Claudette's Blog

The nation's home builders are experiencing their worst nightmare. 

This week the Commerce Department reported that construction of new homes dropped 16.8 percent last month to a seasonally adjusted annual rate of 466,000.  Well below the 530,000 units economist had expected.  This was the slowest pace on records dating back a half a century. 

Otherwise stated, housing starts are now 56.2% below the annual pace from the January 2008 market. 

This is unfortunate news for home builders; however, in an environment with 11 months plus of inventory to sell, it is probably good for the housing market.  With the glut of foreclosures and other unsold homes, we need to clear out what is already here before building more houses that will be left empty and idle. 

Here, in the Northeast, construction has dropped 42.9 percent to a record low of 36,000 units at an annual rate. 

Applications for building permits have also dropped to a record low, falling 4.8% to a rate of 521,000 units which was below economists' expectations. 

These numbers were released just as the current administration is polishing the details on its foreclosure rescue plan in hopes to provide comfort to an ailing housing market.  As we all know the current housing problems have pushed this country into a recession and have ignited the current financial crisis. 

Obama's $75 billion "Homeowner Affordability and Stability Plan" promises to provide mortgage restructuring or refinancing assistance to 9 million families in order to keep them from foreclosure.  So far, the plan has garnered a cloudy reception from Wall Street this week as the stock market has continued its downward slide.

The ultimate goal is to relieve the overly burdened housing inventory and to sell the existing surplus.  Albeit painful for home builders, the slow-down in housing starts could help to facilitate this effort.

The plan that was unveiled this week to help struggling homeowners has three key components:

1. Refinancing for responsible homeowners suffering from falling home prices
2. A comprehensive $75 billion homeowner stability initiative - a multi-part strategy to prevent millions of foreclosures
3. Support low mortage rates by strengthening confidence in Fannie Mae and Freddie Mac

If successful, this plan could rescue some of the people who are facing the loss of their homes and reduce the number of foreclosure properties flowing into the market.

Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough 

Today, President Obama signed into law a stimulus bill that will release the biggest influx of federal dollars since Lyndon Johnson's Great Society program.  The $787 billion package is aimed at reversing the country's economic problems with billions going to individual states. 

Governor Deval Patrick has appointed real estate developer, Jeffrey Simon to oversee the money that will flow into Massachusetts.  With 30 years of experience in the real estate industry, Simon oversaw the redevelopment of several closed military bases, including Fort Devens in Massachusetts and four bases in Bermuda.  Simon's title will be Director of Infrastructure Investment and will be paid a salary of $150,000 from the federal-stimulus share.  

The governor cited the failure of the Big Dig as an inspiration for appointing Simon to his position.  With the central artery project there was no single point of contact watching over the expenditure of public funds.

With the stimulus money headed our way, the infighting over whose projects will get priority has already begun. 

Mayor Michael Bissonett of Chicopee sited the tension between mayors and governors across the country over who is going to receive which dollar amounts and for which purposes.  He also said that a council of mayors and other leaders are outraged that one proposal will be sending millions to the Massachusetts Turnpike rather than to a backlog of local road and bridge projects. 

The Mass Turnpike saga continues. 

Currently, our state is slated to receive well over $2 billion with $408 million for highway work and $386 million for mass transit projects according to Senator Kerry.  One of the projects on the table is a possible rail link from Boston to Fall River and New Bedford. 

With the signing of the bill today, the Obama administration implied that the economic stimulus plan will create or save 79,000 jobs in Massachusetts over the next two years.

Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough 

A recent study done by the Massachusetts Association of Realtors pointed out some interesting numbers. 

Not surprisingly, they found that over 90 percent of all homebuyers are using the internet as part of their home search.  They also found that over 90 percent of buyers chose to work with a real estate agent to guide them through the process. 

 Social Networking

According to the report, 47 percent of homebuyers are using social networking sites, such as MySpace, Facebook, LinkedIn and Friendster.  That is up from 50 percent last year.  Twenty-seven percent of those in ages from 18 to 24 reported that they use these sites every day. 

 Demographics  

• The median age of Massachusetts home buyers in 2008 was 39 years old and that was the same figure as the previous year. 
• Median income was up to $88,100 compared to $84,400. 
• Fifty-eight percent of home buyers were married couples.
• Eighteen percent single females and twelve percent single males.
• Ten percent of home buyers were born outside of the U. S.
• The median age of the first-time home buyer was 31.
• Fifty-three percent of first-time buyers were between 25 and 34 years old.
• Forty-eight percent of first-time home purchasers had a median income of $80,600 compared to $60,600 nationally. 

Financing:

• Ninety percent of buyers financed their home purchase.
• Savings were the primary source of down payment funds for 74 percent.
• Forty-four percent used funds from the proceeds of a sale of their home. 

Consumer Confidence:

• Forty-seven percent of all Massachusetts buyers believed that their home purchase was a better investment than stocks.
• Thirty percent felt that their home purchase was at least as good of an investment as a stock purchase.

Home Sellers:

• The median age of home sellers was 47.
• Their median income was $105,500.
• The typical home seller had owned their home for seven years.
• Thirty-seven percent of sellers did not reduce their asking price before the home sold.
• Sellers typically sold their homes for 95 percent of asking price.
• Thirty-three percent of sellers offered incentives, such as home warranties and help with closing costs.

Looking at this report, it is interesting to note that even with all of the technology available to home buyers that most people still rely on realtors to help them interpret the data and help them through their real estate transactions.  In this complex market of declining values, having the professional assistance of a buyer broker is more crucial than ever. 

Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough 

The much-anticipated $15,000 tax credit for homebuyers has been scaled back to an $8,000 tax credit for first time home buyers only.   

A few days ago, following extensive lobbying in Washington, home builders and realtors had hailed the proposed $15,000 tax credit.  Charles McMillan, President of the National Association of Realtors, had indicated that the credit might lead to 1 million additional home purchases.  Toll Brothers' CEO, Robert Toll had said, "The $15,000, I have no doubt, will make the greatest difference."  Pulte Home Builders' CEO, Richard Dugas was urging Congress to push the credit up to $20,000 or more and Centex's Timothy Eller had commented, "We have to absolutely stimulate the demand side of housing in order to begin to provide some price support for the prices that are continuing to decline and, of course, absorb these continuing foreclosures." 

The budget for the $15,000 tax credit plan was priced at $35.5 billion.  The revised credit will be close to $3.7 billion, a substantial reduction. 

This about-face by the government could cause a temporary setback in the minds of some homebuyers.  People who had expressed excitement about the $15,000 tax credit may now re-evaluate their plans. 

The purpose of the tax credit was to spark people who are sitting on the sidelines to enter into the market and a buy a home now rather than to watch our inventory of unsold homes grow larger.   The $15,000 credit, extended to all buyers, could have gone a long way toward stimulating the housing market. 

For now, the highlights of the revised stimulus plan will provide the following housing-related provisions:

• The current Home Buyer Tax Credit for first-time buyers, which had been essentially a 15-year loan, will now become a true credit and will not have to be paid back.  The amount of the credit is 10% of the purchase price or $8,000, whichever is less.
• The maximum loan amount limits for Freddie Mac, Fannie Mae and FHA loans will return to what they previously were last year which will allow buyers of higher-priced homes to obtain financing at conforming rates.
• State governments will receive funding to offset some of the impact of the current foreclosure situation.
• Homeowners who install energy-efficient items such as new doors, windows and furnaces could get up to $1,500 in tax credit. 

Considering the fact that the meltdown in the financial sector was driven by the collapse in housing, it is surprising that the response from government has been so tepid.  

Are these measures enough to help the ailing housing market?    

Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

The federal government is working on a plan to stimulate the currently sagging housing market.  In the Senate, a "voice vote" has been made to propose a $15,000 tax break for homebuyers.  

More details are emerging about the amendment to the pending economic stimulus bill, which is the brainchild of Georgia Senator Johnny Isakson, a former real estate broker.    

Unlike the current $7,500 housing tax credit, the new credit would be available to all home buyers and would not have to be paid back.  The $7,500 plan that is now in place is offered only to first-time home buyers and requires a repayment plan over a 15 year period.  The new amendment would replace the current plan on the date of its enactment. 

The mechanics of the plan are that it would provide a direct tax credit to any homebuyer who purchases any home.  The amount of the credit would be $15,000 or 10 percent of the purchase price, whichever is less.  Purchases would have to be made within one year of the legislation's enactment.  

The credit is nonrefundable and can be claimed over two years, so buyers whose tax liability is less than $15,000 would have a second year to capture the credit.  For example, a buyer who owes $10,000 in taxes would be able to take a $10,000 credit in the first year after their purchase and a $5,000 credit for the year after that. 

The new tax credit amendment was modeled after legislation that was put into effect in the 1970's when the country was facing a similar housing crisis to the one we have today.  Easy credit had flooded the market with new construction and with rising interest rates and a slowing economy; we were left with a three-year supply of vacant homes.  In response, Congress passed a $2,000 tax credit to anyone purchasing a new home for their principal residence.  The result was a stabilization of home values, a drop in housing inventory, and, eventually, a recovery in the housing market.  

Aside from injecting some cash into people's pockets, how may this proposal change the way banks are dealing with homebuyers?  Perhaps some of the current restrictions will be loosened with more money flowing around.  Specifically, will a lower down payment be more acceptable to a lender if they know a $15,000 tax credit will be coming back to the borrower? 

Time will tell.  The amendment is far from being signed and delivered.  It still needs a vote from both houses then the President's signature. And, this part of the stimulus package could yet be revised.  

Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough 

It has been a recurring issue over the years that banks have expressed a desire to enter into the selling side of the real estate transaction.  Some banks have actually sought out the opportunity to own real estate brokerages.

For obvious reasons, the National Association of Realtors has been opposed to this idea and has petitioned the government to block banks from doing so.  Part of their reasoning is that the division of responsibility in the real estate industry makes all parties more accountable. 

Arguments - Pro and Con

 The American Bankers Association has contended that the public would benefit from access to greater choice and a healthier competition.  On the other hand, realtors have argued that consumers would ultimately lose in this proposition with fewer choices, higher loan fees and reduced customer service.

Also at issue is the fact that banks are meant to be neutral parties, lending money without bias, and their involvement in the selling part of real estate would remove that impartiality.  

Pending Legislation

Both houses of Congress have subsequently sided with the real estate industry this week on this matter with the reintroduction of the Community Choice in Real Estate Act.  Over a dozen U. S. Senators and more than 245 members of the House of Representatives have signed onto the bill. 

Since 2003 there has been language included in annual appropriations bills which has temporarily blocked banks from having the power to own and operate local real estate brokerages.  The passage of the Community Choice Act will make this prohibition permanent.  

Senator Barbara Boxer, who introduced the legislation, stated that, "Permitting banks to engage in commerce could compromise their lending decisions and create conflicts of interest while restricting consumer choice and competition among mortgage lenders."  

It seems clear, at the least for the present, that there is strong sentiment among consumers, community advocates and the legislature that the business of selling real estate should remain with real estate agents and stay out of the hands of banks. 

 Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough 

You have found the home of your dreams and you are ready to put an offer on it.  Before you sign the contract make sure you know which items will convey with the house and which will be excluded.  There can be some confusion about this, particularly if the listing is vague on the matter.

 Real Property vs. Personal Property

For the purpose of selling real estate, property is divided into two categories:

Real Property is the land and everything that is attached to it, including the ground to the core of the Earth and up to the sky.  This would encompass the building, landscaping, trees and anything which is appurtenant to land or which is considered immovable by law.  

Another way to think of it is what realtors call fixtures.  Examples of fixtures are:  wall-to-wall carpeting, attached lighting, built-in ovens, stoves, microwaves and ceiling fans.  That is to say every item that is physically attached to the property, including, but not limited to the furnace and the kitchen sink.  All of these items will be included in the purchase unless they are mentioned as exclusions in the listing.

Personal Property is that which is not attached, such as furnishing, scatter rugs, free-standing lamps, refrigerators, washers, dryers and the grand piano.  These are all considered personal to the owner and can sometimes be used as bargaining chips when negotiating a price on a house. 

On the listing sheet there often be inclusions and exclusions.  If the refrigerator, washer and dryer are not mentioned, they are not included in the purchase price.  If a chandelier is mentioned as an exclusion, the sellers are taking it with them even though it is attached to the property.

Some sellers may even be attached to a particular tree or shrub in their yard and want to bring it to their new home.  In that case, the tree would be an exclusion in the listing and the seller would dig it up and remove it prior to the closing.  In this situation, be sure to have your attorney put wording in the purchase and sale agreement to specify that the landscaping will be back in good order after the tree is removed and not be left with a gaping hole.  Likewise, a chandelier should be replaced with a standard chandelier, lighting fixture, or, at the very least, an electrical cover to hide the exposed wiring. 

Window treatments can present as an interesting opportunity in the sale of a home because:

1. They are often custom-made or tailored to the specific decor of the home and, therefore, have limited value to the seller, and,
2. Since custom-made window treatments can be an expensive undertaking, they can be a good value for the buyer.

If window treatments are to be left this needs to be spelled out in the offer to purchase. 

The best way to avoid confusion on any of these items is make a list of all personal property that will be included in the sale, attach it to the offer and make certain that it is included in the final purchase and sale agreement.  This will help to ensure that you have a smooth transfer of ownership of the home and everything that goes with it.

Related Posts:

Home Warranties, Are They Worthwhile?

Assessing the Value of a Home

Property Disclosure - Who Has the Burden of Proof?

 Copyright 2009 - Claudette Millette, President, TheBuyersCounsel -  800-392-1446, E-mail    

Learn More about Massachusetts Home Buyer Representation - Greater Boston and MetroWest Massachusetts -  Serving Massachusetts Home Buyers Since 1992 

  Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough