6 Things to Keep in Mind When Looking for Mortgage Financing
RISMEDIA, March 26, 2008-There are six critical things prospective home buyers need to do in this sometimes confusing market, says Kansas City mortgage expert Bruce Brown, founder of the website http://www.MortgageAnswersFast.com.
“There is an excess of housing inventory right now and that makes it a good time for buyers to get into the market. Lower prices mean lower monthly payments, but before prospective buyers jump in, there are some key things they need to know about getting a mortgage right now,” he says.
6 Essentials to Look For Include:
1. Use a down payment — Consumers will see better loan terms if they can put at least 5% down. “Each 5% increment will help,” according to Brown, “so put as much down as you can and speak to a loan professional for specifics on various scenarios. Zero down payment programs have all but disappeared, although FHA and conforming 3% down programs still exist. Even with a small amount down, buying compares favorably to renting.”
2. Shop the right way for interest rates — “Fees are critical, as they affect your overall cost, so don’t go by interest rates alone,” adds Brown. “An interest rate that sounds higher may include no fees, while another is lower but includes fees that may make the actual financing cost higher, so be sure to have it spelled out for you.” Lenders are required to provide a Good Faith Estimate of all costs, and consumers are advised to check it carefully against the HUD-1 Settlement Statement to make sure there are no “surprise” charges or other fees. MortgageAnswersFast.com provides consumers detailed explanations of how to analyze Good Faith Estimates to ensure borrowers find the lowest total loan cost.
3. Be wary of advertising — The airwaves are full of advertisements trying to entice consumers into a mortgage because the Federal Reserve has cut interest rates claiming “rates will never be lower.” In actuality, long-term fixed interest rates for mortgages are tied to bonds called mortgage backed securities (MBS) and the prices investors are willing to pay for them, Brown explains. “The Fed does not control long-term fixed interest rates for mortgages. There may be some impact on adjustable rates, but seldom to the extent that advertisers would have you believe. So borrowers should research mortgage rates rather than simply believe false advertising claims.”
4. Think about paying more for your house — “It might sound crazy,” Brown says, “but by paying more for your home you might actually wind up paying less for the transaction. Here’s how: instead of negotiating the sale price down by a certain dollar amount, ask the seller to pay for the costs to “buy down” the interest rate on the loan. The monthly payment can be reduced substantially, saving cash flow in the short run while increasing your principal balance in the long term. Seller funds can also be used to buy out PMI,” Brown explains. “Your mortgage professional can help you calculate the actual savings.”
5. Know your PMI options — PMI, or Private Mortgage Insurance, protects the lender from losses incurred after default when foreclosing on a property. If a borrower has less than 20% down on a conventional conforming mortgage, they must pay PMI, with rates that can vary based on credit score. “Borrowers typically pay PMI monthly,” according to Brown, “but there are other options, including lender-paid mortgage insurance, in which premium is added into the interest rate of the loan. There are other options that allow a smaller fee at closing without raising the rate, and sellers can also pay the fee at closing, which sometimes can be a condition of the sale.” For more detail on these sometimes confusing alternatives, he recommends that borrowers check with their mortgage professional.
6. Improve credit scores — Credit scores have always been important, but never more than today, especially for borrowers with less than 20% as a down payment. Small differences in score can mean big differences in interest rates or fees, so consumers should do everything they can to show their credit in its best light. “Do not close out credit card accounts, but instead distribute the balances as evenly as possible and use old cards every few months to keep them active,” Brown says. “Check your credit report for errors and get them corrected, and get rid of liens and charge offs, if you have any, and resolve any late payments. All these will have a quick and positive effect on your credit score.” Even people with great credit scores as high as 720 may pay a penalty based upon recently changed guidelines. “Credit repair is not just for people who have credit problems,” he adds. “Most people don’t realize they can optimize their score using a few simple techniques.”
Brown is quick to recommend loan officers that are Certified Mortgage Planning Specialists (CMPS) as they can best help consumers sift through the myriad details of a loan transaction. “This means they are certified by the CMPS Institute,” he says. “Getting the right mortgage is much more than just getting a loan, because it has impact on wealth-building, retirement and other strategies in personal finance. CMPS professionals are trained in all of these, so they make a great choice for borrowers who want to understand how to use their mortgage to become financially more secure.”
Bruce Brown is a Certified Mortgage Planning Specialist, the founder of MortgageAnswersFast.com, the president of First Security Mortgage Company, and has appeared on the KC Fox affiliate’s real estate features as the “Purchase Pro.”
For more information, visit www.MortgageAnswersFast.com.
Wednesday, March 26, 2008
Tuesday, March 25, 2008
More Banks Consider Short Sales
Daily Real Estate News | March 25, 2008
After about a year of dealing slowly and reluctantly with short sale offers, many banks are reconsidering, looking for solutions that will allow them to recoup debt in foreclosure situations.
Observers say that if the trend continues, it will reduce or eliminate the need for taxpayer bailouts.
The National Short Sale Center, which helps short buyers negotiate with banks, says three-quarters of its short offers are approved now, up from maybe half six months ago.
"Before, people on the phone at banks didn't even have the authority to negotiate. Now they're calling us with numbers," says Pam B. Canada of nonprofit NeighborWorks in Sacramento, Calif.
To be sure, many agents and counselors think banks still have their heads in the sand. "They're out to get the last dime, even when people don't have a dime," says real estate practitioner Heidi Mueller in San Francisco as she heads to an auction sale on the courthouse steps.
Source: Forbes, Bernard Condon (04/07/08)
After about a year of dealing slowly and reluctantly with short sale offers, many banks are reconsidering, looking for solutions that will allow them to recoup debt in foreclosure situations.
Observers say that if the trend continues, it will reduce or eliminate the need for taxpayer bailouts.
The National Short Sale Center, which helps short buyers negotiate with banks, says three-quarters of its short offers are approved now, up from maybe half six months ago.
"Before, people on the phone at banks didn't even have the authority to negotiate. Now they're calling us with numbers," says Pam B. Canada of nonprofit NeighborWorks in Sacramento, Calif.
To be sure, many agents and counselors think banks still have their heads in the sand. "They're out to get the last dime, even when people don't have a dime," says real estate practitioner Heidi Mueller in San Francisco as she heads to an auction sale on the courthouse steps.
Source: Forbes, Bernard Condon (04/07/08)
Monday, March 24, 2008
Existing-Home Sales Rise in February
Sales of existing homes increased in February and remain within a fairly stable range, according to the NATIONAL ASSOCIATION OF REALTORS®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.
Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”
The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.
Source: NAR
Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.
Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”
The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.
Source: NAR
Friday, March 21, 2008
Mortgage Rates Drop Below 6%
According to Freddie Mac's data, mortgage rates have dropped back below 6 percent after spending more than a month above that threshold. Thanks to the Federal Reserve's aggressive moves to insulate the U.S. economy by slashing borrowing costs, 30-year fixed home loans averaged 5.87 in the latest numbers.
That compares to 6.13 percent this time last week and represents the first time since mid-February that the benchmark interest rate has been less than 6 percent.
"Slowing consumer spending and weak employment conditions are among the concerns behind the Fed's decision to lower the target federal funds rate," says Freddie Mac chief economist Frank Nothaft.
Source: Tulsa World (Okla.) (03/21/08)
That compares to 6.13 percent this time last week and represents the first time since mid-February that the benchmark interest rate has been less than 6 percent.
"Slowing consumer spending and weak employment conditions are among the concerns behind the Fed's decision to lower the target federal funds rate," says Freddie Mac chief economist Frank Nothaft.
Source: Tulsa World (Okla.) (03/21/08)
Wednesday, March 19, 2008
How to Gear up for the Spring Selling Season - Home Maintenance Checklist
RISMEDIA, March 19, 2008- The first day of Spring is March 20th and as most homeowners keep to the age-old Spring tradition of deep cleaning, this ritual is even more important as homeowners gear up for the Spring selling season. According to a recent poll, nearly 80% of Angie’s List members said they keep up with routine maintenance, either doing it themselves or by hiring help. The vast majority of these homeowners say their diligence helps them save money and avoid more costly repairs down the road.
“In today’s market, it’s imperative to have your home in the best shape and condition possible in order to get it sold and attract buyers,” says Cecilia Sherrard , a buyer, seller and relocation specialist for Realty One Real Living. “Starting from the curb, make sure your home is one you’d want to see inside.”
“Making a list of items to check around the home this season - and then actually following through with the tasks - can help reduce home maintenance and utility costs,” says Angie Hicks, founder of Angie’s List.
The 20% who don’t keep up say they just don’t know what to check and when, they forget about doing it or they just don’t have time for it. Angie’s List, a provider of ratings and reviews of local service companies, went to the experts to develop a list to help the veteran maintainers, as well as those still in the dark, keep up with the house this season.
Spring Cleaning
The first step to Spring cleaning is making a list of which areas of your home need to be freshened up.
- Experts recommend a professional carpet cleaning every 12 to 18 months. Schedule an appointment with carpet cleaners now to cut down on your wait time.
- Check your gutters. Professionals recommend gutter cleaning in the spring and the fall. Clogged gutters can lead to water damage.
- Use a garden hose to remove the film left by dirty snow and rain from your siding and deck. Attach a soft-bristled, long-handled car brush to the hose for some extra help. Use a mild cleanser to get those tough-to-clean spots.
- Remove wet leaves and debris from your deck, front porch and around your house on a regular basis. Allowing the debris to accumulate can trap water, lead to staining or mold build-up, as well as create an ideal environment for termites.
Home Maintenance
Snow, ice and wind can wreak havoc on your home, so be sure to go over the structures in early spring. Finding damage early will increase your chances of getting an early repair, as many home improvement companies begin their busy seasons this time of year.
- Scrutinize your crawl space for water accumulation or excessive moisture, and keep an eye out for water damage on the sub-floor and joists beneath the kitchen, bathroom and laundry areas.
- Give your roof a “once-over” for damage inflicted during the winter. Depending on the style and pitch of your roof, you may want to use a ladder and a pair of binoculars to look for missing or broken shingles and other damage. If you don’t feel comfortable on a ladder, call a professional before the busy season begins.
- Check the weather stripping around doors and windows. The winter season may have caused some damage. Also remove any storm windows and replace with screens.
- Check the valve where water enters your house, outdoor faucets and valves to toilets, bathroom and kitchen sinks. Turn each off and on several times to identify any leaks.
Outdoor Maintenance
By preparing for outdoor projects early, homeowners can get a jump on things like landscaping - but don’t forget about your driveway! Water that seeps into your driveway can freeze, causing cracks and other damage.
- Talk with your landscaper or local garden center about the best way to enrich your soil for the types of plants in your yard. Proper fertilization can keep your soil and your plants in great shape throughout the year.
- If you’ve postponed tool care, now is a good time to get in the garage and take a closer look at your garden equipment. Does the mower need serviced? It’s a good idea to call now. Garden service companies will get busy in the next couple of months. Don’t forget to clean and sharpen other garden tools as well.
- Spring is a good time to examine your asphalt driveway’s surface for damage. Regular resealing is the best way to protect the surface and keep it in good shape. If you’re planning to hire a professional to seal the driveway, summer is peak time of year - so call now to get on their schedule.
“Start with the entry door,” says Sherrard. “Paint or replace and take notice of missing screens or old storm doors. Add a new mailbox, lighting fixture, or address to add a new feel. Clean up the garage and landscaping.”
Appliance Maintenance
Regular maintenance on major home appliances can help to ensure their efficiency and lifespan.
- Get your air conditioner serviced. Technicians can test your air conditioner as long as the temperature is above 60 degrees. Call now to get on their schedule before the first warm days of spring.
- Clean and lubricate hinges, rollers and tracks on garage doors with a light household oil - don’t use petroleum-based lubricants. You can call a professional to take care of this, as well as service the opener mechanism itself. Don’t attempt to service the opener mechanism yourself. Your garage door opener can be one of the most dangerous appliances around your house.
- Get your water heater serviced. Maintained properly, water heaters will last for years and deliver gallon after gallon of hot water. Left alone, they’ll quickly lose efficiency, sucking dollars out of your wallet with every degree of heat.
- Spring rains are just around the corner, so be sure your sump pump works properly. To test, fill the sump pit with water and go outside to make sure the pump is actually discharging water. You can also eliminate any build-up in the system by pouring white vinegar through the unit.
Home Projects
You may have already received your tax return. A recent poll found that 25% of Angie’s List members plan on using their tax checks to invest in home repairs. Some investments will have a better return than others, so choose your projects wisely.
“Clean out closets and cabinets providing as much empty space as possible,” says Sherrard. When preparing to sell, “Pack away all personal items including photos. The emptier your home, the larger it appears. Buy a new bed in a bag for your bedrooms. Dust everything including the basement.”
What’s more, says Sherrard, buyers look at mechanicals and corners.
“Freshen the home by airing it out thoroughly and sanitizing baseboards, woodwork, floors and lighting fixtures,” she says.
- The roof, furnace and water heater, won’t garner great returns, but are expected to be in good shape. Proper home maintenance saves you money on a daily basis and positions you well for a sale.
- Kitchen and bath renovations are expensive but great investments if you are going to be in your house at least five more years. They’re also the rooms buyers pay the most attention to and can make or break your sale.
- Turning attics and basements into livable space, or adding decks, can bring a better return than adding square footage, and the upfront costs aren’t nearly as exorbitant. Finishing touches matter, though. Wall-to-wall carpeting and drywall in a basement will bring a lot more than cheap paneling and a drop-in ceiling.
“A clean home is desired as it reflects the owner’s level of activity when it comes to maintenance and keeping up with the property,” says Sherrard. A lot of these tips are cheap and some even free. When done properly, Sherrard reminds that “your home should now give you the feeling of checking into a hotel; decorated, yet depersonalized and clean!”
According to the website, 1,334 of Angie’s List members participated with the poll. Responses are representative of Angie’s List members, but not the general public.
For more information, visit http://www.angieslist.com and http://www.youshouldown.com.
“In today’s market, it’s imperative to have your home in the best shape and condition possible in order to get it sold and attract buyers,” says Cecilia Sherrard , a buyer, seller and relocation specialist for Realty One Real Living. “Starting from the curb, make sure your home is one you’d want to see inside.”
“Making a list of items to check around the home this season - and then actually following through with the tasks - can help reduce home maintenance and utility costs,” says Angie Hicks, founder of Angie’s List.
The 20% who don’t keep up say they just don’t know what to check and when, they forget about doing it or they just don’t have time for it. Angie’s List, a provider of ratings and reviews of local service companies, went to the experts to develop a list to help the veteran maintainers, as well as those still in the dark, keep up with the house this season.
Spring Cleaning
The first step to Spring cleaning is making a list of which areas of your home need to be freshened up.
- Experts recommend a professional carpet cleaning every 12 to 18 months. Schedule an appointment with carpet cleaners now to cut down on your wait time.
- Check your gutters. Professionals recommend gutter cleaning in the spring and the fall. Clogged gutters can lead to water damage.
- Use a garden hose to remove the film left by dirty snow and rain from your siding and deck. Attach a soft-bristled, long-handled car brush to the hose for some extra help. Use a mild cleanser to get those tough-to-clean spots.
- Remove wet leaves and debris from your deck, front porch and around your house on a regular basis. Allowing the debris to accumulate can trap water, lead to staining or mold build-up, as well as create an ideal environment for termites.
Home Maintenance
Snow, ice and wind can wreak havoc on your home, so be sure to go over the structures in early spring. Finding damage early will increase your chances of getting an early repair, as many home improvement companies begin their busy seasons this time of year.
- Scrutinize your crawl space for water accumulation or excessive moisture, and keep an eye out for water damage on the sub-floor and joists beneath the kitchen, bathroom and laundry areas.
- Give your roof a “once-over” for damage inflicted during the winter. Depending on the style and pitch of your roof, you may want to use a ladder and a pair of binoculars to look for missing or broken shingles and other damage. If you don’t feel comfortable on a ladder, call a professional before the busy season begins.
- Check the weather stripping around doors and windows. The winter season may have caused some damage. Also remove any storm windows and replace with screens.
- Check the valve where water enters your house, outdoor faucets and valves to toilets, bathroom and kitchen sinks. Turn each off and on several times to identify any leaks.
Outdoor Maintenance
By preparing for outdoor projects early, homeowners can get a jump on things like landscaping - but don’t forget about your driveway! Water that seeps into your driveway can freeze, causing cracks and other damage.
- Talk with your landscaper or local garden center about the best way to enrich your soil for the types of plants in your yard. Proper fertilization can keep your soil and your plants in great shape throughout the year.
- If you’ve postponed tool care, now is a good time to get in the garage and take a closer look at your garden equipment. Does the mower need serviced? It’s a good idea to call now. Garden service companies will get busy in the next couple of months. Don’t forget to clean and sharpen other garden tools as well.
- Spring is a good time to examine your asphalt driveway’s surface for damage. Regular resealing is the best way to protect the surface and keep it in good shape. If you’re planning to hire a professional to seal the driveway, summer is peak time of year - so call now to get on their schedule.
“Start with the entry door,” says Sherrard. “Paint or replace and take notice of missing screens or old storm doors. Add a new mailbox, lighting fixture, or address to add a new feel. Clean up the garage and landscaping.”
Appliance Maintenance
Regular maintenance on major home appliances can help to ensure their efficiency and lifespan.
- Get your air conditioner serviced. Technicians can test your air conditioner as long as the temperature is above 60 degrees. Call now to get on their schedule before the first warm days of spring.
- Clean and lubricate hinges, rollers and tracks on garage doors with a light household oil - don’t use petroleum-based lubricants. You can call a professional to take care of this, as well as service the opener mechanism itself. Don’t attempt to service the opener mechanism yourself. Your garage door opener can be one of the most dangerous appliances around your house.
- Get your water heater serviced. Maintained properly, water heaters will last for years and deliver gallon after gallon of hot water. Left alone, they’ll quickly lose efficiency, sucking dollars out of your wallet with every degree of heat.
- Spring rains are just around the corner, so be sure your sump pump works properly. To test, fill the sump pit with water and go outside to make sure the pump is actually discharging water. You can also eliminate any build-up in the system by pouring white vinegar through the unit.
Home Projects
You may have already received your tax return. A recent poll found that 25% of Angie’s List members plan on using their tax checks to invest in home repairs. Some investments will have a better return than others, so choose your projects wisely.
“Clean out closets and cabinets providing as much empty space as possible,” says Sherrard. When preparing to sell, “Pack away all personal items including photos. The emptier your home, the larger it appears. Buy a new bed in a bag for your bedrooms. Dust everything including the basement.”
What’s more, says Sherrard, buyers look at mechanicals and corners.
“Freshen the home by airing it out thoroughly and sanitizing baseboards, woodwork, floors and lighting fixtures,” she says.
- The roof, furnace and water heater, won’t garner great returns, but are expected to be in good shape. Proper home maintenance saves you money on a daily basis and positions you well for a sale.
- Kitchen and bath renovations are expensive but great investments if you are going to be in your house at least five more years. They’re also the rooms buyers pay the most attention to and can make or break your sale.
- Turning attics and basements into livable space, or adding decks, can bring a better return than adding square footage, and the upfront costs aren’t nearly as exorbitant. Finishing touches matter, though. Wall-to-wall carpeting and drywall in a basement will bring a lot more than cheap paneling and a drop-in ceiling.
“A clean home is desired as it reflects the owner’s level of activity when it comes to maintenance and keeping up with the property,” says Sherrard. A lot of these tips are cheap and some even free. When done properly, Sherrard reminds that “your home should now give you the feeling of checking into a hotel; decorated, yet depersonalized and clean!”
According to the website, 1,334 of Angie’s List members participated with the poll. Responses are representative of Angie’s List members, but not the general public.
For more information, visit http://www.angieslist.com and http://www.youshouldown.com.
Thursday, March 13, 2008
California Fast Facts
Fast Facts
Calif. median home price - January 08: $430,370(Source: C.A.R.)
Calif. highest median home price by C.A.R. region January 08: Santa Barbara So. Coast $1,135,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region January 08: High Desert $234,310 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 07: 33 percent (Source: C.A.R.)
Mortgage rates - week ending 03/06/08 30-yr. fixed: 6.03% Fees/points: 0.5% 15-yr. fixed: 5.47% Fees/points: 0.5% 1-yr. adjustable: 4.94% Fees/points: 0.5% (Source: Freddie Mac)
Calif. median home price - January 08: $430,370(Source: C.A.R.)
Calif. highest median home price by C.A.R. region January 08: Santa Barbara So. Coast $1,135,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region January 08: High Desert $234,310 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 07: 33 percent (Source: C.A.R.)
Mortgage rates - week ending 03/06/08 30-yr. fixed: 6.03% Fees/points: 0.5% 15-yr. fixed: 5.47% Fees/points: 0.5% 1-yr. adjustable: 4.94% Fees/points: 0.5% (Source: Freddie Mac)
Tuesday, March 11, 2008
Why Now is a Smart Time to Buy
Daily Real Estate News | March 11, 2008
Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.
The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.
Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.
Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.
Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.
Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.
Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.
Source: The Wall Street Journal, Shelly Banjo (03/11/08)
Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.
The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.
Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.
Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.
Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.
Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.
Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.
Source: The Wall Street Journal, Shelly Banjo (03/11/08)
Friday, March 7, 2008
Foreclosure 'crisis' is overblown
Sure, there are pockets of pain around the US, but it's not as if most Americans are losing their homes. More than 99% of homes aren't in foreclosure.
By Scott Burns
A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas drew a lot of attention. Released by RealtyTrac, a company that compiles data on home foreclosures, the list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year.
Though the report had some dismal news -- such as the nearly 4.9% foreclosure rate in the Stockton, Calif., area -- a close look at the data also provides some reassuring information. It tells me, for instance, that the foreclosure crisis is a regional problem, not a systemic one. It could become a systemic problem, of course, but we're a long way from that now.
This news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval. But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics:
Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.
In the top 100 housing markets, the average foreclosure rate was somewhat higher -- 1.38% -- and it was up 78% over the previous year. But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less.
Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% -- to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%).
By Scott Burns
A recent list of year-end mortgage foreclosure rates in 100 top metropolitan areas drew a lot of attention. Released by RealtyTrac, a company that compiles data on home foreclosures, the list showed the number of foreclosure filings in each metro area, the percentage of homes being foreclosed and the percentage change from the previous year.
Though the report had some dismal news -- such as the nearly 4.9% foreclosure rate in the Stockton, Calif., area -- a close look at the data also provides some reassuring information. It tells me, for instance, that the foreclosure crisis is a regional problem, not a systemic one. It could become a systemic problem, of course, but we're a long way from that now.
This news will disappoint the gloom-and-doom crew and all those seeking the excitement of financial upheaval. But it may be time to temper our worry and take a closer look at some of the year-over-year foreclosure statistics:
Though the national rate of foreclosure increased by a whopping 79% between December 2006 and December 2007, the rate was still only 1.033%. Because about 30% of all homes are owned mortgage-free, this means that for all the noise about a crisis, only seven-tenths of 1% of all homes were in foreclosure.
In the top 100 housing markets, the average foreclosure rate was somewhat higher -- 1.38% -- and it was up 78% over the previous year. But if you rank-ordered the list of the top 100 areas, only 34 had foreclosure rates above the group average. Fifty-one areas had rates of 1% or less.
Foreclosure rates actually fell in 14 of the 100 areas. More important, many of the areas with the highest increases in foreclosure rates were rising off rates that were tiny. The Bethesda, Md., area, to offer the most extreme case, saw foreclosures rise 1,288% -- to a rate of 0.682%. In other words, foreclosures there were virtually nonexistent the year before. Today they are still well below the national average. The same can be said for the Albany, N.Y., area (up 638% to 0.25%), the Baltimore area (up 544% to 0.73%) and the Providence, R.I., area (up 354% to 0.41%).
Thursday, March 6, 2008
Prediction
NAR: Home Sales to Hold Steady
The volume of existing-home sales is expected to remain stable through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Lawrence Yun, NAR chief economist, says many buyers have been waiting for higher mortgage loan limits.
“The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he says. “Therefore, a notable rise in home sales can be anticipated in the second half of the year."
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.
"This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity,” Yun says. “Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.
Market Forecast
Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.6 million in 2009. The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.
A pattern of disparate price performance continues around the country with a roughly even split between up and down markets. Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J.
At the same time, many areas that have lost jobs are showing price declines.
“Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace,” Yun says. NAR’s housing affordability index is forecast to rise 14 percentage points to 127 in 2008.
New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009.
“As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half,” Yun said. “That will permit a quicker return to balanced market conditions in many local areas.” The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.
A Look Across the Region
Across the United States, the PHSI in the:
West: jumped 13 percent in January to 93.8, but remains 12.7 percent below a year ago.
Midwest: rose 0.6 percent to 85.2, but is 13.3 percent lower than January 2007.
Northeast: declined 4.1 percent in January to 69.6 and is 28 percent below a year ago.
South: fell 6.1 percent in January to 89.5 and is 23.8 percent below January 2007.
Other Market Indicators
The 30-year fixed-rate mortgage, which has moved erratically in recent weeks, is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009.
Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009. The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year.
Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.
— REALTOR® magazine online
For more economic news and research reports, visit NAR's Research division at REALTOR.org.
The volume of existing-home sales is expected to remain stable through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Lawrence Yun, NAR chief economist, says many buyers have been waiting for higher mortgage loan limits.
“The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he says. “Therefore, a notable rise in home sales can be anticipated in the second half of the year."
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8.
"This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity,” Yun says. “Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.
Market Forecast
Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.6 million in 2009. The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.
A pattern of disparate price performance continues around the country with a roughly even split between up and down markets. Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J.
At the same time, many areas that have lost jobs are showing price declines.
“Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace,” Yun says. NAR’s housing affordability index is forecast to rise 14 percentage points to 127 in 2008.
New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009.
“As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half,” Yun said. “That will permit a quicker return to balanced market conditions in many local areas.” The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.
A Look Across the Region
Across the United States, the PHSI in the:
West: jumped 13 percent in January to 93.8, but remains 12.7 percent below a year ago.
Midwest: rose 0.6 percent to 85.2, but is 13.3 percent lower than January 2007.
Northeast: declined 4.1 percent in January to 69.6 and is 28 percent below a year ago.
South: fell 6.1 percent in January to 89.5 and is 23.8 percent below January 2007.
Other Market Indicators
The 30-year fixed-rate mortgage, which has moved erratically in recent weeks, is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009.
Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009. The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year.
Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.
— REALTOR® magazine online
For more economic news and research reports, visit NAR's Research division at REALTOR.org.
California Fast Facts
Fast Facts
Calif. median home price - January 08: $430,370(Source: C.A.R.)
Calif. highest median home price by C.A.R. region January 08: Santa Barbara So. Coast $1,135,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region January 08: High Desert $234,310 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 07: 33 percent (Source: C.A.R.)
Mortgage rates - week ending 02/28: 30-yr. fixed: 6.24%; Fees/points: 0.5% 15-yr. fixed: 5.72%; Fees/points: 0.5% 1-yr. adjustable: 5.11%; Fees/points: 0.7% (Source: Freddie Mac)
Calif. median home price - January 08: $430,370(Source: C.A.R.)
Calif. highest median home price by C.A.R. region January 08: Santa Barbara So. Coast $1,135,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region January 08: High Desert $234,310 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 07: 33 percent (Source: C.A.R.)
Mortgage rates - week ending 02/28: 30-yr. fixed: 6.24%; Fees/points: 0.5% 15-yr. fixed: 5.72%; Fees/points: 0.5% 1-yr. adjustable: 5.11%; Fees/points: 0.7% (Source: Freddie Mac)
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