Low Mortgage Rates, Low Prices – So Where Are The Buyers?

There’s very little debate over the fact that this is a “Buyer’s” Market” right now.  The thing is that this time around it’s a little different than in past market cycles.  There are plenty of homes to choose from, prices are low (still declining in many areas) and interest are as ever.

By all rights, there should be lots and lots of people buying houses right now.  There aren’t!  There are buyers and they are buying houses but not at the pace that the market conditions should justify.

Why not?

Here’s a short video that may be helpful in understanding part of the reason.

New “Quality” Guidelines for Fannie Mae Mortgages

I recently received the following doc from William Raveis Mortgage Company* regarding the new guidelines that went into effect on 6/1/20.

As you’ll see there are some new pieces of documentation that will be required for all FNMA loans. These are being adopted by Secondary Market Investors.

This does not necessarily mean that it will be harder to get through the mortgage process.  It does mean that you should be very vigilant in discussing ALL aspects of getting your loan with your lender.   Being prepared lessens the chances of last-minute surprises.

View this document on Scribd

*William Raveis Mortgage Company is an affiliated company owned by the brokerage I work for – William Raveis Real Estate.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Are Foreclosures Really Decreasing?

RealtyTrac – a leading provider of tracking data on Foreclosure Activity, used by many private and public sector organizations to help evaluate foreclosure trends, reported late last week on a national level foreclosure activity dropped 9% in April.

Sounds like good news right?

Well – hold 0n just one minute there, Bucko.   There may, indeed, be more to the story.

What if there were lots and lots of  homeowners, who can’t afford their payments have realized that the banks are taking a long time to take action against them?

What if some of those homeowners just stopped making their payments and are staying in their homes, making no payments for up to a year or more?

Diana Olick of CNBC says these are questions that have to be considered.   Here is her article from May 13, 2010 on this very subject called  “Banks Ignore Delinquent Borrowers”

I’ll hang on here while you go read that.

OK  – Done?

So how does that affect owners that are operating outside of this part of the market.  You know, people who have equity in their house and would like to sell.

While no one knows for sure when those foreclosures are going to hit the market – or if they are in your town, your neighborhood, one thing is for sure.  If they do, it will affect the value of your home in a negative way.

Again – every situation is different and you have to work with your Realtor to determine the best course of action for you.  Having said that, if you are interested in selling, come up with marketing plan and a price point that will move your house quickly.  The idea of  “Trying a high price” for a while – may have passed.

If you have a need to move for one reason of another, such as wanting more space, less traffic, nearer to work or school – just get it done.   Even though the economy shows signs of getting better, the decline in housing prices may not be over – not for quite a while.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Upcoming Foreclosure Prevention Clinics in Hartford

Any of these dates:

• May 18, 2010
• June 15, 2010
• July 20, 2010

Each Seminar will begin at 5:30 and runs for two hours.  They will be held in the Handel Performing Arts Center Community Room at the University of Hartford.  You can get directions here.

They are being presented by the University of Hartford Paralegal Program and the CT Fair Housing Center

In addition to learning about the process and how best to minimize the impact of foreclosure, you will also have the opportunity to meet with volunteer attorneys as well as Paralegal students.

There is no pre-registration required and anyone can attend.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

How Much Should Rising Interest Rates Influence Home Buyers?

Some of the most common questions that get asked of most Realtors are

• Will Housing Prices continue to go down?
• Will the appraised value of my house continue to fall?
• Are interest rates going to stay low?

Fact is, none of us know if appraised values of houses will continue to fall or if interest rates will go up or if the market has bottomed out.

In today’s NY Times, Nelson Schwartz (no relation) did a column entitled  “Consumers in U.S. Face the End of an Era of Cheap Credit. He talks about how we as American have spent the last 30 years or so watching interest rates basically trend downward. While there certainly have been fluctuations, let’s face it, rates, in all areas of credit have significantly lower than they were in the 1970s

I can remember buying my first home in 1979.  We had a variable rate mortgage that started out at 10.5% and had the potential to go up as much as a point per year.  The lender magnanimously capped the loan so that it would never exceed 17%.   We sold that house a few years later – the rate had climbed to around 13%.

This was the norm and we didn’t really think of it as a bad thing – it was just the way it was.

Today – we’re in a huge crisis, part of which is based on the fact that some variable loans have climbed from 5%  ALL THE WAY UP to 9% or so.

Needless to say, our attitudes about interest rates have changed. Mr. Schwartz indicates that many economists are saying these days are over.   Rates have “nowhere to go but up.”

For the last 3 years mortgage rates have gone up and down between the low 5% and the mid 4% range.   At the same time home buyers have been hesitating to buy homes because they are waiting for home prices to “bottom out”.

As of right now, in most markets, home prices are still dropping a bit, so this “wait and see ” attitude is still prevalent among potential buyers.   As a Realtor, I have a number of clients who have been looking at homes with me for more than a year – or more than two years.

Here’s the thing – if you “do the math”  rising interest rates might offset any continued drop in prices.  Here’s an example.

If you were to buy a home today for $250,000 and put $25,000 down you’d be borrowing $225,000. If that loan is for 30 years at current rates of around 5% your principal an interest payments will be $1207 per month.

If you hesitate on your purchase and wait 9 months, the house might indeed go down in price.  Let’s say it drops another 5% and the you can buy the house for $237,500.   If you put the same $25,000  down, your loan would be for $212,500.   If rates go up by just 1 point – to around 6%, your monthly principal and interest will be $1308.

So – in the end, you be buying at a lower price, but paying $100 more per month – and that additional amount is not adding to your equity – it’s all in interest.

Add to that the fact that if you wait and you also have a house to sell, your home will also likely drop another 5% in price.

So – in the end, you will not only not save money by waiting – you’ll actually be paying more – maybe considerably more.

Now – no one really knows what’s going to happen.  Prices could stabilize and interest rates could drop.  It’s all about educating your self on the market conditions and making the best decision you can.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

FAST FACTS #3 – Mortgage Terminology: LTV (Loan to Value), DTI (Debt to Income)

LTV – Loan To Value ratio.  This is the ratio of a mortgage expressed as a percentage of the value of home.  For example, if you were to purchase a home valued at $100K and you were borrowing $76K, your LTV would be 76%.

The higher the LTV, the bigger risk for the lender. In other words, should you default on a loan with a 40% LTV the bank would only be losing 40% of the value of the home.  If you should default on a loan with a 95% LTV, the bank would stand to lose all but 5% of the value of a home.

This is of particular importance to lenders in a depreciating market  If, for example, the bank were to loan 95% of the value of a home and the market declines by 6% over the course of a year, the amount of the bank’s risk now exceeds the value of the property.

DTI – Debt To Income ratio.  This is the ratio of your monthly expenses expressed as a percentage of your monthly income. This ratio is used, actually to mean two different things.

• The first is based strictly on the monthly cost of the home (Mortgage payment, taxes and insurance) against your total income.
• The second meaning includes ALL of your monthly obligations including credit cards, car loans, etc. against your total income.

Most lenders will look at and set limits for both ratios in determining your qualifications to obtain a mortgage.

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Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.