Home buying may never get any cheaper

NEW YORK (CNNMoney) -- Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.

With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable -- but it won't stay this way for much longer.

Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.

A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores.

Some economists, like Trulia's Jed Kolko, expect home prices to pick up even more quickly. Trulia's data shows that the national average for asking prices already increased 1.4% in the first quarter of 2012, compared with the last three months of 2011.

Mortgage payments at lowest level in decades

"This is a strong indicator that we will start seeing home price indexes, like the S&P/Case-Shiller, start to report home price increases this summer," he said.

Prospective homebuyers who've been sitting on the fence shouldn't worry if they aren't quite ready to make the leap. Analysts are predicting that the initial price gains will be modest, at least, in most markets.

Hoffman, for example, is forecasting a 2% increase in 2013 compared with 2012. Meanwhile David Stiff, chief economist for Fiserv, predicts that prices will turn in the last quarter of 2012 and will rise 4.2% for the 12 months through September 2013.
Foreclosures start to fade. One major factor that will drive the trend is the cooling of the foreclosure crisis. Stan Humphries, chief economist for Zillow, said that the percentage of mortgage loans 90 days or more late, a good predictor of future foreclosures, is "falling fast."

That percentage dropped 15% year-over-year to 3.1% through the end of 2011, according to the Mortgage Bankers Association. And the decline is accelerating: More than 70% of the decline came in the last three months of the year.

Before things slow down, however, buyers should brace themselves for a temporary spike in the number of foreclosures as banks start expediting the processing of hundreds of thousands foreclosures that were stuck in the system following the robo-signing scandal. That backlog should move more quickly now that new guidelines for processing foreclosures have been outlined in the $26 billion foreclosure settlement.

Many of the bank-owned properties currently coming out of the foreclosure pipeline are being snapped up by investors who are fixing them up and renting them out -- often to those who were displaced by the foreclosure of their own home. That has helped to lift prices on foreclosed properties, according to Alex Villacorte, the director of analytics for Clear Capital, which specializes in housing market valuations.

Home buying much cheaper than renting

"That could have a significant impact on the market overall in terms of providing a rising floor to home values," he said.

In some markets hit hard by foreclosures, the turnaround in prices is already underway. Phoenix recorded an 8.4% jump in home prices during the three months ended April 30, compared with the three months ended January 31, according to Clear Capital.

"It's crazy," said Tanya Marchiol, founder of Team Investments, a Phoenix real estate investing firm. "Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000."

Miami saw a 4.6% increase quarter-over-quarter through April, and Tampa, Fla., was up 4.4%, according to Clear Capital.

Goodbye 3.8% mortgage. In addition to home prices, mortgages could also move higher.
Mortgage rates have been at or near historic lows for much of the past six months. The average interest rate for a 30-year, fixed-rate mortgage has not topped 4.5% since July 2011 and this week, it hit 3.84%, a new low.

But rates aren't expected to remain at these record-low levels much longer. As the economy continues to recover, rates will move higher, said Doug Lebda, CEO of LendingTree, the online lending site. Although, he said, they will "stay very reasonable."

The Mortgage Bankers Association is forecasting that the 30-year fixed will hit 4.5% by the end of the year.

Greater demand for loans will help fuel the increase, according to Lebda.

6 Ways to get a great mortgage deal

Even though mortgage rates have been cheap, borrowing for home purchases has been sluggish. The Mortgage Bankers Association estimates that homebuyers will take out mortgage loans totaling about $415 billion this year, an increase of less than 3% compared with 2011. Next year, however, it forecasts that amount will almost double to $706 billion.

As housing markets stabilize and prices stop falling, homebuyers will be even more confident about buying, said Humphries.

"People can now see the light at the end of the tunnel," he said. "And that can be enough to get them off the fence."




by Les Christie cnnmoney.com May 3, 2012



Home buying may never get any cheaper

Phoenix-area homebuyers squeezed out by investors

Many potential homebuyers who sat on the sidelines watching metro Phoenix's house prices fall during the past five years are back in the market, ready to take out a mortgage and move in.

But many are finding they cannot buy.

Armed with a preapproved mortgage and even enough cash for a hefty down payment, they bid on foreclosed homes and houses up for short sale -- but are outbid by investors buying houses for cash on the spot.

Traditional homebuyers, who typically make an offer contingent on other steps such as an appraisal and securing the loan, find they can't compete with someone who is willing to pay up front the entire asking price or more.

Tight supply makes the competition even stiffer.

Home resales, averaging 7,500 a month, are at their highest level since the peak of 2005-06. But the number of homes for sale is at the lowest level in more than a decade. There currently are about 23,000 homes for sale in metro Phoenix, one-third of the area's housing inventory in 2009.

With demand for houses high and supply so low, many are drawing multiple bids.

That is not to say the bidding wars are driving up prices in the overall housing market nearly as much as they did in boom times. Median resale prices remain near the bottom of the lows to which they fell after the housing crash and wave of foreclosures that began in 2007.

But those low resale values have kept many traditional sellers out of the market, too, experts say. Many homeowners don't have enough equity to sell, or just don't see enough profit to make selling and moving worth it.

The result is that much of today's bidding is on foreclosure homes or short sales, where banks approve a sale for less than the current borrower owes.

And in these cut-rate homes, cash is king.

Foreclosures have declined in recent months, as banks increasingly approve short sales to help residents avoid foreclosure. The drop in foreclosure inventory is working to push up home prices a little each month.

Most metro Phoenix homes for sale are still considered great deals. Market watchers agree that long-term investors paying cash will lead to fewer empty homes and a better market overall.

But for the housing market to truly recover, they say, it must see a return of the regular participants: homeowners confident enough to put their houses on the market, and perhaps more importantly, regular buyers with mortgages and jobs who can afford to buy homes of their own.

"Phoenix's housing market is in a state of fast changes," said Mike Orr, real-estate analyst for Arizona State University's W.P. Carey School of Business.

"Prices are ticking up, and buyers are getting more and more frustrated they can't find homes," said Orr, who also publishes daily real-estate analysis called the Cromford Report.

Traditional buyers

Nakisha and Lenny Williams heard about the great deals for Phoenix foreclosure and short-sale homes more than a year ago. The couple began searching online. The low prices for homes built just a few years ago helped them decide it was time for a move.

The young couple quit their jobs, sold their Chicago-area home for a modest profit and relocated to Phoenix, where they found new jobs fairly quickly and rented an apartment while they shopped for a home. But the Williamses have been outbid on at least five homes so far and have been waiting for more than a month to hear back on their latest bid on a Litchfield Park house.

Nakisha Williams works for a water company. Though Lenny Williams recently lost his construction job, the couple have been saving for a down payment and are preapproved for a mortgage they can afford, if their offer of $120,000 for the home is approved.

"It's crazy for buyers now," said the couple's real-estate agent, Yvette McDonald of Monopoly Realty. "The Williamses are still looking for other homes while they wait to hear back from the lender on the Litchfield Park home, but we can't find anything that is still available by the time we make an offer."

She has several other potential buyers in the same position, making multiple offers that aren't accepted or are topped by other bidders, especially investors.

Investors

Andy Rysdam has $10,000 for a down payment and is preapproved for a mortgage to buy a home for as much as $175,000. Recently, his real-estate agent found a potential house listed late in the afternoon. They went to see it first thing the next morning, and already there were seven other offers on it.

"It's the investors getting the best homes. They have cash," said Rysdam, who is renting and not giving up on buying a home despite already being beaten out by investors several times.

Cash buyers, who are typically investors looking to resell the properties or use them as rentals, account for nearly 60 percent of all Phoenix-area homebuyers now, according to data compiled by AZBidder.com, an online foreclosure-auction service.

"We are seeing multiple offers on any decent home," said Rysdam's agent, Brett Barry of Phoenix's HomeSmart. "These are different than the bidding wars from the boom, but buyers are getting more and more aggressive as the inventory of homes for sale continues to shrink."

Scottsdale real-estate agent Diane Watson is working with a Canadian investor who wants to spend $10 million on metro Phoenix homes that can be turned into rentals.

Wealthy investors can make more money buying foreclosure or short-sale homes in growing areas like Phoenix and renting them for seven to 10 years until prices rebound than they can on most other investments now.

Watson can't find enough homes for her Canadian investor and is considering approaching homeowners underwater on their mortgages and late on their payments to sell through a short sale even before their lender suggests it.

"I am about to go door to door," she said. "People don't realize they have the short-sale option because the deals have been so hard to do in the past, but not now."

Laura Gonzales thought she had found the home of her dreams in Phoenix. The elementary-school teacher has been renting a house in north Phoenix's Desert Ridge area since she moved from California in 2007.

As foreclosures have climbed in her neighborhood and home prices have fallen, she has slowly saved for a down payment. In January, she found "the perfect home" listed for short sale just a block from where she's renting. The house was bigger, and her monthly mortgage payment would be less than her rent.

She made an offer the day it was listed for sale. But already a dozen other offers had been made. She upped her offer by $10,000, but at least two investors upped their offer by twice as much.

The home ended up selling for almost $200,000 -- more than $50,000 over the asking price.

"It was heartbreaking," Gonzales said. "And last month, the same thing happened to me on a house I didn't want nearly as much, but I felt like I had to keep bidding because the homes I like are going so fast in this area."

Diane Brennan of Scottsdale's Keller Williams Integrity First Realty said the housing market is crazy now. "It's nearly impossible to buy a home in the $100,000 range," she said. "I've got tons of buyers and no properties to sell them. One home in south Scottsdale got 43 offers."

A rush to avoid higher prices

Metro Phoenix's median existing-home price has been steadily ticking up since last August when it fell to a 12-year low of $113,000. In February, the median price for the region was up to almost $123,000, according to a monthly analysis from AZBidder. All types of homebuyers see metro Phoenix's prices finally rising and want to close a deal before they go higher.

Some first-time buyers with Federal Housing Administration financing have a bit of an advantage now, said real-estate agent Barry.

Those buyers are required to put down only 3.5 percent, so they can often keep bidding with investors, knowing that if they win and the appraisal doesn't come in that high, the lender will have to lower the price to meet the housing agency's requirements.

Banks might boost supply of homes

Banks still hold many of the homes they took back through foreclosure in recent years; the rush to buy could push them to put more on the market.

"If lenders are holding back on foreclosures and waiting for a sign the homes will sell, well, the time is now," said Jim Sexton of Phoenix's Realty ONE Group.

"Real-estate agents and buyers are all frustrated. The demand for homes is real."

Lenders did slightly increase the number of new notices of foreclosure they sent last month, which could mean more short sales or foreclosures for buyers to choose from in the next few months.

Housing analysts say the current buying frenzy may run its course in six months and not create a lasting recovery. Experts say the region's housing market won't really recover until regular homeowners, who can afford their mortgages, feel like they can sell and make a decent profit -- not the profit of 2006, but enough to pay off their mortgage and net a slight profit if they bought before 2000.

Regular buyers, who have to put down 10 to 20 percent for a mortgage, might have to wait for those regular sellers to put their homes on the market, creating enough supply to ease the bidding frenzy. When demand is strong enough that multiple bids are made on houses owned by homeowners, not lenders, that will be a strong sign of a return to a normal market.

"Once sellers begin to realize the market is recovering, and they can actually make some money on their home, then the market will truly start to stabilize," said ASU housing analyst Orr.

by Catherine Reagor - Mar. 10, 2012 11:25 PM The Republic | azcentral.com

Phoenix-area homebuyers squeezed out by investors