Market Analysis
(We
attempt to update this consumer comment section at least weekly and sometimes
more frequently should news warrant. But, there are times when we are on
vacation or there is other interference and an update is delayed. If you find
that the comment is out dated, please check back. We will do our best to remain
as current as possible in helping you determine the direction of long term
interest rates. Thank you!)
January 26, 2012
Although there is plenty of bad news regarding the economy’s
slow recovery, there is some good news in the real estate segment of the
economy. While we will discuss all the events affecting us, let’s begin by
saying home loans are available with the lowest rates in 5 decades and home
values very attractive.
The Federal Reserve’s commitment to retaining low rates to
at least early 2014 was expected to excite both investors and prospective home
buyers. While the stock market typically reacts positively to such news, low
rates alone have proven insufficient to spur home buyers. The result is that
for the savvy buyer, opportunities are numerous.
Even though loans are available and qualifying requirements
are less flexible than in the past, media coverage exaggerates this impact on
the ability for buyers to qualify for a home loan. One does need to dot every I
and cross every T but with competent guidance from a lender, borrowers are
acquiring loans every day.
In many cases home values have leveled off and coupled with
the lowest interest rates in over 50 years, this is an excellent time to
purchase a home and/or an investment property. The fear that home values could
still reduce inhibits some would-be buyers from proceeding. But, a careful
analysis of any projected value reduction vs purchasing now before appreciation
factors push values upward, suggests waiting to buy is not the best economic
decision. This may sound like so much real estate hype but the facts are that
smart investors and potential home owners are taking advantage of the market
right now with the anticipation of retaining the property for a longer period
(5 years or more) and fully expect to realize an appreciating market within the
next few years. It is the epitome of buying low and waiting for the asset to
appreciate in value.
Housing is clearly the economic segment that needs more revitalization
if the whole economy, including employment, is to recover. The programs coming
from Washington
all rely upon the big banks voluntarily participating and have consequently
been ineffective. President Obama noted at his recent State of the Union speech
that he is proposing yet another program to help homeowners refinance at these
great low rates and thus save on their monthly payments. Short on details, we
remain skeptic.
The HARP2.0 program designed to assist underwater home
owners has yet to be rolled out at most lenders. The old HARP program was
mostly unsuccessful and many have little enthusiasm for this revised edition. The
program does not address the issue of those borrowers that are so far
underwater (the amount owed is higher than the current value of the home) that
there is really no incentive to refinance because they will never recapture the
lost equity. If one refinances and can anticipate that it will take 10 years or
more to just get even, most homeowners might see this as merely renting their
homes until they have to sell, likely still at a loss or via a short-sale in
the future. So, we are unsure that HARP2.0 will be any more successful than
past editions of the program in helping those most in need of assistance.
The President also talked of holding lenders accountable for
their past excesses. He is asking the Attorney General to aggressively
investigate and prosecute those who broke the law, participated in fraudulent
activities and were responsible for the current housing crises. Wouldn’t we all
like to see some of the responsible CEO’s in orange jump suits and handcuffs?
Does anyone think it will actually happen?
Looking at the whole economy, there are signs of very slow
recovery. But in a time that calls for boldness in resolving our nation’s
economic woes, Washington
is paralyzed and nothing happens. Most anticipate this malaise continuing for
several more years. Maybe that is why the FED (noted above) has announced they
will keep rates low for another 2 years?
While the economic recovery remains fragile, at best, world
events could impact any recovery. The Iran dust-up, financial concerns in
the European euro countries and continuing job outsourcing could undermine any
recovery quickly. Many suggest that it matters little who is elected to Washington this year as
both political parties are ineffective, corrupted by too much money and bereft
of any solutions for helping the majority of Americans.
This too shall change. We don’t minimize the concerns but it
is important that we not become paralyzed by bad news. In adversity there is
always opportunity. So it is with today’s real estate market. Re-read the
opening portion of this article and determine if this is the time for you to
buy a personal residence or an investment home. Success typically comes to
those who are contrarians . . . doing the opposite of what most people are
doing. So, while many shy away from real estate in fear of possible value
reductions, concerns over ability to qualify for a loan, etc., contrarians are definitely
buying real estate. You could be one of them. You may be surprised at your
ability to buy a home today. Call Humboldt Home Loans for a FREE consultation
and pre-approval interview with John Fesler (707-269-2318) or Jody Harper
(707-269-2334) today.
Experience Excellent
You may find several tip sheets (found in our "tip sheet" section
of this web site) interesting as you determine if you should proceed with
either a purchase or refinance transaction . . . check out "Never Been a Better Time
to Buy", "Refinancing" and "Locking the Interest Rate"..
Here are a few additional tip sheets of particular interest. You may view my
complete tip sheet table of contents by clicking below.