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Tim Hall:
Licensed Real Estate Broker, actively selling since 1993. Co-founder of Re/Max Central Properties, with my wife, Bell Hall, and team-leader for a team of 7. BA from Capital University and a US Navy Veteran CU-60 U.S.S. Saratoga. Father of 3 - Alicia, Erica, and Amber; and grandfather of 1, Ava.
Home > Blogs > Greater Dayton Home Report > Archives > 2008 > January
January 2008
FED Targeted to lower rates on Wednesday
FED Targeted to lower rates 1/2 point on Wednesday
Last week, the Federal Reserve cut their key interest rate by three quarters of one percent, down to 3.5 percent. It is anticipated that there will be another cut of 1/4 to 1/2 after the meetings conclude Wednesday.
As I told you in the last post, it is difficult if not impossible to PERFECTLY time locking a rate on a loan. The rates fluctuate constantly. So by the time the rate reaches your target level, it is too late to start the process. Refer to the last post on how to win in this scenario.
Moving UP in a DOWN Market
So what to do in the interim? Start shopping! The softening of the overall market has made for some irresistable deals, in otherwise solid areas. Here’s a thought: Perhaps you can buy “up” a couple levels without paying any more than you would have for a base home just 18 months ago. We recently concluded negotiations for a family that will end up living in an awesome home, golf course community, for a substantial discount. It helped that the “seller” was a relocation company. This is a well known source for better than market deals, even in a stronger market!
It doesn’t mean that you can’t just sit tight, refi your home and pocket the savings because you surely can! But, honestly, it also could mean buying up at a nice discount. If under more normal conditions your home is worth $150K, and we assume you have to discount by 10% due to the soft market, that nets you out at 135K before expenses. Assume you wanted to buy a home for 225K. If that seller must offer a similar discount to move the home now, then you could buy it for $202,500. So you sacrificed $15,000 to save $22,500.
Now reverse the situation. Your home appreciated 3% so instead of $150,000 it can sell for 1$154,500 for a GAIN of $4,500. That same move-up home appreciated for 3%. It is now going to sell for $231,750 or a GAIN of $6,750. So you gained $4,500 but lost $6,750. Can you see why people move up in down markets?
What if you don’t know what you can get out of your home, realistically! Great question. Sometimes, as a broker, I will take offers based upon my seller finding, and contracting, on a home of their choice within a certain number of days, usually not more than a week. since the inventory is plentiful, there are many great homes to chose from, and this can work out quite nicely.
Food for Thought!
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Rates Falling, Refi’s Rising ! Bernanke economic “Stimulus Package”
According to the Inman News Service, an excellent real estate centric reporting agency, mortgage application volume during the second week of January posted a huge increase as interest rates continued to decline, per the Mortgage Bankers Association report released last night. Why, because the SMART MONEY takes advantage of short-term opportunities!
An excerpt of the article follows. Now COMBINE this with the highly anticipated Fed economic stimulus package and you get a “Grand Slam” for existing home owners.
Let me explain.
- Congress passed legislation to soften the tax impact to home owners forced to sell their homes via short sale, or forclosure. This will speed up the transition to a blanced supply.
- Home builders have reduced their new construction over 60% from the highs of 2005; 700K new homes in 2007 versus 1.7 million homes in 2005.
- Rate cuts, BIG cuts, are ahead.
Here is how to make the most of this opportunity. If you don’t have to sell, don’t. If you have a mortgage, find out TODAY what the terms are. You need to know the balance, the interest rate, the years remaining and if you have any pre-payment penalty.
Seriously, I believe that the INSTANT there are signs of the housing slump hitting bottom, that the cost of mortgages goes back up. The FED doesn’t want a repeat of what got us into this mess to begin with. SO, you win if you are thoughtful enough to gather the above information and watch rates. I happen to own some rentals, my personal residence and a commercial building. I can’t watch rates constantly so I leave that to my banker. If you want him to watch rates for you, send me your contact info at tim@timhallteam.com and he will get in touch. These rates can turn on a dime, and my goal is to catch historic lows, just like I did in the past.
Tim
Here’s the excerpt
Home loan apps jump 28%
Refis see another large gain as interest rates slide
Inman News
Mortgage application volume during the second week of January posted a huge increase as interest rates continued to decline, the Mortgage Bankers Association reported today.
The group’s market composite index, a measure of home loan application volume, climbed 28.4 percent on a seasonally adjusted basis between the first and second weeks of January. This double-digit gain comes on the heels of a 32.2 percent rise in the index one week earlier, the largest in four years.
The index that tracks refinancings posted the largest gain, rising 43.4 percent last week on a seasonally adjusted basis from the week before, while the index tied to purchase loans grew 11.4 percent.
According to MBA, the average contract interest rate on 30-year fixed-rate mortgages sank to 5.62 percent from the previous week’s 5.73 percent, and the average rate on 15-year fixed loans dropped to 5.07 percent from 5.21 percent. Rates on adjustable-rate mortgages (ARMs) fell sharply during the period, with the average one-year ARM tumbling from 6.04 percent to 5.77 percent.
