In Wisconsin, Housing Prices-to-Income per Capita and Housing Payments-to-Income per Capita are at their lowest since 1982. And, that’s a good thing!

Near record-low interest rates pushed the Housing Payment-to-Income per Capita ratio over 39% lower than the 30-year average.  

Let’s take a practical example.  If a buyer purchased a $200,000 home in May of 2003, at a 5.48% interest rate their principal and interest payment was $1,133.07.  The same mortgage in 2011 at a 3.91% interest rate would be $944.48 for a monthly savings of $188.59, a yearly savings of $2,263.08 and savings of $67,892.40 over the 30-year mortgage.

Today’s smart buyers understand that by taking advantage of record-low interest rates and fantastic home values they can lock in relatively low housing costs for 30 years. No matter what happens to inflation and in turn prices, today’s buyers will have locked in a housing payment they can plan on for the next 30 years.

"The Wisconsin housing market is still very much a buyer's market, and the decline in median prices in December combined with 30-year mortgage rates below 4% has pushed affordability to very high levels, which is great news for buyers who qualify for mortgage credit," said Wisconsin Realtors® Association President and CEO, Michael Theo.

Owning a Home is a Good Financial Decision

For most, improving a way of life has been the primarily reason for owning a home. However, in recent years more and more people are finding the need to justify a home purchase as a sound financial investment as well.

If you look at the Return on Investment graph below, you’ll see that owning a home over the last 11 years had significantly higher returns than the S&P and NASDAQ which both resulted in negative returns.

While this is all said and true, many still may question whether it is the right decision based on the real estate market of the last several years. The answer is a resounding YES! It is the right decision.

According to the opinions of over 100 of the nations top economists in the Macro Market Survey, an annual appreciation of 1.1% is expected beginning this year through 2015. See graph below.

In summary, housing prices are expected to continue to drop in the first part of 2012 and then start to rebound later in the year. By the year 2015, the economists expect annual appreciation over 3%.

When you accumulate appreciation from year to year, the return on a house purchased today and sold in 2016 is expected to return almost 11%. If the economists’ predictions are correct, the fear of losing money if buying a house is finally over.

Our Market Predictions

Pricing is Determined by Supply and Demand

Pricing for an item or service is typically determined by supply and demand, and in the housing industry, it usually isn’t different. Except for this year.

Currently, the demand for housing is increasing while supply decreases. So based on the old adage, one would think that pricing will soon increase. But that isn’t the case right now. While the supply and demand ratios are in much better shape now than they were six months ago, the amount of inventory (supply) is about to increase.

The majority of the increase will include distressed foreclosure properties. As the foreclosure inventory comes to market, it’s going to have a major impact on supply and demand. As distressed properties sell at a discount, the price of non-distressed properties will continue to soften, significantly impacting all prices.

So, if you’re selling or thinking about selling your home, waiting until spring to sell or put it back on the market to get a higher price doesn’t make sense today. Instead, you’ll want to list and get it sold now before the distressed properties hit the market.

And, if you’re thinking about buying a home, don’t wait out the market hoping to buy at a lower price in spring. Rates are low today making it more affordable than ever. Don’t risk paying more for a house because of a higher mortgage rate just to get it at a lower price. Plus, who knows if your dream home will still be around.

Final Advice for Sellers

List and sell your home today to avoid competing with distressed properties coming to the market later this spring. Price your home competitively and below similar homes on the market to make sure your home sells now.

Final Advice for Buyers

Take advantage of today’s low interest rates and softening prices. Waiting for home prices to drop even more, may actually result in increase costs if mortgage rates increase.

New Year, New Career!

Are you a people person? Do you want more freedom in your job?

True freedom means being your own boss, which makes real estate one of the most rewarding careers you can choose. And if you are going to join a real estate company, you might as well join the best.

At Shorewest, REALTORS^®, Wisconsin’s Largest Home Seller™, you will find exceptional opportunities and unlimited support. With over 900 sales associates and more than 300 support staff, Shorewest has long believed in hiring the best people, training them well and recognizing their achievements.

Have no sales experience? No problem.

Many successful Shorewest real estate agents have come from careers other than sales. Check out the video to see for yourself.

Visit joinshorewest.com to find out more.

Homes are Selling

On average 12,109 homes sell every day, according to a National Association of REALTORS® (NAR) December 2011 report. And, of those 72% or an average of 8,718 buyers a day receive a mortgage.

In Wisconsin, home sales are up 14.8% when you compare the fourth quarter of 2011 with that of 2010, according to Wisconsin Association of REALTORS®. In our marketing area of 12 counties, we’re averaging 1,650 homes sold every day.

With increasing consumer confidence, record low mortgage rates and housing affordability at an all time high, we’re predicting the number of home sales to increase dramatically in 2012.

Connie Chen, senior analysis at Moody’s Financial, is predicting an increase in home sales of 30%, and an increase of new construction of 60% compared to last year.

The national unemployment rate is down from over 9% to 8.6%. And, the Wisconsin unemployment rate is even better at 7.1% (U.S. Bureau of Labor Statistics, Dec. 2011)

In December of 2012, the Mortgage Bankers Association released a study on what people thought about buying a home. They broke it down into two segments — those that owned a home and those that rent. Within each segment, they broke it down further by race, marital status, education and region. The results show that both segments — the home owners and renters — the vast majority agree that now is a good time to buy a home. Click here to see the details of this study.

When selling your home, the buyer’s mortgage provider must approve the selling price to justify the loan. This is done by appraising the home compared with similar sales and homes in the market. Unfortunately, distressed (discounted) properties are often included in the appraisal comparison. This results in one out of three offers not closing because of the home value appraising below the offer price.

Sellers basically need to sell their homes twice in today’s market — to the buyer and then to a bank. That’s why you need a professional to navigate through the process – especially from contract to closing.

There’s a new wave of foreclosures coming to the market. In the past, we mainly saw houses with sub-prime mortgages going into foreclosure. Today, homeowners with jumbo loans now constitute a greater strategic default risk than any other type of borrowers, including sub-prime, according to Moody’s Analytics. That’s because an exceptionally high number of jumbo owners are stuck with persistent negative equity, meaning their house is worth less than the amount they owe on it.

So the foreclosures coming to market will basically affect every price point, every neighborhood. And, the higher the home price is the greater the impact might be.

by: John Inzeo, Vice President

As we entered 2012, interest rates continue to remain at all-time lows. But for how long is the question.

So whether you’re purchasing a home or refinancing an existing mortgage, don’t procrastinate. Rather take advantage of the low rates and soft home prices that are available today.

We have little control over the future of rates. Monetary policy, new regulations and guidelines as well as economic swings within our own country and abroad, should lead us all to take action now while the getting is good. Trying to time the market remains a dangerous strategy when we have so little control over what affects the market. Taking action before market changes occur is the best strategy for consumers today.

Although we have a long road to travel, I do believe that the mortgage industry has made great progress to correct past problems and can now begin to refocus on better ways to deliver financial solutions to customers.

Do you have an Android, iPod Touch, iPad or iPhone? If so, you are going to want to download Shorewest’s free application to help find your new home. Shorewest recently released the Android and iPad applications and updated the iPhone and iPod Touch applications.

“Consumers are becoming more mobile with their technology, so we decided to provide applications for the popular Android and iPhone/iPad platforms,” said Joe Horning, President of Shorewest, REALTORS®. “We are continuing to keep pace with our current and future clients to make their home-buying experience easier.”

The free ‘Shorewest’ applications are available through the ‘Market’ on your Android-powered device and in the App Store for your iPhone, iPad and iPod Touch.

The applications offer:

• Map search including: “Nearby” (Android GPS Required)
• Search active and open houses
• See recently viewed homes
• Search for offices and agents by name
• Search by street name, property type, price and more
• Mark favorites: save interesting properties
• Share properties via e-mail
• Contact us with a touch of a button
• And so much more!

Click here for the Android App
Click here for the iPhone, iPad or iPod Touch App