REAL ESTATE: Finally a Good Investment?

The housing market still looks pretty bleak: There were a record one million foreclosures last year, home prices are still falling in many regions and the number of "underwater" properties is at a record high.

And things don't look much better in other areas of real estate. The number of construction jobs continues to decline, even as other parts of the economy have added jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up during the past few months.

Basically, the real estate market remains a mess.

Real estate encompasses a wide range of markets – homes, apartments, hospitals, office buildings, strip malls, dormitories and other properties. But for our purposes, let's focus on residential real estate, or homes. Here are four reasons to think residential real estate might represent a bargain – with one big caveat.

Everyone hates homes.

Homes are probably the most hated asset class in the country. That's what happens when a bubble bursts. People avoid thinking about the value of their home. Sellers moan about no offers, buyers gripe about impossible lending requirements.

Hatred of an asset is often the precursor to contrarian interest, and being contrarian is at the heart of many investment strategies. To paraphrase Warren Buffett, be fearful when others are greedy and greedy when others are fearful. Mr. Buffett backed that idea when he invested in the stock market in the teeth of the financial crisis in late 2008 and early 2009.

Of course, being contrarian for its own sake isn't wise investing. Gold was hated for years ("dead money") before it recently became an attractive asset class. Still, a lot of smart ideas begin with the question: What does everyone hate?

Smart people are buying real estate.

This cohort is led by John Paulson, the hedge-fund manager who made $20 billion betting against the housing bubble. Last fall he said in a speech: "If you don't own a home buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home."

Why is Mr. Paulson so adamant? Because he believes long-term interest rates are not going to get much lower. They have, in fact, risen since he gave that speech, but they remain remarkably low by historic standards. Low rates and the expectation that home prices will rise is his argument. For his part, Mr. Buffett has predicted the housing market will bottom this year.

Real estate performs well during inflation.

There's no inflation these days, but when buying a home one should take a longer view. And the longer view shows that the economy has enjoyed a disinflationary period since the early 1980s. A number of folks think that cycle is slowly reversing itself.

If that's the case, then convention would argue for holding assets that do well in an inflationary environment. That includes Treasury Inflation Protected Securities, commodities and real estate. Remember that during the stagflation nightmare of the 1970s, real estate had a strong run.

Inflation isn't a significant issue in the U.S., but it's a growing problem elsewhere. China and India have taken steps to fight inflation, the euro zone is getting flickers of inflation and the U.K. has had oddly higher prices (above 3%) for an extended period of time. If the cycle is slowly turning, real estate makes more sense.

Demand may be coming back.

Supply isn't as out of whack as it used to be. At the end of November, home builders reported 197,000 new homes on the market, the lowest level since 1968, according to Yardeni Research. The National Association of Realtors reports that the inventory of existing homes for sale fell 4% to 3.71 million homes, which represents a 9.5-month supply at the current sales pace, down from a 10.5-month supply in October.

Those aren't pretty numbers, of course, but they are moving in the correct direction. And that may be a reason that many home builder stocks, such as KB Home ( KBH: 14.79*, -0.19, -1.26% ) , Hovnanian ( HOV: 4.45*, -0.06, -1.33% ) , Pulte ( PHA: 24.06*, +0.02, +0.08% ) and Toll Brothers ( TOL: 20.40*, -0.30, -1.44% ) , have come off their lows in the past several weeks.

It's all comes down to jobs. There are a zillion caveats to any positive home thesis, but the big one is unemployment. If the economy is not creating jobs, the chance of a rebound in housing is diminished. It's hard to buy a home without a job, and folks who aren't working don't want to take long-term risks.

The job market is still struggling and the debate is hot about when it will recover. Optimists see recovery this year. Pessimists see pain for several years ahead. How this X factor gets resolved will say a great deal about whether housing will rebound.

Taken from an article on SmartMoney.com. Read more: 4 Reasons to Buy a Home Now - SmartMoney.com http://www.smartmoney.com/personal-finance/real-estate/-1295050347411/#ixzz1BhVVZ0hR

A little-known strategy for cutting mortgage payments

Homeowners looking to lower their monthly mortgage payments and reduce their interest rate may be able to do so without refinancing. A little-known strategy called recasting or re-amortization is available through some mortgage lenders and servicers, and eliminates the hefty fees and daunting credit requirements of refinancing.

• Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.
• Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.
• Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.
• Homeowners considering re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum. JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.
• Another challenge is finding a lender, or loan servicer, that offers re-amortizing. JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval. By Lynnley Browning

If you're in a mortgage pickle, it may be worth a look-see into this strategy. Call me if you have questions and I'll try to point you in the right direction! - Mike

How-To Videos on YouTube About Homebuying

Especially in today’s housing market, the prospect of buying a home can seem overwhelming for many Americans who may not be aware of how to begin the process of shopping for a home or even a mortgage. To help navigate this process, the U.S. Department of Housing and Urban Development (HUD) and the National Association of Realtors® (NAR) unveiled three how-to videos to help prospective homeowners find a home they can afford, shop for a mortgage they can sustain, and what to expect when they go to closing.

“Educating consumers about the home buying process is at the heart of what Realtors® do,” said 2010 National Association of Realtors® President Vicki Cox Golder. “Informed home buyers create the conditions necessary for responsible, sustainable home ownership, and we’re very happy to be a part of this project.”

HUD’s videos are easily accessible from both HUD and NAR’s websites as well as from HUD’s YouTube channel. They include:

Shopping for your Home – The homebuying process obviously starts with finding a place you’ll want to call home. This short video will instruct viewers on assessing how much of a home you can afford, working with a real estate agent and what happens once you find the home you want to buy. Housing counselors can assist home buyers and home owners on issues such as home buying, fair housing, credit issues, and foreclosure prevention.

Shopping for your Loan – Once you’ve found the home of your dreams, the next step is to shop for a mortgage loan. This video will help prospective buyers use the good faith estimate (GFE), which is a form that spells out the terms of a loan offer, to shop for the best loan for them. Viewers will learn how to use the GFE to determine how long an interest rate is available for a particular loan and how to identify key loan terms and costs of a particular loan offer. HUD suggests buyers shop and compare GFEs from multiple mortgage brokers and/or lenders in order to get the best loan for their situation, and I heartily concur.

Closing the Deal – Finally, this video walks the viewers through the actual closing process including how to make sure the loan they were offered closely matches what they encounter at the settlement table. In particular, HUD will walk the viewer through the HUD-1 Settlement Statement and demonstrate ways buyers can compare their actual costs with those reflected on their Good Faith Estimate.

HUD partnered with NAR because a real estate agent is often the primary point of contact for homebuyers and HUD believes real estate agents are in a great position to provide these videos to their clients as they move through key areas in the homebuying process.

To view HUD’s new homebuyer education videos, visit HUD’s YouTube channel at www.youtube.com/HUDchannel.

As Your Personal REALTOR, I am here to answer any of your personal questions about homeownership, buying, selling and avoiding foreclosure. Don't hestitate to contact me!

Help for Troubled California Homeowners On Hold ... But Not For Long

California expects mortgage-aid program to begin in weeks.

The California Housing Finance Agency (CalHFA) reported this week that its “Keep Your Home California” program will be delayed because of logistical issues with the program. The program was scheduled to begin Monday, Nov. 1.

· The “Keep Your Home California” program is a $1.83 billion government aid program that will pay down loan balances and provide monthly cash assistance to struggling California homeowners.

· One of the logistical complications that has caused the delay is the fact that Fannie Mae and Freddie Mac last week instructed their loan servicers to participate in the program, dramatically increasing the number of potentially eligible homeowners.

· Funded with federal money, the program offers four different types of cash assistance for an estimated 100,000 low- to moderate-income California homeowners. Additionally, eligible borrowers must have endured some sort of loss of income.

· The two primary forms of aid include $875 million dedicated toward unemployed Californians who need help making their monthly payments, and $790 million to be used to directly reduce mortgage loan balances.

· Although the program has been delayed for several weeks, homeowners struggling to make their mortgage payments are advised to not wait for assistance programs to begin before contacting their servicer or lender. Instead, homeowners should begin working with their lender or servicer at the first sign of difficulty.

· More information about the “Keep Your Home California” program can be found at www.keepyourhomecalifornia.org. A toll-free hotline soon will be established.

As a Certified Distressed Property Expert, I can help you navigate your way through the maze of programs and what is available for you. Contact me for help today!

What the Foreclosure Freeze Means For You

Q: How have California mortgages been affected?

A: So far, BofA is the only lender with a moratorium that affects California. Other lenders, including Ally Financial and JP Morgan Chase, have halted foreclosures in the 23 states that require a court’s approval before a home can be seized. California is not one of those states. But Attorney General Brown has called for all banks to stop foreclosures until they can prove they’re complying with state law, which prohibits lenders from recording notices of default on any mortgages made from 2003 through 2007 unless the lender contacts or tries diligently to contact the borrowers to see if they qualify for a loan modification.

Q. What effect will this have on the housing market? And what does this mean to people who want to buy a foreclosed home?

A. Foreclosure sales currently account for 43 percent of the California market, according to RealtyTrac, a real estate data firm in Irvine. To the extent that these problems begin to show up in California, it could put a temporary roadblock in front of a sale. One problem: title insurance firms are shying away from any sale involving a questionable foreclosure. But real estate analysts say that as long as the problem is solved quickly - say, 60 to 90 days - it should have relatively little impact on the market. Rick Sharga, RealtyTrac's executive vice president, said he's noticed little impact from the moratoriums that have recently gone into effect.

For more information, please don't hesitate to shoot me an email or give me a quick call! I'll be happy to talk with you about what this means to you as a buyer, seller or distressed homeowner!

A New Way To Buy a Home At a Discount!

The buyer's market may have just got better for you.

To pare down their growing inventory of properties, Fannie Mae and Freddie Mac are scrambling to unload nearly 150,000 foreclosed homes. And that means 2004-esque deals – like requiring as little as 3% down, offering to pay a portion of the closing costs and arranging special financing and warranties for repairs and renovations.

It's another option for home owners who want to trade up -- and an easier way into the market for first-time home buyers, says Dean Baker, co-director of the Center for Economic and Policy Research who studies the housing market.

The downside: Angry neighbors. Many realtors say these types of listings are devaluing nearby properties. They state that in some areas where Freddie and Fannie homes are on the market, buyers could find a better deal on a nearby market-rate home that doesn't require repairs, he says.

Buying a Fannie or Freddie home can be more complex than pursuing an open-market real estate listing — or even a commercial bank foreclosed property. There’s a smaller selection of appealing and those tend to sell the fastest. And there's little room to negotiate price.

"Our goal is to recover as much as we can to offset our loss and not to be low balling properties just to move them,” says a Freddie Mac spokesman. “We absolutely have no motivation to be leading a downward spiral in home prices.”

The three best features of Fannie and Freddie foreclosures that may make digging for these deals worthwhile:

1. Small down payment

For its foreclosed properties, Fannie Mae will accept down payments as low as 3% on 30-year mortgages at the same interest rates banks are currently offering. And Fannie Mae doesn’t require private mortgage insurance. Compared to a typical bank mortgage, which requires 10% down, plus PMI for buyers with less than 20%, that’s a huge savings – an estimated $51,000 up front and upwards of $2,500 per year PMI on a $300,000 mortgage.

It's a tradeoff, though. For buyers with 20% down, mortgage payments on a 30-year mortgage loan at 5% would be $1,288 a month. With just 3% down, the buyer would need to borrow $291,000 and make a $1,562 monthly payment.

2. Help with renovations

Fannie and Freddie have fixed big flaws like leaky roofs and damaged electrical work, and they often handle small projects like replacing appliances that are broken or missing, tearing up old carpet, or fixing other damage left by former owners or vandals.

Now, to entice buyers who want to update or upgrade, many of Fannie Mae's properties come with an optional mortgage that includes extra financing up to $30,000 for repairs and improvements. But with a little down payment and the extra amount tacked on, the buyer could end up owing more than the house is worth – especially if home prices continue to drop.

3. First dibs

Buyers who plan to live in their Freddie Mac-purchased home will get to see properties for at least the first 15 days they’re on the market -- before the listing opens to would-be landlords. Many bank-owned foreclosure properties are snatched up by cash-stocked investors who can wait out the downturn to sell later at a profit.

And Fannie and Freddie homes can be seen inside and out -- unlike some regular foreclosure listings. Consider bringing along a contractor when you view the home to help spot areas that need repairs and provide pricing. (Most contractors will do this for free.)

“It gives families who want to buy a home to live in the opportunity to look and bid without competition from cash-rich investors,” says a Freddie Mac spokesman.

Taken from: How to Buy a Home at a $100,000 Discount - Personal Finance - Real Estate - SmartMoney.com Read more: http://www.smartmoney.com/personal-finance/real-estate/tips-on-buying-a-home-at-a-100-000-discount/?page=all##ixzz11VYT6DJq

First-Time Buyers! New 30-Year Mortgage From CalHFA!

If you are a first-time buyer, or if you haven't owned a home in the last three years, this may be your opportunity to shop the LOW prices in the market today!

The California Housing Finance Agency (CalHFA) announced this week the launch of a new fixed-rate, 30-year, FHA-insured mortgage program for low- and moderate-income home buyers.

CalHFA provides financing and programs for low- and moderate-income Californians. The program announced this week enables qualified, first-time homebuyers - defined under federal law as not having owned and occupied a home for the past three years - in California to receive a 30-year mortgage with a fixed interest of approximately 4 percent.

Borrowers are eligible to use the California Homebuyer’s Downpayment Assistance Program, which can provide up to 3 percent of the purchase price of the home for down payment or closing costs.

In addition to being a first-time home buyer, borrowers also must meet income limits, which vary by county and family size. Call me to see if you qualify. Borrowers also must purchase homes within FHA’s loan limit and CalHFA’s sales price limits. Mortgage loans are limited to $417,000 under FHA guidelines, while CalHFA’s sales price limits vary by county.

Additionally, borrowers must meet the minimum credit score requirements and maximum debt-to-income ratios and complete a HUD-approved home buyer education program.

For more information on whether or not this new CalHFA program can help you with your first-time home purchase, contact me!