But as a top salesperson in my office for four years straight, I continue to sell many homes to those people who want to take advantage of the real estate market. You have to find those people that want that American dream and are tired of renting and know they can only get a house now while prices and rates are both down.
i hope my answer gave you a clearer picture.
Government incentives, historically low interest rates, "fire sale" prices......isn't it time to see what the market can accomplish on its own?
It has to do with consumer confidence. And it has to do with the tightened criteria that are preventing even reasonably well-qualified people from getting loans.
Look: There are ways that investors can offer 0% financing. That's simple to do. I won't go into the details--nothing illegal or immoral though. It's just that you find your profit in other ways. Heck, seller financing could work the same way. If someone bought, say, 20 years ago for $200,000 and the house is now worth $450,000, you could do owner financing at 0% and it'd work OK for all parties. What would the owner get if he put that money into a bank paying 1%? A few thousand dollars? Maybe $4,000-$5,000? But if he put it on the market conventionally at $460,000, he'd probably be happy to get an offer for $445,000. Then he'd probably be asked to pay some closing costs--another $6,000-$8,000 or so. And we're not even talking about commissions here. But he's probably willing to accept a $10,000 discount (a negotiated price and some closing costs) just to sell the house. Why, that's probably double what a 0% interest loan would cost him, versus putting his cash into the bank at 1%.
So why isn't every homeowner in America (who can afford to do so) offering 0% financing? Because that's not the main problem. OK: With seller financing there may not be quite as much difficulty "qualifying." But you've still got that big issue with consumer confidence. People aren't buying because . . . they aren't buying. They're afraid to buy.
No mortgage rate is going to move this market. Restoration of consumer confidence and the ability of those with reasonable credit to get a loan is a major part of the solution.
I have seen that statement that every new home creates 3 new jobs.
I worked for contractors for a number of years and sold homes. When the economy fell into recession, my job disappeared. I live in a very prosperous part of the country and that seems improbable that it could occur. But it did. I worked for Engle Homes, a builder who brought excellent craftsmanship to construction along with creating great communities populated with people who could afford those homes. I loved my job. I enjoyed working with Engle's people and many of them would like to be working for the next Engle. It won't happen for a few years yet.
A friend was fond of saying: You pay your dues and take your chances. When it comes down to it, we fight the good fight. At the end of the day, things take care of themselves.
The economy was surging as late as May for parts of Colorado. It was like everyone was on the launchpad waiting for the countdown to run out. There was no launch. Things seem to be just moving along, not dropping and not going up. Blame the constant parade of worrisome headlines. Don't shoot the messenger. We need to do some more fixing before the economy reclaims its pace. We can do things like modify mortgages and help consumer confidence. But, we also seem to be in serious disagreement about how to go about it. To my mind, I think we need more willingness to compromise and get the job done.
Until the markets and Washington are seen as acting rationally, we will be stuck in idle. We're ready to go. But no one else is.
Thanks for your comment, Guy. Hope you have a good year.
DAVID COOPER Foreclosure Specialist with 35 Years Experience Buying Below Market. For a Free List of Bargain Homes, see website or Call +1-7024997037
Long Realty -Tucson, AZ
A few months ago, it looked like the U.S. was flirting with disaster. There was a budget stalemate, a drop in the credit rating for the U.S. If that wasn't enough, Europe had to get into the game.
Just this morning in Europe, the nations came to an agreement. They're letting Greece off the hook for half of what it owes. Greece won't be insolvent - not for a while.
Sorry about the long narrative. Here is the punchline: And the economy grew close to 3 percent.
We can get too focused on economic data. While the world was going crazy, consumers were out there consuming. The economy still has problems. But, what are people with a need for a home going to do? Wait for rates to start higher? They might.
You're right. There is no magic number. Or is there? Four percent seems magic to me because I wouldn't mind paying that small amount on my mortgage. Four percent means someone who was paying 5 percent is saving money every month. If they're frugal, it doesn't all go to frivolous things. But, families can go out to dinner a few more times without thinking whether they should. Junior can get that baseball mitt. Daughter can have an iPhone. That seems magic to me. What it means is all this great stuff that I mentioned at the top starts to happen.
Have a great rest of your week, everyone!
Rational speculators are in no special hurry until prices are likelier to start rising faster than rates. For developers and landlords, buying RE right now is like buying a computer-- there is always going to be a cheaper and better one tomorrow, so why rush into anything unless you need a 1031 exchange.
For actual flesh-and-blood home-buyers, not many of them exist right now. Home-buyers are either first-timers, or people who are trading old for new.
First-timers means someone with savings and job security, which usually means someone who has been well-employed for several years running but who hasn't ought a house yet, or who recently got a decent raise or first career. Not many of those people around these days. Existing homeowners can't buy until they can sell, and there is still a surplus of inventory keeping prices down, so nobody with a home and positive equity wants to take a loss, and those with negative equity can't trade up even if they wanted to.
No matter how low rates/prices get, you still need some combination of cash/credit/income/equity to buy RE. Usually 3 out of 4, or a lot of 2 out of 4. Those are all in short supply these days, and those who have them are mostly savvy investors who can drive hard bargains and are in no special rush, since they know this is not a one-day sale.
There is also a certain fear factor, but I think that's mostly over-rated. Market sentiment always tends to lag market performance, both in upswings and downswings, but money ultimately matters more than feelings do. The plain reality is more homes for sale than people who are capable of making six-figure purchases right now, and until that changes, it's like offering the Mona Lisa half-off-- you and I still can't afford to buy it, so what does it matter?
Consumer confidence is showing up here and there. If you're watching the national scene or the stock market, confidence seems to ebb and flow with each new day. The last two weeks were strong. But this week ... Home builder confidence was up. The stock market dipped Monday. Luxury homes had a breakout month in September. Stay tuned. It's getting interesting.
I think the number one problem is consumer confidence but that is a broad concept. I think most customers have that nagging feeling that their jobs may not be as secure as they once thought and that would certainly cause people to hold back from making a large purchase. I don't know any one who wants to court a forclosure.
Our business is esentially tied to the economy. Buyers need to be able to project some years down the road with their finances and hope they can pay their obligations. There is no easy answer and we as sleaspeople in a particular profession have to project a level of confidence ourself toward our sellers and buyers. For those that can, now is a great time to buy.
Thanks for that informative discussion of owner financing. Makes perfect sense in this market. I haven't had any sellers do owner financing. As you have mapped it out, I can see people bypassing the banks. I'm wondering how widespread that is.
We are accustomed to thinking that lower rates help enlarge the pool of potential buyers. I agree with Sunnyview. At these low levels, rates don't seem to move the needle at all.
Better employment and time alone should help the market a lot. People with jobs are more likely to buy even if rates move higher eventually. Right now the job insecurity and credit devastation is making the recovery slow. Keeping rates low does help the market hold ground, but is not enough to move the market alone.
How many of you have seen an article on Monday that says breaking news: foreclosure filings are down!!! and then on Wednesday you see an article that says breaking news: foreclosure filings are up!!! My point is, there is information coming at us from everywhere and by every news organization, blog, website... As agents, buyers, sellers and consumers, we all need to take a step back and reassess all this information and apply what we think is relevant to our business and "local" market and economy.
I feel that most consumers including myself believe that there is just too much "uncertainty" right now. I believe that one of the key factors driving it is our gov't. If Capitol Hill would actually pay attention to its citizens and stop trying to prove that "mine is bigger than yours" to the opposing side, we might actually start to see some "certainty" and consumers will start believing again. This is the time to come together. (and no, I'm not saying we should depend on our gov't for handouts. I'm saying our elected leaders need to lead!!!)
Have you guys seen the commercial that talks about how every new home built creates 3 jobs? How can you create 3 jobs building a house, when the consumer doesn't have a job to buy the new home in the first place or is too afraid that on any given day they can be laid off?
I love your question, it's such a deep issue and one that can be seen and debated from so many different points of view.
Just my 2 cents which nowadays worth less than1!
Check out this story:
I have a who crop of buyers who are all diligently working on credit repair right now.
REALTOR,CDPE The Elite Group
Your Castle Real Estate
J O B S
Low-low rates like we are seeing now will actually hamper our recovery. When the economy heats up (gradually) interest rates will increase, putting downward pressure on home prices again (as a factor of affordability). When the majority of 'pent up demand buyers' can buy a home for the same or less than renting, we will be at the bottom of the market. Hold onto your hat when that happens because we won't be able to keep up with all the new business!!!
I'm wondering if 30-year fixed rates could drop below 4. Check out:
Your comments are well taken. Confidence is key. When the economy starts moving again, these rates will be a distant memory - but still good. Anything under 7 percent is a good rate. As Ron Rovtar notes, people who feel good about their local economy are inclined to buy. I'm willing to bet those who observed that prices are slipping in their areas are going to be looking at little improvement for the next two years.
If buyers are holding off waiting for prices to drop still further, they might have luck in a few markets. Builder magazine notes that pending sales are up in the South and West. Existing home sales were up, too - though were not as strong.
A good rate by itself is certainly not the answer. At these levels, shaving fractions off that rate will make a difference. In these penny pinching times, that's huge!
of Longmont, CO
720 810 0683
Since you asked this question back in May mortgage rates have dropped again and the market has indeed improved some. But I'm not convinced that interest rates had all that much to do with the improvement, though some evidence may suggest exactly this. It seems to me that sales in Boulder and Broomfield counties have mostly improved during periods when buyers have felt more comfortable about the future from an economic point of view. Right now, the comfort level seems to have dropped a bit. However, even as people seem a little more reluctant to buy, they are still moving forward with purchases. This may mean that the interest rates have had more of an impact than I suppose or that the psychological side of the recovery is still relatively strong even if the economic numbers (growth, unemployment, income) being reported by the media are less encouraging than we had hoped.
In June, we started beating 2010 monthly sales figures (an a year-over-year basis) in the Boulder/Broomfield county area. The trend continued in July and preliminary figures for August indicate strength again. So, at least locally, something is happening out there and it is not all bad. I guess we will have to wait and see which factor (interest rates or comfort level) is the primary driver.
Prudential Real Estate of the Rockies
My husband and I paid 12 percent interest on the first home we purchased. The belief was that home prices would continue upward, so we felt compelled to act before we couldn't afford to buy. We have a stagnant situation these days. Buyers don't feel any pressure to buy.
You are indeed correct about confidence. It seems to have evaporated. But there is a point at which people come back into the stock market. Is there a point people reach in their minds that things can't get worse?
I've been sharing this link here on Trulia because I think news will get around that there won't be a massive inventory of homes that will hit the market - at least not from Fannie Mae, Freddie Mac and HUD.
The article appeared in The Street.
A Huge Housing Bargain -- but Not for You
The thrust of the story is about the big give-away. But the effect will be to create rental opportunities and remove these homes for a while from available real estate.
Thanks for your comment.
Jack Gillis, M.B.A., J.D.
Jack Gillis Realty Advisors
Nathan Grace Real Estate, Broker
5619 Dyer Street | Suite 100
Dallas, TX 75206
I just checked Yahoo. It has today's rate for a 30-year conventional at 4.326. Talk about cheap money! This sounds "irresistible" to me, but that fact that the rate is falling again (leaving buyers to wonder if they will get a better rate tomorrow) along with the fact that inventory here in Boulder County is depleted may keep still some people on the sidelines.
Landlords can deduct their mortgage interest, so the idea that mortgage interest can be deducted by landlords but not by owners really isn't going to fly.
SuZ, you start and continue great discussions!
It is perplexing at one moment and not surprising another that people are not do everything they can to get a mortgage. The middle class has counted on housing as a means of wealth building for so many years, yet our government talks of removing the tax deduction.
This is not the time for mixed signals from Washington.
The middle class will figure it out.
The question is whether it will do that before rates move higher.
I am going to pull for the average consumer. I think a rate under 7 percent is marvelous. Make a great investment and live in it - what can be better than that?
Thanks, as always, for sharing your thoughts, Mack.
Mack makes a good point, too. $70 difference on a monthly payment is nothing to write home about. But, we should look at it as a savings of $4,200 over five years of the loan and $25,200 over the life of the loan. People are probably living in their homes more than five years these days, so if we are looking for solutions for our clients, we should be trumpeting information like this. A $70 difference is huge, Mack!
And Marianne points are good, too. Jobs are going to weigh heavily on people's minds for a while. I wish I knew how confidence was going to be restored. Just as the stock market seemed ready to draw the average Joe back in, growth slowed and economies began to struggle.
David, after the last five years, I don't know if my heart/stomach could take Jimmy Carter-size inflation. But, what the heck! I'm willing to try. David does raise a very good point. However: Problem No. 1: Will Fed policy move the economy in that direction anytime soon? Problem No. 2: Will some inflation improve the economy? Inflation usually is not associated with growth. Stocks don't do well. The people who buy stocks and would need more real estate would have to be persuaded that real estate is where their money should be. It is a good inflation hedge. So why isn't real estate headed for new highs like gold has performed in recent years?
Inflation is likely, some analysts say.
Would inflation get us anywhere? Raising the costs of goods might be a slippery slope for countries like Greece. I'll take stagflation, if it means keeping some economies afloat.
Anyone have any thoughts on inflation?
Would anti-growth inflation be the right medicine for the economy?
David Cooper Las Vegas Foreclosure Investor in Bank Owned REOs at 20% off. For your Freee List
email: firstname.lastname@example.org or Call +1-7024997037
I think we're learning that low interest rates can cease being a stimulus. People don't really make their decisions on a few percentage points here or there, and the difference between 4% and 4.5%, for example, on a $250,000 loan, is like $70 - not exactly the tipping point for most buyers.
But if interest rates are thought to head from 4.5 to 6.5, well, that's $320/mo, that would move some bodies!
If there is a magic number I think we have passed it. There will need to be some other incentive or action that will build up consumer confidence again. Lower unemployment figures will help. I think the most uncertainty in home buying is do I have a job 1st, and will I be able to keep my job 2nd. Fear seems to be ruling the normally rational minds of young buyers and others.
Robert McGuire ASR
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct â€“ 303-669-1246
These lower interest rates and lower home prices are inticing some buyers to make a move! The home buying market will get better. As the stock market historically goes up, buyers and sellers will see a future increase in their home's value if the do purchase a new home today.
We also need to clean up the financial mess from the banks. They continue to make money riding on our backs and stuffing their pockets with cash while turning their backs to their customers.