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Feeling like there is no other option but foreclosure can be an overwhelming experience. Know that you are not alone. Thousands of homeowners in the United States are facing the same challenges as you every single day. Now more than ever before there are solutions.
You need help, guidance, and someone who understands the difficult choices you are facing about your home, your family, and your life. Quite often a homeowner facing a foreclosure thinks they have to go through the process alone, forced into a daunting situation caused by unforeseen circumstances beyond their control. Facing damage to your credit, and the possibility of not being able to purchase another home for 10 years can be a tough future to face, but by tapping into the expertise of a knowledgeable real estate agent, there are options available for you and you’ve come to the right place.
Insight on the real estate market across the United States, with Russel
Haraus, Appraisal Research Counselors, and our own Steve Haines, Texas
Real Estate Magazine, and Leslie Erickson, Prudential Georgia Realty.
Economists Mark Dotzour and James P. Gaines of the Real Estate Center at Texas A&M University share their insights.
After falling every year since 2006, the number of homes sold in 2010 seems to be have stayed close to 2009 levels.
Do you think the market has hit bottom? When the final counts come in, Texas home sales in 2010 will be down 6%-7% from the 2009 level. The homebuyer tax credit moved a great deal of demand into the first half of the year, but left the second half soft. Monthly sales volume was down at least 14% every month since June. The recent foreclosure mess caused sales to decline, as fewer distressed properties were brought to market, and has probably pushed recovery further into the future.
The outlook for at least the first half of 2011 is not encouraging. Interest rates are creeping up and job formation, while positive, is not strong enough yet to fuel significant recovery. The second half of 2011 holds promise. With luck—and assuming no other major shocks to the real estate system—2011 overall should be about the same as 2010 statistically and reflect a turning point toward meaningful recovery during the next couple of years.
The recovery, though, will be slow as mortgage credit remains tight and buyers’ attitudes toward homeownership adjust. Sales velocity as measured by the number of transactions per 1,000 households continues to revert to its long-term normal level of around 20 sales per 1,000, from 24.5 per 1,000 in 2010.
What factors will affect sales volume in 2011?
The primary factor affecting 2011 sales will be job growth. We need better than 2% annual rate of increase to stimulate new household formation and to encourage buyers to enter the market. Not only will the total number of jobs created be important, but also the incomes and permanence associated with new jobs. If all new jobs are temporary, low-income positions, the impact on housing will be fairly minor.
The major factor that will retard sales growth will be the mortgage credit market. Lenders face an unenviable situation: On one hand, the government is encouraging institutions to create new home loans and even threatening punishment for not doing so. On the other hand, the banking regulators come down hard, requiring higher reserves on all new real estate loans added to a lender’s portfolio. Fortunately, Texas is one of the few states actually creating jobs and creating a positive atmosphere toward home buying. The rental market has also picked up in the past couple of years, making the acquisition of some problem properties attractive to investors, adding to the potential sales volume.
How will prices trend in Texas in 2011?
The median home price in Texas did very well in 2010 by comparison to the rest of the country. The state median price will end the year (2010) slightly ahead of 2009, and expectations now are that 2011 prices will continue to be steady with perhaps a slight increase. In today’s economic climate, avoiding a price decline is a positive.
How long can interest rates stay this low?
As 2010 ended, monthly mortgage interest rates had begun to rise from the unprecedented levels of the past 12 months. The Fed right now seems dedicated to keeping interest rates low to stimulate economic activity, including housing. But risk has returned to the investment and capital markets as a very real factor, which means that as the year progresses, we should expect interest rates to rise. The pace of increase and the magnitude, again barring some unforeseen event or shock to the system, should be gradual on both counts.
Increasing interest rates in 2011 could have some surprising effects. If buyers expect rates to increase, it may encourage some to buy sooner rather than later—just as if they expected home prices to increase. The restraint, of course, will be the ability of those buyers to qualify for a loan.
What’s the most vulnerable part of the residential real estate market?
One thing is fairly certain: The two most significant issues facing the housing market are the potential for an economic relapse and fragile buyer expectations. Housing is not fueling the economic recovery as it has during past recessions. Today, housing is dependent upon general economic improvement for its own recovery. The government stimulus programs for housing have so far only delayed any real recovery and provided modest help to distressed homeowners or those who would like to be homeowners.
By the end of 2010, most economic indicators pointed toward a slow improvement in the overall economy. Private-sector jobs were being created, GDP was positive, consumer spending was growing, and corporate profits were up. But general economic improvement so far is extremely fragile. Any number of problems could emerge to disrupt it, such as global financial crises, state and local government budget deficits creating more unemployment, stagnant consumer and business spending causing erosion in small to-medium-sized businesses, and massive uncertainty about the impact of past and future government policies and programs.
Consumer expectations play a substantial role in housing, too, and today’s buyer expectations are as fragile as the economy. Their expectations about future home prices, interest rates, and their ability to qualify for loans will influence and ultimately determine the direction of the 2011 market. Many view today’s market problems as significant opportunities, while others see current conditions and decide that now is not the time to make a major investment. Long-term, homeownership has always proved beneficial, but as with most things, decisions today are made in the short-term.
What indicators should agents look for to judge the direction of their local markets?
There will be major differences in conditions among Texas markets and even within local markets. Sales volume and sales by price segment will be key factors along with new construction. Local permitting data can be watched. There will probably be little new development, so most new construction will be in existing communities.
Price trends are always important. Locally, price-per-square-foot may be as meaningful as overall averages and medians. If price-per-square-foot stays competitive with replacement cost, this will not bode well for new construction.
Foreclosures and distressed sales may play a significant role in local housing markets. The first half of 2011 may be especially vulnerable to influence from foreclosures as the foreclosure moratoria are relaxed, releasing more properties that were postponed.
Local lending practices need to be closely watched, and agents need to stay especially alert for indications that mortgage credit underwriting is changing. Qualifying buyers will be especially difficult this coming year, so any changes in attitudes and actions by lenders need to be followed closely. And, of course, local job creation will be a must-watch for everybody to gauge real market improvement potential.
How will the state’s budget crisis affect the real estate market?
It’s difficult to determine what effects the state’s budget problems will have on the housing market until we know what actions are to be taken. Two of the major anticipated impacts are the level of state employment and the pass through problems to local school districts. The state may be able to address some of its budget problems without major layoffs of currently employed workers. Attrition and hiring freezes may be able to handle the personnel cost issues. Local school districts, which rely on the state for more than 50% of their funding, will have much more difficult decisions.
Mark Dotzour, Ph.D, is chief economist and James P. Gaines, Ph.D, is research economist at the Real Estate Center at Texas A&M University.
Visit the center’s Web site, www.recenter.tamu.edu, for more information.
