Investors around Wall Street were acting positive yesterday.  Many of them rallied because they thought they could see the bottom in the housing market.

Investors have a unique perspective about things when they are at their worst that is a little refreshing.  They see ‘the worst’ or ‘the bottom’  as the beginning of improving times.  If we are at the bottom, there is no where to go but up!

Investors found a sliver of hope to line the dark clouds of the housing slump on Monday.

Investors latched onto the National Association of Realtors’ upbeat tone Monday, sending the U.S. stock market higher in direct contrast to the stark data in the report, which said that sales of single-family homes and condominiums dropped by 0.4% in January to a seasonally-adjusted annual rate of 4.89 million units, the slowest pace on record since 1999. Despite this dire news investors seemed optimistic that the housing market may be bottoming out and that the increase in loan limits could lead to a rally in home sales toward the end of 2008.

Surprise! Home Sales Spark Hope

I personally do not know if we have hit bottom yet, and I suspect that we have not.  California, Florida and other places such as that may have found bottom, but I suspect that many places that were less inflated, have not yet begun to correct.

Until they do correct or at least get real about home values the bottom of the pit may not quite be in site, but at least we can hear the pebbles hitting the bottom from our current perspective.

So who wants to invest in a tankless water heater first to raise the value of their home so that they can flip it?

That’s what I thought!

This spring I will be faced with a serious problem as I prepare to sell my home.  We have an extravagant swing set and fort combination custom built in the back yard of our home.  Kids absolutely love the thing and many adults find it very interesting as well.  I have had several retirees (with grown kids) ask about getting one built for themselves, to presumably let their grand kids play in when they come to visit, but I know they are just hoping to climb up in there themselves.

So my problem is what to do about this great thing.  Conventional wisdom would suggest that swing sets should not be left at the house in order to appeal to the widest potential audience of buyers.  However, real estate is a little upside down right now.  I have a suspicion that if I leave it, it could be one of those things that helps to convince just the right buyer that this is the house for them and their family or even their grand kids.

Fortunately, I have several months yet to figure it out before I list the house.  I guess we will see how this turns out!

One of the questions that we have to consider about the changing environment of real estate is whether or not homeowners will stay in their homes longer that it has become more difficult to borrow and buy and sell their homes.  Over the last couple decades more people have been staying in the same home for a shorter period of time.  Many people continually moved up into bigger and better homes.  This continual movement meant that they did not always have defined a dream home the first time, because they could experiment and try again in a few years when they bought their next house.

Now that things are slowing down and it’s to be more difficult to buy and sell a house, buyers may have to become a little bit more choosy about what they buy and why they buy it.

Impact of Higher Energy Prices on Home Buying Decisions

at the same time there is a slowdown in the real estate and mortgage market, energy prices are at all-time highs.  The price of oil has finally reached the level of $100 a barrel in people are definitely noticing the cost of energy.  I suspect that people may take a look at the homes they are buying and work to ensure that these homes are built and energy efficient ways, using energy-efficient products, and possibly even powered with alternative energy it least in part.

I think the putting green products in the homes before a buyer closes on a home will also become a bigger trend.  Many alternative energy products are expensive and most buyers don’t necessarily want to foot the bill for an energy system separate from their home mortgage.  I suspect that many buyers may start requiring a sellers install alternative energy systems into their houses as a requirement of sale so that the buyers can then finance the upgraded home and the new alternative energy products with a single mortgage.

It only makes sense, why spend $20,000 on an alternative energy system and finance at 10 or 20% interest when you could pay six to 7% interest on the same energy system.  I also think this makes sense for small upgrades like replacing light switches with switches that automatically timeout in turn lights off in many other common everyday things in the household or a house that add to the cost of electricity, heat, natural gas and many more aspects.

There was an anemic improvement in the housing market in November.  Home sales increased from 4.98 million to 5 million homes.  This happened at the same time that 30 year mortgage rates dropped from 6.38 to 6.21% in November.

There were other small but positive signs in the housing market as well.  The number of homes available for sale dropped to 4.27 million homes, about a 10.5 monht supply.  This indicates about a 3.6% drop in a bloated housing market that never heard of ephedra diet pills.

There was some bad news, the median home price dropped from $217,300 in November of 2006 to $210,000 in November 2007.

Among other things it should be noted that a pick up occurred in the presence of two historically significant factors, lowering house prices and lowering mortgage rates.

Existing-Home Sales Edged Up In November, but Remain Weak - WSJ.com

I have a suggestion that could provide average Americans with a solution in the face of the Mortgage crisis and a troubled real estate market.  (and it contradicts my last article on incentive arbitrage a bit but not in spirit as taking advantage of the incentives to save real money also takes something back to the major builders that have contributed to the problem.  We’re talking major price concessions in that article as opposed to some trivial gift like a Technomarine watch or a toaster or DVD player.)

Here’s the solution in 2 parts:

1.  Do not buy a new home from a builder.

2.  Only buy a home from an actual home owner that has lived in the home.

Now the point of this illustrative solution is to help increase the number of home sale transactions for existing homes, relieving the burden on existing home owners that live there as opposed to helping out the major builders that are partly responsible for the run up in real estate prices, the over supply of new homes, and the past sales tactics that have under priced new homes to sell as compared to existing homes.

Here’s the latest statistics on home sales

A Commerce Dept. report released on Dec. 28 showed U.S. new-home sales plunged 9%, to a 0.647 million unit annual rate in November, from a downwardly revised 0.711 million in October (from 0.728 million previously). Market forecasters had expected a more modest decline to 0.715 million. Following downwardly revised numbers for August and September, new-home sales are stuck in a steep downtrend.

New-home sales dropped by 19.3% in the Northeast, 27.6% in the Midwest, and 6.4% in the South. However, sales increased by 4% in the West. Over the last 12 months, new-home sales nationwide have tumbled by 34.4%, the biggest annual slide since early 1991, and stark evidence of the painful collapse of the once high-flying housing market.

The supply of homes for sale rose to 9.3 months’ worth from 8.8 (revised from 8.5). Whereas earlier sales and price data had suggested big price cuts by homebuilders were clearing inventory, this pattern has been reversed with the November data and revisions.

New Home Sales: A Stunning Slide

What can you do in a market where you wake up one morning and look down the street and see a contractor offering the same house for $50k less than what you paid for your own house?

Well, you could buy that house . . .

IF you could sell your current house for what you paid for it or better. Today, many builders are offering huge incentives to sell their houses and clear out their inventory.  They are discounting the house, the extras, the taxes, the appliances and much much more.

If you can unload your current home and get your money out of it and then buy into one of these discounted and heavily incentivized (almost a word!) houses, you could save yourself a lot of money.

Look at it this way.  Let’s say that you have a mortgage on your current home for $250k, and you paid $275k.  Down the street a new but essentially the same house is selling for $225k.  If you can sell your house today for $275k, pocket the $25k in equity and turn around and buy a home for $225k just down the street, then you have made a good deal.  (Assuming that the move and all the changes of address and things are worth it.)

That’s the general concept.  I am not saying that it is easy, not as easy as switching your Nike golf shoes, but possibly easier than currency arbitrage.  The real trick is selling your own house and getting the value out of it.  If the builders could sell their houses they would, unless they are currently under the gun to sell fast, and then you may have an opportunity!

When you live or own a home in a neighborhood, you have thrown your lot in with your neighbors.  It is in your best financial interests for your neighbors to do well.  If they build up their home value or even some day sell their home for a good price, that raises the comparable value of homes in the neighborhood.  That can help you get a better interest rate, a larger home equity loan, or someday might help you get a better price on your own home sale.

The house above is a home that recently listed in my own neighborhood.  This home is pushing the envelope on price in our neighborhood.  That is a good thing for all of us neighbors. 

Here is a Link to Homes for Sale in River Bridge, Lawrenceville, Georgia $210,000 for this particular home.

Its a good price for the home, part of the reason why we were paying attention.  Most of the homes in our area price out in the $250 - $350 price range.  That’s relatively average, possibly a little on the low side for Lawrenceville Georgia Real Estate.

I point all this out because today the real estate and mortgage industry is a little confused.  Neighbors often times get caught up in their personal issues and complaints about each other.  They do not always realize that it is in their best interests to cooperate with each other.  If your neighbor’s lawn mower breaks down, loan yours to them. Its good for the neighborhood.

If your neighbor works on their home from 6 am till midnight a couple nights a week.  Let it slide.  They are building up the value of their home and the neighborhood and by extension your home.  They are giving you free money so do not be so quick to complain.

If someone sells a home in your neighborhood, help them sell it by passing on some information.  The more successful they are at selling their home for their asking price, the more successful you will be in the future.

 Madison, Wisconsin is proving to be an area that is ripe for controversy in the real estate world.  Homeowners are selling their houses by themselves without a realtor and doing better than homeowners at cell with a realtor in Madison, Wisconsin.

These results run contrary to the results generated by the real estate industry, which is by far not an arbitrary or objective group to provide homebuyers and sellers information about the most cost-effective way to buy or sell a house.  Buyers and sellers of houses are more more getting annoyed at paying six to 7% to a realtor.  This is been exacerbated by the price of McMansions that oftentimes go for a half-million dollars or better depending on where you live and might go up to a $1.5 million before you break into mansion territory.

The averages are under $200,000 though.  And regular everyday homeowners are saving all those fees and they’re getting a better price on their house.  They are not selling their house as fast as a realtor does in the area, but they’re getting more money for the sales price and not paying commissions.

Now if you don’t have the time, or if you’re not capable of selling your own home in a realtor can provide you a good service.  Furthermore if you don’t need to squeeze out an extra five to 10 or $15,000, and a realtor might build a sell and move your house faster than if you try to do it by yourself.  But if you need that extra money, and you can spare a few extra weeks maybe a couple of months than selling your house without a realtor in Madison, Wisconsin might work out for you.

I’m going to be putting my house on the market soon and I’m definitely looking at both the for sale by owner scenarios as well as the discount realtor scenarios.  In the meantime you definitely should read this article for some more information on the trends in Madison, Wisconsin and where they are contradicted elsewhere.

Link to Home sellers get lucky in Madison, Wis. - Jun. 8, 2007

We are kicking off a new site to to focus on home loans. The real estate market in the mortgage market are in a slight state of turmoil, and it’s even more important now to pay extra attention to that market, what’s going on in the industry, and what is right for you when you purchase a home and take out a loan or mortgage.

We are going to walk through this process, a look at best practices and new trends and figure out the best way to navigate the real estate and mortgage markets today. I will be walking you through my attempts to finance a home and sell my current home. In addition to my firsthand experience, I have a double major in finance and accounting and a Masters in international tax law. I have also completed required courses to sit for the real estate exam in multiple states even though I don’t work in that industry and have not sat for the exams.

My family has worked in real estate for close to a 60 years and through indirect experience from the family business I have additional perspective. I sold my first home was 10 years old, and I financed my first home I was 24. neither of those achievements are extra impressive today in the age of the Internet and the real estate booms, however the industry is tightening and starting to revert back to controls and mechanisms that have been ignored for the last 10 to 15 years. Current homebuyers need to be aware of the change in the industry, and the practices and policies of the industry if they are to navigate their way through the markets and make the best deals on their own behalf and avoid the pitfalls that come with being overextended and a mortgage or a home in a market where credit is contracting.

We’re hoping to gather your insights and questions and share our experiences along the way!