Hello - happy weekend to all of you. I wanted to send you a quick email to give you all something to talk about this weekend. Last week, the financial companies began to post their first quarter earnings. Despite the massive losses, the picture that was painted was very impressive. It signaled what appears to be the bottom of the credit crunch. This is the first major step in turning the housing market around. As you know, financing is what gave us all our great times of the early 2000's and has been the demise of our last two years.
- All the major financial firms continued to write off billions of dollars during the first quarter marking three straight quarters. However, the losses were much less than previous quarters and all stated they felt the worst is now behind us.
- For the last eight months, jumbo loans were being sold at .60 - .70 cents on the dollar. (The means a bank could only get $325,000 from an investor in exchange for a $500,000 loan) Now, loans are beginning to sell for .90 cents on the dollar. (Again, being able to sell that same loan for $450,000). Before the credit crisis, banks could sell their loans for 1.02 for the dollar which is where they would make a small profit with each loan. (This means that same loan would sell for $510,000 which means the bank would make $10,000 issuing that loan plus any points they collected during the transaction) The more money that begins to flow, the faster banks clean up their books and the sooner they get back to the old days of free money...not quite as free as it used to be but certainly much better than where we are today.
- Rates are slowly beginning to rise - a healthy economy leads to higher interest rates. Right now, rates are very low, but this week we did see a slight upward trend in average rates. This again shows signs of investor confidence in our markets and our economy. We can lock in your buyer's rate for up to 12 months with a free float down.
- The DOW was up 5% just this week alone. When you are at the bottom of any market - stocks, housing, bonds, etc - the reversal is always very swift. That is why investors always say that you have to be in the market at some point to realize the significant gains. If you wait to time the bottom of any market, you will most likely miss the reversal and cost yourself a great deal of money. That is the same for housing - today, our prices are severely depressed but when the market turns, which it is already showing positive signs, our prices will react in the same fashion as stocks - a swift, high percentage increase.
- Talk about FHA and the government stimulus package. I have been around these past two weeks meeting with over ten builders and thirty agents. Only a small handful understood the impact the new Jumbo FHA loan could have on their business. You can sell 100% financing up to $700k. Most lenders are still requiring 10-15% down payments in that price point due to the declining market issues put forth by Fannie Mae and Freddie Mac. FHA does not have a declining market policy and allows sellers to pay up to 9% in closing and down payment assistance. You can sell 100% financing with marginal credit at a rate of 6.0% for a jumbo loan or 5.75% for traditional FHA.
Please feel free to call me if you have any pre-qualifications or questions regarding the information referenced above. My cell phone is 301-448-5151. Good luck and thanks again for your time!