Federal officials are very concerned about the July numbers for people purchasing real estate.  The drop could be an indicator that the housing market is teetering on the edge of another massive drop in the real estate market.

As a result, there is again discussion on reviving the home buyer tax credit, but the Obama Administration has not yet moved forward on that plan. Instead, relief is being given in the form of refinancing programs along with an emergency loan program for the unemployed, according to MSNBC.com.

“It’s too early to say whether the tax credit will be revived,” [Housing and Urban Development Secretary Shaun] Donovan said in an interview on CNN’s “State of the Union” program. He said the administration would “do everything we can” to stabilize the shaky U.S. housing market.

Relief at this point would be welcomed by possibly one out of ten home owners, real estate agents included!

Home sales plunged in July, according to the National Association of Realtors.  The loss in sales was somewhat expected as the federal tax credit finally ended (under contract by the end of April) and given the job losses of recent months.  However, the degree that sales fell was unexpected - to its lowest level in 15 years. MSNBC.com reports,

July’s sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

The question is, how long until a steady housing recovery?  While not an economist, I’d argue that the housing recovery will solely depend upon recovery of the job market.  With first-time unemployment filings hitting 500,000 last week - the worst report for the year - there’s still a lot farther to go for a full recovery.  Until people feel confident in their jobs being secure, the likelihood of major purchases like real estate and cars will be low.

While there is some housing activity, I expect the recovery to stall for another six months as we get through the dark winter months.

When a price point for real estate is fairly low, choices in what to purchase may become fairly limited.  For the last two days, I’ve been touring homes with buyers who are relocating from out-of-state and we are very careful to keep a low price point in mind so that monthly payments will remain low.

This has resulted in two distinct kinds of houses:  the handyman special or mobile homes.

The plus of the handyman special is they have been site-built so living in tornado alley, they should be a little safer.  In addition, they’ll likely be sturdier in the long-term when faced with weathering the elements.  The downside?  Oh my… the bad smells, the foundation issues, close neighbors, overgrown yards (one where we actually saw a mouse run from one side of the yard, across the driveway, and into the tall grass on the other side of the yard), the holes in the wall, the additions clearly built without permits and codes inspectors, the missing appliances, adn the list goes on.

The plus of mobile homes?  They have in general been in excellent condition.  They typically come with several acres of land.  And they’re usually thousands of dollars less than the site-built homes.  The downside is even with a permanent foundation, a strong wind could tear them apart.  Insurance will be higher - especially because the acreage is located outside of city limits, therefore farther from fire stations.

What would you pick?  Me?  I’d be all about the mobile homes with lots of land and trees for added privacy.

I saw a home on my local MLS a few moments ago that for some reason made me want to check to tax records and look at the history of the home.

The 1600 square foot home sold in 2004 for $151,990.

Fannie Mae bought it back this year for $130,000.

It’s now on the market for $104,900.

The 33 percent price drop is pretty indicative of the current values of homes in one neighborhood in my city.  And it’s a really pretty house, to boot. Ouch.

One of my real estate instructors once said that people love agents to drive them around showing houses.  I heard that when I took all of my real estate classes learning the law, marketing, and salesmanship.   I was convinced that eventually people *would* buy so you might as well stay on their good side and show them a house or two.

Almost seven years and thousands of miles later, I don’t just drive anyone around anymore.  Unless they talk to a lender first (or have proof of funds if cash buyers), they stay with their feet firmly planted on Terra until I learn more.  I want to know exactly how much the lender says they can afford rather than learning they have champagne taste on a beer budget.

A buyer called earlier today to say that a house in her Mom’s neighborhood has come on the market listed at $175,000.  Another neighbor told her that the seller just wants to get rid of it and would take $80,000 for it.  Naturally I doubted the truth to this, but promised to look into it and call her back.  I learned that the “new” owner bought it for $157,000 just 10 months before and remodeled it.  I knew there would be no way they’d give the home away for $80,000.

If it sounds too good to be true, then it’s too good to be true.

Another agent told me she has been working with buyers today who want to buy, but only if the seller will come off the price $40,000 to $50,000 dollars.  That just doesn’t happen, either.  You have to put yourself in the position of the seller and ask, “Would I do that?”

Would you?  Probably not, so don’t expect a hand-out from the seller.

Builder confidence in the housing market remains low, especially since the federal tax credit incentives have ended.  A score below 50 means a negative outlook and this month’s number was 14 - the lowest it has been since March 2009.  According to MSNBC.com,

Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in May fell to 213,000, the lowest level in nearly 40 years. And, at the current sales rate, it would take 8.5 months to exhaust that supply. In a healthy economy, new home inventory takes about six months to exhaust.

The good news is builders are not anticipating that the economy will fall back into a recession, but the recovery will be slow and drawn-out.

Since we now live in a buyers market (for now, anyway!), sellers are grappling with how to make their mortgage payments on an unsold home if they’ve already moved.  One option we talked about yesterday was renting through a property management company.  Another option is to allow the sale of the real estate through a lease purchase agreement.

How does this work?  A buyer agrees to purchase the home through an official legal sales and purchase agreement.  The closing date is pushed out six months to a year, depending upon why the buyer can’t close right away (maybe they have to pay off a credit card or be on the job for two more months before a lender will approve the loan).  A lease agreement is also completed both to protect the seller and the buyer, including whether pets are allowed, and if the buyer can Paint or make other changes to the property before the purchase is finalized.

A very important way to protect the seller in this process is to make sure a substantial non-refundable deposit is made by the buyer.  Most people recommend the deposit be 10 percent of the purchase price, but honestly I think that’s a bit extreme.  I believe a deposit between $5000 and $7500 could be adequate if it’s nonrefundable. The money CAN be applied toward closing costs or the purchase price in the end.

No buyer will want to walk away from that kind of money by getting cold feet.  In addition, the deposit will protect the seller should the buyer walk and subsequently damage the house.  That amount could clean and/or replace carpet, cover the cost of painting, and replacing broken appliances.

The deposit money should be placed in an escrow account at the title company, especially if it’s to be applied toward closing costs.

In addition, if a seller is leasing they should be careful in contract stipulations that state what they have to repair or replace should the stove stop working, or other problems (flooding, fire, etc.).   Be sure that the homeowners insurance is maintained and up-to-date.

Another caveat is if the closing is a year out, perhaps the value of the home changes. If it goes up, the buyer gains instant equity because the seller will have to honor the purchase contract.  If the value goes down, though, and the real estate won’t appraise, what happens?  Will the seller be prepared to reduce the purchase price?

I have been involved in only three lease-purchase properties.  Two closed, one did not.  The one that did not was very unpleasant for everyone involved.

What experiences have you had with lease purchase contracts?

Photo from lease agreement form.info.

April has finally arrived - yes two days ago, but it’s here.  One of my friends firmly believes that if this month doesn’t explode with business, we may as well turn out the lights and roll up the sidewalks out front.  He believes this is the final and best month to sell real estate in 2010.

So far, it has easily been the busiest month I’ve had in nine or ten months.

I’m very worried as an agent about what happens after April 30th when the federal tax credit expires.  Will real estate come to a standstill?  Or will this slow recovery continue?

I am hoping that people who are qualified to buy will continue to buy even after the carrot dangling before them is gone.  When I bought my first and second homes, I wasn’t tempted because of a bag of loot.  I bought because we had saved and struggled and wanted a place of our own.

I think that part of the American spirit lives.

I’m working with a buyer right now who is sitting pretty.  He has owned his own home for the last six years, so when he buys he will be eligible for the $6,500 home buyer tax credit that is set to expire soon.  You have to be in a binding contract no later than April 30th and close by June 30th.

To make his options even better, we live in an area where the prices of homes have fallen drastically.  The floor plan he’s looking at sold two years ago for between $116,000 and $126,900.  Today he is considering the same exact home for … $75,000.

The price is unlikely to keep falling at this point - we are at the bottom in this instance.  However, he’s looking for a home based on convenience so this one fills those needs.  It’s close to the interstate and the attractions of our thriving metro area, it’s close to the school where he works, and it’s a townhouse so virtually maintenance free - a definite benefit for him since he doesn’t want to be bothered with mowing the lawn, weeding, or fixing gutters.

If you’re thinking about buying there truly has not been a better time than now if you want to take advantage of great prices and are eligible for the federal tax credit.

Photo by Gina Earheart and Melissa DeMeno of Reliant Realty, Nashville, TN.

I’m hearing a new buzz in the office lately… the sound of hope.  Everywhere I turn, agents are being more positive about the market.  One agent just stuck his head in my door to say that he sold a $400,000 listing - had both the buyer and seller sides.  Plus he has another listing for about $120,000 that he’s also found a buyer for.

I’m hoping it’s not the final push for buyers to grab that $8,000 first-time home buyer tax credit from the Feds due to expire at the end of April (well, under contract by April 30th).  My hope is this may be actually the market starting to turn.

I’ve been working at a concession stand at a major arena in my area to raise money for my daughter’s extracurricular activities and talked to one of the stand managers.  He said he used to be a construction worker, but is now in the food industry.  While I’d hate to see him leave because he’s on of the nicer managers, I do hope he can get back into his preferred career.  He thinks construction is starting to pick up.

What do you think?  Just a passing thing or real recovery?