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Housing Crisis Forecasted to End 2012
On Tuesday, Capital Economics announced that they expect the housing crisis to end in 2012. What makes them feel so confident? Loosening credit by banks.
Currently, the average credit score for a new approved loan is 700, a figure that was much lower prior to the crisis, but has been the norm for the past year. However, banks are now lending 82% loan-to-value ratios, rather than the low 74% they were lending in 2010. This is one of the clearest signs that point to the stabilization of mortgage lending and the improvement of mortgage credit conditions.
If you want to see if your credit qualifies you for a mortgage, click here. Or contact one of our many loan officers, located in over 44 states.
Pending Home Sales Index Posts Second Best Month Since April 2010
After 3 consecutive months of growth, the housing market appears to have eased a bit in December.
According to the National Association of REALTORS®, December’s Pending Home Sales Index slipped 4 percent from the month prior. The index measures the number of homes under contract to sell nationwide, but not yet sold.
Despite falling below its benchmark “100 value”, December’s Pending Home Sales Index is the reading’s second-highest value since April 2010 — the last month of last year’s home buyer tax credit program.
In other words, the housing market continues to show signs of improvement, propelled by low home prices and the cheapest mortgage rates of all-time.
Freddie Mac’s mortgage rate survey put the 30-year fixed rate mortgage at an average of 3.96% in December — a 75-basis point improvement from December 2010. This helps to make homes more affordable nationwide.
On a regional basis, December’s Pending Home Sales Index varied :
- Northeast Region: -3.1 percent from November 2011
- Midwest Region : +4.0 percent from November 2011
- South Region : -2.6 percent from November 2011
- West Region : -11.0 percent from November 2011
But even regional data is only so helpful. Like everything in real estate, data must be local to be relevant.
Throughout the West Region, for example, the U.S. region in which pending home sales fell the most, several states must have performed better than the regional average. And, undoubtedly, there were cities, towns, and neighborhoods that experienced marked market growth.
Unfortunately, the Pending Home Sales Index can’t capture that data. Nor can it identify the markets in which home sales suffered.
For today’s San Ramon home buyers and sellers, therefore, it’s important to understand your local market and the drivers of local activity. Reports like the Pending Home Sales Index can paint a broad picture U.S. housing but for data that matters to you, you’ll want to look local.
For local real estate data, talk to an experienced real estate professional.
Choosing to Become a Landlord in a Lower Income Area
If you are considering becoming a landlord, you don’t necessarily have to invest in a luxury, vacation spot in order to make money. Today there are opportunities for obtaining steady cash flow and profits from renting in lower income neighborhoods.
There are different reasons that people choose to live in lower income sections of neighborhoods, such as the Mission District in San Francisco California, or c
ities that will not require the landlord to take a chance on either an unstable population or an area that is unsafe. Remember, you are seeking to invest in lower priced real estate to rent because you have financial limitations similar to those you hope to rent to. When you are examining lower income areas where you might become a landlord, consider the stability of the area in terms of whether it is perhaps near a college and has a large student population or whether the area has a large young-adult population. Areas known for charging lower rents are as varied as areas with higher rents. Researching the area you are considering is critical for your investment.
While you are researching the rental prices in an area, you should also research the availability of rentals in an area. If there are many properties to rent, this will impact your opportunities for successful renting. Many low income rental areas also have landlords with multiple properties available, so you want to be sure that your purchase is likely to be able to allow you to charge competitive rental rates in an area.
Many areas have multiple types of housing available for rental such as rooms, entire homes, smaller apartment buildings or apartment complexes. A good way to narrow down what type of property you are considering to become a landlord of is to explore the neighborhood as a potential renter first. If you wouldn’t choose to live in your property, perhaps the property is a bad choice as a purchase for you as a landlord.
Always calculate how much money will be required for you to charge in rent in order to cover your monthly expenses on the property. The costs of maintaining a property are significant and you will want to use online tools or the advice of experts to include these costs to determine how much monthly rent you will need to charge in order to have positive cash flow.
There are many governmental assistance programs that help individuals pay for rent. Find out how these work in a particular area and whether your property is eligible for such rental. Because government assistance is involved in such a transaction, thoroughly investigate additional paperwork or standards with which you must comply to maintain your eligibility to receive rent that is paid in part or more by a governmental entity.
As in the case of all property you purchase, the taxes and insurance necessary for the property are part of your foreseeable expenses. These costs of home ownership should never be omitted from your calculations.
There are many laws protecting renters from individuals seeking to charge them for homes that are in terrible condition, in terrible neighborhoods or that present them with a miserable existence. As a landlord you will be providing someone with a home and your goal should never be to buy a property and just rake in the bucks without paying attention to your tenants. A fair price and livable quarters are essential for both you and your potential tenant to establish and maintain a successful relationship.
Purchasing lower-cost property with the intent to rent is a big decision as is any real estate purchase decision. The above tips will help you consider becoming a landlord in a lower income area.
Related articles
- Rental Concessions to Attract Tenants (choiceofhomes.com)
- Landlords ‘need to have commercial insurance in place’ (premierlinedirect.co.uk)
- How to deal with difficult tenants (premierlinedirect.co.uk)
- How to Rent with Bad Credit (mynewplace.com)
- How a Landlord Evaluates You (rentersinsurance.com)
A Simple Explanation Of The Federal Reserve Statement (January 25, 2012)
Wednesday, the Federal Reserve’s Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The Fed Funds Rate has been near zero percent since December 2008.
For the third consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote, objecting only to the language used in the Fed’s official statement.
In its press release, the Federal Reserve noted that the the U.S. economy has “expanding moderately” since its last meeting in December 2011, adding that the growth is occurring despite “slowing in global growth” — a reference to ongoing economic uncertainty within the Eurozone.
The Federal Reserve expects moderate economic expansion through the next few quarters but is wary of “strains” from global financial markets, and these three threats to the U.S. economy :
- The housing sector remains “depressed”
- The unemployment rate remains “elevated”
- Fixed business investment has “slowed”
On the positive side, the FOMC said that household spending is rising and inflation remains in-check. The group also believes that employment will gradually improve nationwide going forward.
The Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs.
Immediately following the FOMC’s statement, mortgage markets rallied, pressuring mortgage rates to fall in and around San Ramon.
Mortgage rates remain near all-time lows and, for homeowners willing to pay points plus closing costs, conventional, 30-year fixed rate mortgages can be locked at below 4 percent. If you’re in the process of buying or refinancing a home in California , it’s a good time to lock a mortgage rate with your lender.
The FOMC’s next scheduled meeting is a one-day event slated for March 13, 2012.
The Federal Reserve Meets Today : Mortgage Rates Expected To Move
The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.
The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.
The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night.
The Fed Funds Rate can only be changed by FOMC vote.
For home buyers and would-be refinancing households in Pleasanton , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.
Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout California. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%.
The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.
Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.
As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.
Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.
Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets.
When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.
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