Posted: Thursday, May 14, 2009
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Home affordability
 Home affordability improved again Wednesday after the government reported worse-than-expected results for April’s Retail Sales.
Mortgage rates edged lower for the third consecutive day. The impetus for the rate rally this week may be a long-awaited stock market correction. After touching multi-year lows in mid-March, the Dow Jones added 30 percent going into last Friday. It has since lost close to 300 points and as those dollars leave the stock market, they’re finding their way toward bonds. The demand is pushing bond prices up which, in turn, causes rates to fall. Yesterday morning, the rally in rates picked up steam on the heels of April’s Retail Sales report. With figures off a half-percent from March and roughly 7 percent from 2008, investors are concerned that consumer spending may not be as strong into the summer months as previously expected. Consumer spending is important because it comprises two-thirds of the economy and is believed to be the way out of the current recession. If expectations of a recovery caused mortgage rates to rise recently, it makes sense that a revision of those expectations would cause rates to fall. Markets are fickle, however, and the slightest bit of “good news” could pump cash back into stocks at the expense of bonds. Until then, however, enjoy the low rates — they may not last long.
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Posted: Friday, April 10, 2009
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A lender friend sent me an article that I just had to share. It was written by Damien Caves, for the New York Times. Here's a link: https://tinyurl.com/falling-prices And here's the print version: While her friends ran up credit card debt and bought show homes beyond their means, Taina Goldman saved for a down payment. She moved back in with her parents, sharing a room with her young daughter, ate in and worked two jobs. “I don’t live dangerously,” said Ms. Goldman, 42, a nurse. “You can’t live on ‘what if.’ Now, she is reaping the rewards. She and her daughter recently moved into a three-bedroom, two-bathroom ranch-style house, with a pool, after putting 20 percent down and persuading the seller to cover most of her closing costs. She paid $187,000 for a house that sold in July 2006 for $370,000. And there are many more like her. Across states with high numbers of foreclosures, severe declines in real estate values are reinvigorating a group of buyers previously priced out: middle-class families with steady jobs, who are often buying a home for the first time. Figures released last week by the National Association of Realtor s show that sales of existing homes across the country rose 5.1 percent in February, with much of the increase concentrated in foreclosed homes bought for less than $300,000. Even with tighter borrowing restrictions, many families used to renting are discovering that they can afford to own. “They are the most active participants right now because they don’t have the burden of having to sell their old homes,” said James Diffley, a managing director at IHS Global Insight , a research firm. “You have a bunch of young people who were forced to sit on the sidelines because houses were so darn expensive, and now they’re starting to come in.” The addition of a tax credit of up to $8,000, part of the federal housing rescue plan passed in February, appears to be sweetening the pot for some of those buyers, while banks eager to unload foreclosed properties have also begun to offer incentives, like money for closing costs. “A lot of the banks have adjusted their thinking,” said John Ahlbrand, a real estate agent who with his wife, Ruth, owns ReMax Central in Las Vegas. “If they show they have the ability to repay — imagine that — then the bank helps.” Jennifer Vaughn’s development in Homestead is one of many where prices seem to fall by the day. A 26-year-old first-time buyer, Ms. Vaughn closed on a three-bedroom, three-bathroom townhouse in November, paying $87,000 for the foreclosed property with an F.H.A. loan. The price was far below the $261,000 the house sold for in October 2006, but a few weeks ago, a townhouse with the same layout and fancier features sold for $75,000. And a third is about to close for $65,000, said Andy Lopez , a real estate agent at Keyes Company Realtors who found Ms. Vaughn her townhouse. So already, she appears to owe more than her home is worth. Not that she minds. “I’m going to stay for five or six years at least,” Ms. Vaughn said, “and I’m sure prices will go up somewhat by then.”She also has one of the recession’s safest job: she works for a collection agency. Ms. Vaughn said she could afford her $1,100 monthly payment, which includes taxes and insurance, and had already settled in. “It’s like the best feeling,” she said, admiring the arches in her doorways. “I never thought I could own.” Many other buyers are equally giddy. Julio Cesar Memeses, 45, a construction worker who is about to close on a three-bedroom home in West Phoenix for $50,000, said he and his family were thrilled to own “a piece of the American dream.” He said they were not worried about making their mortgage payments because the price was so low. Ms. Goldman, too, said she felt pleased. “It’s like, wow, I accomplished something,” she said. She said she had visited 200 properties before finding her current home late one night and deciding she had to have it. Sliding open the glass door to the pool on a sunny afternoon, she said: “I love the light. That’s what captured me.” Her daughter, Tiffany Munro, 14, stood beside her. “I’m, like, this is my house,” Tiffany said, looking skyward, and smiling. “I get to live here.” In all, Ms. Goldman said she spent about $6,000 fixing up the house. Like Ms. Vaughn, Ms. Goldman said she did not worry about declining prices because she had no plans to leave. Asked if she felt vindicated — rewarded for saving when so many others spent — she said no. “It’s sad that for me to buy a house, the economy had to be like it is,” she said.
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Posted: Friday, February 27, 2009
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![BusinessWeek names the best affordable suburbs in all 50 states]() Nationwide, home affordability has received a serious boost from the combination of falling home prices and falling mortgage rates.
Today, because of the sagging economy, in most parts of the country, the cost of owning a home versus renting one is now very close to its historical average. That said, though, near every major city, there are some neighborhoods in which home affordability and quality of life are stand-out. Using real estate data from OnBoard Informatics, Business Week highlights these areas in a report it calls the "Best Affordable Suburbs". Now, the country's "Best Affordable Suburbs" doesn't list the nation's most affordable suburbs, but instead, a group of cities, towns, and villages in which the populace sits between five and sixty-thousand, and the economy, the schools, the lifestyle and the crime levels are all within a desirable range. As concluded by Business Week, these are areas in which buying a home is a good value. At the top of the list is Awake, Wisconsin, a suburb 20 minutes west of Milwaukee, prized for its outdoor lifestyle and healthy jobs market. The complete 50-state listing is posted at Business Week's website.
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Posted: Wednesday, February 25, 2009
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 One popular housing theory is that -- before a bona fide housing recovery can begin -- the cost of owning a home versus renting one must return to historical levels.
If that belief is a truth, a national return to rising home prices may be in store for 2009. Falling home prices coupled with falling mortgage rates, too, have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home. This is the exact 18-year historical average and not since 2001 has the gap been this small. As reported by the Wall Street Journal, though, the study has some flaws. For example, the data doesn't account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies. But, combining a relatively low cost of ownership with the government's $8,000 tax credit for first-time home buyers is likely to convert long-time renters into never-before homeowners. This, too, is thought to be a key element of the housing recovery. In many markets (but not all), home prices are expected to edge lower through 2009. Provided mortgage rates stay low, the cost gap between owning and renting will shrink even more.
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Posted: Wednesday, February 11, 2009
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![Home affordability improved because of the Geithner speech]() His speech was much anticipated, but it was what Treasury Secretary Tim Geithner didn't say Tuesday that helped home affordability.
Mostly it was because of "safe-haven" buying on Wall Street. Safe-haven buying is when investors move cash to the safest investments possible for fear of losing their money elsewhere. This existence of the pattern is evident in looking at yesterday's Dow Jones Index timeline. Stock markets were down some in the morning. Then, at 11:00 AM ET, in the moments immediately following the public release of Geither's speech as text, stock market plunged by about 2 percent. As the speech was delivered live, markets fell by 1 percent more. It's not that Geithner's speech was a bad one, per se. It's just that Wall Street was looking for a detailed plan that included remedies for banking, housing, and the economy overall. What it got instead was an outline for a plan and a frank discussion about the complexity of the economy. Stock markets had been bid up last week in anticipation of a bailout. Yesterday's action was the subsequent sell-off because economic uncertainty continues to linger. It all ended up being good news for mortgage rate shoppers, though. When the dollars fled the stocks, they made their way towards safer, less-risky investments like mortgage bonds. And, because mortgage-backed bonds set the "going rate" for conforming mortgages nationwide, the added demand yesterday caused mortgage rates to fall, making mortgaged homes less expensive on a monthly basis, relative. For now, rates remain near the bargain levels set in early-January. As the Treasury clarifies its plan in the coming weeks, however, rates are susceptible to big swings. (Image courtesy: The Wall Street Journal)
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