You are currently browsing the monthly archive for March, 2009.
I am currently active and well versed in this aspect of real estate investment. If you need questions answered please give me a call.
HUD’s new Neighborhood Stabilization Program will provide emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. The Neighborhood Stabilization Program (NSP) provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes.
NYC and metro area to receive $100 million. HUD Secretary Shaun Donovan announced on 2/19 that the Obama Administration is awarding more than $170 million in grants to support over 300 local homeless service programs throughout New York State.
Interestingly enough, the current wave of home buyers is comprised of investors and vacation home or second home buyers. By definition risk takers, who see an opportunity and act on it. Long term value is the hallmark of any good investment. Consider this when buying any property, but do not loose site of the fact that a house is not just a commodity, it is also in its purest form, a shelter. If you are able to purchase a second home or investment property to take advantage of the growing rental market, the time to act is now, while rates are at ubber-historical lows.
I would discourage any home buyer to excersise the 3.5% down opportunity. It is the reason so many are loosing their property to foreclosure now.
WSJ* March 30, 2009, 12:46 PM ET Who’s Still Investing in Real Estate?
The share of homes purchased as vacation residences or investment properties dropped to 30% of all sales in 2008 from 33% in 2007, according to the National Association of Realtors. However, amid continued gloom in the housing market, it raises the question of who still is investing in real estate. Vacation-home buyers appear to be taking advantage of reduced prices, and are more interested in long-term value than investment.
According the NAR, vacation-home buyers plan to keep their property for a median of 12 years, with 58% planning not to sell for 11 years or more. Meanwhile, the median price of a vacation home was $150,000 last year, down from $195,000 in 2007. Under these circumstances, buying a second home in a downturn makes sense. Even if the market continues to struggle, the value of the home comes from its use not as an investment. However, more second homes were bought as investments than for use as a vacation retreat. Vacation-home sales dropped 31% to 512,000 last year, while investment-home sales fell just 17.2% to 1.12 million, the NAR said. By comparison, primary-residence sales declined 13% to 3.77 million in 2008. Price declines attracted investors, as well as vacationers.
The NAR reported that a typical investment property cost $108,000 last year, down from $150,000 in 2007. Part of the lure of an investment home may be for use as a rental, with 58% of respondents to the NAR survey saying that was the most important reason for the purchase. As the housing market continues to suffer and credit remains tight, it could boost the demand for rental units. However, the supply of homes on the market remains high, and some sellers may turn to renting. Indeed there has been some evidence that rents are declining, as supply increases.
Real-estate speculation also could rely on flipping the property in a short time horizon. Investment buyers plan to hold their property for a median of five years, according to the NAR. However, the outlook for prices may put a damper on those plans. While there has been some very tentative signs that housing starts and sales may be nearing a bottom, the outlook for prices remains negative as inventories of unsold homes continues at high levels.
“The excess supply of unsold homes means that new and existing home prices will have to fall further this year. We have long estimated that prices will have to decline by another 10% to 15% to reduce the unsold inventory and to encourage potential buyers to believe that prices will rise after they buy their home,” BNP Paribas said in a research note.
And even when prices finally stop falling, there is little indication of upside potential. The economy is expected to grow slowly for the next few years, and the labor market still is far from a bottom.
Of course, all real estate is local. According to the NAR, investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence. It is difficult to judge a local investment based on national data. Some investments in areas that weren’t as susceptible to the bubble in housing or areas where the bust has worked through more thoroughly may make more sense than regions that are still working through the process of price correction.
The average 30-year fixed mortgage rate dips to 5.19%, according to a report from Bankrate.com, the lowest rate since 1956.
NEW YORK (CNNMoney.com)By Catherine Clifford — Home mortgage rates dropped to a 52-year low this week, according to a report released Thursday, in the wake of the government’s announcement that it will buy more than $1 trillion in debt.
The average 30-year fixed mortgage rate fell to 5.19% this week, down from 5.29% in the week prior, according to Bankrate.com’s weekly national survey.
The previous low was 5.28%, hit this January and in June 2003; the last time rates dipped lower than 5.19% was in 1956, according to Bankrate.com.
To put the plunge in mortgage rates into perspective, 30-year fixed home mortgage rates averaged 6.77% in late October. At that time, a $200,000 home loan would have meant a monthly payment of $1,299.86. Now, with the mortgage rates down at 5.19%, the monthly payment for the same loan would be $1,096.99. That works out to a savings of more than $200 per month.
Meanwhile, the average 15-year fixed mortgage rate fell to 4.80% from 4.86% in the the prior week. The 15-year fixed mortgage rate carried an average of 0.49 points.
The government announced last week that it would be buying more than $1 trillion in debt in order to increase liquidity and improve credit conditions. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee – the policymaking committee of the Fed that sets interest rates – turned to less traditional means to encourage lending.
The Federal Reserve said that it would buy an additional $750 billion in mortgage-backed securities and $300 billion of long-term Treasurys. The so called “quantitative easing” policy essentially increases the money supply and is designed to push interest rates down, making borrowing cheaper.
“At this point, what we are going to see is mortgage rates fluctuate at these levels,” said Brian Bethune, chief financial analyst at IHS Global Insight. “I don’t see them dropping significantly from where they are now.”
Mortgage rates move in relation to the yield on the 10-year government bond. While there is not a direct correlation, they do move in the same direction. Bethune said that there are two factors that will prevent Treasury yields, and by extension mortgage rates, from dropping much further.
“One is the huge Treasury borrowing requirements,” he said. As the government looks to fund its massive stimulus spending programs, it has had to issue a record amount of debt. The increased supply keeps a lid on the price of bonds and stabilizes yields.
“In addition, as we get closer to perceptions of a trough in the economy, the yields will tend to see upward pressure,” said Bethune. Uncle Sam’s debt is considered one of the safest places for investors to keep their cash. During times of market uncertainty, demand surges, the prices increase, and yields fall. But as market sentiment begins to believe the economy could be headed for recovery, demand for Treasurys will lessen, lifting yields.
Surge in refinance: The dramatic drop in mortgage rates has motivated home owners to refinance in great numbers, but the drop in mortgage rates has not spurred as large an increase in new home purchases, said Mike Larson, real estate analyst at Weiss Research.
“We are still not seeing a huge impact on home buying,” he said. “All else being equal, it will help the market,” said Larson. “But it is not the huge impact you are seeing on the refinance side.”
Bankrate.com compiles national averages every Wednesday by surveying the top 10 banks and thrifts in the top 10 housing markets. For historical data, Bankrate.com cites the National Bureau of Economic Research. 
