My Real Estate Blog

The economic recovery seems to depend on jobs. The report out last Friday was disappointing. The Labor Department reported that the private sector added just 71,000 jobs in July, fewer than the 90,000 expected.

The Federal Reserve could take steps to stimulate the faltering economy. What are the options?

During the financial crisis, the Fed pushed down short-term interest rates to near zero, and then took the extraordinary step of purchasing $1.7 trillion in mortgage securities and Treasuries. That further drove down mortgage rates a half point and helped stimulate the housing market.

What will the Fed do now? Economists say the Fed is likely to reinvest the proceeds from maturing mortgage securities in new mortgage or Treasury assets. This would spread the benefits beyond the housing sector and Treasury bonds would be easier to sell. Only about $160 billion in mortgage assets are maturing each year, so the effect on interest rates would be minuscule. This would reassure jittery financial markets that like to see action.

Hopefully whatever the Fed decides to do, helps to stimulate the economy. More jobs help everyone. Without jobs, no one will buy houses.

Home sales activity in May increased for the 9th consecutive month. It was the 3rd month of positive year-over-year price movement in 2010, according to the Illinois Association of Realtors latest report. The statewide total home sales were up in May 27.1%.

Buying conditions remain favorable even though the homebuyer tax credits have expired, as mortgage interest rates are hovering at historic lows. Low interest rates combined with lower home prices give buyers more bang for their buck.

How about the Chicago Metro area? In the City of Chicago home sales were up 32.1% in May. Also encouraging is the 2.2% increase in sales price from a year ago. Similar increases were noted in the collar counties.

The tax credits definitely helped the market. Low interest rates and Jobs would help the gains continue.

In a presentation to the National Association of Real Estate editors in Austin, Texas, last week, Stan Humphries, Zillow.com's chef economist, pointed to 4 myths that he said that consumers are latching on to as they try to make sense out of current market statistics.

1. The housing recession is over. It's not, Humphries said. He estimates that the bottom won't come until the 3rd quarter, at least from a national perspective. Doug Duncan, chef economist for Fannie Mae, also agreed with that estimate.

2. After markets hit bottom, prices will rebound to boom levels. Not going to happen, according to Humphries. He expects the bottom to be a long and flat affair across the markets.

3. The worst of the Foreclosure mess id behind us. More wishful thinking, according to Humphries. He estimates that foreclosures will peak later this year. Realty Trac estimates that foreclosure activity won't stabilize until late 2011.

4. The tax credits saved the housing market. With or without a tax credit, those who bought would have done so anyway, Humphries said. The biggest incentive for home sales were the low prices, low interest rates, and increased lending by FHA (Federal Housing Administration).

It's easy to see why many want to look on the bright side. They want to go on with their lives and their housing plans, and many will.

A growing number of metropolitan areas are experiencing price gains from a year ago. With most states seeing healthy gains in home sales from the first quarter of 2009, according to the latest survey by the National Association of Realtors.

Sales increased from a year ago in 44 states and the District od Columbia, 31 states and the District of Columbia saw double digit gains, while 2 were unchanged and 4 were down. Much of the gains were due to the tax credits available.

Buyer confidence is back, with home buyers having long term views. The typical home buyer today plans to stay in their home for 10 years. Buyers are putting the flipping mentality behind them and viewing housing for what it is- shelter that provides social benefits and a good investment for the long term.

How is the Midwest? The median existing single family home price dropped .8% in the 1st quarter from a year ago, with home sales up 10.7% from a year ago.

Lending continues to be a problem even with some easing of credit. The housing recovery still has a ways to go.

To avoid a bad experience, make sure your sales contract includes an inspection contingency.

Your mission during the inspection period, is to learn as much about the property as you can. Investigate any issues that could affect whether or not the property will meet your long time needs.

Find out what systems need routine maintenance. Ask the seller to provide you with contact information of any people who have worked on the property that they would recommend.

Many states have property disclosure requirements. Illinois is one state that does. Make sure you get a copy. It is Illinois law that you do. Any problems that seller has had should be declared to you.

Sometimes the seller has had an inspection before putting the house on the market. Make sure that you also have your own inspection with someone that you have hired.

Today, many are purchasing REO (bank owned) properties. In this case you will receive little information from the seller. Be extra careful and investigate anything that you can.

Buying a home can be a good experience as long as you are careful.