Posts Tagged mortgage affordability

The good with the bad in Salt Lake City

There is good news, and there is bad news, right now it’s a mixture of both in Salt Lake City.

First, the bad news: AllPro Realty, one of Salt Lake City’s big brokerages, has gone out of business. Bankrupt. Kaput. Gone. They left many Realtors broke by not paying them the commissions they have due. And to add insult to injury, it appears they have used the money owed to others to open-up under a different name with the owner of AllPro Realty’s son-in-law being listed as the primary broker of the new company. Very unethical.

In the good news category: Sales of existing homes in Salt Lake City and Salt Lake County was up 13% in September.  The overall reason why isn’t clear yet, but some of it may have to do with FHA’s announcement that one October 1, 2008 they would stop allowing certain types of down payment assistance like Nehemiah.

I still hold that FHA’s data is flawed and that the rate of foreclosures amongst those receiving seller-assisted down payment is no different than those that received family-assisted down payment, but we still having non-real estate people making real estate policy in Washington. We have rich politicians who don’t have any issues making a down payment on a new home making policy for those that don’t make as much money as they do: Joe Mainstreet.  Or more to the point right now: Joe Plumber who only makes $40,000 a year or so.

But off my soap box and back to the subject at hand. Sales are up. Hopefully it’s a trend that will continue with just an occasional stumble.

The trade-off has been that prices are down.  The average price of a home in Salt Lake County has fallen 9.46% over the past 12 months from $243,000 to $220,000.  Why? Here’s my thinking. First and foremost, home prices in Salt Lake City increased around 55% from 2003 to 2007, I feel driven by the availability of Stated Income loans that were used to buy more house than someone would qualify for via a Full Doc loan. This allows sellers to ask more and buyers to bid against each other, artificially increasing the value of homes. And what is the value of a home? Whatever someone will pay for it.  The kicker is Utahn’s incomes did not increase by an equal amount.

Now with the elimination of almost all Stated Income loan products, more Utahns are qualifying for less home.  But more realistic in relationship to their income and what they can afford.  This is bringing home prices back into a realistic range.  You see, the average household in Salt Lake County makes about $60,000  a year, which qualifies them for a $211,000 loan.  So I think we’re seeing average home prices sink back to the range of the average Utahn’s documentable income.

Second, although Utah hasn’t been hit by the foreclosure problems that other states have, there has been some, and homes selling at auction below market value, or homes being short-sold to sell them before they go to auction is driving down values since a major indicator of appraised value is comparable sales within a given area around the property being appraised.

For those that document their income the market is very good, and it’s a very good time to buy.  Rates are still historically low and homes have become more realistically valued for the area, and contrary to what you hear on the news banks are still funding loans. Wall Street is hurting, but Main Street is a bit more insulated because not everyone on Main Street is a rich investor in the Stocks and Bonds markets.

If you or anyone you know has any questions on their current mortgage, please contact me.  I’m always happy to answer them.

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Mortgage rates wild ride

Stocks down. Rates down. What’s going on here?

After a bad day on Wall Street yesterday rates fell dramatically this morning only to have three upward adjustments as the day went on?  Why, a few reasons today:

1. Stocks

2. Bonds

3. Fed Funds Rate

Mortgage rates are based on bonds. When stocks are not attractive, investors move their money to bonds which pay less, but are more secure. This drives mortgage bond yields up and thus rates down. So when Wall Street had it’s worst stocks day since September of 2001 yesterday, bonds got a big boost and rates dropped almost a full point this morning to around 5.5% for a 30-year fixed or an FHA 30-year fixed.  The day began with stocks falling 1.5% and as the day went on and the Fed decided not to cut the Funds Rate again it gave investors confidence in the course of the Fed and the markets and stocks rallied to a 2.5% increase. Hence, stocks got better, bonds got worse and so did mortgage rates.

How much worse? Well still better than they were last week.  A 30-year fixed loan is still pricing around 6.00%, which is better than 6.375% to 6.50% it was last week.  If I had to guess I’d say that rates are going to continue to bounce between 5.75% and 6.375% for the foreseeable future.  The last two days could have just been a momentary blip, an anomaly like we had last February when rates fell dramatically for about half a day.

Why didn’t the Fed cut the Funds Rate?  Because they have injected $120 billion into the banking system in the past two days.  It would seem the Fed wants to make borrowing more accessible rather than simply cheaper.  This is probably a good long term move to stave-off inflation increases because more money will be available to more people which will help fuel the economy rather than simply make a limited amount cheaper to less people.

The upshot though is that it’s still a good time to buy because rates are still low. Sure, maybe not the 4.50% low of a few years back, but those days are not sure to return for quite awhile, if ever.  Rates are still at historical lows, though, and home prices are stabilizing in Salt Lake City and throughout Utah, which will make homes available to more potential buyers.  I have a payment calculator available on my website as well as an affordability calculator.  Fool around on them to figure-out how much home can be afforded as well as what the payments would be.

Also, with rates where they are at now, it might be a good time to look into refinancing an 80/15 or 80/20 loan into a single loan.  A better rate might be in place on a first, but the second is higher and the blended rate of the two is the one you want to beat to save money.  There is also a blended rate calculator on my website to figure-out what the true rate is on a combo 80/10, 80/15 or 80/20 loan.

Call me if you have any questions.  Also, I appreciate and referrals you may provide since my business is almost fully referral-based.

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