....recent observations by Mike Bower, with Mortgage America in Allentown - 610.366.2586 or email: mikebower@rcn. Mike, what are you seeing right now in the real estate, from a local lender's perspective:
Well oddly enough, even though the sales in our market are down 20% my business was up 10% in 2007 vs 2006 and on pace to be up 25% this year vs 2007. The reason for this I think is that we never really did a whole lot of Subprime loans. So when they went away it didn't cut into our business at all. Prior to 2000-2001 FHA was about 30% of the loans that we did. Between 2001 and 2006 it was about 3%.
With the changes in the mortgage industry FHA has all of sudden become very popular again. We have always been an FHA friendly mortgage company so we are actually doing very well in this market. On the other hand a lot of the banks that did bigger loans and new contruction are hurting quite a bit. They are finding it difficult to find construction perm and Jumbo business.
Brokers who supplemented most of their income with Subprime are mostly out of business and others are struggling. The biggest challenge for the mortgage industry this year is just keeping up with all of the changes. It seams like we get program change memos weekly. 100% financing has become virtually extinct unless you are a veteran or qualify for a Guaranteed Rural housing loan. Fannie Mae and Freddie Mac changed their pricing policy to include borrower FICO scores in the calculation.
Someone with a FICO score under 680 can expect to pay a higher rate on a conventional mortgage regardless of their down payment amount. FHA does not have this requirement which is another factor in it's sudden popularity. The latest challenge was the declining market policy implemented and then retracted by Fannie Mae. It basically required homes in a "declining Market" to have a minimum of 5% down. Since they retracted this policy they have decided to cancel all 97% loans as a general rule, eliminating the need for the "declining Market" policy.
Rates have been extremely volatile this year! It seams that they either > go> up or down every day, sometimes as much as two or three times throughout the day. I have never seen the rates this volatile in my 15 years in this business. Mortgage rates change as Fannie Mae mortgage backed securities are sold. The price of these securites is affected by many economic and geo-political factors. In the last couple months the rates have been going down on bad economic news (unemployment numbers and recession talk) and up on inflationary news (high gas/ oil prices).
Monday, June 9, 2008
a few encouraging signs for the market, June 2008
from the latest 'realTellen' newsletter (downloadable on http://www.realsellen.com/about.html:
The latest pending home sales index has been slipping. Nationallyhome prices are coming down. Locally, the high inventory andlower consumer confidence is starting to affect our Lehigh Valleyprices as well. . . but is it all bad news?
Let's look at a few indicators that Lawrence Yun, National Associationof Realtors' Chief Economist watches, to get an idea.Although it's low,Lawrence Yun highlights that it is importantto also note that the pending home salesindex has actually been moving in avery narrow range from August of lastyear to March of this year and that thistime period reflects post credit crunchconditions where subprime loanoriginations virtually dis-appeared from the market place. We are still feeling the after-shocks of the lending crisis and obtaining a mortgage has become much more challengingover the last few months for many.
Despite national trends, the Northeast region continues to show some good signs of recovery. In March, pending home sales in theregion rose 12.5 percent.
Home sales are expected to continue soft forthis quarter nationally, but then lift a bit in the third quarter this year. Mortgages will become more widely available. Both Fannie Mae and Freddie Mac recently announced plans to further provide liquidity, including in the new higher conforming jumbo markets.Yun predicts a solid recovery with the help of a wider use of FHA loans. Many lenders are trying to get HUD approval so they canmake loans. Consumers are digesting the benefits of this saferloan product that carries much lower interest rates. As consumersrealize that FHA loans no longer carry the stigma as being purelyfor low-and-moderate income households with credit issues, theseloans should be a more stable foundation for our upcominghousing markets. (FHA loans require as little as 3% down, as long as thecredit history and income, etc fit the parameters - great loans!). Exports continue to ramp up solidly and inventories fell - this should givea good lift to the second quarter GDP.
Business profits are surprisingly solid (except for homebuilders and the financial industry). Business spending will grow as a result. These factors indicate that the economy will be better in the second half of this year after having stalled in the firsthalf. The improving economy should also lift consumer spirits (confidencewas down 5.46% this month) -- soon we should see more building confidence to buy a home.
The Federal Reserve lowered interest rates at their recent meeting; Fannie Mae announced that it will purchase conforming jumbo loans for its portfolio at the same pricing as non-jumbo loans -- this will measurably reduce interest rates on jumbo loans very soon. Rates are still quite good and it's a great time to take advantage ofthose and the lower prices right now... just a little more confidence and we will get there.I've had local buyers say they still want to wait, for prices to come down more...we may be [hopefully] in the trough of the curve here and interest rates couldgo up soon; so at the risk of being called an optimist - carpe diem!
The latest pending home sales index has been slipping. Nationallyhome prices are coming down. Locally, the high inventory andlower consumer confidence is starting to affect our Lehigh Valleyprices as well. . . but is it all bad news?
Let's look at a few indicators that Lawrence Yun, National Associationof Realtors' Chief Economist watches, to get an idea.Although it's low,Lawrence Yun highlights that it is importantto also note that the pending home salesindex has actually been moving in avery narrow range from August of lastyear to March of this year and that thistime period reflects post credit crunchconditions where subprime loanoriginations virtually dis-appeared from the market place. We are still feeling the after-shocks of the lending crisis and obtaining a mortgage has become much more challengingover the last few months for many.
Despite national trends, the Northeast region continues to show some good signs of recovery. In March, pending home sales in theregion rose 12.5 percent.
Home sales are expected to continue soft forthis quarter nationally, but then lift a bit in the third quarter this year. Mortgages will become more widely available. Both Fannie Mae and Freddie Mac recently announced plans to further provide liquidity, including in the new higher conforming jumbo markets.Yun predicts a solid recovery with the help of a wider use of FHA loans. Many lenders are trying to get HUD approval so they canmake loans. Consumers are digesting the benefits of this saferloan product that carries much lower interest rates. As consumersrealize that FHA loans no longer carry the stigma as being purelyfor low-and-moderate income households with credit issues, theseloans should be a more stable foundation for our upcominghousing markets. (FHA loans require as little as 3% down, as long as thecredit history and income, etc fit the parameters - great loans!). Exports continue to ramp up solidly and inventories fell - this should givea good lift to the second quarter GDP.
Business profits are surprisingly solid (except for homebuilders and the financial industry). Business spending will grow as a result. These factors indicate that the economy will be better in the second half of this year after having stalled in the firsthalf. The improving economy should also lift consumer spirits (confidencewas down 5.46% this month) -- soon we should see more building confidence to buy a home.
The Federal Reserve lowered interest rates at their recent meeting; Fannie Mae announced that it will purchase conforming jumbo loans for its portfolio at the same pricing as non-jumbo loans -- this will measurably reduce interest rates on jumbo loans very soon. Rates are still quite good and it's a great time to take advantage ofthose and the lower prices right now... just a little more confidence and we will get there.I've had local buyers say they still want to wait, for prices to come down more...we may be [hopefully] in the trough of the curve here and interest rates couldgo up soon; so at the risk of being called an optimist - carpe diem!
Thursday, January 3, 2008
Trends in real estate - building GREEN in Easton PA
What is ‘Green’ Building, and why do we care?
BUILDINGS are the #1 culprit in our global-warming trends here in the U.S.... So building Green is an exciting current trend in real estate that has finally hit Easton PA with an exciting 're-purposing' of a 1920s hotel building - now transformed into the EASTONIAN luxury condos and currently undergoing certification as a Green building.
Just a few of the initiatives that make this building Green:
· constant fresh air 24/7 - affords health benefits inside; and less environmental damage outside. You maintain your own unit's air temperature; yet there are not 30+ separate air compressors and furnace blowers impacting the environment.
· all materials meet one of three criteria - low/no VOC (volatile organic compounds), recycled or rapidly renewable, and/or locally produced
· The roofing material is a special qualified white surface which acts to reflect away the suns energy, adding to building mechanical system efficiency and reducing the "heat island effect"
...building Green is not only nice for peace-of-mind and future generations - it's an exciting marketing tool to keep in mind for home values too... consider solar panels as an option to 'fuel' or assist on your own home HVAC systems -- there may even be some state grants to help with installations.
see http://www.eere.energy.gov/ for info. on building Green.
some resi / commercial units still available @ EASTONIAN; just over an hour from NYC: www.eastoniancondo.com
BUILDINGS are the #1 culprit in our global-warming trends here in the U.S.... So building Green is an exciting current trend in real estate that has finally hit Easton PA with an exciting 're-purposing' of a 1920s hotel building - now transformed into the EASTONIAN luxury condos and currently undergoing certification as a Green building.
Just a few of the initiatives that make this building Green:
· constant fresh air 24/7 - affords health benefits inside; and less environmental damage outside. You maintain your own unit's air temperature; yet there are not 30+ separate air compressors and furnace blowers impacting the environment.
· all materials meet one of three criteria - low/no VOC (volatile organic compounds), recycled or rapidly renewable, and/or locally produced
· The roofing material is a special qualified white surface which acts to reflect away the suns energy, adding to building mechanical system efficiency and reducing the "heat island effect"
...building Green is not only nice for peace-of-mind and future generations - it's an exciting marketing tool to keep in mind for home values too... consider solar panels as an option to 'fuel' or assist on your own home HVAC systems -- there may even be some state grants to help with installations.
see http://www.eere.energy.gov/ for info. on building Green.
some resi / commercial units still available @ EASTONIAN; just over an hour from NYC: www.eastoniancondo.com
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