By RE/MAX of New England - Last updated: Monday, February 13, 2012

By Steve Harney
Inman News’ 2011 100 Most Influential Leaders in Real Estate
Author Keeping Current Matters

More and more research is coming out showing that it makes great financial sense to purchase a home today. Whether it is rent-vs.-buy ratios, income-to-price ratios or income-to- mortgage payment ratios, purchasing a home right now is a bargain compared to historic norms.

If we look at the COST of a home today compared to pre-peak prices, we can truly understand the tremendous savings available in today’s real estate market. According to the S&P Case Shiller price index, residential real estate values have returned to 2003 prices nationally. That, in itself, says something. However, when you factor in mortgage rates, the case for buying a home today becomes even more compelling.

In 2003, 30 year mortgage rates stood at 5.83%. Today, they are under 4%. How does that impact the actual COST of a home? On a home purchased for $250,000, here is the difference in monthly cost:

You save $278.12 a month, $3,337.44 a year and $100,123.20 over the life of a 30 year mortgage! You buy the home for the same PRICE but the COST has been reduced by more than $100,000.

This is why so many financial advisors are saying that this may be one of the greatest times in history to purchase a home.

Story submitted by RE/MAX Properties Associate Terry Kern

A few years ago, I was showing property to a couple in their late 40’s. They were purchasing their first home and were very excited. They had raised their family and were finally ready to own their own home. We looked and looked and finally found the perfect home in Hudson. We wrote up an offer, submitted it and then negotiated back and forth for a few days. The offer came to a standstill while we were still $12,000 apart.

After a few days I began encouraging my buyers to look at other homes. The wife had her heart set on this home and while she looked at others, no other homes interested her. A week went by and we still hadn’t heard anything from the seller and the wife still hadn’t found anything she liked that was available.

After about 2 weeks, I received a call at about 6:00 PM from the listing agent. The seller had decided to accept our last offer, but only if we could still close that same day! I was on the road when I got the call and stopped at a store to pick up a Christmas cactus for my buyers. I called and quickly asked if they were home and if I could stop by. I was able to get off the phone before they could ask “why was I stopping by?” When I arrived the husband let me in. I asked if his wife was home and he said she would be right out.

When she came into the entryway of their home, I handed her the plant and said with a BIG smile, “This is for your new home.” She took the plant with a smile and a thank you and then turned to walk away. I thought to myself, “Did she understand what I just said?” Suddenly, she spun around and said, “What did you say???” So I repeated what I had said a little slower. Her hands started to shake and did a little Happy Feet dance and said, “Oh My God!” and then turned and started to run into the kitchen with the plant. She got half way down the hall and turned and ran half way back to ask “REALLY?!”

When I said yes, she turned back toward the kitchen and ran off screaming and crying. She almost dropped the plant when she got to the kitchen before she could plunk it on the counter. She came running back with tears streaming down her face and literally JUMPED into her husband’s arms! We closed on their new home 4 days later on Christmas Eve.

Terry Kern

Sales Associate

Office Phone: 603.589.8800

Cell Phone: 603.498.6462

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Longer days and warmer weather aren’t the only reasons to celebrate right now. Recent news continues to reinforce that the housing market in New England is improving, and just as important, there are several positive signs on the national front which should encourage buyers, sellers, and agents alike.

According to our latest RE/MAX of New England Monthly Housing Report for March, home sales were up dramatically. Each state posted double digit gains in year-over-year home sales. Rhode Island led the way with a 25.6% increase, followed by Vermont at a 25% year-over-year increase. Connecticut (up 15.4%), Massachusetts (up 14.3%), New Hampshire (up 12.3%) and Maine (up 12.1%) also posted exciting gains as well.

While home sales have been strong since the fall, it is even more encouraging to see that home prices are beginning to stabilize. In fact, in March, Maine and Massachusetts both experienced a slight uptick in median sales price, up 1.1% and 0.5% respectively. It is a trend being played out on the national level as well. According to The National Association of Realtors®, median sales price increased 2.5% in the U.S. in March 2012 compared to March 2011.

Stable prices are the next piece to fall into place in the housing recovery. As strong sales continue throughout the rest of this spring and this year, excess inventory will continue to be depleted. Prices will stop declining, begin holding steady, and eventually, they will ever so slowly begin to rise again.

The key to this entire formula is for buyers and sellers to remain active, and they certainly have good reason to. Interest rates remain at or near historic lows, and unemployment continues to decline in most communities. Buyers and sellers should also be confident that the economic recovery is not going to take a step back. Just last week, Abby Joseph Cohen, the Chief Equity Strategist for Goldman Sachs, said the investment powerhouse fully believes we will not slip back into another recession in the near future.

The Federal Reserve, which has long recognized that a robust economy is supported by a vibrant housing market, is also rolling out a new program in June which aims to speed up the short sale process. The ultimate goal is to help families shed mortgage debt and avoid foreclosure, while at the same time accelerating the pace at which this block of inventory moves.

Anyone who has ever dealt with a short sale before is well aware of the snail’s pace the process can move at. Buyers and sellers can go months without a response from the bank, only to find out their offer has been rejected.

According to the Boston Herald, the new policy will require banks respond to short sale requests within 30 days if it is owned or securitized by Fannie Mae or Freddie Mac. After 30 days, the bank must provide weekly updates explaining what is behind the delay. Final decisions are required within 60 days and banks that fail to comply will face fines and other penalties.

This new policy is sure to help make the short sale process more transparent, and will hopefully encourage buyers not to rule out this type of transaction because of the uncertainty usually associated with it.

As the government continues to adjust its housing policies to continue to make it easier for qualified borrowers to purchase a home – whether it is a short sale, foreclosure, or regular transaction —
this year’s spring housing market is shaping up to be one of the most active in recent memory thanks to an improving economy and the return of consumer confidence. Best of all, many of the indicators of a long-term, meaningful housing recovery are present, which should give buyers and sellers alike renewed confidence in the real estate market.

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The housing industry is staging a recovery with increasing sales and stabilizing prices, according to a national survey of RE/MAX agents. Four out of five agents believe U.S. home prices won’t decline further. In fact, nearly 70% predict prices will go up, led by a strong demand for homes in the low to middle price ranges.

“To active real estate agents, this market is definitely heating up,” said RE/MAX CEO Margaret Kelly. “They are witnessing a recovery across the country fueled by home buyers and sellers taking advantage of a significant market opportunity.”

Agent opinions are documented in the quarterly RE/MAX Market Insights, an online survey of 1,022 residential experts. The survey builds brand visibility for RE/MAX agents, and is typically picked up by more than 300 news outlets. Collectively, RE/MAX agents sell more real estate than any other real estate network in the U.S.

Download the RE/MAX Market Insights survey infographic.

Key findings include:

• Price rebound: 68% say prices will be higher by the end of 2012.
• Today’s prices: 29% below the peak reached during the housing bubble.
• Demand for lower-priced properties: 80% of agents say it’s good or very good.
• Demand for homes in the middle-price ranges: 71% rate it as fair to good.
• Demand for high-priced homes: 58% call it poor to fair.

A snapshot of today’s homebuyers served by RE/MAX agents:

• Roughly one third are first-time buyers. Another third are homeowners looking to sell so they can move up or downsize. The remainder are mostly investors, who believe the market has hit bottom.
• One in five buyers pays cash, receiving an average discount of 15%.

The most significant challenges facing first-time homebuyers are having an acceptable credit score, posting a down payment, and facing a shortage of homes for sale. Repeat buyers have the added burden of selling their current home. They, too, are facing a scarcity of homes to purchase in the lower and middle price ranges.

Nearly half of the agents say lower priced homes in their markets are selling for slightly less than the asking price, while 17% say buyers are paying full price and 11% say buyers are paying slightly more than the asking price.

For homes in the middle-price ranges, 49% report sale prices are slightly less than the asking price, while 8% say full-price is being paid. For the high-priced homes, 43% report that sale prices are moderately less than asking prices, with another 25% saying it is slightly less.

With bank-owned homes making up a significant portion of the current inventory, agents report that 62% of their non-investor buyers have a favorable attitude toward foreclosures, while only 27% have a favorable attitude toward short sales.

“With distressed properties still making up a sizeable portion of homes on the market, this inventory is being cleared effectively by buyers, who don’t mind investing a little to fix up a property in return for an attractive bargain,” Kelly added.

Among buyers’ highest priorities were quality of schools, and condition and size of the home. The lowest priorities included public transportation, walkability and energy efficiency.

Most RE/MAX agents advise their buyers to hire a professional home inspector and to attend the inspection. Getting pre-approved for a mortgage, not merely pre-qualified, also is recommended.