Housing affordability conditions improved in most metropolitan areas from softer
existing-home prices and record-low mortgage interest rates in the fourth
quarter, with rising sales and lower inventory creating more balanced
conditions, according to the latest quarterly report by the National Association
of REALTORS®.
Introduced
with this release is a new annual metro-level housing affordability index, with
historically favorable conditions dominating across the country.
The
median existing single-family home price rose in 29 out of 149 metropolitan
statistical areas in the fourth quarter from a year earlier; two were unchanged
and 118 areas had price declines.
Lawrence
Yun, NAR chief economist, said the figures reflect greater home sales activity
at lower price points. “Sales have risen strongly in lower price ranges from one
year ago, while sales at the upper end remain sluggish,” he said. “More
importantly, we’re seeing a consistent trend of declining inventory, which means
supply and demand conditions are becoming more balanced in more areas, which
will help stabilize home prices.”
The
national median existing single-family home price was $163,500 in the fourth
quarter, down 4.2 percent from $170,600 in the fourth quarter of 2010. The
median is where half sold for more and half sold for less. Distressed homes --
foreclosures and short sales which sold at discounts averaging 15 to 20 percent
-- accounted for 30 percent of fourth quarter sales; they were 34 percent a year
earlier.
Median
price measurement reflects the types of homes that are selling during the
quarter and can be skewed at times because the level of distressed sales, which
artificially depress median prices, can vary notably in given markets. Annual
price measures, also reported today, generally smooth out any quarterly
swings.
“Broadly
speaking, the very middle of the country, from the Dakotas and Nebraska to
Oklahoma and Texas, has experienced very stable home price trends because of
stronger job creation in those areas,” Yun said.
Total
existing-home sales, including single-family homes and condos, increased 5.9
percent to a seasonally adjusted annual rate of 4.42 million in the fourth
quarter from 4.17 million in the third quarter, and were 9.2 percent above the
4.04 million pace during the fourth quarter of 2010. All regions rose from the
third quarter and from a year ago.
At
the end of the fourth quarter there were 2.38 million existing homes available
for sale, which is 21.2 percent lower than the close of the fourth quarter of
2010, when there were 3.02 million homes on the market.
NAR
President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami,
said market conditions vary widely around the country. “Even with record high
housing affordability conditions, all real estate is local,” he said. Both
buyers and sellers need to be aware of what works in their local market, and
REALTORS® are the best resource because they have unparalleled knowledge of
local market conditions and options.”
NAR’s
national Housing Affordability Index rose to a record high 184.5 in 2011, based
on the relationship between median home price, median family income and average
mortgage interest rate. The higher the index, the greater the household
purchasing power; recordkeeping began in 1970.
An
index of 100 is defined as the point where a median-income household has exactly
enough income to qualify for the purchase of a median-priced existing
single-family home, assuming a 20 percent down payment and 25 percent of gross
income devoted to mortgage principal and interest payments. For first-time
buyers making small down payments, the affordability levels are relatively
lower.
Metro
areas with the greatest housing affordability conditions in 2011 include the
Detroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio,
at 242.9; and Decatur, Ill., at 236.8. Only 24 out of 152 metros measured had an
affordability index below 100 in 2011.
“Clearly,
the Midwest has the greatest concentration of areas where home buyers have the
strongest purchasing power, followed by the South,” Yun said. “Metros on the
West Coast and along the Northeastern seaboard have generally higher-priced
homes, which account for lower affordability.”
Between
2010 and 2011, in markets where comparisons are available, all but 2 out of 148
areas showed improvement in housing affordability, and 69 MSAs had double-digit
increases in affordability conditions.
The
share of all-cash home purchases in the fourth quarter was 29 percent, unchanged
from the third quarter; they were 30 percent in the fourth quarter of 2010.
Investors, who are drawn by bargain prices and who account for the bulk of cash
purchases, accounted for 19 percent of transactions in the third quarter; they
were 20 percent in the third quarter and 19 percent a year ago.
First-time
buyers purchased 33 percent of homes in the fourth quarter; they were 32 percent
in both the third quarter and the fourth quarter of 2010.
In
the condo sector, metro area condominium and cooperative prices -- covering
changes in 54 metro areas -- showed the national median existing-condo price was
$160,800 in the fourth quarter, which is 1.7 percent below the fourth quarter of
2010. Ten metros showed increases in their median condo price from a year ago;
one was unchanged and 43 areas had declines.
Regionally,
existing-home sales in the Northeast rose 6.3 percent in the fourth quarter and
are 3.7 percent above the fourth quarter of 2010. The median existing
single-family home price in the Northeast fell 4.6 percent to $229,200 in the
fourth quarter from a year ago.
In
the Midwest, existing-home sales increased 7.0 percent in the fourth quarter and
are 14.1 percent higher than a year ago. The median existing single-family home
price in the Midwest declined 3.3 percent to $134,100 in the fourth quarter from
the fourth quarter in 2010.
Existing-home
sales in the South rose 3.8 percent in the fourth quarter and are 9.1 percent
above the same quarter in 2010. The median existing single-family home price in
the South was $146,500 in the fourth quarter, down 3.8 percent from a year
earlier.
Existing-home
sales in the West increased 8.1 percent in the fourth quarter and are 8.4
percent higher than a year ago. The median existing single-family home price in
the West declined 4.2 percent to $205,200 in the fourth quarter from the fourth
quarter of 2010.
Source:
National Association of REALTORS®
Homeownership Possible Within Three Years After Foreclosure
Losing your home can be devastating to your credit, not to mention your psyche, but you can buy again within as few as three years after a foreclosure or short sale.
It's not surprising when you lose your home you also lose some self-esteem, especially if your were raised in a culture that sees homeownership as a status symbol, as a sign that you've finally arrived.
Some lost self-esteem also comes from the belief you've lost your shot at the American Dream. Others will tell you seven to ten years must pass before you can buy again. At that time, uninformed people say, you'll have to buy at high interest rates.
That's not always true.
If you file for bankruptcy, and make the right credit and financial moves, you can buy a home again as soon as two years after your bankruptcy is discharged.
What's more, if you rebuild your credit and maintain a healthy, on-time credit profile, you can take advantage of low down payment and low interest rate loans. The Federal Housing Administration (FHA) allows you to buy a home with as little as 3.5 percent down and take advantage of some of the best interest rates on the market.
FHA loans literally replaced the subprime brand, but came with federal backing.
Also see: "U.S. to lower size of guaranteed mortgages"
You also may be eligible for first-time homebuyer programs that assist you with your down payment and closing costs. First-time homebuyer programs are not just for those who have never owned a home, but allow you to qualify if you have not owned a home in the past three years.
Some private lenders, home owners and investors also may allow you to buy a home even sooner than the two- to three-year period, but it will cost you a higher interest rate and require a large down payment.
With the housing market flat and many local markets still expected to see prices fall more, it is not a bad idea to spend the next several years cleaning up and re-establishing your credit. Good credit will allow you to buy a home with a minimal down payment and the lowest interest rates.
If you lost your home to foreclosure or a short sale, don't lose hope. Don't hesitate. Begin today putting yourself in a good position to buy.
Fix your credit
• Rebuild your credit by making your monthly debt payments on time. Don't ignore your remaining credit obligations during foreclosure or after losing your home. Your credit score gets a boost, in part, based on the number of positive accounts in your credit report. The more you have, within reason, the faster your credit score rises, even after losing a home.
• Pay down your credit cards but not to a zero balance. Your credit score gets a boost if you maintain a balance that is about 30 percent or lower than your credit limit. Keeping a balance reveals you can borrow money and pay it back on time. Don't close out your credit cards because the longer your positive credit history, the more your credit score and your ability to buy a home will improve.
Save money
• Most of today's homebuyer programs require a down payment. FHA loans require 3.5 percent down -- $3,500 for every $100,000 you borrow. You likely will have to pay closing costs, another 2 percent to 3 percent of the sales price. This is another $2,000 to $3,000 per $100,000. Do the math to determine how much you need to save each month, over the next two or three years, to have enough to cover your down payment and closing costs.
Don't be pressured
• Buy only when you are ready. You didn't lose your credit overnight. Likewise, it will take time to rebuild your credit and save for a down payment. Home buying deals will be available for years to come.
• Avoid adjustable rate mortgages (ARMs) and consider a 15- or 30-year fixed rate mortgage (FRM) that is a fully amortized loan so your payment and interest rate are fixed for the duration of the loan. Full amortization means each payment helps pay down the principal. When your loan term ends, so does the loan balance.
• Buy based on what you can afford, rather than a higher amount approved by the lender. You already know the risk of biting off more than you can chew. Lenders will pre-approve you based on your gross monthly income, but that does not consider taxes subtracted from your paycheck, food, clothing, utilities and other monthly obligations.
Know your comfort zone. Don't over-extend yourself.
Published: February 8, 2012
It's not surprising when you lose your home you also lose some self-esteem, especially if your were raised in a culture that sees homeownership as a status symbol, as a sign that you've finally arrived.
Some lost self-esteem also comes from the belief you've lost your shot at the American Dream. Others will tell you seven to ten years must pass before you can buy again. At that time, uninformed people say, you'll have to buy at high interest rates.
That's not always true.
If you file for bankruptcy, and make the right credit and financial moves, you can buy a home again as soon as two years after your bankruptcy is discharged.
What's more, if you rebuild your credit and maintain a healthy, on-time credit profile, you can take advantage of low down payment and low interest rate loans. The Federal Housing Administration (FHA) allows you to buy a home with as little as 3.5 percent down and take advantage of some of the best interest rates on the market.
FHA loans literally replaced the subprime brand, but came with federal backing.
Also see: "U.S. to lower size of guaranteed mortgages"
You also may be eligible for first-time homebuyer programs that assist you with your down payment and closing costs. First-time homebuyer programs are not just for those who have never owned a home, but allow you to qualify if you have not owned a home in the past three years.
Some private lenders, home owners and investors also may allow you to buy a home even sooner than the two- to three-year period, but it will cost you a higher interest rate and require a large down payment.
With the housing market flat and many local markets still expected to see prices fall more, it is not a bad idea to spend the next several years cleaning up and re-establishing your credit. Good credit will allow you to buy a home with a minimal down payment and the lowest interest rates.
If you lost your home to foreclosure or a short sale, don't lose hope. Don't hesitate. Begin today putting yourself in a good position to buy.
Fix your credit
• Rebuild your credit by making your monthly debt payments on time. Don't ignore your remaining credit obligations during foreclosure or after losing your home. Your credit score gets a boost, in part, based on the number of positive accounts in your credit report. The more you have, within reason, the faster your credit score rises, even after losing a home.
• Pay down your credit cards but not to a zero balance. Your credit score gets a boost if you maintain a balance that is about 30 percent or lower than your credit limit. Keeping a balance reveals you can borrow money and pay it back on time. Don't close out your credit cards because the longer your positive credit history, the more your credit score and your ability to buy a home will improve.
Save money
• Most of today's homebuyer programs require a down payment. FHA loans require 3.5 percent down -- $3,500 for every $100,000 you borrow. You likely will have to pay closing costs, another 2 percent to 3 percent of the sales price. This is another $2,000 to $3,000 per $100,000. Do the math to determine how much you need to save each month, over the next two or three years, to have enough to cover your down payment and closing costs.
Don't be pressured
• Buy only when you are ready. You didn't lose your credit overnight. Likewise, it will take time to rebuild your credit and save for a down payment. Home buying deals will be available for years to come.
• Avoid adjustable rate mortgages (ARMs) and consider a 15- or 30-year fixed rate mortgage (FRM) that is a fully amortized loan so your payment and interest rate are fixed for the duration of the loan. Full amortization means each payment helps pay down the principal. When your loan term ends, so does the loan balance.
• Buy based on what you can afford, rather than a higher amount approved by the lender. You already know the risk of biting off more than you can chew. Lenders will pre-approve you based on your gross monthly income, but that does not consider taxes subtracted from your paycheck, food, clothing, utilities and other monthly obligations.
Know your comfort zone. Don't over-extend yourself.
Published: February 8, 2012
Subscribe to:
Posts (Atom)