Low Mortgage Rates Recently, many sources reported that mortgage rates fell after the Federal Reserve signaled it would keep interest rates exceptionally low until at least late 2014, which is further into the future than had previously been anticipated. Renovations That Pay Off CNN Money reports the Top 5 Renovations a home owner can make to increase the value of their home. Low Mortgage Rates Mortgage rates sunk to record lows again, according to CNN Money. The average rate on the 30-year fixed mortgage fell to 3.94%, matching the all-time low hit in early October, 2011, according to Freddie Mac's weekly mortgage rate survey. Meanwhile, 15-year fixed-rate loans hit a new record low of 3.21%, surpassing the record set on October 6. Five-year adjustable rate mortgages also plumbed new depths, hitting 2.86% for the week. Low-interest mortgages will be available at least through mid-2012, according to Freddie Mac's chief economist, Frank Nothaft. Source: CNN Money Good News for Folk Frustrated with their Mortgage Company Consumers have a new resource for mortgage problems, as a result of recent legislation.  It is found online at:  http://www.consumerfinance.gov/   Consumers may also call at: (855) 411-CFPB (2372). Hopefully, homebuyers having issues obtaining a mortgage (and there are too many to enumerate) will be able to find some assistance here as well.  Listing Your Homes During the Holidays Sixty percent of real estate professionals advise their sellers to list a home during the holidays because it’s a good time to sell, according to a new survey conducted by Realtor.com. Why are the holidays such a good time to sell? Seventy-nine percent of the agents surveyed said that more serious buyers come out during the holidays, and 61 percent say less competition from other properties make it a great time to sell. Plus, 17 percent of agents say the cold weather is actually a benefit, making homes feel more cozy. But online listing photos become even more crucial during the holiday season, according to the survey. Slightly more than half of agents say that the photos are more important because sellers tend to offer less open houses around the holidays, and so the online photos help buyers decide the properties to see and which ones to possibly bypass. Source: Realtor Mag A Turnaround in Real Estate?  Fortune magazine recently touted “The Return of Real Estate.” “Finally! After years of plummeting home prices, the market is showing signs of a turnaround.” Oh, how many in the industry have waited for such a declaration! The author goes on: “Forget stocks. Don’t bet on gold… the most attractive asset class in America is housing.  It’s time to buy again.” Of course, this is just one writer and one publication. However, it is interesting to note that there are growing signs of a recovery. It’s been a long time coming. Chip Case of Case-Shiller fame is quoted as saying that the dramatic decline in new construction will be a significant factor in the housing recovery. Indeed, the Fortune piece claims low new construction figures and the steep fall in house prices nationwide and especially in “sand” markets, will lead housing back as a healthy sector. Mark Zandi of Moody’s Analytics is an optimist. He expects home prices to rise faster than inflation in the years ahead at least in those housing markets without huge inventories due to foreclosures. With rising rent levels already underway, home ownership as a strategy may regain some shine after all. There is something happening in many housing markets which has been absent for the past several years. Buyers are growing more confident that prices have bottomed out or will do so soon.  For the moment, there is a bit of good news on the short-term planning horizon Source: PAR Just Listed Change in Federal Guidelines for Mortgages For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. If the Federal government’s new guidelines are passed, the government  will no longer cover the risk of default for those loans and many lenders will refuse to make them. Here in the Philadelphia area, the limit has always been low--$417,000, so there will be limited repercussions here. Since Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, they are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.Source: NY Times  Home Buyers Go Hunting Alone After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what's known in real estate as a buyer's agent. Many experts think this is a bad move – worse, for example, than trying to sell a house without an agent. For one thing, in most cases, a buyer doesn't pay an agent; the buyer's agent splits the commission with the seller's agent, so the services are essentially free to the buyer. Also, a buyer's agent can usually access historical price data for home sales in the area, which means he can recommend a bidding strategy that targets comparable properties that sold for less, rather than the mid-range. John Vogel, adjunct professor of real estate at the Tuck School of Business at Dartmouth College, calls going through this process alone "a mistake." In many cases buyers may be at an advantage when they work with a buyer's agent – at least compared to relying on a seller's agent for advice or guidance. A seller's agent is contractually obligated to help make the sale happen in the seller's favor, often as close to the asking price as possible. Read full article. Source: Smart Money Floodplain Remapping Floodplain mappin is 85 percent complete throughout Pennsylvania, according to Dave Bollinger, mitigation outreach coordinator for the Federal Emergency Management Agency (FEMA), in Philadelphia. Floodplain maps that have been approved are available online.  Areas that are undergoing the remapping process are available on a separate website. If a homeowner’s property moves from a low-risk to a high-risk zone, they are able to purchase flood insurance at the lower rate before the new mapping takes effect. A grandfather clause allows them to keep that rate throughout the time they keep the flood insurance policy in force. In fact, Bollinger said this grandfathered rate can pass to a new property owner if the house is sold. “Many people don’t realize that the policy stays with the house, not the owner,” he said. NABEA Gives Top Concerns to Consumers Buying a Short Sale  A survey sent to members of NAEBA examined known issues that could complicate or kill a transaction and ranked those most critical for consumers to know before entering a short sale deal. Known issues that were ranked as important to know included: - Short sales can take 4 to 6 months or longer and 80% of buyer agents warn that even after the seller has accepted your offer, the lender can reject your offer in favor of a higher offer. Buyers may spend money on home inspectors and attorneys only to end up without a house. - 83% of respondents believe it is important for consumers to know home inspections conducted prior to third party approval may be a waste of money.   -The majority of exclusive buyer agents (80%) warn that sellers may agree to any offer even if there is little chance that the bank will approve it, and 68% warn that during negotiations for approval the lender and seller may come to terms on a loan modification killing your transaction. Source: NAEBA Why is now a great time to buy? Here are 10 reasons: 1. You can get a good deal. Prices are down in most areas. They're at a level that makes sense for people's income. 2. Mortgages are cheap. At 4.3 percent on average for a 30-year fixed-rate mortgage, your costs to own are down by a fifth from two years ago. 3. You can save on taxes. When you add up the deductions for mortgage interest and others, the cost of owning can drop below renting for a comparable place. 4. It'll be yours. The one benefit to owning that never changes is that you can paint your walls orange if you want (generally speaking; there might be some community restrictions). How many landlords will let you do that? 5. You can get a better home. In some markets, it's simply the case that the nicest places are for-sale homes and condos. 6. It offers some inflation protection. Historically, appreciation over time outpaces inflation. 7. It's risk capital. If the economy picks up, you stand to benefit from that, even if you're goal is just to have a nice place to live. 8. It's forced savings. A part of your payment each month goes to equity. 9. There is a lot to choose from. There are some 4 million homes available today, about a year's supply. Now's the time to find something you like and get it. 10. Sooner or later the market will clear. The U.S. is expected to grow by another 100 million people in 40 years. They have to live somewhere. Demand will eventually outpace supply. Source: Wall Street Journal, Brett Arends  Homes Getting Smaller CNNMoney.com reported that in 2009, the median new home was about 2,135 square feet, which was down from 2,300 square feet only a few years earlier. CNN quotes Steven Pace, a North Carolina developer, who observed, “Home buyers are asking for less, cutting back on options and reducing square footage.” Before the housing bubble burst, it was typical to explain expanding housing preferences as part of modern life: we really did need three- and four-car garages, 4,000 square feet of newly constructed, modern housing space with several upgrades, including a bathroom for nearly every bedroom. Yet now, upscale items such as “formal landscaping, decorative water features, tennis courts and gazebos” are out of fashion.  These days, however, it is easy to explain why median new homes are diminishing in size.  With no appreciation potential ahead for several years, housing is back to being a consumption good and it is expensive to purchase, furnish and maintain extra space. Source: Austin Jaffe, PAR Best Places to Retire A recent release from U.S. News & World Report lists the most affordable places to retire. The list, which includes Ann Arbor, Michigan and Fort Worth, Texas, was populated based on median home prices and an affordable cost of living. Source: U.S. News & World Report, REALTOR® Magazine Online, FICO Score No - No's Recently, credit reporting agencies revealed what deductions occur in FICO scores with certain actions by borrowers. Many were surprised to see how difficult it is to get a good FICO score and keep it over time. As many in the industry have noted, taking care of your credit record is quite important and as the evidence above shows, your record is sensitive to any lapses or mistakes. Consider: for Borrowers with a sub-prime 680 score and an eight-year credit history with two delinquencies · Maxing out a credit card: reduces FICO by 10-30 points · Produces a one-month delinquent payment: reduces FICO by 60-80 points · Settles a credit card balance without full payment: reduces FICO by 45-65 points · Agrees to a short sale: reduces FICO by 55-75 points · Accepts a foreclosure: reduces FICO by 85-105 points · Declares bankruptcy: reduces FICO by 130-150 points The impact of these acts on a less risky borrower, one with an excellent 780 score (or one who has not missed a payment in 15 years): · Maxing out a credit card: reduces FICO by 25-45 points · Produces a one-month delinquent payment: reduces FICO by 90-110 points · Settles a credit card balance without full payment: reduces FICO by 105-125 points · Agrees to a short sale: reduces FICO by 115-135 points · Accepts a foreclosure: reduces FICO by 140-160 points · Declares bankruptcy: reduces FICO by 220-240 points Source: Real Estate Today Reversal in Home Finance Behavior During some long periods (such as 1991-2006), homeowners came to appreciate the significant increases to their equity positions as owners of real property. While “equity build-up” contributed to the enhanced equity via the funding of the sinking fund built into the FRM payment schedule, the major factor was continual high rates of price appreciation. Coupled with fixed rate mortgages at lower rates than house-price appreciation, the returns were leveraged further by mortgage financing.  In the 1980s and 1990s, financial innovations permitted households to draw upon this new source of wealth without having to sell their assets. The development of “home-equity loans” as second mortgages and “home-equity lines of credit” enabled households to fuel additional consumption by borrowing against their newfound wealth.  It became common to view housing as the owner’s personal cash register – or home equity as one’s very own ATM.     The Wall Street Journal reported that as much as $80 billion each quarter was “cashed out” during the period of growing house prices (December 8, 2010).  With continuing price increases, lending policies softened and this added to the opportunities. (In the U.K., this financing phenomenon was termed “equity leakage,” following the tradition of separating the housing and financial sectors.) At its peak, cashing out accounted for 90 percent of all residential mortgage refinancing.  Now there is a new development: refinancing is now a “cashing in” experience. The Journal reports that in the third quarter of 2010, home-equity financing totaled about $7.4 billion (or less than 10 percent of the volume at the market’s peak). Further, those cashing out were only 18 percent; those cashing in (mostly to lower their monthly payments) totaled about 33 percent. There are at least three implications of the “cash-in” trend.  - While refinancing used to be viewed as a major funding source for exotic vacations, new cars, college tuition or other household expenditures, now it is being used to pay off existing debt and to help manage the household’s cash outflows. - Cash-out refinancing was a mechanism to fuel consumer spending and economic growth.  Cash-in refinancing is consistent with elevated household savings, lower consumption and regrettably, lower rates of economic growth. - Those households that might benefit the most from home equity loans (especially cash in refinancing) often cannot participate since their initial equity contribution is long gone and they are faced with significant negative equity. In addition, the sizable fees required to refinance hit these borrowers particularly hard.  Source: Austin Jaffee, PAR