Raleigh Real Estate Market Update

JohnHuber — Sun, 29 Aug 2010 18:23:33 +0000

I like to watch the financial and national news… but sometimes it just is tough to take all of the gloomy commentary. I’m a naturally positive person so I try to look on the bright side of things. Having said that, I’ve been hearing a lot of negative headlines swirling around the news about the housing market lately. It seems like every day there is a headline such as “Housing Demand Slumps”, “Home Sales Plummet”, or “Fears of ’Double-Dip’ Recession Return”.

Many of these headlines can create a self-fulfilling prophesy, meaning that they can actually create the fear that they supposedly are reporting on. Consumers are nervous. They are spending less and saving more (a good thing in my opinion), and when they read headlines like the above examples, they further tighten their grip on their wallets and purses, causing even more temporary pain in the economy and housing market.

The reason I think this saving/lack of spending is a good thing is because the consumer needs to massively reduce the amount of debt that they carry in order to create a more stable environment for the economy going forward. Unfortunately, this causes temporary (but often severe) pain in the form of a recession.

All of this doom and gloom has clearly taken a toll on the national housing market. Home sales dipped to their lowest pace since 1995 last month, falling 27% from June to July. The good news is that this will continue to keep interest rates at historic lows for the time being, and it will also continue to be a great buyers market (prices are still very attractive). The bad news is that our government (both left and right) does not share in my belief that we need to stop spending in order to create a healthier environment in the long run. Politicians on both sides of the aisle don’t seem concerned about our country’s future, just their next election. They do not want any short term pain, for fear of losing out to someone who is more in favor of “borrow and spend now, kick the debt can down the road”. The reason I say that this is bad news, is because I think that our current environment of low interest rates will not last long. The Fed is now buying our own bonds, effectively increasing the amount of dollars in circulation, which will eventually lead to inflation and higher interest rates.

The moral of the story: I truly believe that this is one of the most remarkable opportunities to purchase real estate, and it may be one of the best times we’ll ever see. If you plan to hold onto the house you are buying for 3-4 years minimum, I think you would see a great return on your investment.

More good news: locally, we live in one of the strongest markets in the country. Although home sales dipped 9.9% from June to July in the Triangle area, prices have INCREASED 7.7% since July 2009. Keep in mind that when you see a headline that says “Home Sales Decrease”, it is referring to the volume of transactions, not the prices. The fact that 9.9% fewer homes traded hands last month is not a huge concern for me. Inventory (homes on the market) is a much more useful number to focus on. This is currently at 10 months, which is still higher than normal (a healthy, balanced market is usually around 6 months).

So again, despite lower numbers of home sales, the median home price has appreciated to $199,000 in the Triangle. This is the highest median price in 2.5 years, and it’s 15% higher than the low of $170,000. If you purchased a home in the last year, congratulations: it is likely worth more than what you paid for it.

Real estate, like any other asset class has periods of growth and contraction. Right now, it looks like we are beginning to emerge from a contraction in the market place and it looks like a great time to buy. As the Oracle of Omaha said, “Be greedy when others are fearful, and fearful when others are greedy”. The former applies to our current housing market situation.

Give Up or Pay Up? Is your Raleigh Real Estate Investment under water?

JohnHuber — Fri, 09 Oct 2009 13:44:46 +0000

Real estate has been all over the news for the past two years. First it was the real estate bubble in 2006 and early 2007, then the word “subprime” became almost a household term (and it definitely became a household term for Realtors and mortgage brokers), then real estate began slipping nationwide, and then the market crashed last September, credit dried up, foreclosures doubled and even tripled in some cities, and the financial world markets went into a tailspin. What a fun ride it has been!!

Luckily, for those of us who live in Raleigh and make a living working with Raleigh real estate, our lives have been much less affected than some of our fellow professionals in Florida, Nevada, California, and the Northeast. Downtown Raleigh real estate and North Raleigh real estate remain two market places that have remained very stable and numerous neighborhoods have actually appreciated. Cameron Village, for instance, has seen it’s median home price appreciate 8.1%! Most people don’t believe that… either trust me, or look it up, it’s true! Of course, there are certain neighborhoods in our downtown Raleigh real estate market that have gone down in value as well, like certain condo projects or certain new construction neighborhoods where supply vastly outweighs demand…. but me being the optimist that I am makes me want to focus on the positive. Also, by understanding these statistics and trends, I’m better able to educate my clients on the Raleigh real estate markets so that they can make an informed decision on the home purchase or investment.

But amidst all of the recent foreclosure chaos, there has been an interesting phenonenom occuring. Banks are so backed up with foreclosures that they are too busy to grant requests for loan modifications to borrowers who are currently paying their mortgages on time (those select few)… Many borrowers need to refinance, or modify, their loan into a fixed rate that they can afford so they don’t go into foreclosure. So these “loan mods” (mortgage lingo) are in many cases granted first to the borrowers who are in default. So here is the interesting trend that is beginning to occur: Many borrowers around the country are “under water” meaning their mortgage balance is more than the house is worth. These borrowers can afford their payments, but they desire to complete this loan modification. But the only way they can do this is to quit paying their mortgage for a few months. This way, they have the attention of their bank, and the bank is forced to either modify the loan, or take back yet another property into foreclosure. Given the two choices, the bank will likely modify the loan because they know that the foreclosure process is expensive, and if it forecloses they will take back an asset (the house) that will be worth less than the new balance on the new loan. So they modify the borrowers loan and the borrower gets to lower his payment and/or balance in some cases.

The question that was brought up by CNBC on this video is this: Is intentionally quitting on your mortgage, even when you can still afford it, immoral? In other words, many borrowers truly can’t pay… they’ve lost their jobs, etc… and they have to foreclose. But there are certain people, like the investor in this video that stop paying their mortgage in order to get some negotiating power with his bank so he can lower his payment. Take a look….

http://www.cnbc.com/id/15840232?video=1182586806&play=1 (I couldn’t figure out how to embed the CNBC video so this link will take you to CNBC’s site)

Again, many of these people are in locations where home prices have dropped 10%, 20%, or even more. Luckily, we live in an area where demand for Raleigh real estate has been stable and the supply has not grown completely out of control. Nevertheless, it’s still a buyers market out there and will be for a while to come. Rates are low, there’s still time to collect the $8000 if you are a first time buyer, and prices are very affordable…. what a great combination!

John Huber works with downtown Raleigh real estate, North Raleigh real estate, Raleigh investment real estate and other surrounding areas of Wake and Johnston County. He studies statistics, knows the neighborhood trends, and helps his buyers and investors make good decisions and helps sellers maximize their profits. He also works with other real estate professionals to help increase their residual income.

John Huber Real Estate » Raleigh Real Estate Investment

Raleigh Real Estate Market Update

Give Up or Pay Up? Is your Raleigh Real Estate Investment under water?