Nothing is a certainty—especially considering the future of America’s housing market. Experts are predicting improvement, and at the very least, stabilization. Empirically, there is evidence out there to suggest that home prices will continue to fall, and other reasoning that suggests prices will cease falling, especially in the states like California, Nevada, Arizona, and Florida that were hit hardest by the market collapse.
Evidence suggesting that matters will improve is backed by statistics stemming from the unprecedented amount of federal help the government has given the housing market. Things like the Homebuyer Tax Credit and 50-year record low mortgage rates are keeping homes selling—at least for right now. But when considering the long term according to John McIlwain’s recent publication, entitled “Housing in America: The Next Decade”—which he published as Senior Resident Fellow and Chair for Housing at the Urban Land Institute—there are certain economic factors that dictate a very slow recovery and suggests a shift in the way the housing industry has been functioning.
(To read about Mr. McIlwain’s credentials, click here.)
Mr. McIlwain plainly points out that there’s one outstanding factor that’s going to hamper a stabilized housing market: foreclosure rates. According to his dossier, there were 1.7 million foreclosures in 2008, 2 million in 2009, and there are projected to be 2.4 million foreclosures in 2009. Currently, 1 in 7 mortgages are in default. In an attempt to curb soaring foreclosure rates, the federal government appointed the Home Affordable Modification Program (HAMP) to adjust rates for mortgages looking at the prospect of foreclosing. Unfortunately, this program has not proved as effective or as popular as the Homebuyer Tax Credit. HAMP has adjusted less than 5% of eligible mortgages. At best, the government’s attempts to help the foreclosure problem has only stabilized the damage, not reversed it.
McIlwain goes on to point out that despite the efforts of the government, the two major factors that are preventing an improvement in foreclosure rates are unemployment and “under water” mortgages—both issues that have had disparate regional effects and are currently projected to get worse on a national scale before they get better.
Above is a look at unemployment coming into 2010.
These mortgages that are “under water” (meaning that the mortgage rates are paying for a house that is no longer worth the price of the mortgage) are stalling what McIlwain calls the “move up” market, meaning homeowners who upgrade to better, more expensive second properties, or who move to attain better employment. The inability for these homeowners to relocate or pay off their under water mortgage is “[constraining] labor market mobility and economic recovery.”
Inevitably, McIlwain comes to a pessimistic conclusion: because government programs cannot compensate for unemployment or under water mortgages, foreclosures are greatly expected to rise as home prices will fall—despite what off-the-cuff projections will tell you.
Now if you feel a little bit lost or perhaps disheartened about McIlwain’s decidedly grim predictions, he does do us the service of outlining exactly how we’ll pull out of this housing dilemma. That, however, is another point to pick up in another blog.
Archive for February, 2010
The Future of the Housing Market-According to John McIlwain
Monday, February 8th, 2010More About Listing Photography
Friday, February 5th, 2010
Inspired by an article in Austin, TX’s Realty Line Newspaper about listing photography, I thought I would elaborate even more on the topic, because I can’t stress enough the importance of taking amazing pictures for your property. What was once referred to as curb appeal is now “pix appeal,” to quote FrontDoor.com’s Shannon Petrie. Homeowners no longer rely so much on their curb appeal, but their online appeal. It makes sense considering that 87% of buyers search for their home online.
So what exactly can you do to make your house look as good as possible?
A crucial point to stress would be the idea that you are trying to capture the space of your house in the photo—not how nice your things look in the room. That’s important to keep in mind because there is a difference. You may have a nice living room set up with electronics and sofas and ottomans, and although all of that might be clean and tidy, to the buyer looking at photograph, that’s just going to clutter up the space of the living room. Sometimes, as the seller, you might be too far in the proverbial woods to see the trees.
When taking a photograph, it’s important to consider your lighting. Nothing can mess with a home’s visual appeal more than poor lighting. According to Petrie, natural lighting is your best bet. It tends to give rooms a bright and open appeal. Flashes typically cast nasty shadows that degrade the quality of photographs. When doing exterior photos, you want to shoot on overcast days so that sunshine doesn’t cast shadows on the house. Open curtains and let that natural light flow into the room. You want the house to look bright and inviting.
In order to capture the space of a room, you are going to want to shoot from doorways or corners of rooms so that you can include as much of the space within as possible. The same goes for the exterior. Avoid shooting the property head on. Shooting the house at an angle will give the viewer a better grasp on the space and shape of the house.
But the best advice is to take lots of photos. Give yourself as many chances as possible to capture the essence and beauty of the room. Digital cameras allow you to take your time, deliberate, and over-shoot—if you have to.
Once you’ve gotten the photos you wanted, it’s always a good idea to touch up afterwards. You can do this using Photoshop (if you have it,) iPhoto, or use the assistance of free online photo editing tools. There’s a whole plethora out there. If a room looks a bit dark, lighten it up. Enhance colors to really make that picture bounce off the page.
The same way a bumble lands on the prettiest flower, a buyer will take more interest in prettier and more spacious homes. You cannot be too meticulous when photographing your house. The better your photographs are, the more buyers you will attract with your MLS.
Credit Cards Over Mortgages
Wednesday, February 3rd, 2010Remember that Brent White essay about under water mortgages? Some of you may have read it and some may have not. Basically, it was an essay on how under water mortgage owners are financially better off by walking away than by attempting to pay off a mortgage for a house that no longer retains equal value. He also got into some very interesting insights about the psyche of the American consumer and the pressure felt to fulfill their obligation of paying their mortgage. Engaging stuff.
Building upon that, a new study has shown another trend moving away from people’s tendency to pay off their mortgages. Now, it seems, that people are more bent on paying their credit cards off as opposed to keeping their mortgages current. No more than three years ago, the exact opposite was the norm.
In a study conducted by Trans Union, a global credit solutions company, and published on CNNmoney.com, it is reported that now about 6.6% of consumer are delinquent on their mortgages while being current on their credit card payment, while in 2007, 4.6% were delinquent on their credit card payments and only 3.95% were delinquent on their mortgage. The statistics increase for states that were hit hardest by the mortgage crisis—namely California and Flordia.
It doesn’t seem like a whole lot, but it cites an increasing trend in the way Americans are looking at their financial portfolios. Something has caused them to push their mortgages to the back burner. Most likely, it’s the fact that people’s homes are no longer making them money, so they’re more inclined to let their mortgages slip.
Now it seems that Mr. White’s little diatribe on the idea of consumer guilt and fear of shame over their mortgage has flopped to the side of credit.
