Buyers: Are they their OWN WORST ENEMY?

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Woo Hoo… the August Existing Home Sales report was released Wednesday, showing a decline in the number of homes sold nationwide, and a reduction in the median sales price.

LEAVE IT TO THE MEDIA:

I can’t say that I am surprised, though, the mainstream media… playing on their love for the “sensational” spun these statistics as a big negative.

Are they driving an agenda, or do they simply NOT GET IT?

Sure… the slow down in home sales wasn’t a good thing, but it wasn’t terrible, either — sales were actually up in half of the regions around the country.

And, if I can get on my soapbox for a sec… citing “median sales price” is somewhat pointless because median sales price only measures the price point at which half the homes sold for more, and half sold for less. Woopie!

What does matter [I am glad you asked] =0) The third statistic in the report is what deserves as much — maybe more — attention that the others.

According to yesterday’s press release, the national home supply is decreasing.

This is sweet news for those selling their homes… even those selling Orlando Real Estate.

In this report, the National Association of REALTORS [NAR] said that the country’s existing supply of homes for sale fell by 7 percent in August.

At the current pace of sales, that represents a 10.4-month supply, which is down .5 down from July. I don’t have my mortgage calculator handy, but I think that is 5%, is it not?

The POINT: A reduced supply of homes for sale, everything else remaining equal, home prices go up!

This is Supply and Demand in its purest form.

The one thing that is seems economists and experts can agree on, is that reducing the housing supply is one of the most important elements to a sustainable housing recovery. And let there be no doubt… we have seen several indications that this is happening, like…uh… builders not building as much.

Bottom Line:

This is refereshing news for home sellers because a reduction in housing supply tends to lead to higher prices.

(Images courtesy: The Wall Street Journal Online)

Mortgage Chili: Effective Oct. 1 – FHA Makes Homeownership More Affordable

Earlier this year — and for the first time in its history — the FHA changed its funding fees and mortgage insurance structure.

Effective October 1, 2008, it’s repealing those changes.

Partly to keep FHA home loans affordable, and partly to comply with new laws, the FHA is rolling back its up-front fees and ongoing mortgage insurance requirements and replacing them with new ones.

The new up-front FHA fees are as follows:

• 1.750% : All purchase and “standard” refinances
• 1.500% : All “streamline” refinances
• 3.000% : All FHASecure programs for delinquent mortgagors

These fees are paid as a one-time cost at closing, and are calculated by multiplying the loan size by the fee. A $200,000 FHA purchase, for example, now carries a $3,500 one-time charge.

Ongoing mortgage insurance requirements have changed, too. These changes are based on the loan type and the amount of equity in the home.

• 15-year fixed with 90% borrowed or less: 0.000% annually
• 15-year fixed with more than 90% borrowed: 0.250% annually
• 30-year fixed with 95% borrowed or less: 0.500% annually
• 30-year fixed with more than 95% borrowed: 0.550% annually

Mortgage insurance premiums are calculated by multiplying the initial loan size by the annual premium. The same $200,000 FHA purchase outlined above, using a 95% 30-year fixed mortgage, would require a monthly mortgage payment add-on of $83.33 until the loan is paid in full.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA guidelines have remained relatively loose. FHA allows 3.500 percent downpayments on purchases, for example, and allows “cash out” refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

Mortgage Chili – Is DPA… DOA? Should it be?

OMG! Now what.

First the gov’t takes away down-payment assistance and now it wants to give it back?

Honestly, I have mixed emotions about this.

One one hand, it could be the shot in the arm that the housing market needs. Right now the industry is teetering on the influx of the First-Time Home Buyers. Move up buyers can’t move until the FTHB buys their home and the Dream home buyers can’t move up until the move-up buyers buy their home.

In essence that first domino must fall… butttttttt, at what cost?

The downside of the DPA programs is that the default rate on those loans was over 300% higher… don’t fool yourself… this does effect everyone in the end and might have more to do with our current situation than may be able to be measured.

I guess, being intellectually honest, the reimmergence of DPA, if in fact it makes it through all the hoops, may be a mixed bag at best.

Sure, having the new folks enter into the marketplace is necessary, but what is the long-term cost??

My advice to those that are reading this and may personally benefit from the new DPA, please do not let some smooth-talking mortgage professional… uh person… get you in over your head.

The future rests on it, and only time will tell.