December 30, 2010 Newsletter
As year end approaches, not many can predict with any certainty what 2011 will bring. In the real estate marketplace most agents believe we have seen the worst as far as price ”adjustments” in our area, and investors are starting to get active. That activity would indicate they believe we are at or near the bottom as far as pricing. There are several factors which will impact the coming months.
Rates were at an all time low at the end of October, beginning of November. The Fed came out with its QE2 plan to buy securities, with an idea that low interest rates would hold, yet as soon as the plan was announced, rates began to climb. Rates for fixed thirty year loans were in the low 4’s, but went up to 5 or better in the eight ensuing weeks. Look for rates to fall back after January 4, once the Fed’s policy gets enacted. Keep your fingers crossed.
Here is where it gets sticky. Forget about the appraisal issue momentarily, in the past two years if the potential borrower did not have impeccable credit, the loan would not happen. FNMA has new guidelines, effective December 13, 2010. Under these guidelines, borrowers with less than 20% down are able to obtain loans. The bad news is the debt to income ratio lenders are looking at is still very stringent. But for those with less than 20% down, but little debt, the ability to purchase has opened up.
The largest factor looming over the coming months should be based on how many properties go to foreclosure. Currently there is a moratorium affecting many institutional lenders, while there are ongoing investigations as to “robo signing” of court papers. There is some sentiment that lenders realize that foreclosure will not net them the loan amount in default, so some lenders are looking more kindly on negotiating with the defaulting borrower, to keep them in the home. Of course in the instance where the borrower has no possibility of making payments (lost job, divorce, death in the family..) those properties will still go on the auction block. But where the homeowner is behind but has the potential to carry the home, the lenders are starting to be more receptive. If that becomes policy, it will take many foreclosed properties off the market and help bring the “normal” sales market some relief.
Short sales are still occurring and lenders have accepted the fact that they are going to be around for awhile. The more the lenders work with the borrowers, the better.
Keep tuned and we will advise you as to how these factors play out in 2011. Have a safe new year’s eve, and look for the new year to bring some relief to the real estate market. We want to be your one stop shop for real estate advice and assistance. Call me at 410 884 1160 or email me at firstname.lastname@example.org.