Mortgage Money Will Be Cheap!

Interest rates will remain at historic lows and money will be abundantly available to those who can afford to borrow it. The problem is lending requirements have become so strict that fewer borrowers fit today's bank guidelines. To get a loan, a borrower's FICO score needs to be above 620 for FHA and 720 for conventional. Banks order FICO scores from 3 credit reporting agencies and use the middle score. To stimulate the real estate market, the Feds are likely to keep interest rates in check throughout 2011.

STARS ALIGN FOR BUYERS

Interest rates below 5% & prices bottoming out in the 1ST half of the year will drive 2 of the 3 main ingredients for buyer affordability to cyclic lows next year, Freddie Mac's chief economist said yesterday. "Buyer affordability is at the highest level in decades," said Freddie's Frank Nothaft. "With affordability high, many 1ST-time buyers will be attracted to the housing market in the new year, likely translating into more home sales in 2011 than in 2010." Though they will rise above their present level, he expects rates on 30-year fixed-rate loans to remain below 5% throughout the year. As for home prices, price indexes for the U.S. as a whole are likely close to bottoming out. The National Association of Realtors' Affordability Index for the 1/3 quarter reported one of the most affordable buying markets since the inception of the index in 1971, he noted.

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2011 HOUSING TRENDS

McMansions are out; compact housing is in: The era of the McMansion is over, according to the 2011 edition of "Emerging Trends in Real Estate," co-published by PricewaterhouseCoopers and the Urban Land Institute. Not only are baby boomers downsizing to more manageable homes, but 1st-time buyers are also entering the market with extremely different tastes than their parents. The younger generation of homebuyers, born between 1977 and 1994, are interested in smaller homes in vibrant, compact, walkable neighborhoods. As baby boomers move into smaller homes, who will they sell their large, suburban homes to?

Homebuyers are thinking long-term: In the past, many homeowners thought of their houses as "credit cards" to borrow money against -- a mindset that caused many of the financial problems. While most Americans still think buying a home is a smart financial move, they also realize that a house is more than an investment. Instead, today's buyers are looking for a home, a place to provide shelter and security for a family. As a result, homeowners are planning on stay in their dwellings longer; 1st -time homebuyers want to own their homes for a decade, while repeat buyers want to own theirs for 15 years.

More foreclosures to come: Foreclosure processing was delayed this fall by the "robo-signing scandal" raising concerns that many homeowners may have been unfairly evicted. Though the controversy caused a dip in foreclosures in October, it won't cause a huge drop-off in the number of distressed properties entering the market, says Rick Sharga, senior vice president of RealtyTrac. At the rate the banks are going, it will likely take several more years to work through the millions of delinquent mortgages. But on the bright side, if banks continue to foreclose homes gradually, home prices are likely to stay stable.

Mortgage rates remain low: It's not too late to take advantage of low mortgage rates. While rates are expected to rise slightly in 2011, they will likely remain low, even under 5

Housing recovery contingent on jobs: Above all, a healthy workforce is key to housing recovery. While the unemployment rate remains high, current homeowners will continue to lose their homes to foreclosure, and potential homebuyers will find it difficult to qualify for loans. According to the National Association for Business Economics, unemployment will stay above 9 percent in 2011, which could hold back a housing recovery next year.

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THE HOUSING MARKET IN 2011

According to Dan Elsea, President of Real Estate One, the largest Real Estate Brokerage in Michigan: The November Michigan Real Estate market was down from the frantic activity of last fall, but up over the market bottom of 2008. Values have stabilized (price per square foot) in the past 6 months & available homes for sale have continued to fall, which are both positive signs towards a more stable market. Overall the number of months inventory (MSI) is still in the Buyer's market range, but at 5.1 months, it is getting close to balanced.

The average days on market (DOM) for homes sold has remained about the same over the past 2 years. The reason seems to be a small segment of the market is well priced & selling quickly while the majority remains priced out of the main stream, taking months or even years to sell. For Sellers, that means they need to be fully aware of the total market and focus on Solds over active listings. Those still on the market after 6 months are priced out of the market & not relevant competition.

So what will next year look like for Michigan real estate? We would expect it to look and feel a lot like 2010, maybe down a bit in number of homes sold, but growing stability in pricing. Also a continued decline in available home inventories, but not falling as fast as 2010 (more bank properties and an improving market will bring out those sitting on the fence). If we simply match 2010, that would be a great success, since it would mean our core economic improvement has made up for the artificial market push this year from the tax credits.

HOUSING SHORTAGE COMING IN 2011?

The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don't start focusing on building new houses, the market will have a much bigger problem on its hands. "We need one and a half million houses per year just to keep up with population growth," Wesbury said in an interview with Steve Forbes. "And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we're down to about 6 & 1/2, 7 months' inventory whether you look at new homes or existing homes."

By: Alexandra Zendrian of Forbes

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North American International Auto Show

One of the premier international auto shows in the world!


Held at Cobo Center.


Public Show is when all of us get to check out the cars.
January 14

Charity Preview Gala

                                                  January 15-23

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