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Archive for the ‘Mortgage Rates’ Category

We Think We’re Going to Believe Grandpa

There are those currently debating the financial advantages of owning a home. Some are looking at studies and reporting that homeownership has never really been a great investment.

One of these people is Jack C. Francis, a former Federal Reserve economist and professor at Baruch College. He said in a recent CNBC article:

“For generations, parents and grandparents have been telling us that the way to get ahead was to buy a house and keep making payments with a fixed interest rate and after 20 or 30 years it would be way up in value and that was your nest egg in old age. You could either live in it rent free or sell it and use the proceeds to rent an apartment.”

The article goes on to explain the rest of Mr. Francis’ comment:  

That was good advice until 2006 when home prices collapsed, he says, and it “may become good advice 10 years from now, but right now it’s not.”

Mr. Francis bases his conclusions on a study he completed which covered the years 1978 through 2008. In his study it showed that home prices increased annually by 5.7% and that the S&P 500 increased by 10.8%. Based on this information, Mr. Francis gives the following advice:

To students who come to him for guidance on whether to buy or rent in the near term, however, Francis has one word of advice: wait. “I keep telling them this is not the time to buy,” he says.

Let’s take a closer look at this conclusion.

1. We have our own study.

Mr. Francis did a study over a thirty year period which did not include the last 3 years. If we look at the same categories since January 2000 (covering one of the worst decades in American real estate history), we find that home values GAINED 42% while the S&P LOST 4.7%. It all depends on which set of data you choose to use.

2. The proper comparison is rent vs. buy.

All of these comparisons claim that putting your money into a different investment vehicle other than real estate might make sense. What they are not taking into consideration is that the investor will still have a housing expense. They will still need money for shelter. They cannot just take their money for shelter and buy other assets with it. A person can’t live in their 401k or their IRA. This leads us to…

3. In most markets today, owning is LESS expensive than renting.

Trulia recently came out with their Rent vs. Buy Index. The report shows:

 that it is more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities.

For more on this issue including a 50 city breakdown, click here.

4. Current mortgage opportunities may never be available again

The government has driven mortgage interest rates to all time lows. You can still get a 5% rate and guarantee it for 30 years. Both of these opportunities may soon disappear. Mortgage rates will increase as the economy improves and the Fed no longer feels pressure to keep rates low. The 30 year mortgage may soon be a thing of the past if suggested mortgage reforms come to be. You can lock in your housing expense for 30 years if you purchase. Renting is like having an adjustable rate loan with no cap that readjusts EVERY year. Which way do you think a landlord will readjust it?

For more on this, click here.

5. Most Americans see more to homeownership than financial value.

Last week, Fannie Mae released the National Housing Survey. The survey reported:

  • 96% of all homeowners said homeownership has been a positive experience.
  • 84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.
  • 2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).

Bottom Line

There are more and more studies being done on the value of homeownership. We think we will trust in what our parents and grandparents said. Your mortgage payment is money you put into your savings. Your rent payment goes into the garbage.


If Your Goal is to Buy Low, Buy Now

There is a very famous saying which asserts “Sell High, Buy Low”. It is obviously great advice no matter what the investment. Below is a graph showing the cycle of investments. It shows the points of maximum risk and maximum opportunity when purchasing. We want to sell high (point of maximum risk) and buy low (point of maximum opportunity).

The challenge is how to determine when we have hit bottom if you are a purchaser. The only time you can guarantee a bottom is after you pass it.

However, there is more and more evidence that the COST of a home has in fact hit bottom. Notice we have used the word COST. Unless you are an all cash buyer, you must take into consideration the expense of financing a property to determine the true cost of purchasing the home. Interest rates have increased over the last quarter; and the rise in rates has counteracted any fall in prices.

When is the best time to buy a home? When is the opportunity right?

Let’s look at an example:

Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.

For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).

Your principle and interest payment would now be $1,067.54.

By waiting to pay less for the PRICE of the house, the COST increased $93 a month. That adds up to $1,116 a year and over $33,000 over the life of the loan.

We realize that there are other things to consider (ex. the mortgage tax deduction, etc.). This example is just a simple way to show that there is a difference between COST and PRICE.

Bottom Line
If you want to buy low, buy now. It appears COST has hit its lowest point.

Cheryl Walsh
C. Walsh Realty

Search for Homes in North Attleboro, Attleboro and the Attleboro areas.

Housing Price Conspiracy??

North Attleboro Real Estate prices. Cheryl Walsh, North Attelboro real estate agent, real estate homes for sale.We believe that things are usually as they seem. We are not the type of organization that believes in conspiracies. However, there is something interesting in some of the housing price studies we are seeing in our research. It seems that some of the groups making the predictions are the same ones that have the greatest power to affect the prices they are projecting.

Most housing analysts warn that the heaviest downward pressure on prices will be created by distressed properties and the speed at which they will be released to the market. Research shows that ‘short sales’ sell at a 20% discount and foreclosures sell at a whopping 40% discount. Obviously, when and how much discounted real estate enters the market will have a major impact on prices of surrounding properties.

Back to our research:
We are now seeing that a certain segment of those projecting future pricing have two things in common:

– They believe prices will fall rather dramatically in the first half of 2011
– They have control of the flow of discounted properties to the market
– Predictions for the first half of 2011 by firms that fall in the above category:

Bank of America projects that prices will fall 3.7%
Fannie Mae predicts that median prices will drop $12,500
Wells Fargo reported that they feel home prices will drop 8%
Not a coincidence.

We are beginning to realize this is not a coincidence. The organizations which should best know when the surge of foreclosures will be released are saying house prices will be hit the hardest in the first half of the year. We are not asserting that there is anything devious in what we have found. We are just reporting that those who have control over the flow of distressed properties must think/know that inventory is about to be released. Why else would so many of them be predicting a sharp decline in home values in the next 120 days?

Bottom Line
If you currently have your house on the market and are hoping that you will see a better price after the snow melts or the temperature warms up (aka Spring), BE CAREFUL! Those in the know are warning you the best price might be attained TODAY! 

Note from North Attelboro Real Estate Experts:
These reports are very helpful but not necessarily the way the market will develop for you. You should always consult an expert before moving ahead with anything like this! 

Cheryl Walsh
C. Walsh Realty
C. Walsh Construction, Inc.
Cheryl @
Direct:  508.695.3500 X 201

by The KCM Crew on January 12, 2011

What’s the Deal with Interest Rates?

It has been an up and down ride for the economy and the North Attleboro real estate market. You remember what it was like. There was the housing boom where home values rose and anyone could get a loan for a new home. Many experts said it would end. Many said it would end badly. Well they were right. In 2010, Americans faced the most foreclosures in history. You may have known someone or maybe it was you. With the econonmy taking a downturn, many people lost their jobs. The loss of a job affects more than just income. Loss of jobs also health care, family life, bills and mortgage. This had a negative impact on the North Attleboro market. We have seen an increase in the number of foreclosures and short sales in the Attelboros.

The current market consists of many foreclosure properties and many homes that are priced to sell. It’s a buyer’s market and interest rates remain low. It’s still a great time to buy. Lower interest rates mean you could qualify for more house than you expected to buy. It also means there are many more houses on the market to choose from. This gives you a great deal more flexibility to find the perfect house.

Take a look at this graph that indicates what the differnece in your interest rate makes on your mortgage payment:

 But this also creates opportunities for sellers. You may not get the same price for your home that you may have gotten two or three years ago, but sellers can also take advantage of the lower interest rates. Now may be the time to move up to a new home. Don’t forget that you can get more house for less money, the inventory of homes is greater and you can be more picky. Your home will sell if you price it right. Don’t go it alone. Find an expert to help you list and market your home. Price it right the first time and it will sell!

I would be happy to help you find a mortgage or with the buying and selling of your home!

Cheryl Walsh
C. Walsh Realty
Ph:  508-695-3500