Doom and Gloom Sells – Good News Does Not


Doom and Gloom Sells – Good News Does Not

Last week an article ran in many newspapers and on the Web touting “Mortgage Applications Fall 5%”.  Anyone who is watching the market for signs will see this message as doom and gloom.  But remember, doom and gloom sells – good news does not.

If we look at the numbers for trends and what is behind the numbers we will see a much different indication than what that headline reported.  First of all, the time period that was measured for the 5% reduction in mortgage applications was for one week and it was for the week of the Martin Luther King holiday.  Banks and most mortgage companies were closed that day.  Not only that, but the headline doesn’t mention that the week before, mortgage applications were up 23%!  Some additional good news is that the measurement of future home buying gauge jumped 10.3% indicating that the future looks good for the real estate market as this upswing continues.

If you are thinking of buying or selling real estate, talk to a real estate professional who can get you the information you need to make sound decisions.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland

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It’s Not Just The Economy – It’s About Confidence


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It’s Not Just The Economy – It’s About Confidence

It’s hard to look at the news or pick up any business publication that you do not see something about the economy in general and jobs in particular. Politicians are talking about what they think will get the jobs going and that in turn will bring about a robust economy. There is no doubt that more jobs will bring about a better economy, but ONLY if there is a corresponding uptick in the confidence of people.

There is no doubt that as mortgage interest rates go down, home sales go up. This is clearly indicated by the chart below showing the years from 1970 – 2006. In the 1980’s when home mortgage rates skyrocketed, home sales plummeted. Over the years there have been minor ups and downs, but in general, mortgage interest rates have declined and home sales rose.

This fact is still true today more or less. In today’s economy, home sales have increased slightly, especially in the end of 2011. But the mortgage rates are at historically low rates and you would think that home sales would skyrocket. As of this week, a 30 year fixed rate was 3.88%. Those low mortgage rates have resulted in an increase of home sales, but not in the number of sales one would expect. (See chart below)

The one factor that no one seems to be addressing is the level of confidence in this country. Whether it is a first time home buyer who is ready to take a leap of faith and buy a home or the hiring manager of a company who needs to hire a new person – there just isn’t the level of confidence that we need in this country to get the wheels turning. If the confidence were in place, the jobs would follow. The next chart gives a clear picture of how confidence in this country is holding back the economy.

Although I doubt any CEO’s of any large companies are reading my blog, I would like to suggest that companies take a leap of faith and hire one more person than they absolutely have to have. If you’re not sure if you can sustain the position, hire a temporary employee for six months.

If you are one of those who are ready to take a leap of faith and buy or sell property, talk to a real estate professional who can give you the answers you need to make an informed decision.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland

Financial Institutions Loosen Credit Requirements for Real Estate


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Financial Institutions Loosen Credit Requirements for Real Estate

The long awaited news of financial institutions loosening credit requirements appears to becoming a reality sooner than expected.  The projections for 2012 were that credit would not ease substantially until late 2012 or 2013.  However, a recent report from Capital Economics, a global independent, macro-economic research consulting firm, states that the real estate bust appears to be coming to an end sooner than anticipated.

Their findings are based on the data that credit requirements have dropped dramatically recently indicating that financial institutions are jumping into the mortgage business once again.  There are several indicators that are pointing in the right direction.

Several months ago, a credit score of nearly 800 was required to get a mortgage company to loosen its grip on the money, now however, the average credit score is in the range of 700.  This score is still higher than required prior to the real estate bust, but significantly lower than the beginning of the down turn.

In addition to the lower credit score required to obtain a mortgage, financial institutions are now lending amounts up to 3.5 times the borrower’s earnings.  This is up from 3.2 times the borrower’s earnings during the crisis.

The best news yet, is that banks have increased the LTV (loan to value) ratio.  In the middle of 2010 banks LTV ratio was 74%.  That ratio has now increased to 82% – a very significant indicator of a rebound of the real estate market.

I certainly don’t need to point out that the real estate market has not rebounded to the days of old, but the indicators all point in the right direction.  There are two factors that I think are still an issue:  one is the financial situation in Europe and the other is the confidence factor here in the United States.  I will be addressing the confidence factor in my next blog.

As I have been saying on this blog for some time now, the market is rebounding, slowly but surely. If you are thinking of buying or selling, talk to a real estate professional who can get you the information you need to make informed decisions.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland

 

 

 

Housing Inventory Down 22% Nationwide


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Housing Inventory Down 22% Nationwide

The number of homes on the market dropped 6% to December, 2010 to December 2011.  Nationwide, the number of homes on the market plunged 22.3% for the year.  This is a dramatic shift in real estate and could be a strong indicator for the real estate market.

Nevertheless, there are a large number of homes that have foreclosure pending.  The infusion of those foreclosed homes into the market may keep the price of homes only slightly higher than last year.

In the 145 markets tracked by REALTOR, only Springfield, Illinois had a year over year increase in the number of homes on the market.  In other markets, inventory levels plunged: Miami down 49.7%; Phoenix down 49.1%; and Bakersfield, California down 46.6%.

Meanwhile, the national median price edged up 5 percent year-over-year; and asking prices climbed 32.5 in Miami, 21.7 percent in Naples, 21.5 percent in Fort Myers-Cape Coral, and 19.4 percent in Punta Gorda. However, asking prices were down 11 percent in Detroit, 10 percent in Chicago, 7.6 percent in Las Vegas, and 7 percent in Sacramento.

As I have been saying on this blog for some time now, the market is rebounding, slowly but surely.  If you are thinking of buying or selling, talk to a real estate professional who can get you the information you need to make informed decisions.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland

Pre-Qualified vs. Pre-Approved


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Pre-Qualified vs. Pre-Approved

All too often you hear people use the terms pre-qualified and pre-approved used interchangeably.  But the two terms are very different and it is important to understand what those differences are and how to use them to your advantage.

When you decide to buy a house it is important to know how much house you can buy.  Many times I talk to clients who have been looking at houses in the $350,000 range, and they like what they see so they decide they want to buy.  Unfortunately, their finances will only allow them to obtain a mortgage for $200,000.  Those houses that go for $200,000 are usually no match for the ones they looked at for $350,000 and they wind up disappointed at everything they look at.  Real estate 101 teaches you to never, and I mean never, show a client a house for which you know they cannot afford.  It only brings disappointment to the clients and frustration with the agent.

To get an idea of what a client can spend on a house, real estate agents are trained to compute a pre-qualification.  It is a quick crunch of numbers and will give a ball park of a mortgage the buyers will qualify for.  Even though I’m a real estate agent, I almost never do pre-qualifications and the reason is the difference between the two.

As I mentioned, a pre-qualification is a quick calculation of how much of a mortgage a client will most likely be able to obtain.  There is no money backing this calculation and does not go into any of the details required to obtain a mortgage, such as how long have you been employed, your credit score or any other of these factors that mortgage companies will look at to determine a mortgage amount.

A pre-authorization on the other hand is done by a mortgage person who has the financial backing of a mortgage company or companies.  Before a pre-authorization is done the mortgage counselor will run the credit bureau report and obtain the credit score.  They will most likely want to see payroll stubs and possibly tax returns to confirm the information provided.  Based on this extended information the mortgage counselor can then make a determination of the amount of the mortgage the clients will be eligible for.  Never the less, once a buyer signs a contract and they are considered “in escrow”; things can change and the amount of the mortgage can go up or down.

It is important to remember that even though a mortgage company “pre-approves” you for that loan amount, clients need to make a decision of how much mortgage amount they want to spend.  There is nothing wrong with going for less than what the mortgage company approves you for.

Once a buyer is pre-approved, they can then start shopping in earnest.  It is important that the dollar amount of the pre-approved mortgage be conveyed to the real estate agent who can then search for homes in that dollar range.  The mortgage counselor should also provide a letter for the amount of the pre-approval that the real estate agent can maintain in the file.  However, I strongly encourage people to not use that letter when negotiating the buying of a home.

The reason I say this is because it can tip the hand of the buyer to the seller.  Let’s assume that the buyers have been pre-approved for a mortgage of $300,000.  The buyers are looking at a home listed for $300,000 and want to make an offer of $275,000.  If the real estate agent provides a pre-approval letter stating that the buyers are approved for $300,000, there is little incentive for the sellers to negotiate for the $275,000 amount.  Rather, the mortgage counselor should provide a letter stating that the buyers are “approved for the offered amount.”

There is a word of caution that I cannot stress enough, and that is once an offer is made on a house, the buyers must maintain a conservative approach to their finances.  The mortgage company will be checking and re-checking the credit bureau right up to the point of closing and if there are significant changes, the mortgage may be denied.

There have been horror stories of buyers who, after negotiating the sale of a home, went out and bought new furniture to move into their new home.  Unfortunately, the increase in their debt ratio resulted in them not being eligible for the loan and the whole deal fell through.  Once you make an offer on a house, do not spend anything until the closing.

One bit of advice: Always, and I mean always, have a contingency that the purchase of the house is based on a loan approval.  Even if you are absolutely sure that your mortgage will go through, if something happens you want to protect any earnest money you put down.

As the market continues its upward climb some of you may be in the market to buy or sell real estate or may know someone who will be. I would greatly appreciate an opportunity to talk with anyone about the prospects of buying or selling real estate in any part of the country. If you’re not in the Greater Nashville area, I can refer the connection for you in any part of the country and find a professional who will take care of you.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland

How do buyers and sellers find a real estate agent?


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How do buyers and sellers find a real estate agent?

How buyers and sellers connect with a real estate agent is the quest that real estate agents constantly ponder.  It is also a challenge for the buyers and sellers.  How to find an agent that will handle one of, if not the, largest financial transaction in your life?  All too often that choice is left to chance.  And more often that decision is simply whatever is convenient and not who is the best agent to serve your needs.

Research has shown that by far, agents are picked because someone has a friend or relative in real estate.  There is nothing wrong with that, I welcome any friends or relative’s referrals.  In fact, referrals are the life blood to a real estate agent.  In recent studies, 39% of the people who used a real estate agent did so from a referral from a friend or relative, but not necessarily an agent they had used.  The majority of sellers only contacted agent before signing a contract.

Studies done by the National Association of REALTORS indicated that the vast majority of buyers and sellers who used a real estate agent for a transactions were satisfied with the service they received, yet only 22% of them used the agent they had used in the past.

Ironically, some of the least effective marketing techniques are those that agents spend the most time and money doing.  For example: The mailings or postcards that you receive in the mail accounts for only 2% of the methods used to find an agent; ads in the newspaper, Yellow Pages or home book ads accounted for 1%; and the never ending “advertising specialties, the calendars and magnets accounted for less that 1% of the methods used to find a real estate agent.

So let me be frank, my purpose of this blog is to generate contacts with the hopes that you will refer me to anyone and everyone who is interested in buying or selling real estate.  However, that being said, I also want to give you some ideas of what to look for to find a real estate agent.

First and foremost, you want an agent who can and will deliver on what you agree to do in order to consummate the purchase or selling of a home.  Be very careful of an agent who oversells the price of your home just to get the listing and then it sits on the market month after month.  All too often people pick the agent that comes in with the highest list price of the home, but then cannot deliver, because that is not the true market price of the home.  Remember, it is critical to price your home to sell, not to list.

The second area that I would suggest that buyers/sellers be mindful of is how progressive is the agent in marketing your property.  All too often I see a home come on the market that is overpriced and the only thing that happens is the property is listed in the MLS and a sign placed in the front yard.  After a few weeks the sign begins to look faded and begins to tilt but no one – especially the buyers pay any attention to it.  If the only thing an agent offers you is to place your property in the MLS – find another agent as quickly as you can.  In this day and age that simply will not cut it.

As I mentioned before price your home to sell, not to list.  When you talk to the agent before the contract is signed, asked them about the CMA (Comparative Market Analysis) and how they determined the price that they say they will list it at.  It is important that they use current information and look at both listed homes in the area and those that have recently sold.  I will also mention that there is an element of art to determine the price so expect some wiggle room – but not much.

One of the areas that are often overlooked is to be sure you are comfortable with the agent, and remember, the agent works for you.  If you have a question about the process you should feel comfortable asking the agent and knowing that they will get back to you in a reasonable period of time.

As the market continues its upward climb some of you may be in the market to buy or sell real estate or may know someone who will be.  I would greatly appreciate an opportunity to talk with anyone about the prospects of buying or selling real estate in any part of the country.  If you’re not in the Greater Nashville area, I can refer the connection for you in any part of the country and find a professional who will take care of you.

As always, if I can help with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.

Roland