MARKETTRENDS| BUYER CONSIDERATIONS
A HISTORICAL AND UNIQUE CIRCUMSTANCE FOR PURCHASERS
To reiterate, we are fortunate to reside in theWashington DC Metropolitan area. Valueshave certainly stabilized, and in many mar-kets, modest rates of appreciation have re-turned. However the reader feels about thegrowth of the Federal Government, publicsector hiring serves to somewhat insulate thisregion from negative trends apparent in otherparts of the country.The graphs to the right reflect two very differ-ent market trends within our MetropolitanArea. The top reflects trending for marketstypically defined as “commuter markets”;those within reasonable transportation accessto Washington DC. The lower graph demon-strates the steeper decline experienced inareas where foreclosure activity became theprimary inventory source within the market.While our Regional market experienced adecline in average sales price of over twentypercent, the
distressed markets saw theaverage sales price fall by sixty percent.
The regional market has recovered marginallyfrom it’s bottom, however,
those that had thecourage to enter the distressed market atit’s bottom, enjoyed a twenty five percentincrease in average sale since 2008.
Unfor-tunate for some, average sales price in dis-tressed markets remain at a level forty per-cent below their peak.Distressed properties are not simple transac-tions. They are sometimes well worth thepatience and diligence required from the pur-chaser. With interest rates at historical lows,and prices low, the opportunity is ripe forthose qualified to purchase.
The graphs above clearly dem-onstrate the situation owners are faced withwho purchased, or refinanced during the mar-ket’s crest. Owners with significant negativeequity have few good choices when faced witha job loss or life changing event. While valuetrends have turned positive, it is the propertyacquired, or refinanced peak values that willcontinue to be “distressed sale” opportunitiesfor purchasers.Qualified buyers can now borrow purchasemoney, using thirty year fixed rate loans, with aninterest rate below five percent;
the lowest inover five decades.
While recently, there havebeen rate dips to the mid four percent range,even at a five percent rate, the principal and inter-est payment on the average sales price of$250,000 is only $1,342.Financing is also obtainable with as little as threeand a half percent down, or $8,750 on the sameaverage sales price. The opportunity is madeclear in the graph below. Policy makers havepriced money at this level to encourage demandfor housing. Rates will return to normal levels.At six percent, the principal and interest paymenton the same $250,000 loan goes from $1,342 to$1,498 per month.
Does it really make sense topay $156 more a month, or $1,872 a year, or$56,160 over the term of the loan for the sameamount of purchase money?
For the last several years, FHA insuredmortgage loans have been the best choice formost purchasers. These loans offer a uniquefeature which allow borrowers to refinance theirFHA insured loan to lower rates when available.As you can see in the graph to the bottom left,this feature would likely benefit most that havepurchased in the last seven years.The
refinance qualifications are significantlyless stringent
than are those for a conventionalrefinance:
No appraisal is required.
This means thatthose with negative equity will qualify, regard-less of current home value.
No Income verification is required.
Thereare no debt to income ratio standards. Thosewho’s incomes have changed since acquiringtheir home will still qualify.
No Asset verification is required.
There areno “cash reserve” requirements to refinanceyour FHA insured loan.
Approvals are not credit score driven.
The basic requirements of for this refinance are:
The refinance must result in a lowering ofthe borrowers monthly principal andinterest payment.
The mortgage to be refinanced must al-ready be FHA insured.
The mortgage to be refinanced should becurrent. (There is no stipulation regardingprior delinquency)
No cash may be taken out using this refi-nance process.
Interest rates have fallen significantly since theexpiration of the “Home Buyer Tax Credit” onApril 30th. We are in contact with our clients whopurchased using an FHA insured leverage thisfeature of their loan.
Even those who pur-chased as recently as several months ago arebenefiting from this opportunity.
Every indication is that rates will be higher by theend of 2010.
If you were our client, and havean FHA insured loan, we have already been intouch.
If you were not, but feel you could benefitfrom this program, please just pick up the phoneand call us. We can help.We are full service real estate professionals.Helping families lower their payment through thisprogram is not a commissionable event for anagent. We promise our clients full service; andlending is a critical component of full service realestate firms.
Promise made; Promise kept.
MORTGAGE RATES: A WINDOW OF OPPORTUNITY
Regional Value Trend
2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0
A v e r a g S a l e s P r i c e
Distressed Market Value Trend
$0$100,000$200,000$300,000$400,000$500,0002003 2004 2005 2006 2007 2008 2009 2010
A v e r a g e S a l e s P r i c e
30 Year Fixed Rate MortgageRates - 2003 to 2010
1 / 1 / 2 0 0 3 1 / 1 / 2 0 0 4 1 / 1 / 2 0 0 5 1 / 1 / 2 0 0 6 1 / 1 / 2 0 0 7 1 / 1 / 2 0 0 8 1 / 1 / 2 0 0 9 1 / 1 / 2 0 1 0
3 0 Y e a r F i x e d R a t e