The signs have been there: record-low interest rates and reasonably priced homes.
This week, the Wall Street Journal presents two factors that make now “an excellent time to buy a house.” First, the ratio of home prices to yearly rents is close to its pre-bubble average. Second, when mortgage rates are considered, houses are the most affordable they have been in decades.
The article goes on to explain that whether or not buying is a better deal than renting depends on the relationship between prices and rents, the cost of financing and other factors. The good news is that the numbers all seem to be heading in the right direction.
According to Moody’s Analytics, the nationwide ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble. With all things being equal, a lower ratio means buying is preferable to renting. Even though the price/rent ratio is not as low as it has been, house payments are more affordable than they have been in decades because mortgage interest rates are so low.
And, despite public opinions otherwise, mortgage money is available according to information in the article attributed to Stan Humphries, chief economist at Zillow, a home and real estate consumer website.
The article closes with this advice: “When prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”
FREE Buyer Consultation - Call Clara TODAY!!! 856-264-1058
Friday, October 21, 2011
Wednesday, October 19, 2011
5 Reasons to Loosen Rules for Investors & Underwater Owners
A plan to jump-start housing
By Jack Guttentag
Inman News™
Share This Editor's note: This is the third in a three-part series.
Previous articles in this series argued that, absent a liberalization of Fannie Mae and Freddie Mac lending terms, a second round of home-price declines was very likely. Renewed price declines would have a devastating effect on homeowners and the economy, and would also increase Fannie and Freddie losses on both old and new loans.
This makes the liberalization of lending terms a requirement of responsible conservatorship.
The changes needed include a rollback of risk-based price adjustments to where they were before the financial crisis, and relaxation of misguided underwriting rules.
Previous articles focused on the need to modify rigid affordability rules, eliminate income documentation requirements for sterling borrowers, and eliminate the requirement for property appraisals on purchase transactions. This article identifies a few more.
Liberalize lending terms and remove restrictions on loans to investors
Investors buy houses to resell or to rent rather than to occupy. During the go-go years, investors bought houses to resell at a profit, and in the current depressed market they are buying houses either to sell or to rent until the market improves.
Laurie Goodman has shown how important investors are to restoring a supply-and-demand balance in the current market. The problem is that there are fewer investor loans now, when we need them, than there were before the crisis -- when we didn't need them.
The major barrier to additional home purchases by investors is the onerous rules imposed on investor loans by Fannie Mae and Freddie Mac. In September 2006, Fannie Mae charged 1.5 to 2.5 points extra if the borrower was an investor rather than an occupant, and investor loans could be up to 90 percent of property value. Today, the price increment is 1.75 to 3.75 points, and the maximum loan is 85 percent of property value.
Fannie and Freddie also limit the number of loans that any one investor can have to four, with up to 10 allowed under more restrictive lending terms. This restriction has the effect of limiting the home investor market to small players.
The higher prices, lower maximum loan-to-value ratios, and limits on the number of loans an investor can have are all counterproductive in the current environment. Investor activity would be stimulated if 90 percent loans were available at a 1 point price increment and limits on loan numbers were eliminated. When home prices start rising by more than 3 percent a year, the old rules could be reimposed.
Eliminate LTV and appraisal requirements on HARP loans
The Home Affordable Refinance Program (HARP) was designed to make refinance possible for underwater borrowers who are current on their payments and whose loans are owned by Fannie or Freddie. A major problem with the program is a maximum loan-to-value ratio (LTV) of 125 percent, which cuts out a sizable segment of the potential market for no good reason.
I can see why the agencies might have limited the program to borrowers with LTVs above 125 percent. The net loss to the agencies from refinancing is lower for high-LTV loans than for lower-LTV loans because high-LTV loans are more likely to default and lower interest rates will prevent some of these defaults.
The loss to the agencies from refinancing underwater mortgages is the interest loss on loans that would have remained in good standing had the refinance not occurred. This loss is not related to the LTV. The benefit to the agencies is the loss avoided on loans that would have defaulted but don't because of the rate reduction. This benefit is larger for higher-LTV loans, which are more likely to default.
By scrapping the LTV maximum in the HARP program, the agencies would also be eliminating the need for appraisals, which would simplify the program and expedite the implementation.
Concluding comment
There are many more changes in Fannie and Freddie rules that would help to generate increased housing demand, but my internal editor says that more examples are not needed. The overriding need is recognition by the agencies and its conservator that assets are not conserved by acting as if Fannie and Freddie are small lenders with no power to affect the market.
These entities are a major part of the market, and their assets are best conserved by policies that convert the currently anemic market into a healthy one. Once that principle is accepted, I will be happy to flesh out the list, and so will many others.
The author, Jack Jack Guttentag, is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
By Jack Guttentag
Inman News™
Share This Editor's note: This is the third in a three-part series.
Previous articles in this series argued that, absent a liberalization of Fannie Mae and Freddie Mac lending terms, a second round of home-price declines was very likely. Renewed price declines would have a devastating effect on homeowners and the economy, and would also increase Fannie and Freddie losses on both old and new loans.
This makes the liberalization of lending terms a requirement of responsible conservatorship.
The changes needed include a rollback of risk-based price adjustments to where they were before the financial crisis, and relaxation of misguided underwriting rules.
Previous articles focused on the need to modify rigid affordability rules, eliminate income documentation requirements for sterling borrowers, and eliminate the requirement for property appraisals on purchase transactions. This article identifies a few more.
Liberalize lending terms and remove restrictions on loans to investors
Investors buy houses to resell or to rent rather than to occupy. During the go-go years, investors bought houses to resell at a profit, and in the current depressed market they are buying houses either to sell or to rent until the market improves.
Laurie Goodman has shown how important investors are to restoring a supply-and-demand balance in the current market. The problem is that there are fewer investor loans now, when we need them, than there were before the crisis -- when we didn't need them.
The major barrier to additional home purchases by investors is the onerous rules imposed on investor loans by Fannie Mae and Freddie Mac. In September 2006, Fannie Mae charged 1.5 to 2.5 points extra if the borrower was an investor rather than an occupant, and investor loans could be up to 90 percent of property value. Today, the price increment is 1.75 to 3.75 points, and the maximum loan is 85 percent of property value.
Fannie and Freddie also limit the number of loans that any one investor can have to four, with up to 10 allowed under more restrictive lending terms. This restriction has the effect of limiting the home investor market to small players.
The higher prices, lower maximum loan-to-value ratios, and limits on the number of loans an investor can have are all counterproductive in the current environment. Investor activity would be stimulated if 90 percent loans were available at a 1 point price increment and limits on loan numbers were eliminated. When home prices start rising by more than 3 percent a year, the old rules could be reimposed.
Eliminate LTV and appraisal requirements on HARP loans
The Home Affordable Refinance Program (HARP) was designed to make refinance possible for underwater borrowers who are current on their payments and whose loans are owned by Fannie or Freddie. A major problem with the program is a maximum loan-to-value ratio (LTV) of 125 percent, which cuts out a sizable segment of the potential market for no good reason.
I can see why the agencies might have limited the program to borrowers with LTVs above 125 percent. The net loss to the agencies from refinancing is lower for high-LTV loans than for lower-LTV loans because high-LTV loans are more likely to default and lower interest rates will prevent some of these defaults.
The loss to the agencies from refinancing underwater mortgages is the interest loss on loans that would have remained in good standing had the refinance not occurred. This loss is not related to the LTV. The benefit to the agencies is the loss avoided on loans that would have defaulted but don't because of the rate reduction. This benefit is larger for higher-LTV loans, which are more likely to default.
By scrapping the LTV maximum in the HARP program, the agencies would also be eliminating the need for appraisals, which would simplify the program and expedite the implementation.
Concluding comment
There are many more changes in Fannie and Freddie rules that would help to generate increased housing demand, but my internal editor says that more examples are not needed. The overriding need is recognition by the agencies and its conservator that assets are not conserved by acting as if Fannie and Freddie are small lenders with no power to affect the market.
These entities are a major part of the market, and their assets are best conserved by policies that convert the currently anemic market into a healthy one. Once that principle is accepted, I will be happy to flesh out the list, and so will many others.
The author, Jack Jack Guttentag, is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
Thursday, September 1, 2011
4 Dont's When Selleing a Home
By Melissa Dittmann Tracey, REALTOR Magazine
Kelly O’Ryan, an office manager for Coldwell Banker in Lexington, Mass., recently highlighted several tips of what home owners shouldn’t do when trying to sell their home in an article at RISMedia. Here are a few don’ts that made it on their list, see if you agree!
1. Don’t slack off on home maintenance. Houses in need of TLC often attract investors or property flippers, which are known for submitting low-ball offers. To attract offers and the highest bids, sellers should attend to any upkeep and maintenance issues before putting the house for sale.
2. Make sure the home isn’t being overshadowed outside. Nothing kills curb appeal more than a home you’re selling that you can’t even see. Be sure to trim trees or bushes to ensure they aren’t blocking any windows or the exterior of the home.
3. Remove wallpaper. Wallpaper and borders can be a nuisance to remove so you might want to take these personal decor touches down before you list the home. Neutralize the homes in subtle colors that will appeal to the most buyers and allow buyers to better visualize their personal decor moving in.
4. Don’t keep an empty home empty. Buyers can struggle in picturing themselves moving in if a home is left empty. Vacant homes can feel cold and rooms can look smaller than they really are. That’s why O’Ryan reminds us why builders spend thousands of dollars staging model homes. If your listing is vacant, consider staging it to bring in furniture and accessories to help define the various rooms functions.
Thinking of Buying or Selling?
Call Clara
856-264-1058
Kelly O’Ryan, an office manager for Coldwell Banker in Lexington, Mass., recently highlighted several tips of what home owners shouldn’t do when trying to sell their home in an article at RISMedia. Here are a few don’ts that made it on their list, see if you agree!
1. Don’t slack off on home maintenance. Houses in need of TLC often attract investors or property flippers, which are known for submitting low-ball offers. To attract offers and the highest bids, sellers should attend to any upkeep and maintenance issues before putting the house for sale.
2. Make sure the home isn’t being overshadowed outside. Nothing kills curb appeal more than a home you’re selling that you can’t even see. Be sure to trim trees or bushes to ensure they aren’t blocking any windows or the exterior of the home.
3. Remove wallpaper. Wallpaper and borders can be a nuisance to remove so you might want to take these personal decor touches down before you list the home. Neutralize the homes in subtle colors that will appeal to the most buyers and allow buyers to better visualize their personal decor moving in.
4. Don’t keep an empty home empty. Buyers can struggle in picturing themselves moving in if a home is left empty. Vacant homes can feel cold and rooms can look smaller than they really are. That’s why O’Ryan reminds us why builders spend thousands of dollars staging model homes. If your listing is vacant, consider staging it to bring in furniture and accessories to help define the various rooms functions.
Thinking of Buying or Selling?
Call Clara
856-264-1058
Monday, May 9, 2011
Happy Mother's Day
My mother is living and well in sunny California! I love her dearly as she is definitely one of the true angels who dwell on this planet in human form. If she were catholic, she'd be a saint!! Everyone is always wanting to claim my mother as their own...and I understand how wonderful she is so I don't mind it too much...But I remind them, especially when I am home, that she is MY mom! LOL....
I am also fortunate enough to be surrounded by a few wonderful women who I call "MOM", one of which is my mother-in-law. My husband & I picked her up, after moving through the Susan B Orman Cure for the Cause traffic. This traffic jam had me ponder that every event is an opportunity for something wonderful. I saw parts of the city I'd never seen which were beautiful and reminded me of the rich history of the architecture of the city. One of the reasons that I got involved in real estate is that I love both structures and landscapes...Yes I'm a tree hugger. LOL.
We joined my brother in law and his wife for a wonderful Cuban "dim sum" at Cafe Libre. I thought I had won a guest judge spot on TOP CHEF. The chefs tasting menu was just that, a sample of most of the menu in small but fulfilling portions.
The appetizer course consisted of three spreads: one consisting of eggplant & spices, another a black bean hummus - yummy, and the third a seafood chopped salad to be dipped with plaintain, casaba? and yucca chips.
The next course, another trio of chicken & corn, beef & shrimp & spinach enpenadas, crab cakes, tuna ceviche, and ribs, all over unique spicy/sweet relishes. By the main course, my taste buds were peaked and my belly kinda full...but the anticipation of the entree trio had me push through.
The entree course was a trio of mahi mahi, perfectly seared, buttery delicate and sweet; a jumbo prawn on a sugar cane stick - very nice touch; and a medium, tender beef steak. All served with a side of rice and fresh sweet plaintains! I don't know where I put it, but I did not leave anything on my plate...It was scrumptilicious!
Okay one more course to go! A trio of desserts...Really...no room....creme brulee, rice/tapico? pudding and a triangular jelly filled crisp bread. Okay so now you can pull me up off the floor as I am passed out on food. So I ordered a cafe con chocolati...a cuban mocha with expresso but smooth cuban cofee....to wake me up for the drive back to my in-laws....and then back across the bridge to my bed beckoning me from home!
Given that the past few weeks in real estate have been extremely busy as the the weather gets nicer, it was nice to have a day off...only a few of my clients called...most to say Happy Mother's Day...to enjoy a true break in the day and a moment with family and friends.
As I said, I love structures and landscapes....Cafe Libre was an opportunity to be transported to another country in the middle of the afternoon. The open lower restaurant, faux windows, buildings and banana fans, the food, the service, down to the check in a cuban cigar box created a new memory to share and a perfect compliment to living in the trio of Philadelphia, New Jersey, & New York.
I am also fortunate enough to be surrounded by a few wonderful women who I call "MOM", one of which is my mother-in-law. My husband & I picked her up, after moving through the Susan B Orman Cure for the Cause traffic. This traffic jam had me ponder that every event is an opportunity for something wonderful. I saw parts of the city I'd never seen which were beautiful and reminded me of the rich history of the architecture of the city. One of the reasons that I got involved in real estate is that I love both structures and landscapes...Yes I'm a tree hugger. LOL.
We joined my brother in law and his wife for a wonderful Cuban "dim sum" at Cafe Libre. I thought I had won a guest judge spot on TOP CHEF. The chefs tasting menu was just that, a sample of most of the menu in small but fulfilling portions.
The appetizer course consisted of three spreads: one consisting of eggplant & spices, another a black bean hummus - yummy, and the third a seafood chopped salad to be dipped with plaintain, casaba? and yucca chips.
The next course, another trio of chicken & corn, beef & shrimp & spinach enpenadas, crab cakes, tuna ceviche, and ribs, all over unique spicy/sweet relishes. By the main course, my taste buds were peaked and my belly kinda full...but the anticipation of the entree trio had me push through.
The entree course was a trio of mahi mahi, perfectly seared, buttery delicate and sweet; a jumbo prawn on a sugar cane stick - very nice touch; and a medium, tender beef steak. All served with a side of rice and fresh sweet plaintains! I don't know where I put it, but I did not leave anything on my plate...It was scrumptilicious!
Okay one more course to go! A trio of desserts...Really...no room....creme brulee, rice/tapico? pudding and a triangular jelly filled crisp bread. Okay so now you can pull me up off the floor as I am passed out on food. So I ordered a cafe con chocolati...a cuban mocha with expresso but smooth cuban cofee....to wake me up for the drive back to my in-laws....and then back across the bridge to my bed beckoning me from home!
Given that the past few weeks in real estate have been extremely busy as the the weather gets nicer, it was nice to have a day off...only a few of my clients called...most to say Happy Mother's Day...to enjoy a true break in the day and a moment with family and friends.
As I said, I love structures and landscapes....Cafe Libre was an opportunity to be transported to another country in the middle of the afternoon. The open lower restaurant, faux windows, buildings and banana fans, the food, the service, down to the check in a cuban cigar box created a new memory to share and a perfect compliment to living in the trio of Philadelphia, New Jersey, & New York.
Looking to Buy or Sell?
Call Clara 856-264-1058
Saturday, February 19, 2011
The Cost of Waiting for Prices to Fall
by The KCM Crew
Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.
The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point.
PRICES
The National Association of Realtors (NAR) released their 4th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year: The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009. A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.
INTEREST RATES
The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said: “Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”
So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?
The price is the same. It just costs more. Let’s show you what the news means:
By sitting on the sidelines for the last 90 days a purchaser lost:
- $89.44 a month
- $1,073.28 a year
- $32,198.40 over the thirty year life of the mortgage
If you buy a $340,000 home, double all these numbers.
Bottom Line
Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year.
Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.
The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point.
PRICES
The National Association of Realtors (NAR) released their 4th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year: The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009. A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.
INTEREST RATES
The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said: “Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”
So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?
The price is the same. It just costs more. Let’s show you what the news means:
By sitting on the sidelines for the last 90 days a purchaser lost:
- $89.44 a month
- $1,073.28 a year
- $32,198.40 over the thirty year life of the mortgage
If you buy a $340,000 home, double all these numbers.
Bottom Line
Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year.
Thinking about purchasing?
Call CLARA today!
856-264-1058
Thursday, January 13, 2011
HUD Condo Guideline Extension Could Translate to Increased Condo Sales
Buyers interested in purchasing condominiums with an FHA loan may already know that the condo development must be on the FHA approved list. In order for the condo development to be on the list, the development must meet certain HUD guidelines.
Recently, HUD released Mortgagee Letter 2011-03, which extends the temporary guidance for condominium rules through June 30, 2011. These temporary guidance changes increase the chances for a condo development to be approved.
Mortgagee Letter 2011-03 extends and clarifies temporary guidance announced in Mortgagee Letter 2009-46 A. The temporary guidance:
Recently, HUD released Mortgagee Letter 2011-03, which extends the temporary guidance for condominium rules through June 30, 2011. These temporary guidance changes increase the chances for a condo development to be approved.
Mortgagee Letter 2011-03 extends and clarifies temporary guidance announced in Mortgagee Letter 2009-46 A. The temporary guidance:
- Increases Federal Housing Administration (FHA) concentration requirements to 50 percent,
- Requires 50 percent of units in a project to be owner-occupied but vacant and REO property are not considered in the calculation of the owner-occupancy percentage,
- Reduces the pre-sale requirement to 30 percent,
- All projects in Florida are required to be reviewed under the HUD Review and Approval Process (HRAP), and
- The Spot Loan Approval Process was eliminated on February 1, 2010, for all FHA case number assignments on or after February 1, 2010 and is not extended.
The temporary guidance is effective for all FHA case numbers assigned through June 30, 2011, excluding spot loans.
As the number of REO condo units increases, vacant and REO units may adversly affect condo developments ability to meet the owner- occupied percentage. This change alone, may keep more develpments on the list for FHA financed loans. That could translate to more homes being sold in condo developments as many Buyers utilitze FHA loans which require only 3.5% downpayment for property purchases.
Looking to Buy or Sell?
Call Clara 856-264-1058
Wednesday, September 22, 2010
Making Your Home Loan Affordable
You or someone you know may be facing challenges keeping up with your mortgage payments OR you may just want to reduce your interest rate to take advantage of the fixed lower interest rates. If you are feeling overwhelmed and wondering where to get help, now there is really help!
In February 2009, the Obama Administration introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis to get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure.
Get the information you need NOW to MAKE YOUR HOME LOAN AFFORDABLE. The Making Your Home Affordable website gives information on the five programs now available. These 3 links were taken from the site:
1. Explanation of the 5 Programs available (inlcuding program to reduce 2nd mortgage payments) - http://makinghomeaffordable.gov/eligibility.html
2. Documentation Forms needed: http://makinghomeaffordable.gov/requestmod.shtml
3. Lenders who service these programs - http://makinghomeaffordable.gov/contact_servicer.html
All these links are on the same site. www.MakingHomesAffordable.gov. They are all govenment sponsored programs that give incentives to the banks to work with homeowners to KEEP their homes. You can appy ONLINE
SHARE THIS INFORMATION WITH OTHERS!!!
Also feel free to call me if you have any questions, choose to sell your home, or want information about the short sale process.
Clara Lyons, Realtor/Realtist
NJ State President NAREB, National Assn of Real Estate Brokers (NAREB)
I turn real estate dreams into reality! - One Home At A Time!
856-264-1058
ClaraSellsHomes@gmail.com
Know anyone thinking of buying or selling? I love referrals!!
In February 2009, the Obama Administration introduced a comprehensive Financial Stability Plan to address the key problems at the heart of the current crisis to get our economy back on track. A critical piece of that effort is Making Home Affordable, a plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure.
Get the information you need NOW to MAKE YOUR HOME LOAN AFFORDABLE. The Making Your Home Affordable website gives information on the five programs now available. These 3 links were taken from the site:
1. Explanation of the 5 Programs available (inlcuding program to reduce 2nd mortgage payments) - http://makinghomeaffordable.gov/eligibility.html
2. Documentation Forms needed: http://makinghomeaffordable.gov/requestmod.shtml
3. Lenders who service these programs - http://makinghomeaffordable.gov/contact_servicer.html
All these links are on the same site. www.MakingHomesAffordable.gov. They are all govenment sponsored programs that give incentives to the banks to work with homeowners to KEEP their homes. You can appy ONLINE
SHARE THIS INFORMATION WITH OTHERS!!!
Also feel free to call me if you have any questions, choose to sell your home, or want information about the short sale process.
Clara Lyons, Realtor/Realtist
NJ State President NAREB, National Assn of Real Estate Brokers (NAREB)
I turn real estate dreams into reality! - One Home At A Time!
856-264-1058
ClaraSellsHomes@gmail.com
Know anyone thinking of buying or selling? I love referrals!!
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