June 6th, 2009 by Scott

Today I welcome another real estate proffesional and friend to this blog. Daniel Smelcer is with BB&T and brings us a history lesson:

Hindsight is always 20/20, but this New York Times article, now almost ten years old, sheds some light on the early days of subprime mortgage lending, where the push came from, and what the motivations were. It also includes an eerie quote from Peter Wallison, at the time a resident fellow at the American Enterprise Institute, who predicted that if Fannie Mae’s new policies fail, “the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html

Daniel Smelcer is the Financial Leader of BB&T’s Decatur Main branch. In addition to managing the branch, Daniel makes second mortgages, lot loans, and small business loans. He graduated from the University of North Carolina at Chapel Hill in May 2004 with a B.S. in Business Administration with a concentration in Finance, and has been with BB&T ever since. He lives in Decatur with his wife, Susan, a graduate student at Emory University.

BB&T, daniel smelcer, home buyers, Mortgage, subprime mortgage

June 3rd, 2009 by Scott

Everyone Wants a Lower Price, But What About the Impact of Interest Rates?

When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It’s important to keep in mind, however, that the sales price is not the only factor that determines what your monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.

Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values in many markets, the rate of decline appears to be stabilizing.

That being said, it would not be unreasonable for you to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Many markets are reporting that lower property values have been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.

Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.

But do not be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!

Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.

For anyone who was waiting for prices to drop even more, a 1.00% increase in your interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.

If you’re waiting for home prices to fall even lower, be aware that while holding out for a lower price may help you win the battle, you could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.

Clock is Ticking on Free Money
If you, or someone you know, is planning on purchasing a home this year, be aware that you must take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today’s market, this could impact a lot of people who aren’t in the know.

Add new tag, bank owned real estate, first time home buyers, home prices, interest rates, Mortgage, real estate market, tax credit