Rent vs. Own is an age old question. And the answer differs depending on where in the country you want to live. Connecticut is LoanClassrooms backyard so a comparison into CT real estate is what we are going to do.

I recently read an article in the local Norwalk Citizen newspaper. It was an article on rents in the Stamford-Norwalk area. It is what intrigued me to do this comparison.  I read the article and thought it was good stuff.

I was shocked to learn that in the entire US the Stamford-Norwalk area of Connecticut now requires the highest hourly wage to be able to afford to rent an apartment. In a recent report from The National Low Income Housing Coalition they detailed a report on hourly wages needed to afford two bedroom apartments by state, county and metropolitan area. The Stamford-Norwalk area was the highest in the country. Danbury Connecticut ranked 8^th. As a state Connecticut was sixth in the country overall.  The study pegged the required annual income at nearly $70,000 a year to rent a two bedroom apartment in Fairfield County based on a monthly rental amount of $1,750.

Now let’s look at what $70,000 would get you if you were looking to buy a home as opposed to rent in Fairfield County. According to Zillow.com the median price for a 2 bedroom single family home in Norwalk, CT is $375,000. Let’s say you have saved enough to put a 10 percent down payment for a purchase. You put down $37,500 for your down payment and take a mortgage for the balance, $337,500. Based on your mortgage payment of principal and interest, your property taxes, your home owners insurance, an interest rate of 4.875% for a 30 year fixed mortgage and applicable mortgage insurance or (PMI) the housing payment is $2,400. To put that in perspective on an income of $70,000 that is pre-tax $5,833 a month. With a mortgage payment of $2,400 that leaves food, utilities, taxes, insurance, cell phone, food, car credit card, general living expenses yet to be paid. Assuming you are in a 28% tax bracket your take home pay less taxes is roughly $4,100. Meaning $1,700 a month needs to cover all the rest. That is living pretty tight. Not impossible but darn tight.

In summary the old question here is rent vs. own and based on the numbers renting for a while might be the answer at that income level and purchase price. Keep in mind we used 10 percent for a down payment. The average median price for a 1 bedroom single family home is $265,500 in Norwalk, CT. So if you want to own and are in that income level buyers market or not you will have to look hard to find something in your price range in Fairfield County. It is understandable why Fairfield County is the highest income requirement to rent in the country.

The snow is gone, the ground is wet and the smell of spring is in the air. That means the Spring Real Estate Market is here. If you are in the market to buy a home you will certainly come across homes that have been foreclosed.  In February there were roughly 291,000 filings alone. Here are some things that you need to know when buying or putting an offer on a foreclosed home.

·         First of all there are several stages of buying a foreclosure. You can actually go to the auction and bid on the house. You need to be aware that the standard requirement is posted in the paper for the down payment. It is typically 10 percent of the estimated value and the funds need to be certified or a cashiers check.

·         If you are the highest bidder and have your funds ready, you have typically 30 days to close on the purchase. Make sure your mortgage is good to go or you could be at risk

·         Aside from going to the auction, nowadays it is more common for the lender to foreclose and then list it with an agent. He takes your offers to buy and works on behalf of the bank or lender.

·         Buyer beware, foreclosure sales are as-is. So if you are putting an offer on a home that was foreclosed and bank owned make sure you get an inspection before-hand. If not you may be in for more than you bargained for.

·         If you are looking at a foreclosure as an investment think long term. This is not a “quick” flip market. Six months minimum, if you know what you are doing you may be able to make a good profit. But the key is being able to hold the property for a while.

·         Often times there are liens or back taxes that are due on foreclosed homes. Have your attorney do a search to make sure that you are not stuck with the previous owners tax debt.

·         Do your homework with the bank or the real estate agent representing the bank to find out depending on where you live if the home was “winterized” before the utilities were turned off. You may also want to make sure the utilities are in working order before buying. Besides most lenders or banks want the utilities in working order before they lend you money for a mortgage anyway. However if by chance that is not the case you should investigate.

The stories that you hate to read about are the ones where you have hard working citizens that because of the real estate downturn and the mortgage crisis end up getting hurt. The real estate boom brought with it a flurry of new construction. It was not just one town but everywhere. From Maine to Connecticut to Virginia to Nebraska and the West coast. The story that I am referring to are the people that have fallen victim to the boom in construction.

Real estate prices kept appreciating as they raised the builders kept on building. Brand new condominium complexes kept going up. In some parts of the country they were selling faster than they could build them and this is where the problem started.

Selling a condominium pre-construction became a normal practice in the real estate world. I personally bought a condo pre-construction back in 2007. Builders would accept offers and down payments often times before ground even broke. In some of the more speculative areas like Vegas, Arizona and Florida units would be sold out before a project was even complete.

The people who bought pre-construction had down payments and were left waiting for the condo’s to be finished. The problem lies where people purchased these units and had financing but amidst the mortgage crisis a lot of the programs do not exist anymore. So the people who put 10 percent down payments on these condos thinking that they had financing for the other 90 percent of the purchase price are realizing that they in fact have no financing leaving them and their down payments at risk.

I had a client that lost his deposit on a new condo complex in Stamford, Connecticut. He put his down payment down almost two years ago and had financing from a lender. The lender told him that they no longer offer the program he was approved for. He needed stated income financing. He came to my office at Everlsey Capital Mortgage in Norwalk, Connecticut to see if I could help him. Unfortunately stated income loans are no longer around and there was nothing I could do to help him. He ended up losing his deposit.

There was an article in the New York Times Real Estate section on this very topic. It featured stories just like the client that came into my office looking for a mortgage. These are the stories that you hate to hear about and it is unfortunate that these people are victims of the financial crisis. To read the New York Times article click here:    NY Times Article

One of the country’s largest mall operators General Growth Properties filed for bankruptcy yesterday. It is one of the largest commercial real estate collapses in U.S. history. General Growth Properties which is based in Chicago, IL has been in the commercial real estate market since its founding in 1954. It was the second largest mall operator in the country behind Simon Property Group.

The stumble and sequential bankruptcy filing has affects here in Connecticut. General Growth Properties manages the Brass Mill Center in Waterbury, CT and it also runs The Shoppes at Buckland Hills in Manchester, CT. The company either owned or operated 200 regional shopping malls and controlled approximately 200 million square feet of retail space.

Here is a link to the New York Times article yesterday in regards to the collapse.      New York Times

Candy Spelling widow of the late famed producer Aaron Spelling place “the manor” located in the exclusive Holmby Hills neighborhood of California for sale and listed the property for $150,000,000. The largest home in Los Angeles County sits on nearly 5 acres and encompasses a massive 56,500 square feet.

An excellent strategy is to list a home that without searching internationally I think is the highest list price on the market in the US by far. Especially when the economy is in the toilet and even the super rich and celebrities are feeling the credit crunch. I would assume that the strategy other than to sell the home is to see if it could make the Guinness Book of World Records for the longest running Real Estate listing? That very well could be. The next highest listing I could find in the area is $65 million. Interesting to see if and what it sells for.

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Could this be the week that is the turning point of the financial mess? A fine week it has been. I am not sitting here yelling “bottom”, we have hit “bottom” just yet but the news flow this week has certainly been positive and the markets have proved it.

The Dow Jones Industrial Average started the week out at 7278 and closed yesterday at 7924 rallying nearly 10 percent for the week. A couple surprise earning announcements comingled with some light at the end of the tunnel in the Real Estate world and poof, we have a rally on our hands.

On Monday the report came out that existing home sales were better than expected. The figures reversed course of a downward trend and posted a 5.1 percent increase. The market cheered and on Wednesday new home sales data was released for February and that too rose unexpectedly. The Commerce Department said new home sales rose 4.7 percent to a seasonally adjusted annual rate of 337,000. Forecasts were for a 300,000 figure.

In historical comparison neither the existing or new home sales figures are great. In fact the new home sales figures were down 40 percent from the same month a year earlier and the adjusted annual rate of 337,00 new home sales is the worst on record dating back to 1963. We know all too well that the economy is in a recession and our equity and real estate markets have been in a never ending downward spiral. It is the positive news that we are looking to build on. Personally I do not think we are at bottom yet, for the sake of my livelihood as well as the rest of the country I hope that I am wrong. There are still too many facets of the economy that are in turmoil. The point that needs to be taken from this is positive, if for nothing else it is a relief from the doom and gloom to get a little positive news. It is also a signal that maybe not this week or next but soon we can start to say that we are in recovery and moving in an upward trend. This week shows us that there is light at the end of the tunnel.

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