November 5, 2010

Is it true what they say?

With all of the information we are all bombarded with in the media, how are we really supposed to know what to believe?  I certainly don’t need to tell you this, but sensationalism sells newspapers… big surprise, right?  For the purpose of this writing, I will focus most of my attention on the Treasure Valley, but if you live outside of the greater Boise area, the rules still apply.

 

There’s no doubt that there is a lot of media attention on the current housing “crisis”; a word that alone strikes fear in many, as it is intended to do.  There’s also no question that we are going through one of the toughest times in our lives with the job market, the economy, and many other issues that affect our lives.  How we respond to this chapter in history will have a huge impact on our future, and the future of our families, and my hope is to separate the hype from the reality, encourage you to do your homework, and enable you to make a more informed assessment of your next home purchase.  If you haven’t heard by now, this is one of the best times in most of our lives to buy a home, even if the scare tactics that you hear and read about tell you otherwise.

 

Much of today’s headlines focus on the foreclosure rates. I certainly don’t want to make light of the issue, it is the elephant in the room and there are a lot of people that are negatively affected by it.  With that said, pay close attention to the reports on the numbers – they are generally based on national figures to have more impact, and don’t necessarily reflect what is going on in the Treasure Valley.  Without going into specific numbers, you may read that a certain number of homes have gone into default.  What they fail to say is that a good percentage of those homes never go to foreclosure because the loan was caught up or modified; or the home was sold prior to foreclosure.  My research shows me that we are only slightly up in total distressed homes (Short sale & bank-owned) YTD, in fact – over 2,400 distressed Single Family (SF) homes have been sold in Ada County this year, and just over 1,800 in Canyon County.  To give you a little perspective, there are currently 3,200+/- SF homes on the market in Ada County, and only 1,800+/- in Canyon County – both of these inventory levels haven’t been this low in many years.  (This number does not reflect the nearly 1,100 SF homes that are currently under contract in Ada & Canyon County combined, or homes that are not in the MLS)

 

In August all of the headlines read that we had a HUGE drop in sold homes; by my calculations down 24% in Ada County from the previous July.  What they didn’t tell you was that we were up 26% in sold single family homes year to date (YTD) in Ada County as of the end of July.  Canyon County was up a staggering 40.5% YTD at the same time, even though it was down 14% from the previous July.  We are currently holding on to a 9% gain YTD in Ada and nearly 24% in Canyon – that’s impressive in any economy, and makes you wonder why they insist on focusing on the negative… oh, I remember – see paragraph one.   If you weren’t keeping track, June was the last month to close on your home purchase in order to take advantage of the last tax credit offered by the government – more on that later. (This closing date was extended until July 31, 2010, but you still had to have been in contract by April 30)  July’s drop didn’t surprise anyone in the industry, and the fact that we are still way ahead of last year doesn’t either, the real estate market is moving along nicely.

 

If you missed the tax credit, it’s nothing to lose any sleep over.  The interest rates are lower than they were in the beginning of the year when they were hovering around 5% give or take. Keep in mind that for every 1/4 point reduction, you save thousands of dollars over the life of the loan.  For example, a 5% interest rate on a $100,000 loan equates to a principal & Interest (P&I) payment of roughly $537.  At 4.25%, your P&I payment today would be $492 – a $45 dollar per month savings, and over $16,000 over the life of the loan.  That’s a significant amount of money, and something you can take to the bank.

 

You’re probably wondering where I’m going with all of this, so here’s my point.  Don’t always believe what you hear or read.  Verify any and all claims made by the media and do your homework – remember; they have ad space to sell.  Be sure to confirm that the news they are reporting is local.  Every market is different, and national news doesn’t tell the true story of what is going on in our own back yard.  Take what your peers tell you about the real estate market with a grain of salt and seek advice from an experienced Realtor®, lender or tax consultant.  Check with your accountant to see how the purchase of a home will affect your ability to write off portions of your home sale and monthly payments each year.  Don’t view your personal home as an investment; plan to live there for at least 5-10 years and enjoy the peace of mind & pride of ownership, not to mention creating a stable environment for your family and living the American Dream.   As we’ve discussed in the past, this is truly a great time to buy a home, and here are a few more reasons why:

  • As of this writing, there are currently 350 homes, condos & townhomes in Ada County between $50,000 & $100,000, and 644 in Canyon County – 50 of which were built in 2010 or are “To Be Built”.
  • From $100,000 to $150,000 – there are a combined total of 1,517 available homes, condos & townhomes; with over 20% of them built in 2010 or “To Be Built”.
  • There are still plenty of loan programs out there, with historically low interest rates.
  • Home inventories are dropping; you don’t want to wait too long.  When demand exceeds supply, home prices will go up - great for sellers, not so great for buyers.
  • You really, really want to buy a home!

If you are in the market, or are still sitting on the fence, you need to consider talking to a Realtor® about your options, and how to get started with your search.  Please feel free to contact me with any questions that you may have, I am here to help.

 

Terry Ivins

208.870.5086