Joe Knows Mortgages

 Brevard County Mortgage and Real Estate Market Data For January 2010 

       Welcome to the first market data report for Brevard County Real Estate of 2010.  While 2009 turned out to be a good year for both the reduction in inventory, and sales of existing inventory, it also proved to be the year of lending changes, and bottoming out prices.  With 2009 in the distant past, we now get our first glimpse into the new decade for 2010. 

        Not too surprising, the vast majority of sales were under $200,000 with 76% of all residential transaction selling between $0 and $199,999.  This trend has been consistent over the past year as the first time homebuyers are greatly incentivized to come in and purchase.  However, we did see an increase in the average price sold of homes to $160,079 in January 2010 versus $148,474 in January 2009.  This data could be telling us that we have hit bottom, and are going up. 

        The biggest surprise for January is the sheer number of cash transactions that are taking place.  This January 2010 we had 252 cash Transaction which accounted for 52% of the market.  Again, Real Estate has historically been a decent investment, and with so few places to put your money right now, buyers are choosing to use their cash instead of financing.  When the cash on the sidelines starts coming into the game at this pace, that is a sign that we have hit bottom. 

        Whether or not the Brevard County market has hit its bottom or not, one thing is certain: it is an outstanding time to buy real estate.  If you are a first time homebuyer, the government is still offering the $8000 tax credit, however, there is an end date, so you better act soon to find your home and claim your government incentive.  Also, we know that the federal government will stop their Mortgage Backed Security purchase program which will almost instantly add to the increase of interest rates.  So, if you are on the fence, or if you know someone who is thinking about buying, now is the time to act.  If you have any questions, please contact me.

Everyone knows that when you refinance your current mortgage into a new one you can benefit in better terms, better interest rate, better payment, and you may skip a month of your mortgage payment, however, most people do not look at the opportunity cost of the money that it costs to do the refinance.  What rate of return is your money getting right now as it sits in the bank? A half a percent? A whole percent?  I doubt it is doing much better than that.

What if I told you that you could receive a guaranteed rate of return on your money of over 60% per year?  Would that interest you at all?  Of course it would; you are a rational, financially conscious human being.  Well, let me give you a scenario where that is not only true, but highly likely in today’s mortgage interest rate environment:

Let’s say that you have a mortgage of $300,000 at an interest rate of 6.25%.  Your monthly principle and interest payment would be $1847.  If you were able to take advantage of today’s interest rates, and refinance the $300,000 balance into a 4.75%* interest rate, you would then lessen your monthly payment to $1564 per month.  That is a monthly savings of $283, and a yearly savings of $3396.

As we all know, there is a cost to refinance; these costs are called closing costs.  You can either roll the closing costs into the loan, or you can pay them out of your pocket.  If the closing costs were around $5500, and you were saving $3396 per year because of the reduced payment, then that “investment” of $5500 will get a 61% annual rate of return, for as long as you have that loan.  If you had the loan 10 years, then you would have saved over $33,960 and achieved over a 600% rate of return on your investment.  How much would $5500 earn you at your bank right now?

While this scenario may not be exactly like the one that you are currently in, think about this:  what is my money doing for me right now?  Can I use that money that is gaining no interest in the bank for something that will give me a better rate of return with little or no risk?  Even if you have little to no equity in your home, you still may be eligible to refinance your home into a better interest rate.  There are several government sponsored programs that you may be eligible to take advantage of and put your money to work for you.  Please contact me today, before these interest rates and programs are gone.

*Author of this article makes no claims and is not advertising this rate.  This is a theoretical situation. For current interest rates and to have a professional go over your options with you, please contact Joe Harris at joe@joeknowsmortgages.com

Many Thousands of Americans have had to sell their house through a short sale in the past few years.  Who would have guessed a few years back that prices would plummet like they did?  Here in Brevard County, home prices in some areas have been more than cut in half. 

If you had to sell your house short, more than likely the credit report will show a mortgage settled for less than owed.  If you go to apply for a mortgage, there are new rules surrounding this type of derogatory credit.  The new rules  for Fannie Mae says that it must be 2 years from the completion of the short sale, with no exceptions.  This is fairly straightforward.  If you had a short sale in the last two years, you are ineligible for a loan which is bought by Fannie Mae (that is all conforming loans, or anything that is not government). 

US Department of Housing and Urban Development  (HUD), who determines the rules for FHA loans, has not made a ruling on short sales as of when this article was written.  While this may sound promising, the majority of the lenders are treating short sales on an FHA mortgage like they do on a conventional mortgage.  However, there are a few lenders out there that will entertain a short sale if there are extreme extenuating circumstances prior to two years.  Otherwise, like on a conventional loan, you must wait two years.

So here is the long and short of it:  if you have recently experienced a short sale, you will be ineligible for  a conventional loan for at least 2 years; you may be eligible for FHA financing, however, you will have to prove that there were extenuating circumstances.  These extenuating circumstances could include loss of job, death of a wage earner, hospitalization, or some of these sorts.  Additionally, you cannot have had any mortgage lates in the last year.  For a loan to be considered prior to 2 years, it must be strong.

There is life after short sales, however, it seems as though for loan qualification purposes, it starts after 2 years for most.  This is really not that long of a time, and there are probably some people who went through a short sale a few years back that are ready to buy again.  For more information, contact Joe Harris.

There is much new regulation coming down the pipe for the mortgage industry with Regulation Z changes, and RESPA changes; many of my peers are beside themselves and raving mad about the changes.  In the next years many of the rules that hold professionals in the mortgage industry accountable will become stricter.  This may sound crazy, however, I invite the changes with open arms.

 

Why are Mortgage Professionals any different than other professionals?  It is my job to be as exact as possible.  Wouldn’t you be upset if an engineer or architect got “close” to building the road or building correctly?  If you got in any legal trouble you’d be hoping your attorney got better than “close” on the facts.  Certainly if you were sick and needed an operation you would be looking forward to your surgeon being well prepared and informed in the profession he chose, and was exact on his procedure.  

 

Long gone will be the days that someone can make a living in this profession without knowing what they are doing.  Also, I truly hope that those who made boat loads of cash by misleading their clients have also left the industry.  To be a professional means that you study the trade, learn the rules, and know you business just like other professionals.   The public has requested more attention to detail in the mortgage profession and I for one think that’s what they should get.

 

While I am not a fan of rules, regulation, and government intervention, I also believe that the clients should be protected.  We have gone way to long with many making a bad name for few. I think it is time for those many un-professionals to play by the same rules that the true professionals have been playing by all along.  If these rules will weed out the un-professional, and protect the clients, than I welcome them with open arms.

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