When one hears the word “foreclosure,” images are conjured of families unable to meet their loan commitments, and forced to consider unpleasant options.  However, it’s not only homeowners that suffer from a foreclosure.  Renters can be “out on the street” if their landlord defaults on mortgage payments.

A report from the Mortgage Bankers Association states that nearly 20% of recent foreclosures have been against investors who did not live in the property, and even tenants in good standing face having to vacate the premises if they’re renting one of these properties.

Why mention this gloom and doom scenario?  Because home values have declined, and buyers are seeing the best deals in many years.  While unpleasant for sellers, price declines increase affordability for buyers, so if you’ve been renting, now is a fantastic time to turn that monthly payment into equity.

Interest rates have inched up, but still-historically low rates combined with very affordable housing yield a formula that should put you in a home that you own for the same amount you are now paying for rent.  Not to mention that at a lower purchase price, you’ll enjoy some great appreciation over the coming years.

Just because you’re renting now, you’re not necessarily safe from suffering the consequences of a foreclosure.   Take matters into your own hands and buy yourself some peace of mind.

This week’s economic data and comments from Fed officials confirmed the economic outlook shared by most investors, namely that the economy is slowing sharply. Wednesday, the Fed cut the target Fed Funds rate by one half point to 1.00%, as widely expected. The vote was unanimous and followed a coordinated half point rate cut on October 8. Investors believe the statement left the door open for further rate cuts and have priced in another half point rate cut before the end of the year. The Fed appears to be most concerned with boosting near-term economic growth. While aggressive short-term stimulus is good for the stock market, mortgage investors are worried about its impact on long-term inflation, and those concerns helped pushed mortgage rates higher during the week.

A second factor also contributed to this week’s rise in mortgage rates. The federal government’s takeover of Fannie Mae and Freddie Mac in September left mortgage investors with the impression that there was explicit government backing of the debt and guarantees issued by Fannie and Freddie. Government officials have been sending mixed messages, however, raising some concern about whether the two companies really will have the long-term backing of the government. Due to the uncertainty, investors, particularly important foreign investors, have been reluctant to invest in Fannie and Freddie guaranteed mortgage backed securities. Yields required by mortgage backed security investors directly affect most mortgage rates. If the government were to unambiguously convince investors that it will stand behind Fannie and Freddie guarantees, then mortgage rates could be expected to move lower.

Thanks to Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com

We are definitely in the full swing of the “seasonal” real estate market.  We have seen an increase in activity in purchases of first time home buyers and vacation home buyers (there are some great deals in both of these segments – actually in all segments!).   Interest rates remain low, sellers are willing to negotiate.  NOW IS THE TIME TO BUY.  For those of you that think we have not “hit the bottom of the market” – you are going to miss out!!  

Sold Market Analysis April 2008: 

Total Listed 638; Total Sold 161; Average List Price Sold $200,219; Average Sale Price Sold $186,473; Average Days on Market 161

Mortgage rates ended the week close to where they began the week, but the end result masked a lot of movement. The week began poorly for mortgage markets. Stronger than expected Retail Sales data and tough talk on inflation from Fed officials pushed mortgage rates higher on Monday and Tuesday. In particular, Tuesday’s Fed speakers suggested that the economy was beginning to recover – even if there is still a long way to go – and that inflation concerns have increased. The tide turned on Wednesday, however, when CPI, the most closely watched inflation report of the month, showed a lower than expected increase in inflation. Mortgage rates fell every day through the remainder of the week.

The April Core Consumer Price Index (CPI) rose at a 2.3% annual rate, below the consensus forecast of 2.4%. So far, higher food and energy prices have not been passed through in a large way to the prices of other goods. The Fed has been emphasizing inflation fears for a couple of weeks, which has had a negative impact on mortgage markets, so the good news on inflation was a relief to many investors. The Fed is generally considered to be comfortable with Core CPI readings below 2.5%.

In the housing sector, this week’s news was mixed. Against a consensus forecast of 940K, April Housing Starts rose 8% to an annual rate of 1,032K units. Building Permits, a leading indicator of housing market activity, rose 5%, the first increase in in five months. The construction of single family homes remained weak, however. The strength in the Housing Starts report came from new apartment construction, which is extremely volatile on a monthly basis. Separately, the National Association of Realtors (NAR) reported that median home prices fell 8% during the first quarter from the same period one year ago. The chief economist of the NAR suggested that the data may be a little misleading, since a smaller percentage of high end homes were sold during the period due to the difficulty in obtaining jumbo mortgages. In addition, the results varied in different parts of the country. 100 out of 149 metropolitan areas saw price declines during the first quarter.

Compliments of Corey Phelps, Front Street Mortgage, (231) 360-7283, email: corey@frontstreetmtg.com

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, and some of the costs involved in buying your home.

2. Gains.Even with today’s market, home-ownership is a good investment.  Right now, you can find some real good deals.  This market is going to change and now is the time to buy.
3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
5. Predictability. Unlike rent, your mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.
6. Freedom. The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

To calculate whether renting or buying is the best financial option for you, use this calculator courtesy of Ginnie Mae: http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH

For the listings in Northern Michigan, visit www.45thParallelRealty.net

1. Your home is most likely to sell for top dollar when it’s fresh to the market.

2. Buyers buy after they shop around. Buyers are in search of the best deal. If your home is priced too high, it will make the others look more attractive.

3. Your property will need to be appraised. If it appraises below the contract price you may have a problem.

4. Other than possibly location, price is the most critical item that both buyers & real estate agents look to when selecting homes to view.

5. If priced too high, it’s possible that no one will seriously consider or see the benefits of starting the negotiations.

6.  The more accurately priced the property is, the less likely the buyer is to start the negotiations with a “low ball” offer. 

 To view northern Michigan real estate, visit our website www.45thParallelRealty.net.