Ask A New Jersey Closing Expert

The data shows the housing forecast by the National Association of Homebuilder. The total housing starts are expected to increase in 2009 which is a leading indicator showing that this may be the bottom year of the housing decline. If these forecasts are accurate, there should be a rebound in the housing market with increasing buying and selling activity which will eventually lead to an increase in housing value over the course of the last Quarter of 2009 into 2010. But these are all forecasts, what will really happen is a matter of watching and seeing.

 Ankit Duggal; www.qualitycloser.com

Reference:

The housing crisis is far from being over. Looking over the Economist this past weekend it was visible that the data/ maps used by Mr. Bernanke only seemed to encompass houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. But by excluding subprime and jumbo loans, the maps/data has left out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.

In my opinion, we seem to be in middle of a housing crising mess.

 Resource:

The Economist, May8, 2008

Home prices declined by 12.7% in the month of February. The market is taking a sharp decline as seen by the market chart above which maps the housing price trends from Jan 2000 to Feb 2008. The leading indicators are still not positive as the housing starts are down, the constructions permits are still not increasing and the new home sales are taking a sharp decline . All these indicators show that there is still weakness in the housing market which will equal to further declines in the housing prices.

 Your friend,

Ankit Duggal

www.qualitycloser.com

References:

“Home Prices Fall 12.7 Percent”, The Big Picture Blog

 http://bigpicture.typepad.com/comments/real_estate_/index.html

 Newsheadlines:

U.S. employers cut payrolls by a larger-than-expected 80,000 workers in March, as the unemployment rate jumped from 4.8% to 5.1%, the highest since September 2005, the Labor Department said April 4. Economists had forecast a decline of 60,000 in non-farm payrolls and a rise in the unemployment rate to 5%.

The number of new people signing up for jobless benefits for the week ending March 29 jumped by 38,000 to 407,000, the highest point since September 17, 2005, following the devastating Gulf Coast hurricanes. Analysts predicted claims would be about 365,000.

A 0.3% decline in construction spending in February — a record 24th consecutive month that building activity has tumbled — provided further evidence of the braking economy

In a quarterly study released April 3, the American Bankers Association said that the percentage of consumer loans at least 30 days past due rose to 2.65% in the fourth quarter from 2.44% in the third quarter, and from 2.23% a year earlier. The rate of delinquencies was the highest since a 2.75% rate in the first quarter of 1992.

All these headlines show a declining housing market. The economy is slowing which is having a circular negative affect on the condition of the marklet. The decline will cause a further downward trend in the housing prices and until the leading indicators such as construction turn around then only will we start to see a change in the housing market towards a positive.

Your friend,

Ankit Duggal

www.qualitycloser.com

Some gurus have looked at a value of a 50% fall in valuations.

I will say that number struck me as really high but then I thought that I would re-examine this view in light of recent developments, and the afforability index.

Here is some data a dug up.  If the ratio of homes to wages were to revert to it historical average the U.S. domestic real-estate market would lose $6.6 trillion paper value roughly 50% of most real estate valuations. 

 Here are the graphs that I found to suppor this idea.  The Green line is the average ratio.  Now many people will argue that homes are different etc. 2 people incomes etc.  I would counter the size of the average household has fallen dramatically.

Seems the housing market may have a ways to go in terms of dropping price value due to declining affordability by homeowners.

Take care,

Ankit Duggal

www.qualitycloser.com

 References:

“Will America Loose $6.6 trillion in paper value?” http://nickgogerty.typepad.com/designing_better_futures/2007/08/will-america-lo.html

Managining creidt is a long and sometimes confusing process. There are people everywhere giving contradictory advice. So here is my take on the couple of myths out there that hurt potential homebuyers chances to get a good mortgage.

1. You should avoid using credit cards

Thats a myth is crazy. There is an article that I read in the American Chronicle that acutally advocated that consumers stop using “their credit cards, pay off everything and go to an all-cash plan.” Boys and girls this is bad advice in my opinion as in order to prove to the FICO scoring system that you know how to manage revloving debt, you MUST dare I say NEED to have active credit card accounts with some balances on them. I dont suggest you go off the deep end and get 15 credit cards and just charge everything onto your cards that you cannot pay down. But I do suggest you get one or two credit cards to buy your groceries, gas, dinners with the family etc. and then you pay them off every month; that will show the scoring system that “hey this guy/girl can handle credit and is a financially prudent person.”

2. The Type of Credit Card Doesn’t Matter

Here is a little suprise; it does! The credit scoring system does not like third party finance cards i.e. department store cards, clothing store cards. The scoring system defers and gives perference to major credit cards such as good old Visa and Mastercard.

3. Paying off a Charged-Off Credit Card Account will Improve Your Credit Score

This is definitely a myth because if you have an old charged off credit card debt and you make payments on it all of a sudden, you renew the 7 year credit reporting statute from the date of the payment (Thats the Law People). The best path to take in my opinion is to debt negotiate i.e. offer the creditor .25-.50 cents on the dollar as payment in full exchange for the a deletion letter from the creditor; the important thing to ask for is the Deletion Letter.

 Thats my take on some of the myths I hear and read out there. Do you research and do your thinking but do not follow the myths in the market blindly.

Your friend,

Ankit Duggal

www.qualitycloser.com ”Fulfilling all your Closing & Notary Needs”

Resources:

American Chronicle Article , Jan 10, 2007 publish date

You Magaznie, Santi Rodriguesz, March 2008

“What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. Bottom line for homeowners: An average drop of 25%.” - Paul Krugman, Economist

It’s a terrible market out there but there are still people saying that we should jump in now as the market has seemed to bottom. Are they right?- Maybe. But I think that we are still not at our bottom; Why do I think this:

“Today’s housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low interest rates of a weak economy. Either the economy’s long-term prospects will get worse or rates will rise. In either scenario, housing will weaken.” Business Week

A. Prices still disconnected from fundamentals. House prices are still much too high, far beyond any historically known relationship to rents or salaries. Yearly rents are 3% of purchase price. Mortgage rates are 6.5%, so it costs more than twice as much to borrow money to buy a house than it does to rent the same thing. Worse, total owner costs including taxes, maintenance, and insurance are about 9%, which is three times the cost of renting. Salaries cannot cover mortgages

B. Buyers borrowed too much money and cannot pay the interest. Now there are massive foreclosures and senators are talking about taking your money to pay for your neighbor’s McMansion, even though no one in the US has been made homeless by foreclosure. In fact, forclosed owners end up far better off: they go reap large savings every month, since it costs less than half as much money in rent as they were paying to “own” the very same thing.

C. Shortage of first-time buyers. High house prices have been very unfair to new families, especially those with children. It is literally impossible for them to buy at current prices, yet government leaders never talk about how lower house prices are good for pretty much everyone, instead preferring to sacrifice American families to make sure bankers have plenty of debt to earn interest on. Every “affordability” program drives prices higher by creating more debt for buyers to use.

D. Fraud. It has become common for speculators take out a loan for up to 50% more than the price of the house he intends to buy. The appraiser goes along with the inflated price, or he does not ever get called back to do another appraisal. The speculator then pays the seller his asking price (much less than the loan amount), and uses the extra money to make mortgage payments on the unreasonably large mortgage until he can find a buyer to take the house off his hands for more than he paid. Worked great during the boom. Now it doesn’t work at all, unless the speculator simply skips town with the extra money

As this post hopefully shows you that there is still a lot of bad in the market that we have to clean up. We are no where close to having bottomed yet as Real Estate analyst at big firms have stated that we are still in the middle of the housing decline and have yet to see the full effect of the exotic ARM blow up. Hope this gives you all food for thought.

Your friend,

Ankit Duggal (AD); www.qualitycloser.com

Sources:

1. Business week

2. “US Housing Crash Continues”; Housing Crash Continues, Bubble Pops. http://patrick.net/housing/crash.html

Well, here are the facts from last week:

The U.S. consumer price index rose 0.4% in January, higher than analysts’ expected 0.3% gain, the Commerce Department said February 20. The core index, which excludes food and energy costs, increased 0.3%, more than economists’ expected hike of 0.2%.
On the same day, the Federal Reserve released the minutes of its Jan 29-30 closed door meeting. At that session, the Fed lowered its growth forecast for the year from a range of 1.8% to 2.5% to a range of 1.3% to 2%, citing “further intensification of the housing correction, tighter credit conditions … ongoing turmoil in financial markets and higher oil prices.”
The Conference Board said on February 21 that its index of leading economic indicators — an important gauge of future economic activity over the next three to six months — fell 0.1% in January. With the decline, the leading index has fallen 2% over the last six months, the biggest decline since early 2001.
Meanwhile, the Federal Reserve Bank of Philadelphia, one of the 12 regional Fed banks, said on February 21 that its index measuring factory output contracted to minus 24.0, well below analysts’ forecast of minus 11.0. It was the weakest reading since the 2001 recession. Housing starts picked up 0.8% in January from December, the Commerce Department said February 20. However, building permits — an indication of future construction — fell 3%.

 These stats show that the market is headed further south. This is bad news for the Real Estate Market. We need a true change along with decreased interest rates to help move towards a better economic and housing situation.

 Your friend,

AD, www.qualitycloser.com

 Resources:

Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com and Yahoo Economic Calendar

Women control 91 percent of homebuying or remodeling decisions. This finding from a recent Harvard University study caused Doris Perlman, founder and president of Possibilities for Design, a Denver-based home design firm, to delve more deeply into the homebuying habits of female baby boomers (women born between 1946 and 1964).
Among her observations:
This target market is looking for practicality and comfort, which translates into demand for wider hallways and stairs, living areas on the main floor, and open-air floor plans with multifunctional spaces.
Both task lighting and natural light are of major importance to compensate for declining vision that many baby boomers are starting to experience.
For aging eyesight, any marketing material in smaller than 13-point type is “retail suicide.”
Seventy-five percent of female boomers will settle for a smaller house if that’s what it takes to get high-quality products and amenities.
Women buyers are looking for strong character in home design, such as cottages with a crisp and clean look, urban enclaves with rich colors and textures, and calming and contemporary Asian influences.
Women are attuned to colors, while men do not seem to care as much. In response, the color trends of 2005-2006 included brown becoming the new black; grayed-out greens; reds coming up orange; classic colors with such new names as Wasabi, Aero Blue and Vanilla; and textural effects suggesting copper, pewter and stone.
Female baby boomers now have more time to relax, engage in social activities and explore hobbies, making “special-interest” rooms an essential feature in their home selection. “Women shop with peripheral vision: They notice everything,” Perlman said.
Women 55 and over are cyber-savvy, and use their computers for ordering and correspondence.

A very interesting study looking into the thought pattern of how to market towards the decision maker who are an every growing class of women. Men of the world watch out. Just wanted this post to be light hearted.

 Your friend,

AD; www.qualitycloser.com