Monthly Archives: January 2012

Latest on License Law

Looking for proficiency exam locations?
IAR has more than 60 exam locations located around the state and space will get limited after March 1. The best advice? Take your exam as soon as possible!

Want a quick (and cost-effective) route to get your transition and CE?
Take the “IAR 30-Hour Transition Home Study” course (Item #625) available from the IAR REALTOR® Store – look under store category “Pre-License.” The cost is $165. Once you have successfully completed the 30-hour course, there are no other continuing education hours required to renew your license. You also earn credit for GRI Course 1. This option is particularly good for members who are licensed as a salesperson and who have not taken any CE yet this year.

IAR Transition Help Line
The IAR Transition Help Line is available 9 a.m. to 3 p.m. Monday through Friday. E-mail questions@IARlicenselaw.org or call 877-538-5861. Due to the high volume of calls to the help line, you may have to leave a voice message. You can also find transition information at IARlicenselaw.org.

The Trend Has FINALLY Turned in Real Estate

By Dr. Steve Sjuggerud
Thursday, January 19, 2012
Something’s up down here,” my brother told me over the weekend.

Right now, I’m unable to buy a distressed property,” he said. He’s been trying to buy quality properties where he can get a good price – properties like bank-owned real estate, foreclosures, short sales, and such – in Central Florida.

But lately, he simply can’t do it.

It seems like the Realtors and the big investors are tied up with each other,” he explained.

These properties are disappearing from the market before they’re even on the market. And for the ones that DO make it to the market, the bids I’ve made on Day One – even above asking price – haven’t been accepted.”

Somehow, my brother didn’t even come away with Grandma’s house (as I wrote about here).

I think this is interesting…

It’s anecdotal evidence of what I believe is happening right now. I believe the signals are telling us the housing market is finding its “clearing price” right now…

This is it. This is the bottom. There are plenty of buyers at this moment to match the sellers. The latest stories from my brother – combined with the most recent data and the “leading indicators” – tell me the bottom should be in… or very close.

As a leading indicator, something I find interesting is the dramatic rise in home-improvement stocks, like Home Depot and Lowes. Home Depot is now at 10-year highs. When a stock is hitting 10-year highs, whatever was troubling it before is over…


Stock-price activity often leads economic activity… So is the dramatic risk in home-improvement and homebuilding stocks wishful thinking from stock traders? Or is the rise in these shares leading economic activity in housing?

I think this is legit… The latest data backs that up…

Yesterday, Bloomberg News reported, “Confidence Among U.S. Homebuilders Climbs to Highest Since 2007.”


Bloomberg said, “Confidence among U.S. homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved… Record-low borrowing costs, a growing population, and reduced prices may drive demand for homes this year…

Another simple piece of data where you can see some improvement is in building permits issued for single-family homes. And it’s not rocket science… If you’re going to have a recovery in housing, you need a recovery in building permits. It’s the first step to building a new house.

Building permits bottomed out three years ago. But they’ve been recovering:


The recovery in permits is not huge. But we are still off the lows of three years ago. It’s a move in the right direction.

I could go on… The general picture is that consumer confidence is rebounding.Things are getting less bad.

The official statistics of home prices might not show the recovery yet… because they are always MONTHS old. But I strongly believe the bottom is in, right now. Today.

Invest accordingly.

Good investing,

Steve

Further Reading:

“With prices this low, you need to consider buying a house,” Steve writes. “If you can buy and hang on for a couple years, it could be the lowest-risk, highest-reward investment you ever make…” Find more evidence the housing market has bottomed here: Those Fools… The Housing Bust is OVER.

If you’re still not convinced real estate is one of the best values out there right now, listen to the proof. Steve shares two incredible real estate deals… These deals are real, and they’re happening right now.

Inexpensive solutions for your Illinois real estate education needs

Sure Win CE provides simple inexpensive solutions for your Illinois real estate education needs. Whether education for the current real estate professional or professional education to get your real estate license, we are here for you. Contact Sure Win CE for all the details regarding licensing in Illinois along with the education courses to move forward. If you have questions, need help ordering or would like to pay by check call them at 888-844-7515.

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Zillow: Home values in November back at 2003 levels

by KERRI PANCHUK Tuesday, January 10th, 2012, 8:05 am

Home values in the United States in November remained flat with the prior month but declined 4.6% from last year, according to the latest real estate markets report fromZillow Inc.

The company’s home value index, which measures prices across the nation, shows the average home price was $147,800 in November, the same level recorded in 2003.

Of the 165 housing markets tracked by Zillow, 60% noted appreciating or flat home values in November, including Los Angeles, Washington, Miami-Ft. Lauderdale, Fla., San Francisco and Detroit.

Zillow said foreclosure liquidations rates are down sharply in the wake of the robo-signing controversy last year, which slowed foreclosure processing overall.

In November, slightly more than eight of every 10,000 homes in the country were foreclosed upon. That is down from October 2010 when 11 of every 10,000 residential properties faced a similar fate. Zillow’s numbers are based on completed foreclosures.

Zillow said the number of foreclosures could rise again if attorneys general reach a settlement with financial firms, giving banks more certainty over the foreclosure process.

“Overall, we are seeing encouraging signs in housing data such as sequential months of slowing depreciation rates, stabilizing markets and organic improvement in value trends, largely in the absence of government policy intervention,” said Stan Humphries, Zillow chief economist.

“However, we’re not out of the woods yet,” he said. “Supply and demand are still not in balance in many markets and we do expect higher foreclosure liquidation rates near-term, which will put additional downward pressure on home values.”

Good News in Home Sales

NAR released its pending home sales index figure last week, and for the second month in a row, the index is up. What’s more, the index has broken 100. That’s significant because the only other time the index has hit 100 in recent years is when the home buyer tax credit was available. “It is the natural, organic power of great affordability conditions and job creation that is bringing the index level up,” says NAR Chief Economist Lawrence Yun. “This is a very encouraging sign.”
Hear more from Lawrence Yun on trends in housing data and sales  Click Here

Now’s The Time To Get Back Into Real Estate

By John R. Talbott

I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt. And this from the author of The Coming Crash in the Housing Marketpublished in 2003 and my 2006 book, Sell Now! The End of the Housing Bubble. Let me explain why.

Home Prices Relative to Peak Prices During Bubble

Home prices are off anywhere from 10% to more than 60% in cities across the country. There is no reason to believe that prices were “fair” during the bubble as we have seen they were largely caused by loose and aggressive lending by banks and non-banks. But, it is always better to buy at a discount rather than at a historical peak, and these seem like awfully big discounts. And by my calculations, in most cities across the country, real prices adjusted for inflation have just about come into line with where prices were in 1997, before all this crazy bank lending started, so there should be little additional downside risk by buying today. There are still some neighborhoods across the country that have not seen very dramatic declines in price, many of them very wealthy and expensive enclaves, but given the distribution of incomes lately heavily weighed toward the wealthy, these areas may never see a really large home price decline.

Home Prices Relative to Construction Costs or Replacement Costs

Homes in many cities across the country are now selling for as little as $60 to $70 a square foot. Depending on the quality of construction and the underlying land value, this represents a 50% to 65% discount to the costs you would incur if you tried to build a similar home today in these cities. While there is no guarantee that there will be a strong rental market in the short run, in the long run it just seems to make sense to buy if you can acquire assets at half or less of the cost of building them.

Home Prices Relative to Incomes and Rents

During the peak years of the housing bubble, entire cities like San Diego were seeing their homes priced on average at 11 times the area’s median family income. Such prices financed primarily with debt are by definition unsustainable. Now, because banks have pulled back on their lending formulas, homes in many cities are changing hands at three to four times average family incomes. Similarly, at the peak, houses traded at such large multiples of possible rents that it made the projects uneconomic from the start. Now, with homes trading at more reasonable multiples of rents, houses and condos can be purchased that are immediately cash flow positive in year one and enjoy all the upside of any appreciation that will occur as inflation returns.

Home Prices in Real Terms, Not US Dollar Terms

We still talk about home prices in dollar terms, which is silly because the dollar has lost 98% of its purchasing power relative to a more stable asset like gold over the last fifty years. If instead of pricing houses in dollars, we look and see what a home would cost in ounces of gold, we see that houses today are a real bargain. As a matter of fact, this graph shows that average homes, measured in the number of gold ounces it would take to buy them, are now trading at forty year historical lows.

2011-12-20-Screenshot20111220at3.24.35PM.png

You might argue that this is because gold is priced highly today. I would argue that gold’s purchasing power has changed very little over time, it is the dollar that is depreciating and thus giving the appearance that the price of gold is rising. Actually, gold is quite stable relative to other assets and commodities and it is the dollar that is highly volatile and declining in value due to the US funding its deficits by printing dollars.

The Real Bubble – US Treasuries and Future Inflation

The real bubble out there is longer US Treasuries and 30-year fixed rate mortgages for home-buyers. With US debt equal to its GDP and equal to more than four times our government’s total tax revenues and with annual deficits of $1.3 trillion and growing, it is amazing to me that people will lend to the US for thirty years for less than 3.0% a year. Even more amazing is that individual homeowners can borrow at 4.0% (around 3% after tax) for thirty years on a fixed rate basis, some 300 basis points better than Italy which has a lot more people and makes much better shoes.

Homes may not appreciate greatly in real terms over the next twenty years, but they don’t have to if inflation comes back, which is the only way the US and Europe are going to get out from under the huge debts on their countries and their banks. You may not make a lot in real terms on the house, but if inflation returns, you could make a killing on your investment as your thirty year debt becomes worth less and less in real terms. Run the numbers, but if inflation and interest rates go back to say, 7% to 8%, you could easily make eight to ten times your equity investment on the house because you locked in your borrowing costs and home appreciations historically have always correlated well with unanticipated inflation.

So, run, do not walk to your neighborhood banker and either finance a new home purchase or take out the maximum amount of money he or she will lend you on a home equity loan and buy hard assets, not financial securities, with the money. When inflation comes roaring back the only perfect hedge is to be a borrower, not a lender or investor. Shakespeare said, “Neither a borrower nor a lender be,” but they didn’t have huge government deficits and the risk of future inflation back in the Bard’s time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours