New Trend In Real Estate

The newspaper and national real estate speakers are talking about the new trend in Real Estate.  It was first called the “Age Wave” and now it is being referred to by experts as the “Senior Tsunami.”  Undoubtedly, the next big shift in the real estate industry is going to be largely impacted by our aging population.  And the first wave has already begun to sweep the nation.   The first time buyer used to push our market but that buyer is having a hard time qualifying and buying.

“We (baby boomers) are the wealthiest consumer segment in the housing market.  We have money to buy homes if we can sell our home at what we think it is worth, and that is also improving,” states a housing researcher, John Sheleimer.

FACTS:
• One in eight Americans are currently 65 years or older.
• In the next 20 years the senior population is projected to double in size.
• Aging seniors are projected to move out of an estimated 11.3 million housing units between 2010 and 2020.
• 65% of senior homeowners own their home free and clear of any liens.

While some senior adults will choose to age in place, a staggering number of them will have no choice but to move into housing that better suits their physical, financial, and emotional needs. When this flood of older generation homeowners begins to relocate, they and their caregivers (adult children) will be looking to their trusted advisor in Real Estate for guidance and expert advice, and who better than the Magee Team?
 

Another trend is that the older buyers are less interested in the huge “retirement” communities that were developed in the past but are looking more for smaller age-restricted subdivisions close to traditional housing.  The over 55 buyer still wants amenities such as walking trails, pools, clubhouses, fitness centers and not necessarily limited to the smaller square footage since they have so much “stuff” they don’t want to get rid of. 

Some of us have been thinking about moving as we are in the situation that we have just mentioned.  If so, we would be happy to have a consultation to see if this is the time or not to make that move. 

 

Give us a call. 

Thanks,

Betty

 

The Market

The Market

There are some good trends in the market with one being that the housing is recovering even with the tight credit approval we are facing.  With still low down payment on FHA at 3.5% and a 5% down on conventional, it is a good market to buy.  If mortgage accessibility opens up (it is cyclic), we may just have a booming year in sales!

Now the downside is that Washington may change their policies and require more money down, like 20%.  They may trim or take away the mortgage interest deduction which is an advantage of owning over renting.  They also add capital gains on the home sale which we have not had for some years.  All of these would greatly halt the progress in home sales.

There will still be more unequal wealth distribution according to accondomist.  Homeowners are building wealth after buying at low prices.  Renters do not accumulate wealth and the renter population is rising simply because tighter credit hinders “good” renters from becoming homeowners.  Now we are seeing an increase share of property owners as investors and as a rule, too many investors in a neighborhood will bring the neighborhood down since properties are not usually maintained as well.  Owning a home is really down right now at a rate of 65.5% of the population which is the lowest in 15 years! Homeownership has always been the avenue in accumulating wealth for people. 

If you are renting, check out the possibility of owning a home and give us a call. 

What Is “Buy and Bail?”

When people cannot sell their house, they will buy another house with a temporary lease or a paper lease on their existing home, buy another home that they can afford the payments and maintenance, and then let their current home go back to the Bank as a foreclosure. We just had a couple come in from Michigan that they were losing so much on their house there, they just wanted to see if they could qualify for a home here and then let that one go to Foreclosure. This is a NO, NO! Lenders and FHA are really looking at possible leases on homes when someone is buying another. It won’t work anymore!

What are the affects of letting your house go back to the Bank? You won’t be able to buy with the following types of financial problems:

• Chapter 13 Bankruptcy - would require 2 years from Discharge date or 4 years from Dismissal date (uncompleted Bankruptcy)

• Chapter 7 Bankrupty – 4 years from Discharge or Dismissal date

• Foreclosures – 5 years from completion date with a 10% down payment and a 680 FICO score at least

• Pre-Foreclosures (short sales) – 2 year period from completion date (NO exceptions regardless of extenuating circumstances)

Easier To Get A FHA Loan!

Perhaps the door to an FHA-insured mortgage just opened a little wider.

With no fanfare or public announcements, two of the largest FHA-approved lenders have backed off their controversial "overlay" requirements on FICO scores (lender overlays are qualification requirements that can be more stringent than FHA's own requirements). This has been a problem with our lenders. I would say to the Lender that is not required by FHA, and they would respond, but it is required by our underwriting! Very frustrating not to know all the rules!!!

Looks like both Wells Fargo and Quicken Loans are now willing to lend to applicants with 580 credit scores. This is really what FHA had as minimums. Because of the economy, many credit scores (FICO scores) have been dropping. These two are the two largest originators of loans. Before they have insisted on the 620 FICO score, so this is good. If you came in lower than the 620, lenders would not even look at your application.

An estimated one third of Americans now have FICO scores below 620, according to one consumer group's estimate. (From Inwood News)

How Do I Get My Down Payment Money?

In today's market, you may have good credit, income and job stability but you don't have the down payment money. 79% of buyers that were interviews said this was the biggest obstacle in buying a house.

Where could you get the down payment?
A couple of suggestions are below:

1. Most buyers depend on the savings or the proceeds from the sale of a previous primary residence for the down payment. But, perhaps you didn't receive that much equity from your home or you didn't have one to sell.

2. Another frequently overlooked source of down payments could be the buyer's IRA. If neither of you as buyers has owned a home within two years, each may withdraw $10,000 from your own IRA to be used to buy a home. The money must be applied within 120 days from the withdrawal. The 10% penalty normally associated with early distributions is avoided but it will be subject to income tax since it was exempt the year it was deposited into the IRA.

3. Gift letter from family member! Family member must sign a gift letter that they don't expect you to pay it back. This is your "inheritance." I tell buyers that you need that "inheritance" now rather than in 20 years when your family dies and you inherit their money.

Of course full disclosure of the source of the down payment needs to be made to the lender and lenders will help you with the process of borrowing from your IRA..

Call us with questions.

Are Interest Rates Rising?

Yes we are seeing a little increase with the average rates on 30 year at the end of November being closer to 4.75%.

The government loans have seen a downtrend of delinquency on the mortgages that they have right now, so that is good. Actually at 9.13% delinquency rate is the lowest since the first quarter of 2009 and lower than it was a year ago. That IS good! That means the tightening of qualification and requiring having a job and having some money, fewer buyers are getting into homes they can’t afford and defaulting.

If we can see an improved delinquency rate, perhaps some of these stricter rules like higher credit scores could be adjusted down a little. There are good buyers out there that just goofed up one time and messed up their credit and they cannot buy. I like a lot of the restraints on buying qualification but the pendulum is way over right now. We need to come back to the reasonable middle!

Are Interest Rates Rising?

Yes we are seeing a little increase with the average rates on 30 year loans at the end of November being closer to 4.75% while they have been as low as 4.00% and having one builder offer 3.9% on a new home.

The government loans (FHA and VA) have seen a downtrend of delinquency on the mortgages that they have right now, so that is good news. Actually at 9.13% delinquency rate is the lowest since the first quarter of 2009 and lower than it was a year ago. That is still good! That means the tightening of qualification and requiring having a job and having some money, fewer buyers are getting into homes they can’t afford and fewer default on their loans.

If we can see an improved delinquency rate, perhaps some of these stricter rules like higher credit scores could be adjusted down a little. There are good buyers out there that just goofed up one time and messed up their credit and they cannot buy. I like a lot of the restraints on buying qualification but the pendulum is way over, being extreme. We need to come back to the reasonable middle!

Refinancing Advice!

Applications for refinancing are down right now while mortgages for purchasing are up a little. Hopefully it is a sign of the confidence of the buyer improving a little.
When you do refinance, you need to ask yourself why you are considering refinancing:
• Is it to lower your payments and save on interest?
• Is it to shorten the term to pay the loan off sooner?
• Or is it to take additional cash out of your equity to consolidate your debts and provide some cash?

Check with your good mortgage person to make sure if you are paying points or origination fees that you might want to pay a slightly higher interest rate since points on a refinance are not deductible.

Reducing the years on your mortgage is a great idea. If you are refinancing back to another 30 year loan, I feel you are going backwards and that is not going to help you in the future getting your house paid off. You may never pay it off but you can certainly build equity quicker and your mortgage interest rate is usually lower.

Does Your Credit Score Really Matter?

Yes, your credit score does matter! There is a direct relationship with lenders on your credit score and what kind of interest rate you can expect to receive from the lender.

OK, the scenerio is that you start shopping lenders for rates. They give you the best rate but that is based on a great credit score! You later find out that your credit score is only 660, so you receive a higher interest rate of 5.079% instead of the 4.466% that was quoted you. See the chart below:

30 year Fixed Rate Mortgage - $200,000 Loan Amount
FICO Score APR Monthly Payment
760-850 4.466% $1,009
700-759 4.688% $1,036
680-699 4.865% $1,057
660-679 5.079% $1,083
640-659 5.509% $1,137
620-639 6.055% $1,206

What's the solution so you won't be blindsided? Get pre-qualified! Have the lender run your credit score so you know what your rates will be and your payment. When interviewing with lenders, find one that you feel is honest and has your interst at heart, is knowledgeable and is willing to take the time to explain things to you. Don't shop rates!!

I will be happy to guide you in your search even though I am not a lender but have enough experience in the business, I know who you need to work with that best fits those guidelines.

Why Aren’t Banks Loaning Their Money?

Nearly 50 years, from 1958 to 2008, according to the Texas A & M Research Center, Banks really held no excess reserves. Then in March, 2010, the reserves reached an unbelievable $1,120 billion. These excess reserves are like gasoline pooling in the bottom of a barbecue grill full of smoldering charcoal. The Fed has poured all this massive amount of gasoline to try to ignite the fire. It has not worked.

Banks usually have required reserves and excess reserves. They usually don’t keep as much in excess reserves. They don’t make as much of a profit from funds held by the Feds which range from 0% to ¼%, according to the Texas Real Estate Center. Banks are sitting on all this money. Why are Banks not making loans to consumers and businesses but are having more fed funds? It looks like they feel it is a risk-free return as the best investment option. Question is how is this going to affect future inflation?

I’m not an economist and really don’t understand how Banks work but I do know that we have too many restrictions in getting loans right now. I’m not talking about 100% financing and anyone can get a loan and everyone should buy a house. I’m talking about common sense lending that takes in the whole picture of a borrower rather than just using the FICO scores!

What Is “Buy and Bail?”

When people cannot sell their house, they will buy another house with a temporary lease or a paper lease on their existing home, buy another home that they can afford the payments and maintenance, and then let their current home go back to the Bank as a foreclosure. We just had a couple come in from Michigan that they were losing so much on their house there, they just wanted to see if they could qualify for a home here and then let that one go to Foreclosure. This is a NO, NO! Lenders and FHA are really looking at possible leases on homes when someone is buying another. It won’t work anymore!

What are the affects of letting your house go back to the Bank? You won’t be able to buy with the following types of financial problems:

• Chapter 13 Bankruptcy would require 2 years from Discharge date or 4 years from Dismissal date (uncompleted Bankruptcy)
• Chapter 7 Bankrupty – 4 years from Discharge or Dismissal date
• Foreclosures – 5 years from completion date with a 10% down payment and a 680 FICO score at least
• Pre-Foreclosures (short sales) – 2 year period from completion date (NO exceptions regardless of extenuating circumstances)