do I buy or sell first ?

February 18th, 2015

that is the century old question. Like many things in life, you need to do your homework, be prepared and fully understand your options. What are the current market conditions? Is it a hot buyers market or a soft sellers market? What can you expect to net out of your current home and is it ready to be put on the market? If your current house sells fast, but you have not closed on the new one, where do you live? Can you afford two house payments? Here are some thoughts and suggestions:

- get several opinions of the value of your current home via appraisers, agents, Internet and your own search

- meet with your mortgage broker (more then one is a good idea). Find out your options regarding mortgage approvals for two properties, temporary (home equity, bridge) loans, locking in interest rates, and get any suggestions from your mortgage person regarding current market conditions

- go inside and take a look at as many properties as possible. This will give you a good idea of the new home you will be buying. Plus it gives you a good idea of how your current property needs to look to sell fast

- consider all options. If you sell first, do I have a temporary place to live. If I buy first, can I afford two mortgage payments.

It is very rare to buy the new home at a low price, then sell your current one at a high price. I usually prefer to buy first. This way you get the house you want and at the best price. Put in as many offers as it takes to get the best price. Once you get a good deal, now you can price your home just below the competition and it should sell fast.  If you sell first, then you are under a lot of pressure to pay top dollar and it may not be the perfect property you were looking for. Remember, the three most pressured moments of your life will be dealing with    1. a family death 2. a divorce 3. buying a new home

Know your competition

February 9th, 2015

You only need one buyer, but you have multiple competitors. You need to know them so you can convince the buyer yours is the best one for them. First, there is the Investor resale property. The investors with deep pockets either flip or wait for their tenant to move out. Then put their property on the market with newly finished hardwood floors, new interior and exterior paint, new carpet, upgraded fixtures and more. Their property is vacant and in move in condition. Plus they will pay the buyers closing cost. Second, is the builder of new homes. Their properties are brand new, with new roof, appliances, move in condition and never lived in. They offer  Home Warranty’s between 1 - 10 years. They also will pay the buyers closing costs. Third, is the owner occupied resale property down the street from yours. They know your property is for sale and they watch your asking price very closely.

We strongly suggest you view the inside of each of the competitors property. As stated in the Godfather movie: ‘keep your friends close and your enemies closer’. The buyer for your property will do their research online, then quickly try to view all properties in their price range and location desired. Be ready to answer all questions and give out extra information based on anticipated questions that may come up.

another Window has opened

January 14th, 2015

2015 is the year to take ‘charge’. 5% is the magic number. For the past five years interest rates have been at historic lows (the first Window opened). During that time you should have either refinanced or bought a new home with a mortgage rate below 5%. If not, this is the year to ‘take charge’ and do it. Auto loan rates, whether new or used, are below 5%. If you are paying more, this is the time to refinance or trade in. Gas prices are down dramatically (the second Window opened). What are you going to do with the savings? I learned an interesting fact over 30 years ago. Approximately 50% of all credit cards have a balance and only the minimum is paid each month. That means you are paying 18% or higher interest rate each month. Today, the number is still approximately 50% of all credit card holders. That’s terrible. I strongly suggest to those with a balance, use the gasoline savings to pay down your balance. This is a huge step towards improving your credit score and setting yourself up to buy a home. If you have any loans that you are paying over 5% interest rate, now is the time to make a change. Another 5% suggestion. Right now job openings are at a 14 year high, 5 million unfilled positions. It’s time for a 5% raise at your current job or a new job that pays 5% more.

Remember, the more you make and the better your credit will equal a better home for your family.

Gas Prices predicts a big 2015

December 24th, 2014

New buyers: with 5.2 million foreclosed homes in 2007 & 2008, these owners will be passing the seven year mark in which their foreclosure drops off their credit report. Starting now, they will be able to qualify for a non-FHA mortgage. Plus with their credit improved and tired of renting, we look for these buyers to be back in the market.

New sellers: current average time staying in a home is over 13 years (longest ever). Sellers that have been waiting for prices to rebound will be putting their homes up for sale. Those baby boomers and empty nesters that are anxious to downside. Plus the first time home buyers from a few years ago that need a larger home will be selling to move up.

Interest rates: we are always talking about how low they are. This year will be the bottom and you better hurry to lock in. Federal Reserve policy of lower rates were based on employment, inflation and GDP. Historically, the Fed has been slow to react and it looks like they are doing it again.

Renters: 35% of households rent. This has slowly increased each year since 2005, with a low of 30%. Today, with millions of properties owned by investors for rental purposes, the renter with large families are opting to rent 3 or 4 bedroom homes versus renting the two bedroom apartment. Get ready in 3-4 years when the investors decide to sell/cash in and these renters turn into buyers.

New developments for 2015: Look for mortgage qualifying to get easier. Look for builders to keep increasing the home price. Look for developers to over build new apartment buildings. Look for investors to start selling.

Don’t be fooled by adjustable rate mortgages!

December 16th, 2014

3/1, 5/1, 7/1 adjustable rate mortgages offer a lower interest rate the first year, thus a lower monthly payment. But, don’t be fooled. Each year the interest rate changes and at the end of the term, either 3, 5 or 7 years there is a balloon payment. Balloon payment means you owe the entire balance right now. If you are confident rates won’t move much or that you can quickly sell the property, here are some historical facts:

Interest rate moves- Federal Reserve raised short term interest rates from 8.85% in August 1980 to 20% in January 1981 (less then six months). Other countries move their short term rates even quicker, for example; this week Russia raised their short term rates from 10% to 17%. Our country has not seen this is a long time, but it could happen.

Home values- Baby boomers had gone the last 40 years confident that their real estate holdings are guaranteed to always go up. Well, they did until 2009. That myth was proven wrong.

To avoid future problems and pressures, lock in today’s low interest rates with a 15 or 30 year fixed mortgage. Avoid buying a property that is over the appraised price or the real estate agent added their commission to the price, which means you are paying more.

3% down ‘Full Doc’ loans are back

December 9th, 2014

FNMA announced they are now backing 3% down payment, full documentation loans, to first time home buyers. FNMA said: “Our goal is to help additional qualified borrowers gain access to mortgages”. Freddie Mac also announced a similar 3% down payment program called “Home Possible Advantage”. Both companies have been major players in the mortgage business for many years, but both were hurt with the sub-prime mortgage melt down. In the past five years, FHA has backed 80% of all new mortgages. With this added liquidity, buyers will have more options to buy their new home. This is good news for people that want to buy or sell a house. This will end up being bad news for those investors that have purchased properties to rent out. You will start to see less renters next year as the renters turn into buyers.

Fannie Mae

Year end quick facts

December 2nd, 2014

Existing home sales: after four years in a row with under 5 million homes sold, 2014 will be the 2nd year in a row of over 5 million homes sold.

Inventory of homes on the market: after four years in a row of over 2 million homes on the Market for sale, 2014 will be the 2nd year in a row of under 2 million homes for sale.

Mortgage down payment: 3.5% down payment needed for a FHA mortgage. Over 75% of new loans this year used the FHA program. New programs coming by the year end through FNMA and Freddie Mac will require only a 3% down payment.

Mortgage interest rates: 4.1% 30 year and 3.2% 15 year. These are the best rates if your credit score is 740 or higher. New FHA standards require minimum of 580 credit score. The mortgage rate depends on your credit score.

Home Equity Lines of Credit (HELOCs): with home values up, over $67 billion in HELOCs in 2014. The most since 2009.

These facts all point to a positive real estate market in 2015.

This theme will be the biggest debate in 2015

November 3rd, 2014

Rent or Buy

Rent versus Buy a home. The foreclosure and bank owned properties are now behind us. Low interest rates have been low for so long now that everyone has gotten used to them at these levels, so I guess that must be the new normal. Home values have come back and builders are building. So what now?  How about the new trend? More renters then buyers. This is music to the ears of all the investors that have bought millions of residential homes over the past few years. After all, renting them out was the main purpose for buying in the first place. Now, the investors dreams have come true. With more renters then buyers, what do you think is going to happen? That’s right, rents are increasing. This will continue until the renters decide they are being taken advantage of. At that point they will start a new trend: ‘First-time buyers are back in the market’. Today’s report that first-time buyer this year represents the lowest level in nearly three decades-just 33 percent of all homes sold. The experts are starting to debate the reasons why and this discussion will be a major topic next year. I remember the first book I read after graduation, ‘The 25 wealthiest people in American History’. I discovered that they either made their money from real estate or once they accumulated wealth from banking, shipping, railroad, etc., they invested their money into real estate. Eventually the renters will figure that out. More updates to follow.

How much do you spend on a house payment?

October 10th, 2014

What percent of your income goes to pay rent? Is it 10% or 20% or 30% or more? How does that compare to a house payment? Your house payment depends on the price of your house and mortgage amount. There is a wide range of prices for the same size house depending on where you live. Coastal areas and the Northeast are much higher then the Midwest and South. Affordable housing and a good job market tends to attract younger workers. Demographic researchers describe those born between 1977 and 1992 as ‘Millennials’.  The ‘millenials’ population in certain markets keep increasing. Jobs and affordable housing are key reasons. Here are a few of the affordable places to live:

Metro area Payment/Income Home price Income
Augusta,GA 10.52% $64,100 $37,561
Fayetteville, NC 13.14% $97,500 $45,742
Atlanta, GA 13.98% $111,600 $49,200
Jacksonville, FL 13.99% $99,000 $43,621
Philadelphia, PA 14.06% $81,675 $35,801
Baltimore, MD 14.35% $90,000 $38,655
Little Rock, AR 14.81% $122,000 $50,768
Columbus, OH 15.26% $125,000 $50,502
Omaha, NE 15.35% $128,000 $51,392
Milwaukee, WI 15.62% $108,000 $42,611

Your buyer needs a job

October 7th, 2014

well, there is good news on this front. 4.84 million job openings are available right now. That is the highest number since January, 2001, according to the U.S. Department of Labor. Workers moving to your area to get a new job means motivated buyers. Workers getting new jobs for higher pay means they can afford to buy a larger home. For those buyers getting new jobs, they better hurry to lock in the low mortgage interest rates. The Federal Reserve has kept rates very low for a very long time for only one reason. They want unemployed workers to get jobs. Lowering the unemployment rate has been their main reason for keeping rates low. Improvement over the past six months now has the national unemployment rate at 5.9% (lowest since July, 2008). This has opened the window for mortgage rates to rise. We have said many times, once rates start to rise, they will rise very quickly.