Real Estate Information Archive

A message from Steve Harney:

The short term fixes used to bolster the real estate market (the purchase of mortgage-backed-securities and homebuyer tax credits) proved to be just that: short term fixes. Everyone now seems to feel that the only true solutions to the challenges in housing are

• the creation of jobs and
• the increase in consumer confidence jobs will create.

I totally concur. However, if tomorrow the administration was to announce the greatest jobs program ever attempted and promised to implement that program immediately, it would take 12-18 months for it to have any noticeable impact on housing demand. That begs the question:

What if you want (or need) to sell in the next 6 months?

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Holy Cow! Have you taken a look at where interest rates are these days??? There are Ten Year Mortgages in the 3.75% range for heaven’s sake! Yes, 3.75%!!!

What are some of the issues to consider as you (and all of America) contemplates a refinance?

1.  Does it make financial sense?

If you are considering a “rate/payment reduction” refinance, I typically recommend that people do one simple calculation. Divide your monthly savings into the costs (out-of-pocket expenses AND any increase in your principal balance). That number will tell you how many months’ payments it will take to “break even”. Depending on how long you anticipate staying in the home, and comparing that to your “break even” month, will give some clarity to what is the right decision.

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Rumors are running wild that the administration is considering a new tax credit for homebuyers. We don’t want to comment on whether or not a new tax credit would be a good or bad thing for real estate right now. We’ll let others handle that hot potato. Our goal is to give you the best, up-to-date information on the chances it will happen.

Our strong belief is that it will NOT happen.

The rumor started when Housing and Urban Development Secretary Shaun Donovan appeared on CNN‘s “State of the Union with Candy Crowley” on Sunday. CNN reported:

When pressed on whether the White House will now push for an extension of the tax credit, Donovan suggested the credit will not come back in the short-term but he left the door open to bringing it back down the road if the industry does not improve.

“I think it’s too early to say, after one month of numbers, whether the tax credit will be revived or not,” Donovan told CNN. “All I can tell you is that we are watching very carefully. I talked earlier about new tools that we will launch in the coming week, and we are going to be focused on where the housing market is moving going forward. And we’re going to do everything we can to make sure that this market stabilizes and recovers.”

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MacroMarkets has assembled a very distinguished panel of over 100 economists, investment strategists, and housing market analysts who are surveyed every month regarding their 5-year expectations for future home prices in the U.S. The report is the  Home Price Expectations Survey.

Their purpose for this undertaking?

We are hopeful that this survey, and our panelists, will help to stimulate constructive debate among consumers, institutions and policy makers regarding expected future changes in home prices – and their behavioral, policy, and risk management implications.

We believe each of their goals is important. We also want to relay the findings of the surveys to you in order for you to see what the experts are saying and also look at the trends that are developing in their beliefs.

What the experts are saying:

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Last week, HUD announced their intention to change their insurance premiums, in order to raise HUD’s own reserves to cover anticipated losses and fund their operations. Let’s look at the impact on today’s home buyer, resulting from the changes which will go into effect on September 7th.

The “spin” is that they are trying to reduce the closing costs to buy a home by lowering the Up Front Mortgage Insurance Premium (UFMIP) from 2.25% to 1.00%.  On a $300,000 loan, the borrower will save 1.25% on $300,000 or $3750- a significant number no doubt. BUT, that amount can be financed into the mortgage; therefore, at 5%, the borrower’s monthly payment will only be reduced about $20 a month. Yes, $20 a month for 360 payments would be a big deal, but since most people are more concerned with their monthly payment than loan amount, let’s look at the other change to the insurance premiums…

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