When the housing bubble burst in 2006, the cost of buying a house was considerably higher than renting that same house in most areas. Today, the opposite is true in many states, particularly those hit hardest in the housing crash-namely Arizona, California, Florida and Nevada and right behind them, Illinois, New York and New Jersey.

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We believe sellers have a window of opportunity for the next 90-120 days in which to sell their homes for maximum price. We believe there will be increased downward pressure on home prices later this year and the first half of 2012.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country existing housing inventory is already high and actually increasing. In addition, an inventory of distressed properties (foreclosures and short sales) will be coming to market later this year. This inventory has been delayed for the last several months because of faulty paperwork by the banks when they originally attempted foreclosure proceedings on these homes.

Celia Chen, of Moody’s Analytics explains:

“Foreclosures are weighing on the outlook for U.S. house prices, and the slow resolution of issues surrounding the so-called robo-signing scandal is keeping distressed homes off the market”.

The New York Times also recently reported on this issue. They looked at the delays in certain states. As an example, this is what they found in New York:

“Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure, according to LPS. The average over the last six months: 286. That is far lower than at any point since the recession began.”

Banks are now correcting these errors.

There is evidence that the banks are getting their documentation in order and about to again increase their foreclosure repossessions. Housing Wire reported:

“Since major lenders delayed foreclosures to fix a broken process late last year, the amount of filings declined, but in May signs emerged the effect might be wearing off.”

They went on to quote RealtyTrac CEO James Saccacio:

“…lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory… Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask.”

What will this mean to home prices?

As this inventory comes to market, it will impact prices in two ways:

It will provide discounted competition for buyers
It will impact the appraisal values of all homes in the area
Again, we quote Celia Chen:

“It is quite possible that house prices will pick up slightly in the second or third quarter of this year, as foreclosure sales remain depressed while nondistress sales pick up…By the fourth quarter of this year, however, the distress share will rise, sending the house price index back down…

House prices will founder until early next year and start rising in earnest at the end of 2012.”

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year or until next year will not guarantee a higher sales price. If anything, it probably guarantees the exact opposite.

Here is information from the KCM (Keeping Current Matters) team that will be helpful to buyers making that all-important decision.

“You have finally found the house of your dreams. It is priced right and is receiving a lot of attention from other buyers. You don’t want to miss this opportunity so you are ready to put in an offer with the real estate agent immediately. What can you do to guarantee your offer is the one accepted? Financially, offers can be broken down into three categories:

1. An All-Cash Offer
Obviously, a cash purchaser is always favored by any seller. In today’s real estate market, an all-cash offer is even more enticing. Last month, one in four real estate transactions were impacted by a low appraisal. An all-cash buyer eliminates the need for the bank appraisal.

2. A Non-Contingency Offer
If you don’t have the cash reserves for an all-cash purchase, the next best thing would be to make a non-contingency offer. To do this you should be already pre-approved for a mortgage and have your current house already in contract. This gives the seller the confidence that you are a qualified buyer who will be able to complete the purchase.

3. A Contingency Offer
Some buyers start the process of looking for a new home before their current home is sold. This could be a big mistake. If you find the home you were hoping for (perfect for your family AND priced right), it will be very difficult to get your offer accepted because you are not actually qualified to buy.

Asking a seller to wait for your home to sell is somewhat unreasonable in today’s environment. One of the reasons you would want the home is because the seller priced the home at a value to sell it NOW. They want to know it is sold when they accept an offer. They normally will not even entertain a contingency offer.

BOTTOM LINE
Unless you have the ability to purchase with cash, the best thing to do is to be pre-approved for a mortgage and have your current house already in contract before looking for the home of your dreams. That guarantees you will get the home you love at a price that makes sense.”

“Business School professors Eli Beracha of East Carolina University and Ken H. Johnson of Florida International University have done extensive research on which makes more sense financially: to rent or own a home. They published, Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? In their paper, the professors do not dispute the social benefits of homeownership: ”
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As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.
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Every time a major manufacturer considers making a move within the US, there are 15,000 Economic Development Directors sealing large envelopes containing a packet filled with lovely and inviting brochures hoping to win jobs through private investment.

Boeing’s expansion announcement for Charleston is the national coup of the year for the Lowcountry.

We don’t know if there were 15,000 involved in the recent site review by Boeing, but we have to believe the competition was fierce.   The winner was the Charleston area, North Charleston to be exact.  The loser was Seattle, Boeing’s hometown for decades.

Boeing plans to break ground on a 584,000 square foot expansion near its existing North Charleston factory within the next few weeks.   They’ll begin rolling 787 Dreamliners out of Charleston in 2011.  The 787 is Boeing’s first new jet in more than a decade.

Boeing’s $450 million investment will produce at least 3,800 jobs.

The announcement is massively positive news for a state currently suffering one of the country’s highest unemployment rates and still reeling from recent political embarrassments.

Gooden + Faircloth welcomes Boeing and predicts everyone associated with the company moving into the area will love Charleston as much as we do.

Reprinted from Charlotte Observer August 22, 2009

Charlotte-area home prices continued a slow creep upward in June, according to a closely watched index released this morning.

Area sales prices remain in negative territory compared with a year ago, but rose .7 percent from May to June, according to the S&P/Case-Shiller Home Price Index. While that was down slightly from the previous month’s uptick, it was the third monthly gain in four months and further evidence prices are stabilizing.

The increase comes as the broader index of 20 metropolitan areas also has been improving.

“For the second month in a row, we’re seeing some positive signs,” said David Blitzer, chairman of S&P’s index committee, adding “there are hints of an upward turn from a bottom.”

Home prices and sales remain well off their highs, locally and nationwide, but today’s Case-Shiller reading adds to a growing list of small improvements.

The index is especially meaningful because it tracks repeat sales of existing houses, the most precise broad measure of how home values are adding up. Charlotte’s run of rising values outlasted the 19 other markets for a long time. But in April 2008, the region turned to losses. This March, Charlotte saw a tiny gain, followed by an April decline and now two consecutive months of gains.

Charlotte’s prices compared with a year ago also improved, moving out of double digit losses, to a 9.6 percent decline. That remained the fifth smallest decline of the group.

Compared with a year ago, all 20 of the index’s markets remain down. But 18 areas had positively monthly gains in June, up from 13 in May. Phoenix, long the most depressed market, saw a monthly gain. Las Vegas registered the biggest monthly loss, which pushed it into last place, with prices down 32.4 percent from a year ago.

The Democratic Leadership Council was formed during the Bill Clinton presidential years.   It is known for its moderate positions, positions which often mirror classic moderate Republican positions.

The DLC has recently released a report which it believes contains the key to reinvigorating the American economy.  Gooden + Faircloth agrees.

According to the DLC, reticence among many potential home buyers to move into the market is preventing recovery. Few doubt that the housing bubble’s implosion drove the nation into its current recession. The authors suggest that an upswing in the housing market could also play a crucial role in turning the broader economy around.

Newly-installed DLC CEO Bruce Reed commented: “The housing market helped start this economic crisis. Getting homes moving again is crucial to speed the nations recovery.”

The Report, titled Moving Houses: How Sparking a Housing Recovery Is The Key To America’s Economic Recovery, makes several recommendations, including:

• Expand the $8,000 Homebuyer Tax Credit to individual and family homeowners looking to move or buy a new home, regardless of whether they previously owned another. This expansion is estimated to cost $11.4 billion;
• Limit the credit by ensuring it expires at the end of the year, forcing those intent on taking advantage of the credit to get into the market in the short term; and
• Ensure that homeowners have access to the credit at closing by directing the Secretary of HUD and/or the Secretary of the Treasury to use existing authority (possibly through the Home Program or the Troubled Asset Relief Program) to set up a fund that would advance some of the down payment and closing costs.

Among the report’s key findings:

• The turning point in five of the last seven recessions has been marked by the moment housing sales began to swing up again.
• The housing sector was responsible for over 75 percent of all job growth from 2004 through 2007.
• In the past year alone, existing and new home sales have fallen by 13.1 percent and 37.6 percent, respectively.
• Nationally, sales of existing homes fell 10.3 percent in February from a year ago, and the U.S. median sales price slid almost 16 percent to $165,400.
• The housing sector makes up approximately 10 percent of the nation’s GDP.

To access the full report, click here.