Monday, September 28, 2009

The Power of Numbers

I never thought about the significance of numbers. Because I had zero intentions of becoming an economist, analyst, mathematician, statistician, or any professional that crunches numbers for a living, I figured I would leave that stuff to the experts. Then I became a realtor and quickly realized that this business is all about the numbers and I am the expert.

Each day agents across the country answer questions like: What is the value of my home? How long will it take to sell my house? How do I know if I’m paying a fair price? These questions are typical and easily answered. Reviewing statistical reports, pulling comparables and answering questions are all in a day’s work. When referring to numbers, realtors usually stick with ranges and rarely commit to solid numbers. Why? It is impossible to predict exactly what a house will sell for. I try to suggest a price range, support my proposal with sufficient data, and let clients make the ultimate decision. When a client purchases a home, I select comparable properties and give a range of fair market value.

Each month the National Association of Realtors and Greater Capital Association of Realtors, (GCAR) release data regarding the national and local housing markets. This information is important because it lets us know how the markets are performing in comparison to one year prior. Not only do these numbers influence consumer confidence, they also serve as a useful tool in predicting future trends. This month GCAR indicated that existing home sales in the Capital Region for the month of August decreased by 12%; however, pending sales increased steadily over the past three months, with an 18% increase in August compared to the same month a year ago. What does this mean? Pending sales refer to properties under contract. There was more activity in the months of June, July and August than during the same time last year. This is good news, and industry stakeholders hope those pending sales will boost closed sales in about 45 to 60 days, which is the average time a home takes to close.

Nationally, existing home sales were on a roll, they increased four months in a row-- April through July-- sparking predictions that we might be on the way to recovery. Existing home sales for August retreated by 2.7%; while nationally, the median home price dropped by 12.5%. In large part, this is blamed on the large number of foreclosures and short sales across the country which can skew the numbers. Locally, we faired okay, with only a 2% drop in median sale price from $198,800 in August of last year to $195,000 last month.

What do all of these numbers mean? What does the future hold for the local and national real estate market? I don’t know. And you know what? Nobody else does either. But these numbers have real power; they influence the decisions of buyers and sellers everyday. And although I think they’re important, I also think if you’re in the market to buy or sell a home, there is only one time that matters, and that time is now.

Monday, September 21, 2009

Who's The Winner?

In the Capital Region and nationally, it may be the best time ever for first-time home buyers to make their move and purchase a home. The real estate frenzy that left so many first-time buyers out of the game is a distant memory; and right now, with unprecedented incentives, low interest rates and an inventory of moderately priced homes, the "newbie" buyer is the prized player.

So what are these incentives? The $8,000 tax credit for first-time home buyers, part of The American Recovery and Reinvestment Act of 2009 is one that Congress passed early this year. It allows first-time buyers the opportunity to collect a tax credit of 10% or $8,000-- whichever is less-- of the purchase price of their home, provided the home buyer meets the following criteria:

• Purchase the house on or after January 1, 2009 and before December 1, 2009.
• Meet income requirements of $75,000 for individual taxpayers and $150,000 for married couples filing jointly (*note, there is a "phase-out" range for taxpayers with a modified adjusted gross income, please see website for details)
• Use the home as a principal residence
• Hasn’t owned a principal residence within the past three years
• Purchased the property from a non-family member.

What's great about this incentive is it doesn't have to be repaid unless the homeowner sells the house within three years or neglects to use it as a primary residence. And we're talking about real money; this is a tax credit not a tax deduction. What's the difference? If a buyer who qualifies for this credit has no tax liability to offset, he or she can receive a check for the full amount of the incentive. Who couldn't use $8,000 dollars in their pocket? Trouble is, this incentive is due to expire on December 1, and despite lobbying efforts by The National Association of Realtors, NAR, we still aren't certain congress will extend it. NAR estimates nationally that between 1.8 and 2 million first-time home buyers will take advantage of this credit. The IRS reported last week that this tax credit has already provided benefits to 1.4 million families. Unfortunately, we won't have an exact number for the Capital Region until next year, after income taxes are filed. But after evaluating my own business and talking with local real estate agents and mortgage brokers, I've come to the conclusion that locally, 40% or more of our business this year is coming from first-time home buyers.

The second incentive, this one issued by New York State, could save first-time buyers more than $30,000 over the life of their mortgage loan. The New York State Mortgage Credit Certificate issued by SONYMA enables qualified buyers to convert 20% of their annual mortgage interest into a direct income tax credit on their Federal tax return for each year of the life of their loan. For example, if a buyer pays $12,000 in mortgage interest in any one year, they can earn a tax credit for $2,400. The remaining 80% or $9,600 will continue to qualify as an itemized tax deduction. There are stipulations to the NYS MCC, and a tax professional should be consulted. The mortgage loan can not be issued by SONYMA but rather one of the authorized lenders listed by SONYMA. The loan must also be a conventional one with a fixed interest rate. In addition, applicants must meet SONYMA's first-time home buyer requirements, income limit requirements and purchase a home that doesn't exceed SONYMA's allowable purchase price (please see website for details; these requirements are broken down by county and Target Areas). In spite of that, the MCC is another fantastic opportunity for first-time buyers and one that is not due to expire any time soon. In addition, this incentive can be combined with the American Recovery and Reinvestment Act of 2009 tax credit, provided the home closes before December 1. In the Capital Region the transaction time for purchasing a home is about 45 to 60 days, which means first-time home buyers should have a contract written by October 1, if they want to take advantage of both incentives.

Right now these select buyers can have it all. With interest rates hovering around 5% for a 30 year fixed rate loan, unbelievable incentives backed by the government and a multitude of moderately priced houses on the market both nationally and across the Capital Region, these players are already the most valued players in the game right now.

(Thank you to Nick Lemme of Bank of America and  Dave Stagnitti of Advantage Mortgage for their contribution. Click below on the link to my website, and you can find information about each of their services  under "Neighborhood)


Monday, September 14, 2009

Planning Ahead--The Seller's Advantage

Over the weekend I scheduled an appointment with a young couple who plan to list their house early next spring. This was a starter home and although they've made many improvements they're eager to "move up" and find a house with a little more space and an open floor plan. In effect, the meeting was to advise them of things they could do to help make the house more marketable.

It's difficult to anticipate what the state of our economy will be next spring and even more difficult to predict the number of buyers who will be looking in a particular price range. It would be nice if the Federal government extends the $8,000 tax credit for first-time home buyers beyond November 30th. The good news is New York State recently passed the Mortgage Credit Certificate Program for first-time home buyers; a new tax credit expected to save  mortgage holders more than $30,0000 over the life of their loans. Government incentive certainly helps stimulate the market but will government continue to offer incentive for first-time home buyers?  We realtors don't know. But one thing I do know is this: despite not having a crystal ball when it comes to legislation, bank lending and mortage rates, having the luxury to plan ahead certainly gives my sellers an advantage. My clients have more than six months to prep their house before a "For Sale" sign is placed on their front lawn. Between now and then they can address any large issues with the house, make repairs, paint, update, purge items, etc., and not feel rushed or stressed.

A good real estate agent wants every home to be priced right, be in the very best condition and to "show well" when it's put on the market.  The idea is to blow away the competition--we want our listing to look better than any other listing in that price range. Now don't get me wrong, this doesn't always go so smoothly. Homeowners aren't always as open to our critical eye as you might think. Nonetheless, most understand our point and are willing to make concessions. When spring comes, I look forward to meeting with my clients again. I can't wait to see the changes they make between now and then. I look forward to putting my RealtyUSA sign on their front lawn; but most importantly, I look forward to seeing the word "SOLD"! 

(If you're  interested in reading more about  the first-time home buyer incentives I refer to in this blog, please scroll down & click on the link to my website. The document is called 2009 Incentives)