According to a recent article in RIS Media, a real estate information website I follow, Freddie Mac just released the results of its Primary Mortgage Market Survey. Great news for home buyers: mortgage rates are down in every category. For instance, a 30-year fixed rate mortgage averaged 3.89 percent last week, down from 4.71 percent at this time last year. Similarly, last week’s 15-year fixed rate mortgage averaged 3.23 percent, as opposed to last year’s 4.08 percent. And the five-year Treasury-indexed hybrid adjustable rate mortgage averaged 2.82 percent last week, versus last year’s 3.72 percent.

All  these numbers make for pretty dull reading, I know. They add up to exciting possibilities, though. So take the plunge and make 2012 the year of home ownership. As an experienced New Jersey Realtor, I’d be delighted to help make this happen for you. Happy New Year!

Jack Hough, the author of the WSJournal article, explains that because house prices have fallen so dramatically since 2005, the ratio of house prices to yearly rents is shifting in favor of buying. He compares a house’s price/rent ratio to a stock’s price/earnings ratio; in both cases a lower ratio means that more income can be generated for the price paid. And the price/rent ratio has been dropping steadily over the past several years.

Most first-time home buyers are primarily concerned with getting a  mortgage, and here too, the numbers are in their favor. The 30-year mortgage rate is currently just over 4%, almost a record low. Mortgages are not as easy to obtain as they were during  the housing bubble, but qualified applicants (those with a job, a good credit rating and enough cash for a down payment) will be rewarded with low monthly payments.

Here’s a current example of a 2 bedroom “rent” option in Montclair vs. a 2 bedroom “buy” option.

• RENT: 18 Baldwin Street. 2 bedrooms, 2 bathrooms. Rent: 2300/month
• BUY: 50 Pine Street. 2 bedrooms 2.5 bathrooms.  Mortgage: $1050, property tax $695, HOA fee $225 = $1970/month

The bottom line for renters: now is the time to take the plunge.

Montclair rental - gone in 1 day

Real estate is always a “good news-bad news” business. The most obvious example of this is an overheated market: great news for home sellers, lousy news for home buyers.  An article I read recently in RISMedia,  an online trade publication, discusses another good news-bad news situation: the current rental market.

The article cited a study by the Harvard Joint Center for Housing Studies, which concluded that the fledgling national economic recovery will actually hurt renters. More Americans are finding new jobs, but these jobs often pay less than their former ones, so they are choosing to rent a home instead of buying one.  In addition, the continuing foreclosure crisis means that many former homeowners can now only afford to rent. With no real increase in multifamily rental units planned by developers, rental units will almost certainly become scarcer and thus more expensive.

Montclair is already showing signs of upward pressure on the rental market – There are only 35 rental units at the moment listed on the MLS as compared to 230 that are currently for sale.  As a New Jersey Realtor, I have firsthand experience with this trend: I listed a 1 BR condo renting for $1850/month in a loft-type building in Glen Ridge, walking distance to the NYC train, on Saturday; by Monday, it was gone.

The good news in this scenario: a poor rental market often means it is a good time to buy a home. Mortgage rates are at their lowest in years, and home prices have dropped significantly from several years ago. Are you looking for more space for your growing family? Have you been considering buying a multifamily property as an investment? If you answered “yes” to either of these questions, then take advantage of the good news (for buyers) and make your move before the tide turns again.

Most buyers are happy to have another company with which to compare rates, but some buyers balk at the prospect of having their credit pulled again because they fear it will damage a hard-earned high credit score.  This is a ploy that some mortgage guys use to stop the buyer from shopping around for a better rate.  Read this fantastic article by loan officer Dan Green (whom I’ve actually never worked with) to understand more about how much this will truly damage your credit score.

A recent New York Times article discusses the rise in short sales in Manhattan due to the recession. One market analyst said “2010 might well be dubbed the Year of the Short Sale nationally. ‘A short sale is going to be the only way for many people who bought at the peak and who are now underwater to move on with their lives if they have to relocate or downsize.’” Like Manhattan, Montclair, Glen Ridge Maplewood and the rest of Essex County have seen the number of short sales rise. When the alternative is foreclosure, selling a house through a short sale is a way for the owner to come out of the deal relatively unscathed. I discuss the issue of short sales further in Short Sales for Buyers and Short Sales for Sellers. If you have any questions about short sales, either because you’re thinking of selling your house short or you’re interested in buying a house that’s  a short sale, please email me for more information.

Assemblymen and state Senators both pointed to the increase in jobs the credit would have brought, not just in the field of construction but also for home contractors, furniture makers, and all the industries involved in building and outfitting new houses. But Gov. Christie has long made it clear that he was against the credit, for the simple reason that the state does not have the money (yet he found $875m available for the embarrassing Xanadu shopping center in the Meadowlands…).

The extended-deadline amendment to  HR 4213, the “American Jobs and Closing Tax Loopholes Act of 2010,” was added onto an amendment that also extended unemployment benefits. It just barely passed before the June 30 deadline, and was written so that there will be no gap between June 30 and when it was signed by the President in early July. Home buyers will still have to show all the evidence that they entered a contract before April 30.

So what does this mean? The newly-passed amendment eases the stress of thousands of NJ home buyers. The credit has proven to be extremely popular, which has been great for home sales, but has also led to backups in the normal time it takes to qualify for a mortgage. In addition, many first-time buyers are buying homes in foreclosure or short sale and the additional paperwork is adding to the logjam. Those of you waiting for your mortgage to clear, there is at least the bright side of amazing rates to look forward to, the best recorded by Freddie Mac since 1971, when it started following interest rates. The average annual rate for a 30-year fixed-rate mortgage (20% down) is now 4.69%. Just a year ago the rate was 5.42%. Though the low rates are a sign of the shaky economy, they are a positive for those looking to buy homes or refinance existing mortgages. No wonder mortgage brokers are swamped!

The Washington Post reports that rates for a 30-year, 20%-down fixed-rate mortgage are the lowest they have ever been since Freddie Mac started following rate changes in 1971. As of last Friday, 6/25, the average rate is  4.69%, down from 4.75% the week before and more than 5% a year ago. Rates for a 15-year, fixed-rate mortgage have gone even lower, as low as 3.875% (compared to 4.89% last year).

The Post explains that mortgage rates are dropping

because investors, nervous about global economic stability and a volatile stock market, are plowing their money into mortgage securities backed by Fannie Mae and Freddie Mac, assets that investors perceive to be relatively safe bets.

But despite the great terms, consumers are becoming less and less interested in buying houses and applying for mortgages. The end of the tax credit in April combined with shaky employment and stagnating wages have led to a steep drop in home sales, and a corresponding decrease in mortgage applications. While some people are still in the market to buy a home, the numbers are reduced and the lower mortgage rates are not working to attract those on the fence. Michael Fratantoni, a vice president at the Mortgage Bankers Association, says that consumers at this point are used to fairly low mortgage rates, and do not therefore see the 4.69% rate as a reason to commit to a mortgage if they are not otherwise prepared to.

However, for those who already have mortgages, now is an excellent time to refinance, and indeed, refinancers make up a whopping two-thirds of all mortgage activity. For those who can, refinancing is a great option, but not everyone who wants to will be able to, given that house prices have dropped and their own credit history might not fit the more stringent qualifications mortgage lenders have adopted since the subprime mortgage crisis.

1. 1999: 37% of buyers searched for a home online. 2009: 90% of buyers searched for a home online.
2. 1999: median home value is $137,600. 2009: median home value is $172,600
3. 1999: 82% of buyers purchased detached, single family homes. 2009: 78% of buyers purchased detached, single family homes.
4. 1999: 46% of buyers choose suburban neighborhoods. 2009: 54% of buyers choose suburban neighborhoods.
5. 1999: 68% of buyers were married couples. 2009: 60% of buyers are married couples.
6. 1999 and 2009: the median age for buyers was 39.
7. 1999 and 2009: “neighborhood quality, affordability, and convenience to work and school have consistently been top priorities.”

I bought my Montclair home just over a decade ago –11 years to be exact– and it has doubled in value, current market conditions notwithstanding.  Happy to be living here in Essex County, NJ and not where the median home value has increased by a mere 25% (see #2, above).

(Lani Rosales, December 31, 2009, Agent Genius Blog)