What is most likely the most important thing you look for when you search for a new home? Yes, you want it to be comfortable, beautiful, safe; you want it to have the right amount of room in the right places for your household's activities and needs. You want a good location.

But more than anything, you want it to be affordable. No way are you willing to pay more than the home is worth.

And what determines the worth of a home? The best answer to that question is provided by the prices reasonable buyers have recently paid for similar homes in the same neighborhood or nearby areas.

Notice this: You probably won't pay any attention to a house that is obviously priced well beyond what it is "worth." There are plenty of homes to look at, and you will most likely confine your search to the homes whose price tags make sense to you.

Now, turn the tables around. If you are selling your own home and you price it right, perhaps you can understand from this exercise in reverse psychology why studies have shown that homes priced at market sell not only faster than those that are priced above market--they also sell for higher prices.

Before you set the price on your home, let's look together at the recent selling prices for comparable homes! So, call Beth at 425-450-5208.

"REO" is short for "real estate owned." It refers to homes and other properties owned by banks and other lenders who have taken title through foreclosure. It is not a happy affair, but it can be, in some cases, the source of great bargains for homebuyers.

But be careful! As Jim Wasserman writes in the Sacramento Bee, "'Buyer beware' is the watchword with a bank-owned home sale." Buyers of foreclosure properties just don't have the safety nets available in more normal transactions. The Lenders, because they have never experienced living in the homes, are not required to disclose property defects or to repair when there are problems. Buyers, therefore, should make use of reliable inspectors to make sure they're not signing up for problems.

Further, the rather faceless banks tend to be reticent about negotiating prices. They will deal with counter-offers, but they frown upon lowball offers and tend to reject them. They also want the buyers to have their financing well in hand, and do not want to accept offers with contingencies.

In short, despite the many ads we see about making a fortune by buying foreclosure properties, we will be wise to bring in our real estate advisors and inspectors to make sure the bargain doesn't quickly become a lemon. Let's talk. Just

call Beth at 450-5208 and visit her website at www.bethbillington.com.

Economists often pay close attention to the ratio between how much local incomes have been rising and how much local real estate prices have been climbing. If real estate prices rise faster and farther than do local incomes, then it is a sure sign that local real estate is moving into a range in which it's either difficult to afford or simply unaffordable.



Often, economists will assert that the market will slow dramatically until one or both of two things happens: First, incomes must rise to a level that is more on a par with home price levels and/or second, home prices must stall or even fall to a level more on a par with income levels.



Life, however, is rarely this simple. We are looking, after all, at human psychology and the many unexpected factors that make up demand for homes. Consider the historical fact that every two new jobs created and filled in our area translate into the need for one new home. The number of jobs, in other words, can work in contrast to the income level of those jobs. Demand can grow even if income levels do not.



Thus, real estate markets often slow and heat up in unexpected ways, driven by factors beyond the hard numbers quoted by economists. Reading a real estate market is as much an art as a science, and truly adept real estate and mortgage professionals develop that art with care. For more information or assistance call Beth at 425-450-5208.

This is a rather strange indicator of how affordable the homes are in a given area−strange primarily because it makes assumptions that may or may not be true. Generally, the index notes the amount of income needed to purchase an area's median-priced home in a transaction with a 20% down payment and an institutional mortgage loan for the balance of the purchase price. In recent years, however, fewer and fewer transactions match this formula.



So be it. Once the index identifies the amount of income needed for such a purchase locally, it looks at the percentage of existing households that have enough income or more to complete such a purchase. In recent years, it has all too often been the case that 30% or fewer of our households could afford to buy our median-priced home.



As this percentage moves up and down over time, it provides some insight into the strength of the market. If a larger percentage of households can afford the median-priced home, housing is more affordable, and the number of sales should rise. Conversely, if the percentage declines, housing is less affordable and sales will likely decline.



The market cycle is constantly on the move, though, and wise buyers are alerted to wait for the often brief time span in which prices have either stopped rising or actually fallen. Generally, that is when the bargains show up. For help email Beth at beth@bethbillington.com.

In a buyers' market, sales are obviously slower than in a sellers' market. What constitutes a buyers' market, after all? An abundance or over-abundance of homes on the market for sale. With so many homes available for sale, and fewer potential buyers of those homes, sales slow, price appreciation slows or even turns negative, and the newspapers are full of stories about what a dreadful real estate market we're experiencing. In a sellers' market, there are far more ready and able buyers than there are homes for sale, and homes sell quickly.



What is particularly remarkable is the amount of expert advice thrown at us in a buyers' market. Somehow, as prices ease and it becomes possible to negotiate terrific terms with those who are anxious to sell their homes, the market gurus decide it's not a good time to buy. Wait a year, they often say. Avoid the carnage.



Trouble is−as a very rich man named Bernard Baruch often observed−the very best time to buy is precisely when no one else is buying. The reasons should be obvious, but they are compelling only for the wisest among us.



If it's harder to sell a home and you'll get a lower price in the sale, but it's easier to buy a home and you'll get a lower price in the purchase, things not only even out−you can often end up ahead in your sale and purchase in a buyers' market. Why the negativity, then? Because people start to believe that prices will just keep falling (probably the same people who, in a sellers' market, believe prices will just keep rising).



The bottom line: When you need to move, and you find the right house, let market conditions be a secondary consideration. The right time to buy is when you find the right house at the right price with the right terms. Simple, but true. For more information call Beth at 425-450-5208.

The primary way homes were marketed in the past was in the newspaper classifieds, where hundreds of brief advertisements vied for the reader's attention, most of them failing to get much notice. But all of this has changed, largely due to the Internet.



The number of print classified ads plummeted by 15.7% in 2007, and initial studies suggest they'll fall by another 7.3% in 2008. If far fewer people are advertising their homes in the newspaper classifieds, why should you?



Bear with me, but the answer is the same as the question: The reason is that far fewer people are advertising in newspapers.



That means your ad will stand out more and therefore more people are likely to notice it. But it is important to consider who is most likely to notice the ad. It is true that younger potential homebuyers rely increasingly on the Internet as they seek out homes to consider. The likely reader of classified ads, therefore, is older and is less aware of how to use modern technology.



Now, if that sounds like part of the profile of a likely buyer for your property, then do, indeed, consider running effective classified ads to get your home sold to an appropriate, grateful buyer. For more information email Beth at beth@bethbillington.com

One of the things we are reminded when the real estate market surprises us with a serious slowdown is that it is very good to have a reasonable amount of equity in a home, especially if we're never certain when we may want or need to sell it.



Say, for example, you own a modest $500,000 vacation home that you rent out frequently. You bought it originally for $400,000, and you've been sprucing it up during the times it's stood empty−upgrading the appliances, adding new wall and window coverings, and finding ways to make it more and more beautiful. And you've financed these upgrades largely through a second loan you took out against the home.



The problem here is that your decorating and upgrading could put you in a position where you have as much money in the home as it is worth. Should the market take a dive−and the value of the property decline−you may not be able to get all of your money out of the home in a sale. Indeed, you may have to pay out of your pocket to cover the full amount of indebtedness secured by the home.



It is wise, therefore, to maintain a healthy cushion of equity−wiser than it is to decorate the property to the nines−just in case the market turns and your options suddenly narrow as a result. The same is true with your own home, in fact, and with many capital assets you may own. For assistance with real estate call Beth at 425-450-5208.

Though this column often suggests that (1) you take matters into your own hands when buying a home, using your real estate professional as an invaluable coach, not as the person making your decisions for you and (2) that you will thank yourself for the rest of your life if you buy the home that is right for you when you find it, not when television economists say it's the right time to buy−we must suggest that you truly give yourself all the time and advice you can get when it comes to refinancing your home mortgage.



Consider the case of the homeowner with a mortgage that is performing very poorly for her. Perhaps it's an adjustable rate mortgage and its terms allowed the rate and monthly payment to climb sky high at the first adjustment. She will want to find a mortgage professional whom she can relate to and trust, someone who will walk through all her options with her and suggest all possible ways of improving her situation−someone, too, who will keep her in mind as market rates and available mortgage programs go through their changes, calling her when a genuinely appropriate opportunity arises.



Now consider the case of the homeowner who knows far too little about the workings of mortgages and is continuously refinancing in an effort to get the lowest possible rate. This person needs a deeper understanding of when it will−and when it will not−serve him to refinance. Sometimes, you see, the loan with which you refinance may provide a lower monthly payment... .but the piper will eventually have to be paid, as interest rates force his overall obligation higher over the life of the loan.



Your real estate and mortgage professionals should, above all, help you make informed decisions that benefit you throughout your life. They are not order-takers; they are advisors. Find advisors you can relate to and trust and tell them what you need. You'll be glad you did! For more information call Beth at 425-450-5208.

Increasingly, we've realized that there is something magical about looking at a house that you may want to buy and make your own. When a home looks right, when it strikes you from the first moment you enter the door, your mind almost inevitably begins to imagine how your belongings, your furniture−indeed, your life−would look in this house.

There are several things that can pop the imaginative bubble in which potential buyers tour a home. If a home looks neat and clean to the point of sterility, for example, it is difficult to imagine living in it. No one wants to live in a hospital ward. A home should look inviting, like comfortable clothing. On the other hand, it shouldn't look messy, dark or full of other people's paraphernalia or memories.

Thus, the best preparation of a home for a showing involves making it bright, spacious, livable, and−for lack of a better word−free of history. Free of the presence of its actual owners. This can be very subtle. Too many photos of family members, for example, simply remind a potential buyer that this is not their home. And the bubble bursts.

And if photos can pop the bubble, the physical presence of those who live in the house can demolish all the potential buyers' imaginings of what it would be like to live there. After the first viewing, perhaps, it can work to make the seller available to answer questions and make suggestions about the house. But before that−do all you can to allow the potential buyers' imaginations to soar... and their buying decisions to firm. For help with your real estate call Beth at 425-450-5208.

"A capital gain is an increase in the value of any capital asset that you own," says a USAA article on the subject. A good example? Real estate. Stocks, bonds, personal property and collectibles are also capital assets, and when you sell any of them for a higher price than you originally purchased them, you have realized a capital gain, and you will likely have to pay a tax on that gain.



But let's return to real estate. If you bought your personal residence several years ago for, say, $450,000 and you sell it for $650,000, there's an obvious $200,000 gain, much of which you can simply put in your pocket as profit from the sale. And capital gains from the sale of personal residences, as you probably know, get very special treatment.



If you file jointly as a married couple, you can exempt up to $500,000 in capital gains from taxation in the sale of a personal residence in most cases. That means your $200,000 profit (less the costs of selling) simply won't be taxed. Thus, if you would normally be taxed in the 25% bracket on capital gains, you'll save roughly $50,000.



This is one of the stunning ways in which a personal residence can serve you financially, and one of the mains reasons that people look to their homes as one of the foundations of their financial lives and bedrocks of their savings programs. For more information call Beth at 425-450-5208.

Financial advisors in our newspapers and magazines love to write about this subject, suggesting that we buy when sellers are willing to negotiate, when interest rates are low, when others are buying, etc., etc.



The reality is that there is no ideal time−in the abstract−to buy your home. The best time to buy is when you can afford to buy, and need to buy a home that suits the needs of your household, and have found the right home to fulfill your needs and wishes.

It's true that we've seen home prices skyrocket in certain years, and that people who bought when home prices reached their peak weren't always pleased with the results. But the problem didn't reside in the home, nor did problems show up in the real estate deals, nor even position of the stars in the heavens. The problem showed up when people bought more than they could afford to buy, particularly when they used a mortgage loan they didn't understand and found, months after the deal closed, that the monthly payment started to rise insidiously.



There may be no better time to buy than that magical moment when very few people think they should, and interest rates are low, and the market is coming into recovery. But that is a moving target, very hard to hit. A good home at a fair price with financing that fits the buyers' profile−that is surely the definition of a good deal for a buyer. For assistance call Beth at 425-450-5208 or email her at beth@bethbillington.com.

"Bottom-fishing": a scary term often used when real estate prices have eased and seem on the verge of easing further. We don't advise it.



Actual bottom-fishing tends to yield up the least attractive fish, the ones who scrape the bottom of the sea and gobble up the most toxic of foods. That's relevant here. Because most buyers who wait anxiously for just the right moment−when home prices reach their cyclical bottom−end up losing far more than they gain. That moment is always impossible to pick out, especially when it is happening. And when it has passed and the market has moved into genuine recovery, there is no "rewind" button. It's gone.



And what, precisely, is gone? Not just the lowest possible price, but also the opportunity to negotiate the most favorable possible terms of purchase. As the market nears recovery, sellers' attitudes and flexibility quite naturally begin to firm. There is a sense that a stronger market is just beyond the horizon, and sellers are less inclined to do back flips for capable buyers.



Not that you want to demand back flips of your seller, but here is the truth about a buyers' market. Though buyers are in the driver's seat in most transactions, there is a kind of equal opportunity at work. The chances of negotiating a transaction that truly benefits all parties are far greater than they are in the heat of a sellers' market, when even the sellers are forced to act and react too quickly to engineer truly constructive terms of purchase.



Rather than waiting, most of us will benefit most greatly by working at the far more thoughtful pace allowed by a buyers' market... and no waiting for the fish on the bottom of the sea. For help call Beth at 425-450-5208.

It has generally been true that many people wonder, especially when home prices have skyrocketed, why they should pay a commission to a real estate professional or work with a mortgage professional when there are cheaper ways to buy, sell or finance a home. The reader won't be surprised that this article argues for making the best possible use of your real estate and mortgage advisors. In fact, several such articles will be found in these pages as time goes by.



The first thing that needs to be said is: Good point. Real estate and finance advisors are generally paid quite well for their services and the size of the payment rises as the price of homes rise.



But there is much to say here and little space. The first point that needs to be made is simply that a large number of very reliable surveys have shown in recent years that the proceeds from the sale of a home are significantly larger when a real estate professional assists in that sale. And that's after paying the commission.



As real estate prices have risen, the complexity of the transaction has taken quantum leaps. Most home sellers and buyers have found that they save money, rather than paying more, by calling on the services of a trusted real estate and mortgage advisor. That's the bottom line. For more information call Beth at 425-450-5208 or email her at beth@bethbillington.com.

We don't tend to think of houses aging to the point of being uninhabitable, but it can happen if homes are not maintained with care. The same is even truer of the appliances in our homes, without proper care they can become unusable.



The National Association of Home Builders recently issued a study that estimated the amount of time various parts of a home should last. The most basic parts of a home−its foundation, drywall, plaster, pipes, basement and framing−should last at least fifty years, the study asserts.



The median age of a house in America today is 32 years, four years older than when the NAHB did its last such survey in 1993, meaning that homebuyers should be that much more aware of the condition of the most basic elements in the construction of the home they choose to buy. Some of those elements, though, have far more durability than they used to. Kitchen cabinets, for example, used to last 15 to 20 years; now, they're expected to last 50 years. A good paint job used to last 3 to 5 years; now, thanks to chemical improvements, it lasts 15.



Some things, mainly because they've become more complex, don't last as long−refrigerators, for example, and water heaters. You can view the complete NAHB study at www.nahb.org/fileUpload_details.aspx?contentID=72475. For answers to your questions call Beth at 425-450-5208.

There is an obvious and tremendous benefit from having a great working relationship with a real estate (and also a mortgage) professional long before you actually have to call on these people to help with the purchase and/or sale of a home. You know your deal will be handled in the best possible way; you know that your specific and unique needs will not only be heard, they will be acted on; and you know that you can trust the advice and suggestions of your professional assistants. These are huge matters!



And there's more. What you may not realize is that an on-going relationship with your real estate and mortgage professionals will help you stay on top of the national and local real estate markets. They will also keep on top of interest rate trends, make you aware of new mortgage programs, and apprised of relevant new opportunities as they arise. You will have a knowledgeable professional reporting to you whenever something that could benefit you becomes available.



Your home is probably your most important investment−it's a near-cliché by now−and it's also the foundation of your financial life. For your health, you have an on-going relationship with a doctor and dentist; for your financial security, you have (or should have) an on-going relationship with your insurance expert; for your tax matters, you have an on-going relationship with a great tax advisor. It makes sense in so many ways to give yourself the benefit of a great real estate advisor and a trusted mortgage professional. For information call Beth at 425-450-5208 or email her at beth@bethbillington.com.

This is a very involved question. Is it better to remodel your existing home or to find the home that answers your needs and move into it?



Truly, you will benefit by discussing the matter at some length with your real estate advisor, but let's look at a few of the more obvious considerations.



The reality is that you are usually better off finding another home that truly meets your needs and wishes. You can do the necessary research and wind up very confident that your next home's value hasn't been distorted by additions to or subtractions from its original design, and isn't out of line with the value of other homes in the same neighborhood. Further, you don't have the problem of trying to fit square pegs into existing round holes, or newborn children into former closets.



By far the most important issue is to know exactly what you need your new (or remodeled) home to provide you. The second issue is sheer economics. Not only do you need to see whether you can get the money back out of your house that you put into it in a remodel, but you also need to look at market conditions. Is it reasonably easy to sell this home today? How easy or difficult is it to buy another? What would the differences be between financing your remodel and financing the purchase of another home? Again, be sure to talk with your real estate advisor about these questions. Just call Beth at 425-450-5208!

Arguably, the practice of "staging" a home−in which design professionals prepare a home so that it won't just look good for potential buyers but will also romance them into a personal relationship with the home−is quickly becoming a nearly standard portion of marketing a home.



All of the old traditions still hold. It's important to make a home as bright as it can possibly be, with unobstructed windows, a sense of the outdoors flowing into the indoors (often with plants on either side of the windows), and with every light in the house turned on. The house should have the domestic counterpart to the smell of old-fashioned comfort foods−floral scents, a freshness in the air, perhaps the smell of baking in the kitchen. Wherever possible, the home should be freshly painted, with bright displays of flowers in all the gardens.



Nothing new there. What is new is the way a home can be made to tell a story−a tale that the potential buyer moves herself and himself into. And this means the obvious indications that someone already lives in this house, such as photo displays, should be removed, as should a great many extremely personal objects. Further, just the right amount of furniture−for a good showing, not necessarily for optimal living−should grace the rooms.



It's worth talking about carefully with your real estate professional. It can bring a faster sale at a higher price. Just call Beth at 425-450-5208.

Arguably, the practice of "staging" a home−in which design professionals prepare a home so that it won't just look good for potential buyers but will also romance them into a personal relationship with the home−is quickly becoming a nearly standard portion of marketing a home.



All of the old traditions still hold. It's important to make a home as bright as it can possibly be, with unobstructed windows, a sense of the outdoors flowing into the indoors (often with plants on either side of the windows), and with every light in the house turned on. The house should have the domestic counterpart to the smell of old-fashioned comfort foods−floral scents, a freshness in the air, perhaps the smell of baking in the kitchen. Wherever possible, the home should be freshly painted, with bright displays of flowers in all the gardens.



Nothing new there. What is new is the way a home can be made to tell a story−a tale that the potential buyer moves herself and himself into. And this means the obvious indications that someone already lives in this house, such as photo displays, should be removed, as should a great many extremely personal objects. Further, just the right amount of furniture−for a good showing, not necessarily for optimal living−should grace the rooms.

If the market slows and house prices decline, there is a big temptation to wait on the sidelines−even if you find a bargain price and great terms on precisely the home you want−until you're certain that prices have reached their bottom for this cycle. Do not heed this temptation unless you're an inveterate gambler.



Remember two things. First, when prices turn, interest rates usually join them on the upswing. A home that had a bargain price and superb financing, therefore, can lose its price advantage nearly overnight. And once the market has truly turned, history tells us it is very unlikely to descend again.



Second, there are a lot of things other than money considerations that go into a purchase decision. If you have found the right home for your own future and the future of those in your household, it usually isn't worth risking the loss of that home over a few hundred dollars−or even a few thousand dollars−that you might have saved if you'd waited until the extraordinarily brief moment when prices and rates were the most favorable to buyers.



This isn't just a financial issue. It's an issue involving how well you live the life of your dreams. Keep those dreams in mind when the price still looks great and the terms and rates are favorable.

The financial press generally defines a "good" market as a seller's market, when buyers are bringing in offers within a week of a property going up for sale. A "bad" market, therefore, is a buyer's market, when sales are slow and home prices stop appreciating at a rapid rate (if at all).



But what's so bad−if you're an alert buyer−about a "bad" market? Let's say market conditions have trimmed 10% off of your market value. That's not much on the stock market, but it's a great deal in real estate. It rarely happens. So your $500,000 home is now worth $450,000. We'll say that you go on the market right at the lower asking price and sell fairly quickly.



We'll say further that you find a wonderful home−formerly $600,000, but now reduced by market forces to $540,000−and you buy. We'll say you come in with a 10% down payment, which is $54,000 instead of $60,000. Your mortgage is smaller than it would have been. Even your property taxes are most likely lower.



This is a simplified, generalized example, of course. A "bad" market often offers up bargains to those who look carefully−even better transactions than the one outlined here. The moral of this story is easy: In a "bad" market, it's time to look for a very good deal, indeed. For assistance call Beth at 425-450-5208.

During a real estate boom, we get used to tacking maybe an additional 20% to the value of our home each year, and sometimes even more. In a few years, we begin to assume that this is the way it should be and, indeed, this is the way it will always be. But it isn't.



The real estate market goes through cycles. When you notice that the market value of your home has risen so much that you yourself could no longer afford to buy the home, you see problems in the making. Someone like you can't buy your home. Who can? Who will?



Though the purchase of a home is usually based on a complex set of emotions, the fact remains that the property is a commodity. Just like a car whose design makes you imagine feeling like king of the road as you cruise the beach highways, a spectacular home may seem to be worth far more than its plainer counterparts in the neighborhood, but nothing will erase several very basic facts about your local real estate market. Values in that market are interdependent.



A very crucial step in putting your home on the market, therefore, is to get as real as possible about your home and the micromarket in which you will sell it. Whether it is a Kia-style tract home or a Porsche-style beachhouse, you really can't evade the market in which your home is selling. Your home's market value is primarily determined by what similar nearby homes are selling for in today's market, not on wild emotions.

In a seller's market, it goes without saying that buyers will do all they can to keep from ruffling the pride of the seller. For example, most buyers won't come in with lowball offers, because they rightly expect sellers to simply throw such offers out the front door. When so many people want to buy your home, who needs to go through the sometimes arduous process of negotiating a deal everyone can live with?



In a buyer's market, though, sellers very often do need to go through such an arduous process. If, for example, the seller receives what seems to be a "low-ball" offer, it probably isn't time to throw it out with the week's garbage.



Realize first that someone is actually making a binding offer to buy the home, and that some careful analysis and communications could result in a sale. Go back to the comparable sales analysis. Homes in the area could be selling for slightly less than they did when you first visited the data on recent sales. Look, too, at the direction of the market and the possibility that home values will be relatively stagnant for a time.



Then look closely at exactly what you need to accomplish and what you want to accomplish with the proceeds from the sale of the home. And then make a counter-offer, replete with praise for the original offer, that represents what you would want to receive in the sale. The buyer will probably counter your counter-offer, giving you the chance to take your price as low as will work for you−and also probably bringing out the buyers' bottom line. At this point, deals are very often put together, and all parties to the transactions end up satisfied. For more information call Beth at 425-450-5208.

One of the crucial things to research before deciding where to move for your retirement years is what tax consequences the move may have−not just the process of moving but also the year-to-year, day-to-day expenses created by the tax codes in your new home.



You may be especially attracted to a state that has no state income tax, for example−but you should look closely at the other ways you will be taxed in that state. In many cases, local property taxes, sales taxes, gas taxes and estate taxes may more than make up for the missing state income taxes. Look, too, at the way businesses are taxed. Those who plan to run their own businesses in their new residential area may face inflexible B&O" (Business & Operations} taxes based largely on the business's gross income.



How to begin exploring this important factor in your decision about where to move? Start with the "Taxes by State" guide at www.retirementliving.com. Be sure you read carefully. Arizona, for example, has a state sales tax of 5.6%; California's is 7.25%. But local municipalities add to the sales tax, in some cases {Arizona} resulting in a combined rate of 10.7%, where California tends to top out at 8.75%.



This website also features great information about other aspects of retirement living. For assistance call Beth at 425-450-5208 or email her at beth@bethbillington.com.

NWREporter January 2008

Americans remain convinced that buying a home is a good long-term investment. That's just one of the findings from the 2007 National Housing Pulse Survey, released last month during the annual REALTORS® Conference & Expo.

The survey measures how affordable housing issues affect consumers. This year's results show that nearly nine out of 10 consumers believe that buying a home is a good financial decision. Fifty-nine percent of respondents also agree that now is a good time to buy a home; that number is even higher (64 percent) in areas of recent home price declines.

"Owning a home continues to be a good, long-term investment, and most consumers understand that," said National Association of Realtors® President Pat V. Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. "This new survey clearly shows that people believe in the value of homeownership and know that owning a home is one of the best ways for most families to build a nest egg."

This year's survey shows that Americans are more concerned about obtaining a mortgage and having enough money for down payment and closing costs than they have been in five years of polling. Nearly six in 10 respondents believe it's difficult for people in their area to obtain a fair and affordable mortgage. More than eight in 10 say having enough money for down payment and closing costs are obstacles for homebuyers in their area, up 17 percent from 2005. Sixty-three percent also think the mortgage approval process is an obstacle, up 13 percent since 2005.

"Buyers in the conventional market can still obtain mortgages at very favorable rates," said Combs. "In addition, NAR is advocating for FHA modernization; changes to this program will help many more first-time buyers become homeowners."

Of those surveyed, more than one in five homeowners have some type of variable-rate mortgage, including interest-only (15 percent), adjustable-rate (6 percent) and a balloon or other large payment due in the next five years (2 percent).

These homeowners feel more strain from their monthly mortgage payment than those with fixed rates. In fact, more than half of those with variable rate mortgages say they feel a significant or slight strain, whereas fifty-three percent of those with fixed-rate mortgages feel little or no strain at all. Despite these findings, only five percent of respondents say they are very or fairly worried about being able to make their mortgage payments over the next year.

When it comes to challenges facing the mortgage market, Americans are split on the need for more federal government oversight. Forty-seven percent believe the federal government should take a more active role, while 45 percent believe oversight is the private sector's responsibility.

While 32 percent of those surveyed perceived the rate of home foreclosures in their area to have increased over the past year, 39 percent report the rate has remained about the same; 6 percent believe the foreclosure rate has decreased in their area. When asked how big of a problem foreclosures were in their area, 38 percent of respondents said foreclosures were a very big or moderate problem, but the majority, 51 percent, said foreclosures were only a slight problem or not one at all.

"Realtors® are in the business of helping people into homes, and we want to make sure they can afford to stay there," Combs said. "NAR believes that one foreclosure is one too many, and we are working with government agencies, lenders and consumer groups to protect home buyers and sellers in the real estate transaction and beyond."

The lack of affordable housing continues to be a greater concern than jobs, crime, terrorism or the environment. Nearly seven in 10 survey respondents are concerned about the cost of housing in their area. In the short term, more than half of survey respondents believe home sales and values in their neighborhood will remain about the same in the next three months. Only one-fourth of those surveyed believe sales and values will continue to decrease, while about 10 percent believe they will rise.

The 2007 National Housing Pulse Survey is conducted by NAR's Housing Opportunity Program. The telephone survey was among 1,000 adults living in the United States in October 2007. The study has a margin of error of plus or minus 3.1 percentage points.

The Housing Opportunity Program was created in 2002 to provide Realtors® with the tools and information they need to promote housing opportunities in their community, in both the rental and homeownership sectors of the market. The program encourages local Realtor® associations to create housing opportunity initiatives aimed directly at helping consumers gain access to housing. To date, nearly 600 state and local associations have such programs in place.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

There are many more faces to this question than space permits, however, here's some general background on this consideration.



When choosing a place to retire, you usually have broad requirements in mind. The Consumer Reports Money Advisor suggests, "Some of the most important attributes of a good retirement location are reasonable housing prices, lower-than-average-taxes, and access to good medical care. Then there are the three C's to consider: crime, climate, and cost of living.



How can we research these matters effectively? For starts, You can perform a side-by-side comparison of crime stats, climate, and cost of food and housing of two cities (and then another two, and another, and so on) at www.bestplaces.net. [Click on 'compare.'] Then plug your income into the cost-of-living calculator to see about how much you'll need to maintain your current standard of living in a new location.



You can also take an enjoyable quiz that suggests best places to live based on your answers to pertinent questions. The bottom line here: start planning NOW. For help call Beth at 425-450-5208.

It's good to remember that your home mortgage can provide one of the most important financial foundations for your life. Unfortunately, many buyers simply seek a mortgage loan that will allow them to complete the purchase of a home, never giving much of a thought to the ways that the loan(s) they took out would either help or imperil their financial future. This approach puts the cart precariously in front of the horse.



A home mortgage should match the financial profile and needs of the borrower. Further the borrower should be able to access equity when emergencies or opportunities make it important to do so. It's crucial to look closely at two very important factors when taking out a mortgage loan, therefore.



First, you need to map out your own financial status along with your needs and wishes for the future. What can you afford? How is your income likeliest to grow? Do you want to pay down your mortgage quickly or to allow the home's gradual equity buildup to increase your stake in the home.



Second, what kind of mortgage best suits your plans and wishes, not just your current ability to pay? Which mortgage is the best match for your future, and which will provide support for your financial security?



It is important to work with a mortgage advisor who can talk through these questions with you and help educate you to the point where you can make decisions you are confident about. For assistance call Beth at 425-450-5208.

While the primary reason for refinancing is generally to reduce your monthly mortgage payment−usually by taking out a refinancing loan with a lower interest rate−it has always been important to make certain that the monthly savings will pay for the cost of taking out the refinancing loan before you sell the home. How long, in other words, will it take your monthly savings to cover the full costs of refinancing?



Another concern is whether, by replacing your existing home mortgage loan with a new one, you might be increasing your overall expense of financing the home by stretching the term of your existing loan with the new one. The old one, after all, may be fully paid off in fifteen years; if so, it's time to do the math before jumping into a new 30-year loan with a lower mortgage rate.



The secondary reason for refinancing, in any case, is that you want out of the loan currently financing your home purchase. Perhaps you have an adjustable rate mortgage whose future has become worrisomely uncertain, or perhaps you have a 5-year "hybrid" loan that is about to roll over into an adjustable mortgage whose terms are unattractive to you. In these cases, it will pay to sit for an hour or two with your trusted mortgage advisor and real estate professional and check all your options. Remember: A low initial monthly payment doesn't always mean the loan will be the most economical choice over the long haul. For help with your real estate needs call Beth at (425)450-5208.

It's crucial, if you want to minimize the cost of your adjustable rate mortgage loan over its life, to look beyond the first month's payment. Often called a "teaser rate," the first month's payment is calibrated as low as the loan program can possible allow to attract people who assume their low monthly payment will continue until the loan is paid off. It very likely won't.



The simple key is the distance (or "spread" or "margin") between the loan's index and the resulting interest rate on which the new monthly payment is based at each scheduled adjustment time. Let's say your loan started at 5% and you therefore chose it over a loan that began at 5.25%. The choice seemed obvious at the time, but the loan you passed up may have had a lower constant spread, meaning that a few years out, the monthly payment would have been lower than what you're experiencing with the loan you chose.



If, for example, your loan is adjusted to 2.25% above the current 1-year Treasury security rate, the resulting interest rate−and payment amount−will be higher than it would have been if the loan adjusted to 2% over the same index. This seems obvious, but it is overlooked by far too many borrowers. Check closely for each loan's "spread" before choosing it. For more information call Beth at 425-450-5208.

Let's assume you're in the 28% tax bracket for a moment (leaving off considerations of state taxes). We'll also assume you took out a $500,000 30-year fixed-rate-mortgage at 6.5% in a relatively recent purchase of your personal residence. What, specifically, are some of the tax benefits your home will provide?



Your first year interest payments−the highest over the life of the loan−will amount to $32,335. (I assume I have your attention here and, yes, that's $32,335.) This rather dismaying interest burden is eased significantly, though, because the deductibility of that interest obligation could cut your personal income tax liability by over $9,000.



How about property taxes and points? Let's assume you paid two points to originate your loan. That $10,000 is deductible in the year of purchase (not so if we're talking about a loan refinancing, which dances to different tax rules). You can also deduct your property taxes in their entirety.



And remember−you can exempt up to $500,000 in proceeds on the sale of this home from taxation if you are married and file jointly (up to $250,000 if you file solo). That's potentially a tremendous amount of untaxed capital gains, and it could mean thousands of dollars in added profits. For assistance call Beth at 425-450-5208.

While a home's location is still very important--there are few things more important to a local real estate market than its location close to an area where economic growth is creating jobs at a rapid pace--the issue of price has become equally important. Not just selling price... asking price.



Today, a property whose asking price is way off the mark probably won't even be looked at, much less have offers made on it.

Why is this? Two reasons, though there are probably more.



First, we've all become a great deal more sophisticated about real estate. We're not wild horse traders, we're dealing with one of the most important investments in our lives.



Second, most Americans have grown increasingly value conscious. Recent surges in real estate sales have been inspired by the possibility of buying a home that will suit the buyers' needs well into the future with financing that will help keep the cost of living down, rather than by some spending mania.



Buyers are looking for a house that is priced right--before they even look at the house. You need the assistance of a seasoned real estate professional to gather all the data and come up with the right price. It will make your home sell faster--and far more profitably, as many recent studies have shown. Questions? Just call Beth at 425-450-5208.

Is it best to buy a home when the market is alive with buyers and you can be sure that your own home will sell quickly if you find another that you wish to buy? Or is it best to buy when the market has cooled and sellers are more willing to accept both your offered price and the terms and timing you've asked for?



There is no satisfactory answer to this question. Perhaps the closest we might come to a viable answer would be to say that buyers should shoot for the time shortly before a slow market reaches bottom, when sellers are still flexible and prices are as low as they're likely to go. Ideally, then, the buyer would find and purchase a home, and then sell his or her existing home as the market begins to regain steam.



That kind of timing, though, is nearly impossible to pull off.



So we're left with this truth: The best time to buy or sell real estate occurs when you truly want and need to buy or sell real estate. Every market has both opportunities and pitfalls, and it's important to negotiate your way through them to the best possible purchase and sale with the guidance of a seasoned real estate professional you trust−someone with whom you are truly compatible. Don't leave this to chance. Find the best possible support and advice when you seek to buy or sell real estate... no matter the condition of the market! For expert advice call Beth at 425-450-5208.

Friday, December 21, 2007

By Bernice Ross

Inman News

In all the years I've been writing this column, I have never received such an outpouring of response as I did from the two November articles on how media coverage of negative housing news is hurting our industry.

In spite of gloom and doom of recent news reports on the state of the nation's housing, there is plenty of good news, the most recent of which comes from the National Association of Realtors.

Laurence Yun, the chief economist for NAR, had plenty of positive news for Realtors at last month's conference. Yun attributed much of today's subprime mortgage problem to greed. Wall Street wanted the 10-12 percent return that subprime mortgages yielded as opposed to the smaller returns from more traditional mortgage products. His take on the Wall Street types: "They gambled. They lost."

Yun's outlook for 2008 sees a shift from greedy speculators to serious homeowners. 2008 will be a year of opportunity where there will be serious, healthy business. Furthermore, Yun predicted that the market returns to normal by 2009.

According to Yun, one of the biggest mistakes that reporters make is talking about national trends. Nationally, 2007 was the fifth best year ever on record. Home prices declined about 1.5 percent after a 50 percent run up in prices.

The challenge is that national numbers are pretty much irrelevant. Yun argues that talking about national averages is about as effective as having a national weather forecast. Like the weather, all real estate markets are local. In fact, you may have a buyer's market and a seller's market operating within a single market area based exclusively upon price point. Here are the other key pieces of positive news from Yun's economic report:

1. New housing starts: Even though these are dropping, there was too much building in recent years. The market is simply adjusting to normal supply-and-demand pressures. The inventory is "being controlled which makes stabilization occur more quickly."

2. Foreclosures: According to Yun, the 41 percent increase in foreclosures has resulted primarily from investor-heavy real estate purchases in Arizona, California, Florida and Nevada. The majority of these individuals are flippers whose investments did not payoff. More importantly, the number of foreclosures in Utah, New Mexico, North Carolina and South Carolina is actually declining.

3. Under-priced markets and superstar cities: Although the coastal markets are still overpriced, Middle America is under priced. Nevertheless, Yun cites a new trend termed, "superstar" cities. These cities will command premium prices, regardless of what the market does. There is so much wealth concentrated in these areas, that measurements are simply not predictive. In addition to London, Paris, Tokyo and New York, Yun also identified San Francisco, Miami and Seattle as potential new superstar cities.

4. The recovery has started: Other than the three states hit heavily by job losses in the automotive industry (Indiana, Michigan and Ohio), the states that first experienced a downturn in the Northeast, are now in recovery. Specifically, Connecticut, Massachusetts, New York and Rhode Island were the first to feel the slump and are now well into a recovery. Furthermore, there appears to be a pent-up demand for first-time buyer properties due to a large number of Gen Ys (born 1977 to 1994) that are now buying their first homes. Falling interest rates will motivate many of these buyers to step into the market now.

5. New jobs and corporate profits are still strong: Corporate profits are still strong with companies as diverse as Microsoft and Jack Daniels reporting close to record profits. Furthermore, the economy has generated 4 million net new jobs and wages are rising.

6. A weak dollar may harbinger more foreign investment in U.S. real estate: Although the decline of the U.S. dollar will end up costing us more when we go overseas or purchase imports, it has resulted in more manufacturing jobs returning to the U.S. It also may mean more foreign investment in U.S. properties as well. Just a few years ago, the Canadian dollar was only worth 70 cents in U.S. currency. Today, the Canadian dollar has been hovering at about $1.05 to $1.10 U.S. What this means is that we c! an expect more Canadians and Europeans to be purchasing U.S. property, because our prices are approximately 50 percent cheaper than they were just three years ago.

7. Real estate: Still the best shelter: For those agents who represent reluctant first-time buyers, Yun points to some interesting research from the Federal Reserve. Between 1995 and 2004, the average renter accumulated $4,000 in wealth. In contrast, the average homeowner accumulated $184,400. Furthermore, the typical homeowner holds their property for six years. Within this period of time, NAR's research shows that approximately 97 percent of the homeowners will have a positive equity position after that period of time.

Bottom line: 2008 represents the best window that buyers will have to find excellent deals with excellent financing. Get the word out there. If they wait, prices and interest rates will be higher and the reluctant buyer may be forced out of the market.



Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate's Discounters" and "Who's the Best Person to Sell My House?" Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com

It happened in the 1990s. As we've all seen, it can happen again. Home values, usually temporarily, can dip below the balance of the mortgage or mortgages on the home. A home whose estimated value has fallen to $380,000 may conceivably be securing $390,000 in mortgages.



Should the homeowners run screaming into the night? Hardly. The first and perhaps most important thing to realize is that lenders almost invariably lose a lot of money if they foreclose. Foreclosure, therefore, is a last ditch effort to salvage at least a portion of the money owed to the lender.



Therefore, lenders are usually extremely ready to work out modified repayment programs with borrowers wherever necessary. In most cases, though it's just a matter of continuing to make the regular monthly payments, and over a relatively short period of time, the market value of the home will rise above the loan balance once again... and continue to rise.



It is particularly good, though, to check in with your lender if you face a time period in which it might be extremely difficult to meet your monthly payment obligation. Indeed, you should speak with your lender yourself before speaking to any services that promise to resolve these matters for you. If you do the communicating, you are most likely to end up with an agreement that works for you. For help call Beth at 425-450-5208.