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

March 3rd, 2009 by Scott

Banks need to remove special assets (bank speak for collection or nonperforming loans) off the books to be able to get back to the business of banking.  While removing these assets are easily talked about the transactions and how to go about it is a royal headache.  In the 80’s and 90’s RTC (Resolution Trust Corporation) was formed by the government to buy toxic assets from the failed or failing Savings and Loans.  This process served the needs fairly well, and there are signs that we may reinstate this type of program.  Market Watch.com is reporting that last week FDIC sold a block of loans to a private investment group that ended up with a shared interest in the portfolio. http://www.marketwatch.com/news/story/FDIC-sells-15-billion-toxic/story.aspx?guid=%7BB08BA9AC-3B4F-490E-9B0F-789D14EE365C%7D 

In true free market style two investors in NJ are taking there own approach to buying up some bank problems and converting them to opportunities.  Raj Bahati and Albert Behin are rolling up their sleeves and finding profits from buying the mortgages in groups from the lenders.  The catch is they must buy several loans at one time, but they are getting them for 40 cents on the dollar.  These are Alt A loans that were not the worse of the worse but still were mostly no income verification loans.  This approach buys the loan before it goes to foreclosure so this allows the investors a chance to be creative in how they deal with the homeowner allowing a lot of them to stay or at least humanizing the experience by having one on one dealings instead of the cold corporate special asset department.  This post is based on a story ran on NPR.  To hear the whole report    

http://www.npr.org/templates/story/story.php?storyId=101227971

bank owned real estate, Mortgage, real estate, real estate investing, RTC, shortsales, toxic assets

February 27th, 2009 by Scott

Warren Buffet says, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” While Mr. Buffet was writing about buying stocks, the same can be said for housing today.

Housing issues have permeated the economy both locally and nationally. This week, one index that tracks housing prices, S&P/Case-Shiller Home Price Indices, indicated home values fell the most since 1968, declining 18.5% in December from the year before.

Looked at from a different perspective, this means home prices have fallen to levels not seen in six to twelve years, depending on individual markets. Following the Case-Schiller report was the report from the National Association of Realtors (NAR) recently. The NAR reported that home prices for the month of January fell by 14.8%.

The bright spot though in contrast was that the number of homes sold in December increased. Home buyers from coast-to-coast have been buying distressed properties at the rate of 45% of total sales.

Recognizing that now is the time to buy, everyone – from those looking to purchase their first home to seasoned real estate investors – is buying homes today. Bruce Norris, the head of an investment group in Southern California, expects to buy at least 100 homes this year as, “This is the buying opportunity of our lifetime.”

Fundamentals Point to Strength
The basic fundamentals of the housing market point to higher prices ahead. Almost half of the properties being sold today are existing homes that are either owned by banks or homes on which banks are accepting short sales, allowing them to be sold for less than what is owed.

New homes or homes under construction are near all-time lows. The country’s demographics point to more potential buyers coming into the housing market than projected inventory in coming years. This all points to higher prices on the horizon as demand will be greater than supply. This is supported by the fact that the inventory of unsold homes fell 2.7% in January.

Why Buy Now?
Three very important reasons to buy now are:

• Interest rates are near all time lows;
• Home prices have declined to levels not seen in years; and
• Qualified first-time home buyers are now eligible for up to an $8,000 tax credit.

Lower Prices Don’t Always Equate to Lower Payments
One final point to consider. Even if you believe that home prices will continue to decline, it’s very difficult to believe that interest rates will remain at these low levels.

Did you know that even if home prices were to decline 10% but also during that time, interest rates available for home loans were to increase by 1.00%, your monthly principal and interest payment would actually be higher? It’s true. So, if you are thinking of buying or the end of your lease is near, get busy and get in the game. To quote Mr. Buffet again, “If you wait for the robins, spring will be over.”

atlanta, bank owned real estate, first time home buyers, home prices, interest rates, Mortgage, real estate, real estate investing, real estate market, shortsales, tax credit

February 27th, 2009 by Scott

BB&T grew from a small NC bank making loans to tobacco farmers to one of the largest banks in the US.  This happened under the leadership of one CEO John Allison.  The link here is to a lecture Mr. Allison did for the Ayn Rand Center for Individual Rights.  Mr Allison has just retired from BB&T and he gives an interesting “insider” look at how the goverment aided the market meltdown.  He goes on to look at what policies and individual changes must be made to get out of this mess.  He has some strong free market beliefs and is not afraid to put them out there.

One warning, this is 97 minutes long, and Allison is not the most entertaining speaker, but you will be impressed by his command of the subject.

http://www.aynrand.org/site/PageServer?pagename=reg_ls_financial_crisis

Ayn Rand Center for Individual Rights, BB&T, John Allison, Mortgage, news, real estate, real estate market, reccesion, tax credit

February 26th, 2009 by Scott

What does the Stimulus plan provide for housing?  Here is a link to the highlites.

NEW YORK TIMES

http://projects.nytimes.com/44th_president/stimulus/housing

NATIONAL BOARD of REALTORS

First time homebuyers $8,000.00 tax credit

http://www.realtor.org/wps/wcm/connect/b32db1004d05f6338052c5fd73e5610f/government_affairs_tax_credit_chart_021308.pdf?MOD=AJPERES&CACHEID=

Great site from National Home Builders FAQ’s about tax credit;

http://www.federalhousingtaxcredit.com/2009/faq.php#21

first time home buyers, Mortgage, news, tax credit