Recent Blog Posts
Vacancy Rates Drop to Lowest Since 2006
The national vacancy rate among single-family non-rental homes fell to 2.3 percent in the fourth quarter of 2011, according to data released Tuesday by the U.S. Census Bureau.
That’s down from 2.7 percent at the beginning of last year, and the lowest homeowner vacancy rate since early 2006.
Undoubtedly, the decline in vacancies is an offshoot of fewer foreclosures in 2011 combined with a slight uptick in home sales for the year.
RealtyTrac reports foreclosure starts were down 39 percent from 2010. And while new home sales had their worst showing in recorded history, the National Association of Realtors tracked a 1.7 percent annual increase in existing-home sales.
Paul Diggle, property economist with Capital Economics, says it’s another sign that excess inventory – at least the visible inventory – is slowly but surely being cleared. It
“leaves the visible inventory at a level consistent with house prices bottoming out later in the year,” according to Diggle.
The Census Bureau also reported that the nation’s homeownership rate dropped to 66.0 percent – its lowest level in nearly 14 years – as the housing downturn has eaten away at the share of Americans who are willing and able to own their own home.
The fourth-quarter homeownership rate gave up almost all of the previous quarter’s gain, Diggle noted.
“What’s more, despite median mortgage costs being more affordable than ever and early signs that mortgage credit is becoming more available…the seven-year downturn in homeownership may still have further to run,” he warns.
The flipside, Diggles says, is there are more households in the rented sector and fewer properties lacking tenants, which is helping to drive rents, and therefore landlords’ returns, higher.
He expects rental value growth is to hit 3 percent this year and average rental yields to rise to around 5.5 percent.
With house prices still falling for now, Diggles says it will be a while yet before homeownership is once again seen as an essential part of the American Dream, and that’s despite the fact that owning now seems to make greater financial sense than renting.
The drop in the homeownership rate pushed the share of households in rented accommodations up, from 33.6 percent at the beginning of 2011 to 34.0 percent in the fourth quarter. The ratio of homes in the rental sector that were vacant also fell, to 9.4 percent.
(Homeownership and Vacancy Rates Drop article courtesy of DSNews.com)
Who’s the Quarterback?
Given that it’s Superbowl Week (Go Giants!), I thought we might go with a football theme today. I can’t tell you how many different people I hear proclaim that they are the quarterback of the real estate transaction – the agent, the loan officer, an attorney, accountant or financial planner. But for goodness sake, the buyer/borrower had better be the one calling the shots. Not that everyone else doesn’t play an important role, but the buyer/borrower is the one most impacted by the choices made.
Here’s my opinion of how the team works best:
- Head Coach (Your Loan Officer) – Your loan officer should be the Head Coach. After careful analysis of your income, credit and assets, this is the person in the best position to make sure you are playing to your strengths and minimizing your weaknesses. Your loan officer can discuss the economic realities of homeownership, while listening to your quality of life concerns. (How often you’ll be able to eat out or vacation, for example.) The loan officer can set up the game plan.
- Offensive Coordinator (Your Real Estate Agent) – Your real estate agent is your offensive coordinator. Armed with the game plan (which includes your limitations), the agent calls the plays, counseling you on the geography, the competition, the best ways to negotiate your way to your personal touchdown. Agents know the playing field (the inventory and the market). If you hire them to represent you, they can disclose the weaknesses of your competition (the seller).
- Offensive Line (Your Attorney, Accountant and Financial Advisors) – Your attorney, accountant and financial advisors are your offensive line. They are there to protect you from the blitzes that come from outside (sellers, title issues, tax consequences, and protecting your assets). Not the glamour positions, but vital to any success you are going to have.
- Running Backs and Wide Receivers (Your Friends and Family) – Your friends and family are the running backs and wide receivers. They often receive the glory and attention, but honestly, if everyone else doesn’t do their job, they rarely ever see success. Bad game plans, weak play calling, poor execution on the offensive line or by you, as quarterback, leave them merely as names on the roster.
As with any team, communication is the most important component to getting the desired results. Being the center of the action on the field, the quarterback (you) needs to honestly talk with your coaches and coordinators, so they can help direct you on the proper play calling. Simultaneously, you need to heed the feedback from your offensive line, running backs, and receivers to filter wise advice from emotion. Be the quarterback of your own home-buying process and you’ll be more likely to realize your dreams (and not the dreams of someone else).
Why Deals Die
I have seen estimates stating that 29% of deals that go to contract and require a mortgage, don’t close. That number boggles my mind. It means that even after a buyer and seller come to terms on a sale (not an easy feat these days), 3 out of 10 transactions fall apart. What are some of the more common reasons?
- Appraisal issues – In many markets, we are still seeing declining values. Appraisers are in a difficult position, and with so many transactions (including seller’s concessions to assist buyers with closing costs) values aren’t always coming in at sales prices.
- Short Sales not being approved by the current lender – With so many sellers owing more than their home is worth, buyers’ proposals need to be sanctioned by the lender (who will be receiving less than they are owed). Some of the offers are too low, but often, the lender isn’t local and they really don’t know what the property is worth today.
- Bad pre-approvals from the loan officer – Today, loan officers who are not reviewing tax returns, analyzing bank statements, and asking for detailed explanations and documentation on credit blemishes, are truly hurting the customers. Issuing pre-approvals based on the representations of the customer is reckless and a cause for dismay later.
- A lack of transparency – Whether it’s a seller or agent not disclosing property issues, or a buyer trying to sneak things by an underwriter, too many people think they can cut corners. That is not the world we live in anymore. Everything is uncovered. Being honest in the beginning, gives you the best chance to overcome obstacles.
It is clear by the numbers that closing loans can be more difficult today. However, with proper planning and integrity, many of the challenges can be dealt with early and successfully. Agents documenting values of the homes, loan officers doing complete reviews of the loan profile up-front, and everyone telling the truth helps get deals to a successful conclusion and avoids horror stories.
