Primary Markets vs. Resort Towns

I’m on vacation this week and away from our little sandbar by the bay. However, I couldn’t help but question the native realtors about their demographic and get their perspectives.

Primary markets are very different from the resort towns of Truro and Provincetown. My suit and tie wearing counterparts provided some interesting information for me to take home.

The three main sources of business these days are short sales, foreclosures and young married couples buying their first homes. Apparently, many have saved for years just waiting to pounce on the deals this market is providing. Although the short sale and foreclosure may produce a buyer, the home in many cases is destroyed inside by the previous owner who lost their property.

The first time homebuyer tax credit is incentive enough to make buyers take that leap in the markets of Western Massachusetts and Northern Maine.

Mortgage Rates in Provincetown

It appears spring flowers aren’t the only things inching up this time of year. Mortgage interest rates for 30 year products increased slightly the past few days after reaching record lows last week.

The national average mortgage rate is now 4.84%, this is up from 4.78% last week as reported by Freddie Mac. The rates have been hovering in the high 4’s for two months straight and all eyes are watching this movement. The low rates have created a flood of business for banks and mortgage brokers catering to consumers seeking to refinance and save thousands a year in monthly payments. The latest increases in rates may push even more consumers to act.

The 30 year rates were impacted positively in March when the Federal Reserve announced that it would purchase $1.2 trillion in mortgage backed securities and $300 billion in government debt. 15 year mortgages have also been affected. The rates for these less traditional mortgages are around 4.5% according to The Boston Globe.

Local banks are offering 30 year products at or around 5% with no points. A local branch of a large national lender is offering a rate in the high 4’s with points attached.

Here’s a note of caution. Be careful when shopping for a new mortgage. Although the days of teaser products are gone, read the fine print and make sure all fees, including points are disclosed up front. You don’t want the illusion of paying a 5% interest rate and find out that it adds up to 6% when all is said and done.

First Time Home Buyer Tax Credit

The clock is ticking on one of the most enticing features of the American Recovery and Reinvestment Act of 2009: the first time home buyer tax credit. The act authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence between January 1, 2009 and December 1, 2009.

Before you stop reading this because you have owned a home in the past, note that the definition of ‘First time home buyer’ is a buyer who has not owned a principal residence during the three-year period prior to the purchase. So even if you have owned a home in the past, but have been renting for the past three years, you would qualify!

What does the credit really mean? Plain and simple, it is cash back to you from the government. It is a dollar for dollar reduction in what you owe. If you owe $8000 in taxes for 2009, the credit would be applied and you will owe nothing. If your tax liability is only $1000, then you will receive a check for $7000.

What types of properties qualify? Any property that you will use a primary residence will qualify, including but not limited to single family homes, and condominiums. You will even qualify if you build a new home and occupy it before December 1.

Only 7 months remain in which to take advantage of this credit. Don’t miss out.

Source for this article and for more information: www.federalhousingtaxcredit.com/2009

Has the Market Bottomed Out?

This week brought some peculiar behavior in the real estate market which led to conflicting reports and opinions as to whether we’ve reached a turning point.

Last Saturday was alive and buzzing with real estate shoppers. Realtors from Provincetown to Orleans reported that the combination of scheduled showings, walk in inquiries and busy open houses, were reminiscent of a stronger market. The weather cooperated as well.

Mortgage brokers reported that although the majority of their traffic is refinance business, the number of buyers seeking pre-approval letters, are increasing.

As a result of the recent activity, this week brought a number of offers from buyers still seeking to get a steal, not a deal, on the outer cape. Most fell flat and only one condominium priced under $300,000 was put under agreement.

The Boston Globe reported this morning that home values slipped an average of 15% in Massachusetts since the market peak in 2005 compared to other states which saw a 50-60% decrease in value.

It’s hard to predict when the curve will turn upwards, but here are some significant signs that momentum is building for something to happen:

1. Pre-approved buyers are shopping. Getting a mortgage these days is not an easy thing and going through the process shows commitment to buy.
   
2. The interest rates remain historically low.
   
3. Low prices are creating extreme opportunity.
   
4. Closed sales in the hardest hit markets of Phoenix and South Florida have already increased three months in a row due to the purchase of foreclosed properties and short sales.
   
5. The Housing stimulus package is helping sellers keep their homes and avoid slipping into foreclosure or listing their homes at fire sale prices.

Stability may be returning and although there is a long road ahead, it appears flat and clear with the writing on the wall as to where this is going.

Activity This Week

The performance of the real estate market was a bit static this past week.

The optimism in the air created by the combination of low interest rates and low listing prices had generated some sales activity in Provincetown for the first quarter. Although the quarterly comparison to last year was dismal in regards to number of sales, dollar volume had increased. There was one sale this week, a $349,000 condominium. Another condominium, new construction, went pending. The property is listed for $399,000. 

Easter brought many shoppers to town looking at single family homes and condominiums. Traffic volume for shoppers was high on Friday and Saturday. Easter Sunday was very slow, as most realtors observe the holiday and do not work.

Open house traffic for Friday and Saturday of Easter Weekend was also up a bit. As spring proceeds, more open houses will pop with the advent of warmer weather.

The activity over the holiday weekend included numerous second and third showings. These usually lead to offers. However, the interest rates inched up earlier this week causing a ripple effect amongst homebuyers who want to be sure they get the lowest rate possible. 

Compare the real estate market to a Wal*Mart. The store is full of shoppers but only a few are at the register.

Is Mortgage Insurance the Latest Incentive to Attract Buyers?

Sold: January 1- March 31, 2009

Provincetown

• Homes = 5
• Condominiums = 8
• Avg Days on Market = 324
• Avg Sales Price = $531,664

Truro

• Homes = 4
• Condominiums = 2
• Avg Days on Market = 177
• Avg Sales Price = $466,767

Wellfeet

• Homes = 8
• Condominiums = 1
• Avg Days on Market = 139
• Avg Sales Price = $420,333
  

Sold: January 1- March 31, 2008

Provincetown

• Homes = 5
• Condominiums = 31
• Avg Days on Market = 193
• Avg Sales Price = $424,344

Truro

• Homes = 4
• Condominiums = 4
• Avg Days on Market = 237
• Avg Sales Price = $515,713

Wellfeet

• Homes = 8
• Condominiums = 2
• Avg Days on Market = 300
• Avg Sales Price = $600,250

Sunshine in Sight?

April showers bring May flowers. Can it be possible that the rain on the housing market will turn into brighter months ahead?

President Obama announced this week from the G20 Summit that the recession has turned a corner. With rescue packages in place for struggling homeowners, interest rates as low as they’ve been in years and the stock market performing favorably, we are hoping he is right. A little spring sunshine in our economy may be just around the corner.

However, with the jobless rate the lowest it has been in 26 years, consumers are not motivated to buy a home out of fear of losing their jobs. Builders have identified this as the number one issue in selling new construction. Not having the resources to pay a mortgage due to a lay off ranks among the top anxieties in the United States today. Developers have stepped up to the plate and are now offering targeted incentives to overcome this obstacle.

Free upgrades like granite countertops, swimming pools and finished landscaping are a nice touch, but seem to have no impact on a buyer’s decision. These finishes are practically expected in today’s market and major developers recognize this.

Major builders are offering mortgage unemployment insurance as an added amenity to overcome the buyer’s fear of losing a job. The way this works is the developer pays for a mortgage insurance policy for the buyer. Typically, this policy is valid in case the homeowner loses his or her job within the first two years of the purchase date. Up to six months worth of payments can be made while the buyer looks for a new job. In some cases, the builder has included the cost of the insurance, which is estimated to be $450 to $900 per customer, into the listed price.

Right now, the insurance is limited to only those buyers who finance with the development company directly.

This is definitely a bold marketing move and numerous builders are adopting this strategy daily. As with any sales promotion, time will tell how effective this program will be.