“Income is derived by what value we can create for others, therefore do what you enjoy, do it the best, and this will allow you to create the most value.”
– Garrett Gunderson: is an entrepreneur and author
REAL ESTATE AS A HEDGE AGAINST INFLATION
We haven’t heard a lot about inflation recently. However, prices have started to creep upward over the last year. As examples, here are a few categories that increased from
November 2010 to November 2011:
• Food at home – up 6.2%
• Housing fuels and utilities – up 3.5%
• Transportation – up 9.2%
Today, we want to address the issue of inflation and the advantages of owning real estate. The National Association of Realtors (NAR) took an historic look at the impact of inflation. Here are some inflation numbers over the past 30 years:
We can see that real estate has fared very well. The most important number is the $0 increase in mortgage amount. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.
NAR then looked at inflation moving forward over the next thirty years. Obviously, if it remained the same as the last thirty years the percentage increase would be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:
We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. Either would be a great hedge against future inflation.
PRICES MOSTLY STABILIZE: WHY AREN’T MORE TALKING ABOUT IT?
An improving job picture and prices stabilizing for non-distressed homes are all signs that point to a housing recovery taking shape, Barclays Capital analyst Stephen Kim told HousingWire.
“In the absence of a government home buyer incentives, prices for non-distressed home sales have stabilized for almost a year,” Kim said. “This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of non-distressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”
The key to when the housing recovery will largely take off “depends primarily on when these first-time buyers decide it is safe to buy a house,” Kim told HousingWire.
RECORD NUMBER OF HOMES IN FORECLOSURE
The foreclosure pipeline has never been more crammed, with lenders attempting to push 2.2 million homes through the process as of the end of October, according to a monthly report issued today by Lender Processing Services Inc.
Foreclosure starts jumped 5.7 percent from September to October, to 232,865, LPS said. But the report also showed significant improvement in the long-term outlook for foreclosures.
The number of borrowers who were behind on their loans by at least 90 days but who were not yet in foreclosure at the end of October dropped by nearly 19 percent from January, to 1.76 million. That’s a 42.5 percent drop from a peak of 3.06 million in January 2010.
Compared to January, the number of homeowners behind by just one payment also dropped 7.4 percent, to 1.66 million, and 60-day delinquencies were down 11.8 percent, to 665,804.
Delinquencies of all types (30-day, 60-day and 90 days or more) were down 13.6 percent from January to October, to 4.08 million, while the number of homes in foreclosure increased by less than 1 percent.
WINTER-SELLING TIPS FOR OVERCOMING THE GLOOM
Selling a home in the cold, dreary winter months may not be ideal but there’s still plenty you can do to get a home to standout.
“Buyers out looking at homes in December or January are, as a group, quite serious about buying,” Laura Ortoleva, a spokesperson for the RE/MAX Northern Illinois, told RISMedia. “Therefore, sellers tend to benefit because each showing is more productive, and fewer showings are needed to sell the property.”
RE/MAX agents offer some of the following tips when selling a home in winter in a recent article at RISMedia.
Turn on the lights: Counter winter’s cloudy and short days by turning on all of the lights in a home for each showing. “Also, it’s a great idea to keep the lights on in the front of the house even if no showings are scheduled,” says Marlene Granacki of RE/MAX Exclusive Properties in Chicago. “People are always driving past the house, and keeping it lighted makes it look happy and welcoming.”
Have a place for shoes: Prospective buyers may arrive at the front door with shoes coated in snow or salt. “Make it easy for buyers to deal with their shoes when they arrive,” says Barbara Hibnick of RE/MAX Showcase, Long Grove, Ill. “Put a festive area rug at the front door for a great first impression and so visitors can wipe their feet. Have slippers or disposable booties available, along with a bench or chair, if there is room for one, where a visitor can sit and easily remove or put on their boots.”
Watch for odors: Homes can get stuffy in the winter. “Pet odors can be especially worrisome in winter,” says Mike Mondello of RE/MAX Synergy in Orland Park, Ill. “Use a room fragrance if needed, but nothing too strong, and I recommend that in winter sellers clean more often.”
Don’t make it too toasty: “Don’t blast buyers with hot air,” the RISMedia article notes. Keep the temperature at a comfortable 65 degrees during your showings (although keep in mind that a comfortable temperature for your thermostat can vary form house to house.) Potential buyers will most likely be wearing their winter coats when they tour the house so no reason to make them sweat.
FANNIE MAE HALTS FORECLOSURES FOR THE HOLIDAYS
Fannie Mae says it will suspend evictions for single-family foreclosures and two- to four-unit properties during the holiday season, from Dec. 19 through Jan. 2, 2012.
“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards, executive vice president of Credit Portfolio Management for Fannie Mae, said in a statement. “No family should have to give up their home during this holiday season.”
While the holiday moratorium is in place, legal and administrative proceedings for evictions may continue, but”families living in foreclosed properties will be permitted to remain in the home,” Fannie Mae announced in a statement.