There are lots of reasons to own versus rent a house, but it depends on a variety of factors. To begin the thought process, I recommend that potential buyers consult with a mortgage broker to see how monthly rates offered by different loan programs compare to monthly rents. Currently, historically low mortgage rates and affordable housing prices make right now an opportune time to buy.

Buying a home largely depends on your lifestyle and current income. Qualifying for a loan and the down payment are oftentimes the two biggest hurdles that buyers face. The next question to ask is how long do you plan to live in the house? Given the difficult economic times, I recommend to buy and own a home for at least a 3-5 year period of time. The forecast is that the next few years will see slow growth. Transactional costs are expensive, real estate is not a liquid asset, and prices may appreciate or depreciate. Buying a home requires thoughtful contemplation.

Overall though home ownership’s benefits typically outweigh the option to rent:

• Tax Deductibility—You can deduct the cost of your mortgage loan interest from your state and federal income taxes. Since interest generally will account for most of your payment during the first half of your mortgage, the savings can be significant. Some of your costs at the time of closing (including prepaid mortgage interest) can be taken as deductions on that year’s income tax return, and points paid up front at the time of closing represent additional mortgage interest and may be taken as a deduction.
• Tax Deductibility of Property Taxes—You can deduct all of the property taxes you pay.
• Appreciation Potential—Real estate is considered a strong long-term investment because it usually appreciates in value. The effects of borrowing potential can increase as the value of the home appreciates.
• Capital Gains Exclusion—When it’s time to sell your home the amount of capital gains you have to pay is reduced. A homeowner can exclude up to $500,000 per couple if married and filing jointly, or $250,000 if single or filing separately for homes that have been the taxpayer’s principal residence for the previous two years.
• Capital Gain Treatment—Congress allows preferential tax treatment on gains from capital assets held for more than one year. This would be important for a homeowner who has gains in excess of the allowable exclusion.
• Principal Accumulation—Mortgages are designed to pay the interest for the time that the money has been used, as well as to retire the principal debt over a period of time. This payment plan means that part of the payment each month is for principal accumulation.
• Personal Enjoyment—Pride of ownership is a valid reason for wanting to own a home. You can personalize your home while enjoying the financial benefits. Usually a home provides a larger living indoor and outdoor space than renting with a limited use of space.

If you are thinking of buying a house this year, please contact me to discuss your options. I can also provide the name of a few mortgage brokers to you as well. Good luck and happy house hunting!

Economic growth is expected to be no greater than 2 percent through the end of 2012 – a growth rate that makes the economy very vulnerable to any external shock that could trigger a downturn, according to Fannie Mae’s Economics & Mortgage Market Analysis Group.

External factors, coupled with uncertainty surrounding the degree of domestic fiscal austerity, including the scheduled expiration of various tax cuts and unemployment benefits, and the impact of forthcoming regulations, will determine how fast the economy will grow.

“There’s been a little seasonal cyclical pickup in housing activity recently, as spring and summer sales are generally stronger than fall and winter, but leading indicators point to housing sales bouncing near the bottom at least through the end of 2012,” said Fannie Mae Chief Economist Doug Duncan.

“Home prices are a key factor for any positive movement in the housing market, and the large inventory of distressed homes working their way through the market is putting downward pressure on prices. Now that we are entering a traditionally weak seasonal sales period, we expect home prices to show renewed declines after firming for several months,” Duncan stated.

For more information, click here.

By price point, not much has changed since the beginning of this year. The low end of the market place remains in a seller’s or neutral market, and the high end of the market ($1.5 million and above) remains in a buyer’s market.

Below are two charts that provide an overview of the market conditions for the past three months. For example, the market is in the buyers’ favor if they are looking in the $1.5 – $2 million dollar range. However, if they’re looking in Greenbrae, they’re looking in a seller’s market since demand is very high there right now. It is also interesting to note that typically the more days on market, the lower the selling price. The towns that are in a seller’s market have a much closer listing price and selling price.

Opportunities abound in real estate right now (low prices, low interest rates) but a variety of factors come into play when you’re deciding where to buy or when to sell. I strongly recommend that a seller or a buyer carefully review the sales of homes by price point and town in order to negotiate the best price possible given the market conditions.

Mortgage Bonds are getting a boost today on news that a Debt Ceiling contingency plan is being brought forth by the Treasury Department. This good news is moving rates lower. The Treasury’s plan would guarantee present holders of US debt will receive interest payments on time before the Treasury makes any other payments — even if the debt ceiling is not raised.  As a result The Bond market is sensing the government will do whatever it needs to avoid an outright default – hence the positive rate movement.

INDUSTRY NEWS

On October 1st, the temporary maximum loan limit for conforming (FNMA & FHLMC) mortgages and FHA insured loans is scheduled to drop to a maximum of $625,500 for most Bay Area Counties (Sonoma: $520,950, Napa: $529,950).

As the expiration nears, the market will focus more and more on jumbo financing and we want you to know that Terra Mortgage Banking is one of the few (if only) North Bay Mortgage Bankers who underwrite our own jumbo loans in-house up to $1.5M.  This means your jumbo loan will receive the same expedited service you have come to depend on from Terra for your conforming loans.

Bottom Line: Terra’s expedited closing times give Realtors and their clients a competitive advantage when writing offers. Please contact Gina Kemsley today with questions or helping with getting a loan.

CURRENT INTEREST RATES | JULY 29, 2011

CONFORMING RATES
($200,000 – $417,000) 0 POINT
• 30 Year Fixed: 4.500% (4.58% APR)
• 5/1 ARM: 3.125% (3.20% APR)

JUMBO RATES
($729,751 – $2,000,000) 1 POINT
• 30 Year Fixed: 4.875% (5.02% APR)
• 5/1 ARM: 3.250% (3.39% APR)

CONFORMING (HIGH-BALANCE) RATES
($417,001 – $729,750 cap by county) 0 POINT
• 30 Year Fixed: 4.625% (4.69% APR)
• 5/1 ARM: 3.375% (3.44% APR)

RATE TRENDS
Rates are DOWN compared to last week.
Rates are DOWN compared to last month.
Rates are UP compared to one year ago.

Gina Kemsely, Terra Mortgage Banking can be reached at 415-464-3144 or gkemsley@terramb.com

Agents have seen an increase in multiple offers and all-cash buyers this summer. When homes are priced competitively or below market value, they sell very quickly, often with multiple offers. If they’re not priced well, they tend to sit on the market for quite some time. However, selling real estate still depends on location, condition of house and price.

Many of my clients ask me, “Have we hit the bottom?” Robert Shiller, MacroMarkets’ chief economist and co-founder, recently said, “A significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end. Despite persistent macroeconomic uncertainty and unprecedented housing market dysfunction, almost two-thirds of the panelists see the U.S. residential real estate market as at an historic turning point.”

Although no one can predict the bottom, real estate has picked up significantly this summer which gives us all hope that real estate is improving.

Interesting article posted on Inman News today…if the real estate market has hit the bottom this first half of the year, then that means only one thing: real estate is moving up! Read the entire article below.

2011 seen as ‘turning point’ for home prices

MacroMarkets panelists expect little growth through 2015. More than half of economists, real estate experts and investment strategists polled by MacroMarkets LLC in June said they now expect national home prices to hit a bottom sometime in 2011 and remain stable through 2015. MacroMarkets polls more than 100 housing experts with a wide range of views, including FusionIQ CEO Barry Ritholtz, Moody’s Analytics economists Mark Zandi and Celia Chen, National Association of Realtors Chief Economist Lawrence Yun, Freddie Mac Chief Economist Frank Nothaft, and Rosen Consulting Group’s Kenneth Rosen. Panelists are asked to project the path of the Standard & Poor’s/Case-Shiller U.S. National Home Price Index over the coming five years. Robert Shiller is MacroMarkets’ chief economist and co-founder. “A significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end. Despite persistent macroeconomic uncertainty and unprecedented housing market dysfunction, almost two-thirds of the panelists see the U.S. residential real estate market as at an historic turning point,” Shiller said in a statement.

“SLOW DOWN… YOU MOVE TOO FAST.” Maybe the economic recovery is taking acue from these 1960′s lyrics by Simon and Garfunkel, as the economic recovery seems to be in a sluggish state at the moment. And while it doesn’t leave too many Americans “feelin’ groovy,” there are some amazing opportunities at hand in housing. Here’s what you need to know about the economy and housing industry – along with one sure thing about the current situation.

Volatility was extremely high last week – not just in the financial markets, but also in the economic reports and economic outlook. The big news of the week was the official Jobs Report, which came in well below expectations. In fact, in the private sector alone, the report indicated that only 83,000 jobs were created in May – and that number was almost 100,000 less than expected!

Although the Hourly Earnings component of the report came in a little better than expected, the overall report was just plain bad. Even for a market hungry for good news, there was no way to spin this report. Now the markets will have to wait and see if this was a one-off bad report and just a bump in the road to recovery… or if things have indeed slowed down once again.

Manufacturing slowing?

New data on the manufacturing sector of the economy also indicated a possible slowdown, as the Chicago PMI and the ISM Index – which both measure manufacturing – came in below expectations.

Rumors of a bailout lower the US Dollar.

In news across the pond, reports came out last week that Germany is putting together a plan to bailout Greece. The plan would “kick the can down the road” a little longer for Greece, allowing them more time to figure out a strategy to get their debt in order. As a result of these bailout hopes, the Euro was strengthened and the US Dollar dipped lower. Remember, a softer US Dollar helps US Stocks, as US companies benefit from stronger exports with a weakening Dollar. But a lower Dollar isn’t so good for Bonds, so this news stalled the rise of Bonds early last week.

Home prices still very affordable.

Moving from Europe back home to the US, we also received new data last week on home prices across the country. According to the 20-city Case-Shiller Home Price Index, prices were down 0.8% in March. Overall, foreclosures and bank-owned sales continue to weigh on housing – and are expected to do so for a couple more quarters. That said, the housing market is very localized, so only a local real estate professional can help you understand where home prices are at in your community – let me know if you need a referral to someone great in your area.

One thing’s for sure…

If you or someone you know is considering purchasing a home or refinancing, this is an ideal time to see how you can benefit from the current market conditions. Home prices are extremely affordable right now and home loan rates are near historic lows.

It only takes a few minutes to look at some options that fit your unique goals and situation. Call or email today to see how you can benefit from the current situation!

FORECAST FOR THE WEEK

After last week’s volatility, the markets receive a bit of a reprieve – with no major reports due out until mid-week. Here are some reports to watch, followed by some news items that may impact Bonds and home loan rates in the days ahead:

• The Fed’s Beige Book will be released on Wednesday. The Beige Book contains anecdotal information on the current economic and business conditions. Although some people consider the Beige Book to be a lagging report, it can serve as a helpful indicator of the Fed’s policy decisions. It reflects data from bank reports, as well as interviews with key business contacts, economists, market experts, and other sources. After the volatility and negative news last week, this report will be as important as ever.
• The Jobless Claims report comes out Thursday. Last week, Initial Jobless Claims were within expectations, so it wasn’t a horrible reading. That said, the disappointing Jobs Report demonstrates that employment is definitely still a concern, so the markets will be watching the Jobless Claims report closely this Thursday.
• Also on Thursday, we’ll see the Balance of Trade report, which focuses on exports and imports. Remember, a negative balance of trade – or a deficit – occurs when imports surpass exports. Rising deficits can be reflective of increased consumption, which can be a sign of a strengthening economy.

Please contact Gina Kemlsey of Terra Mortgage Banking at 415-464-3144 or gkemlsey@terramb.com for questions or more information.

***

Roughly forty percent of the homes for sale on today’s market are short sales and foreclosures! Distressed properties are well known for their value (a reputation which is sometimes accurate, and sometimes not), but they also have a reputation for causing buyers to become distressed, too!

Transactional snafus, last-minute surprises and long, drawn-out escrows that never close seem to be par for the course. Instead of avoiding these properties altogether, get educated about the most common dramas that go down in these deals, and how you can avoid falling victim.

1.  Run-on (and on, and on) escrows. When you’re buying a home (or selling one, for that matter), time is absolutely of the essence.  And buyers reasonably expect that the big time suck in real estate is in the house hunting process itself; seems like once you find a home you want to buy and the seller agrees to your price and terms, things should move pretty quickly, right?

Not so much, when it comes to some distressed property sales. I’ve heard tell of the occasional, swiftly-moving escrow on an REO (real estate owned – by the bank). But for the most part, these transactions take anywhere from a few days to a few weeks longer than “regular” sales, because of the extra signatures, supervisor-level approvals and even investor involvement required to seal the deal.  Banks don’t have the same sense of urgency individual home sellers do, and it’s not uncommon for the people who need to sign on the dotted line to be on vacation or scattered across the country, adding days’ or weeks’ worth of time to the escrow.

And short sales are also an entirely different animal when it comes to escrow timelines. While a standard sale from an individual seller to an individual buyer might take 45 days from contract to closing, a short sale can take anywhere from 45 days to 6 or 8 months (!) to get the deal closed, after the seller has accepted the contract.

Avoid the drama by: expecting your escrow to run long, and being pleasantly surprised if it doesn’t.  Expectation management is everything. Make sure you take these extended timelines into account when you’re working with your mortgage broker on the issue of when to lock your interest rate, and how long your rate locks will last. You might even need to plan on and/or set aside an allowance for the cost of extending your low interest rate, if rates are rising rapidly during the time you’re waiting for the deal to be done.

2.  Bank won’t take lowball offer.  If I had a dollar for every time I’ve received a question from an outraged reader to the effect that a buyer has had their short sale or REO offer rejected on grounds that it was too low, even though the bank has no other offers, I could buy a foreclosure myself (admittedly, it’d be one of those $150 foreclosures in some blighted town with tax liens and no plumbing, but still).

Banks owe their shareholders and investors a duty to get as much as they can for these properties. Just because you see it’s on the market and listed as a short sale or a foreclosure doesn’t mean they’re going to give it to you for a fraction of its worth. The bank’s goal is to get a purchase price as close as possible to the home’s fair market value, as determined by the recent sales prices of similar, nearby homes, with some adjustments made for the property’s condition.  Fact is, many banks would rather see the listing agent reduce the price by a moderate amount, and wait to see what offers come in, than to accept an offer 30 percent below the asking price just because there are no other offers on the table.

Avoid the drama by:  working with your agent to make a realistic offer, based on recent comparable sales in the neighborhood, not just on what you think you can get away with.  You can waste a lot of time, spin a lot of wheels and lose out on a lot of properties making lowball offer after lowball offer on distressed homes. Sit down with your broker or agent, review the ‘comps’ and make a smart offer that reflects a good value for you, is within your budget and is not bizarrely out of the realm of the fair market value of the property.

3.  Last minute postponements/cancellations. These transactions have an uncanny way of being delayed at the last minute – or never going through at all, through no fault of the wanna-be buyer. You signed docs yesterday, put your dog in the crate this morning and just hopped in the moving truck, only to get a text from your broker that the deal didn’t close because the escrow company which was selected by the bank flubbed the checkboxes on a single sheet of paper (it happens). Or, you’ve been in contract (with the seller) on a short sale for four months, and the bank refuses the sale entirely because the seller refuses to kick even $1 of their own cash into the deal, despite having a flush savings account.

Avoid the drama by:  staying as flexible as possible with your moving plans as long as possible.  Best practice is to plan on some overlap between the time you can be in your last place and your scheduled move-in date.  Also, if you’re in contract on a short sale, you should take the point of view that you don’t have a firm deal until you get the bank’s approval of the transaction. So don’t even think about starting to make moving plans or paying for home inspections and appraisals until you know the bank has green lit the deal and that the purchase price and terms they’ve approved work for both you and the seller.

4.  The bank’s black box. Make an offer on a normal home and you’re likely to know what the outcome will be within a few hours or a few days, at the outside. If things take longer because the seller is out of town or some such, the listing agent tells you that, and you at least know what’s going on.

Make an offer on a bank-owned property or a short sale?  It’s a crap shoot – could be days, but could also, easily, be weeks or months before you know what’s going on.  And no amount of calling, pleading, prodding or nudging is likely to get you much information on how your offer or the seller’s short sale application is being handled or what (if any) progress is being made.  And that “black box” into which your offer disappears at the bank level is very frustrating.

Avoid the drama by:  continuing your house hunt until you have an answer back.  Maniacally pestering the listing agent for answers or harassing your buyer’s broker into spending hours on hold with the bank is highly unlikely to get you any insight. (With that said, it does make sense for your agent to check in regularly – sometimes even daily –  with a short sale or REO listing agent to stay updated on any developments with the property and to make sure your offer/transaction stays in the front of their mind.)

Most of the angst in these situations arises when a buyer feels they passed on properties that would have really worked for them when they pinned their hopes on a distressed home.  You can only control your efforts and activities, not the bank’s.  So, consult with your own broker or agent about staying proactive in viewing and even pursuing other properties until you have a firm “yes” from the bank on your short sale or REO offer.  Until that time, and usually for a short time after you get the bank’s approval, you have the right to back out of the transaction if you need to (make sure your broker briefs you on precisely when you’re right to rescind your offer or exercise contingencies – i.e., bail – will expire).

5.  Double standards. In a “regular” equity sale with no bank involvement, both buyer and seller are obligated to meet various timelines.  Seller has to provide disclosures by X date, open the property to inspections – with utilities on – by Y, and close and move out by Z.  REO and short sale buyers, on the other hand, are often dismayed to find that even though the bank might take weeks or months to sign or handle its deliverables, the bank will insist that the buyer show up, sign or send a check quick-like.

Avoid the drama by: chalking it up to the (admittedly irritating) way things are – the price you pay to buy from the bank.  Realize that working with the bank on the bank’s terms is unavoidable when you buy a distressed property. Then, go into the deal with realistic expectations – including the expectation that the bank will drag its feet, despite expecting you to keep every deadline – and you’ll be less frustrated, and less likely to make poor decisions out of frustration.

Also, make sure you do respond in a timely manner to the bank’s requests and your obligations under the contract.  I’ve seen banks capitalize on buyer delays in returning signatures and removing contingencies to accept higher offers they received in the interim.  Don’t lose your home on a technicality because you assume that the bank’s lackadaisical timelines apply to you as well.

Author: Tara Nicholle Nelson, writer for Trulia.com

WHEN IT RAINS, IT POOR’S… With the US already facing tough decisions over its national debt, the credit rating firm Standard and Poor’s last week cut its credit outlook on the US from stable to negative. Standard & Poor’s also said the US’s AAA credit rating could be cut within two years, if headway isn’t made in closing the budget gap. This is important because countries have credit ratings, just like individuals.

But what does all this mean? Let’s break it down…

First of all, it’s important to note that the downgrade to the credit outlook was a long time coming, and Traders in the pits even joked that S&P is late to the party with this call. For more information about different countries credit ratings – as well as your own state’s credit ratings – check out this Credit Ratings Link.

All joking aside, this is a serious issue, as the last thing the US wants to endure is an outright credit downgrade. That would make the interest expense on the US debt even more burdensome – and, remember, we are all on the hook for this debt and the carrying costs.

But if this was a long time coming, what sparked the change in outlook? The S&P cited the wide political divide amongst Congress as a major hurdle to meaningfully lower the federal budget deficit. Both parties want to lower the deficit but there is stark disagreement on how to get there. Hopefully, the S&P’s actions will spark a fire in Congress to get serious and get something done.

How does this issue impact Bonds and home loan rates?

The national debt concerns won’t be addressed easily, especially when you remember that the country is approaching the debt-ceiling limit on May 16th. So in the immediate future, this will make for more volatility in the markets as headlines gyrate both Stocks and Bonds. Bonds are in an even tougher spot in the long term – and here’s why:

First… if the US government is successful in taking action to lower the budget deficit and avoid an outright credit downgrade, then we should expect a longer duration of accommodative Fed monetary policy, as the Fed doesn’t want an economic slowdown to recreate a “deflationary” environment. If things do slowdown significantly, we may start hearing debate for a QE3 (or a third round of Quantitative Easing), which would not be good for Bonds and home loan rates.

Second… if the US debt received an outright downgrade, it would be really bad for Bonds. As it stands now, this doesn’t seem likely and you shouldn’t be overly alarmed. But, it’s important to understand what is at stake here. The bottom line is that with some extra belt tightening as a result of this issue, we could expect to see slower economic growth in the future, as government spending would have to slow immensely to help close the budget gap.

That said… home loan rates remain historically low right now. However, there are a lot of headwinds for Bonds down the road and last week’s credit outlook downgrade was just another one.

Now’s the time to learn more about these issues and see how you can take advantage of the current low home loan rates and affordable home prices. It only takes a few minutes to look at your specific situation.

FORECAST FOR THE WEEK

This week will be jam-packed with economic reports that can have a big impact on the markets and home loan rates:

• We’ll see more housing news this week with the New Home Sales report right away Monday morning, followed by the Pending Home Sales report on Thursday.
• Consumers are also in the news this week. First, we’ll see the Consumer Confidence report on Tuesday, followed by the Consumer Sentiment Index on Friday. Both those reports give us some insight into how confident consumers are in the economy. Second, we’ll get a look at Personal Spending and Personal Income on Friday – which provide insight into the financial picture of consumers.
• The Federal Reserve holds its FOMC meeting this Tuesday and Wednesday, with the release of its Policy Statement coming Wednesday afternoon. As always, what the Fed says could impact home loan rates.
• Speaking of the Fed, we’ll see the Fed’s favorite gauge of inflation this Friday in the Personal Consumption Expenditures report.
• We’ll also get a read on the economic recovery with Wednesday’s Durable Good Orders, which gives us an update on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time, like furniture, televisions, appliances, vehicles, copy machines, and so on.
• On Thursday, the markets will see the latest report on Gross Domestic Product (GDP) – which is the broadest measure of economic activity – as well as Friday’s Chicago PMI, which is a good indicator of overall economic activity.
• The Jobless Claims report also comes out Thursday. In the latest week’s report, Initial Jobless Claims fell but still remained above that pesky 400,000 level as the job market continues to be a thorn in the side of the economy. Until we can see a pattern of unemployment claims well below 400,000, we will not see a significant fall in the Unemployment Rate.
• Finally, on Friday the Employment Cost Index (ECI) will be released. The ECI is one way to evaluate wage trends and the risk of wage inflation, as well as possible price pressures. This is important to the housing industry because if wage inflation threatens, it is possible home loan rates will rise through Bond prices dropping.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Bonds hovered in a tight range and were unable to improve much last week due to rising Stocks and inflation concerns.

Those two elements only add to the headwinds for Bonds and indicate that now may be the ideal time to take advantage of low home loan rates. Call or email to see how you can benefit by acting now.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

For more information, please contact Gina Kemsley of Terra Mortgage Banking at gkemsely@terramb.com or 415-464-3144. 

Marin and San Francisco offer up to 15 rebates on energy efficiency projects. You can save up to $4,000 for energy efficiency improvements including air sealing, attic insulation, duct sealing, hot water pipe insulation and more. And think of the savings over time!

For more detailed information on these rebates, check out this website: http://www.energysavvy.com/rebates/

Here’s to saving money this spring!