Ask Trisha Dear

According to the latest monthly data prepared by the Houston Association of REALTORS® (HAR), April sales of single-family homes climbed 9.6 percent versus one year earlier. That marks the second biggest monthly increase of 2012.

"The Houston real estate market continues to benefit from a healthy economic climate led primarily by the addition of 96,000 new jobs locally in the past 12 months, according to the Texas Workforce Commission," said Wayne A. Stroman, HAR chairman and CEO of Stroman Realty. "Increases in pending home sales along with declines in active listings continue to keep our housing inventory at the lowest levels we've seen in more than three years."

The April single-family home average price rose 11.2 percent year-over-year to $223,328, the highest level for an April in Houston. The median price—the figure at which half of the homes sold for more and half sold for less—rose 8.2 percent to $160,120, which is also a record high for an April in Houston.

Foreclosure property sales reported in the Multiple Listing Service (MLS) fell 10.1 percent year-over-year in April. Foreclosures comprised 18.8 percent of all property sales, which is down dramatically from the 27.8 percent level recorded at the beginning of the year. The median price of foreclosures in April ticked up 1.1 percent to $79,900.

April sales of all property types in Houston totaled 6,156, an increase of 9.9 percent compared to April 2011. Total dollar volume for properties sold during the month soared 21.2 percent to $1.3 billion versus $1.1 billion a year earlier.

April sales of single-family homes in Houston totaled 5,136, up 9.6 percent from April 2011. This marks the 11th consecutive monthly increase.

Broken out by housing segment, April sales performed as follows:

At $223,328, the average price of single-family homes rose 11.2 percent from last April, resulting from a surge in sales activity among homes priced from $250,000 and above and a decline in the sales of homes priced below $80,000. The average price achieved an April high for the Houston market. At $160,120, the median sales price for single-family homes increased 8.2 percent year-over-year, also achieving an April highpoint.

HAR also breaks out the sales performance of existing single-family homes throughout the Houston market. In April 2012, existing home sales totaled 4,317, a 9.1 percent increase from April 2011. The average sales price rose 11.4 percent from last year to $210,807 and the median sales price increased 9.0 percent to $149,900.

The number of townhouses and condominiums that sold in April leapt 12.4 percent compared to one year earlier. In the greater Houston area, 472 units were sold last month versus 420 properties in April 2011.

The average price was flat at $168,007 in the April 2011- April 2012 comparison. The median price of a townhouse/condominium edged up 3.3 percent to $135,000.

Demand for lease properties tapered in April for the first time in more than a year. Single-family home rentals ticked up 1.5 percent compared to April 2011 earlier and year-over-year townhouse/condominium rentals declined 8.7 percent.

May 9--Area housing prices will rise this year amid a strong local economy and a limited supply, economist Ted C. Jones said Tuesday at an annual symposium on real estate and the economy.

Apartment rents could go up as much as 10 percent, which will encourage more people to become homeowners. The median price of a house will rise about 3 percent, Jones, chief economist for Stewart Title Guaranty Co., told an audience attending a luncheon of the Hobby Center for Public Policy's Institute for Regional Forecasting at the University of Houston.

"This market is back," he said. "It's vibrant."

Other recent reports on Houston-area real estate seem to support such optimism.

In the first quarter, home sales jumped 9 percent over the same period last year to 12,936, according to the Texas Quarterly Housing Report. The median price reached $150,900, a 4 percent increase.

While the housing market is still stressed in some neighborhoods, buyers are more active, said real estate broker Shad Bogany, who attended the luncheon. Sellers are getting multiple offers for some homes, and in some cases, investors and consumers are competing for low-priced foreclosures.

Jones said new jobs in Houston will continue to come from the energy, health care, manufacturing and transportation sectors, but he was conservative in his projection for 2012. He estimated that area employers will create 70,400 jobs this year and 72,400 in 2013.

"The good news is we could probably exceed that," he said.

The projections are below the gain of 79,300 jobs the Texas Workforce Commission reported for 2011, which Jones said reflected his concern that European distress could cut demand for oil.

Construction jobs, he said, will get a boost over the next couple of years as developers resume big commercial real estate projects they put on hold during the recession.

Jones projects more residential construction in the coming years, too.

Builders will get permits for 22,205 single-family homes this year and as many as 24,870 by 2014, according to Jones' projections. Multifamily construction permits will grow from 10,629 this year to 13,322 in two years.

Employment gains also will propel commercial real estate, where construction has fallen.

Rents will rise for industrial and office properties as occupancy rates tighten, Jones said. 

Posted by By Nancy Sarnoff, Houston Chronicle on May 9, 2012

By Benny Kass
Inman News®

1. The vacant lot is encumbered with a mortgage: If you walk away, your lender could ultimately foreclose on the lot. If the lot does not generate enough money to pay off the existing loan (which is usually the case), depending on your state law, the lender could go after you and your other assets for the deficiency.

And even if your state prohibits deficiency judgments (which a few states do), instead of foreclosing, the lender could file suit against you based on the promissory note that you signed. Then, once it has a valid judgment, it could garnish your wages, and attach your other assets.

2. The vacant lot is free and clear. This is a little less risky if you choose to walk away. Ultimately, the city/county where the property is located will sell it for nonpayment of real estate taxes.

But before you go down that path, have you -- and your financial advisers -- considered other alternative options? If there is a mortgage, ask the lender if it will take back the property by way of a "deed in lieu." This means the lender will get the property directly "in lieu" (instead) of a foreclosure.

If there is no mortgage, have you considered donating it to a charity so that you may be able to get a tax deduction? Have you considered selling it for whatever the market can bring? Because this was probably not considered "investment property" you probably won’t be able to take a tax loss on any sale, but confirm this with your own tax advisers.

What about your neighbors? Perhaps they would like to have a lot adjacent to their property for future growth? I have had a number of clients who sold directly to their neighbors, thereby not having to pay a real estate commission.

And in the final analysis, is there any merit in hanging in there for the foreseeable future? I cannot guarantee anything -- and my two crystal balls are shattered -- but I do believe we are on the road to recovery. You will kick yourself for a long time if the market picks up and you have already divested yourself of that vacant lot.

DEAR BENNY: In December 2007 I purchased a one-bedroom unit on the top floor in a mixed-income development. Nearly seven months ago, management ran a water test on the roof that resulted in water flowing into my unit, as well as both structural and personal damage to my ceiling and possessions.

I am a board member and I'm really concerned because I've been told that both categories of damages are my responsibility.

If management and the developer can dismiss me with such disregard, I can imagine how other homeowners would be treated under similar circumstances. Nothing about the water test was my doing; it was a deliberate test, ordered by management, in response to complaints of water leaks in other units.

What is my remedy? Should we still be paying master dues? --Elaine

DEAR ELAINE: Pardon me while I vent about a topic of great concern to me, namely the relationship between a property manager (or company) and the board of directors.

When a landlord rents his property and uses a property manager, he wants only the bottom line: What's the monthly cash flow? The manager handles all of the details using his discretion.

But in a community association, it should be the reverse: The board provides the guidance and the orders, and the manager faithfully follows through.

So, in your case, the decision is not the property manager's to make; it is the board that makes that decision based on the facts, and on the recommendations and opinions of the association's attorney and insurance agent.

Does the association have legal counsel? If not, you should. Plus, that attorney should be independent of the property manager. Also, if the board makes a decision, because this involves your unit you should recuse yourself from any vote, and have the minutes reflect this for your protection.

I cannot provide a legal opinion without knowing all of the facts, but if the leak occurred while doing a roof-leak test, common sense tells me that the problem is in the common elements and not in your unit.

Do you have HO-6 insurance coverage? That's insurance to cover problems in your unit that are not covered by the master insurance. If you do have it, contact your insurance agent; he or she will be helpful in determining the cause of the leak. If you do not have that insurance, I strongly recommend that you get it immediately.

As for your master dues question, this also should be responded by your association counsel. However, the answer may also be found in your association legal documents.

Auto sales. Consumer confidence. Manufacturing. Retail Sales. Exports. You name it. Over the last six months, nearly every facet of the U.S. economy has shown improvement. And the real estate market is no exception.

Here’s the irrefutable proof:

Recovery Sign #1: Housing Starts. In February, housing starts checked-in at an annual rate of 698,000 units. That’s up 14.7% from the 608,800 starts in 2011… up 18.9% from the 586,900 starts in 2010… and up 25.9% from the record-low 554,000 starts in 2009. Even after the uptick, though, we’re nowhere close to the high-water mark of 2.07 million starts hit in 2005.

Recovery Sign #2: Building Permits. In February, building permits – a proxy for future construction – climbed to an annual rate of 717,000 units. That was ahead of expectations. It also represents the highest level since October 2008.

Recovery Sign #3: Dwindling Inventory. Expect even more building on the horizon. Why? Because new home inventories plumbed their lowest level on record in January at 150,000 units.

If we include existing homes in the mix, the total number of homes listed for sale has dropped – on a year-over-year basis – for 12 consecutive months. Now there are 2.43 million homes listed for sale, which is down 19.3% in the last year and down 39.8% from the record inventory of 4.04 million homes in July 2007.

Recovery Sign #4: Bidding Wars. The lack of inventory is creating a competitive bidding environment. Online brokerage firm, Redfin, reports that agents encountered multiple bids on about 50% of offers in Seattle, Boston, Washington D.C. and Oregon through March 15.

Recovery Sign #5: A Bottom in New Home Sales. Last year, new home sales fell to 302,000 units – the worst reading on record. For comparison’s sake, in 2005, 1.28 million new homes were sold. The market has likely bottomed out. I say that because new home sales in February checked-in at an annual rate of 313,000 units, which is 11.4% higher than last February’s rate.

Recovery Sign #6: A Rebound in Existing Home Sales. In the last year, demand for previously owned homes ticked 8.8% higher to an annual rate of 4.59 million. And the number of contracts to buy existing homes in February jumped even more – up 14% year-over-year.

Recovery Sign #7: Prices. As I’ve written before, prices will be the last sign of a recovery. They’re a lagging indicator, like unemployment. That being said, signs of a price rebound are materializing. Based on the latest Case-Shiller Indexes, prices in Miami and Phoenix – arguably two of the hardest-hit real estate markets – were up in January by 1.2% and 2%, respectively. That marks the third consecutive month of improving prices in Miami and the fourth in Phoenix.

Recovery Sign #8: Rising Confidence. If insiders know best, they’re certainly sending bullish signals. The National Association of Realtors/Wells Fargo Index of builder confidence climbed for the sixth month in March. It’s now at the highest level since 2007.

Individual builders aren’t hiding their optimism, either. The CEO of the nation’s third-largest homebuilder recently said, “A very real trend is beginning to take shape… There are empirical data points that are today confirming that the market is showing real signs of stability.” Indeed!

Recovery Sign #9: Historic Affordability. With prices down an average of 36% from the peak – and rent prices rising – it’s never been cheaper to buy a home. In fact, the National Association of Realtors Housing Affordability Index hit a record high of 206.1 in January. (A value of 100 means a family earning the national median income can afford a median-priced property at current mortgage rates.)

A separate study by Trulia found it’s now less expensive to buy than rent in 98 of America’s 100 most populous metropolitan areas. (Honolulu and San Francisco were the lone exceptions.)

And yet another study found that the affordability gap is widening, strongly in favor of buying. Deutsche Bank reports that the average rent is now 14.9% more than the average home loan payment – up from 8.1% in the previous quarter.

It’s worth noting, too, that borrowing costs are down about 20% in the last year. Mortgage rates hit an all-time low of 3.87% in February – down from 4.95% a year ago.

Recovery Sign #10: Employment. It’s hard to buy a house if you don’t have a job. And no one can deny that the labor market is improving. In the last eight months, the unemployment rate is down almost one full percentage point.

Recovery Sign #11: An Influx of “Smart Money.” Greg Zuckerman of The Wall Street Journal reports, “Over the last couple months some of the best investors on the street… have been making big bets on homebuilders.” And he’s not kidding.

Published on Real Trends 4/17/2012

And, when it comes to the cash, we’re not talking about small change here.

Here are just a handful of the reasons your sellers might consider making energy upgrades:

1. Lower utility bills increase cash flow immediately

Energy-efficient home upgrades save homeowners money immediately on monthly utility bills.

Take, for instance, the gas bill associated with a household’s hot water use – it’s the second-largest energy cost for the average home. A traditional water heater is powered up and keeping that huge vat of 80, 100, even 120 gallons of water hot 24 hours a day, 7 days a week. By installing a tankless or on-demand water heater, homeowners can expect to see a 24% to 34% reduction in water heating costs – immediately!

Same with installing a solar energy system, which most homeowners don’t realize they can do for a small or no down payment. With a solar power service , homeowners have the ability to lock in low electricity rates without having to own or maintain the panels. A solar service provider does it for them and they enjoy the benefits of solar power that’s less expensive than traditional dirty energy. One solar power service customer calculated that if his regular utility continues increasing rates at 6% per year he’ll save about $24,000 over the 20-year solar power service agreement.

If your sellers push back on the costs of your painting, landscaping, and staging recommendations, suggest these improvements instead. They can reduce a home’s operating costs immediately with little or no upfront cost.

2. Green improvements increase sale price and offset losses

A spate of recent studies indicate that green home improvements actually boost the value of a home:

• The Appraisal Journal reports that a home’s value increases by $10 to $25 for every $1 decrease in annual energy bills. For a 3,000-square-foot home, green improvements could increase the value by $8,000 to $25,000.
• Lawrence Berkeley National Laboratory compared solar homes to comparable homes without solar panels and found that an average-size solar system can add around $17,000 to a home’s value.

Last month Bloomberg reported that American homeowners lost roughly $7 trillion in home value over the course of the housing market recession. While these macro market dynamics may be out of the individual homeowners’ control, green home improvements offer a rare opportunity to offset such market losses.

For example, two separate home builders have done the math and reported that, all other things being equal:

• The value of solar homes increased 20% faster than that of the comparable non-solar homes in the same time period, and
• A community of solar homes had a sales rate double that of a similar community of non-solar homes in the same area.

Home energy upgrades can offer a great opportunity to get market-beating appreciation.

3. Energy upgrades can earn sellers tax credits and rebates

The federal tax credits for buying a home are a thing of the past, but there are still a number of federal, state, and local tax incentives for making energy-efficient home improvements. Some of the most overlooked tax credits, rebates, and other governmental incentives to go green are actually offered on the local level, where your sellers might qualify for tax credits for energy upgrades like:

• Basic energy-waste minimizers like energy-efficient weatherization, home insulation, and sealing
• Dual-paned windows
• Tankless water heaters
• Low-flow toilets and shower heads
• Rainwater and greywater conservation systems

Encourage your sellers to visit local city and state Web sites and look for a tab or link to Homeowner Resources for more information on credits. Better yet – position yourself as an expert resource of these little-known programs by posting the links on your own website, blog, or Facebook page, as well as emailing them to sellers you know who might benefit from this knowledge.

4. Decrease Days on Market [DOM]

Sellers stress about the challenge of differentiating their homes from all the competitive listings on the market and getting them to move quickly when the market is slow. Greening things up is one way to speed up the process. According to the US Department of Energy’s Office of Energy Efficiency & Renewable Energy, a solar home will sell twice as fast as a home without solar panels – even in a depressed market.

Suggest green improvements like solar panels and water tanks to your sellers who are looking for serious ways to stand out. Some of these upgrades hold the power (pardon the pun) to save them and, in turn, the buyers attracted to green homes, tens of thousands of dollars.

Property condition ratings introduce new risk                               

Many of the houses coming on the market today are foreclosure sales, which usually sell "as is" and are often in poor condition. This may create a buying opportunity for some buyers, but it may be a hazard for others.

Purchase opportunity

A purchase opportunity arises because many potential buyers don't want the hassle of fixing up a house in poor condition, which means that there are fewer competing buyers. In addition, those who sell houses "as is" are frequently in a hurry to get it done, which means that they are disinclined to wait for a higher offer.

The buyers in the best position to take advantage of such opportunities are those with the skills and knowledge required to assess what needs to be done and how much it will cost.

Risk of value uncertainty

But purchasing a house in poor condition has serious risks. One risk is the greater uncertainty connected to its value. The worse the condition, the more costly the improvements required to make the house livable, and the larger the potential error in judging in advance what these costs will be.

The appraisal may reduce but not eliminate the uncertainty connected to the property's value. Appraisers mainly rely on the sale prices of comparable properties, after adjusting for the differences between the subject property and the comparables.

But because information on the condition of comparables is often difficult for appraisers to obtain, the error in making price adjustments is relatively large when the property is in poor condition.

Risk of not finding a mortgage

But today the greater risk in buying a property in poor condition is that the buyer will be turned down for a mortgage or forced to find a lender who will make the loan but at a premium price.

This problem seldom arose before the financial crisis because there were very few foreclosure sales, and lenders generally operated on the assumption that valuation errors would be erased by property appreciation. Today, those looking to buy a house in poor condition need to consider this risk very carefully.

Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) recently developed a classification system for housing condition ranging from C1 (the best) to C6 (the worst), but only C6 is unacceptable to the agencies in "as is" condition. Nonetheless, many lenders require a C4 or better.

Rationale for condition requirement

It is understandable why the agencies that bear the risk of default would either require that the condition of mortgaged houses meet some minimum standard, or base their purchase prices or insurance premiums on house condition.

As noted above, the potential error in appraisals is larger for houses in poor condition, which would result in greater losses on loans that default. When defaults occur early, furthermore, the house that was in poor condition when the loan was made is very likely to be in poor condition at default, which increases marketing costs.

Why some lenders are stricter than the agencies, however, is not clear. Presumably the servicing of loans on properties in poor condition is less profitable, perhaps because these loans have relatively short lives. It is also possible that the cost to servicers of managing foreclosures of properties in poor condition is relatively high.

Whatever the reasons for lender caution, homebuyers looking for bargains in the sale of distressed properties need to take it into account in planning their purchase strategy.

A purchase strategy for distressed properties

An inspection report from a licensed expert will help in the decision as to whether to buy the house but will not eliminate uncertainty regarding how an appraiser will classify the condition of the house. If the house is classified C5 or C6, a loan may not be available.

If the sales contract has a mortgage contingency clause, which is a standard provision in some states, the buyer who can't get a mortgage because the property is classified C6 or C5 will get his earnest deposit back and the deal is canceled. However, the thwarted buyer will not be reimbursed for the cost of the inspection or the appraisal, which might total about $700.

If a property is being sold "as is" and the standard sales contract does not have a mortgage contingency clause, I would pass unless the seller agreed to return my earnest deposit if the property is classified C6 by the appraiser. You could be more conservative and require the return of the deposit with a C5, which would avoid a mortgage problem because most lenders will accept a C4 or better, but it may substantially reduce the number of sellers who will deal with you.

While accepting a C5 will give you access to more houses, you must find one or more lenders who will accept a C5. You would be well advised to do this in advance of purchase.

Thanks to Kevin Iverson, who contributed materially to this article. Inman News

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Lawrence Yun, NAR chief economist, said this is a hopeful indicator going into the spring home-buying season. "Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations."

Regionally, the South led the way increasing 7.7 percent in January. The Northeast also saw a 7.6 percent rise for the month. The Midwest and West both fell, however, falling 3.8 and 4.4 percent respectively.

"Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery," Yun said. "If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater." In the new homes market, sales declined in January to a seasonally adjusted pace of 321,000, but were up 3.5 percent over last year at this time.

NAHB Chief Economist David Crowe reports, "This is indicative of the incremental, steady progress that the market is making toward recovery in conjunction with modest economic and job growth. Increasingly, potential buyers are feeling better about their financial situation and their ability to buy a home, but the challenges posed by tight credit conditions and appraisal issues continue to slow that process."

Despite the decline for the month this is the fastest pace seen again since April 2010. Finally, the Mortgage Bankers Association reports that mortgage applications declined this last week by 0.3 percent. Michael Fratantoni, Vice President of Research and Economics reports that "more than 20 percent of refinance applications were for HARP loans.

He continued that "the HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010."

The Houston Association of Realtors (HAR) reports that the Houston housing market has continued its upward trend into 2012, with January marking the eighth consecutive month of increased home sales. The year also opened with a continued decline in active property listings and growth in pending sales—a combination that signals a healthy market with a balanced supply of housing inventory, and that puts Houston on enviable footing compared to many other markets around the U.S.

January sales of single-family homes climbed 9.2 percent versus one year earlier, according to the latest monthly data prepared by HAR.

"The January report shows continued strength in the Houston housing market that we began seeing in the latter part of 2011, and it gives us cause for optimism as we look ahead to the typically active spring and summer buying months," said Wayne A. Stroman, HAR chairman and CEO of Stroman Realty. "We have also seen more jobs being filled locally and you generally don't experience a strong real estate market without healthy employment."

January Monthly Market Comparison

The month of January brought Houston's overall housing market positive results when all sales categories are compared to January 2011. Total property sales and total dollar volume rose on a year-over-year basis. The median price rose while the average price was flat.

Month-end pending sales for January totaled 3,164. That is up 6.0 percent from last year and suggests another positive month of sales when the February figures are tallied. The number of available properties, or active listings, at the end of January declined 15.1 percent from January 2011 to 42,067. The inventory of single-family homes dropped to its lowest level since December 2009—5.7 months, compared to 7.2 months one year earlier. That means it would take 5.7 months to sell all the single-family homes on the market based on sales activity over the past year. The figure is significantly better than the national inventory of single-family homes of 7.2 months reported by the National Association of REALTORS® (NAR). These indicators all continue to reflect a balanced real estate marketplace for Houston..

Houston Real Estate Milestones in January

• Volume of single-family home sales rose for the eighth consecutive month
• Single-family home rentals rose 15.3 percent
• Townhouse/condominium rentals increased 15.6 percent
• 5.7 months inventory of single-family homes is the lowest level since December 2009 and compares favorably to the national average of 7.2 months.