- Dec 2008 Time to buy?

It may be time to start thinking about buying a house

By Ron LieberYour money: New York Times

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.

That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.

This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.

Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.

When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”

The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.

Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.

While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at PasadenaCityCollege in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”

For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.

Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”

One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.

Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.

Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.

“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”

- Dec 2008: Feds

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Federal Reserve Announces $600 Billion Plan to Buy Mortgage Assets

Ending months of speculation, the Federal Reserve announced this morning that it would spend up to $600 billion to buy mortgage-related assets in an attempt to prop up the battered housing market.

Specifically, the Fed said that it would buy as much as $100 billion in direct obligations from the housing-related government-sponsored enterprises—Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. In addition, it will buy $500 billion in mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

Though the move was a positive sign that the federal government wants to help the housing market, analysts questioned whether financial institutions would use the funds to invest in the residential mortgage market, especially given the likelihood of further declines in home prices and rising foreclosures. The Fed hopes to at least improve liquidity and reduce mortgage interest spreads.

“Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late,” the Fed said in making the announcement. “This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.”

Mortgage interest rates began falling after the announcement. By mid-afternoon, rates on 30-year fixed-rate mortgages were below 6 percent, according to Bankrate.com.

The $600 billion would be equal to about 5% of total mortgage debt, 8% of securitized mortgage debt, and 13% of agency-backed mortgage debt, according to an analysis by Zelman & Associates.

The Fed will begin a series of competitive auctions through its dealers next week to buy the direct obligations. It hopes to begin buying mortgage-backed securities before the end of the year. The purchases will be conducted by asset managers selected through a competitive process. “Purchases of both direct obligations and MBS are expected to take place over several quarters,“ said the Fed’s statement, adding that further details would be provided after consultation with market participants.”

The announcement explains Treasury Secretary Henry Paulson’s reluctance to give specifics last week about government plans to buy troubled mortgage assets. Paulson took heat from Congress for retreating from the original focus of the Trouble Assets Relief Program (TARP).  In a press conference today, reported by Associated Press, Paulson said “It is naive for any of us to think that when you are dealing with a situation of this magnitude that a bill could be passed or a single action taken to make all the issues go away.”

The move appeared to lift the stock market in early morning trading. But by mid-afternoon, the Dow Jones industrials had retreated into negative territory as many investors sought to cash in gains of the previous two days. Builder stocks, as measured by a Dow Jones Wilshire U.S. Home Construction Index, were up more than 10 percent through mid-afternoon trading.

Separately, the Treasury announced another program today to prop up the markets for consumer lending. The Treasury will provide $20 billion in credit protection from last month’s $700 billion bailout package to the Federal Reserve in connection with a $200 billion loan facility. The Fed will lend up to $200 billion to holders of securities backed by consumer loans of different kinds

Dec. 1, 2008 - Dec 2008: Last year

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This time last year:

Homes valued at $575,000 were selling for $505,000 while
the market was still in its unknown position. Today that very home is selling any where from $475,000 -$515,000 doesn’t sound to much better, does it? Well, look at it this way. If you are one of the millions of Americans who purchased at a non inflated rate, or you’ve owned your home for the last five to six  years you are among the millions of Americans who are in a great position giving the scenario below.

Five to six years ago 2002-2005 you may have purchased a 4 bed 2.5 bath home, 2,400 to 3,000 Sq-Ft for roughly $379,000, placed 3% down $11,370.00 with a remaining mortgage of $367,630.00. One year into your purchase (2003) you decided to refinance for a lower rate. Now your homes value reached $495,000.00 < a sneak preview into inflated home values begins.

You may have decided to capitalize on that instant equity you just received. Say you reached in and took $90,000 and decided to add some personal touches to your home. Within the following year your home is worth $585,000.00 to $625,000.00 with all those upgrades and tailored landscape. Homeowners who decided to sell at this point made an un-heard-of ROI

For those of us who stayed where we were, began to see a slip in the market, not to worry though. In 2006 we gained knowledge of the sub-prime mess and how this was going to spiral out of control. Still, no worries. Now we're in a 2008/09 market, our home values have dropped considerably from $625,000.00 to $495,000.00 / $515,000.00. Was this really such a horrible drop? We're actually in a 2003 market if you do the math correctly. Lets see

In rough numbers your mortgage is $367,630.00, Equity loan of $90,000.00 = $457,630.00.
Between March 2008 and November 2008 Our Realty Team has sold many 4 bed 2.5 bath homes ranging from 2,400 to 3,000 Sq-Ft for $497,000.00 to $526,000.00 in less than 50 days.The homeowners gain was $68,370.00. Most of our homeowners have downsized to roughly 1,800 Sq-Ft to 2,000 Sq-Ft at a market price of $299,000.00 to $350,000.00 having more than enough to place down on their next purchase. Others have bought up, still having enough to place down.

Who do you believe is on the front line of our countries housing market situation.
If you were charged with a crime you did not commit, would you hire a probate Attorney or an Attorney who practices Criminal Law? No brain-er on that  right? When you have an interest in selling your most valuable possession (your home) Do you seek the advice of  the local reporter or do you seek the advice of a professional Realtor. 

It doesn't hurt to make a call. In today's market an Agent has nothing to gain by pricing high to get a listing, so you'll find most are very up-front with your interests, so the next time you sit on your sofa and pick up that little black box, before you click the power button, know this. The media prints what sells and very seldom less.

Want to learn more?

Connecticut Economic Department

How is the economic situation in CT

Labor Market Information

CT Demographics & the economy

- Dec 2008: Gay Marriage

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Gay marriage law could boost state economy                                                

By MARIAN GAIL BROWN
Staff writer
11/22/2008

With same sex marriage now legal in Connecticut, combined with the buying power these couples possess and the scenic New England backdrop, it looks like a no-brain-er that the Constitution State needs to roll out the rainbow carpet.

The buying power of the gay and lesbian market is projected at $712 billion this year, according to Witeck-Combs Communications' annual survey of gay consumers. And the Williams Institute at UCLA Law School estimates that despite the fact that the state has only 7,386 same-sex couples, gay marriages could pump anywhere from $3 million to $13 million into Connecticut's economy within the next three years.

That's because Connecticut has no residency requirement for marriage licenses. Couples can hail from anywhere. Beside Connecticut, Massachusetts is the only other state where gay couples can wed, now that California has passed Proposition 8.

And until July, Massachusetts, unlike Connecticut, required couples to live in that state. And while New York State does not allow gay marriages, it has announced that it will accept a same-sex marriage conducted under valid law in another state. With Connecticut being closer to the New York metro area than Massachusetts, a number of wedding planners see the shorter drive, travel time as an incentive to wed here, rather than there.

"Connecticut is a progressive state and a place where people are open minded and accepting of others," said Ron Johnson, co-owner of Executive Chef

in Trumbull and Stratford, who anticipates an uptick in business because of Connecticut Supreme Court's same sex marriage decision that took effect Nov. 12.

Executive Chef is a 17-year-old catering company that has arranged hundreds of weddings and other formal affairs, and has several gay wedding receptions already booked.

If Connecticut tourism and economic development agencies play their cards right, Johnson says, they have a chance to market the state in new, more inviting ways that show homosexuals are valued and accepted.

"In the same way that heterosexual people think about going to Vegas to get married or Tijuana to get divorced, Connecticut could position itself as a mecca for gay marriage," Johnson said.

"Sooner or later, it seems to me, that this is the way the rest of the country is going to go anyway, and we'll find much more important things to do than poking our noses into the private lives of people this way."

The state Department of Public Health expects "an initial surge in the number of same-sex marriages for the next few months," William Gerrish, a DPH spokesman, said, adding that it cost the state $26,000 to reword its marriage licenses and distribute them to the state's 169 town clerks.

In the first few days the new document was available, about 70 gay couples completed them. A Connecticut marriage license is valid for 65 days from the time a couple takes one and a clergy member or justice of the peace officiates the ceremony.

In the first six months that California permitted same-sex marriages, close to 18,000 gay couples wed. Similarly situated couples now have no West Coast state in which to wed.

"Connecticut could look quite inviting to these couples," Wendy Marks, a University of California at Riverside professor of economics, said. "A lot of these people will turn to either Connecticut or Massachusetts to get married."

"The more welcoming Connecticut is to them, the more cultural acceptance it exhibits, the more it stresses that it protects civil rights and ensures that gays aren't harassed, this group may come to view Connecticut as a place to move to," Marks added.

"Over the long haul, attracting more gay couples to wed in Connecticut might encourage them to think of Connecticut as place they'd want to relocate to. If that happens, what Connecticut would see would be an infusing of more highly-skilled, highly-educated professionals in its workforce."

Bob Heffernan, executive director of the Connecticut Florists Association in Monroe, sees gay marriage as boon to the state's florists.

"When civil unions came into law in Connecticut, the florists across the state did a fair amount of business. We had floral arrangers from Vermont and Massachusetts conduct workshops on some of the new mores and customs associated with gay weddings," Heffernan said.

"It remains to be seen how many more marriages will take place in Connecticut because of this court decision, but what we're doing is urging our members to go after this market and tell everyone that they welcome their business and want to help make their day as special as it can be."

State Department of Revenue Service statistics show that Connecticut's 531 florists grossed $87.7 million in floral sales last year. In 2006, DRS figures show that 599 florists had gross sales of $90.6 million. Typically, 10 percent of the state's floral sales come from weddings, from table arrangements to bouquets and boutonnieres for the bridal party.

Heffernan has a civil union with his long-time partner. Their ceremony was conducted on Dec. 3, 2005, just two months after the state's civil union law took effect, at the couple's Litchfield County home. Thirty-five relatives attended.

"We had no idea how big it would be, and who would attend. We put the word out to our relatives. We called them. We didn't mail a single invitation. All of the inviting got done over the phone," he said. "And every single person we invited showed. We were amazed about all of the love and support we had. It was incredibly uplifting."

Heffernan now wonders what the General Assembly will do in its upcoming session about civil unions, whether such legal relationships will be

converted automatically into marriages or remain as is.

"We've been together for 14 years, and if the Legislature takes action to convert our civil union into a marriage, then I don't know that we have to go through another ceremony," Heffernan said. "So, what we might do is still up in the air."

Gay nuptials already show signs of becoming big business in Connecticut. The Rainbow Wedding Network, a North Carolina-based bridal show company catering to the gay market, has a same-sex wedding expo planned for Dec. 7, at the Courtyard by Marriott in Shelton. Forty gay-friendly businesses will showcase everything from catering, travel planning, wedding cakes, and photography to musical talents.

Rainbow Wedding Network organizes about 25 expos in about a dozen states annually, including New York at the Javitz Center, Boston, Atlanta and San Francisco.

Amanda Hager is an event planner with the Rainbow Wedding Network, who lives in North Carolina. Four months ago, the 26-year-old met her partner, Loren Buhse, a landscaper. The two women lived six blocks away from each other in their town for the past two years, but had never crossed paths.

Then some mutual friends introduced them at a Mexican restaurant.

"You know that saying that when you you've met 'The One' that you just know it," Hager said. "I'd hear my mom say it and I'd think, 'that is sooo corny.' It's ridiculous. Then I shook this woman's hand and I just knew. I couldn't believe it. But I did. I know that we are meant to be together."

A day after Rainbow Wedding Network's expo in Shelton, the North Carolina couple will fill out a marriage license at City Hall in Shelton.

"The hard part will be to decide where to have the ceremony," Hagar said. "We want it to be outdoors, someplace beautiful, someplace special that will have meaning to us. That's what we are trying to figure out now."

- Dec 2008: Info

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INFO THAT HITS US WHERE WE LIVE

October Existing Home Sales last week were reported down 3.1%, to a 4.98 million annual rate. Compared to a year ago, existing homes sales are down just 1.6%. Basically, sales have remained in a range of 4.85 to 5.14 million for the last 14 months. But we are working off the excess inventory, which is now at 9.6 months, down from the 11.0-month peak set in June. It is encouraging that credit-worthy buyers are getting loans and that mortgage rates, which have been low, may be coming down even more.

October New Home Sales came in at a 433,000 annual rate, lower than expected. The inventory is at 11.1 months, but the actual number of new homes has fallen to 385,000, down 32.5% from its mid-2006 peak and its lowest level since 2004. Unsold completed new homes are now down to 172,000, a record decline from their 199,000 peak in January. With the recent drop in mortgage rates, some experts are now proposing we are perhaps at or very close to the bottom for new homes sales.

Last Tuesday saw some very positive news for our industry, when the government announced a $600 billion program to purchase mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae. This should help bring down mortgage rates for people buying or refinancing with a conforming mortgage. Past recessions have shown that home sales go up when mortgage rates go down.

Review of Last Week
MORE TO BE THANKFUL FOR... The markets ended Thanksgiving week recording their fifth straight day in a row of gains. During that time, the Dow rose almost 17%, the S&P 500 19% and the NASDAQ well over 16%. This was the first time the Dow and the S&P gained for five straight sessions since July 2007. And these were the biggest five-day percentage gains in over seventy years.

All this happened in a week that had its share of disappointing economic news. Q3 GDP was revised downward and we had the first decline in consumer spending since 1991. Consumers' risk aversion hit the business world too, where new orders for durable goods sank 6.2% in October. The Chicago PMI, a manufacturing gauge, came at the lowest level in over 25 years.

But wait. Personal income was up 0.3% for October and, although down for the month, consumer spending is up 2.3% for the year. Oil is now $53.63 per barrel. Investors also gained confidence from the government's $300 billion backstop for Citigroup, as well as the $600 billion purchase of mortgage-backed securities covered above. Naysayers feel the shortened, low volume trading week means this is just a bear market bounce, but it's encouraging to see some confidence coming out of Wall Street.

Friday's rally left the Dow up 9.7%, to 8829.04. The S&P 500, up 12.0%, went to 896.24. The NASDAQ, up 10.9%, ended at 1535.57.

Stock prices are going up, but people still worry the consumer could put the brakes on this holiday season. So many investors seek a safe haven in bonds, pushing the yield of the benchmark 10-year Treasury to an historically low 2.906%. This points to lower mortgage rates, which already dropped last week and are expected to slide even lower, as reported above in Home Base.

This Week’s Forecast
WILL IT BE A FREAKY FRIDAY?... It should be an interesting week, but the big focus will be on Friday's November employment report. Economists expect another month of job losses and everyone will key on the overall unemployment number.

On the way to this hopefully not-too-freaky Friday, we'll have Monday's ISM manufacturing Index and Tuesday's appearance before Congress by GM, Ford and Chrysler, revealing how they would deploy a possible $25 billion government loan.