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Follow the Rents!


A leading indicator for home prices? Follow the rents!

The big question for home buyers and sellers today is: "Where are home prices headed?" People want to know if now is a good time to buy or sell, or if they should wait. We all need to stay on top of trends in real estate values -- so what's a good way to analyze the situation?

Yale economist Robert Shiller states it bluntly: "If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure." Shiller is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.

Traditionally, people have been willing to pay a modest premium to own a home rather than rent it. Recent studies report that in 1999 rents averaged 87% of the after-tax mortgage payment for houses and condos of similar size in the same neighborhood.

When home prices took off, this percentage changed. By mid-2006, rents had fallen to less than 60% of after-tax mortgage payments. In some markets, owners were paying twice as much as renters for a similar property in the same neighborhood. In a few places, owner monthly payments were three times average rents.

The 87% ratio of rent to ownership cost for 1999 is a good benchmark because it stayed around that level throughout the 1990's and the steep rise in home prices hadn't really begun.

With that as our guide, we can conclude that home prices at last appear to be stabilizing. By the end of October 2009, rents on average were up to 83% of ownership costs!



February 18, 2010

News Alert: Federal Reserve Raises Interest Rate Charged to Banks, In First Move Since 2008

The Federal Reserve, taking its first step to return lending to normal after more than two years of extraordinary actions to prop up the economy, on Thursday raised its discount rate -- the interest rate it charges on emergency loans to banks -- by one-quarter percentage point.
The increase, to 0.75 percent from 0.50 percent, takes effect on Friday.
Officials said the move was not meant to be a broad tightening of credit. Rather, they said, it was intended to discourage emergency borrowing when other financing is available to banks.
The discount rate had been at 0.50 percent since December 2008.

[Source: New York Times]

Breaking News



With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

The waiver will take effect on February 1. 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.

Limits to waiver:

  1. All transactions must be arms length.
  2. In cases in which the sales price of the property is 20% or more above the sellers acquisition cost, the waiver will only apply if the lender meets certain specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. Specific condition and other details are in the text of the waiver at

Housing Sales


INFO THAT HITS US WHERE WE LIVE  Last week presented us with divergent housing news. First, November Existing Home Sales came in UP 7.4%, at an annual rate of 6.54 million. This was way ahead of estimates and a 44.1% sales jump over a year ago. We had increases in all regions of the country, all due to single-family homes.

The median price went up to $172,600, down 4.3% from a year ago, but a big improvement from January, when prices were off 17.5% from the prior year. The supply declined to 6.5 months, as inventories fell to 3.52 million, their lowest level since December 2006. In the past three months, Existing Home Sales are up 28.5%. One more sign of housing market recovery came in a report that prices for homes financed with conforming mortgages increased 0.6% in October.

Now for the news in the other direction. November New Home Sales fell 11.3%, to an annual rate of 355,000. But November was an unusual month, with uncertainty over the tax credit slowing things down. New Home Sales are still UP 7.9% from January and inventories dropped in November to 235,000. This is the lowest level since 1971 and a 58.9% decline from the mid-2006 inventory peak. So even at this slower sales pace, experts feel home building will have to increase over the next few months to meet the demand that's out there.

Good News!


NFO THAT HITS US WHERE WE LIVE  We saw strong evidence last week that homebuilders are well on their way to recovery. Housing starts for November were UP 8.9%, to an annual rate of 574,000 units. Single-family starts were 35.0% higher than their January and February lows. The very volatile multi-units starts were UP 67.3% from the previous month's cyclical low. And get this -- starts were UP in every major region across the country!

Building permits are the future of homebuilding and guess what. They were UP 6.0% for November, to an annual rate of 584,000 units. This was above expectations and the fastest rise in a year. Single-family permits were UP 5.3%, registering their best pace since September 2008, when the economic mess began. Overall, homebuilding is UP in Q3 and many experts anticipate another gain in Q4 and even bigger increases in 2010-2011.

Mortgage rates continue at attractive levels, though they're creeping up. Fannie Mae's survey for the week ending last Thursday showed 30-year fixed-rate mortgages averaging 4.94% with an average 0.7 point (including the origination fee) for 80% loan-to-value (LTV) ratio loans. Last week the Fed confirmed they would end their purchase program for Mortgage Backed Securities on March 31, 2010. This is expected to cause mortgage rates to keep inching up. One more reason for buyers to act now!

March Housing Statistcs

Average Sales Price-
The average new home price this month ($288,745) is 7% lower than one year ago (310,032).  The largest increase occurred in Jackson County.  Leavenworth County also posted an increase in average sales price for new home this month compared to March 2008.  The average existing home price ($132,021) is 5% lower than the same month one year ago ($148,910).  Leavenworth, Miami, and Platte counties experieced increases in average sales price for existing homes from the same month last year.  The average price for combined new and exsting homes in the region this month was $150,788, which is down 10% from the average sales price of $168,394 for the combined in March 2008.  Leavenworth County experienced and increase in the average sales price for new and existing combined from the same month last year.

Home Sales-
New home sales this month of 189 represents a 45% decrease from one year ago when there were 343 new homes sales in March.  New home sales increased 21% over the past month when there were 156 new homes sales.  Existing home sales this month were down 10% from one year ago whent there were 1,924 sales.   But they were up 33% from last month's sales of 1,299 compared to this month's sales of 1,728.  Combined home sales of exisitng and new homes were 1,917 for March, which is up 32% from the totla of 1,456 sales from a month ago.  However, this month's combined total sales were down 15% from one year ago when there were 2,266 sales.

New home inventory decreased again this month with 2,968 homes in inventory compared to 3,074 new homes on the market last month.  The new home inventory for the region is 32% lower than it was a year ago at this time when there were 4,378 new homes on the market.  Resale inventory this month was up 6% with 13,937 compared to 13,193 a month ago.  The exisitng resale inventory this month is 8% lower than it was a year ago when the resale inventory was 15,157.  New and existing inventory combined was 16,908 this month compared to 16,270 last month representing a 4% increase in the past month.  One year ago the inventory was 19,536 which represents a 13% decrease in total inventory over the past year.

Kansas City Region Supply of Homes on the Market-
The supply calcuation has been modified and is now determined by taking the "Inventory" and dividing it by the "12 month average of the number of Sales."  Generally speaking, a 5-6 month supply of homes on the market equates to a "balanced" market.  When the supply exceeds 6 months, the market begins to favor buyers, and when the supply is less than 5 months the market tends to favor sellers.  Supply in the Region showed some changes over the last month due to the new calculation.  Supply for combined new and existing homes showed a 7.8 month's supply for March compared to 7.5 in February.  With these changes in supply over the last month, a buyer's edge is still present in both the new home market and in the existing home market.

Kansas City Home Prices

Fed Report: Real Estate Stabilizing in Key Cities
While real estate and other industries remained weak in all 12 of the Federal Reserve districts, there is reason for optimism in several areas, according to the Federal Reserve, which released its periodic "Beige Book" report of economic activity on Wednesday.

In Boston, Fed contacts reported "early signs of improvement" in the residential real estate sector, and the news was equally good in New York where the book said banks are reporting "the most widespread rise in demand for residential mortgages in more than seven years."

In Richmond, Va., commercial real estate is reporting moderate increases in activity and residential lending is rising because of strong demand for refinancing, the report said. Demand for refinancing is "hard to keep up with," one of the Fed's contacts said.

Meanwhile, commercial real estate weakened in Kansas City while residential real estate is holding steady, the report concluded.

New Year's ReVolutions!


By Michael Guld

RISMEDIA, Dec. 29, 2008-While the origin of New Year's resolutions goes back as far as 153 B.C., in modern day times, they usually evoke feelings of guilt. Most verbs associated with resolutions are restrictive in nature, including "to quit, stop, loose, reduce or eliminate." The implication is that you need to improve, fix or repair something that’s broke or not complete. By its very nature, people see New Year's resolutions as a difficult exercise at best, requiring discipline, determination and willpower...which are not exactly energizing words. As a result, most people "make" the resolutions January 1, and usually begin to "break" them by February 1 as their commitment fades and enthusiasm for attainment wanes. Case in point: The extreme increase in traffic at a health club the beginning of the year, which quickly subsides as the weeks and months progress.

Well here’s an idea: This year, consider creating New Year's "reVolutions," transformational actions that will lead to breakthrough results. New Year;s reVolutions can energize and invigorate by the thought of "what’s possible." By definition, which one of the below would inspire you to get out of bed January 1?

- A resolution - a solution, accommodation or settling of a problem
- A reVolution - a drastic and far reaching change in ways of thinking and behaving

New Year's revolutions are personal and broader in scope than the traditional resolutions. The framing of your revolutions requires stepping back and deciding what do you want to be as opposed to what you need to do. If someone were to introduce you to a large crowd recognizing you for your accomplishments, what would you want your bio to say? Are you on track to be that person? If not, what actionable steps can you take today that will help you get there tomorrow?

To help increase the chances of keeping inspired (vs. disciplined) with your New Year's revolutions, follow these 10 tips:

Goals are dreams with a deadline - Dreams are all about "wants and desires" with no commitment, where goals are "concrete and defined" with commitment. Where do you ultimately want to be and what do you want to do? Imagine limitless opportunities and be willing to take a chance to lay yourself on the line to achieve them. Write down three actionable goals that you can visualize and that you WILL achieve by the end of 2009. Keep them in front of you at all times so your daily actions will lead you to the attainment of these goals.

Positive attitude plus positive actions equal positive results - While having a positive mental attitude is a good start, it is the positive actions that follow that will lead to success (vs. wanting, hoping and waiting for them to happen). Make a plan on how you will achieve each goal with mini-plans, mini-goals and corresponding dates for each.

Follow your passion - Commit to doing more of what you enjoy doing that invigorates, provides pleasure and satisfaction and less of what you do not enjoy that leads to procrastination and stress (delegate, hire out, etc.). Your chores are other people’s challenges.

Soar with your strengths - Spend more time on those projects, tasks or activities that accentuate your talents and natural gifts and less time on the improvement of your weaknesses or shortcomings (delegate to others). By focusing on your strengths - what you are naturally good at - you will have a higher self-esteem, be more professionally fulfilled and you will ultimately be far more successful.

Be the organized executive - Being overwhelmed with clutter can make you feel busier than you actually are. Start the year fresh by doing a total catharsis or cleansing. Go through every piece of paper in every file with a goal to trash it, box it (future needs) or re-file it (near term needs). Your files will be reduced by 66 to 75 percent. You will start out the year with a refreshed attitude. Begin or end each day with 20 minutes worth of organizing, even if it means hiding piles until you can get to them.

Re-analyze your "to-do list." Does it look more like an annual plan? Are you working 10, 12 and 14-hour days and you still don’t feel like you get it all done? Go back through your "to-do list" and prioritize it to "do it," "delegate it" or "scratch it." Prioritize your list so you can do more of what brings you personal, professional and monetary rewards and less of what steals your time. Make sure you add in your "want to-do list" items, as opposed to only those tasks that others ask you to do.

Compartmentalize your priorities - Once you have decided on your priorities of the day, week, month, and year, focus on the tasks at hand..setting up firewalls to keep any distractions from diluting your focus. While we have two arms, two eyes and two ears, we only have one brain, so it is extremely difficult to concentrate on two or more projects and do them well at the very same time.

Change the way you see everything - By reprogramming your brain to see opportunities vs. obstacles, challenges vs. chores and celebrate what you've accomplished vs. feeling bad about what you have not, you will increase your energy, improve your attitude and raise your level of professional satisfaction.

Surround yourself with positive people - Good attitudes are contagious, elevating organizations to heights previously thought unreachable, but bad attitudes are more contagious, draining energy; accelerating discontent, and destroying morale. Choose to spend your precious time with people that will support you, encourage you and celebrate in your success.

Reinvent yourself - Even performers like Madonna realize that change is cathartic, energizing and can be very good for a career. It is easy to become stale and accept the way things are if we don’t shake it up every once and a while, even in our dress and our surroundings.

While we now have new technologies like cell phones, e-mail, PDAs, wireless cards -  all designed to save us time, make us more efficient and more effective - the reality is they can be pulls and distractions as well - taking us off tasks to what is truly important. Do not become a slave to technology, but instead use technology as a tool to help you achieve your goals.

Finally, we all have a goal to "get it all done," when in reality we have to accept that we will never "get it all done." There is no way to accomplish all that we want to do plus all that is asked from us by our work, family, friends and organizations.

The reality is wherever we spend our precious resources - time, money and energy - is where we will get the greatest results. Decide first on what results you want to accomplish in 2009, and spend your time, energy and focus to achieve your New Year’s reVolutions. .

Existing-Home Sales Rise


Existing-Home Sales Rise on Improved Affordability

WASHINGTON, October 24, 2008

Existing-home sales increased last month as buyers responded to improved housing affordability conditions, according to the National Association of Realtors.

Existing-home sales - including single-family, townhomes, condominiums and co-ops - rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007.

Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains. "The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island," he said. "The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike."

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said low home prices and low interest rates have been attracting buyers. "This is the first time since November 2005 that home sales have been above year-ago levels," he said. "Credit tightened at the end of September, but the improvement demonstrates that buyers who've been on the sidelines want to get into the market to make a long-term investment in their future."

According to Freddie Mac, the national average commitment rate for a 30--year, conventional, fixed-rate mortgage fell to 6.04 percent in September from 6.48 percent in August: the rate was 6.38 percent in September 2007.

Yun said there may be market disruptions. "The credit markets are not settled yet, although the mortgage market stabilized with the government takeover of Fannie Mae and Freddie Mac. Inventory remains high, and price declines are pressuring owners," he said. "Additional housing stimulus would stabilize prices more quickly, which in turn would bring faster stability to Wall Street. Removing the repayment feature on the first-time buyer tax credit and permanently raising loan limits would bring more buyers into the market and further reduce inventory."

Total housing inventory at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July.

The national median existing-home price for all housing types was $191,600 in Septembe,, down 9.0 percent from a year ago when the median was $210,500. "Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35 to 40 percent of transactions. These are pulling the median price down because many are being sold at discounted prices," Yun explained. "The current market is not being dominated by speculative investors. Rather, 80 percent of current buyers are purchasing a primary residence, which is a bit higher than historic norms."

Single-family home sales increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 560,000 units in September, but are 15.7 percent below the 664,000-unit pace in September 2007. The median existing condo price was $199,400 in September, down 10.2 percent from a year ago.

Regionally, existing-home sales in the West jumped 16..8 percent to an annual rate of 1.25 million in September, and are 34.4 percent higher than September 2007. The median price in the West was $253,600, down 18.5 percent from a year ago.

In the Midwest, existing-home sales increased 4.4 percent to an annual pace of 1.19 million in September, but are 2.5 percent below a year ago. The median price in the Midwest was $152,500, which is 7.9 percent lower than September 2007.

Existing-home sales in the South rose 2.2 percent in September to a pace of 1.90 million but remain 7.8 percent below September 2007. The median price in the South was $167,200, down 4.1 percent from a year ago.

In the Northeast, existing-home sales slipped 1..2 percent to an annual pace of 840,000 in September, and are 7.7 percent lower than a year ago. The median price in the Northeast was $246,800, down 5.4 percent from September 2007.

The National Association of Realtors, "The Voice for Real Estate," is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

NOTE: References to performance in states or metro areas are from unpublished raw data used to analyze regional trends; please contact your local association of Realtors for more information

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit.  Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales,, which generally account for 85 percent of total home sales, are based on a much larger sample - more than 40 percent of multiple listing service data each month -  and typically are not subject to large prior-month revisions.

Total inventory and month's supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.

The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

The Perfect Storm!


The Perfect Storm




By James A. Crumbaugh, III

Note: I wrote this article at the very beginning of 2008. This morning when I walked out to the driveway to retrieve my newspaper, the headlines read, "Real Estate Market Is Turning Around." The perfect storm is in full fury now. Watch the real estate market continue to improve.

RISMEDIA, Nov. 24, 2008- "The Perfect Storm."  What could I possibly mean when I say that the real estate industry is about to enter the perfect storm?

After 35-plus years in the real estate industry, I've watched good and bad markets come and go. There are always mitigating factors that cause these markets, both good and bad, to make an abrupt change. Those that have spent a couple of decades in the real estate industry will tell you this: when a market changes from bad to good or the opposite, it almost always happens very quickly, particularly when a market goes from good to bad.

I think everyone reading this article will agree - that is what happened this time as well, when the real estate market went south on us.

So what do I mean when I say that the real estate industry is about to enter the perfect storm? Let's look at several factors. The first factor is (at the time the original article was published) a new national election was about to take place with a change of leadership.

Markets tend to pause when we are in this phase, waiting to sense what the change will mean. Next, with the possibility of a recession facing the United States, with several states already experiencing a recession, the stock market is going to continue to retreat.

When the stock market starts to retreat as it is now, investors almost always start to look at real estate, because it’s a tangible item - it's concrete, something they can fully grasp.

Then, you have to take a look at where the real estate industry is at this moment. With the exception of Texas, we have in most states a severe real estate issue facing this country. We have declining prices in most areas as well as a huge over-supply of inventory. Yet, we also have some of the most attractive mortgage interest rates available in quite a while, and contrary to popular belief, there is still plenty of mortgage money available for the qualified borrower.

Let's now take all these issues and throw them into a paper bag, give that paper bag a good shaking and then dump it out. What do you have?

It is the perfect storm for the real estate market. Real estate prices are at a very attractive level. In fact in some areas, due to an over-correction, the properties are undervalued.

Mortgage interest rates are very low and very attractive and we have a huge over-supply of resale inventory. You add all of this together, and for the real estate investor and the natural real estate buyers, the ones who what to move up or move down or move to a new area or whatever the reason is, you have one of the very best times in years to buy property.

The year of 2008 is going to go down in the history books as the year that the current real estate market makes a u-turn and starts to stabilize and appreciate again. Everyone keeps saying now is the time to buy. Let me tell you, it's not only the time to buy, it's one the very best times to buy we will see for years to come.

James A. Crumbaugh is CEO of Allison James Estates and Homes Real Estate

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