Rate versus Price Reduction

This is a great reminder from our friend Mike Ouverson at Waterstone Mortgage:

Since the Fed’s Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings…and rates overall are off their lows. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could well cost you more money in the long run.

Let’s look at an example to see why. Say a home buyer wants to buy a home that costs $300,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $10,000. If, in the meantime however, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and locking in the 5.25% interest rate. In other words, the buyer would save $10,000 only to end up paying $35,000 more.

Now these prices and rates are just for the sake of example. But the point is that home prices are already very affordable…and rates are still low for now. So in the end, waiting for a home price to reduce may end up costing you much more than you expect if rates rise.

Today, 30 year interest rates are as historically low as 4.5% and 15 year interest rates are as low as 3.875% and aren’t expected to go much lower.

Six New Programs If You Have a House To Sell

There’s never been a better time to invest in a new home, but do you have a house to sell?  Here is a brief overview of six alternatives for our clients to sell their house for those that have a house to sell.  Read it over and stop by for a visit so we can explain them in further detail.

1. Buyer For Your House

It may not be the best time to sell your home, but if you are committed to selling your home there are buyers for your home and we can show you how.  We also have a preferred Realtor contact that will sell your home at a reduced commission, which will save you thousands of dollars on the sale of your house and put more money in your pocket.   

2. Lump Sum Money From Your House

This alternative will give you the opportunity to have someone provide you with a large sum of money for your present home and afford you the opportunity to do the things that mean the most to you and bring comfort, peace, happiness, and contentment for the things you want to do in life.  This is offered by banking institutions every day and there are generally no qualifications for it other than having equity in your home.

3. A Monthly Fee Paid to you to Cover Your Present Home

Have someone pay your current mortgage or loans each month and create a source of income by turning your house into an investment.   That source of income has many benefits but the main purpose for you is to keep your house in place and have money coming in while you wait for the market to rebound a little bit.  This will help your cash flow, build wealth and secure your future for the things that are important to you.

4. Appreciation of Present House

Do you think your house will be worth more or less in the future?  Most folks would answer more and that is correct if history is an indicator.  Banks continue to loan money on homes, lines of credit and second mortgages because they know homes are an investment that will eventually increase in time.  The key is buying and selling at the right time and now is a great time to buy, and maybe not the greatest time to sell, so these alternatives help you take advantage of capital appreciation.

5. Reverse Mortgage – A New Alternative for Those With A House to Sell

What if a bank would give you money you did not have to pay back in your lifetime?  For those over the age of 62, there are new reverse mortgage programs where you can purchase a new home with low interest rates and no income qualifications and don’t have to make any monthly payments until your sell your move out of your home. 

6. Guaranteed Price Alternatives

By using one or more alternatives, you are locking in today’s price.  With inflation possibly on the horizon and the increased cost of materials, labor, oil prices and borrowing money, by investing today you will essentially be riding the wave of price increases and intern increasing your base of wealth for the things you want to do in the future.

BIG NEWS: $6,500 Tax Credit for Repeat Buyers

The federal government is doing its best to continue to stabilize the housing market and have expanded the original $8,000 First Time Home Buyer Tax Credit to also include a $6,500 Tax Credit for Repeat Buyers.  This is great news for anyone who is considering investing in a new home since the government is essentially going to give you $6,500 for moving.  There are some conditions and limitations though and we have listed some of the more important ones below. 

1. A repeat home buyer is defined as someone who has used their sold home, their home being sold or their current home as a principal residence consecutively for 5 of the previous 8 years.
2. You must be under contract by April 30, 2010 and close by July 1, 2010.   As a side note, the government said there is no way they will be extending these benefits so it is highly unlikely they’ll be extended (although it is the government saying that so you never truly know).
3. Income limites of $125,000 for a single person and $250,000 for a married couple.

Combine the $6,500 tax credit gift with historic low interest rates, housing at its most affordable point in years and this is a great time to invest in a new home. 

So you have all the complete facts, please visit our website at http://www.medicidevelopment.com/special-programs.php to find the Frequently Asked Questions regarding the $6,500 Tax Credit.  You can also go to http://www.federalhousingtaxcredit.com/ hosted by the National Association of Home Builders (NAHB) to find out more as well.

we have also listed below many of the Frequently Asked Questions regarding the new tax credit as provided by the National Association of Home Builders (NAHB)

River’s Edge receives VA & FHA Approval!

We are pleased to announce River’s Edge has just received approval for it’s future homeowners to receive VA and FHA loans when financing their home.   What does this mean to you?  Some of the benefits include:

1. Buyer’s at River’s Edge can finance a home with low down payment of as little as 3.5% of the purchase price.

2. Allows for seller’s assistance with closing costs.

3. Mortgage Insurance Premiums are much less than with conventional loans saving you money.

4. Lower income requirements for the borrower.

5. Can purchase a home through a Reverse Mortgage.

6. Many more benefits…

More information will be posted on our website in the near future, please keep an eye out for it.  Also, if you have further questions regarding these programs, make sure to call your representative at River’s Edge at 763-493-8955.

Have a happy 4th of July.

Active Spring for the Twin Cities Housing Market

The news keeps improving regarding the Twin Cities Housing Market.  The Minneapolis Area Association of Realtors (MAAR) reported on April 13th, 2009 that the market is seeing considerable improvement and “all in all, dropping prices, low mortgage rates and government incentive programs for home buyers are making this a spring to remember.”

The complete MAAR Weekly Market Activity Report by reads as follows:

“It’s becoming a wild and active spring for the Twin Cities housing market. First, pending sales ought to give REALTORS® some joy in their Easter baskets, with 1,004 reported for the week ending April 4—a 28.7 percent increase over last year and the best single week since May 2007. New listings went skyward compared to last week with 2,055 for the week ending April 4, but they remain 11.2 percent behind the same week a year ago.

The recent jump in sales is bringing the supply of available homes down even further. There are currently 26,085 homes on the market in the region—17.5 percent below this time last year and good for 7.7 months of supply.

Finally, like Warren Robinett in Adventure, this week’s WMAR has its own Easter egg tucked away. The Housing Affordability Index for April has grown to 218, which means the median family income is 218 percent of what’s necessary to qualify for the median priced home. For those of you scoring at home, that’s a 40.8 percent increase over where we stood last year at this time and is 77.3 percent over our low point of 123 in July 2006. We have to bear in mind that increased lender-mediated activity makes that number supernaturally high.

All in all, dropping prices, low mortgage rates and government incentive programs for home buyers are making this a spring to remember.”

You Can Have It All – In Today’s Housing Market

Relax for a moment and take a deep breath.  I want to take you to a place where there are no distractions, only peace and quiet.  I want you to forget about the economy and the media’s coverage of the housing market and all your preconceptions for a moment.  Now continue on and read the many reasons (in no particular order) why now is undoubtedly the best time to invest in a home. 

 1.    Low Interest Rates - Rates remain at near record lows.  A conventional mortgage on a $200,000 home at a rate of 6.25% (last year, and likely next year) vs. 4.75% (today) would cost you over $186 per month more or $2,232 per year more.   This adds up to almost $66,960 of savings over the life of the loan.

 2.    Affordable Home Values - Home values are sort of irrelevant? Whether values are historically high or historically low, everyone is on a level playing field.  For most home investors, the possibility of receiving a lower than expected price for their existing residence is more than offset by the lower price they are receiving on their new home from a Builder.  Subcontractors and suppliers are very eager for business and are cutting costs for new construction allowing Builders to price homes aggressively low.  Plus, according to the Minneapolis Association of Realtors, the Housing Affordability Index (HAI) continues its yearlong improvement and another new record with a March 2009 HAI of 206-31.2 percent ahead of its March 2008 mark of 157. This will not last!

 3.    Higher Appreciation - Which investment is more likely to appreciate – your current older home that may need work or a home freshly designed and built to be relevant for today’s and tomorrow’s buyer?  After all, while you wait for the market to recover, wouldn’t you rather be waiting in a new low maintenance home, customized to your taste and style rather than wondering if your lawnmower is going to start this spring?

 4.    Buy Low, Sell High - It’s the first rule of investing.  Home purchases are not meant to be short-term investments and smart buyers know that waiting for a stronger market means paying higher prices.  You’ve heard the news that new housing starts have been falling for the past two years, meaning the supply is rapidly decreasing.  This also means that when the demand returns to normal levels and new homes are in short supply, prices will undoubtedly skyrocket.   It’s Economics 101, ask Warren Buffett!  Don’t lose out your chance to invest near the bottom.

 5.    Energy Efficiency - New homes have advanced technology and environmentally friendly features that can help you save money.  Take pride in living in a more environmentally friendly home and figure out what you would do with extra money in your pocket each month.

6.    Experience the New Home Experience – Builders are rolling out the red carpet for their customers these days.  Don’t miss out to have a great buying experience with a customer focused builder before they get too busy to go that extra mile.

7.    Quality Counts - Homes built in a slower housing market are constructed with more care and by more highly talented craftsman.  A lot may have been overlooked in the days of “How fast can we build?” – not on purpose of course, but some builders may not have had the time to be picky.  Now builders are able to be more hands on and make sure attention is paid to the details.  Plus with a possible lighter workload, only the best tradesmen have retained by subcontractors, which in effect “weeds out” the amateurs.

8.    Made in the USA - With the housing industry comprising over 1/5 of America’s GDP, it’s no wonder the economy is struggling.  Most Americans feel a patriotic draw toward buying American made products, but does it really make a difference?  Think about this – virtually ALL of the dollars spent building and buying a new home stay in your local community.  Simply put, those who wait on the sidelines are continuing to compound the problem, but those who can afford to purchase a car or home or something else manufactured in the USA during a time of recession and actually do it are patriots and should be applauded.

9.    Unbeatable Investment – Even in down markets, over the long term home prices still appreciate more than the stock market.  Although housing prices have decreased over the past few years in the Twin Cities, take a look at what’s happened to the much more volatile stock market only in the past few months.

10.   New $8,000 Federal Tax Credit – Until December 1, 2009, qualified first-time home buyers (those that haven’t owned a home in the previous 3 years) can receive an $8,000 tax credit that doesn’t have to be paid back.  Learn more at: www.FederalHousingTaxCredit.com

11.   The Market has Improved - According to the Minneapolis Association of Realtors the Twin Cities market is showing significant signs of improvement.  Pending sales are up 33 out of 34 weeks this year over the previous year.  Also, new listings and total inventory of homes are down over the same period.  This means more home sales and less competition to sell your home, which is great news when selling or buying a home.  These indicators signify the Twin Cities market is stabilizing which is necessary for the market to continue to improve.

To add to the discussion for further explanation please make a post on our BLOG.

Thank you to Tom Joyner from the Villas at Timber Run and Jeff Scherber from Prime Mortgage who contributed to this BLOG post.