Thursday, February 18, 2010
Banks Hurting Themselves and the Little Guy
I'm sure everyone knows by now how hard it is to get financing. If you are buying a home right now, your credit score needs to be super high, your income readily flowing(not just now, but for the last several years), and be prepared to have some underwriter crawling up your you-know-what. Now this is because the banks several years ago gave out too much money to people who couldn't afford it and now they are in full cover their butts mode. Guess I would be also if I were them. The crazy part is they, the banks, have swung so far the other way they are in serious danger of hurting themselves again.
Case in point....
To make sure that the homes they are giving out mortgages to are not going to be money losers down the road, they have gone after the appraisers to tighten their guidelines. Sounds like a sound solution? When an appraiser searches for comps (similar properties that sold recently) they are being instructed to take off the value of the seller assist (money that the seller gives back to the buyer for settlement costs) if any. Still kind of makes sense? When a seller gives a seller assist they have effectively lowered the price of the home. Now, what if you're buying in a neighborhood where most people need a seller assist to buy the home? Think about it for a moment........
If evertime a house is sold, the comps are not the most recent sale prices but 3 to 6% less, what does that do to the value of that neighborhood? It effectively decreases the value of the neighborhood 3 to 6% with every sale. This is a true declining market at that point and who did it? Well the banks did it. Now if one of the earlier clients of the banks can't make his mortgage payment for whatever reason, and the bank ends up foreclosing on the property (taking it back from the borrower) they are left with a property that is worth less than what they lent on it previously. Ooops, way to take aim at your own foot and fire!
Of course there is a simple solution.....instruct your appraisers to not deduct the sellers assist in instances where the sales in that particular neighborhood have a high percentage(over 50%) of seller assists.
Sounds like "common sense" to me. Unfortunately, "common sense" just isn't that common anymore. I just dont understand!
Case in point....
To make sure that the homes they are giving out mortgages to are not going to be money losers down the road, they have gone after the appraisers to tighten their guidelines. Sounds like a sound solution? When an appraiser searches for comps (similar properties that sold recently) they are being instructed to take off the value of the seller assist (money that the seller gives back to the buyer for settlement costs) if any. Still kind of makes sense? When a seller gives a seller assist they have effectively lowered the price of the home. Now, what if you're buying in a neighborhood where most people need a seller assist to buy the home? Think about it for a moment........
If evertime a house is sold, the comps are not the most recent sale prices but 3 to 6% less, what does that do to the value of that neighborhood? It effectively decreases the value of the neighborhood 3 to 6% with every sale. This is a true declining market at that point and who did it? Well the banks did it. Now if one of the earlier clients of the banks can't make his mortgage payment for whatever reason, and the bank ends up foreclosing on the property (taking it back from the borrower) they are left with a property that is worth less than what they lent on it previously. Ooops, way to take aim at your own foot and fire!
Of course there is a simple solution.....instruct your appraisers to not deduct the sellers assist in instances where the sales in that particular neighborhood have a high percentage(over 50%) of seller assists.
Sounds like "common sense" to me. Unfortunately, "common sense" just isn't that common anymore. I just dont understand!
Monday, February 1, 2010
You Snooze You Lose (or at least you may be missing out)
Time already is growing short for buyers hoping to land a great deal before some key changes occur.
Later this spring, the federal homebuyer tax credit -- up to $8,000 for first-time buyers and up to $6,500 for move-up buyers -- is scheduled to expire. Buyers must have their new home under contract by April 30, and the transaction must close within 60 days after that.
Mortgage rates also may start to climb soon. In late 2008, the Federal Reserve began a $1.25 trillion campaign to purchase mortgage-backed securities and drive borrowing costs lower. The policy is scheduled to end in March, many experts agree that mortgage rates subsequently could rise anywhere from a half-point to a full point.
We've had these low rates in effect for over a year, people have the tendency to think this is where rates should be. Well, they're not. Rates are artificially low and it's only based on the impact from the Federal Reserve.
If rates do move higher, shoppers waiting for the absolute bottom of the housing market may regret their procrastination. A slight increase in interest rates can wipe out any savings achieved by waiting for a lower sales price.
It is now time to get your ducks in a row if you hope to secure a purchase before the looming spring deadlines. Now more than ever, it's really important to know what your level of qualification is before you go and look for a property, because so much has changed in the last two or three years in underwriting.
Keep this in mind, If you are looking for a new home, or interested in investing in Real Estate you would be wise to act soon. The low prices and low rates cannot last forever!
Time already is growing short for buyers hoping to land a great deal before some key changes occur.
Later this spring, the federal homebuyer tax credit -- up to $8,000 for first-time buyers and up to $6,500 for move-up buyers -- is scheduled to expire. Buyers must have their new home under contract by April 30, and the transaction must close within 60 days after that.
Mortgage rates also may start to climb soon. In late 2008, the Federal Reserve began a $1.25 trillion campaign to purchase mortgage-backed securities and drive borrowing costs lower. The policy is scheduled to end in March, many experts agree that mortgage rates subsequently could rise anywhere from a half-point to a full point.
We've had these low rates in effect for over a year, people have the tendency to think this is where rates should be. Well, they're not. Rates are artificially low and it's only based on the impact from the Federal Reserve.
If rates do move higher, shoppers waiting for the absolute bottom of the housing market may regret their procrastination. A slight increase in interest rates can wipe out any savings achieved by waiting for a lower sales price.
It is now time to get your ducks in a row if you hope to secure a purchase before the looming spring deadlines. Now more than ever, it's really important to know what your level of qualification is before you go and look for a property, because so much has changed in the last two or three years in underwriting.
Keep this in mind, If you are looking for a new home, or interested in investing in Real Estate you would be wise to act soon. The low prices and low rates cannot last forever!
Friday, April 3, 2009
Tuesday, March 31, 2009
The Market This Year
Well, here we go again. Different Spring, same question, "How is the market?" With recent events this question has more meaning than it did in previous years. Let me put forward some of the highlights and the low lights.
A. Interest Rates below 5%!!!! The banks have to lend and if you are credit worthy you will be getting a great rate. Also the banks are so money hungry that paying points to reduce your rate actually is worth it, especially if your credit is not so worthy.
B. Short Sales -- These are transactions where the mortgage company agrees to take less then they lent the homeowner. Why? Because they lent them too much!!!!
C. Huge Inventory-- For buyers this is great, you've got your choice and you have some serious bargaining leverage since there are so many sellers and a lot less buyers.
D. Foreclosures-- For the most part if these homes got this far along they really aren't worth it.
E. Stimulus-- $8000 credit for new homeowners (anyone who hasn't owned a home for the past 3 years) This is a straight tax credit that can be taken of this years taxes or next depending when you buy (probably next considering tomorrow is April) as long as you buy before December 1st. There are also some great township grants available, Haverford township is offering up to $15000.00!!!!
F. The Correction-- A lot of the outrageous prices are gone. The recent boom in Real Estate was too big and certain areas have definitely undergone a correction. If you bought in the last 4 years and need to sell expect to get what you payed and no more. Some people may not get what they payed. Certain townships are worse than others. Some in the area have stayed pretty stable, Havertown is still a great value.
G. Shiny Penny--- If your home is priced right and shows well you will sell fast, because the people on the fence are waiting for a nice home (because of the massive inventory). Conversely, buyers if the house looks great jump, because someone else will if you don't.
I could go on and on. I enjoy homes and enjoy talking about them. If you want to know more specifics for where you live give me a shout or drop me an email.
A. Interest Rates below 5%!!!! The banks have to lend and if you are credit worthy you will be getting a great rate. Also the banks are so money hungry that paying points to reduce your rate actually is worth it, especially if your credit is not so worthy.
B. Short Sales -- These are transactions where the mortgage company agrees to take less then they lent the homeowner. Why? Because they lent them too much!!!!
C. Huge Inventory-- For buyers this is great, you've got your choice and you have some serious bargaining leverage since there are so many sellers and a lot less buyers.
D. Foreclosures-- For the most part if these homes got this far along they really aren't worth it.
E. Stimulus-- $8000 credit for new homeowners (anyone who hasn't owned a home for the past 3 years) This is a straight tax credit that can be taken of this years taxes or next depending when you buy (probably next considering tomorrow is April) as long as you buy before December 1st. There are also some great township grants available, Haverford township is offering up to $15000.00!!!!
F. The Correction-- A lot of the outrageous prices are gone. The recent boom in Real Estate was too big and certain areas have definitely undergone a correction. If you bought in the last 4 years and need to sell expect to get what you payed and no more. Some people may not get what they payed. Certain townships are worse than others. Some in the area have stayed pretty stable, Havertown is still a great value.
G. Shiny Penny--- If your home is priced right and shows well you will sell fast, because the people on the fence are waiting for a nice home (because of the massive inventory). Conversely, buyers if the house looks great jump, because someone else will if you don't.
I could go on and on. I enjoy homes and enjoy talking about them. If you want to know more specifics for where you live give me a shout or drop me an email.
Wednesday, March 4, 2009
Why We Shouldn't Hesitate
I've skipped a bunch of weeks blogwise. I had goofy things to write about like snow etiquette and my recent role as nurse for my two oldest kids. But I still wanted to write about the state of our Union and the direction we're taking with respect to my business and all of yours. I didn't write weeks ago because it really is just too much to digest in such a short period of time. Seems to me knee jerk reactions and instant posturing. I never expected instant results and didn't feel the need to be coddled.
Months ago when the stock market started it's crash we reacted with a cash infusion that was just a bandage to prevent an absolute colapse. These past 5 months we would watch a see saw of speculation and rumor fluctuate the market up and down. I always felt that we still had some more to fall and was never upset with being told that it would probably happen. In fact I said that the Dow would have to fall below 7000 before we could start true growth on real and solid expansion. Yesterday the president quipped that now that the market is so low we should be luring back some investors.
The one thing that became a pet pieve of mine was the origination of our "crisis". Being in the real estate business it has become dificult to listen the argument that the mortgage crisis was the root of all of our troubles. Yes, there were a lot of irresponsible loans and people reaching beyond their means for a dream dangled in front of them. But, the more I thought about it the mortgages were all loans made with tangible assets, homes. So, even though some of them were over valued and being forclosed upon the bank wouldn't be losing 100% of their investment. Meanwhile some of the bogus financial instruments, like credit default swaps, evaporated. And big time money managers were cooking the books and litterally fooling the market. How much of the Dow's average was fake. We tryed to prosper on notions and speculation on what would happen without ever doing anything.
I would hope that with the massive amount of money we have "borrowed" from the future we can inspire true growth, progress and innovation. There is no going back now this money is going to be spent and we are being asked now to adjust to new careers or paths to prosperity. Here's hoping that the money we direct to new projects and green alternatives will inspire business to participate in growth and solid investments. I would hope that we figure ways to create products of true value to market to the world in what appears to be a more hand in hand global economy.
Today I read this article which inspired this little rant.
U.S. mortgage demand off before Obama rescue detailsWed Mar 04 12:59:36 UTC 2009 By Lynn AdlerNEW YORK (Reuters) -
Months ago when the stock market started it's crash we reacted with a cash infusion that was just a bandage to prevent an absolute colapse. These past 5 months we would watch a see saw of speculation and rumor fluctuate the market up and down. I always felt that we still had some more to fall and was never upset with being told that it would probably happen. In fact I said that the Dow would have to fall below 7000 before we could start true growth on real and solid expansion. Yesterday the president quipped that now that the market is so low we should be luring back some investors.
The one thing that became a pet pieve of mine was the origination of our "crisis". Being in the real estate business it has become dificult to listen the argument that the mortgage crisis was the root of all of our troubles. Yes, there were a lot of irresponsible loans and people reaching beyond their means for a dream dangled in front of them. But, the more I thought about it the mortgages were all loans made with tangible assets, homes. So, even though some of them were over valued and being forclosed upon the bank wouldn't be losing 100% of their investment. Meanwhile some of the bogus financial instruments, like credit default swaps, evaporated. And big time money managers were cooking the books and litterally fooling the market. How much of the Dow's average was fake. We tryed to prosper on notions and speculation on what would happen without ever doing anything.
I would hope that with the massive amount of money we have "borrowed" from the future we can inspire true growth, progress and innovation. There is no going back now this money is going to be spent and we are being asked now to adjust to new careers or paths to prosperity. Here's hoping that the money we direct to new projects and green alternatives will inspire business to participate in growth and solid investments. I would hope that we figure ways to create products of true value to market to the world in what appears to be a more hand in hand global economy.
Today I read this article which inspired this little rant.
U.S. mortgage demand off before Obama rescue detailsWed Mar 04 12:59:36 UTC 2009 By Lynn AdlerNEW YORK (Reuters) -
Applications for loans to buy U.S. homes and to refinance existing mortgages fell for the second straight week, the Mortgage Bankers Association said on Wednesday, as consumers awaited for specific details on President Barack Obama's housing stimulus plan.The $275 billion program announced two weeks ago aims to reduce mortgage rates and stem the record tide of foreclosures that has dragged home prices down nearly 27 percent from their mid-2006 peak.The Mortgage Bankers Association's seasonally adjusted mortgage applications index, made up of both purchase and refinance loans, fell 12.6 percent to 649.7 last week.That was about half the level posted early this year, when average 30-year mortgage rates fell as low as 4.89 percent, according to the trade group. Mortgage rates rose to 5.14 percent last week from 5.07 percent the prior week.Potential buyers and refinancers have pulled back in the hopes that Obama's Homeowner Affordability and Stability Plan will cut borrowing costs and steady house prices."The housing stimulus package was announced but without sufficient detail to cause the market to have comfort that it would work, and (a sense about) when it would work," Michael Feder, chief executive at real estate data and analytics company Radar Logic, told Reuters on Tuesday.The Mortgage Bankers Association's seasonally adjusted refinancing applications index slumped 15.3 percent to 3,063.4, less than half the level seen as recently as mid-January.Its purchase index dropped 5.6 percent to 236.4 last week, having steadily descended from this year's high of 344.2 in the week ended January 2.An unwillingness to buy a fast-depreciating asset, a supply glut and swiftly evaporating jobs continue to contribute to the housing market swoon, analysts agree."While there is some demand from bargain hunters, housing conditions remain quite dire," Barclays economist Michelle Meyer wrote on Tuesday after the January National Association of Realtors pending home sales index slid to its lowest level since the index was started in 2001."Consumers have lost confidence in the economy and are worried about job security, discouraging big-ticket purchases," and tight credit conditions are overshadowing relatively low mortgage rates, she added.(Editing by Leslie Adler)
My gut feeling after reading this is.......
A. Eventually homes will be sold at a reasonable price.
B. Mortgage Rates hovering around 5%, what are you waiting for?
C. Rather have my money in a solid asset then in this stock market.
D. The banks have to make loans, right now if you have good credit you can purchase or refinance at an unbelievable rate and save money by being proactive instead of reactive.
Now if you've made it this far through my blogorant please comment!! Love to have a variety of opinion.
Monday, February 2, 2009
First time buyers could receive a $7,500 tax credit if they purchase soon!
The article I attached to this blog outlines another part of the Stimulus plan that is geared to helping the housing market. If you are in a market that has not been crushed valuewise by this economy and are considering buying but are too scared this should be the straw that breaks the camels back. Basically you will be able to claim a 7500.00 credit on your taxes (even on your 2008 return) if you buy by the end of this year. Similar to the credit/loan that congress tryed last year but with the caveat that you won't have to pay it back. FREE MONEY!! Although I rarely think that handouts from the government help I think that if you were buying a home anyway or thinking about it, now is the time!!
Read the entire article for eligibility requirements. Remember it has to get through the Senate also.
NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.
Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.
Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.
"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."
A 10% increase would yield an extra half million sales this year.
Who qualifies
To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.
Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.
Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.
And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.
The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.
Buyers beware
But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.
Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).
And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.
"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."
The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least.
"By the time it's implemented," said Trupo, "there could be very few months left to act."
An earlier version of this story incorrectly stated that the tax credit for a home purchased in 2009 could only be taken off of 2009 taxes. However, homebuyers can choose to take the credit for 2008, according to the IRS. Even if they buy a home after they've filed their 2008 taxes, they can file an amended return.
Read the entire article for eligibility requirements. Remember it has to get through the Senate also.
NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.
Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.
Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.
"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."
A 10% increase would yield an extra half million sales this year.
Who qualifies
To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.
Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.
Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.
And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.
The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.
Buyers beware
But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.
Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).
And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.
"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."
The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least.
"By the time it's implemented," said Trupo, "there could be very few months left to act."
An earlier version of this story incorrectly stated that the tax credit for a home purchased in 2009 could only be taken off of 2009 taxes. However, homebuyers can choose to take the credit for 2008, according to the IRS. Even if they buy a home after they've filed their 2008 taxes, they can file an amended return.
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