Brad Elsner\’s Blog

World events spark short-term drop in rates
World events, especially the tragedy in Japan, have caused a short-term drop in home loan rates just as the economy is heating up. This means that you now can purchase or refinance a home at the lowest rates in months. According to the Freddie Mac Weekly Survey, rates have dropped over 0.25% in the past several weeks. Rates on 15-year fixed home loans are the lowest they have been since December. This lower rate equates to an approximately $500 in annual savings in interest on a $200,000 mortgage.  

For the past several months, rates had been rising from the historically low levels they reached during the second half of last year. These rates presented a great opportunity for homeowners to refinance their home loan. It was even a better opportunity for those who were interested in purchasing their first home, an investment property or trade up. With bargains available, purchasing made so much sense for those who see real estate as a long-term investment and more importantly a better life for their family.

Rising rates were not bad news for the state of our economy. The rates were rising because the economy is recovering and that is very good news. Evidence of a recovery is all around us. Just last week, CNN indicated that rents are about to rise precipitously and one must ask whether the recovery of the home purchase market will be next.   Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Some experts expect rents to spike 7% or so in each of the next two years…”

How long will rates stay low because of this crisis? No one can tell. But if you missed out on refinancing or purchasing last year, this could be your opportunity. Today, those who hesitate may be missing a very historic opportunity. Home affordability is the lowest it has been in our generation. Those who have a lot of money have been picking up bargains for the past year. Why? Those who are successful stay ahead of the trends. These lower rates mean that everyone can take advantage of this occasion to own the home of their dreams or reduce their payment on the home they already own. With gas prices up, wouldn’t the savings help?
 
The Markets.   The crisis in Japan contributed to a precipitous drop in rates in the past week. Freddie Mac announced that for the week ending March 17, 30-year fixed rates averaged 4.76%, down from 4.88% the previous week. The average for 15-year fixed fell to 3.97%. Adjustables were also down with the average for one-year adjustables decreasing to 3.17% and five-year adjustables falling to 3.57%. A year ago 30-year fixed rates were at 4.96%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac, “With the crisis in Japan, investors rushed to buy the security of U.S. Treasury bonds, which lowered its yields and other rates as well. This allowed fixed home loan rates to drift lower this week. In aggregate, families have been strengthening their balance sheet s. In the fourth quarter of 2010, household net worth rose by $2.1 trillion, boosted by gains in the stock market. This helped lower their financial obligation ratio (debt payments relative to disposable income) to the lowest level since the first quarter of 1995.”
   
Americans are more confident about the stability of home prices, according to Fannie Mae’s latest national housing survey, conducted between October 2010 and December 2010.   And when it comes to home ownership, younger Americans are particularly optimistic, the survey finds. Nearly 80 percent of all respondents, including home owners and renters, surveyed said they thought housing prices would hold steady or increase over the next 12 months-which is up from 73 percent in January 2010.   A similar survey released by Prudential Real Estate and Relocation Services has 68 percent of respondents saying the real estate market and property values will recover in the next year or two.
 
In fact, survey respondents from the Fannie Mae report expressed more confidence over the stability of home prices than they did about the overall strength of the economy. Sixty-one percent said the economy is heading on the wrong track. Young Americans, Hispanics, and African-Americans were the most positive about their views on home ownership among the general population, according to the survey. Nearly 60 percent of Generation Y respondents (those between 18-34 years old) say that buying a home offers a lot of potential as an investment. Also, more than one-third of Hispanics and African Americans say they plan to buy a home within the next three years, compared to one in four of the general population. Check out the full 100+ page National Housing Survey PDF from Fannie Mae.
 
 
Double-digit rent hikes may be coming soon.   If you aren’t planning to buy a home soon – it may be wise to renew your lease sooner than later.   Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years. “The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
 
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode. Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years – to a national average that will top $800 per month.
 
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years. In San Diego, Alford anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%. This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together. As a result, landlords had to reduce prices and offer big incentives to snag renters.
 
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live. Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends. “There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.” Source: CNNMoney.com

10 Reasons to Buy a Home
Time magazine is being overly pessimistic in its recent cover piece that called into question the benefits of homeownership. In fact, now is a great time to buy. And, what’s more, tomorrow will be a great time to own, because the fundamental strength of homeownership hasn’t changed.

Why is now a great time to buy? Here are 10 reasons:

1. You can get a good deal. Prices are down 30 percent on average. They’re at a level that makes sense for people’s income.
2. Mortgages are cheap. At 4.3 percent on average for a 30-year fixed-rate mortgage, your costs to own are down by a fifth from two years ago.
3. You can save on taxes. When you add up the deductions for mortgage interest and others, the cost of owning can drop below renting for a comparable place.
4. It’ll be yours. The one benefit to owning that never changes is that you can paint your walls orange if you want (generally speaking; there might be some community restrictions). How many landlords will let you do that?
5. You can get a better home. In some markets, it’s simply the case that the nicest places are for-sale homes and condos.
6. It offers some inflation protection. Historically, appreciation over time outpaces inflation.
7. It’s risk capital. If the economy picks up, you stand to benefit from that, even if you’re goal is just to have a nice place to live.
8. It’s forced savings. A part of your payment each month goes to equity.
9. There is a lot to choose from. There are some 4 million homes available today, about a year’s supply. Now’s the time to find something you like and get it.
10. Sooner or later the market will clear. The U.S. is expected to grow by another 100 million people in 40 years. They have to live somewhere. Demand will eventually outpace supply.

Source: Wall Street Journal, Brett Arends (9/16/10)

Is a distressed property the right deal for you?

With the first-time homebuyer tax credit deadline having come and gone, you may be asking yourself, œWhat now? Fortunately, the door is now open to a new wave of savings: distressed properties.

For many buyers, the term foreclosure brings up images of run-down homes with no heat and rotting wood. While this is still the case for some homes, it™s no longer the standard. In fact, first time buyers are snatching up distressed deals in decent condition for great prices.  

According to a November 2009 Keller Williams Research Buying Distressed Properties Survey, 40 percent of all buyers for bank-owned foreclosures (REOs) were first-time buyers in 2009. 50 percent of all short sale buyers were first-time buyers.

By definition, a distressed property is one that was purchased with a loan and the homeowner is no longer able to make their mortgage payment resulting in foreclosure “ or if they™re lucky a short sale “ meaning they owe more on the home than it™s currently worth. With a 20 percent increase in foreclosures from 2009, distressed properties still remain a large portion of home sales and are going to continue well into 2010 as homeowners continue to feel the effects of an economy on the mend.

If you™re in the market for a home and are prepared for a unique transaction, a distressed property can be a great option. Here™s why:

Prices are low “ Buying a foreclosed property is an excellent way to get a home for less. Research shows you can save 10-40 percent over the price of similar properties in a traditional sale.

Mortgage costs are low “ With rates hovering near historic lows, financing costs to are favorable. Keep in mind, rates are always changing. It™s important to begin the pre-approval process so that you know how much you can realistically afford.

You have options “ The number of homes in some stage of the foreclosure process still remains high. RealtyTrac, a site dedicated to tracking foreclosures across the country, estimates that there are approximately 2.1 million homes in some stage of foreclosure in the United States.

Sellers and lenders are motivated “ According to data from RealtyTrac, in  April, one in  every  387 households in the country has received a foreclosure filing. The bottom line is that many sellers are still feeling the pain of a down economy and are anxious to out get from under a home that is putting stress on their current financial frustrations. While it is still an emotional transaction, these sellers are willing to come down on price or even consider concessions such as helping out on closing costs. Banks holding on to large portfolios of Real Estate Owned (REO) properties want to unload quickly “ and price these home to sell.

Your best ally when purchasing a distressed property is an expert. Always have a professional REALTOR ®  by your side to help you make informative decisions.

Homeowners struggling to sell their homes in a short sale are getting some relief, thanks to the federal government’s Home Affordable Foreclosure Alternatives, or HAFA, program.

Up to now, many short sales — in which the lender accepts a sale of the property for less than the full amount owed — have taken months to complete. Sometimes, the complex and lengthy process has failed, resulting in foreclosure.

HAFA establishes streamlined short sale rules and incentivizes borrowers and lenders to work together to avoid foreclosure. The rules — in effect between April 5, 2010, and Dec. 31, 2012 — also are intended to speed up the short sale process.

“The streamlined short sales process will definitely help homeowners,” says David Liniger, Re/Max International chairman and co-founder.

Prior to HAFA, homeowners often listed their home for sale without an idea of what the lender would accept.

“A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond,” Liniger says.

Under HAFA, borrowers receive preapproved short sale terms from the lender prior to putting the home on the market.

Lisa Matykiewicz, a Realtor and Certified Distressed Property Expert in Gilbert, Ariz., says the updated short sale rules establish an easy-to-understand process with predefined steps that “make it easier for everyone to understand.”

Eligibility requirements

The HAFA guidelines apply to lenders who voluntarily participate in the HAMP program. The Department of Housing and Urban Development says more than 100 servicers have signed up to participate in HAMP, covering more than 89 percent of mortgage debt outstanding in the country.

To be eligible for HAFA, homeowners must first apply for a loan modification through the Home Affordable Modification Program, or HAMP. Owners who do not qualify for a loan modification or miss payments during the initial loan modification period qualify for HAFA.

Other HAFA requirements include:

• Property is principal residence.
• Mortgage originated before Jan. 1, 2009.
• Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
• Borrower is delinquent or default is foreseeable.
• Homeowner demonstrates hardship.
• Borrower’s total monthly housing payment exceeds 31 percent of gross income.
• Unpaid principal does not exceed $729,750.

According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender’s short sale agreement.

“I think it’s great that the lenders in this program have to offer a short sale before going to foreclosure,” Matykiewicz says.

When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers’ mortgage preapproval and the status of negotiations with other lien holders on the seller’s property.

Finally, lenders must approve or deny the contract within 10 days.

HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.

Other incentives

In the past, short sales were especially difficult for homeowners with more than one loan on their home, since the home sale typically repaid only the first mortgage. HAFA’s financial incentives include a payment of up to $3,000 for second mortgage holders.

“Second trust lien holders are often owed five or 10 times that $3,000 payment,” says Liniger. “But if the property goes to foreclosure, the second trust holder is not likely to get any money at all. This at least guarantees they get something.”

Other HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short sale proceeds with second lien holders and $1,500 to the homeowners for relocation.

“The moving expense allocation acts as an incentive for them to stay in the property until the short sale goes through,” says Liniger. “Owner-occupied properties are usually in better condition than vacant homes.”

HUD to Revise FHA Loan Program “ 2010

Federal Housing Administration (FHA) Commissioner David Stevens recently announced some big changes to the FHA loan program:

·                 Borrowers with credit scores of 580 or less would have to put 10 percent down in cash in order to qualify for an FHA loan. (This may not hurt that many people, since few lenders will even grant a loan to borrowers with a credit score of 580 or less at the moment, even though FHA permits it.)

·                 Borrowers with higher credit scores would be able to put down only 3.5 percent in cash on their purchase.

• FHA™s mortgage insurance premium (known in the industry as œMI versus œPMI for private sector private mortgage insurance) will rise from 1.75 percent to 2.25 percent.
• FHA will ask Congress for approval to raise the annual mortgage insurance premium from its current .55 percent level.
• Sellers will only be allowed to give 3 percent to the buyer to defray closing costs, down from 6 percent.

The moves are being made to shore up FHA™s flagging finances and help the agency avoid a nasty taxpayer bailout.

In last year™s annual audit, it was revealed that FHA had fallen below the 2 percent capital reserves required by Congress. The current level of capital reserves is somewhere around .53 percent, according to the agency, down sharply from 3 percent in 2008.

œStriking the right balance between managing the FHA™s risk, continuing to provide access to underserved communities, and supporting the nation™s economic recovery is critically important, Stevens said in a statement.

FHA has become the only lender available for many Americans. Over the past few years, FHA has gone from insuring around 3 percent of loans to more than 25 percent – a level that Stevens called unhealthy for the mortgage market

This may be a great opportunity to reach out to buyers who are currently hesitating to purchase.  

We have recently been the victims of attempted property scams. After notifying Channel 5 they met  me at the property and aired an interview regarding the scam. Here is a link to that interview.

http://www.ksdk.com/video/default.aspx?aid=117193&storyid=192745#/News/For+rent+or+for+sale%3F/48541678001/48355648001/59972268001

WASHINGTON “ Buying a home is about to get cheaper for a whole new crop of homebuyers ” $6,500 cheaper.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House is scheduled to vote on the bill Thursday.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers ” or anyone who hasn’t owned a home in the last three years ” would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

“This is probably the last extension,” said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

“We are still in a world of economic hurt, and Congress must continue to act boldly and creatively,” said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. “With the right mix of tax breaks and investments we will get through this recession and get folks working again.”

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

“For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home,” Bond said. “And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place.”

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break ” for companies with revenues of $15 million or less ” in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.

The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.

“It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns,” said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.

The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.

Housing Affordability Surges to Highest

Level in 18 Years

RISMEDIA, May 20, 2009-

Nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 72.5% of all new and existing homes sold in the first quarter of 2009 were affordable to families earning the national median income  of $64,000, up from 62.4% during the previous quarter and up from 53.8% during the first quarter of 2008.

œUnderlying the increase in affordability are lower home prices and record low interest rates. Combined with the $8,000 federal tax credit for first-time home buyers, consumers are beginning to return to the marketplace, said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

Indianapolis was the most affordable major housing market in the country during the first quarter. Almost 95% of all homes sold were affordable to households earning the area™s median family income of $68,100. Indianapolis has now topped the affordability list 15 consecutive quarters.

Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Akron, Ohio; Grand Rapids-Wyoming, Mich.; and Syracuse, N.Y.

Several smaller housing markets posted even higher affordability scores than Indianapolis, with Sandusky, Ohio outscoring all others. There, almost 98% of homes sold during the first quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Monroe in Michigan and Mansfield, Springfield and Canton-Massillon in Ohio.

New York-White Plains-Wayne, N.Y.-N.J., where just over 21% of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation™s least affordable major housing market in the first quarter. Though affordability jumped 7 percentage points for the quarter, this was the New York metro area™s fourth consecutive appearance at the bottom of the list. Other major metros near the bottom of the chart included San Francisco; Los Angeles-Long Beach-Glendale, Calif.; Nassau-Suffolk, N.Y.; and Honolulu.

Sellers¦. If you have to sell, you have to sell. Here is what needs to be done to get your home sold for the most money and the least amount of time. You have to get buyers to fall in love with one of two things if not both. First, they need to LOVE the price. You have to make them think they are going to lose a smokin™ deal, or you have to get them to fall in love with your home.   There has to be something absolutely amazing about your house. Something very desirable and hard to find. Here is an example. Remodel your kitchen and baths. I am not talking about getting stock materials   from the home super stores. Get the good stuff. If you don™t have an eye for design or know what most people desire, contact a good designer & contractor. Chances are they are offering great prices now.

    If you go the remodel rout and put $30K to $50K into your home you will have more buyers see your home because you have something special. The more buyers you have visiting your house the better the chance of a sale at a higher price.

  OK, let™s check out the other option. Your home is clean and well maintained but hasn™t been updated since the late 90™s or earlier. I believe you can still get your home sold quickly but you will have to attract the buyers with something else. Obviously, your average house is not going to attract many buyers. There are a boat load of average homes on the market. What will separate yours from the rest?? This answer is not an easy pill to swallow. You will have to give your house an incredible price. Take a look at the market   figure out what the œmarket value is and beat  it by 10% to 15%. If you think your home is valued at $499K ask $425K to $450K.   If you think about it, just about every retailer is dropping prices. They are not messing around with piddly price drops of 10%-15%. They are taking 25% to 75% off. They have to to compete and get their product sold. If you aren™t buying what I am saying, put a buyers hat on and lets go on a home search. We find 40 homes that fit your search criteria. After looking at the price and the pictures you weed out 35. All of those homes you weeded out were average homes with average prices, homes you didn™t like the style or simply over priced homes. Do you want one of those 35 to be your house?

The Markets…  The good news continues for rates on home loans. Freddie Mac announced that for the week ending April 23, 30-year fixed rates averaged 4.80%, down slightly from 4.82% the week before. The average for 15-year stayed at 4.48%. Adjustables were down with the average for one-year adjustables decreasing to 4.82% and five-year adjustables falling to 4.85%. A year ago 30-year fixed rates were at 5.88%. Frank Nothaft, Freddie Mac vice president and chief economist stated “The housing market is showing further signs of possible improvement. House prices rose for the second consecutive month in February, the first back-to-back increase since April 2007, according to the Federal Housing Finance Agency. Among the nine Census divisions, six experienced positive gains in February, led by a monthly increase of 3.8 percent in the Pacific Division.”