Thursday, February 16, 2012

Moving to Ogden Utah - What Economist Think


Economic and housing marketing outlook

Lawrence Yun phd                                                                            Chief Economist                                                                                     By Lori Fleming


Lawrence Yum Economist for the National Associate of REALTOR said “The Rocky mountain regional should have the most growth due to job and way of life with the data looking great on a national level and since Utah was behind the bubble we should be seeing that last effects and start heading upward.” 


Looking ahead here are  4 issue we are still facing. 


  1. We currently have the best affordable condition - interest rates are great for buyers to obtain great deals on their new house.  You would think people would be rushing in to purchase that new home- But there is no pick up in the market,  causing the market to remain slow and unsure. 


  1. National prices have stayed stable for 2 to 3 years - the feeling is everyone believes home values are still falling WHY?   As long as people believe it will still fall they will hesitate, this is  due mostly to news and incorrect local figures. 


  1. We currently have the  lowest newly constructed inventory with tons of vacate lots, banks are not willing to lend on new construction feeling they will remain vacant once completed.  Banks are only causing added problems by holding onto the cash and making lending guidelines hard to reach for most builders. The banks have  plenty of cash so that they can with stand any stress test placed before them- cash is not circulating into the economy. Banks are also receiving threats from investor -  if they do loans under lost guideline they will be shut down. The average hard working people are paying higher rates to obtain jumbo loans and are giving up with all the hurdles they are having to jump through. 


  1. Fannie  and Freddie are making internal self sustaining loan profits from hedge funds hurting the tax payers ( borrowing money at lower rates) - Fannie and Freddie are still reporting loses but investors are coming back into to picture picking up the REO properties soaking up the bank owned and distress properties and turning the profit on cash transactions. 


1980 interest rate were 13% people were entering the market and purchase properties value at less they what they could purchase today for the same purchase price because of todays rates. In 2012 the rates are at an all time low under the 4%  with prices of house also at the best price but where are the buyers....


For the past 4 years it has been tough in home sale, which has effected more people then just the REALTORS, if you think about it many things are tight to the Real Estate Market. You have builders, movers, lenders, concrete business, and the oil and lumber industries  just to note a few who are all effected by the lack of money circulating in the market place. Before the market bubble  national there was 1,400,000 realtors, today in  2012 national there a under 1,000,000 reflecting just how the market has changed in this time.

One thing to think about inventory is down 20% due to the uncertainty this will effect the supply and demand causing price to raise and the lack of homes also make it hard for sellers to want to add to the inventory with the fear they will not be able to replace what they currently have . 


Builders and new builds are forced to remain low due to the lending guidelines,  banks are not lending on spec homes making it difficult for any new starts. Unless the builders have deep pockets and can fund the project or can get a pre-sold vacate lot will remain vacate. So ask yourself  if you are a buyer how long will these prices remain this low. As demand increase these prices will rise. Now is the time to start your buying process


Why is lending so hard to get now days you ask. 

Buyers average credit scores for approved loan have increases which effects the ability to get a loan by this increase of higher credit scores it has effect 15 to 20 % of buyers ability to obtain a loan only allowing high incomes to purchase. This is forcing the rental market up or kids moving back with parents or more roommates in smaller places.


Something to think about is this market of unemployment and foreclosure other areas have not remained low. 

  • Food prices up 150%
  • Gas prices  up 197%
  • College tuition up 698%
  •  Medical services up 410%
  • Rents  up 200%
  • Monthly  mortgages 30 fixed rates up 0%.
  • With all the inflation of products or services mortgage rates are the only rates that are in line are below services on a national level.


Who are buying  INVESTOR who are paying cash and getting great deals. Where investor were buying gold which is now very expensive, they are looking at a  better way to make a return on there investments. Purchasing bank owned properties fixing them up and flipping them is giving them much more return on their money.  Open the opportunity for new buyers to purchase a home that has be remodeled and restore with little out of pocket repairs for the new buyers. 


Right now in North Dakota they have rose to number 3 in growth due to the oil in the state. Working at Mc Donald you would receive a starting wage of $15 to 18 per hour, with Michigan at an all time low due to the automotive business.


How is the government trying to recover - 

  • Forcing buyers to have 20% down payment in order to purchase their home
  • Doing away with the mortgages interest dedication -
  • Higher property taxes - 
  • Higher capital gains taxes 

This  will KILL the market and consumer confidence. The National Association or REALTOR along with the local Associations are fighting this to protect the right for the American dream


Ronald Reagan -  once said “We will preserve a part of the American dream by protecting the tax deduction..”


In the 1940 4 million no downpayment VA  loan for returning World War II  veterans were giving and the world was booming there were very few foreclosures, buyers were proud to own the American dream. With the wars of today we are having returning vets coming home to lower jobs, higher cost and very little benefits. By taking away the VA 100% loan or asking for 20% down will hurt all!


The 100% loan worked in the 1940 it could work again today helping the True buyers to achieve the piece of the American Dream