Gold Rush or Ghost Town?

Happy Carnival Week for those of us in Provincetown. The theme of Wild, Wild West this year is so fitting as a description of the real estate market.

Are we on the eve of a gold rush for the purchase of foreclosed properties? Will there be a ghost town of empty homes fueled by distraught sellers who lowered their prices to virtual giveaways?

Most likely we won’t see this in Provincetown, Truro and Wellfleet. Here’s what we’ve seen so far this year.

Sellers who have a large equity stake or those who need to sell have priced their properties in line with what the market is doing. This alone presents opportunity for those buyers waiting for the right time. There has been talk of more adjustment over the next year, but even so, the time to buy is now. On the average, Provincetown, Truro and Wellfleet have experienced a 10% adjustment in the market.

Sellers who have been unrealistic took their homes off the market or left their listings active for vanity’s sake, hoping that a magical and perhaps naïve buyer will come along.

Here’s what’s bring buyers this year. Besides the low prices, when mortgage interest rates adjust down, a flurry of buyers rush to town and take advantage of the low priced homes and condos. They buy creating a hiccup of activity.

When rates go up, the activity seems to stop. This time presents cash buyers who use their strong buying power to make a dream of owning on the cape a reality. A cash buyer is now worth his or her weight in gold. 

One thing is for sure. The remainder of 2008 will be an interesting time to see how the market performs.

Happy Carnival. Have fun. Enjoy the festivities.

Making Sense of Refinance

This week we answer the following blogger question:

Q: Interest rates have gone down since I purchased my home in Truro a few years ago. How will I know when it makes sense to refinance?

A: Homeowners refinance for many reasons. Common reasons include: the desire to opt out of an adjustable to a fixed rate loan, the need to use the equity in your house for another expense (like a remodel or a child’s tuition), or simply to save money on your monthly payment. 

The formula to figure out whether a refinance will be favorable for you is quite simple. First, you need to figure out how long you plan to be in the house. Take the amount of your monthly savings with the new loan, and multiply it by the number of months you plan to be in the house. Compare this number to the fees that you will be charged for the refinance. If the fees are higher than the savings, then it may not be worthwhile to refinance at this time. Many people never get past the illusion that a lower monthly payment can create. Remember, you must consider the long-term equation.

It is always a good idea to consult an expert. Speak with your mortgage broker and ask him/her to lay out the comparison for you. If you don’t have a trusted broker, ask a friend or your real estate professional.

Keep in mind that it may be difficult to refinance in today’s market due to the difficulty of obtaining accurate comparable sold properties. Appraisers are hard pressed to provide banks with current sales due to the slow down in the market. This could impede your refinance efforts. 

Stimulating the Market

This week we’ll briefly outline the new federal housing legislation to help stimulate the failed housing market and take a peek at the state’s law to address the foreclosure issue.

The federal program, which became active last Wednesday provides the following: 

Tax relief to first time homebuyers in the amount of a $7,500 tax credit. This will be issued providing it is used by July 1 of next year. The credit must be paid back, interest free, at a rate of $500 per year over 15 years.

Homeowners who claim the standard tax deduction can receive a tax relief of $500 for single and $1,000 if married. 

Bonds will be made more attractive to investors potentially lowering the cost to develop affordable housing.

For some owners here on the cape…the capital gains you claim when selling your second or vacation home may be impacted if you used it as a primary residence for a certain period of time leading up to the sale.

Lendors will need to provide revised disclosure statements early in the process and provide mortgage documents no later than seven days prior to closing.

Freddie Mac and Fannie Mae will increase their lending amounts to markets with higher property values.

Homeowners facing foreclosure will now be able to take advantage of federally backed mortgages to get out of aggressive mortgage products.

Senior Citizens will benefit by an increase in the monthly payouts for reverse mortgages.

Veterans are protected from the foreclosure process until nine months after they return from active service

Communities hit by the demise of foreclosed properties will share a redevelopment fund to restore vacant homes.

We’ll see how the federal program works out. It is a massive step in the right direction to help correct the soft real estate market and rescue suffering homeowners trying to save their properties.

The state law which delays property foreclosures seems to be working. The law which became active May 1st, is designed to give homeowners a 90 day grace period before being foreclosed upon.

There were 2308 new foreclosures in June of 2007. This June there were only 350 according to The Warren Group, a Boston based real estate data publishing company. The law may be working. However, the overall number of foreclosures are due to double this year compared to 2007.

Completed foreclosures have dropped 19.5% from May to June. More time is needed in order to determine the results of this law.

Eye on the Housing Crisis

This past weekend the Senate met for an emergency session regarding the housing crisis.

A bill sponsored by Democratic Senator Chris Dodd passed 72 to 13 in a rare Saturday session and will most likely be signed into law by George Bush this week. This bill is designed to help homeowners who are committed to risky adjustable rate mortgages that are due to increase to an un-affordable amount. Some 400,000 struggling homeowners could be positively impacted by this measure. It authorizes government backed mortgages for homeowners at risk for foreclosure, provides tax credits to first time home buyers, new property deductions and new standards for brokers and mortgage contracts. This will hopefully slow the foreclosure epidemic down.

The foreclosure rate is now close to 8500 families per day and a projected 1 in every 8 homes will be foreclosed upon within 5 years. The law has also dedicates $4 billion to help communities maintain and redevelop homes that have been foreclosed upon, an affordable housing trust fund and tax exempt bonds to refinance bad mortgages. Also, part of the law will allow for the creation of an agency with a president appointed director. The agency will dedicate unlimited federal funds to help insure the mortgage giants Freddie Mac and Fannie Mae.

As we skid along the bottom of the real estate market, we'll keep our eye on how things play out. 2008 is turning out to be a very interesting year in the real estate market.

Seasonal Price Shift?

Buyers and sellers alike often ask if prices decrease during the winter on the Outer Cape. It’s a good question, but the answer is contrary to what you might expect. Even though our local population diminishes during the cooler months, the real estate market on the Outer Cape is active year round. We never see a seasonal shift in pricing deflating some buyers hopes that if they wait for the winter, they will get a better deal. In fact, one of our busiest periods traditionally falls in January, right after New Year’s. Determined buyers often begin their search during the winter months so that they can be assured of summer occupancy in their new properties. Also, many buyers receive sizable year end bonuses that can provide the down payment needed to make the dream of owning on the cape a reality.

We tend to see a slight increase in market inventory immediately following the summer season. Another ‘trend’ that we have seen is increased activity in the Commercial market during the winter months. Future business owners shop for and purchase property during our quiet months in order to allow themselves enough lead-time to prepare for the summer crowds.

The best time for you to buy is when you find the perfect property and your gut tells you so! Remember, that in addition to being the ideal summer destination, the Outer Cape is a beautiful and restful place to visit in the off-season.

Trouble for Goliath?

In the wake of the failure of such giants as Countrywide and Washington Mutual, no one expected this past week to see Indymac Bank join the ranks of failed mortgage institutions. Federal regulators shut down IndyMac last Friday. The bank’s assets as of the end of the first quarter 08 were over $32.01 billion, making it one of the largest Lendors in the nation.

The Federal deposit insurance corporation has taken over the bank which it described as the "fifth FDIC-insured failure of the year." Indymac reopened Monday under management of the FDIC.

But more startling and perhaps disturbing is the potential failure of Fannie Mae and Freddie Mac. Fannie Mae was created during the Depression as a way to revive a collapsed housing market by providing mortgage guarantees to low- and middle-income Americans.

Today they own or guarantee a mind-boggling $5 trillion in loans, which is why the fear that they could go under is so important. Fannie Mae or Freddie Mac usually purchases home loans as packages from banks. Your home loan could be one. If Fannie Mae and Freddie Mac were to fail, analysts say mortgage rates would soar, mortgage lending would grind to a halt and borrowers of all kinds would pay higher rates, negatively impacting the already sluggish economy and real estate market. 4
The Bush Administration met over the past weekend to explore options to prevent any failure of the mortgage giants.

Senator Chris Dodd, trying to calm fears, says there is no crisis and no bailout is necessary. Quote "The economics are fine in these institutions, and people need to know that." End quote

It is truly an interesting time for the real estate industry.

2008: A Look Back ... So Far

This week, we take a look back with a year to date recap through July 6, 2008 and comparison of year to date 2007 of the real estate activity in Provincetown, Truro, Wellfleet and Eastham.

This includes all categories of real estate, Single family homes, multi family homes, condominiums, lots of land, hotels and commercial.

In Provincetown, 93 properties sold in 2008 year to date. In 2007 77 properties sold during this time. Provincetown activity is up 16 sales compared to last year.

In Truro, 33 properties sold in 2008 year to date. In 2007 30 properties sold during this time. Truro is up 3 sales compared to last year.

In Wellfleet 26 properties sold in 2008 year to date. In 2007 48 properties sold during this time. Wellfleet saw a decrease in activity by 22 sales.

In Eastham 62 properties sold year to date 2008. In 2007 65 properties sold during this period. Eastham saw a decrease in activity by 3 sales.

In 2008 the majority of sales in Provincetown have been condominiums, 68 in total, in Truro 20 single family homes, In Wellfleet 17 single family homes and Eastham 48 single family homes. 

Provincetown appears to be performing slightly better than the past few years. This could be due to the low interest rates in the first two quarters of 2008 combined with low prices. Buyers are taking advantage of this opportunity.

Truro has seen a slight increase in sales. This could be due to price adjustments and buyers seeking opportunity.

Wellfleet has seen a dramatic decrease in sales this year compared to the same period last year. This could be due to pricing and buyer demographics for Wellfleet.

Eastham has seen a negligible decrease in sales.

We’ll keep monitoring the activity and bring it to you weekly.