Why Now Is The Time To Buy

Housing Market Has Bottomed, Banking Analyst Bove Says
By: Antonia Oprita Associate Web Producer, CNBC.com

The biggest problem that banks have faced was the fall in the housing market, and this seems to have bottomed, Rochdale Securities banking analyst Richard Bove told CNBC.
"I really believe that the industry has bottomed, that we're not going to see further crashes in home prices or in home sales," Bove told "Squawk Box."

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How To Get The Best Mortgage Rates

First, make sure you are comparing current mortgage rates for the same type of mortgage. Mortgage rates and closing costs can change significantly from one day to another, so if you are comparing offers from multiple lenders it must be done on the same day. For example, if you are shopping mortgage rates and have a quote for a 30 year fixed at 5.75%, only compare it to other 30 year fixed quotes at 5.75%.

Next, compare the total of all points and lender fees for each mortgage (from section 800 to 813 on the Good Faith Estimate), that is the price of the mortgage. The lender with the lowest cost has the best mortgage rates.

If you are refinancing, you will also need to review the cost of title insurance, closing/attorney, and appraisal. Some large national companies have negotiated excellent rates for these services on your behalf. The company with the lowest combination of points, fees and third party costs for the same rate and product has the best mortgage rates.

Things to Watch Out For

APR is not always accurate, so it should not be used. To get the best mortgage rates, compare current mortgage rates and closing costs.

Good Faith Estimates are just estimates. Many brokers and lenders will give you a low ball estimate, and then after you have paid for your appraisal, they will inform you that the mortgage rate or closing cost have gone up. Look for lenders that guarantee their closing costs up front.

There is nothing wrong with No/Zero Closing Cost Loans. Just be aware that you will be looking at higher mortgage rates in exchange or if you are refinancing, the closing costs could be included in your principal.

Paying higher points and fees will result in lower mortgage rates. For example, at 7% you may have zero points and fees, while at 6% you may have points and fees of $3000. To get the best mortgage rates, you must estimate how long you will have the mortgage. Also, make sure you are comparing current mortgage rates when doing your comparison.

Pending Home Sales Rise Again

Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun , NAR chief economist, cautions that there could be delays in the number of contracts that go to closing.

“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he says. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

Region

• Northeast: The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago.
• Midwest : In the Midwest, the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008.
• South: The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago.
• West: In the West, the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

The Effects of Appraisals
NAR President Charles McMillan says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. "

Affordability at a high
NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun says.

The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates, and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

First-time buyer tax credits offers a boost
The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

— NAR

Sales Are Up but Jam Persists for Jumbo Loans

Sales Are Up but Jam Persists for Jumbo Loans

While sales to first-time home buyers are up, experts say the jumbo loan market is weak because trade-up buyers cannot secure affordable financing.

"If you've ever wondered what the mortgage market would look like without government support, that's what we have today in the jumbo market," says mortgage industry consultant Howard Glaser.

NATIONAL ASSOCIATION OF REALTORS® Chief Economist Lawrence Yun notes that the spread between conforming and jumbo loan rates rose to 3.9 percentage points in March from 1.4 percentage points in 2005. He says buyers able to make a purchase are holding off because they do not want to pay jumbo loan rates.

Source: American Banker, Lew Sichelman (06/04/09)

© Copyright 2009 Information Inc.

Bargains Hard to Find In Attractive Areas

Bargains Hard to Find In Attractive Areas
Potential buyers in areas that were hard hit by the housing downturn have read about bargains, but only find it disappointing when they go shopping.

"Every open house I've been to has been a zoo," says first-time homebuyer Sam Rivero, who has looked at 35 properties during the last three months. "If you follow what the media say, you'd think sellers are desperate to sell a house, but when you get there it's totally the opposite."

When the real estate bubble burst, it didn’t affect the mid-priced market, said real estate information firm MDA DataQuick. Instead, it created opportunities in troubled neighborhoods and slowed sales in the market of homes priced above $1 million. But in areas where most of the homes sell for $400,000 to $800,000, there are few discounts to be found.

Even the foreclosure market has slowed, says University of Southern California Professor of Real Estate Tracey Seslen. Seslen said lenders with foreclosures are supporting market stabilization and releasing only a few homes at a time to avoid flooding the markets.

"The biggest problem," says Phyllis Harb, an associate with RE/Max Tri City in La Canada, Calif., "is that people are overreacting to housing statistics, thinking they can come in and make an offer 20 percent below price."

Source: Los Angeles Times, Chip Jacobs (05/03/2009)