Real Estate Information

Happy New Year! It is with great optimism that I write to you all in the new year. Thanks to our University of Utah Utes and their perfect 13-0 season, 2009 could not have started off any better. I’d also like to take this opportunity to thank everyone who participated in our Christmas Box charity drive. Thanks to your donations we raised over a thousand dollars for the Christmas Box. Because wallets were so tight this year, it was even more special that people gave to such a good cause.

I’ve been writing for several months in a row now about the economy. Well it is still the number one topic of conversation for most people and will continue to be for awhile to come. Most economist are predicting a bleak 2009. I would encourage all of you to work on getting your financial house in order this year. Through my business I have met some wonderful people including accountants, financial advisers, brokers, etc., that do a fantastic job of helping you with your personal and business finances. If you ever find yourself in need of a particular referral, please let me know. In the meantime, if you are ever in need of real estate or mortgage advice, please feel free to call on me anytime.

Welcome to 2009. The year of the _______? You decide what this year will hold. The possibilities are endless. The only limitation is your imagination and capability to challenge yourself and see your goals through. It's time to plan ahead. But before I move on, I want to say something very important. As good as it is to plan ahead, and set goals, just remember that you don’t need a special event or occasion such as a new year to plan and implement a change or goal in your life. If you have an idea or a goal that pops into your head that you are confident will help you better yourself or your life, then institute it right away, don’t wait for a catalyst.

Understanding that you don’t need an excuse to implement change in your life, let’s take a look at the new year and see what it holds. Let's look into the crystal ball and see if we can predict what this year will hold for us.

As we have been saying for months, the market is on the verge of rebound. And every month that passes, the evidence supports that position more and more. Lender's are accepting the foreclosure rates and helping distressed home owners refinance or adjust their mortgages so that they can hold onto their homes. Lenders are opening up their wallets and loosening the reigns on the cash flow to consumers and allowing them to get fantastic rates on loans to gobble up the inventory and help stabilize the market.  

In our local market, the number of new listings every month has stalled, and even gone down. That means that every month less and less homes are listed for sale on the market. Partially because more folks can afford to hold onto their homes, and partially because home owners are seeing that rebound over the bend. With more and more homes being sold every month, as well as few and few homes coming onto the market every month, inventory levels are finally starting to balance out.

Major media outlets touted 2008 as the year to forget, and are projecting a memorable 2009.  However, must we not forget that history is a guide. If anything, it is important to remember 2008. Remember what transpired. Learn from the mistakes that were made, and watch future trends to make sure we don't end up with another 2008 in the future. Just as 2007 will be remembered as the year the market started to move down for the first time in nearly a decade, 2009 will be remembered as the year the market started to move up from one of the worst economic crises in recent history.

That starts with you, the consumer. Make smart decisions with your money. Make smart investments in your future. One of, if not the most secure asset you can ever get your hands on is real property. Therefore, you can be a major participant in one of the biggest rebounds in real estate history by securing real estate, and using it to make you money.

Whether you are looking for renovate and flip, or to invest traditionally with a rental property or a lease option property, benefits are there to be had. So, 2009 will be the year of what? You decide. And remember, if you need any help or advice or just want someone to bounce ideas off of, give me a call, I am happy to help.

Losing your home can be a very emotional event in your life. Since homeownership is considered the “American Dream” and one of the best benefits of freedom, the loss of homeownership can feel like you are being evicted from a very elite club, and having your freedoms stripped from you.

You should know however, that short sales are very common and for a variety of reasons. By doing a short sale, you are protecting your rights to purchase a home in the future, and showing your high level of responsibility by working to solve the problem before the home goes to a trustees sale, which would result in a successful foreclosure, and possible worse financial distress.

Many people may not understand why they can’t just raise the price of the home to cover their costs. That's because price is happening in the present, and value is in the eyes of the beholder. What you paid for your home has no bearing on it’s current value, or the offer price they may receive.

"Fair Market Value" - is the price a buyer will pay and a seller will accept for the house, given that neither buyer nor seller is under duress.

However, "duress" is the keyword. 

"Duress" - is either party under pressure, causing them to have to perform quickly. 

In the case of a foreclosure, or job relocation, you may need to perform quickly. That puts you under duress. Fair market value flies out the window.

If you are upside down, you may think that you  “can’t sell”. The fact is, you probably “won’t sell”. An example of somebody that can’t sell is someone whose home has been swallowed by a mudslide or an earthquake, whereas the property no longer has an value. If a buyer exists, that will pay an amount for a property, then the home can be sold. Make sure you understands the difference between “can’t sell” and “won’t sell”.

According to Eric Tyson, MBA and Ray Brown in “Home Buying for Dummies”, it is important not to let “impartial” get confused with “fair”. Fair Market Value doesn’t care about any of the following:

• How much the sellers need because they overpaid for their house when they bought it.
• How much the sellers need to recover the money they spent fixing up their house after they bought it.
• How much money the sellers need to pay off their loan.
• How much money the sellers need from the sale to buy their next [home]...

There are more than a few considerations to take into account when considering a short sale.

Credit Liabilities

A short sale will have adverse effects to your credit. However, the effects of a short sale on your credit is far more desirable than the effects of a foreclosure. A foreclosure will have a much more adverse effect. If you currently have good or excellent credit, this will be a large blemish. However, this blemish will fail in comparison to what a foreclosure will do. Credit reports recover much faster from short sales than they do from foreclosure. 

Tax Liabilities

Probably the most commonly overlooked aspect of a short sale, is the tax consequences to the seller. Even though no physical money is received, banks will issue a Form 1099 to most sellers for the outstanding amount that was not covered in the cost of the sale. This will be considered income to the seller by the IRS, and will be subject to normal income tax rates. Since no income tax is paid, there will be an amount due at the end of the year. The exception to this is that some homeowners may meet the IRS’s definition of insolvency (⎯either in bankruptcy or with debts exceeding assets⎯) and may not be required to pay taxes on the amount forgiven. Also, with the economic stimulus package in 2008, the IRS for the most part stopped counting foreclosure debt forgiveness as income. Talk to you accountant to find out what, if any is your tax liability.

If you think you may be in need of a short sale, contact us, and I will be happy to review your situation and see what may be the best solution for you.

If history has taught us anything, it is that it will happen again. History repeats itself, and it has proven that fact to us time and time again. Using history as our guide, we start to notice trends and commonalities that happen around certain events. For example, throughout history, all U.S. recessions have been preceded by a housing market downturn. It was no surprise to analysts that the current recessions we are experiencing happened because they noticed the downturn in housing as did the rest of the country. 

However, with that comes some fantastic news. Using that same guide, we can make two predictions that are rock solid that bode well for not only the American economy, but also for you as a consumer, homeowner, and citizen. The first has to do with time frames. Most recessions throughout history have lasted between 16 and 18 months. Based upon when the "official" start of the current recession is roughly dated, we are on the down hill slope of our trek. Depending upon which start date you want to reference, as an economy we are about 14 to 16 months into this current recession. With history as our guide, we can know with a certain level of confidence that this recession will soon be coming to an end.

But, why stop there? There is another guide we can use to help solidify that we are near the end of this economic flu. The new President of the US. Every four years Americans start to tighten their wallets and become apprehensive about what direction the country might move in. This is directly related to the presidential elections. History tells us this effect is much greater when there is a guaranteed change in the white house as is the case with the 2008 presidential election. The good news is, once the campaigning, propaganda, stress, and elections are all over, we as a country come together and decide on one person. Once that decision is made, Americans go back to being themselves confident that the majority will have picked the right person for the job. 

Throughout history, after a new president takes office, the economy always improves slightly at the hope and confidence the country has in its newly elected leader. 2009 will bring no exceptions to this trend. So what was our history lesson today? We learned that economic downturns tend to last only a short time and that we are nearing the end. As an added bonus, the economy rebounds ever so slightly once a new president takes office. With both of them working together, it is only a matter of time before our economic flu shoot kicks in and our country is back to ruling the playground with authority.

Don't let the news media influence your decisions in real estate, let a real estate professional give you the information you need to make that decision. You will be all the wiser for it, and in a much better situation when all is said and done.

In last months Salt Lake Board Realtor(r) magazine there was a great article about the projected growth of the Wasatch Front for the next 30 years. It's in its entirety in my newsletter.

Read it here: http://www.utahrealestateguy.com/Newsletter

The gist, which I completely agree with, is that the current economic conditions too will pass and the opportunity created by a doubling of the population is going to be enormous.

Other take-a-way from the article is that the demographics are shifting and that the rental market will continue to be a larger and larger portion of overall housing. That is great news if you are investing in rental properties like we do.

Final thought. I'm a big fan of Warren Buffet and he is famous for taking advantage of a market when everyone is panicking and for avoiding a market when everyone is buying. I think that is very wise advice. In my own words, "Everyone always thinks the existing conditions will last forever and they never do."

It's amazing what has been happening in all the financial markets and the repercussions it has had in the real estate industry. Rates and Gasoline seem to have something in common over the past few years. They have both moved in the same direction. Now, as gas prices are falling, so too are rates. There are programs out there that can get you into a home for a 30-year fixed loan at under 5%. That is some of the best rates this country has seen in several years.

If you have been considering refinancing or purchasing, now is the best time to do it. Especially if you can do it before Christmas. Save yourself a payment and give yourself some more shopping money. Get some cash out, or just get a lower payment. Either way, it puts money into your pocket every month. Call (801) 355-3093 and ask for Kristen to see what she can do for you. You might be pleasantly surprised.

Now that the presidential election is over and all the investors know what to somewhat expect, the markets can loosen up, and they have. More on how the presidential race effects the economy on Friday.

As I follow the news on the national real estate market, I realize more and more that consumers are not being given accurate information as to the condition of our local Salt Lake City market. There really is no such thing as a "national market". As with any overall view of an industry, the press, and other media outlets take an average of everyone to come up with what they view as the "national average". However, in real estate that doesn't always work.

For example, what happens at Toyota in terms of new products, number of sales, workforce downturn etc... can have a direct impact on the other car manufacturer's. The same is not true in real estate. If the Boise Idaho market experiences a huge increase in the number of buyers and homes start "flying off the shelves", it doesn't have any impact on the Salt Lake market. 

There is the real estate industry, which includes lenders, mortgages, home inspectors, appraisers, home repair, real estate agents, real estate brokerages, builders, and more. Then there is the real estate market, which is a specific portion of the industry. The real estate market deals directly with the number of homes available vs the number of homes sold. it also takes into consideration time on market, average sales price and other statistical information. The availability of finances can impact the real estate market, however that is simply one facet of the real estate industry affecting another.

There are literally thousands of individual real estate market's across the United States. Each market is affected only by the local economy and housing demand vs housing availability. If a large corporation such as Microsoft were to build a new factory in Tucson Arizona that will employ 100,000 people, it will have a booming effect on the real estate market of Tucson. However the impact it has on other markets in Arizona will be minimal, and it certainly won't play much of a factor with the Salt Lake City market with the exception of residents of Salt Lake moving to Tucson for a new job.

Therefore, when you listen to both the local and national press and media, please keep in mind they are using averages for the country and combining information that doesn't necessarily go together.  If you want the most accurate information on your local real estate market, contact your local real estate expert, such as Utah Full Service Brokers. It is our job to know what is going on in our local market, and we pride ourselves at providing top quality service to all of our clients.