A popular article published last month in the Wall Street Journal titled "Is now the time to buy your first house?" polarized today's real estate market by accurately describing the two major camps on today's real estate market.
One viewpoint is that of opportunity.
Eric Lascelles, Chief Economist for RBC Global Asset Management, outlines high affordability from lower prices and record low mortgage rates. Lascelles calls today's real estate market, "the best time in a generation to be a first-time home buyer."
A. Gary Shilling takes the opposing viewpoint warning of a 20 percent drop in single-family home prices needed to catch up to the historical home price trend identified by Robert Shiller of Yale University. He cites large amounts of unseen inventory that will oversupply the market leading to the continued price correction.
A recent estimate from Standard & Poor's Rating Services supports Shilling's take on the market and estimates there is 46 months, almost 4 years, of distressed homes hidden within the national real estate market. S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are Real estate owned (often decribed as REO). The agency also includes loans that are likely to default, even after a refinance or a modification of loan terms.
But as intriguing as the 'rent-and-wait' scenario is, it is quickly becoming the more expensive housing strategy.
The Commerce Department found that current median U.S. rent was $721 per month in the first quarter, up 5.6 percent from year-earlier levels.
The Wall Street Journal reported the rental market "is out of whack" with "supply among rental housing is the tightest in more than a decade as only 8.8 percent of units were vacant in the first quarter" of 2012. With the steep fall in homeownership rates in the U.S., the demand for rental units is the highest in 15 years.
North County San Diego is experiencing a tight rental market with landlords securing higher-than-expected rents and multiple rental applications months before the current tenant vacates.
The challenge awaiting a Shilling homebuyer is finding a comparable Carlsbad property to rent and wait out any further downturn. The average $700,000 home would rent today for around $3,500 a month, or a cost of $42,000 a year. A 20 percent decline of today's $700,000 dollar home would be a loss of around $140,000 in equity. But the cost of waiting roughly 5 years for such the Shilling decline would cost $210,000 in comparable rent. This does account for the 2.5 percent average yearly increase in rent that would see the $700,000 property renting for $3,900 in 5 years.
If the renter decided to buy instead, a 30-year fixed payment on that same $700,000 home with 20 percent down and good credit would be about $3,500 a month. With deductions for property tax and mortgage interest, the cost would be less than renting.
Today's home buyer would welcome new distressed property into our local marketplace. Carlsbad and other North County cities are experiencing an inventory shortage amidst an upturn in buying activity. Multiple offers, bidding wars and slightly higher prices are being reported regularly.
Current mortgage rates are creating the affordability and demand.
Carlsbad home buyers are securing 30-year fixed mortgage rates as low as 3.75 percent. And although many lack the needed down payment to purchase in today's market, buyers are turning to VA and FHA government backed mortgage programs that require little to no down payment.
The most common loan in today's market is the FHA backed mortgage loan. FHA home loans have flexible guidelines on income levels, credit score and down payment requirements. Home buyers can put as little as 3.5% down, 100 percent of which can be a gift loan from a family member.
Ultimately, the debate of whether to purchase or rent remains highly personal. A black-and-white statement on whether or not to buy a home is not appropriate in today's marketplace. Today's homebuyers must explore all options and decide the best route for themselves.
$30,000 For Successful Short Sale
In May, one of San Diego's largest mortgage servicers announced a nationwide program offering up to $30,000 in relocation assistance for short sales.
In an effort to avoid challenges associated with foreclosure including increased cost and damage to property, Bank of America unrolled a pilot program in Florida in 2011 where distressed homeowners were given substantial monies for completion of a successful short sale. Although not every short seller will qualify for the program, the opportunity to secure money for successful short sale will incentivize those homeowners that may have just walked away from the home.
The relocation expenses are offered at closing and can range from $2,500 up to $30,000, and the amount offered is determined on a case-by-case basis, with variables such as the value of the home and amount owed factored into the equation.
New Guidelines For Short Sales
The real estate market welcomes new guidelines set by Fannie Mae and Freddie Mac designed to expedite the short sale response times from mortgage servicers such as Bank of America and Wells Fargo.
Under effect as of June 15, servicers now have 30 days to review and respond to short sale offers or requests with a requirement to issue final response within 60 days.
Short sales are pre-foreclosure homes where the owner owes more than the property is worth.
In a short sale, a lender agrees to accept less than the amount owed and release the lien. Short sale property makes up 51 percent of the available 'for-sale' homes in the North County Coastal marketplace.
Buyers often groan when seeing short sales, even avoiding bidding on a short sale, due to the uncertainties that exist around time-to-close, approval price and closing costs.
Although skeptical that servicers can deliver on the new Fannie and Freddie timetables, real estate professionals remain hopeful the new guidelines will help correct the lengthy 'short sale' process.
?By Tyson Lund
One viewpoint is that of opportunity.
Eric Lascelles, Chief Economist for RBC Global Asset Management, outlines high affordability from lower prices and record low mortgage rates. Lascelles calls today's real estate market, "the best time in a generation to be a first-time home buyer."
A. Gary Shilling takes the opposing viewpoint warning of a 20 percent drop in single-family home prices needed to catch up to the historical home price trend identified by Robert Shiller of Yale University. He cites large amounts of unseen inventory that will oversupply the market leading to the continued price correction.
A recent estimate from Standard & Poor's Rating Services supports Shilling's take on the market and estimates there is 46 months, almost 4 years, of distressed homes hidden within the national real estate market. S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are Real estate owned (often decribed as REO). The agency also includes loans that are likely to default, even after a refinance or a modification of loan terms.
But as intriguing as the 'rent-and-wait' scenario is, it is quickly becoming the more expensive housing strategy.
The Commerce Department found that current median U.S. rent was $721 per month in the first quarter, up 5.6 percent from year-earlier levels.
The Wall Street Journal reported the rental market "is out of whack" with "supply among rental housing is the tightest in more than a decade as only 8.8 percent of units were vacant in the first quarter" of 2012. With the steep fall in homeownership rates in the U.S., the demand for rental units is the highest in 15 years.
North County San Diego is experiencing a tight rental market with landlords securing higher-than-expected rents and multiple rental applications months before the current tenant vacates.
The challenge awaiting a Shilling homebuyer is finding a comparable Carlsbad property to rent and wait out any further downturn. The average $700,000 home would rent today for around $3,500 a month, or a cost of $42,000 a year. A 20 percent decline of today's $700,000 dollar home would be a loss of around $140,000 in equity. But the cost of waiting roughly 5 years for such the Shilling decline would cost $210,000 in comparable rent. This does account for the 2.5 percent average yearly increase in rent that would see the $700,000 property renting for $3,900 in 5 years.
If the renter decided to buy instead, a 30-year fixed payment on that same $700,000 home with 20 percent down and good credit would be about $3,500 a month. With deductions for property tax and mortgage interest, the cost would be less than renting.
Today's home buyer would welcome new distressed property into our local marketplace. Carlsbad and other North County cities are experiencing an inventory shortage amidst an upturn in buying activity. Multiple offers, bidding wars and slightly higher prices are being reported regularly.
Current mortgage rates are creating the affordability and demand.
Carlsbad home buyers are securing 30-year fixed mortgage rates as low as 3.75 percent. And although many lack the needed down payment to purchase in today's market, buyers are turning to VA and FHA government backed mortgage programs that require little to no down payment.
The most common loan in today's market is the FHA backed mortgage loan. FHA home loans have flexible guidelines on income levels, credit score and down payment requirements. Home buyers can put as little as 3.5% down, 100 percent of which can be a gift loan from a family member.
Ultimately, the debate of whether to purchase or rent remains highly personal. A black-and-white statement on whether or not to buy a home is not appropriate in today's marketplace. Today's homebuyers must explore all options and decide the best route for themselves.
$30,000 For Successful Short Sale
In May, one of San Diego's largest mortgage servicers announced a nationwide program offering up to $30,000 in relocation assistance for short sales.
In an effort to avoid challenges associated with foreclosure including increased cost and damage to property, Bank of America unrolled a pilot program in Florida in 2011 where distressed homeowners were given substantial monies for completion of a successful short sale. Although not every short seller will qualify for the program, the opportunity to secure money for successful short sale will incentivize those homeowners that may have just walked away from the home.
The relocation expenses are offered at closing and can range from $2,500 up to $30,000, and the amount offered is determined on a case-by-case basis, with variables such as the value of the home and amount owed factored into the equation.
New Guidelines For Short Sales
The real estate market welcomes new guidelines set by Fannie Mae and Freddie Mac designed to expedite the short sale response times from mortgage servicers such as Bank of America and Wells Fargo.
Under effect as of June 15, servicers now have 30 days to review and respond to short sale offers or requests with a requirement to issue final response within 60 days.
Short sales are pre-foreclosure homes where the owner owes more than the property is worth.
In a short sale, a lender agrees to accept less than the amount owed and release the lien. Short sale property makes up 51 percent of the available 'for-sale' homes in the North County Coastal marketplace.
Buyers often groan when seeing short sales, even avoiding bidding on a short sale, due to the uncertainties that exist around time-to-close, approval price and closing costs.
Although skeptical that servicers can deliver on the new Fannie and Freddie timetables, real estate professionals remain hopeful the new guidelines will help correct the lengthy 'short sale' process.
?By Tyson Lund