House OKs Lift on Fannie, Freddie Loan Limits
The economic stimulus package hammered out between the White House and Congress on Thursday lifts the size of home loans that may be bought or insured by Fannie Mae and Freddie Mac.The Fannie/Freddie cap would rise to $729,750 for one year. Currently Fannie and Freddie are capped at $417,000.

The measure also would permit the Federal Housing Administration to indefinitely insure loans up to that same level. Currently, FHA loans may not exceed $367,000.“The stimulus package announced today is a positive step toward strengthening the housing market and our economy," NAR President Dick Gaylord said in a public statement. "The increase in loan limits should provide liquidity to the mortgage market in all parts of the country allowing qualified home buyers who may have been on the sidelines to enter the market."

The measure is also expected to make jumbo loans more affordable because it will make them more attractive to investors, who since summer have shunned home loans that don’t pass through Freddie or Fannie.“In high-cost states, many home buyers with good credit could save $3,000 to $5,000 per year by not being forced into the current jumbo mortgage market," Gaylord said. "Currently, only families in lower cost areas are able to qualify for these types of affordable loans.

Such a move would stimulate home sales and help stem the rise in foreclosures, reducing the number of foreclosures by as much as 210,000."In particular, prospective home buyers in costly regions like California, Northern Virginia, and New York have faced higher mortgage rates and tougher loan terms, and those areas would get relief under the plan, says Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.

"This is meaningful because the mortgage crisis and meltdown is geographically concentrated," she says. "This response will assist the stressed areas."

Source: Reuters, Patrick Rucker (01/24/08) and REALTOR Magazine Online

Real estate rates fall overnight

30-year fixed rate at 5.31%; 10-year Treasury yield at 3.44%

Wednesday, January 23, 2008 source: Inman News

Long-term mortgage interest rates dropped Tuesday, and the benchmark 10-year Treasury bond yield tumbled to 3.44 percent.

The 30-year fixed-rate average sank to 5.31 percent, and the 15-year fixed rate fell to 4.82 percent. The 1-year adjustable rate dipped to 5.25 percent.

The 30-year Treasury bond yield was down to 4.2 percent.

Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

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Mt. Pleasant Market Update – January, 2008

Has the single family home market hit bottom yet?

This is the most common question in everyone’s minds right now. Sellers are anxious to see their home sold, buyers are anxious to buy, but don’t want to lose equity by buying in a declining market, and investors are waiting for the cycle to turn around to start re-investing in property.

Although picking the bottom of the housing market is as difficult as predicting the stock market, there are some encouraging signs that point to a recovery during 2008. The following charts show statistics for single family homes in Mt. Pleasant (MLS Areas 41 and 42), taken from the MLS.

As the above chart shows, inventory is still very high, although, for the PAST FIVE MONTHS inventory has been slowly declining. I believe this encouraging sign is due to several factors:

1. Sellers have finally realized they are not going to get the price they were expecting (based on the 2005 market), and they are withdrawing their home from the market;
2. There is very little new speculative construction going on; and
3. Re-sales are continuing to happen (at the 2003/04 level).

We Were Spoiled!

In Mt. Pleasant we had such a good market during the last 4 to 5 years before this downturn, that everyone expected to place their home on the market and sell it in two weeks! While this was true at the peak of the market in the Summer of 2005 (see the following chart), today the average time to sell a home in Mt Pleasant has risen to almost 160 days. This is also due, in my opinion, to several factors:

1. Much higher inventory levels mean that, on average, any single home will take longer to “get its turn” to sell if the demand stays the same.

   

   Notable exceptions to this rule are homes that are priced aggressively from the onset. Those homes are still selling quickly.
2. Buyers are more cautious and are generally looking around for a much longer time before making a decision.

Another factor that has changed is the “negotiability” of list prices (see next chart). While in 2004 the average Sale Price/List Price ratio was above 99%, today it is around 95%, which means that buyers are negotiating harder and getting better deals than before.

And the current ratio is probably underestimated, given that it is calculated based on the LAST list price before the home goes under contract. If this ratio was based on the original asking price (like in 2004) it would be much lower. The chart also shows how sellers become more negotiable in the slow winter season, and

less negotiable in the busy summer season (demand-driven).

The “Months of Inventory” indicator shows that Mt. Pleasant is still in a “buyers’ market”. This number is calculated by dividing the total number of available listings by the number of listings sold every month. It is used as a measure of the average time that it would take to sell all the available inventory.

From May 2003 until January 2006, the market had just 2-3 months of inventory (a sellers’ market). From that time it started to climb steadily, until reaching a peak of 18 months in October, 2007.

Although it is encouraging that this number has come down during the “slow” winter season, we’ll have to wait another 2 to 3 months to be able to tell if the market has indeed turned for the better.

Future Outlook

My prognosis for this year is positive, for the following reasons:

1. Interest rates have come down to the lowest level in 5 years – this will encourage “hesitant” buyers to jump in.
2. Prices have come down and sellers are a lot more realistic than a year ago. Sellers who are motivated to sell will price their homes strategically and those homes will sell first. Real estate is cyclical, prices will come back up, following the basic supply and demand theory (more people, same amount of land available)
3. There are virtually no new homes being built at the moment in Mt Pleasant, so the existing home inventory will begin to decrease.
4. We are still receiving many out-of-town and out-of-state buyers who are interested in living in Mt Pleasant.

Potential risks that can affect the recovery of our real estate market:

1. The sub-prime debacle is far from over. I believe we’ll see more foreclosures and tightening of lending standards this year. I believe the numbers are not significant enough to affect the market, but negative media attention does affect the public’s perception.
2. Consumer spending/credit crisis – Many consumers have been funding their credit purchases with their home equity. As real estate markets decline and this equity disappears, this may cause economic hardship which may lead to a national recession.
3. The presidential election – Markets are always unsettled in an election year.
4. The hurricane season – Although the past season was a non-event for Charleston, a major hurricane will affect the property market.

Source: Charleston Trident MLS – information deemed reliable but not guaranteed.

Disclaimer: This analysis constitutes a market opinion and should not be construed as investment advice. Prospective buyers, sellers and investors must rely on their own research and interpretation of facts to base their decisions.

Charleston Market Update

Overall, the Charleston market, although it has seen an increase in available inventory and the average time it takes to sell a listing, remains relatively healthy. The median price has remained unchanged, but the level of activity still shows market resilience given all the industry turmoil at the national level and the sub-prime loan crisis.

Excepting for the time on market, Mt. Pleasant showed a stable (but soft) market. However, the decrease in inventory is an encouraging sign that may indicate bottoming out. If inventory continues to decrease in early Spring, Mt. Pleasant is poised to be one of the first sub-markets in the Charleston area to recover from the downturn (it was also one of the first submarkets to be hit). Some people believe that Mt Pleasant and Daniel Island are the "Californias" of the Charleston metro area (i.e. the trend-setters).

The Summerville market remains reasonably strong, although a little weaker. Problems with local traffic have led Dorchester County to enact a "new development freeze" for 6 months to let it catch up with infrastructure development.

The Goose Creek market continues to move forward, attracting new developments and new industry. However, the significant increase in available inventory may signal further price softening to come next year.

NEW SELLING STRATEGIES FOR THIS MARKET

With the dramatic increase in inventory in Mt Pleasant during the last 18 months, Sellers (and when I say "Sellers" I mean those people who ARE motivated to sell, not those who just want to "test" the market) must understand that they need to use different strategies to succeed.

No one can control the market. Sellers must accept that they can only control two things: Price and condition.

In a "Sellers' market" like we were living in 2005 (when we had very little available supply), Sellers could ignore any deferred maintenance issues and still receive multiple offers within days of listing the home. Sellers could price their home anywhere (within reason) and buyers would often agree to pay prices above their list price.

It is a "Buyers' market" now, and motivated Sellers must change their strategies if they wish to succeed:

1. Condition: Buyers are very picky and they have lots of homes to choose from! Sellers must take care of all deferred maintenance issues, replace tired-looking carpet, paint, landscape and stage their home to put "their best foot" forward from day one. Their home must be in perfect condition and present like a model home - otherwise it may take a long time to sell!

2. Price: Sellers cannot "test the market" any longer by pricing the home in the "middle of the pack". Nowadays it makes no sense to start higher and "be willing" to reduce the price over time gradually. This strategy will result in them "chasing the market from behind" unsuccessfully. They need to price their home aggressively to start with. Look at the competition, pick the 2-3 listings that are most similar to theirs, and price their home significantly below (3%-5%) from the beginning. They also need to make sure that their List Price is at or below recent comparable sales in the area. Otherwise they may get a nasty surprise when the Buyer's bank orders the appraisal, since these days, after the sub-prime meltdown, appraisers are very conservative!

In the end, Sellers who pick this strategy will sell first, and probably for a higher price (in a declining market, as time goes by, prices decrease). Sellers who decide not to choose an aggressive pricing strategy to start with end up getting caught in the "downward spiral" of a neighborhood, where all competitors start lowering their prices gradually, and everyone ends up in the same boat (worse off)!

CITY OF CHARLESTON RAISES PROPERTY TAXES

The Daily Journal reports:

Charleston raises property taxes

By Scott Miller , Staff Writer

Property tax bills in Charleston will rise about 4.5% next fall now that the City Council has approved the first tax increase since 1999.

Critics at Tuesday’s council meeting, when the increase was passed, said the city was taxing low-income property owners out of town. But Mayor Joseph P. Riley Jr. said additional money is needed to fund improvements to the fire department.

The fiscal 2008 budget includes $2.6 million in new taxes and $2.4 million in fire department upgrades, a direct response to the June 18 Sofa Super Store blaze that killed nine firefighters.

The budget creates positions for 18 additional firefighters, six new dispatchers, four training officers, four inspection employees, new vehicles and equipment, among other upgrades. The $143.9 million budget, a 9% increase from last year, raises the property tax rate by 3.3 mills, or 4.5%, to 77.1 mills. A mill is equivalent to one dollar for every $1,000 of assessed property value.

The owner of a home assessed at $175,000—a figure Riley used when discussing the tax increase—will pay an additional $23 annually. The owner of commercial property valued at $500,000 in Charleston will pay $99 more. Commercial property owners will pay more because their property is taxed at 6% of market value rather than at 4%.

No one spoke during a public hearing on the budget two weeks ago, but a handful of residents denounced the tax increase Tuesday. One was a Charleston real estate broker who led the successful statewide effort to replace property tax revenue with a sales tax increase to fund schools.

“Even now, with the relief we’ve gotten, taxes are still too high,” said Emerson Read, chairman of nohometax.org. “This is going to affect mostly low- and middle-income (residents), first-time home buyers and elderly retired people.”

Resident Jack Simmons agreed, saying the city was taxing people out of town.

“One of our basic freedoms is the ability to own a home,” he told the council.

Riley called the tax increase “a last resort” and again noted that the city has cut taxes 12 times since 1990.

Council members Henry Fishburne and Larry Shirley voted against the tax increase. Council members Deborah Morinelli, James Lewis Jr., Robert Mitchell, Jimmy Gallant, Wendell Gilliard, Louis Waring, Yvonne Evans, Paul Tinkler, Anne Francis Bleeker and Kathleen Wilson voted in favor.

Fishburne said the city could have trimmed fat in the budget, possibly by lowering the 2.5% salary increases given to city employees. He had previously argued that City Council does not receive enough time to evaluate the mayor’s budget proposals. Riley introduced his proposed budget about a month ago.

CHARLESTON MARKET IMPROVES SLIGHTLY

Here is a press release from the Charleston Trident Association of Realtors that has not made headlines (yet?)

Median Price Rises, Inventory Declines

Date: 11/12/2007

Charleston, S.C. (November 12, 2007) –– The median sales price of a home in the Charleston area rose for the second month in a row to $208,705, reports the Charleston Trident Association of REALTORS® (CTAR). The median price for October 2007 is 0.8 percent above that of October 2006 ($206,950), and the year-to-date median home sales price ($210,000) rose 1.8 percent over 2006 ($206,230).

The number of sales in the lowcountry declined by 22.7 percent in October 2007 compared to October of last year (792 to 1,024). Year-to-date sales for 2007 (10,902 through October) are down by 21.2 percent over the same period in 2006 (13,837). The average time it took to sell a home increased to 3 months (96 days).

“We’ve seen record numbers of homes put on the market this year which lends itself to slightly reduced sale prices in some areas and a longer selling period,” said CTAR President David Kent. “The flip side is, of course, that buyers should be really excited about the selection they have to choose from. And with interest rates and prices so competitive, this really is a great time to buy a home!"

Market Statistics

	October 2006	October 2007	Y-T-D 2006	Y-T-D 2007
Units sold	1024	792	13837	10902
Avg. Days-on-Market	77	96	65	94
Median Price	$206,950	$208,705	206,230	210,000

Inventory
Inventory declined for the fifth month in a row, resting at 10,398 homes available for purchase through the Multiple Listing Service (MLS) as of November 10. There are 1,941 condos for sale, the majority of which (366) fall in the $140,000 - $199,999 price range. Single-family homes account for 8,802 listings. The greatest number (1,789) of single family homes currently for sale are priced in the $140,000 - $199,999 range. As of today there are 1,184 properties under contract.

2007 Current Inventory (On the 10th)
June	10869
July	10865
August	10806
September	10717
October	10594

Berkeley, Charleston, and Dorchester Counties
In Berkeley County, 211 homes were sold in October 2007 with a median sales price of $176,500 and 91 days-on-market average. Of the 388 homes sold in Charleston County, the median sales price was $264,500. The average days-on-market for these homes was 114. In Dorchester County, 160 homes were sold at a median price of $178,000 with an average days-on-market of 85.

Median Sales Price Comparison
	Oct 2006	Oct 2007	Y-T-D 2006	Y-T-D 2007
Berkeley County	$169,470	$176,500	$171,753	$179,500
Charleston County	$241,000	$264,500	$239,900	$249,058
Dorchester County	$192,687	$178,000	$184,000	$193,606