Kingdom Realty

Existing home sales surged in October to the highest level in more than 2-1/2 years, according to a real estate industry report issued Monday.

The National Association of Realtors reported that existing home sales rose 10.1% last month to a seasonally adjusted annual rate of 6.1 million units, up from the downwardly revised rate of 5.54 million in September.  The sales beat forecasts of 5.7 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, and were 23.5% above the 4.94 million-unit pace of 12 months ago.

The gain was due in part to an influx of buyers looking to take advantage of an $8,000 tax credit that the Obama administration made available for qualified first-time home buyers, the report said.  The tax credit was scheduled to expire at the end of November, but it has been extended to April 30 and expanded to include more home buyers.

The median price of homes sold in October was $173,100, a 7.1% year-over-year drop. Distressed properties comprised 30% of the houses sold during the month.  Sales in the South specifically jumped 12.7% to 2.30 million

If you were in Charlotte in the 90’s, and you wanted culture, you could go one place…. North Davidson Street.  This street and the neighborhood that surrounded it is located in Charlotte, and from about 24th St – 36th St, artists  congregated here.  Real artists.   Why here?  Well, the commercial buildings were somewhat shoddy but had character, the houses were run-down but were historic bungalows with alot of charm.  Crime was high, house prices were low.  Ah! We’ve hit on one of the keys.  Rent was CHEAP!  Houses were cheap to rent, artists could become homeowners if they wished.   Bars like Fat City and Pat’s one more could exist and thrive because of the low values of the buildings.  The area had enough ‘darkness’ as to inspire true artwork.

What happened?  Well, artists are cool!  Everyone wants to be affiliated with the cool people.  As the neighborhood became known as the NoDa (North Davidson) , and as ‘the art district’ was born there admirers began buying into the neighborhood at a breakneck pace.  Condos were built, houses were flipped, buildings were demolished for larger buildings, trendy places entered, rents went up, and the neighborhood quickly became a rather pricey area to live or work in.

While the neighborhood is very cool (only 2 miles north of downtown, close to train station, public transportation, parks, lots of historic charm, high walkability), the people who made it what it is today became priced out of the neighborhood.  There may be lots of great art galleries there now, but fewer artists can afford to make their studios there.  A starving artist certainly cannot afford the mortgage on a  $450,000 bungalow!

Prior to NoDa, the place for many artists was Plaza Midwood.  The same thing happened to them there.   Briefly, there was a really cool, run down building near Trade Street & Graham that housed some artwork(and some artists).  The building was torn down to make way for a parking lot, then a high rise.

So where can artists go these days if they live in the greater Charlotte area?  As of right now, I have heard the same resounding answer: NOWHERE!  They are largely scattered throughout the city and without a communal place to collaborate and get inspired.

This is all about to change.   A neighborhood is quietly gearing up to become the next destination for artists.  It has all the makings: cheap housing, beautiful commercial and residential structures, historic charm, and the right amout of grittiness.    I would like to keep it under wraps for awhile to give the artists a heads up first.  Are there any artists left in this area? Give me a call and I’ll give you the 411.

The weekly average rate borrowers were quoted on Zillow Mortgage Marketplace for 30-year fixed mortgages decreased decreased nine basis points last week to 4.75  percent, down from 4.84 percent the week prior. Meanwhile, rates for 15-year fixed mortgages fell four basis points to 4.25 percent from 4.29 percent, and 5-1 adjustable rate mortgages fell three basis points to 3.68 percent,  from 3.71 percent the week prior.

The volume of mortgage requests last week rose 29.1 percent from the prior week. Of last week’s requests, 47 percent were for refinance loans, 51 percent were for purchase loans and 2 percent were for home equity loans. The prior week, 41 percent of requests were for refinance loans, 56 percent were for purchase loans and 3 percent were for home equity loans.

Most states continued to experience rising existing-home sales in the third quarter, with prices moderating in many metro areas, according to the latest survey by the NATIONAL ASSOCIATION OF REALTORS®.

During the third quarter, 123 out of 153 metropolitan statistical areas2 reported lower median existing single-family home prices in comparison with the third quarter of 2008, while 30 areas had price gains.

The national median existing single-family price was $177,900, which is 11.2 percent below the third quarter of 2008; the median is where half sold for more and half sold for less. Distressed sales – foreclosures and short sales – accounted for 30 percent of transactions in the third quarter, which continued to weigh down median home prices because they sell at a discount relative to traditional homes.

In the South, existing-home sales rose 11.3 percent in the third quarter to an annual rate of 1.97 million and are 5.9 percent higher than the third quarter of 2008.

The median existing single-family home price in the South was $160,000 in the third quarter, down 7.9 percent from a year earlier. After Cumberland and Oklahoma City, the next strongest price increase in the region was in Shreveport-Bossier City, La., at $152,300, up 8.6 percent from the third quarter of 2008; Jackson, Miss., at $141,200, up 4.6 percent; and Durham, N.C., where the median price rose 3.6 percent to $184,300.

Fannie Mae will allow homeowners facing foreclosure to stay in their homes and rent them for as long as a year, as part of the government’s latest effort to help troubled borrowers, while keeping more foreclosed properties from hitting the housing market.

The “Deed for Lease” Program lets borrowers who don’t qualify for loan modifications transfer their property to Fannie Mae in exchange for a lease. Borrowers-turned-tenants will pay market rents, which in most cases are lower than the cost of mortgage payments, and might be offered extensions when their leases expire.

Fannie Mae wouldn’t say in its Thursday announcement how many homeowners it expects would take advantage of the program. The company acquired 57,000 properties through foreclosure during the first half of the year.

Borrowers have to demonstrate they can’t afford their current mortgage, but can pay the rent. The borrower’s mortgage servicer has to show the borrower didn’t qualify for a loan modification.

Fannie will use a professional management company to handle maintenance, and properties that are sold during the lease period will include an assignment of the lease to the new owner.

The move by Fannie follows a similar effort by Freddie Mac that began offering month-to-month leases to owner-occupants who had lost their homes to foreclosure. The Fannie Mae program differs in one important respect: Fannie’s foreclosed homes won’t be listed for sale.

The number of homes listed for sale fell in many U.S. cities in October as buyers sought to qualify for a federal tax credit.

The supply of homes available for sale in 27 major metropolitan areas at the end of October was down 2.8% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. ZipRealty data cover all single-family homes, condos and town houses listed on local multiple-listing services in metro areas where the firm operates.

Inventories typically increase in October. On a national basis over the past 25 years, they have grown about 1% on average in October from September, according to Zelman & Associates, a research firm. Ivy Zelman, chief executive of the firm, said she believes the drop in inventory this year reflected a rush by first-time home buyers to qualify for a federal tax credit due to expire Nov. 30. Congress is expected to extend that tax credit for five months and make it available to some people who already own homes.

Compared with the year-earlier month, the October inventory in the 27 metro areas was down 29%.

The exact level of supply is hard to measure because properties included on multiple-listing services don’t include all of the foreclosed homes that banks are preparing to sell. They also don’t reflect what many analysts believe will be a huge supply of bank-owned homes likely to hit the market over the next few years.

Tax break for buying a home has been extended and expanded with today’s legislation.

The legislation will extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The credit, which many say has recently boosted home sales, was set to expire after November 30.

The Senate’s bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

Sales of previously-owned homes jumped 9.4% in September after falling for the first time in four months in August, said the National Association of Realtors. Year over year, sales of existing homes were up 9.2% in September.

“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” said Lawrence Yun, NAR chief economist.

Early information from a NAR report to be released next month suggests first-time homebuyers accounted for more than 45% of home sales in the past year.

Prices still falling. Yun said the market is still underperforming as home values continue to decline.

The median price of homes sold in September was $174,900, falling 8.5% from a year earlier. The drop in prices has been led by an influx of distressed properties, which accounted for 29% of sales in September and include foreclosures and short sales.

Where the homes are selling. Regionally, the strongest market was the West, where sales climbed 13% to an annualized rate of 1.3 million. That was 5.7% higher than last year’s rate. The median price of homes sold during the month was $219,000, down 15% from last year.

In the Midwest, sales were up by 9.6% to a pace of 1.25 million, which was 7.8% higher year-over year. Prices there have dipped 1% since 2008 to a median of $147,600.

Sales in the South were up 9% from August and 10.8% from last September to a rate of 2.6 million. Prices have dropped 7.6% to $153,500 in the past 12 months.

The Northeast reported a modest rise, with existing sales up 4.4% from August to a rate of 950,000. That was 11.8% from a year ago. The median price there was $234,700, down 7.6% from last year.

Think your earnest money is safe?
The buyers at 210 Trade thought so when they plunked down their earnest money deposits for a shiny new to-be-constructed condo downtown. Deposits were made from eager buyers for amount ranging from a few thousand dollars all the way up to $80,000. The critical mistake some of them made was that they did not ensure their money was stored in escrow. Now the developer is out of money, filing for bankruptcy and the buyers are very unlikely to see a penny of their deposits back.

Now some potential homeowners are leery of making deposits for yet-to-be contructed homes or condos. To avoid this fear, stipulate your deposit be held in escrow by an attorney or by your agent’s realty company, not by the developer. It is also important to have your Realtor or an attorney craft language in the purchase & sales contract that can let you get your deposit back easily if the developer fails to meet construction deadlines.

The market value of Charlotte, NC homes  rose by 0.6% in July compared with June, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s.  “Wow”, you say, “0.6%…that’s….underwhelming”.  Well in the case of a $200,000 home, then officially that is $120.  Annualized, you just made $1,440.  The good news is that house values in Charlotte did go up.  There are many cities in the U.S. which are feeling the continued effects of a price ‘free-fall’.

The better news to remember is the Charlotte in the headlines over the past year for its lack of free-fall.  Imagine yourself for a second in Miami or Phoenix.  At first, you are happy…because it is nice & warm in those cities right now, whereas it is 40 degrees and raining at the moment.  Now think about your property being worth 68.6% of what you paid for it a year ago.  The price changes in each some hard-hit cities over the past year, based on the Case-Shiller data for July include: Las Vegas, down 31.4%; Phoenix, down 28.5%; Detroit, down 24.6%; Miami, down 21.2%; Tampa, Fla., down 18.4%; San Francisco, down 17.9%.  Charlotte, in comparison is down only 9% over the past year.  Now take a look at your stock portfolio.  Yes, we have seen some recent gains in the past 6 months.  But most things in your portfolio are still off by about 30% from this time last year, aren’t they?

The answer is that before the bubble burst last year, real estate in the Charlotte area was generally undervalued.  Cost of living is low and the medium home price is lower than average.  Charlotte was passed over by many national investors for more exciting cities.  These investors got what they asked for…plenty of excitement!  Almost like a roller coaster, really…shaped like a downward spiral.

In Charlotte, we have the theme park Carowinds, and they have a ride which I believe is called Drop Zone.  This ride brings you up to the very top, lets you sit there for a few seconds, feet dangling in the air.  Then, all of a sudden, it feels like the bottom falls out and you are free-falling right next to  your neighbors, relatives and friends.  Many real investors outside of Charlotte are feeling like they have experienced the Drop Zone over the past year.  As a fellow real estate investor, I have been pained by this 9% drop.  But 31% in a year?!  I feel fortunate that my investments have not been playing on the Drop Zone.

If you bought in Miami at the height of the market, you paid on average $380,000 for a house. This same house today in Miami is worth on average $216,000. In Charlotte at the height, you paid on average $167,000 for a house. Today, that home is worth on average $158,000. The summary: (1) The initial buy-in was significantly lower in Charlotte, (2) The short-term value decrease in Charlotte is relatively slight in terms of dollars and percentage, and (3) The current value is still significantly lower in comparison. THE THIRD POINT IS THE MOST IMPORTANT POINT…the current value represents today’s buy-in price.
Time to buy some affordable, reasonable, well-valued real estate! Buy in Charlotte!