Area Info  |  About  |  What's My Home Worth?  |  Buyers Request  |  Home  |  Contact  |  Sitemap

Home Pricing in 2011

The KCM Blog

Oswald Acted Alone and We Did Land on the Moon

by The KCM Crew on January 12, 2011 · 5 comments

in Pricing

We believe that things are usually as they seem. We are not the type of organization that believes in conspiracies. However, there is something interesting in some of the housing price studies we are seeing in our research. It seems that some of the groups making the predictions are the same ones that have the greatest power to affect the prices they are projecting.

Most housing analysts warn that the heaviest downward pressure on prices will be created by distressed properties and the speed at which they will be released to the market. Research shows that ‘short sales’ sell at a 20% discount and foreclosures sell at a whopping 40% discount. Obviously, when and how much discounted real estate enters the market will have a major impact on prices of surrounding properties.

Back to our research

We are now seeing that a certain segment of those projecting future pricing have two things in common:

  1. They believe prices will fall rather dramatically in the first half of 2011
  2. They have control of the flow of discounted properties to the market

Predictions for the first half of 2011 by firms that fall in the above category:

  • Bank of America projects that prices will fall 3.7%
  • Fannie Mae predicts that median prices will drop $12,500
  • Wells Fargo reported that they feel home prices will drop 8%

Not a coincidence

We are beginning to realize this is not a coincidence. The organizations which should best know when the surge of foreclosures will be released are saying house prices will be hit the hardest in the first half of the year. We are not asserting that there is anything devious in what we have found. We are just reporting that those who have control over the flow of distressed properties must think/know that inventory is about to be released. Why else would so many of them be predicting a sharp decline in home values in the next 120 days?

Bottom Line

If you currently have your house on the market and are hoping that you will see a better price after the snow melts or the temperature warms up (aka Spring), BE CAREFUL! Those in the know are warning you the best price might be attained TODAY!

  • Share/Bookmark
Print This Post Print This Post

Tagged as: Foreclosures, Home Prices, Short Sales & Foreclosures

The KCM Crew

About The Author


We at The KCM Crew are pursuing our mission of building a home for real estate information. We are truly dedicated to helping real estate professionals by supplying all the tools and resources they need to be seen as industry leaders in their marketplace. See how we can help you to become an industry leader in your marketplace, and be sure to check out our page on Facebook and follow us on  Twitter.

{ 4 comments… read them below or add one }

Todd Hawkins January 12, 2011 at 4:41 pm

Here’s something else to bear in mind. Due to the suspension two years ago of mark-to-market (fair value) accounting rules by the Financial Accounting Standards Board (FASB), banks are valuing their REO “assets” at whatever they deem realistic (i.e. not what the market thinks is “fair value”). When those eventually sell, those houses must be booked at the sold price, and that ends the mirage between Lender and The Street and the banks’ reserve requirements and all manner of other FASB rules must then be followed. So they have to be careful just how fast they release their “shadow inventory” lest they trigger all sorts of Basel regulations when that REO sells for 20 cents on the dollar when they valued at 60.

Comments[0] | Permalink

3 Questions to Ask Before Buying a Home

The KCM Blog

3 Questions You Must Answer Before Buying a Home

by The KCM Crew on January 4, 2011 · 10 comments

in For Buyers,Pricing

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. And most of that advice is probably negative. Why buy now with prices still falling? Don’t you realize real estate is no longer a good investment? Don’t you know that people who bought five years ago lost their shirt? We understand the concern your friends and family have. However, let’s look at whether or not now is actually the perfect time to buy a home.

There are three questions you should ask before purchasing in today’s market:

1. Why should I buy if house prices are still depreciating?

We believe that in most parts of the country prices will in fact soften in 2011. Price is the major concern for anyone selling a home. When you are buying, COST should be your primary concern however. Your monthly payment (cost) is definitely impacted by the price of the home you purchase. The other major component is the interest rate. Waiting for prices to bottom out while rates are increasing can wind up costing you more over the life of the mortgage (see chart here).

Over the last seven weeks, rates have increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached chart shows this increase. Waiting for prices to bottom out seems to make perfect sense. Yet, at a time when rates are increasing, it might NOT make sense. Make sure you have a mortgage professional help you with this math before making a decision.

In an article last week CNN Money reported:

“You can kiss those record lows goodbye,” said Greg McBride, chief economist for Bankrate.com.

Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.

“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse,” he said. “Rates will probably never revisit those levels.”

2. When will I begin to see appreciation if I buy now?

This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010.  They ask 100+ housing industry experts to project housing prices through 2015. The most current survey shows that the experts are predicting prices to soften until 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2015.

Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: You want to buy low and sell high. We may be at the low point regarding the COST of a home. But, this decision should not only be a financial one.

That leads us to our third and final question:

3. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason whether you decide to purchase or not.

Bottom Line

The COST of a home will probably remain relatively unchanged even if prices continue to depreciate. Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway.

  • Share/Bookmark
Print This Post Print This Post

Tagged as: Home Prices, Homeownership, Interest Rates

The KCM Crew

About The Author


We at The KCM Crew are pursuing our mission of building a home for real estate information. We are truly dedicated to helping real estate professionals by supplying all the tools and resources they need to be seen as industry leaders in their marketplace. See how we can help you to become an industry leader in your marketplace, and be sure to check out our page on Facebook and follow us on  Twitter.

{ 8 comments… read them below or add one }

Frank Passanante January 4, 2011 at 10:47 am

Like politics, all real estate is local. National trending is important to prove the relative postion of the market you work. The bottom line is the true value of home ownership compared to other forms of shelter. A tenant’s rent is not guaranteed to stay the same. Similar to an adjustable rate mortgage. We don’t need more uncertainty in our lives. The owner may decide to sell and we are compelled to move. That’s a drag. Buy a home, start a garden, paint your favorite color, let your baby crawl on new carpets, build neighborhood friendships. As interest rates increase, you get less home for the money. Except for the weakest of markets, it is generally agreed that we are bumping along the bottom. People die and families grow- there are always sellers and buyers.

Ed Daniels - Metrowest Boston Real Estate January 4, 2011 at 1:04 pm

I agree with Frank’s comments, being a home owner gives stability (though some foreclosed on owners would disagree!). A renter does not know if that Landlord has other plans for their home, or is even paying the bills. Buying a home puts the control into your own hands. Plan well, care for the home, make the payments, and enjoy coming home every day!

Manny Allende January 4, 2011 at 1:12 pm

Great info for would be first time home buyers. We should all help potential buyers understand that the best time to buy is when they’re ready…both emotionally & financially.

Arleen Pecone January 4, 2011 at 7:43 pm

That is so well said, Frank…..about “local” Real Estate. and PERSONAL improvement to quality of life.

MaryBeth Muldowney January 4, 2011 at 11:45 pm

Thank you again for your timely insight. A home purchase is just that, a home not just a house or an investment. “Home” is significant for so much more, stability for you and your family, a monthly expenditure you can budget for in the next 30 years if desired, and a sure way over time to increase your net worth. Cannot wait for you to visit our Realtor Association (Plymouth and South Shore) in Massachusetts again in February, always standing room only!

homebody January 5, 2011 at 4:50 am

Summer is around the corner and a quick look around prompts you to want to find some home and garden accents that will revamp the lawn. Since homes are not selling as they had, many home owners are looking to better what they have. Whether it is inside the home or outside.For help visit:

home and garden tips

Greg Carlson January 5, 2011 at 8:26 am

I agree that the intangibles are key to home ownership. I am more interested in
understanding the rationale for a 14 year time line. With the pace of change, how can anyone predict 5 years out, let alone 14! Also, this does not bode well for new construction for a long time. When does the pent up demand that is developing each year due to population increase kick in? Not sure what the benefit of this prediction is. I would like to hear more on the rationale from Steve. I did read some of Case Schillers rationale: Vct =E(INDEXii / INDEXio) x Vio :)

Carol Borden January 5, 2011 at 11:32 am

What perfect timing to have this to share with our clients who may be holding out on purchasing their first home! Thank you.

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post:

Comments[0] | Permalink

3 Questions to Ask Before Buying a Home

The KCM Blog

3 Questions You Must Answer Before Buying a Home

by The KCM Crew on January 4, 2011 · 10 comments

in For Buyers,Pricing

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. And most of that advice is probably negative. Why buy now with prices still falling? Don’t you realize real estate is no longer a good investment? Don’t you know that people who bought five years ago lost their shirt? We understand the concern your friends and family have. However, let’s look at whether or not now is actually the perfect time to buy a home.

There are three questions you should ask before purchasing in today’s market:

1. Why should I buy if house prices are still depreciating?

We believe that in most parts of the country prices will in fact soften in 2011. Price is the major concern for anyone selling a home. When you are buying, COST should be your primary concern however. Your monthly payment (cost) is definitely impacted by the price of the home you purchase. The other major component is the interest rate. Waiting for prices to bottom out while rates are increasing can wind up costing you more over the life of the mortgage (see chart here).

Over the last seven weeks, rates have increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached chart shows this increase. Waiting for prices to bottom out seems to make perfect sense. Yet, at a time when rates are increasing, it might NOT make sense. Make sure you have a mortgage professional help you with this math before making a decision.

In an article last week CNN Money reported:

“You can kiss those record lows goodbye,” said Greg McBride, chief economist for Bankrate.com.

Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.

“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse,” he said. “Rates will probably never revisit those levels.”

2. When will I begin to see appreciation if I buy now?

This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010.  They ask 100+ housing industry experts to project housing prices through 2015. The most current survey shows that the experts are predicting prices to soften until 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2015.

Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: You want to buy low and sell high. We may be at the low point regarding the COST of a home. But, this decision should not only be a financial one.

That leads us to our third and final question:

3. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason whether you decide to purchase or not.

Bottom Line

The COST of a home will probably remain relatively unchanged even if prices continue to depreciate. Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway.

  • Share/Bookmark
Print This Post Print This Post

Tagged as: Home Prices, Homeownership, Interest Rates

The KCM Crew

About The Author


We at The KCM Crew are pursuing our mission of building a home for real estate information. We are truly dedicated to helping real estate professionals by supplying all the tools and resources they need to be seen as industry leaders in their marketplace. See how we can help you to become an industry leader in your marketplace, and be sure to check out our page on Facebook and follow us on  Twitter.

{ 8 comments… read them below or add one }

Frank Passanante January 4, 2011 at 10:47 am

Like politics, all real estate is local. National trending is important to prove the relative postion of the market you work. The bottom line is the true value of home ownership compared to other forms of shelter. A tenant’s rent is not guaranteed to stay the same. Similar to an adjustable rate mortgage. We don’t need more uncertainty in our lives. The owner may decide to sell and we are compelled to move. That’s a drag. Buy a home, start a garden, paint your favorite color, let your baby crawl on new carpets, build neighborhood friendships. As interest rates increase, you get less home for the money. Except for the weakest of markets, it is generally agreed that we are bumping along the bottom. People die and families grow- there are always sellers and buyers.

Ed Daniels - Metrowest Boston Real Estate January 4, 2011 at 1:04 pm

I agree with Frank’s comments, being a home owner gives stability (though some foreclosed on owners would disagree!). A renter does not know if that Landlord has other plans for their home, or is even paying the bills. Buying a home puts the control into your own hands. Plan well, care for the home, make the payments, and enjoy coming home every day!

Manny Allende January 4, 2011 at 1:12 pm

Great info for would be first time home buyers. We should all help potential buyers understand that the best time to buy is when they’re ready…both emotionally & financially.

Arleen Pecone January 4, 2011 at 7:43 pm

That is so well said, Frank…..about “local” Real Estate. and PERSONAL improvement to quality of life.

MaryBeth Muldowney January 4, 2011 at 11:45 pm

Thank you again for your timely insight. A home purchase is just that, a home not just a house or an investment. “Home” is significant for so much more, stability for you and your family, a monthly expenditure you can budget for in the next 30 years if desired, and a sure way over time to increase your net worth. Cannot wait for you to visit our Realtor Association (Plymouth and South Shore) in Massachusetts again in February, always standing room only!

homebody January 5, 2011 at 4:50 am

Summer is around the corner and a quick look around prompts you to want to find some home and garden accents that will revamp the lawn. Since homes are not selling as they had, many home owners are looking to better what they have. Whether it is inside the home or outside.For help visit:

home and garden tips

Greg Carlson January 5, 2011 at 8:26 am

I agree that the intangibles are key to home ownership. I am more interested in
understanding the rationale for a 14 year time line. With the pace of change, how can anyone predict 5 years out, let alone 14! Also, this does not bode well for new construction for a long time. When does the pent up demand that is developing each year due to population increase kick in? Not sure what the benefit of this prediction is. I would like to hear more on the rationale from Steve. I did read some of Case Schillers rationale: Vct =E(INDEXii / INDEXio) x Vio :)

Carol Borden January 5, 2011 at 11:32 am

What perfect timing to have this to share with our clients who may be holding out on purchasing their first home! Thank you.

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post:

Comments[0] | Permalink

Outlook about the Market in 2011

The KCM Blog

2011: The Year a House Again Becomes a Home

by The KCM Crew on December 29, 2010 · 13 comments

in For Buyers,For Sellers

For almost a decade now, every time we talked about real estate we immediately discussed money. We didn’t talk about the value of a home but instead about the price of the house. We didn’t worry about a roof over our heads but instead the ceiling on our interest rate. We didn’t care as much about where we raised our family as we cared about how much we increased our family’s net worth.

That will change in 2011. The KCM Crew believes very strongly that real estate will return to what it has been for the 200+ year history of this country: a place for us and our families to live comfortably. It will also prove to be a great long term investment as it always has been.

Our parents and our grandparents didn’t buy their homes as a short term financial investment. They bought it so they had a place of their own to come home to at the end of the day; a place to raise their family; a place they could feel safe.

Sure they dreamed of a ‘mortgage-burning’ party. They realized it was a form of forced savings. They were taught that, if they paid their mortgage every month, they would wind up with a little retirement account decades later.

And, they realized that wouldn’t happen if they rented.

However, in the last decade, we somehow forgot that the financial aspect was the serendipity not the major reason to buy. We believe that 2011 will be the year that people return to the historic reasons families purchased a home. This is the year when we again remember that homeownership is a major part of the American Dream.

What about the challenges to a housing recovery? Let’s look at them.

The Economy

Most reports are showing that the economy is doing better than expected. This shopping season provided additional proof of this point. As the economy recovers, so will consumer confidence. This will be great news for housing.

Unemployment

There is much talk about a ‘jobless recovery’. We agree that unemployment will continue to be a challenge. However, when you talk about housing, it is not the unemployment rate that is all telling. Instead, it is the change in the rate. As unemployment skyrocketed, people started to worry about their own job. Any change creates concern. Unabated concern turns to fear. Fear causes paralysis. The spike in unemployment has plateaued. People no longer have the feeling that ‘they are next’. The fear will diminish and people will start moving on with their lives. This too will be great news for housing.

Interest Rates

It seems the bottomless pit in which rates have been falling does have a floor after all. And it seems we have found it. Those purchasers who had been waiting for the best interest rate may have already missed it.

Prices

Economists are projecting that prices will not see any appreciation in 2011. Sellers who had been waiting for 2006 to return will come to the realization that waiting any longer makes little sense. They will instead decide to get on with their lives and sell this year.

Prices probably will soften further. However, the possible savings to potential buyers will be minimized by a rise in interest rates.

Bottom Line

This is the year that normalcy returns to real estate. People will buy and sell based on the desire for a better life for themselves and their families. They will realize that is the true value of homeownership and they will be willing to pay for that value.

  • Share/Bookmark

Tagged as: Home Prices, Home Sales, Interest Rates

The KCM Crew

About The Author


We at The KCM Crew are pursuing our mission of building a home for real estate information. We are truly dedicated to helping real estate professionals by supplying all the tools and resources they need to be seen as industry leaders in their marketplace. See how we can help you to become an industry leader in your marketplace, and be sure to check out our page on Facebook and follow us on  Twitter.

{ 12 comments… read them below or add one }

Charles D'Alessandro December 29, 2010 at 9:10 am

Steve this is right on! We can only hope !

“This is the year when we again remember that homeownership is a major part of the American Dream” !

Thank you Steve!

Dr. Rosen December 29, 2010 at 12:11 pm

Total nonsense. House remain ridiculously overpriced and will see further declines in 2011. What a bunch of clap trap from a realtor! Here we go again with the BS

Jim Wire December 29, 2010 at 1:28 pm

Most of my clients that I am talking with are telling me that they are ready to buy this year. They feel that we are close enough to the bottom and the stars are aligned. Homes are the most affordable in Tahoe since the late 90′s. Units sold had doubled this past year and I’m expecting to see sales to further increase in volume. If this happens, we will be closer to a more balanced market in terms of supply and demand.

Jonathan Kauffmann December 29, 2010 at 1:30 pm

I’d say there are 2 more challenges that you missed: 1) inventory levels and 2) distressed property sales

Obviously, there are a lot of factors in every market and it’d be great if we could snap our fingers to right the ship. However, if inventory levels stay high and the distressed sales (both foreclosures and short sales) stay as relevant as they are in most markets, the housing market will have a tough time recovering in 2011.

You could make the argument that lower unemployment and a better economy will take care of both of those issues…which very well could be true.

Alex Cortez December 29, 2010 at 1:39 pm

I don’t normally retweet posts, but I had to on this one. This goes well beyond real estate and into the American psyche, all that has made our nation great. Thanks for the post, KCM crew.

Jean Sackin December 29, 2010 at 2:00 pm

What a refreshing thought!

Kathy Goughenour December 29, 2010 at 2:28 pm

You and Charles D’Alessandro are on the same wave length. Two weeks ago, he called me to discuss the idea you wrote about here on “the house becoming a home again.” I guess great minds think alike!

Steve Harney Steve Harney December 29, 2010 at 2:30 pm

@ Jonathan Kaufman – Great point. Prices will definitely continue to fall. We addressed this issue just last week in a post:

http://kcmblog.com/2010/12/20/the-trick-is-to-not-flood-the-valley/

In that post, we said:

“Both the Bank of America and Fannie Mae have projected that house prices will fall dramatically at the end of the first quarter of 2011 and then slowly move upward through the rest of the year.”

However, today’s post talks to the point that the ‘financial’ considerations of buying or selling will be overtaken by the ‘life’ reasons in 2011. We very strongly believe that!!

Steve Harney Steve Harney December 29, 2010 at 2:43 pm

@ Dr. Rosen,

Because we totally understand your skepticism, we will be totally transparent. There are eight individuals that comprise the KCM Crew. Seven do not have a real estate license nor ever have. I do and have had it for almost 30 years. I have not listed or sold property for over 15 years. The musings on this blog come from a team of researchers with no vested interest in listing or selling real estate. We just report on the housing market.

To that point we know prices will definitely continue to fall. We addressed this issue just last week in a post. Perhaps you missed it:

http://kcmblog.com/2010/12/20/the-trick-is-to-not-flood-the-valley/

In that post, we said:

“Both the Bank of America and Fannie Mae have projected that house prices will fall dramatically at the end of the first quarter of 2011 and then slowly move upward through the rest of the year.”

However, today’s post talks to the point that the ‘financial’ considerations of buying or selling will be overtaken by the ‘life’ reasons in 2011. We very strongly believe that!!

Julie Porowski December 29, 2010 at 3:15 pm

You’re right on, KCM Crew! What’s old is new! I have been a Realtor for 25 years and as I have discussed with many of my “old-timer” collegues lately, things are going back to the way they used to be…you bought or sold a house because your family is expanding/shrinking, a job transfer, a divorce, a better school district, etc. And guess what…you may actually have to have verifiable assets, a downpayment and the ability to pay back a mortgage! What a concept! The market is getting back to normal (not the fake “normal” of 2003-2006) …I think I’m going to have a very successful year!

Kimberly Byrd December 29, 2010 at 4:04 pm

This is spot on! I have been preaching this for about 2 years now. We can’t expect real estate to be a way to make a quick buck, but as an INVESTMENT…and not a short-term one. One in our future, our family’s future, for retirement, for security…

The “quick buck” theory is partially what led to part of all of this problem and inflated people’s lifesatyles to a level that they had to be brought down from.

Dr. Rosen December 29, 2010 at 4:32 pm

The fundamental thinking that real estate is an “investment” is what got people into trouble. It’s a place to live; a roof over your head. It is completely wrong to see real estate as an investment for our family’s future. This is not the first time real estate has gone down in value. Of course we live in a screwed up culture where people define themselves by their material possessions which is sad and pathetic. There is no way prices will drop dramatically and then start to rise all of a sudden. That’s just stupid/ignorant wishful thinking. Once they figure out what to do with all that shadow inventory and unemployment improves AND the market hits bottom which we are not at yet, prices will remain flat for quite some time. This is how the cycle will work because historically, that’s how it’s been. There is nothing to suggest a bottom. In S. Fla, 4 houses were taken back for every one sold in 2010. Because the government and the banks refuse to let the market self correct, this process will continue well into the future. Prices must come down to affordable levels and employment must improve.

Leave a Comment

{ 1 trackback }

Previous post:

 
Comments[0] | Permalink
Subscribe to this feed

Home Page | Properties | Buyers | Sellers | My Listings | Area Info | About | What's My Home Worth? | Buyers Request | Testimonials | Mortgage Information | Dream Home Finder | Free Real Estate Reports | Blog | Sellers Request | Community Links | School Links | Request Info | Weather | Helpful Links | Home Buying Info | 15 Reasons Why I Should Be Your Real Estate Agent | Additional Real Estate Info | Different Types Of Real Estate Home Loans | For Sale By Owner Real Estate Info | Free E-mail Property Updates | Free Market Update | Free Real Estate Newsletter | General Request | Home Gardening Info | Home Improvement | Home Moving Assistance | How Much Real Estate Can You Afford? | Just For Kids | My Real Estate Link Partners | Real Estate And Mortgage Glossary | Real Estate Mortgage Programs | Real Estate Refinancing Information | Real Estate Tax Info | Selecting Your Next Home | Tourism And Travel | Why Select Me To Help You Sell Real Estate? | Why Select Me To Represent You When Buying Your Next Home? | Real Estate Mortgage Calculators | Real Estate And Consumer Info | Real Estate And Community Bulletin Board | Property Search (MRED - Residential) | Property Search (MRED - Commercial)
Site Map | E-Mail
WestmontDarien


Logo
Platinum Partners Realty
5200 Main St. • Downers Grove, IL 60515
Phone: (630)960-1536 • Fax 630-960-1652
Mobile 630-207-9909