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.

The Wall Street Journal: Why It’s Time to Buy

CBS Money Watch: Why the Time to Buy is Now

Forbes Magazine: 9 Reasons to Buy a House Now

National Public Radio: For Many, It’s Still a Good Time to Buy a Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.

Interest Rates – Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards – The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:
-The qualification process for loans will become more difficult
-The cost of a loan will increase

Bottom Line
There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

From the KCM Crew (Keeping Current Matters)

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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.”

1. One of the most dramatic ways to update the kitchen is to add new cabinets. However, if a homeowner has been blessed with solid wood boxes, frames and doors, they should reface rather than replace. This option allows the original cabinets to stay in the home but adds a fresh new look.

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“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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Many people looking for unoccupied homeowners insurance for an empty residence will find that the process can be difficult. Many companies will not cover such a dwelling or charge high premiums because of the increased risk associated with vacant properties. The chance of burglary and vandalism are higher. The potential of unnoticed damage which can compound problems and costs also increases. There may also be an issue with squatters. See more