Buyers feel trapped in their homes as they want to use the new tax credit.

February 15, 2010 by Mimi Miller.

Underwater mortgages halt some move-up buyers
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Enlarge By Eileen Blass, USA TODAY

By Stephanie Armour, USA TODAY
Chris and Candice Basso would like to move up to a larger home this spring, taking advantage of a federal tax credit worth up to $6,500 for repeat home buyers.
But even a big tax credit won’t be enough to lift them into a bigger, better home.

The Centreville, Va., couple are trapped in a two-bedroom townhouse that’s worth less than their unpaid mortgage. They face the same predicament with a condo that they own and rent out. Unable to sell either property for what they owe and with their equity wiped out, a new mortgage is out of the question.

Chris Basso fears it may be years before they can buy a bigger place — a real concern, because Candice is scheduled to give birth to their first child in August, and their townhouse already feels cramped. “I’ll have a teenager by the time housing values come back up and I can get out of my house,” says Basso. With a baby coming, “We’re trying to figure out where to fit all the furniture. We still scour the home listings every day just to see what we could afford now. It’s heartbreaking to seewhat we could get today with our housing dollar now, but we’re stuck.”

Stuck, like millions of other homeowners, also underwater on their mortgages, thanks to sinking home prices. The plight of people such as the Bassos is a big worry for the housing industry as the crucial spring season nears, when nearly a third of the year’s sales are made.

Despite the tax credit — which expires April 30 — and 30-year fixed mortgage rates that are still hovering around 5%, it’s an open question whether enough move-up buyers will enter the market this spring to bolster housing’s fledgling recovery and energize a broader economic rebound.

“For a well-functioning market, you have to have that trade-up buyer,” says Mark Zandi, chief economist at Moody’s Economy.com.

Zandi estimates that more than 15 million homeowners are underwater — about one in five, he says. First American CoreLogic, using a different methodology, estimates 10.7 million residential properties had negative equity at the end of September, or almost one in four, by its reckoning.

Either way, a substantial number of homeowners are financially unable to enter the home-buying market just now. “Trade-up buyers are normally a big chunk of the market,” Zandi says. “We’re going into (the spring market) with less steam.”

Move-up buyers made up 53% of 2009’s shrunken market, down from about 60% in recent years, according to the National Association of Realtors (NAR). If theydon’t return in larger numbers, the inventory of mid- to high-price homes will remain high — dragging down home values overall.

Congress recognized the importance of move-up home buyers when it renewed and expanded last year’s popular first-time buyers credit to cover people who have bought homes before. Under the credit’s rules, people who owned the home being sold or vacated as their primary residence for five-consecutive years in the past eight are eligible for a credit of up to $6,500 on the purchase of a replacement home.

The deadlines are tight: Purchase contracts must be signed by April 30, and closings have to occur by June 30.

The NAR estimates 1.5 million homeowners will take advantage of the credit, but there’s no way to tell how many deals would have occurred without the credit.

Underwater homeowners aren’t the only ones unable to benefit from the credit. Many potential buyers in higher-price markets such as New York, Boston, Hawaii and San Francisco won’t qualify because their incomes are too high. Under the income limits, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

“Here in New York and a lot of major metro areas, they will blow that income cap,” says Edward Ades, a vice president with mortgage brokerage Universal Mortgage.

Some real estate professionals say buyers who expected to benefit from the tax credit are frustrated when they discover they aren’t eligible.

“A lot of people think it will be great, and then they look into it and find out they won’t get it. A lot of these people are young professionals,” says Janice Leis, a broker in Boca Raton, Fla. “It’s like false advertising. They get out with their hopes up, and they get their hopes dashed.”

Good times for first-timers

The past year has been good for first-time home buyers. The collapse in home prices, low interest rates and last year’s first-time buyers tax credit made buying a home more affordable than it’s been in years. But for people who bought homes at or near the market peak in 2005, moving out and up to more expensive houses has been harder.

Local market figures bear this out: Sales of entry-level homes are booming, while sales of pricier homes are sliding.

In the Los Angeles metro area, sales of entry-level homes at a median price of $248,737 soared from 28% of transactions in November 2007 to nearly 46% in 2009, according to Zillow.com.

Buyers are flocking to snatch up homes in that price range, which include 900-square-foot homes in the heart of the city with palm trees in the front yard, and two-bedroom, 890-square-foot condos in the beachside neighborhood of Playa del Rey.

“At the low end, there is absolutely activity,” says Carol Grogan, with Prudential California Realty. “It’s amazing. If it’s under $500,000, especially if it’s a house, there’s high demand. It’s crazy.”

But sales of mid- and high-price homes have dropped sharply. From November 2007 to November 2009, homes at a median price of $408,417 have slid from 37% of transactions to about 32%.

Homes priced at a median of $707,543 have fallen from about 35% to 23%, according to Zillow.

About a fifth of the homes in the Los Angeles metro area, covering Long Beach and Glendale, are underwater, Moody’s Economy.com’s data show.

It’s a similar situation in the Seattle metro area, where a fifth of the homes are underwater.

“We’re seeing more activity in the lower level,” says Cathy Millan, a Realtor with Windermere Real Estate in Seattle. “There have been a lot of first-time home buyers coming through, but the higher end is sitting.”

Sales of entry-level homes at a median price of $209,952 jumped from 37% in November 2007 to 40% in November 2009, according to Zillow.com.

Those priced at a median of $478,282 slipped from 32% in November 2007 to 30% in November 2009.

Signs of interest

Despite its shortcomings, the tax credit may be having some impact. Realtors say buyers are talking about both the move-up tax credit, as well as the credit of up to $8,000 for first-time buyers, when they look at homes. Some say the tax credit is launching the spring buying season unusually early this year.

Charlie Russo, a sales counselor with Plantation Homes, a home builder in Firethorne, Texas, says there’s no question the credits have pulled some buyers into the market.

“The low interest rates really have people in the market, and then the money (from the tax credit) is a huge incentive for people who weren’t looking right now,” Russo says. “It’s a perfect storm of incentives for them. No one ever paid me to buy a house.”

The tax credit is a motivator for Marifran Manzo-Ritchie, who says now seems like the perfect time for her to sell her home and buy another place.

It seems perfect because the home she bought in Phoenixville, Pa., for $150,000 seven years ago is now worth about $280,000 following the revitalization of the former steel town. Plus, her family, with three children, needs more space.

If she closes on a new home by June 30 as she believes she’ll be able to, she’ll qualify for the move-up home buyer tax credit. She and her husband are already working with a Realtor to list the house this month.

“Our home, which once seemed so big, seems very, very small now. And our property value has increased, so we have the equity,” says Manzo-Ritchie, 34, who runs a marketing agency from home. “But it’s the tax credit that really lit the fire under us.”

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Fort Collins/Loveland Hits Dream Town Status

February 11, 2010 by Mimi Miller.

Fort Collins/Loveland Hits Dream Town Status
Source: AARP.org | May 9, 2003

Fort Collins/Loveland ranked # 1 as boomers redefine retirement and lead the move to a new generation of dream towns

Once again, baby boomers are breaking the rules. But this time it’s in ways that will alter the country’s future physical and financial landscape. This influential group has bumped traditional retirement off its list of priorities and is now contemplating what to do in their next stage of life. And where. Responding to this trend, the May/June issue of AARP The Magazine features the editors’ picks of the 15 top dream towns for this new generation of future retirees.

The list of 15 highly livable towns was compiled according to a range of criteria, from affordability to community life, access to outdoor recreation to proximity to good health care.

AARP The Magazine discovered what those of us in Colorado have known for years—we have a lot of super places to live. Fort Collins/Loveland was chosen as the #1 place to reinvent your life. Close to Denver and facing the Front Range of the Rockies, the towns boast fine culture, beautiful scenery, and a bustling college town. Included in the ranking were job availability, affordable housing, culture and entertainment, access to outdoor recreation, safety, colleges and universities, sense of community, proximity to good comprehensive healthcare, good public high schools and ease of getting around.

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Continued High Negative Equity and Home Value Declines Put a Damper on an Encouraging 2009

February 10, 2010 by Mimi Miller.

RISMEDIA, February 10, 2010—Home values across the country declined again in the fourth quarter of 2009, as the Zillow Home Value Index fell 5% year-over-year, and -0.5% quarter-over-quarter, to $186,200. That marked the 12th consecutive quarter of year-over-year declines, according to the fourth quarter Zillow Real Estate Market Reports. Despite home value declines seen across most of the country throughout 2009, some markets experienced what appeared to be a bottom in home value declines, or even increases in home values during the year. However, the fourth quarter of the year brought signs that the fledgling recovery of home values in many of these markets is slowing again. If the declines are sustained, the result will be a “double dip” in home values, defined as two periods of sustained declines in home values separated by a brief period of stabilization or recovery.

One in five, or 29 of the 143 markets tracked by Zillow, showed at least five consecutive month-over-month increases in home values during 2009 before beginning to flatten or fall again in the second part of the year. These markets include the Boston metropolitan statistical area (MSA), the Atlanta MSA and the San Diego MSA.

Home values in an additional 29 markets, including the Los Angeles and New York MSAs, increased on a month-over-month basis each month throughout the fourth quarter. However, the rate of increase slowed from November 2009 to December 2009 in 21 of those markets, and several appear likely to experience several months of sustained decline in early 2010.

The percent of single family homes with mortgages in negative equity was essentially flat from the third to the fourth quarter, changing from 21% in Q3 to 21.4% in Q4. This comes after a decrease in negative equity from the second quarter’s 23%.

The number of homeowners losing their homes to foreclosure across the country reached a peak in December, with more than one in every thousand homes being foreclosed–a number not reached since Zillow began recording national foreclosure data in 2000.

“While we have seen strong stabilization in home values during 2009, there are clear signs that they will turn more negative in the near-term,” said Zillow Chief Economist Stan Humphries. “What we saw in mid-2009 was a brief respite from a larger market correction that has not yet run its course. The good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn.

“The recent stabilization owed a lot to policy support in the form of tax credits, lower interest rates and increased Federal Housing Administration lending. The remaining correction in home values we’ll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise. While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time.”

Foreclosure re-sales across the country remained high, making up more than one-fifth (20.3%) of all U.S. home sales in December. Foreclosure re-sales also made up the majority of sales in several MSAs, including the Merced, Calif. MSA (68.3%), the Las Vegas MSA (64%) and the Modesto, Calif. MSA (62%). Additionally, 28.5% of home sales nationwide sold for less than what the seller originally paid.

Several markets across the country showed positive longer-term appreciation. Home values increased year-over-year in 27 of 143 markets and remained flat in 15.

The Boston MSA was the largest area with year-over-year appreciation, despite its more recent downturn in home values. The area’s Zillow Home Value Index rose 1.9% in 2009. Home values in the Boston area rose for eight months in 2009, which outweighed the recent declines.

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Denver lands close to 30% of $1 million-plus home sales

February 9, 2010 by Mimi Miller.

By John Rebchook, on February 8th, 2010

This home at 3220 Zuni St. in Highland is priced at just over $1 million. It is listed by Dee Chirafisi of Kentwood City Properties.
Almost one out of every four homes sold and closed in the metro area in 2009 took place in Denver. And almost 30 percent of the homes sold above $1 million were in Denver.

An analysis of Metrolist data by independent broker Gary Bauer shows that 10,010 homes closed in the Denver area last year, accounting for 23.8 percent of the 42,027 home sales in the metro area last year. Arapahoe County was No. 2, with 8,230 single-family homes and condo closings last year.

That may not be too surprising.

“Denver usually seems to get the largest percentage of the buyers, except during the time when Douglas County was really growing like gangbusters,” Bauer said. During much of the 1990s, Douglas County was the fastest growing counties in the U.S. and is still one of the fastest. (Indeed, I remember writing a story at the Rocky Mountain News during the ’90s that Highlands Ranch in Douglas County accounted for one of five out of every new and used-homes sold.)

Denver Mayor John Hickenlooper said that given Denver’s size, Denver’s showing last year isn’t startling.

“Denver accounts for 22.2 percent of the metro area’s population,” Hickenlooper said. “So we are doing a bit above that for home sales, but not much more. Denver is right about where it should be.”

Hickenlooper did say that a Realtor-friend recently mentioned to him that sales activity seems to have picked up recently.

Corey Wadley, a broker and co-owner of Nostalgic Homes in West Highland in northwest Denver, said that a lot of buyers are drawn to certain Denver neighborhoods because they think homes will retain their values more than suburban counterparts.

“In the Highland neighborhood, for example…our prices held stable during this recession,” Wadley said. “I think the biggest factor is homes being able to hold values. There’s only a finite amount of new stuff in a place like Highland. I think also there is a uniqueness about Denver neighborhoods. You can walk street-by-street and see how the housing stock changed from different eras and from additions, renovations and even some scrape offs.”

Perhaps what was most surprising about Bauer’s report, is that Denver also dominated the $1 million and over price category. The 131 single-family homes and condos that sold and closed last year in Denver accounted for 28 percent of the 471 homes sold in that lofty price range. Arapahoe County, with 95 homes selling at $1 million or more and Douglas County with 67, accounted for 20 percent and 14 percent of that market, despite a number of high-end enclaves.

“That is a bit surprising,” said Chris Mygatt, president of Coldwell Banker Residential Brokerage Colorado. In the past, he said, the vast majority of homes in that price range were in Arapahoe County, because of the concentration of huge homes in Cherry Hills and Greenwood Village.

“What I think what this is showing is a societal change,” Mygatt said. “It speaks to the idea that people who have a significant amount of money who are down-sizing or right-sizing, who are deciding they do not need a half acre or an acre of land. It’s never been more fashionable to be frugal. Let’s face it: Someone who is buying a million-dollar home is not spending their last million dollars on it. But they don’t want the expense of watering a giant lawn or keeping it clean, even if they can afford it. ”

He said the move to Denver from the suburbs is a trend he sees continuing. Mygatt said there are “too many 6,000-square-foot homes,” in the suburbs, and they will be increasingly difficult to sell.

“The smart developers are now building a very well-designed, very efficient 3,500-square-foot home instead of a 6,000-square-foot home,” Mygatt said. “And the new homes are very, very green. ”

“That’s great,” about Denver, said Christina de Barros, of RE/MAX Masters. “It is a little surprising given that Arapahoe County has Cherry Hills and Greenwood Village and Douglas County has Castle Pines Village. ” Cherry Hills, for example, had 46 home sales of more than $1 million last year, while Cherry Creek in Denver, had seven, she said. And Boulder County (although not most of the city of Boulder), had a total of 126 home sales above $1 million, for 27 percent of that market, making it Denver’s closet competitor.

Some well-heeled buyers were picking up screaming, high-end deals last year, said Susan C. Mathews, a broker with Fuller Sotheby’s International Realty.

“There were a lot of foreclosures, or more likely short sales, in places like Hilltop and Crestmoor,” Mathews said. “I saw homes that were originally priced at $2.25 million and up selling for $1.4 million or $1.5 million. And that was good. It helped us get some of this inventory off the market.”

She said high-end deals can still be found, but there are not as many as there were in 2009.

“I think consumer confidence is returning,” Mathews said. “People are not as afraid that prices are going to continue to drop if they buy now. I do think we are past the bottom.”

Wadley said that in northwest Denver, homes priced below $450,000 are selling, but it is tougher to move ones above that range.

“But Jenny (Apel,his wife and co-owner of Nostalgic Homes) did sell a William Lang mansion off Lowell (Boulevard) last year for $950,000,” Wadley said. “And I think that when homes that do sell in places like Cherry Hills for above the $1 million mark, they have been heavily discounted from their original asking price.” In fact, he said he thinks a lot of those ultra-expensive suburban homes are being sold at a loss.

Bauer said that one reason Denver dominates the luxury home market, is that empty nesters, who are at the age and income level who can afford seven-figure homes, would rather live in an urban area than in a suburban community.

“I think part of it is the aging of the population,” Bauer said. “Many people are still working, and want to be closer to where they are working, which is often downtown. They are down-sizing and their children are grown. For a large percentage of the population, Denver offers a chance to be close to the sporting facilities, theater, and everything else in downtown and LoDo.”

He pointed to Janet Elway as an example.

“With these $1 million-plus homes, people really want something special,” Bauer said. “Janet Elway went from a giant home in Cherry Hills to a Denver home in Belcaro.”

County $0-
$100k $100k-
$200k $200k-
$300k $300k-
$500k $500k-
$750k $750k-
$1mil $1mil+ Total %
of Total
Adams 1,453 3,376 1,295 509 89 17 11 6,750 16%
Arapahoe 1,410 3,283 2,119 1,019 238 66 95 8,230 19.6%
Boulder 105 1,061 1,083 1,259 456 136 126 4,226 10%
Broomfield 4 228 369 313 77 5 8 1,004 2.4%
Denver 1,901 3,480 2,092 1,703 524 179 131 10,010 23.8%
Douglas 82 689 1,760 1,575 402 130 67 4,705 11%
Elbert 23 70 95 111 13 3 - 315 0.75%
Jefferson 447 2,374 2,336 1,228 300 69 33 6,787 16%
TOTAL 5,425 14,561 11,149 7,717 2,099 605 471 42,027

Source: Gary Bauer

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

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Kitchen Luxury trends in for 2010 from Luxury Institute

February 3, 2010 by Mimi Miller.

January 11, 2010
Kitchen trends for 2010
Today’s kitchens today are continuing to evolve into family rooms which can accommodate multiple cooks, family dining, and entertaining.

Here are just a few of the major design trends popping up in luxury multi-purpose kitchens as 2010 begins.

Countertops
Kitchen countertops are increasing in mass – think thick – and demand is growing for new surface materials. As granite wanes in popularity, crackle glass, concrete, and wood (with decorative edges) are all moving to the fore as popular countertop materials. One of the most innovative counters combines glass with LED lighting. The result is a glowing glass countertop which can be programmed with most any color to match your mood of the moment.

Counters in new kitchens may also vary in height to add visual interest and to create work zones for special purposes and for both short and tall cooks. Counters and islands are also increasingly designed to double as serving and dining areas.

Work zones
As more activities gravitate to the kitchen, designers are building in special purpose areas. A quick food prep station makes simple meal preparation and cleanup easy. A baking center offers ingredient storage within reach and a counter height designed for chopping, mixing, and rolling. A coffee bar or a wine tasting and beverage center are other popular special purpose work zones.

Sinks
Large farm sinks are a hot trend and multiple sinks continue to be in demand. Water conserving faucets are part of a trend toward eco-friendly kitchens.

Cabinetry
Mid-height cabinetry is a major trend in contemporary kitchens and beginning to appear in traditional kitchen designs as well. Shorter cabinets may “float” on the wall or incorporate European-style legs and even be used as room dividers. In-demand cabinet materials include stainless steel, environmentally-friendly bamboo, pecan or alder wood. Cabinets are customized with interior fittings for efficient storage. Horizontal cabinet doors (sometimes motorized) are another emerging kitchen trend.

Although the all white kitchen is still popular, cabinetry is also showing up in a variety of finishes and colors to give a kitchen the look of a furnished room.

Appliances
Forget the concept of a cooktop, double oven, microwave, dishwasher and a refrigerator creating an adequate kitchen. Today’s cooks want more. Extra dishwashing drawers, elaborate coffee making appliances, warming drawers, additional ovens, wine coolers may all be part of a luxury kitchen and many of these appliances may be hidden within cabinetry.

On the other end of the spectrum, forget subtle, some homeowners are using the refrigerator as kitchen art. Coolors, an Italian company will silk screen a refrigerators with a bold animal print, your favorite photograph or most any other image. The range hood or cabinet fronts can be silk screened to match.

Electronics
The kitchen is now home to televisions, computers, and sound systems. With friends and family gathering in the kitchen, entertainment and information need to be within reach.

Multiple kitchens

Luxury homeowners frequently want multiple kitchens. In addition to the primary gourmet kitchen, a catering kitchen – where preparations occur for dinner parties and other entertaining – may be on the must have list. A mini-kitchen in the master bedroom and another in the primary guest suite provide a convenient place for a midnight snack or that first cup of morning coffee. Of course, what was once the barbeque grill has morphed into a full outdoor kitchen with ice maker, dishwasher, dining area and more.

The kitchen is the heart of the house and this decade begins with trends which focus on making it more functional for a variety of lifestyle purposes and more attractive as a entertaining center.

Posted by Waco Moore on January 11, 2010 in Luxury Trends | Permalink | Comments (3) |

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Fannie Mae announces 3.5 percent seller assistance on HOMEPATH properties

February 2, 2010 by Mimi Miller.

News Release - January 28, 2010
Fannie Mae Announces 3.5 Percent Seller Assistance on HomePath® Properties

Incentive Part of Ongoing Effort to Stabilize Neighborhoods

WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today that people purchasing a Fannie Mae-owned HomePath® property will receive up to 3.5 percent of the final sales price to be used toward closing cost assistance or their choice of appliances. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010.

“Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover. Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help,” said Terry Edwards, Executive Vice President of Credit Portfolio Management. “Homebuyers have the option to choose between financial assistance toward closing costs or new appliances for their home.”

Properties eligible for this incentive are listed on HomePath.com and most listings include detailed property descriptions, photographs, community and school information and more. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing which offers homebuyers an opportunity to purchase with as little as 3 percent down.

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Dot Hill adding employees in Longmont

February 1, 2010 by Mimi Miller.

Dot Hill moving its HQ here - Dot Hill Systems Corp. is relocating its corporate headquarters to Longmont from Carlsbad, Calif. With it will come employees from California, and the company will be adding new jobs this year. “They have been consistently growing,” said John Cody, president and CEO of the Longmont Area Economic Council. “They expect to add another 100 jobs in the next year or so.” The company will be hiring for positions in engineering, research and development, and accounting and administration.

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4Demographic Trends That Will Affect Housing

February 1, 2010 by Mimi Miller.

A new report from the Urban Land Institute predicts two major changes in the U.S. housing market as we began a new decade.

Home appreciation will slow considerably to about 1 percent to 2 percent annually.
The current U.S. homeownership rate, now at 67 percent (which is down from a record high of 69 percent), will fall further to about 62 percent.

4 Major Demographic Trends

The report also cites four major U.S. demographic trends that will have a major impact on housing.

1. Aging baby boomers (ages 55 to 64 years old): They will keep working, and many will be forced to stay in their suburban homes until values recover. Those who are able to move will choose mixed-age living environments that cater to active lifestyles. Walkable suburban town centers also will appeal to this group.

2. Younger baby boomers (46 to 54 years old): They are now entering their prime earning years but they will lack home equity and unlike the older members of their generation, they won’t be able to purchase second homes. This will likely curb the prospects for the second-home market.

3. Generation Y: They are larger than the baby boom generation (with a population of about 86 million). As they enter the housing market, they are less interested in homeownership than their parents were when they were young adults. “They will be renters by necessity or choice for years ahead,” says John K. McIlwain, author of the report.

4. Immigrants – both legal and illegal: They are nearly 40 million strong. They often prefer multi-generational households and if they can afford them, larger homes in neighborhoods with a strong sense of community.

Source: The Urban Land Institute (01/27/2010)

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Flippers beware of the FHA 20 % rule

January 29, 2010 by Mimi Miller.

[RSS Feed]
Investor Report: 20 Percent Limit
by Kenneth R. Harney

Foreclosure and REO investors have begun taking a closer look at the Obama administration’s recent loosening of rules on property “flips”… . And they’re seeing some potential complications.

The policy change allows investors to resell houses they’ve acquired and rehabbed in less than 90 days to buyers using low-downpayment FHA mortgage financing.

Most investors interviewed by Realty Times last week welcomed the loosening of the rules, but said there are snares for the unwary.

For example, the program sets a 20 percent cap on the difference between an investor’s acquisition cost of a foreclosure and the price paid by the new buyer.

Price gains in excess of 20 percent must be justified with extensive documentation of the improvements made and their impact on the property’s valuation.

Bobby Taylor, a broker with Coldwell Banker Mountain West Real Estate in Salem, Oregon, says the 20 percent standard limit is reasonable, but could prove troublesome for investors who overspend on fix ups or pay too much up front.

In the Salem market, according to Taylor, the average foreclosure sells for about $165,000, while the average non-distressed house sells for around $210,000. If an investor buys a foreclosure at $165,000 and does enough fix up to sell for $210,000 within 90 days, that increase would blow through FHA’s limit.

“Investors who can document how much legitimate value they added would still pass muster, but Taylor warns they’re likely to face tough scrutiny from lenders.

That’s because most FHA lenders today are extremely nervous about getting sideways with FHA - which lately has been sanctioning lenders for rule violations and kicking some of them out of its programs altogether.

Bruce May, who runs Genequity Investment Group in Vista, California, says the 20 percent limit could be a tight squeeze for investors who make significant improvements to properties.

“I think 25 to 30 percent would have been better,” he said, but 20 percent works on properties “where we know we can get in there, turn it around and get out” quickly at a moderate cost.

The challenge for investors focused on the returns on their investments, May said, will be controlling the sometimes high and unpredictable holding costs - which can range from “cash for keys” payments to tenants and former owners to ease them out of the properties, to insurance charges and even vandalism repairs.

On the whole, though, May says, the FHA policy change “is going to open up foreclosures to many more FHA buyers,” and should help put a lot of houses back into the marketplace faster than before.

Published: January 29, 2010

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Generational Buying

January 28, 2010 by Mimi Miller.

From the International Builders’ Show: Selling to the Generations
January 22, 2010 by Erica Christoffer ·

By Erica Christoffer, Contributing Editor, REALTOR® Magazine

Whether you are working with a Baby Boomer, Gen Xer, or someone in the Gen Y age range, it’s important to know what your buyers wants in a home.

While age demographics are still a driving factor in the type of home your buyer is interested in, and three presenters at the International Builders’ Show Wednesday said there is a tie that binds – today, less is more.

Saying goodbye to McMansions, Mary Dewalt of Mary Dewalt Design Group, Steve Lane of Denver-based KEPHART, and Ken Perlman of Sullivan Group Real Estate Advisors outlined the driving demand behind each generation and what features they want in their downsized home in the session “From Wow to Now: What Today’s Home Buyers Really Want.”

Baby Boomers (age 45-65):

They don’t see themselves as getting older, and they don’t want to compromise their active lifestyles. About 83 percent plan to work past retirement, and more than half of those are interested in starting a new career or business. This age demographic wants start-of-the-art… and low-maintenance everything! They are design savvy and look at catalogs such as Pottery Barn, Crate & Barrel, and Restoration Hardware. “They are really looking at their homes as a sanctuary,” said Dewalt. Downsizing is appealing to them, but Baby Boomers still want elements such as pet spaces and areas for memorabilia. Amenities, details, and outdoor spaces are also at the top of their lists.

Gen X (age 30-45):

Fueling the first-time buyer and move-up market, Gen Xers love social spaces. Most are willing to give up square footage for location. This generation has also waited longer to have children, and once they do have a family, the emphasis is being on “super-parent.” They are goal-oriented, career-oriented and often they are more attracted to minimalism than Boomers. But they still want amenities. A neighborhood’s walkability is huge for Gen Xers, as is community, outdoor space, sustainable elements, and kids’ spaces. They look at catalogs from IKEA, Pottery Barn and Chiasso.

Gen Y (age 11-30):

Don’t rule out Gen Y, they are taking over the pool of first-time buyers. And location, location, location is the name of their game. Seeking to eliminate their long commutes, Gen Y will give up living space for their community of choice – often urban areas and near public transportation. Think high-density and low-maintenance, said Lane, especially surrounding universities and high-tech business centers. They look at blogs for design tips, as well as catalogs from IKEA, Anthropologie, and Dwell. They are connected, social, and embrace green on a larger scale than Gen X and Boomers. These money-savvy buyers believe energy efficiencies will provide them with a greater return on their home investment in the long run.

For more coverage from the International Builders’ Show in Las Vegas, also visit our Styled, Staged & Sold blog.

Tags: baby boomers, demographics, Gen X, Gen Y, International Builders’ Show

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