HVCC – Petition to Overturn Delivered to Cuomo Today

The HVCC should take another blow today as a petition to overturn it signed by more than 120,000 individuals will be delivered to Attorney General Cuomo’s office today.  We all know the problems this bill has caused, i would just like to list a couple that i am aware of:

1. Purchase contracts expiring because the HVCC conduit not forwarding appraisal orders timely enough
2. Clients having to pay for, four and in some cases five different appraisal invoices because they are not transferable
3. Big Banks charging $750 – $1,000 as an application fee to help cover the cost of the appraisal that used to cost $350 – $450
4. Closing Costs have increased by as much as 35%, due to multiple appraisals
5. Appraiser being underpaid for the same work or more

I hope that this law will be overturned.  If you have been affected by the HVCC sign any petition you can. 

 

The following is a great article for background as to why the HVCC came into existence.  Click the lick and read on.

http://www.appraisalpress.com/news/articles/hvcc_the_cure_is_worse_than_the_disease/

Do I Qualify For The Home Buyer Credit Extension

If you haven’t heard yet, the first-time home buyer tax credit that Barack Obama put into motion has been extended until April 30, 2010. This is a welcome sign to any first-time homebuyers that missed the original date of December 1st, 2009. Not only is a good for first-time home buyers, it also shows great promise for those that have owned real estate in the past. The tax credit has been extended and also enhanced and this is a great sign that the housing market may receive even further stabilization from this extension.

With get into details about the extension of the first-time home buyer tax credit. Sen. Johnny Isakson from Georgia propose the home buyer tax credit act of 2009 on June 10. The original plans was to have a $15,000 home buyer tax credit that later changed into the $8000 tax credit that we see today. The extension to this bill was signed into law just last week.

Now you can qualify for the $6500 credit if you have lived in your previous home for five years. This story was broke by Reagan Lachapelle, who is in aid to Harry Reid. This new enhancement of the bill really opens up the potential for how many consumers can execute advantage of it.

lawmakers decided that they really need to act even more than a half to prevent home prices from slipping any further because it has been one of the worst drops in our nations history dating back to the times of the Great Depression.

There’s also been some extensions to the incumbent limits of those two qualify. 75,000 250,000 used to be the income limits and novels have been changed to 125,000 to 250,000. Again, this opens the door for quite a few more people to qualify for the tax credit which will hopefully stabilize the whole market even more.

How Much To Offer On A Home

When you are looking to purchase a home, it is important to have a certain mindset before you offer.  Many buyers make the mistake of paying way more for a house that is staged or looks “nice”.   I have seen one home go for over $20k more than a very similar home just because it was staged and smelled nice.

Everyone wants to look at homes that the sellers have taken the time to prepare for sale, but as a buyer you have to think the exact opposite and think of the home minus the furnishings and staging.  It can be hard, but the buyers that can do it make a much better decision in the end.

US Home Appreciation Rates

How fast do homes appreciate historically in the US?

I had only found census data back to 1954 and some limited data for previous decades. I used some historical data that can be found to calculate annual home appreciation at 4.51% from 1960-2009 and dating back to the 1920’s homes have historically appreciated around 4.12% annually.

That data seems to point to appreciation between 1890 to 1930 period being really low which makes the overall averages less.

The data shows home appreciation for specific historical periods as follows :

1890 to 2009	2.96%
1900 to 2009	3.74%
1920 to 2009	3.53%
1948 to 2009	4.08%

If we divide the data to before WWII and after:

1890 to 1939	0.74%
1940 to 2009	4.61%

Or the past 100 years, 1909 to 2009: 3.43%

If you break the information down into decade chunks we will be able to see a few interesting points:

1890’s	0.53%
1900’s	1.40%
1910’s	3.30%
1920’s	-0.70%
1930’s	-0.45% Limited data available before this time period
1940’s	8.16%     The first full decade after the depression
1950’s	2.67%
1960’s	2.57%     50 year time frame 4.51%  1960 – 2009
1970’s	8.12%     Beginning of ramped inflation
1980’s	5.86%     30 year time frame 3.94%  1980 – 2009
1990’s	2.84%
2000+	3.14%

Note that these numbers are all calculated using simple math and do not account for any inflationary adjustment.

So what does all this new data tell me? First it seems the long term historical home price appreciation is 3-4% range rather than 5%. The data from the range of 1890 to 1920 is much less relevant in today’s market. During that time period we were still transitioning in the world and it was a much different place. I think the past 30 years is much more realistic of history if we’re going to use it as a platform to try to predict what may happen in the future.

Home Selling In Tough Market

If you are trying to sell your home, it is important to pay close attention to the foreclosure, REO, and short sale market.   Even though they might be a slightly different market, those foreclosure listings WILL directly impact your market value.  There are quite a few issues coming these days with appraisals.   Keep in mind that they buyer’s lender must see the value in the home as well and they will validate the price with strict appraisal standards.

Timing The Real Estate Market

Before You make a move to buy or even sell a home, take a second and think about your timing.  We can’t all wait until the market is perfect to make a move, but even knowing what to look for can help with your decision.   In the end it can end up making or breaking your retirement plans.

Consider Adjustable Rate Mortgages as an Option

With rates as low as they are, why would I ever consider taking an adjustable rate mortgage?

This is a question I am asked almost daily, in the next couple minutes as you read this I wish to help you understand why adjustable rates are valid options for many Americans.  We have to first provide some structure and some historical background for context to this discussion.  The average loan right now last less than 4.5 years and we are living in our homes less than 7 years.  Yet we hold this fear that we have allowed the media to continue to spread that if we do anything other than a fixed rate mortgage we will lose our home.  I am suggesting for some there may be a better way, if we will slow down and think for ourselves we will be make educated decisions, rather than guess.

In every country besides the United States of America adjustable rate mortgage is the norm.  We are the only country that has a system (Fannie Mae / Freddie Mac) that allows for a fixed rate mortgage.

That being said lets walk through with what is an Adjustable Rate Mortgage (ARM).  ARMs as defined by multiple sources are mortgage loans where the interest rate on the note is periodically adjusted based on a variety of elements.  The interest rate, and your payments, is periodically adjusted up or down as the index changes do to the economy or other outside influences.  Those elements are the index it is based off of, the margin the banks charges and the interest rate caps associated with each loan.

ARM Indexes

While you can’t dictate which index a lender uses, you can choose a loan and lender based on the index that will apply to the loan. Ask the lender how each index used has performed in the past. Your goal is to find an ARM that is linked to an index that has remained fairly stable over many years.

Among the most common indices are the rates on 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR).   When you are comparing lenders, consider both the index and the margin being offered.

It is easy to track the historical average of any index you are being quoted, don’t just take the word of the loan officer.  Go to google.com, type in history average for xyz index and you will get all kinds of information.

Margin

Think of the margin as the lender’s markup. It is an interest rate that represents the lender’s cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate. The margin stays the same during the life of your home loan.

Interest Rate Caps

Rate caps limit how much interest you can be charged. There are two types of interest rate caps associated with ARMs.  Periodic caps limit the amount your interest rate can increase from one adjustment period to the next.  Overall caps limit how much the interest rate can increase over the life of the loan. Overall caps have been required by law since 1987.

Okay now we have some context for what is an ARM and how they move, lets me answer the question we started with, “If my payments can go up, why should I take out an ARM?”

The initial interest rate for an ARM is lower than that of a fixed rate mortgage, where the interest rate remains the same during the life of the loan. A lower rate means lower payments, which your payment will be cheaper for the same amount financed; providing you with additional financial stability.

Let me asked a question that most of us do not slow down enough to think about, how long do you plan to own this house? Rate increases in the future whatever the possibility are not as much of a factor if you plan to sell the home within in the next few years.

Are there other lift changing events that may happen in the next few years? Do you expect your income to increase? If so, the extra funds might cover the higher payments that result from rate increases or you may decide to buy a different home.  As well there are additional questions you need to ask yourself and ask your lender to decide if it is a valid option for you or not.

The Bottom Line

Do not be afraid to explore all of your options, do not use an ARM to buy more house than you can afford.  That is exactly the wrong reason to take out this type of loan. This is what led to some of the financial troubles our country has been involved in.  Some Lenders and Realtors will give you that idea; it makes them more money the more you borrow.  Take the monthly payment savings and invest it or apply it as additional principal payments.  Use these programs to financially benefit yourself and your family.

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