Steve's Soundbytes

President Obama has stated there is no quick fix to today’s economic crisis. Since the basis for the crisis is the collapse of the real estate market, then the case can clearly be made that the resurgence of real estate market can put an end to the crisis. A $15,000 non-repayable tax credit for all home buyers will jump start the economy and change the mood of Americans from fearful to hopeful.

THIS STIMULUS IS NEEDED NOW
Spring is traditionally the time when house hunters search for new homes in anticipation of moving their families prior to the start of the school year. Now is the perfect opportunity to introduce a stimulus package that will positively affect many aspects of the economy. At the current levels, it is anticipated that there will be 4½ million home re-sales and 500,000 new homes sales in 2009. This is significantly below recent historic levels. A $15,000, non-repayable tax credit for any homebuyer, (regardless of income level or the price of home purchased) will jump-start the economy faster than any other idea currently before Congress. There is but one stipulation, which is that home buyers taking advantage of this tax credit will be required to remain in their newly purchased home for three years.

IMMEDIATE IMPACT OF THE TAX CREDIT
The positive and immediate impact of the proposed tax credit will be a stabilization of the real estate market throughout the country. It will change the psychology of potential homebuyers, consumer confidence will return, and Americans will begin spending again. It will stop the free fall of home values and breathe new life into the construction industry. It will stem layoffs and begin reversing unemployment trends. It has been proven time and again that when the housing market is robust, people spend money. This $15,000 tax credit for anyone who buys a home in 2009 will help the banks, the public, homebuilders and hundreds of vendors who are part of the process. Some of the benefits and those who will be helped include:
Finance companies and banks
Moving companies
Home builders
Banks selling foreclosed homes
Title companies
Lawyers
Insurance companies
Interior designers
Appliance industries
Carpet and Painting vendors and installers
Furniture companies

Additionally, this will cause the domino affect of new employment in many ancillary industries.  

STABILIZATION OF THE HOUSING INDUSTRY
Stabilizing the real estate industry and the arresting the downward spiral of home values will have the following additional impact:
banks will be able to adjust their capital due to the rising values of their loan portfolios
foreclosures will slow and/or stop
banks will be able to divest themselves of their growing inventory of foreclosed homes currently on their books
upward trends in the real estate market will allow local and state governments to begin recouping their tax revenues. Trends towards government insolvency will stop.

 
A TAX CREDIT CAN DRAMATICALLY CHANGE OUR COURSE
The Federal Government has the ability to make a swift and dramatic change in the perceived and actual lack of confidence permeating the nation’s economy and psyche. The most recent study of the housing industry shows every sector of the country declining in value, with the exception of California. Conversely, it also shows the highest ever affordability index of consumers’ ability to afford a home at 166. In layman’s terms, people have the money to buy, but they have no confidence that a new home will retain its value, much less gain in value. A housing stimulus such as the one proposed will have an immediate and positive impact on the economy, and further, it will not exclude anyone who can qualify to purchase a home, regardless of the price of the home or the buyer’s income. Everyone will benefit.

STOCK MARKET BENEFITS ALSO
There is one other important and positive benefit to this stimulus program: As the economy’s recovery is accelerated, the equities market will also react more quickly in an upswing. The stock market anticipates 6 months in advance when there is a mood swing in the country. This stimulus will impact the equities markets because investors who have lost wealth in 401ks and other investments will be encouraged to pursue a change in housing, once they see their investments recovering. From an overall perspective, if the 5 million new and existing home purchases that are predicted for 2009 receive a $15,000 tax credit, the cost to the Federal Government is $75 billion. If another 2.5 million took advantage of the same program and the 5 million purchases became 7.5 million new and existing home purchases, the cost to the Government would be a maximum of $112.5 billion, far less than the $2-3 TRILLION currently being proposed as necessary to stimulate the economy.

A $15,000 TAX CREDIT IS THE SOLUTION
There are many problems facing our nation. Going forward, a swift and strong resurgence of the housing market can rebuild Americans’ faith and confidence in our economy more effectively than many of the proposed “shovel-ready” projects which could take years to implement. A $15,000 tax credit for all qualified homebuyers is the solution to the crisis we are currently in, and Congress is urged to act immediately to pass single-purpose legislation enacting this tax credit. It is a win-win for everyone.

Things are looking up!

I have often been accused of being an optimist. Seeing a glass half full has always made a lot more sense to me than bemoaning the fact that half of my drink is gone! So, I'm looking at the current state of our market in a very positive way. Let's look at some of those positives:

1. Compared to last year at the same time, we had 1535 active residential listings in the Burlington-Alamance County Multiple Listing Service(MLS). As of today, we have 1235 active residential listings. To me, this represents a normalization of our market, based on the size of the "buyer pool" that we normally have available. So, we have fewer active listings/homes available for sale, which means the inventory is shrinking. This should bring prices to a more representative level. As much as anyone wants to get a "good deal", I have always been a believer in "win-win" deals where both sides come away feeling like they did allright.
 
2. Interest rates are still very reasonable ie: LOW! Both Hallmark Mortgage Co.(Michelle Roten) and Carolina Home Mortgage (Kate Crawford) quoted me 4.875% today for a 30yr. fixed rate mortgage for a person with good credit ( 740 minimun). Let's face it folks, the reason we are in the mess that we are in now is that mortgages were being given to anxious buyers who didn't have the kind of credit rating that would indicate that they would be willing to continue making timely payments on those mortgages in the event that challenging times came into their lives. Well, the challenging times came and they bailed leaving the banks, and ultimately, us holding the bag. So, good credit ratings, some down payment and a little more conservative lending philosophy is probably a good thing.
 
3.The BIG BOYS have had consolidate and pull back a little, the BIG BOYS being the large regional and national building contractors and developers. They are the ones that come into markets like Burlington/Alamance County and skew things with their mass produced, less than average quality homes. This should help us to, again, lower the inventory and raise the quality of the construction that we get in the new homes.
 
In my opinion, these are all good things. Our glass is half-full here in Central NC. With quality people like Mac Welliams of the Chamber of Commerce out there actively beating the bushes looking for new employers/industry, we are poised for growth that we can sustain and that will add to our quality of life here rather than "boom" us into infrastructure problems, high taxes,high crime rates and more people who crowded into Alamance County looking for "the good life".
 
Until next time.  
Steve

Merry Christmas, Burlington homeowners: The value of your home rose about 3.1 percent this year, placing you and your neighbor in the fifth best-performing market in the country.

The figures are for the first three quarters of 2008, according to a study by Zillow, a real estate information company that tracks home values and trends in the industry.

Compared to the 8.2-percent average drop in home values nationwide, Burlington's housing market is among the best performing in the country.

In fact, North Carolina's home values fared better than most of the nation this year. Along with Burlington, Jacksonville is ranked at No. 1 and Winston-Salem is ranked No. 3, each with home values rising more than 4 percent.

Norma Jean DeMott, president of the Burlington Alamance County Association of Realtors, says things aren't as bad here as elsewhere. Due to Burlington's central location in the state - halfway between Raleigh and Winston-Salem, halfway between the beach and mountains - and North Carolina's central location on the East Coast.

"We still have buyers in the market and all indications are that next year will be better. Industry is still growing in North Carolina," she said.

Increasing home values are good news, and buyers continue to hold the upper hand in the real estate market, but home building and business development is still near zero, says Marlene Sanford, president of the Triad Real Estate and Building Industry Coalition in Greensboro.

"Builders here are doing about 10 percent of the business they were last year, if they are still in business at all," Sanford said. "We never had a bubble here. They aren't doing well at all."

Nationally, home values fell about $1.9 trillion through Sept. 2008.

Out of 163 metro areas Zillow tracks, only 30 saw gains this year. Along with N.C.'s cities, State College, Pa., and Anderson, S.C., round out the top five.

All five of the worst-performing markets were in California.

Zillow calculates the median value of all single-family homes, condos and cooperatives in a given area using a formula based on its estimated values of individual homes.

 --------------------------------------------

- Best-performing markets

1. Jacksonville, N.C. - +4.9 percent

2. Winston-Salem, N.C. - +4.1 percent

3. Anderson, S.C. - +3.5 percent

4. State College, Pa. - +3.4 percent

5. Burlington, N.C. - +3.1 percent

- Worst-performing markets

1. Stockton, Calif. - -32.3 percent

2. Merced, Calif. - -31.2 percent

3. Modesto, Calif. - -30.4 percent

4. Salinas, Calif. - -30 percent

5. Vallejo-Fairfield, Calif. - -27.8 percent

Source: Zillow