“I grew up thinking of snow as a luxury you visit.”
– John Landis
Featured In This Issue
Special Days and Events
The birth flower for December is the Narcissus. The birth stones for December are the Turquoise and the Zircon.
Extending the Good News for Home Buyers
Let’s first turn to the terrific news regarding the housing stimulus. Earlier this month, the U.S. Congress overwhelmingly passed and the President signed into law new measures to maintain the momentum for a housing market recovery. The home buyer tax credit, originally scheduled to expire at the end of November will now be available through the middle of next year and more potential buyers will be able to take advantage of it. The income limit was also increased and many move-up buyers – not just first-timer purchasers – also will qualify. Furthermore, loan limits will not shrink as was planned for next year; in high-cost areas, the loan limit will remain at near $730,000 in 2010, thereby permitting more consumers to tap into the historically low mortgage rates.
As most of us are aware, the housing market recovery to date has been concentrated in the lower-end starter home segment. While the mid-priced market has begun to show signs of life, it is still far below normal activity. The upper-end remains sluggish. Therefore, enlarging the tax credit to include move-up
Adding it all up, home sales are now expected to get a boost by roughly 15 percent next year. Existing-home sales are forecast to post 5.7 million units in 2010 (up from 5 million units in 2009). New home sales will also rise, reaching 550,000 (from 400,000). More importantly, inventory will likely fall to a 6-7 months’ supply by the middle of next year. That draw down of inventory means that that there are likely to be modest home price gains. Roughly speaking a 2-5 percent price gain is likely in many parts of the country in the next year.
Rising home values will prevent home prices from overcorrecting even further. Home prices have, indeed, been overcorrecting and have led to sizable destruction in middle-class housing-related wealth. By contrast, stock market and financial wealth have experienced spectacular gains in the past nine months. Despite those gains, however, consumer confidence still continues to tread near historic lows.
Why is there a disconnect between the rising stock market and low consumer confidence? Most middle-class families have the majority of their wealth tied to housing and less to the stock market. So as long as home values fall, then consumer confidence and the broader economy will face challenges. Therefore, housing-focused stimulus measures will help households build up their housing-wealth (again) and lay the foundation for a sustainable economic recovery.
There were those who argued against the home buyer tax credit. They contended that it would be cheaper for the government just to let home values slide by $8,000 (the amount of the credit) because from a buyer’s point of view, there is no difference between a $8,000 credit or an equal amount decline in home value. However, a further decline in home value by that amount would have translated into a $700 billion wealth destruction for middle-class home-owning families. Such an unnecessary loss of household wealth would hold back general consumer spending and thereby hinder a broader economic recovery. But with the tax credit extended and expanded, rising home sales will help nudge home values upward rather than continuing to overcorrect. Yes, the tax credit extension will have an impact on the federal budget deficit – around $10 billion. But those monies will be easily recovered as the economy gets a boost in addition to preserving the middle-class wealth.
The commercial real estate market will also benefit, though as always after some lag time. As the economy becomes more fully entrenched in “recovery” mode, employment will start to turn around. Rising employment and recovering consumer wealth will mean an eventual increase in demand for office, retail, and industrial space.
As always, there are some caveats. Despite the very positive news on the housing stimulus, there remain significant risks to the forecast. Mortgage rates will rise from their rock-bottom points as we move into the next year. The Federal Reserve will slowly start the unwinding of its mortgage-backed security purchases. Also, consumer prices will be watched for any sign of accelerating inflation. Bond investors, therefore, will be cautious about lending at such a low rates. The 30-year fixed rate is likely to reach 5.7 percent by the end of 2010 from the current 5.0 percent.
The labor market is another worry. Though anticipated, the rising unemployment rate is a painful reminder that not all is well. The unemployment rate in October zoomed into double digits – 10.2 percent, its highest level since 1983. And the climb is not over yet – look for unemployment to hit 10.4 percent before reversing. With 7 million job cuts in the past two years, the current total payroll employment at 130.8 million is even below the total jobs that existed in 2000. The country has about 25 million more people in 2009 compared to 2000, yet the total number of jobs has remained unchanged. The silver lining is that the pace of job cuts is now less sharp now than in the first half of the year. Still, the jobless rate unfortunately will remain stubbornly high for quite some time. While job creation is expected to turn positive by spring, unemployment will likely be at 9.5 percent by November 2010 at the time of the mid-term elections. A more-than-usual number of elected officials will be voted out.
Despite the risks of rising mortgage rates and rising unemployment, the housing outlook has significantly improved. As the fear of falling home values disappears, that one key negative factor that has held back home sales will no longer be in play. Happier days are ahead.
Reprinted from REALTOR® Magazine [November, 2009] with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.
Make the Holiday Season Merry and Bright: Holiday Home Safety Tips
Home decorations help make the holidays joyful and festive for friends and family. While you are stringing the lights and spreading warmth and cheer, one of the most important considerations is how to keep your house and family safe from fire and injury.
“A home fire, gas leak or electrical accident can be especially devastating during the holiday season,” says Sue Dempsey, vice president, North American sales & marketing, CSA International. “Yet a few indoor and outdoor safety precautions can help protect your family and achieve comfort and joy during the holidays.”
CSA International, a leading North American product certification and testing organization, offers these important tips for safe holiday decorating:
CSA’s Top Twelve Tips for Holiday Home Safety
1. Going out? Lights out! Always turn off holiday lights when you leave the house unattended or when going to bed.
2. Don’t be dismayed, but discard the frayed. Carefully inspect holiday light strings each year and discard any frayed cords, cracked lamp holders or loose connections. When replacing bulbs, unplug the light string and be sure to match voltage and wattage to the original bulb.
3. Help your tree resist a fire. Try to purchase a freshly cut tree, as they are more resistant to fire. Keep your Christmas tree watered and far away from open candles. When using an artificial tree, choose one that is tested and labeled fire resistant. Regardless of the type of tree, place it away from heat sources such as radiators or fireplaces.
4. Contain any flames. Don’t use open flames or candles on or near flammable materials such as wreaths, natural trees or paper decorations.
5. Check for a certification mark. When purchasing light strings, extension cords, spotlights, electrical decorations, gas appliances or carbon monoxide alarms, look for the certification mark of an accredited certification organization such as CSA International, UL or ELT to ensure that the products comply with applicable standards for safety and performance. Also know the warning signs of counterfeit – and potentially unsafe – decorations, products and gifts. These warning signs include missing parts, instructions, safety features or warrantees; packaging with spelling mistakes or poor graphics; or products significantly lower-priced than all other brands.
6. Use one and be done. Never connect more than one extension cord together; instead use a single cord that is long enough to reach to the outlet without stretching, but not so long that it can get easily tangled.
7. Don’t meddle with outdoor metal. When hanging outdoor lights, keep electrical connectors off the ground and away from metal rain gutters. Use insulated tape or plastic clips instead of metal nails or tacks to hold them in place, and be sure to choose the correct ladder for the job.
8. Remember that timing is everything. Use a certified outdoor timer to switch lights on and off. Lights should be turned on after 7 p.m. to avoid the electricity rush hour.
9. Keep the gas behind glass. Do not use your gas fireplace if the glass panel is removed, cracked or broken. Only allow a qualified service person to replace fireplace parts.
10. Be alarmed. Be sure to install smoke and carbon monoxide (CO) alarms on every level of your home – especially near sleeping areas – and test the alarms monthly.
11. Be a friend to your furnace. To help prevent CO hazards in your home, have a qualified heating contractor perform a yearly maintenance check of your furnace and venting system, and clean or replace your furnace filter frequently during the heating seasons.
12. Clean the clutter. Do not store combustible materials such as gasoline, propane, paper, chemicals, paint, rags and cleaning products near your gas furnace. Gasoline or propane cylinders should only be stored outside the home.
For more information on holiday decorating and products that have been expert-tested and meet recognized standards for safety or performance, please visit www.csaholiday.com.
Courtesy of ARA Content
Smashed Sweet Potatoes
Preheat the oven to 375 degrees F. Scrub the potatoes, prick them several times with a knife or fork, and bake them for 1 hour or until very soft when pierced with a knife. Remove from the oven and scoop out the insides as soon as they are cool enough to handle. Place the sweet potato meat into the bowl of an electric mixer fitted with a paddle attachment and add the orange juice, cream, butter, brown sugar, nutmeg, cinnamon, salt, and pepper. Mix together until combined but not smooth and transfer to a baking dish. Bake the potatoes for 20 to 30 minutes, until heated through.
Hope you’ve enjoyed December’s Newsletter. Please call or send an e-mail if you have any questions about buying, selling, or investing in real estate.