Hi everyone! I just received a questionnaire from Steve McLinden @ Bankrate.com
The following are my responses to his questions about how the Real Estate Market went from Maximum acceleration to backwards and the cause and effect -
Q. Hi.I am a real estate journalist with Bankrate.com and am working on a piece on the largest foreclosure markets in the U.S. - of which Boise City (somewhat surprisingly) is one.
Response: ( Not really surprising considering we had 20%+ Appreciation annually from 2003-2006 - What economy can sustain 20% + annual appreciation?)
Q. My questions, posed to you for email response, are:
What led to the foreclosure situation in that market?
Response: 20%+ Appreciation annually from 2003-2006 - What economy can sustain 20% + appreciation?) Add to this the availability of stated income loans - Interest only loans - 90%+ investor loans - sub 6% interest rates and you have all the ingredients for the "perfect Real Estate Tsunami.
Q. How can consumers (buyers) take advantage of it?
Response: As many savvy Billionaires have stated publicly "Buy when everyone else is selling - and sell when everyone else is buying. Today's Prices have bottomed out in many areas and are in many places severely under replacement costs. Buying now while rates are White Hot and home prices are Sub Value is where tomorrow's profits are incubating.
Q. How can existing homeowners sell homes there?
Response: Easy - Price below competing Bank Owned Property - Stage home for maximum acceptance and offer incentives paying closing costs if needed. The fact that the home you are living in has depreciated is not a reason to stay out of the market. The market does not discriminate - If you have to give your house away to allow you to take advantage of another sellers similar dilemma then it is all relative. The important part is making sure the property you are buying is more valuable (faster appreciating) than the one you are selling -
Q. What will it take to pull out of the current doldrums?
Response: More Incentives from public or private sector ....or unemployment figures below 8% The entire housing crisis could have been derailed by the Gov't stepping in way early in 2003 and tightening the loan requirements. Once they missed that opportunity the next FIX should have been instead of bailing out the Banks & the Insurance industry and appropriating a near trillion dollar stimulus package, they could have created a public mortgage option offering 3% fixed rate interest for 10 years and requiring loan applicants to actually qualify for their loans. This would have stopped the run away home value deflation and provided a softer landing.
Q. I apologize for the short notice, but please send comments of any length to me by mid-day Tues., Dec. 29th. Unfortunately, this is a quick-turnaround story.
Response: No problem Steve - As a Buyer's Agent I am used to short notice-) Thanks for asking - always happy to provide counsel
*Questions in Questionnaire were to me from Steve Mclindend below. Responses were posted after each question
Thanks and Happy Holidays,
Steve
Steve McLinden
Bankrate.com
(817) 483-8510
Dallas area CST)
Warm regards,
Dale Alverson
e-Pro Certified
Certified Buyer Broker (CBB) - (Only One in Idaho)
Certified Relocation Professional (CRP) (one of 4 in Idaho)
Accredited Buyer Representative (ABR) (#70 of 54,000 USA) 35+ years - Representing Clients - not Sales - 43 Degrees North Real Estate
www.teamboise.com
dale@teamboise.com
Direct Cell 208-863-3093
Toll Free 800-359-0855
Fax 208-338-1010
Boise Idaho
Well it has happened hasn't it. - If you are a first time home buyer you have missed the bottom. I have tried to explain in several blogs and emails about taking advantage of the market conditions while the market was cold and the interest rate was hot. Now with a 1/2% interest rate hike last week to 5.5% we can fully appreciate the previous 4.8% financing....and we won't even talk about the rarefied air of the 3.875% financing that was available on select properties.
So now you want to know will the rate come back down. The answer is maybe - but probably not. No one knows the answer,( just as no one could predict when the rate would go up). What I can tell you is we have definitely reached bottom in the under $200k price range. In the last 90 days home prices have stabilized in the sub $200k range and the ratio of sales price to asking price has increased from 95% to around 98%-99%. The 1st time buyer Tax Rebate program has been effective in getting the lower price range moving.
With the Government increasing the Bond prices to attract investors the mortgage market is not looking as competitive and obviously investors are only loyal to the return on their investment.
The cost of complacency is more poignant when you consider the cost of mortgages relative to purchase power. Lets say you were looking at buying a $200k home with FHA 3.5% minimum down which would give you $193k loan @ 5% for a $1036. monthly payment. Now lets say while you re waiting for interest rate or home price to drop the rate goes up to 5.5%. Now your $193k loan payment goes up to $1095 per month. This .5% change in interest rate = $11,000 in purchase power! In other words you could have bought a $211,000 home with 3.5% FHA down for a $203,615 Loan amount at 5% interest for a $1093. payment!
You may say well I'm not a 1st time buyer so I am not affected as much. OK let's look at your situation. Let's say you have a $210,000 home and you have held off lowering the price $10k because you want every dollar you can get (don't we all!) Now lets say your move up home is going to be $300k and your going to put 20% down for a $240k loan. At 5% interest rate your monthly would be $1288. Now lets say you hold off for 90 more days trying to extract that infamous $10k on your existing house and in the meantime interest rates go up to 5.75% - Your monthly payment goes up to $1400. - If you would have lowered your sales price to $200k and taken the 5% money you would be $54 a month ahead even after borrowing $10K more because you took 10k less for your house!
Here is the bottom line: The cost between what you are trying to achieve today and what you will be able to achieve tomorrow will never be less than it is right now today. The longer you wait the greater the distance is going to be between what you can buy with your money today and what you can buy later. We all know that these low rates will not sustain We know that recovery will take place and with the new administration quadrupling the national debt we can be assured that we are going to have inflation. New construction is at a 2 decade low in cost of building. Building lots have been slashed in half to sub 2002 levels or lower. The cost to develop a lot tomorrow will exceed the cost of a building lot today if the bare ground was free! Builder, developers and banks are willing to sell at bottom prices to either promote growth or clear inventory.
Do what you have to do to take advantage of these conditions today! You are no longer in a gaining position by waiting. If you need to sell 1st, drop the price and make it move and take the hit. If you don't have to sell then seriously start your purchasing process now. You are going backwards while you wait.
Every 1/2% jump in interest rate on a $200k loan costs $11,289. in loss of purchase power. Are you stepping over a dollar to pick up a dime?
Let those that have ears hear - I am here waiting for your call - Let's move while we can - you have the advantage - Use it or Lose it!
Dale Alverson
e-Pro Certified
Certified Buyer Broker (CBB) - (Only One in Idaho)
Certified Relocation Professional (CRP) (one of 4 in Idaho)
Accredited Buyer Representative (ABR) (#70 of 54,000 USA)
35+ years - Representing Clients - not Sales -
43 Degrees North Real Estate www.43re.com <http://www.43re.com/>
www.teamboise.com <http://www.teamboise.com/>
dale@teamboise.com
Direct Cell 208-863-3093
Toll Free 800-359-0855
Fax 208-338-1010
Free Money - Is there really such a thing? Well the answer is YES! - if you are a 1st time home owner or have not owned in 3 years.
I hear you - your thinking well it's not free if you have to do something to get it right? Technically your right of course but let's look at this in real life terms.
OK...so you do have to have a FICO score above 640 ...and you do have to be able to afford the monthly payments ...and of course not everyone can, however for those that can, a separate program sponsored by Idaho Housing allows you to borrow $7,000. of your next year $8,000 1st Time Buyer Tax Refund and use the funds for down payment and closing costs today!
Now let's look at an example: Lets say you qualify and you are find a nice home for $150,000. FHA lets you have a loan for 96.5% of the sales price so you will need 3.5% down payment or $5,250 Down and closing costs of about $2,500. Under normal conditions, this would require you to have about $7,750 cash at closing. With the $7,000 loan against your $8,000 Tax credit you are about $750 short of enough to close....but wait these are not normal times are they?
If we get the seller to pay your closing costs of $2,500. (not unusual in this market) you will only have to come to closing with the $5,250 leaving you about $2,600 left after you receive your Tax Refund in 2010 and pay off your Down payment loan.
Bottom Line:You get the house for no money out of pocket and collect $2,600 for passing GO...and have ownership of a home that now allows you to claim a further Tax Deduction for interest paid on your home purchase for the next 30 years.
So tell me is there such a thing as FREEMONEY or not?
Now lets talk about Really Free Money!
If you are a Veteran you can get 100% financing - again have the seller pay your closing costs and get $8000 Tax refund in 2010. - Free probably doesn't get any more Free than this!
**This amazing program currently ends in December of this year.....so now you know ...help me get the word out to your friends - family - acquaintances - anyone you might know that can take advantage of this program. You will help them - you will help the economy - If you have been looking for a way to do your part to move America forward, this is as good a chance as were going to get!
God Bless ,and Thank you in advance for your help - We all appreciate your efforts!
Dale Alverson
Certified Buyer's Agent
43 Degrees North Real Estate
Your personal Real Estate Advocate for life
Direct Cell 208-863-3093
One word - NOW!
- last Friday, Jack Koskinen, interim chief executive of Freddie Mac, said that home loan rates are near the bottom and that any further decreases will be small-
We all want the last drop - the lowest price - the best time - but few will take advantage of that precise moment - because they won't realize it has happened until it is gone-
So the signal has been sent to not expect that long awaited 4.0% everyone seems to be looking for.
Just as there is no such thing as a bad profit - there is no such thing as a bad 4% Mortgage Rate. These are the lowest Rates in 3 decades .
Prices are at bottom in lower price ranges and the ability to negotiate in higher price ranges is astronomical.
If you want a barometer to determine when to invest in the Real Estate Market - Use this one: When ever properties get low enough that you can put 20% or less down and the PITI will break even with current rent prices.
Rent prices have remained stable in the last 2 decades through upswing and downswing with less than 10% deflection. Compared to the Stock Market and other investment options Real Estate is still and will always remain your best option!
Dale Alverson CBB,CRP ABR,e-PRO
43 Degrees North Real Estate
35 years Representing Clients - not sales!
800-359-0855 dale@teamboise.com
Santa Coming in Spring?..... Well it sure looks that way - Yesterdays unprecedented close to the Bond Market signals an unheard of break through to a very tough layer of resistance closing 138 basis points higher.
Yesterday's result of the Federal reserve's commitment of $1.25 Trillion Dollars to buying long term treasury Bonds and buying back mortgage backed securities is a direct move to lower Mortgage Rates, as well as other consumer debt rates. This unprecedented very aggressive move, is the direct result of a major effort by the Fed to bring us out of this recession.
We don't know as of yet how low this will cause rates to go, however as of today, we are well into the 4% range, and I have confirmed a rumor that there is a local bank that will give a 3.85% 30 year fixed rate loan on bank owned property with 10% down! or 4.87% ZERO Down and NO PMI! (call me for a list of qualifying properties)
I have been saying since the start of this Real Estate bubble burst, that the answer to the problem was not Govt. bail outs to Wall Street. The answer to the whole debacle is much simpler than anyone suspects. The market would correct almost instantly if the Govt. will put the money back into the Home lending market by providing 3% 30 year fixed financing to every qualified buyer. Maybe they will finally get it right!
Windows of Opportunity Pass!
Caution*** People miss opportunities like the ones being presented today because they wait until the media tells them that if they don't hurry they will miss the opportunity. The problem is that by the time the media reports it - most of the benefit has passed.
This Window of Opportunity is already under pressure even as it has been created. Because spending this kind of money by the Fed - requires the Fed to print money, it also induces and greatly risks inflation. Yesterday there were early indicators that this is exactly what was happening. The cost of the Euro was 2 cents higher than on Wednesday when the Fed announcement came out. (a significant leap by normal standards)
Bottom Line: If you are waiting for a signal from on high to make a move in the Real Estate Market, DON"T WAIT ANY LONGER - It is TIME! This Fed incentive to the Housing Market will be effective at getting people out and the market will definitely heat up - and as you should know - the more people looking and buying - the less discount you are going to receive. Increased sales = increased inflation = less purchase power. What ARE you waiting for - Pick up the phone - Get to the Market Place - Santa has delivered -
Dale Alverson 43 Degrees North RE
35 years representing Clients! - Not Sales-
Direct Cell 208-863-3093
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