Simply put, the real estate absorption rate is the formula that indicates whether it is a “buyer’s market” or a “seller’s market”. It denotes how well the market is absorbing the current inventory of listings.

The ultimate question is, “Is the current inventory level shrinking or growing?” Shrinking inventory favors sellers and growing inventory favors buyers.

Absorption rates, in any defined market, are considered one of the very best indicators of whether that market is a seller’s market, a buyer’s market or a neutral market. It is based on how many months will it take to sell the inventory currently on the market.

A seller’s market has a 1-4 month absorption rate while a buyer’s market has absorption rates greater than 7 months. A neutral market indicates 5-6 months of available inventory.

Absorption rate can be calculated in a number of ways. Certain factors are critical such as the time frame. Will the figures reflect a month’s worth of sales, a quarter, a year? In my opinion, working with six months worth of inventory to compute a month’s figure is the most useful.

If you’re end calculation equals the absorption rate for the entire Katy area, this number is meaningless. To end up with a meaningful figure break down the numbers to market segments.

Analyze the sales in a particular subdivision. Bracket related information, for example: sq-footage, age, year built, swimming pool and the like. Add a particular price range to any of these parameters.

The general rule of thumb is to divide the number of homes sold in 6 months by 6 to calculate the number of homes sold in a month. Then, take the current listings and divide by the number of homes sold in 1 month. The absorption rate equals the number of months it takes to sell a home. Here’s a random example:

Homes Sold (1000)/Months (6) = 166 homes sold per month

250 Current Listings/166 homes sold per month = 1.5 months

Using this data, the home should be sold in 1.5 months. Clearly, this example (not reflective of any particular Katy area) indicates a strong seller’s market.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404. I offer financial incentives to my sellers/buyers. I have specialized in Katy real estate for over 20 years. Experience does count!

Many Katy Realtors still do not understand the process of a  Short Sale  even though there are many such properties in Katy. What does it take to get a get a Short Sale written and closed?  Acquaint yourself with the basics by reading this article and call me at 713-818-2404; I am an expert in the field of Short Sales!

Let’s start at the beginning, what is a “Short Sale”. A Short Sale is where the net proceeds from the sale of a property are less than what is owed to  mortgage companies and other lienholders. The seller receives no funds from the sale and all lienholders must agree to the transaction.

The seller’s best interest is served by having any sale approved by the mortgage company.  Although the seller’s credit is adversely affected, they do not have a foreclosure on their record.

The mortgage company tries to get the highest amount they can in order to reduce their loss on the transaction . This involves a negotiation process which can take quite some time. As a general rule, these transactions will take a minimum of 30 days to complete but,  depending on the circumstances, can take 90 days or more. All parties involved in the transaction need to be aware of the possible time frame involved.

Because the mortgage company is taking a loss on the transaction, they control a lot of the specifics of the sale, including, but not limited to, what can/can’t be included in the contract and when closing/funding must occur.

Following are the usual stipulations tied to a Katy Short Sale:

• Any contract submitted is subject to acceptance by all mortgage companies and lienholders. It is not considered executed until all approvals are received, even though the seller will sign the contract in order to submit it to the mortgage company. The Special Provisions section of the sales contract will include verbiage similar to this: “This contract is subject to acceptance of seller’s mortgage companies and lienholders.”
• All offers must include a lending pre-approval letter.
• The seller will not be able to do any repairs to the property. The sale is “as-is, where-is”. (Note: This not always true. It depends on how many offers are on the property which is usually multiple.)
• Seller is not in the position to provide Homeowner’s Association documents. If buyer requires the documents a part of evaluating the purchase of the property, buyer will need to order and pay for them.
• Mortgage companies generally will not pay for surveys, inspections, treatments or residential service contracts. Depending on the offer and the amount they will receive, the mortgage company may or may not allow some seller contributions to buyers closing costs.
• When and if the mortgage company accepts an offer, they will have a specific date for closing/funding. These dates are generally firm and while it may be possible to get an extension, there is no guaranty an extension will be granted.
• There is no guarantee that any offer submitted by a buyer will be accepted by the bank.

by Danielle Hale, Research Economist

• Headline CPI is the measure of inflation based on the Consumer Price Index most often discussed in the media because it is what most consumers actually feel in their pocket books—the changes in the prices of all goods. Headline CPI is used to adjust Treasury Inflation Protected Securities and individual income tax parameters.
• Core CPI is a measure of inflation also based on the Consumer Price Index and reported by the Bureau of Labor Statistics. It is called “Core” inflation, because it excludes volatile food and energy prices, which tend to swing in response to economic rather than monetary shocks. It tends to be used by monetary policy makers.
• Looking at data from the late 1990s through the present, we see that headline inflation is more varied and is frequently but not always higher than core inflation.
• Core inflation, has remained in the 1 to 3 percent range (denoted by green brackets).
• Whether the Fed is intentional about it or not, core CPI has tracked a 2 percent target fairly closely in the last decade. Even in recent months, when talk of inflation and deflation is grabbing headlines, Core CPI has remained at 1.7 to 1.8 percent on a year-over-year basis—well within the range it has maintained for the last 10 years.Copyright National Association of Realtors, Reprinted with permission

One of the benefits of writing a blog is that, sometimes, I can brag about me. This is one of those posts, forgive me for being self-indulgent, please.

What are those letters I often put behind my name? What’s a GRI?

Realtors who hold the Graduate Realtor Institute (GRI) designation have dedicated their time and money to advanced real estate education to bring you above-standard professional service. The GRI curriculum incorporates a common body of knowledge for progressive real estate professionals; within certain perimeter it is State-specific as are real estate laws.

A Realtor who possesses the GRI designation has not only completed a course of study, 90 post-licensing hours required by the program, but also strictly subscribes to the Code of Ethics of the National Association of Realtors (NAR). This should be a prime consideration, the ethics of your agent.

Why choose a Realtor with a GRI designation? Buying and selling property is a complex and stressful experience. For many families it’s the biggest single investment of their lifetimes. Over the years, since I attained my GRI in 1990, real estate transactions have become increasingly complicated and, quite unfortunately, litigious. I am proud to say that in my near-20 years of practicing real estate none of my transactions, or me, personally, have ever been involved in a lawsuit.

New technology, laws, procedures and the increasing sophistication of both buyers and sellers require Realtors to perform at an ever-expanding level of professionalism. So, it’s more important than ever that you work with a Realtor who has a keen understanding of the real estate business. According to NAR, “The GRI program has helped the best and the brightest in the industry achieve that level of understanding.”

It is with great pride that I add the letters GRI to my name.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404.  I have specialized in Katy real estate for over 19 years. Experience does count!

The Housing and Economic Recovery Act of 2008, the most sweeping housing legislation since the Depression era, was passed by the U.S. Senate and House of Representatives at the end of last month and was signed into law by President Bush. The new law addresses various aspects of the housing downturn, including assistance for homeowners who are behind on their mortgages, federal oversight of Fannie Mae and Freddie Mac, and funding for cities to buy and fix up foreclosed properties.

Many of the provisions of the new law go into effect October 1, 2008 but for first-time home buyers who bought, or will buy, their home between April 9th of this year and July 1, 2009, there’s an immediate bonus — a tax credit of up to 10 percent of the sales price, up to $7,500. Note that this is a tax credit, not a tax deduction. A deduction is an item that is subtracted from your annual income before income taxes are calculated. A tax credit is subtracted from the amount of taxes you owe.

“First-time home buyer” is specifically defined in the new law, and includes those who may have owned a home in the past, but not within the last three years. To qualify, be prepared to show your last three years’ worth of income tax returns to prove that you did not pay mortgage interest during that period. There are also income limitations on the tax credit – $75,ooo per year if you’re single and $150,00 if filing a joint return to qualify for the full credit, but the credit does phase out beyond those amounts up to $95,000 for singles and $170,000 for joing filers.

By the way, the tax credit isn’t a gift – you have to pay it back. Nevertheless, it provides an initial reprieve, as repayment doesn’t begin until two years after purchase, and is payable over a 15 year period. If you sell the property before the tax credit has been fully repaid, any remaining amounts owed are due to the IRS upon closing.

Applying for the tax credit isn’t mandatory, but for many, it will make home ownership feasible in the coming year — and that’s exactly what the tax credit is intended to accomplish.

Written by David Reed, Texas-based mortgage banker with more than 20 years experience

and author of Mortgages 101 and Mortgage Confidential.

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404.  I have specialized in Katy real estate for over 19 years. Experience does count!

I make a point of telling my buyer clients, “I’m so much fun to work with until you break one of my Four Rules for Real Estate Success. Then, it’s not a pretty picture!”

1. Location, location, location
2. It’s better to buy an ugly house on a good lot; you can always fix a house but a lot is permanent.
3. Buy on the low end, price-wise, of a higher neighborhood.
4. The only time to think about resale is before you buy.

So, there we go! Should I smile or throw an ugly tantrum?

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404. I have specialized in Katy real estate for over 19 years. Experience does count!

Reprinted from Wikipedia

In real estate, a “short sale” is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt.

For example, if the unpaid balance of a loan is, say $100,000, and a property sells for $90,000, under a short sale the lender might accept $90,000 as payment in full. In such instances, the lender would have the right to approve or disapprove of a proposed sale.

Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.

A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history. Additionally, a short sale is typically faster and less expensive than a foreclosure.

In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator’s approval. “Red tape” is very common in short sales, similar to REO and HUD properties, requiring potentially multiple levels of approvals and conditions.

Junior liens, such as second morgagees, HELOC lenders, and HOA (special assessment liens), may need to approve of the short sale. Frequent objectors to short sales include tax lieners (income, estate or corporate franchise tax – as opposed to real property taxes, which have priority even unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale.

While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor’s credit report, or even flat refuse to do so “due to their financial loss.”

For information about Katy area homes, you can search the entire Houston MLS from this blog. For questions or to tour any area homes, contact me directly at 713-818-2404. I have specialized in Katy real estate for over 19 years. Experience does count!