US rates slashed to nearly zero

The US Federal Reserve has slashed its key interest rate from 1% to a range of between zero and 0.25% as it battles the country's recession.
In its statement, the Federal Reserve warned that "the outlook for economic activity has weakened further".
It predicted that rates would stay at the current exceptionally low levels "for some time".
It added that it was considering ways it could spend money on supporting the economy and credit markets.
Analysts said that the key rate is now virtually zero.
"Whether it's zero or 0.25% actually does not make a huge difference," said Holger Schmieding at Bank of America.
He added that the more important factor is what policymakers plan to do now that they cannot cut interest rates any further.
The Federal Reserve is already injecting billions of dollars into the banking system as well as buying debt based on home loans.
Postpone purchases
The Federal Reserve stressed that it was already planning to buy large quantities of additional debt based on mortgages and is considering whether it would be a good idea to buy long-term US government bonds.
The strategy of a central bank buying government bonds mirrors the so-called quantitative easing carried out by the Japanese government when it was fighting deflation in the late 1990s and early 2000s.

The Federal Reserve promised to use "all available tools"
Deflation becomes more of a risk as interest rates approach zero.
It is a serious problem for an economy because people postpone making any large purchases as they believe prices are going to fall, which stifles economic activity even further.
Quantitative easing is, "just another word fr the central bank injecting so much money into the system that a good deal of it is passed onto households and businesses at a reasonably low interest rate," Mr Schmieding explained.
The rate has been cut drastically by the Federal Reserve from the 5.25% where it stood in September 2007.
Market response
It is the lowest the central bank's key rate - the target rate for banks to charge to lend to each other overnight - has been since records began in 1954.
The decision received a luke-warm initial reception from the stock market, with the Dow Jones Industrial Average rising from 8,684 just before the decision to 8,740 about half an hour after it, which is a rise of just 56 points.
But once the news had been digested, the Dow Jones closed up 360.4 points, or 4.2% at 8,924.9.
"You've seen the dollar weaken because it was a larger than expected cut - the dollar is falling against all major currencies," said Matt Esteve at Tempus Consulting in Washington.
"On one side, we effectively have a zero interest rate in the US - on the other side, the Fed has sent a sign that they are ready to use all tools to help the US economy out of recession."
Earlier in the day, official data confirmed that the threat of inflation is receding, as consumer prices fell a record 1.7% in November.
Government help
President-elect Barack Obama said in a speech on Tuesday that his administration would also be doing its bit to stimulate the economy because the central bank could no longer use its main tool.
"We are running out of the traditional ammunition that is used in a recession, which is to lower interest rates," he said.
"That's why the economic recovery plan is so absolutely critical."
He has undertaken to create at least 2.5 million jobs by 2011 as well as launching a programme of improvements to the country's infrastructure.

story courtesy of BBC news

Lessons Learned: Low-cost mortgage could be a big gift

By GENE KELLY/Personal Finance ColumnistFriday, Dec 12, 2008 - 12:17:17 pm CST

December is dwindling down to a precious few days. Yet, there may still be time to power shop for a major family gift — a low-cost home mortgage.Fixed rates available on 30-year and 15-year loans are the lowest in a half century. This appears to be a major inflection point for long-term interest rates.A few days ago, a Lincoln friend called to share good news: Instead of making payments on both a first and second mortgage, she had just locked in a 30-year mortgage that will carry a bargain fixed rate of 5.25 percent.“We knew rates had been dropping,” she explained, amidst all the upheaval in the credit markets and loan foreclosures. Their old “piggyback” loan package consisted of a larger 30-year fixed loan with an interest rate of 5.75 percent, and a 10-year second mortgage that had a 7 percent interest rate.“Since mortgage rates change daily, we asked our mortgage broker about refinancing,” she said. “He found us a low-cost mortgage, with no origination fee or discount points.“One Lincoln-area lender has even advertised a 30-year fixed rate of 5.125 percent. The rate can be dropped to 5 percent by paying a 0.25 percent discount fee, or to 4.875 percent by paying a 0.50 percent discount.Moreover, the Treasury Department is considering ways to encourage banks to offer rates as low as 4.5 percent for newly-issued 30-year fixed mortgages.Of course, to get a low-cost mortgage, you’ll need a good credit history. Banks have tightened lending standards. Having a credit score of 740 or more should put you in the catbird seat.So before you shop for a new mortgage, check your credit scores and request your credit reports at http://www.annualcreditreport.com/.Declining mortgage rates mean the next few months could be a terrific time to trade up to a bigger house or buy a first home.A home is more a shelter than an investment: Over the long run, home prices tend to increase at an inflation-adjusted rate of 3 to 4 percent a year, roughly in line with household income.Everything seems to be on sale. Since I’m a card-carrying contrarian, you’ll find me shopping for short-sleeved shirts when the winter merchandise cubicles are being stocked. I’m the type who would look for a new umbrella only on a sunny day.Nearly all assets have been repriced. Double-digit markdowns have affected investments ranging from the big dividend-paying growth companies to gold and other commodities, and from high-yield junk bonds to aggressive small-cap stocks.I was as puzzled as anybody by the dramatic global collapse of bond and equity investments. But why are so many long-term investers running away from the resulting bargains? Provided you don’t need your savings in the near future, this could be a phenomenal opportunity to accumulate cheap shares. Readers tell me all their savings are going to be moved into bank accounts, Treasury notes or money-market funds.True, you can get a seemingly-decent yield on certificates of deposit. But after subtracting inflation and taxes, this approach is guaranteed to shrink your purchasing power over the coming decades.Looking into 2009: While volatility will continue, I believe the bear market in stocks has bottomed. If the bear cycle and the recession play out as they have historically, the economy should begin to grow again in the second half. U.S. stocks would then end the year in the black.Early filers: Extra real-estate standard deduction now available. If you usually bulk up your itemized deductions by accelerating payment of charitable donations or state and local taxes into the current year, a change in the Internal Revenue Code might mean a change in strategy:For 2008, you could be better off claiming the standard deduction. For the first time, you can take a new, additional standard deduction to reflect real-estate taxes — up to $1,000 for married folks who file jointly and $500 for singles.A 65-year-old married couple who file jointly could get a standard deduction that totals $14,000 for 2008, if they paid at least $1,000 in state and local real-estate taxes. To do the math, both husband and wife get a basic standard deduction of $5,450. There are additional amounts for those 65 or older add $1,050 for the wife and $1,050 for the husband). Finally, add $1,000 for the new real-estate standard deduction.This change in the tax code will be available again for 2009.

Investor Report: Rethinking Controversial Limits

Here's some potentially good news for investors from the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

James Lockhart, who runs the agency, says there's been some "re-thinking" underway on the controversial limits on the numbers of rental properties investors can own if they're seeking new financing.
Both Fannie Mae and Freddie Mac have imposed a four-unit limit, reversing their previous investor maximum of ten units.
The rationale for the change, according to the agencies, was their belief that investors who own higher numbers of rental condos and houses pose a greater risk of default, foreclosure and loss for the companies.
The restriction effectively shut out many small investors from Fannie's and Freddie's standard programs -- and pushed them into much higher-cost financing from so-called "hard money" lenders.
In a letter to Charles McMillan, president of the National Association of Realtors, Lockhart said, "While no final decisions have been made, I can share with you the fact that the issue of raising the selling guide ceiling on investors loans is under active consideration at one of the (corporations), and reflects an appreciation of the role for investors in the housing recovery."
Realty Times obtained a copy of Lockhart's letter to McMillan, which was intended to respond to issues raised at the Realtors' annual convention in Orlando in November, where Lockhart spoke to two sessions. Lockhart did not disclose which company may soften its rule, but when one changes its standards, the other typically follows suit.
Lockhart addressed another issue of concern to investors and other buyers of condo units: The negative impacts of growing numbers of foreclosed units and bank-owned REO in condo projects.
Under current rules, Fannie and Freddie generally avoid loans in condominium developments where less than 51 percent of the units are owner-occupied. The problem is that both companies define REO and foreclosed units as non-owner-occupied, even though they are temporarily vacant and not owned by investors.
Lockhart said in his letter that "at least one" of the two corporations -- either Fannie or Freddie -- "is considering a clarification of the 51 percent (rule) that would exclude REO units from being counted as investor units … in the owner-occupancy ratio."
Lockhart offered no timetables for either of these key potential policy improvements, but investors may well see one or both changes within weeks.
At the very least, it's good news that the top executive regulating Fannie and Freddie recognizes the significant roles investors can play in helping the industry dig out of the current mortgage mess.

Six Signs That You're Ready To Buy!

By Michele Dawson
Figuring out whether you're ready to buy a house -- whether you're a renter or are aiming to move up or size down -- can be a daunting task. But there are signs that will indicate whether you're ready to take the buying plunge.
If you are thinking about buying, you're not alone.
David Lereah, the National Association of Realtor's chief economist, said the housing market has reached a new plateau. "Over the last few years, it's become apparent that the level of home sales will generally remain at higher levels than what was common in the mid-1990s," he said. "The fundamental change is a growing population with a rising number of households entering the age in which people typically buy their first home. In short, we have the need, desire and ability for people to buy homes."

So are you ready to make the move? You might be if you:
Are familiar with the market. If you've been paying attention to how much houses are listed for in the neighborhoods you're eyeing and have a realistic view of how much a house will cost you, you're in good shape. But if you're dreaming about that big corner house with no clue about it's asking price, you may want to spend some more time becoming familiar with the market and how much houses are going for.

Have the money for a down payment and closing costs (paid for by Hartland Homes). The down payment is a percentage of the value of the property. Freddie Mac says the percentage will be determined by the type of mortgage you select. Down payments usually range from 3 to 20 percent of the property value. Also, you may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20 percent. Freddie Mac says that as a general guide, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. Also, your income, debt and credit history go into determining how much you can borrow. As a general rule, your debt -credit card bills, car loans, housing expenses, alimony and child support -- should not be more than about 30 to 40 percent of your gross income.

Know what additional expenses will come with owning a home. This includes homeowners insurance, utility bills, maintenance costs -- roofing, plumbing, heating and cooling.
Have your credit in good shape and make sure your credit report is accurate. Potential lenders will view your credit history -- how much debt you've accrued, how many accounts you have open, whether your payments are made on time, etc. -- to determine whether they'll give you a loan. You should get a report from each of the three credit reporting companies: Equifax, Experian, and Trans Union.

You haven't made any recent major purchases, particularly a vehicle. If you do, you may have a harder time getting a loan -- or it could potentially lower the amount you'll be approved for.
Once you decide you're ready, you'll need to be prepared to move quickly if you're aiming to buy in a sellers' market.

The next steps involve calling a Hartland Homes agent and getting prequalified for a mortgage loan. This way you'll know if you can get approved and how much you can spend on a house. It also puts you in a stronger position when you ultimately make an offer on a house.

Planning For Your Future

What you need to know about real-estate investing

By Dave Kansas

Investing in real estate is a key part of any investor's financial planning. For most of us, our homes are a big part of our net worth. And as we grow older, we build equity in our homes that can help fund our children's college or our own retirement. Here, we'll take a look at investing in our private residences, in vacation houses and in income or rental properties.

Our Homes
Owning a home comes with tax advantages. For instance, interest paid on mortgage is tax-deductible. And in some cases, home improvements can provide tax advantages. Selling a home also has some tax advantages. If you are single and have lived in your primary residence for two years, the first $250,000 of profits from the sale of the house are tax-free. If you're married, the exemption is $500,000. And you can take that tax advantage once every five years.

Second Homes
Investors have some options about optimizing the purchase of a second home. They can use the residence as a personal property, in which case the interest payments are tax deductible. Under the tax code, taxpayers itemizing deductions can claim mortgage interest payment deductions on the first $1 million of debt incurred for the purchase of a first or second home. To qualify as a second home, an owner must use the residence for more than 14 days per year.

The other option is to rent the property when you're not using it. If you rent for fewer than 14 days, you can still qualify for the personal home deduction. If you rent for more than 14 days, the tax treatments change, because now your second home is considered an investment property. Expenses such as mortgage interest and maintenance are divided between personal and investment use, proportional to the number of days of rental use and actual use. The expenses counted as investment are deductible; the portion allocated for personal use, including mortgage interest, is not deductible, because an investment property is not considered a personal second home.

Income Properties
Investing in income property is riskier than buying a second home, because rather than having a place to visit on the weekends, an income property is purchased to deliver, well, income. A two-family home, called a "duplex" in some parts of the country, may sound easy to rent and maintain. But if one unit is empty, 50% of your rental income isn't coming in that month. And that rental income is usually aimed at paying off a mortgage used to purchase the income property. Having a 100-unit building makes it less likely that you'll face a 50% vacancy rate, but even a 10% vacancy rate means you are trying to rent out 10 units, which can take a lot of time. Investing in income property sounds glamorous, especially when you run the numbers with full vacancy rates and no turnover. But pipes break, people move out and the roof sometimes needs replacing. The landlord of an income property has to deal with all these headaches. Landlords who have a lot of money can hire other people to handle these things, but most of us investing in real estate don't start with such full pockets.

Valuing an income property is more complex than valuing a residence. When you buy a residence, you are calculating your ability to pay a mortgage out of your own earnings. When you buy an income property, you're calculating how the income (rents) will help pay the mortgage.

So how to value an income property? An income property has an annual net operating income, or NOI. This is a figure of rental income less anticipated vacancies, maintenance and other expenses, not including interest payments or other debt related to the property. Most investors divide the NOI by something called the "cap rate" to come up with the proper value for one apartment in a complex. The cap rate relates to the expected annual rate of return on the property, and most income property buyers recommend using a cap rate of 9% (0.09) or 10% (0.10) when evaluating a property. So a property with an NOI of $100,000 and a cap rate of 9% would have a value of $1.1 million. This kind of simple calculation isn't perfect, but in a real-estate market that is increasingly frantic, doing even simple math can help you understand if you're overpaying for a property. Like investing in stocks, investing in real estate works best when you don't overpay. Cap rates vary depending on all kinds of local variants, such as the proximity of good schools, safety and local economic growth.

Trouble pulling the trigger on your first home?

Tips on making the move to homeowner By Melissa Paul

You’ve made up your mind to buy a place of your own. You’ve saved a hefty down payment. You’ve poured over the daily downloads for months on end. You’ve made open house tours part of your weekend ritual. But months, perhaps years, have passed and you find yourself still in your rental, no closer to being a homeowner than when you started. But why?

Perhaps, because your current home is familiar. You know exactly what to expect. You’ve come to accept its shortcomings whether they are loud neighbors, a leaky ceiling or scant street parking. There are few surprises.

For many first-time homebuyers, pulling the trigger can be a frightening experience. Will you be happy there? Will you like your neighbors? Will you be tied down, house rich and cash poor? What if you lose your job? Will you hate your commute? In short, your fears stem from the unknown.

Paolo Forte is the eternal condo-shopper. “I’ve been looking for four years," says the 35-year-old Boston resident. "I have actually seen condos come on the market, sell, and then be resold a second time. While I’ve been waiting, condo prices continue to rise, and I keep spending more money on rent.”

In Betsy Townsend’s 10 years as a Realtor® in Boston’s pricey Beacon Hill, she’s seen everything. “I find that people often hesitate to make the ‘biggest purchase of their life’ because they fear they will make a ‘bad investment’ and pay too much,” she said. “Sometimes people lose site of the fact that they are looking for a place to live instead of just an investment.”

Still, there is hope anyone like Forte who have hesitated when they should have been bidding. You are surrounded by family, friends and co-workers who took the leap and are reaping the benefits. Give these steps a try and you could be among them:

• Get comfortable with your finances: Anticipate the new costs that you will incur such as taxes, homeowners insurance, utility bills, and commuting costs. This will help you determine the maximum price you can spend on a house. Enlist the help of a financial expert if you need help. Remember, the first year is the hardest; you will start to receive tax benefits in year two.
• Partner with a Realtor: Even though the internet gives you access to endless amounts of market information, don’t be fooled into going it alone. Instead, try out a few realtors and when you find one you like who listens to you, stick with him. He or she can line up properties to view, answer many of your questions, and make connections for you in your new community. Best of all, Realtors often have the inside track on a new properties just coming on the market.
• Accept some risk: Realize that there is uncertainty in everything, but no matter what happens, you will deal with it. Ask family and friends about their experiences and learn from them. Be sure to keep some cash reserves in the bank as a safety net. And remember, you have home owners insurance for a reason.
• Fine tune your “must-haves”: Is there a community that you absolutely want to live in? Are you adamant about wanting a garage, a fireplace or a finished basement? Make your list of what’s important to you and look for it. You may find that you are willing to sacrifice one feature, if the rest is fabulous. If you are not crazy about the house, don’t bid. It’s important that you love it at the outset.
• Be ready to bid: Great houses don’t stay on the market long. Sometimes one open house leads to three offers. If you love it, be ready to make your best offer. If you are wavering, ask yourself, “How will I feel if I don’t get this house?” You might just get it, and if not, at least you’ll you know you tried.
• Reap the reward: Owning a home can be one of the most exciting and satisfying things you’ll ever do in your life. It’s an investment that can pay you personal dividends as well as financial.

For Forte, his 2007 new year’s resolution is to pull the trigger on a new home. “I’m finally ready to take the step. I’m tired of standing on the sidelines. I’ve set a deadline and I am ready to bid when I see it. It’s been a long time coming, but I know I am on my way to being a homeowner.”

10 benefits of buying at the end of the year

By Michele Dawson

With interest rates for 30-year fixed mortgages still hovering at around 6 percent, the end of the year is a great time for renters to become homeowners, growing families to move to more accommodating homes, and Baby Boomers to find houses that fit their evolving lifestyles.

In addition to low interest rates, there are other benefits to buying at the end of the year, including:

Tax savings. Closing on your new home by Dec. 31 means you can deduct mortgage interest, property taxes and points on your loan on your income tax return. You can also deduct the interest costs associated with a home equity loan. These deductions are significant, especially in the early years of your loan when you are paying off so much interest.

Sellers might be more motivated. Many sellers will also be anxious to sell by the end of the year so that they, too, can enjoy tax savings on the next home they purchase. That means you may have more leverage during negotiations and they may be willing to accept lower than their listing price. However, if you're in a strong seller's market, you'll want to be conservative -- and always heed the advice of your real estate professional.

If you're buying a new house, there's a good chance builders will be offering incentives. Many builders will throw in nice little extras to sell as many houses as they can by the end of the year.

Generally speaking, your housing choices during the fall are still healthy. By December there are traditionally fewer houses on the market. October and November are great months to go house hunting.

It's easier to move. Many moving companies are booked six or so weeks in advance during the busy summer months. In the fall and winter it's normally easier to secure the services of a moving company or rental equipment on shorter notice.

A new home for the holidays. The holiday season is a great time to celebrate your new home with family and friends.

In addition, you'll enjoy the many benefits that come with homeownership, regardless of what time of year you buy, including:

Paying toward something you own. If you're renting, your rent payment goes toward something that will last you a month -- a place to live for 30 or so days. When you buy a house, your monthly mortgage payment goes toward something you own.

Consistent payments. Landlords have the discretion to increase your rent, plus it's exposed to inflation. Once you secure a mortgage, you can rely on consistent payments (if you have a fixed-rate mortgage).

A place to make your own. When you own your house, you can update your kitchen, paint your home's exterior in any color you choose, change your fixtures, and replace your carpeting -- all with the knowledge that the changes you make are your own.

Gaining equity. In the beginning, most of your payment goes toward interest. But gradually more will go toward paying off your principal, meaning you build up equity -- or savings -- in your home. Another factor in equity is appreciation. As home values go up in your area, so too does your rate of equity.

Number of first-time home buyers is increasing

Survey shows they are taking advantage of falling prices, interest rates

The Associated Press

Low home prices and excess supply helped drive a rise in first-time U.S. home buyers and reduce excess inventory, according to a study released Saturday by The National Association of Realtors.

According to the survey, which was released at the 2008 Realtors Conference & Expo, the number of first-time buyers rose to 41 percent from 39 percent of all transactions in 2007.

"First-time buyers are much more flexible in entering the market because they aren't concerned about selling an existing home," National Association of Realtors Chief Economist Lawrence Yun said in a statement.

Yun attributed the increase to low home prices, "plentiful" supply and affordable interest rates. Looking ahead, Yun expects further increases in first-time home buyers because of a temporary first-time buyer tax credit and improvements to the FHA loan program.

"It's been an optimal time for entry-level buyers with a long-term view," Yun said.

According to the study, the median age of first-time buyers was 30, down from 31 in 2007.

The median income for a first-time buyer was $60,600 and typical first-time buyers bought homes costing $165,000.

Of first-time buyers who made a down payment, 69 percent used savings and 26 percent used money from a friend or relative. Another 7 percent received a loan from a relative or friend, while 16 percent used funds from their investments. A fixed-rate mortgage was chosen by 92 percent of those surveyed.

Looking at home sellers, the median age was 47 with income of $91,000. Three-quarters of respondents were married, lived in their home for six years and had their home on the market for eight weeks.

Results from the survey come from a questionnaire that NAR mailed to 133,000 home buyers and sellers nationwide who bought their homes between July 2007 and June.

Educated Homeowners Surviving Housing Crisis

by Broderick Perkins

If the experts have said it once, they've said it a thousand times, but they can't say it enough. Homeownership doesn't come with a manual. It's up to you to learn what you are getting into before you embark on what's likely the most valuable acquisition you'll ever complete. It's no surprise new mortgage modification programs, foreclosure assistance and bankruptcy laws come with mandated homeownership counseling. When you get schooled on the issues of homeownership, you have much greater chance to continue as a homeowner -- even when the economy crashes down around you. The foreclosure rate for low-income homeowners who attended homeownership education programs had a foreclosure rate that was 20 times less severe than that for subprime borrowers and three times better than that found in the prime mortgage market during the second quarter of 2008, according to data from NeighborWorks America, a staunch non-profit advocate for healthy communities. "The facts tell the real story," says Kenneth D. Wade, CEO of NeighborWorks. "The vast majority of mortgages facilitated by NeighborWorks organizations are to buyers with low and moderate incomes and less than perfect credit scores, yet by obtaining quality mortgage advice these homeowners have been able to sustain homeownership during the most severe housing crisis since the Great Depression," Wade added. Long before homeownership counseling was de rigueur, South County Housing, a chartered NeighborWorks member in Gilroy, CA, was doling out a heavy curriculum of homeownership studies along with sweat-equity programs and loans that look a lot like subprime mortgages. However, thanks to smarts the group gave its largely Latino buyers, South County's portfolio foreclosure rates today hover around zero, belying rates in the rest of foreclosure-hammered California. There's more. When NeighborWorks compared its total loan portfolio's foreclosure start rate of 0.21 percent in the second quarter of 2008, it found the overall nationwide homeowner market had a foreclosure rate more than five times as much, 1.08 percent. Nationwide, the foreclosure start rate for only conventional conforming loans was 0.61 percent, compared to NeighborWorks' portfolio rate of 0.21 percent. Buying a home today without learning what it takes to keep it, is like a trip to a Vegas -- for insights on both the money-losing potential in the casinos and the kind of widespread homeownership devastation that comes with ignorance. Learned homeowners consistently out perform those without the lessons. Says Wade, "The idea that some observers now are pointing to low-income people as the cause of the financial crisis we’re facing today is just wrong. NeighborWorks organizations have a track record of providing one-on-one mortgage advice, encouraging homebuyers to avoid loans that they can not afford for the long term." The message is brutally simple. Seek accredited homeownership counseling now and prepare in advance for your own home. Even if you already own your home, enroll in a counseling session. There's plenty of counseling available. In October, the U.S. Department of Housing and Urban Development (HUD) doled out, to more than 2,300 local housing counseling agencies, $50 million in housing counseling training and housing counseling grants for first-time home buyers. It's your tax money. Use it. Get home schooled.

Real Estate Outlook: Housing in Recovery

by Kenneth R. Harney

With all the turbulence and losses in stocks and bad economic news in the headlines lately, you can easily lose perspective on what's really going on in the real estate sector.

For example, new mortgage applications increased last week by 12 percent, according to the Mortgage Bankers Association. Applications from people looking to buy houses with FHA loans were up by 15.3 percent, while applications from purchasers seeking conventional mortgages rose by six and a half percent.

How could that be, with all the grim economic news? Well, remember that there is a huge pent-up demand simmering away out there for housing -- especially from first-time buyers who want to scoop up low-priced deals.

When fixed interest rates drop -- and last week they were down by a quarter of a percentage point -- those buyers start doing the math and getting into the market with offers.

Fixed thirty year rates fell from six and a half percent to 6.24 percent during the week. Fifteen year rates broke below six percent to 5.9 percent, down from 6.14 percent.

Another piece of positive news you may not have noticed: Pending home sales were higher than year-earlier levels for the second straight month -- 1.6 percent higher than September 2007 .

Although pending sales contracts were down slightly for the month, in the western states they wee up by 3.7 percent, and now stand at an extraordinary 39.7 percent higher than they were at the same time in 2007.

At the National Association of Realtors' convention in Orlando, chief economist Lawrence Yun, warned the delegates not to expect a housing recovery overnight, certainly not with unemployment on the rise. But he projected a slow, steady, multi-year upward trend, with 5.02 million total sales this year, 5.3 million for 2009, and 5.6 million for 2010.

Already sales are up significantly in major markets in many parts of the U.S. Yun specifically mentioned the west coast of Florida, the Phoenix area, Virginia, Long Island New York, Kansas City, Minnesota and Idaho.

So here's the key point to keep in mind as you try to make sense of the headlines: The stock market is NOT the housing market. It's on a whole different set of tracks. And it's been in a highly volatile state for more than a month.

Housing, on the other hand, has already endured its painful correction for two and a half years … is now pretty much stabilized … and is slowing moving toward its cyclical recovery.

Can I qualify for a home loan?

You may have heard some ads on the radio about how the market here in Nebraska is good and you can get a loan. This is very true. While there are far less options out there today for people with poor credit there are still plenty of options for people with good credit. In general, good credit would be defined by little or no late payments in the last year, no judgments or collections and at least 2 years after a bankruptcy. If you have had a bankruptcy, it is important that you establish positive credit. Assuming you have a stable job and your ratios are in line you can get a loan. What types of loans are available? The most common loan we are seeing right now are FHA. An FHA loan has more lenient income to debt ratios and require only 3% down. (Starting January 1 the down payment minimum increases to 3.5%) If you have served in the military, you may be eligible for a VA loan. This is a 100% loan. Since it is a government backed loan, the ratios are also more lenient.Finally, there is the Conventional loan. A conventional loan would be used if you have 20% down and excellent credit. Finally, if you are a first time homebuyer and don't make too much money, there is a 100% loan (USDA) and a $15,000 down payment assistance program, both are only available in rural areas. Both of these programs are available in our Eagle area. Don't forget, if you purchase a home before July 1, 2009, and you are a first time homebuyer, you are eliglible for a $7,500 federal tax credit. There has never been a better time to buy a new home!!!! Call Hartland Homes today to find out more or email us!

Nebraska Ranks 49th in Foreclosures!

Nebraska Ranks 49th in Foreclosures! So what does this mean? Our foreclosure rate is the 2nd lowest in the US! That is good news. As I said in my last post, Nebraska isn't really experiencing the "foreclosure crisis" and our banks are in good shape too. Are we experiencing more foreclosures than 3-4 years ago? Yes. However, you need to keep in mind that our foreclosure rate is very low when compared to the rest of the nation. The following statistics are courtesy of RealtyTrac : For the month of October, in Lancaster county there were 8 foreclosures filed, that is 1 in every 14,413 housing units. Now, compare that to Riverside county in California: 6,897 foreclosures filed, that is 1 in every 106 housing units. Or even worse in Clark county, Nevada: 12,1550 foreclosures filed which is 1 in every 62 housing units! As you can see, what is happening in Lincoln is realitively minor.

It seems lately all we hear about is the looming financial crisis and the bail out. I was very happy to read the Journal Star’s article on Nebraska banks being ok.
It is important for Nebraskans to know that, as with the Real Estate foreclosure mess, this financial crisis is national, NOT local! The media is largely national. And although what happens on a national level does affect us to a certain degree, the biggest factor in our economy right now is the negative media!!!
Did you know that the Real Estate foreclosure mess is primarily in Nevada, California, Arizona and Florida? These are places where prices rose exorbitantly and risky loans with adjustable rate mortgages were offered. Investors were buying like crazy to flip for a profit, counting on the increasing prices and incredible demand. When they got scared and pulled out, it caused a glut of supply and prices started falling. Regular people wanting to own but not able to afford these pricy homes took advantage of loose mortgage requirements and loans with lower starting interest rates. Then, when the rates began to rise, and prices began to fall, these homeowners (who were already stretched beyond their means and a credit risk too boot) could not make their payments or refinance to get extra money!
From 2004 to 2006, subprime loans, as a percentage of all mortgages, doubled. It is only reasonable to assume that default rate on these loans would be higher than on standard loans with more conservative requirements. However, keep in mind that over 95% of these loans are not in default! You would never know!

What does all this mean for Nebraskan’s who want to get a loan to buy a home? There are still lots of options available. What is not available is “no document loans”, 80/20 (100%) loans with less than stellar credit, or loans for 125% of the purchase price. What is available? FHA loans with 3% down and reasonable credit. (this will increase to 3.5% down on 1/1/09) There is also the VA 100% loan for veterans, 100% loan available in rural areas, $15,000 down payment assistance in rural areas, and don’t forget the $7,500 tax credit!