Ask A New Jersey Closing Expert

Women control 91 percent of homebuying or remodeling decisions. This finding from a recent Harvard University study caused Doris Perlman, founder and president of Possibilities for Design, a Denver-based home design firm, to delve more deeply into the homebuying habits of female baby boomers (women born between 1946 and 1964).
Among her observations:
This target market is looking for practicality and comfort, which translates into demand for wider hallways and stairs, living areas on the main floor, and open-air floor plans with multifunctional spaces.
Both task lighting and natural light are of major importance to compensate for declining vision that many baby boomers are starting to experience.
For aging eyesight, any marketing material in smaller than 13-point type is “retail suicide.”
Seventy-five percent of female boomers will settle for a smaller house if that’s what it takes to get high-quality products and amenities.
Women buyers are looking for strong character in home design, such as cottages with a crisp and clean look, urban enclaves with rich colors and textures, and calming and contemporary Asian influences.
Women are attuned to colors, while men do not seem to care as much. In response, the color trends of 2005-2006 included brown becoming the new black; grayed-out greens; reds coming up orange; classic colors with such new names as Wasabi, Aero Blue and Vanilla; and textural effects suggesting copper, pewter and stone.
Female baby boomers now have more time to relax, engage in social activities and explore hobbies, making “special-interest” rooms an essential feature in their home selection. “Women shop with peripheral vision: They notice everything,” Perlman said.
Women 55 and over are cyber-savvy, and use their computers for ordering and correspondence.

A very interesting study looking into the thought pattern of how to market towards the decision maker who are an every growing class of women. Men of the world watch out. Just wanted this post to be light hearted.

 Your friend,

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“When an asset like real estate becomes overvalued, even if you drop interest rates to zero, you can’t force consumers to borrow more, because they’ve already borrowed too much. Nor can you force lenders to lend, because they’re already puking on ‘bad paper.’ It’s called a liquidity trap.” -Bob Campbell, San Diego Real Estate Timing

This quote is shown to be hitting a nerve as keep as seen by the article titled, Fed Interest-Rate Cuts Fail to Lower Borrowing Costs:
“The Federal Reserve’s interest-rate cuts last month have failed to lower borrowing costs for many companies and households, increasing the chance of further reductions from the central bank. Companies are paying more to borrow now than before the Fed reduced its benchmark rate by 1.25 percentage point over nine days in January, based on data compiled by Merrill Lynch & Co. Rates on so-called jumbo mortgages, those above $417,000, have increased in the past month, making it tougher to sell properties and risking further price declines.” 

 This is a great post that I read on another blog that I wanted to share with you.  This blog is showing that the factors of borrower sentiment combined with banks willingness to lend will the true factors that will pull us out of this housing downfall. The Fed can keep shotting the interest rate bullets to drop the rate but it is only when the borrower sentiment rises and when banks start lending out to a little looser guidelines can the affect of these bullets be truly felt in the housing and credit markets.

Your friend,

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Sources:

bigpicture.typepad.com  (The Big Picture Macro Prespective on Capital Markets)
Housing mess too big for a quick fix
Bill Fleckenstein
http://tinyurl.com/yqabfs
Fed Interest-Rate Cuts Fail to Lower Borrowing Costs
Scott Lanman
Bloomberg, Feb. 13, 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_c9_tQiZOLo&

Fair Isaac Corp.’s credit score— developed by engineer Bill Fair and mathematician Earl Isaac to help banks and department stores calculate their customers’ creditworthiness—has come to loom over consumer finance. “FICO is the wizard behind the curtain of the economy,” says Matt Fellowes, a scholar at the Brookings Institution, a Washington think tank.But with mortgage defaults surging and credit-card issuers bracing for more problems, the wizard seems to have lost some of its magic.In the past few years a group of “credit doctors” and mortgage brokers began devising tricks, some illegal, to help borrowers juice their FICO scores to qualify for credit cards and mortgages on homes they couldn’t afford. At the same time new, exotic mortgages were bursting onto the scene and Fair Isaac was slow to keep up with the changes. By the end of the housing boom in 2006, FICO’s accuracy in predicting the likelihood of a borrower’s repaying a debt had slipped.

This has caused Fair Isaac has announced a sweeping overhaul of the FICO score, its most dramatic ever. The firm promises FICO 08 will be a better predictor of consumer behavior. Who is really to blame the greed of Wall Street, Banks or Fair Issac, all  it provides the proability of someone being a good borrower (like I said in the statement it is only a proability); it is the responsbility of lenders to complete the due diligence checks in my opinion.

 Your friend

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Resources:

Credit Scores: Not-So-Magic Numbers - by Dean Foust and Aaron Pressman

The rise in the FHA insured loan limits from $200,200 to $271,000 (low-cost markets) and the rise in limits to $417,000 (high cost markets) coupled with the raise in the cap to $729,750 on jumbo mortgages that Fannie Mae and Freddie Mac can buy. This is expected to raise the new home demand by 10% according to research firm Zelman & Associates.

This move by Congress can help pay dividends in terms of helping to slow down the falling prices in home sales but I doubt that this will help bring about revival in the entire market. I believe that the Fed’s continued push to dropping interest rates and a increase in FHA backed loans will help fund more deals as those homebuyers who have been sitting flat may now consider making a move into the market.

 Your friend,

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A quit claim deed is the legal way that one person (the grantor) transfers real property, such as a house or land, to another person (the grantee). As an example, a divorcing husband may quit claim his interest in certain real estate to his ex-wife. While the concept is simple and straightforward — relinquishing all ownership claims to a particular property — it’s also important to note what a quit claim can’t do.
In renouncing claim, the grantor makes no guarantee or promise that the property is free of debt. Another important distinction is that the grantor makes no promise that no one else claims to own the property. Tracing its origin to Anglo-Norma times (circa 1,000 CE), the quit claim deed says, in effect, that the grantor is signing over whatever ownership he or she may have in the property. It does not even guarantee that the grantor has any ownership interest at all. By accepting such a deed, the grantee assumes all the risks.
Furthermore, many title companies are reluctant to insure title when a quit claim deed was used previously to transfer title, and therefore, recommend use of a warranty deed instead. A warranty deed conveys full title to the property and warrants that title against defects such as tax liens, legal judgments and unpaid debts.
Point out the difference between a simple quit claim and a warranty deed to your clients and recommend that they consult a real estate attorney for more information

 Hope this gives some insight.

 Your Friend,

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Resources:

David Quinones; www.dquinones.imbhomelending.com

The housing market prices are still falling and the decline is far from over.  The housing prices plunged while the foreclosure rates are still rising.

Home prices plunged by a record 8.4 percent in November, according to a composite index based on 10 U.S. cities tracked by Standard & Poor’s. It was the eleventh straight monthly decline for the so-called Case-Shiller index.

“Nothing in these numbers suggest a bottoming out. The numbers universally are disappointing,” said David Blitzer, S&P’s managing director and chairman of the index committee.

A separate report showed that mortgage foreclosures surged in 2007 as many homeowners found themselves unable to keep up with sharp increases in mortgage payments and unable to refinance because their homes had lost too much value. Some 1.3 million homes were the subject of a foreclosure filing, up about 80 percent from 2006, according to RealtyTrac.

Despite falling interest rates and some $100 billion in cash pumped into the global banking system by the Fed, credit remains tight as lenders worry about the risk of further losses from bad mortgage debts. Unless the tide can be turned to stop a coming wave of mortgage foreclosures, rising loan defaults this year will dump more empty houses on a market already glutted with too many. So far, tumbling mortgage rates have done little to revive the housing market. Coupled with larger and larger number of mortgages resetting this will continue to lead to a larger drop in housing prices.

 With more than 1.8 million mortgages scheduled to reset to higher rates this year and next, the outlook for the housing market remains bleak as more foreclosed homes are put up for sale. A late-year surge in foreclosure filings suggests that many are in the initial stages of the foreclosure process, RealtyTrac said

(http://www.msnbc.msn.com/id/22897832/)

This continued mixture of larger inventory and larger number of properties falling into the foreclosure process; this will lead to a continued decline in the housing market.  There is a slight position of hope as the Fed rate drop coupled with the upcoming Spring/Summer buying market could help level off the decline in housing prices.

Your friend,

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A new study shows exactly how and why that might occur: Home Price to Rent Ratio:

“U.S. house prices “likely would have to fall considerably” to return to a normal relationship with rents, says a study by one former and two current Federal Reserve economists.

The study, which doesn’t necessarily reflect the views of Fed policy makers, suggests prices would have to fall 15% over five years, assuming rents rose 4% a year. House prices would have to fall further if the adjustment took place more quickly.

The study tracks rents and home prices back to 1960 and found annual rents fluctuated at around 5% to 5.25% of home prices until 1995. At the end of that year, the average monthly rent was about $553 (or about $6,600 a year) and the average home price was about $134,000.

But starting in 1996, home prices started to grow much more rapidly than rents. By the end of 2006, they had more than doubled to an average of $282,000, while the average rent had risen 48% to $818. That drove the annual rent/price ratio down to 3.48%.

That means the rent/price ratio is about a third below its long-term average. To return to normal would require some combination of falling prices and rising rents. The paper suggests house prices would need to fall about 3% a year, if rents grew in line with their 4% average annual growth this decade.” (http://bigpicture.typepad.com/comments/real_estate_/index.html)

 This study shows that the housing market has not yet reached its bottom. Espically given the decline in New Home Sale even after the Builders provided tons of incentives; this shines light that the market has yet to reach its bottom.

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Sources:
The Rent-Price Ratio for the Aggregate Stock of Owner-Occupied Housing
Morris A. Davis, Andreas Lehnert, and Robert F. Martin
Department of Real Estate and Urban Land Economics, University of Wisconsin-Madison
Federal Reserve Board of Governors
December, 2007
http://morris.marginalq.com/DLM_fullpaper.pdf

Housing slump and mortgage crisis combined to reshape population flows in 2007, according to demographic estimates released by the U.S. Census Bureau in early 2008

 In particular, the data revealed that:
Nevada’s growth rate fell to 2.9% in 2007 from 3.5% the previous year.

Florida’s growth also hit a low of just above 1%, down from its high of 2.3% in 2005. Arizona, No. 2 in growth, slipped to 2.8% from 3.6%.
Washington this year became the 13th largest state, bumping Massachusetts to No. 14.
Midwestern industrial states, including Michigan and Ohio, continue their population decline. Michigan lost 30,000 people in one year, leaving a total population of 10.07 million (8th largest state), and Ohio grew by only 3,404 people for a total population of 11.47 million [7th largest state).
Reflecting a slowdown in the lure of the Washington, D.C. metro area, Virginia gained a net 3,000 people from other states, down from 10,000 in 2006 and a high of 41,000 in 2003. “Maryland had an increase in out-migration,” Frey says. “In-migration into the greater D.C. area seems to be slowing down.”
Louisiana, still grappling with the effects of 2005’s Hurricanes Katrina and Rita, gained almost 50,000 residents between July 1, 2006, and July 1, 2007, although the state still has 200,000 fewer residents than it did before the storms. New Orleans’ population is about two-thirds of its pre-storm level.  (Data Provided by Brooking Institution)

This housing market is chagning the demographics of New Jersey as individuals are moving away from the high priced areas of Northern Jersey to areas closer to South Jersey and Philadelphia. Just some stats which I found interesting and their coorelation to our everyday lives.

 Your Friend,

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The Federal Reserve surprised everyone Tuesday with an emergency intersession rate cut of .75%, the deepest cut in the Fed Funds Rate since 1984. The Fed Governors are acting in direct response to recent reports that the country is on the brink of recession.
If you have credit cards, auto loans, HELOCs, or an Adjustable Rate Mortgage, the Fed’s decision to cut this key interest rate is great news. For long-term mortgage rates however, this could signal the beginning of the end for the lowest 30-year home loan rate borrowers have experienced since 2005.
Let’s look at the impact of a few recent Fed Funds Rate cuts and the corresponding impact to home loan rates to see what this could mean for you:

PeriodFed Funds Rate Cut  Impact to Home Loan Rates
January to June 2001

Down 2.25%Rose 0.10%
October to December 2001

Down 0.75% Rose 0.45%
May to August 2003

Down 0.25%Rose 0.78%
Rates are predicted to be cut again when the Federal Reserve meets at the end of this month. Many believe Tuesday’s action was taken because of a dramatic downturn in the stock market, where the Dow dropped 464 points, the worst single day drop since September 11, 2001. Since the Fed’s announcement, the Dow has recovered much of those losses but volatility is likely to remain a consistent theme throughout the week.
If you are waiting for long-term mortgage rates to fall further from here, don’t count on it. Your best chance to lock in the lowest mortgage rates since 2005 is now. Getting your application in process will allow you to capture a rate near all time lows and, with many experts predicting home values could continue to decline, waiting could kill your chance to capture a great rate if your home doesn’t appraise (Insight provided by Santi Rodriguez, Branch Manager of Gateway Funding, srodriguez@gateway-funding.com)

Hope this help everyone who is confused by what the Fed rate cut means to their mortgage and home buying picture.

Your friend,

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Fed cuts the Fed Funds Rate 3/4 of a point.

“Don’t take today’s move … to mean that the FOMC is through,” said Richard Moody, chief economist at Austin-based Mission Residential, in a note to clients. “We expect another funds rate cut at the scheduled January 29-30 meeting, with possibly more to come in the spring.”  The federal funds futures market now points to a 2% fed funds rate by September, Fed watchers said.  (http://www.marketwatch.com/news/story/fed-isnt-finished-rate-cuts/story.aspx?guid=%7BFE058836%2D414C%2D4CC9%2D8F04%2D866CF0AB29DE%7D)

What does this mean for the mortgage and real estate market

Well this shows us there is one thinking that the “reduction of interest rates” is a magic pill to solve any problem.  This concept is told best by the comments of “Investing Lawyer” who states that 

 unlike /11 where the problem was ONLY confidence after a recent terrorist strike against on of the financial capitols of the world… (and the economy doing so so)… This time cutting rates won’t be the magic bullet ( http://www.marketwatch.com/news/story/fed-isnt-finished-rate-cuts/story.aspx?guid=%7BFE058836%2D414C%2D4CC9%2D8F04%2D866CF0AB29DE%7D)

 This shows me that the market is headed for a deep reduction this year and the reduction of the interest rates is a way to put out a pillow to save the falling ass of homeowners. The market in my opinion will see another correction of 5 to 10% until stabilizing by the last quarter of 2008 and then developing a flat trend and holding steady values for a fixed period of time. This all is a result of our natural greed and our need for instant gratification; this is best put in the quote below:

“Historically, societies that seek high levels of instant gratification and are willing to borrow against future incomes to achieve it have more often than not suffered inflation and stagnation. The economies of such societies tend to run larger government budget deficits financed with fiat money from a printing press. Eventually, the ensuing inflation leads to recession, or worse, often because central banks are forced to clamp down. Then the process starts all over again. Many countries in Latin America have been particularly prone to this “populist” malady, as I discuss in chapter 17. I regret that the United States may not be wholly immune to it.” (Greenspan, The Age of Turbulence on page 255)

Your friend,

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