Sunday, April 15, 2012

The Magical Mortgage Market is Open For Business

What can I say about the market this week?  How about this, things are picking up.  People are really thinking about buying again, and the data supports these assertions.  The down side is the banks and mortgage companies are still shell shocked from the last time they made mortgage money available to all comers.

Oh, we’ll see easy money again, there will come a time when the mortgage guys will once again check your pulse and if there is a slight heart beat, you’ll be approved for a loan, maybe bigger than you even thought possible—just not in this decade.  As they say, “Once burned, twice shy…”

No, in this decade you’ll have to over-qualify for any money you want to borrow.  Mainly you’ll have to prove that you really don’t need a loan, and after you do that, the doors of the magical mortgage market will open wide to you.  But first you have to show you have strong income and plenty of tenure on your job, and very few recurring expenses (like student loans and the like).  You’ll need to show your credit is solid, and if you do that—you’ll most likely qualify.  Yes, there are lots of "ifs," but it's one of the best times in America to buy a home. And it won't last forever.

In Englewood foreclosures and short sales are still selling at deep discounts – they accounted for 34 percent of February sales.  The Multiple Listing Service here in town is like a Goodwill bargain basement of homes, and I can tell you, today we are open for business.

But the buyers are not just families, investors who normally don’t need a loan to make purchase-- snatched up 64.5 percent more homes in 2011 than in 2010 and now account for nearly one in every four homes sold, according the National Association of Realtors.

Fortunately, as buyers we have Canadians and Europeans who are thrilled that their money is growing against the rapidly inflating dollar.  So our second home market is coming back too. Vacation and retirement buyers are jumping on the second home bandwagon. They pushed vacation/second home sales up 7.0 percent in 2011.

But based on my own personal memory, this market is still pretty quiet.  In fact owner-occupied purchases fell 15.5 percent last year.

Forecasts for a housing recovery are all about when we’ll see the market recovery, not if. You may have seen the stock market prices of the largest home builders all go up after they announced that they had a strong January and February, and go back down in March and April when they announced that there were more contract cancellations than they had ever seen before.

Remember that today the available mortgage rates are near record lows (as long as you qualify) and home prices may finally be within reach of many consumers who want to buy now. If you feel renting has merit and you want to rent for the next few years, I have bad news, industry wisdom says that rental rates will be escalating as demand has increased, even in the face of more units coming on the market. Plus, if you qualify for a mortgage, your monthly payment may well be less than renting.

One last caveat, if you are thinking of buying, be sure to check your credit score before you apply for a loan.  You can access your own credit report from the only federally approved source of free reports, AnnualCreditReport.com, to make sure your credit is mortgage-worthy. Don't get taken by sound-alike websites that offer you "free" credit reports that are only "free" after you buy a credit monitoring service.
And remember too, homeownership comes not only with a mortgage but also with insurance, taxes, utilities, and maintenance. Include them in your budget to determine what is truly affordable.  We call the base figure PITI (Principle, Interest, Taxes and Insurance), but maintenance, HOA fees and lawn and pool fees also add in there.

If you feel some pressure to get in the market at today's affordable prices and low interest rates, remember if you move too quickly that too could be a mistake. Take the time to obtain a home inspection, learn the neighborhood, investigate the school district and buy only what you need.  Remember, most of the homes that were lost in the market collapse were bought with the largest amount of money the lender would lend. Make your next purchase affordable.

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from Englewood.  You can reach him at dane.hahn@gmail.com or 941-681-0312.  See him on the web at www.danesellsflorida.com

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