Have We Reached Bottom?

Have We Reached Bottom? 10 Factors to Consider
RISMEDIA, June 24, 2009-Historically, the value of real estate goes through cycles. Many factors affect the value of homes including the laws of “supply and demand.” From the Appraisal Institute, here’s a quick reference guide to some of the factors involved and advice on how to spot a turning point in the market:
1. A spike in local sales activity. A spike refers to a significant rise in the number of home sales (or values) in a local market area, which generally is measured month to month. A spike does not necessarily mean continued growth, i.e. it could be a one month phenomenon.
2. Higher asking and selling prices vs. appraisal value opinions for residential properties. Appraisers study the markets; they do not make the markets. When the data shows higher sale prices in comparable properties market value opinions will increase proportionally. Appraisers seek evidence of value but do not create the value. In time periods with low activity, evidence of any kind is difficult to find.
3. More activity at open houses. Open houses with five to eight attendees is considered average, so a dozen or more people attending an open house means buyer interest is picking up. Also, the mood of the attendees is important. Are they optimist and upbeat? Buyers interest alone does not always translate to effective purchasing power. If the number of buyers in the market increases but they do not have requisite down payments, the sales may still not occur.
4. Shorter marketing times. In some markets, houses have been up for sale for more than a year. In most balanced residential markets, properties that are priced competitively will typically sell in less than six months. If the Days On Market (DOM) is shortening, many practitioners will read an improvement in the market.
5. Reduced number of foreclosures and short sales. A reduction in these transactions commonly signals a more balanced market. If lenders are reluctant to foreclose because of an oversupply of inventory, they may choose to wait to repossess the properties, which could allow a spike in the number of foreclosures later despite a better market condition.
6. Stabilized employment. Stable or increasing employment rates provide the necessary confidence for potential buyers to invest in a home. Since most buyers rely on borrowed funds to make real estate purchases and borrowing money usually requires a source of repayment and that usually means jobs, an increase in this basic need, will enable more real estate sales.
7. Fewer buyer incentives and seller concessions. Seller-paid incentives or concessions are a sign of seller motivation. If there are fewer builders offering “free” upgrades and fewer sellers sweetening the deal with big screen TVs, it may be a sign of lessening supply and therefore a better market.
8. New construction starts. Most builders are quite attune to their markets and will not build new homes without a corresponding contract for sale or a perceived increase in demand. An increase in the number of building permits usually indicates higher demand and higher prices. If residential properties are selling for 25% less than they cost to build, only a few new homes will be built. It would be prudent to buy an existing home rather than build a new one for a much higher price.
9. “Move-up” buyers entering the market. More buyers willing to move to a larger or superior quality home indicates a healthy market. The lack of buyers at the lower end of the price range will have a chain reaction throughout the market. If a buyer for a high priced home has a lower priced home to sell first, the sale of the higher priced home may have to occur before the higher priced one can sell.
10. Apartments advertising renter specials - fewer renters in the market may indicate more people are moving into owner occupied homes or it could indicate a reduction in population. Lower population will cause an oversupply of housing which will oftentimes permeate throughout several markets.

Recommendations For The White House

Business Roundtable, an association of chief executive officers of leading U.S. corporations, issued a set of recommendations for the White House and Congress that are aimed at jumpstarting the housing market in order to stimulate a broader economic recovery. The Business Roundtable’s recommendations are as follows:

· Keep mortgage interest rates at historically low levels (below 5 percent) for at least one year;

· Expand the current First-Time Homebuyer Tax Credit incentive from the lesser of 10 percent of the purchase price of the home or $8,000 to a higher limit of either 10 percent or $15,000 for all homebuyers, remove the income restrictions and include all primary residence purchases for one full year;

· Conduct a thorough review of current foreclosure mitigation and loan-modification programs in light of rising loan-modification re-default rates;

· Make permanent the current temporary conforming loan limits; and

· Continue to review and strengthen government efforts already underway to review and refine mortgage lending practices.

“We believe targeted, demand-side solutions – such as the ones Business Roundtable is recommending today – will provide a critical next step for a housing recovery that will help create jobs and boost the economy as a whole,” said Smith in the Business Roundtable’s press release.

Coldwell Banker Realtors applaud the Business Roundtable for its proactive efforts to reinvigorate the U.S. housing market, and we are proud of the leadership role our parent company, Realogy, has taken in this regard. Many of our brokers and sales associates already have been involved in grassroots lobbying efforts in support of housing issues with your elected officials in Washington, D.C.
We understand that the legislative process is often a long and winding road that is hard to predict, but at some point in the future, we expect to make our voices heard in support of any new legislation in Congress that would advance these recommendations.

Utah To Rebound Quickly

SALT LAKE CITY -- A new study shows Utah may be poised to recover from the recession more quickly than most states. The
reason, according to the conservative authors, is Utah's business-friendly environment.
This is a conservative study with a lot of praise for Utah's conservative Legislature and its policies,but the forecast is a pragmatic look at what businesses want and what Utah has.
Poised to attract more high-tech companies, more in research and medicine, in recreation, tourism and energy; Utah may have
what it takes to climb out of the recession first. "We do have a very attractive environment for business, and it's been stable," said Sen. Wayne Niederhauser.
One of the advantages comes in the area of tax policy, specifically income tax reform. Utah also has less government regulation and involvement is a plus for businesses. Gov. Jon Huntsman is also working to promote Utah as a future renewable energy hub. Together, it could add up to an even more prosperous future for Utah. "There probably is not another state in America right now with better practices, in terms of attracting, building and promulgating renewable energy," Huntsman said.
At the same time, Utah has a chance to lead the way in using prosperity to create a better life for people. It can do so in many ways. One example is in being smart about health care reform. "We're saying it's great the state is embarking on health system
reform. Let's make sure that, at the end of the day, those reforms result in predictable costs for businesses and affordable costs for employees so they can succeed on the job," said Judi Hilman, with the Utah Health Policy Project.
By comparison, states like California and New York have been raising taxes steadily. That has led to a very difficult downward spiral for those states.

March 2009 KSL