Saturday, January 28, 2012

December Payroll Tax Cut Deal to Raise Borrowing Costs in April

Right before Christmas, Congress and the White House agreed upon a two month extension of the payroll tax cut for all Americans that pay Social Security taxes.  That agreement keeps the percentage that working Americans pay into Social Security at 4.2% of their salary instead of the previous 6.2% of their salary. 

Unfortunately, some of the ways that Congress decided to pay for the $33 billion cost of this tax cut will likely make borrowing to purchase a home more expensive.  This is because Congress agreed to a 10% increase in the FHA Mortgage Insurance premiums beginning in April.  So those borrowers who cannot afford to put 20% on a home will have to pay higher mortgage insurance costs.  

In addition, Fannie Mae is raising the guaranty fee they are charging by 10% for all single-family mortgage loans delivered on or after April 1, 2012.  This will result in an annual charge equal to one tenth of one percent of a mortgage loan.  By example, an individual purchasing a home for $200,000 would pay an additional $200 a year for the entire lifespan of the loan.  

The bottom line for buyers is that borrowing costs will be going up shortly due to this government decision, which should give them motivation to buy before these changes take effect. 

Sunday, January 22, 2012

What is the difference between DOMM and DOMP on MLS property listings?

When you look at a listing people often wonder what the difference is between DOMM and DOMP as it relates to how long a property has been on the market.

Both of these terms represent different indicators of how long the property has been listed for sale.

DOM-M stands for Days on the Market- MLS. Or the number of days this exact MLS listing has been on the market (not the home, but the MLS#).

DOM-P stands for Days on the Market- Property. So regardless of the number of different Realtors, it shows the number of days the property has been for sale.

Sometimes a property might be 85 days with one Realtor, and then 10 days with another. That would show up as: DOMP/DOMM= 95/10.

The most important number is the DOMP number to give a buyer an indication of how long the property has been sitting on the market.

Wednesday, January 18, 2012

Real Estate Forecast for 2012

2012 is moving fast. The NBA season has finally begun, NFL playoffs are underway, and the Golden Globes have been awarded. So what about the real estate market? Where is it headed? What can investors expect as we move ahead?

The best guess: “the real estate market will continue to fluctuate,” (to paraphrase JP Morgan). But at the same time there are some key factors to consider as you shape your investment strategy for the year.

First of all, more than ever, the real estate story is a local story. While some areas of the country continue on a downward trend, the outlook for Northern Virginia continues to be positive. Recent surveys by both the National Association for Business Economics and Manpower Employment show expectations for “moderate economic growth through 2012 for the Washington, DC, Arlington and Alexandria, Virginia areas, with little likelihood of another recession or an outbreak of inflation.”

But just the way the US stock market is adversely affected by Europe’s trials and tribulations, so there are nationwide issues that can affect even our healthy local real estate market. So, it helps to understand the big picture and what to watch for.

Writing in the Wall Street Journal on January 5, Nick Timiraos listed five issues that he believes will help determine the fate of real estate prices in the coming year. In brief here are five key issues to watch:

* Confidence and jobs – will 2012 see a marked improvement in employment figures across the country?

The real estate market depends upon it.

* Foreclosures – how will banks and lenders deal with the 440,000 REO’s already on the books and the 3.4 million more properties in jeopardy of foreclosure?
* Rents – As the vacancy rate drops to its lowest in years, will rising rents cause people to buy?
* Mortgage credit and rates – will banks make it easier for people to obtain financing?
* Regulation – how will new rules that result from the Dodd-Frank Act affect lending practices?

Many of the answers to these questions may depend on unforeseen influences. Of course, the government is aware of the hugely negative impact that the housing market continues to have on the economy and even the Fed is now looking for ways to help. Next time we’ll look at whether or not these latest government proposals will be helpful, harmful, or just plain ineffective. Stay tuned.

Thursday, January 12, 2012

Buying a HomePath Property

Many good investment properties are part of Fannie Mae's Home Path program.  These are properties that Fannie Mae has foreclosed on and there are many benefits:

1)  Fannie Mae has preferential financing through its HomePath program.  A buyer only has to put down 3% of the purchase price, there are flexible terms including an interest only option, there is no mortgage insurance, no appraisal fees, and no appraisal so there won't be a problem getting the financing.

2)  Fannie Mae has a HomePath Renovation Mortgage, which includes some financing to renovate the property up to $35,000.

3)  Competitive Pricing.

Whereas typical lenders require 20% down, payments and construction loans are hard to find, Fannie Mae will give investors the financing to buy cash flow properties with very little down.  If you are a savvy investor you can take advantage of these great opportunities.

Sunday, January 1, 2012

Looking Forward/Looking Back

As we stand on the threshold of a new year, it seems particularly appropriate to remember that January is named after Janus, the two-faced Roman god of beginnings and transitions, who looks back to the past and ahead to the future; and to take a moment for reflection.
It’s a time to review the past year to see what worked and what didn’t. It’s a time to analyze successes and appreciate them. We should never take our achievements for granted, or skip over them.  Each successful venture has something to teach us and helps build confidence in our investment strategy and our ability to execute this strategy. And each points the way to even greater successes as we move ahead into 2012. 
It’s also a time to take a good hard look at what didn’t work out and why. The goal is not to beat one’s self up over mistakes but rather to find and extract lessons learned. As Tavis Smiley points out in his excellent book, Fail Up, it’s not the failures that matter, but what we learn from them and how we use those lessons to change our behavior that will help us progress. It’s the old idea of turning stumbling blocks – big challenges - into stepping stones.
When reviewing the past don’t be discouraged: a project that didn’t work out can be a protection– one of Garth Brooks’ beneficial ‘unanswered prayers’. And if the failure was your fault, if you feel you could have handled a situation better, make any needed apologies, learn what you need to learn so you don’t make the same mistake again, and then move on. Often we learn more from our failures than from our successes, so keep the lessons you learned, they will strengthen your foundation for progress. But don’t carry regret or worry, guilt or discouragement into 2012. 
            It’s a time to look ahead with confidence and expectation – even excitement - to new opportunities and adventures. We can’t know exactly what the future will hold in the way of challenges or opportunities. Last January who could have known that 2011 would see interest rates drop below 4% or that at year’s end hedge funds would be moving back into the real estate market:  But with a consistent strategy in place: ( we can be prepared to deal with those challenges effectively and recognize and seize those opportunities.