Joe Knows Mortgages

Single Family Residence Sales for May 2009 Show Continued Increase

                The Brevard county real estate market continues to improve at a rapid pace.  Looking at the data for May 2009, sales are up 7% over April 2009.  Sales are also up over 18% year to date through May verses last year.  Sales are up, rates are low, and prices are still favorable.  This is a great time to buy a house.

                Even if you think that prices may still drop, the impending increase in interest rates will more than likely outweigh a small decrease in price (check out this article on this subject).  And with sales on the rise, it is only a matter of time before pricing rebounds.

                While most of the single family residences sales in May seem to be below $100,000, 62% of the sales are above $100,000.  The properties below $100,000, in addition to the first time homebuyer credit, still present an excellent opportunity for those first time home buyers.  If you want to buy a house, but are waiting, you may lose $8000.

                Don’t forget, contrary to popular belief, financing is still available.  66% of those homes purchased in May of 2009 were financed.  Rates are still historically very low, and people are closing on homes with financing.  It is always in your best interest to consult a mortgage professional to go over your purchasing power and financing options.

                     Homes are still priced very aggressively, and interest rates are also at historical lows.  If you have the means to do so, or are even thinking about it, you need to speak with a professional to see if you can make it happen.  Not only will we not see these low prices again, we may not see these low interest rates; and if you are a first time homebuyer, or have not owned a property in three years you may be entitled to an $8000 tax credit.  Now go out there and buy a house!

 

Everyone Wants a Lower Price, But What About the Impact of Interest Rates?

When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It’s important to keep in mind, however, that the sales price is not the only factor that determines what the monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.

Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values here for Brevard County Real Estate, the rate of decline appears to be stabilizing.

That being said, it would not be unreasonable for buyers to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Many markets are reporting that lower property values have been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.

Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.  So the interest rates for a Brevard County Mortgage is still low.

But buyers shouldn’t be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!

Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.

For anyone who was waiting for prices to drop even more, a 1.00% increase in interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.

If you or your clients are waiting for prices to fall even lower, be aware that while holding out for a lower price may help them win the battle, they could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.

Clock is Ticking on Free Money
If you are planning on purchasing your first home this year, you need to take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today’s market, this impacts many buyers.

If you have questions about this update, give us a call. I can show you how waiting for the lowest price could really cost you or your clients more in the long run.

All signs point to rising interest rates.  The inflationary fears have started to materialize and have affected the Bond markets.  Over the next few years, Trillions of dollars will be pumped into the economy, and many fear that this will cause hyperinflation.

Because interest rates are determined by the price and yield of Mortgage Backed Securities, when consumer confidence comes back, there will be a flight away from fixed income instruments, and towards equities or stocks.  In other words, money will stop flowing towards bonds, and will start moving towards other items that will more likely beat inflation.

While bonds offer a fixed rate of return and are stable, in times of inflation, your rate of return may not be beating inflation.  When there is less demand, the price of the bond will go down, and the yield will go up; the yield is the interest rate.  Again, this means that interest rates are headed up.

What does this mean?

Rates are still low; however, we know that they are heading up.  If you know ANYONE who is looking to purchase a home or Refinance their existing home, it is time to let them know that they need to act soon.  A rise in interest rates will mean decreased purchasing power and increased costs.  Rates are still relatively low, and prices are still low; it is still a great time to buy a home!

With over 25 agents attending from 10 different offices from all over Brevard County, this event was a wild success.  While giving exposure to the property is the goal, it is also nice to have a time to speak with your professional peers from a myriad of different offices.

For those who attended, thank you for previewing this spectacular property.  Please keep this wonderful home in mind when you have buyers that are looking for the very best. 

For those who did not attend, I hope to see you at next month’s event.  If you did not receive an invite, and would like to attend future events, please contact Joe Harris at joeharris321@gmail.com

Opportunity Everywhere!

 

After completing my market analysis for April, I continue to see that Brevard County remains one of the best values in coastal florida.  Between the rivers, and the beaches, where else can you enjoy such a high quality of life, and pay such a reasonable price for a house?

Check this out!  80% of the sales of single family residences in the month of April are under $200,000.  That means that home pricing has presented an opportunity for more people to achieve the dream of home ownership.

While the low priced sales get the majority of the attention, we are still experiencing many move up buyers, and first time buyers in the $200,000 to $500,000 range.  With 98 sales in this range, many are finding outrageous bargins that simply can not be passed.

                As you can see from the financing stats, cash is still king!  35% of buyers in April chose to pay cash for the property.   This is a good thing; this means that people are looking at the real estate in our market and saying that the prices are so low, it is worth risking their cash to purchase the property.  In years past, roughly 10% of purchases were done with cash.

One of the biggest misconceptions is that there is no financing and lending available right now.  I am here to tell you that is just not the case.  With the overwhelming majority of 64% of the transactions being financed, you may clearly see that money is available.  Not only that, the money is cheap!  Buyers have been getting historically low interest rates.

As a professional living and working in Brevard County, it is great to see home prices that are affordable to many.  It has been said many times over that in times of disparity there is opportunity.  Right now you can buy a house at a deep discount, at historically low interest rates, to give you one outstanding opportunity!  If you have the means to purchase a home, there is truly no better time than right now.