Wednesday, January 28, 2009

Get Your Home Sold First!

New mortgage guidelines squeeze move-up buyersWhen a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.

In doing that, new mortgage guidlelines make it more important than ever that people sell and setttle their old home before they settle on their new one. Otherwise, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.

Its all because mortgage guidelines are dramatically tighter for people "carrying two mortgages".

Among the changes this spring's buyers face:

Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.

Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.

In other words, getting your home sold first, just like the old "pre-boom" days is still the smartest way to move forward in the current market because being a move-up buyer isn't as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.

Therefore, if you expect to be a move-up buyer in the next 12 months, consider getting your home listed first, and scheduled to settle before you close on your new home.

Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.

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Tuesday, January 27, 2009

Are We Seeing the First Signs of a Housing Recovery?

Existing Home Sales showed a dwindling supply in December 2008Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling.

Just one month after falling below the 5-million unit trend line, sales volume roared back by 300,000 homes in December, surprising housing analysts and making a case that this spring's Buying Season could be a competitive one.

Falling home prices helped fuel home sales. Nationally, the median sales price -- the point at which half of all homes sold for more and half sold for less -- was $175,400, down $32,000 from last year.

However, the most important part of December's Existing Home Sales report isn't making headlines.

At December's sales pace, it would now take 9.3 months to exhaust the existing home supply. Last month it was 11.2 months. This means that buyers are competing to purchase fewer homes which, in turn, puts upward pressure on home prices.

This is Supply and Demand at its most basic definition.

Economists have long said that the keystone of housing's recovery will be rebalancing in home supply. Coupled with the all-time low in housing starts, December's Existing Home Sales data signals future strength.

(Image courtesy: The New York Times)

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Wednesday, January 21, 2009

What do you Think of This Video?

I have never used this blog for the promotion of a specific real estate listing, and it is with some hesitation that I am posting this now.

I have never been a big fan of videos or virtual tours, but I recently tried a new marketing program called RealEstateShows which created the video above for me.

I would be interested in knowing reader response ot the program RES created for me, using the still photos from my MLS submission.

Is this something that people want to see on Blogs? Or is it to self-serving to post this here?

Please let me know - I do promise that in any case, the normal flow of thoughts and information will continue as it has before - I just wondered if people would enjoy one or two of these once in a while.

Why the Recession is the Buyer's Friend

Retail Sales fell in 2008 for the first time in 40 yearsAfter a weak holiday shopping season, annual retail sales declined in 2008.

It marks the first annual Retail Sales decline since the government started tracking the data 40 years ago.

It also gives credence to the notion that the U.S. economy is suffering through a deeper recession that previously thought. A pullback in spending -- especially during the shopping-heavy month of December -- highlights the cautious nature of today's American shoppers.

And in a strange sort of way, all of this may end up being good news for spring home buyers.

Because Retail Sales are reflective of consumer spending, a dramatic pullback helps to keep the economy in slow gear, countering the inflationary impact of government stimulus and direct intervention. Inflation, you'll remember, causes mortgage rates to rise. Its absence, therefore, helps to keep mortgage rates low.

In addition, it's earnings season on Wall Street and weak corporate guidance has spurred a 6-day decline in the Dow Jones Industrial Average. As dollars leave the stock market, investors are parking them in the safer world of bonds. This includes mortgage bonds, of course, which further pressures rates lower. And of course, lower rates make housing, at any price more affordable for any buyer.

As a result, economic weakness -- to a point -- can be the friend of a person in need of a new home loan. For active home buyers or people entering the market this spring, therefore, the timing may be just right, with affordable prices in our market combining with these lower rates to make the potential housing cost better than it will probably be in the future as the economy recovers spurring sales and reducing inventory.

(Image courtesy: The Wall Street Journal Online)

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Tuesday, January 20, 2009

The History of 1708 Welsh Road

In real estate, as in most sales oriented businesses, we're taught to set goals. I always set larger goals that were a little open to interpretation.

For example, I knew I wanted to be a real estate investor, but I didn't say I wanted to own 3 or 5 or 7 properties. All of my goals were clear and achievable, but open to a little flexibility.
One of my goals as a young man was to own an architecturally significant" piece of real estate. I wasn't sure what that meant, but I coined the phrase to indicate that I wanted to own a cool looking building that was somehow pretty neat.

A number of years ago , I co-signed for a friend, and ended up getting stuck with an old building that had been vandalized. It was an old house that had been getting old and weathered when I was a very young boy.

Trying to make lemonade out of the lemon I got stuck with, I had plans drawn up to make the property into offices, figuring that I would rent each office like an office suite. As my company grew, I got too busy to get involved in what seemed to be a huge project, until 2004 when we really needed the space for our company.

Sure enough, the job was a massive undertaking, and it seemed like there were problems at every turn, but after about 7 months, we were ready to move in to our new home.

The building, a Queen Anne Victorian with a large porch, turret, and stone finish, had turned out pretty well, and though the interior was great office space, the front of the building had been restored to something that we thought might approximate the original home.

Then my friend Eileen Wulko brought in a history book owned by her dad Joe McDermott Sr. In the book was a picture of our office taken in the very early 1900s showing the house, old phone lines, electric street lights, and an old car driving up Welsh Road to Bustleton Avenue. I was thrilled to see that the house (form the street) looked pretty much the way it had 100 years earlier,

A couple of years went by, and I got a call from a man named Barclay Thorne who said that his grandfather had built the property (and the house next door) and that he had pictures of the construction of the home.

We met and he was kind enough to allow me to scan the photos of the building of the property, pointing out the architect holding the drawings in one photo, and sharing with me stories of his family.

The video here is comprised of some of those photos, the photo found by Joe McDermott, and some photos of the renovation of the building in 2004.

Courtesy of RealEstateShows, here is a video montage of one of the oldest homes in the Bustleton section of Philadelphia. My "architecturally significant" office, and the completion of one of my goals.

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Space Saving Ironing Fix!

The Touch-Up Topper is a space-saving ironing boardIroning boards can be bulky and awkward -- especially in a cramped laundry room or a small apartment.

Instead of fumbling with a folding board for a quick press, look to the Touch-Up Topper instead.

The Touch-Up Topper is a heat-resistant, portable ironing surface that rolls or folds for storage. Using sewn-in magnets, the quilted pad fastens to the top of most washers and dryers, turning any metallic surface into an instant ironing surface.

At 32" x 18 1/2", the Touch-Up Topper has a larger ironing surface than traditional ironing boards and it costs less, too. The Touch-Up Topper costs $14.95 and is available for sale at SkyMall.

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Monday, January 19, 2009

I Can't Believe the Eagles Blew it

Since we just had such a heartbreaker yesterday when the Arizona Cardinals beat the Philadelphia Eagles , I thought I would remind everyone that we did have a winner last year win the Phillies won the World Series.
At least we can still root for a team from Pennsylvania whose home town starts with a "p" -
Go Steelers :-)

Lower Mortgage Rates Require Higher Fees

Mortgage rates are down, but closing costs are upAnother week, another headline screams how mortgage rates have fallen to an all-time low.

Freddie Mac published its weekly mortgage rate survey Thursday and found that the "average" mortgage rate is now 4.96 percent, the lowest since the survey started in 1971.

But, if we look beyond the headline, we find that there's another part of the story worth watching. Mortgage rates are falling but the number of points required to lock those rates is not.

Lenders now require an average payment of 0.7 points to get the 4.96 percent rate from the headlines. That's up from 0.6 percent last week and 0.4 percent a year ago.

A "point" is a fee equal to 1 percent of the loan size.

Therefore, to get access to a 4.96 percent interest rate on a $200,000 home loan, today's lender would require an extra $200 versus last week and $600 versus last year. Today's mortgage borrower would be subject to a $1,400 closing cost in addition to the "typical" closing costs accompanying a purchase or refinance.

This is a period of historically low rates -- there's no doubt about that. However, the cost of getting access to low rates is increasing. The press doesn't always tell that part of the story and it's one more reason to look deeper than the headlines.

(Image courtesy: The Wall Street Journal)

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Monday, January 12, 2009

2009 Housing Market Predictions? No one Knows

You can't predict the future of housing or mortgage ratesThe New Year is not yet one week old but that's not stopping market "experts" from predicting what's in store for 2009.

The calls on housing and mortgage rates run the gamut:

Put it all together and it's clear that the experts have no better idea about the future than you or I. Their guesses are educated ones, but they're guesses nonetheless.

A terrific example of how poorly experts can predict the future comes from a Wall Street Journal performance analysis of 1,700 mutual funds.

In 2008, only one earned a positive return. That one fund represents zero-point-zero-six percent of all tracked mutual funds. Surely, the fund managers of the other 99.94% didn't expect to post negative returns on the year.

So, before you use predictions about the demise (or recovery) of the broader economy to make "personal economy" decisions, consider that the oft-quoted experts have a hugely better track record in analyzing the past than the future.

All we know for sure right now is that home prices in our market have not fallen as far as the prices in other markets, and that the reduction in activity has not been mirrored by a drastic reduction in sales prices. With housing as affordable as it is now, buying a home for your family , or to establish financial security for yourself is still a good idea, if you buy with the intention of remainng in the property for more than a year or two. And with rates as low as they are now, over the long term, the 1 or 2% price fluctuations we have seen would not impct the long term benefits of home ownership.

The old saw still holds true "it is better to buy real estate and wait than it is to wait and buy real estate"

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Friday, January 9, 2009

It's Semi-Official : New Conforming Mortgage Fees Go Into Effect Monday

Fannie Mae LLPA go into effect Monday, January 12, 2009Even though its effective date is April 1, 2009, mortgage applicants should start seeing Fannie Mae's new fee structure from lenders beginning this Monday, January 12.

The reason why Fannie Mae's mandatory loan fees are hitting lender pricing so far in advance is because lenders can take up to 30 days to package and sell a loan to Fannie Mae post-closing.  In effect, this moves the April 1 start date to March 1.

Then, figuring that March 1 is roughly 45 days from now and that 45 days is a normal window on which to close on a home or on a refinance, the start date again pushes back, this time to January 15.

Given lenders' typical timeframe to close, fund, and sell a loan to Fannie Mae, in other words, it's normal that pricing reflects the fee changes two-and-a-half months in advance.  Homebuyers and would-be refinancers would do well to take notice.

If you are floating a mortgage rate today -- or shopping for one -- consider locking it in before the close of business.  Effective Monday, any number of traits in your home loan could increase your closing costs:

  • Your credit score
  • Your downpayment / equity percentage
  • Your home's property type
  • Your reason for wanting a mortgage
  • Your loan type

For a complete look at Fannie Mae's new, mandated loan fees, visit the Fannie Mae web site.  If you have trouble interpreting the worksheet, call or email me and we can talk about it together.

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Thursday, January 1, 2009

We Wish You All a Happy New Year 2009

2008 was a challenging year. Mot so much because of the economics of the year, or even the political strife created by a contentious election, but because of the loss of my best friend, my wife Sheila.

Sheila always looked for the best in people and with an open heart wished the best for them as well. In her memory, the memory of the love that she spread during her life, and the love that her family and friends felt for her, I wanted to share this lovely video.

Here is myhope that 2009 will be a better, happier year for all of us, and that we can all experience the good things that she would have wished for us, that we wish for ourselves, and that we wish for our loved ones-

Home Prices On The Rise, Says The October Home Price Index Report

Home Price Index April 2007 to October 2009

More positive signals from housing -- home values are still on the rise.

According to the Federal Housing Finance Agency, after posting its first quarterly increase since 2007 this past September, the Home Price Index rose by another 0.6 percent in October.

Prices are up in 4 of the last six months.

But before we take the stats to the proverbial bank, it's important that we recognize the Home Price Index for its shortcomings.

  1. HPI only accounts for homes with mortgages backed by Fannie Mae or Freddie Mac
  2. HPI only accounts for re-sold homes -- newly-built homes are excluded
  3. HPI aggregates national data whereas real estate markets are local phenomena

On a broad scale, the Home Price Index can be useful, but it doesn't specifically apply to Palmyra or any specific U.S. market. For that, analysts tend to turn to the Case-Shiller Index, a privately-produced report that assesses home values in 20 cities nationwide.

The good news for home sellers in South Philly is that Case-Shiller's most recent report corroborates the government's conclusion -- home values are creeping back.

Home buyers should pay attention. When public and private sector data is in accord, markets tend to go along and, looking back, housing likely bottomed in February 2009. Since then, home sales are up, home supplies are down, and values have increased in most U.S. markets. Furthermore, so long as mortgage rates remain low and government stimulus is in place, the trend should continue through at least the first quarter of 2010.

If you're on the fence about buying a home right now, or wondering about timing, consider your options vis-a-vis today's market. Into the new year, homes won't likely be as cheap to buy, nor to finance.

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