Now May Be The Perfect Storm For Sellers

Storm CloudsIt’s been a crazy year so far in the north Dallas real estate market. Buyers are out in droves and homes are flying off the market. The bad news for buyers is there are very few homes available in some areas and the ones that are properly priced, prepared, and show-ready are under contract in days.

This is fantastic news for potential sellers! With low inventory and lots of willing buyers, this may be one of the best times in years to list and sell their homes.  Even better news is that homes are selling for close to list price and in many cases for more than list price.

Many sellers believe that the spring may be the best time to list and sell, but selling now may actually be a better time given the market conditions and low inventory.

Thinking about selling? Click here to find out what your home may be worth.

Please contact us at 214-227-6626 if you have any questions.

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Historic Low Rates Cannot Solve The Problem

Maybe Washington is finally getting the idea. Ben Bernanke recently said, “Historic low rates cannot solve the problem” and “strong housing policies to help the housing market recover are needed to advance a tepid U.S. economy.”

Given the current lending environment, many potential buyers either cannot or will not commit to purchasing a home. There are also thousands of investors waiting on the sidelines with deep pockets of cash to invest. There are simply too way obstacles and economic concerns. 

Last year’s Federal Tax Credits spurred activity for a few months but it quickly tapered off as the deadline passed.  I heard a speaker this week calling for capital gains and rental income to be tax-free for 10 years to encourage investors to come into the market and help absorb the excess inventory.

This idea has real merit.  These investors do not need loans and have the resources to rehab properties so we get real cash into the economy. Further, there is a real need for quality rental properties. Rather than a tax credit that costs the taxpayers money, let’s eliminate or reduce taxes on rental income for a fixed period of time. This would encourage investing in income producing (rental) properties, increase the supply of rental properties, and reduce the inventory of properties on the market.

Housing can help lead the way out if we create an environment that encourages private sector investment.

REALTOR® Magazine-Daily News-Is Real Estate Jeopardizing Economic Recovery?

Analysts are blaming the housing sector for the slow economic recovery.

Analysts say the real estate market often leads to economic recoveries. However, “I expect housing will not provide as much support to this recovery has it has in previous ones,” says Eric Rosengren, the president of the Boston Federal Reserve Bank.

REALTOR® Magazine-Daily News-Is Real Estate Jeopardizing Economic Recovery?.

Source: REALTOR(R) Magazine Online

Would the Elimination of the Mortgage Interest Deduction Hurt the Housing Market?

I was reading the news this morning and came upon an article titled, “Commission Offers Controversial Solutions to Axe Deficit — Members Balk” on the FoxNews website. The “Deficit Commission” appointed by President Obama is working on a plan to reduce the nation’s deficit. 

US Federal Tax Forms

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One of the commission’s suggestions is to eliminate the Mortgage Interest Tax Deduction in favor of a lower tax rate for all.  Personally, I think this plan will have a huge negative impact on the housing market and our economy in general. 

Let’s look at a $250k, 5 percent mortgage.  The homeowner pays $12,500 in interest per year and likely itemizes deductions of about $18k. If we remove the Mortgage Interest Tax Deduction, the same homeowner now uses the standard deduction and pays taxes on an additional $7500. If the homeowner is in the 25 percent tax bracket, the loss of the deduction adds $1875 to their tax bill. It gets worse with larger mortgages and higher tax brackets.

Basically, they would eliminate the Mortgage Interest Tax Deduction and lower the tax rates across the board at the same time.  It appears that this plan will “spread the wealth” increasing taxes on homeowners and reducing taxes for all. 

With so many homeowners in distress, they simply cannot absorb any increases in costs and stay in their homes.  Combine this idea with the various new taxes beginning in 2011 along with rapidly increasing energy/food costs and we have all the right conditions for another economic collapse.

As a nation, we have to focus on reducing costs and creating jobs in order to get out of this mess. Taxing the middle class will only make it worse.

Tom Branch, Broker, CDPE, SFR

State Of The Housing Market

I was interviewed yesterday evening by Bob Morrison with the Broadcast News Service concerning the general state of the housing market.

Housing Crisis

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Today’s release of September New Homes Sales data is expected to show a modest increase.  With interest rates at all-time lows and prices being slashed, one would expect to see much more activity.

According to Lawrence Yun, chief economist at the National Association of REALTORS®, “A housing recovery is taking place but will be choppy at times depending on the duration and impact of a foreclosure moratorium.”

Based on what I see locally in the greater Dallas Real Estate market, I would agree that the next few years are going to be “choppy” but not simply because of the impact of the foreclosure moratorium.  I think there are some larger issues at work.

The two bigger issues are the general state of the economy and the tightened mortgage lending standards.

People are not rushing out to purchase big-ticket items because they’re not secure that they will have continued employment. The economy is still very weak and until we get Main Street back to work, I don’t see people purchasing homes on Main Street in large numbers.

I’m often asked, “How low do rates have to go to get people back in the market?” I think that’s the wrong question! Rates are at historic lows with rates on a 30-year fixed rates mortgage below 4 percent with some lenders.  Many people who can qualify have already refinanced their mortgage and plan to stay put for a while.  The lending industry did a “180” on underwriting standards and many people who are making their payments on-time simply cannot qualify to refinance or purchase a new home.

The other elephant in the room is the massive balloon of adjustable rate mortgages coming due in 2011.  As long as interest rates remain low, the impact in 2011 should be minimal. However, the bubble does not go away, it slides in 2012 and later years. Granted it gets smaller each year, but it will take five years or so to disappear.

Much of what happens in the next few years depends on getting Main Street back to work and for the lenders to let the mortgage underwriting pendulum swing back towrds center.

Tom Branch, Broker, CDPE, SFR