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Nowhere to go but up
By Mark Karten on December 14, 2009
As we look back at 2009, it was a pretty amazing year to be a buyer of real estate.
The prices that we thought were so low at the beginning of the year dropped another 15% by the end of summer.
Interest rates in the 5% range dropped down to 4.5% as well. It looks like the lows are behind us now.
More and more economic indicators show that we're rebounding as a nation, and real estate is seeing the effect as well. Everyone is waiting for the "bottom" - the holy grail moment to buy a home. Has the moment passed?
Housing prices are on the rise, 1.3% to be exact, in Las Vegas. Not only that, but mortgage rates are climbing, too. By Spring, we may see rates in the 5's again. When we get good news about unemployment, interest rates rise.
It just happened this week - unemployment went down and mortgage rates went from 4.71% to 4.81%, click HERE for the details. There are other factors that will impact the rates including the fact that the Federal Reserve may stop buying mortgage-back securities by the end of first quarter, 2010.
Business Week had an interesting article entitled "If You Don't Buy a House Now, You're Stupid or Broke." Subtle. The writer, Marc Roth, describes the history of interest rates and just how good we have it now. The most important point he makes is that you need to factor your interest rate, not just the price of the home, when considering the value of buying now. With home prices on the rise, it's easy to understand his reasoning. Click HERE to read the article.
When you add the changing rules by FHA which makes it harder to get a loan and more money down to get it - your window of opportunity is closing faster. Lending is just one side of the coin. Supply and demand is what determines our prices and there's still a lot of uncertainty ahead.
Our first drop in housing prices was due to the sub-prime lending meltdown, which we're still digging ourselves out of. It looks like a second wave is about to hit us by mid-2010. We are due for a record reset of option ARMs (adjustable rate mortgages), which will cause house payments to double or triple if they're not refinanced.
The Consumer Mortgage Audit Center (CMAC) is projecting a mortgage crisis in 2010 as large as the subprime. As quoted in a recent article on DSNews.com, "We've spoken to Florida attorneys who sit at the forefront of the U.S. foreclosure crisis and have learned that 53 percent expect recasting ARMs to present a mortgage crisis as large as subprime and 61 percent expect to work on more loan modifications in 2010 than they did in 2009," said Sylvia Alayon, VP of operations for CMAC "The New Year is going to hold very rude awakenings for some homeowners, but there are things you can do to analyze your situation and get help if you need it."
According to Alayon, only a few option ARMS in existence have been modified, but she believes many more homeowners will rush to modify their loans as they slip closer to negative amortization. Homeowners who act now to modify exotic mortgages may be saved from negative amortization and eventually foreclosure, Alayon said.
"Depending on each homeowner's unique financial situation, we've seen everything from lenders modifying mortgages lower to make them affordable again to Fannie Mae allowing homeowners facing foreclosure to shift from homeownership to home rental," said Alayon. "Options are out there, but you have to do some work to get to them."
So the answer to the question, "Are we at the bottom?" is still unknown. Unfortunately, by the time we know the answer, it will have passed us by.
Have a great week and if you have any specific questions I can answer for you, please don't hesitate to contact me directly!
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