Real Estate Information

Home sales for April came out in the last two days. As usual, the message and headline presented by the media substantially deviated from the truth.

New Homes

Yesterday s new home sales figures earned the headline, New home prices plunge, sales soar. That doesn t sound too horrible. Prices are down, sales are up. That stands to reason. The truth is prices are down and sales are down. Let s look at the data.

A big drop in the price of the typical new home sold in April spurred much better-than-expected sales, according to the latest government reading on the battered real estate and home building market released Thursday.

New homes sold at an annual pace of 981,000 in April, up 16.2 percent from the revised 844,000 pace in March. Economists surveyed by Briefing.com had forecast an 860,000 rate in April.

Great news, right? So what if there were more new homes sold in April than March. That stands to reason. How did April 07 compare to April 06 - the most important comparison available? Up? Nooooo.

But even with the April spike factored in, April sales came in 10.6 percent below year-earlier levels.

So now how was that headline “Sales soar” truthful? Maybe if the writer considers a 10.6% drop soaring.

There was some good news in this report though. The months of inventory available has dropped by over two months. This is significant as it means prices should begin to stabilize for new homes. I would expect sales will continue to level off for much of this year until demand and consumer sentiment picks up again.

Kasriel pointed out that the median number of months it takes builders to sell a completed home has risen every month for the past seven. It now stands at 6 months, the longest time it takes them to move a completed home since 1993, and it s almost double the 3.4 months it took them to sell a home as recently as September.

However, the faster sales pace in April helped take the estimated months supply of homes on the market down to 6.5 months from 8.1 months in the March report.

Existing Homes

This morning April s existing homes report came out. The headlines were equally inconsistent with the data. CNN s Money section screamed, Weakest home sales since 03 hit values! While the trend is dipping down, I m not concerned, yet, that a housing crash is in progress. The volume of sales slowed in the existing home market and the median price fell slightly.

The group s closely watched report showed the annual pace of existing home sales fell 2.6 percent to 5.99 million in April, down from a revised 6.15 million pace in March. It s the first time the pace of sales fell below the 6 million level since June 2003. Economists surveyed by Briefing.com had forecast a little-changed sales rate of 6.13 million.

The median price of a home sold in the month was $220,900, down 0.8 percent from the $222,600 price for a typical home sale a year earlier.

Again, I m not bothered too much because the comparison is 2006 s record high. New home s median price dropped nearly 11% in April and had a 10% loss in volume, while existing homes had a price drop of only .8% with a 2.6% drop in volume. Very interesting.

What I am concerned with is the amount of existing home inventory. That has indeed jumped to glut levels.

The slower sales pace and a 10.4 percent increase in the inventory of homes on the market in the last month to 4.2 million means there is now an 8.4 month supply of homes for sale nationwide, up from a 7.4 month supply in March.

It is encouraging to know the inventory levels of new homes is dropping as that should place residual inventory pressure on existing homes. Apparently market conditions and consumer sentiment are saying it s a good time to buy a new house over existing older inventory. Time will tell as we move deeper into the summer home buying season.

A niche market that never seems to slow down.

Many of us have fond childhood memories of dad loading up the station wagon or van and heading out of town for a long week-end.

For some the destination was a lakeside campsite, but for many it was the summer cottage or cabin by the lake. For others it was a Winter activity that brought with it the long-anticipated excitement of driving up to the favourite mountain and throwing open the doors to a modest old ski lodge that one could call home for the next week or so. But unless one was lucky enough to inherit dad s cabin, the thought of purchasing one piece of recreational paradise can be daunting for most young families.

With prices still

on the rise and demand for vacation homes brisk notwithstanding the general slowdown in real estate, there are a few bright lights for homeowners looking to pick up a second home or recreational property.

The Canadian Mortgage And Housing Corporation has instituted recently a new program that will provide Homeowner Mortgage Loan Insurance for borrowers with more than one residential property. This means that Purchasers can now obtain a mortgage insured by the Canadian Mortgage And Housing Corporation on a recreational property with as little as five percent down.

Traditionally getting institutional financing for a vacation property was a challenge, because lenders typically based their lending decisions on the risk of reselling this type of properties. As many second homes are located outside urban centers and, more often than not, in remote rural or coastal areas they might have limited resale potential, which from a mortgaging point of view increased the risk of financing. To mitigate this risk, lenders would require borrowers to put up more money down - as much as thirty-five percent or more, in fact. Even well-known and popular destinations such as Whistler, British Columbia required a minimum of twenty-five percent downpayment.

But lifestyles are changing and these changes affect decisions that real estate consumers make regarding how and where to live. So the Canadian Mortgage And Housing Corporation has made a move to put vacation properties within reach of more people. With a constant and steady increase in demand for this type of properties, the Canadian Mortgage And Housing Corporation has determined that the market is such that it is willing to insure lenders against potential losses. This is welcome news for those who have been longing to get a recreational property but did not want to wait until retirement to come up with the downpayment.

All Canadian Mortgage And Housing Corporation s products are permitted to be used with the Homeowner Mortgage Loan Insurance and since most major institutional lenders already have their own recreational property mortgage products, consumers have the flexibility to choose the type of financing that is right for them.

However, as with most types of financing, there are some key limitations that is important to be clear on. The purpose of the Homeowner Mortgage Loan Insurance is to make it more feasible for consumers to purchase a second home. It is important to distinguish between a second home and a rental property. The Homeowner Mortgage Loan Insurance is not intended to allow an investor to purchase a rental property with five percent down. The guideline states that at initiation the real capital asset that secures a mortgage insured by Canadian Mortgage And Housing Corporation must be intended for occupancy at some point during the calendar year by the borrower or a relative of the borrower on a rent-free basis. If a rental income is anticipated from the property at a future date, it will not be calculated for the purpose of assisting the Purchaser to qualify for the loan.

The location of the property is not restricted to major resorts or popular vacation spots, but there are some general requirements that apply as well. For instance, the recreational property must be suitable for and available for year-round occupancy. Properties that are constructed for seasonal use or have seasonal access are not eligible. As such, vacation cottages located on an island must have year-round bridge or ferry access. And finally, timeshare interests, life leases and properties in rental pools are not eligible.

The Canadian Mortgage And Housing Corporation s website can be found at http://www.cmhc.ca/

Luigi Frascati

luigi@dccnet.com

www.luigifrascati.com

Real Estate Chronicle

Labels: REAL ESTATE # posted by Luigi Frascati @ Saturday, May 26, 2007

By FRANK GLUCK Herald Tribune

MANATEE COUNTY — Many of Manatee s gated communities that shut off their roads to uninvited visitors may have to become much more welcoming.

County commissioners on Tuesday directed the county attorney s office to draft an ordinance requiring that community development district roads remain open to the public, even if they have gates.

Many of Manatee s community development districts, or CDDs, are fenced in and have gates with security guards to limit entrance.

Click here to read the entire story.

Three-room apartment on Prague 5. Cost of 3 500 000 crones. The second floor of the nine-floor panel house. Area Velka Ohrada, Praha 5. The area of 78 meters square. The glazed balcony of 6 meters square. The cooperative property, on translation documents are submitted to a private property.

Dave Ramsey is rapidly becoming one of America s most popular financial planning personalities. While I agree with most of what he says, when it comes to mortgages I have an issue.

Ramsey is highly conservative when it comes to finances and believes people should only use 15 year fixed mortgages when it comes to buying a home. I don t disagree with him in theory. He s right if your goal is to pay off the house as fast as possible. However, in reality, the 15-year fixed doesn t appeal to very many people. Why? The payment is too high!

This is the reason there is a variety of loan programs available to help people get the best loan for their objectives, their price range and their tolerance to risk.

There is a group of people out there who agree with Dave

Ramsey and will only do 15 year loans. They plan on living in their house until their mortgage is paid off, usually longer. They have a low tolerance to risk and debt, play by the rules and will always have a significant down payment. This group of people will also utilize 30 year fixed loans to lower the monthly payment, but will usually end up making additional payments to pay down the loan faster. They simply don t like the concept of debt.

On the other hand, there are three other groups of people who buy homes that see things differently. The opposite to the first group don t care about the term, the rate or the type of loan. They only care about the payment amount. They want a payment that allows them to live in the house they want while still leaving money left over for fun. Their income levels vary, but the bottom line is lifestyle. For these people a 15 year loan is automatically out because the payment will be automatically higher.

The third group of people are truly risk sensitive. Buying a home is fearful for them, and they will always opt for a fixed rate loan. Additionally, they will be concerned about the monthly payment as well as the loan amount. Risk is a big deal for this group and they will opt for the loan that is safest, with the lowest payment - a fixed rate loan with an amortization period of at least 30 years. As house prices have jumped, more “exotic” fixed rate products are coming to market with 40 and 50 year amortization terms. Again, this group of people have a variety of financial circumstances, but will always have a concern for safety and security.

Lastly, there is a group of people out there who don t care about any of this stuff. Like group two, they care only for the home. They don t consider risk because they believe their earning, or earning potential trumps any risk out there. They want the most bang for their buck. These are the people Option ARMs were originally designed for people with high earning capability that usually fluctuates dramatically during the year. People in this group want their home to make a statement. They will take the riskiest loan that allows them to meet their housing goal.

What s particularly interesting about these different groups is they re fairly evenly split - 25%, 25%, 25% and 25%. So while Mr. Ramsey s advice for only using 15 year loans is good, 75% of home buyers don t, won t or can t listen to him. I know that had I taken his advice, (had I known when I bought my first house) I d probably still be saving for a home. I would have missed out on the appreciation gains earned and I d still be deeply in debt. In the instance of debt and mortgages there truly is more than one way to “skin that cat.”

When shopping for a mortgage take all these factors into consideration. Don t get stuck with a mortgage that doesn t fit you or your goals because you ve heard everyone should only have one type.

On Friday we talked about the benefits of living in condos. If that got you interested be sure to read this article about three things every home buyer should know before they purchase a condo unit.

First of all know what your monthly condo fee covers. Does it include any utilities? What are the fees or consequences if it s late? Some condo owners have lost their homes due to missed payments or ignored fees. Condo fees are included in the debt to income ratio when calculating the mortgage. If the fees are high in comparison to surrounding communities, try to find out why. Are there additional amenities included? Are utilities calculated in?

Secondly, ask for a copy of the condo s CC Rs (covenants, conditions and restrictions) before you buy. Are there limitations to satellite

dishes? Can you put up a screen door or a paneled door? Are pets allowed? Can you paint the outside of your unit? Can you put a for sale or for rent sign in your unit? These are the types of things many people forget to or don t know to investigate.

In the case of an established homeowner s association, how is it doing financially? A prospective homeowner can get a copy of the financials, but often don t. A good question to ask to figure out the financial health of the community is how many “special assessments” have been made in the past couple of years. Are there any upcoming assessments. How much were they. An HOA that is forced to levy assessments often has problems financially or is facing large infrastructure improvements that should be a warning sign. New condos don t have this problem as their HOAs are run by the builder until the majority of units are sold.

As was stated in the previous article, condo living can have great benefits to first time buyers and people who aren t sure they want a house. However condos can have pitfalls namely in unexpected costs and heavy restrictions from the HOA. Do your research and you ll be able to make the best choice to suit your lifestyle and pocketbook.

There is no such a thing in Real Estate as agreeing now to agree at a later date. Real Estate, by its own very nature, is all black and white - you either do things, or you don t. There is no grey area in Real Estate, which one can find otherwise in commerce and trade. For instance, letter of intents that are widely used prior and during negotiations between corporations or between individuals and corporations have no place whatsoever in the world of real estate, where the only subject matter of trade is the exchange of titled interests in land for money. One cannot stipulate today to contract out in the future and hope the stipulation will be upheld, unless such an agreement is contained in a contract drafted and accepted today and is in the form of an option.

In essence, a stipulation to contract out at a later date is a void contract, meaning that such a stipulation does not exist under the law of real estate because no contract ever existed in the first place. Therefore the parties to the stipulation must be returned to their original bargaining positions as far as it is practically possible. This is also the case in the situation where both parties want the stipulation to continue - an impossibility since no contract exists between them in the present tense. This principle was recently reaffirmed in the Supreme Court of British Columbia in a case involving a private transaction between a prospective Purchaser and a prospective Seller. In this case there was a document executed between the parties, which clearly set out the legal description of the real property to be exchanged as well as the purchase price - CAD 580,000. The document also set out that there would be a deposit of $10,000 held by the purchaser s lawyer in trust, that the deposit would be applied towards the purchase price and that it would be returned to the purchaser if the sale failed to complete. Although on a cursory examination this document closely resembled a Contract Of Purchase And Sale there was, however, a fundamental element entirely missing: the date of completion. As no completion date had yet been agreed upon, a paragraph was inserted in its lieu that read as follows: “The Contract of Purchase and Sale of the Property will be prepared by the Purchaser s lawyers with terms conditions, and the date of completion of the Property to be agreed by the Vendor and the Purchaser”. Later on a completion date was actually agreed upon by the parties, stipulated to be March 3, 2005. On February 24, the solicitor for the Purchaser forwarded to the solicitor for the Vendor the necessary documents to complete the transfer. However, on March 3, 2005, the completion date set out in the document, the vendor declined to complete, on the grounds that there was only an agreement to agree in the future to the purchase and sale of the subject property. The Court agreed with the Vendor. In reaching his conclusion, the Trial Judge opined as follows: “Here the wording of the executed document is clear. The parties have said that a contract will be prepared with terms and conditions to be agreed by the vendor and the purchaser. “To be agreed” means some further agreement is necessary in the future. [ ] this is a circumstance where “the execution of the further contract is a condition or term of the bargain”. In other words, where the parties have stated that the terms and conditions are to be agreed, it cannot be said that the document is the mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. The deposit was ordered reimbursed to the Purchaser forthwith. Luigi Frascati luigi@dccnet.comwww.luigifrascati.com Real Estate Chronicle

Labels: REAL ESTATE # posted by Luigi Frascati @ Wednesday, May 23, 2007

In a story I read the morning from Realty Times reminded me of why I don t like carpet. When I lived in Michigan, I didn t mind it because in the winter time, it helped keep the house a little bit warmer than if I would of had wood or tile floors. But here in Florida, tile floors are best to have for a couple reasons. Once the sand gets in the carpet, it trashes the carpet pretty quickly and tile floors also help keep the house cooler here in a warm climate.

Here are a few excerpts from that article:

Over the last 20 years, there have been many complaints made to health agencies relating to carpeting — as they have been tested and some have contained hazardous materials.

One of the hot button issues is carpet glue used for installation. Over recent years,

companies have reduced the levels of harmful substances hazardous materials. But some installers allege that the “safe” adhesives do not perform as well as the “bad” adhesives.

Once installed, the carpets retain a little of everything embedded on the shoes of people who walk on them.

Since this can include many of the pesticides, chemicals, and solvents found outside, a carpet represents a microcosm of the outside world, but in a confined space.

SO ..I think it s best to say that if you do have carpet, to make sure you clean it quite often. Think about all the things you are tracking inside your home from the bottoms of your feet or shoes. Oil, gas, dog poo, bugs, pesticides and many other nasty things. These are the same floors you are walking all over with that stuff on the bottom of your shoes that your kids are playing on. All that stuff gets trapped into the fibers of the carpet.

Needless to say, I think I ll stick to tile floors. They are much easier to clean.

As the Salt Lake valley runs out of cheap land to develop, more and more high density housing projects are coming online.

Some of them are being built over existing sites, while others are conversions or complete remodels. Due to the age of some of the buildings downtown, some conversions have been turned into complete tear downs once the project starts.

For first time home buyers, condos present tremendous opportunities to find out what home ownership is about without having to make the same financial or upkeep commitments a small house would have. (For the purposes of this article, let s also consider townhouses to be grouped into this higher density category.)

First time home buyers often fear the repair and maintenance obligations a home brings. There are constant chores like

cleaning out the gutters, raking leaves, mowing the lawn and shovelling snow. A condo or townhouse offers the financial benefits of ownership, plus the pride of ownership without many of these maintenance chores.

Sure, the condo owner is responsible for picking up inside the unit and the minor plumbing and electrical problems that are bound to occur, but those tend to be one time shots and can often be repaired cheaply by the budding do-it-yourselfer or a quick call to the local handy-person.

Condo living often has fun benefits like the community pool, open spaces, and even a workout room. With close neighbors a sense of community and socialization often develops.

Owning your first home can be intimidating and exciting. By choosing condo living for the first home you can get a chance to see what it s like without the hassles of routine maintenance. As you become secure in the regular tasks of a homeowner, you may choose to move up to a house. On the other hand, a condo may end up being the best way to live your life. Either way, it s a great first step.

As is the custom on the Salt Lake Real Estate blog, this week s real estate blog carnivals are being reviewed. We only review the carnivals we participate in as there are hundreds out there in the blogosphere.

First off, the Carnival of Real Estate was held by RSS Pieces (a valuable site for real estate blogging knowledge) where a beauty contest was held. Only the top six contributors were crowned. The rest of the competition was left crying in their evening gowns at the Zillow carnival recap for the also-rans.

Class was in session at the Consumer Focused Carnival of Real Estate where my article on the perils of mortgage loan marketing received an “A.” Also sharing that grade was Dan Melson s article on rate comparisons. A very worthy read for anyone shopping for a mortgage.

No themes clouded this weeks straightforward Carnival of Real Estate Investing. Mary Wozny made her picks and laid them out for everyone interested. Fortunately, my post on real estate investing opportunities made her stringent cut. This same article was also picked up on a “best of the best” carnival recap at On the Moneyed Midways. Thanks to both of you for the selection.

Finally in what is rapidly becoming my favorite carnival, (it has many financial articles with different topics) the Carnival of Personal Finance held its 100th edition. Coincidentally it had 100 entries and my article on mortgage loan marketing again made the cut.

Thanks again to each of the Carnival hosts. This is a very time consuming job and I appreciate your selection, opinions and creative presentation.