Pittsburgh Real Estate Blog | Pittsburgh Homes R Us

To say that October was a quite a month for the economy would be … well … quite an understatement.

Be that as it may, once again the numbers are in for the Pittsburgh residential real estate market.

The biggest overall trend we see for October 2008 is that  homes for sale are staying on the market longer, compared to October 2007.

Not much of a surprise here as credit for the preceeding months tightened up and we saw fewer buyers in the market. This is also reflected in a drop in sales volume for the 3 counties in this survey.

It’s interesting to note that East Allegheny County experienced the smallest drop in sales while experiencing an increase in average sale price. With the economy continuing to sputter, it’s possible that buyers are now opting for the lower prices in East Allegheny, compared to North Allegheny and Westmoreland Counties. However, it’s still too early to draw any definitive conclusions.

Here are the stats for single-family homes, courtesy of the West Penn Multi List:

The year-end numbers, which I will be posting in January 2009, should be interesting. So far, for the first 10 months of the year overall sales volume is down compared to last year but average sale price is holding pretty steady.

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In my last post, I covered the Hope for Homeowners Act of 2008.

As an alternative to this FHA program, homeowners may want to check into a lender-direct loan modification instead. Here’s why:

* Under the HOPE for Homeowners program, a new loan is originated and the interest rate on the new loan is likely to be at current market rates. Under a direct-lender loan modification, the homeowner may be able to negotiate a below-market rate.

* The FHA program requires that the new loan be a minimum 30-year term. Under a direct-modification, the lender may offer a shorter term for the loan.

* On the new FHA loan, the homeowner is required to pay a 3.0% up-front mortgage insurance premium as well as a 1.5% monthly premium.  There may be no insurance or other premiums required for a direct lender modification.

* In addition to the mortgage insurance premium, under the FHA program the homeowner will have to pay customary closing costs which could be as much as 3.0% of the loan amount. Closing costs for a direct lender modification may be less.

* A second mortgage cannot be placed on the new mortgage for a five-year period after the FHA HOPE for Homeowners loan is originated.

* The equity gained on the home in the future is shared with the FHA. The shared equity starts at 100% to FHA during the first year and remains at a minimum of 50% to FHA from five years from origination throughout the duration of the mortgage. If or when property values increase, the homeowner could lose a substantial amount of the profit when the home is sold, depending on the value of the home and the appreciation amount.

So, a lender-direct loan modification may, or possibly may not, be a better deal for the homeowner. As in any financial situation, consumers should weigh all options and seek advice from competent experts.

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The statistics are in for the Pittsburgh housing market for the month of September. Once again, these stats were taken from the West Penn MultiList and reflect sales for single-family homes only.

As you will see from the numbers, nothing too earth shaking occurred during the month of September, compared to last year.

Sales volumes remain down for most areas but the changes are not significant. Average sale price in general is holding steady, with some areas slightly down and a few slightly up.

For this month I added a new stat - average days on market for sales closing during the month of September. This number has risen slightly in most areas but not significantly so.

So, the magic question once again - what is the housing market outlook for the Pittsburgh area for the next 12 months?

Honestly, I have no idea.

What seems to be clear is that (as I’ve mentioned before) Pittsburgh didn’t have a "housing bubble" like many other areas in the country. Thus, no wild numbers to report.

On the other hand, we do not live in a vacuum.

Apparently, we’re going to get some relief from the government in the form of the controversial "bailout," which the President signed just a few hours ago.

There are also other relief programs that are already in place - one of which, the Hope for Homeowner’s Act of 2008, I will be discussing in an upcoming blog.

All this may help in the short term. However, the area of continuing concern is the fact that the federal government is now more than $10 trillion in debt. And the government continues to monetize that debt by printing more money to pay for more things. As more money is injected into the system, the value of the dollar will continue to fall.

That is, and should rightly be, our real long-term economic concern.

It’s a shame that almost no one is talking about it - certainly not the Presidential or Vice Presidential candidates.

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Now that it has become more challenging for buyers to get loan approvals, it would be helpful to have an idea of what lenders look for in the financial status of buyers.

Although the criteria will vary from lender to lender, the following is becoming fairly standard when applying for a mortgage loan.

Here’s a brief summary of what you’ll need:
 

* Employment - Two years of verifiable employment.

* If you’re self-employed you’ll need the past two years of tax returns and year-to-date profit and loss statement certified by an accountant.

* If you’re using bonus, commission or overtime money to qualify, this money must be verified by your employer as a continuing source of income and must appear as income on your last two years of tax returns.

* Income tax returns - last 2-3 years.

* Alimony or Child Support - documented evidence if you’re receiving these payments and intend to use the money to help you qualify for a loan.

* Divorce - if you’ve been divorced, you need to verify that you are not paying alimony or child support.

* Rental income - if you own rental property, you’ll need copies of all leases and income statements for the past two years. Lender may require that you have at least 30% equity in the property.

* Full explanations for any large deposits into your bank accounts within the last 3 months.

* Closing costs - you’ll need proof that you have the money to cover closing costs. Cash-on-hand will probably not be considered an acceptable source.

* Gift money - if you’re getting some money to help you pay closing costs you’ll need to fill out a form, signed by both you and the donor and a verification that the donor has sufficient funds to cover the gift and that the funds have been deposted into your account.

* If any money to close is coming from the sale of another property, you’ll need a copy of the signed sales agreement for that property and a copy of the HUD-1 (statement of closing costs) from that sale.
 

Again, requirements may vary from lender to lender - and there may be other documentation you’ll need aside from what I’ve stated above.

Despite the current problems in the economy and the housing market, if your credit is solid and you can provide documentation for just about anything, your chances for a loan approval are still excellent.

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Ah, September. The kids are back in school, baseball is winding down (mercifully, for the Pirates) and  football is winding up (Go Steelers!), and fall colors are about a month away.

For the Pittsburgh housing market, the changes seem to be a bit more of the same - the area is continuing to experience a downturn in the housing market.

Sales volume is continuing to take a hit. August 2008 sales volume compared to August 2007 is showing drops in most areas.

Here are the numbers:
 

August 2008 Sales Volume vs August 2007
East Allegheny County  -25%
North Allegheny County  -22%
Plum Boro  -30%
Monroeville  -54%
Penn Hills  -48%
Squirrel Hill  +8%
Westmoreland County  -12%
Murrysville  -43%
 

I can certainly attest to the fact that there are fewer buyers out there now than there were a year ago.

However, average sale price for homes are showing some interesting changes in some areas:
 

August 2008 Average Sale Price vs August 2007
East Allegheny County  +11%
North Allegheny County  +12%
Plum Boro  +6%
Monroeville  -26%
Penn Hills  -20%
Squirrel Hill  -18%
Westmoreland County  -10%
Murrysville  -7%
 

(Note: Stats are taken from the West Penn MultiList)
 

It’s difficult and tricky to identify any of these numbers as a trend for the near future.

It’s quite possible that we could see an overall improvement in the market leading up to the Presidential election. That would not be unusual.

Also, with interest rates falling again slightly, we could see things picking up - for a while.

But there are some disturbing reports lurking in the shadows.

The Federal Deposit Insurance Corporation (FDIC), the entity that insures bank deposits, will supposedly be raising the insurance premiums they charge memeber banks. So, it wouldn’t be much of a surprise to see this rise in costs of doing business for banks passed on to consumers in the form of higher rates and/or higher loan fees.

The FDIC is scheduled to implement this change in October - but again, we may not see the effects of this until after the election.

And with Freddie Mac and Fannie Mae still on the ropes, and more banks in the same precarious position …

Personally, I do not see the policies of either the Democrats or Republicans being a cause for much optimism in the long term.

Then again, I’m still waiting for my crystal ball to arrive in the mail.

Pittsburgh remains one of the better housing markets in the country. That may not be saying much right now, but at least it’s saying something positive.

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Zillow has just released its latest quarterly report for the national housing market.

While I’ve questioned Zillow in the past, and while I do still question their market value assessments ("Zestimates"), they appear to be getting their "sold" numbers from a variety of reliable sources.

However, since part of their report is based on their "Zestimates," some caution is required when taking their numbers at face value.

Overall, the nation’s home values have decreased by an average of about 10% from last year. The hardest hit areas are not big news - California and Florida are still experiencing the bursting of their housing bubbles, with some areas of California seeing price drops of as much as 40%. Some observers believe these markets will continue to drop over the next few years.

The Pittsburgh metropolitan area, on average and as a whole, hasn’t changed much since last quarter and has seen a slight increase in home values of 0.6%. Pittsburgh ranks in the top 10% in market stability according to the Zillow report.

The Philadelphia metro area has seen prices fall by about 3.5% from last year.

Of course, there are areas that vary within our region, as I reported in my last housing update where I compared July of this year with July 2007.

In the latest Zillow report, there are home value increases averaging around 6% in parts of Westmoreland County. In Allegheny County, home values have risen in areas such as the City of Pittsburgh, Monroeville, Allison Park, Gibsonia, and Bethel Park, where the average is around 3%.

So, we’re holding our own for now - which is not very surprising. The Pittsburgh area has had a conservative housing market for a long time and we’re continuing to see the wisdom and benefits of that economic conservatism.

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In a previous blog, I mentioned the Homebuyer Tax Credit for first-time buyers which is included in the housing bill recently passed by Congress - the Housing and Economic Recovery Act of 2008.

To recap - the bill provides a credit of up to 10% or $7500 (whichever is less) for first-time home buyers. The "credit" is actually a loan which is paid back over 15 years in equal payments. If you sell your home before the credit is paid back in full, the balance is due at time of sale.

The credit applies to the purchase of a home made between April 9, 2008 and July 1, 2009.

Here are a few more details on this credit:

Residency - The home you buy must be your primary residence until you pay back the credit. So, if you’re thinking of buying and then renting out the property, you’ll have to pay the balance of the credit in the year that you first rent it out.

Repayment - Starts two years after the year in which the residence is purchased.

First-time homebuyer - According to the CCH Group (a tax advisory company), "a person is considered a ‘first-time homebuyer’ if he or she (or spouse) had no ownership interest in a principal residence during the three-year period before the new home is purchased."

Income Eligibility (based on adjusted gross income) - For married couples, you can receive the full tax credit if your income is less than $150,000/year. The credit is then phased out up to an income limit of $170,000. If you’re single, you can receive the full credit if your income is less than $75,000/year; the credit is then phased out up to a limit of $95,000/year.

Claiming the credit - The credit is claimed after you purchase the home, so it cannot be applied to your closing costs.

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Looks like the downturn in the housing market is finally starting to hit home.

We’re seeing a lot of negative numbers for July 2008 compared to the same month last year.

Once again, I took a look at residential, single-family home sales, based on statistics from the WestPenn Multi List. Numbers reflect the percent change between July 2008 and July 2007.
 

East Allegheny County
Sales Volume -22%
Average Sale Price -3%

Westmoreland County
Sales Volume -25%
Average Sale price -8%

North Allegheny County
Sales Volume -24%
Average Sale price +1.6%

Butler County
Sales Volume 0%
Average Sale price +6%

Washington County
Sales Volume -32%
Average Sale price +7%

Murrysville
Sales Volume -48%
Average Sale Price +5%

Plum Boro
Sales Volume -42%
Average Sale Price -11%

Monroeville
Sales Volume -11%
Average Sale Price +3%

Penn Hills
Sales Volume -36%
Average Sale Price -16%

Squirrell Hill
Sales Volume -42%
Average Sale Price -1%

While the market in Butler County continues to remain strong, the rest of  the statistics speak for themselves.

The question now is: what effect, if any, will the housing stimulus package have on the Pittsburgh market?

I think it will take, at the very least, a few months  to see what happens.

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In case you missed it, part of the Fannie Mae/Freddie Mac bailout included some measures that will affect buyers and homeowners.

• A $7,500 tax credit for first-time homebuyers - note that this is based on 10% of the sale price, up to a maximum credit of $7,500.  However, don’t get too excited - this money is more of a loan, in that it will have to be paid back over the course of 15 years. But at least it’s interest-free. This will apply to home purchases made between April 9, 2008 and July 1, 2009.
• A tax deduction for homeowners who don’t itemize deductions on their income tax returns - estimated deductions will be between $500 and $1,000.
• Higher limits on mortgages insured through Fannie Mae and Freddie Mac - up to $625,000 beginning January 1, 2009. The current temporary limit of $729,750 will stay in effect until the end of this year.
• Mortgage refinancing for distressed homeowners - allows homeowners facing foreclosure to apply for lower fixed-rate mortgages backed by the FHA. However, the original lenders would have to agree to potentially take a loss on their loans.

On the darker side of all this are provisions in the 600+ page bill that will require the fingerprinting of mortgage loan originators (broadly interpreted to include anyone who takes a mortgage loan application) and the requirement for payment systems nation-wide to report online transactions to the IRS. This includes eBay’s PayPal, Amazon.com, and Google Checkout, as well as the major credit card companies.

Some bloggers (you can Google the topics) are questioning these provisions, especially wondering what that last one is doing in a housing bill.

Based on some research I did, it does not appear that either of these provisions will be removed from the bill when it is finally signed by President Bush.

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I hear hurricanes ablowing.
I know the end is coming soon.
I fear rivers over flowing.
I hear the voice of rage and ruin."

                        - Creedence Clearwater Revival

Most people don’t want to hear bad news. I surely don’t.

Most people like to believe that when the ride gets bumpy, things will soon smooth out - and not get bumpier. Many people have faith that our elected leaders will not let the ship go down.

However, if we’re going to be realistic, then we need to face reality.

This country is in some economic trouble. And it’s not looking good.

Many of you have probably heard the news by now - Fannie Mae and Freddie Mac in distress. IndyMac, one of the largest mortgage banks in the country going belly-up. The Bear-Stearns bailout.

And that’s just the recent news.

The US government has pretty much stepped in to say that they will not allow these large financial institutions to go under - that the government, i.e. US taxpayers, will be the lender of last resort.

While this may sound like a reasonable, necessary and immediate solution, it will only make things worse in the long run.

Consider that the federal government is now approximately $9.5 trillion in debt - and that’s only the debt that we know about, the debt that’s "on the books."

To get some perspective on this $9.5 trillion national debt - if you took one dollar bills and stacked them in a single pile, this pile would be approximately 568 miles high. Picture driving from Pittsburgh to Nashville.

Hmmmmm.

We have an economic system in this country that is built on debt. Even the so-called money we carry around in our wallets and pockets represents nothing more than a debt instrument.

While I’ve mentioned that the housing market in Pittsburgh has not seen the wild swings of other markets, we need to keep in mind that our fair city does not exist in a vacuum. Buyers in this area access the same lenders that people all over the country use. And as these lenders tighten the screws, we’ll feel it over here as well. Even local lenders will be forced to become far more conservative when it comes to handing out money.

In fact, this is already coming to pass.

I’m not an economist nor a politician. I have trouble understanding most of the mumbo jumbo we hear from people who are economists and politicians.

But the mumbo jumbo is there for a reason - to confuse people; to lead us to believe that it takes economic wizards and esoteric incantations to figure out what’s going on.

I believe that economics does not reside in a supernatural realm where only the initiated may partake of ancient wisdom.

I believe the solution to all this is fairly simple: This country needs to get on sound economic footing by reducing the size, and therefore the expense, of government. We need to do away with fractional reserve banking. We need to return to a constitutionally-based dollar, which is gold and silver coinage.

This may sound quaint (even conspiratorial!) to some, but this is the only way to get the economy on solid ground.

Making these changes would be painful for a while. But not nearly as painful or long-term as allowing this present system to run its course.

Some folks might call me an alarmist. My take is that if you smell smoke, you sound the alarm. Waiting for the building to first go up in flames seems fairly useless.

It could take many more years before everything implodes, but in the meantime the writing is clearly on the wall.

If we don’t heed these warning signs soon, there will be much weeping and gnashing of teeth.

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