$8,000 tax credit can be used for down payments

The FHA announced at the end of the week that the new $8,000 first-time homebuyer tax credit can now be used toward a down payment.  The announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to “monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments.

Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, helping to achieve a lower interest rate.

Consumer advocacy groups have been clamoring for the change and wondering whether it actually would happen.  By monetizing the tax credit,

If inventory is on a three-year cycle, don’t worry

If past is precedent, perhaps this chart gives reason for hope.

Jonathan Miller is a widely and frequently appraisal executive whose blog I check every day. He’s one of the smartest people I know in real estate, so I quote him and his reports frequently in my biweekly newsletter. (You can find a link to his blog on the right under “Some of My Favorite Links.”)

In any case, this new chart of his intrigued me, as I hope it intrigues you. The point that Jonathan makes is that

There but for the grace. . .

C’mon, admit it.  You groan inwardly, suppress a frown and check your watch impatiently.

That’s when someone who is physically challenged has to get on or off a bus or otherwise delay your travel.  At the same time, I’ll bet you feel guilty for your impatience, and maybe you even try to put yourself in the individual’s place who has the temerity to impose himself or herself on you – never mind everyone else.

What brings this to mind are two circumstances. 

Start spreading the news that rents are declining

If you can make it here, so the song goes, you can make it anywhere.

Well, making it here means you still have to spend a wad on housing, whether buying or renting somewhere to live.

The latest news is that doorman units in Manhattan are down 6.92 percent and non-doorman units are down 3.62 percent since May of 2007, according to the Real Estate Group of New York.  A two-bedroom apartment in a doorman building in Manhattan now averages $5,112 a month.  If you think that’s a lot – I do and will have much more on this topic in my bi-weekly newsletter on Friday – be glad that the sum is 4.53% lower than it was a year ago.

Another brokerage that also specializes in rentals, Citi Habitats, reported yesterday that average rent for all Manhattan apartments in 2008 was $3,679,

Booming consumer optimism could affect housing

One reason buyers have been on the sidelines so long in the U.S. housing market in general and the New York market in particular has been their lack of confidence.

Nationally, that confidence jumped up again in May, according to the Conference Board’s Consumer Confidence Index, which had improved considerably in April.  The Index now stands at 54.9 (1985=100), up from 40.8 in April.  The Present Situation Index increased to 28.9 from 25.5 last month.  The Expectations Index rose to 72.3 from 51.0 in April.

Says Lynn Franco, Director of The Conference Board Consumer Research Center:

“After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months (Sept. 2008, 61.4).  Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first.  Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months.  While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”

If she’s correct, does that mean

Index measures 19.1 percent decline in U.S. in a year and a 19.7 percent in New York since 2006

According to the S&P/Case-Shiller Home Price Indices released today, a trend that began in late 2007 continued in the first quarter versus one year earlier, reaching a 21-year record percentage decline.

I’ll be providing more detailed information in my newsletter on Friday, but the topline data show that the 10-City and 20-City Composites posted annual declines of 18.6% and 18.7%, respectively, slight improvements from their returns for February.

“Declines in residential real estate continued at a steady pace into March,” said Index Committee Chairman David M. Blitzer.  “All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines.  Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines.  On a positive note, nine of MSAs are reporting a relative improvement in year-over-year returns and nine of the 20 metro areas saw an improvement in their monthly returns compared to February.  Furthermore, this is the second month since October 2007 where the 10- and 20-City Composites did not post a record annual decline.  Based on the March data, however, we see no evidence that that a recovery in home prices has begun.”

Minneapolis had a record monthly decline of 6.1% in March, representing the largest such drop of any metro area in the history of the indices.  For March, Detroit and New York also reported their largest monthly declines, returning -4.9% and -2.5%, respectively.  The performances of these two metropolitan statistical areas (MSAs) represent the extremes of the national boom/bust scenario, Case-Shiller stated.

The New York index is still up 73.4% from January 2000, though down 19.7% from its June 2006 peak.

With respect to this index and all the others, I always take the information with a grain of salt.  They are useful for detecting trends, but each of them is flawed when it comes to the data they use.  Among the various flaws are areas covered, the transactions recorded and the data researched.  For example, the federal government analyzes only sales that fall within Freddie Mac and Fannie Mae parameters.

One defect in reporting on the New York MSA is that it casts a wide net including portions of Connecticut and New Jersey and, of course, boroughs outside of Manhattan, which is a world unto itself.  And it takes forever to have transactions recorded in Manhattan, so the data are way out of date.

Also, I’m seeing that prices fell farthest and fastest during the last quarter of 2008 and the first two months of this year.  I haven’t seen reported or with my own eyes that prices have fallen as little in Manhattan as Case-Shiller is showing.

Do you agree?

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

Malcolm@ServiceYouCanTrust.com
http://www.ServiceYouCanTrust.com

A rose by any other name would be . . . WHAT?

A rose by any other name would blush to be called NoCo or WaHi or FiDi.

No doubt because SoHo and other neighborhood nomenclatures have caught on, real estate brokers in Manhattan are having a field day trying to glamorize certain neighborhoods by giving them ridiculous names.

So, now we have

Buyers whose offers die should blame themselves

It’s not the seller’s fault if your offer is rejected.  It’s the buyer’s failure to understand how to make a winning offer.

Often the root of the buyer’s problem is a lack of determination to get the whole story.  If you finally find a property you like, you’ll need to dig beneath the numbers, which are quoted in virtually each of my newsletters.  You’ll also need to put yourself in the seller’s place as you consider the details of your offer.

First, statistics. 

U.S. prices tapering off, so maybe bottom is near

According to its just released March Monthly Housing Market Report, Radar Logic has found that prices in 25 metropolitan statistical areas (MSA’s) averaged virtually flat in both February and March after being practically in free fall for much of 2008.  Home prices actually increased in March on a month-over-month basis in 11 of the 25 MSAs covered by the report; in six more MSAs, prices decreased less in March than they did in February.

Radar Logic’s composite index showed a 2% average monthly decline in 2008.

“While not a bottom, the stability in home prices we are seeing is certainly good news,” said Radar Logic President Michael Feder.

Of course, month-to-month change provides virtually useless comparisons.  That’s especially true as the spring buying season begins.  Year-to-year is more meaningful, but it remains interesting to look at the March statistics, with

No sale when bland is nothing more than blah

Conventional wisdom imparted to fledgling real estate agents has it that properties ought to be excised of personality to appeal to the biggest number of potential buyers.   Out with walls of primary colors!   Down with paintings and family photographs!

The theory is that many buyers don’t have enough imagination to see themselves in a place that is too evocative of someone else.   Thus, nearly bare walls of linen white in stripped-down rooms are said to be the rule.   (Removal of clutter, oversize furniture and the odor of pets or tobacco are wisely recommended.)

But the question of too much personality can be overstated.