A Look at the Housing Markets
Well...the jury is still out on what the sub prime mortgage melt down will do, but you know its serious when the IMF does a study.
Some observations:
IMF: Happily, they concluded that the sub prime problems were likely to be contained to that area. ""Major dislocation still appears to be a low-probability event," If it were to spread the fear is that banks would tighten credit even for their best customers. That would make it harder to borrow and that's a slowdown.
FRB: Fed Chairman Bernanke told congress that its likely that this can be contained. Now, this doesn't mean a crash or even a severe correction.
NOTE: At this point all we can conclude is that there is a slowdown in the real estate markets...that has already happened. Changing markets are always murky and it takes quite a while to actually figure out what is happening, predictions aside we usually get it after the fact.
NAR: They predicted this week that prices would drop by only 0.07 percent form 2006 levels and sales of existing homes will drop 2.2%....thats digestible.
NOTE: Of course, there is real pain out there. One of the major new home builders. DR Horton Inc reported a drop of 37% of new home orders in just the last quarter! Seems the new home sector is in much more dire straights.
Freddie Mac: Interestingly the 30 year mortgage was 6.49% last year and this week its 6.17%...Just as it should be. When markets slow money cost should drop eventually creating demand again.
SF Chronicle: Govt to the rescue! "The Federal Housing Administration could be revamped to refinance mortgages in danger of default, the JEC's report said, citing a proposal by a Harvard professor under which the housing agency could oversee a "rescue fund" that would restructure failed or failing mortgages. Aid could also be provided to community organizations or banks that work with borrowers to refinance loans."
Be a cautious buyer. Don't overextend. Shop well and mind your fixed costs. Shop your insurances and mortgage rates. When shopping for the best mortgage, keep a close eye on extra costs such as points or fees.
- Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
- Ask about the loan's annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.
- Check your local newspaper for information about rates and points currently being offered.
- Ask for points to be quoted to you as a dollar amount rather than just as the number of points so that you will actually know how much you will have to pay.
Management Tip: A good manager pays a lot of attention to the variables in ownership. Vacancy's are one of those areas that can be controlled to keep your unit full at a good rent rate. It begins with good tenant screening. Here are some tips:
- Have potential tenant complete and sign a standard rental application to provide personal and employment information and authorize the landlord to obtain a credit report and background checks. Obtain the applicant credit report through a Credit Reporting and Tenant Screening Agency
- Do call prior landlords. They are your best, most honest source for information regarding on your prospective tenant. Present landlords, wanting to get rid of bad tenants may not be most objective source for you.
- Set a minimum income requirement as a multiple of the rent. We are comfortable with 3X the gross income as a qualifyer.
- Credit Rating: Consider a minimum score, a minimum of late pays, income to rent ratios
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