Monday, September 1, 2014

Foreclosure Inventory Down 37% over Last Year!

Foreclosures Down 37% From Last Year | Keeping Current Matters

According to the latest CoreLogic National Foreclosure Report, "approximately 660,000 homes in the US were in some state of foreclosure as of May 2014". This figure is down 37% from the 1 million homes in May of 2013. May marked the 31st consecutive month in which there were year-over-year declines.

Mark Fleming chief economist for CoreLogic revealed:

"Significant gains have been made in the last year to reduce the foreclosure stock. Yet, these improvements are occurring disproportionately in non-judicial states. The foreclosure inventory in judicial states is averaging 2.1% which is more than twice the 0.9% average that is occurring in non-judicial states."

The foreclosure process in the twenty-two judicial states can take, on average, anywhere from 180-400 days according to the Mortgage Bankers Association. The lack of initial court intervention in non-judicial states, often means that the process of foreclosure takes significantly less time.

Therefore, judicial states as a whole, have taken longer to catch up to the rest of the country in liquidating foreclosure inventory.

All five states with the highest foreclosure inventory as a percentage of mortgaged homes are judicial states.

CoreLogic Foreclosure Report Top 5 States | Keeping Current Matters

On the list of the five lowest inventory states, only North Dakota uses a judicial process.

CoreLogic Foreclosure Report Lowest 5 States | Keeping Current Matters

Bottom Line

Even though some states have not recovered completely from the foreclosure crisis, the nation as a whole is on the right track as inventory decreases.

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This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

Billionaire says Real Estate is Best Investment Possible

Billionaire says Real Estate is Best Investment Possible |Keeping Current Matters

Billionaire money manager John Paulson was interviewed last week at the Delivering Alpha Conference presented by CNBC and Institutional Investor. He boldly stated:

"I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you're the owner-occupier of."

Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes, John Paulson is:

"A multibillionaire hedge fund operator and the investment genius."

According to the Wall Street Journal, Paulson is:

"A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were."

Why does he believe homeownership is such a great investment?

Paulson breaks down the math of homeownership as an investment:

"Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let's say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment."

How many are seeing a 50% return on a cash investment right now?

Paulson goes on to compare the long term financial benefits of owning verses renting:

"And you've locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed."

Bottom Line

Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – if you don't yet live in your own home, go buy one.

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KCM Cover2Agents: Do you have clients who are on the fence about homeownership? How can you help them feel confident about their decision to purchase a home now?

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This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

Sunday, August 31, 2014

What is holding back the Real Estate Market?

What is holding back the Real Estate Market? | Keeping Current Matters

Though the housing market is recovering nicely, it is not doing quite as well as some analysts had predicted. There has been no shortage of excuses offered as to why this is: the rise in interest rates, more stringent lending standards, the weather.

However, we feel that there is one factor that is most responsible for curtailing the number of houses sold – the number of houses available for sale!

Inventory Levels are BELOW Historic Norms

In a recent economic forecast, Freddie Mac addressed this exact issue:

"Including newly built homes in the inventory count, the total number of homes offered for sale relative to the number of households in the U.S. has been running at the lowest level in more than 30 years, as shown in the second exhibit. The relatively low for-sale inventory reflects several features of today's market."

"A supply-constrained market (holding other factors constant) will result in a decline in the volume of sales and an increase in real transaction prices."

NAR Report Confirms Inventory Constriction

History shows us that a balanced real estate market requires a six month supply of available housing inventory. The National Association of Realtors released their Existing Homes Sales Report earlier this week. The report revealed that we are still only at a 5.5 month supply of homes for sale. We have not reached the 6 month mark in over two years.

The recent increase in buyers now looking will again put a strain on this number. That is why today at 2PM EST, we are hosting a special webinar for real estate professionals; The 4 Keys to Prospecting for Listings that Sell. Agents can reserve their seat here.

Bottom Line

While inventory levels remain below historic norms, it will remain a seller's market. This being the case, if you are considering selling your home, now may be the time to list it for sale.

This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

NAR's June Existing Home Sales Report [INFOGRAPHIC]

NAR's June Existing Home Sales Report [INFOGRAPHIC] | Keeping Current Matters

This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

Buying a House? 4 Reasons to DO IT NOW

Buying a House? 4 Reasons to DO IT NOW | Keeping Current Matters

Here are four great reasons to consider buying a home today, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 30.8% (most optimistic) and 9.4% (most pessimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although the Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage are currently around 4.2%, Freddie Mac is projecting that rates will increase to 5.2% by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way, You are Paying a Mortgage

As a research paper from the Joint Center for Housing Studies at Harvard University explains:

"Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That's yet another reason owning often does—as Americans intuit—end up making more financial sense than renting."

4. It's Time to Move On with Your Life

The 'cost' of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But, what if they weren't? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe it is time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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Summer 2014 | Things to Consider When Buying a Home | Keeping Current MattersATTENTION: If you are a real estate agent looking for more information to simply and effectively explain to your buyers why now is a great time to purchase, sign up for a Free 14 Day Trial of KCM and download the Summer Edition of our 11-page eGuideThings to Consider When Buying A Home.  

This article originally posted by Keeping Current Matters. Read more articles like this at www.KCMblog.com.

The Reason They're Called Benefits

Benefits of VA financing 2.pngThe Veterans Administration guarantees home loans for eligible veterans.  It is considered an attractive loan because the veteran can purchase the home with no down payment up to specific loan limits and no mortgage insurance. This makes the monthly payment considerably lower.

Let’s assume a buyer wants to purchase a $200,000 home and can get a 4.5% interest mortgage for 30 years.

A FHA loan would require a $7,000 down payment plus $3,377.50 in up-front MIP which can be rolled into the mortgage. The monthly mortgage insurance premium would be $221 per month for a total payment of $1,215.94.

The VA loan doesn’t require a down payment. There is a 2.15% VA funding fee that can be rolled into the mortgage which would make the principal and interest payment on $204,300 much less at $1,035.16.

The revised loan limits for 2014 are published by VA and can change each year especially based on high-cost areas. However, a lender can allow a home purchase in excess of these amounts with a 25% down payment on the amount above the limit.

If a purchaser wants to buy a $600,000 home in an area where the VA limit is $417,000, the lender could require a $45,750 down payment and make a $554,250 mortgage. In this example, the purchaser is able to get in for less than 10% down payment and no mortgage insurance.

Veterans with the available funds for a down payment should compare all loan products to consider which will provide the lowest cost of housing. A skilled real estate professional and a trusted mortgage advisor can be valuable resources.

Saturday, August 30, 2014

Who's Paying Your Mortgage?

who is paying your mortgageAs a homeowner, you obviously pay for your mortgage but as an investor, your tenant does.  Equity build-up is a significant benefit of mortgaged rental property.  As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property.  Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down.  It can be accelerated by making additional contributions to the principal each month along with the normal payment.  Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years.  The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses. 

11-11-2013 7-42-16 AM.png

Notice that both properties have a positive cash flow before tax.  The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property.  The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that.  A simple definition of an investment is to put away today so you’ll have more tomorrow.  Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities.