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Many Silicon Valley homeowners have already taken advantage of lower-than-ever interest rates to save several hundred dollars a month by refinancing their mortgage loans.
But until now, millions of owners across the country who could probably use those savings the most have been locked out of them: those who bought near the top of the market and whose home values are worth less than their current mortgage balance. (more…)
When CNBC’s Diana Olick blogs or talks, I listen. Few reporters do a better job of cutting through the B.S. to shine some light on the current housing mess than she does with her Realty Check blog on CNBC.com.
The latest example is her explanation of why “Negative Home Equity is Worse Than You Think.”
While business-intelligence and analytics firm CoreLogic puts the current number of negative-equity mortgages in the U.S. at 22.5 percent, Olick notes, that number doesn’t do justice to the effect the situation is having on the move-up market. That’s because when you add in a seller’s real estate commissions, closing costs and the amount needed for a down payment on a new home, the number of move-up seller/buyers who are under water goes up by several percentage points.
The weight of this “effective negative-equity” situation on the housing recovery is exacerbated by the fact that the now=expired federal income tax credit pushed so many first-time home buyers through the transom that we now must depend on the move-up market to get us out of this mess, Olick explains.
Oh well, at least interest rates are also going up!?!!?!
“May you live in interesting times.”
The origin of this old saying — reputed to be related to an old Chinese proverb — is in doubt, but few people question that it is intended to be a curse.
I bring it up because two news headlines that popped up this morning promise to make life even more interesting in coming months for home buyers and sellers alike.
The first is that pending home sales surged unexpectedly in October, up more than 10 percent against a forecast of zero-to-negative growth.
The second is that mortgage rates continue a recent rise as the economic picture brightens.
You are free to interpret the meaning of these two developments for yourself. Taken together, however, I take them to mean this: The greatest home buying opportunity in a generation is now much closer to its end than to its beginning.
Reports earlier this week indicate that consumer confidence is back on the rise, and that they are spending this holiday season — online sales especially are way up. The stock market has been on a tear the past couple of days on this news, with financials and home builders specifically up today. And the stock market tends to be a forward indicator, by anywhere from three to nine months.
And speaking of interesting times, I would be remiss if I did not point you to a very interesting article CNBC’s Diana Olick posted on her Realty Check blog earlier his week, which noted, in part:
“No question it is a buyer’s market out there, but really only for the buyers who don’t have to sell. Those who do have to sell, the move-up buyers, are stuck in this bizarre financial disconnect. It’s all about math, that they apparently refuse to do. They expect a great discount on whatever house they’re buying, but they are unwilling to take a loss on the home they’re selling, even if it’s a net gain in the end.”
That’s a very good summation of where we stand today. Where we’ll stand a few months from now, when 2010 is in the rear-view mirror and the housing slump is well into its fifth year, I believe will be another story.
Every agent who represents buyers — including me — has been hammering home the need for buyers to get a letter of pre-approval before making an offer on a home. Many, if not most, sellers aren’t even taking offers seriously if they are not accompanied by such a letter.
It’s not uncommon for buyers to push back a bit; typically they will assure me that their bank “has said I won’t have any problem getting a loan.” All buyers who are seriously in the market and have yet to approach a lender for a letter should read this story from the New York Times, unless they’re happy to risk the loss of the home of their dreams to another buyer who showed up better prepared.
- Copyright © 2010 Inside Real Estate, LLC
