Seth Jacobs – Maine Mortgage Banker / Broker

For the past few years, homes have been the most affordable on record. Low rates and low prices make a wonderful combination. However, this wonder combination may soon be coming to an end. Why do we say this? For one, new home sales are the lowest they have been since the government started keeping records in 1963. While that sounds like bad news, the inventory of new homes for sale is not going up. This inventory is actually one-third of what it was just five years ago. This commentary just appeared in Fortune: “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Mike Castleman, CEO of Metrostudy. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses.” Bottom line, we are not building fast enough to accommodate future demand. Even the ominous shadow inventory which has hung over the market is now shrinking. There were 2.0 million units in various stages of “pre-foreclosure” one year ago and 1.8 million units today, according to CoreLogic. This may not seem a huge drop, however, it is the first move downward in several years.

What makes us think that the demand will arise to continue to shrink the shadow inventory? The population of America is rising. We had shrinkage of household formulation during the recession and this masked the continuing rise in population. Tight credit conditions also turned many potential homeowners into renters, though many are renting houses. However, the news that the economy has now produced 400,000 jobs in the past two months is the continuance of a reversal of this trend. As America goes back to work, household formulation will rise again and there will be significant latent demand uncovered. We understand that two months of data does not guarantee the whole trend reverses itself. We lost about eight million jobs during the recession and the workforce grows by 150,000 monthly. So we have a long way to go, but the trend is moving in the right direction. The key is moving from a vicious to a virtuous cycle. More jobs create demand. Demand creates more jobs. And all this will help loosen credit conditions as a stronger economy will help convince banks to have faith in the average American again. You may be hearing the “bad news” regarding home prices right now–but this is a story that may be changing faster than many analysts have envisioned. Even the Federal Reserve Board is taking notice as a member stated this week that the Fed may be raising rates by the end of this year.

More Americans signed contracts to buy homes in February, but sales were uneven across the country and not enough to signal a rebound in the housing market. Read more…

Is this the last opportunity to purchase or refinance at bargain home prices and rates which are at record lows?

For the past several months, rates have been rising from the historically low levels they reached during the second half of last year. These rates presented a great opportunity for homeowners to refinance their home loan. It was even a better opportunity for those who were interested in purchasing their first home, an investment property or trade up. With bargains available, purchasing made so much sense for those who see real estate as a long-term investment and more importantly a better life for their family.

Rising rates were not bad news for the state of our economy. The rates were rising because the economy is recovering and that is very good news. Evidence of a recovery is all around us. Just last week, CNN indicated that rents are about to rise precipitously and one must ask whether the recovery of the home purchase market will be next….

“Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years. “The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.” By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode. Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years…”

World events, especially the tragedy in Japan, have caused a short-term drop in home loan rates just as the economy is heating up. This means that you now can purchase or refinance a home at the lowest rates in months. According to the Freddie Mac Weekly Survey, rates have dropped over 0.25% in the past several weeks. Rates on 15-year fixed home loans are the lowest they have been since December. This lower rate equates to an approximately $500 in annual savings in interest on a $200,000 mortgage.

How long will rates stay low because of this crisis? No one can tell. But if you missed out on refinancing or purchasing last year, this could be your opportunity. Today, those who hesitate may be missing a very historic opportunity. Home affordability is the lowest it has been in our generation. Those who have a lot of money have been picking up bargains for the past year. Why? Those who are successful stay ahead of the trends. These lower rates mean that everyone can take advantage of this occasion to own the home of their dreams or reduce their payment on the home they already own. With gas prices up, wouldn’t the savings help?

Contact me quickly as we expect to be plenty busy this week with those who recognize the significance of the timing.

-Seth

MARKET WRAP: The announcement from the Treasury that it will begin selling $10B in Mortgage Backed Securities each month starting this month sent MBS prices lower today. The total amount the Treasury owns is $142B. The news sent MBS and Treasuries considerably lower but they did manage to pare some of those losses by the close of trading. The 4% coupon fell 34bp to end the session at 98.97, despite a weak read on Existing Home sales. A big M&A deal and a somewhat stabilization of Japan’s nuclear reactor problems helped to boost Stock prices today and as money came out of the Bond markets. AT&T announced it will purchase T-Mobile in a deal worth $39B. The Dow surged 178.01 to 12,036.53, the Nasdaq rose 48.42 to 2,692.09 while the S&P 500 gained 19.18 to 1,298. Oil prices rose as the US and western allies launched an air attack on Libya in an effort to oust Gadhafi settling at $102.33/barrel up $1.26. There are no major economic reports due for release tomorrow.

Buying a vacation property or second home is something special you do for yourself and your loved ones-a way to share the good things in life. Now, to help you enjoy that experience even sooner, Reliant Mortgage Company has Vacation Home Loans available for Seasonal Maine Properties!

Seasonal Properties
• We will permit the financing of a “seasonal” property, not suitable for year round occupancy
• Second Home occupancy only
• The property must be located in an area where second homes are common, and are not commonly suitable for year round occupancy
• The appraiser must certify that the inability to use the subject property year round is not detrimental to marketability
• At least one sales comparable should be a seasonal property, not suitable for year round occupancy
• SFC “922” is required for loan delivery
• Found on page 13 of the Freddie Underwriting Guidelines dated 8-10-10

Same Freddie guidelines as traditional second homes but:

1. No heating system is required for the home.
2. No traditional well is required if there is an alternative water source that is common to similar homes….example is pipe to a lake.
3. No traditional septic system. Holding tanks or similar are acceptable if common.
4. Foundations which are piles or pillar and posts are acceptable.
5. The key is getting comps with similar features to prove that the property is not unique and is marketable.
6. Island properties are acceptable in very limited cases. They must have full time police, fire and medical services available.

Competition for this product is limited. Contact me today to be pre – approved for a Seasonal Second Home Mortgage.

Oftentimes borrowers don’t have any credit card debt or open lines of credit and this can hurt their scores. For these types of clients it’s recommended they open a secured credit card with a min balance of $300-$500. Problem is where can they get one of these? A simple and easy place for borrowers that need help badly is at capital one.

Here is another link with a list of cards for people with bad-fair credit if the capital one doesn’t work- just make sure it says they report every month to all 3 bureaus.

To apply for a First Time Home loan contact me today!

Seth

The more you use the Internet, the more you appreciate its convenience and access to services like banking and shopping. Unfortunately, the Internet also gets exploited for frauds that can sometimes look surprisingly genuine. Here are some of the tell tale signs of typical frauds, and some safety checks you can use to avoid them.

How it works: The most common fraud arrives by email, claiming to be from your bank, credit card company or some other service you use. It usually asks you to send your account details, and sometimes your PIN, either by return email or through a website. Various tricks are used to lower your guard, such as ‘security and maintenance upgrades’, ‘investigation of irregularities’ or ‘bills or charges due’.

Fraudsters can scan the Internet for email addresses or generate them at random. They don’t need an online service provider’s mailing lists. They may send just a few dozen emails or thousands. Even if only a few unsuspecting people bite, it can be worth the effort. These emails can look genuine by using the names of real people, logos and branding, links to pages from the real website, or “official looking fine print”.

Safety checks to avoid fraud

• Only use your PIN through the official login site offered by your provider.

• Check official websites for announcements.

• Use only secure sites for keying in financial or personal information.

• Take common sense privacy precautions, such as avoiding financial transactions at “internet cafés” and libraries.

• Act quickly if you think you’ve been conned. If you get a suspicious email tell the service provider. If you have sent any details through an email or website you’re a bit worried about, contact your bank, credit card company or service provider right away.

Please do not hesitate to contact me if I might be of any assistance to you at this time!

In case you are scheduling any travel time in the near future, here are some safety tips on how to make your house look “lived in” while you are away.

1. If you can afford it, hire a house sitter to live in your house while you are away. As an alternative, ask a relative or friend to live in your house, even if it is just for a few days, or a couple of overnight stays. If you can’t arrange to have someone live in your house, arrange for someone to check on your house at least every second day. They should take in ad mail and postal mail, pick up any litter in the yard, and put out some garbage and/or recycling bins, even if they have to bring some of their garbage over to your place to put in the bins!
2. Install timers for house lights. Set the timers to mimic normal living patterns.
3. Close blinds/drapes before leaving. Ask whoever is checking your house to change the blinds’ positions every few days.
4. If your car is visible from the street, arrange to have it moved and/or driven every few days.
5. Arrange to have your lawn cut or driveway shoveled, depending on the season.

I hope you found these ideas to be helpful, and please do not hesitate to contact me at 888-775-4200 if I might be of any assistance to you at this time!

Mortgage interest is generally fully tax deductible. For example, being in the 28% federal tax bracket has the effect of lowering your borrowing costs by almost a third. In the early years of a loan, much of the monthly payment is interest, so these savings can really add up. Tax savings are real dollars, so don’t forget to take this benefit into consideration as you make decisions regarding your mortgage financing.

Mortgage bond prices are positive this morning helping to bounce back a bit from the steep selloff yesterday.

Traders will position themselves ahead of the Fed results tomorrow afternoon. Many believe the Fed will announce continued quantitative easing. Quantitative easing is tool used by the Fed to increase the supply of money by increasing the excess reserves of the banking system. The Fed basically creates money out of nothing, crediting it’s own accounts, then uses those funds to purchase financial assets usually including government bonds and mortgage backeds securities from financial institutions.

The rest of the week looks to be interesting. We have a Fed meeting, productivity data, and the employment report all in a single week. This is not your typical week with the significant data and elections all hitting us at once. There is more potential for wild market swings, as was evident this afternoon with the terrible slide in prices pushing rates higher.