Good Morning,
Hopefully you haven’t been waiting too anxiously for this email. I apologize for the delay…I had two closings this morning that I needed to attend. I hope the weekend was good for you.
On today's call: Markets, Housing, Bankruptcies, Interest Rates
The stock markets were down today thanks to rekindled concerns regarding the state of the Euro and it’s prohibitive effects on global economic growth. Now that the markets have calmed down from the initial announcement of the Fed’s QE3 bond-purchase program, many analysts are saying that it the targeted buying of $40 billion worth of bonds each month will not be enough to properly stimulate the economy and lower unemployment levels. If economic and corporate news continues to deteriorate as it has over the past few weeks, even more purchasing might be required. But the more money the Fed creates the more it could come back to haunt us economically in the future. It’s the most dangerous catch-22 I can think of.
In housing, some anticipated reports are due out this week, including the Case Schiller home price index and the new home sales report. Both of these numbers could provide good indication of where the housing market is going. In regards to shadow inventory, which has been a major drag on the housing market, it has been estimated that 1.2 million homes have been trimmed off this list by banks during the first half of this year. The figure is expected to double by the end of it, too. “Shadow inventory” refers to a combination of troubled mortgages and foreclosed homes. A continued rapid decline in inventory should prevent downward pressure on home prices and hopefully improve sales prices nationally.
It is widely assumed that filing a bankruptcy can destroy your credit. At least initially this is most likely going to be the case. But time heals everything doesn’t it? Most people that file believe that it will be at least seven to ten years before they’ll be able to obtain home financing. In fact, though, mortgages are available despite this negative mark on the credit. In some cases, such as loans insured by FHA, you be approved just one year after a bankruptcy, whether it’s chapter 13 or chapter 7. Conventional mortgage guidelines mandate at least two to four years, depending on the circumstances. The most important thing someone can do after a bankruptcy is to re-establish their credit and show that they can manage it responsibly. This can be done by taking out a small, secured credit card, or having a co-signer, keeping current on rent and utilities, and paying bills before they are due. Make sure to keep and use one to two credit cards as well. A bankruptcy has the most negative effect on your credit score (dropping it at least 200 points vs at least 80 for a foreclosure) and rebuilding credit is not easy. But once it’s done, a mortgage is attainable in much less than the assumed seven to ten year period.
The 30 year fixed is getting close to heading into the low-to-mid 3% range, which is something I’d never thought I’d write. And the 15 year fixed is moving into the mid-2% range…unbelievable, huh? Not much more to say other than rates are at historic lows and I’m pretty busy!
Have a great week and please let me know if you need anything.
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