, they have changed their business models, constructing smaller, cheaper dwellings to attract first-time buyers and putting up fewer houses that don’t have buyers lined up in advance.

Despite slumping sales this year, builders have begun construction on homes at a faster rate than last year, with many counting on a boost from the federal tax credit of up to $8,000 for first-time purchasers and $6,500 for some current homeowners.

“New homes are selling, so builders were smart,” Newport said. “They are not going to slow down the pace.”


Why buy a home when rent is so cheap…because owning a home reaps benefits beyond the obvious

15 Apr

Despite the challenges facing the housing and mortgage markets, 65% of Americans would still prefer to own a home rather than rent, according to a Fannie Mae national housing survey.In addition, 43% of respondents cite safety as a key reason to buy, while 33% are motivated to buy because they perceive schools to be better in neighborhoods where most homes are owned by their residents.A full 70% said they believe buying a home continues to be one of the safest investments available compared to 74% who think putting money into a bank account is safe, and only 17% believe buying stocks is a safe investment.

In addition, there are some deeper other valid reasons why people want to buy a home even in a soft rental market like we are experiencing now. Socially, owning a home provides life and residential satisfaction, as well as contributing to better health. As far as the community is concerned, home ownership encourages neighborhood stability, civic participation and better youth behavior.

As far as economics are concerned, home ownership allows the individual to have better quality housing, reduced housing costs, improved portfolio wealth, and better access to credit. In the neighborhood, home owners improve house price appreciation and job mobility.

These are all fantastic theories, but is there evidence that home ownership is more socially and economically beneficial than renting.

The theory is that owners live in bigger units of higher quality and with more amenities. There is empirical evidence that:

  • owners enjoy an average of two more rooms and 600 more square feet than renters;
  • owners are twice as likely to have a separate living or dining room; three times as likely to have a working fireplace; twice as likely to have a washer and dryer; and twice as likely to have a garage or car port;
  • renters are twice as likely to suffer from rodents; holes in walls, ceilings and floors; wiring deficiencies and water leaks and;
  • renters are three times more likely to live in crowded conditions—more than one person per room.

How do we know that monthly housing costs are lower for renters than for home owners? There is evidence that:

  • owners pay less per square foot than do renters;
  • owners pay a lower percentage of their income for housing costs than do renters;
  • housing costs-to-income ratios diminish over time, but these savings may be eaten up with maintenance or transaction costs; and
  • owners enjoy substantial tax benefits through the mortgage interest deduction.

The theory is that owners see civic involvement as a means of protecting their investment and have stronger attachments to neighborhood and community. Evidence is strong and consistent that homeowners are more likely to participate in voluntary organizations and engage in local political activity.

Home owners accumulate assets through homeownership in two ways: (a) home owners reap the full return (or loss) associated with house price appreciation; and (b) as their mortgage is amortized through repayment, a household builds equity—the difference between the value of the home and what is owed on it. Housing equity represents roughly 45% of the average home owner’s net worth; and home owners have better access to both secured and unsecured credit.

When you add it all up, home ownership is a winner….no matter what the rent is!!!

Top 10 Questions to ask on a Short Sale

12 Apr


1. What is your experience representing sellers in short sales?

Dealing with a knowledgeable and experienced agent who has successfully closed many short sales is the sine qua non for a successful short sale.

Thousands of agents are now taking short sale certification programs and presenting themselves as short sale specialists. Many of these agents have never closed a short sale in their lives. In fact many of the people teaching certification classes have themselves never closed a short sale.

Knowing the mechanics of a short sale is not enough. Lots of agents now have this information from taking one of the many certification classes now prevalent. It will not get the job done.

Ask the agent how many short sales they have closed representing sellers in the last year. I would also ask them if they have closed any representing a seller with the particular loan servicer who is the third party approver(s).

(Representation of buyers in a short sale counts for nothing in terms of short sale experience since all the approval action goes on with the listing side.)

The listing agent needs to know how to escalate a deal to get an approval. Some loan servicers – BOA immediately comes to mind – reflexively decline short sales and, I believe, manufacture values, notwithstanding what their appraisal or BPO says, hoping to extract the maximum dollars from the buyer and agents.

(Understandable perhaps, but if they really wanted to get the most money from the short sale, they should provide a target number up front, not spend months jerking buyers and sellers around).

The agent needs to know how to get to management to get an approval with Servicers like this. In fact the listing agent needs to know how to do this just as reflexively as the servicer who is going to reflexively decline the deal.

Negotiating price prior to getting to the Management level is going to prolong the process, not shorten it. But the listing agent has to know how to get around the lower level negotiators.

2. How many liens are there on the property?

First or first and second or HELOC, HOA, Condo, Special Assessment, Tax?

Second lien holders and HELOC holders can be extremely difficult and are very adept at killing deals and cutting commissions.

3. Who is/are the servicer(s)?

BOA, for example is extremely difficult to deal with. Much more so than Wells Fargo. So unless you just get lucky it will take a much more experienced and savvy agent to get an approval from BOA than WF.

4. Who is the investor or insurer on the loan?

Fannie Mae, Freddie Mac, FHA or VA or Conventional or PMI

Conventional loans are the Wild West for servicers since they can approve or deny anything they want.

Fannie Mae loans frequently have PMI which means, nothing is happening without the PMI companies approval, so even if there is only one lien, there may be two approvals required.

FHA has a proscribed process which allows servicers little latitude for game playing.

5. Is the listing agent going to have one contract signed and submitted or do they say they are going to submit the offers to the servicer to decide which one they want?

I would personally advise my buyers to run away from any deal where the agent says they are going to submit multiple offers to a servicer. That tells me the listing agent is clueless. Why would you send multiple offers to a loan servicer who takes months to approve one deal? If the agent can’t figure out which is the best deal in a multiple offer situation, they should get out of this business completely.

6. Has the servicer previously approved a deal which the buyer walked away from or has the servicer disclosed an acceptable price?

This may shorten the process, but not necessarily. Some servicers will force the agent to start all over from square one again with a new buyer, including ordering a new appraisal.

7. Does the agent have any financial modeling program to determine whether the offer is going to yield more cash to the investor than foreclosing?

This is how the lenders ultimately decide whether or not to approve a deal. Absence of this is means you are pretty much throwing darts with a blindfold on.

8. Has the property been priced appropriately?

I still see short sale listings where it is obvious the property is priced at a number which would pay off all of the liens. Ridiculous. Don’t even think about showing your buyers this property.

9. Do the agent comments say something like “commission paid on net sales price” or “50% to selling agent of approved commission”?

Either this agent is clueless or they don’t know how to handle commission negotiations with the lender. This is a run away, don’t walk situation.

10. Does the agent purport to be an expert?

I would be very, very wary of anyone who purports to be an expert. The only experts I am aware of are the guys sworn in as such in court rooms. We have 10 to 15 short sales in various stages of approval all the time and I see new twists on servicer tactics and processes every day – and there are dozens of servicer representing hundreds if not thousands of different investors. And don’t forget HAMP or HAFA.

Bonus Question:

11. Will an Attorney get you a better deal on a Short Sale?

Think about it. Until this year, most attorneys would have turned their noses up at dealing with loan servicer on short sales. Suddenly, they’re experts in short sales.

Time’s running out for tax credit:

6 Apr

Attention shoppers: You have barely a month left before the current home buyer tax credit expires.

First-time home buyers qualify for up to $8000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.

And this is absolutely, positively (most likely) your last chance to claim the credit.  So don’t wait, thinking the credit will be extended for a third time.

There is little sentiment for continuing this program, especially because many consider the latest go-round’s results to be disappointing. Even the Senate’s biggest proponent of the home buyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.

“He has no plans to introduce legislation to extend the credit,” said Isakson’s spokesperson. “Part of the benefit of the tax credit was the urgency its sun-setting generated.”

That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time home buyers, netted huge sales jumps, the real estate has  market slowed over the winter and early spring.

That may be because some people believed that Congress would just keep adding time to the clock, according to Nicolas Retsinas, director of Harvard’s Joint Center for Housing Study.

“The credit’s influence and impact has waned considerably,” said Retsinas.

“You got a lot more bang for the buck on the first go round,” added Mike Larson, a real estate analyst with Weiss Research. “Most people acted on the presumption that the credit was going away.”
Who’s eligible:

Not every buyer qualifies for the credit. Here are some guidelines:

Home buyers who have not owned a home for the past three years may earn up to $8,000 or 10% of the purchase price, whichever is lower.
Buyers who have owned a home for five consecutive years of the past eight qualify for up to $6,500 in credits.
There are income limits of $125,000 for single taxpayers and $225,000 for couples.
Anyone paying more than $800,000 for the home cannot claim the credit.

There’s a prohibition on claiming the first-time home buyer credit if either member of a couple owned a home within the three-year period. They can claim the existing home buyer credit.

Home buyers who are under 18 or are listed as dependents on the tax returns of others don’t qualify. The home must be kept at least three years.

The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return.

Note that buyers get the full amount of the credit they’re due even if that exceeds the amount of taxes they owe. If you’re a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.

The Albert Einstein Guide to Social Media

2 Apr

Albert Einstein knew an awful lot. And if you pay attention to his work and his most famous statements about it, you might just think he was talking about us, the social media crew.

We might not be looking for a unified theory for all things quantum in our day jobs, or pondering the discrepancies between particle theory and relativity, but here are a few things Einstein has managed to summarize for us just the same. Funny how some concepts apply pretty universally…

A perfection of means, and confusion of aims, seems to be our main problem.

It all starts with the goals and objectives, but look around you, and you’re sure to see the folks that still think the Facebook Page is the holy grail of social media success. Know what you’re aiming for before you choose any one path to get there.

Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction.

We’re hell bent on creating convoluted indexes and formulas to calculate and measure the fuzzy stuff like influence, affinity, or loyalty. As if somehow putting an algebraic formula to it will make it legitimate. Are there simpler ways we can be approaching these seemingly complex problems from a more human level? Is it ever enough to just say “this feels like the right thing to do”, even if we don’t have a spreadsheet upon which to demonstrate the results?

Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.

You can count a zillion fans and followers but what are you going to do with them when you have them? Are they moving you toward something, or are they just there? And things like having genuine intent or an authentic mindset (not one on a mission statement somewhere) are much harder to quantify and put on a report, but they matter a great deal. They’re part of the untouchable essence of outstanding companies. It’s like porn. You know it when you see it, but it’s awfully hard to define.

Information is not knowledge. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.

Case studies, case studies, case studies. Oh, how we want to read about what everyone else has done in hopes that it will be the safety net for us not having to do our own planning and strategizing. There are, however, no shortcuts. Precedent isn’t proof, and someone else’s story isn’t likely to be in the right context. There’s a fine line between not wanting to reinvent the wheel, and not wanting to do the thinking for yourself and be accountable for your decisions.

Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are even incapable of forming such opinions.

Loosely translated: majority isn’t truth. Just because “everyone” is doing it doesn’t mean it’s great. Conversely, just because you’re being the perpetual contrarian doesn’t mean you’re any smarter than the rest, you’re just joining the complaint flock. It takes courage and thought to go against the grain, illustrate a new approach, own it, and take actual risks in execution, not just on paper.

Everyone should be respected as an individual, but no one idolized.

We don’t need a bunch of internet famous people and a confluence of empty personal brands. We need people that do good work and make a difference to the people in their universe, whether on a business or personal level.

If you can’t explain it simply, you don’t understand it well enough.

We need more clarity, accountability, and translation of social media into terms that everyone can relate to. Enough with the buzzwords and lingo already. “Joining the conversation” doesn’t explain anything.

Peace cannot be kept by force; it can only be achieved by understanding.

Teaching and guiding adoption of social media can be an arduous task. But forcing too many rules without context and understanding is a recipe for resistance and resentment. And dragging people unwillingly into the social web before they’re truly culturally equipped will undoubtedly end in failure. Understanding new concepts and ideas takes time, patience, and the willingness of some to make small strides instead of huge leaps.

People love chopping wood. In this activity one immediately sees results.

We all wish that you could just throw up a blog and instantly see a lift in your sales numbers, but it doesn’t work that way. Cultivating a social media community takes more time than many businesses would like. They’re so anxious to know whether they’ve made a good or bad investment, so they demand results and guarantees before they start. But much like the business relationships you’ve built the old fashioned way, creating trust and loyalty is an investment, not a transaction.

Strive not to be a success, but rather to be of value.

In a world where content is everywhere, it’s not enough to just have a bunch of eyeballs see what you do. Value is a wonderful aim, if you understand that value is defined differently for everyone. Your definition of value doesn’t matter when it comes to offering it to someone else. You have to figure out how your customers, prospects, and community define it, and deliver that to them, relentlessly.

We can’t solve problems by using the same kind of thinking we used when we created them.

Social media is, in many ways, a solution to some of the problems we’ve created ourselves. The divide we’ve created between the company and the customer is one of our own design, and social media is helping to shorten that distance again. As a result, we cannot try and cram social media into the same mindset we’ve used for sales, marketing, and customer service for the last several decades, or we’ll just end up right back where we started, and end up blaming social media itself for not living up to our expectations.

The road to perdition has ever been accompanied by lip service to an ideal.

Authenticity. Trust. Transparency. Community. They’re a bunch of buzzwords – and empty ones at that – unless they’re backed up at a root level, and driven by concrete intent and execution. A poster on a wall or a vision statement drafted in a boardroom doesn’t mean jack unless you’re empowering and allowing the actions that help people deliver on those promises. Period.

Insanity: doing the same thing over and over again and expecting different results.

We collected impressions for ads as if having a million people see a billboard without any notion of what they did with that information was actually effective. We build call centers to automate customer service. We talked in “key messages” and soundbites, and we buried our mistakes under PR gloss-overs. Customers are now pushing back on those ideas and demanding better from businesses. Yet, we’re approaching Facebook as an eyeball collection tool, or Twitter as a press release distribution service, or throwing interns to manage our customer support forums, and we’re wondering why we’re having trouble seeing value in these tools?

Anyone who has never made a mistake has never tried anything new.

We’re talking about new approaches to business problems, here. We’re talking culture shift. Adjustments to our approach, the courage to evaluate our weaknesses, and the willingness to invest in things that aren’t the same as we’ve always done. All that means that mistakes are inevitable. And rather than lynching and publicly vilifying those that fall short, let’s learn from each other, from ourselves, and start allowing social media a legitimate place in business process innovation.

Not bad for a guy with crazy hair who never tied his shoes, but who managed to single-handedly and drastically change our understanding of the universe around us. I’m thinking we can help businesses do the same for the online world we’re creating here. You?