All I Want for Christmas is Mortgage Principal Reduction?

Realty Times - Housing Answer: Principal Reduction?

Save Money With Energy Efficient Window Coverings

• 
  
  
  
  
  
  
  
  
  
  
  

  Save Money with Energy-Efficient Window Coverings

  Energy-efficient window coverings help reduce heating and cooling costs and may qualify for the federal energy tax credit. Read

Visit houselogic.com for more articles like this.

Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®

Homes Are Selling Across The Country, and Here's Why...

Homes Are Selling Across The Country, and Here's Why...

We started to see problems with transactions as early as July 2005, but prices continued to climb until about February 2006 in South Florida, which essentially represents the peak in our market.  According to Case Shiller, this is where average prices are now in proportion to then.  With affordability at an all time high due to home prices and low interest rates, whoever isn't convinced that now is the best time in recent history to buy a home is allowing the media to steal away your greatest opportunity for homeownership.

Common Sense Isn’t Common Practice

It used to be that there was logic applied in the world of mortgage lending. An appraiser determined the value of a home by the axiom, “what a reasonable buyer would pay a reasonable seller”. An underwriter weighed the plusses and minuses of a file (after analyzing the income, the assets, the credit profile and the appraisal) and made a judgment call based on their experience.

Loans with sizable down payments used to be more flexible with how income was documented or what quality of credit was required. Even the decision of what made up “good credit” has been reduced to a FICO score. Determining the risk of a loan affected its approval or denial. Further, loans deemed riskier were given less favorable terms (higher rates and/or costs or larger down payments).

But today, everyone has tried to quantify everything and put everything into a matrix. Credit scores are numerical, and the number determines eligibility and cost. Gone is the concept of explaining why you have defects in your credit. We don’t care why, we just look at your score. Appraisers now are being scored and their data being scrutinized to a level most would find mind-boggling. Amenities that make a home worth more for a particular buyer (like a pool or upgraded basement) are virtually ignored. Underwriters have primarily become fact-checkers and quality control as a computer software program underwrites the vast majority of mortgages today.

Gone is common sense. It has been replaced by numerical formulas and a cover-my-behind, justify-everything-with-data mentality. Basically, the pendulum has swung too far. It used to be that lending was too easy (see the subprime debacle), but now we have eliminated too much of the human element. We need common sense back.

People who have saved 30% for a down payment know what they can afford monthly. Don’t they?

People who had a medical challenge two years ago that is not likely to reappear should not have a twenty year credit history destroyed. Should they?

People aren’t likely to overpay for a home with so much inventory and all the media exposure about falling prices. Are they?

Bring back some common sense when we need it most!

Real Estate As a Hedge Against Inflation (from KCMBlog.com)

Real Estate as a Hedge against Inflation

We haven’t heard a lot about inflation recently. However, prices have started to creep upward over the last year. As examples, here are a few categories that increased from November 2010 to November 2011:

• Food at home – up 6.2%
• Housing fuels and utilities – up 3.5%
• Transportation – up 9.2%

Today, we want to address the issue of inflation and the advantages of owning real estate. The National Association of Realtors (NAR) took an historic look at the impact of inflation. Here are some inflation numbers over the past 30 years:

We can see that real estate has fared very well. The most important number is the $0 increase in mortgage amount. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.

NAR then looked at inflation moving forward over the next thirty years. Obviously, if it remained the same as the last thirty years the percentage increase would be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:

Bottom Line

We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. Either would be a great hedge against future inflation.