Friday, December 19, 2008

Mortgage rates at 37-year low: average 5.19% for 30 years

The market has begun to tick upwards in the area.  Although the winter season is normally a little slow, we have actually seen both showing and contract activity improving substantially from the same time last year.  I believe most of this is due to the smart Buyers taking advantage of incredible mortgage rates and snatching up solid home values. 

Although many people consider Washington D.C. area recession proof, I do not believe that is correct.  However we are recession resistent and we have not seen the violent down swings that other parts of the country have endured.   

This is a great time to buy.  As Warren Buffett says “I sell greed and buy fear”.  That strategy has worked pretty well for him :-)

This article was in the USA Today published December 19, 2008.

(USA) — Mortgage rates are falling to levels unseen since the 1960s, driving a surge in home refinancings among credible borrowers.

The government’s efforts to aid the mortgage market have driven rates to near 50-year lows, says Keith Gumbinger, vice president of financial market researcher HSH Associates. Refinancings have tripled in the past month as a result, he says.

“This is an historic opportunity,” Gumbinger says. “This is the program for borrowers not in trouble.”

Mortgage-finance giant Freddie Mac reports the average 30-year fixed-rate mortgage slid to 5.19% this week, the lowest since Freddie Mac started its weekly mortgage market survey in 1971. The 30-year rate was 5.47% last week and 6.14% a year ago.

This week’s drop was helped by the Federal Reserve’s decision Tuesday to cut a key interest rate to a record low and its pledge to give the ailing mortgage market more help if necessary.

The low rates stand to help tens of millions of homeowners cut monthly payments, which could result in more spending on goods and services and lift the economy, says Marc Savitt, president of the National Association of Mortgage Brokers.

The big questions are whether rates will go lower and how long they’ll stay down.

Homeowners should act now because rates aren’t likely to go much lower and they tend to rise faster than they fall, Savitt and Gumbinger say.

 

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Tuesday, November 11, 2008

2009 New Loan Limits Released for FHA

HUD ANNOUNCES NEW, PERMANENT FHA MORTGAGE LOAN LIMITS
New limits range from $271,050 to $625,500

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today announced the new Federal Housing Administration (FHA) mortgage loan limits for single-family homes as prescribed by the Housing and Economic Recovery Act of 2008.

Beginning January 1, 2009, FHA will insure single-family home mortgages up to a maximum of $625,500 in high cost areas. The February 2008 Stimulus Package temporarily raised the FHA maximum to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.

“In today’s environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas,” said Preston. “These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today’s buyers market”

For several years, FHA’s loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.

FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.

Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.

The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.

Anne Arundel County $494,500

Prince George’s County $625,500

Howard County $494,500

Calvert County $625,500

Charles County $625,500

Montgomery County $625,500

Baltimore County $494,500

Baltimore City $494,500

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Wednesday, September 10, 2008

1st Time Home Buyer Credit

These are the new tax credit provisions for 1st Time Buyers.  This is a great chance to save on taxes this year if you are in the market to buy.  This a great chance to save up to $7,500.  Between this great cresit and falling interest rates, now is the time to Buy.

 

In our quest to continue to provide excellence to you, please find below the key points of the First Time Homebuyer Tax Credit that became law through the H.R. 3221 Housing and Economic Recovery Act of 2008.      

Feature

H.R. 3221

Housing and Economic Recovery Act of 2008

Amount of Credit

Ten Percent of the cost of home, not to exceed $7500.

Examples: 

Ø        If a home costs $65,000, the allowable credit would be $6,500.

Ø       If a home costs $120,000, then the allowable credit would be $7,500.

Eligible Property

Any single-family residence (including condos) that will be used as a primary residence.

Refundable

Reduces income tax liability for the year of purchase.  Claimed on tax return for that tax year.

Individuals should consult a professional tax advisor for exact tax calculations.

Examples:

Ø        If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.

Ø       If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.

Income Limit

Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.  Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.  Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.

First-time Homebuyer Only

Purchaser (and purchaser’s spouse) may not have owned a principal residence in three years previous to purchase.

Recapture

A portion (6.67% of credit) is to be repaid each year for 15 years.  If home is sold before 15 years, then remainder of credit is due in the year of the sale. 

Ø        If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.

Ø        If the homeowner dies, their heirs do not have to pay back the remaining balance.

Ø        If the house is sold before fifteen years have passed and the home’s appreciation is less than the amount needed to be to paid back, the loan is forgiven.

Ø       If the home is turned into a rental or investment property, the pay back balance is due in that year. 

Effective Date

Purchases on or after April 9, 2008 until July 1, 2009

 

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Tuesday, September 2, 2008

How Appraisals Work

This article looked interesting to me as we come across this everyday in the business.

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn’t always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren’t uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of homes that have actually settled.

Posted by Scott Smolen at 17:36:07 | Permalink | No Comments »

Wednesday, July 2, 2008

What is Going to Bring the Housing Market Back

This article from Fortune Magazine hits the nail on the head.  The entire housing market will come back below almost everybody’s radar.  Nobody will know where the bottom was until we look back at it.  However the “new affordability” of 1st Time Buyers is creating a stronger market for everybody. 

Anytime home prices have fallen, rental prices begin to rise.  We are seeing that more and more every day.  I anticipate rental rates in this area to raise nearly $100 per month per year for the next 3-4 years at a minimum.  Rents were artificially kept down during the housing boom as it made too much sense just to buy.  This also increased the number of “investors”; I actually believe many of the “investors” were more like speculators.  When these speculators could not sell the house that they contracted to purchase from a builder at a profit when it was completed, they had to do something.  Some of the homes went to foreclosure, while others were rented out at whatever the owner could get in order to avoid having to pay the entire note. 

However that excess rental inventory has been worked out of the system.  The demand for rentals has risen and the supply has dropped.  Thus we have seen a major decrease in days on the market for a properly priced rental property (usually less than 30).  We have also seen the rental rates head up again.  The higher rents and lack of rental availability combined with FHA loans or VA loans have allowed the first time Buyer back into the market.  The entire real estate market is an ecosystem.  Once the first time Buyers come back, everything else will begin to function better and better.  We are seeing this happening more and more every day.  It is impossible to tell where the market has bottomed or will bottom out until after it has happened.  However the signs are there that we have either seen it, or are certainly very close. 

 

When owning is as cheap as renting


When the real estate market comes back, it will not be with a sonic boom. It is likely to be subtle, below the public’s radar. The revival will probably begin in the areas hit hardest by the bust: in Florida, Las Vegas, and the honeycombed tracts that flank the broad freeways east of Los Angeles known as the Inland Empire. (Indeed, home sales in Southern California surged 22% from March to April, hitting their highest levels since August.) Why will housing come back? For a reason as solid as floor joists: The entry-level buyer, for the first time in years, is finding that owning a new house is suddenly just as cheap as renting. “Those first-time buyers got locked out by high prices,” says John Karevoll of DataQuick, a research firm that assembles data on the U.S. real estate market. “Now the buying activity that was on hold is starting to come back.”
 In hindsight, the reason for the current malaise is simple: too few buyers. By 2007 more and more people were frozen out of the market - especially the entry-level buyers, who now account for as much as 30% of new-home sales. They’re the twenty something young professionals who rent until they get married or the first child arrives, and then reach for the American dream of homeownership. From 2005 to 2006 some first-timers rushed to purchase homes they couldn’t afford with the help of exotic loans. But another big group of young consumers steered clear and are finally looking to buy. Now that prices of new houses have fallen as much as 30% in areas including the Inland Empire and the outskirts of Phoenix, they are returning- prompting a turning point in the housing cycle. Call it the New Affordability.

Posted by Scott Smolen at 23:13:54 | Permalink | No Comments »

Tuesday, July 1, 2008

10 Markets set for steepest loss

This article was just posted by CNN yesterday.  As you can see, our market (or surrounding areas for that matter) is not mentioned in anyway.  We are fortunate to have the employment in this area to support the house values.  Although real estate is extremely regional in nature, if you watch the news you would believe these type of estimates are forecast for the entire country.  These are mainly vacation destinations that saw prices run up due to wide spread speculation (similar to the price of oil today and the .com bust of a few years back). 
However our market is much more insulated and fundamentally sound as the job growth in the Washington D.C. area is continuing better than almost any other place in the country.  Even in the worst housing markets in the USA, you can see a dramatic forecast difference from top to bottom.  I firmly believe we are nearing the 7th inning stretch if we compare the overall market to a baseball game.  At this time, there are still some great bargains to be had but the increased activity has begun to see this real deals get snatched up quicker and quicker in our region and I expect that to continue.

10 Markets set for steepest loss
CNN MONEY.COM 6/30/08
 
Miami, Fla. 12-month forecast: -24.9%

Fort Lauderdale, Fla. 12-month forecast: -22.2%

Orlando, Fla. 12-month forecast: -21%

Phoenix, Arizona 12-month forecast: -18.3%

Las Vegas, Nevada 12-month forecast: -18.3%

West Palm Beach, Fla. 12-month forecast: -17.6%

Tampa, Fla.  12-month forecast: -17.1%

Riverside, Calif. 12-month forecast: -16.9%

Tucson, Arizona 12-month forecast: -16.9%

Stockton, Calif. 12-month forecast: -16.8%

Good news is there may be a bottom in 2009-2010

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Thursday, June 26, 2008

Home Sales Rise in May

The National Association of Realtors says existing home sales rose 2 percent in May, only the second gain in the past 10 months. Analysts had forecast a 2.2 percent increase.  Although the sales came in a little lower than expected, the increase is certainly good and a sign that the market is improving across the country.

Locally, we saw improved activity throughout the Spring as well.

Posted by Scott Smolen at 15:34:12 | Permalink | No Comments »

Wednesday, June 25, 2008

So why has oil risen so wildly? The answer…The Fed.

I saw this article come out today and felt it hit the nail right on the head.  I realize that most consumers feel lower interest rates are better for the economy.  However since the Fed took so long to reduce their rate, they were basically forced to overreact when they finally moved on it. 

When the Saudi government agreed to increase oil production over the weekend (not an act of kindness, just them looking out for their long term best interest) the price per barrel did not drop dramatically this week.  That is a clear sign that this is not a supply / demand issue.  There are no gas lines; we do not have to ration fuel.  The supply is fine.  The hedge funds and the weak US dollar have created the high price of oil.  This article does a nice job of explaining this in detail.   

The evidence is too clear to ignore. Let’s take a look at where we were before the first Fed cut on September 18th.  The Fed Funds Rate was at 5.25%, Oil was at $73 per barrel and the Euro was $1.35.  Not great, but not bad.  Fearing a recession, the Fed did the right thing to stimulate the economy - they cut.  But cutting rates in the US makes higher rates in Europe appear much more attractive.  So the Dollar began to tank against the Euro and just got worse as the Fed continued to cut.  Now it takes $1.56 to equal one Euro.  That is a huge swing.  And here is where it gets interesting…Oil is priced in Dollars, so as Dollars decline, Oil price per barrel must rise.  Oil has gone from $73 a barrel before the Fed cuts to yesterday’s close of $137 a barrel. (Today $134.55)  
Again, oil prices are surging mainly because of the Dollar weakness and the Fed cuts.  Think about it - has demand for oil suddenly skyrocketed in the past 8 or 9 months?  Sure it has gone up, but oil had already doubled in price when it was at $70.  And higher prices for oil hurts everything.  Sure at the pump and for heating, which allows less to spend, but travel, manufacturing, shipping…the list goes on and on.       

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Tuesday, June 24, 2008

What Today’s Buyers Want

I saw this article in the latest National Association survey and thought it was interesting what Buyers are looking for more and more today as opposed to just 3 years ago.

57 percent of homebuyers say oversize garages are “very important,” in a survey just released by the National Association of Realtors® (NAR). The 2007 Profile of Buyers’ Home Feature Preferences says preference for a garage with two or more spaces showed the biggest growth among ranking home features, with a 16 percent increase over 2004 survey results.

According to the survey other priorities that gained importance among homebuyers were air conditioning, master bedroom walk-in closets, hardwood floors, granite countertops, and cable/satellite TV-readiness.

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Monday, June 9, 2008

DISA to Move to Ft. Meade as Part of BRAC

What is DISA? - Defense Information Systems Agency
The Defense Information Systems Agency is a combat support agency responsible for planning, engineering, acquiring, fielding, and supporting global net-centric solutions to serve the needs of the President, Vice President, the Secretary of Defense, and other DoD Components, under all conditions of peace and war.

DISA headquarters will be moving to Fort Meade by September, 2011.  This means nearly 4,300 DISA, Joint Task Force-Global Network Operations, and tenant positions will transfer to Ft. Meade from Virginia as well according to disa.mil.  Ground breaking for construction took place in April 2008. 

DISA is only a small part of the BRAC relocation.  However it is obvious that many of the people transferred will look for homes which will help raise housing values in the Fort Meade region.  BRAC will truly create a need for housing in the immediate area as it begins to take place.  As the demand increases and supplies begin to decrease, it is very likely there will be significant appreciation in home values in this part of the country regardless to what other areas real estate values do.

 

 

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