Kyle's Blog

Congressional Budget Office Proposal Could Further Damage Economy

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Wed, 02 Sep 2009 11:01:20 -0500

Congressional Budget Office Proposal Could Further Damage Economy

It's a well known fact that a large part of the American economy is driven by housing, whether it be home sales, or construction. And most Americans enjoy the mortgage tax deduction as way of offsetting the tax burden they bear every year.

Now the Congressional Budget Office has targeted the mortgage tax deduction as a means of stemming the deficits generated by Federal Governments out of control spending. The recent stimulus packages and the proposed Health Care Reform package have driven deficits to new highs.

The CBO is now proposing to lower the mortgage interest deduction cap from $1 million to $500,000. The second proposal would eliminate the tax deduction and replace it with a flat tax credit of 15% of the annual mortgage interest paid by consumers. This could have devastating effects on home sales, but more importantly home construction which provides hundreds of thousands of jobs which have already been negatively affected by a weak economy. If implemented, this could not only slow our economic recovery, but potentially throw it our economy into another downward spiral.

We all know how the Federal Government thinks, "start small, think big", it will simply be a matter of time before necessity would drive another reduction in the mortgage cap, and a reduction in tax credit. How long do you think it would take for these trends to wipe out all deductibility of the mortgage tax credit?

Use your $8,000 Tax Credit NOW- New guidelines passed this week!

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Mon, 01 Jun 2009 15:01:15 -0500

Just In Time to Make Dreams Come True On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time homebuyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs. This, according to Les Christie of CNNMoney.com, will continue to push demand by first time home buyers. Mr. Christie states a recent study by the National Association of Realtors which shows the $8000 tax credit for first time home buyers has truly stimulated the real estate market. First time home buyers recently accounted for 53% of all homes sold. That reflects a 10% surge in that sector of the home buyers market. It’s anticipated this new incentive will cause another major influx of first time home buyers entering the market to purchase a home

As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn't collect the $8,000 credit until tax time, rather than at closing time -- when it's needed. "We believe this is a real win for everyone," said HUD secretary Shaun Donovan in a speech before the National Association of Homebuilders (NAHB). "Families will now be able to apply their anticipated tax credit toward their home purchase right away. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

The National Association of Realtors states prior to this action, many buyers were still locked out of the market. Recent changes in the mortgage industry have eliminated most programs which provided 100% financing for home purchases. Allowing family’s immediate access to the use of this $8000 for down payment/closing cost has will lighten the stress on families who struggle to save up for a 4% down payment.

If you have been waiting to purchase your first home, now is the time to act! This program is currently slated to end December 1, 2009. Don’t miss this opportunity to enjoy the dream of home ownership!

Pending Home Sales are on the Rise !!

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Thu, 28 May 2009 12:15:39 -0500

Pending Home Sales Are On The Rise According to NAR
By Kyle Smith

Market indicators for the first three months of 2009 are showing signs of hope based on recent pending home sales. With many first-time buyers taking advantage of near record-high housing affordability conditions, and record low interest rates according to the latest report released by the National Association of Realtors (NAR) on Monday.

NAR's Pending Home Sales Index, which looks at recent real estate contract sales as a barometer of future activity, reflects some signs of promise. Contracts written in March of 2009 show a 3.2 percent increase over contracts written in February of this year. That is 1.1% higher than contracts written in March of 2008.

According to Lawrence Yun, NAR chief economist, states it may take a few months for the market to gain momentum, but current signs are encouraging. This increase could be the leading edge of first-time buyers responding to the $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment," Yun said. "We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around."

A regional perspective shows the southern and western sectors of the nation saw improvements in their localized pending home sales. NAR reported that the index in the South rose 8.5 percent in March and is 7.7 percent above a year ago.

NAR's overall Housing Affordability Index (HAI) continues to linger near record highs. In layman's terms, one can buy more home for the same or less money than in recent years. Homes provide a unique opportunity to generate tax benefits, while appreciating in value. Tyler and the East Texas market have seen little effect in home prices over the last 18-24 months. Market time, the time a home spends on the market before a contract is received has increased, but only a few segments of the market have seen prices fall as sellers have proven willing to wait for the market jitters to settle before taking less for their homes.

According to NAR, a median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount, NAR said. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.

Tyler has seen an increase in foreclosures over the last 18 months. The largest part of the foreclosures has been in the investment sector as many investors chose to accept adjustable rate mortgages (ARM's) for their lower interest rates. However, those adjustable rate mortgages began to reset over the last 18 months, and now they find themselves unable to cover the increase in mortgage payments. I have seen a large increase in the number of investors who have taken money out of the stock market and paid cash for investment properties. This has created a significant return on investment with the affordability of investment properties, and a rise in prospective tenants searching for housing in an already tight market. Foreclosures have forced a lot of tenants to relocate, and the loss of available properties has push demand well over the supply of homes available for rent.

What does this mean to you? Whether you are a first time home buyer, a buyer looking to move up to a larger home, or an investor interested in diversify your holdings, now is the time to act. If the market continues to improve, and interest rates begin to rise as has been predicted by many leading economist, this affordability may not hold out for long. Talk to a Realtor® in your area to see if the time is right for you to purchase a home.

Kyle Smith is a Real Estate Consultant with Keller Williams Realty in Tyler, Texas.

Obama Takes Action to Reduce Foreclosures, and Increase Oversight and Prosecution of Fraudulent Loan Practices

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Wed, 27 May 2009 01:03:01 -0500

President Obama signed two important Acts into law this last week. The first initiative was the Helping Families Save Their Homes Act, and the Fraud Enforcement and Recovery Act (FERA), on May 20. The Helping Families Save Their Homes Act is aimed at helping homeowners by making mortgages more affordable and preventing "avoidable" foreclosures.

Obama stated this bill "expands the reach of our existing housing plan for homeowners with FHA or USDA rural housing loans, providing them with new opportunities to modify or refinance their mortgages to more affordable levels." Estimates are that as many as 9 million homeowners could benefit from this legislative action. The legislation, however, was ultimately passed without the cram down provision. The critics state the "cram down" provision, would encourage borrowers to shirk their responsibility, and miss payments or default on their loans to benefit from a forcible rate reduction induced by government control or legislation. Removing the cram down provision made the bill more palatable to both the legislators, and investors holding those notes who would be negatively affected the forcible reduction of interest rates. Another concern over the "cram down" provision was that this could be seen as a step to nullify all written contracts as unenforceable. Only time will shed light on the actual results this bill has on homeowners in jeopardy of default, and those who hold the notes.

In an effort to curb fraud in the mortgage lending industry, FERA was passed to provide $331 million to agencies such as the Federal Bureau of Investigations (FBI) and the Securities and Exchange Commission (SEC) to combat fraud. Investigations of mortgage fraud have doubled over the last three years. The law also expands the authority of the Department of Justice "to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes," according to President Obama.

US Banking Suffers Another Hit, the 24th in 2009

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Wed, 27 May 2009 01:00:24 -0500

The U.S. treasury department through its agency, the Office of Thrift Supervision, closed down BankUnited, FSB, a Florida based institution, last week. BankUnited incurred a loss of over $1.2 billion last year on account of loan defaults. According to authorities, BankUnited was "was critically undercapitalized." An investor group led by the Blackstone group and the Carlyle Group has acquired the assets and liabilities of BankUnited, FSB, and will reopen the bank as a newly chartered savings bank, named BankUnited. The closure is expected to cost Federal Deposit Insurance Corporation (FDIC) about $4.9 billion. The struggling economy and the consequent bank failures have resulted in a drastic reduction of the FDIC funds available for bailouts, from $52.4 billion as of December 31, 2007 to $18.9 billion as of December 31, 2008. In 2007, the nation saw 3 bank failures- that number rose to 25 in 2008, and now stands at 24 in the first four and a half months in 2009. According to FDIC, this trend will continue throughout 2009, and could continue to increase for several years to come.

New Credit Card Rules Passed

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Sat, 23 May 2009 13:03:39 -0500

New Credit Card Rules to Protect Card Holders

President Obama signed a new law intended to protect consumers from the "predatory" practices of the credit companies. Robert Gibbs, White House spokesman, said, "These are important reforms to protect consumers and to bring some commonsense rationality into our financial system". The law will restrict card issuers from providing credit cards to consumers less than 21 years of age unless they can provide proof of income sufficient to repay the debt. Otherwise, a parent or guardian would be required to sign on as a guarantor, or co-signor to the obligation. Many parents are already speaking out that they don't want to be held responsible for the action of their teens. The opposition from the credit card industry didn't persuade Congress to waver on the new restrictions, which passed the bill. Another restriction in the new bill would require issuers to provide 45 days notice before an interest rate increase could take affect.

Hey, Chicken Little!! The sky isn't falling, but mortgage rates sure have!!

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Fri, 01 May 2009 16:32:55 -0500

Freddie Mac released the news that mortgage rates are the lowest since they started tracking it back in 1970. This week has seen rates that are 4.78% and holding. The Los Angeles Business Journal published an article relating information from Freddie Mac via The Washington Business Journal.

For home buyers (who typically move every 5-7 years), this means that on a home priced at $200,000, this rate will drop their payment by $212 a month, or a savings of $2,500 a year! That's a good chunk of change- when you figure that over 5 years,it's over $10,000!!

If you are thinking about buying a home this year- with the $8,000 Tax Credit, the mortgage rates at a 39-year low, high inventory of homes for sale, there's never been a better time! So, what are you waiting for? Let's go find that new home for you. Don't just be wishing you had bought that new home- DO IT NOW! ... be proactive, save yourself a whole lot of money & start living your homeowner dreams NOW.

The Perfect Fixer Upper

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Mon, 17 Mar 2008 18:32:28 -0500

I personally have never owned a new home. I perfer to purchase the home that others look at and claim, "That home needs WAY too much work". Why, you ask, woud I be such a glutton for punishment (WORK)?? Because work is where the profits are at! I have personally purchased and remodeled over 20 homes. I have also assisted others in their search of the perfect fixer upper, and even helped a couple of buyers begin a new career in flipping homes.

If the thought of holding a paintbrush sends shivers up your spine, you may be a candidate for a new home. However, a fixer upper can come in many shapes and sizes, so to speak. A fixer upper can be a home that simply needs a coat of paint and flooring, or as extensive as tearing out everything to the bare studs. Some even scream for the studs to be moved, allowing for better flow of the floorplan.

Should you choose to become a "Weekend Warrior", it is extremely important to know not only what talents you have, but which of these talents you can perform at a professional level. Many ambitious entrepreneurs buy a home, a hammer & paintbrush and strike out on their new adventure. It's important to understand one's limitations though- some quickly realize they are in over their heads, and end up having to call in the professionals to fix what they messed up, PLUS the original repairs on the home. So, it's important to capitalize on what you CAN do, and hire out what you cannot do.

You may be the investor who has all the vision of what the property can be, but have no desire to do any of the work yourself. If this describes you, you might be the "Passive Investor".

Whether you are the "Weekend Warrior" or the "Passive Investor", one thing is true for both- there are investments which lead to immediate equity to be had in today's real estate market. You just have to know how to find them. The first step to finding them is contacting an agent who not only knows the market, but knows the cost of repairs, remodels, and can determine the value of your home post-remodel. With my vast experience in this field, I am prepared to help you locate the best possible investment- one that will not only create immediate equity today, but will also appreciate in value and put cash in your pocket on down the road.

Call me today and let's get started looking for your "Perfect Fixer Upper" today!

Kyle Smith, Realtor
The Stars of Texas Team
Keller Williams Realty
903-530-4171
kyle@starsoftx.com

The “Truth” About the Housing Market…… Don’t Listen to the News!!

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Thu, 25 Oct 2007 15:54:41 -0500

Unless you live under a rock, you undoubtedly have read or heard the stories in the media about a housing market decline. And what is so amazing is each story is stated as though the decline is taking place in your neighborhood. Unfortunately, the news isn’t always providing factual statements as it relates to you. In fact, you will probably be surprised to learn that home prices have increased by approximately 1% when 2007 home sales are compared against the numbers posted in 2006.

“Sensationalism sells” is a statement I remember hearing as a child. Before television and radio, most people learned about what is taking place by reading the newspaper. In order to sell more papers, editors learned to create “Sensational” headlines. And nothing creates interest and sensationalism more than bad news. Bad news, death tolls, and catastrophe make much better news than success and survivors.

The National Association of Business Economists published an online report titled, "Economists See Credit Problems as Bigger Threat than Terrorism”. This is sensationalism at it’s best. They followed this statement up with one in three members claiming that “the housing boom can be described as a 'serious National bubble." However, they stated later in the article that three in four said they would "buy a house today if they intended to use it as their primary residence”. This is sensationalism that goes unsupported by the opinions of it’s own members. In the same article, members were asked to look five years into the future, and 42 percent expected US home prices to remain flat, while 41 percent said prices would rise". But how about this, 34 percent of the same group calls the housing bubble a threat bigger than terrorism. I’m not saying the media would make the same mistake, but I would expect the headlines to be based on the beliefs of the largest segment of the group, not the minority. To wrap up the opinions of the NABE, "59 percent still say there is no national housing bubble, only significant local bubbles. Another 8 percent said there's no bubble at all and that the market is functioning correctly". While the sensational headlines may have missed the mark, it appears the majority of the NABE members do understand the fact that the housing market should be studied on a local level.

Another factor that may play into the stories told by the media is time. It’s much faster and in fact easier to find negative statistics to report. National media has produced hours of footage stating how the housing market has suffered a severe downward trend. But they are not studying Tyler, Texas. Tyler has remained largely unaffected by negative pressures due to our strong and diversified economy. The Tyler area has a large job pool of skilled labor, as well a very large population of skilled professionals. Another factor that helps maintain a strong market is the incredible number of Americans that are learning about Tyler and east Texas as a phenomenal retirement community.

While the national housing trend has slowed the influx of relocation and retires moving to our area, this change has only slowed the price increases in our market. Michigan has been affected by job declines; Las Vegas and some coastal communities have been affected by what seems to be overbuilding. Overbuilding is where development and construction has grown at rates that are unsustainable levels. These factors along with the crisis in the mortgage industry have created a downturn that has trickled into our community. But nothing like has been reported, not it is time to set the record straight. While some markets in the nation have been negatively affected, Tyler, and it seems much of east Texas has remained mostly unaffected, at least where price is concerned. The time homes spend on the market have increased in some price ranges. Under $150,000, homes are still selling within the same timelines we have experienced fort he last several years. The market for homes over $200,000 has slowed somewhat, however, part of the slowdown in this market is the tremendous amount of development and new construction that has focused on the luxury market.

I have spoken to over 100 agents over the past 6 months, discussing both recent sales activity, and what the future holds. And everyone I spoke with shared the same mindset I hold, if the media would report the real numbers, numbers based on our local market, we would continue to see the same robust activity we have seen over the last 5 years. Our market remained unaffected for the first several months after the media reported a shift to a buyers market. Since that time, a minor softening has occurred in the higher price ranges, however, our market continues to grow, our prices have continued to climb, and the “news has failed to report this story”. Therefore, I feel safe in saying, “Don’t listen to the news, ask a Realtor® what is happening in the Tyler real estate market, and what would be the best course of action for you in today’s market.

To go back to the article NABE article, 58% of the economists "predicted a 'meaningful' recovery in U.S. housing markets before the second half of 2008 or in the second half of 2008. The majority of the other 42% predicted the recovery in 2009". If history repeats itself, as it typically does, the “national trend” will be a soft market for two or three years, followed by five or more years of a strong and vibrant seller's market.

Realtors® learned in Real Estate 101 that the market is driven by supply and demand. And let’s face it, as long as we have rising population, rising incomes, and ambitious individuals, we will see home prices rise and fall. But the overall trend will be long-term appreciation. The housing market is vital to a stable economy, with that being said, the Federal Government will insure mortgage money is available, and at rates that will support homeownership without overheating the economy.

If you are reading this message from a market outside of East Texas, remember, the same applies for your market. The media tends to report on generalities, that don’t always reflect the actual market conditions. In fact, homes in different price ranges don’t always follow the same trend. It is possible to have a sellers market in one price range, while other price ranges are experiencing a buyers market. So always consult with a professional before you make decisions that affect your families financial future.

As you search for a Realtor® please keep one thing in mind, some of us love the business of helping others buy and sell homes, while some love the people we get to work with, and a few of us cherish both. Find an agent that not only knows the business, but also has your best interest at heart- you will both prosper in this type of relationship.

Tyler Market Is Heating Up!

Kyle Smith- Stars of Texas Team (Keller Williams Realty) — Tue, 02 Oct 2007 16:03:53 -0500

Good news for Tyler and East Texas homeowners, the buyers are coming. We have seen a sudden increase buyers looking at homes in the last week. How much you ask, 350%. After a few weeks of slow activity, we have received a surge of activity, with contract numbers increasing as well. Interest rates have fallen over the past two weeks, and that seems to have fueled much of this renewed interest in home buying.