Real Estate Outlook for 2011



As 2011 arrives, I have been questioned often to provide an opinion on where the residential real estate market is headed.  In responding, I am reminded of “The Great Karnak” from the Johnny Carson Show, as some uncertainty remains in the answer to this question.

 2010 will be remembered as the tale of two halves.  The first half exceeded all expectations with the benefits of the federal tax credits which contributed greatly to an increase in sales and closings.  That activity proved unsustainable as the second half activity fell significantly.  In the end, 2010 looked a lot like 2009 in terms of activity.

 There is continued pressure on pricing as supply outweighs demand in many areas and price points.  Most experts are indicating our pricing has returned to 2004 – 2005 levels.  I remain optimistic that values will stabilize in 2011 as demand begins to return to the market.

 On the positive side, it appears that the new congress has been met with consumer and business support and that the employment figures are responding.  November and December employment figures showed strong gains.  As the jobs sector improves, consumer confidence will improve and the housing market will certainly follow suit.

 New construction is showing strong growth already.  As widely anticipated, new homes will emerge first and it is my opinion that we are seeing that affect in the market now.

 My forecast for 2011 – modest growth in sales and more stability in values.  This might be your best opportunity if you are considering a move up to a larger home.  It is widely believed that we are at the bottom of the value cycle.  The experts also indicate interest rates will not fall lower than they are currently.  The perfect blend of low prices and low rates with the anticipation both will rise might present the best opportunity to “time the market”.

 If you or anyone you know is interested in discussing this golden opportunity, please call me.  If you want to do a little research on your own, please visit my website at WWW.DebbieTWilliams.com where you will find active AND SOLD homes in your neighborhood.  It’s a great way to get started.

 Happy Holidays and Best Wishes for 2011!

What Impact Do Foreclosures Have On My Home’s Value?

I am often asked this question by homeowners-those considering a sale as well as those curious about their neighborhood values. The answer is “it depends”.

If you live in a community with few to no foreclosure activity, the chances are you will be minimally affected by this situation. Unless other sales in the neighborhood were distressed (such as short sales) the history of activity and pricing will be represented by transactions between traditional sellers and buyers and the values will mirror the overall market. This does not necessarily mean your values have or will remain the same, it simply means the values will be in line with the overall market in the region.

If you are in a community where foreclosure activity is present, there could be an effect on values in your neighborhood. Typically, appraisers (and buyers) will discount a single foreclosure in determining values for other active homes on the market. However, if there are several recent foreclosures, the appraisers (and buyers) will typically use those sales as “comps” in the market. Those comps are typically lower than the traditional sales and will impact the prices accordingly.

To put this foreclosure matter into perspective, consider the following. Nearly one-third of all homes in the U.S. carry no mortgage. So, when you hear that the foreclosure rate is nearing five percent of all mortgages, that number excludes homes without mortgages and the actual rate of all homes is lower. Also remember, more than 90% of all borrowers remain current on their mortgage payments.

Are you interested in knowing whether your neighborhood prices are affected by foreclosure activity, please call or e-mail me. I can do an analysis of the market and report back with specific details.

Lastly, if you are interested in knowing about real estate activity in your neighborhood, I have a great new tool called “Market Report” that summarizes all active, pending and sold properties with links to detail pages, mapping tools and other statistics. This e-mail report can be sent monthly and the feedback from my clients has been awesome!

June 2010 Real Estate Market Update

We are in the height of the proverbial real estate “Spring Market” and in the transition period following the expiration of the tax credits.  So, I am often asked, where does the real estate market stand?

 The trends have been very favorable in 2010.  In the Charlotte region, 2,537 homes sold in May and the average closed price was $212,454.  This was the largest number of closings and the second highest average sale price in the past 12 months.  This is indeed good news.

 Two thousand  homes were placed under contract in May.  This is 31% below April and 12% below May 2009.  It is very apparent that we saw many sales that would have occurred in May shift into April this year so buyers could take advantage of the tax credits which expired April 30.

 More than 50% of all May sales were priced under $150,000.  While the higher price points are seeing more activity, it is interesting to note the more moderate price points continue to outperform the overall market.

 So, where is the market going from here?  June and July will be a great indicator for the balance of 2010.  I expected May to be soft as compared to April as the tax credits expired.  If the market is to sustain itself without the support of taxpayer money, we will see those results within the next 60 days.  I remain optimistic for continued improvement.

 Interest rates have fallen well below 5% again.  Inventory remains strong and sellers understand the “new norm” when it comes to pricing.  With the market positioned to do quite well in the next few years, real estate is indeed a wonderful long-term investment.

 If I can help you or someone you know with a real estate need, please call me.

Septic Systems and Maintenance

There are still many homes around Lake Norman that do not have city sewer service. Instead, these homes have septic systems to get rid of waste. I would like to familiarize you with the types of systems, and how to maintain them in this post.

There are many kinds of septic systems, but most are a conventional or modified conventional system. This type of system has a septic tank and a drain field with two to six  gravel-filled trenches. Other types of systems include a pump to conventional systems, pressure manifold systems, low pressure pipe systems and aerobic treatment unit systems. These types of septic systems normally have pumps, electrical floats and controls, alarms or other mechanical parts.

The septic system separates the solids contained in the sewage from the liquids. The soil must be porous enough to absorb the septic tank discharge. The capacity of the soil to absorb liquids is measured by a percolation test reading (or perk test as it is often called). This test is performed by the Health Department who determines how many bedrooms a new house can have. If the soil “perks” for a four bedroom home, then the house should legally only be built having four bedrooms.

To properly maintain a septic system, it is important to know the location of the septic tank and drainfield. It should ideally be pumped every two to three years to clean it out. Other things to keep in mind include:

• Don’t cover absorption field with extra fill, driveways, swimming pools, or decks.
• Don’t drive a car or heavy equipment over the tank or field because the pipes will be crushed.
• Don’t plant any trees or bushes at or near the system since the roots will clog the system.
• Don’t use the toilet as a garbage disposal.
• Repair leaking toilets and dripping faucets so the system isn’t overloaded with extra water.
• Limit the use of the garbage disposal and don’t put grease, cooking oil, coffee grinds, egg shells etc. in it.

Following these simple rules regarding the maintenance and operation of the septic tank system will keep problems to a minimum. A minimum amount of care will result in many years of trouble-free operation.

How To Avoid Capital Gains Tax With A “Like-Kind” Exchange

Do you own investment or rental property that would create a  large taxable capital gain if sold? There is a way to your sell your property and defer any capital gains tax under Internal Revenue Code 1031.

In a 1031 exchange, you must buy/trade a property of equal or greater value without removing any cash from the transaction.

However, after the property is sold, there are strict rules and time limits that must be followed in order to defer taxes.

• After the property has been sold, all the sales proceeds must be held by a qualified third-party.
• You have 45 days to report to this intermediary the replacement property that you are going to purchase. Up to three properties can be designated.
• The transaction MUST close within 180 days from the sale date to complete the tax-deferred acquisition.

More than one property can be traded on either side of the exchange. For example, you can trade two rental houses for an apartment building of equal or greater value. Or you can trade an office building for three rental houses of equal or greater value.  Raw land can also be used in a trade.

Personal residences don’t qualify for IRC 1031 trades because they are “unlike property” i.e. not used for investment property. However, if you found your dream home you could sell investment property and trade it for the dream house. The dream house would then need to be rented for at least 12 months before converting it into your personal residence.

Sales of a personal residence acquired in an IRC 1031 tax-deferred exchange  must be owned at least 60 months before sale. At least 24 of those 60 months must be owner-occupied to qualify for the IRC 121 exemptions.

Tax deferred exchanges are complicated transactions. Be sure to talk to your CPA or real estate attorney before entering into one of these transactions. And of course, it is important to hire a real estate broker who is experienced in working with exchanges.

Cost of Lake Living Hits Low-Water Mark as Sales Slump

This is from an article written by Julie Bird for the Charlotte Business Journal .

Living the good life on Lake Norman costs a little less than it did a few years ago.

The Huntersville neighborhood of Lookout Point is a good example says Debbie Williams, a broker at Allen Tate Realtors. Three years ago, no home at the lakefront development could be bought for less than $1 million. But, she recently sold a home on an acre-plus lot and 270 feet of water frontage for $850,000. Other homes in the neighborhood are listed below the $1 million threshold.

“It has been a challenge to try to let my neighbors know their homes aren’t worth as much as they were in the past”,says Williams, who lives in Lookout Point.

Foreclosures and short sales make up a significant portion of Lake Norman area sales, Williams says. She estimates prices for waterfront homes have dropped on average 11% to 15% since the financial crisis hit. Price drops are common during the sales process. A lake front home at The Point first listed at $3.2 million, for example, but its list price recently dropped to $2.75 million.

It is also costing less to build a house on the lake, says custom home builder Len Bealer of Kenneth Bealer Homes. Material costs are down 5% to 7% and labor costs have dropped up to 20% in the past two years. Waterfront lot prices are down 10% to 15% as well, he says.

In Captain’s Point in Cornelius, one-time $1 million lots are selling for $700,000, says Bill Saint, president and chief financial officer of Simonini Builders, Inc. After ponying up $1 million or more for land, he says, owners typically built 6,000-square-foot or larger homes. Now there’s increasing interest in building smaller and less expensive homes, even on the lake.

Despite lower prices, construction remains a tiny sliver of the Lake Norman market, Williams says. She found only four lakefront homes under construction on the Multiple Listing Service in mid-March. They ranged in price from $645,000 to $1.4 million. Three were in Iredell County.

The construction slowdown has hurt builders. Kenneth Bealer has three employees, down sharply from its peak of 25. Bealer supervises most of the construction himself. Before the recession, the company had posted 18 years of annual growth of 5% to 7%. He recently sold a speculative home, the last one started before the economy stalled, for $1.375 million, or “a significant loss”. It has been “the roughest two years of my life,” he says.

But Bealer says business is reviving. Lower construction costs are helping custom homes compete with resales for buyers. Consumers also are beginning to feel more confident. Bealer recently signed two construction contracts and is working with clients on two or three more.

Simonini also began construction this spring on a 150-home community in Cornelius called Robbins Park. Saint says three homes have sold, and eight or nine are under contruction.Prices start in the high $400,000 and approach $750,000. This price range is “totally underserved” in the new-home market in the lake area, he says. Robbins Park is near Birkdale.

In early March, Saint says seven new homes priced between $500,000 and $800,000 in key area between Interstate 77 and the lake were for sale. Even fewer were listed at higher prices.

“So many people think there’s so much on the market, so much inventory” Saint says.”But if you want a new home at the lake, there are very few homes to choose from”.

The average price of new homes in the Lake Norman market was $631,718 in the fourth quarter, says Bill Miley, Charlotte market manager for MetroStudy. The data reflect sales in 82 subdivisions, many of which are not directly on the lake. The average size was 3,700 feet.

Including resales, Allen Tate’s Williams says homes are selling for less than $1 million represent the bulk of Lake Norman sales. According to MLS, 66 homes sold for less than $1 million between September and mid-March. Another 312 are on the market. Williams found four active foreclosures and short sales in the under $1 million market. Of 31 pending sales, seven were foreclosures or short sales.

In the $1 million to $2 million range, she found 122 listings. None of the 17 sold in the last six months was a foreclosure. In the $2 million-plus market, two were foreclosures or short sales.

Benefits of Home Ownership

There are many benefits to owning your own home that I would like to discuss in this post. Probably the most important benefit, aside from providing a roof over your head, is homeownership as an investment. Generally, homes appreciate about five percent a year. Some years will be more, and recently they have been less. This figure will vary from region to region, and neighborhood to neighborhood. Five percent may not seem like that much at first, because there have been years when the stock market has returned a lot more. But let’s take a second look. Let’s say that you bought a $200,000 house with 20% down. That would be an investment of $40,000. At an appreciation rate of 5% annually, a $200,000 house would increase in value $10,000 the first year of ownership. That means you earned $10,000 on a $40,000 investment or 25%! Of course, you are making monthly mortgage payments and paying property taxes. Since the interest on the mortgage and the property taxes are both tax-deductible, the government is essentially subsidizing your home purchase. Your rate of return when buying a home is higher than most any other investment you could make. Interest rates are at historically low levels and there is an oversupply of homes currently on the market . Take advantage of the first time homebuyers’ credit, or the move-up credit and buy a home before April 30. You will be glad you did!

What is the status of the real estate market?

The real estate crystal ball – where are we are where are we going? I am hearing this question a lot lately. I have some answers based on trends that are now becoming apparent. First, market activity has improved dramatically over this time last year. It has been over 12 months since the stock market hit bottom. Investor confidence is returning. Many Americans are feeling more confident about their wealth – so long as they have stability in their job. Allen Tate Company’s sales volume has increased 25% YTD vs. same period last year and each month is showing stronger gains. The 2009 tax credit certainly helped the market with first-time buyer tax credits. The extension of those credits and the addition of the repeat buyer credit are helping us right now. There remains uncertainty of what will happen as those credits expire April 30. If you plan to take advantage, NOW is the time! Please contact me to get started and get under contract by April 30. There will be NO better time than now to buy a home. Prices remain well below the peak of several years ago and I expect any appreciation to be slow in coming. While many industry leaders are declaring “Increases in average sale prices”, look carefully at this. The higher-end market is beginning to see signs of activity now. Those sales are having a positive influence on the average sale price but it is my opinion there is very little true appreciation in the market. Nonetheless, long-term opportunities are plentiful right now. Interest rates remain at or near 5%. Two influences will impact rates in the near-term. The Fed is preparing to cease purchasing “Mortgage Backed Securities”, so it is likely that rates will rise slightly as the open market investors will demand higher returns. Opposing that influence is the position by the Fed that they intend to keep rates at historical lows for the foreseeable future. Bottom line – I expect rates to remain between 5% – 6% in 2010. So, this is very good news for you. The buying opportunity right now is as good as it will get. The market activity has improved dramatically. The higher-end market activity is thawing. Please call me if you are interested in a summary of your personal needs. I would be delighted to assist you or your friends.

You can reach me at 704-574-3680 or debbie.williams@atcmail.com.

What is a Real Estate Short Sale?

I am sure that a lot of you have heard about short sales in the real estate market, but don’t really know what they are or what is involved in getting one approved.

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of a borrower’s financial hardship. The homeowner sells the mortgaged property for less than the outstanding balance on the loan, and turns over the proceeds of the sale to the lender. Banks will incur a smaller financial loss than foreclosure or continued non-payment. A short sale is also typically faster and less expensive than a foreclosure, but can still take several months to get approved.

It is very common in short sales to have multiple levels of approvals. Not only does the lender have to approve the deficiency, but junior lien holders such as second mortgages, equity lines, and homeowner associations must give approval. If the lender required mortgage insurance on the loan, the insurer will probably be involved in the negotiations also. It is not surprising that many short sale deals have a high failure rate and often do not close in time to prevent foreclosure.

So what do you do if you have to sell your home and owe more on it than it is worth? 

• Call the lender- Get the supervisor’s  name and phone number who handles short sales. This may require many phone calls. The best place to start is the customer service number on your mortgage statement.
• Submit a letter of authorization-Typically lenders do not want to disclose any of your personal information without authorization to do so. If you are working with a real estate agent to sell your home, then you need to provide a letter with the property address, loan number, your name, date and the name of your agent and contact information.
• Preliminary net sheet-You will need to get an attorney to prepare a settlement statement with the estimated sales price you expect to receive and all the costs of the sale to include unpaid loan balances, outstanding payments due, late fees, real estate commissions etc.
• Hardship letter- Provide the lender with a detailed letter describing how you got in a financial bind i.e. lost job, health issues etc.
• Proof of income and assets-Provide bank statements,savings accounts, money market accounts, financial assets such as stocks, bonds or real estate to the lender.
• Comparative Market Analysis-If your home is worth less than you owe , have your real estate agent prepare a market analysis which shows prices of similar homes to provide to the lender.

Short sales can adversely affect a person’s credit report, although the negative impact is typically less than a foreclosure. Short sales will remain on a credit report for seven years, but is is possible to obtain another mortgage one to three years after the short sale.

But beware, the I.R.S. could consider debt forgiveness as income and there is no guarantee that the lender will not legally pursue a borrower for the difference between the amount owed and the amount paid. I recently closed a short sale and the seller had to sign a promissory note with the lender for $20,000!

Short sales are not for the”faint of heart” for either sellers or buyers. If you are considering selling your home as a short sale, or buying a short sale, I would highly recommend talking with a real estate attorney and your accountant before starting the transaction.

If you have any questions about this post, or I can be of service to you, please call me at 704-574-3680, or e-mail me at debbie.williams@atcmail.com.

What Paperwork Is Needed For The IRS?

You have probably heard that President Obama signed legislation a few months ago to extend the first-time home buyer tax credit. To claim the $8000 first -time buyer tax credit, you must sign a contract on a home by April 30, 2010 and close by June 30, 2010. The new tax credit has also increased the income cap to $125,000 for single filers and $225,000 for joint filers.

Homeowners who have lived in their current home for five consecutive years of the past eight may take advantage of a $6.500 tax credit on the purchase of a new home. The same rules apply with this tax credit as far as the timetables and income limits. The maximum price on a home is $800,000.

Here is what the IRS wants from a home buyer  seeking a credit:

1. A fully executed IRS form 5405 on which the taxpayers provide basic information supporting their credit including their income and purchase date.
2. A copy of the settlement statement “HUD” that proves the sale and purchase transaction actually took place. All parties’ names, signatures, property address, sales price, and date of purchase must be included.
3. For repeat buyers, the IRS wants documentation that prior to their latest purchase, they have lived in their former property for a consecutive five years out of the past eight years. This may include property tax records, hazard insurance records or copies of annual mortgage interest statements filed with their federal taxes.

According to the National Association of Realtors, 1.5 million repeat purchasers and 900,000 first-time home buyers are expected to apply for credits this year, so it will take four to six weeks for the IRS to process checks.

There has never been a better time to purchase a new home! Interest rates are historically low, inventory is high and these tax credits will save you money.

Hurry! April 30 is right around the corner!

If you have any questions about this posting, don’t hesitate to contact me at 704-574-3680.