Brian's Journal

Recent FHA Loan Process Meets My Approval

by Brian

My most recent transaction involved an FHA Loan and I have to say the process was very satisfactory. Buyers are required to bring a small down payment, so they end up being better qualified to own a home and able to make the payments. The inspection and appraisal both went well and we settled the whole thing on time.

If you currently have a home for sale, I would suggest being open to accepting FHA financing on a purchase offer for your home. Based on the current market conditions and the state of the  mortgage market, at least the perception of the mortgage market, we will see a lot more homes financed with FHA insured loans. This is not necessarily a bad thing.

Be sure to check with your hired representative, Realtor or attorney,  before making any decision on whether or not to accept an offer from a prospective Buyer.

Watching the News

by Brian

As a general rule I do not watch the news. I get the newspaper primarily for the sports section, coupons and comics. I also like to solve the word jumble. I am currently letting my subscription run out, because I just can't stand the bias in our local fish wrap. Attitude is so important, especially for the self employed, and the news does nothing but bombard you with the negative.

I do, however, need to keep up with what's going on. There are several blogs that I subscribe to and I also keep tabs on what is going on locally by keeping in touch with local business leaders and politicians. I'm not saying that I never watch the news, but I just found out about the hurricane last night.

In the good old days, the news was reported on. Reporters would ask who, what, when, where and why questions. They found out what was going on and reported it. There were also opinion commentaries as there are today. Unfortunately, today the opinions have filtered in with the reporting.

In order to get both sides of the story we have to watch the conservative news channel and any of the many liberal channels in order to get both sides of the story. We have to have a discerning ear to determine which is fact and which is opinion. Not always easy to do, after all, we're all busy.

Take my industry, for example. The facts are that 2005 was the most awesome year ever in home sales. 8.4 million houses sold that year. Of those 1.4 million(est.) were sub prime loans. The average home price was around $219,000. Mortgage rates were 5.9%. There were about 133.7 million jobs in 2005.

Now let's look at where we are now. There are 138.0 million jobs, or 4.3 million more jobs now then in 2005. Mortgage rates  are at around 6.5%, modestly more than 2005, but historically low. The average home price is still right around $219,000. If we predict a 50% reduction in sub prime lending, that would put us about 700,000 fewer sub prime loans. The projection for home sales is 6.9 million homes sold for 2007, or 1.5 million less than 2005. If the entire sub prime market dries up, which no one thinks will happen, then we have already reached the bottom in terms of the credit tightening standards affecting home sales.

Turn on the news and what you will hear is that the housing market is nearing its demise. Seriously, the lenders who incorrectly priced high risk loans need to be weeded out of the marketplace. High reward almost always comes with high risk. Especially with money. There is no such thing as high returns on easy street. There is no such thing as a free lunch.

It makes no sense that the housing  market is in such a funk based on the FACTS in the above paragraphs, yet it is. I believe it is lack of confidence due to most Americans being glued to their TV sets for 4.5 hours a night. Bombarded with bad news and negative energy.

After we collectively "get over it" I think the housing market, nationally, will take off. Probably some time next year. I think there are alot of folks who are sitting on the sidelines who need to move for one reason or the other, and will not be able to wait much longer. Once you realize that you would not be applying for a sub prime loan anyway, you will be able to move forward with your plans.

Watch the news at your own risk. Remember that all Real Estate is local. Before making a decision to move-up or go from renting to owning, be sure to meet with me and let me consult with you. I will ask you insightful, thought provoking questions. Based on your answers, I will advise you on a wise course of action, tailored specifically to your personal situation. All consultations are private and confidential. You wouldn't represent yourself in court. Why would you want to represent yourself when buying or selling a home? 

First Qtr 2007 Outlook

by Brian
Everywhere I go people ask me how the real estate market is going. Not to sound sarcastic, but it really depends on where you live. And I mean it could depend on the neighborhood you live in.

When I say how long a market is, I am referring to how long it would take it to sell all of the existing houses for sale if no other houses came on the market. Generally what I am seeing is that certain price ranges are in longer markets than others. Houses that are in the under $200K range are in shorter markets than those that are priced over $300K.

    The graph above is a snapshot of the Days On Market(DOM) (you can hold the hand over the graph and click on it to make it larger) for the Mid-Atlantic region for the first quarter 2007. When DOM trends in the longer direction, the market generally becomes longer. As houses take longer to sell, more new houses come on to the market increasing the housing inventory.  If there are more houses for sale then it would take longer to sell all of them, even if no other houses came on the market. DOM and the length of the market are not the same, but the former can be an indication in the trend of the latter.

     I know that is a lot swallow, but it is really important that when you are making a decision to have a real estate agent sell your home or help you buy a home that they understand this concept and how it relates to your individual situation.

    We get the paper and watch the news and graphs like the one above are placed in front of us. The reporting agency tries to sensationalize the real estate market by having the "graph above" as evidence. This graph is just one statistic of many that would be required to give you a true sense of the market. My point is, that in order to make an informed decision for you and your family, you don't want to rely on a national news report about the real estate market. You want someone like me to come out and get an understanding of what is important to you. Then relate your values to what is going on specifically where you are currently and exactly where you want to go.

    To give you my OPINION on the Baltimore Market, which may not even be specific enough for you to make decisions by, I believe that fundamentally our housing market and economy are strong. Unemployment was at 4.2% for Feb 2007, which is considered like 100% employment. Unemployment hasn't been an issue for years. Core industries, those that import capital and export goods or services, comprise about 51% of our Gross Regional Product(GRP). In other words, we have a very strong base for our local economy.  Certainly 2004 and 2005 were tremendous growth periods, but our area will still be growing through the rest of the year, albeit not as robust as prior years.

     Real Estate has historically appreciated at 4-5%  a year. Over the past three years we have experienced maybe a 20% appreciation around here. A combination of interest rate cuts and slight housing price reductions will have Baltimore real estate humming again, as the affordability index comes back in line. Real estate is too large a part of the national economy for those two things not to happen, again this is my opinion.

    Johns Hopkins and the military base realignment alone will be bringing thousands of jobs and families to our region. Guess what?  They all will need a place to live.

    Look I'm not an economist, but I do know how to analyze local conditions as they relate to real estate. I treat all situations specifically to the concerns of the family or investor that I am helping.  There is nothing DRASTICALLY disturbing about our regions economic fundamentals. I plan to continue as I always have- advising you based on local statistics and trends. Helping you realize your goals or helping solve your problems, as best I can.