Real Estate Outlook: Will 2012 See Improvement?

We’ve seen the effects of tight mortgage conditions over the last year. Existing and new homes sales have struggled and we are now left with sizable pent-up demand. Will this trend continue into 2012?

For starters, consumer prices fell in October, meaning low wage workers and others struggling to make ends meet will find more affordability. Additionally, according to experts, this decline gives the Federal Reserve more wiggle room when it comes to policy making should the economy worsen.

Why the decline, which was not wholly expected? The recent developments in the European debt crisis have had their affects on American markets.

Yet, affordabilty is the name of the game for 2012. The National Association of Realtors reports that next year will be one of the best years on record for housing affordability.

"Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year," said Lawrence Yun. "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more home buyers to take advantage of current opportunities."

NAR President Phipps says that "mortgage availability remains a real concern since the private market has yet to return. While the housing market is still in recovery, we firmly believe that lower loan limits will only further restrict liquidity in mortgage markets."

Home sales could start to see some improvement in the new year, though. Existing-home sales are expected to rise 4 to 5 percent.

"Once home prices turn positive on a sustained basis, consumer confidence will rise and help the broader economy to improve," Yun added. "If we could maintain sound and reasonable mortgage underwriting standards, the market would be able to avoid a future big boom and bust cycle, but mortgage standards remain overly stringent."

While mortgage rates may rise slightly, they will still be near historic lows. In fact, the Federal Reserve is committed to keeping rates low through mid-2013.

The latest reports on the remodeling market show that today’s low rates may be allowing stay put homeowners the opportunity to refinance and funnel extra funds into home improvements. According to BuildFax the remodeling market is up 34 percent over September 2010. They report the top projects are roof remodels/replacements followed by deck and bathroom remodels.

Nearly two and a half years after the recession the economy and housing market continue to struggle, but recent stats and surveys are revealing that a change could be on the horizon for 2012. For now, affordability and interest rates are making for tempting deals for today’s buyers.


Written by Carla Hill
November 21, 2011

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Family Mortgages Help Buyers Pursue The American Dream

The real estate market took a beating and many people suffered severely but many buyers today still want to have the American Dream and own their own home.

The problem is mortgages are hard to get and people are underemployed, but there is a solution that's making housing a family affair.

USA Today reported that family mortgages are growing in popularity. The chief executive, Timothy Burke of National Family Mortgage, calls the family mortgage "an opportunity to create a win-win".

Burke's company sets up and services intrafamily loans. The idea is that in a time when parents of grown children are looking to earn greater interest on their investment money and simultaneously their grown children are looking to buy a house at a lower interest rate, an intrafamily loan could help both sides.

According to USA Today, more than 12 million in loans has been financed to help families through National Family Mortgage. Those intrafamily loans range from an $18,500 down payment to a refinancing for $1.17 million.

For many parents the stock market is a big risk. So the opportunity to invest in their child's mortgage is a creative solution for both parent and child. In some cases, loans are so difficult to get that even if buyers have 20% down, they can still be rejected. Additionally, some buyers are losing out to cash buyers.

The intrafamily loans are giving some buyers a competitive advantage by allowing them to make an all-cash offer, especially on homes like foreclosures where the market is competitive.

According to the National Association of Realtors (NAR), last year, 9% of first-time homebuyers who made a down payment had received a loan from either a friend or relative. Also in 2010, nearly 30%, of those surveyed for NAR's annual Profile of Home Buyers and Sellers, reported that they received a gift from a friend or relative.

If you're planning to use the intrafamily mortgage, be sure to meet with experts to help guide you through the process. As more parents help their grown kids get into housing, the American dream stays alive for them. NAR found, in the same study, that without the help, buying a home would be very difficult–nearly 36% of first-time homebuyers needed help with a downpayment.

Fueling the interest of parents' involvement in an intrafamily loan are a few powerful factors including: the desire to help family members, the incentive to receive a higher interest return, the increasingly affordable homes, and the concern for their children's economic future.

The intrafamily mortgage may be the next best solution to what has not usually been seen in America but is certainly more popular in other cultures, multi-generational housing. However, if families can't combine and live together the intrafamily loan still offers the grown child and the parents an opportunity to help each other in tough economic times.

Published by Realty Times

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Will Rates Stay Low?

While the Federal Reserve has promised to keep rates "low" until 2013, it is clear to many experts that the current historical lows we are experiencing will not last.

According to the latest projections from the National Association of Realtors® (NAR), interest rates should gradually rise out of historic lows as we move through 2012.

This isn't the most welcome news for a housing market that has continued to falter and a credit market that already has tightened lending standards

The NAR reports that current surveys reflect the tight credit conditions. They report that recent buyers are staying well within their means, with higher incomes and higher downpayments.

Richard Peach, Senior Vice President at the Federal Reserve Board of New York, who said the economy is under-performing, reports, "Nearly two-and-a-half years since the end of 'the great recession,' the economy continues to operate well below its potential. Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level."

Lawrence Yun, chief economist of the National Association of Realtors®, said home sales should be stronger. "Tight mortgage credit conditions have been holding back home buyers all year, and consumer confidence has been shaky recently," he said. "Nonetheless, there is a sizable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can't continue indefinitely. This demand could quickly stimulate the market when conditions improve."

It is this improving jobs markets that many analysts are waiting for. Yun projects the GDP will grow 1.8 percent this year and 2.2 percent in 2012. The unemployment rate should decline, albeit modestly, to around 8.7 percent by the end of 2012.

Around this same time, experts expect that "mortgage interest rates should gradually rise from recent record lows and reach 4.5 percent by the middle of 2012."

This is still an incredibly low rate and many experts feel that housing market, while still struggling, will improve throughout next year and after. In fact, the NAR expects new home sales to reach 372,000 next year. Existing home sales could fare just as well, rising 4 to 5 percent in 2012.

"Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year," Yun said. "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more home buyers to take advantage of current opportunities." The bottom line is that the housing market should improve over the next year and along with that improvement will come higher interest rates. Buyers interested in making a move should take head of today's historically low rates and high levels of affordability.

Published by Realty Times
Written by Carla Hill
November 16, 2011

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30-Year Fixed-Rate Mortgage Averages 3.99 Percent

MCLEAN, Va., -- Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average mortgage rates changing little from the previous week amid a mix of economic data reports as the 30-year fixed-rate mortgage averaged 3.99 percent, dropping below 4.00 percent for the second time this year. The 30-year fixed averaged 3.94 percent in the October 6, 2011 survey.

30-year fixed-rate mortgage (FRM) averaged 3.99 percent with an average 0.7 point for the week ending November 10, 2011, down from last week when it averaged 4.00 percent. Last year at this time, the 30-year FRM averaged 4.17 percent.

15-year FRM this week averaged 3.30 percent with an average 0.8 point, down from last week when it averaged 3.31 percent. A year ago at this time, the 15-year FRM averaged 3.57 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.98 percent this week, with an average 0.6 point, up from last week when it averaged 2.96 percent. A year ago, the 5-year ARM averaged 3.25 percent.

1-year Treasury-indexed ARM averaged 2.95 percent this week with an average 0.6 point, up from last week when it averaged 2.88 percent. At this time last year, the 1-year ARM averaged 3.26 percent.

Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Fixed mortgage rates were little changed this week amid a mix of economic data reports. The economy added 80,000 net jobs in October, below the market consensus forecast, but employment gains over the prior two months were revised up by 102,000 and the unemployment rate fell to 9.0 percent, the lowest in six months. Factory orders improved in September, yet the expansion in the service industry slowed in October."

"Soft house prices and low mortgage rates have kept home-buyer affordability historically high, according to the National Association of Realtors® (NAR). In the third quarter, 74 percent of the NAR's metropolitan areas exhibited annual house price declines, compared to 72 percent in the second quarter. In addition, 30-year fixed mortgage rates averaged 4.3 percent in the third quarter as opposed to 4.7 percent in the second. These factors helped raise September's NAR Housing Affordability Index to the third highest reading on record which dates back to 1971."

Published by Realty Times
November 11, 2011

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10 Tips For Those Who Have Decided To Buy

Wanting to buy a home and deciding to buy a home are two different things. The first is a desire or a dream. The second is commitment to achieve the goal. Do you want to buy, or have you decided to buy?

What are you planning when you think of purchasing real estate, whether it's a house, condominium, cottage, or investment property? Is this something you'd like to do, but could be dissuaded from if it seems too hard, or your life becomes busy? Or, is this a goal you take on with determination to overcome barriers and maximize strengths?

If you are ready to commit to success, you are determined to replace wanting to buy with deciding to buy. Here are 10 tips to help you on the path to real estate ownership.

1. Decide who will facilitate your buy The professional team you put together can make all the difference. You're not looking for new friends, so concentrate on credentials and experience. Salespeople are trained to be personable, so if someone is likeable that's nothing special. Their knowledge and ability to strategize on your behalf does matter. The real estate professional you select must be as convinced as you are that you can be successful and understand how to make success happen.

2. Decide when will you buy Buying a home, cottage, or investment property is not something to rush into, but taking a long time does not necessarily make your choice a better one. A recent online survey by Canada Mortgage and Housing Corporation, the national housing agency, revealed that Canadians take, on average, 11 months to plan their purchase. That means sometimes the process takes longer than a year, and sometimes things happen more quickly. To facilitate a sound buying decision, project ahead three months at a time to see what external factors in your life and career might disrupt buying momentum, or add additional advantages to the timing. Possibilities of interest rate increases and price fluctuations are difficult to pinpoint for even the most informed experts, so prepare to respond to any shifts commonly predicted for your chosen location. Keep in mind, that if your Offer to Purchase were accepted today, you would probably not move in for 30 to 90 days depending on the sellers' plans and yours. Tip: The more pressure you put on yourself to adhere to a specific move-in date, the less flexibility you'll have in purchase negotiations regarding price and terms.

3. Decide where you will buy Location is still the key factor in sustainable value and rate of appreciation over time. The best returns come from buying the best location you can afford—neighbourhood and street, or condominium complex and floor. You can renovate or rebuilt the structure or unit, but you cannot move the land or condominium complex. Location matters. Spend time discussing your choice of housing, neighbourhoods, and special features like in-law suites or separate apartments with your professional advisors before you start looking at properties.

4. Decide which you will buy It's not how many properties you view that will ensure success, but whether you see the property that best suits your needs, wants, and decision making. One strategy involves acting quickly with newly-listed properties, another stresses the hidden value in slow-to-sell real estate. You may decide to stay on alert for new listings in the best neighbourhood and on the best street you can afford. Time invested in preparation will enable you to act quickly when the ideal property hits the market. If you decide on the alternate strategy that seeks purchase-price advantages with properties that do not show well, still search out the best location you can afford. Here, you'll view tired or poorly-decorated condominium units or houses, and revisit with contractors and decorator to evaluate true potential.

5. Decide what you will buy Stay on point and avoid getting carried away. Your buyer agent will help keep you focussed, but you need to be sure you know what features you want and need, and why. Does proximity to schools or public transportation matter? What will your home-based business require? Will an income-suite enable you to buy an even better location? Is this a fixer-up property that will build your financial strength, so you can eventually buy your goal property, or are you here for the long haul? Write your must-have list down and check it when you view properties and before you make an offer.

6. Decide what value you can add Do you have skill with interior design or home renovation? Or, will you hire the expertise you need? Concentrate on improvements that increase functionality, affordability, comfort, and resale, not just changes in decor. What professional skills can you add to the search, analysis, or decision making?

7. Decide what buying will cost Set a budget for the entire project, not just the mortgage. Your real estate professional can help prepare a full financial projection of costs. For more on mortgages, see “Mortgages: 7 Things You Don't Want to Learn the Hard Way.”

8. Decide how you measure success Short of having your Offer to Purchase accepted, how will you know how well you're progressing? What ongoing evaluation criteria does your real estate professional suggest? If you don't track time and the properties you've seen, you may become overwhelmed with detail and confused by the continually changing real estate market. While you're set on your decision to buy, interest rates, the economy, and many other variables may change. Focus is the key. Organization will ensure your success.

9. Decide what's unique to your situation What considerations or challenges must you take into account that may not be true for all buyers? Do you have a property to sell before you can buy? Do you have special mobility needs, or design features like higher ceilings or a detached garage that are important to your hobbies or business? Share this information with your real estate professional at the start, so they have the full picture of your needs.

10. Decide: What's the point of buying? This decision must come first and stay first as you go. There are many great reasons for buying real estate, but what are yours? Not reasons you've been told to buy or think you should, but why you know you're prepared to invest time and effort on the quest. When your point or purpose in buying is crystal clear, you can weigh the relative merits of the properties you view, and the many small decisions that must be made on the way to the first big step: Have you decided to make an offer?

Written By: PJ Wade
August 9, 2011

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Tips For Saving!

Saving money for a downpayment is a very worthy goal. Homeownership has been shown to be a good long-term investment that creates family and community stability.

The National Association of Realtors' 2010 Social Benefits of Homeownership and Stable Housing study found some delightful upsides of becoming a homeowner, such as it making "a significant positive impact on educational achievement," and "evidence of the positive impact of homeownership on health even after controlling for factors like income and education.'

Many families find finances to be tight. Money comes and goes. How can you budget your life so that homeownership turns from a dream into reality?

First, be realistic about your current expenses. Take a few weeks to a month to track every expenditure. If you use a debit card for every purchase, you may already be able to go into last month's records for a break-down. Divide expenses into columns: rent/mortgage, groceries, household expenses, travel, fuel, dining out, entertainment, clothing, etc.

Now, align that list with your monthly income. Are you sending out more than you're taking in? Today's economy is not a time to be cutting it close. If homeownership is truly a goal, then you should make sure that you are saving all you can.

Decide what things can be done without. Are you overspending on dining out or going to movies? Try to find alternatives that cost less or content yourself with home-cooked goodness and Netflix! A typical night out can cost anywhere from $50 to $100. If you save that money each week it adds up to $2,600 to $5,200 a year!

The same goes for cable or satellite TV. Many people pay tons each month for their beloved channels. At $100 a month, that adds up to $1,200 a year.

Start a savings account that is specifically for your downpayment. Put money in it at the beginning of each pay period. We tend to spend a dollar here or a dollar there when we have it accessible in our daily accounts. Be tough on yourself and transfer the funds to savings as soon as you have them. Then watch them grow!

Find other ways to save on money. Some families shop sales and with coupons. It's time downgrade other parts of your life. Do you really need a luxury car and latest fashions or will a cheaper model and recycled fashions be sufficient?

Many companies offer family plans, such as gyms and cell phone providers. Credit card companies may be willing to negotiate a lower rate on your balances. Be willing to talk to companies to see what deals they offer!

The act of savings can be hard in our society. Everything we "want" is right at our fingertips, either down the block or on the Internet. The key to reaching your goal is to keep your focus. It will be worth it!

Written By: Carla Hill
October 5, 2011

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Tying the Knot? Good Way Couples Can Save for a Down Payment on a Home

Saving money for a down payment on a home has always been a challenge and a lesson in financial discipline but today it’s, perhaps, more difficult than ever.

That’s partly because the down payment is more substantial than in the past few years when zero down could get you into your dream home.

The Washington Post recently reported on a unique, sign-of-the-times approach to saving for a down payment.

These days engaged couples are scrapping the traditional wedding list and opting for a non-traditional wedding registry that creates an opportunity for wedding guests to help collect cash for a down payment.

The National Association of Realtors reported for 2010 that 27 percent of first-time homebuyers used gift money from relatives and friends to make their down payment. Nearly 60 percent of homebuyers were married couples.

Deposit a Gift, a New York City company, has set up about 6,500 gift registries with 30 percent of them, split evenly, for down-payment funds and home-improvement funds, since it launched in 2009.

It seems no more “white elephant” gifts; people are asking for and getting what they really need–cash for their home.

The down-payment gift registry helps take the awkwardness out of guests simply giving money. Today, couples are uploading photos on blog sites and showing their dream home much like the old days when couples would ask for dinner china or fine stemware.

The down-payment fund touches many people in a very personal way. Some people have already lost their home to foreclosure; still others know the enormous struggle to make ends meet. Getting some financial help to purchase a home is largely a universal need.

A quick search on the Internet can put you in touch with a number of wedding gift registries. You should research them carefully. Many include other helpful options such as connecting you with a directory or wedding vendors and even a rebate for using their select vendors.

Once the money starts rolling in, however, you have to understand how you can use it. The rules for using gift money depend on the type of loan you are getting. So be sure to ask a qualified expert for assistance.

Generally, a down payment will require that at least 5 percent of the money comes from your own savings, not gift money from the registry. There might be some exceptions, so check with the mortgage company.

Some mortgage companies, like SunTrust Mortgage, even have a bridal registry that works just like a down payment registry. In 1996, the Federal Housing Administration encouraged lenders to establish bridal registry accounts to accept money for savings toward a down payment from the couple’s relatives and friends. However, this never really caught on with lenders.

SunTrust Mortgage offers other programs for first-time buyers to help them save for a down payment. The Home Purchase Registry Account allows contributions from relatives and friends who do not have a financial interest in the transaction. Various other rules apply; be sure to go over the details with your agent and lender.

Written by Phoebe Chongchua
October 28, 2011

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Five Great Things about Homeownership

If you've been on the fence about homeownership, now is the time to take a leap! Don't let the negative press deter you from one of life's greatest joys.

Take a look at five short and sweet reasons that homeownership is great!

1. Equity. When you pay rent, you never see that money again. It is lining the landlord's pocket. Yes, buying a home may come with some hefty initial costs (downpayment, closing costs, inspections), but you will make that money back over time in equity built in the home. Historically, homes appreciate by about 4 to 6 percent a year. Some areas are still experiencing normal appreciation rates. For the areas that have seen harder times since the recession, experts feel that the housing market will recover. Homeownership is about building long-term wealth. A home bought for $10,000 in 1960 is most likely worth 10 times that in today's market.

2. Relationships: Renters tend to see their neighbors come and go quickly. Some people sign year leases while others are in the community for much shorter terms. Apartment complexes also tend to have less common shared space for people to meet, greet, and socialize. Homeowners, however, have yards, walking trails, or community pools and clubhouses where they can get to know each other. Neighbors stay put much longer (at least three to five years if they hope to recoup their closing costs). This means more time to develop relationships. Research has shown that people with healthy relationships have more happiness and less stress.

3. Predictability: Well, as long as you have a fixed-rate term on your mortgage it's predictable. Most people buying homes today know that a fixed-rate is the way to go. This means your payment amount is fixed for the life of the term. If your mortgage payment is $500 today, then it will still be $500 a month in 10 years. This allows for people to budget and make solid financial plans. The sub-prime crisis meant many homeowners with adjustable rate mortgages saw their monthly payments rise and then rise some more. Homeownership, though, generally comes with a predictable table of expenditures. Even the big purchases are predictable. You know most roofs last just 15 years (or so). You know that each year you'll need to pay for the gutters to be cleaned, and so on.

4. Ownership: Okay, this is a given. Homeownership means you "own" your home. That comes with some incredible perks, though! You can renovate, update, paint, and decorate to your heart's desire. You can plant trees, install a pool, expand the patio, or do holiday decorating that would rival the Kranks (if the HOA allows!). The bottom line is this is your home and you can personalize it to your taste. Most renters are stuck with the same beige walls and beige carpet that has been standard apartment decor for 20 years. Now is your chance to let your home speak!

5. Great Deals: It's a great time to buy. Interest rates are at historic lows. We're talking 4.0 percent instead of 6.0 or higher. This means big savings for today's buyers. Home prices have also taken a dip since the recession, which means homes are more affordable than ever. If you have steady income and cash for a downpayment, then be sure to talk to your local real estate agent about what homes in your area could be a fit for you.

Homeownership can be a real joy. It's time to get off the fence and into a home that is right for you!

Written by Carla Hill
November 2, 2011

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