Focus Professionals, Inc Real Estate Blog

The recent years of low interest rates, special loan programs for $0 money down, or very small deposits, combined with endorsements from the government incentivizing us that “All Americans Can Own A Home” have put many American families into homes that previously would have been unable to afford them. Today we seen the fruits of those programs, with record foreclosure rates, refinancing with virtually no equity in the home accumulated over the past year or two, and  manic efforts to save credit by selling the house fast.

Federal statistics show that nationwide, the number of vacant homes for sale soared 34 percent to 2.1 million at the end of 2006, compared to the end of 2005 — the fastest increase ever recorded, according to the latest “U. S. Census Bureau Reports On Residential Vacancies and Homeownership” released Jan. 29.

A year ago, the number was only 1.57 million homes waiting sales.

The vacancy rate for owned units, 2.7 percent, broke another record moving from 2.0 percent a year earlier. The rate has never been above 2 percent from 1965 to 2005, with the long-term average at only 1.4 percent.

Housing starts were down nearly 18 percent over the past 12 months, but given the high inventories of vacant homes, that may not be down enough.

The number of housing units in 2006 rose by 2.14 million, but the number of units occupied rose by only 1.04 million, less than half as much.

The rate of home ownership was slightly down at 68.9 percent in the last quarter, compared to 69.0, both in the third quarter of 2006 and the last quarter of 2005.

So, when the Bush Administration says “all Americans can own a home…” — they mean it, just not for very long.

We are advising our clients to be conservative in the loans they select for the purchases of their homes, and lenders are getting tighter in any event. It will be an interesting year ahead for the real estate markets… very interesting… don’t get lost is in the sauce… be conservative in your debt load, and make sure that you can afford the payments on your house, even if the rates increase over time, and if at all possible, DO NOT use 100% financing programs, but instead save money until you can put at least 10% down on the house… it may save you a lot of aggravation in the future.

I just wanted to clarify the previous post, in so far as it is not ONLY credit scores that effect a person’s ability to get a loan. Such things as cash reserves (savings), income, other assets, other debt, and the amount of the mortgage being applied for, also have a large impact on the borrower’s ability to get a mortgage. Also, if the house being purchased is an investment property, or owner occupied, and if the person has other experience with investment properties, can also have a decided impact on the viability of a borrower’s capability to gain financing.

But it is true that credit scores have a tremendous influence over lenders, and that it is becoming increasingly difficult to obtain financing with less than great credit. There is still some ability to gain sub-prime loans, but these are increasingly regulated, and so harder and harder to get. The days of easy money are rapidly coming to an end, at least for now.

What to do? Contact us at Personal Mortgage Brokers for some assistance if you are looking for financing, whether for a purchase of your first home, an investment property, or to refinance your existing properties.

As with the old television series, Lost in Space, where the Robot, when excited, flailed his arms and yelled: “Warning, Warning Will Robinson, Warning!” I now feel the compulsion to let you all know that interest rates are edging upward but remain at near 20 year lows. But more importantly, making loans harder to get is the fact that the credit scores required to get a conforming mortgage for either a purchase or refinance are now at 680!!! Last year, you could get such a loan with a score of 640, and 2 years ago, you only needed a score of 620!!!

This is due in part to the issues surrounding predatory lending, and the increasing number of foreclosures. The former are regulatory issues coming effective January of this year, and in many States in the weeks following that. The latter issue effects the economics of lending. There is simply less money available, but also the lenders are seeking to ensure higher quality borrowers. There is still sub-prime loans available at below these credit scores, but those are highly regulated based on the new rules, and also harder to come by.

How does this effect the market?

With inventory of houses for sale high, and turnover low, sellers are softening prices. The effect of the increasing difficulty in borrowing money may depress prices somewhat, and increase inventory further… it is a buyers market now, but it is also harder to buy. This complexity will out itself over the next few months. We are interested to see how that goes.

Kay Van Kampen’s post today on ActiveRain got me athinken’… she discusses the nature of being a professional Realtor and how showing agents sometimes lack propriety when showing houses while sellers are present. What is professionalism when it comes to Realtors showing houses to buyers.

I commented that it would be best to ensure that the seller not be present, as our experience has been that they rarely do well at showings, often being attached to their homes, and thus having difficulty tolerating comments by buyers, or their agents, especially if the agent is representing the buyer. Sellers have their heart in their home, and it is often the case that the changes desired or comments made by buyers, let alone by their representatives, are uncomfortable to sellers.

Another thing to consider is “why is the listing agent not present” and “why did the listing agent allow the seller to show the house?” — We all are aware of the issues surrounding procuring cause on the part of showing agents, yet somehow we find it perfectly satisfactory to complain about the professionalism of buyers agents who are looking out for the interest of the buyer, but never the less we do not attend the showing, and we do not tell the seller not to attend.

Where does professionalism lay?

In a recent instance, we experienced a buyers agent commenting negatively about various aspects of the property we had listed. As it turned out, these aspects, not to the buyers agent’s taste, were very much to their clients tastes, and the comments ruined the relationship and the possibility of selling our listing to the buyers… INSERT FOOT IN MOUTH

(more…)