TIME TO MAKE LEMONADE

 

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.

Inflation Tame

As the stock market fell to five-year lows during the week, investors moved to less risky investments. Treasury markets were the primary beneficiary of the flight to safety, and Treasury yields reached the lowest levels in decades. Mortgage rates fell during the week as well, but to a much lesser extent.

The news during the week on inflation pointed to lower future levels. The October Consumer Price Index (CPI) inflation report showed a large monthly decline in the overall index due to lower oil prices. The core rate, which excludes food and energy, saw its first monthly decline in over 25 years, and the annual rate fell to 2.2% from 2.5% in September. Oil prices have continued to move even lower this month, which will be reflected in the November data. Lower expected inflation is almost always a good thing for mortgage rates.

In the housing sector, October Housing Starts fell to a record low, and Building Permits, a leading indicator, fell 12%. These were weak numbers, but a decline in new home building will reduce the number of unsold homes on the market, which should help to stabilize home prices sooner. The recent decline in home prices has one bright spot. Combined with relatively low mortgage rates, homes have reached their highest level of affordability in four years, according to the National Association of Home Builders (NAHB). The NAHB index compares the cost of paying for a home, based on average home prices and mortgage rates, to the median household income. Increased affordability allows more people to participate in the housing market and should boost demand.

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

FED Cuts Rate by .75

Statement: NAR Commends Federal Reserve Board on Timely Interest Rate Cut

WASHINGTON, January 22, 2008 -  The following is a statement by Lawrence Yun, chief economist of the National Association of Realtors®, on today’s action by the Federal Reserve Board: “Today’s 75-basis-point cut in the Fed funds rate to 3.50 percent is a very good step in the right direction to boost the economy and send a clear message to both the market and to consumers.  This strong rate cut will help lower mortgage interest rates and lessen the burden of adjustable-rate loans that are resetting in the current environment.  It also could help stimulate business investment in the wake of market uncertainties.  We commend the Federal Reserve Board on its bold action, but at the same time we urge it to keep a close watch to see if additional action is needed.”