Yes, you might be better off buying now than when the tax credit was in effect. The reasons are very simple. A historic drop in interest rates and less competition if you are buying residential property under $400,000. If you were taking out your mortgage today, your interest rate would probably be around 4.5% for a thirty year fixed rate mortgage. Rates in April were right around 5.25%. You would be spending $135 less on your monthly payment, for an annual savings of $1,620 per year.
Home sales hit a wall with the expiration of the tax credit, reminiscent of how “Cash for Clunkers” sucked up a lot of future demand for car sales. One advantage of the current market situation is that lower interest rates and housing prices are available to everyone purchasing residential real estate, whether homeowners or investors. I have noticed an increase in savvy investors buying real estate to “fix and hold”. They are saying the drop in demand after April has enabled them to get lower offers accepted.
Do I wish a tax credit would come back for everyone, not just first time homebuyers? Of course I do. Do I think it will with our record deficits? Not likely. If you purchased back in April, congratulations. You are making yourself rich instead of a landlord. Hopefully you went with a zero or low cost loan. If so it might make sense to refinance now, saving a lot of money. As always, have your mortgage professional do the numbers.
Remember that unless you are Warren Buffet, you can not time the market. I have missed a lot of great deals because I thought prices were going to go a little lower. Feel free to call or email with any questions.
Next Week: Update on FHA negative equity refinance program
As you know, a lot of Realtors these days are utilizing social networking to get the message out about a home that they are trying to sell on behalf of their client. Consumers are posting their homes on Craig’s list and Zillow in hopes of attracting a buyer. They post the home information week after week on their profiles, but they never seem to get a lead and or inquiry. Shortly thereafter, they abandon the process and tell everyone that social networking didn’t work for them and you know what, they’re right.
The reason they are right is because they are doing it wrong. They have missed the point of the entire platform and how it works. According to Webster’s dictionary, the term “social” means, “of or relating to human society, the interaction of the individual and the group, or the welfare of human beings as members of society.” The key term in that whole thing is interaction. You cannot just post material day after day on social networking sites and never interact with other people. You need to comment on their posts, their home listings, their pictures, their comments, and their games. When you do that, you start a dialogue. The dialogue turns into a conversation and the conversation may turn into a friendship. Once you make friends then you can do deal! I’ll say that again in case you missed it. You need to make friends first and then that gives you the opportunity to do deals like sell a home. If you follow that rule about making friends first, then you’ll finally see results from social networking. This rule applies to any business and not just real estate.
I was recently consulting a non-profit group on internet and social marketing. They thought that they could spend $1500 a month on internet marketing and see a direct P&L result of say $3000 a month. Social networking doesn’t work that way. It’s not a cash machine where the standard profit and loss balance sheet applies. Here is what I told the nonprofit on what they could expect if they embark on an internet social media campaign:
“The most likely scenario to see a return on your investment will be in the form of relationships. You will broadcast a message and make yourself known to thousands of people every day (which is 100 times more than what you are doing now with a passive website). Out of that, conversations will happen, relationships are made, databases are formed, and followers ensue. Over time, those relationships will become stronger and leads to visits to the Ranch and that will lead to someone stepping up making a one-time gift donation of say $10,000. Then a second person will step up with a one-time gift and so on and so on.”
That’s the way social networking makes things happen. So stop posting information about homes; start conversations or provide value added information that start conversations. Make a friend and do a deal.
http://coloradodreamhouse.com/featured/property.php?id=7 As with the rest of the home, even the lot of this 9,729 square feet, 4-bedroom, 7 bath home enjoys thoughtful design that flows effortlessly from one beautiful and useful space to another. On the way to the front door, one feels welcomed by lush landscaping and a perfect laughing waterfall splashing gently as it cascades to a quiet brook. The property abuts to Bluffs Regional Park, designated open space. The views, privacy, and access to open space will always remain unspoiled. Call Dan Polimino at 303-522-1161 or Gary Lohrman at 303-829-5900 for a private showing. Offered at $2,795,000.
http://www.coloradodreamhouse.com/index.php/news/ The next four weeks are going to be slow in Colorado Real Estate as kids get ready to go back to school and parents try to get back into their normal routines. The good news is the second selling season from September 15th through November 15th is right around corner. That’s the second best time to sell a home in Colorado. What does the next four weeks mean for buyers and sellers? To find out watch this week’s market update with Fuller Sotheby’s International Realty agent Dan Polimino.
Effective October 4th, 2010, FHA will lower the upfront mortgage insurance premium (MIP) and raise the annual mortgage premium. Upfront MIP will decrease from 2.25% of the loan amount to 1 percent. The annual mortgage insurance premium, paid monthly on FHA loans over 15 years, will change from 55 basis points to 85 or 90 basis points. The reason for the change is to prop up the FHA Mutual Mortgage Insurance Fund which is “running on fumes” and needs to be gassed up.
Under the current rules a $200,000 loan has a $4,500 upfront MIP and a monthly premium of $91.67. Currently the monthly MIP is computed by taking the loan balance of $200,000 multiplying by 0.0055 and dividing by 12. The good news under the new rules is that the upfront MIP will decrease by $2,500, however the monthly MIP will increase by $60 or $70; an annual increase of $720-$840 per year. It is not known at this point if borrower’s who wish to refinance an existing FHA mortgage will receive a credit towards the upfront MIP on a new mortgage.
Is it better to wait or go forward now? As always, have your mortgage consultant do the math to see what best suits you. The logic of reducing upfront fees and increasing monthly fees, when there is a pressing need to increase a reserve fund, escapes me. It must be because I did not go to Harvard and have spent most of my life in the private sector.
Feel free to call or email with any questions or comments.
Next Week: New FHA program for borrowers with negative equity.
