Home Buyers too Scared to BUY! Missing out on great deals.

I thought this article was interesting. It presents the classic dilemma – the best time to buy is when nobody thinks it is. Well, this is the time, and buyer’s fear works to your advantage. I can understand the fear, but if you have a job and good credit there is probably no better time to do it.
This is a very interesting article (link) showing that real estate listings where photos taken by SLR cameras seem to have an edge over listings where cheaper cameras are used. This is a strategy I have employed for a good number of years. The ability to take better photos and work with them digitally to adjust lighting (and sometimes photo shop out a telephone pole or two) is a key part of my marketing. I have also found that the number of photos combined with the time of day they are taken also impact how they resonate with people. I spend a lot of time with sellers preparing and staging their homes for the market. I work with a professional stager to ensure the HGTV effect. Since technology and photos have effectively replaced the old first showing, getting this part just right is critical. When my listings come on the market I want them to fulfill every buyer’s dream. Rich classic photos do make a difference.

4 Tips for Setting the Right Sales Price

From Realtor Magazine – great words of wisdom!

Sellers think their homes are worth more than their real estate professional recommends, and buyers think these same homes are worth less.

It’s a difficult disconnect that makes selling properties a challenge. Successfully marketing a home requires that the price be set carefully -- or it will languish on the market. Among the considerations:

  • How many homes are for sale in the neighborhood? The more homes on the market, the more important it is to list at the lower end of the scale. "I want buyers to ask why is this house priced so competitively," said NAR President-elect Ron Phipps of Phipps Realty in Warwick, R.I. "I want the answer to be an offer."
  • Take short sales and foreclosures into consideration when pricing. If the competing properties are in lousy condition, they are less of an issue, but if they are well taken care of, yet priced 25 percent below market, they can be a serious factor.
  • Negotiate decisively. "Buyers are not interested in back-and-forth negotiations these days," Phipps said. "They are less emotional and more disciplined. They will walk away."
  • Cut the price when you have to. If no one shows up for an open house, if no one calls and if there are no offers, then the price is too high. That means it's time to make a meaningful price cut.

Media Fails to Inform Home Buyers of Windfall!

Little Understood Math Benefits Buyers

Over the past 5 months a huge benefit has quietly snuck in under the radar for home buyers and the media failed to inform anyone. Interest rates have steadily tumbled since June 2010 and the 30 year fixed rate of 5.25% five months later is now around 4.25%. What does this mean to you?

For Buyers - Do the Math
A $200,000 30 year fixed loan at a June rate of 5.25% generated a payment of $1104/m. That same loan amount will now drop to $983 at 4.25% which is a savings of 12.5%. Let me put that into perspective for you. You just saved $121 per month or $43,560 over the life of the loan! But that’s not all you saved. It’s really more like $60,000 when you consider tax write offs for mortgage interest and the effect of compounding interest on your money. It’s also a forced savings plan. Most of us would like to think we could save $120/m for 30 years but life gets in the way and we don’t. In effect this is a forced savings plan ensuring you sock it away every month. This scenario does not even contemplate value appreciation or inflation protection your home provides over the coming years.
Huge Savings!
$200,000 - loan you just saved 12.5% or $25,000!

$300,000 - $37,500 Savings

$400,000 - $50,000 Savings

$500,000 - $62,500 Savings

Additional Buyer Savings
  • Lower sale price on new home also generates closing cost savings of 20%

For Sellers - Do the Math
This works in your favor as well. You will get less for your home today than its peak a few years ago. However, if you purchase a new home you’ll pay much less for that one as well. The gap between sale and new purchase price is usually constant. What is not constant is the interest rate (see savings above) which has dropped. In fact you’ll probably have a lower interest rate on your new home than you did on your old one.
Additional Seller Savings
  • Lower sale price on old home generates closing cost savings of 20%
  • Lower purchase price on new home sees the same savings of 20%
  • Lower interest rates generate savings of about 12% over the life of the new loan

Bottom Line

The best time to buy is when nobody thinks it is. Since we are officially out of recession we are most likely at the bottom of the housing market. We are definitely at the bottom of the interest rate cycle. The moment our economy shows solid signs of recovery you can bet interest rates will shoot up. Low prices, low interest rates, strong regional job market – advantage Buyers!

Who’s the next person you know that could benefit from this opportunity?

What is a Reverse Trifecta?

A: Trifecta is defined as - any achievement involving three successful outcomes.

Q: So what’s a Reverse Trifecta - where you have one successful outcome based on three achievements?

A: Our current real estate market!
Foreclosure homes and distressed properties make up about 25% of the nationwide real estate market (source link). That impact is being felt even in Maryland where regional job security is stronger than most areas in the country. So by my definition here’s the Reverse Trifecta. The three achievements leading to the successful outcome are 1) deeply discounted home prices 2) historic low financing 3) good jobs.

The result is a once in a generation opportunity for home buyers. Call me and let me know if you know of anyone who might want to take advantage of this great market.

July market stats for Howard County

Click Here to View July Stats. Notice the increase in units sold year to date – an increase of 10.5%. Median sales price has remained pretty flat and the number of days on market has decreased 33.5% over last year. Listing inventory has increased by 11.3%.There has been a significant slow down in sales July 2010 compared to 2009.

In summary the Howard County market has seen increased numbers of sales and decreased days on market while prices have remained stable over the past 12 months. Listing inventory has increased and that means there are still some good buys out there. With interest rates in the 4.5% and lower range for 30 year fixed, it’s a great time to buy!

Shadow Inventory

This is a term to describe homes that are in the foreclosure pipeline that haven’t hit the open market yet. This interesting article identifies the cause of the greatest recession since the Great Depression as “our nation’s over-leveraged, over-valued position in housing.” It is a sobering viewpoint that it may take some years yet before we work out of the down housing market. One key factor is “Shadow Inventory” and its impact once these homes hit the open market. Summarizing the article, it could be some time before we see a rise in home prices, interest rates are likely to remain low, credit will be tight and qualifying for a home loan will be a rigorous process (particularly difficult for the self employed) and buying opportunities will be plentiful. Keep in mind that our regional economy is probably one of the strongest in the nation. That bodes well for us in the short and long term.

$75 Million Dollar Handyman’s Special

Check out this article – a 90,000 square foot home is up for sale in Windermere Florida. It has a 20 car garage, 3 pools, and indoor roller rink and 23 bathrooms. It looks kind of ugly to me, but what do I know? The only think can think of is, waking up, feeling like a midnight snack and having to take a bicycle to the nearest of the 10 kitchens because it’s too far to walk! Sounds like too much work for me! :)

Columbia / Ellicott City Rank #2 in the Nation for Best Places to Live!

This report was just released and it shows that Columbia and Ellicott City rate the #2 slot for best places to live! It’s always nice to know that the quality of living this area has to offer is receiving the recognition it deserves. I was very excited to note that the accompanying photo displays the Patapsco Female Institute ruins where we held our client appreciation party last fall.

When Renovating My Home Where is My Money Best Spent?

I get asked this question often and the answer is; there is no easy answer. But there are some basic guidelines that can help prioritize your projects and make sure you get the most bang for your buck. I came across this article on HGTV Pro. It gives a good idea of where priorities ought to be when planning your next project. Once you have an idea of what you would like to do, feel free to give me a call. I’ll be happy to share some good information about where your dollars will go furthest.

Why Americans Get Ripped off on Mortgage Loans

An interesting article I found on the Wall Street Journal. Your loan will be around for a good long while after you purchase or refinance your existing home loan. It’s always a good idea to really do your homework when considering mortgage options. I have a number of lenders I work with who I trust to thoroughly explain your loan options and make sure they are looking out for your best interests. Contact me if you would like to speak with any of them.

Interest Rate Alert!

Here are some rates today June 29, 2010
They will never get lower than this! If you know someone who would like to take advantage of these historic rates, please call!

30 yr fixed at 4.5% NO POINTS

15 yr fixed at 3.875% NO points

5/1 ARM 3.5% NO POINTS


30 yr fixed 4.5% no points

5/1 ARM 3.5% no points



Low E Glass and Doors

Here is a great article about Low E glass in widows and doors. There are still incentives for energy efficient windows and doors in Maryland through to the end of the year. It’s a good time to consider upgrading windows and doors.

Great News!

We have now launched a new search program that we are making available to our clients. It’s called Listingbook and it’s one really neat and powerful program. Here’s what it can do for you.
  • Create your own searches and then customize them to your specifications
  • Get up to the minute sales info such as Days on Market, Price Changes, Price Reductions, Sold Info
  • Save your favorite homes on a Watch List
  • Organize your multiple searches using a simple online interface
  • Set up property alerts
This fully integrated communication tool allows you to stay on track and not miss any important information. It’s one of the ways I put good information into your hands – quickly. Using these features you can closely watch the market in the way you want to watch.

Feel free to give it a drive or recommend it to your friends. Here is the link http://www.listingbook.com/ select me as your agent and I will be able to help customize your search and provide you with an enhanced information package.

Housing Market Diagnosis: Bipolar

There are lots of factors pulling and tugging at our housing market and these can vary dramatically depending on where you look – Maryland – Nevada – Florida – Michigan – California etc. Our regional economy still performs well due to the steadying influence of the government. Other areas are not so strong. The bottom line is we are going to bounce around for a while yet while seeing a modest improvement later in 2010. This article  really paints an accurate picture of some of the uncertainty we are seeing. Don’t forget. uncertainty can provide opportunity.

Existing Home Sales Soar In April

Home sales jumped as a result of the April 30th deadline for the government grants. The winter storms took a lot of momentum out of the market but just before the deadline we experienced a surge. (click here) Since the deadline we have experienced a mixed bag of activity, some areas and price ranges have continued active while others have definitely languished. I expect to see a little more stabilizing occur over the next few months as our economy continues to improve. In the meantime, interest rates are still a great bargain, in fact one analyst pointed out that the lower rates we are seeing now could actually equal the $8,000 grant if new buyers remain in their homes for the next 4-5 years.

Deal of the week: Check out the 10 year fixed. 3.875% with 0 points!

I often say that interest rates are one of the most important and frequently overlooked facets of the home buying process. Since buyers will pay for many years after the purchase of a home, the interest rate on the “rent” of the money is just as important as the original purchase price. I just received this update advising of a loan product with 3.875% rate with 0 points from one of the lenders I work with. Now that’s a pretty great rate.

There are some really excellent interest rates out there at this time. Who is the next person you know looking to take advantage of these low rates, give me a call.

Buyer Surprises Before Settlement – A New Wrinkle to be Aware Of

Applying for mortgage? Starting June 1, you could face another credit screening
By Kenneth R. Harney
Saturday, May 15, 2010; E01

If you're thinking about applying for a home mortgage, here's some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.

The last-minute credit report will be designed to find out whether you have obtained -- or even shopped for -- new debt between the date of your loan application and the closing. If you've made applications for credit of any type -- for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card, you name it -- the closing could be put on hold pending additional research by the lender.

If you've actually taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the whole deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.

The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and fraud by borrowers. Fannie's "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.

"There's an almost irresistible urge" for many mortgage borrowers, said Don Unger, chief executive of Advantage Credit of Evergreen, Colo. "The lender says, 'Okay, you're approved for the loan,' and you immediately think about shopping for all the things you need for the house. You go to Home Depot" or other major retailers, "and you put in an application."

In the past, that might not have raised an eyebrow -- or even been detected. But under the new double-check policy, when the Home Depot application shows up as a "hard," or borrower-initiated, inquiry on a credit report, Unger said, the lender "is going to have to contact" the merchant and determine whether credit was extended, in what amount, and how this might affect the applicant's home financing transaction.

Marc Savitt, president of the National Association of Independent Housing Professionals and a mortgage broker in Martinsburg, W.Va., said it's not an uncommon scenario. "Most often the new debt involves furniture or other goods for the house," Savitt said. "However, we have seen debt for new cars and other major purchases."

Terry Clemans, executive director of the National Credit Reporting Association, recalls one case in which the home buyers "went out and gorged on $40,000 worth of new furniture and all types of stuff" after their loan approval -- incurring monthly payments far beyond what they could possibly afford. Under the new policy, they would likely be shot down before closing.

Fannie Mae spokeswoman Janis Smith said lenders "will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages -- anything that may have changed since initial application that might impact a borrower's debt-to-income ratio."

As a practical matter, some lenders are likely to ask their credit reporting vendors to perform the actual investigations when new debts or inquiries pop up on borrowers' files. Fannie Mae's instructions say that "lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing" are considered in the final loan analysis.

Unger, however, said all this may not be as straightforward as it sounds. For example, if the credit report is pulled immediately before closing to comply with the "up to and concurrent" requirement, there may not be sufficient time to check out inquiries -- especially those in which no actual drawdown of debt has been reported to the national credit bureaus. He also questioned whether entire loan packages might need to be re-underwritten -- a time-consuming process -- based on credit data discovered at the eleventh hour.

In that event, poof goes your closing.

How should home buyers and refinancers prepare for the new credit check procedures? Lenders and credit reporting company executives say everybody needs to follow just one basic rule: abstinence. Between your application for a mortgage and the date of closing -- which might be a span of 45 to 60 days or more -- resist the irresistible.

Don't apply for new credit unless you discuss it in advance with your lender and get a green light.

Home is Where the Heart Is. Eh?

I came across this article today about a Lynx that was trapped in Canada and relocated to Colorado in 2005 as part of a reintroduction program. Over 200 Lynx were relocated to re-populate the species after they had died out in the state. Over the past 5 years this Lynx (BC-03-M-02 as he was known to the biologists - I think I’d call him Homer) methodically made its way back to where he started, demonstrating a remarkable homing instinct. The sad new is that he perished in a trap once he arrived back in his home territory in Canada. Although the story has a sad ending it does say a lot about how important home is to all of us on this planet. But, this story does have some good news. Homer fathered two litters during his stay south of the border so his family genes will be around for a long time to come. Travelling cross country in hostile territory for over 2000 Kilometers through three states and one province– I’d say that’s pretty good for a 25 pound cat who knows how important home is.

NEXT CYCLE of the First-Time Homebuyer Program (FHP)

Here are the program highlights:
  • Opens April 19, 2010, and continues through Dec. 31, 2010 or until all available funds are disbursed, whichever occurs first.
  • Program provides matching funds of up to $7500 per household for down-payment and closing-cost assistance to low-and moderate-income homebuyers.
  • Qualified lenders in Maryland include: BankAnnapolis; Advance bank; Chesapeake Bank of Maryland; Hamilton Federal; MECU of Baltimore; Rosedale Federal S&L Assn.; Slavie Federal Savings; First Mariner; Ideal Federal Savings; Presidential Bank; Columbia Bank; First United Bank & Trust; First Shore Federal; K Bank; Carrollton Bank.
  • Participation lenders may have geographic or demographic restrictions.

If you or someone you know would like to take advantage of this program or would like more information call or email me.

8 Tips to Take Advantage of the Homebuyer Tax Credt Before Time Runs Out.

The deadline for Homebuyers grants is fast approaching and there are just about 30 days left. Here are some good tips to remember when considering the grants and their impact on your home purchace or selling decision. I have had lots of people calling to ask questions about the program and how it affects them. Do you have questions?

Interest Rates Expected to Stay Low

A recent Washington Post article quoted Fed Chairman Ben Bernanke as saying "the federal funds rate is likely to remain exceptionally low for an extended period." He has said the same thing in every statement for the last 14 months. That is about as clear a signal as possible about where Ben stands on long term interest rates. Rates will continue low until things change and at some point things will change, for the better. At this time, however, it looks to me that the Fed Chairman is saying out economy hasn't yet recovered enough to allow interest rates to push higher. We have a ways to go before our economy swings into more positive territory. We are seeing some tentative early swings, but at the present we are still struggling a little. When change comes, it will come quick and interest rates will adjust quickly as well. I blogged recently abou the Four Windows of Opportunity. This window of opportunity - low interest rates is still open. For now.

If you know of anyone interested in locking in a low interest rate on a new home purchase, give me a call.

First Time Home Buyer Credit--How Do I Get My Money From the IRS?

I came across this information which is really helpful as you apply for the First Time Home Buyer Credit. It's a little wordy (isn't everything at the IRS?) but very accurate and I guess that's what counts when it comes to your taxes. Anyway, take a quick look as it may answer some of your questions about this important grant. I'm seeing lots of first-time buyers starting to zero in on this credit. Move-up buyers purchaing a new principal residence and qualifying for the $6,500 grant are taking advantage as well.

Who is the next person you know that would like $8,000 or $6,500 for their next home purchase?

Home Prices Gain for Seventh Straight Month

It seems like our housing market is doing the slow but sure bumpy recovery thing, but here is a report that shows we are starting to make some headway. This index is up more than 3% since last May but is still below its May 2006 peak. Reports like this will continue to jump around a lot but the overall trend will be upwards, especially if we continue to see evidence that our economy is improving.

Plastic Granite

We’ve all longed for that elegant and classic look and feel of granite countertops in our dream home. We often thought about doing it in our current homes but then the reality of the cost benefit analysis kicks in and we come to the conclusion it’s either unaffordable or it would over improve our homes or both. New products seem to be hitting the market at a torrid pace these days and here’s one that is really interesting – plastic granite or in other words Formica on steroids. Take a look and see for yourself. This could be a cost effective alternative for your next home improvement project.
Click Here to View a Video Demo.

Ice Dam Problems

The recent heavy snows and storms have created a situation that we have not really experienced here before – Ice Damming. I have been receiving lots of phone calls and emails from people having problems with water coming into their homes as a result of ice dams on their roof. The purpose of this communication is to share some helpful information that will allow you to trouble shoot and prevent further damage. Because you have not had a problem yet doesn’t mean you won’t. The warmer weather and strong sun should take the snow off most roofs over the next few days. The melting snow could initially create more problems as the water builds up behind the ice dam. Here is what you can do.

See my recent post below about ice dams to understand the problem:

  • Call a professional roofing contractor if you experience problems

  • Don’t go up on your roof unless you know what you are doing - roofs covered with snow and ice can be slippery

  • Don’t remove ice with an axe or other sharp tools unless you are experienced. Roofing shingles are not made to withstand heavy blows and in the cold weather they are brittle and can crack or break leading to leak problems in the future

Here are a couple of home remedies I have come across that can be helpful:

  • Put ice melt into nylon stockings and tie the ends closed to create a "sausages." Place these in a couple of places along your roof, perpendicular to the edge. The chemicals will slowly melt and create a channel for the water to flow through.

  • If you have a long enough garden hose, attach it to a hot water source and use that stream of hot water to melt channels through the ice dam. You can also melt and clear away the snow about four feet back from the edge of the roof to prevent further accumulation.

  • Use the same method to thaw ice in gutters. You do not need to get all the ice out of the gutter – just enough so it loosens up. As soon as water is flowing in the gutter it will widen out the channel on its own.

Other helpful ideas:

  • Keep snow cleared away from exterior heat pumps so they can operate unrestricted.

  • Make sure your sump pump exterior drain pipe is clear so if your pump kicks on it will have a place to expel the water.

  • Make sure the storm water drainage openings in your street are clear so when snow starts melting it will not back up and create a lake in front of your home or on your property.

  • Remove icicles off your roof edge if possible – especially the big ones. They are dangerous and can actually rip the gutter or fascia boards right off your home. Be very careful when you do this!!

We are currently experiencing days where melting occurs, and then temperatures drop at night so a re-freeze occurs. This is good because it creates a controlled release of snow. However, we will likely experience a rapid melt at some point so be prepared to handle an excess of water. Try to keep snow and ice back from your home and make sure there are drainage channels for water to flow away from your home. If there is any chance of water working its way back to your house try to address that issue before the melt begins.

Good luck and call if you have any questions

Welcome to Snowmageddon 2010!

It’s hard to believe the weather we have been experiencing over the past few days. In my area we had around 32-34 inches Friday and Saturday with another 10 to 20 inches on the way overnight and through tomorrow (Wednesday February 10, 2010). Our lives are full of cancellations and delays. Travel is difficult and a little scary. People are not used to snow packed roads and snow banks that tower over 10 feet high in some places. Intersections are interesting – making a left hand turn is an exercise in faith. You can’t clear traffic until your car’s nose is already into the oncoming lane. Wow! This weather has raised a lot of concerns about snow load and a phenomenon called Ice Damming. No pun intended. I thought I’d share some info that might be helpful.

Be safe out there and pray for spring!

Snow load – most roofs are engineered to handle the snow loads we are experiencing. Safety advisories warn people that removing snow from your roof can be dangerous for obvious reasons, but it can also create problems. First, the additional weight of people tromping around on a roof already heavy with snow can actually cause the very condition you are looking to avoid – collapse. Secondly, it is easy to damage roof shingles removing snow since they are not designed to be scraped with a shovel. It may be best to hire professionals if you feel you need to have snow removed. For most pitched roofs, there should be no problem.

Ice Damming - this condition occurs when snow build up on the edge of a roof and creates a dam sending water back up under the shingles and into your attic. Here are some helpful links to identify the problem and what to do to resolve it.

Trends in Housing Year End 2009 Report & Highlights

The strength of our regional market is evident in these figures just released (link). We are performing pretty well and prospects are bright for continued recovery in our housing market in 2010. Prices in some areas rose a little and days on market (time it takes for a home to go under contract) has dropped. This indicates a market that has definitely leveled off and is preparing for recovery in the coming years.

View the Press Release
Downlaod the PDF

The Four Windows of Opportunity--Great for Buyers and Sellers

Our current housing market presents four windows of opportunity, and like most windows they will all close at some time. Right now Buyers are presented with a unique set of cirumstances--a perfect storm of advantages which may not be around for much longer. Here are what I call the Four Windows of Opportunity, the benefits to buyers and sellers and when to expect these windows to close.

If you or someone you know is looking to take advantage of this collision of benefits, please contact us as soon as you can.

Here they are:

1) Homebuyers Grant
2) Low Interest Rates
3) Low Home Prices
4) FHA Financing Changes

1) Home Buyers Grant

Buyer Benefits $8,000 for first time buyers - does not have to be repaid. See link for more details.
$6,500 for buyers who purchase a new residence even though they already own a home - does not have to be repaid. See link for more details.

Seller Benefits First time and move up buyers coming back into the market creates demand for homes which benefits sellers.

Window Closes - April 30, 2010 (homes need to be under contract by April 30, 2010 and closing before June 30, 2010 - Click here for details). Usually, it takes three months or longer to sell a home. That's why it is critical sellers put their home on the market right away. Otherwise they might not leave themselves enough time to both secure a buyer for their current house and find a new home by the April 30th deadline.

2) Low Interest Rates

Your home purchase price is a one time event. Mortgage payments are a monthly event and will be around for a long time. You reap these benefits for years.

Buyer Benefits Interest rates for 30 year fixed mortgages are still hovering around the 5% range. Some loan programs can take those rates significatly lower. These rates are at historic lows and are not likely to go lower.

Seller Benefits Low interest rates bring buyers back into the market creating demand for homes. Sellers become buyers and take advantage of the same low rates.

Window Closes - Sometime Late 2010. There is no question that as we work our way out of the Great Recession rates will trend higher. Timing on this one is my best guesstimate. It could wiggle around a little depending on how the economy is fairing. Remember these rates are artificially low right now because of the Obama Housing Recovery initiative. We'll hear lots of chatter on the news as the rate increase process gains momentum.

3) Low Home Prices

Buyer Benefits Home prices seemed to have bottomed out. Deep discounting is rarely seen these days as homes coming on the market already reflect adjusted prices. We are seeing prices as low as 2002 levels in some areas. This is probably as close as anyone can get to perfectly timing the bottom of the price cycle.

Seller Benefits Buyers coming back into the market taking advantage of lower prices creates demand for homes. Your home may sell for much less than its value a few years ago, but the one you are buying will have dropped as much if not more.

Window Closes - Sometime 2011 or 2012. Prices will again begin to creep up once excess inventory disappears. We don't expect to see rapid price rises at that time but there will be a definite upswing at some point. Conservative lending practices and higher interest rates will keep any rapid rise in check.

4) FHA Financing Changes

Buyer Benefits We just received news about changes to FHA financing that will benefit buyers purchasing foreclosed Banks Owned or HUD properties (click here) which takes effect February 1, 2010. There are other changes looming which will not help buyers using this type of financing. The increasing of FHA insurance premiums and along with increased credit requirements will impact buyers (click here). Seller assistance (now at 6%) will be reduced to 3%. FHA loans are underperforming in most markets so expect to see more negative adjustments to this program.

Seller Benefits Buyer using FHA financing creates demand for home sales, which in turn helps sellers.

Window Closes - Spring 2010. We are waiting to hear when these changes will take effect but understand it will be soon - probably spring of this year.

Change to FHA Guidelines--Buyers Win Big!!

Here is a summary of proposed changes to FHA Guidelines that should be passed February 1, 2010. Buyers using FHA loans will be able to purchase bank owned, foreclosed and HUD owned properties – properties which are often the best deals. These changes will allow buyers using FHA loans access to affordable properties – an important advantage in our current market. FHA financing allows for low down payments – as low as 3 ½ percent as well as allowing up to 6% of the purchase price for seller assistance to cover closing costs. Some changes are on the horizon for FHA loans which will cost buyers more money, so the window of opportunity to maximize the use of these loans may close soon.

Mortgage Market in Review

The upshot of the following article is that interest rates remain low but there is some bouncing around from week to week. Long term forecast is for rates to rise so this is a great time to refi into a 30 year fixed or buy that first time home and transition out of renting into something of your own.

Mortgage Market in Review

Market Comment Mortgage bond prices rose last week pushing mortgage interest rates lower. The bond market rallied nicely Tuesday following moves by China to curb growth. Oil prices fell almost immediately providing a much-needed reprieve following the recent run up in prices tied to severe cold weather across the US. The consumer price index data showed tame inflation, which also helped rates improve. For the week interest rates fell by about 1/2 of a discount point.

The inflation data Wednesday will be the most important economic release this week. Signs of stronger than expected inflation would not be good for mortgage interest rates. The bond market is closed Monday in honor of the Martin Luther King holiday. Interest rates may be volatile Tuesday as trading resumes following the extended holiday weekend.

Economic Indicator: Martin Luther King Day
Release Date & Time: Monday, Jan. 18
Analysis: Important. Shortened trading week may result in volatility when trading resumes Tuesday.

Economic Indicator: Producer Price Index
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Unchanged, Core up 0.2%
Analysis: Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.

Economic Indicator: Housing Starts
Release Date & Time: Wednesday, Jan. 20, 8:30 am, et
Consensus Estimate: Up 1.0%
Analysis: Important. A measure of housing sector strength. Weakness may lead to lower rates.

Economic Indicator: Weekly Jobless Claims
Release Date & Time: Thursday, Jan. 21, 8:30 am, et
Consensus Estimate: 445k
Analysis: Moderately Important. An indication of employment. Higher figures may result in lower rates.

Economic Indicator: Leading Economic Indicators
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: Up 0.5%
Analysis: Important. An indication of future economic activity. Weakness may lead to lower rates.

Economic Indicator: Philadelphia Fed Survey
Release Date & Time: Thursday, Jan. 21, 10:00 am, et
Consensus Estimate: 18.2
Analysis: Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

The index of leading economic indicators (LEI) is a weighted average of eleven economic variables that "lead" the business cycle. It is constructed for forecasting future aggregate economic activity. The eleven variables that make up the LEI measure workers’ hours, initial unemployment claims, new factory orders, vendor performance, contracts and orders for plant and equipment, new housing permits, changes in unfilled orders, prices of raw materials, stock prices, money supply and consumer expectations.

Each of the variables that comprise the index has a tendency to predict (or lead) economic activity. For example, new orders for manufactured goods, new orders for plant and equipment, and new building permits are all direct measures of the amount of future production being planned for the economy.

Analysts monitor the LEI in an effort to predict future economic growth. When the LEI report is up, mortgage market participants expect credit demand to increase and inflationary pressures to build. Thus, when the LEI report is rising, interest rates tend to rise as well.

The LEI report is a valuable forecasting device that correctly predicts most economic turning points. The percentage change in the LEI is reported monthly and is an indication of the activity that will occur within the next three to six months. The LEI tends to turn down before peaks in the business cycle. Continuous declines are generally accepted as evidence that a recession continues.

Nine of the eleven components that make up this index are known before the release of the report, so the index is easy for economists to predict. Thus, although this is important predictive data for market participants, surprises are not common with the release of this data.

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Mortgage Rates Begin New Year with Slight Drop

Rates for 30-year home loans inched downward this week, the first decline in a month, but remained above last month's record lows. That's a great piece of news to begin the New Year. If I were a betting man I would wager that interest rates are about as low as they are going to get at this point and will likely begin to trend up as we work out of the recession. If you are considering refinancing or the purchase of a new home, now is a good time to take advantage of these low rates. This coupled with the First Time Home Buyer's grant of $8,000 and $6,500 for move up buyers purchasing a principle residence means it's a great time to make a move.