Buying into the American Dream

For the fifth consecutive year, President Bush has declared the month of June as National Home Ownership Month. This effort is designed to encourage and inform prospective home buyers about the programs and tools available to make it possible for them to purchase a home, with a specific goal to increase minority homeownership in America by 5.5 million by 2010.

As part of the celebration, Nevada Association of Realtors (NVAR) members and leadership from around the state will participate in a Habitat for Humanity project in Las Vegas at the end of the month, building a house for a low-income family. The state association also will work with the National Association of Realtors to further promote tools and education for prospective home buyers. For tools, tips and resources on Homeownership Month or buying a home, log onto www.nvar.org or www.realtor.org.

Long- And Short-Term Rates Rise on Stronger Than E

The latest Freddie Mac Primary Mortgage Market Survey (PMMS) shows that the 30-year fixed-rate mortgage (FRM) averaged 6.37 percent with an average 0.4 point for the week ending May 24, up from the previous week when it averaged 6.21 percent. Last year at this time, the 30-year FRM averaged 6.62 percent. The 15-year FRM averaged 6.06 percent with an average 0.4 point, up from the previous week when it averaged 5.92 percent. A year ago, the 15-year FRM averaged 6.23 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.02 percent, with an average 0.5 point, up from the previous week when it averaged 5.92 percent. A year ago, the 5-year ARM averaged 6.21 percent. Frank Nothaft, vice president and chief economist for Freddie Mac, credited the rise in interest rates to stronger-than-expected consumer confidence and recent comments from members of the Federal Reserve that raised inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year. Nothaft expects a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year.

Gas Prices Have Little Effect On Home Sizes

For the first time since the oil crunch reached record highs way back in 1981, gas prices have risen even higher as the nation braces for an expensive summer for transportation. How will gas prices affect housing? According to the most recent Lundberg Survey, the price of gas is $3.18 per gallon for regular unleaded. AAA, the motorist group, showed prices up 11.8 percent over last month. Americans' love affair with SUVs has caused housing manufacturers to upsize garages, along with other housing features. "Census data collected since 1991 indicates that the percentage of homes built with garages for three or more cars has doubled, from 10 percent in 1991 to 20 percent in 2005," wrote the National Association of Homebuilders in 2006. In 2005, the average floor area in a newly built home reached an all-time high of 2,434 square feet - up from an average 2,349 square feet in 2004 and just 1,645 square feet in 1975. Since then, home sizes have moderated slightly due to high building costs. Some homebuyers are seeking smaller, but feature-rich spaces.

Big Week For Housing Numbers - Is It Over?

Both new and existing home sales numbers for April were released last week. According to the National Association of Home Builders, sales of new U.S. homes surged in April, ending months of declines. Sales rose by 16 percent to a seasonally adjusted annual rate of 981,000. Prices crashed in April, down 10.9 percent over last year, to a median price of $229,100. Putting the numbers into perspective, last year NAHB members sold 1,097,000 seasonally adjusted homes in April. The pace of sales is the fourth consecutive month below the benchmark one-million pace, a cause for concern that the worst isn't over, and hope that the pricing correction has hit bottom. One news report calculated that the new home price is down 11.1 from March 2007, making it the biggest month-to-month drop in sales prices on record, and the sharpest year-over-year drop since December 1970. Meanwhile, sales of existing homes, as reported by the National Association of Realtors, declined to a four-year low to a seasonally adjusted annual rate of 5.99 million units in April from an upwardly revised level of 6.15 million in March. This is 10.7 percent lower than the 6.71 million-unit pace in April 2006. Worse, housing inventories rose 10.4 percent to 4.20 million homes for sale. That's an 8.4-month supply, the largest on hand in 15 years.

What's More important - Buying a House? Or a Hom

As you read and study about buying real estate, you will often find the words "house" and "home" used interchangeably. There is a huge difference between a house and a home.

A house can be a place to eat, sleep, park your car, and put all your "stuff" (including other family members). It is a material possession and an investment. A home is where you feel comfortable, warm, safe, and protected.

A home is where you live.

A house is something you buy logically. A home is an emotional purchase. When buying real estate you have to balance your emotional wants and your logical needs because there will almost certainly be a time when the two conflict.

Example

For example, you may want a house with a view, but the payment is higher than you feel comfortable with on a thirty-year fixed rate mortgage.

What do you do?

Purchase the house anyway and budget more carefully for the next few years? Buy the same house without the view and get it cheaper? Make a larger down payment by borrowing from your 401K or family members, so you get a lower payment? Get an adjustable rate mortgage with a smaller payment instead of a fixed rate loan? Or buy a smaller house and still get the view?

When viewing the house, most people look at it emotionally and envision it as a safe, happy, comfortable home. Later, when making the offer or filling out a mortgage application, your logic may begin to kick in, instead. That's when "buyer's remorse" may come up, but...that's a different article.

Balancing Act

The trick in buying real estate is to view all decisions with both a logical perspective and an emotional perspective. If a situation presents itself that requires a trade-off, decide on whether there is a huge conflict or a small one. Logic should win the big conflicts, but emotion should always be a factor, even winning the small ones.

You will find yourself owning a warm, happy, safe home ? and an investment for the future at a price you are willing to pay.

HOW CHANGING JOBS AFFECTS BUYING A HOME

For most people, changing employers will not really affect your ability to qualify for a mortgage loan. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

Salaried Employees

If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage.

Hourly Employees

If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems.

Commissioned Employees

If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years.

Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.

Changing jobs would negatively impact your ability to buy a home.

Bonuses

If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income.

Changing employers means that you do not have the two-year track record necessary to count bonuses as income.

Part-Time Employees

If you earn an hourly income but rarely work forty hours a week, you should not change jobs. There would be no way to tell how many hours you will work each week on the new job, so no way to accurately calculate your income. If you remain on the old job, the lender can just average your earnings.

Over-Time

Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average.

Self-Employment

If you are considering a change to self-employment before buying a new home, don?t do it. Buy the home first.

Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.

If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.

THINGS NOT TO DO BEFORE PURCHASING A HOME

Review the blog titled, "Don't Buy a Car," and apply it to any major purchase that would create debt of any kind. This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings, and automobiles of course.

Don't Move Money Around

When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.

The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer.

Oh, don't change banks, either.

Should You Change Jobs?

For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

HOW BUYING A CAR REDUCES YOUR PURCHASE PRICE

Debt-to-Income Ratios and Car Payments

You see, when determining your ability to qualify for a mortgage, a lender looks at what is called your "debt-to-income" ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner?s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and car payments.

How a New Car Payment Reduces Your Purchase Price?

For example, suppose you earn $5000 a month and you have a car payment of $400. At current interest rates (approximately 8% on a thirty-year fixed rate loan), you would qualify for approximately $55,000 less than if you did not have the car payment.

Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours. Do not get discouraged, however. You should still take the time to get pre-qualified by a lender.

However, if you have not already bought a car, remember one thing. Whenever the thought of buying a car enters your mind, think ahead. Think about buying a home first. Buying a home is a much more important purchase when considering your future financial well being.

Do not buy the car. Buy the house first.

NEW HOME SALES SOAR 16 PERCENT

New-home sales soared in April, an unexpected surge marking the biggest climb in 14 years, according to a report that showed declining inventories and signaled hope for the long-suffering housing sector.

Separately, demand for expensive goods rose mildly in April, according to a government report Thursday that also showed capital spending by businesses grew again.

Sales of single-family homes increased for the first time in four months, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday. March new-home sales decreased 1.4% to an annual rate to 844,000, a figure revised down from an earlier estimated 858,000. Sales fell 3.8% in February and 13% in January. Year-to-year, new-home sales were 11% lower than the level in April 2006.

The average price of a home last month decreased to $299,100, down from $324,700 in March and $310,300 in April 2006. The median price was $229,100, lower than $257,600 in March and $257,000 in April 2006.

The surge in April sales was a surprise. The median estimate of 25 economists surveyed by Dow Jones Newswires was a 0.2% increase in April sales to an 860,000 annual rate. It was the biggest increase since 16.4% in April 1993.

Going forward, the subprime mortgage market mess is expected to restrain sales. The Federal Reserve's latest quarterly survey of banks' senior loan officers, conducted in April and released last week, showed lenders tightened standards on subprime and non-traditional mortgages. Analysts expect tighter standards will lower the number of mortgages approved and keep sales depressed.

Regionally last month, new-home sales rose 3.8% in the Northeast, 8.5% in the West, and 28% in the South. Sales fell 4.0% in the Midwest.

There were an estimated 538,000 homes for sale at the end of April, representing a 6.5 months' supply at the current sales rate. In March, an estimated 546,000 were for sale, an 8.1 months' inventory.

An estimated 92,000 homes were actually sold in April, up from 81,000 in March, based on figures not seasonally adjusted.

APRIL 19, 2007 - MGM BUYS PARCELS FOR NEW CENTER

MGM Mirage, which is currently building the massive $7 billion Project CityCenter on 66 acres on the south Strip, has assembled the acreage to construct a similar and potentially larger development on the Strip's northern end.

The Las Vegas-based casino operator will announce this morning it has finalized two Strip land acquisition deals worth a combined $575 million that will give the company more than 100 contiguous acres for development stretching north from Circus Circus Drive to Sahara Avenue.

As part of the plans, MGM Mirage said it will refurbish the aging Circus Circus.

"This land assemblage creates a very interesting and exciting opportunity for our company to create an integrated resort complex on the north end of the Strip," said MGM Mirage President and Chief Financial Officer Jim Murren.

MGM Mirage will spend $444 million to purchase a vacant 25.8-acre parcel from Gordon Gaming Corp., the current owners of the Sahara.

The site, on the northwest corner of the Strip and Sahara Avenue, is one of the boulevard's last major undeveloped locations. It once housed the original El Rancho Vegas, one of the first hotel-casinos in Las Vegas, which was destroyed by fire on June 18, 1960.

In addition, MGM Mirage is spending $131 million to acquire a 7.6 acre parcel from Concord Wilshire Partners, a Southern California real estate developer that had announced plans last year to build a hotel-casino on the oddly shaped site in conjunction with the publishers of Maxim Magazine.

Both transactions are expected to close by May.

MGM Mirage acquired Circus Circus and its 68-acre site in 2005 as part of a $7.9 billion buyout of the Mandalay Resort Group. Circus Circus includes the hotel-casino, a low-rise motel, the Adventure Dome theme park and a recreational vehicle park.

The newly acquired land parcels, which average about $17 million an acre, connect with Circus Circus.

"What's exciting about this purchase is that it fully unlocks the value of the Circus Circus land," Murren said.

MGM Mirage expects to eliminate the recreational vehicle park and the low-rise motel, allowing for 44 acres to be combined with the newly purchased 34 acres.

Murren said the 78 acres on the north Strip could hold the same potential as Project CityCenter, located between the Monte Carlo and Bellagio which began construction last year.

The development will include a hotel-casino, boutique hotels, high-rise residential and a retail, dining and entertainment district.

Murren said that unlike CityCenter, which MGM Mirage is financing, the company would take a different approach and seek partners to develop the north Strip location.

"We had so much interest in CityCenter from so many different resources that we believe this development allows us to bring in new financial and strategic partners," Murren said.

"We have an opportunity to bring into the mix new ideas, new brands, new customer bases and new marketing approaches. There is such an increased level of interest to get into Las Vegas, that we believe entities will want to partner up with MGM Mirage. This will create an opportunity for our shareholders to monetize a fair amount of our real estate holdings."

Murren said an enhanced Circus Circus would play an important role in the new development. The casino's customer base, he said, is expanding. Casinos that cater to the middle income customers, like the Stardust, have been eliminated from the market and others are expected to soon follow.

He said the 3,700-room casino, which generates about $80 million annually in cash flow, would receive a makeover.

"We intend to do with Circus Circus what we've done with the rest of our properties," Murren said.

GM Mirage operates 10 casinos on the Strip, more than any other gaming company.

"We're going to put some money into it and enhance and expand it over time," Murren said. "Circus Circus will be a gateway to our new development, similar to what Monte Carlo is to Project CityCenter."

Murren didn't yet have a timetable for the north Strip development but said it was conceivable work could begin before CityCenter is completed.

Gaming analysts have targeted development opportunities on the northern end of the Strip as the next wave of potential Strip development, stretching from Convention Center Drive to Sahara Avenue.

In March, Los Angeles-based SBE Entertainment Group, in partnership with San Francisco-based Stockbridge Real Estate Funds, agreed to acquire the 1,720-room Sahara and its 18-acre Strip parcel from Gordon Gaming for an undisclosed price.

Sources said the deal was valued at between $300 million and $400 million. The transaction is pending approval of Nevada gaming regulators.

John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, which handed the sale of the Sahara to SBE and the vacant site to MGM Mirage, said the casino company might have been spurred by the Sahara deal.

SBE Entertainment has said it plans to renovate the resort, adding nightclubs, restaurants and other enhancements.

"When they saw what (SBE) is planning, I think that might have motivated them along," Knott said. "There is a lot of activity all of a sudden on the north end of the Strip."

Boyd Gaming Corp. is expected to unveil designs by June for its $4.4 billion Echelon development that will be constructed on the site of the demolished Stardust.

Earlier this week, the company planning to build the $2.8 billion Fontainebleau sold a nearly 20 percent ownership to Australia's largest gaming operator, increasing the likelihood the announced 63-story, 3,889-room hotel and casino could soon be under construction.

"There has been a great deal of energy injected into the north end of the Strip and our 78 acres could be right in the middle of all that," Murren said.

He added the company had taken an interest in the Sahara land a few months ago.

The Sahara's vacant land parcel was one of three locations in conjunction with the casino that was controlled by Gordon Gaming, which was founded by the late gaming pioneer William Bennett when he bought the aging resort in 1995.

Gordon Gaming still controls an 11.3 acre parcel on Paradise Road across from the Sahara that Knott said remains on the market.

Concord Wilshire spent $90.25 million in 2005 to acquire four small parcels that made up the site acquired by MGM Mirage. The developers ran into opposition from the owners of Sky Las Vegas, a neighboring high-rise condominium development because the Maxim might have blocked views of Sky residents.