Mortgage rates inch up

Buyers, Beware: Mortgage Rates Up

Mortgage rates that once dipped below 5 percent have pretty much gone away, but don't expect rates to spike to 1980s levels now that the Federal Reserve has ended a program that purchased mortgage-backed securities to keep interest rates low, East Bay mortgage brokers say.

In just the past week, the average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent. As mortgages get more expensive, more would-be homeowners are priced out of the market — threatening the housing market's fragile recovery.

Many analysts forecast rates will rise as high as 6 percent by early next year. For people who bought their first home in the 1980s, when rates stayed over 10 percent for several years, paying 6 percent for a home loan may seem like a steal. But it's coming as a shock to many first-time homebuyers this spring.

Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.

"It's unlikely we are going to see interest rates below five percent moving ahead," said  a mortgage banker. "The reason is that we are exposed to market movements now and the security blanket, which was the Federal Reserve, is no longer there."

And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.

"Although the federal program has ended, it's too early to say whether it will result in a rush among consumers to get home loans or refinance existing loans. Rates are still incredibly low. We've been spoiled by 4.5 percent and 4.75 percent rates and think 5.25 percent is a disaster, but really it's a great rate.

"(The lower) rates are going away. We already hit bottom and that was awhile ago," said one broker. "I think we have to keep things in perspective. Rates have been gradually rising since last summer."

For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.

It's all about affordability. For every 1 percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.

The rule of thumb: Every 1 percentage point increase in mortgage rates reduces a buyer's purchasing power by about 10 percent.

For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will get you a loan of only $270,000.

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If you are waiting for the right time to buy a home, then this just might be that time...

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Money Crunch Hits High-Dollar Houses

Money Crunch Hits High-Dollar Houses

In Franklin's immaculately landscaped New Urbanism neighborhood, Westhaven, past a Greek-inspired fountain surrounded by blooming tulips, sits a looming brick edifice that once was a $1 million house.

The bank foreclosed on the couple that owned it, and new buyers put a contract on it for $699,900 — easily a 30 percent price drop.

Over in Magnolia Vale in Brentwood, a buyer last summer scooped up a Greek-columned, 7,000-square-foot home for $808,500. The previous owner had paid $1 million three years earlier.

Foreclosures generally are rare in the housing market above the $500,000 price point, but they do occur. And real estate agents say a faltering economy has led to more than ever in Middle Tennessee.

The reasons why luxury homes go back to lenders seem painfully similar to lower-priced properties: Homeowners, investors and homebuilders get overextended with debts, lose income and walk away from houses they can no longer afford. But there are some major differences with properties built for upper-income buyers. With only a few exceptions, most of the foreclosures advertised above $500,000 are brand-new homes that builders lost to the bank and that no one lived in. Developers convinced that a housing boom two years ago would never end built luxury homes for wealthy buyers who never materialized.

As real estate sales slumped, lenders began foreclosing on builders who could no longer pay their bills. The builders had relied on a steady flow of home sales to pay off their construction loans or buy land. But the good times didn't last.

The result has meant more bank-owned homes coming on the market in some of the newest, most-expensive neighborhoods in the Nashville area, many of those homes in Williamson County, the wealthiest county in the state.

Builders Ed and Rebecca Newsham built a house in Heathrow Hills in Brentwood in 2007 using a $1.4 million loan. It has a pool, cascading waterfalls and 2,100-bottle wine cellar, along with gorgeous hilltop views of the countryside. But after waiting for years for a sale at a price over of $2 million, the Newshams, who had a stellar reputation as builders, filed for bankruptcy protection.

Reliable data on foreclosures by price are hard to track. Many Realtors who list homes for sale don't put the word "foreclosure" on the multiple listing service information that real estate agents share. Some say marketing a luxury home as "foreclosed" would be a black mark against the property, and it would encourage low-ball offers from buyers.

"Whenever buyers smell blood, the offers come in a lot less,'' said Steve Fridrich, president and chief executive officer of Fridrich & Clark Realty. He specializes in high-end sales and is seeing more troubled properties in that market.

Fridrich said he handled no foreclosures or short sales two years ago. Today, he has six. Still, other well-heeled homeowners are managing to hang onto luxury homes even if their careers or annual incomes have taken a hit with the recession. People who own $500,000-and-up homes tend to have other assets or savings with which to make mortgage payments even when they lose money on investments or get axed from high-paying jobs.

Sometimes, though, homeowners just can't keep their homes no matter what. "More people at the higher end are losing their jobs, as well — the vice presidents, the CEOs.

Others may have borrowed too heavily to buy expensive homes in exclusive neighborhoods.

It can take three to five years before a borrower can get another mortgage after a foreclosure — two years or more after a short sale. A short sale is when the lender agrees to a sale for less than what's owed on the mortgage.

Such a nick on a person's credit report can make it harder to get a business loan or even another management job. More employers have started to check credit reports of job applicants before hiring someone.

Still, some people are deciding to walk away from their homes and stop paying mortgages as a business decision, even if they can afford the payments.

When they look at a return on their investment, and they are so 'upside down' in their mortgage, it would take them five or six years to get it back. They just think they're going to cut their losses.

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Happenings in High-Dollar Homes

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Nashville Home Sales Soar 22 Percent

Nashville Home Sales Soar 22 Percent Interest rates are at historic lows, the government is shoveling thousands of dollars in tax credits at people who buy homes, and the Nashville real estate market responded in March with a 22 percent increase in sales compared with a year ago.

With a new sense of optimism, sellers are putting more homes up for sale here, buyers are signing more contracts, and homes are moving at a much brisker pace that's likely to last at least until summer.

Don't expect the same for prices. Despite optimism among Realtors that there'll be a last-minute rush for sales before federal tax credits expire on April 30, median prices probably will remain down by double-digit percentages from their peak three years ago.

Stagnant prices could last at least until the summer, and some real estate experts say it may be eight years before Nashville-area prices recover to the heady days of summer 2007 when median prices swelled to $196,000 in a nine-county area.

In March, the median price for a single-family home in the Nashville area was $159,250, about flat compared with a year earlier, the Greater Nashville Association of Realtors said Thursday.

"When we start to see job growth really pick up in earnest, we might see sustained price increases for homes,'' said David Stiff, chief economist at Fiserv, a national research firm that tracks more than 300 housing markets. He thinks it could be 2018 before prices here get back to mid-2007 levels.

Realtors say they're getting a lot busier in April as the final days in which first-time buyers can get an $8,000 federal tax credit play out.

The tax credit applies to housing sales contracts signed by April 30 and closed by the end of June. There also is a $6,500 tax credit for existing homeowners.

The sharp increase in sales during March represents the sixth consecutive month that more homes sold here year-over-year, the Realtors association data show.

Sales rose for 6 months
John Gimenez decided to put his tiny 950-square-foot home on the market this week, just as the tulips bloomed and before the tax credit runs out. Within an hour of listing it for the first time, Gimenez had already shown his East Nashville house to an interested shopper. He is asking for $174,900, or $15,000 more than he paid for it three years ago before making improvements such as a new roof, new deck and new heating and air conditioning.

"We're very optimistic,'' said Gimenez, who plans to buy a larger house because he is getting married and wants children. "It seems like people are getting a little more confident."

Lucy Smith, the president of the Realtors association, said she expects sales to increase at least through early summer because of the tax credits.

"What happens after that, we'll just have to wait and see,'' she said.

All Nashville-area counties saw sales gains in the first quarter except for Maury County, home to the now idle General Motors plant at Spring Hill. Williamson County saw sales climb nearly 20 percent in the quarter, and Davidson County sales went up about 10 percent.

Pending sales up 30%
More people signed contracts as well, with pending sales up nearly 30 percent to 2,231 in March, the Realtors association said.

Inventory climbed slightly, with 300 more single-family homes on the market in March compared with the year before.

Karen Rogers was one of those who put a home on the market recently — a townhome on Whitland Avenue in West Nashville.

"We are hoping to get interest from people qualifying for that tax credit,'' she said.

Rogers is finishing a medical residency at Vanderbilt and plans to move with her husband to Virginia for a permanent job.

They had purchased their two-bedroom townhome for $215,000 three years ago and hope to sell for $224,900.

Christie Bradley, a Realtor with Fridrich & Clark, said she is definitely getting busier because of the soon-to-expire tax credits. She put one house on the market on Wednesday and had four showings by Thursday.

As part of a nationwide push from the National Realtors Association, she will have four open houses this weekend.

"I ran out of agents to help me with my open houses, so I have my husband helping me,'' she said. Bradley and her husband also are trying to sell their own house.

Some take financial loss
Kelsey Najpaver and her husband have a contract to sell their home in West Nashville for $217,500 — or $2,000 less than they paid for it three years earlier.

And Najpaver feels lucky. Other houses in the neighborhood were taken off the market after sitting around for more than a year without a sale. The Najpavers are moving because of the husband's new job."It's obviously not ideal,'' she said. "But we felt very fortunate just to sell it."

Condominiums listed in the Realtors' multiple listing service were flat at 200 sales in March, about the same as a year earlier. The average condo sales price was $137,450 here last month, down 12 percent from a year ago.

But price declines for single-family homes and condos have not been as dramatic in Nashville as other markets that experienced big housing bubbles. For instance, the Jacksonville, Fla., housing market saw a 40 percent drop from peak prices, and Sacramento, Calif., had a 55 percent collapse.

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Great information on Nashville Home Sales for March 2010

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Let the Short Sales Begin - CNBC

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Well, here we go... a new chapter in the Never Ending Story...

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How to Get the Extended Home Buyer Tax Credit

You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here's what you have to do to get your benefit:

1. Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
   
2.  Decide whether to: 
   • apply the credit to your 2009 tax return, filed on or before April 15, 2010;
   •  file an amended 2009 return; or, 
   • apply the credit on your 2010 return, filed on or before April 15, 2011.
     
3. Attach documentation of purchase to your return.

Documentation of Purchase

Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, we will include instructions and links to the appropriate forms.

When to Apply the Credit

Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.

Buyers purchasing in 2010 will have the option to:

•  Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
•  File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
•  Claim the credit on their 2010 tax returns.

If you, or your client, purchased a home between January 1, 2009 and November 6, 2009, please see: How to Get the 2009 First-Time Home Buyer Tax Credit.

Applying the Credit to Your 2009 Taxes

You will need to do three things to claim the credit on your 2009 tax return:

1. Fill out Form 5405 to determine the amount of your available credit;
2. Apply the credit when you file your 2009 tax return or file an amended return;
3. Attach documentation of purchase to your return or amended return.

Applying the Home Buyer Tax Credit to Your 2009 Tax Return

Bridge Loans: Using the Home Buyer Tax Credit Up-Front

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As a friend put it so eloquently, "Tic-tock, Tic-tock"

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Real Estate Blog - Making Home Affordable - The banks get another report card

Gary W. Oakes, CRS, GRI, ABR, e-PRO

Franklin, TN

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