5 Financial Reasons to Buy

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Higher Mortgage Rates Predicted -- Perhaps Even Higher Than You've heard

Most experts are calling for an increase in mortgage interest rates in 2014. However, some experts believe the increase will be more dramatic than is being projected. They believe rates will be closer to 6% than 5% by year’s end. The Fed announced last month that they would be pulling back some of their stimulus package which has helped the housing market by keeping long term mortgage rates at historic lows for the last few years.

 Above are the most recent projections of where rates will be at the end of 2014 by the four major agencies. However, we believe that the government is not afraid to shoot right past these levels.

Doug Duncan, chief economist for Fannie Mae, this past summer announced:
 “I don’t think the Fed ultimately would be troubled with a 6.5% mortgage rate.”

 And Frank Nothaft, Freddie Mac VP and chief economist, at virtually the same time explained: "As the economy continues to improve, we expect to see continued upward movement in long-term interest rates… At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.”

Only time will tell. However, we feel that rates could easily reach the 5.75-6% range by year’s end.

My All Thumbs Year in Review

This has been quite an eventful year in EcoRealty, Check out some of our posts and predictions.

Taper Time

The word tapering in financial terms is increasingly being used to refer to the anticipated reduction of the Federal Reserve's quantitative easing, or bond buying program.

The Fed has announced that they would be pulling back some of their stimulus package which has helped the housing market by keeping long term mortgage rates at historic lows for the last few years.

Some reports will now claim that housing prices will have to drop as interest rates begin to rise. There is no historical evidence of this. Below is a chart showing the last four instances of mortgage rates rising dramatically and what happened to home values at the time.(click on graphic to enlarge)

Sales Report for Existing Homes

Housing Market Continues to Rebound

The housing market showed a number of positive signs in the midst of seasonal easing, according to the latest results from the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. While homebuyer traffic continued to decline, the non-distressed market remained relatively strong in October. Time-on-market for non-distressed properties averaged 8.9 weeks in October, based on the three-month moving average, up only slightly compared with the previous month and well below the average of 12.0 weeks in October 2012.

Non-distressed properties in a number of states in the West were on the market a significantly shorter amount of time than the national average, led by California at 5.0 weeks in October, based on the three-month moving average. Non-distressed properties in the Farmbelt, South and Northeast were on the market for at least twice as long as properties in California. The average number of offers on non-distressed properties remained high in October at an average of 2.1, based on the three-month moving average. In October 2012, non-distressed properties received an average of 2.0 offers. 

Home prices for non-distressed properties are holding firm, with a national average of $270,700 in October, based on the three-month moving average, up from$265,500 the previous month and in line with the $271,500 average seen in October 2012.
 “There is a shortage of good inventory,” according to an agent in California. “Homes that are priced correctly and in good condition with good floor plans are selling quickly and often with multiple offers.”

Some 5 Year Plans for Your Home's Value

How Trees Can Boost a Home's Sale Price

In an analysis of 2,608 real-estate transactions over 10 months, researchers found that homes with "street trees," those planted between the sidewalk and street, sold for $7,130 more, on average, than homes without street trees.

A recent Wall Street Journal report goes on to suggest that neighbors can reap the benefits as well. Homeowners who live within 100 feet of street trees enjoy a sale premium of $1,688, on average, even though the trees aren't on their property.

Why Rates Are Low Again

Mortgage rates are declining towards their all tine lows. This chart helps explain why.

FHA Mortgages Are Increasingly Popular For Buyers

Nearly 1 in 5 home buyers use FHA financing, though, and there are good reasons why. The FHA has been helping U.S. home buyers since 1934 and, with its myriad of loan programs, there's an FHA loan program for just about anyone.

The Mortgage Report's FHA FAQ will help you understand the in-and-outs of how the FHA mortgage program works.

Perfect Timing for a Realtor's Open(casket) House

Welcome to the highest priced residence in Belleville, NJ. The historic converted 18th century mansion had been on the market for over six months at $1,650,000 with no takers. So it was time, last week, for the listing agent to pull out all the stops with a catered open house to alert local brokers to news of a huge price drop to $999,000. The chief selling point was the owner's amazingly luxurious residence on the two upper floors of the historic mansion that had been converted to "mixed use" on the ground floor.

"9000 square ft mixed use building with additional 2 story structure (10 car garage) and parking in rear. Ground floor appropriate for commercial use. 2nd floor is a residential renaissance masterpiece with work by Italian and French master craftsmen. Also includes Freight elevator, finished basement."

Until we arrived at the downtown Belleville address, most the invited brokers had no idea what the current commercial use was.  At the time I opened their creaky front door, all 3 sales persons were occupied on the upper floors, leaving me several creepy minutes to wander undisturbed through the ground floor establishment accompanied only by the funereal piped in mood music. In my mind, I channelled The Adams Family theme.

Flow Chart of The Morgtage Process

Despite the hurdles that many buyers face in getting a mortgage approved, today's home buyers have more mortgage financing options than at any time in the last 5 years. With so much choice and brand-new rules, it can be tough to know which loan is best. Thanks to Dan Green's Daily Mortgage Report:

Check local mortgage loan limits at The Mortgage Reports.

The Shutdown's After Effects on Housing Market

The government closure that finally ended late last week was beginning to put a noticeable  crimp in the recovering housing market.

Housing lenders rely on a variety of government data, such as verification of borrowers' income, which are unavailable with the partial closure of the Internal Revenue Service and other agencies. The mortgage industry has found creative ways to work around the shutdown. Banks are getting data from other sources. Sometimes they're simply taking the risk of making loans without some information.

Nevertheless, the shutdown is delaying loans around the country. And some experts warn that home lending could have been more severely disrupted if the political stalemate in Washington persisted much longer.

The chart below, showing rate projections for the 2014, was prepared just before the shutdown.

The Price of Waiting to Buy

The Government Shutdown and its Effect on Real Estate

Congress has failed to approve a Continuing Resolution (CR) providing funding for most government operations. Therefore, spending authority for most of the government expired at midnight on Sept. 30, 2013. Until legislation providing for funding is signed into law, many offices and programs of the federal government are now shut down.

This means many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The Office of Management and Budget (OMB) requires each agency to have contingency plans in place. The information below is based on a National Association of Realtors" (NAR) staff review of agency contingency plans for the current shutdown and past experience with previous shutdowns and near-shutdowns.

Internal Revenue Service The IRS is closed and has suspended the processing of all forms, including tax return transcripts (Form 4506T). These transcripts are required for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted.

Federal Housing Administration 
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. Management & Marketing (M&M) Contractors managing the REO portfolio can continue to operate. You can expect some delays with FHA processing. inistration The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing.

Renovation SOS

Licensed contractor John DeSilvia comes to the rescue of distraught homeowners who have seen their homes left in shambles by the contractor they hired to fix it. Bad plumbing, shoddy framing, being structurally unsound: These are the complaints that homeowners have after hiring a bad contractor. DeSilvia steps in to make everything right, but he only has a few days in which to do it. After John and his team finish their work, these homeowners won't recognize their place.

 "Rescue My Renovation" crews demolish, build, renovate and refurbish projects in Tri-State area homes. “If you have been a victim of a contractor who has done shoddy work on your home, they want to hear your story,” Firstbrook said. If you would like to be considered for the new series and are currently living in nightmarish conditions, email casting@boywonderproductions.net.

The Fate of Rates

Last week, Bernard Bernanke startled many by announcing that the Fed will not wind down their bond buying program right now. The program is part of an overall stimulus package geared at bringing back the national economy. The Fed’s purchase of these bonds over the last few years has driven mortgage rates to historic lows. The assumption that there would be a reduction in bond purchases has caused 30 year mortgage rates to spike upward over the last few months. Surprisingly, Bernanke revealed the Fed will continue bond purchasers at the current pace.

 What does it mean to mortgage interest rates? Some buyers are waiting to see if interest rates will come back down before making a decision about buying a home. Though no one can guarantee where rates will be in a few months, we don’t believe waiting is a good strategy.

Most experts believe rates may actually move higher. The Mortgage Bankers Association,Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb.
With home prices increasing and interest rates projected to also increase, the cost of buying a house could quickly increase rather dramatically.

NJ Cash Buyers Grow to 45% of Housing Market

As interest rates climb steadily, the proportion of cash purchases that are taking place in New Jersey has made it one of the top 10 markets in the country for investors. In addition to rising interest rates, the reluctance of big banks to make mortgages easily available has also become a significant contributing factor, as well.  

Finally, given their propensity to pay for real estate purchases with cash, in whole, and up front, institutional investing has also been a huge contributing factor Cash sales: 45.0% Median list price: $279,900 institutional sales: 3.1%

Mining Ethics From the Wind

Ethical Electric is America's first supplier of exclusively 100% renewable energy. They characterize themselves as "the good guys" in the energy industry. Their goal is to power as many American homes and businesses as possible with 100% clean energy from renewable sources like wind and solar.

Ethical Electric intends to use their profits to fund causes that benefit our planet and "advance equality, peace, justice and opportunity." To spread the word, they're partnering with some of such prominent environmental organizations as the Sierra Club, the League of Conservation Voters and the Wilderness Society.

Switching is fast and easy - you'll still get the same bill, the same service, over the same wires. All that changes is that instead of powering your home with dirty energy, like oil, gas and nuclear, funding dirty politics, your electricity will be 100% from local, renewable sources and a share of your electric bill will help support their affiliated environmental causes.(click on photo to enlarge)

Bubbles of Fresh Expectations

Rebounding from 6 years of declining prices, this infographic includes the average projected growth in home values for the next 4 years.