Houston Real Estate starts to show signs of a recovery pulse as sales are almost flat, prices continued their up creep, inventories and days on market are shrinking and foreclosures are playing less and less of a role.
Transactions involving bank foreclosures come with their own original set of difficulties, and that’s not even counting obstacles created by institutional red tape and incompetence. So it’s only natural that when Buyers are looking to purchase REO foreclosures (assets owned and liquidated by banks), plenty of questions arise. As they should. Given that we love answering questions, it made sense to put together a list of the 10 questions most frequently asked by home buyers and demystifying them with some straight forward, plain speak answers. So, without further ado:
The benefits of purchasing and owning investment real estate are well known or you wouldn’t be here in the first place reading this post. But in order to make that ownership happen, you have to be aware of your financing options and know their pros and cons so you can put them to work within the right investment strategy. One financing options may be a perfect fit for one strategy and Nightmare on Elm Street for another. During our consultation sessions with our clients, this question comes up every single time as it very well should. And we always say, there’s no one-size-fits-all solution – you just have to know your options so you can pick the perfect fit.
The time has come for me to share with you a previously undisclosed Foreclosure Secret. Those that possess The Secret can not only save tons of money but they will be empowered to take action and start making money today. To date, I have not shared The Secret with anyone else, for fear that its power to disturb the balance in the foreclosure real estate market. I learned The Secret after years of experience dealing in the distressed property niche and once it came to me I keep seeing evidence of its power everywhere. I suggest you get pen and paper ready, because what you are about to learn will change your search forever.
If you have done so much as casually browse for Houston Homes lately, you know the current market offers a bank owned property selection the likes of which we have not seen in the recent past. From the ultra affordable neglected, to “I can’t believe this is a foreclosure” recent constructions, there’s a flavor out there for every taste. Say you started seriously looking at making at move at one of these homes, do you know what your offer should be? Is it a good idea to lowball, pay asking or give them even more? I’m pretty sure you want to pay the least amount possible, but don’t want to lose the deal either. In this post, we try to give you an idea on how to strike the right price balance.
During the current economic crisis, “foreclosure” has turned into somewhat of a buzzword. The majority of home buyers who would have never considered these properties before, is now open to the idea of purchasing a home that might need some repairs if it’s going to land them a sweet deal. But even though the deals in the bank foreclosure landscape are available, they are not quite as plentiful as most think. Contrary to what most people believe, only 10-15% of REO homes (another term for “bank owned”) are sold below market value enough to constitute a good deal. The good news is banks are bringing properties on the Houston real estate market at a rate of 80-90 new foreclosures per week which puts the number of good deals from 8-10 each week. Identifying those deals takes us hours and hours of research daily. You, on the other hand, can simply sort through the good stuff on our Houston Foreclosures page.
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I have never even seen your house, its upgrades, curb appeal or that new air conditioner installed not too long ago. But trust me when I tell you that I know why your home isn’t selling. Whether acting alone, or in combination with each other, there are eight factors that scare away buyers worse then teenage girls at a horror movie screening:
The Price is Wrong
This factor sits at number one for a very good reason. Pricing a home above its true market value in a tough market can cause irreparable damage to your probability of success. Pick an agent that a) doesn’t just pretend but truly knows the market and its intricacies and b) you trust (vital!). Use up all your skepticism in scrutinizing agents but once you decide, listen to their pricing advice and price it right or watch it sit.
The real estate market in the Houston Area showed further evidence of visible strengthening in the June 2009 sales figures released by HAR. Numbers moved in lockstep with a three month trend of improvements that has median sales prices rising, total sales falling at a slower pace and sound inventory levels.
Median Sales Prices rose 2.8% to $164.500 compared to 2008 for the second month in a row. Remember, prices rose about half that in May, they were virtually unchangedin Apriland they had been falling prior to that. Further evidence of a positive upward trend.
Average Sales Prices dropped 2.4% to $221,783 compared to 2008. They had been pretty much flat in May. More than a decline in prices, this indicates a shift towards lower priced properties as the first time homebuyer tax credit program works its way and provides incentives to purchase homes before November 30th.
So you cashed out of your local bloated market in California / Florida / Arizona circa 2006 and conquered some sweet new construction deal(s) in the Houston area. You know you weren’t alone as during that time everyone and their lovely mother was doing it. How could you pass it up, anyway? Brand new property, ridiculous price/SF, great cashflow, fully managed, investment heaven. Fast forward thirty six months and you find yourself fighting rising property taxes (a county’s gotta eat) and insurance rates eating away at your ROI like a monkey on a cupcake. Rent mostly covers expenses, but it might be time to exit that investment and go in a different direction.
It is a bit counterintuitive, I’ll give you that, upfront. It seems more rational to find the house you want to purchase first, then pursue financing options. But in this market, more than ever, the exact opposite is true. The preapproval letter from the lender is the necessary passport you must have to start buying a Houston Home. You wouln’t travel to a foreign country without your passport, would you? Didn’t think so.
There are several reasons why you should (and must) get a preapproval letter first...
When the market shifts, like it did in late 2007, it is easy to get caught off guard as your decisions still take into account a market with ever increasing home values and an abundance of buyers. These decisions inevitably lead to an overpriced home that will stay unsold for months causing frustration and confusion. Let me be blunt with you: It does not matter what the home could have or should have sold for in 2006. Those rules no longer apply.
But there are 4 Strategies you can use today to get your Houston Home sold under the current market conditions...
If you enjoyed these real estate articles, you may want to sign up for the Free RSS Feed. Or if we can help with anything Houston Real Estate or if you want to dive in and Search Houston Homes, 713.952.3200 is the number to start the conversation.
On Tuesday, HAR released the latest figures for the Houston Real Estate market activity during the month of April and as it's often been the case in the last year or so, the numbers were pretty mixed.
The Good
After three consecutive months of drops in the Median Sales Price, prices have stabilized. That's great news! In addition, there are fewer active listings on the market for sale now than there were a year ago. In other words we're looking at some of the healthiest inventory levels in the country. In April, it would take 6.1 months to sell all the existing inventory at the current rate of sales. In comparison, areas like Arizona and Florida have long been sporting absoprtion rates well in the double figures.
The Bad
Total number of sales continue their ongoing slide that started a year and a half ago. This is primarily due to a slower economy, tightened credit markets and stricter loan qualification requirements. Number of pending sales is also down - an indication that the end to slower sales is not quite here yet.
To Sum it Up
Numbers for April were definitely mixed but leaning closer to positive with stabilizing sales prices and goodlooking inventory levels. Increasing oil prices are also sure to give a boost to local economy and therefore to the demand for homes.
To see a video analysis head on over to ErionHouston.com
I get an email from the Texas Real Estate Political Action Committee (TREPAC) this afternoon about three proposed bills in the Texas Legislature that would allow counties to impose a real estate transfer tax to raise money for transportation projects. Needless to say, TREPAC is slightly biased in its view about these proposals so I decided to find out for myself. I read all three proposed bills, SB-950, SB-934, SB-942, arguments pro and con.
This idea stinks!
The only somewhat valid argument for a real estate transfer tax is that it can help keep property taxes under control. Newsflash: Texas already has the highest property tax rates in the country averaging around 2.5%. In comparison, Washington DC which has a real estate transfer tax of 1.1% has property tax rates of 1.3%. Not to mention that this proposal has fund raising as it primary purpose, not lowering property taxes.
The proposed bills in our Legislature leave it up to counties to set the rate but most estimates range from 0.5-1.5% of the transaction price. In some cases, this would increase the closing costs for buyers by thousands of dollars and edge them out of the market. This would result in stifled activity for the housing market and the six percent of the US economy it represents.
There are currently 135 total properties for sale asking an average of $200.27/SF (virtually unchanged) priced as low as $149.9k all the way up to $1.35M. Over half of the current inventory for sale (51.85%) are new construction homes. On average , active listings have been on the market for 124 days which is an improvement over January’s 139 days. Only 1.5% of the current inventory are foreclosures.
Pending Sales
A total of 12 properties went under contract in February, at different stages of the transaction (i.e. pending inspection, pending but taking backups, pending closing) - That’s significantly lower than the January figure. The average asking price of the homes that went under contract is $154.01/SF priced as low as $199k all the way up to $964k. A third of the homes that went under contract were new construction. On average, pending sale listings have been on the market for 83 days. Two of the twelve pending sales were bank foreclosures.
Sold
A total of 13 properties were sold during February (62% jump from a month ago) at an average of $163.33/SF with sales prices ranging from $192k all the way up to $866k. About a quarter of the sold properties in The Heights during January were new developments. On average , sold listings have been on the market for 146 days. Just over seven percent of the solds were bank owned properties.
The current absorption rate for Houston Heights remained unchanged at a healthy 6.78 months - that is, it would take about 7 months to sell all the current inventory at the rate homes have been selling in the neighborhood over the past year. There is a definite disconnect between the price Sellers are asking for their properties and the price homes are actually selling in the area. Currently the difference is about 11.5% which is considerable. Every home is different - that’s true. But if you are in the market trying to sell, you will be facing an uphill battle if your asking price is higher than what it takes to sell by double digit percentages. Without sugarcoating it, the choice is simple:
If you need and want to sell, lower the price to match the market
If you can afford to wait, bring the property back on the market once it has turned the corner.
The numbers never lie - if you know how to read them.
Yesterday, we were contacted by one of our local stations, Channel 39, to contribute to a story on taking advantage of the current market and getting some great deals buying Houston Foreclosures.
Kudos to Andrea Nguyen for a superb job on the story.
As stimulus package was signed into law this past Wednesday, speculation about the housing provisions in it ceased. During the course of congressional negotiations we went from a $15,000 tax credit to nothing, and everywhere in between.
The simple facts
Under the $787B recovery package, first time homebuyers (that make less than $75,000/year) are eligible to get an $8,000 tax credit that does not require repayment, if they purchase a primary residence from January 1st, 2009 through December 31st, 2009. The credit is refundable - If the annual tax liability is less than the credit, the taxpayer will receive the difference in a check. The tax credit does not apply for investment properties or second homes.
Here’s an idea
The median home price in Houston Real Estate as of January 2009 is about $130,000. In the current environment, buyers are getting an average discount of about 7% off asking price. Bank and government foreclosures are often priced 15%+ less than their true market value. With FHA financing, homebuyers can purchase a Houston home with a 3.5% down payment. Finally, the stimulus package tax credit amounts to about 6% of an average priced starter home.
To put it all together: You would be purchasing a home at a sweet 31.5% Off!! As in 68.5 cents on the dollar.
Need I say more to support my conviction that this is THE best time to buy a home in the last 50 years? To spin off a Warren Buffett nugget of wisdom: Be agressive when others are fearful and fearful when others are agressive. The time is now…
Just over a month ago, 2008 came to an end as one of the choppiest years for the real estate market in at least two decades. Across the country, markets were hit with slow sales and falling prices with some areas in the West dropping as much as 30%. News media outlets latched on to the national data and milked it for all it was worth, arguably making it much worse by further frightening buyers that were already feeling uncertain. There was no effort whatsoever, to parse the data and point out markets that were actually doing well - relatively speaking. Instead, we had two equally stubborn extremes: Skewed catastrophic reports from newsmedia and stubborn boneheaded cliches from Associations of Realtors.
Now the numbers for the Houston Real Estate market are out and I’d like to give you the straight story without any coating - sugar or otherwise.
The Bad News
During 2008, Realtors sold a total of 69,220 single family homes which represents a drop of 17.3% drop over 2007. That is, 14,516 fewer homes were sold in 2008 when compared with the year before. The reasons that justify this drop are several and well known: Tightening credit markets and lending guidelines, loss of employment and overall uncertainty about the economy kept buyers from pursuing and purchasing homes. Further, Hurricane Ike put the brakes on the entire real estate establishment in the Greater Houston Area for at least four weeks. It also caused a large number of sales to fall through due to hurricane damage. When it comes to total number of transactions, virtually every market in the country suffered a drop over 2007.
The Good News
The average sales price during 2008 actually rose by about 1% (to $208,266) over 2007 while the median sales price remained unchanged at $152,000. You won’t find this story in the Chronicle because this is very positive news and they’re not in THAT business. In a nutshell, this means that while it would be normal for prices to come under pressure during periods of slower sales, not only did home prices in the Houston area NOT drop - they actually rose. This makes a lot of sense, if you think about it. We did not experience the rampant post Y2K appreciation that states like California, Arizona and Florida went through. In other words, if prices didn’t rise aggressively, they will not fall aggresively either.
Inventory
At the end of December 2008, the months of inventory was at 5.7 months - in other words, it would take 5.7 months to deplete the current inventory based on past 12 months sales (by comparison, certain markets in Florida are looking at 20+ months of inventory). This number is also down from December 2007 - a positive sign that shows the Houston Real Estate market is trending toward being more balanced after spending most of 2008 in Buyer’s Market territory.
Looking forward
In my opinion, the Houston Real Estate market (and other similar markets) will begin to rebound during the last quarter of 2009. Stronger sales will be fueled by home buyer incentives in the stimulus bill, looser Fannie Mae credit restrictions for investors and more fluid credit markets overall. With a stronger push in the sales territory, prices should remain stable if not experience mild appreciation.
As a consumer, you have the right to truthful information, not agenda driven spin. I hope to have provided some insight into the realistic conditions within the Houston Real Estate market.
In the midst of an atmosphere of job losses, layoffs and unemployment, Houston just closed the year as the top in the country for job growth adding 57,300 jobs in 2008. From the Houston Business Journal story:
Houston had the best year of any market, picking up an additional 57,300 jobs, according to a new bizjournals analysis…Seventy-two of the markets suffered declines in employment in 2008. The New York City area took the worst hit in absolute terms, losing 120,300 positions…Texas dominated the small list of markets that added jobs last year, nailing down the top three positions, and four of the top five.
The increase is down significantly from 2007 when the area added 218,000 jobs. But the fact that we have job growth while 88% of markets lost jobs in the same time period is a testament to how well the area is weathering the storm. Since the local employment market is the foundation that supports (and fuels) our housing market, this is very positive news for Houston real estate.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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