Archive for the ‘Homebuyer Tax Credit’ Category

Current prices are money in the Bank

Oversold Real Estate


While the media continues with bad news about the real estate market, working in the trenches is revealing a totally different picture. Yes home prices are continuing to slide, but real inventory is becoming increasingly scarce! Well priced homes that are in great condition, including foreclosures and short sales are selling within days of being listed. Under priced foreclosures are receiving multiple offers some times as many as twenty offers and many of them cash! Buyers are bidding these – homes up to over asking price. Market value for any home has a range from low, the medium sale price and the high. These foreclosures are selling from the medium to the very high of market value depending on location and condition. Every one seem to think that most of the Buyers are due to the $8000 Tax Credit, which much of it is, the problem with that scenario is where are all these CASH Buyers coming from? Cash Buyers are outbidding other Cash Buyers in their pursuit of a great deal. Buyers are far to concentrated on making an offer below the asking price, which is what they perceive to be a great deal, the problem with that is when houses are selling below $100 a square foot they are already selling for below construction cost and that price does not include the lot! So the great deal is already built-in to the oversold prices.  

Here is an example of what I am talking about. Amex on Monday had a promotion for a BMW 328. The promotion price for a $34000 car was about $19000. Trade in value or cost to replace is $30000 according to Kelly Blue Book. There were only three cars available at that price. How many thousands probably hundreds of thousands of Buyers tried to their very best to get that great deal on a Depreciating Asset! Real estate on the other hand is an Appreciating Asset which historically doubles in value every 10 years.  

 The question is how long is it before the pent-up demand to purchase homes starts driving the prices up from the oversold prices we are seeing today? I am not talking about the levels of price seen in 2005, I am talking about the cost to replace the home in today’s economy, cost to build including the lot which is what it would cost a Builder to build the home not including any profit.  

Yes, I know that real estate is a function of supply and demand as is any other commodity. The difference with real estate is that it is a home that you can live in and enjoy while it appreciates in value. you can’t live in that 2% CD in the bank, you can’t live in your gold and silver positions, you can’t live in any other commodity except real estate. I am not saying that real estate is poised to soar in value, what I am saying is that at some point the market has to come back to replacement costs!  I also don’t mean to infer that prices are going to soar in the coming months and years. Due to the exaggerated run up in the market from 2000 to 2005 this market cycle will probably be a much longer cycle than usual with prices continuing to slide although at a much slower rate. Once prices stabilize they will probably move sideways as all the foreclosures and short sales get bought up. Once all of that inventory is bought up prices will resume the normal price appreciation of a real estate cycle. 

If you are currently behind on your mortgage payments, unable to get a mortgage modification, and experiencing a hardship as defined in Acceptable Hardships ( click Here, ) this is the time to get your home on the market and avoid the consequences of Foreclosure!


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According to the National Association of Realtors cheif economist, Lawrence Yun, the housing market is headed to a substainable recovery in 201o. It is led by the First Time Homebuyer Tax Credit  (Article from the IRS website) which has been expanded and extended to June 30th 2010.

Read more about the housing recovery in this artile from Rismedia. Click here to read the whole article.

This is great news for Distressed Home Owners and for move up and first time home buyers!

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