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Bill Sims Real Estate Insider's Newsletter

March-April 2010

My last couple of newsletters have been downright depressing if you are involved in the real estate industry or have a home to sell, but now I have some good news: there are 1,115 homes currently on the market in West St. Tammany Parish, and 202 of them are "Under Contract". Assuming 75% of these contracts make it to Act of Sale within a month, there will be 151 homes selling. That converts into a market inventory of 7.4 months...a HUGE improvement over the past month's supply of 17.4 months!

Perhaps at last buyers are trying to buy before the tax credits expire, and before Fannie Mae and Freddie Mac quit propping up the mortgage market on March 31st.

Do NOT take comfort in pronouncements by Federal Reserve Chairman Ben Bernanke that the Fed is going to keep interest rates low while the economy tries to recover...I have a degree in Economics, and it is Macroeconomics 101 that there is not a connection between the Federal Reserve Discount Rate and mortgage rates...The Fed Rate is very short-term (term measured in days) compared to a fixed rate mortgage being measured in years. Mortgage rates are determined by supply and demand...supply of mortgage backed securities compared to demand by investors. Alternative investments such as 10 Year Treasury Bills compete with mortgages for investors, and investors of course go for the best balance of yield compared to risk. And the Fed has run out of funds to prop up Fannie Mae and Freddie Mac.

For the past couple of years investors have felt that mortgage backed securities are not worth the risk at current yields, so the Federal Reserve has artificially propped up the market by buying $1.25 trillion of mortgage securities from Fannie Mae and Freddie Mac, along with $175 billion of debt.

When this ends on March 31st I expect interest rates to increase by .5 to 1.5% from the currently very low levels around 5%.

Sincerely,

William "Bill" Sims

Bill Sims Real Estate Insider's Newsletter

Jan-Feb 2010

The local real estate market has been very quiet. I had 1 listing sell in December to a first-time homebuyer taking advantage of the $8,000 tax credit, but that was the only "action" I had all month.

The $6,500 tax credit to current homeowners buying a different home has not made much impact--has barely been mentioned by the media, so I suspect few people know about it, and they likely do not understand how it works. Both the $8,000 and the $6,500 tax credit are set to expire in April, and more details are available on my website, www.BillSimsRealEstate.com.

I mentioned in the Nov-Dec newsletter that the Federal Reserve was threatening to quit propping up the mortgage backed securities market by March 30, 2010. They are still indicating that intention, though I do think the Administration could influence them to continue their efforts. Otherwise rates will rise from around 5% to 6 or 6.5%.

A rise from 5% to 6.5% on a 30 year fixed $300,000 mortgage would increase the monthly payment (exclusive of taxes and insurance) by $286. I can only imagine the negative impact this would have on the real estate market, and on the value of your home. Right now buyers are "making out" provided they don't sell a home, or have had the home they area selling for several years, but in this scenario nobody makes out but the investors in mortgage backed securities!

Sincerely,

This good news is buried back in the financial pages of most newspapers, and not even mentioned in the TV broadcasts: the average 30 year fixed mortgage rate nationwide has dropped to 4.71% as of December 1st.  This is the lowest national average ever recorded since records began being kept in 1971.

The Federal Reserve system has pumped $1.25 trillion into mortgage backed securities to force interest rates down.  Currently the Federal Reserve is saying they will run out of available funds "in the spring", and then we can expect rates to start up...I have a degree in Economics, along with graduate studies, and it is in Econ 101 that printing more money (which the Treasury Department has been doing furiously for the past year) is inflationary, and when inflation threatens the interest rate on loans--especially long-term loans such as home mortgages--goes up.  While I have no doubt the Fed will try to keep a lid on, at some undetermined time the steam is going to blow the lid off and inflation is going to become a real problem--a problem the Federal Reserve has few tools available to handle. 

Meanwhile, run the numbers and look at either re-financing or buying that new home now!  Call me to help figure how much your monthly payments will be at various rates--I have a calculator that computes payments.

 The House voted on November 5th to expand a popular tax credit for homebuyers. 

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring .

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven't owned homes in the previous three years — could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

It's official: Congress has voted to extend the $8,000 First Time Homebuyer Tax Credit. As long as we have a contract in place by April 30, 2010 and a Act of Sale date prior to June 30, 2010, the borrower will still be eligible for the tax credit.

Congress also committed to expanding the program and offering a $6,500 credit to some existing home owners. The details are still coming in - I am committed to letting you know as soon as possible.

Please let me know if you or someone you know has any questions about buying or selling in this market.

My favorite Loan Officer, Stephanie Weeks, sent the following to me this morning--she is expecting interest rates to go back up, so now may be the time to buy:

Will interest rates stay this low through the next year?    The Feds met last  week at their regularly scheduled Federal Open Market Committee meeting. But what exactly does  their decisions mean for home loan rates? The Feds said they are going to finish purchasing the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program.  They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions. It is a known fact that once the Feds ceases its purchases, that interest rates will climb higher...most likely back above the 6% area. The Fed is attempting to allow rates to gradually rise. However, this means that waiting to purchase or refinance until next year,  will more than likely mean a higher interest rate. Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread out over time. Which could lead to more volatility for rates in the near term. As the Fed's proved last week with their decision, now is the time to take advantage of the low priced market, the first time home buyer $8000 tax credit (which ends on November 30th) and the extremely low interest rates.  Move quickly towards purchasing your long awaited home today!

Call today to lock in your interest rate!?!?!?!?!?!?!?!?!?     Sincerely, Stephanie A. Weeks NOLA LENDING GROUP LLC 985-612-2124

Very important for everyone who owns property in St. Tammany Parish to go to the Tax Assessor's website and review their proposed tax bill for 2009...some are going down a little due to lower millages, some are going up a little, and some are going up a lot!

You can click on "Tax Assessor" button on the left-hand side of my homepage, www.BillSimsRealEstate.com.  Then select "Property Value Search".  Change search to "Address Search", then select "Proposed 2009".

The Tax Assessor's website has directions on submitting an appeal, which MUST be done by September 15th!!!

Bill Sims Real Estate Insider’s Newsletter

September-October 2009

My July-August newsletter started off with “buyers are buying, not just looking anymore! They are buying mostly homes that meet their needs AND that are great deals.”

That trend has continued: 4 of my 5 active listings at the beginning of July were under contract by the end of the month…now I have just 2 listings and am looking for more to sell!

Nationwide the sale of homes jumped the most since the National Association of Realtors began tracking sales in 1999. According to their Chief Economist, Lawrence Yun, “The housing market has decisively turned for the better. We are bouncing back”.

To my surprise, this increase in home sales is continuing into the traditionally slow time that starts in August and continues until about Thanksgiving. My listings are getting showings regularly and I’ll be surprised if they are not soon sold.

There continues to be just over a year supply of homes for sale, so only those that are priced for today’s market are selling. The actual selling prices are about 4 to 5% less than 1 or 2 years ago…many homes are still listed at 2007 to 2008 prices, but if they sell they are selling at a substantial discount from listing price.

Interest rates have dropped again, and no longer is paying a discount point necessary to “get a good rate”, which would currently be around 5.375%, but can fluctuate day-to-day and week-to-week. I have no idea how long rates will stay so low, and those who wait might miss out.

Feel free to call 985-246-9257 or email CaptWSims@yahoo.com to discuss the current market and what it can mean to you.

Sincerely,

Bill Sims

The media has done very little coverage of this gift from the Federal Government to First Time Home Buyers!

That has me concerned, because the program is set to expire on December 15th, and many may miss out on it.

I suspect some are confusing a tax credit and a tax deduction.  The former is returned to you, dollar for dollar.  All you have to do is filed an amended 2008 tax return (not as hard as it sounds, you don't start from scratch!) and the IRS deposits the $$$ in your account in a few days. 

The system was set up originally so that you didn't get the $$$ until after you bought a house.  Now the FHA has a program set up so you can get the money BEFORE Act of Sale.  That is great, because you can use it toward the FHA Funding Fee and Closing Costs!

Below is an article by the National Association of Realtors that I copied and pasted:

First-Time Home Buyer Tax Credit for Closing Will Move Market