Alan Zibel of MSNBC.com recently posted this, and I thought it was interesting:
Sales of new homes surged 27 percent last month, bouncing off the previous month's record low and blowing past expectations as government incentives and better weather boosted sales.
The Commerce Department said Friday that new-home sales rose in March to a seasonally adjusted annual sales pace of 411,000. It was the strongest month since last July and the biggest monthly increase in 47 years.
The median sales price was $214,000, up more than 4 percent from a year earlier, but down more than 3 percent from February.
The new-homes sales report reflects signed contracts to purchase homes rather than completed sales and thus gives economists a feel for how many buyers were out shopping for new homes in a given month.
It is likely capturing consumers who are trying to qualify for federal tax credits that will expire today. The government is offering an $8,000 credit for first-time buyers and $6,500 for current homeowners who buy and move into another property.
To qualify, buyers must have a signed contract complete by the end of the week and must complete the transaction by the end of June.
"Everyone's just trying to sign on the dotted line," said Jennifer Lee, an economists with BMO Capital Markets.
Nearly 1.8 million households have used the credit at a cost of $12.6 billion, according to the Internal Revenue Service.
"These robust numbers say the credit is working," said David Crowe, chief economist at the National Association of Home Builders. He forecasts sales will rise through April, weaken modestly, and then remain stable through the rest of the year.
The rise in a new-home sales was seen nationwide. Sales grew a whopping 44 percent in the South and 36 percent in the Northeast. They also rose about 6 percent in the West and 3 percent in the Midwest.
The number of new homes up for sale in March fell 2 percent to 228,000. At the current sales pace, it would take nearly 7 months to exhaust that supply.
Still, new-home sales are down 70 percent from the peak in July 2005, and some analysts predict they will sink back to the winter's dismal levels after the tax credit runs out.
"I expect we'll see a very sharp drop back," possibly to new record lows, said Paul Ashworth, Senior U.S. economist with Capital Economics.
- So, I want to talk about what all of this means: First of all, on a personal basis, I have contracted with several first time home buyers this month, so I agree that the credit was helping tremendously, but I've also contracted with several people buying lake homes. It seems that overall, people are beginning to have more faith in the economy again. We have a few manufacturing plants in Hartwell and the surrounding areas which are also hiring large numbers of people this spring, which is helping with middle range home purchases and greatly assisting with my leasing services. Now that the home buyer's credit is disappearing, I do expect to see some of the lower end home sales go more slowly (durnnit!), but I don't think sales will die off completely as some predict, since many of the spring sales are still relocation or recreational second home directed and not first time home buyer driven. Not to mention, your real estate buying dollar still goes a longer way right now and interest rates are still great!
One thing I look forward to seeing is how the government is now going to produce a resurgence in commercial and investment purchases. I have many great income producing investment properties listed, but they unfortunately are selling slowly right now because lenders have not yet loosened up on commercial lending. Right now, most buyers have to put down almost 40% to buy investment properties and then the interest rates are not super. That being said, these investment properties are priced at very affordable rates - the days of 8% CAP rates are long gone for Sellers, and we're seeing more 12%+ CAP rates. The good news is leasing has been strong both commercially and residentially, so there are more investment properties actually producing income now. We may have to see a surge in Seller Financing to move these properties before the commercial property ladder begins climbing again.
Some of my clients and I have been doing lease-purchases with our properties to move them. It is complicated, takes an agent who knows what she is doing to set up correctly, a seller who is in a position to "be the bank" for a little while, and everyone has to wait to finally get to closing, but in general I'll take a good sized downpayment and then allow the Buyer to pay over the next year with a good portion of the "rent" going towards their earnest money - thus helping them get to the required downpayment over a year's time. So far, I've only had it fail once, but the client still made over $18k on the venture and still has the property to sell, thus no one considered it a "failure"!
If it is something you think may work for you, call me today and let's discuss how to get you in the game. Hopefully lenders will wake up in the mean-time and get back on board with some investment lending options. No One wants the banks to fall back into old habits which have gotten them into trouble, but the trouble-causing habits were lending more than the property was worth to people who weren't qualified rather than simply lending money on investment properties. If you have an investor with 15 to 20% to put down, good credit, and is buying the property at a good price, that's a good risk in my opinion!
In the meantime, we just keep on working. It is the American way: when times get tough, we roll up our shirt sleeves and work to figure out how to convert things to our favor! At least things have been interesting through all of this; I've gotten a good bit of practice thinking outside the box. Give me a call if you are ready for someone who can help you find interesting ways to work towards the sell of your property, and let's see what we can make happen together!
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