Surprise and delight your neighbors with a secret gift drop
1. Make two treat bags or “boo baskets” filled with fun items for your neighbors
2. Secretly deliver them to two neighbors, along with a note that says “You’ve been BOO-ed!” (Download “boo” signs & instructions here.)
U.S. home prices have declined across the nation in the past year—albeit at varying levels. Latest national price declines range from as little as 4.5 percent (Dallas, Texas) on a year-over-year basis in February to as great as 35.2 percent (Phoenix, AZ) according to S&P’s Case-Shiller Home Price Indices.
It is the anticipation by many prospective buyers for further home price erosion that keeps them on the sidelines and from participating in homeownership despite the lowest interest rates since Freddie Mac commenced the statistical series in 1971.
While further price declines may be realized, the likelihood of rising interest rates makes purchasing now a better option than waiting for further potential value declines. Simply stated, there is a greater possibility of interest rate increases than potential value declines. Even with the price decline, the interest rate increase may result in the buyer no longer being able to qualify for a loan on a home they wish to purchase for which they qualify today. Despite facing a potential in declining home values, now may be a better time to buy.
To make the comparison simple, let’s assume a loan amount today of $100,000 with a 30-year fixed-rate residential loan at 5 percent. Nationwide at the time of this writing, the average 30-year rate was 4.85 percent per Freddie Mac.
A buyer today at 5 percent interest borrowing $100,000 has a monthly principle and interest payment of $536.82. If prices decline 5 percent (and the loan amount does also) and interest rates rise just ½ of 1 percent, then the monthly payment remains the same ($539.40).
So if rates go up just 1 percent to 6 percent per year, then prices must drop at least 10 percent for that same buyer to qualify for the same monthly payment. A 1.5 percent increase in rates to 6.5 percent requires a 15 percent price decline, and a 2 percent increase necessitates a 20 percent price decline to qualify.
(Note: This 1 percent interest rate change to a 10 percent price change is only true when interest rates are 5 percent as they are today.)
Why will rates increase in the future more than prices decline? Looking at the S&P’s Case-Shiller Home Price Indices, the aggregate 20-city prices have already declined 29.1 percent since peaking in July 2006. For many cities, much of the price decline has already taken place. And Austin has seen very little decline in the median home price! And why will rates increase? Massive deficit spending has a high potential to drive up inflation and hence interest rates. Additionally, since these are the lowest rates since 1971, it’s not hard to project the likelihood of rate increases.
So NOW may be the best time ever to buy a home and take advantage of truly historic low interest rates!
Information provided by Ted C. Jones, PhD, Senior Vice President—Chief Economist, Stewart Title Guaranty Company.
via the National Association of Realtors:
“Here’s our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury’s package holistically, in compliment with each other – mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.
So here’s what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.
In addition, we preserved what we have – which some tend to forget is always on the table when these negotiations start up again – mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).
We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be. It’s pretty hard to complain when they give you what you ask for and you lose something you never had.
While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.”
What to expect in 2009:
Resulting in:
. . . The short answer – more of the same – at least for 3 quarters. Unfortunately, and we can no longer ignore it – we are in the throws of a full blown recession… it took us some time to get here, and it will take some time to get out. We should expect to see more local and national layoffs in the 5-15% range, more distressed home sales, and more foreclosures at every price band (no one is immune to this beasty of an economic downturn). Our lack of consumer confidence permeates every market.
The good news.
Remember, there is always a silver lining or a ray of hope – all you have to do is keep your head (and attitude) up! The good news is Central Texas and Austin specifically is poised to weather this downturn potentially better than any other medium-to-large city in the nation!
Our local economy is stable and still growing, even if it is at half the rate we projected last year. Housing starts (new construction) will be reduced approximately 20-25% to match the lowered demand figure and existing home prices will likely see a small price adjustment (down 3-6%) over the next 9 months.
The sun will come out tomorrow!
By 4Q we should have shaken off these blues and start to see a rebound in home prices and consumer confidence. The bottom line? 2009 will be down when compared to 2008 in terms of # of closed homes, and home price appreciation (flat to down).
Opportunity knocks for “Buyers”
While I don’t recommend ‘timing’ a market – If you are old enough to remember the post Internet-Bust effect on housing in Austin, then you’ll have to agree we are probably looking at what could be the VERY BEST MARKET opportunity for home buyers. If you have a W2, at least 5% cash, and the better credit scores to qualify this summer may be the best time to invest in a new home, investment property or second home. That buying opportunity should last approximately 6 months until the rest of the economy rebounds.
The best time to invest is when the market is down. If you are a first time home buyer or have your ‘financial house’ in order – now is the time to act with resolve to re-build your wealth through residential real estate.
This simple rule of investing is rarely mastered because it runs counter to our emotions. As we move through the current cycle of the housing market we should listen carefully to the words of the wealthiest person in the world, Warren Buffett, who said “Be fearful when others are greedy. Be greedy when others are fearful.”
There is no doubt many people are fearful because the worldwide economy and housing markets are hurting. Nevertheless, the smart investor understands that NOW is the time to invest in assets that have lost value over the past 12 months.
Want to be a hero? Talk to your friends, co-workers, cousins, nieces and nephews that are currently renting an apartment or sharing a room. Now is the BEST time for them to take the first step toward financial security by purchasing a home of their own. As an added bonus, many home buyers may be able to take advantage of the First-Time Homebuyer Tax Credit offered by the federal government.
Without a doubt, this could be an opportunity of a lifetime. According to mortgage specialist Carson Vaughn, this government program authorizes a tax credit of 10% of the purchase price on a home (up to a maximum of $7,500) for qualified first-time home buyers. The home must be purchased on or after April 9, 2008 and before July 1, 2009. The full tax credit is available for a single person with adjusted gross income (AGI) of less than $75,000 and is phased out up to $95,000. A married couple is eligible for the tax credit with adjusted gross income (AGI) of less than $150,000 and phased out up to $170,000. Anyone who has not owned a home in the last 3 years is considered a first-time homebuyer. The tax credit of $7,500 has to be paid back to the government over the next 15 years. It is essentially a tax free loan.
To find out how to capitalize on the current market don’t hesitate to contact us. We’d love to answer your questions and help you take advantage of the current opportunities.
You can find us at: 9600 Escarpment Blvd H930 | 288.8088 | partners@AUSTINREPS.com
Or, for more information on the first-time homebuyers tax credit or other financial concerns, contact Carson Vaughn of Advantage Mortgage Network at carson@amnetloans.com | 512.439.7555
A quick energy saving tip: Thaw frozen foods in the refrigerator rather than on a countertop. Not only is it safer, but frozen items will help cool the refrigerator as they defrost and help reduce its running time.
For more energy saving tips and helpful phone numbers, click here.
Austin Real Estate Partners’ staff includes two Texas notaries. Stop by our offices M-F from 10AM-5PM to get your important documents notarized.
Welcome to a Golf Club that’s more than a place to play – it’s a place to belong for a lifetime or for a day!
The best way for you to learn about Grey Rock Golf Club is to experience it for yourself, so we invite all our Austin Real Estate Partners Friends and Neighbors to visit the club during September and enjoy $10 off the resident rate.
Call 512.288.4297or visit www.greyrockgolfclub.com to book your tee time. (Be sure to mention Austin Real Estate Partners.)
Help a child to SOAR to new heights in reading by volunteering with the Clayton Elementary School SOAR program. Volunteers devote 2 half hours per week to help students prepare for the TAKS test & increase their reading level.
No prior experience necessary.
You do not have to be a teacher or a former educator to work with the SOAR Reading Team program.
Just 30 minutes per week.
You will help make a lasting difference in a child’s life in only thirty minutes.
Increase students’ confidence and self-eteem.
Immediate and frequent feedback from their Reading Coach keeps the students reading and reaching for higher goals! This program supports the teachers in 2nd through 4th grades.
Sign up here or contact Melinda for more information.
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