Mortgage Rates Still on the Rise Ahead of Treasury Auctions

Mortgage Rates Still on the Rise Ahead of Treasury Auctions

Mortgage rates took a beating last week. Even the most aggressive lenders are now creeping towards 5.00% (for WELL-QUALIFIED borrowers). See more...

Check Those Smoke Detectors: New Massachusetts Smoke Detector Regulations Go Into Effect Jan. 1

Check Those Smoke Detectors: New Massachusetts Smoke Detector Regulations Go Into Effect Jan. 1

Armstrong Field Real Estate is Moving!

Received notice from Salem Five Bank (the landlord for my office) that they will not be renewing my lease at the end of February because they want to expand their call center. I said "Why don't you use the vacant space that is in your upper floors?" Evidently that is not in their master plan. I should have known when they didn't renew the lease for the other business that was next to me. Why would Salem Five use valuable ground floor space for a call center that does not have walk-in traffic? (doors are always locked). It is against everything that Salem is trying to do with their downtown - First floor space should be for retail or businesses that create foot traffic (ie: my business).

The good news is that I have found what is even better space then we have now. I'm currently negotiating the details of a lease. It has huge south facing windows, more space than what we currently have, plenty of storage, better parking, better visibility, restored antique hardwood floors and more.

The bad news is (besides the fact that I really hate moving) that it will cost a lot of money to build out and set up the space with a phone system, computers, desks, etc. Not to mention changing the address on everything. But with 4 new agents signing on this month (currently 18 agents) and more in the pipeline, it will be good to have the extra space. Plus I can build myself a office bigger than the 6'x7' space I am now using. Plus a game room (guitar hero competitions every Friday!), kitchen area, library, conference room and more.

Watch here for updates and our grand opening.

Jim Armstrong

Real Estate Outlook: Housing Warmer Than Weather

Real Estate Outlook: Housing Warmer Than Weather

If new applications to buy homes are any gauge, the U.S. housing market is warming up, and that's despite the fact that we're now into the traditionally quiet holiday season.

Applications for home purchase loans soared 42 percent last week on a non-seasonally-adjusted basis compared with the week before, according to the Mortgage Bankers Association.

That burst of activity may have been influenced in part by the long Thanksgiving week layoff. Or it could have been an early reaction to the extension of the $8,000 tax credit or the start-up of the new $6,500 credit.

Either way, it was an exceptional week for mortgage lenders.

But here's another possibility: With the economy gaining a little momentum, interest rates have begun edging up again.

Mortgage rates are still close to historic lows, 4.9 percent on average for 30-year fixed and 4.3 percent for 15 year fixed, but MBA chief economist Jay Brinkmann says they're likely to exceed 5.2 percent by this coming March.

So, maybe the rush to nail down financing by home buyers is a smart move … compared with paying half a point higher rates by early spring.

On other economic fronts, we're looking at a mixed bag of reports this week, though mainly positive:

Freddie Mac's found home prices nationwide up by about one point on average during the third quarter. That's on top of a two percent gain for the second quarter. Clear Capital, a real estate data company, also found prices up marginally - by 1.4 percent - during the month of November, though a few local markets came in with double digit gains.

But not all surveys agree on that. The well-regarded “IAS 360” index came in with a contrarian result. It found that overall prices in the U.S. were down slightly on average -- by about half a percent.

Since there's not a huge variation among the three reports, we can probably safely conclude that -- at the very worst -- prices have stabilized in most markets -- and at the very best, they're up a little.

There were also positive indications on lower delinquencies and foreclosures across the country. Realty Trac says foreclosure filings in November dropped by 8 percent - the fourth consecutive month of declines.

And Trans Union, the big credit bureau, forecasts three percent fewer mortgage delinquencies next year - after three straight years of rising delinquency rates.

Meanwhile,another national study on price reductions on listed properties found that during November the number of price cuts dropped in 27 major markets, a welcome sign of more realistic asking prices.

From: Jim Armstrong's Real Estate Update - December 2009

New FHA Guidelines for Condominiums

New FHA Guidelines Could Amp Condo Sales

"FHA approved" may become the most popular condominium amenity in the United States soon, thanks to the new guidelines established by the FHA to take effect February 1, 2010.

The guidelines addressed the two imperatives facing condominium sales: down payments and the financial integrity of condominium associations. Both are equally important to a condominium recovery.

"FHA approved" used to mean a 3.5% down payment. Starting early next year, "FHA approved" will mean 3.5% down plus a financially stable association approved by your lender. This is huge.

According to Attorney Richard D. Vetstein, who writes the Massachusetts Real Estate Law Blog, the revised FHA Condominium Lending Guidelines include the following requirements:

To qualify for FHA mortgages, associations must:

• Maintain a reserve equal to 10 percent of the annual budget
• Make sure no more than 15 percent of its owners are more than 30 days late with condominium fees
• Allow lenders to review their financials and insurance policies
• No more than 10% of the units may be held by a single investor
• Fidelity insurance must be obtained for 20+ unit projects
• No more than 25 percent of space allowed for commercial use.

"The new FHA guidelines (combined with the almost year old Fannie Mae condominium guidelines) really make it imperative for condominium associations to get their collective acts together with respect to the financial management of the association," counsels Attorney Vetstein. "Condominium boards need to ensure that reserve accounts are adequately funded, condo fee delinquency rates are low and that the association is generally well run financially. If they don’t, they are contributing to a drag on market value for all units due to non-compliance with the new condominium guidelines.

For a new condominium to qualify for FHA financing the following guidelines apply:

Effective February 1, 2010:

• 50 percent of the total units must be presold before FHA financing is approved
• 50 percent of the total units must be owner occupied
• No more than 10% of units may be held by a single investor
• Unit owners must obtain individual HO-6 insurance policies if the master policy doesn’t cover interiors
• Re-certification is required every two years

Projects that received approval between October 1, 2008 and December 7, 2009 will be "grandfathered" and will have to follow the new guidelines’ re-certification process .

The marketing benefits are significant:

1. More buyers will enter the market because they can afford the lower down payment.
2. No single investor can purchase more than 10% of the units, so the idea of a controlled association by one or two investors is no longer a threat.
3. More inventory will offer wider choices tending to keep prices in check, as "FHA approved’ condominiums come on line.
4. More real estate agents will be willing to show condominiums to their buyers, because the lender who provides the mortgage will have to approve not only the condo documents, but the condo association’s budget, reserve account and its fidelity insurance policy.
5. New construction developers have the guidelines needed to create urgency in their pricing strategies, which is key to building and maintaining momentum.
6. Commercial lenders will have a more comfortable level with developers. While the 50% presale requirement may look obtrusive, it is actually a benefit to the developer, because it will create urgency for buyers to purchase.
7. Established associations that have dragged their feet to get their finances in order, now have a valid value-based reason to become "FHA Approved."
8. Real estate agents will show FHA approved condominiums with confidence in the association’s finances, not just because the down payment is low.
9. Forward thinking lenders will hustle to become a "an approved lender’ in resale and new communities alike
10. Knowing the property already has approved lenders will make competition for listings tighter and will attract more buyers and more prospects to the listing.

Brokers taking listings in condo communities without FHA financing will be competing with ones that do, making it important for associations to serious consider becoming FHA approved.

First time home buyers are generally thought of as the primary market for FHA financing. There is something to that, but in today’s world, many who bought their first homes years ago and lost them during this recession will appreciate the FHA financing availability even more than those coming out of rentals.

For now let’s agree that the FHA is being responsive and fair by giving new homes developers livable guidelines, associations a tool to become financially stable, and all associated with the industry, hope.

There will no doubt be other changes as the market calls for them "FHA was given a difficult task under the Housing and Economic Recovery Act of 2008 (HERA) to revamp the approval process for condominium projects, and before it established its latest guidelines, invited and was open to industry experts from organizations like the Community Associations. "As a result, significant improvements to the initial requirements have been made and dialogue continues between CAI and HUD in an attempt to create regulations that will lead to greater stability in the condominium market," Dawn Bauman, vice president of Strategic Initiatives for the Community Association Institute said. CAI is an organization representing more than 29,000 individual members, 60 local chapters, and the interests of the one in five homeowners living in a community association. For more information visit www.caionline.org.

It’s good to see that the buyer’s interest is represented. It shows. And it will pay off handsomely in the days ahead.

Cash for Caulking

Obama Proposes Cash for Caulking

A program has been proposed by President Obama on Tuesday that would reimburse home owners for installing windows, energy-efficient appliances, and insulation.

Under what has been dubbed “Cash for Caulking”, home owners would get a 50 percent rebate on energy-efficient air conditioners, heating systems, washing machines and dryers, refrigerators, replacement windows, insulation and other energy-saving improvements up to $12,000. This equates to a household that spends $24,000 could get $12,000 back.Most likely there would be no income restrictions.

The director at the American Council for an Energy-Efficient Economy, Steve Nadel, who is helping to create the legislation, says they are considering having contractors and/or retailers pay part of the cost upfront to reduce the need for home owners to come up with lots of cash.

Mortgage Rates Hit a Record Low

30-Year Rates Hit Record Low

The average interest rate for 30-year mortgages has fallen to the lowest level since Freddie Mac began compiling its weekly survey in 1971, declining to 4.71 percent this week from 4.78 percent a week ago.

Rates also were more attractive for 15-year fixed loans, which fell from 4.29 percent to 4.27 percent, but many consumers may not have qualified for them because they now face higher credit standards from lenders.

Still, the Mortgage Bankers Association's index of application demand, which rose 2.1 percent on a seasonally adjusted basis during Thanksgiving week from the previous week, shows that consumers were looking to take advantage of mortgage rates at a historic low.

Source: USA Today, Stephanie Armour (12/04/09)