Tuesday, June 9, 2009

Real estate market musings..........

Upon reviewing more of the day to day real estate news stories of late, I am coming to the conclusion that the real estate market should actually be divided into 2 parts.

This reflects more on the mortgage side, but loans are a huge factor in determining the market, especially in today's credit crunch.

The 2 factions would be divided among those really looking to buy or sell and those who would like to refinance if and when conditions are right. People looking to buy are looking for the right home for their "right" price, and are not going hold off on the "right" deal because mortgage rates have risen within the past 2 weeks. Yet, it seems that too many people within and outside of the real estate community believe otherwise.

Those looking to refinance should be on high alert at the end of this month. The government is playing games with mortgage rates and that will probably continue for some time. They lower the rates to spur activity, and then raise them again to slow down the flow and keep those in the industry busy enough to survive (in most cases).

My personal prediction is that the rates will drop again on Tuesday June 30th, and perhaps by at least 1/2 point. You can't go by what has happened to the rates in Junes past, just as I say the experts should not keep going by home sales statistics from years past either.

Those who have also been tracking the rise and fall of mortgage rates over the past 8 months would have noticed the reductions coming prior to holiday weekends. The first significant drop took place right before Thanksgiving weekend in November. It happened during the exact week that a lot of people were traveling, preparing for the holiday, and generally not ready. Those who were in position started taking advantage of the reduced rates, but it wasn't everyone.

Same thing happened during the Christmas and New Year period, and again in February prior to the Presidents Day weekend. It was after Memorial Day that the mortgage rates have risen to their highest in a while.....from their lowest in years.

Why June 30th? Because it is the end of the month and end of the quarter, which distracts from lenders and financial types dealing with closings on properties, and closing out their month of June and 2nd quarter. Not coincidentally, this date comes 2 business days before the business world shuts down for Independence Day weekend. (Most businesses are considering Friday July 3rd to be a holiday.) This would also be 4 weeks after the current rise in rates.

But for those who would purchase, again, I don't see mortgage rates being prohibitive even if a bit higher than during prior weeks.

Within the past 2 days, I have read articles and opinions from the rentals angle. One point of view says that because fewer multi-family unit loans are available it means that fewer new apartment units will be built, resulting in reduced inventory. The angle is that less inventory will result in higher rents for what is available, and that means many who would be renters might be better off to purchase.

The other side of that coin indicates the same circumstances could be better for renters. Entities which develop apartment buildings for income would stand a greater chance of obtaining one or more new construction loans for multi-family if and when their present holdings are full and producing demonstrated income. That would seem to favor keeping rentals at reasonable rates in order to have them filled. Thus, a "renters' market" if I may coin a new phrase.

As of today, I favor the "renters market" argument. There are plenty of vacancies in many cities for rentals. Look through your local real estate section under "Apartments" and you'll find some of those "1 month free" type of offers.

Regarding the housing market, I have been saying this for months and will continue. With housing prices dropping in many cities, the issue for many sellers is finding a qualified buyer. When that is the issue, it means that the price is reasonable and that potential buyers are trying to get the property, but do not qualify.

The problem I have with that scenario is that the potential buyer winds up "turned away" and then either goes elsewhere or stays put. Rent to buy could be the way to go. If that potential buyer didn't qualify for a loan, chances are they could afford the monthly mortgage on the property they are seeking.

Often times the potential buyer is turned down due to credit issues, and NOT because they don't have a reasonable down payment. I'm not saying it's easy, but I am saying I don't hear about much of an effort to make something happen so that buyer and seller can both move on.

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