Posts Tagged ‘Real estate economics’
Five Key Issues for 2012 Housing
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on January 18th, 2012
While many housing markets rose together during the boom and fell together during the bust, they’re coming out of the downturn at very different speeds, and so it’s no longer a matter of a “national” housing market. We’ve seen recovery happening on a local market level, and at very diverse rates.
With that in mind, here are the five key issues as published by the Wall Street Journal that will determine the housing market in 2012:
1. Confidence and jobs: The housing market still needs the economy to add more jobs to stimulate demand for home purchases and to prevent mortgage delinquencies from rising. The good news is that housing is more affordable than it has been in decades. But many that are considering buying are not striking because they are concerned that the prices will continue to drop. Others don’t want to buy a house until they have more evidence that they’re not going to get laid off or see their hours cut back.
2. Foreclosures: Whether home prices hit a floor this year also relies on how banks manage a huge overhang of foreclosed homes that they haven’t yet taken back and resold. Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency.
3. Rents: Apartment rents are rising as vacancy rates drop. If low mortgage rates aren’t enough to give urgency to buyers, rent hikes could accelerate their decisions to take the plunge. This is a good thing.
4. Mortgage credit and rates: Federal policymakers have taken extraordinary steps to keep mortgage rates low and federal-backed entities are responsible for backing nearly nine in 10 new mortgages. But it’s still hard for many buyers to get a loan because banks are demanding lots of documentation of borrowers’ incomes, and appraisals are tanking some deals. Banks will need to put their loan problems behind them before there’s much easing in lending standards.
5. Regulation: Many analysts don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012.
Meanwhile, the regulator that oversees Fannie and Freddie is revamping the way that mortgage companies are paid for collecting loan payments.
What other key things do you think will affect the market this year?
Try Before You Buy – the New Way for Potential Homeowners?
Posted by Sibet B Freides in Real Estate Economics on April 18th, 2011
With banks being so stringent about homeowner loans, consumers are finding more and more that they need a back up plan. Enter the growing popularity of the lease to own option.
Lease to own requests are most common in hard-hit markets where foreclosures have driven down home prices and sellers can’t or don’t want to come down anymore on the asking price. If the house isn’t occupied it’s an opportunity to create some revenue for the seller.
But while sellers seem more likely to consider lease-to-buy arrangements, most won’t advertise it. Agents are reluctant as well, as it delays their commission.
What are the risks?
The renter-buyer could back out of the deal. For that reason, it’s important for home sellers to understand the difference between a lease option–where the renter simply has the option to buy down the road–and a lease purchase agreement, which requires that the renter put down anywhere from .5% to 2% of the sale price in earnest money or pay a monthly rent premium with a share of the rent going toward the purchase price. The sale price and timeline are also spelled out in the contract.
If the renter backs out, the homeowner does get to keep the earnest money, however they may not be able to get the renter to move out in order to put the house back on the market.
If renter-buyers don’t buy the home they’re usually out earnest money, unless they convince a homeowner to do a lease option with no strings attached. An agreement like that usually signifies a seller’s desperation, which would warrant further questioning regardless.
Conversely, what if the homeowner stops paying the mortgage? If the homeowner is foreclosed on, buyers of course have a claim against them, but will be competing with other creditors.
Potential lease-to-own tenants should at minimum ask for proof that the owners are current on their mortgage.
Strict loan requirements and rising rents – do you think least-to-own is the new growing trend? Is it a positive or negative trend in your opinion? Tell us by commenting below or post your thoughts on our Facebook page!
