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Wednesday, December 29, 2010

2011: The Year a House Again Becomes a Home

by THE KCM CREW on DECEMBER 29, 2010

For almost a decade now, every time we talked about real estate we immediately discussed money. We didn’t talk about the value of a home but instead about the price of the house. We didn’t worry about a roof over our heads but instead the ceiling on our interest rate. We didn’t care as much about where we raised our family as we cared about how much we increased our family’s net worth.

That will change in 2011. The KCM Crew believes very strongly that real estate will return to what it has been for the 200+ year history of this country: a place for us and our families to live comfortably. It will also prove to be a great long term investment as it always has been.

Our parents and our grandparents didn’t buy their homes as a short term financial investment. They bought it so they had a place of their own to come home to at the end of the day; a place to raise their family; a place they could feel safe.

Sure they dreamed of a ‘mortgage-burning’ party. They realized it was a form of forced savings. They were taught that, if they paid their mortgage every month, they would wind up with a little retirement account decades later.

And, they realized that wouldn’t happen if they rented.

However, in the last decade, we somehow forgot that the financial aspect was the serendipity not the major reason to buy. We believe that 2011 will be the year that people return to the historic reasons families purchased a home. This is the year when we again remember that homeownership is a major part of the American Dream.

What about the challenges to a housing recovery? Let’s look at them.

The Economy

Most reports are showing that the economy is doing better than expected. This shopping season provided additional proof of this point. As the economy recovers, so will consumer confidence. This will be great news for housing.

Unemployment

There is much talk about a ‘jobless recovery’. We agree that unemployment will continue to be a challenge. However, when you talk about housing, it is not the unemployment rate that is all telling. Instead, it is the change in the rate. As unemployment skyrocketed, people started to worry about their own job. Any change creates concern. Unabated concern turns to fear. Fear causes paralysis. The spike in unemployment has plateaued. People no longer have the felling that ‘they are next’. The fear will diminish and people will start moving on with their lives. This too will be great news for housing.

Interest Rates

It seems the bottomless pit in which rates have been falling does have a floor after all. And it seems we have found it. Those purchasers who had been waiting for the best interest rate may have already missed it.

Prices

Economists are projecting that prices will not see any appreciation in 2011. Sellers who had been waiting for 2006 to return will come to the realization that waiting any longer makes little sense. They will instead decide to get on with their lives and sell this year.

Prices probably will soften further. However, the possible savings to potential buyers will be minimized by a rise in interest rates.

Bottom Line

This is the year that normalcy returns to real estate. People will buy and sell based on the desire for a better life for themselves and their families. They will realize that is the true value of homeownership and they will be willing to pay for that value.

Friday, December 24, 2010

Tax Deal Has Home Owner Benefits

Home owners were among those who benefited from the tax compromise that President Obama signed last week. Among the most home owner-friendly provisions are:

Deductions for private mortgage insurance: The agreement extends through 2011 a provision allowing home owners to deduct mortgage insurance premiums. To qualify for the full deduction, homeowners must have an adjusted gross income of $100,000 or less. Taxpayers with AGI of $100,000 to $109,000 can claim a partial deduction. Borrowers can’t deduct mortgage premiums on home loans that closed before 2007.

Tax credits for energy-efficient home improvements. Home owners who install insulation, new windows or other energy-saving improvement in 2010 are eligible for a tax credit worth 30 percent of the cost up to a lifetime maximum of $1,500. Improvements must be bought and installed by Dec. 31. Those who delay improvements to 2011 still get a tax credit, but it is capped at $500.

Source: USA Today, Sandra Block (12/21/2010)

Wednesday, December 22, 2010

Four Steps to Sustainable Homeownership

Purchasing a home is an exciting step in anyone’s life, but there is more to the process than just getting approved for a loan. In fact, it is even more important to make certain you are ready to keep your home for the long term. To that end, here is a look at 4 things you can do to make your homeownership sustainable.

Step #1: Increase Your Knowledge

The first step you need to take is to learn as much about your mortgage loan options as possible. This way, you can be certain to apply for the best type of loan to meet your personal needs. In addition to learning about the pros and cons of various loan options, you need to learn more about how credit scores, discount points and other factors affect the overall cost of a loan. As part of this process, you should contact your local HUD housing counselors to learn more about special buyer programs that might be available in your area.

Step #2: Get Your Finances Under Control

Before you can purchase a home, you need to be certain you will qualify to buy it. If your credit score is below 620, you will be better off taking some time to bring up your score before you make a purchase. This way, you can keep your interest rates down, which will help keep your mortgage payments down and will make it easier for you to keep up with your monthly payments. Of course, by getting your finances under control before you buy, you will also be more likely to be able to stay on top of your bills after you make a purchase.

Step #3: Create a Budget

In order to remain safely within your means, your mortgage payments should never be more than 28 to 33 percent of your total monthly gross income. If you have other debts, such as car payments, student loans, credit cards or child support payments, the total cost of these debts and your mortgage payment should not exceed 36 to 40 percent of your monthly gross income. Therefore, before you make a purchase, carefully analyze your debts and create a budget that will ensure your monthly payments remain below this figure while also leaving enough money available to put toward a savings plan.

Step #4: Get to Saving

Before you start looking for a home, you should have plenty of money saved up to apply toward the purchase of your home. In most cases, Earnest money, which is a deposit provided to the seller, will be required when making an offer. Earnest money requirements can range anywhere from $500 to two percent of the purchase price. In addition, depending upon the type of loan you get, you might need to make a substantial down payment or closing costs. In addition, by establishing good saving habits now, you will be better prepared to handle your finances effectively in the future.

Tuesday, December 21, 2010

Growing Economy Big Factor for Buyers

Economists are surprisingly positive about the impact of rising interest rates on home sales.

The consensus is that while rates are up from where they were, they are still at historically low levels and rock bottom rates are only a part of what encourages people to buy homes. More important factors could be jobs and other financial issues, which appear to be improving.

“Since the recent rate increases have essentially just undone the declines from earlier months, it is hard to see why sales should drop significantly further from current levels,” wrote Goldman Sachs economist Ed McKelvey in a research note published Thursday evening.

Source: The Wall Street Journal, Nick Timiraos (12/17/2010)

Monday, December 20, 2010

Home Building Edged Up in November

Housing starts increased 3.9 percent last month from October, the U.S. Department of Commerce reports.

Despite the gain, activity remains 45 percent below the threshold — 1 million units annually — that is considered healthy. And permits, which gauge future demand, slid 4 percent to the lowest level since April 2009.

In November, builders broke ground on 555,000 units, fueled by a 6.9 percent jump in construction of single-family homes; multifamily projects, conversely, declined 9.1 percent.

Source: Boston Globe (12/17/10)

Tuesday, December 14, 2010

Rising Rates Could Get Buyers Moving

Ironically, it could be rising interest rates that finally push home buyers off the fence and into the market.

While Congress is debating the tax-cut compromise, the financial markets have interpreted the proposal as a development that will likely push mortgage interest rates higher than they have been for months.

Analysts are predicting that buyers will move quickly when it looks like rates are going up and are unlikely to come down. "Once people see this might actually be the bottom, they’ll go for it," says Paul Dales of Capital Economics.

The average rate for a 30-year fixed loan increased to 4.61 percent in the week ended Thursday, Dec. 9, from 4.46 percent the previous week. The average 15-year rate rose to 3.96 percent from 3.81 percent.

Source: Fortune, Nin-Hai Tseng (12/10/2010)

Monday, December 13, 2010

Advocacy Group Urges FHA Reform

The Center for Responsible Lending on Thursday called on the Federal Housing Administration to take further action to protect consumers from what it characterized as “Wild West lending.”

"The FHA was created to make mortgages accessible, affordable, and sustainable. Without clear rules to prevent overcharging, abuses are inevitable. That undercuts the reason the program was created in the first place," said Evan Fuguet, senior policy counsel for the center, in a statement.

The CRL recommended that the FHA adopt the following policies:

· Immediately apply pending Federal Reserve rules that, come April, will ban kickbacks and other incentives to overcharge for mortgages.
· Establish reasonable limits on loan costs to prevent inconsistent and abusive pricing.
· Maintain a strong focus on access to fair and affordable credit for all families regardless of race.
· Continue to strengthen efforts to enforce FHA rules.

Source: Center for Responsible Lending (12/09/2010)

Saturday, December 11, 2010

How Home Prices, the Economy, and Your Attitude Are Connected

Home prices are tied to the economy very closely. When the economy is running smoothly, home prices and sales are soaring and people feel more secure with their money and their stability. But when one of these things changes, they all change with it.

If the economy starts to turn, people begin to lose jobs and want to leave the area searching for different work. Because there is less work, less people want to move to the area, leaving sellers stuck. As the housing market begins to lower, home prices drop and people aren’t worth as much money as they were before. They begin to feel poorer and stop making big ticket purchases. The loss of that cash flow hurts the economy more, and the spiral continues.

Housing Market

If the housing market begins to turn, then homes lose value, people feel poorer and the economy suffers. If people begin to feel poorer without either the economy or the Dallas housing market turning, they can drag the whole thing down. Sometimes politicians or other interest groups want people to feel poorer to sway public opinion, so it is possible for this to occur, and it has occurred in the past.

You can do your part to help the economy and the housing market by remaining calm about your finances. Focus on making smart economic decisions and stay calm. It’s important to prepare for a down-turned economy, and keep as level as possible. If you practice this when the market is high, it will be easier on your family when the market is low.

Easier Said

This advice is easier said than done, especially with job loss, the rise of foreclosure rates, and increasing Dallas short sales. The light at the end of the tunnel is getting closer. It will be a long battle to get there, but we will be seeing relief.

Friday, December 10, 2010

Rising Interest Rates Stall Some Home Sales

Rising interest rates have closed the door on $1 trillion in loans, said Scott Buchta, an investment strategist at Braver Stern Securities in Chicago.

As rates on loans guaranteed by FHA rise above 5 percent, fewer and fewer buyers qualify. LendingTree Chief Economist Cameron Findlay pointed out that a 30-basis-point rise in the 10-year Treasury note's yield would typically add about $45 per month to the payments on a $250,000 mortgage.

"Should rates rise higher from here, you'll start to have an impact on a purchase market that is just starting to recover," said Buchta.

Source: Reuters News, Al Yoon and Daniel Trotta (12/08/2010)

Thursday, December 9, 2010

Holiday Decor Can Catch a Buyer's Eye

Tastefully done holiday decorations can be the eye candy that captures a buyer’s interest, says Lee Ralph, an associate with Coldwell Banker North Tampa (Fla.).

“We even negotiated a contract on Christmas Day last year,” Ralph says.

Ralph suggests using elegant themes and warns against over-decoration. “That may keep the buyer from being comfortable and able to visualize the home as their own,” Ralph says.

Designer Rick Davies, co-owner of Lafayette & Rushford Home, a home decor store in Dunedin, Fla., makes these suggestions:

· Work with what can’t be changed. Work carefully with the color, style, and age of the home.

· Consider proportions. Don’t put a huge wreath on a tiny door.

· Light the way. Simple pathway lights are a gracious way to greet potential buyers.

· Be subtle. Choose contemporary colors, including bright greens, lemongrass, golds, and ambers.

· Natural is in. Natural-look and organic materials are in vogue, including berries, artichokes, moss, twigs, acorns, and feathers.

Source: St. Petersburg Times, Terri Bryce Reeves (12/04/2010)

Tuesday, December 7, 2010

Things to Consider Before Doing a Remodel

Because contractors continue to have difficulty finding work in many parts of the country, many home owners are enjoying home-remodeling bargains.

Before signing a contract, here are some things Tara-Nicholle Nelson, author of "The Savvy Woman's Homebuying Handbook" urges people to consider:

· When the market is flooded with properties, buyers are frequently unwilling to pay for upgrades, although an upgraded home may sell more quickly than a dated one.
· Sellers concerned about guaranteeing a remodeling return on investment should focus on preserving the value and the likelihood of resale instead of on aesthetics.
· Don’t overbuild. McMansions have fallen out of fashion.

Source: Boston Globe, Tara-Nicholle Nelson (12/06/2010)

Monday, December 6, 2010

Mortgage Rates Continue Upward Climb

Freddie Mac reported that fixed-rate mortgages rose for a third consecutive week during the period ended Dec. 2.

· Interest on 30-year loans inched up to 4.46 percent from 4.4 percent.

· Rates on 15-year mortgages averaged 3.81 percent, an increase from 3.77 percent a week ago.

Adjustable-rate mortgages were slightly higher as well:

· One-year ARM rose up to 3.25 percent from 3.23 percent

· Five-year ARM moved up to 3.49 percent compared to 3.45 percent.

Source: Inman News (12/03/10)

Saturday, December 4, 2010

Hurdles to Buying A Home

A lot of hype out there right now about the time being right for buying a home because home prices are down and mortgage rates are near all time lows – making home ownership very affordable. But, so many people are sitting on the sidelines according to NAR as home sales are 25% less than figures from 2009.

So what has people sitting on the sidelines if NAR’s figures are accurate?

First off, the $8000 home buying tax credit that the Bush administration started and the Obama administration renewed and extended has expired (except for Vets – yes Vets can still take advantage of low VA rates and 100% financing using the tax credit until April 2011). Many real estate and mortgage experts suggest this has had an impact on the market slow down. Ok, I buy it. Next reason…

Credit Scores – Mortgage guidelines are the toughest they have been in years. It seems like every month we get a notice saying that FICO score requirements for mortgage programs go up. Currently many lenders are requiring credit scores of 640 or greater to qualify. Some predict that with this sole requirement, at least 1/3 of all possible US based home buyers cannot qualify because their scores are less than 640. Ouch for a housing market turnaround.

Income and Assets – mortgage qualifications have tightened their analysis of job history, income, and assets. Bank statements, for example, are looked at more closely than ever with even the slightest elevated deposits questioned. A shaky job history could lend itself to you getting the thumbs up or thumbs down in the case where an underwriter has some discretion about approving your mortgage. And for income, you must be able to solidly prove it with pay stubs, W-2′s and tax returns, etc. If you are self employed be prepared for an even tougher road.

Appraisals – Perhaps one of the most frustrating thing is the continued weakness in the housing market caused by foreclosures and short sales. Perfectly good homes where the owners are not in financial trouble are facing diffculty in being fairly valued because they are surrounded by now substandard foreclosure and short sale homes. Sellers can’t agree on price with buyers and home values are not matching up with sales contract prices. According to some, the business of appraising is just a mess.

And finally, the fear of the unexpected – With the economy in the state that it is in, many people have little confidence in job security or that the economy has made a turn for the better. With job security at question as well as fears that home prices are still not at the bottom it is no wonder why so many people are waiting.

One proactive thing you can do if you are looking to buy a home is to get yourself pre approved with a mortgage lender. At the very least you can take care of your credit scores and personal finance hurdles in the mean time if you also have fears about the economy and housing prices.

Friday, December 3, 2010

4 Reasons To Buy A Home During The Holidays

Real estate sales and mortgage loan transactions tend to slow way down during the winter holidays. This phenomenon is certainly understandable – there is enough going on with holiday shopping, traveling, parties, cooking, and decorating without adding a move. But before you pack it in and close up shop until after New Years consider these reasons to buy a home during the holidays:

1) Get A Great Deal – Anxious sellers with homes on the market are likely thinking their chances of selling during November or December are slim. You may be able to get an even lower price accepted at this time of year. Consider the cost of 2 – 3 additional mortgage payments and maintaining the home for that time. There is also the added value of the peace of mind for the sellers that comes with closing before the new year.

2) Undivided Attention – Because home sales decline during the holidays both real estate agents and mortgage professionals are less busy and will be able to devote more time and energy to the deals they are working on. It is good to consider holiday closings and vacations that may be scheduled and to be up front about how this might affect the time line of the purchase.

3) Available Contractors – If a home requires some work before it can be moved into this is an ideal time of year to have it done. Most general contractors and specialists such as electricians, painters, roofers, and plumbers are not very busy around the holidays. Most home owners don’t want to undertake a home improvement project with the holidays looming and risk serving Thanksgiving dinner with a torn up kitchen, or having work done on the house while the in-laws are in town for Hanukkah. Have the pick of the professionals in the area and possibly a discount as well by getting projects started now.

4) Time Off – While moving might not be the most relaxing way to spend the time around the holidays it is convenient in that it’s a time when many people have vacation from work and school. If the office is closed for a few days around the holidays it could be an ideal time to move and start the new year in the new house! For moves scheduled before the holidays homeowners with children should be sure to head off their kids’ fears and include Santa when updating everyone with the new address.

Thursday, December 2, 2010

Bankrate: Mortgage Rates Dip Down

Mortgage rates retreated last week, following two consecutive weeks climbing higher. The average conforming 30-year fixed mortgage rate decreased to 4.58 percent, according to Bankrate.com. The average 30-year fixed mortgage has an average of 0.40 discount and origination points.

To see mortgage rates in your area, go to http://www.bankrate.com/funnel/mortgages/.

The average 15-year fixed mortgage decreased to 3.97 percent, and the larger, jumbo 30-year fixed rate dipped as well to 5.18 percent. Adjustable rate mortgages dropped as well, with the average 5-year ARM at 3.66 percent and the average 7-year ARM falling to 3.97 percent.

The last time mortgage rates were above 6 percent was Nov. 2008. At that time, the average rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now 4.58 percent, the monthly payment for the same size loan would be $1,022.90, a savings of $219 per month for a homeowner refinancing now.

SURVEY RESULTS

* 30-year fixed: 4.58% -- down from 4.62% last week (avg. points: 0.37)
* 15-year fixed: 3.97% -- down from 4.02% last week (avg. points: 0.32)
* 5/1 ARM: 3.66% -- down from 3.71% last week (avg. points: 0.38)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

Wednesday, December 1, 2010

Employment growth helps Texas economy outpace nation's

By David S. Jones | columnist

Employment in the Texas private sector is keeping the state's job growth headed in the right direction.

In his Monthly Review of the Texas Economy for October, Ali Anari, Ph.D., says the state added 166,000 jobs during the fiscal year ending in September.

"That's an annual growth rate of 1.6%," says the Real Estate Center research economist. "Over the same period, the U.S. economy gained 321,000 jobs, an annual growth rate of 0.2%.

"The private sector posted an annual employment growth rate of 1.9%," reports Anari, "compared with 0.5% for the U.S. private sector during the year."

Texas' seasonally adjusted unemployment was 8.1% in September, unchanged from September last year. Meanwhile, the nation's September-to-September rate decreased from 9.8% to 9.6%.

"All Texas industries except trade, construction, and information had more jobs in September 2010 than they did 12 months earlier," Anari points out. "Mining and logging ranked first in job creation with an annual employment growth rate of 14.1%. The average number of active rotary rigs increased from 379.4 in October 2009 to 687.96 (in October 2010)."

The complete report is available online free at http://recenter.tamu.edu/econ/