Archive for the 'Think Big' Category
Collaborating with the GHREB
We enjoy writing this blog. It’s an outlet to share our knowledge with a diverse reader base, exercise some creativity, and have a conversation with the Greater Hartford community about real estate.
Lots of different people read this blog; folks curious about real estate in general, those thinking about buying or selling a home, newspaper and TV reporters, other real estate agents, and an occassional friend or relative.
Most of the feedback we get about this blog is positive. We work hard to write interesting articles and take pictures that support our topics. We are in no way trained reporters, but still feel that our product quality is useful to the masses.
Recently I had a reporter from the New York Times contact me. That was an exciting event. She read one of my market statistic blog posts and made note of Newington consistently being a Seller’s market during a good portion of 2009. She wondered why this might be the case when other bordering towns were Neutral or Buyer’s markets. We had a discussion about the town of Newington and its housing market. I gave her the name of a top agent in Newington so that she could get another perspective. The result was this nice article published in the Times last weekend. The author was kind enough to quote me and mention my blog. I really appreciated that.
Now, not everyone that reads our blog is that great about giving credit where credit is due. I’ve had instances where reporters have clearly used my market analysis information and not attributed it to me. Additionally, people take my pictures and reuse them without asking permission or citing any type of source. Not cool. We always try to give credit where credit is due and we would just ask that others do the same.
On Monday we’ll be launching a new publication which we’re excited about. It’s an extension and enhancement of the market statistics information which our audience seems to find valuable. On a quarterly basis we’re going to look at the single family home and condo data for every town in Hartford County and the County overall, providing our thoughts and market commentary.
We really hope that you enjoy our blog and learn something new every now and then. If you’d like to talk with us about anything we’ve written about, or the market in general, please feel free to contact us. We’re always happy to speak with you and collaborate on your projects. If you see a picture that you’d like to use, please ask us and we’ll consider your request.
Real Estate Stories of the Past Couple Weeks
There have been a number of interesting articles about real estate in the financial press over the past couple weeks. Here’s a quick wrap-up of what you may have missed while you were off for the holidays…
Wall Street Journal, December 23rd: Data from the National Association of Realtors shows that Home Sales, Prices Brighten (subscription required). Though the current data is positive, the author expresses concern about “a continuing flood of foreclosures and the eventual withdrawal of government life support.” They note that the housing has been strongest in “middle-class homes with short commutes,” something that rings true in the Greater Hartford markets.
Wall Street Journal, December 24th: The next day, the headlines reversed to New-Home Sales Drop 11.3% as Impact of Stimulus Fades (Subscription Required). This time the data came from the Commerce Department, which noted that the measure was very volatile (it had risen 7.4% the previous month) and new home sales make up less than 15% of total home sales. And in our area, new home sales are far less than 15% of the total.
Wall Street Journal, December 24th: On the same page, we learn that Resession Alters Migration Pattern in US. Although this story isn’t directly about real estate, it is interesting to consider the implication of people moving around the country on local real estate markets. A large map shows the population changes by state for 2004-2005 and then for 2008-2009. Florida and Nevada showed the most dramatic shifts, from strongly growing to modestly decreasing populations. Connecticut appears to be consistent across the two time periods with both reflecting losses of between 0 and 50,000 people.
Wall Street Journal, December 29th: Everyone who loves a good house hunting story definitely needs to read this tale as A Picky Home Buyer Pursues an Epic Hunt for ‘the One’ in the San Francisco Bay Area. It took over two years and 298 properties for Lidia and Doug Pringle to find the right place to call home. Wow.
Calculated Risk, December 30th: During the past two declines in home values (early 1980s and early 1990s), prices did not bottom until the unemployment rate peaked.
The Big Picture, December 31st: Morgan Stanley released a research piece suggesting that the 10 Year Treasury could rise to 5.5% in 2010. What caught our eye was that they estimated that the higher Treasury rates could push rates for 30-year fixed mortgages up to between 7.5% and 8%. These rates are, of course, much higher than buyers are used to seeing. The commentary basically says that Morgan Stanley must be concerned about inflation increasing, and that the charts the commentators use to look at the market show strong increases in inflation expectations over the past year.
Wall Street Journal, December 31st: The Department of Housing and Urban Development have had Rules to Clarify Cost of Mortgages in the works for a while, tightening the requirements around Good Faith Estimates that lenders give to buyers when quoting mortgage rates. Their overall goal is to force lenders to report all of their fees and rates in a way that allows borrowers to more easily compare rates between lenders. It will be interesting to see how this transition goes as lenders and real estate attorneys adjust to new regulations.
Wall Street Journal Blogs, January 1st: The Five Key Housing Issues to Watch in 2010 are 1. mortgage rates; 2. the future of Fannie, Freddie, and the FHA; 3. loan modifications; 4. more loan resets; and 5. the tax credit.
New York Times, January 1st: Some feel that the Federal Government’s effort to modify loans is Adding to Housing Woes. They argue that allowing homeowners to remain in their homes by modifying their mortgage has been counterproductive. Homeowners have their hopes falsely raised and waste money trying to keep a home they simply cannot afford before finally defaulting on the modified mortgage.
So that’s the word on The Street as the real estate markets move into 2010. The headlines seem to have a negative bias, highlighting concerning data, unsuccessful recovery programs, and the unfortunate reality of many Americans struggling. We’ll have to see how it all plays out here in Greater Hartford. And as always we’ll hope for the best and plan for the worst.
Homebuyer Tax Credit Update
The Senate has overwhelmingly passed an extension to the hotly debated homebuyer tax credit. The updated version of the program has larger scope and is more generous than its predecessors. Note that the extension is not official until it is also passed by the House and signed by President Obama.
The new program offers people that have lived in their home for 5 years or more (move-up buyers) a $6,500 credit. It also increases the income cap to $125,000 for single return filers and $225,000 for joint return filers. Just like the previous incarnation, first-time buyers receive an $8,000 credit. Purchases must either close by April 30, 2010 or be under “binding contract” by that date and close within 60 days of April 30th. Homes must cost less than $800,000 to qualify, and buyers must be at least 18 years old to take advantage of the program. Once the final version is passed, we’ll link to all the specifics and details – this is a summary of the main points and changes.
Observations
1. “Move-up” buyers do not need to be buying a more expensive home. In fact, it seems likely that there will be lots of “move-down” buyers that take advantage of the program. Just imagine how many homeowners there are out there that have lived in their home for 20, 30, 50 years and are ready to downsize.
2. The expiration of the program is not very convenient for families with children in school, who often prefer to move over the summer. The absolute latest that a deal could close and qualify for the credit is 60 days after April 30th, which is Tuesday, June 29th. The last scheduled day of the West Hartford school year is Thursday, June 17th, with three snow make-up days taking the possible last day to Tuesday, June 22nd. If school did extend to the 22nd, then families would either have to move during the school year or try to move within one week of school ending.
3. In the Greater Hartford area, the “move-up” clause may be more effective in spurring real estate activity than the “first-time buyer” clause. We’ve already reported that we did not encounter many first-time buyers that were only making a purchase because of the credit. Nearly all were going to buy anyway and simply accelerated their purchase. The “move-up” credit, and the short window to claim it, could create a flurry of activity for people who were considering a move in the next year or two.
4. The “move-up” clause seems like it will encourage current homeowners who want to take advantage of the credit to put their home on the market early in the new year. They would need to find a buyer for their place, and then successfully bid on a new home to move to by April 30th.
5. The credit has been encouraging buyers to accelerate their purchases for the past year. At some point that trend will reverse and there will be a period in which real estate activity is unusually low. The most likely time will be just after the credit finally expires for good, though it’s possible it could happen while the credit is still available. The summer of 2010 seems like a good candidate.
6. Do we know how much this program is expected to cost the Federal government? I have not seen any projections as to how many “move-up” buyers are out there that could claim the credit. We know that over 1.8 million first-time buyers are expected to claim the credit in 2009. Presumably the shorter window of opportunity will be the main way in which the program’s costs are contained.
Renewing the Home Buyer Credit
We’ve received a lot of questions recently about the soon-to-expire First Time Home Buyer’s Credit. Since the time has basically passed to be able to take advantage of it in a home purchase, the discussion has shifted to the future of the program. Analysts and commentators around the country are weighing in on the subject, dividing into two camps.
Camp 1: Extend the credit, and perhaps even expand it to all buyers and with larger credit amounts. Their basic contention is that the program is instrumental to stabilizing the fragile housing market, and that real estate will grind to a halt without the credit. The National Association of Realtors (NAR) has taken a leadership role in advocating this position, and has issued this Call to Action to their Membership in addition to their direct efforts in Washington.
Camp 2: End the program and allow the markets to rebalance on their own. This group feels that the credit is a poor use of taxpayer money and extends a credit/housing bubble which keeps home prices artificially expensive versus income levels. Numerous economists of all political leanings have taken this side of the debate. Economist Barry Ritholtz, author of The Big Picture Blog has been writing about the subject regularly and most recently posted a piece titled Why Expanding the Home Buyer’s Credit is a Mistake that summarizes the position and links to others in the same camp.
Our position is more sympathetic to the second group than the first. The real estate markets in Greater Hartford don’t seem to be locked up, and the tax credit doesn’t seem to be a critical consideration. Our experience has been that capturing the tax credit is nice, but it is not the key factor that motivates buyers to purchase their first home. We have worked with many buyers over the course of the year that have qualified for the credit. Some have accelerated their search to be sure to close in time, while others are going to miss out because the right house for them is not available. We have not worked with anyone who is buying solely because of the credit.
In addition to observations about the use of the credit among our clients, we also tend to side with the economists on the theoretical arguments about the credit. Our main issue is that the most of the buyers claiming the credit would have purchased a home anyway. NAR did a study finding that “about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit.” They are using this data to support their contention that the credit helped the markets. However, it seems to us that the government paid the credit to at least:
buyers that would have purchased anyway, which is more than 80% of the total people that received it. So that comes out to at least:
of our tax dollars that could have been spent elsewhere, or not spent at all. Perhaps that’s not much when the annual deficit is in the trillions, but $11 billion seems like a lot of money.
We’d like to see a more honest discussion over the credit’s goals as the powers-that-be debate its extension. The data shows that the program is more about broadly supporting the lower end of the housing market than it is about convincing non-owners of the virtues of homeownership. Perhaps the housing market, like other industries, is “Too Big To Fail” and should be bailed out since it impacts such a large percentage of the US population. Or perhaps the government needs to take a step back and start allowing people who make poor investment decisions to lose their money, both on Wall Street and on Main Street. Either way, this is the debate we should be having as a nation as our representatives consider extending and expanding the government’s role in the housing market.
An Evening with David Nyberg
On Thursday, October 15, 2009 (tomorrow evening), real estate developer David Nyberg will be hosting a social hour, giving site tours of two Downtown Hartford projects, and participating in a roundtable discussion. I am coordinating the event through HYPE, and would like to extend an invitation to those outside of the HYPE membership to join us. Please RSVP to me (Kyle Bergquist) to register if you are interested in attending; seating is limited.
Mr. Nyberg has been at the forefront of the effort to bring more residential opportunities to Downtown Hartford in recent years. His three Downtown projects include 55 on the Park, The Metropolitan, and most recently 915 Main Street. Mr. Nyberg is also active in the Asylum Hill neighborhood of Hartford as well as other communities.
During this event we’re hoping to get an enthusiastic group together to see a developer’s view of Downtown Hartford. The roundtable portion of the event will give us an opportunity to learn more about Mr. Nyberg himself, his views on Hartford, and his experiences with the City.
Tomorrow evening’s itinerary will be roughly as follows:
5:00 pm: Meet at 901 Main Street for drinks, appetizers, and a site tour
6:00ish: Walk to 266 Pearl Street (The Metropolitan) for a site tour
7:00ish: Walk to 31 Pratt Street (MetroHartford Alliance) for drinks, dinner, and discussion.
Our group is called HYPEd on Downtown Development, and is working to find constructive ways to influence the continued evolution of the capital city’s downtown neighborhood. We’re hoping to be part of the revitalization process that will make Downtown a vibrant mixed-use community. The event is free of charge and open to anyone interested in participating in that spirit.
Again, please RSVP to me (Kyle Bergquist) and either call or email with any questions.