This January 2012 we continue to have lower purchase prices, low interest rates and low inflation.
People who bought from 1991 through 1996 realized no appreciation, nor did they lose money if they stayed in their home until at least 1998. Some homebuyers are concerned that values will continue to decrease and are waiting for a defined price reversal. If we look at the last market reversal we saw the stabilization to appreciation process continue from 1990 to 1997.
People who remained in their home through the end of this cycle in 2006 saw the values increase dramatically due to the sub prime adjustable lending practices of 2003-2006. This dramatic expansion of values has been in a correction since 2006, challenging people who bought in the past 5 years. We now see homes prices around 2003 values or before, depending on transaction variables This is significant when we apply adjusted values of inflation. I can show you neighborhood specific information for your favorite property type and value.
The Total Inventory of Single Family and Condos priced between $100,000 and $400,000 in New Haven County available for sale as in December 2011 was 3,671, down -7.7% from 3,978 last month. December 2011 provided 9.4 Months of Standing Unsold Inventory
I anticipate a longer view on appreciation of 10-15% over the next 5 years from today's prices. We are seeing more interest from foreign investors, as well as local landlords.
The possibility of increased interest rates threatens values in the short term, increasing monthly ownership costs for debt service. The increase in debt to earning ratios will challenge the ability of buyers to purchase the same cost property without increasing income or reducing other obligations.
Mortgage rates Maintained record lows in December 2011,
In Connecticut we see a 30 year fixed rate at 3.75% on Jan 8, 2012 with no points available to qualified FHA borrowers through my in house direct underwriter, Bill Considine
The FHA 30 year mortgage rate of 4.15 percent, with borrowers paying an average point of 0.7 percent is “the lowest in over 50 years,” Frank Nothaft, vice president and chief economist at Freddie Mac, said in a news release Aug 17, 2011. The survey’s previous low was 4.17 percent in November 2010.
A $200,000 30-year mortgage will increase $125/month if it rises 1% from the current (June2011) rate of 4.25%. When interest rates go back to 6.25% the monthly cost will increase $253/month.
Inflation benefits debtors at the expense of creditors. Inflation benefits those who receive the money first before prices rise and hurts those on fixed incomes.
Cheap financing hasn’t done enough to boost home sales in part because lenders are being more selective with applicants. Fed policy makers have described the housing market as “depressed” in statements following their last eight meetings. In the future it will be interesting to see when this evaluation changes, and to track the history of these assessments.
On 1/12/12 the New York Times reported one of the country’s largest home builders reported a third consecutive quarter of growth in orders and said the housing market was bottoming out after a long downturn. “As I look ahead to 2012, I am cautiously optimistic that we are seeing a real bottom form and we will begin to see signs of recovery,” Lennar’s chief executive, Stuart A. Miller, said in a conference call. Stocks of other home builders, like KB Home, the PulteGroup and D. R. Horton, also rose on Jan 11, 2012
If you can jump through the hoops to get a mortgage then this is an amazing time to purchase real estate,” said Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, and the former head of the Treasury Department’s Office of Economic Policy. “There are going to be a lot of people kicking themselves a few years from now because they didn’t take advantage of the low prices and the low mortgage rates.”
The Federal Housing Administration is extending a waiver of its no-flipping rule. Buyers using FHA financing will be able to buy homes that have transferred in the last 90 days. This is great for investors because it expands the pool of homebuyers for their rehabbed homes. If the sales price is >20% of the seller’s cost, the new lender must justify the increase in value,
Home ownership is about quality of life. People want a place to live and spend time with their families. You want to feel safe. You want good schools. You want comfortable living space, inside and out, that you can control and design. You want to live in a neighborhood that has other people who value these things.
People are finding lots of reasons to buy now, but your reasons are unique to you and your life. I will help you make a good decision as you consider:
Possible rising interest rates
Adjusted cost for inflation
Quality of life
Your housing dollar must be spent some where
Leveraged value of loan
Decreasing Rent to Own Ratios
5-year window of commitment for probable 10% appreciation
Your connection to community and school
Your ability to personalize/improve/modify your home
Lateral moves to new neighborhoods
Picking neighborhood values
Living among people with similar values
Neighborhood pride of ownership
Connecticut is doing better than the National average in ratio of forclosed to total property inventory.
In November Connecticut had a ratio of 1:1792 which was in the lowest 30% Nevada topped the list with 1:175
In December Connecticut has a ratio of 1:1145 with 1263 new recorded forclosures
See them all at www.realtytrac.com/trendcenter/uiservices/heatmap.aspx
Connecticut is doing better than the Nation average of new recorded forclosures per month.
in November Connecticut was in 35th position with 804 new forclosures
In December Connecticut declined to 38th place with 1263 indicating a nationwide increase in activity
See them all at www.realtytrac.com/trendcenter/uiservices/foreclosureactivity.aspx
Everyone has to commit a certain monthly cost to his or her shelter, so the decision remains very personal and unique. General accepted housing costs are 30% of your gross income. I can show you numerous examples of people who think now is a good time to buy the same type of house you are considering right now.
Rent Ratio = Home Ownership Price divided by Annual rent
Consider a $200,000-250,000 house while paying 1600/month rent:
(250,000) divided by (1600x12=19200) for a rent ratio of 13.02
(200,000) divided by (1600x12=19200) for a rent ratio of 10.41
Price-to-Rent Ratio of 1-15: Owning a home is less expensive than renting in this scenario
Price-to-Rent Ratio of 16-20: The total costs of homeownership are greater than renting, but it might make sense to buy depending on your unique situation.
Price-to-Rent Ratio of 21+: Renting is much less expensive than owning a home
Total homeownership costs include mortgage (principal & interest), property taxes, homeowners insurance, closing costs, HOA dues and private mortgage insurance. It also includes credits for tax advantages of homeownership, (mortgage interest, property tax and closing cost deductions). Total costs of renting include rent and renter's insurance.
As we consider the cost of buying to renting it is interesting to consider the changes in Fair Market Rents across the state, indicating demand or vacancy in certain market areas. You could by a $200,000 house for about $1550/month with a 3.75% 30 year fixed mortgage
Here is a Great Rent Vs Buy Calculator in the New York Times. Set the taxes at 3.5%
New Haven saw a significant 9% change (from $1,246 for a two-bedroom unit to $1,352) in Fair Market Rents from a November 1, 2011 report from U.S.H.U.D..
The changes reflected no geographical or other consistency among the 10 major housing markets in the state. The following metro areas saw FMRs rise: Danbury, from $1,512 for a two-bedroom unit to $1,601; Milford-Ansonia-Seymour, from $1,184 for a two-bedroom unit to $1,298; New Haven-Meriden, from $1,246 for a two-bedroom unit to $1,352; Waterbury, from $951 for a two-bedroom unit to $1,075; Norwich-New London, from $1,007 for a two-bedroom unit to $1,145. The following metro areas saw FMRs fall: Bridgeport, from $1,291 for a two-bedroom unit to $1,277. Stamford-Norwalk, from $1,811 for a two-bedroom unit to $1,769. Hartford-West Hartford-East Hartford, from $1,113 for a two-bedroom unit to $ 1,038. Southern Middlesex County, from $1,155 for a two-bedroom unit to $1,080. Colchester-Lebanon, from $1,129 for a two-bedroom unit to $1,126.
I appreciate it when you forward my emails to your friends and family who may like my low pressure, high information client focused business model. I believe that helping you make the right decision is more valuable then telling you what to buy.
My breadth of information and market knowledge, negotiation skills and professional experience benefit my clients who buy and sell real property.
My clients have realized the value of my full service marketing and brand identification with Coldwell Banker, the most successful real estate company New Haven County, and beyond
Sincerely,
Dave Carr - A Connecticut REALTOR since 1996
Coldwell Banker Residential Brokerage
Direct Line 203.654.2905
| Year | Quarter | New Haven-Milford, CT |
|---|---|---|
| 2011 | 3 | -4.45 |
| 2011 | 2 | -4.55 |
| 2011 | 1 | -2.99 |
| 2010 | 4 | -1.53 |
| 2010 | 3 | 0.01 |
| 2010 | 2 | -4.23 |
| 2010 | 1 | -6.89 |
| 2009 | 4 | -4.28 |
| 2009 | 3 | -5.31 |
| 2009 | 2 | -5.39 |
| 2009 | 1 | -5.00 |
| 2008 | 4 | -6.42 |
| 2008 | 3 | -6.65 |
| 2008 | 2 | -4.54 |
| 2008 | 1 | -2.02 |
| 2007 | 4 | -1.15 |
| 2007 | 3 | 0.05 |
| 2007 | 2 | 1.23 |
| 2007 | 1 | 2.06 |
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