Archive for the ‘Mortages and Loans’ Category
The real estate market was overheated during the first 6 months of 2013. Low home inventory, record low interest rates and the lack of new construction were to blame for the unsustainable, rapid price increases and multiple bidding wars for properties.
5 Reasons we do not feel the hyper-inflated housing market will, or should, continue.
- Rising Interest Rates – Interest have risen sharply in the past few weeks and the trend continues up. Current rates will slow the number of homebuyers and speculators that are coming into the market during the next 6 months.
- Marginal buyers have been priced out of the market due to bidding wars, rapid price increases and higher borrowing costs.
- Wall Street and large investment groups are curtailing their buying. One-third of all homes purchased this year were Cash sales. This translates to heavy investor buying, which will slow down going forward in 2013.
- Shocking run up in home prices are not sustainable. In May, home prices were up 12.1% on average. This brings home price levels to a 5 year high. Pricing is now at a point that many of the short term gains have been realized, and the market will fall back to more normal levels.
- Realtors and builders report that inquiries and calls from new customers is down 11%, so far for June.
Summary: We feel that the housing market was under valued at the start of 2013, but a frenzied market chewed through much of the low hanging fruit. With rising interest rates, and increasing inventory levels, we see a move to more sustainable and healthy growth moving forward. It is still an excellent time to buy or sell. Inventory levels will increase, but they will remain on the low side throughout the year. Interest Rates are still at historic lows and price increases, although impressive, leave the average home price far below levels seen in 2006 and 2007.
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Is your dream to own your home free and clear?
If so, join the crowd. More borrowers than ever are taking out 15-year mortgages in hopes of accelerating the day they can wave bye bye to the bank, the Globe’s Jenifer McKim reports.
While the traditional 30-year loan has long been king, 30 percent of borrowers during the second quarter opted for shorter loan terms with 15-year terms the most popular, the Globe’s Jenifer McKim reports.
That’s up from just 10 percent during the same time period in 2006, when the real estate market was at its peak.
And rock bottom interest rates have been one big factor – the piece offers up a Natick homeowner who found she could shift to a 15-year loan and save money given the drop in interest rates.
It is certainly an intoxicating dream at a time when debts, both personal and national, seem so crushing. Yet there are some potentially big pitfalls to this approach.
For starters, my bet is that our Natick homeowner is in the minority.
First, not everyone is in position to capture the lowest rates – you have to have some darn good credit these days.
And if you end up having to pay a bit more in order to pay down your mortgage faster, there is an opportunity cost here. The extra cash you are pumping into your mortgage is money that you could otherwise stash, tax-deferred, into a retirement account.
For that matter, if you have credit card debt, you should be paying that down first – the interest rates are likely much higher than on your mortgage.
Moreover, if you do run into trouble, such as losing your job or taking a hit to the paycheck, you have locked yourself into a format that may not be so easy to get out of. Good luck trying to refinance back into a 30-year mortgage at that point.
A Plymouth financial planner cited at the end of the piece actually had the best advice for homeowners eager to hasten the day when they make their final mortgage payment. He argues for making extra payments on a 30-year mortgage in order to accelerate repayment. If money gets tight again, you can just stopping paying that extra in.
This also gives you the extra flexibility to craft an approach that works from you, maybe putting a little bit more into both the mortgage and the retirement account as opposed to either or.
Makes sense to me, but how about you?
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Bank of America has come up with a new tool to deal with its glut of abandoned and foreclosed homes…. a Bulldozer.
Bank of America, the nations largest mortage servicer, plans to “donate” 100 blighted homes in Cleveland, OH and contribute cash toward their demolition. The bank has a similar plan for 100 homes in Detriot, 150 in Chicago, with 9 more cities to follow. Wells Fargo, Citigroup, JPMorgan Chase and Fannie Mae are also considering their own bulldozing programs.
Getting rid of repossesed homes is the biggest headache for US lenders. 1,679,125 homes ( 1 in every 77) are in some stage of foreclosure as of June. Lenders feel that no one will buy many of these homes and they”re trying to cut their losses. Bulldozing the problem away means the banks won’t owe property taxes to our floundering cities and it won’t have to pay for repairs, maintenance and upkeep on the property. In addition, there are some perks for giving away a house. The banks get a bunch of tax write-offs and best case… they may even get a pat on the back and some nice PR, too.
The idea of Bulldozing houses is nothing new. Although the banks are not blowing up homes for alturistic reasons…I think we can all agree that removing home inventory is good for all of us. In 2010, Warren Buffet advised that “blow up a lot of houses” was a viable option and similar to ‘cash for clunkers’ auto program. I always thought bulldozing abandoned homes and returning the land to a raw state was a smarter solution than handing out money in the form of a homebuyer tax credit. The tax credit cost billions of dollars, put money into the hands of a few people blessed with good timing and did little to reduce inventory.
Bankers, why not take the “TNT” strategy one step further. Donate unwanted houses to local non-profits vs blowing them up? Make a call to Habitat for Humanity, for example? I can’t understand why Habitat is still building new homes, when we can’t get rid of the ones that are causing problems in our neighborhoods. Habitat needs to change their business model with the times and so do our lenders. Families, who are in dire need now, wait up to 6+ months for a new home to be built and the cost of building from scratch far exceeds the costs of rehabbing properties, in most cases.
Just my two cents….
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An estimated one million U.S. homeowners, behind in their mortgage payments, are breathing easier today after three of the country’s largest banks agreed to immediately stop new foreclosure actions until they could review sloppily-read foreclosure filing by their own staffs.
The lenders are Bank of America, JP Morgan Chase and GMAC Mortgage Co. owned by Ally Financial Inc. They are temporarily halting foreclosure actions in 23 states.
They are Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.
For the homeowners, the action by the banks gives them a little more time to catch up on their delinquent mortgage payments.
For the residential real estate market, the action means fewer houses will be dumped in the for-sale arena, giving falling prices a chance to stabilize.
For the real estate market as a whole, the banks’ actions give the industry another black eye at a time when it is struggling to regain the public’s confidence.
(This article posted by Alex Finklestein
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- The National Multi-Housing Council, which measures changes in rental and occupancy rates, reports that the rental market has tightened significantly in the last few months. Their “Market Tightness” index increased 38 percent from October 2009- April 2010.
- RealFacts reports that they national average apartment rent, for all sizes of apartments, was $943 per month in the first quarter of 2010, up from $932 in the 4th quarter of 2009.
- Hitwise, which tracks online searches, revealed that online searches for rentals surged 171 percent over 2009.
- Experian said the fastest growing search terms for real estate were…”Cheap homes for Rent” up 128 percent; “House for Rent by owner” up 94 percent; and, “Home for rent by Owner” up 84 percent.
- Borrowing conditions have also eased for investment properties and interest rates are at highly attractive lows.
- Sales volumes for multi-family housing have jumped, as investors realize higher profits and higher rents going forward.
Why is the Rental Market going to get tougher?
- Homes are cheaper than they have been in over 10 years, but lingering fear about real estate ownership are holding some potential buyers back.
- Tighter lending requirements keep many from obtaining the financing required to buy.
- Some people don’t plan to rent forever, but as values still fall in their area, it makes sense to wait.
- In our tight job market, many people want the flexibility of renting in case they need to relocate for a better job opportunity.
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If you are one of the millions of Americans who are outraged by the unrepentant behavior of the “too big to fail” banks, please consider moving your money to a local, community bank. These arrogant, “Walmarts of Banking” have continued to reward themselves with huge bonuses, expensive trips, parties, private jets and fancy offices at the expense of working people. And, to add insult to injury, these banking shysters are spending millions of tax dollars to lobby Congress, solely to prevent financial reform that might protect us from paying for their fraud and financial fiasco’s in the future.
HAVE WE HAD ENOUGH, ALREADY???
Forget about the politicans in Washington DC, they don’t really work for us and we don’t need them to make our position clear. Americans can simply move their checking or savings accounts from the Wall Street “bailout” behemoths such as Citibank, Bank of America and Wachovia to their local, community bank or credit unions. And, switching banks is not a lot of trouble. If you want to read over a checklist before you start, go to the moveyourmoney.info website for tips and helpful information.
Millions of taxpayers and outraged citizens have already moved their money. They’ve had enough and they’re not taking it anymore. The bonus… even though it surprised many people who made the change, the rewards for switching to a local bank are huge All banks, large and small, now offer Debit and Credit cards, ATM’s and Online banking. But, the big banks can not match small banks in terms of service. Local banks offer lower fee’s, higher interest rates on deposits, personalized service focused on the local community and perhaps best of all, you can speak face to face with someone you know, who can make a decision for the bank. What’s not to LOVE????
Crow Erickson, Inc., parent company of InfoTube.net, puts our money where our mouth is. We conduct all our business at a local, community bank and we hope every hard working American follows our lead. Are you Tired of Feeling Helpless?? Do you Want Change Really??? You have the power, this time! Move ALL Your Money from the Megabanks today. Action is the only change Wall Street understands.