A hybrid water heater? Really?

I recently received an e-mail touting the all-new "Hybrid Water Heater" from GE. You may have seen these advertised during the Olympics too.

Well - I had to do a little research on this. First off - what the heck is a "hybrid water heater"? Beyond that, my question is always - does it save money? If so, how does it compare to other types of water heaters?

The "hybrid" water heater is essentially an electric water heater that utilizes heat pump technology to achieve high efficiency. I would say that's a pretty clever approach. I'm not sure about the "hybrid" label, but GE didn't get where they are because of bad marketing. I did find on the Energy Star site that this is a fairly recent technology and that there are a handful of these systems available from major plumbing suppliers.

It takes a little bit of digging, but according to the research so far the operational savings are real and compare favorably to other types of high-efficiency water heaters that operate via natural gas (or propane) - even tankless water heaters.

The upfront cost are a little higher though. The GE version retails for about $1600 and others appear to fall in the same range. When you factor in installation costs, you'll probably run a tad higher than a tankless system and maybe 1/2 the cost of a solar water heater (which, of course, has no operational cost unless a backup system is used).

Generally speaking, this technology looks like it could be a promising option for many homeowners, particularly if they do not have gas service to their home. I would certainly recommend any of my clients consider it if they are building a new home or when replacing an older system.

You can check out a couple of these new water heaters at the following websites:

GE "Hybrid" water heater
RUUD heat pump water heater

December market is all over the map

Anyone looking at December's market statistics would be hard pressed to decipher whether it's good news or bad. Home builders are still having a tough slog, but existing homeowners can take some solace that pricing has appeared to stabilize.

Nationally, the numbers raised fears that the housing market will begin falling again when the tax credit expires. Several stats highlighted the concerns:

• Pending home sales dropped 16% from November, but was up 15.5% on a year over year basis
• Existing homes sales dropped 16.7% on a monthly basis, but up 15% on a yearly basis
• New home sales fell 7.6% (with a 41% decline in the Midwest region)
• The Case-Shiller price index was still showing a slight decline nationally, but the price curve shows prices flattening.
  

Cincinnati's numbers did show a somewhat more positive trend than the national numbers:

• On a full year basis, the number of sales increased modestly over 2008. However, the average sales price was lower as first time buyers were an outsized portion of the market.
  
• Average sales price increased from Dec. '08 to '09 from $141.6K to $152.8K. The number of sales year over year also increased from 1,271 to 1,306 for the month.
  
• Overall inventory continued to fall. The absorption rate (ratio of sales to inventory) continued to remain below '07 and '08 at 8.9 months. There was probably a bit more increase from November to December (8.0 to 8.9) than we'd like to see, but was typical going into winter.
  

See charts for December based on the Cincinnati MLS.

No doubt it is and will be a buyer's market for some time yet. However, I do see some balance returning to the market. Buyers continue to ask for as much as 20 - 30% off list prices, but banks, builders, and even homeowners have begun to hold more firmly on pricing. For their part, banks have learned where to price houses to get them sold quickly and at full asking price (or more).

FHA loosens restrictions that may help investors

Effective February 1st, the FHA will waive its "90 day rule" for 1 year. In its current form, this rule prevents a potential buyer from buying a property that has been owned for less than 90 days by the current owner. The initial basis of this rule was to eliminate "flipping" properties (that is, buying the property only for the purpose of reselling it quickly in a hot market).

This temporary waiver of the rule should help legitimate investors who can rehab a property quickly without imposing an arbitrary timeline before they can sell again. In some cases, this has held back investors looking at buying a low-priced foreclosure "as is" that could be fixed up and sold again quickly due to the additional costs associated with sitting on the property for a time - or alternately - if a rehab was well done and priced to sell quickly, then buyers eligible for an FHA loan were effectively eliminated from bidding on the property.

While this change will help in certain situations, there are still some constraints a potential investor has to consider, including:

• Transactions must be arms-length, i.e., the buyer and seller must be unrelated
• A new requirement has been added that if the sales price is 20% more than what it was bought for previously, it requires supporting documentation of improvements, and possibly 2 appraisals.
  
• It is not applicable to "reverse mortgages" (or an HECM mortgage as it is officially referred to).

In addition to the items noted above, the waiver does not have any affect on the existing requirement for documentation and 2 appraisals if the price is more than double the previous sale and is being sold in less than 180 days. This does happen on occasion and has surprised more than a few buyers.

Click here to see the full FHA press release.

FHA changes likely to impact first time and median income buyers

FHA loans have been a significant part of home sales over the past couple of years after 100% loans went away. While these low down payment loans have no doubt help stabilize the housing market, the burden on the FHA has grown relative to their presence in the market.

This week, the clamps began to tighten down. While some are concerned that this will cause home sales to drop off again, it nonetheless is probably a good thing for the longer term return to normalcy. Changes for buyers include:

• Increased mortgage insurance from 1.5% of loan amount to 2.25%
• Increased down payment requirements based on credit score
  
• Reducing the amount a seller can pay towards a buyer's closing cost from 6% to 3%

The timing of these changes varies, but some will be implemented very quickly. To see the full list of changes and timelines, view the HUD announcement