My Thoughts on the Market: 1st Time Buyer, Move Up Buyer and Investor.

As we work in 2010, we all recognize that the market has changed. It seems like a month of Sundays since a deal was simple and the sellers were people, not some amorphous blob called FNMA or HUD or Bank of America. There are lots of things we want to convey to our current and future clients so I will put the "pen to paper."

1st Time Homebuyers:

There are a multitude of reasons to buy now. Here are some highlights:

1. Pricing- home prices have dropped 20-40% from the peak in 2006.
2. Rates- Some people just don't understand that 5% is "cheap money".

While the Federal Government has been nice enough to invest heavily in Mortgage Backed Securities, they will begin to withdraw from the market before summer. This will drive rates higher.

3. 1st Time Buyer's Tax Credt of $8,000. This will be going away soon. Buyers must be under contract by the end of April and close by the end of June.

It is unknown if this will be extended, but it does leave us wondering how long the government can

subsidize the housing market.

4. Down Payments- FHA loans are the product of choice for first time buyers. At this time, 3.5% down payment is required. As of this summer, 5% will be required for folks with higher credit scores and as much as 10% down will be required for lower scores. Also, seller contributions will be limited to 3% of the purchase price. Previously, up to 6% was allowed. Lastly, Upfront Mortgage Insurance will go from 1.75% of the loan amount to 2.25%.

In summary, these changes will impact the number of buyers in the market. If you are a first time homebuyer, I would not wait one day to get started on my search. Homes in this sector of the market are already in high demand. It is quite common for a home under $200,000 to be on the market for one or two days maximum if it is priced properly. As we get closer to the deadline, more and more buyers will be hitting the streets in search of a place to call home. Don't get left behind or buy a home you don't love just to get the tax credit.

Move up Buyers:

In my opinion, people in this category are in the best position. The market is not inundated with buyers and there are plenty of nice properties that are priced very attractively. This buyer can take their time looking for their dream home and make an aggressive offer on a property. If you can qualify (lots of self employed folks can't at this time), I would strongly urge you to consider getting into the market. Between tax credits, inventory, pricing and interest rates, there may never be a better time to purchase the home you will live in for the rest of your life.

Investors:

Depending on your cash position and ability to take risks, now may or may not be the time to be buying. If you have lots of cash, purchasing foreclosures on the steps of the courthouse may never have looked better as HUD has eliminated the 90 day anti-flipping rule. This investor will purchase multiple homes for cash with lots of upside but plenty of risk as well as the properties may require large and costly repairs that were not apparent at time of purchase. From what I understand, you do not get to inspect the property to any real degree.

If you are the position to purchase one property for cash, look to the foreclosure market. There are tons of homes with enough damage that a buyer can't get financing. This removes most of the competition. If you are willing to deal with repairs ranging from electrical to flooring to drywall to roofing, you may come out in a very nice position.

Investors looking to purchase a property that will require a mortgage: My recommendation is that you wait until the FHA changes take place and the tax credits have expired. There will be a lot of new inventory and a reduced pool of buyers in the market. This should allow you to make agressive offers on nice properties.

Moving forward, there are plenty of concerns in the market. I would hope that the govenrment would have the sense to not hit us with everything at once. By this, I mean pulling out of the bond market, eliminating tax credits and requiring larger downpayments for borrowers. I would also hope that lenders and Fannie Mae would be very careful in releasing properties to market. The "shadow inventory" has a whole lot of people scared. This means there are households that are majorly delinquent on the mortgage and are still in the house. Lenders are hesitant to foreclose because they don't want to flood the market with inventory. Lastly, I would want lenders to figure out a way to do repairs so that properties could be financed. When a property becomes a "cash only" type of deal, the property sells for a reduced amount. This hurts the entire neighborhood.

Happy Hunting!

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Patrick Randles

Sunstreet Mortgage, LLC

Tucson, AZ 85718

(520)850-7485