Mortgage Rates: Hurry Up and Wait (absence of news on the fiscal cliff)

The waiting game continues. As our Representatives in Washington DC, the President and the members of Congress dilly-dally instead of getting serious about negotiating a deal to avoid the major tax increases and automatic spending cuts known as the fiscal cliff, market participants have no choice but to wait for signs of movement. Today, with no new information to consider markets are calm.


Mortgage rates have ticked higher this morning after a positive start for the stock market. In the absence of news on the fiscal cliff, the stock market today is trading simply based on non-US and corporate news. A positive economic report from Germany and a halt to the recent fall in the stock of Apple has turned trading positive this morning.

Equally, if not more importantly today, the US Federal Reserve’s Open Market Committee begins a two-day meeting at which it is widely believed to announce a new program for the purchase of long-term government securities. It’s Operation Twist program, in which existing short-term securities in its portfolio were replaced with longer-term securities (primarily mortgage-backed securities) has helped to push rates to the all-time lows where they currently sit. However, Operation Twist will end at the end of this month. Without new buying by the Fed, rates would definitely rise, yet new purchases expand the Fed’s balance sheet which adds to the risk.

Tomorrow all eyes will be on the Fed and their decision to pursue additional quantitative easing. I also expect the market will be waiting to hear the thoughts of Chairman Bernanke in the post-meeting news conference regarding the fiscal-cliff and longer-term budget matters. I expect the Fed Chairman to let our political leaders “have it” with both barrels tomorrow and explain clearly just how much damage is possible if we fail to reach a deal on these fiscal matters.

Mortgage Rates: Low Mortgage Rates Unchanged After Big Jump in Home Prices

Low mortgage rates remain unchanged after a big jump in home prices was reported by CoreLogic, a data analysis firm. The CoreLogic home price index increased 6.3% in October as compared to a year ago, the largest annual jump in over six years dating back to June of 2006. This was the eighth consecutive gain in home prices across the nation on a year to year basis, according to CoreLogic. The firm indicated that prices fell 0.2% in October from September, but this decrease can be attributed to the end of the home selling and buying season.

Today’s 30 year fixed mortgage interest rates are as low as 3.10%, 15 year fixed mortgage rates are as low as 2.375% and 5/1 ARM loan rates are as low as 2.250%. Good credit and qualifications are required in order to receive these lowest mortgage rates available. Borrowers should be prepared to submit documentation for employment, income and assets. These are necessary for verification, debt to income ratios and to show the funds available to complete the mortgage transaction. An appraisal is also required for loan to value ratios and will be ordered by the lender. In some cases, lenders will request additional information after examining the loan file. Some borrowers, those who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, can refinance through HARP 2.0 which does not have loan to value caps or the need of an appraisal. This means that even borrowers with LTVs above 125% can obtain lower mortgage rate loans as long as the existing mortgage has been paid on time for the previous six months with no more than one late for the six months prior to that. While HARP 2.0 has been available with no LTV maximums since earlier this year, there are many borrowers who are eligible, but have not yet taken advantage of this opportunity. There are also others who have been denied and have not tried to obtain HARP 2.0 through another lender which is often a successful strategy. With the online form submission, eligible borrowers can receive more information and the opportunity to find a lender who will work with them. This process is safe since it does not require a social security number, as well as, quick since a response is returned almost instantly.

Current FHA 30 year fixed mortgage rates are as low as 3.00%, FHA 15 year fixed mortgage interest rates are as low as 2.625% and FHA 5/1 ARM loan rates are as low as 2.250%. FHA is a stronger contender when it comes to mortgages. Multiple mortgage products make it appealing to a wide variety of borrowers who may need a specific type of loan that is offered only through FHA. The low down payment requirements and flexible credit guidelines allow more borrowers to become homeowners which is something that may not be possible through other mortgage programs. Although FHA closing costs (APR) are high, which is due to various FHA fees and the upfront mortgage insurance premium, FHA allows these costs to be added to the loan amount in many cases. Seller concessions up to 6% can also be used for this purpose. After owning a home for a period of time, borrowers can refinance through the FHA streamline refinance with no cash out. The streamline does not require an appraisal, a credit history or any other documentation which makes it a quick and easy process. Borrowers who have had FHA mortgages that were endorsed prior to June 1, 2009 can use the FHA streamline to refinance to lower mortgage rates and will also receive lower upfront and annual mortgage insurance premiums for the life of the loan. This offer is only available through the end of 2013. The only requirement is that mortgage payments must be current and on time for the previous twelve months. More information about FHA loan products and the FHA streamline refinance can be obtained by submitting the online form which will return a response almost immediately.

Today’s jumbo 30 year fixed mortgage interest rates are as low as 3.125%, jumbo 15 year fixed mortgage rates are as low as 2.625% and jumbo 5/1 ARM loan rates are as low as 2.250%. Some borrowers need financing that is above the conforming and FHA loan limits, and for this purpose, jumbo mortgages are available. Excellent credit and qualifications are required in order to receive these lowest jumbo mortgage rates. Since these loans are actually private loans held by the lender, guidelines can be strict and will require substantial assets to fund the mortgage transaction, as well as, show the necessary months of reserves. As this market has been improving, some flexibility may be offered to well qualified borrowers. The best thing borrowers can do is to shop around for the best jumbo mortgage rates and terms for which they are eligible. This can easily be done by submitting the online form which does not require detailed personal information or a social security number.

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How are Current Mortgage Rates Determined?

Locking in low mortgage rates is more than the luck of the draw. There are many components that contribute to how mortgage lenders gauge the rate range they offer to borrowers.
Here are three major influencers of mortgage rates today.

#1. Supply and Demand

Like any business, the issue of supply and demand must be assessed in order to determine what to charge customers for a service. In the case of mortgages, the mortgage crisis of 2008 sent demand for mortgage loans plummeting as supply shot through the roof. The ample number of mortgage lending options in the market and a disinterest in home financing resulted in current mortgage rates dropping to historic lows.

#2. Fed’s Regulation D

The banking operates in a single, large loop when it comes to the way interest rates are determined. The Federal Reserve sets certain requirements for all financial institutions with regard to how much money they must have on deposit.

Banks who do not have enough funds to meet the Fed’s Regulation D requirement, can choose to borrow the cash from other financial institutions or the Federal Reserve itself. However, as with all loans, this borrowing comes at a cost. The borrowing institution must pay interest on the loan while still generating a profit, so consumer mortgage rates are increased as a result.

#3. Likelihood of Default

In addition to the aforementioned factors that drive mortgage rates today up or down, borrowers’ credit histories play a significant role in the rate range they can expect to receive upon submitting a mortgage application.

Even if current mortgage rates are at an all-time low, borrowers who have a less than stellar credit history, and especially those without a substantial amount of equity or down payment to allot to the loan, will likely qualify for higher mortgage rates.

When lenders review a borrower’s creditworthiness, they are essentially making a judgement call as to whether the applicant is a high-risk for default. Lending money to an individual with a track record for making late payments or who doesn’t have any credit history to speak of leaves mortgage lenders with an immense level of uncertainty as to whether they’ll even get their money back.
As a result, mortgage providers will often increase mortgage rates to expedite the return of their money, to reduce their chances of loss in the long-term.

Despite these factors, borrowers who have diligently worked toward maintain a strong credit history can still accomplish their dream of owning a home by taking advantage of mortgage rates today, while they’re still incredibly affordable.


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Is There a National Real Estate Recovery?

Is American real estate in full recovery? Or something closer to half recovery? New data compiled from multiple listing services across the country suggest it’s the latter. Though they get relatively little public attention, the stark fact is that more than half (75 out of 146) of the top metropolitan real estate markets surveyed by Realtor.com in its latest monthly study are not seeing anything like a recovery.

Their median list prices have either declined during the past 12 months or stayed flat, and their houses can take exceptionally long times to sell. The number 75 is significant: It’s up from 69 just a month ago, so the lackluster performance phenomenon could be spreading, despite record low mortgage rates and modest growth in the overall national economy.

On the flip side of this sobering picture, of course, are the 71 major real estate markets that are seeing undeniable recoveries: fast rising prices, declining inventories of homes available for sale, and quick median turnaround times from listing to sale. Among the standouts in the price recovery category are:
–Sacramento, Calif., where median list prices in October were 31 percent higher than they were in October of 2011 and where houses sell in a median 32 days after listing, one third the national median of 97 days.

–Phoenix, where prices are up 26 percent year-over-year and houses sell in a median 47 days.
–San Francisco, where the October median price of $750,000 is 17.4 percent higher than 12 months earlier, and the median list-to-sale time span is just 44 days.

–Seattle (12.5 percent median list price increase, 53 median days to sell; )

–Washington D.C. metro (prices up 11 percent, 49 days from listing to sale;)

Add to these cities like Miami (prices up 11.6 percent), Las Vegas (prices up 12.4 percent) and Atlanta (prices up 13.1 percent) and you begin to get a sense of what it’s like in the fast lane of the recovery. Some of them have actually gone from price boom to price bust to boom again, all within the span of a decade.

Contrast these numbers with what’s going on in the less vigorous markets, some of them among the largest and most prominent cities in the country. Though Chicago’s 5.9 percent median list price decline is not the worst – that dubious distinction is held by Peoria, also in Illinois, where prices in October were 11.5 percent lower than the year before – but it is certainly the most populous and most economically significant city on the downgrade. Chicago houses now take a median 101 days to sell after listing. Philadelphia is another in this category: prices down 2.2 percent, 105 days median time to sell, and the inventory of homes on the market up by 6.4 percent – never a good sign for future price movements.

Though areas with negative median prices are heavily concentrated in the central states — where local economies have been struggling for years and may not have ever emerged from the recession — a number are also in the northeast and along the Atlantic coast. They include Hartford, Conn. (-1.4 percent), Newark, N.J. (-2.9 percent), Norfolk-Virginia Beach, Virginia (-5 percent), Myrtle Beach, S.C. (-3.1 percent), Harrisburg, Pa. (-3.4 percent), Charleston, W.V. (-9.7 percent) and Reading, Pa. (-7.8 percent). Not all of them are concentrated in the eastern half of the country, however, witness regional outliers such as Salem, Ore., where prices are down 4.6 percent over the year.

The takeaway here: Not only is there no “national” real estate market, there’s also no “national” real estate recovery. And until local economies do what they have to do to support vibrant real estate markets – produce new employment, sustain net new household growth and resolve deep-rooted fiscal problems – there likely won’t be local real estate recoveries either.

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How to Cut the Cost of Your Mortgage Loan by at Least $50,000

November 14, 2012

 

 Despite the roller coaster-like ups and downs the housing market has experienced over the last several years, home ownership remains the key component of the American Dream for most citizens. But even considering that we’re seeing the best mortgage rates in history right now, financing the purchase of a home is a financial obligation that can put a great deal of strain on family budgets.

However, because mortgages are such large and long-lasting debts, significantly cutting their cost can be done by making fairly minor adjustments to the loan terms. It may sound impossible, but reducing the cost of your home loan by $50,000 — or much more — doesn’t require any drastic moves at all.

Two Ways to Knock Off $50k or More in Interest from Your Mortgage

Let’s use a 30-year fixed mortgage loan of $250,000 as our example. The following are two different refinancing strategies you can use to eliminate $50,000 in mortgage debt from your life.

Scenario #1: Reduce Your Mortgage Interest Rate by 1%

Mortgage interest rates have fallen dramatically in the past few years. According to HSH.com, the average interest rate for a 30-year fixed mortgage in 2008, just off the heels of the market crash, hovered above 6%. Today, mortgage interest rates for the same term average about 3.4%.

So consider the hypothetical mortgage loan above — even if you just recently obtained financing on a home within the last year or two and agreed to a mortgage rate of 5% APR, you can now refinance to, say, 4% APR. It doesn’t seem like much, but here’s how much you would save:
Using this mortgage calculator, we find that a $250,000 loan with a 5% interest rate, paid over thirty years, equals 360 payments (12 months multiplied by 30 years) of $1,342.

This equates to spending a total of $483,120 over the life of the loan. Subtract the initial principal of $250,000, and that leaves $233,120 worth of interest paid over the 30-year loan.

Now, calculate payments again with the lower interest rate of 4%. Instead, you would make 360 payments of $1,194, or $429,840 in total. Subtract the $250,000 principal and you’re left with $179,840 in total interest paid.

You just saved $53,280 on your mortgage.

Scenario #2: Cut Your Mortgage Term Length in Half

It’s easy for home owners to get caught up in the size of their monthly mortgage payments, rather than consider the entire cost of the loan. Unfortunately, lessening monthly payments often results in greatly increasing the overall amount of money you will pay for home financing.

Consider again the above 30-year fixed mortgage with a principal loan amount of $250,000 and the 4% interest rate. If instead of opting for a 30-year term, you agree on a 15-year mortgage instead — and we’ll keep the interest rate at 4% for simplicity’s sake — you will significantly reduce the total amount of interest paid over the life of the loan.

According to the above mortgage calculator, a $250,000 loan at 4%, paid over 15 years equals a monthly payment of $1,849.

This is a much larger payment required every month, but consider this: $1,849 multiplied by 180 payments (15 years) equals a total loan cost of $332,820. Subtract the $250,000 principal and you’re left with $82,820 in total interest paid over the life of the loan.

By simply opting for a 15-year fixed rate mortgage rather than the 30-year as depicted in Scenario #1, you save $97,020 in interest. That’s almost one hundred grand to put toward other important goals like a college fund, retirement savings or investing.

Should I Refinance?

While the hypothetical savings are impressive, refinancing is not a one-size-fits-all solution to saving money on a mortgage. It’s important to consider things like closing costs and how far into your current mortgage you have already paid before changing the terms of your loan.

For instance, refinancing means ending an existing mortgage and opening a new one, whether that’s with your same lender or someone else. Closing costs must be paid to refinance a loan, just as they were to obtain the original loan. Ensure that the amount of the total closing costs doesn’t cancel out the savings you would enjoy from a decreased interest rate.

Secondly, when changing the term length of your mortgage, consider how long you’ve held the current loan. Your loan amortizes according to a schedule devised by your lender, and most amortization schedules allocate a larger percentage of monthly mortgage payments towards interest rather than principal in the initial years of the loan. As the home loan gets closer to being paid off, more of your payments go toward paying down the principal.

That means if you’ve held your current mortgage for a long time, much of the money you’ve put into it has already paid down a large portion of interest. Refinancing the loan with new terms may not be a wise move.
A mortgage will likely be the biggest financial responsibility you ever take on, so it’s important to be realistic about what you can afford. But when determining that number, don’t forget to consider the long-term costs of a home loan — especially how much interest you will pay in total — and don’t get stuck on that monthly payment figure.

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Five Frequently Asked Questions on Mortgage Rates

Mortgage borrowers ask lenders a lot of questions, and the first usually is: What's your rate?
Whether they plan to purchase a home or refinance an existing mortgage, borrowers' chief concern is how they can get the lowest rate and save the most money.

By raising the rate question early, borrowers are also asking, though perhaps indirectly, whether a new loan is a good option for them, suggests Peter Thompson, a senior loan officer at Prospect Mortgage in Naperville, Ill.

"People want to make sure they're getting as good a deal as possible," Thompson says. "Even if they don't shop the rate, (they want to know) they're not getting taken advantage of, that they're getting the best deal. But they're also saying, 'What can you do? Is this something that's going to be possible?'"
Below are five of the most frequently asked questions about mortgages and mortgage rates that borrowers have for lenders.

What's Your Rate?

The question, "What's your rate?" is only natural, yet there is no one rate for all borrowers.
Rather, Thompson explains, lenders offer a range of rates, depending on myriad factors that include the property type, loan term, borrower's credit score, rate-lock duration, and whether the borrower will pay points or receive a rebate credited against the closing costs. (A point is an upfront fee equal to 1% of the loan amount.)

That variability means the lender needs more information from the borrower to quote a rate accurately, adds Greg Cook, a loan consultant at Golden Empire Mortgage Inc. in Temecula, Calif.
"Is this a purchase or refinance? A 30-year loan or 15-year loan? How much of a down payment are you going to make? Those are questions that we, as lenders, are trained to ask, but sometimes we don't get that chance," he says.

Can You Give a Lower Rate Than the Other Guy?

Many borrowers pose the rate question repeatedly, calling multiple lenders because they think that's a good way to shop for a mortgage. It isn't.
"They want to hear someone tell them a number that was lower than the last person. That's what they're looking for," Cook says.

Unfortunately, this quest for the one true lowest rate is mythical. All rates fluctuate from week to week, day to day or sometimes hour to hour.

Personalization and market risk make rate shopping difficult for borrowers, though many experts advise borrowers to shop for a loan, and the federal government requires lenders to use disclosure forms that encourage comparisons.

Jim Pomposelli, a mortgage banker at The Federal Savings Bank in Chicago, suggests that consumers should shop around -- up to a point.

"Don't run a Dutch auction where you are going back to everybody three times because at some point, you'll get what you pay for," he says.

Can I Get the Lowest Rate Among my Friends?

Another reason why some borrowers push so hard for the ultimate lowest rate is bragging rights. Cocktail-party talk and water-cooler chitchat are so important to them that reason flies out the window or at least takes a back seat to emotion.

"There is money to be saved, but when people really, really, really want to get that last bit off the table, I don't think it's fundamental economics," Pomposelli says. "It makes you feel good. It makes you feel smart. People want to feel they are smarter than the market."

May I Float Down the Rate?

Some lenders offer borrowers an option to "float down" a rate as an inducement to lock it -- in other words, to have a second chance to lock the rate if rates fall. Pomposelli says such programs are "quite expensive" for lenders, who have to make up the difference in another way.

"Banks aren't stupid," he says. "If you lock in at one rate and then you want to go lower, there is a charge in there somewhere."

Alternatively, borrowers can allow the rate to float to try to capture a downward tick, though that can be risky since rates can rise as well as drop, Pomposelli warns.

"You're thinking you might be able to save $20 (a month), but what if all of a sudden, you're paying $40 more?" he asks.

Can You Tell Me More About the Loan Terms?

Once the rate question has been raised and addressed, borrowers typically want more details about loan terms. Thompson says some frequently asked questions include: When can we close? Can you do this loan as a no-cost refinance? Is this a 30-year fixed-rate loan? Is there a prepayment penalty?
"A lot of the conversation is about making sure they know that it's the deal that it really is," he says.


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US mortgage rates for past 52 weeks at a glance

Average U.S. mortgage rates were little changed this week, staying near their record lows.
Here’s a look at rates for fixed and adjustable mortgages over the past 52 weeks:

	CurrentAvg.	Last week	52-weekHigh	52-weekLow
30-year Fixed	3.40	3.39	4.00	3.36
15-yearFixed	2.69	2.70	3.31	2.66
5-yearadjustable	2.73	2.74	2.98	2.71
1-yearadjustable	2.59	2.58	2.98	2.57
All values inPercentage points
Source: Freddie MacPrimary MortgageMarket Survey

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7 Real Estate Risks: Are They Over- or Under-Estimated?

We tend to speak of the risks of various courses of action in black and white, as risky or not. But the truth is, everything in life has risks - even doing nothing! Behavioral experts, economists and my dear old Dad agree: we’re most likely to make decisions we later regret when we under- or overestimate the risks of the outcomes we hope to avoid. So, outside of extremely high-risk endeavors like base jumping and going on blind dates, the real challenge in life is not to avoid risk entirely, but to assess it accurately and manage it accordingly.

This need to assess and act on risks appropriately, neither overblowing them or blowing them off entirely, is particularly critical when it comes to real estate risks. It’s easy to let your personality determine how you view and manage real estate risks. But that’s a costly approach: if you let your personal tendency to be risk averse stop you from ever owning a home, you will also miss out on the personal and financial advantages of home ownership, and the opposite is true. If you take a devil-may-care attitude toward your real estate and mortgage matters, you’re highly likely to make some highly regrettable decisions along the way.

So, instead of going on risk assessment autopilot, let’s take a quick, yet deep, dive into seven of the real estate-related risks that come up the most often in the minds of smart buyers, sellers and owners like you and how you can manage each of these risks wisely.

Risk #1: The Risk of Foreclosure. The risk of losing a home has only recently moved to the front of our collective national consciousness. Foreclosure was once a very, very rare event, seen as an unlikely worst-case scenario. But it became a vivid nightmare come true for an all-time high number of home owners during the recession. The risk and fear of foreclosure is largely due to this increase in foreclosure rate over the past few years, and to the vivid, catastrophic nature of the event. Also, almost everyone knows someone who either lost a home or had serious mortgage distress, so it seems like a very common occurrence.

When we take a look at the facts behind this risk, we realize that the risk of foreclosure appears to be much higher than it truly is. There are roughly 76 million owner-occupied homes in the U.S., according to the Census Bureau. Earlier this year, real estate data firm CoreLogic revealed that there had been 3.4 million foreclosures since 2008. That would mean only about 6 percent of homes in America had been through a foreclosure - and this, through the very worst recession of most of our lives.

The more probable risk is the risk of ending up underwater, which more than 25 percent of American homes were at some point during this past 5 years.

The fact that home values rise and fall cyclically is not a risk or a probability - it’s a fact of the real estate market, and one that you can’t do anything about. Your aim should be to manage and minimize the risk of serious mortgage distress (i.e., struggling to make the payment) or foreclosure. And you have the power to manage these risks by:

• Making smart mortgage choices. Buying at a price well within what you can afford, selecting a mortgage that your household finances can sustain over time, and not overleveraging by borrowing cash against your home equity for things like cars, clothes or ready cash.
• Making smart financial moves over time, including building a cash savings cushion you can turn to if a job loss or disability interrupts your income.
• Buying a home in as desirable a location as you can afford - and in an area with strong prospects for economic and population growth.
• Making small, extra payments to bring down the principal balance on your loan, if and when you can afford to.

Risk #2: The Risk of Overextending Yourself. This is a very real risk - more real, even than the risk of actually losing a home. Home buyers can overextend themselves when they take loans that give them falsely low upfront payments;. This was common in the subprime era that many believe led to the recession, but is less likely with today’s tighter lending guidelines and narrow loan programs...
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6 Ways to Sell Your Home This Fall

BOSTON (TheStreet) -- Fall is second only to spring as the busiest time of the year for home sales -- and Idaho Realtor Gail Hartnett sees this autumn as an especially good time to have your property on the market.

"Inventory is low, so if you have your house on the market and is priced well, it's going to sell," says Hartnett, a National Association of Realtors regional vice president and an agent with Keller Williams Realty Boise.

Home sales in Idaho and many other U.S. locales are rebounding this fall as low prices, improved consumer confidence and rock-bottom mortgage rates bring buyers out. At the same time, many would-be sellers are either too discouraged to put homes on the market or are waiting for prices to rise, creating a shortage of available homes in much of the country.

Add in the fact that many people travel to their hometowns for Thanksgiving, football games and the like and Hartnett believes it's a bad idea to keep your property off of the market this fall.
"People who've been thinking of moving back home will look at some houses when they come for a visit, and finding the perfect place will push them into action," she says. "But if your place isn't on the market, they won't see it."

Houses that boast green grass and lush gardens in the spring, though, look a lot less inviting during the fall.

Here are six things Hartnett recommends all would-be sellers do this autumn to adjust for that and get a home moving:

Give your home a cozy smell
Fall brings back childhood memories of hayrides and Thanksgiving dinners for many, and Hartnett recommends maximizing your place's "homey" feeling this time of year.
The Realtor always has spiced cider, fresh-baked cookies or other warm and friendly fare cooking up in during showings and open houses at properties she's listing.

"We take some big old pots and dump cider in them, then warm it up and the whole house smells good," Hartnett says. "It's just a warm, homey smell that makes people feel good when they enter."
She places cider and cookies ready for serving in a strategically out-of-the-way place visitors reach only after touring the house. That way Hartnett has a chance to "pitch" the house to buyers while they snack.

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Real estate investors are optimistic about housing market

By Justin Pierce

Despite some shifts in the housing market that make it more difficult to earn money investing in residential real estate, a large majority of people in that field plan to buy as many or more properties in the next 12 months to rent out or sell for profit.

That’s one of the findings of a study released last month that attempted to measure the impact people involved in income or speculative real estate are having on the housing market .

The survey — sponsored by BiggerPockets.com, the nation’s leading social Web site for real estate investors, and Memphis Invest, one of the largest providers of single-family rentals — shows that 65 percent of investors plan to buy a lot more homes during the next 12 months.
Still, from my experience in the Washington area, business conditions are changing with rising home prices, stiffening competition and shrinking margins. Anyone seeking to get into real estate investing should proceed with caution and not expect to earn the same money that has been made in the past few years.

The report points out that investors played a fairly substantial role in the housing recovery. The housing crisis pushed nearly 4 million foreclosures onto the open market, devastating home values. This and the coinciding financial crisis squashed homebuyers’ confidence and their ability to buy. At that time, real estate investors began buying up the foreclosures when few other people could enter the market. They bought up so many properties that they established single-family rentals as a $100 billion business. In fact, the report says that single-family rentals now outnumber apartment units.
They are also renovating the homes they buy and spending an average of $7,500 per home. That totals more than $9.2 billion every year in construction-related spending, according to the report. This is critical business for an industry that was hit hard by the recession.

In 2008, Congress approved the Neighborhood Stabilization Program to provide funds to municipalities and not-for-profit organizations to repair damage to foreclosed homes. Up to this point, they have spent a total of $7 billion of tax payer money.

Real estate investors are doing more than this every year with their own money or money that they borrow. Surprisingly, the report finds that only one in four real estate investors are cash buyers. In fact, slightly more than half make down payments and finance the rest of the purchase amount. If you read my last post, you’ll see just how much most real estate investors pay for financing.
This strikes at one of the prevailing myths about real estate investors. Very few have cash for their projects. I can also tell you that most real estate investors are more afraid of you, the retail buyer, than you are of them. Real estate investors have to pay higher interest rates than owner occupants and they have many more additional costs. Back in 2006, real estate investors would come in and buy properties at market value and then gamble that they would make their profit within a year on appreciation alone. I can tell you that most all of those investors are out of business now or they’ve learned very painful lessons.

Some 3 percent of American adults or 7 million people are active real estate investors, according to the report. These people are actively looking to buy more property and about half of them make more than five purchases each year. This is a diverse group of people. About 76 percent are under the age 55. They are more likely to live in the South or West of the country and about two-thirds of them make less than $75,000 per year.

Even more interesting, the report tells us that this group of active investors does not plan to slow down despite rising home prices and increased competition. About 65 percent of the active investors plan to buy as many or more properties in the next 12 months as they did in the past 12 months. This is big news considering that fact that real estate investors accounted for as much as 25.3 percent of all home purchases as of May 2012. This indicates that investors have confidence that the housing recovery will continue and their robust activity will help ensure it.

Keep in mind that this is a national survey. The Washington area doesn’t exactly fall in line with national trends. But real estate investors are very optimistic creatures. When the report says 65 percent of investors plan to buy more property in the next 12 months, I believe it. But the key word is plan. I’ve never met an investor who plans to do less this year than last year.

The real estate market in this area has been on a steady climb for a while. New waves of foreclosures have provided targets and opportunities for investors over the past few years. But as illustrated by data from RealEstate Business Intelligence and MRIS, inventories are down and prices are up. Prices in some areas are up to 90 percent of where they were at the peak. Investors will be pressured to pay way more than they’d like for fixer upper homes and many of them will get in trouble if they’re not careful. Nothing throws cold water on investors like a bad deal.

I would expect investor activity to stay fairly strong in this area but I think demand for rentals will slow a bit as home prices increase. I also think rehabbers and home flippers will face stiff competition and less opportunity. I’m already seeing that in my business. I’m getting tighter on my budgets and spending more time and money to find viable projects. If interest rates stay low and prices continue to rise, investors will likely move to land development, commercial real estate or possibly other markets. At some point, we might also see investors become sellers as we did in the late 1990s and beyond as they liquidated holdings they’d accumulated in the down market 20 years ago.

This market should continue to be strong but I would advise investors to begin reassessing their business models. I would also recommend extreme caution to those looking to begin a real estate investing career. You are probably not going to make money in the next few years in the same manner it was made in the last few years.

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Home prices rise 2% in Aug., faster than in July

10:14AM EDT October 30. 2012 -
WASHINGTON (AP) — Home prices rose in August in nearly all U.S. cities, and many of the markets hit hardest during the crisis are starting to show sustained gains. The increases are the latest evidence of a steady housing recovery.t
The Standard & Poor's/Case Shiller index reported Tuesday that national home prices increased 2% in August compared with the same month a year ago. That's the third straight increase and at faster pace than in July.
The report also said that prices rose in August from July in 19 of the 20 cities tracked by the index. Prices had risen in all 20 cities in the previous three months.
Cities that have suffered some of the worst price declines during the housing crisis are starting to come back. Prices in Las Vegas rose 0.9%, the first year-over-year gain since January 2007. Prices in Phoenix are 18.8% higher in August than a year ago. Home values in Tampa and Miami have also posted solid increases over the period.
Seattle was the only city to report a monthly decline. Still, prices there fell just 0.1% in August from July and are 3.4% higher than a year ago.
"The sustained good news in home prices over the past five months makes us optimistic for continued in the housing market," said David Blitzer, chairman of the Case-Shiller index.

The steady increase in prices, along with the lowest mortgage rates in decades, has helped many home markets slowly rebound nearly six years after the housing bubble burst.
Rising home prices encourage more people to put their homes on the market. They may also entice would-be buyers to purchase homes before prices rise further.

The S&P/Case-Shiller index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The August figures are the latest available.

The figures aren't seasonally adjusted, so some of the gains in August reflect the benefit of the summer buying season.

Stan Humphries, chief economist at the housing website Zillow.com, expects the monthly price index to decline later this year.

"This doesn't mean the housing recovery has been derailed," Humphries said. "This is exactly what bouncing along bottom looks like."

Other recent reports show that the housing market is improving, albeit from depressed levels.
Home builders started construction on new homes and apartments at the fastest pace in more than four years last month. They also requested the most building permits in four years, a sign that many are confident that home sales gains will continue.

Home building is still far below the pace that economists say is consistent with a healthy housing market. New-home sales jumped last month to the highest annual pace in the past two-and-a-half years. Sales of previously occupied homes dipped in September but have risen steadily in the past year.

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Mortgage Rates in U.S. Increase With 30-Year at 3.41%

By Prashant Gopal - Oct 25, 2012 9:00 AM CT

U.S. mortgage rates rose, increasing borrowing costs as home values extend a rebound from their worst crash since the 1930s.

The average rate for a 30-year fixed mortgage climbed to 3.41 percent in the week ended today from 3.37 percent, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate rose to 2.72 percent, from 2.66 percent.

Mortgage rates fell to record lows this month, spurring demand for real estate and helping support prices as buyers compete for a shrinking supply of listings. Home values jumped 1.3 percent in the third quarter from the previous three months, the biggest gain since 2006, Zillow Inc., a Seattle-based property-data company, said this week.

“Now that people have confidence that a bottom was reached and is in the rear-view mirror, now there’s a willingness to take advantage of those historically low interest rates,”Russell Price, a Detroit-based senior economist for Ameriprise Financial Inc. (AMP), said in a telephone interview yesterday. “Now they’re much more effective in facilitating an ongoing recovery.”

Contracts to buy previously owned homes climbed 0.3 percent in September from the previous month and almost 15 percent from a year earlier, the National Association of Realtors said today.
Purchases of new homes jumped 5.7 percent in September to a 389,000 annual pace, the most since April 2010, figures from the Commerce Department showed yesterday.

The 30-year average reached 3.36 percent earlier this month, an all-time low, according to Freddie Mac.

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How To Spot A Home That Might Sell Below Its Real Estate Value

Want to increase your chances of buying a home below current real estate value? Just look for a seller who didn’t listen to his agent.

The best real estate agents encourage their sellers to do whatever it takes to get the home in its absolute best condition before going to market. The better the home shows, the more likely the seller will get top dollar.

Sometimes, this could be as simple as removing personal items or decluttering. Other times, an agent will suggest bigger fixes, such as painting, replacing carpet or upgrading countertops or cabinets. Savvy sellers listen to their agents, make the changes suggested and go to market in top form. That’s not always how it plays out, however.

For any number of reasons, many sellers protest suggested fixes. Either they don’t want to be inconvenienced, don’t believe the fixes will matter or don’t have the financial resources to make it happen. Inevitably, this means the buyer will get a discount on that property.

How to spot a home that might sell below its value
Is there a home for sale in a good neighborhood and in the desired school district that seems to be well-priced but for some reason isn’t selling? This is the home you want to investigate, because chances are the seller didn’t listen to his agent. Specifically, here are some tell-tale signs to look for.

Big furniture or a lot of furniture
Most people don’t buy furniture to use when staging their home. Often a seller may have a lot of furniture in one room, which makes the room look small to potential buyers. Real estate agents and professional home stagers know this all too well. For example, stagers always suggest a small loveseat over a full-blown couch or sectional sofa. Also, in the bedrooms, king beds often take up too much space. So a stager will often push the seller to swap it out for a queen or full-sized bed.
When you enter a house that seems crowded with furniture, imagine the rooms with fewer or smaller pieces. Be aware that plenty of potential buyers won’t get past the sense that the rooms are too small, and they’re likely to move on to a home that feels bigger. In turn, this could give you room to negotiate a good deal with the seller.

Dark rooms
There was a home in West Hartford, CT on a great block, but the interior was dark. Three large French doors in the living room led to a deck, but the doors were stained black, and the carpet was brown. On top of that, the window coverings were big, heavy and overtook the room.
The house sat on the market for months, even though the price wasn’t far off the real estate market value. Here’s why: Every buyer walked in and out because the house was so dark. After the home had been on the market for three months, a smart buyer made an offer $40,000 below asking and ended up getting it.
Before the buyer moved in, he removed the window coverings, stripped the stain on the doors and painted them white, pulled up the old carpet and had the floors stained to a lighter oak. Right away, the dark room became light, bright and welcoming. The buyer’s total cost: $9,000, which instantly added $31,000 to his equity.

Grandma or Bambi staring down from the walls
Buyers are looking to see themselves — and not the current owners — in a home. Too often, however, the seller hasn’t “depersonalized” his home enough, or at all. Even though the listing agent may have told the seller to clear the house of his possessions, the seller may be proud of his accomplishments and resist.
And so potential buyers are treated to walls decorated with diplomas, family photos, awards and trophies. Moose and deer heads hanging on walls are surefire deal killers, especially when the hunting rifle used to kill Bambi is proudly displayed, too. At best, buyers tend to see such highly personal stuff as clutter that takes the focus away from the home. They’re turned off by it all, and they walk away.
They might also be walking away from a great deal. Are the bones of the home good? Does it have the floor plan you like? Are the kitchens and baths in acceptable condition? Is it in the area where you want to live? If you say “yes” to all of these, hang around a little longer. Imagine the home without the seller’s junk. Picture yourself living there, without Bambi.

A good home that doesn’t show well = a great opportunity
Ultimately, sellers who don’t listen to their agents or stagers inadvertently give savvy buyers a discount. For you to see that potential, try to understand as much as you can about why the seller is selling. Look for sellers who have ignored their agent’s advice. While conventional wisdom says that a buyer would be turned off by a home that shows poorly, go against this. Imagine the potential. And then, once the home is yours, make those small changes the seller should have made. Right away, you’ll have a little bit (maybe even a lot) of equity, thanks to the seller.


Read more: http://www.zillow.com/blog/2012-10-22/how-to-buy-a-home-below-current-real-estate-value/#ixzz2ADulUmkK

U.S. mortgage rates continue to fall

Long-term mortgage rates moved lower this week, with the average rate on a 30-year fixed-rate mortgage just above an all-time low, according to the Washington Business Journal.

Freddie Mac’s weekly rate report says a 30-year fix averaged 3.37 percent in the week ending Oct. 18, down from 3.39 percent last week. A 15-year fix averaged 2.66 percent this week, down from 2.70 percent.

A one-year adjustable-rate mortgage rose to 2.60 percent, from 2.59 percent.
Housing data continues to show a strengthening housing market.

This week, the National Association of Home Builders said builder confidence this month rose for the sixth consecutive month and is now at its highest level in more than six years.

In Dayton, the number of new home building permits is up 5 percent so far this year, according to the Home Builders Association of Dayton.

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Time right to buy a home

In the article the writer cites three major reasons to support the opinion; home prices, supply and mortgage rates. Home sales the past several months in northeast Wisconsin support the conclusion.


For most of us we have never seen home prices as low as this in our lifetimes. Low home prices have led some buyers to get the “deal of the decade,” and lend support to the theory that purchasing now reinforces the benefit of home ownership as a long term investment as values rise. Housing is cyclical and as the supply and demand effect begins to affect the market it’s reasonable to conclude values and prices will rise.

The National Association of Realtors continues to report their housing affordability index at the highest level on record. The index tracks average family incomes compared to the affordability of the average home. As rents rise the affordability gap between renting and owning shrinks and in some cases becomes inverted where home ownership costs less than renting.

There is still an abundance of homes on the market in most price ranges. As sales rise and homeowner’s who have wanted to sell list their homes it provides buyers with a continuous flow of inventory from which to choose their new home. The inventory has declined as sales increase but there are still many homes on the market.

The third element in the trifecta is mortgage rates. The 30-year fixed rate mortgage for home purchases continues to hover around 3.50 percent. The astute buyers who lock in the interest rate now will save thousands if not tens of thousands of dollars over the life of the loan. With home prices, the low rates contribute significantly to housing affordability.

Homes sales in Wisconsin were up 17.3 percent in July and 20.3 percent in August compared to the same months in 2011. These positive sales statistics support the notion that many astute consumers are taking advantage of the benefits of purchasing now.

Who are these buyers? Many are first time buyers leaving renting for the benefits of homeownership. Some are move-up buyers who have successfully sold their existing home and they’re purchasing the next home. Some are baby-boomers downsizing; leaving the two-story, four bedroom, family home for the single level ranch or condominium with less required maintenance.

Some buyers are purchasing second homes and leveraging the market to fulfill that dream of owning a second home. Some buyers are relocating from other parts of the country and have either sold their previous home, or in some cases, rented it until the market from which their relocating improves and the previous home sells.

It appears the greatest activity is in the lower price ranges but home sales have improved in all price ranges. With the expert assistance of Realtors, sellers listing their homes at prices commensurate with the marketplace have provided for quicker sales and less issues with appraisal values when buyers and sellers agree on terms.

Home purchase and financing tip: When planning on buying or selling, seek the best advice from the professionals in the market. Enlist the help of friends, relatives, neighbors in indentifying the professionals with the best reputation based on performance. This is the best guarantee for a positive experience.

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Low rates encourage shorter mortgages

As mortgage rates hover near record lows, a growing number of homeowners consider shorter-term loans to pay off their mortgages earlier and regain equity at a faster pace. Is this a smart move or risky game? 30 year fixed rate mortgage – 3 month trend The benchmark 30-year fixed-rate mortgage rose to 3.62 percent from 3.59 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.41 discount and origination points. One year ago, the mortgage index stood at 4.38 percent; four weeks ago, it was 3.7 percent. The benchmark 15-year fixed-rate mortgage rose to 2.91 percent from 2.88 percent. The benchmark 5/1 adjustable-rate mortgage rose to 2.72 percent from 2.68 percent. +

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