An Opportunity of a Lifetime

"A simple rule dictates my buying: Be fearful when others are
greedy, and be greedy when others are fearful." - Warren Buffet

While Mr. Buffet was writing about buying stocks, the same can
be said for housing today.

This week, one index that tracks housing prices, S&P/Case-
Shiller Home Price Indices, indicated home values fell the most
since 1968, declining 18.5% in December from the prior year.
This means home prices have fallen to levels not seen in 6 - 12
years, depending on individual markets. The bright spot, in
contrast, was that the number of homes sold in December
increased. Home buyers have been buying distressed properties
at the rate of 45% of total sales.

The basic fundamentals of the housing market point to higher
prices ahead. Almost half of the properties being sold today are
existing homes that are either owned by banks or homes on
which banks are accepting short sales, allowing them to be sold
for less than what is owed.

New homes or homes under construction are near all-time
lows. The country's demographics point to more potential buyers
coming into the housing market than projected inventory in
coming years. This all points to higher prices on the horizon as
demand will be greater than supply. This is supported by the fact
that the inventory of unsold homes fell 2.7% in January.

Three very important reasons to buy now are:

• Interest rates are near all-time lows;

• Home prices have declined to levels not seen in years;

• Qualified first-time home buyers are now eligible for up to an
$8,000 tax credit.

One final point to consider. Even if you believe that home
prices will continue to decline, it's very difficult to believe that
interest rates will remain at these low levels. Did you know that
even if home prices were to decline 10% but also during that time,
interest rates available for home loans were to increase by
1%, your monthly payment would actually be higher?

So, if you are thinking of buying, now is the time to act!

~ Courtesy of Wendy Charles, CMPS, LoanCentral LLC

5 Reasons to Buy A Home This Year

According to a recent article on MSN Real Estate, many people are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.

Ask for price reductions, improvements, closing costs - whatever - and the seller, desperate to get a contract, is likely to work with you, said Jay Papasan, one of the authors of the book, "Your First Home." But, when the market starts improving, your negotiating power will start to diminish, he added.

"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, and the purchase makes sense in your situation, and you're prepared to live in that home for at least 5 years, there are five reasons you may be headed for a great deal:

1. Affordability is better than ever.

According to the National Association of REALTORS (NAR) housing affordability index, homes are more affordable now than at any other point since the group started the index in 1970. NAR's affordability index is a measure of the relationship between home prices, mortgage interest rates, and family income.

2. You have a large inventory to choose from.

In many places it is taking months to sell a home, creating loads of inventory - from new homes to existing homes to foreclosures. There was a 12.9 month supply of inventory in December given that month's sales pace, according to NAR. Most experts believe a 6 month supply is a balanced market between buyers and sellers.

3. Builders are offering big discounts.

Home builders are getting even more aggressive with their pricing. In fact, some experts recommend looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances.

4. Mortgage rates are historically low.

It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. Earlier this year, rates on the popular 30-year fixed rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks.

5. You can get a federal tax credit.

For those buyers that have not owned a home in the last 3 years, the economic stimulus plan recently signed into law by President Obama provides a federal tax credit of $8,000 for homes bought between Jan. 1 and Nov. 30 of this year. That money would not have to be paid back if the home is not resold for at least 3 years.

The extra cash will come in handy: The average first-time homebuyer spends about $6,000 in the first six months of owning a home.

Low interest rates mean greater purchase power

Over the past several years, we’ve enjoyed low mortgage interest rates. Unlike the early 1970s to early 1990s, when interest rates ranged from 7% to as high as 16%, the 2000s have been a time of relatively low rates. Historically, a rate of 6% is considered favorable. Today’s phenomenal rates, hovering near 5%, are the lowest we’ve seen in almost 40 years.

With interest rates this low and mortgage applications on the rise, it’s evident that many homeowners are taking advantage of this golden opportunity to refinance their current mortgages in the hope of lowering their monthly payments, consolidating debt, or shortening the life of their mortgages. A lesser known benefit of historically low interest rates is that your home-buying budget expands. In other words, low interest rates mean more purchasing power.

If you are like many would be home buyers, determining how much house you can afford begins with figuring out how much you can reasonably spend on a mortgage payment each month - and that’s where a lower interest rate really comes into play.

Let’s imagine you can afford $2,000 in mortgage payments each month. If you’d applied for a loan last year, when rates were near 6%, you would have been able to afford a $333,500 mortgage. With rates now hovering near 5%, you can now afford a $372,500 mortgage without increasing your monthly payments.

In these uncertain economic times, even real estate and finance experts are reluctant to make guesses about when interest rates will go up again. While we are all on the lookout for a better deal, with interest rates this low and more homes to choose from than we’ve seen in years, there is no promise that tomorrow will bring a better bargain. The time to maximize your purchasing power is now!

Home Buyers Starting to Seize Opportunities in Some Western Washington Areas

Pending sales during January jumped from the same month a year ago in 8 of the 19 counties in the Northwest Multiple Listing Service (NWMLS) area. Last month's pending sales surpassed December's weather-hampered activity by nearly 1,100 transactions.

"The market seems to be gaining momentum, and buyers seem to be feeling more confident," reports NWMLS director Meribeth Hutchings. Agents are more optimistic and banks are getting more realistic on pricing bank-owned homes and bank-controlled homes (short sales), which are helping move that inventory, she stated. "The sooner we can eliminate that inventory, the sooner we will get back to a healthy market," says Hutchings, the broker/owner of Windermere Real Estate/Lake Stevens, Inc.

NWMLS director Dick Beeson, broker/owner of Windermere/Commencement Associates in Tacoma, agreed. Beeson attributes the uptick in pending sales to short sales along with low interest rates and a buyer pool that's "finally waking up to the excellent values in the marketplace.” Given the pent-up demand, he believes passage of a stimulus package with key elements for housing would spur a housing rebound.

Members reported fewer closed sales in January compared to a year ago, reflecting the slower pace of sales during the last few months of 2008. Prices area-wide slipped about 13.7% from a year ago.

Condo prices were unchanged from a year ago. Condos that sold last month had median selling price of $250,000, which compares to a price of $249,950 for sales that closed during the same month a year ago. In King County, which accounts for about two-thirds of the NWMLS condo sales, prices increased 3.4%, rising from $270,500 to $279,750.

"It's pretty clear that the real estate train came to a complete stop over the past few months," acknowledges NWMLS Pat Grimm, owner/broker of Windermere Real Estate/Capitol Hill, Inc. "The good news is that the train was moving pretty fast before and now people have an opportunity to get aboard." Affordability is the key, according to Grimm. "With interest rates and prices down, dream properties are within reach again and we're starting to feel the train building up steam."

Officials from the National Association of Realtors® say "significant uncertainty" still clouds the housing market despite improved affordability conditions. "For a sustainable housing market recovery and, hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified borrowers," stated Lawrence Yun, NAR chief economist.

~ Courtesy of NWMLS

Eastside Statistics - January

Current Residential & Condo listings - 4,407 (up 9.57% from last year)
New listings taken this month - 1,404
Pending sales this month - 428 (down 13.54% from last year)
Percent of listings that sold this month - 9.71%
Median closed sales price - Jan. ‘08, $520,000
Median closed sales price - Jan. ‘09, $447,500
Rate of appreciation = -13.94%

~ Courtesy of NWMLS

King County Statistics - January

Current Residential & Condo listings - 12,035 (down 2.71% from last year)
New listings taken this month - 4,159
Pending sales this month - 1,500 (down 10.77% from last year)
Percent of listings that sold this month - 12.46%
Median closed sales price - Jan. ‘08, $395,000
Median closed sales price - Jan. ‘09, $364,137
Rate of appreciation = -7.81%

~ Courtesy of NWMLS

Snohomish County Statistics - January

Current Residential & Condo listings - 5,595 (down 6.42% from last year)
New listings taken this month - 1,980
Pending sales this month - 668 (down 8.24% from last year)
Percent of listings that sold this month - 11.94%
Median closed sales price - Jan. ‘08, $344,500
Median closed sales price - Jan. ‘09, $295,000
Rate of appreciation = -14.37%

~ Courtesy of NWMLS

Snooze and You May Lose!

Rumors have been circulating of the Fed
lowering rates to 4.5% in an effort to stimulate
housing. This has caused many to sit on the
sidelines waiting for the promise of lower interest
rates.

Since the Fed doesn’t actually ‘control’
mortgage interest rates, there is only so much they
can do to lower rates. Each bank independently sets
their own interest rates based on the daily market
and economic conditions, as well as internal factors
such as liquidity and volume control.

The Fed started buying mortgage backed
securities the first week of January and the news of
this drove mortgage rates downward as the promise
of increased liquidity. When you look at the pools of
mortgages they have been buying, however, the
loans are those with rates in the low to mid 6%
range. While this is a smart move on the part of the
Fed, this is not likely to drive mortgage rates lower
any time soon as these actions are having no impact
on the loans being originated at today’s low rates.

The loans the Fed is buying at the higher
interest rates have a high probability of being
refinanced into the current lower interest rate loans
available. This gives the Fed a quick recoup on their
investment, and therefore the ability to continue to
purchase mortgage backed securities for a longer
period of time.

This may very well be the bottom of the market
for interest rates. How much is the opportunity cost
for the consumer who could save $300 per month by
refinancing now, versus waiting another 6 months to
save an additional $50 per month with a lower
interest rate that may never materialize?

~ Courtesy of Wendy Charles, CMPS, LoanCentral LLC

What Happened to Rates with Zero Points???

Wondering why recent mortgage rate quotes rarely
include zero point or “no fee” options? In previous
refinance booms, consumers always had a choice of
selecting from a variety of interest rate and fee
combinations. Typically a consumer can select the
lowest rate with points, increase the rate a bit for zero
points, or increase it even further and pay no closing
fees at all. These options made refinancing simple as
homeowners could do so with NO COST! There was
virtually no reason not to refinance! The homeowner
could always pay off the loan early and refinance if rates
dropped further.

The trouble with zero points and/or no cost
refinances from a bank’s perspective is that these loans
DO tend to get paid off very early. The bank ends up
losing money when the loan is not held long enough to
collect enough interest to recapture the up front costs.

With current rates at record setting lows and banks
in their worst financial position since the Great
Depression, most simply cannot afford the losses
associated with loans being paid off early.

The result is lenders are not offering attractive rates
for zero point loans and no cost options are virtually nonexistent.
The banks are now betting that if consumers
pay points and closing fees to get historically low fixed
rates, the odds of the loan being paid off early through
another refinance are slim. End result is a win/win for the
bank and consumer. The bank now has a long term
profitable loan on the books, and the consumer gets a
historically low rate!

~ Courtesy of Wendy Charles, CMPS, LoanCentral LLC