by Peter G. Miller

In the midst of all the gloom and doom on the housing front, one remarkably-bright statistic has just been announced: Last week the National Association of Realtors reported that 12 percent of all existing home sales last year were not primary residences, they were instead vacation homes.

It turns out that a lot of us have second homes at the lake, the beach, in the mountains or just somewhere different. The idea that so many of us have not just one house but two is at least counter-intuitive given that almost 1.3 million homes were lost to foreclosure last year, according to figures from RealtyTrac.com.

What do such numbers say about our housing market?

It takes a given number of dollars each month to support a primary residence, a standard that a large number of owners are not meeting. As the Mortgage Bankers Association explained in its most-recent delinquency report, “the rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever.”

And yet at a time when many households are plainly having huge problems, it’s clear that another group of households is doing very well. Not only can folks in this second group support one house, they can afford at least two.

The implicit reservoir of wealth represented by vacation property owners is important because it means there are large numbers of people out there with dollars that can be used to stroke the economy. If this trend holds up, it also means that about 600,000 second homes will be sold this year, a big and positive number at a time when big and positive numbers should be welcomed.

Reprinted with permission from Realty Times, http://realtytimes.com.

With eight homes completed in the past two years, three currently under construction, and possibly two more starting this spring, we thought it would be a great time to share with you the story of Bob and Linda Goltz, a couple that will soon have their ideal, Northern Michigan retreat at The Reserve.

In the summer of 2007, Bob and Linda Goltz closed on their homesite at The Reserve. With three grown children living in various places across the country, Boyne Mountain offered a convenient location with amenities and activities for their entire family. The Reserve at Boyne Mountain provided the Goltzes a location that was convenient to all of the activities of Boyne such as skiing, golf, hiking, biking, and the beach at Deer Lake, but was out of the hustle and bustle of the base—allowing them to create their own space to spend time together.

Working with Josh Howard of Howard Smith Corp., a builder that has completed several homes at The Reserve, the Goltzes outlined several requirements for their ideal family retreat. The home was to be a log home, had to provide ample open space for family gatherings and entertaining, enough bedrooms to comfortably house the entire family, have a walkout lower level, and be well-equipped to handle all the snowy and muddy gear that is part of outdoor life at Boyne Mountain.

Taking advantage of the homesite, Josh situated the house so it would accommodate a walkout design. With some modifications to the original plan, the garage was angled from the main section of the house to give the entrance a warm and welcoming feel. The breezeway that connects the garage to the house was designed as an oversized mudroom and catch-all. The interior has a very open floor plan—perfect for entertaining and connecting with family—a first floor master suite, two other large bedrooms, and a den that can be used as a fourth bedroom if necessary.

A few extra design features were also important: the main floor of the house is completely wired for surround sound (that will be extended to the patio this summer) and all the interior walls are insulated to help contain the noise of the socializing.

The Goltzes’ home was started in mid-Winter and should be completed by May—just in time for their first family gathering. Throughout the process, Josh and the Howard Smith team have been communicating with the Goltzes and working to ensure they’re completely satisfied with their new family retreat at The Reserve.

The Reserve at Boyne Mountain is a perfect place to create your family retreat. If you are thinking of buying and building, now is a great time to move forward—interest rates are low, construction is reasonable, and it’s a buyer’s market. You could soon be in the same position as Bob and Linda–planning your first family retreat at The Reserve.

The Money Magazine article we mentioned last week—“Build Your Dream House Now”—is one of the best assessments of the current real estate market that we’ve read. We recommend that you read the entire article, but let’s look at one section that’s particularly eye-opening:

Behind the dark clouds hanging over the housing market is a very compelling silver lining: The cost of building the home of your dreams is coming down. “If one or two years ago it cost you $300,000 to build a custom home, today it should cost tens of thousands of dollars less,” says Jim Haughey, chief economist at Reed Construction Data.

Why? With new-home demand drying up, the price of some construction materials has started to sink like a poorly laid foundation. Framing lumber is now 18% cheaper than it was 18 months ago, while drywall is selling for 40% less.

And because overextended developers picked up too much land during the bubble - and are motivated to sell - some lots are becoming dirt cheap. Land prices (often the single biggest expense for custom homes) in certain areas have fallen more than 20% in the past year or two.

“In terms of finding land you want at a good price, this is the best market that I have seen in my 30 years of home building,” says Carl Heldmann, builder and author of Be Your Own House Contractor.

This is exciting news for anyone who has been waiting on the sidelines for the perfect time to buy. Sure, some will wait for prices to fall even more, but existing home sales increased in February—the first improvement in 7 months. We’ll need to see a few more months of similar gains before we can say with certainty that the market is stabilizing, but it looks like the window to take advantage of these historically low prices will soon be closed.

“Why buy now?” That’s the question people are asking themselves.

The reality is it’s a buyer’s market. As one builder pointed out in a recent Money Magazine article, “In terms of finding land you want, at a good price, this is the best market I have seen in my 30 years of home building.”

I think most of us recognize that there are good deals to be had, but when is the best time to take advantage of the market? At the bottom, right? Well, how many of us have perfect timing? Whether it’s the stock market or the real estate market, it is very difficult to time things just right. In real estate, buying the right piece of property low, even if you don’t buy it at the absolute bottom, still has the potential to pay over the long-term.

The real risk of trying to buy at the very bottom is that you might miss the opportunity to buy the right piece of property—the one that suits your needs and the one that will see the best long-term appreciation.

How much can you save by waiting for the bottom? Let’s look at an example:

You decide to purchase a piece of land that was originally priced at $100,000. The seller has reduced the price by 10%, so you purchase it at $90,000. The market continues to slide a bit and the price falls another 5%. Then it starts to climb again.

Let’s assume you put 20% down on the property and get a 15-year mortgage at 5.625%. Your monthly payment would be $590 as opposed to $557—a difference of $33 if you had waited for the bottom.

Knowing that there are many buyers waiting for the bottom, is it worth $33 a month to risk missing the right piece of property? The probability that you will be able to time the market perfectly is quite low. The better bet is to find the right piece of land in this buyer’s market, negotiate the best price, take advantage of the very low interest rates, and make the call with the long-term in mind. Otherwise, you may end up paying more or, even worse, losing your dream property to an even savvier buyer.

ARDEN, NC, March 20, 2008 — McKeough Land Company has announced that Christine Axel has earned top-producer honors for 2007. Christine led the company with 38 homesites sold.

Christine’s success during this challenging real estate market is attributed to the tremendous relationships she builds with customers through attentive service and honest communication. McKeough Land Company has received a number of positive comments from her customers about her dedication to educating them on the buying process and assisting them through the various steps of their purchase.

McKeough Land Company’s North Carolina office is responsible for the acquisition and development of recreational land and waterfront property in North Carolina’s most sought-after locations. Their properties include Chalk’s Landing, a waterfront property situated on the banks of Blewett Falls Lake, and Round Mountain Falls, a quiet mountain property located between the quaint towns of Brevard and Cashiers. For more information about these and other properties, visit www.McKeough.com or call their home office (800) 949-0444.

Over the last couple of months, several customers have asked about alternate ways to finance land they are considering purchasing for investment. This isn’t surprising considering that McKeough Land Company is offering some significant discounts for multiple-lot purchases. Based on these conversations, we researched alternate ways for people to take advantage of this buyer’s market.

One interesting and little-known opportunity is the ability to purchase land through a self-directed IRA. “Golden Opportunities in Real Estate for Savvy Investors” explains the process for using a self-directed IRA to buy any type of real estate.

There are several reasons to consider buying land using funds from your IRA, but the most prominent one is that any profit that is generated from the investment is tax-deferred, just like the earnings from your regular IRA or 401K. Once you have decided that you would like to make an investment in land, the process of buying through your IRA is pretty simple:

1. Create a self-directed IRA account (several companies offer this type of product)
2. Liquidate funds from your current IRA or 401K and place the funds in your new self-directed IRA
3. Purchase the land through your self-directed IRA

There are restrictions and accounting considerations, and the details are included in the article linked above.

To make the process of land investment using your IRA easier, McKeough Land Company’s Northern Michigan office has created a strategic alliance with Retirement Investment Alternatives, LLC, a Suttons Bay-based company that specializes in helping clients set up and purchase property through self-directed IRAs. If you would like more information on our strategic alliance and how to purchase land using your IRA, please email Thompson Godfrey or call (800) 290-LAND.

Chicago Agent Magazine recently featured Lake Chapin Banks online and in their magazine.

Located in Southern Michigan, Lake Chapin Banks sits on the St. Joseph River just minutes by boat from Lake Chapin.

One of our expert Land Consultants takes you on an informative walking tour at The Reserve at Boyne Mountain.

The Reserve is an exclusive community of vacation home building sites nestled between the slopes and golf courses at Boyne Mountain. To learn more about The Reserve, visit The Reserve at Boyne Mountain or send us a message.

by Kenneth R. Harney

Despite a lot of sobering economic news for housing and real estate, there are some definite positives taking shape out there.

Pooh-pooh them — or ignore them — at your own peril.

First, the powerful combination of fixed 30-year mortgage rates in the mid-5’s and house prices rolled back to 2003 and 2004 levels in some areas HAS to begin attracting the attention of consumers. That could happen as early as this Spring in some local markets — or later in the year, but the buying opportunities are undeniable.

Second, despite all the grim and gloomy predictions about recession, the U.S. economy is still growing. No question that rate of growth slowed dramatically in the most recent quarter, but the fact is: The U.S economy is NOT in recession, thanks to a couple of key factors:

Total employment gains during the past 12 months exceeded one million new jobs. That measure went negative in the latest month by 17,000 jobs, but the month before job creation was UP by 82,000.

Exports-which jumped by an extraordinary 7.7 percent in the past 12 months — are fueling some of that employment vigor.

Real after-tax household income rose last year by 1.1 percent. That may not sound like much, but in a giant economy such the United States–it’s good news. In a recession, that number would have been negative.

Now to the housing market’s prospects: Within the next 10 days to two weeks, the President is expected to sign legislation raising mortgage limits for the three most consumer-friendly financing programs - Fannie Mae, Freddie Mac and FHA.

(editor’s note: the President signed the legislation on February 13.)

Home buyers in high-cost markets will gain access to much lower-cost financing compared with the deal-killing “jumbo” rates they’d otherwise have to pay.

How big a difference could that make?

Compare payments on a jumbo loan at current rates of 7 to 7.5 percent to the 5.75 to 6.0 rates they’d potentially pay after the legislation takes effect.

Estimates vary as to how many sales and purchases this change will stimulate, but an independent economist on contract with the National Association of Realtors puts it at close to 348,000 additional home sales in the coming 12 months.

Bottom line here: It’s not all gloomy out there. There are some hints of a pick-up on the horizon — provided you’re open to seeing them.

Reprinted with permission from Realty Times, http://realtytimes.com.

In 2007, McKeough Land Company’s Northern Michigan office spoke with over 150 customers about buying lakefront property. Through these and countless other conversations over the years, our team has compiled a list of criteria that customers should consider when looking at lakefront property, particularly in Northern Michigan.

1. Slope to the Water: Does the property sit atop a bluff or have a gentle slope to the water? Many people consider a gentle slope to the water to be more desirable, but we have seen that a property sitting atop a bluff often offers a more panoramic view of the lake that you don’t get with a lower piece of property. One other benefit of being on a bluff is the added privacy from the traffic on the lake. Additionally, the bluff can be intimidating to some who wonder, “How will I even get down to the lake?” In most cases, a sturdy set of stairs or serpentine path can make accessing the water very easy and even provide the opportunity for more deck space.
2. High and Dry: In Northern Michigan, many parcels of lakefront property are only a few feet above the ground water. This means owners may have to build a mound septic system. Mound septic systems have been in use for many years and work well, but if you want to avoid a mound septic system, be sure the property you are considering is “High and Dry” and is approved for a standard septic system.
3. Quality of the Community: When you purchase lakefront property, ensuring your property value remains strong is extremely important. If there are no architectural guidelines governing what type of home your neighbor can build, you run the risk of your property losing value because the neighborhood devalues your property. Be sure to check the association’s protective covenants before purchasing.

These are a few of the criteria we have isolated as being important factors when choosing lakefront property in Northern Michigan. Please come back and visit our blog to learn more about McKeough’s properties and the real estate market “Up North.”