Demand is up, Supply is Down!

For sale, but not for long

Demand is up, supply is down, and time is short for hopeful Mass. home buyers seeking tax credit

By Jenifer B. McKim Globe Staff / February 13, 2010

Karen Daly headed out Sunday to tour a renovated Natick house, confident she would be one of the few home hunters on a cold afternoon during which people were prepping for Super Bowl parties.

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But when Daly arrived at the three-bedroom, $449,000 Cape, she found herself among a half-dozen other disappointed prospective buyers who learned that the seller had already accepted an offer. It wasn’t Daly’s first real estate letdown. Last month, she bid more than $20,000 above the asking price for a house in Framingham -- and lost out.

“If you are a buyer, you have to be very decisive, you can’t hesitate,’’ said Daly, 55, who sold her house in two days last summer and has been renting in Newton. “You are looking at very low inventory and very steep competition.’’

After years of waiting on the real estate sidelines, many are ready to buy a home, hoping to take advantage of depressed prices, low interest rates, and a federal tax credit that expires this summer. But many would-be buyers are facing unexpected concerns: not enough homes for sale and high demand for many that are available. Properties below $600,000 are hardest to find, and the most desirable of those, in good condition and reasonably priced, are generating multiple bids within days of going on the market, real estate agents and buyers say.

Unlike other parts of the country, Massachusetts did not overbuild during the housing boom. While sales have been on the increase since July, the number of single-family homes on the market fell to 21,743 in December, marking 21 consecutive months of inventory decline compared with the same month a year before, according to the Massachusetts Association of Realtors. December’s figure was a nine-year low for the month.

“You have a fairly perfect storm, increased demand and decreased supply,’’ said Alex Coon, a Boston manager for Redfin, an online real estate brokerage. “You can find people out there who are getting frustrated.’’

The buying intensity is a shock to people who have been hearing for years about the Massachusetts housing slump. Home values have dropped by about 15.6 percent since 2005, according to the S&P/Case-Shiller Home Prices Indices.

Lily Robles and her husband, Mike Brink, were stunned when their offer on a $469,000 ranch in West Roxbury last week was trumped by a buyer willing to pay more than the asking price on the first day it was shown. “It is kind of crazy that you don’t have even one day to think about it,’’ said Robles. “It was supposed to be a buyer’s market.’’

For years, real estate agents have tried to convince prospective buyers to sign deals rather than wait to see if prices slide even lower. But now that many buyers seem to be gaining confidence in the market, sellers are in short supply. That’s because homeowners who don’t need to move are waiting for the market to turn and drive up prices.

Those biding their time include Andrew Syiek, 50, and his partner, Thomas Cantara, 49, who have considered moving but don’t want to take a loss on their Leominster home. They purchased the Colonial-style house for $447,000 in 2005 and invested more than $100,000 in a massive overhaul, including a new kitchen and two new bathrooms. “We’d be foolish to move now,’’ Syiek said. “People aren’t moving because they’ll take huge hits.’’

Prospective buyers, however, are motivated by the federal tax credit, which was extended and expanded last year to include homeowners as well as first-time buyers. To qualify, buyers must enter into a deal to purchase a home before May 1 and complete all the paperwork before July 1.

Buyers also are spurred by worries that interest rates, which have been hovering at about 5 percent for a 30-year fixed mortgage, will increase this spring after the Federal Reserve halts its purchase of mortgage-backed securities. In addition, there are signs the state’s housing market is on the mend, meaning prices may not go any lower. Home values in the Boston area have increased 5.6 percent since last March, according to Case-Shiller. Sales have increased for six months in a row, compared with the same month a year before, according to Warren Group, a private company that tracks local real estate.

John Neale, a partner with Sprogis and Neale Real Estate in Boston, is concerned that inventory could continue to dwindle. There were 781 condominiums available for sale in downtown Boston in December, an eight-year low, according to the Listing Information Network, a company that tracks the downtown condo market. He said many baby boomers and young families are choosing to stay in the city. That, combined with the low number of construction projects in the pipeline, means “it is only going to get worse,’’ Neale said.

For those shopping at the higher end of the market, selection remains more plentiful. John Prescott, vice president at Century 21 Commonwealth in Wellesley, said more expensive properties -- more than $800,000 in Natick and $1.5 million in Wellesley -- can linger for months. Sellers often have lofty notions about what their homes are worth, he said.

Some sellers are getting a jump-start on the traditional spring selling season by listing their homes in hopes of attracting time-pressed buyers. But there are not enough of them to satisfy real estate agents, who are trying to grow their listings by sending fliers and making phone calls, instead of waiting for business to come to them.

Jan Crosby, a real estate agent with RE/MAX First Realty in Newton, said she has clients who listed their West Roxbury home last week and were thrilled to accept an offer above the $469,000 asking price on the first day it was shown. Crosby attributed the quick deal to a fair list price and lack of competition in the neighborhood. “Inventory that is out there has been kicking around for a while and it is overpriced and unrealistic,’’ she said. “The motivated buyers are out now.’’

But for how long? Kevin Sears, president of the Massachusetts Association of Realtors, said he is warning potential sellers that interest could wane by summer, when the tax credit disappears and the threat of higher mortgage rates starts to loom larger. “We are going to have a flurry of activity in the spring,’’ said Sears. “What is going to happen after that is anybody’s guess.’’

Jenifer B. McKim can be reached at jmckim@globe.com.

© Copyright 2010 Globe Newspaper Company.

Marianne Blackstone Tabner
REALTOR, CBR, GREEN
Mbtabner@kw.com
www.FineHomesLandAndSea.com
www.MBThomeTeam.com
Keller Williams Realty
200 Baker Ave, Suite 205
Concord, MA 01742
Cell: 978-621-8028
Fax: 978-759-0588

23 Falmouth Woods Rd, East Falmouth, MA 02536 ......"Your connection To Boston NorthWest, Cape Cod and The Islands."

http://mbtabner.blogspot.com/

http://mbtabner.blogspot.com/

Housing Market Recovery

This Month in Real Estate February 2010 ............................................................................................................................................... Commentary Small steps to economic recovery continued last month. Among the positive readings was the report of a third quarter GDP growth rate of 2.8 percent, which followed four consecutive quarterly declines. This advance comes in well ahead of that of our Canadian neighbors, whose economy was once anticipated to be the first country out of recession, and by significant margin. Canada posted marginal 0.4 percent growth. Unemployment fell in November for the first time since April 2008. A strong rebound in home sales activity from year ago levels also points to a firmer stabilization. With the extension of the $8,000 federal housing tax credit into spring 2010, first-time buyers will now have an additional few months to purchase their dream homes. Expansion of the income restrictions now gives possibilities for higher earners to participate too. And the $6,500 tax credit now available to established homeowners with five consecutive years or more in their homes broadens the opportunity landscape. This in turn will allow the housing market more time to find a more solid footing on a sustainable recovery. Although economists continue to debate the overall shape of the recovery, it is widely agreed that the U.S. economy will take a long time to rebound. Unemployment is expected to remain high for several quarters and the number of underemployed is expected by some economists to remain a drag on growth prospects. On the brighter side, according to some economists, a slow and steady growth will likely fair better for the long-term well-being of the economy. Slower, sustained growth can help prevent dangerous asset bubbles, like the recent housing and technology bubbles, from growing and bursting. The Housing Market Existing Home Sales - Up 24% from last year Existing home sales recorded another strong gain in October with many buyers rushing to beat the deadline for the first-time buyer tax credit scheduled to expire at the end of November. Sales surged 10.1 percent to 6.1 million units over September sales of 5.54 million and are 23.5 percent above the 4.94 million-unit level seen last year. Sales activity is at the highest level since February 2007 when it reached 6.55 million. Median Home Price - Very favorable Low home prices are contributing to extremely favorable affordability conditions. Existing-home price was $173,100 in October, 5 percent higher from its low in January but still 7.1 percent below October 2008. Distressed properties, which accounted for 30 percent of all transactions in October, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes. Inventory - Lowest level in more than 2.5 years “We are getting closer to a general balance between buyers and sellers,” according to Lawrence Yun, NAR chief economist. The supply of homes is now at the lowest level in more than two and a half years. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, representing a seven-month supply at the current sales pace, down from September’s eight-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market. Mortgage Rates – Back at 4.78% Remaining at attractive levels for people looking to buy a home or refinance, historically low interest rates are boosting the market. Rates for 30-year fixed loans fell to 4.95 percent in October from 5.06 percent the month before. During the week ended November 25, rates again dropped to the low 4.78 percent reached in the spring. As the economy enters its recovery phase and concerns over inflation come back, mortgage rates are expected to go up. Affordability – Best since 1970s Unprecedented interest rates, low home prices, as well as the first-time buyer tax credit are lifting the housing market. All these factors combined are “adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970,” according to Lawrence Yun, NAR chief economist. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent. Sources: National Association of Realtors, Freddie Mac Government Action New Fannie Mae Policies "First Look" In many markets dominated by distressed properties, buyers jumped off the fence in droves and as a result the number of homes for sale in the first tier of the market decreased significantly. When a new foreclosure becomes available for sale, it often is snapped up by investors with cash on hand, leaving the average home buyer looking for a place to live out of luck. Fannie Mae introduced a new “First Look” initiative to address this and aid in the stabilization of neighborhoods. During the first 15 days a Fannie Mae REO is on the market, only buyers who will live in the home and public entities committed to the best interests of the community may purchase it. Buyers will have 45 days to close, up from 30 days. Earnest money requirement may be reduced. This will hopefully give the average home buyer a greater chance of purchasing foreclosures and provide support to hard-hit neighborhoods, because owner-occupants are more invested in the long-term vitality of a community whereas investors typically are more invested in their monetary return from the property. Increased Credit Scores Fannie Mae is raising its minimum credit score from 580 to 620. This risk management measure will help protect Fannie Mae from future defaults and foreclosure by raising their standard and accepting less risky loans. While risk management is a sound and healthy approach for an entity that the economy depends on, this underscores the importance that potential home buyers check their credit report early in the process, allowing more time to clear up any errors. Earlier this year, Experian, one of three major credit-reporting bureaus, began exclusively providing complete credit report information when purchased directly from Experian or obtained from the government annual credit report. Source: National Association of Realtors FHA Signals Efforts to Manage Risk In an effort to secure its financial health, the Federal Housing Administration plans to require borrowers to have more “skin in the game” soon. Over the past three years, FHA’s market share has boomed from about 2 percent of all new loans to about 30 percent of all new loans this year and 20 percent of refinances. The escalading volume that the administration is currently handling calls for stricter requirements as evidenced by FHA’s capital ratios falling to nearly 0.5 percent well below the minimum of 2 percent. The agency is still analyzing the levels and time frames it wishes to tighten its standards but they expect to: Increase minimum down payments Increase minimum credit scores Increase insurance premiums Lower the amount of seller concessions As one of the major players in the mortgage market, the health of FHA is imperative to the housing market and flow of credit to home buyers, as well as to the health of the overall economy. Taking measures to safeguard the agency from needing a government tax payer-funded bailout is a notable risk management measure. According to a Keller Williams research study, the typical first-time buyer put down 3.5 percent this year. Those who want to take advantage of the tax credit before the April 30 contract, June 30 closing deadline may want to beef up their savings and check their credit report now in anticipation of any changes. Sources: National Association of Realtors, KW Research First Time Home Buyer Survey Topics For Buyers & Sellers First Time & Distressed Property Home Buyers What are other first time buyers doing? The tax credit extension and expansion in November has fueled new discussion about home buyers and the housing market in 2010. Here’s a look at first-time buyers in 2009. The median age is 28, significantly down from where it was in 2005 at 32. Location or Neighborhood was the No. 1 “must-have” for 36% of buyers. 2 out of 3 sellers paid at least part of the buyer’s closing costs. 76% used their own savings for the down payment. 1 in 4 had help from their family for the down payment. As elevated levels of distressed properties are expected to continue for the next few years, here is a glimpse of buying a distressed property: 27% of foreclosures* were purchased by investors. 47% of distressed* properties were purchased by first-time buyers. 89% of those first time buyers that purchased a distressed property were motivated by the $8,000 tax credit. 7 in 10 agents have seen an increase in multiple offers. Approximately 3 out of 5 agents discuss the differences between buying distressed and traditional properties at the buyer consultation. * Distressed – Short Sale and REO, Foreclosure – REO Only

Contact me, Marianne Blackstone Tabner your local real estate expert, for information about what's going on in our area. Newsletter Contents 1. Commentary 2. The Housing Market 3. Government Action 4. Topics for Buyers and Sellers

Tax Credit Extension

First Time Home Buyers

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence.

The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns. The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

Move Up/Repeat Home Buyers

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

If you would like to see more detailed information about the tax credit find all the information on my website at http://www.finehomeslandandsea.com and on the right hand side under "Helpful Links" click on Tax Credit.

Marianne Blackstone Tabner

REALTOR, CBR, GREEN

Mbtabner@kw.com
www.FineHomesLandAndSea.com
www.MBThomeTeam.com
Keller Williams Realty
200 Baker Ave, Suite 205 Concord, MA 01742
Cell: 978-621-8028 Fax: 978-759-0588