Paul Dake’s Real Estate Blog

GOOD NEWS!

More first time buyers can help reduce the inventory and balance out the market.  Home values can then stabilize and real estate will be viewed with more confidence. 

Got questions? Give me a buzz!

Moving Forward: First-Time Home Buyers Leading the Way

RISMEDIA, April 18, 2009-  What will it take to revitalize America’s residential real estate market? Many industry observers are predicting a slow recovery beginning this year, with first-time home buyers leading the way. With low interest rates as well as the $8,000 tax credit in place, first-time homebuyers are faced with a huge advantage in today’s real estate market. A real estate professional can help first-time homebuyers take advantage of the market.

There is a variety of market factors that are enticing first-time buyers. Historically low interest rates are very appealing, as is the $8,000 tax credit in the stimulus bill for first-time buyers that earn less than $75,000 ($150,000 for couples). Home prices are also attractive. The average cost of an existing home in 2009 is about $20,000 less than a home listed during the same period in 2008. Couple all this with the fact that first timers are unencumbered with selling an existing home and you have an excellent climate for new buyers.

We are all being affected in one way or another by the current economic situation.

As a service to you, I am providing links and information to help you, or someone you know, better understand the new programs available.

Please share this information with anyone you think may be interested.

This link will take you to detailed information on President Obama’s Housing Plan.

http://www.realtor.org/government_affairs/gapublic/homeowner_afford_stability_plan

There you will find other Treasury Department links with:

• Summary of Guidelines
• Refinance and Loan Modification Guidelines
• Q & A’s
• A Detailed Program Description
• Housing Examples
• How to Determine if a Loan is Fannie Mae or Freddie Mac

Lastly, below is a summary of the 3 key components to the Making Home Affordable Program.

Please contact me if you or someone you know need any further assistance.

Thank you for your time, and…Think good thoughts!

Paul Dake - Keller Williams Realty Group

610-496-4642

www.PaulDake.com

Making Home Affordable Program: Key Components

On February 18, 2009, President Obama announced his housing plan designed to help 7 to 9 million families avoid foreclosure by refinancing or modifying their mortgages.  The plan also strengthens the federal commitment to Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs).

On March 4, 2009, the administration released detailed guidance on the Making Home Affordable Program.

Here are the key elements of the Obama plan:

1.  The Home Affordable Refinance Program.  Under this program, eligible borrowers may refinance loans that Fannie Mae or Freddie Mac (the government sponsored enterprises, or GSEs) own or guarantee.  The program can help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent.  Cash out refinancings are not permitted.  The program ends in June 2010.

2.  The Home Affordable Modification Program.  This is a $75 billion program with lender, servicer, investor, and borrower incentives to make it work.  The program is limited to homeowner-occupants who are at risk of default or already in default and who have loans at or below the maximum GSE conforming loan limit of $729,750 (or higher for 2-, 3-, and 4-unit properties).  Loan modifications under the program may be made until December 31, 2012.

3.  More Support for the GSEs.  President Obama also announced more support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth.  The plan also raises the cap on mortgages that the GSEs may hold in their portfolios by $50 billion to $900 billion

This Wall Street Journal article has some good, basic info to find out:

- What programs do you qualify for?

- Can you refinance, even if you owe more than your home’s current value?

- Details of the Tax Credit for Home Buyers in 2009 (Big Changes Here!)

- Were you renting and got kicked out because your landlord foreclosed?

- How to get credit for adding energy efficiency to your home.

As more details become available, I will share them with you.

Call me anytime if you have questions on how to get started with your home buying or selling plans.

http://online.wsj.com/article/SB123508484933027389.html

Good Day!

From my perspective, there is still a lot of activity in the market, although deals sometimes take a bit longer to close.  Some home Sellers are reluctant to make further price reductions, and Buyers have a lot of homes to choose from causing them to take their time on making a decision.  Interest rates are still amazingly low.  However, it seems likely that as the market improves, the rates will rise.  We even saw a slight bump in rates late last week.

It is still a fantastic time to buy real estate.  If you’re waiting until prices drop further, just remember that the increase in interest rates could more than make up the savings difference.  When the media frightens the consumers, they freeze up - do nothing, and the market stagnates.  I say this all the time:  everyone’s situation is unique, and what you hear on the news certainly does not apply to all buyers and sellers.

If you have questions or are unsure about your next step, just give me a call for a frank discussion about the real estate market.

Here is an article by Philadelphia Inquirer writer Alan Heavens:

Housing Crisis Needs Solutions, Not Scapegoats

Op/Ed By Alan J. Heavens

RISMEDIA, February 4, 2009-(MCT)-As a real estate writer for The Philadelphia Inquirer I am being inundated by opinions on the housing crisis. They fall into two categories: assigning blame and criticizing others’ proposals without offering alternatives.

Fingerpointing and scapegoating are counterproductive. Instead of criticizing possible solutions, try coming up with your own, so it can be considered rationally.

Michael Nolen, who has been building houses in the Philadelphia suburbs for 32 years, is troubled by what he considers “static” about the reasons for the current difficulties.

“I believe that the housing crisis is an ‘affordability issue,’” he said. “Just before the housing downturn in 2006, I heard an economist say that we shouldn’t worry about the mortgage rates going up a percentage point. He said the problem was that the price of houses was going up over 10% a year, and eventually people will not be able to afford them.”

Nolen believes the fix is to have home prices drop to where people can, indeed, afford them, with mortgages underwritten in ways that guarantee the buyers can pay them off. He also suggests raising wages so people don’t have to get in debt over their heads to buy houses-a notion that has also been proposed by Southern Methodist University professor Ravi Batra.

The glut of unsold houses in the Philadelphia region is the result, Nolen said, of “selling to those who could never afford them from the beginning. This was achieved by never requiring mortgagees to have the ability to pay the loans.”

I’m not taking sides here, but any price cuts are going to have to come from those selling existing homes rather than those selling newly built homes. Marshal Granor, principal at Granor Price Homes in the Philadelphia area, says builders have gone about as far as they can go cutting prices while material and labor costs remain high.

Many potential buyers are afraid of paying too much for houses that will lose value. Sellers fear that lowering asking prices too much will leave them unable to trade up, or unable to weather a prolonged recession.

Think about this: George Tolley, professor emeritus at the University of Chicago, points out that foreclosures have affected less than 1% of all houses in the United States, yet we are given the impression every day that everyone is losing his or her house.

“Alarmist discussion that mortgage indebtedness exceeds market value for up to one in six homes ignores the fact that most homeowners realize that values are likely to recover,” he said.

What’s more, Pepperdine University professor Dennis Torres predicts that by 2015, “homes will be worth twice what they are today, and by 2018 a home will be worth three times as much as in 2008.”

Combined with low fixed rates, a meaningful drop in prices would create affordability today. If Torres is right, few of us will be able to afford to buy six to 10 years down the road.

© 2009, The Philadelphia Inquirer.

Thanks to Karen Birnesser of M&T Bank for the following: 

“IT’S A CRUEL, CRUEL SUMMER…LEAVING ME HERE ON MY OWN.” From 80’s band Bananarama And that’s exactly what potential home buyers and refinancers who stay on the sidelines might be singing.Although home loan rates are very attractive now, the picture could be quite different as some inflationary factors will likely come to light heading into summer. Oil prices may be on the rise as we approach the summer driving season, some of the economic stimulus might begin to take hold, corporate cost-cutting measures could start to bear fruit, and, perhaps most importantly, the Fed will no longer be a buyer of Mortgage Bonds. These are all ingredients in a recipe that could very easily result in significantly higher interest rates this summer…so if you have been thinking about acting on a home loan, do not delay.But with no hint of inflation in the current market, why would Bond traders be fearful now? Are they listening to strange voices and what did they say? The forward looking markets got an earful from Fed Governor Frederic Mishkin last week…and he’s not the only one. Mishkin said that “inflation could come to the forefront, given all of the government programs”, and “once the economy recovers, liquidity must be taken out of the markets”…meaning the Fed may need to rapidly hike rates down the road, to control the potential of inflation.

When I hear the negative news reports about the economy, the real estate market, job loss, etc., I have to say…. it makes me a little crazy!  Now, I understand that there is the reality of the situation, but can’t we have someone say something like, “We are being challenged right now, but let’s be thankful for what we have.  Let’s keep on working and moving forward.  Let’s be optimistic and positive in all that we do, with the knowledge that WE CAN DO IT.”

Staying positive in all that we do makes a huge difference in our lives!  Yes, we all get faced with tough situations, but if we wallow in negativity, how is that going to help?!?

Energy flows where attention goes!  

“Thoughts become things…choose the good ones! (Mike Dooley)

Let’s make 2009 a Fantastic, Peaceful and Prosperous Year!

Buying and selling real estate can be complex and confusing, particularly amid a process rife with misconception. To dispel a few common real estate myths, I have researched some information for you to offer some “truths” to help you better navigate the home buying and selling process.  Remember, I am always available to answer your questions and discuss your needs in more detail.

MYTH: All Realtors are created equal
TRUTH: Real estate agents vary widely in terms of experience, skill, ingenuity, accessibility and ability to produce results quickly and smoothly, among other key factors. Interview at least 3 agents, and come prepared with a list of questions you plan to ask. What is their track record? How do they market listings? Do they have a team to help show your home or does the responsibility fall on one particular agent? Due diligence is key to finding a representative prepared to work hard and who will be available to answer your questions along the way.  (p.s. I’d like to apply for the job!)

MYTH: Home inspections should wait until an offer has been presented
TRUTH: Even before listing a home, it is recommended that sellers hire professionals to inspect the property prior to putting the home on the market. Today’s buyer is discriminating and has many choices - don’t give them a reason to have concerns. A recent client of mine had the report available to buyers and we received the offer, they buyers had waived the home inspection contingency making the offer cleaner, simpler and more desirable for my client.  A success!

MYTH: All negotiations start with a buyer submitting an offer
TRUTH: Sellers do have ways to kick start a negotiation, such as a “Reverse Offer.” Consider that one buyer who has been back for a second or possible third look, but hasn’t pulled the trigger. Make them an offer!  This will create an opportunity for the buyer’s agent to sit down with his or her client and potentially help close the deal.  It shows you’re ready to negotiate in good faith.

MYTH: Only home sellers - not buyers - need a real estate agent
TRUTH: Purchasing a home could be the most important and complex financial transaction you engage in, and going it alone is risky. Indeed, a buyer’s agent can save you time, hassle and thousands of dollars. Take time and care when selecting a real estate buyer’s agent - find someone you can trust, and that you have a good rapport with.

MYTH: Buyers should wait to secure loan approval until they’ve found a home they want to buy
TRUTH: Many buyers want to find the “perfect” home before having their credit pulled, which can backfire when an offer is on the table and time is of the essence. I highly recommend buyers get pre-approved for a loan even before you view your first home. Your credit report may contain inaccurate information that you were not aware of, which can be a time consuming process to rectify. You also want to find out what your loan options are before taking the time to house hunt.  Ultimately, you will need a pre-approval letter to submit with your offer  I work with mortgage officers that I know take good care of my clients.