Archive for the 'FSBO's' Category
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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Chicago Home Sales Reach A Milestone In September
October 26th, 2009 categories: Chicago Info/News, Chicago Real Estate News, FSBO's, For Buyers, For Homeowners, For Sellers, Housing Market
Chicago home sales made a bit of history in September. According to the Illinois Association of REALTORS®, total sales of existing homes in Chicago rose 5.8 percent that month when compared to September of 2008.
This is big news. It’s further evidence that the housing market here has stabilized. We’re in a recovery now, and there’s no denying it.
Overall, home sales throughout the state of Illinois rose 3.3 percent in September of this year when compared to one year earlier. This marks the first time that we’ve seen a year-over-year increase in local home sales since March of 2006.
In the city, 1,918 homes sold in September. That compares to 1,813 sold during the same month one year earlier.
I can point to several reasons for this sales increase. First-time buyers, encouraged by the federal government’s $8,000 tax credit, hit the market hard in the late summer and early fall months. They know that the tax credit is due to expire at midnight on Nov. 30, and they didn’t want to miss their chance to qualify for it. Add historically low interest rates to the mix and one sees why sales have begun to show a spike upward.
Secondly, it seems that Chicago sellers are now pricing their condominiums and single-family homes at prices that are attracting the attention of buyers. Smart buyers know that Chicago housing today is a great bargain. They’re taking advantage of these terrific sales prices.
Finally, you can’t discount the overall strength and resiliency of the Chicago housing market. Sure, even the city’s top neighborhoods have seen home sales decline during the housing slump. But these markets, neighborhoods like Old Town, Lincoln Park, Wicker Park, Lakeview, Lincoln Square and Roscoe Village, are so attractive, and offer so many amenities, that I knew they’d rebound quickly from the residential real estate slowdown.
And that’s just what is happening now.
I’m particularly impressed that Chicago outperformed the rest of the state, seeing its home sales increase 5.8 percent in September while sales in the state as a whole only jumped a bit more than 3 percent.
To me that says one thing: Chicago remains a great place to buy a home.
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Pending Home Sales Yet Another Sign Of A Recovery
September 18th, 2009 categories: Economic Recovery, FSBO's, For Buyers, For Homeowners, For Sellers, Housing Market
Even the most pessimistic of analysts have to admit now that the evidence of a housing recovery is piling up.
Earlier this month, the National Association of REALTORS® reported that the number of pending home sales rose again in July. This marks the sixth straight month that this figure has risen.
That’s significant because it’s a record. This is the first time this figure has risen for so many consecutive months since the REALTORS® association first began tracking pending home sales in 2001.
The pending home sales index is a bit complicated. It’s based on sales contracts signed each month. In July, then, the number of housing contracts that consumers signed rose again. This, of course, is a good sign that the housing market is regaining its strength.
Lawrence Yun, the chief economist for the National Association of REALTORS®, said that the housing recovery is now gaining momentum across the country. We’ve seen signs of it here, too, in Chicago, as housing sales in the city continue to rise month after month. At the same time, the prices of condominiums and single-family homes in Chicago are slowly, but steadily, rising again.
Yun points to first-time homebuyers as one of the main catalysts for the current recovery. The REALTORS® association estimates that from 1.8 million to 2 million first-time buyers will take advantage of the federal government’s $8,000 first-time homebuyer tax credit this year. The association also says that about 350,000 home sales that will take place this year would not have happened without the tax credit.
Chalk up the increase in pending home sales as yet one more sign that the housing market is in the midst of a much-awaited recovery. Remember, as the housing market regains its strength, it will exert a positive influence on the rest of the economy. A strong housing market usually equals a strong economy, too.
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The Housing Market Index Reaches A 16-Month High
September 17th, 2009 categories: Chicago Real Estate News, Economic Recovery, FSBO's, For Sellers, Housing Market
According to the country’s home builders, the housing market is looking good.
Each month, the National Association of Home Builders releases its Housing Market Index report, a survey geared at taking “the pulse of the single-family housing market”.
Respondents report on three facets of their business, each series weighted and averaged:
- How are market conditions today?
- How do market conditions look 6 months from now?
- How is the traffic of prospective buyers of new homes?
For the 3rd straight month, the Housing Market Index improved. It’s now at its highest level since May 2008.
The housing market has shown signs of life since March. Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns. Builders showing confidence is another positive signal.
Fed Chairman Ben Bernanke said that the recession is “very likely over” and strong housing data corroborates that statement.
As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations. If you’re an active home buyer, therefore, and looking for “a deal”, be aware that time is close to running out.
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The Long-Term Trendline For Existing Home Sales Points To A Housing Recovery
August 25th, 2009 categories: FSBO's, For Buyers, For Sellers, Housing Market, Real Estate News
The housing market continues to surprise. Last week, the latest good news came in the form of the monthly Existing Home Sales report.
An “existing home” is a home sold by an existing owner as opposed to a developer. It’s non-new construction property.
The data on Existing Home Sales was noteworthy for its trends:
- Sales volume rose over four straight months for the first time in 5 years
- Sales volume rose year-to-year for the first time in 4 years
- Median home prices fell for the first time since April
Furthermore, first-time home buyers and buyers of “distressed” homes accounted for nearly one-third of the market activity each.
But, before we declare a bottom in housing, it’s important that we remember the First Rule of Real Estate — All Real Estate Is Local.
The Existing Home Sales report is not neighborhood-specific. It lumps cities like San Diego and Saint Paul into a giant sample set and fails to account for regional differences in real estate, let alone neighborhood ones.
This is the primary reason why on-the-ground real estate agents are better sources for a market pulse versus a report from a national trade group. The national group can’t know the happenings of every street and every home in a market.
That said, however, the national data isn’t completely useless.
Looking at the long-term patterns in the Existing Home Sales report, we can infer that ample supplies, low mortgage rates and tax credits are spurring home sales in a lot of U.S. markets.
Eventually, this will lead home prices higher.
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