Archive for the 'For Sellers' Category
Will Generation Y Lead Us Out Of Our Housing Doldrums?
April 12th, 2010 categories: Chicago Real Estate News, Economic Recovery, For Buyers, For Homeowners, For Sellers
Once in a while, I’ll stumble across a newspaper story that reminds me of the importance of in-depth, analytical reporting. I came across one of these April 2 in the Chicago Tribune, an analysis of the home-buying needs of Generation Y buyers by writer John Handley.
Handley’s story focused on the importance of this group of buyers. It quoted Chicago-area real estate experts who predicted that Gen Y buyers will lead Chicago and the nation out of their long housing slumps.
There are several reasons that the experts cited for this. First, there are simply a lot of Gen Y buyers. According to the Tribune story, there were 75 million people born between 1982 and 1995. These are the members of the Gen Y generation, and they are now in their 20s. They’re entering, or are already in, their home-buying years. Simply put, this means that there are more potential buyers now entering the market, which should lead to an increase in housing sales.
The story also mentions that Gen Y buyers purchase homes at earlier ages, and that they tend to spend more money on these first residences.
And once Gen Y buyers purchase their first homes, they become future buyers of larger, more expensive residences. Like other generations before them, they’ll buy first homes, live in them for a certain number of years and then upgrade. This should all equal a significant number of future home sales.
What impact have the Generation Y buyers had on the housing market today? Builders are creating homes designed to appeal to these younger buyers. This means smaller, more-efficient homes. It also means more home that are high-tech, homes that are wired for high-speed Internet connections.
If the Generation Y buyers behave as the housing-market experts predict, it will mean good things for the future of both the residential real estate industry in Chicago and across the nation.
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Demand For Mortgages Rises: Is This A Good Sign?
April 9th, 2010 categories: Economic Recovery, For Buyers, For Homeowners, For Sellers
As a REALTOR®, I’m constantly scanning the financial news looking for indications of the health of the local and national real estate markets. Starting with the last half of 2009, it’s been far easier to find studies and statistics that point to an improving residential real estate market.
For instance, there was this news from the Mortgage Bankers Association: Mortgage applications in the United States rose in late March for the first time in three weeks. In fact, demand for home-purchase loans reached their highest levels since October, according to a story on the Web site of Fox Business.
This is definitely a good sign for both the national and local housing markets. As the Fox Business story rightly points out, if this figure continues to rise, it will indicate good things for the busy spring home-selling season.
According to the Bankers’ numbers, the seasonally adjusted index of mortgage applications – a figure that includes both purchase and refinance mortgage loans – jumped 1.3 percent for the week that ended on March 26. The trade group also reported that the four-week moving average of mortgage applications was up 2.2 percent.
Again, this is good news for spring. As the weather warms, especially in cities like Chicago that experience harsh winters, home sales tend to rise. If homebuyers are preparing for spring by getting pre-approved for mortgage loans, it’s a good sign that they are serious about buying homes during this season. And as more homes sell, the odds increase that sale prices will stabilize, too. This, of course, would be great news for sellers.
Of course, the Mortgage Bankers study is just one indicator. But the more I search for news from the real estate industry, the more I find that there are plenty of encouraging signs out there. It’s a nice change of pace from the days of real estate gloom-and-doom. We’re certainly not back to a thriving housing market, yet. But there are signs that we’re heading in the right direction.
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The Cost of Waiting
April 7th, 2010 categories: Economic Recovery, FSBO's, For Buyers, For Homeowners, For Sellers, Housing Market, Mortgage Info, Taxes
This article was written by and provided courtesy of Michael Wallace, a Mortgage Banker from Chicago Bancorp.
First-time home buyers and move-up buyers must be under contract by April 30th in order to receive their respective $8000 and $6500 tax credits. A lot of people are taking advantage of this and it has stirred up a lot of activity, particularly in the first-time buyer category. Prices have dropped over the last few years, rates are at historic lows and the government wants to give buyers a big check. It’s a perfect scenario for buyers right? But there are still some people out there sitting on the fence and wondering if buying in the current economy and real estate market is a good idea. I’ve crunched the numbers on what I consider to be 6 likely scenarios.
The Cost of Waiting
Let’s look a pretty typical first-time buyer scenario. $250,000 condo purchase using the popular 3.5% down payment FHA 30 year fixed mortgage at 5.125%. The monthly mortgage payment would be $1314 per month, the down payment would be $8750 and Uncle Sam would be sending a check for $8000. Let’s also assume that the buyer remains in the home for 5 years.
What if #1 - 1 year from now real estate prices remain the same and mortgage rates remain the same
Cost of waiting = $8,000…no check from Uncle Sam.
What if #2 - 1 year from now real estate prices remain the same but mortgage rates are 1% higher
Cost of waiting = $17,120. The mortgage payment would be $1466 per month. Over 5 years this is an additional $9120 in payments and the $8000 check is missing.
What if #3 - 1 year from now real estate prices are 5% lower and mortgage rates are the same
Cost of waiting = $3603. The mortgage payment would be $1248. Over 5 years this saves $3960 in payments. The down payment is $438 less. But the missing $8000 still makes the cost of waiting an expensive decision.
What if #4 - 1 year from now real estate prices are 5% lower and mortgage rates are 1% higher
Cost of waiting = $12,302. Even with a smaller loan amount, the increase in rate would increase the monthly mortgage to $1393. Over 5 years this adds up to $4740 more in payments. The down payment would be reduced, but only by $438. Add in the loss of the $8000 and again the cost of waiting is not good.
What if #5 - 1 year from now real estate prices are 5% higher and mortgage rates are the same
Cost of waiting = $12,338. The loan amount would be larger resulting in a monthly payment of $1379. Over 5 years this adds to $3900 more in payments. The down payment is $438 higher and the $8000 is not in the picture.
What if #6 – 1 year from now real estate prices are 5% higher and mortgage rates are 1% higher
Cost of waiting = $21,938. The higher loan amount and higher interest rate result in a monthly payment of $1539. Over 5 years this adds up to $13,500 more in payments. Add the missing $8000 and the $438 more in down payment and this becomes quite costly.
Written by Michael Wallace 03/27/2010
Contact Michael Wallace
(312)738-6051
michaelw@chicagobancorp.com
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Another Deadline Looms for Home-Buying Credits
March 22nd, 2010 categories: Chicago Info/News, For Buyers, For Sellers, Housing Market, Taxes
The National Association of REALTORS® cites both the first-time and repeat-buyer federal housing tax credits as providing a big boost to the recovering housing market across the nation. I’ve seen the impact of the two credits here in Chicago, too; they’ve acted as the perfect incentive, along with housing prices that are more affordable than they have been in years, to inspire Chicago buyers to get off the sidelines and into the local housing market.
But now another deadline for the two credits is looming: Buyers have to act fast to take advantage of either credit. In fact, to qualify for either credit, buyers must have their housing contracts signed and accepted by April 30. Settlement must occur by June 30.
The Washington Times has a good summary of the credits and the deadline for buyers who want to take advantage of them. Basically, though, the first-time homebuyer version provides buyers with an $8,000 tax credit. The move-up buyer credit, for buyers who aren’t purchasing their first home, provides a $6,500 credit.
Both of these credits, though, might disappear after the deadline passes.
I think this is a shame. The housing industry, both in Chicago and across the nation, is still in the beginning stages of a steady but fragile recovery. The housing credits are helping to keep that recovery going. I don’t think the disappearance of the credits will break the industry’s momentum, but it might slow it. And that’s not good for anyone.
We all want our economy to continue is own fragile recovery, right? The health of the housing industry plays a big role in this. When home sales are on the rise, the economy’s health is generally better. Why, then, wouldn’t Congress extend the housing tax credits once again? Don’t we want to keep the recovery going?
If you want to purchase a home in Chicago and take advantage of either tax credit, the time to act is now. Finding a home, making an offer and settling the transaction is a process that takes a long time. If you’re to have any hope of qualifying for the credit, you have to kick your home search into high gear now.
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Study Blasts Zillow. Hallelujah!
March 16th, 2010 categories: For Homeowners, For Sellers, Real Estate News, Technology
When the Web site Zillow debuted in 2006, it became an instant hit with the public. Homeowners, and buyers, loved visiting the site to see what residences around the Chicago area were worth.
It never seemed to bother people that the Zillow estimates, known on the site as Zestimates, were rarely accurate. The Zillow people claim that they base their home value estimates on public records and local real estate sales. But I always found their estimates of properties in Chicago neighborhoods such as Lincoln Park, Lakeview and Lincoln Square to be wildly inaccurate. And I haven’t been shy about expressing this view to my clients.
Still, people flock to the site. And they gossip about it whenever Zillow comes out with one of its lists claiming that home values in Chicago have either risen or fallen.
I now have some more ammunition to support my contention that Zillow’s home value estimates are next to useless. A University of Texas study conducted by Daniel Hollas, Ronald Rutherford and Thomas Thomson concludes that Zillow’s Zestimates are not even better than homeowners’ own estimates.
The University of Texas study focused on 2,045 homes in Arlington, Texas, that sold in the second half of 2006. According to the results, Zillow overestimated the value of 40 percent of the homes by more than 10 percent. Only 0.88 percent of homes had their values underestimated by more than 10 percent.
What does this mean? Only that Zillow tends to overestimate the value of homes by a rather large sum. It’s what I, and many other real estate professionals, have long said about the site.
Zillow has disputed the study, of course. The company earns its living by providing its Zestimates. But I think I’ll side with the university professors – they tend to be smart people, after all – on this one.
Zillow might be fun to visit. Go ahead and type in the address of your Lakeview condo or two-flat in Ravenswood. But remember this: The best way to find out the true value of your Chicago residence is to work with a REALTOR® who knows your neighborhood. The true value of your home isn’t what Zillow guesses it to be, it’s what buyers are willing to pay for it.
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