Massachusetts Real Estate Lawyer Blog

Increasing Home Prices Save Underwater Borrowers

Published on: June 18, 2013 | by Pulgini & Norton, LLP

As home prices have been rising, the number of underwater homeowners has dropped below ten million for the first time in more than three years. An underwater home is one in which the homeowner owes more on their mortgage then the home is actually worth.

9.7 million, roughly 19.8%, of homeowners were underwater in March of this year. That number is down from 12.1 million at the end of 2011. The negative equity in the United States has decreased from $631 billion in December to $580 billion in March.

Home prices have risen 12.1% from April 2012, this increase has lifted 1.7 borrowers above water. If prices continue to increase, it is likely that more homes will be placed on the market for sale. This is also helping to bolster the economy.

Home Price Increase is More Than a Bubble

Published on: June 5, 2013 | by Pulgini & Norton, LLP

The quick increase in housing prices the past year has created conversation of another housing “bubble, but experts say that only a few markets are at risk.

U.S. home prices rose 10.9% from March 2012 to March 2013, which is the largest annual gain in seven years. Even with this dramatic increase, home prices are still off their 2006 high.

Traditionally, average U.S. housing prices are 3.25 times the average household incomes, and as of April, home prices were about 3.2 times the average U.S. incomes. However, some markets are worrisome in California and may have a bubble effect.

Pending Home Sales Reach Three-Year High

Published on: May 23, 2013 | by Pulgini & Norton, LLP

The number of signed contracts to buy homes rose in March to the highest level in three years. The National Association of Realtors stated its seasonally adjusted index for pending home sales rose 1.5% to 105.7, the highest since April 2010. It is also above February’s reading of 104.1.

Signed contracts are seven percent higher than a year earlier, which means that in the next month or two these will become completed sales. However, sales of previously occupied homes decreased in March to a seasonally adjusted rate of 4.92 million, from February’s 4.95 million.

Total existing-home sale are projected to increase close to seven percent from 2012 to nearly five million sales this year, with the median existing-home price is estimated to rise about 7.5%. An index reaching 100 is the average level of contract activity during 2001, when home sales were between 5 million to 5.5 million.

Home Prices Increasing Across the United States

Published on: May 20, 2013 | by Pulgini & Norton, LLP

Home-price appreciation is increasing across most of the U.S., demonstrating that the housing market is turning around after the most severe downturn since the Great Depression. Prices rose by 8.1% in January from the previous year, the largest gain in six and a half years in twenty major metropolitan cities.

Prices typically decrease in the winter months, but rose 1% in January from December, when prices usually fall. Housing demand is growing, while the number of homes for sale has fallen to the lowest number in decades.

Lower mortgage rates are helping homeowners qualify for a mortgage without a big increase in monthly payments. Supply shortages were caused by homeowners unwilling to sell their home because prices had declined, and builders have also not been constructing as rapidly due to competition from bank foreclosures.

US Housing Market Starts to Dip, But Remains Solid

Published on: March 15, 2013 | by Pulgini & Norton, LLP

Homebuilders began working at a slower pace in January than December, but the decrease occurred in the area of apartment construction, which dropped twenty-four percent. However, the rate of single-family homebuilding increased 0.8 percent.

Even though there was a decline, home construction in January was the third-highest since 2008 and demonstrates continued strengthening in residential real estate. Another promising sign is that building permits, which signals future construction, are at their highest point since mid-2008.

The Commerce Department stated that builders started work at an annual rate of 890,000 homes last month, which was down 8.5 percent from December. Analysts did expect a decline in January because of the sharp gain in December.

Multifamily Housing Growth Expected to Continue in 2013

Published on: March 8, 2013 | by Pulgini & Norton, LLP

After many slow years, home building is now steadily contributing to economic growth. An important factor has been the expansion of multifamily construction, such as apartment buildings and condominiums.

Because of the housing crisis, homeownership is down especially among younger households. Also, the total number of households is down compared to where it should be considering the population growth. This current trend has translated into potential for household formation, with most of them expected to become renters as market conditions improve.

The result for the building industry has been an increase in demand for rental units, which has reduced rental vacancy and increased demand for multifamily construction. The number of empty rental units has decreased greatly in the last two years according to the Census Bureau; the current measure is comparable to numbers seen in early 2002.

Six Reasons Why Housing Inventory is Declining

Published on: March 6, 2013 | by Pulgini & Norton, LLP

Home sales have risen compared to the same month in the previous year for eighteen straight months. December home sales were close to thirteen percent above the levels of a year ago. For 2012, sales were up 9% to 4.65 million, which is the highest annual sales total since 2007.

Prices are picking up this year because the number of homes for sale continues to drop. The number of homes for sale at the end of 2012 fell to 1.82 million, which is a 21.6% decline from one year earlier. The six reasons why inventory has continuously dropped are:

1. Many homeowners are underwater: More than ten million homeowners owe more on their mortgage than their homes are actually worth, which is 22% of homeowners with a mortgage, and 15% of all homeowners. Underwater homeowners are not likely to sell because they will damage their credit in a short sale where the bank allows then to sell for less than the amount owed. Because of this, inventory has been controlled where there is a large concentration of underwater homeowners.

2013 Brought Increased Tax for Real-Estate Investors

Published on: March 1, 2013 | by Pulgini & Norton, LLP

Many people who receive rental income from properties such as apartment buildings, single-family homes and retail shops will be hit with an investment surtax of 3.8% that began on January 1, 2013. This Medicare tax, which was passed as part of the Affordable Healthcare Act in 2010, will not affect real estate companies or those who work fill-time managing their real-estate portfolio.

This new tax will affect high-earning professionals, such as doctors, lawyers and others who have full-time jobs and invest in real estate on the side. This tax covers all other types of investment income as well, such as dividends, capital gains and interest from banks or bonds.

An attorney stated, “We know for certain the Medicare tax is here to stay. I think there might have been some question if the tax would be a bargaining chip in the fiscal cliff negotiations. It was not.” The passage of this legislation raised the permanent top rate on Americans with incomes of $400,000 for singles filing, or $450,000 for married couples.

Momentum Builds in Housing Market

Published on: February 27, 2013 | by Pulgini & Norton, LLP

Single-family home startups increased twenty five percent in 2012 nationwide from 2011. The National Association of Home Builders (NAHB) predicts that newly constructed homes will also increase another 35% in 2013. This momentum has provided hope that home building will again support the economic recovery.

The industry’s recovery may be slow due to the need to rebuild its workforce and supply of undeveloped lots. Chief economist of the National Association of Home Builders stated that the industry is “getting better, but we were very ill, and the convalescence period will be very long.”

NAHB reported that the index of U.S. builder sentiment reached its highest level in more than six years in December 2012. Overall, home builders are benefitting from the improving situation that is aiding the existing home market.

Measure of Home Prices Increases Most in 6 Years

Published on: February 22, 2013 | by Pulgini & Norton, LLP

A measure of U.S. home prices jumped five percent in September 2012 in comparison with September 2011. This is the largest comparative growth since 2006. This increase evidences a sustainable housing recovery.

The real estate data shows that prices declined 0.3 percent from August to September, but that monthly figures are not seasonally adjusted. The monthly decline undoubtedly reflects the end of summer home-buying season and not a weakening of the housing recovery.

There have been other indications of the housing recovery in the past year, the Standard & Poor’s/Case Shiller 20-city index improved two percent in August compared to a year ago. The Standard & Poor’s/Case Shiller 20-city index is a constant-quality house price index, using data collected from repeat sales of single-family homes.