Don’t rely on housing to support a strong economic recovery, according to three housing market experts.
Many believe a housing market rebound will lead the way to an economic recovery despite government spending cuts, tax increases and an ongoing economic malaise in Europe.
But Yale University economist Robert Shiller, Wellesley Collage economics professor Karl Case and David Blitzer, managing director of Standard & Poor’s Index Committee, doubt that scenario.
New housing starts are low, shadow inventory is moving onto the market only slowly and potential homebuyers continue to have a hard time obtaining mortgage approvals, they explained.
“All this talk that we’re in this great recovery — we probably are in the short run, the longer run doesn’t look so terrific to me,” Shiller, who created the S&P/Case-Shiller housing index with Case, told CNBC.
“People are worried about housing as a risky asset,” Blitzer added. “All the things that looked like they were going to snap back aren’t snapping back, but some of them are.”
New housing starts dropped 16.5 percent to 853,000 in April. Building permits were up, but housing starts are more important for increasing gross domestic product (GDP) than are building permits, which don’t entail actual building, or sales, which represent wealth transfers as opposed to wealth creation, according to Case.
“You build a house, you’re adding $300,000 to the capital stock,” Case explained. “That’s a lot of GDP just in the direct effect of housing starts. It’s been the perfect instrument of housing policy.”
The number of houses on the market is low, partly because foreclosures are moving more slowly than expected.
“We thought the shadow inventory would be pouring on the matter as trends changed,” Case noted. “That never happened.”
Existing home sales rose in April, but are not meeting demand because of limited inventory and tight credit, according to the National Association of Realtors (NAR).
Existing-home sales increased 0.6 percent in April, to 4.97 million from 4.94 million in March.
Lawrence Yun, NAR chief economist, believes housing is solidly recovering.
“The robust housing market recovery is occurring in spite of tight access to credit and limited inventory,” Yun stated in a press release.
“Without these frictions, existing-home sales easily would be well above the 5-million unit pace. Buyer traffic is 31 percent stronger than a year ago, but sales are running only about 10 percent higher. It’s become quite clear that the only way to tame price growth to a manageable, healthy pace is higher levels of new home construction.”
After falling in March, existing-home sales increased in April, although they were still not enough to meet underlying demand due to limited inventory and tight credit, reports the National Association of Realtors. All regions recorded year-over-year price gains.
A recent headline on the blog of the Redfin real estate firm warns of “early signs of a cooling off period.”
As if. Without any apparent irony, the recent experience of a Los Angeles real estate agent was presented as one data point in support of that “cooling off “headline. She is now encountering just eight to 15 other bidders when writing offers for buyer clients, compared with 30 to 40 competitors earlier in the year. So if you’re buying in L.A. your basic odds of emerging with the winning offer have improved from a dismal 3.3 percent to a whopping 12.5 percent. That likely doesn’t feel like much of a cooling off for L.A. house hunters.
With the inventory of homes on the market still sputtering near a 12-year low, the fact is anyone looking to buy right now should get ready to compete. That can mean opening your wallet even before you bid.
Because of intense buyer competition, agents in the most competitive markets now often recommend writing “clean” offers that don’t include a home inspection contingency. That doesn’t mean you shouldn’t give the house the once over. “I refuse to let clients buy without an inspection. You have to know what you’re buying,” says Washington D.C. area real estate agent Candy Miles-Crocker. “This is far too large an investment to just wing it.” (According to Redfin, 69 percent of D.C. offers written by its agents in April faced bidding competition.)
The solution increasingly is for home buyers to pay for a home inspection prior to bidding. Essentially that means wannabe buyers are shelling out $350 to $500 entry fees just so they can waive the inspection contingency. Lose out on a few bids and you could easily spend $1,000 to $1,500 on home inspections before you land your home. Homes are cheaper. The home buying process, not so much.
The home value forecast from Pro Teck Valuation Services reveals the impact low housing inventory has on home prices, which it calls the sold-to-list price ratio.
In the May update, the Honolulu, Tucson, San Francisco and Chicago metro areas are highlighted to determine how the indicator has been useful from a historical perspective as well as in current market conditions to best predict home price appreciation in markets.
“While many were predicting that REO and the ‘shadow inventory’ would keep real estate markets depressed, in reality the shortage of housing inventory has lead buyers to bid more competitively against one another leading to significant home price increases and tighter housing conditions,” said Tom O’Grady, CEO of Pro Teck Valuation Services.
The sold-to-list price ratio typically fluctuates between 92% and 98%, but can exceed 100% in very hot markets, according to the authors of the home value forecast.
Flower Power Doesn’t Pay | Chappaqua NY Real Estate
The Appraisal Institute recently advised that landscaping can make a significant difference a home’s value.
“If a landscaping change is positive, it can often enhance price and reduce a home’s time on the market,” said Appraisal Institute President Richard L. Borges II, MAI, SRA. “But if the change is negative, it can lower the price and lengthen the time a home remains for sale.”
Curb appeal is essential when selling a home, Borges said, noting it’s the homeowner’s opportunity to make a great first impression. A home with lackluster landscaping or an exterior in desperate need of a fresh coat of paint will likely be unappealing to prospective buyers and ultimately could affect the home’s potential resale value, he said.
Landscaping is typically associated with lawns, trees, bushes and flowers. But other items also can be considered part of landscaping, such as fire pits, decks, patios, waterfalls, swimming pools and outdoor lighting … all of which could add to the value of the home.
Borges added that homeowners should trim growth regularly, replant approximately every 5 to 10 years depending on growth and not “overwhelm” the house. He also advised that homeowners check out what their neighbors have done and keep landscaping maintenance and improvements on par with neighborhood norms.
According to the International Association of Certified Home Inspectors, trees that are too close to buildings may be fire hazards. Additionally, larger tree root systems that extend underneath a house can cause foundation uplift and can leech water from the soil beneath foundations, causing the structures to settle and sink unevenly.
A recent study by Lawn & Landscape magazine found that about two-thirds of homeowners say they’ll get less than 60 percent of their landscaping investment back when they sell the home.
“Landscaping improvements could make an impact on resale value, and homeowners need to consider how long they’ll be in the home and whether to make short-term updates or plan for the long haul,” Borges said.
Borges said homeowners should ask themselves the following questions when it comes to the quality of their home’s green space:
Is the landscaping attractive enough to make the prospective buyer walk through the front door? Keep the design contemporary and in line with comparable properties in the area.
Could the landscaping provide cost savings? Landscaping that requires little or no water to maintain could be desirable depending on the geographic area.
In 2009, my predecessor, Andrew Spano and the Board of Legislators signed a legal settlement obligating the county to spend $51.6 million to develop 750 units of fair and affordable housing in 31 so-called eligible or mostly white communities by the end of 2016.
Here’s an update on the status. Let’s start with the bad news.
The U.S. Department of Housing and Urban Development (HUD) is trying to use the settlement to dismantle local zoning laws. HUD has the misguided view that zoning and discrimination is the same thing.
When making an investment in real estate, you should look at it the same way you would look at a financial investment in a bond, stock, annuity, CD or any investment. You should analyze how much cash equity is being invested — just like you would if you bought a financial asset – and how much cash flow it produces. This is commonly called cash-on-cash return. A bond might pay a 5.0% interest coupon cash-on-cash return or a corporate stock might pay a 2.5% dividend in cash. You also need to compare those returns to what you could earn on an investment in real estate.
Of course, real estate has the added potential returns of long-term appreciation in value, similar to a stock investment. But as we’ve learned the past few years, real estate can also depreciate in value. So going forward, let’s stick with cash-on-cash return estimates and while we hope appreciation in value will come, it’s wise to expect that it will materialize. If it does materialize, it will be the icing on the cake on an already smart cash-on-cash positive return investment.
3 Issues to Calculate Returns on Real Estate:
1. Cash Flows and Investment Returns – How much equity do you invest, what are the cash flows off the property, and what is the projected rate of return? Remember that garbage numbers in will give garbage numbers out, so be conservative in your projections.
2. Compare investment returns – How do your cash-on-cash estimated returns on real estate compare to other types of investments? Bank CDs pay .5% to 1.5% these days, bonds pay 4-6%, and stocks can be all over the map and might average overall returns of negative (10.0%) to positive 8.0%. So how do your #1 cash flows and investment returns projections on your targeted real estate purchase compare to other types of investments? Do the returns seem to be worthwhile for the high risk of real estate?
3. Risk – This is one of the most important items. Will your #1 cash flows and investment returns that you projected come true, or were you overly optimistic on your rehabilitation costs, rents and expenses?
The mathematical portion of doing a projection on a real estate deal is actually pretty straightforward. The tough part is properly estimating the actual cash investment needed to get the property rental ready and the cash flows the property will generate. That is the typical difference between a good investment and a bad one – your ability to properly estimate all the costs, rents and expenses.
Given Google’s tight clutch on prototypes of its futuristic eyewear, known as Google Glass, Greg Geilman may be the first real estate agent to test the device.
His finding? The smart glasses, which allow users to perform many smartphone functions, offer a unique “awesome” user experience. And thankfully, he “did not feel like an idiot” sporting them in public.
“People were like, ‘Oh my god, is that really Google Glass?’ Some people look at you a little weird, but I didn’t get any bad reactions,” he said. “I’m really excited about it. It was very comfortable to use. I got used to it right away.”
But as with many devices still in beta testing, Glass could still use some tweaks, he said.
Google has said that it aims to release the product by the end of 2013. Recently, thousands of “explorers” who won Google’s #ifihadglass contest received prototypes of the next-generation smart wear, transforming a legion of techies into walking spectacles and heightening awareness of the product
.The stunning flavors of culinary herbs make them star players in a healthy diet, and the best way to make the most of big-flavor herbs is to grow them yourself. This article includes plans for four herb gardens, each designed to fit into a 12-square-foot area, to help you make the best use of space near your kitchen door. See Top 12 Kitchen Herbs for more on the featured herbs: basil, chives, cilantro, dill, marjoram, mint, oregano, parsley, rosemary, sage, tarragon and thyme.
You could grow kitchen herbs in a geometrical design dating from the days of medieval monasteries if you like, but there are easier ways to include culinary herbs in your landscape design. By following a few basic guidelines and choosing to grow the herbs you’re most likely to use, you can grow a generous supply of kitchen herbs in a surprisingly small space. Add some container herbs that are marginally hardy or prone to crowding out other plants, and you’re well on your way to a gourmet herb garden.