Existing home sale prices for the Orlando area held steady from September to October but it was the first time in more than a year since the number of houses on the market actually increased, according to a report released Tuesday by the Orlando Regional Realtor Association.
The median price for a house in an area that mostly consists of Orange and Seminole counties was $112,700 in October _ up from $112,500 in September. Prices last month were up 7 percent from a year earlier.
One slight shift in the housing market during October was that, for the first time since July 2010, the number of houses listed for sale grew. By the end of the month, the market had 9,973 houses awaiting a buyer, which was 42 more than in September. Even with the increase, the market continues to have a fraction of buying opportunities than it has had in recent years. It was saturated with a high of 26,330 listings in October 2007 and 15,441 listings this time last year.
At the current pace of sales, Orlando has a 4.82-month supply of homes; six months is considered a normal market.
In October, sales of normal homes commanded a median price of $153,000, while short sales fetched a median of $95,000 and bank-owned houses had a median price of $80,000. The normal sales accounted for about 41 percent of all 2,068 sales during the month.
Buyers who purchased an Orlando area home in October paid average interest rate of 4.21 percent, which is slightly above the 4.19 percent average interest rate recorded for September. That rate was the lowest since the association began tracking the statistic in 1995.
Homes of all types spent an average of 106 days on the market before coming under contract in October, and the average home sold for 94.66 percent of its listing price. A year ago, those numbers were 91 days and 94.67 percent, respectively.
If you are a troubled homeowner hoping to refinance, pay attention next Tuesday as details come out on a new federal program that could make it easier starting in late December or early in 2012.
In the meantime, be sure you keep up with your mortgage payments so that you can qualify for the new deal.
Even if you missed payments in the past, it can help to be current going forward, said Kathy Conley, housing specialist for GreenPath Debt Solutions in Farmington Hills.
The revised Home Affordability Refinance Program (HARP) could apply to a broader base of people.
If, for instance, you owe $100,000 on a house that would appraise at just $50,000 – too deep underwater for a conventional refinancing – you might be able to refinance under the new HARP. That was not true under the old HARP, launched in 2009, which had a 125 percent maximum on loan-to-value ratio.
The new plan is expected be a big help for many homeowners in states that have been hard hit by drastic drops in home values, such as Michigan, Florida, California, Arizona and Nevada, according to Greg McBride, senior analyst for Bankrate.com.
Seeing mortgage rates hover near record lows – around 4.23 percent for a 30-year fixed and 3.48 percent for a 15-year – has many folks wondering whether it’s time to refinance.
In this tough housing market, what do you need to know? How can you save money by refinancing and make those low rates work for you?
Even with interest rates low and a revised federal program coming, refinancing is not for everybody who wants – or needs – a better deal on their home and some extra cash.
Some homeowners could face surprising hurdles, even if they’re not underwater and are current on payments.
“Everybody who is really hurting – and everybody who needs the help – can’t take advantage of the rates,” said Kip Kirkpatrick, CEO of Shore Mortgage Services in Birmingham, Mich.
What’s your credit score? How solid is your income? Got a lot of debt?
To refinance, the borrower needs a predictable level of recurring income – so such things as pension income would count, as would Social Security, your regular paychecks, alimony if expected to last three years or more, and interest on investments.
“You will need to provide a full accounting of your income,” said Bob Walters, chief economist for Quicken Loans in Detroit.
Lenders are going to look at how much money you owe on the mortgage and other loans relative to what you’re making.
“A reduction in income can lead to a higher ratio of debt payments to monthly income,” said Greg McBride, senior analyst for Bankrate.com. “A high debt-to-income ratio makes lenders nervous. The borrower is just one unplanned expense away from problems.”
As a general rule, it becomes more difficult – but not impossible – to qualify for a mortgage or refinance when a person’s total debt – to income ratio exceeds 40 percent to 45 percent, Walters said.
Your credit score counts. Lenders generally want a FICO of 680 or higher to qualify for the best rates in a conventional mortgage. A FICO of 620 tends to be the cutoff that often defines who can, and who can’t, get a mortgage.
Walters noted that there are exceptions to the 620 cutoff, especially when utilizing Federal Housing Administration programs with some lenders.
Credit scores also could have more wiggle room under the new federal Home Affordable Refinance Program. Gerri Detweiler, personal finance expert for Credit.com, said consumers who are in the process of a refinancing don’t want to go out and borrow money to get new furniture, buy a car or even get holiday gifts. Lenders are likely to look at your credit even the day before or the day of closing on that new mortgage, Detweiler said.
“If you’ve done something stupid with your credit, you could lose the loan,” she said.
So what if the house you bought for $280,000 and mortgaged for $260,000 is now worth $150,000?
Right now, you can’t do a thing with it.
For a conventional refinancing, the lender wants at most an 80 percent loan-to-value ratio. So if your home is worth $100,000 and you owe $70,000, you could qualify.
The new HARP 2.0 plan is going to address the underwater mortgage issue further.
“Anybody who thinks they’re underwater, I would say just hold off until the new program comes out,” said Brian Seibert, president of Watson Group Financial, a mortgage banker in Waterford, Mich.
The old HARP program had a maximum 125 percent loan-to-value ratio. But that cap is removed under the new plan.
“It’s easier to refinance through HARP than a conventional refinance,” Conley said.
But remember to stay current with mortgage payments.
Under HARP 2.0, the borrower would have to be current with the mortgage payment for the past six months and have no more than one late payment in the past 12. But Conley and others recommend that even if you were late in the past, you can try to be current now if you want to try to qualify for HARP 2.0.
“Definitely don’t skip the mortgage payment so you can go Christmas shopping,” Detweiler said.
Though the old HARP promised far more than it delivered – fewer than 900,000 refinancings and just 72,000 of them underwater – experts say consumers should avoid being discouraged. The revised program, which will run through 2013, could be an improvement.
The program would lower payments but would not reduce principal, so borrowers would still hold mortgages for more than their homes are worth. But they could avoid foreclosure.
Consumers who want to refinance should prepare paperwork, keep up payments, consider the new option and avoid the desire to give up.
“You feel the frustration that people have,” McBride said, “but sitting back and doing nothing is not going to solve the problem.”
Copyright © 2011 the Detroit Free Press, Susan Tompor, personal finance columnist for the Detroit Free Press. Distributed by McClatchy-Tribune News Service.
A monthly index that tracks pending sales of U.S. resale homes rose in September compared to a year ago, while falling on a month-to-month basis, the National Association of Realtors reported today.
Also today, NAR released its latest forecast report for 2011 and 2012, revising up an earlier prediction for U.S. real gross domestic product growth in the wake of third-quarter GDP data released today.
Third-quarter data showed a 2.5 percent rise in GDP, compared with 1.3 percent in the second quarter. NAR expects U.S. GDP growth of 1.8 percent for the full year in 2011, with 2.3 percent GDP growth in 2012. A previous NAR forecast, released last month, anticipated U.S. GDP growth of 1 percent this year and 1.3 percent in 2012. Actual U.S. GDP rose 3 percent in 2010 and declined 3.5 percent in 2009.
NAR’s Pending Home Sales Index, which measures real estate sales contracts signed but not yet closed, increased 6.4 percent year over year, to 84.5, in September. On a monthly basis, the index declined 4.6 percent. The index typically represents about 20 percent of all existing-home transactions. An index score of 100 is equal to the average level of sales contract activity in 2001, which was the first year examined by the trade group.
The index rose on an annual basis in all four U.S. regions. The Midwest saw the greatest increase, up 12.3 percent to 71.5. The region also saw the greatest month-to-month index decline, down 6.2 percent.
In the West, the index jumped 5.6 percent on a year-over-year basis in September, to 105.8 — the highest index value of any region. The region also saw the smallest monthly index drop, down 2.1 percent.
In the South, the index rose 5 percent year over year, to 91.6. On a month-to-month basis, the index slipped 5.5 percent in the region.
The Northeast saw a 4 percent index increase compared to a year ago, to 60.6, and a monthly decline of 4.7 percent.
In its latest economic forecast, NAR projects 4.955 million sales of resale homes this year (up 1 percent compared to 2010), and 5.169 million existing-home sales in 2012 (up another 4.3 percent), with the existing-home median price falling 4 percent this year, to $165,900, and rising 2.6 percent in 2012.
Sales of new, single-family homes, meanwhile, are forecast to fall 4.7 percent this year, to 307,000, and to rise 21.3 percent next year, to 372,000. The median price of a new home is projected to rise 1.8 percent this year, to $225,000, and jump 3.5 percent in 2012.
The interest rate for a 30-year fixed-rate mortgage is not expected to change much. The rate was 4.7 percent in 2010, and NAR forecasts a rate of 4.5 percent for the full year in 2011, and 4.7 percent in 2012.
NAR forecasts the unemployment rate to average 9 percent in 2011, and to improve to 8.7 percent in 2012; last year’s unemployment rate was 9.6 percent.
Here is a recent question that keeps coming up to one of our savvy local lenders and his response:
Client : “Do you think that stated income loans will ever make a comeback?”
Scott the lender: “The existence of stated income programs as well as other “exotic” products was a key contributor to the real estate boom. These products were also the key contributor to the fiscal crisis and economic pain we have felt. There is no doubt that the credit pendulum has moved too far in the other direction, but I do understand why it has happened. Right now, a home loan is not a safe investment for a purchaser. It will not become a safe investment until real estate stabilizes. When real estate does stabilize, the loans which are secured by real estate will be more stable and the pendulum will start to swing back. But not to where it was. You will not see “no-money down, low credit score, stated loans” in my opinion. If we see stated, and that is a BIG IF, it is likely to be for those who have a low LTV, a great score and are willing to pay a high rate premium as these loans may have to be kept in portfolios and will be subject to regulation under the Dodd Frank Act. For example, ability to repay may mean that they have cash in reserve at least equal to the loan size. The real estate markets will recover. The pendulum will swing back. But how far, will remain to be seen.”
I think he is right on the money.
A small home packs plenty of perks, and generally means a lower asking price. But entry price is only one factor—they’re easier on the pocketbook in a host of ways.
1. Lower property taxes. Your small home will be charged at a lower tax rate than its larger neighbors because the assessed value generally is lower.
2. Lower property insurance. The smaller the house, generally the lower the insurance cost, although it also matters where you live and how your small house is constructed. A brick house in wildfire-prone southern California is likely to cost less to insure than a similar-size house with wood siding.
3. You’ll save on heating and cooling. That’s regardless of how energy efficient the house is. In fact, one study indicates that a poorly insulated, 1,500 sq. ft. house is at least $200 cheaper per year to heat and cool than a well-insulated house twice that size. The U.S. Energy Information Administration says homes of 2,000 sq. ft. to 2,500 sq. ft. use an average 102.3 million BTUs of fuel yearly—13% less than homes that are 1,000 square feet larger.
4. Save on major replacements. When you need to replace a major house component or system, you’ll be glad you’re living in a smaller home. For example: According to the Cost vs. Value Report from Remodeling Magazine, the national average for vinyl replacement siding is about $9 per sq. ft.
For a modest-size house (1,500 sq. ft. of living space) with 1,740 sq. ft. of exterior wall space, that’s $15,660. For a 2,500-sq.-ft. house, you’ll pay up to $10,000 more!
5. Easier maintenance. You’ll spend less time cutting those smaller lawns, cleaning gutters, washing windows, and the umpteen other chores that home ownership involves. Figure 16 windows and sliding glass doors on a home of 2,000 square feet or less would take about 10 hours to clean, inside and out, twice a year. Double the house size, and that’s roughly 20 hours spent with a squeegee and rag.
Today’s experts spout off the latest statistics about long-term wealth, home values, and interest rates, yet there’s a much more sentimental side to homeownership. In fact, many home buyers are drawn to homeownership for these warm and fuzzy reasons.
Owning a home allows you to put down roots, both figuratively and literally. On one hand you become part of a neighborhood and community. When you rent, neighbors come and go as quickly as leases renew. Homeowners, however, tend to stay put longer.
What does this mean for you? You can develop, many times, lifelong relationships. This also means your home will see you through many of life’s important milestones.
It makes sense. Many people enter the realm of homeownership as young couples looking to build a nest. They plan on starting their own family and need room to expand and grow. These family homes will see many firsts and will be the container of countless memories. Additionally, homeownership gives families more room to entertain and this means extended family will also share in building memories.
It’s not just young families, though, that seek homeownership. Families with teenagers seek larger homes to room their growing brood. Retiring adults may wish to start a new phase and new memories, seeking out warmer climates or smaller, more manageable homes.
These little moments are what life is all about. Memories from Christmas mornings and summer vacations will fill minds for years to come.
On the other hand you literally can put down roots by planting trees and shrubs! Renters are rarely afforded the luxury of gardening. In fact, digging up the landlord’s yard is frowned upon. As a homeowner you are able to create your own green oasis, including trees that will mature alongside your children and gardens that will feed your hungry pack.
There is a certain pride that comes with homeownership. This little piece of property and land is yours. There’s no one that can evict you or take it away. This security allows people to form deep attachments to both the land and home.
This pride of ownership spurs many owners to make improvements and additions, both to keep the home in working order and to make it more comfortable and usable, which in turns improves neighborhood values and overall curb appeal.
Why do people buy? They may be initially motivated by changes in circumstance, such as a new job or a new family, but they buy based on emotional responses. People want a house that can become their home, where they’ll fill it with good times and memories. Be sure to remember this sentimental side of homeownership the next time you read about stocks, bonds, and housing woes.
by Carla Hill
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