Everyone in the real estate market has been waiting and hoping for some good news; well today we got it. Activity and tone of the Moore County (Pinehurst/Southern Pines) market has been very good over the past six weeks. Today I received the results from May, things are up dramatically!
The month of May represented the best month in real estate since May 2008. Year to date sales volume is up 13.6% over 2011. Units sold is up 8.9% and the average sales price is up 5.2%. Even more dramatic is the growth in new home sales, up 36% over 2011 with an increase in units of 45%. Average sales price is down by 13.6% as builders are choosing to build more modest homes.
The improved market was seen across all price points as unit sales between $300-$400,000 more than doubled and homes from $400-$500,000 increased by 60%.
I have a full complement of the supporting statistics and would be happy to share these with anyone with an interest, give me call of drop me an email.
I can't help myself "I told you so!" The signs of improvement have been evident since the fall of 2011; May is just the first month of significant improvement with more to come through the end of 2012.
Bob Barmore
Broker & Chief Economist
Weichert, Realtors-Larose & Company
Southern Pines, NC
Wednesday, June 20, 2012
Tuesday, May 22, 2012
The Economic Case for Rental Properties in Pinehurst
With home prices low and financing costs at historic lows,now is the time to consider investing in a rental property. Rents are at all time highs creating a great investment opportunity.
Consider this very real example:
1240 Morganton Road, Pinehurst is currently listed for sale for $165,000.
Assume:
You can buy it for $158,500 (96% of list price).
You can finance 80% of the purchase price at 4.25%, $126,800 mortgage and $31,700 down payment
Your monthly mortgage cost is $621.60 + $110 taxes + $75.00 Insurance = $806.60 total monthly cost
This home has been listed for rent at $1,300. Your potential monthly net is $493.40
This generates a return on invested cash of 18.6%. Plus you get the tax benefits associated with rental properties and the potential increase in value of the home as real estate prices increase.
This is not a special case, there are hundreds of opportunities just like this across the market. If you have the capacity to qualify for a mortgage, this is a great time to buy real estate for investment purposes. Where else can you get a comparable return while owning a real tangible asset.
This analysis ignores the potentail windfall associated with short term rentals relating to the 2014 US Mens & Womens Opens to be held in Pinehurst. This specific home could rent for as much as $15,000 to $18,000 during this two week event.
Bob
Consider this very real example:
1240 Morganton Road, Pinehurst is currently listed for sale for $165,000.
Assume:
You can buy it for $158,500 (96% of list price).
You can finance 80% of the purchase price at 4.25%, $126,800 mortgage and $31,700 down payment
Your monthly mortgage cost is $621.60 + $110 taxes + $75.00 Insurance = $806.60 total monthly cost
This home has been listed for rent at $1,300. Your potential monthly net is $493.40
This generates a return on invested cash of 18.6%. Plus you get the tax benefits associated with rental properties and the potential increase in value of the home as real estate prices increase.
This is not a special case, there are hundreds of opportunities just like this across the market. If you have the capacity to qualify for a mortgage, this is a great time to buy real estate for investment purposes. Where else can you get a comparable return while owning a real tangible asset.
This analysis ignores the potentail windfall associated with short term rentals relating to the 2014 US Mens & Womens Opens to be held in Pinehurst. This specific home could rent for as much as $15,000 to $18,000 during this two week event.
Bob
Wednesday, February 1, 2012
Moore County NC Rentals
The downturn in the real estate market and the current state of the mortgage industry's much higher credit requirements has created a boom in the residential rental business. Home owners unable to sell their homes have welcomed the influx of renters looking for temporary housing. Renters are coming form many sources. Many need to relocate but cannot sell their existing home, this is especially true of many of our military personnel. Younger individuals have witnessed the calamity of the housing crash and are unwilling to take the risk of losing 10 or 20% of a homes value, they have no confidence in the "appreciation" of real estate which their parents took for granted. Perhaps the largest number of renters has been created by the much elevated credit requirements imposed by the mortgage industry, they simply cannot qualify or cannot make the required down payment.
Regardless of the source, homeowners and tenants have found each other and a rental boom has ensued. The growth has not been from the traditional apartment complexes but from individuals dealing with an unsold home and looking to move on. Given the choice of continuing to offer a home for sale in a very challenging market versus renting quickly and collecting a $1,400 monthly check, the choice is obvious. Rental rates have increased to historic highs. Current rental rates are often double what a corresponding mortgage would be. Homeowners, although not voluntarily, have become owners of income producing properties and many have found the experience quite enjoyable.
I have sat with many of my clients with homes for sale and discussed the options. While the market has improved, selling now will certainly "lock in" the real estate loss suffered during the housing crisis. To find the next motivated buyer often means reducing the price even further and appreciating that few full price offers can be expected. While the homeowner waits, he continues to pay the mortgage, taxes, utilities, HOA dues, insurance and maintenance expenses. This can easily be hundreds of dollars a month waiting for the buyer to show up and make a "low ball" offer.
The rental option is truly a welcomed suggestion. Rent your home at historic rates (Moore County Ave. Rent is $1,400 for 2011), have a tenant pay the utilities, maintain the yard and in general look after the well being of the home. If one includes the tax benefits of a rental property, the choice is very clear. The additional benefit of allowing time to pass in the hopes of an improved real estate market only adds to the equation in favor of renting.
How do you rent your home? Much like selling your home you can either do it yourself or hire a professional. How does the homeowner find a tenant, check their background and credit, negotiate a lease, deal with routine maintenance issues, collect rents, evict deadbeat tenants, deal with security deposits while staying within the Federal & State laws relating to housing. I suggest this is a job for a professional and likely a staff of professionals all with different skills.
Coldwell Banker Advantage/ Sandhills Rentals offers a full service property management service to our clients. With a staff of three full time licensed agents and support staff to assist in marketing, accounting and daily "issues" makes the process routine. Over the past 12 months Coldwell Banker/Sandhills Rentals has gained a 38% market share of all Moore County MLS reported rentals.
Does your choice of property manager matter? Tenants care, they want to know that their needs will be met; professionally and promptly. Homeowners care because they are relying on the property manager to make prudent decisions regarding necessary repairs, accurately make payments and look after the home owner's interest. Sandhills Rentals does all this and finds tenants faster than the MLS average by a full week.
When you are considering renting your home, give me a call. I am happy to deliver the excellence of the Coldwell Banker/Sandhills Rentals team to your rental needs.
Bob Barmore
Friday, December 9, 2011
Pinehurst Discovered by High End Retailers
Pinehurst demographics?
I read with curiosity a recent Pilot Newspaper article:
“ACalifornia
Morganton Road
.
Southern Pines Outlet Center would include 336,800 square feet of retail and restaurant space, and likely be anchored by Nordstrom Rack, Bloomingdale’s Outlet Store, Neiman Marcus Last Call and Saks Off-Fifth Avenue.
We went through your demographics with them. The tenants have already decided as a group that they want to be here.”
Saks, Nordstroms, Neiman Marcus and Bloomingdales want to come to Pinehurst-Southern Pines because of our demographics?
I decided I wanted to see what the demographics of Pinehurst actually were. While I was at it I decided it would be helpful to compare Pinehurst with Hilton Head Island andMyrtle Beach
Pinehurst Hilton HeadMyrtle Beach
Population 13,120 37,000 27,000
Ave Age 60 51 37
Ave Price Home 280,000 508,000 232,000
Ave Income 60,000 68,000 35,000
Cost of Living Index 90 98.4 92.3
Crime Index 53.8 360 684
One of the first observations is the “small town” nature of Pinehurst. As a resident, I can attest to this. You very quickly know and become known to your neighbors and fellow citizens. Despite the small population Pinehurst benefits greatly from the world class nature of our resort facilities. The constant inflow of tourists infuses Pinehurst with a vitality and excitement which is palpable. The balance between the retirement community and tourist community works well to create the charm of the area.
The magic of Pinehurst is that once you move here you are immediately 20 years younger; note the “average” age is 60. Yes it is a retirement community, but an active one.
I was amazed by the differential in housing costs; over $500,000 for Hilton Head versus $280,000 for Pinehurst. I guess that is the premium you pay for the ocean, but it seems excessive.
I have always considered Pinehurst an oasis of affluence in the middle of nowhere. This is illustrated by the income level of $60,000, a level which is 38% greater than the state average and exceeds evenChapel Hill by $12,500. The great irony is the income level is high yet the housing costs are remarkably low.
The cost of living index also reflects this irony. To the surprise of many it is not expensive to live in Pinehurst. While this may not translate to tourists, the residents enjoy the luxurious facilities and amenities of the area at a very reasonable cost. Life is good in Pinehurst.
I often tell people that there is no crime in Pinehurst. I question the value of a “gated” community; who are you trying to keep out? The low level of crime in the area is amazing. I have looked into the statistics and discovered that the most rampant crime in the area is “barking dogs”. Pinehurst is a wonderfully safe place where neighbors know your name and your kid’s names. You are not anonymous here, like many other cities. People walk he streets after dark without concern.
The high-end retailers seem to have discovered Pinehurst. It is an amazing place to call home. The ambiance and charm of the community is like no other place on earth.
I read with curiosity a recent Pilot Newspaper article:
“A
Southern Pines Outlet Center would include 336,800 square feet of retail and restaurant space, and likely be anchored by Nordstrom Rack, Bloomingdale’s Outlet Store, Neiman Marcus Last Call and Saks Off-Fifth Avenue.
We went through your demographics with them. The tenants have already decided as a group that they want to be here.”
Saks, Nordstroms, Neiman Marcus and Bloomingdales want to come to Pinehurst-Southern Pines because of our demographics?
I decided I wanted to see what the demographics of Pinehurst actually were. While I was at it I decided it would be helpful to compare Pinehurst with Hilton Head Island and
Pinehurst Hilton Head
Population 13,120 37,000 27,000
Ave Age 60 51 37
Ave Price Home 280,000 508,000 232,000
Ave Income 60,000 68,000 35,000
Cost of Living Index 90 98.4 92.3
Crime Index 53.8 360 684
One of the first observations is the “small town” nature of Pinehurst. As a resident, I can attest to this. You very quickly know and become known to your neighbors and fellow citizens. Despite the small population Pinehurst benefits greatly from the world class nature of our resort facilities. The constant inflow of tourists infuses Pinehurst with a vitality and excitement which is palpable. The balance between the retirement community and tourist community works well to create the charm of the area.
The magic of Pinehurst is that once you move here you are immediately 20 years younger; note the “average” age is 60. Yes it is a retirement community, but an active one.
I was amazed by the differential in housing costs; over $500,000 for Hilton Head versus $280,000 for Pinehurst. I guess that is the premium you pay for the ocean, but it seems excessive.
I have always considered Pinehurst an oasis of affluence in the middle of nowhere. This is illustrated by the income level of $60,000, a level which is 38% greater than the state average and exceeds even
The cost of living index also reflects this irony. To the surprise of many it is not expensive to live in Pinehurst. While this may not translate to tourists, the residents enjoy the luxurious facilities and amenities of the area at a very reasonable cost. Life is good in Pinehurst.
I often tell people that there is no crime in Pinehurst. I question the value of a “gated” community; who are you trying to keep out? The low level of crime in the area is amazing. I have looked into the statistics and discovered that the most rampant crime in the area is “barking dogs”. Pinehurst is a wonderfully safe place where neighbors know your name and your kid’s names. You are not anonymous here, like many other cities. People walk he streets after dark without concern.
The high-end retailers seem to have discovered Pinehurst. It is an amazing place to call home. The ambiance and charm of the community is like no other place on earth.
Bob Barmore
Weichert, Realtors-Larose & Company
cell 910 528 9536
Friday, November 4, 2011
Rental Market in Pinehurst/Southern Pines Area
While it is no secret that home sales have been somewhat depressed, the rental market has been absolutely exploding. Great news for Landlords, but what can a Tenant expect?
The red line is the 12 month history of rentals (demand) in the Pinehurst/Southern Pines MLS. The yellow line is the current inventory of available rentals (supply).
The influx of personnel to Ft. Bragg and the current difficult mortgage market have caused the rental market to explode. Locally there is virtually nothing available for less than $900 per month. What is available has issues (unsafe neighborhood, old dreary home, middle of nowhere and such). As the chart demonstrates, the minimum rental for a reasonably habitable family home is $1,100+. For this you will get a smaller three bedroom two bath home with no frills or extras. This is basic shelter. For a few dollars more ($1,300) you will see homes with attached 2 car garages and better finishes throughout. At the $1,500 price range you will find wonderfully updated, older homes with modern appliances, hardwood floors and curb appeal. One of the ironies of the market is that as you approach the $2,000 monthly rent you will see spectacular homes, many you would consider mansions. For $1,000 it is hard to find a mobile home but for $2,000 you get golf front luxury.
The best advice I can offer to renters on limited budgets is to find a roommate or another couple to share the home. Each paying $1,000 they can rent a luxury mansion in an exclusive neighborhood.
Rentals are in very short supply. When you see one you like; grab it with both hands and don't let go! Rentals move very fast. Your dream home may disappear before you can get back to the office and write a contract. This is especially prevalent on weekends.
As an active rental agent I am constantly frustrated by the demands of this market. Unlike the home sales market which is a Buyers market, the rental market is a Landlords market. Reasonable people come to me willing to pay a reasonable rent and they are prepared to spend all day looking at properties. Often I will have only 2 or three available and when I check availability it is likely that one of them is off the market. Once you decide on a home, don't expect the landlord to do much more than hand you the keys. Clean, paint, new carpet or any other request from a tenant usually falls on deaf ears. Don't assume anything; everything you want must be in the lease.
Let me know if I can be of service.
The influx of personnel to Ft. Bragg and the current difficult mortgage market have caused the rental market to explode. Locally there is virtually nothing available for less than $900 per month. What is available has issues (unsafe neighborhood, old dreary home, middle of nowhere and such). As the chart demonstrates, the minimum rental for a reasonably habitable family home is $1,100+. For this you will get a smaller three bedroom two bath home with no frills or extras. This is basic shelter. For a few dollars more ($1,300) you will see homes with attached 2 car garages and better finishes throughout. At the $1,500 price range you will find wonderfully updated, older homes with modern appliances, hardwood floors and curb appeal. One of the ironies of the market is that as you approach the $2,000 monthly rent you will see spectacular homes, many you would consider mansions. For $1,000 it is hard to find a mobile home but for $2,000 you get golf front luxury.
The best advice I can offer to renters on limited budgets is to find a roommate or another couple to share the home. Each paying $1,000 they can rent a luxury mansion in an exclusive neighborhood.
Rentals are in very short supply. When you see one you like; grab it with both hands and don't let go! Rentals move very fast. Your dream home may disappear before you can get back to the office and write a contract. This is especially prevalent on weekends.
As an active rental agent I am constantly frustrated by the demands of this market. Unlike the home sales market which is a Buyers market, the rental market is a Landlords market. Reasonable people come to me willing to pay a reasonable rent and they are prepared to spend all day looking at properties. Often I will have only 2 or three available and when I check availability it is likely that one of them is off the market. Once you decide on a home, don't expect the landlord to do much more than hand you the keys. Clean, paint, new carpet or any other request from a tenant usually falls on deaf ears. Don't assume anything; everything you want must be in the lease.
This is a very demanding market to work in. It requires a full time dedication to the rental market to be able to represent tenants, know the quickly changing market and get a lease in place. The web is awash in rental information of very questionable quality. Homes move so quickly that by the time they hit the web or even the local newspaper, the home is usually rented. Be very cautious of "too good to be true" rentals you see on line or in the paper. Some firms will advertise nonexistent rentals just to get your phone call. Never pay anyone any amount of money before you have a valid lease. The landlords pay all of my commissions and those of the agent representing the tenant. The Tenant pays no commissions.
It requires a great deal of time and attention to detail to be able to provide professional customer service to Tenants in this merciless market.
Let me know if I can be of service.
Bob Barmore
910 528 9536
910 528 9536
Monday, June 6, 2011
"Now is the Time to Buy" according to the Wall Street Journal
The Wall Street Joural JUNE 4, 2011
WEEKEND INVESTOR
Why It's Time To Buy
The Clouds Haven't Quite Parted, But the Long-Term Case for Home Ownership Is Looking Stronger.
Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
.
.Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.
Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as "household formation"—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: "While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound," says Anthony Sanders, a real-estate finance professor at George Mason University.
The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.
But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.
So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.
Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.
"The regular marketplace is hanging tough," says CoreLogic chief economist Mark Fleming.
Here is a look at five key factors that will govern local markets over the next several years:
Demographics
Household formation fell during the economic downturn as a weak economy led some people to stay in school, double up with roommates or move in with family members. According to Moody's Analytics, the number of new households renting or owning a home dropped to 578,000 in 2008 from nearly 2 million in 2005, just before the peak of the housing boom.
But household formation increased to nearly 950,000 last year, says Moody's, and should average 1.2 million over the next decade.
That, combined with increased obsolescence and higher demand for second homes, should begin sopping up excess inventory in much of the country over the next two years, Moody's says.
"Whatever the excess supply of housing is, it is shrinking pretty fast," says Thomas Lawler, an independent housing economist.
Some of the uptick in household formation is likely to come from the leading edge of the echo baby boomers, who have been waiting for the economy to recover before striking out on their own, says William Frey, a demographer with the Brookings Institution. That is likely to fuel an increase in demand for both rental apartments and starter homes.
The portion of people moving across the country has fallen to the lowest level since World War II, he adds. That is a sign that many people have put their lives on hold because of the weak economy.
"When things do pick up, there will be this pent-up demand for everything involved with starting a household," Mr. Frey says.
Of course, when prices in healthier regions begin to rise, many would-be sellers who have sat on the sidelines could begin putting homes on the market, muting the price gains at first, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School. Even so, she expects home prices to stabilize and begin to strengthen over the next two or three years.
There also are some powerful demographic cross-currents worth considering. The first baby boomers turned 65 in January, an age when demand for new homes falls and many begin to think about downsizing. "The baby-boom generation pushed prices up as they got older," says Dowell Myers, a professor of urban planning and demography at the University of Southern California. But in the coming years, "boomers will start flooding the market on the supply side" with larger homes, while fueling new demand for smaller properties with more services and amenities.
Affordability
Rising home prices made renting cheaper than buying in many parts of the country. But that dynamic has begun to change: Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to an analysis of more than 380 metro areas by Moody's Analytics.
Renting is still cheaper than buying in most markets, but rising rents and falling house prices mean that, in some areas, this won't be the case for long. Buying a home is already cheaper than renting in Chicago, Cleveland, Detroit and Orlando, Fla., according to Moody's Analytics. In other markets, including Dallas, Las Vegas and Sacramento, Cailf., the equation is likely to soon turn in favor of homeownership if current trends persist, the firm says.
In Ann Arbor, Mich., where home prices fell 11.2% between 2007 and 2010, according to Fiserv Case-Shiller, housing affordability has risen well above historical levels, according to Moody's Analytics.
That is good news for home buyers such as Steven Upton, a 42-year-old photographer, who in June will close on four-bedroom brick house on 10 acres in an upscale community in Ann Arbor. Mr. Upton paid $400,000 for the home, which previously listed for $600,000. "It's a tremendous deal," he says.
Before buying a house, it is wise to compare rental prices for similar properties. To be ultraconservative, wait until the monthly outlays, including taxes and insurance, are equal. You also could factor in the tax savings of owning, which would make buying more attractive even if the gross monthly outlay is slightly higher.
Employment
The strength of the housing market depends largely on the economy. Rising incomes and increased employment tend to give more would-be buyers confidence and buying power. For now, job growth remains sluggish: On Friday the Labor Department reported that just 54,000 jobs were created in May, far below expectations.
But signs of how a stronger job market could fuel housing demand are evident in the Dallas metro area, which added 83,100 new jobs in the 12 months ending in April—the largest gain in the nation, according to the Bureau of Labor Statistics. Dallas never had a big housing boom or bust and has benefited from trade with Mexico, a strong telecommunications sector and a central location.
View Full Image
.The opportunities for a job with more responsibility drew Duane and Linda Elmer to Dallas from Des Moines, Iowa, where Mr. Elmer was a banker for nine years. The couple has agreed to pay $415,000 for a four-bedroom, four-bath house with a Jacuzzi and pool. Their Des Moines home, purchased nine years ago for $410,000, is on the market for $390,000. "We are willing to take the loss for the opportunity to live in a more diverse community and to take a job with greater breadth of responsibilities," Mr. Elmer says.
Borrowers like the Elmers who are relocating for job opportunities are a big driver of home sales in nearby Plano, Texas, says Harry Ridge, a real-estate agent. He says such sales accounted for 20% of his business last year.
A similar influx of job seekers is fueling housing demand in the Washington area, where 25,700 new jobs were added in the 12 months since April 2010. Washington was the only one of the 20 cities tracked by Standard & Poor's and Case-Shiller that saw home prices rise both on a month-to-month and year-over-year basis.
Credit
Mortgage financing remains plentiful for borrowers with good credit scores and solid employment histories. But for borrowers who don't fit traditional lending standards, getting a loan can still be nearly impossible. In the first quarter, about 10% of banks tightened standards for nontraditional loans, according to the Federal Reserve. Meanwhile, higher down-payment standards are locking some would-be buyers out of the market. Just 35% of renters have the minimum 3.5% down payment needed for an FHA loan on the median-priced home in their market, according to a recent survey by Zelman Associates.
Credit is likely to remain tight for at least the next six months, says Clifford Rossi, a former Citigroup Inc. consumer-lending executive who teaches at the University of Maryland.
But conditions should improve over time, he says: "There's no question that it will gradually get easier."
That will be welcome news to borrowers like Greg Silver. The 50-year-old real-estate developer would like to buy a second home, but hasn't been able to secure a jumbo mortgage because his income consists of capital gains from sales of the properties he develops. Mr. Silver closed three sales in the past 12 months, netting him a total of more than $25 million, but didn't record any capital gains in 2008 and 2009. Sure, he could use some of that cash to buy a home outright, but he would prefer to mortgage it, get the tax deduction and keep his cash free for business purposes.
"It's a little devastating," says Mr. Silver, who is living in Greenwich, Conn.
Psychology
The long-term case for buying over renting remains in force. Yet nowadays, "People are simply scared," says Aaron Galvin, chief executive of Luxury Living Chicago, which finds rental apartments for wealthy clients.
Mr. Galvin says he has seen a 30% increase in business in the last year, driven by would-be home buyers who can afford to purchase a property but are choosing not to do so.
The portion of Americans who believe homeownership is a safe investment dropped to 66% in the first quarter from 83% in 2006, according to Fannie Mae, the government-controlled mortgage company.
But it isn't clear whether the fear will result in a prolonged change in attitudes, as during the Great Depression, or have little long-term impact, as was the case for the housing bust that shook California and the Northeast in the late 1980s and early 1990s. Eighty-seven percent of people surveyed by Fannie Mae said they preferred owning to renting, though access to schools, control over one's environment and other quality-of-life issues now are seen as the key benefits of homeownership, with building wealth and other financial factors viewed as less important. In addition, 67% of renters surveyed by Zelman Associates said they planned to buy a home in the next five years.
Jeffrey Connor may be a bellwether for the future of the housing market. The 40-year-old finance director at a corporate law firm says he thought briefly about buying a house when he moved to Chicago from Washington in October. But he opted instead to rent a luxury two-story apartment in downtown Chicago for $3,559 a month. Mr. Connor says it will take substantial job growth and a sharp drop in foreclosures to convince him to buy.
"The market is clearly soft," he says, "especially when we consider it good news that the unemployment rate is hovering around 9% instead of 10%." Mr. Connor says he isn't worried about missing out on today's low interest rates and will consider buying once unemployment falls to 6%.
Other buyers are showing less willingness to wait for the absolute perfect time to buy. Doug Yearly, chief executive of luxury builder Toll Brothers Inc., told investors in May that "some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates and, most important, the desire to take the next step in their lives. The family with elementary-school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds."
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
WEEKEND INVESTOR
Why It's Time To Buy
The Clouds Haven't Quite Parted, But the Long-Term Case for Home Ownership Is Looking Stronger.
Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
.
.Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.
Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as "household formation"—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.
The upshot: "While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound," says Anthony Sanders, a real-estate finance professor at George Mason University.
The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.
But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.
So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.
Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.
"The regular marketplace is hanging tough," says CoreLogic chief economist Mark Fleming.
Here is a look at five key factors that will govern local markets over the next several years:
Demographics
Household formation fell during the economic downturn as a weak economy led some people to stay in school, double up with roommates or move in with family members. According to Moody's Analytics, the number of new households renting or owning a home dropped to 578,000 in 2008 from nearly 2 million in 2005, just before the peak of the housing boom.
But household formation increased to nearly 950,000 last year, says Moody's, and should average 1.2 million over the next decade.
That, combined with increased obsolescence and higher demand for second homes, should begin sopping up excess inventory in much of the country over the next two years, Moody's says.
"Whatever the excess supply of housing is, it is shrinking pretty fast," says Thomas Lawler, an independent housing economist.
Some of the uptick in household formation is likely to come from the leading edge of the echo baby boomers, who have been waiting for the economy to recover before striking out on their own, says William Frey, a demographer with the Brookings Institution. That is likely to fuel an increase in demand for both rental apartments and starter homes.
The portion of people moving across the country has fallen to the lowest level since World War II, he adds. That is a sign that many people have put their lives on hold because of the weak economy.
"When things do pick up, there will be this pent-up demand for everything involved with starting a household," Mr. Frey says.
Of course, when prices in healthier regions begin to rise, many would-be sellers who have sat on the sidelines could begin putting homes on the market, muting the price gains at first, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School. Even so, she expects home prices to stabilize and begin to strengthen over the next two or three years.
There also are some powerful demographic cross-currents worth considering. The first baby boomers turned 65 in January, an age when demand for new homes falls and many begin to think about downsizing. "The baby-boom generation pushed prices up as they got older," says Dowell Myers, a professor of urban planning and demography at the University of Southern California. But in the coming years, "boomers will start flooding the market on the supply side" with larger homes, while fueling new demand for smaller properties with more services and amenities.
Affordability
Rising home prices made renting cheaper than buying in many parts of the country. But that dynamic has begun to change: Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to an analysis of more than 380 metro areas by Moody's Analytics.
Renting is still cheaper than buying in most markets, but rising rents and falling house prices mean that, in some areas, this won't be the case for long. Buying a home is already cheaper than renting in Chicago, Cleveland, Detroit and Orlando, Fla., according to Moody's Analytics. In other markets, including Dallas, Las Vegas and Sacramento, Cailf., the equation is likely to soon turn in favor of homeownership if current trends persist, the firm says.
In Ann Arbor, Mich., where home prices fell 11.2% between 2007 and 2010, according to Fiserv Case-Shiller, housing affordability has risen well above historical levels, according to Moody's Analytics.
That is good news for home buyers such as Steven Upton, a 42-year-old photographer, who in June will close on four-bedroom brick house on 10 acres in an upscale community in Ann Arbor. Mr. Upton paid $400,000 for the home, which previously listed for $600,000. "It's a tremendous deal," he says.
Before buying a house, it is wise to compare rental prices for similar properties. To be ultraconservative, wait until the monthly outlays, including taxes and insurance, are equal. You also could factor in the tax savings of owning, which would make buying more attractive even if the gross monthly outlay is slightly higher.
Employment
The strength of the housing market depends largely on the economy. Rising incomes and increased employment tend to give more would-be buyers confidence and buying power. For now, job growth remains sluggish: On Friday the Labor Department reported that just 54,000 jobs were created in May, far below expectations.
But signs of how a stronger job market could fuel housing demand are evident in the Dallas metro area, which added 83,100 new jobs in the 12 months ending in April—the largest gain in the nation, according to the Bureau of Labor Statistics. Dallas never had a big housing boom or bust and has benefited from trade with Mexico, a strong telecommunications sector and a central location.
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.The opportunities for a job with more responsibility drew Duane and Linda Elmer to Dallas from Des Moines, Iowa, where Mr. Elmer was a banker for nine years. The couple has agreed to pay $415,000 for a four-bedroom, four-bath house with a Jacuzzi and pool. Their Des Moines home, purchased nine years ago for $410,000, is on the market for $390,000. "We are willing to take the loss for the opportunity to live in a more diverse community and to take a job with greater breadth of responsibilities," Mr. Elmer says.
Borrowers like the Elmers who are relocating for job opportunities are a big driver of home sales in nearby Plano, Texas, says Harry Ridge, a real-estate agent. He says such sales accounted for 20% of his business last year.
A similar influx of job seekers is fueling housing demand in the Washington area, where 25,700 new jobs were added in the 12 months since April 2010. Washington was the only one of the 20 cities tracked by Standard & Poor's and Case-Shiller that saw home prices rise both on a month-to-month and year-over-year basis.
Credit
Mortgage financing remains plentiful for borrowers with good credit scores and solid employment histories. But for borrowers who don't fit traditional lending standards, getting a loan can still be nearly impossible. In the first quarter, about 10% of banks tightened standards for nontraditional loans, according to the Federal Reserve. Meanwhile, higher down-payment standards are locking some would-be buyers out of the market. Just 35% of renters have the minimum 3.5% down payment needed for an FHA loan on the median-priced home in their market, according to a recent survey by Zelman Associates.
Credit is likely to remain tight for at least the next six months, says Clifford Rossi, a former Citigroup Inc. consumer-lending executive who teaches at the University of Maryland.
But conditions should improve over time, he says: "There's no question that it will gradually get easier."
That will be welcome news to borrowers like Greg Silver. The 50-year-old real-estate developer would like to buy a second home, but hasn't been able to secure a jumbo mortgage because his income consists of capital gains from sales of the properties he develops. Mr. Silver closed three sales in the past 12 months, netting him a total of more than $25 million, but didn't record any capital gains in 2008 and 2009. Sure, he could use some of that cash to buy a home outright, but he would prefer to mortgage it, get the tax deduction and keep his cash free for business purposes.
"It's a little devastating," says Mr. Silver, who is living in Greenwich, Conn.
Psychology
The long-term case for buying over renting remains in force. Yet nowadays, "People are simply scared," says Aaron Galvin, chief executive of Luxury Living Chicago, which finds rental apartments for wealthy clients.
Mr. Galvin says he has seen a 30% increase in business in the last year, driven by would-be home buyers who can afford to purchase a property but are choosing not to do so.
The portion of Americans who believe homeownership is a safe investment dropped to 66% in the first quarter from 83% in 2006, according to Fannie Mae, the government-controlled mortgage company.
But it isn't clear whether the fear will result in a prolonged change in attitudes, as during the Great Depression, or have little long-term impact, as was the case for the housing bust that shook California and the Northeast in the late 1980s and early 1990s. Eighty-seven percent of people surveyed by Fannie Mae said they preferred owning to renting, though access to schools, control over one's environment and other quality-of-life issues now are seen as the key benefits of homeownership, with building wealth and other financial factors viewed as less important. In addition, 67% of renters surveyed by Zelman Associates said they planned to buy a home in the next five years.
Jeffrey Connor may be a bellwether for the future of the housing market. The 40-year-old finance director at a corporate law firm says he thought briefly about buying a house when he moved to Chicago from Washington in October. But he opted instead to rent a luxury two-story apartment in downtown Chicago for $3,559 a month. Mr. Connor says it will take substantial job growth and a sharp drop in foreclosures to convince him to buy.
"The market is clearly soft," he says, "especially when we consider it good news that the unemployment rate is hovering around 9% instead of 10%." Mr. Connor says he isn't worried about missing out on today's low interest rates and will consider buying once unemployment falls to 6%.
Other buyers are showing less willingness to wait for the absolute perfect time to buy. Doug Yearly, chief executive of luxury builder Toll Brothers Inc., told investors in May that "some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates and, most important, the desire to take the next step in their lives. The family with elementary-school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds."
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
Thursday, April 7, 2011
Pinehurst's Village Acres (aka The Gun Club)
Annie Oakley, star of the Buffalo Bill Wild West Show, and her husband, Frank Butler, moved to Pinehurst in 1916. Ms. Oakley gave shooting exhibitions and lessons in the area while her husband managed the Pinehurst Gun Club. Today this community is one of the most popular areas in the Pinehurst. Also known as The Gun Clulb, it is a community bounded by Hiway 15/501, Hiway 211, Murdocksville Road and Pinehurst #8 The Centennial and contains approximately 1,400 homes. The neighborhood is made up of modest sized homes, the smallest just over 1,000 sq. ft. and the largest over 2,200 sq. ft. Village Acres is adjacent to the FirstHealth/Moore Regional Hospital campus and convenient to Village of Pinehurst parks, Pinehurst's green way system (5 miles of town maintained trails) and virtually the entire area with easy access to 15/501. This is an excellent neighborhood for first time homebuyers with homes ranging from $120,000 to $300,000 or individuals looking to downsize. The community offers a workable commute to Fort Bragg, making this area very popular for military families. Most homes in Village Acres are 3 bedroom, 2 bath plans, but you will occasionally see a 2 BR or 4 BR plan available. The average home price is just below $200,000.
I would like to illustrate the diversity of housing options avaialable in Village Acres by describing three homes currently on the market.
The three are 40 NW Longleaf Drive, 40 Spring Lake Drive and 225 East Lakeview Drive. None of these listings are mine or my companies, just nice examples of what is on the market.
40 NW Longleaf Driveis a 3 bedroom, 2 1/2 bath home built in 2001. This two story home has approximately 1,600 sq. ft. of heated living space. The home has hardwood floors, rear deck, a large rear yard which is fully fenced and attached two car garage.
This home is lised for $175,000. 
40 Spring La ke Road is currently under construction, likely completed by June 2011. This is a well designed 3 bedroom two bath home with 10 foot ceilings, side loaded two car attached garage, hardwood and ceramic tile floors with carpeted bedrooms, crown moldings, granite countertops and stainless steel appliances. There is an unfinished bonus room over the garage. With over 2,000 sq. ft. of living space this home sits on just less than 1/3rd of an acre. New construction will all the bells and whistles and the listing price is $265,000.
The last home is 225 Lakeview Drive. Offered at $299,999 this 3 bedroom 2 1/2 bath two story home offers over 2,000 sq. ft. of living space. This home is wonderfully unique as it overlooks a large pond which borders the Pinehurst #8 golf course. Water front & golf front, with marvelous multilevel decking, what a special location. This is a well maintained home built in 2002, with lovely finishes throughout. 
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