Buyers Market Ending? | Chris Doering Exclusive Interview

Throughout 2014, we've seen mortgage rates stay and have a cup of coffee around the low 4% range.  However, with the fed looking to raise mortgage rates in the near future, your cost to borrow funds for home purchases may be in jeopardy of rising.

A majority of economists have come to the consensus that the average 30-year fixed-rate mortgage could reach 5% by mid-2015, The New York Times reports. On Friday, Freddie Mac reported the 30-year fixed-rate mortgage averaging 4.2 %. This is largely attributable to the Federal Reserve’s plan to withdraw from buying mortgage-backed securities. 

Economists suggest that while a 5% mortgage rate is still historically low, such an increase still has the potential of reducing buying power in a home purchase. For example: According to some estimates, a 1 percent increase in interest rates can raise a monthly mortgage payment on a typical home by more than $700 in pricier parts of the country. Of course that type of increase is very loosely applicable to the Gainesville market. 

But even in the case of rate hikes up to 7%, the analysis found that homes remain affordable overall. From 1985 to 2000, home owners’ housing costs—including the principal and interest on a median-priced home—accounted for 22% of a home owners’ median household income. However, for comparison, today’s households are spending about 15 % of their median income on a median-priced home.

For further details, check out this recent article from the NY Times:

When Mortgage Rates Rise

Mortgage rates have remained relatively low this year, and little changed, despite previous predictions of an inevitable rise. Borrowers, though, may be wondering how much longer this environment can last.

At this point, waiting for the rise in interest rates “is a little bit like ‘Waiting for Godot,’ ” said Stan Humphries, the chief economist for Zillow, an online real estate information service, referring jokingly to the Samuel Beckett play named for a character who never shows up. 

Mr. Humphries and other economists are now predicting that the average 30-year fixed-rate mortgage will hit 5 percent by the middle of next year, partly as a result of the Federal Reserve’s planned withdrawal from buying mortgage-backed securities. Last week, the 30-year national average was 4.28 percent, according to HSH.com, a publisher of loan information.

While 5 percent is still low by historical standards, an increase of that size can reduce buying power more than borrowers may think. According to Zillow, a 1 percent rise in interest rates could raise monthly mortgage payments on a typical home next year by more than $700 in pricier parts of the country. Zillow compared the effect of a rate increase to 5.1 percent from 4.1 percent for a 30-year mortgage in 35 metropolitan areas. Figuring in the expected increases in home values over the next year, Zillow found that monthly payments would rise by as little as $65 in the St. Louis area and as much as $710 in the San Jose/Silicon Valley region.

In the New York metropolitan area, which includes Northern New Jersey,Long Island and Westchester, monthly payments would rise by about $200.

While a rise in rates of even 50 basis points can have a substantial effect on demand, Mr. Humphries noted that for the country as a whole, homes are still relatively affordable. From 1985 to 2000, paying the principal and interest on a median-priced home ate up about 22 percent of median household income, he said. Now, people are spending about 15 percent of median income for the median-priced home.

“So even when rates go to 7 percent, it will still be affordable” in most areas, Mr. Humphries said.

Los Angeles and the Bay Area are glaring exceptions, as home prices there are demanding 40 percent of household income.

A lack of inventory in mid- to lower-priced homes may pose more of a problem for first-time buyers. Research by Redfin, a national real estate brokerage, shows a sharp decline in home listings below $375,000 compared with 2011.

Looking at properties listed in July, Redfin found 28 percent fewer homes priced under $375,000 than in July 2011, and 50 percent fewer priced at $130,000 or less. Above $375,000, inventory was up by 16 percent.

In August, the number of listings over all declined by an unseasonably high 9 percent compared with July, signaling that it is unlikely “we are going to see a big push in affordable inventory anytime soon,” said Nela Richardson, Redfin’s chief economist.

On the plus side for buyers, the market could become less competitive. The National Association of Realtors reported on Monday that purchases by investors and all-cash buyers fell sharply in August.

“Many markets are not going to see the same multiple-bid environment that we saw even earlier this year,” Ms. Richardson said. “It will be easier to win the home of your dreams than it was a few months ago.”

First-time buyers need not feel rushed, she said, noting that low rates are likely to stay low “for a few more months. It’s O.K. to be patient and to look.”

Contact Jason Hurst Today!

What You Don't Know Can Hurt You | Get into a New Home Sooner, Rather Than Later!

There's an age-old adage that states that, "people are destroyed for a lack of knowledge." At first glance, the connotation of that statement suggests that negative things can happen to you if you're not aware.  However, suppose having a lack of knowledge could also detract you from taking advantage of opportunities before you. This is the angle by which I want to set up shop for this week's blog post.  

The real estate market in Alachua county has gradually recovered from its 2008 recessionary levels and, based on recent figures released by the Florida Realtors Association, we are poised for an even bigger recovery.  According to the February 2014 report that they released, examining year-over-year performance from February 2013 to February 2014, there are some strong indicators of a continued recovery. Here they are:

• New Listings: up 3.9%
• Median Sales Price: up 6.6%
• Average Sales Price: up 7.4%
• Median Days on the Market: down 28.9%
• Average Percent of Original List Price Received: up 1% to 90%

These are very promising figures for our local real estate market especially considering that a harsh winter (by Florida standards at least) hampered a lot of peoples' efforts.  Up until now, you may have been asking why buy or sale your home… So now, I'm asking WHY NOT?!  Oh, and just for a little extra sauce on your spaghetti, rates are still at historic lows; but as a word of warning, there has been much speculation that the economy is recovering and those rates will begin creeping back up in the near future.

Now, I'm sure you're probably saying to yourself, "Jason, I get it… the market is favorable, rates are low, it all sounds compelling, but who on God's green earth will be able to qualify me for a mortgage given my situation?"  Well, I'm glad you asked!!  I have taken the liberty of compiling some very locally-specific, potentially credit-friendly, mortgage loan programs that may insight hope and reinvigorate your goals and dreams of owning or refinancing your home!! Here they are:

USDA LOAN PROGRAM

What is This?
A USDA home loan comes from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program.  It is a mortgage loan offered to rural property owners by the United States Department of Agriculture.

What are the Benefits?

Applicants for home loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories. Additionally, the property must be located within the USDA Home Loan "footprint."

Who is Eligible?

1. To be eligible, you must be purchasing a property in a rural area as defined by the USDA.
2. The home or property that you are looking to purchase must be "owner-occupied"; investment properties are not eligible for USDA loans.
3. USDA Loans require 2% of the purchase price in up front funding fee, and a monthly mortgage insurance premium based on .40% of balance annually. The annual premium is divided by 12 to arrive at the premium charge per month.

THE SHIP PROGRAM

What is this?

Florida Housing administers the State Housing Initiatives Partnership program (SHIP), which provides funds to local governments as an incentive to create partnerships that produce and preserve affordable homeownership and multifamily housing. The program was designed to serve very low, low, and moderate income families.

What are the Benefits?

SHIP dollars may be used to fund emergency repairs, new construction, rehabilitation, down payment and closing cost assistance, impact fees, construction and gap financing, mortgage buy-downs, acquisition of property for affordable housing, matching dollars for federal housing grants and programs, and homeownership counseling.

Who is Eligible?

SHIP funds are distributed on an entitlement basis to all 67 counties and 53 Community Development Block Grant entitlement cities in Florida. The minimum allocation is $350,000 and the maximum allocation is over $8.8 million. In order to participate, local governments must establish a local housing assistance program by ordinance; develop a local housing assistance plan and housing incentive strategy; amend land development regulations or establish local policies to implement the incentive strategies; form partnerships and combine resources in order to reduce housing costs; and ensure that rent or mortgage payments within the targeted areas do not exceed 30 percent of the area median income limits, unless authorized by the mortgage lender. Click here for a full SHIP Program Checklist

VA LOAN PROGRAM

What is This?

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. 

What are the Benefits?

The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 per cent second mortgage and up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less.

Who is Eligible?

The Veteran Loan program is designed for Veteran's who meet the minimum number of days of completed service. The program does allow for benefits to Surviving Spouses.

The VA does not have a minimum credit score used for pre-qualifying for a mortgage loan, however, most Lenders require a minimum credit score of at least 620.

A Veteran who has used their entitlement to previously purchase a home, may have entitlement left to purchase another one. If you previously purchased a home using your VA Benefits then you might still have some of that “Entitlement” available to you for the purchase a new home! For a full list of VA Loan eligibility requirements, click here.

FHA LOAN PROGRAM

What is This?

This is a US Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. 

What are the Benefits?

FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI.

Who is Eligible?

1.  The potential lender assesses the prospective home buyer for risk. FHA loans for buyers who don't meet a minimum 640 FICO score may be subject to higher mortgage rates, but can very likely still qualify.

2. The FHA makes provisions for home buyers who have recovered from "economic events". Via the Back To Work - Extenuating Circumstances program, the FHA reduces its standard, mandatory three-year application waiting period for buyers with a history of foreclosure, short sale or deed-in-lieu; and two-year application waiting period after a Chapter 7 or Chapter 13 bankruptcy. The Back To Work program lasts through September 30, 2016.

So archive this post, book mark it, copy and paste it to a word doc, whatever you have to do because this is valuable stuff! And, other than the conventional mortgage loans, you may be able to take advantage of one of these unique programs NOW!!  I have built a network of individuals who can help you get started with one of these programs and get on the road to homeownership so e-mail me with your questions and  I'll get you hooked up with the right person. Until next time, when it comes to Real Estate…. Think Hurst First!!