Archive for December, 2014 predicts a big 2015

Wednesday, 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!

Tuesday, 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

Tuesday, 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

Tuesday, 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.