Low interest rates, as we all know, are making history. Last week, according to an article found on CNNMoney, “rates on both the 30-year and 15-year fixed loans fell to new records, at 3.89 percent and 3.16 percent, respectively, according to Freddie Mac.”
The question, though, is how long will prospective buyers enjoy such low rates? Even with these rates, sales are still sluggish, with the market flooded with family homes and investment properties. Doug Duncan, chief economist for Fannie Mae, suggests that “low and declining interest rates may cause homebuyers to hesitate: They may expect them to fall even further.
On the other hand, rising rates, which often accompany an improving economy, can give potential homebuyers a reason to act-before rates and prices become less affordable.” Potential buyers sitting on the fence waiting for the rates to go lower may be getting their reason to act: a recent action by Congress may be pushing those rates higher shortly.
According to CNNMoney, “to pay for the extension of payroll tax cuts, Congress mandated an increase in fees for Fannie Mae and Freddie Mac loans. That could mean an increase in upfront costs for borrowers of about half a point, starting April 1. The new fee would add $500 for every $100,000 in principal.” Instead of an additional upfront fee, “borrowers could pay the fee as a higher interest rate, [adding] an additional one-eighth of a point to their rate,” according to Keith Gumbinger of HSH Associates.
That amount might seem inconsequential, but when added to a $250,000 mortgage, the mortgagee could be paying approximately $225 more per year.
Housing inventory slid to 1.89 million homes in December - down 6 percent from the previous month and 22.3 percent from the prior year, according to Realtor.com. In the 145 markets tracked by Realtor.com, only Springfield, Ill., registered a year-over-year increase. Inventories plunged 49.7 percent in Miami, 49.1 percent in Phoenix, and 46.6 percent in Bakersfield, Calif.
Meanwhile, the national median price edged up 5 percent year-over-year. Asking prices - the amount sellers include on a Realtor.com listing - climbed 32.5 percent in Miami, 21.7 percent in Naples, 21.5 percent in Fort Myers-Cape Coral, and 19.4 percent in Punta Gorda, according to Realtor.com.
However, asking prices were down 11 percent in Detroit, 10 percent in Chicago, 7.6 percent in Las Vegas, and 7 percent in Sacramento.
Andrea Szlavik of Prudential Fox and Roach in Collegeville states that “with a market filled with desirable listings, interest rates at historic lows, and a threat of rising rates, prospective buyers would benefit from getting off the fence and jumping into the present day ‘buyers’ market.’”
Homeowners' insurance shouldn't be taken lightly. If you get too much coverage, you're throwing money away. However, with too little, you won't be able to rebuild if disaster strikes. Homeowner insurance policies can vary greatly, and if homeowners aren’t careful, they may find their claims denied when disaster strikes, according to a study to be published early next year by the University of Chicago Law Review.
Knowing what your insurance policy covers -- including fire, theft, and earthquakes -- is important. Nevertheless, knowing the things that aren't covered -- known as exclusions -- may be even more crucial. While home insurers once used standard policy forms by the Insurance Services Office, now some are coming up with their own policies and a few tweaks in the wording can mean trouble for some homeowners, according to the study. Homeowners should read the fine print and carefully review their policies to examine what’s covered and what’s not, the study notes. For example, some policies include mold and lead coverage; other policies do not.
Your homeowners' insurance policy should probably cover the following items:
<!--[if !supportLists]-->1.<!--[endif]-->The structure of your house: Don't base the cost of replacement of your home on what you paid for it, or on the value of the land. You're not replacing the ground around you, and construction costs might be much different from what you paid.
<!--[if !supportLists]-->2.<!--[endif]-->Your personal possessions:Take an inventory of your home's personal property, especially high-priced items such as jewelry, furniture, and electronic equipment. Determine how much it would cost to replace everything if you lost your goods to theft or destruction. If you think you need more than what the basic policies provide, talk to your agent.
<!--[if !supportLists]-->3.<!--[endif]-->Additional living expenses if you can't live in your home: Additional living expenses are usually part of your standard policy and total about 20% of the cost of insuring your home. Policies that provide for unlimited expenses for a short period may also be available, as are policies for special situations, such as renting out your home.
<!--[if !supportLists]-->4.<!--[endif]-->Liability for injury to others: While most policies provide a base of $100,000 in insurance to cover your liability should you be sued, consider getting more: In today's litigious society, potential damage awards could exceed those lower limits in a hurry.
<!--[if !supportLists]-->5.<!--[endif]-->Get special coverage if you need it: If you live in an area that floods frequently, you'll want to make sure your coverage won't leave you underwater in a flood. Similarly, residents in earthquake-prone areas have to weigh the added costs of earthquake insurance against the risks of being uninsured.
<!--[if !supportLists]-->6.<!--[endif]-->Consider umbrella insurance: Umbrella insurance isn't directly connected to your home. However, if other types of insurance you have don't provide enough coverage for damages, then your home could be at risk. Umbrella insurance provides additional coverage that makes sure injured parties won't threaten to collect by taking away your home.
You should consider homeowners' insurance to be an integral part of your overall financial plan. It can help minimize the disruption and economic loss you would realize should a calamity strike.
It appears there is some good news for real estate players here as we close out 2011 and approach the dawn of 2012 although it may be tenuous at best, according to a comparison of statements released by industry groups.
A study released by Deloitte Real Estate Services says the U.S. commercial real estate market “appears to be on a gradual but uneven path to recovery with increased capital availability, transactions and improved fundamentals.” However, “a potential pause in recovery momentum” exists due to the European Debt Crisis, continued high unemployment rates in the U.S. and the high rate of maturing debt levels.
The Associated General Contractors of America released a study that says private construction spending increased for the first three quarters of 2011, but investments in the public sector continue to rapidly decline.
The National Association of Realtors reports pent up demand exists “from buyers who normally would have entered the market in recent years,” and that homeowner default rates now are lower than at any time in history.
A press release issued by the American Institute of Architects says that “there has been a definitive shift away from large residential subdivisions towards smaller-scale infill development projects with a greater emphasis on affordability, access to public transportation, commercial opportunities and job centers.”
Fannie Mae's November Housing Survey, which gauge’s consumer confidence, finds that during the next year 22 percent of homeowners expect home prices to increase, 22 percent expect a decrease, and 53 percent think values will remain unchanged.
And yet another study released by credit reporting agency TransUnion finds that mortgage delinquency rates should decrease in 2012 as long as the U.S. economy continues its move into positive territory.
For now, a 30-year fixed-rate mortgage remains at less than 4 percent, but a forecast by New York based investment banking firm Keefe, Bruyette and Woods, Inc. says the rate of 10-year treasury bonds should rise in 2012 because the Federal Reserve will not purchase enough mortgage backed securities “to keep mortgage rates from rising to 4.7 percent by the fourth quarter of 2012.”
What does all of this information mean? According to BusinessWeek, “…even the worst hit markets will begin to see improvement (in) 2012.”
Homes.org recently released a list of the top 10 reasons for using a buyer's agent. The list was derived from detailed feedback provided by numerous real estate professionals across the country. After reviewing the reasons provided it became clear that the better question wasn't why should home buyers use a buyer's agent but why wouldn't they?
"HUD'S Settlement Cost Booklet, 'Shopping for Your Home Loan' advises the home buyer in Section IV on page 6: It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an "exclusive buyer's agent", who will be working for you, " points out John F. Sullivan, Vice-President & Associate Broker at Buyer's Edge Co. Inc. "If a buyer can't find an exclusive buyer's agent in their area, they should seek a single agency licensee who is an Accredited Buyer's Representative (ABR) or an ABR with a small dual agency brokerage to minimize the chance of dual agency."
Maxwell Carr Realtor® and Designated Luxury Specialist at First Team Real Estate put it this way, "imagine sitting at a poker table, and there's $200,000 in the center of the table. You're emotionally involved, nervous - get the idea? Rather than risk making a mistake, find representation. A [buyer agent] Realtor® is a professional negotiator, with a fiduciary duty to act in your best interest."
Top 10 Reasons for Using a Buyer's Agent based on feedback from real estate professionals actively working around the country, the points below are the most important and beneficial reasons for hiring a buyer's agent.
The past few weeks have showcased numerous signals that the real estate market is on the rise. Recent statistics point to an industry turn around, including a 15 percent rise in housing starts in September; a surge in builder confidence in October, an increase in mortgage applications, and a slew of regional market improvements across the country ].
According to sales numbers reported in September, August's existing home sales increased 3.5% vs. July's results to a 5.03 million home annual run rate. The weakest region was the West with a 13% year over year decline in prices and the strongest region was the South with a 0.8% decrease.
|
Current Level |
Month Over |
Year Over |
|
|
Existing Home Sales |
5.03mm |
7.7% |
18.6% |
|
Existing Home Inventory |
3.577mm |
(3.0%) |
(13.1%) |
|
Existing Home Median Price |
$168.30k |
(1.7%) |
(5.08%) |
|
New Home Sales |
295.0k |
(2.3%) |
6.1% |
|
New Home Inventory |
162k |
(1.2%) |
(21.4%) |
|
New Home Median Price |
$209.1k |
(8.7%) |
(7.7%) |
|
Case-Shiller Price Index |
$142.77k |
1.0% |
(4.1%) |
Wall Street Journal & Forbes recent articles claim that “It’s Time to Buy A Home”
In a recent article entitled” It’s Time to Buy That House”, the WSJ told their subscribers:
“It’s an excellent time to buy a house, either to live in for the long term or for investment income…Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”
MarketWatch.com (the on-line blog for WSJ) told their readers:
“Now could be the best time in history to buy a home.”
Feature on Forbes.com
In a report to their subscribers, Capital Economics reported that:
“The previous declines in house prices and the more recent drop in mortgage rates to record lows have created an unusual situation in which the median monthly mortgage payment is more or less the same as the median rental payment.”
Why is this important? Last week, Forbes explained to their readers:
“If rents simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years. The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation).”
They went on to explain the advantages of homeownership during retirement:
“Even with a dismal 1% growth rate over 30 years, a $300,000 property would appreciate well over $100,000 giving the homeowner an additional nest egg for retirement…
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