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The Jana Caudill Team

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Displaying blog entries 161-170 of 180

Rates Creep Up

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A recent survey and a rate increase could mean more competition for homes

Recent indication is that first time home buyers are getting tired of sitting on the sidelines. According to a recent online poll taken by the National Apartment Association, 17 percent of renters plan to make the jump to home ownership in the next year; 41 percent of the 2,041 respondents planned to be home owners within two years. Only 31 percent planned to still be paying rent five years from now.

Another factor that could very soon contribute to an increase in home buying could be rising mortgage costs. Fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October. After months of aggressively dropping interest rates, many lenders are worried that the Fed will be forced to raise rates back up. As interest rates rise, so do mortgage rates. According to a press release on freddiemac.com, Frank Nothaft, Freddie Mac vice president and chief economist said that, "Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman [Ben] Bernanke and Vice Chair [Donald] Kohn, expressed concern over a threat of inflation." We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, "Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases ... were also up last week."

“What do you think about rates … should I lock in now or wait to see if they fall further?” Think I’ve been asked that a time or two over the past 18 years? You better believe it.  It’s a good question—one that goes through every single buyer’s head at some stage. 

A quoted interest rate is no good unless you’ve confirmed, in writing, that your loan is indeed “locked,” or guaranteed for a designated period of time. You need to be proactive with your locked rate as well and don’t assume that your loan officer already locked you in. In fact, your loan officer shouldn’t lock in your rate without your specific instructions. If it was locked in and rates went down you’d be pretty mad, wouldn’t you?

While neither real estate agents nor loan officers are in the business of predicting the future, it’s still possible to make a prudent choice in the face of uncertainty. Would you rather lock in your rate and watch rates fall or not lock in your rate and see rates go up?

If you decided to lock and rates go down, you’ve secured the market rate that you were happy with. But if rates went up and you didn’t lock, you’d be paying for that mistake for the rest of the loan.

There is an even worse possible scenario: After not locking in your rate, rates shoot up and you no longer qualify for the loan. So it’s important to ask yourself:  “Which way would I rather be wrong?”

If you are comfortable with the rate you’ve been quoted, talk to your real estate agent about the possible consequences of waiting to lock it in.

Written by David Reed, author of Mortgage 101 and Mortgage Confidential.

Taming the Jumbo Mortgage

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Everyone knows the jumbo loan market has been out of whack for nearly 18 months. “jumbo” loans, those amounting to more than $417,000, took it on the chin when mortgage investors stopped buying subprime and alternative loans. For that reason, jumbo rates can be as much as 1.50 percent higher than conforming rates. Historically, jumbo rates were only about a quarter of a percent higher than a conforming rate, but this new spread has kept many out of the housing market: especially those that I call, “just jumbo.”

So what exactly is “just jumbo?” It’s a loan amount that just exceeds the conforming limit of $417,000 and typically reflects a sales price in the $500,000­­–$600,000 range. Many local markets offer homes in this price category, but the marked difference in rate from conforming to jumbo is slowing down sales. What is the difference in payment between a conforming loan at 6 percent and a jumbo loan at 7.50 percent? On a $500,000 jumbo loan, mortgage payments jump from $2,997 to $3,496 a month. That’s almost $500 more!

Fortunately, with some changes in strategy, we can put a major dent in that increase in payment by buying a property with two loans — a first mortgage and a second. With the first mortgage at or below the conforming limit, the second mortgage then eliminates the need for private mortgage insurance, or PMI. And still, with only 10 percent down on a $500,000 sale.

For example, let’s say we have a sales price of $500,000 and you put 10 percent down. With a jumbo loan at 7.50 percent, the monthly payment on a 30-year note is $3,146 plus a PMI payment of about $188, for a total of $3,334. Using a 40 percent debt ratio means that you need to make about $9,700 per month to qualify.

Now, let’s make the first mortgage for $400,000 at 6 percent (conforming) with a second mortgage at 7 percent on a $50,000, 30-year note. The mortgage payments would be $2,398 and $332 respectively, for a combined total of $2,730. That’s a savings of over $600 per month, and now the income to qualify is almost $1,500 less at $8,200 per month! Do you think that has an impact on affordabilty? I do.

Here's another idea: sellers can carry back that second note to provide some additional income, providing an even better second rate for the buyer!

Written by David Reed, author of Mortgage 101 and Mortgage Confidential.

Every year, RISMedia and REAL Trends release two of the real estate’s most comprehensive surveys: the RISMedia Power Broker Report and the REAL Trends 500. Both surveys rank the largest residential real estate brokerages in the U.S. based on both transaction sides and sales-dollar volume, and these reports are frequently used as referral tools and are referenced by thousands. This year, Keller Williams stormed onto the lists with a very strong showing.

KW offices dominated the Power Broker Report – with more offices listed in their top 700 list than any other franchise brand.  The survey also named Keller Williams Realty as the industry leader in terms of number of agent teams.  And, 102 KW offices were listed in the Companies to Watch section – making up 55% of the total list!

As for the Real Trends 500, which lists the top 500 brokerages in the nation, Keller Williams Realty had the second highest amount of offices listed both transaction sides and sales volume, among the top franchise brands.

Even further proof that it's always a great day at Keller Williams!

To find out more about these lists, visit RISMedia’s Website or REAL Trends’ site.

Johnny Depp Makes Movie in Crown Point!

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It's not every day that a major celebrity like Johnny Depp comes to our little town of Crown Point. Mr. Depp was here to portray Hoosier legend John Dillinger in the upcoming Michael Mann film, Public Enemies. For three days, they were filming the infamous breakout scene where Dillinger made his escape from the Lake County jail. Our office, which was not far from the film's shooting, was in an uproar. It was commonly stated that the film was the biggest thing to happen to Crown Point since Dillinger had made his escape seventy four years ago.

Traffic was heavy and many streets were blocked off while the film crew transformed the city to what it looked like back in 1934. People stood outside in the cold for hours in hopes to get a glimpse of the superstar. Since Crown Point Schools were on spring break, many children were present with their parents. Johnny Depp did make time to pose for pictures and shake hands between filming. Public Enemies, which also stars Christian Bale, is rumored to be released in 2009.     

For more information regarding John Dillinger, check out the John Dillinger Museum located in Hammond at the Indiana Welcome Center.

Report: Expect Rent Jump in 2007

by Jana Caudill

Courtesy: USA Today

Renters be warned: Landlords are expected to raise apartment rents for a third-straight year in 2007, forcing tenants to turn over a growing chunk of their pay and making it harder to save for a home, a report to be issued by Marcus & Millichap finds.

With the projected rise of 5% this year, rents would be 14% higher than at the end of 2004, the report says. Over the same period, paychecks are expected to rise 4%, adjusted for inflation.

The widening gap is likely to worsen the crisis for workforce housing, especially in coastal cities, says Hessam Nadji, a managing director at Marcus & Millichap, a real estate investment brokerage. "This is a national trend. We're seeing rents rise in the majority of markets, and we see this continuing for at least three years."

From 2000 to 2004, most landlords couldn't raise rents because so many tenants were leaving to buy houses or condos. To feed that buying frenzy, about 300,000 apartments were converted to condos for sale in the past three years. Now, even with 92,000 new rental units this year, the stock is still too little to meet rising demand.

"It's horrible. I'm going to pull my hair out," says Veronica Gonzales, 25, CEO of an event planning firm in Manhattan, where rents are expected to jump more than 7% this year, the sharpest increase in the USA. Gonzales has been hunting for six months for a place in the city for $2,000 a month. Unfortunately for Gonzales and other apartment dwellers, rents are rising because the payment gap between renting and owning remains wide. Even with this year's increase, the national median rent will be $943 a month, only 60% of the median mortgage payment of $1,566.

Renters will get a bit of a break in places such as Miami, Las Vegas and San Diego, where investors bought thousands of condos, hoping to flip them for a quick profit. Since the market faltered in late 2005, many of those condos have been empty, and investors are seeking tenants to help pay the mortgage.

Mohamed Amar bought two Las Vegas condos in 2005 that he's trying to rent. "I thought it was a good investment," says Amar. "But when I tried to put it on the market, the developer started cutting the price, and they killed everybody." Yet, even in these cities, the report says, rents will rise this year.

Mortgage Rates Stay Low to Start 2007

by Jana Caudill

From www.nwitimes.com

Rates on 30-year mortgages were unchanged in the first week of the new year after posting three consecutive increases to close out 2006.

Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.18 percent this week, the same as last week.

Analysts said the markets in recent days have gotten some confusing messages about how serious the current economic slowdown will be.

"Currently, the market is waiting for a clearer signal on the direction in which the economy is headed," said Frank Nothaft, Freddie Mac's chief economist.

For 2006, 30-year mortgages peaked at 6.80 percent in late July with rates trending lower for most of the rest of the year. That decline was welcomed by the embattled housing industry, which is in the grips of a severe downturn after five boom years.

The Freddie Mac survey showed that other types of mortgage rates were mixed this week.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, edged up slightly to 5.94 percent, compared to 5.93 percent last week.

Five-year adjustable rate mortgages rose to 6.02 percent, up from 5.98 percent, but one-year adjustable rate mortgages fell to 5.42 percent, down from 5.47 percent last week.

The mortgage rates do not include add-on fees known as points. Thirty-year, 15-year and five-year mortgages each carried a nationwide average fee of 0.4 point. One-year ARMs carried a fee of 0.6 point.

A year ago, rates on 30-year mortgages stood at 6.21 percent while 15-year mortgages were at 5.76 percent, five-year ARMs averaged 5.78 percent and one-year ARMs were at 5.16 percent.

Report: NWI Home Values to Increase in 2007

by Jana Caudill

From www.post-trib.com

What housing bubble?

While much of the nation suffers from continued falling housing prices, Lake County will see 3.2 percent growth over past year in residential real estate value in 2007, according to a report by Fortune magazine. This places Lake fifth in the Midwest and 30th in the nation in a ranking of 100 real estate markets conducted by the magazine.

Porter County was not included in the survey, but realtors said housing values there mirror its sister county: rising slowly and steadily.

And realtors here say the 3.2 percent is an average. Houses in some areas, such as St. John and Crown Point, could see even bigger increases in value.

In contrast, residential housing values have declined 3 percent nationally, with larger drops in fast-growing coastal and vacation areas that experienced huge housing value gains in recent years.

Northwest Indiana real estate agents are basking in the glow of the report, which was prepared by Fortune magazine, Moody's and FISERV Lending Solutions and posted on CNNMoney.com.

Leading the way in the nation in rising home values, according to the magazine report, is McAllen, Texas, with Youngstown, Ohio, the top city in the Midwest.

Lake County, listed as the Gary area in the report, ranks 30th in the nation and fifth in the Midwest. Only Youngstown, Akron and Cleveland, Ohio, and Wichita, Kan., outrank the Gary area. Lake County even outranks Indianapolis (the Midwest's No. 7 with a 3 percent rise in value) and Chicago (the Midwest's No. 11 with a 2.6 percent hike in value).

The report comes as a bit of surprise after reports of the price-bubble bursting in top real estate markets such as Miami and San Francisco. And the nation as a whole saw a 3 percent decline in prices, the first time since the Great Depression that prices declined one full year.

James Shaw, a real estate agent with Keller Williams Realty Leaders of Crown Point, said averages contain increases as well as decreases.

And many areas, such as Lake and Porter counties, could ride the wave of steady appreciation brought by being close to, but not part of, Chicago. Suburban and exurban areas did well, both nationally and locally.

Jana Caudill, owner of Keller Williams Realty Leaders, predicted some areas of Northwest Indiana will do even better than the 3.2 percent-increase forecast.

"I'm excited to see the forecasted increase over 3 percent," Caudill said. "But some areas, like St. John, Dyer, Crown Point and Schererville, should see even larger increases in value."

For example, Crown Point is booming, Shaw said.

In 2005, the average listing price was $183,681. In 2006, it was $202,383 -- a 10.2 percent increase.

And right now, the average listing price is $298,333, although Shaw said that is far from what the average for 2007 will probably be.

Shaw said Northwest Indiana is grounded in reality -- increases that won't be deflated later.

"This market is so stable and steady," said Shaw.

The Dec. 25 issue of Fortune is also its annual Investors Guide and will be on news stands until March, according to Susan Brown Williams, communications director for Fortune.

Mortgage Rates Drop Again...

by Jana Caudill

Courtesy: CNNMoney.com

Mortgage rates fell for the sixth week in a row, to nearly the lowest level of the year, as a slowing housing market helped keep rates down, a survey said Thursday.

The 30-year fixed mortgage rate fell to 6.11 percent in the week ended Dec. 7 from 6.14 percent in the prior week, according to Freddie Mac's (Charts) Primary Mortgage Market Survey.

It was the lowest the 30-year has been since the week of Jan. 19, when it averaged 6.10 percent. A year ago, the 30-year averaged 6.32 percent.

The 15-year fixed-rate mortgage averaged 5.84 percent, down from 5.87 percent last week. A year ago, it averaged 5.87 percent. This is the lowest the 15-year FRM has been since the week ending Feb. 9, when it averaged 5.83 percent

Rates for five-year adjustable-rate mortgages (ARMs) came in at 5.92 percent this week, down from 5.95 percent last week. A year ago, the five-year ARM averaged 5.78 percent. It was the lowest since February, when it averaged 5.89 percent.

One-year ARMs averaged 5.43 percent, down from 5.46 percent last week. A year ago, the one-year ARM averaged 5.16 percent. This is the lowest it has been since March, when it averaged 5.41 percent

"Continued signs of slowing in the housing market and weakness in the manufacturing sector helped keep mortgage rates down this week," said Frank Nothaft, Freddie Mac vice president and chief economist.

"Looking forward in the housing market, we think that housing is about 2/3 of the way through the correction, and should stabilize by mid-year 2007," Nothaft said.

With a slowdown in the housing market near a bottom, homebuilders such as Toll Brothers (down $1.10 to $31.91, Charts), Pulte Homes (down $0.86 to $33.94, Charts), Lennar (down $0.77 to $53.40, Charts), KB Home (down $1.26 to $52.23, Charts), and D.R. Horton (down $0.41 to $27.12, Charts) have all seen their profits fall sharply, with many lowering their forecasts.

Experts: Housing Marking in Good Shape

by Jana Caudill

Courtesy: CNNMoney.com

A top economist and market strategist at Citigroup both say they did not think the housing slowdown is going to cause the economy to plunge into a recession or the stock market to fall into a tailspin in 2007.

Speaking at a breakfast for financial reporters at the company's headquarters in New York in November, Citigroup senior economist Steven Wieting said that concerns about a recession due to softness in the housing market are overdone.

In fact, Wieting said that if the housing market had not cooled this year, that would have presented a greater risk to the economy since it most likely would have led to increased inflation and probably more interest rate hikes from the Federal Reserve.

"Without the housing downturn, the economy would be overheating and there would be more inflation and tightening pressures," he said.

Wieting indicated that perhaps too much attention is being paid to the housing market and that there would need to be more than just a real estate slowdown to cause widespread pain to the consumer. He pointed out that consumers have so far withstood weakness in housing as well as a steady rise in the price of oil and gas over the past few years.

"There is this perception of an extremely vulnerable consumer that you've heard about for every day of your career and so have I," he said, in response to one reporter's question about consumer spending. "Consumer stability is nothing new."

Tobias Levkovich, the chief U.S. equity strategist for Citigroup, added that as long as the labor market remains healthy, consumer sentiment will likely remain relatively strong as well.

"Job growth should support continued spending growth," he said.

With this in mind, Levkovich said he conservatively expects the stock market to be up in the high-single digits to low double-digits in 2007. He has a year-end 2007 target for the S&P 500 of 1,500, about 8 percent higher than current levels.

Levkovich said one of the most encouraging signs for investors is that many companies are sitting on a large amount of cash. He pointed to figures that showed cash as a percent of total market capitalization for the S&P 500 is near a 20-year high.

As such, many companies are likely to increase stock buyback programs, pay down debt and boost their dividends in order to keep shareholders happy. "There is a lot of cash at companies that can be used to stabilize stock prices," he said.

Levkovich also said that large cap stocks should outperform small caps because he thinks the pace of earnings growth is expected to moderate to about 7 percent in 2007. Larger stocks tend to perform better when earnings growth is slowing. In addition, valuations for large caps are currently more attractive than smaller companies.

As for specific sectors, Levkovich said media stocks, technology stocks and retailers should outperform the market in 2007 while real estate, basic materials and utilities should lag.

Wieting added that investors in some housing-related stocks, particularly appliance and furniture companies, may not be factoring in the lag effect of this year's housing slump. He argues that weakness in housing this year could translate to soft sales of some big-ticket items that people normally would buy for their new houses next year.

So this could be the one consumer-oriented area that does not do well in 2007, both Wieting and Levkovich said, especially since many housing-related stocks have run up recently on hopes that the worst is over for the real estate market.

For example, shares of furniture and home furnishings maker Leggett & Platt (Charts) are up 5 percent in the past three months while appliance manufacturer Whirlpool (Charts) has gained more than 9 percent. Shares of carpet maker Mohawk Industries (Charts) are up 12 percent.

Shares of retailer Bed Bath & Beyond (Charts) and tool maker Black & Decker (Charts) have each gained nearly 20 percent in the past three months and furnishings retailer Pier 1 Imports (Charts) have shot up almost 25 percent.

Levkovich and Wieting also cautioned investors to be wary of emerging markets stocks, which have been extremely hot this year. Latin American stock mutual funds have soared 34 percent this year according to fund tracking firm Morningstar,while Asia-Pacific mutual funds (excluding Japan) are up 36 percent.

Levkovich called the recent performance of emerging markets stocks "frightening" and reminiscent of the U.S. tech bubble in the late 1990s.

And Wieting argued that even though the economies of many Latin American and Asian countries are likely to remain hot, this can't go on indefinitely, which could disappoint investors with increasingly high expectations.

"Improving fundamentals in emerging markets may be perfectly sustainable but not easily repeatable," he said.

Displaying blog entries 161-170 of 180

Contact Information

Photo of The Jana Caudill Team Real Estate
The Jana Caudill Team
Redkey Realty Leaders
503 East Summit St., Suite 2
Crown Point IN 46307
219-661-1256
Fax: 219-663-5949