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As the American economy starts to emerge from the recession and families start to buy homes again, there will be some notable changes in the new homes that are built. Americans are no longer looking to add on as many luxury features as they can in as large a home as they can afford to buy. Instead they are now carefully evaluating what their needs are, being conservative in their choices, and selecting homes and features that best fit their family’s needs.

This new attitude is showing in the recent change in overall size of new homes being built. In 2006, the median floor area of new single-family homes—which for the most part had trended upward for the past 35 years—peaked at 2,259 square feet. But as home buyers scaled back in the recession, the median square footage decreased to 2,107 square feet in 2009.

In its latest member surveys, the National Association of Home Builders found that builders are responding to changes in home buyer preferences. More than 96 percent of the builders said they planned to produce smaller homes in 2010, and 95 percent said they would offer lower-priced models.

The two features builders reported they were most likely to include were a walk-in closet in the master bedroom and a laundry room. These reflect consumers’ preference for practical features that make effective use of space and provide ample storage.

Of the top ten features most likely to be included in new homes, four provided opportunities for the home owner to save money by decreasing utility costs. They included an insulated front door, low-E windows, a programmable thermostat and energy-efficient appliances and lighting.

“Low-E” stands for low emissivity, which is glass that has special coatings to reflect infrared and damaging ultraviolet light. This keeps heat inside in winter and outside in summer, and protects interior furnishings from fading. Programmable thermostats can be set to automatically adjust the temperature at certain times of day, such as when the family is sleeping.

Among the features builders said they were least likely to include in new homes were smaller kitchens,  two-story foyers, media rooms, butler’s pantries and multiple shower heads in the master bathroom.

It’s a good idea to keep these features in mind if you plan to shop for a new home or to update your current home in order to make it more competitive when you do sell it.

Information Courtesy of National Association of Home Builders

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Are you trying to decide between a new home and a resale?  Here are some of the benefits of buying a new home.

FAVORABLE PRICING

Competition among homebuilders makes new homes less likely to be overpriced. New homes are easy to compare with other new homes in the market equating value to value. The homes are the same age and options are declared up front with a price breakdown for comparative shopping.

NEW HOME WARRANTIES

New home buyers are assured of at least a one year warranty on the home itself, and in some cases two years on major appliances including air conditioning and heating systems.

HOMESITE SELECTION

Location. Location. Location. Being able to select just the right homesite is almost as important as choosing the proper home to fit the buyer’s lifestyle. Developers and homebuilders offer a wide selection of sites.

LATEST MATERIALS

Low maintenance is one of the most important features of the new homes being built today. New technology in building materials has made the homes of this decade virtually maintenance free, especially on the exterior. No longer does a homeowner have to worry about painting every 3-5 years.

ENERGY EFFICIENCY

A new home built today is required by law to meet stricter energy codes than homes built in the past when past codes don’t exist or were much more lenient. Many homebuilders use materials that are designed to exceed the strict limits to produce future savings for the owner.

MODERN APPLIANCES

Appliance manufacturers introduce new models every year and homebuilders are able to offer the latest state-of-the-art equipment at the time of completing a new home. And, because the homebuilder buys for his entire production of new homes, his purchasing power can reduce the cost to the buyer.

FLOORPLAN OPTIONS

Builders of new homes offer a wide variety of functional floorplans to fit your lifestyle. If it’s not an inventory home, some builders also offer the opportunity to either eliminate or add rooms, upgrade materials, include special architecture and generally customize the home.

CHOICE OF FINISHING

With a new home it is possible for the buyer to be the decorator before moving in. Choices of carpet, wallcoverings, paint color, lighting fixtures, window treatments, etc. enables the new home owners to live with their personal selections and not be restricted by the taste of previous owners.

SECURING FINANCING

Securing financing is ithe major obstacle to home ownership. Most homebuilders have done the legwork for you. They have researched the market and negotiated the best rates for specific types of housing. Plus, many builders include closing costs in the price of their homes.

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This is a Guest Post from popular real estate blogger, Chris Record, who is a real estate investor and social media marketing coach living in Southern California.  He currently maintains a blog a ChrisRecord.com and stars in a reality show for entrepreneurs called Unstrapp’d.

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Recently I spent some time researching statistics related to mortgage origination, foreclosures, and our economic climate as it regards to investing in real estate.  Based on all of my research I am convinced that we are going to see a massive increase in opportunity in 2010 and I am excited to position myself in front of these trends to capitalize on it!

Foreclosures have been booming around the country, and with the limited ability to get funding we have seen a surge in creative real estate investing.  We have also seen the average investor lay low because of the difficulty of today’s real estate market which has presented even more deals and opportunities for sophisticated investors who know how to negotiate and move properties.

Here is a summary of reasons why I feel that 2010 will be the year that sophisticated real estate investors create a tremendous amount of wealth…

SUPPLY AND DEMAND

As the population goes up, the demand always goes up as well.  Many amateur investors are focused on where the market is today, rather than looking at the past to recognize trends for the future.  Supply and Demand always rules but only savvy investors allow logic to lead over emotion.  Remember these three words: “Numbers Never Lie”.

Currently the population in the United States is soaring and according to an article in USA Today, we are projected to reach over 400,000,000 people by 2042.  According to the US Census Bureau we are gaining a new person every 11 seconds (one birth every 7 seconds, one death every 13 seconds, and one international migrant every 31 seconds).  We are also seeing record numbers of births as more babies were born in the United States in 2007 than any year in the nation’s history, topping the peak during the baby boom 50 years earlier!

In order to become a more sophisticated investor, it is important to understand population trends related to your local market that you are investing in as well.  Use this tool to compare population growth of the states you are investing in to get an idea of whether your market is growing or not.  Here is an example of the DC Metro population growth comparing Virginia, DC & Maryland.

So as you can see from this graph, DC has maintained it’s population while Maryland and Virginia have shown tremendous growth.  Also take into consideration that this date is only up to the year 2000.

Understanding supply and demand truly helps separate the sophisticated investor from the average investor.  When we take a look at the rolling 12 month single-family permit activity across the nation, it become pretty evident that we are ready for a rebound in permit activity in 2010 and many educated investors believe that we will start to see this turnaround in 2010 for a variety of reasons.

REAL ESTATE IS ON SALE

When we look at the cost of housing compared to family incomes we can see that today’s down real estate market is completely different from the real estate market of the 1980’s when the ratios reached as high as 60%!  From this chart we can easily identify that real estate is on sale and is very affordable for the average family.  We are currently seeing a 25% affordability ratio on homes nationwide which allows investors to move properties much faster as their are more able buyers out there.

MONEY IS ON SALE

Next we take a look at the 30-year FRM rates vs. Prime Rates from 1971-2009.  I remember back in 2004 when every loan officer and mortgage broker was urging everyone to refinance and lock in low rates before they catapulted back up to over 10%.  Of course we all believed the could not possibly stay that low so record numbers of refinances started happening and people were happy they locked in such a low interest rate.  However, here we are several years later and interest rates are still unbelievably low!  In a traditional real estate bubble you would expect rates to jump up as high as 15-20% but we are in a fortunate situation where rates have stayed low and money is still on sale!

When you take into consideration that money is on sale and real estate is on sale it starts to really become clear why NOW is such an ideal time to become an investor.  I.D.E.A.L. is actually a great acronym for real estate investors because real estate can provide:

• Income
• Deductions
• Equity
• Appreciation
• Leverage

FORECLOSURE BOOM

According to My Budget 360 the foreclosure filings nationwide have risen from 100 million to 300 million in the past few years alone!

There are countless reasons as to why our country got itself in this mess, and it is incredibly sad for many people that are facing foreclosure, faced with losing their homes, their dignity, their equity and their credit.  On the other hand if you are someone that is looking to purchase a home, the opportunity has never been better!

in 2001 only 1% of all mortgage loans originated were interest-only or neg-am loans.  By 2006 that number had reached nearly 30%!  The first graph below shows the Option ARM (adjustable rate mortgages) reset schedule, totaling hundreds of billions of dollars in the next two years. The next graph is the interest only and negative amortization share of total mortgage purchase origination’s for 2000-2006. Keep in mind that “73 percent of homeowners with ARM’s don’t even know how much their monthly payment will increase the next time the rate goes up.”

My reason for sharing these graphs with you is to help you understand that we are getting ready to see another wave of foreclosures come in as a result of the ARM’s resetting and people not being able to afford their new payments.  When I really started diving deep into these statistics it became clear to me that 2010 would be a great year of investing, but that it would require becoming a sophisticated investor to take advantage of it.

• I believe that we will start to see a turnaround in the single family permit activity in 2010.  Most of my professional contacts in the construction industry share this opinion with me as well.
• I also believe that we will continue to see a steady flow of foreclosures that won’t stop anytime soon.  This provides a great opportunity to pick up properties at deep discounts either directly from homeowners in the pre-foreclosure phase, or from auctions and banks after they have been foreclosed.
• Due to the difficulty in getting traditional financing, the majority of these properties are going to be picked up by sophisticated real estate investors using creative acquisition strategies.
• Since real estate and money are both on sale, now is the time to take advantage of these trends and opportunities.

So in summary, I would encourage any would-be real estate investor to start studying pre-foreclosure investing as well as auctions and REO’s.  There are opportunities in today’s market to pick up properties for 50% of the appraised value when you know what you’re doing and there is an influx in hard money lenders and private investors out there that are looking for better returns than they have been getting in the stock market lately.

The key to becoming a sophisticated investor to take advantage of this perfect storm in 2010 is to first get educated.  Learn about Subject-To as a technique to pick up properties with no money and no credit.  Learn about Wholesaling as a way to move these properties quickly to other investors who will fix them up and retail them.  Learn about Hard Money Lending and how to raise private capital by helping people self-direct their retirement plans.  And most importantly get connected with other local sophisticated investors in your area that you can do deals with and partner with to help ease your learning curve.

For more information on Real Estate Investing Tips or Social Media Marketing search for Chris Record on the web.

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