South Philly Real Estate Blog

A Housing Market to Embrace

There is an old saying - "Opportunities are never missed.  Someone will take the one you miss."  Today's housing market might just be an opportunity you should examine before you believe the national media headlines.

While sales of existing homes are off from their high, last year was still the fifth best year on record for existing-home sales.  As for prices, the national median existing-home price remains within 2 percent of the all-time high set in 2006.

The biggest enemies of today's housing market and the economy in general are pessimism and uncertainty.  Statistics clearly suggest a sizable pent-up demand in the marketplace.  Yet home sales have remained soft.  Why?  Lack of buyer confidence.

The lack of buyer confidence not only impacts homeowners and the housing industry, but could easily spread to the economy.  Any further weakening in the housing market and its related housing wealth impact could slow the economy into a no growth zone.

So what can we do to bolster confidence?  Look at the facts.  Over the past two years:

·        Average wages have risen by 8 percent

·        4.3 million jobs have been added

·        Total household net worth (assets minus liability) was more than $6 trillion higher in 2007 than 2005 (despite some losses in housing equity)

·        Nearly 2 million new households were formed

This all suggests that there are many more people with jobs at higher wages and with higher wealth accumulation.  However, the rising inventory of homes on the market and slower sales indicate that these potential buyers are uncertain and may be sitting on the fence.

Over time, homeownership has proven to be a good long-term investment.  A look at today's market fundamentals makes a very good case for buying a home if your life and family conditions warrant it. 

I encourage fence-sitters to get into the market and look around. I think you'll be pleasantly surprised at what you find.

There are many low-cost, sound mortgage products today - from prime conforming loans to those insured by the Federal Housing Administration.  The economic stimulus package recently signed into law by the president will also help expand the availability of affordable and safer home financing options.

The package increases the loan limits on FHA-insured loans, as well as those purchased by Fannie Mae and Freddie Mac. Higher FHA loan limits will help an additional 138,000 Americans purchase homes and allow nearly 200,000 owners to refinance and potentially keep their home, according to research from the National Association of Realtors^®.

In addition, NAR believes that increasing the loan limits for Fannie Mae and Freddie Mac will help as many as 500,000 people refinance their loans and could help reduce foreclosures by as much as 210,000. On top of that, more than 300,000 additional home sales could be generated. 

In the end, these higher loan limits alone can be expected to reduce housing inventories and strengthen home prices by two to three percentage points, according to NAR.

Consult the Government Affairs section of Realtor.org --  http://www.realtor.org/gapublic.nsf/pages/economic_stimulus  -- for specifics on the economic stimulus package, including a chart of the new loan limits by metro area]

So join the fight against irrational pessimism - take a look at your local housing market and think, just think, of the possibilities.

Avoid Foreclosure, Help is Available!

Realtors build communities in part by expanding homeownership opportunities and getting people into homes of their own. Those are noble goals, but helping homeowners stay in their homes is also important to sustain those communities.

In this marketplace of rising mortgage delinquencies and foreclosures, that goal can be challenging, to say the least.

Over the past few years, lenders invented new types of mortgages to help families buy their first home and refinance their existing mortgage.  Many of those mortgages helped families without cash for a down payment, or with less-than-perfect credit, qualify for loans known as "subprime" loans.

Subprime loans have a higher interest rate and higher costs, such as prepayment penalties.  In recent years, a very popular, widely available mortgage product was the hybrid adjustable-rate mortgage (ARM).  Hybrid ARMs have an initial period with a lower interest rate ("teaser rate") followed by significant increases over the remainder of the loan. 

A growing number of borrowers with hybrid ARMs and other nontraditional forms of loans are seeing monthly payments jump beyond their means. With overall credit markets tightening, refinancing can be difficult but there is hope.

When monthly payments become too much, the first thing to do is to speak up. You need to seek the help of professionals, whether they are financial counselors, often available through local nonprofit counseling centers, or your lender.

While many people believe that telling a lender about financial difficulties will only hasten a move to foreclosure, borrowers should remember that lenders do not like to foreclose on mortgages.  Taking possession of your house, maintaining it and then attempting to sell it will nearly always be a losing financial proposition for your bank.  Therefore, talk with your lender sooner rather than later to try to arrange new repayment terms.

Realtors can provide assistance to troubled borrowers by explaining sources of help and referring them to counseling.  If your lender is not willing to restructure your loan, Realtors can refer you to other responsible lenders in your area.  Some elderly borrowers have even found solutions to their mortgage difficulties through reverse mortgages and other creative, but responsible, tools.

Above all, beware of consumer scams often advertised as "We Buy Houses for Cash," or similar slogans that sound too good to be true, because they are.

Project HOPE NOW is a voluntary alliance of major lenders who have agreed in principle to assist qualified homeowners who are on the verge of default due to resetting adjustable-rate mortgages.  The national toll free number is 888-995-HOPE to reach a counselor for advice and further referral.

The National Association of Realtors Web site also has several important consumer brochures that can be downloaded free of charge. In addition to information specifically aimed at borrowers facing trouble in making repayments, other brochures offer advice on avoiding predatory loans and obtaining traditional mortgages.  All the brochures are available at www.REALTOR.org/subprime.

Remember, the worst thing you can do if you're having trouble making your monthly mortgage payment is to remain silent.  Help may be available; you just have to ask for it.