The Government Shutdown And Housing

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

We're a little over a week into the government shutdown and many are wondering whether the closing of federal offices has or will impact the housing market.

The short answer at this point is no. But since none of us can predict how long this may last or what the outcome may be, it's hard to say with certainty that no glitches will arise.

Fannie Mae and Freddie Mac back the majority of mortgages in the U.S., and thus far have not been affected by the shutdown. However, the Federal Housing Administration is operating with a reduced staff, which means that FHA loans may experience delays in processing due to the lack of staff.

In fact, news sources say that the Department of Housing and Urban Development, which oversees the FHA, has just 64 of the nearly 3,000 employees who normally work at its offices reporting to work right now.

Features Buyers Value When Purchasing a Home

 

Low Interest Rates Continue to Fuel Housing

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Remember earlier this year when interest rates started to rise and everyone worried that it spelled the end of the housing recovery? As interest rates have crept up for long-term mortgages throughout much of the summer, many have speculated the impact on home buying as inevitably negative.

 However, we're not seeing much evidence to support that.

Mortgage rates have continued to be really attractive throughout the year, with rates on the 30-year fixed-rate mortgage averaging 4.32% in Freddie Mac's survey last week, down from 4.5% the previous week. It marked the lowest level for rates since the week ending July 25.

Although rates on long-term mortgages are still higher than they stood a year ago, it's amazing how low they've remained and how it has yet to completely derail buying activity, as some expected.

FHA to Continue Lending During Shutdown

Applications for all government-backed mortgages will continue to be processed during a government shutdown, according to the U.S. Dept. of Housing and Urban Development (HUD).

HUD originally said on Friday that it would stop working on applications for loans guaranteed by the FHA if the government shutdown. However, it reversed that position over the weekend.

HUD said it will continue processing loans "in order to support the health and stability of the U.S. mortgage market."

Fannie Mae and Freddie Mac also said their operations will be unaffected by the shutdown. The GSEs pay for their operations out of the fees collected from lenders.

6 Ways to be a Good Neighbor

Developing relationships with your neighbors can make your life easier and your community safer—and may result in lasting friendships. The good news is that it’s easy to extend acts of courtesy to those who live close by.

Welcome new people to the neighborhood. Stop by and introduce yourself. Baking cookies is a traditional way to extend a warm welcome, but you can also bring them recommendations for local services, such as babysitters or landscapers; a children’s activity kit filled with coloring books, crayons, and games; or a list of local phone numbers.

Little gestures can go a long way. Offer to collect your neighbor’s mail, water their plants or feed their pet while they’re on vacation. If that’s too much of a commitment, you might offer to keep an eye out on their house while they’re away.

Keep up your house and yard. This will help maintain property values while keeping the neighborhood as a whole looking its best. Mow your grass regularly, trim your shrubs as needed, and make façade repairs in a timely manner.

Walls have ears. If you live in a condo or townhouse, think twice before plugging in noisy appliances near your neighbor’s walls. A television, a hair dryer or even the beep of a microwave may be a little white noise for you but an annoyance for your neighbors.

Know the news. Whether or not you’re head of your community watch program, there are always chances to help out. Keep your neighbors informed of relevant news, such as upcoming construction or recent crime. Extra eyes and ears are always welcomed.

Return kind gestures. If a neighbor lends you something, whether it’s their tools or their time, return the gesture quickly. It’s easy to move along with your project and forget they’ve done you a favor, so be sure to show your appreciation in a timely manner—your gratitude won’t be overlooked.

American Home Shield is providing the information for general guidance only. Due to the general nature of the property maintenance and improvement advice in this material, neither American Home Shield Corporation, nor its licensed subsidiaries assumes any responsibility for any loss or damage which may be suffered by the use of this information.

Home Sales Hit Highest Level in Six Years

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Home sales ended the summer on a high note, reaching their highest level in over six years in August. Prices went along for the ride, with the median price trending nine consecutive months of double-digit year-over-year increases.

Recovery meets growth. Now we're making serious progress.

According to the most recent data from the National Association of Realtors, total existing-home sales – including single-family, condos, townhomes and co-ops – increase 1.7% to an annual rate of 5.48 million in August. The pace was up from 5.39 million in July and 4.84 million in August 2012.

How is Real Estate Benefiting From IPOs These Days?

Alain Pinel, General Manager of Intero Prestigio international, Intero Real Estate Services, Inc.

You know you’ve been in the real estate business for a while when, not only can you talk about the various market cycles of the past, but you actually experienced them first hand….You had a blast riding the good ones, and you somehow survived the bad ones. It makes for a great conversation piece at cocktail parties. You can offer your best take on why the up cycles usually last longer than the down slides and try to rationalize why it did not work that way during the last recession…

All Realtors have the nostalgia of good times, when sellers are getting a hefty price for their home in no time and most buyers are feeling no pain buying their dream home when they want and where they want. For me, the time my memory takes me to when thinking about good times is the late 90’s in Northern California. The market was hot. Crazy might be a better adjective in fact. Properties were moving as quickly as warm baguettes in a Parisian boulangerie in the early morning. Prices were being re-evaluated upwards every month, which did not slow the buying pace any as plenty of new money was available and anxious to be spent.

Buyer Questions

Change in FHA Guidelines Allows More People to Be Eligible

This article by Princeton Capital Admin is great news for many former homeowners in Gilroy and the surrounding area. Team Patereau works with Princeton Capital right in our office and will be happy to refer you to one of our expert loan officers to get you qualified.

If you lost a house to foreclosure or had to sell a home while in the foreclosure process, take a deep breath. You could be eligible to buy a home again sooner than you think.

The U.S. Department of Housing and Urban Development (HUD) released Mortgagee Letter 2013-26 which is the new guidelines allowing previous homeowners with a black mark on their credit history to qualify for a new mortgage as soon as 12 months after foreclosure or pre-foreclosure sale (typically a short sale), down from the 36-month minimum window set under previous guidelines.

Forbes magazine is reporting that there is a current surge in new eligibility from the homeowners who were foreclosed or had a short sale between September 2007 and August 2010 and became eligible under the old guidelines. This new guideline allows people who were foreclosed or had a short sale between September 2010 and August 2012 to also now become eligible again for a home loan.

Not all of these people will want to be homeowners again. Also from Forbes:

The ability and willingness of boomerang buyers to re-enter the market over the next year will be a key bellwether of the long-term health and direction of the U.S. housing market going forward for the next decade, and possibly beyond. The more who re-enter the market sooner rather than later — possibly spurred on by this new FHA rule enabling them to do so — the more likely we’ll see a return to a typical home ownership-dominated society and the more quickly institutional investors will pull out of the single family rental market and move on to other ways of making money.

So let’s talk about the new guidelines.

Guideline Particulars

Seasoning requirements on bankruptcies and foreclosures/short sales can be shortened if a borrower experiences and Economic Event. An Economic Event is defined as any occurrence beyond the borrower’s control that results in loss of employment, loss of income or a combination of both which causes a 20% reduction in household income.

Borrower must meet the following guidelines:

• Verify good credit prior to event
• Verify month of loss of employment/income with written VOE or written termination notice or other publicly available documentation AND documentation of receipt of unemployment income.
• Document household income decreased by 20% during a period of more than 6 months (income from all individuals residing at the borrower’s primary residence at the time of the Economic Event and who was a co-borrower on the borrower’s previous mortgage). Need signed tax returns or W2 evidencing prior income
• Post Economic Event Income. Verify and document borrower’s income after the onset of the economic event.
• Re-establish satisfactory credit for the past 12 months. No lates on housing payment
• Complete Housing Counseling and obtain certificate at least 30 days prior to loan application and no more than 6 months prior. All borrowers, including non-occupant co-borrowers must be on certificate.

Preparing For Getting Pre-Approved

Your best bet when buying a home is to be pre-approved and not just pre-qualified. Gather up:

• Employers’ names, addresses and phone numbers from the last 2 years
• Consecutive pay stubs
• W2s or 1099s from the last 2 years
• Completed federal income tax returns
• Proof of income from other non-employment sources
• Government-issued identification
• Recent statements from all of your checking, savings, money market, stocks, bonds, mutual funds and retirement accounts.
• Outstanding loans and credit card statements
• Student loan statements
• Divorce decree if paying alimony or child support
• If you have filed for bankruptcy, have all of that documentation as well.

Talk to a reputable loan officer about your situation. They spend a lot of time on the new programs and guideline changes and will work diligently to help find a good solution for your situation.

 

Pros and cons of renting vs. buying a home

 

We have been talking to a young couple about whether they should rent now because of their particular situation, or whether they should just go ahead and buy. There are certainly many things to consider, and we think this article from Zillow will be helpful. Let us know what you think.

At some point in your life, you will ask yourself the question, “Is it better to rent or to buy?” and the answer is almost always: “It depends on the state of housing and your circumstances.”

After 2008, when the U.S. economy bottomed out and the housing bubble burst, the standard belief that it’s always better to own, rather than rent, was turned on its head. When home values plummeted and many people found they were upside-down in their mortgages (owed more than the home was worth), the American dream of owning was shattered and renting was suddenly the desired living style.

That’s why the “Rent vs. Buy” question requires people to examine all the elements of the decision, since where we live is an emotional decision as well as an economic one. Here’s one way to break down the issues:

Pros of Renting

• Lower cost upfront – As a renter, you will be required to pay first and last month’s rent and perhaps a security deposit for a pet. If you buy, you will be required to pay a hefty down payment, plus costs for the home inspection, closing costs and other potential items such as a survey and sewer scope. It’s a difference of a few thousand dollars if you rent compared with tens or even hundreds of thousands of dollars if you buy.    Freedom and flexibility – If you are new to the area, you can rent and use this time to check out neighborhoods to see where you might possibly want to buy. By renting you can test an area without committing to it.

• Invest money elsewhere – You can take money that would normally be spent on a down payment and house costs and invest in the stock market or other investment opportunities that could get a better return on value, depending on location.

• Uncertainty in your career -- If you think you might need to move in the near future, or are mulling job changes where you could be relocated elsewhere in the country, renting affords the freedom to come and go as needed.

• Uncertainty in income – If you expect a pay hike or pay cut in the near future, that can change your borrowing ability as well as impact your ability to pay a mortgage.

• Time to establish credit – Got bad credit? By creating a history of on-time rental payments, it can help you build good credit that you would need to qualify for a mortgage.

• No maintenance – When the pipe leaks under the sink, you don't head to your nearest hardware store, you head for the telephone and call the landlord.

• Incidental expenses – Occasionally, the landlord might pick up costs for utilities such as water, sewer, garbage, and in some cases heat and hot water as well.

But there are downsides, too:

• You may have no control over the fluctuation of your rent
• You might be limited in decorating the home or apartment.
• You won’t build equity in your home.
• You are subject to the landlord’s decisions.

Pros of Buying

• Build equity – When you pay rent, you don't own anything. When you pay a mortgage, you increase your degree of ownership in your home with every payment. Also, you can borrow against your ownership (or equity) in the home to pay for major purchases and you can refinance your home at favorable rates to help fund major purchases.
  
• Tax deductions – You can deduct mortgage interest as well as your property taxes. Uncle Sam doesn't give renters this bonus. Not only that, but if you meet certain requirements the IRS won't apply a "capital gains" tax on your profits from the sale of your home. In addition, those who work from home may be eligible to take deductions for their home office and portions of utilities.
  
• Creative control – You like dozens of pictures on the wall? Well, hammer away -- they are your walls now. Like the color mango? Go ahead and paint. Wish you had another room? Go ahead and add one.
  
• Maintenance choices – If you own a home, you can decide how to approach maintenance, either doing it yourself or picking your own contractor. If you live in a rental, you are at the mercy of the landlord when repairs are made and how.
  
• Pride of ownership – It might not make sense for everyone, but having a home you own is still the ultimate American Dream.

While a home can be a good investment – and let's face it, you have to live somewhere – many financial experts caution against purchasing a home simply as an investment. Also, keep in mind that the dynamics of real estate markets across the U.S. vary greatly. This reality requires each consumer to be fairly sophisticated not only in terms of their own finances, but about all the data for the market in which they are looking.

 

Thanks, Zillow, for this insightful article.