Affordability is Key

The U.S. economy has entered a recession and will contract for the next three quarters. The recovery, beginning in the second half of 2009, will be slow.

Despite these challenging economic times, existing home sales will be rising. Why? The answer, in a word: affordability.

With home prices falling in many parts of the country affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. These 93 percent of the working households respond to home buying incentives. Measures such as the recently enacted first-time homebuyer tax credit and a larger number of mortgage loans that qualify for purchase by Fannie Mae and Freddie Mac and through the FHA program will further bring homebuyers to the marketplace.

New home sales will be a different story. There is an overhang of inventory and homebuilders are being forced to cut back sharply. New housing starts have fallen by about 60 percent from their peak activity three years ago. That isn’t necessarily all bad news – since so few new homes are being built, the inventory of vacant new homes on the market has fallen. The total housing inventory – new and existing combined – still remains elevated so further reduction in building by builders will be welcomed. Because of low housing starts, new home sales will continue to be soft.

For the rest of the “indicators” we look at, yes, there will be some pain before we have gain. Look for growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in the latter part of 2009 as the housing market begins a steady improvement.

Affordability Will Continue to Improve

The best news out of our forecast is that affordability will continue to improve. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007. That is good news for potential home buyers and good news for the economy. And even though sales are expected to rise, the increase would be more certain – and more robust -- with an additional stimulus to boost home buying. Removing the repayment feature of the homebuyer tax credit and raising the loan limit higher could help achieve that. Once housing gets moving, then the economy can get moving as well.

Why Refinance?

Most people would like to get mortgage refinancing because of one or a couple of reasons. But the fact of the matter is, there could only one main reason why people would like to get mortgage refinancing. And sometimes it is not an easy decision to do. You may need a lot of research or due diligence on your part or ask family members for ideas or options if you are in some situation whereby as refinance is the focus of attention.

If you have a home and a mortgage, and you are thinking about refinancing, first you must know both what you want out of your new mortgage and what your different options are, so that you can pick the refinancing plan that best fits your needs.

But if you think about it, there are numerous reasons why you would like to opt for a mortgage refinancing. Mainly they are to reduce the home loan interest rate, home renovation, debt consolidation, educational needs and expenses, medical expenses and mounting debts and loans.

Home renovations and improvements can sometimes be the reason why you will get into doing a refinance. For instance, your need a deck at the back of your house and you do not have the cash on hand to do it, then you can use this alternative. This you can do if you have equity on the house.

Reducing the interest on your home loan is always a key in paying off your home loan. For most people, whenever they have the opportunity to get their interest rates down, they will do it in a heartbeat so they can reduce their mortgage payments.

For individuals who have accumulated debts and loans to the max, mortgage refinancing is another option of getting all your debts into single monthly payment through debt consolidation. Such situation is when you have too many different types of bills to pay; you can consolidate them into one loan and then pay one single monthly payment. This would ease your burden of managing too many different lenders and or creditors.

You may also like to do this option when you have medical expenses that are getting too much to handle for you. People can quickly get into huge indebtedness when heir medical insurance cannot cover for the most part of their hospital bills and medications. So this can be a viable option if you are this situation.

Another thing is your children who would like to go to university or college and you do not have the money on hand to finance their education. This is another reason that is commonly seen when people approach their local bank or lender for help.

With all these reasons on why people get a mortgage refinancing, you now know that you are not alone when you contemplate on getting refinance.

Remortgage or Mortgage Refinancing is very commonly done to get or facilitate the borrowing of money to ease some problems or get advantage of a situation. But you have to remember that you have to have a plan for these types of borrowing so that the money will not to waste or unplanned spending. You ought to have the main reason on why you are getting remortgaged.

Foreclosure Fix Expanded To Cover Second Liens

This week, the Obama administration announced that it will expand its $75 billion foreclosure prevention effort to cover second mortgages.

Many delinquent borrowers complained after the modification plan was announced in February that they were being left out because their home values had dropped. The administration moved to address the concerns by tweaking the original modification plan, which calls for adjusting eligible borrowers' loans so monthly payments are no more than 31% of pre-tax income.

Loan servicers recently started taking applications. Servicers covering 75% of the nation's mortgages are now participating in the program, which enables some homeowners with little or no equity to refinance. The plans are expected to help up to 9 million homeowners to avoid foreclosure, according to a senior administration official

Up to 50% of at-risk borrowers carry second liens, a popular option during the housing boom that enabled borrowers to put little or nothing down when buying a home. These loans have complicated the modification process, adding to delinquent homeowners' debt loads. Mortgage investors also have balked at reducing payments on first mortgages when the second loan was left intact.

Under the new plan, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

Investors also can receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers' debt levels.

Servicers who join the new program must modify second loans when a borrower's first mortgage is adjusted. It likely will take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.

Real Estate Outlook: Indicators of Recovery

You may not be quite ready to accept the idea that housing on a national basis has moved beyond bottoming out and is now in recovery mode.

But think about this: Even if you're bearish on the market, you've got to notice that some extraordinarily positive signs are popping up that point to recovery.

• New mortgage applications last week for home purchases and refinancings were up 77 percent from the same week in April 2008, according to the Mortgage Bankers Association. That's a statistic that's hard to ignore!
• Mortgage rates continue to average well below 5 percent -- 4.7 percent last week on average for 30-year fixed-rate loans and 4.5 percent for 15 year loans. Rates like these are a major factor pushing applications way up, no question, but sharply lower housing prices in many markets are an important part of the equation as well.
• Nearly 600,000 homebuyers have already claimed either the $7,500 tax credit from last year, or the $8,000 credit for this year, according to IRS data cited by the National Association of Home Builders.
• Many of these buyers are true first timers, but plenty of others are people who are now jumping back into real estate after not owning for a few years, drawn in by today's much more affordable prices and financing.
• The rebound underway in mortgages is even creating a mini hiring boom! The Bank of America has just announced that it will be adding 5,000 new positions around the country -- just to deal with its red hot mortgage business, which closed nearly 400,000 new loans during the first quarter. Other big lenders are hiring loan officers and processors again too.
• Hard-hit local housing markets continue to roar back with sales gains. On Florida's west coast, in the Sarasota and Bradenton areas, sales were up 28 percent in March over last year, and pending sales -- pointing to more purchases in the pipeline but not yet closed -- were up 27 percent.
• Inventories of unsold houses in the Sarasota-Bradenton area are down 31 percent, to the lowest level since December 2005, according to a report from Trendgrafix.
• Nationally, house prices have begun moving up again after many months of declines. According to the Federal Housing Finance Agency, prices rose by seven tenths of a percent on average last month - after falling by six and a half percent during the previous 12 months.

There is no other way than to read these signs for the best. The market is turning itself around, and nothing but good can come from now.

Goals of the New Mortgage Bailout Program

As we have previously discussed, President Obama has recently unveiled a new mortgage bailout program. Its goal? To help many homeowners in this mortgage turmoil that has gripped the whole country.

With the former administration, several mortgage rescue plans came out under President Bush's administration. However, the problem mortgages continued to rise. They were hoping the mortgage crisis would bottom out, but we have yet to see a bottom in the housing market. The problem with the mortgage bailout under the prior administration is that a lot of homeowners were excluded out of that plan. The plan was set to modify homes of individuals who might have been able to qualify for a refinance, but many opted for a loan modification instead. Many homeowners did not qualify.

The new plan is expected to take this mortgage rescue plan to the next level. It is believed to be the plan that will allow the market to bottom out which will stable the housing market, in turn which stabilize our economy, start creating new jobs and boost our economy. Under the new homeowner affordability and stability plan, eligible borrowers who are on time with their payments, but have been unable to refinance due to their home value eroding, may now have an opportunity to refinance into a new 15 or 30 year fixed rate mortgage loan. Fannie Mae and Freddie Mac will be allowing refinancing of loans that they hold or that are have been mortgage backed securities.

The following are goals of this new program:

• Help credit worthy borrowers who have been committed to paying their mortgages with affordable payments for the rest of their loan. Individuals with high interest, or if they had a teaser rate that will now be increasing might see a big difference in their house payment if they were to refinance. For those submitting a loan application, they will get a "Good Faith Estimate" which will include their new mortgage payment amount, the interest rate, and the total payment over the life of the loan. That homeowner can now use that "Good Faith Estimate" to compare it with what they are paying now and if it makes sense they can go with that option or stick with their original mortgage.
• Provide help with an affordable fixed rate mortgage. Every loan refinanced under the plan will have either a 15 or 30 year mortgage option with a fixed rate interest. Which ends up giving the borrower tremendous savings over the life of the loan. This plan will not reduce the total amount owed on the loan.
• Encourage borrowers to work towards maintaining ownership of the property. The plan will give incentive payments as a borrower makes there modified payments on time. This reduction will accrue on a monthly basis and will be applied directly to the mortgage.

Advantages to Pricing Your Home Correctly

A few days ago, I discussed how to properly price your home correctly. Today I want to talk about the advantages to be gained from this.

Here are some of the advantages for pricing your property correctly:

• A property usually gets the most attention just after it is placed on the market. If it is priced competitively it will most likely get the most attention.
• Real Estate sales agents are drawn to properties that are priced competitively and you will have more showings. More showings equals better opportunities to sell.
• If a property is priced competitively there is usually less negotiation on the price.
• Competitive pricing will attract more qualified buyers
• Besides correct pricing there are other things you can do to help sell your property. Creative marketing can help distinguish your property from all the other available properties, and in today's buyer's market, you want to stand out from the crowd.

Price Your Property to Sell!

If you really want to sell your property when you put it on the market there are some things you must know. For example, the most important thing is the actual current market value of the property.

Follow these instructions and you can appraise your own property and come up with a figure that's accurate within a couple of percentage points.

1. Find and call at least three local realtors and tell them you're thinking about selling your property. Ask the agents to make a comparative market study of your property. Tell them to include every sale in your market area that compares to your home or property. They'll call you back later and want to set an appointment to deliver the information and tell you about their company and ask you to list your property with them.
2. Make an appointment and let them make their presentation, then ask them to leave all the information on the property analysis and their company, so you can study it and make a decision.
3. Once you have information from all three realtors, lay it out on a table and create a work sheet. List each of the Sold properties on a separate line, with their selling price per square foot on the far right. Don't include the active listings that are up for sale, because they aren't relative to your study in determining the value of your property. Hold on to the information, active listings will be important later in determining the price you wish to ask for your property, because active listings will be the properties you are competing with. In other words, you will be competing for the buyers that are available in the current market who will be looking at other listed properties.
4. Add up the column on the right and divide the results by the number of properties on your list. Multiply this number by the number of square feet in your home, and the result should be the current value of your property, within a percent or two. The number you arrive at may be lower than you are comfortable with, and in some parts of the country it's a shocking reality.

If you are going to put your house on the market and want to sell it you must be competitive. More than ever you will have strong competition such as from properties that have been foreclosed on for default on loans and taxes. These homes are often priced below the market for quick sales. You are in competition with other property owners who are selling their properties to avoid foreclosure and these are often priced below the market. There isn't nearly as much demand as there is product. In other words, there are a lot of homes/properties for sale now, making it a "buyers market."

So there you have it: a simple approach to pricing your home correctly.

Stay tuned for my next blog where I explore the advantages of pricing your home to sell.