My Boise River Weekend

It seemed to be a Boise River weekend for me and no it was not because it is at flood stage and it was not for recreation. I had activity that seems to surround the river.

First my lovely home that is close to the Boise River in the Spring Meadow subdivision accepted an offer. And then I have a couple that have been looking for just the right place for the past nearly 2 years. The parameters at first required a tree top view of city of tree, Boise. But suddenly over the weekend after looking at the home with just such a view and private location like they had been desiring, they switched and fell in love with a Boise River front lot in the Waterfront Development. So after a mad scramble to get an offer in, as the sellers had already countered on a different offer, we were able to get it secured. My buyers are thrilled!

 

Boise-Nampa Home Buyers-Another Reason to Buy Now!

 

You likely may not have heard of the "QM" but it could have a major impact on obtaining a mortgage.

What Is ‘QM’ and Why Does It Matter?

We often discuss the difference between the PRICE and the COSTof a home. We want buyers to realize, in many ways, the cost of a home is more important to them than the actual price. Obviously, price is part of the cost equation. The other piece, available financing, is also crucial. Soon, there will be major decisions finalized by the government regarding house financing moving forward. These decisions could negatively impact many buyers. “QM” is a new term which stands for qualified mortgage. The new Bureau of Consumer Financial Protection(CFPB) will be responsible for defining QM thereby setting the consumer guidelines banks and lending institutions must follow before issuing a mortgage. Richard Cordray, the Director of CFPB, plans to finalize the definition this summer. The Center for Responsible Lending quotes American Banker on this timeline: “The Consumer Financial Protection Bureau will issue a final rule by the end of June defining what constitutes a ‘qualified mortgage’ that will be exempt from new rules compelling lenders to verify borrowers’ repayment ability.” The fear of many is that the definition will be too ‘narrow’ resulting in many purchasers not being able to qualify for a mortgage under the QM definition. In a letter to Director Cordray, several industry organizations talk to this issue: “Most economists and housing market analysts in government and in the private sector agree that today’s underwriting standards are tight and are contributing to a slow housing recovery. Our organizations believe that an unnecessarily narrow definition of QM that covers only a modest proportion of loan products and underwriting standards and serves only a small proportion of borrowers would undermine prospects for a housing recovery and threaten the redevelopment of a sound mortgage market… We are convinced that the choices around this important rule, including in large measure the breadth of the QM standard, will affect sustainable homeownership for generations to come.” What Could This Mean To a Home Buyer? If a buyer does not qualify under the new ‘QM’ rules, the cost of financing a home will increase. As the letter mentioned above states: “A narrowly defined QM would put many of today’s loans and borrowers into the non-QM market, which means that lenders and investors will face a high risk of an ability to pay violation and even a steering violation. As a result of these increased risks, these loans are unlikely to be made. In the unlikely event they are made, they will be far costlier, burdening families least able to bear the expense.” Securing a mortgage before these new guidelines take effect may make sense to many buyers.

 

Further Proof the Real Estate Market is Coming Back

From KCM Blog

Last week, the National Association of Realtors (NAR) released their Pending Sales Report which showed that contracted sales were 12.8% higher than the same month last year and higher than any time since sales were impacted by the Homebuyers’ Credit back in April of 2010. The index stood at 101.4 which represents a level that is “historically healthy” (see methodology below).

Here is a graph showing pending sales over the last twelve months:



METHODOLOGY (as per NAR)

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

 

Bidding Wars Have Returned to Idaho Real Estate!

I noticed this article in the Real Estate News, a daily update service of the National Association of Realtors. It is so appropriate to what is happening to the Boise Area Market. The bidding wars are back and are very common, particularly in the lower priced homes.

Some quick examples; I checked on a home in Caldwell for some people this morning-5 offers and all above asking price. I also received 5 offers for a new listing I took in Kuna. I have a family who has made 8 offers on homes, most above asking and was outbid every time. (The good news for him is I had an inside track on a home and we just got his offer approved by the short sale lender this morning.) I received multiple offers on another listing I have in Hazelwood Village.

So be prepared if your are looking for homes today, look at the value not so much at the asking price. No one wants to pay above asking price, but doing so still may get you the best deal!

"Home buyers are unexpectedly finding more competition this spring in landing their dream home. Bidding wars are increasingly being reported in markets across the country, from California to Florida, The Wall Street Journal reports.

"It's a little surprising because we thought bidding wars were done with," Andy Aley, a home shopper in Seattle, told The Wall Street Journal. Aley says he was outbid on a home earlier this year, even though he offered to pay $23,000 above the listing price and also waive inspections and other closing conditions.

Home buyers are frustrated and caught off-guard about the bidding wars re-emerging, real estate professionals report.

"We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," Glenn Kelman, chief executive of Redfin Corp., told The Wall Street Journal.

Why are things getting so competitive? Many housing markets are seeing a drastic decrease in the number of homes listed for-sale, leaving home buyers with fewer options and more bidding on the same house. Housing analysts say the shortage in supply is from sellers unwilling to take much less for their home than what they originally paid for it and pulling their homes off the market. Also, a surge in investors has made the market more competitive, as investors snatch up homes in bulk in all-cash deals.

“The bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump,” The Wall Street Journal reports.

Indeed, the National Association of REALOTRS® reported late last week that pending home sales in March reached their highest level in nearly two years and are up 12.8 percent from a year ago."

I am posting a graphic about the pending sales tomorrow!

 

VA Loans and Idaho and YOU

When listing a house I often get asked about whether or not to accept VA loans. My answer is yes, they are not the bugaboo they once where. And just importantly let us support those men and women who have put their lives on the line for this country! I have helped a lot of veterans purchase homes, and a lot of home sellers sell using VA financing and with more Veterans all the time let's keep it moving.

Here is an article from KCM Blog about Mortgages and Veterans

One of the great things about this country is that we do a lot for those who have served us. And in the area of real estate financing, we can do exceptional things.

Understand that the VA (Veterans’ Administration) is, in the mortgage world, like HUD is with FHA financing. They are an insurance company, collecting premiums and using the backing of the Federal government to guarantee the payments to lenders. Because of the government’s guarantee, lenders can stretch traditional guidelines and offer very competitive terms (of course, while adhering to the VA’s guidance).

Some of the more attractive features of a VA loan are:

 

1. 100% Financing on Home Purchases – Veterans, assuming they are in good standing, can buy a home with no money down. In most cases, the maximum VA loan is $417,000.


2. The Ability to Finance Reasonable Closing Costs – On many VA loans, the closing costs are negotiated into the sales price and the seller pays them. This feature can significantly reduce the cash a veteran needs to buy a home.


3. More Understanding with Regards to Credit Challenges – In an effort to help those who served us, lenders are more liberal towards hiccups in credit.


4. Common-Sense Look at Income – Rather than approve loans strictly by income ratios, VA mortgages incorporate what is called Residual Income. There is a form that actually budgets all expenses (not just housing) to account for family size, heating and electrical usage, and more.


5. Financed Insurance Premium – The VA charges what they call a Funding Fee to set up a fund to reimburse lenders, should a default occur. The Funding Fee varies on loan terms and usage (consult your lender for exact costs), but the good news is that it is typically just added to your loan. Instead of paying thousands of dollars up front, you can pay $10-$50 a month in a higher payment.


6. Refinancing Your VA Loan is Easy – Through the I.R.R.L. (Interest Rate Reduction Loan) Program, getting a better rate (if the market has better rates) does not carry with it all the verifications of income, credit, appraisals, and assets of other loans…and closing costs can be added into the loan! The logic is the VA is already “on the hook” and lowering the payment increases the likelihood of continued payments, so why not be as lenient as possible.

 

Ada and Canyon County PTC Index

A super indicator of the Treasure Valley's market strength. Thanks to Pioneer Title Company!

The PTC Index is a monthly measurement of the vibrancy of the Treasure Valley real estate market. Based on a custom weighted algorithm, it combines nine critical measurements of the real estate market into a single, useful number: the PTC Index. To give you some perspective, when the market was at its most active point in 2005, the PTC Index average would have been 225. In January of 2010 we reached a low of 28. Though times have changed, the need for this data is greater than ever.

March 2012

Building Permits	182
New Home Sales	108
Existing Home Sales	643
Refinance	1164
Average Sales Price	140550.5
Financial-Bond Market(10-yr Treasury)	2.17
Days on Market	76.5
Distressed(Short Sales and REO)	2759
Notices of Default	392
PTC Index	162

March was indeed a sight for sore eyes as the real estate industry typically makes gains this month and sets a tone for the rest of the season which extends to early fall. The average sales price of a home fell slightly by 4% from the month prior, but is up 8% from a year ago. Notices of default and distressed properties (short sales and real-estate owned) also fell a bit by 6% and 4.4% from the month prior, respectively. Building permits made big gains in March as well with a 16% increase from the month prior. Looking at building permits a year ago, we see a whopping 43% increase since then in March 2012! New home sales ticked up by 10% across the valley, while existing home sales continue a positive trend up nearly 20% from the month prior. Refinances also continued their momentum up 15% from the month prior; they show a massive gain of 56% in the year-ago time period.

February was at 131.

What about the interest rates?

The Fed voted last week to continue its near-zero interest rate policy for the next quarter and likely much longer. The move will keep mortgage rates low in the coming months, if not years.

In recent weeks, mortgage rates have hovered around record lows, which has helped increase home buyer purchasing power as well as helped refinancers trim their monthly mortgage payments.

Last summer, the Fed made a rare move in vowing to keep the key rate near zero through late 2014. The move has been criticized by some who say it will cause inflation and awards spenders, not savers. Critics have pushed the Fed to reverse its policy.

However, the Fed says the subdued outlook for inflation has not warranted a change in its policies.

Federal Reserve Chairman Ben Bernanke, following the Fed’s policy-making committee meeting this week, affirmed the Fed’s intention to continue keeping short-term interest rates down until late 2014—and possibly even longer.

The Fed has kept short-term interest rates near zero since late 2008. The Fed has also acted to reduce long-term rates by purchasing Treasury securities and mortgage bonds.

The Fed’s policy-making committee also released its economic forecast, projecting moderate economic growth in the coming months before a steady pick up, as well as a gradual drop in unemployment. The committee also projects for inflation to remain under control, despite the recent rise in oil prices.

“If there’s a substantial change in the economic outlook in either direction, then there would be a change in the outlook,” Bernanke said. “But for now, I think the committee is comfortable.”