What is Really Happening in the Real Estate Market?
Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say. The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes.
Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.
So where does this game playing lead us?
Scott Anderson, vice president and senior economist with Wells Fargo, said by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.
So don't be fooled by a low supply of homes and a perceived surge in home buying...
A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this "phantom supply" of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.
The median price of an Inland house has dropped 43 percent in San Bernardino County and 39 percent in Riverside County in the past year, but the rate has slowed in recent months.
Statistics confirm that banks are keeping foreclosed houses off the market much longer than usual, said Rick Sharga, senior vice president of RealtyTrac, a company that monitors foreclosure trends nationally. Sharga said RealtyTrac studied the 234,716 bank-owned California homes in its database as of the end of November and discovered that only 34 percent were advertised through the state's dozens of multiple listing services, which is how bank-owned properties are normally marketed. "We were frankly stunned by that," Sharga said. Usually repossessed houses are processed, fixed up and listed for sale within 30 days, he said.
While the gradual release of foreclosed properties helps to prop up prices, it also could prolong the real estate recession.
Foreclosure Hiatus
Also, the foreclosure process has been interrupted repeatedly by federal and state moratoriums designed to encourage lenders to modify loans to help financially stressed homeowners keep their homes. Two large government-controlled lenders, Fannie Mae and Freddie Mac, in November imposed holiday suspensions of foreclosure-related evictions that were repeatedly extended until March 31.
In California, legislation took effect in September that requires lenders to give borrowers 30 days notice before taking the first step toward foreclosure. And starting this summer, loan servicers in the state must delay for 90 days the foreclosure of owner-occupied homes or have a comprehensive loan modification program. As the moratoriums expire, the number of foreclosures is expected to spike. So GET READY...this is definitely the time to buy deeply discounted properties and interest rates are fantastic too!
Meanwhile a surge of first-time home buyers and investors, attracted by low prices and mortgage rates and government tax incentives, are competing for a diminishing number of homes for sale. Buyers are snapping up foreclosed houses, many of which receive multiple offers, faster than they can be replaced by new foreclosures.
"At the rate they are dishing out these repos (repossessed houses) it will be years before they all sell," said Kershaw of Prudential Realty, who claims that the banks are missing out on a great opportunity to clear out their foreclosures. "It is spring and we are in the big buying season. This is probably not the time to choke the market with no inventory. It is like not having iPods at Christmas time," said Kershaw. RISMEDIA, April 22, 2009.
Don't Miss Out Like the Banks Are
If you are considering buying property or your clients are, not snooze, it may take longer than you think and you will risk missing a GREAT opportunity by not be prepared.
It's Financial Literacy Month. And to long with this, please read this perfect quote to think about as you go through this very changing period of time.
"What is" is always shifting. Be aware of the shift in order to create the life I want.
Please take a moment to watch my SHORT, yes it's true, it's only 1:56 mins, video
PRESIDENT OBAMA URGES MILLIONS TO REFINANCE THEIR MORTGAGE
Quote of the Week:
"There are 7 to 9 Million people across the country, who right now, could be taking advantage of lower mortgage rates."
Please remember, we are able to orchestrate the new programs available and are excited about the programs that are being released in the next few weeks.
Part of being qualified for this new program is that your existing loan must be owned by Fannie Mae or Freddie Mac. Click on each of the links below to find out if you are a candidate.
Does Fannie Mae Own Your Mortgage?
If you are indeed a candidate, great, inquire to find out what I can do for you right away.
It's really nice to finally hear some good news on the home front. Sales of new single-family homes jumped 4.7 percent from January to February, the Commerce Department reported today. And interest rates are hitting all time lows since 1971.
But...Better compared to what?
What you are NOT hearing is that there is STILL a lot of volatility in the market. Now you may be aware of this but it's important to keep that in perspective and definitely within your focus, especially when you are advising your clients on the right steps to take over the next few years. I couldn't believe it, this morning on one of the major news channels, I actually heard the newscaster say that interest rates hit an all time low today of 4.375%! I couldn't believe what I was hearing. Over the last 2 days interest rates have gone up .125% each day and 2 days ago we were on average at 4.75% for a conforming 30 year fixed loan, $417,000 or less. Take care who you get your information from.
So how does the volatility play out?...
A FEW STATES - 50% of the foreclosure action that took place last month on nearly 291,000 troubled properties nationwide occurred in just 3 states. And guess who is in the top 3? That's right California along with Florida and Arizona (source: RealtyTrac).
While the unexpected increase in home sales and interest rates dropping was welcomed by many including the financial markets, sales of new homes were down 41% from a year ago. February's numbers were the second worst on record, surpassed only by January's annual sales rate of 322,000 homes..
So, although this is good news, in reality, we're really just bouncing off the lows and we have a ways to go. It's important to always be prepared for the worst so that you and your clients aren't taken by surprise.
You can always count on us to provide you and your clients w up to date and insightful market views on real estate and mortgages. So keep checking back for more...
So the question is, do you qualify for the any of the new mortgage programs?
Since last week, I have been contacted repeatedly by clients, friends and family wanting to know if they qualify for any of the mortgage relief programs that have been signed into law over the past few weeks.
More details have been released by Fannie Mae and Freddie Mac on how they will handle refinance transactions authorized by the Home Affordable Refinance program. The complete details of both programs can be found by accessing the program guides from Fannie Mae and Freddie Mac, but I will point out some of the highlights below to help answer your questions.
Lenders and investors are in a holding pattern as they determine if and when and how they will accept these transactions. Even though this legislation has passed - they are not all required to participate. In all cases loans will have to be refinanced with the existing owner of the loan today. Meaning, if Fannie Mae is the owner of your loan, the loan must be delivered to Fannie Mae and underwritten according to their guidelines. The same is true for Freddie Mac.
So how do you know if your loan is owned by Fannie or Freddie?
You have the ability to do this by contacting your loan servicer (company that sends you your mortgage statement) and asking...or you can do this by using the links below. If you need help, I can submit the information for you, simply send me a copy of your current mortgage statement. Note that your property address must be entered exactly as the agency has it on file, or it may not be found (ie: Rd or Road? St or Street?
Let's look at the guidelines for both Fannie Mae and Freddie Mac and some of the key factors I see that will impact or enhance your ability to participate. Even though these are some of the highlights, you can also read more detailed guidelines on your own.
One key point to remember is that these are the guides from the Freddie and Fannie. And just as participation in the programs is voluntary, individual lenders and servicers may choose to implement constraints that deviate from the guidelines on their own.
Fannie Mae
Qualifications for a refinance
You must be receiving either a lower mortgage payment or moving to a more stable type of product like an Adjustable Rate Mortgage to a Fixed-Rate.
The maximum loan amount can only be 105% of your homes value. There is no limitation if you have 2 mortgages but 2nd lien holders will need to re-subordinate and that probably wont be that easy.
If mortgage insurance (PMI) does not exist on the loan today, it will not be required on the new loan. If PMI does exist on the loan, the loan will be required to be re-insured and re-qualified through the existing PMI company.
The availability for appraisal waivers will exist in limited situations.
Applications can be taken now but loan findings may not be available until early April or May but again, each lender may or may not be participating.
Freddie Mac
The Freddie Mac guidelines are somewhat similar to Fannie Mae's, but they are a bit more vague at this time. Although Freddie Mac initially stated that these refinances may ONLY be conducted by the loan servicer or one of their retail channels, I have learned that they are looking at options that could enable more mortgage brokers, like me, to be involved in refinances under this program.
Bottom line - it is still too early to see how this will all play out. If you are truly in financial hardship then other options might be a better way to go.
And if you are truly not in financial hardship and you are looking at options just because the value of your home has dropped then most likely you will not qualify for any of these options. If you HAVE to sell your home, call me to discuss alternative options, there are many.
And if you don't then like many of us, we all get to just sit tight and wait for home values to go up again in the future...and they will.
First off, what is happening with interest rates and reduced yield spread premium? 15 years ago it wasn't uncommon to see nice buy-up schedules on many products, with an increased yield spread premium being offered in return for a higher interest rate. But then along came the refinancing frenzy of 1993 and 1998, followed by the grand daddy refi bonanza of 2002 to 2003. As home loan rates dropped ever lower over the years, you can imagine how the investors felt as they watched loans turn around to be paid off in a relatively short time, as increasingly lower rates made it attractive for clients to refinance, sometimes multiple times in a year. These losses on loans were very costly to lenders.
So...after learning their lesson many times over...the lenders got smarter and started to reduce the amount of par premiums, followed by making those premiums more expensive by demanding even higher rates in return for a smaller premium and have now nearly eliminated that premium pricing which cost them so much money in the past.
Now, who would have ever thought that a credit score of 680 or an LTV of 90% would be considered such risky business? But it's been a tough year for everyone, including Freddie and Fannie, and risk-based pricing is one measure they can take to protect themselves. Previously adjustments could fairly easy to build into the rate, with a small bump up in rate. But those days are gone, often leaving the borrower with no choice but to pay points for the adjustment. This can be frustrating to clients who don't understand why the recent pricing adjustments have to translate into potentially thousands of dollars in cash out of pocket.
Bottlenecks in the Pipeline Keep Rates Artificially Inflated
But wait there's more...Investors have been slammed with the recent uptick in volume, at a time when they have both shrunk in number and depleted their head count, in an effort to slash costs. So while the increase in volume is certainly a good thing, it is apparently "too much too soon" for some investors to handle...and the only way to slow down the volume is by an increase in pricing. And why wouldn't they want to do this??? If their capacity is maxed out, raising rates helps increase profits while making the workload manageable by slowing down the flow of incoming files. Not great for us but good for them.
The bottom line is - smart consumers cannot just call a lender and say: "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan to value percentages, property type, etc... that it is imperative for your clients to speak with a trusted mortgage advisor before making any final decisions about a property.
We are here to provide honest, straightforward advice. We will take ongoing care of you and anyone you refer to us in the same upfront fashion as we always have and this level of service does not end when a transaction is complete. Adapted from MMG
"A good goal is like a strenuous exercise- it makes you stretch."
~Mary Kay Ash
For some reason, when we can't see the future clearly, we tend to see things as becoming worse rather than better. However, the optimistic attitude that gave us the world we now live in is what is needed to take advantage of the fantastic opportunities all the despair and market uncertainty is generating today.
Much of life is about striving to improve - whether that's in our relationships, our professional accomplishments, or in our financial well-being. But success does not come by accident. Decide to achieve your goals and then get the help you need to implement them and be successful!
I was in the process of recording a video this week but I'm loosing my voice and the video was just not turning out so great.
So ....Continuing on from "Why Houses Make Great Investments"...that I wrote to you about a couple of weeks ago.
What a GREAT environment we're in for buying real estate....yep that's right, I said "Great". I'm sure you've read or heard by now how fantastic interest rates are, hopefully you read my email from last week. =) And...you know that homes are on sale and investment earnings are down.
So, how does this affect your plan?
People who are self-employed who will not be getting a pension from their employer, myself included, need do some extra planning to put money aside for our retirement. And now, especially in today's income and investment environment, it's difficult to have enough money to save, right?!
Alright so even if you aren't self-employed and you're expecting a pension, how secure is it? Probably not something you are going to rely on solely, right?
So what are your alternatives. Although there are many, real estate happens to be an excellent choice. Think about your own Estate / Retirement plan, you do have one right? Use this simple form below to start thinking about how rental income can help your bottom line.
Estate Building Plan
Situation:
You want to be able to retire with a secure annual income of:
$____________ or $_________/month.
Problem:
Social Security will not produce all that you need.
Your Pension will only produce annual income of $___________
or you are Self-Employed and do not have a pension plan.
You do not expect to get a BIG inheritance. =(
Proposed Solution:
Acquire ____ rental houses.
Live long enough to have your tenants pay off your house!! =) Or at least paid off way down!
Your real estate portfolio will produce the extra passive income that you desire. And...you get to collect the income along the way, even before you are retired.
** Here's an idea: Have each house represent a specific purpose in your plan. One house pays for your insurance. One house pays your mortgage on your primary residence. One house pays for your vacations etc.
On the chart below, I've listed 3 types of income, the tax benefits and how much can end up in your pocket. I used a self employed person to keep it simple. Keep in mind these are just general numbers, everyone has their own unique situation.
Now....think of it this way, just imagine how you will feel if you have all 3 types of income working for you? Happy, Secure and Financially Free?
2009 is going to be a golden year for purchasing real estate and ultimately will set you up for an incredible retirement, if you plan ahead and develop the right exit strategy. Do not wait, the market is changing rapidly and you have to be prepared in advance.
Next week, I'll show you how real estate can be a fantastic hedge against coming inflation.
All the best wishes for you and your family in 2009.
I know there is a lot to be thankful for this year and definitely in the coming year at least in the opportunities the current housing market is presenting. If you want to buy investment property or a beautiful home to live in, there are significant discounts and benefits that you wont want to miss out on. Peter Drucker said this.....
"The only thing we know about the future is that it will be different."
This applies now more than ever. Each day we are getting new "exploding" news about this bank or that institution, who are we bailing out today, who is going under today... etc. etc. etc. All we hear about is the negative, there is a lot of positive too, you just need to know where to see it or hear it. Hint....these emails and our daily market update, Silverstar Blog or Market Update
My personal goal is to purchase at least 10-15 houses in the next 2-3 years to hold for cash flow and long-term appreciation. Of course, I'd love to have the passive income!!! This is not a difficult goal to achieve in this market and it requires preparation and the right plan.
Reasons Why I Believe that Houses Make a Better Investment than Condos or Other Real Estate.
Well one thing you can count on for sure is inflation over time
and the value of cash flow.
This chart shows you the value of cash flow over time with rental income increasing by 5% per year. You don't have to want to own 12 properties to make a significant impact on your annual income. Just 4 houses, cash flowing $1,000 per month each can replace an $80k income per year in just 10 years. It's really not a difficult thing to do. You simply need to know what goals you want to accomplish, the right path to get there and the exit strategy you plan on implementing.
Suppose you decide to hold 4 houses long-term for cash flow and then have 2 other homes that you will sell in the future after the property has gained appreciation for a chunk of cash? Think back, as if you had sold a house 2 years ago or so at the height of the market.... If I had sold one of my rental properties, I would have make over $150k in just a few years. That's pretty significant!
I want to help you develop a plan, put it in action and manage it along the way. Support is important and necessary to achieve your BIG financial goals. You have to think anyway so why not think BIG!!!
Have a super Thanksgiving Holiday full of everything and everyone you are thankful for.
It sure is crazy what's happening out there and I completely understand many of the concerns I've been hearing from you. That's why I spend my time studying the market everyday and proactively staying on top of the changing landscape in the lending industry, so I can help you make great, well-considered choices for you and your families future.
So Why Buy Real Estate Now?
Many people are struggling to decide if it's the right time to buy real estate. Although we haven't seen the bottom yet, who knows exactly when that will happen? I don't have a crystal ball, do you?
But what do we know for certain? There are Two Ways to Make Money with Real Estate
Buy a property for less than it is worth. Either buying it below the market or buying it on better than market terms. Then you can rent it and hold for appreciation, increased rental income / cash flow and then eventually sell it. See the short video below on cash flow and increasing rents...
Buy a property and add value to it. Developing it, remodeling or changing it's use. This is a lot more difficult to do and I wouldn't recommend it until you have mastered Buying Right the first way to make money in real estate.
Right now, you can Save Tens of Thousands of Dollars Buying a Home that is deeply discounted So Why Wait? Who knows for certain what next year will bring, higher interest rates? More stringent lender guidelines? Job layoffs? The odds are high that all of these will occur based on what is happening today so why take your chances at a later day if you qualify now? It just doesn't make sense!
It's true when you hear that it's best to Buy Low and Sell High, right? However, what do most of us do? Sell low and Buy High, it's human nature to make emotional financial decisions and 9 times out of 10, it's not a good decision!
What if we spent thirty minutes reviewing your situation and goals so we could see if it may make sense for you to act now and so you could do so with confidence? How would that make you feel?
The old adage, "When Life Gives You Lemons, Make Lemonade", couldn't be more true! Instead of lemonade, let's take this opportunity to make money now and for your future!
Stay tuned...next week I'm going to continue on this series showing you the enemies of capital build up and how to best combat them.
This past year, I became a member of the Huntington Beach Kiwanis, hbkiwanis.org/ and this has been one of the best decisions that I have ever made. Not only are our members fun, energetic, giving and
passionate about what Kiwanis stands for but it feels great each day knowing that I get to help someone less fortunate in our community.
So who are these Kiwanians anyway?
We are women and men of our community from all walks of life who spend lunchtime once a week with their fellow members to hear informative programs. A former mayor of our city, business owners, civic and charitable-entity leaders are active members. There are doctors, attorneys, service business owners, and retired industry executives and public servants.
Our main reason for joining the Kiwanis family is a desire to give back to our community by participating in one of the many worthwhile projects funded by the Foundation. Colette's House, Project Cherish, Project Self Sufficiency and scholarships to qualifying Key Win's and Key Club seniors just to name a few....
One of our exciting events coming up is the Harbour Lights Holiday Boat Parade! happening on December 7th. You can get the details here: Boat Parade. All monies raised are 100% donated to the Kiwanis Foundation to support projects like Clothe the Children and Holiday events for children in need.
In addition, we have a Golf Tournament in March 2009 at the Old Ranch Country Club that you wont want to miss. Details here: Golf Tournament. Not only will this be an extremely fun event but our goal is to raise over $50,000 to fund out ongoing programs.
Please come and join us at these events, I guarantee you wont be disappointed!!!
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
A FEW STATES - 50% of the foreclosure action that took place last month on nearly 291,000 troubled properties nationwide occurred in just 3 states. And guess who is in the top 3? That's right California along with Florida and Arizona (source: RealtyTrac).
So...after learning their lesson many times over...the lenders got smarter and started to reduce the amount of par premiums, followed by making those premiums more expensive by demanding even higher rates in return for a smaller premium and have now nearly eliminated that premium pricing which cost them so much money in the past.
We are here to provide honest, straightforward advice. We will take ongoing care of you and anyone you refer to us in the same upfront fashion as we always have and this level of service does not end when a transaction is complete. Adapted from MMG
One of our exciting events coming up is the 
;)
;)
