February 27, 2009

More Buyer Assistance - FHA Limits Have Increased!

Posted to Steve Randall

We recently helped a couple rent a home with the intent that in a year from now they would be ready to purchase a home on their own. We discussed with them how to get themselves qualified for an FHA loan. FHA loans require the least amount of downpayment and therefore a family can get a loan sooner than most conventional loans. In order to assist buyers to purchase a new home, the FHA lending limits have been expanded to include larger mortgage amounts. FHA is one of the best ways for new home buyers to finance a property. These new loan limits will allow buyers to be able to afford more home for the money.

Click here for the current rates for Utah.

Here is a link for FHA loan limits for the rest of the country and here is a link for what qualifications a buyer should have to receive an FHA Loan. For more information on loan qualification please contact me directly for a list of lenders who do FHA loans.

Posted By: Steve Randall





February 25, 2009

First Time Buyers... Great Incentives but be Responsible in Your Choices

Posted to Steve Randall

There is no question that in Northern Utah now is the time to buy a home. The government is doing what it can to stabilize the market, reduce foreclosures, and help people stay in their homes. The fact remains that with interest rates low and inventory plentiful, buyers have a great opportunity to buy very affordable homes. The new $8,000 tax credit being offered right now is also additional incentive to make the move this year. The market is focused on getting fist time homebuyers to move from the sidelines and get into the game.

Even though we are excited for all the new programs to help first time buyers, we don’t want to recreate the situations of the past that lead to this mortgage meltdown. Here are some words of wisdom from our clients, lenders, and title companies:

  1. Be a responsible mortgage holder and be committed to being a homeowner. Owning a home is a great investment over time but lenders want to know that you can pay your mortgage. Sit down with your employer and ask for an honest evaluation of your work situation to make sure you are not going to be one of the next to be laid off. Loss of employment will certainly lead to a lack of ability to make your mortgage payments. Mortgage rates are very low right now (see image above) so buy at the right price and you will be surprised at what you can buy for the money.
  2. Be self-reliant. It is good to have the government offer incentives or to have family who can help with down payments…but don’t count on those sources being available all the time. Live within your means and don’t let your debt get out of hand. Most lenders will want your total debt (house, care, credit card) to be 25% to no more than 42% of your gross income. Most people currently in foreclosure got there because they bought more house than they could afford. As prices dropped, they now cannot sell them except at a loss. Use the available programs to get into a home but don’t add additional debt or home equity lines that will cut into your cash flow and burden the equity in your home. The peace that comes from living within your means will far exceed the extra square footage that will unnecessarily add to your debt.
  3. Finally, take the time to maintain and update your home as you live in it. A home maintained and updated will increase in value. A home that deteriorates will lose value. Take the time to care for your home and property.

All that being said, here is a great link that explains the new $8,000 tax credit and how it works. For more information please contact me directly.

Posted By: Steve Randall





February 20, 2009

All Real Estate is Local!

Posted to Ogden, Steve Randall

No matter what the media reports as national or regional trends, people are most interested in what is happening in their local neighborhood and city. The “All Real Estate is Local” section of this blog is intended to give you local market information. If you can’t find your city or want a specific neighborhood report, please contact me directly.

Ogden, Plain City, Far West, and Harrisville Market Data as of today:

CountyUnit SalesAvg. PriceMedian PriceNew ListingsTotal ListingsMonths of InventoryDOM
Weber54$190,879$169,0007864812.0079
  • Unit Sales = # of units sold in the last 30 days
  • Average Price = The Average price of homes “sold” in this area
  • Median Price = is the midpoint between the lowest price home and the highest price home sold in the last 30 days
  • New Listings= the number of new homes listed in the last 30 days
  • Total Listing = the total number of homes listed in this area currently
  • Months of Inventory is based on the number of months it will take to sell current inventory based on the current sales rate. A balanced market of buyers and sellers is considered to be a number between 5 & 6. We are currently in a buyer’s market.
  • DOM is the average number of days it takes to sell a home in this area.

Here is the latest market data for the five most populated counties of Northern Utah as of the end of January, 2009.

Posted By: Steve Randall





February 20, 2009

Good News for First Time Home Buyers

Posted to Steve Randall

The new stimulus package has certainly been the talk of the country for the past two weeks. It does have some good news for renters who want to become first time home buyers. We have a number of mortgage companies contacting us wanting our assistance to spread the news out to those who are renting and have not owned a home for the past three years that they have a great new opportunity to get into home faster than they may have thought.

The new program offers an $8,000 tax credit (or 10% of the value of the home, whichever is lower) to first time home buyers who purchase a home from the start of the year until the end of November 2009. Tax credits come directly off taxes owed so if your tax liability is over $8,000 this money comes directly to the buyers. A tax credit is very different than a tax deduction — a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for a couple with incomes over $150,000 and single tax filers with incomes over $75,000. Buyers will have to pay the credit if they sell their home within three years.

With interest rates low and inventory high, this may be a great time to get into your first home.

Our next First Time Buyer Webinar is scheduled for March 2, 2009 at 7:00 PM. Lenders, Title Companies, and Home Inspectors will be at the Webinar. To register for the Webinar please contact me directly at least 24 hours before the webinar date.

Posted By: Steve Randall





February 18, 2009

Shadow Inventory- Future Threat to Seller's Listing Prices

Posted to Steve Randall

Market Update:

If You Plan to Sell Your Home

Shadow Inventory

Supply

Housing prices are a reflection of the forces of supply and demand. When buyers are plentiful and housing inventory is scarce, prices will go up. That is not the market we find ourselves in now. Supply of homes is high and buyer’s are fewer…many buyers are waiting to see what will happen in the next few months. As long as more homes are coming on the market than homes that are selling, Sellers will have pressures to push their listing prices downward.

In addition to the current supply and demand imbalance we have another problem entering the market that we we’ll be hearing about more and more in the media. “Shadow Inventory” means that behind the current inventory lie more homes to come on the market in the next few months. This is caused by more foreclosures, ARMs that are re-setting, interest rates, and pent-up-demand by those who took their homes off the market during the Holidays.

The message for Sellers, is now is the time to price your home to sell. Pricing pressures will only be greater in the near future. Selling now will, in the long run, net more to your bottom line than holding out for an improving market and better price.

I know this is not great news for our Sellers but we are looking out for their best Seller’s Net figure. The sooner the sale the greater the net will be. The current market is simply a reflection of the forces of supply and demand. For more market data about your specific neighborhood, please contact me directly.

Posted By: Steve Randall





February 17, 2009

The Real Estate Accelerator - Leverage

Posted to Steve Randall

One of the best books I have read as I have studied the benefits of real estate investment is Real Estate Advantage by Sharon L. Lechter, a CPA, and Garrett Sutton, an attorney. They are part of the consulting group organized by Robert Kiyosaki, as part of the Rich Dad Poor Dad series of books. I would recommend the series to you as a way to quickly get up to speed on real estate investments.

In this book, there is an example of how real estate can outperform other forms of investment for retirement. The example is short but powerful. Let me quickly summarize why I prefer real estate as the center of my own retirement program.

If you have $20,000 to invest, how would your investment grow if you put it into 1) a mutual fund that earns 5% interest income per year; 2) Invest $20,000 and borrow $180,000 for a rental property and let your equity compound; 3) Invest $20,000 and borrow $180,000.. but rather than letting your equity compound, you borrow out the appreciation every two years and use that appreciation to buy another property at a 10% down payment (use your own $20,000 to buy the first property and then use the increased value over two years to make a 10% down payment on a new property and repeating the process every two years).

At the end of seven years, how would your money have grown?

Choice 1: $28,142 Net Equity 5.8% Average Annual Return

Choice 2: $101,420 Net Equity 58.2% Average Annual Return

Choice 3: $273,198 Net Equity 180.9% Avg. Annual Return

One of the advantages you have with real estate investing is an “earning accelerator” called “leverage.”

If you would like to read more about leverage purchase the book and read chapter 2; or send me an e-mail and I will be glad to send you more details.

For more details on how real estate return on investment return on investment compares with stocks, please click here.





February 16, 2009

Cash Flow Investors

Posted to Steve Randall

For any business to be successful it must produce cash flow sufficient to cover expenses and generate profits. The amount of cash flow generated by real estate is often dependant on the amount of the down payment. For example, an investor that pays for the property without taking out any mortgage will generate cash flow except in times of vacancy. A $200,000, three bedroom, 2 bath home that leases for $1200 per month will generate cash flow less amounts set aside each month for property taxes and maintenance.

Most investors, however, will want to take advantage of the principles of leverage which accelerates the cash-on-cash return on investment. Cash flow investors want each property to generate a positive cash flow when expenses are deducted from monthly rental income. The amount of cash flow is determined by the amount of the deposit, interest rate, and the period of the loan.

For example, a $200,000 home with a 10% downpayment ($20,000), $1100 in annual property taxes, $450 annual insurance policy, 30 year amortization, and an interest rate of 6.0% would have a mortgage payment of $1208.00. If the rent is $1200 per month less a 10% management fee, the investor’s cash flow would be $1,200 - $120 = $1080. In order to pay the mortgage of $1208, the investor would need to supplement with other cash flow or reserves the monthly payment each month. If there was a vacancy or maintenance to be done, the deficit would be even greater.

Cash flow investors want to make sure that each property produces sufficient cash flow so that if rental rates decline, vacancies occur, or if maintenance is required, then they still have cash flow to cover those expenses without drawing money from other sources. The way they do that is increase the downpayment to reduce the monthly mortgage payment and to use insurances (property and home warranties) to control maintenance expenses. By increasing the downpayment to 20% ($40,000) the monthly mortgage payment reduces to $1,089. Increasing the downpayment to 30% ($60,000) the mortgage payment reduces to $969.00.

Cash flow investing is the safest form of real estate investment because it anticipates market fluctuations and plans for cash flow accordingly. It also uses leverage to increase the rate of return on cash over paying 100% for a property. Without cash flow, a real estate investment can take away from personal resources. For example, in the case of illness, if there was a prolonged period on not being able to work, the cash flow investor would be able to maintain their properties independently.

Posted By: Steve Randall





February 10, 2009

Another Reason a Home is a Better Investment Than Stocks

Posted to Steve Randall

One of the most popular TV shows today is Oprah. At the end of December Suzie Orman was Oprah’s guest. The topic was real estate and Suzie has been a strong proponent that now was a great time to buy a home. Here is her comment:

To sell all the homes for sale in Utah visit our website at WelchAgency.com or my personal website for market data and easier search methods.

Posted By: Steve Randall





February 09, 2009

What is the Best Long Term Investment… Stocks or Real Estate?

Posted to Steve Randall

One of the great market research services we subscribe to for up-to-date market information is SteveHarney.com. Mr. Harney sent us the updates on the latest foreclosures numbers, interest rates, the impact of the government bailout, and the proposed stimulus package as it relates to real estate. One of the comparisons was how real estate investments compared with stocks since January 1 of 2000 to December 31 of 2008.

In addition he supplied us with a Reecon Advisors Inc survey where 53.7% of investors said that real estate provides a better long-term investment than stocks.

We bring this to your attention now because right now real estate inventory is high, interest rates are low and now is the best time to buy. Sellers are willing to adjust prices in order to move their properties.

Stock Market ROI: If you had $100,000 to invest in the stock market on January 1, 2000, you would now only have $80,200 because stocks have dropped 19.8% during this eight year period.

S&P 500 ROI: That same $100,000 invested in 2000 would now only be worth $64,800.

Nasdaq ROI: Again, the Nasdaq has lost 59.9% of its value in this period leaving only $40,100 of your original investment.

Real Estate ROI: Real Estate on the other hand has shown an increase of 69.8% even with the decreases in value of 2007 and 2008. On average, real estate historically appreciates between 5% and 6% each year. In addition, rental income on properties yield a higher cash-on-cash return than the stock market produces at this time. You can borrow money to buy your real estate but you can’t find a lender to loan you money to invest in the stock market. The $100,000 placed into a real estate investment in 2000 would now be worth $169,800.

One of our new investors said that they were tired of paying the high salaries and bonuses to CEOs who don’t perform. This investor plans on making his money back through real estate.

For information on how to begin investing in real estate go to MyRealEstateRetirementPlan.com and click on the Real Estate Planning Guide button…or just send me and e-mail.

Posted By: Steve Randall





February 03, 2009

January 2009 Northern Utah Sales Data

Posted to Steve Randall

In order to determine when the housing rebound will occur, we need to keep track of the unit sales data, new listing, and monitor the price of homes to see when they begin to move up again. We will try and give you this information in the first week of the following months. Here are January, 2009 results.

  • Unit Sales are the number of properties closed in the month.
  • Median Price is the middle number of the range of homes sales.
  • Average Price is the just that, the average of all homes sold.
  • DOM is the Days on the Market needed to sell the home.
  • New Listings are the number of new listings added in the month
  • Total Listings are the aggregate of all the listing currently on the market.
  • Month of Inventory is the number of months it will take to clear the current inventory based on the current sales rate.

Posted By: Steve Randall





February 02, 2009

Super Bowl Half Time Conversation Turns to Real Estate

Posted to Steve Randall

No matter whom you were cheering for during the game, the interception by Pittsburgh just before the end of the half certainly changed the face of the game. Those in our crowd cheering for the Cardinals had their dreams and hopes dashed in one play.

After that interception the conversation of our gathered group turned to real estate and the current market changes. Some of the people at our assembly had yet to purchase their first home (students). Others in the group had purchased a home several years earlier and they were willing to share their own stories.

One couple had purchased a home in Las Vegas in 2004 for $212,000 dollars. Eighteen months later in early 2006 they had accepted a new job position in Utah which required the selling of their home in Las Vegas for $318,000. The appreciation during this period was 50% on the property and a cash-on-cash return on their $25,000 down payment was 424%. Many investing in Las Vegas real estate in 2004 made such returns… until the market turned the other way leaving a string of foreclosures and losses for investors. They were glad they left when they did. It is always good to know which way the market is heading before buying a property for appreciation so you are not the last one standing at the party or feeling like your touchdown pass was intercepted and run back for a touchdown!

To continue the story, this couple then took their $106,000 profit and invested in another home in Utah in 2006 valued at $389,000. Values in Utah County increased by 18.7% in 2006, and increased by 7.4% in 2007, while decreasing 7.3% in 2008. With the up and down years calculated the home’s value would be estimated at $480,000 at the end of 2008. They are waiting to see what 2009 will bring them but they don’t have to move or sell so they can wait out current market conditions. Here is a great site that lists the appreciation rates for the last five years by zip code.

Sometimes the best retirement real estate investment begins with the purchase of one’s own home. In fact, in most cases, the single largest item of any retiree’s portfolio is the value of the retiree’s personal home. Based on an historic average appreciation rate of 5% per year, a $200,000 home purchase this year will be worth $310,000 in ten years, $505,000 in 20 years, and $823,000 in 30 years.

It is important to understand that even though the increases in values are substantial, the owner still has to pay mortgage interest, insurance, property taxes, and keep the property updated and in good repair to reach these appreciation values. All in all, one real estate retirement plan begins with owning one’s own home.

We can see that an initial $25,000 investment can turn into a sizable part of a retiree’s plan for life after employment days are over. The problem with most people, however, is that they don’t take action or create a plan to purchase a second property. If you are interested in how to build a real estate retirement portfolio, please visit our website and click on the button that says “Real Estate Retirement Planning Guide”. I would also love to receive your e-mail.

Posted By: Steve Randall