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WARNING! If you are serious about buying a home in 2010, you may not have much time left! With the recession of 2007-2009 going down in history, buyers are returning to the real estate market in droves. However, what most shoppers don’t realize is that there are many forces working against them that can make it difficult to find real bargains during the spring and summer. Here are five main forces shaping the market earlier this year, and you’d better pay attention to them:
1. In accordance with the provisions of the massive stimulus package designed to support the housing market, the Fed has been buying mortgage securities for more than a year to maintain liquidity in the housing market, which also artificially supported rates. at a level less than 5%. . However, this part of the ER stimulus is ending in March and is already driving rates higher in anticipation of the program’s grand finale. What does it mean for the mortgage market? It means that, in March or April, you will no longer find rates in the low or middle 5%. The consensus of most economists and financial journalists is that we will have 6% mortgages by the summer. What does it mean to you? Get your loan approved and rate locked no later than mid-February!
2. With the “normal market” demand for mortgage-backed securities still very low, lenders will further tighten their underwriting guidelines. The preview of this was demonstrated in December 2009, when, following FNMA and Freddy, all lenders raised the credit score requirements for prime mortgages from 20 to 40 points, the FHA followed by raising the minimum score to 595 at 620, and some lenders made 640 as the minimum score for the FHA or any other government-backed loan. When summer rolls around, the credit system will most likely tighten up even more, as banks will have a much smaller market to sell their loans, forcing them to choose only the cream of borrowers to bet on. If you’re not one of them, you may need to have at least 25-30% down, ratios below 30%, and a score of 750 to have any chance of getting a home loan.
3. Unnoticed by shoppers, the government passed a number of new laws in the last two years, of course, all of which were made under highly publicized slogans of helping Joe the Consumer. In reality, these new laws practically eliminated a mortgage broker as a viable player in the market. The government blamed the brokers for selling “creative” mortgage products to uneducated consumers who could not afford them, yet the reality is that the brokers were only selling products promoted to the public by the BANKS. The truth is that brokers do not offer their own products, brokers do not participate in the meetings of the boards of directors of banks that decide what financial products to offer to the public, brokers only sell what banks offer if the public demands it. that. In 2006, brokers were responsible for 60% of all loans originated in this country, for the first quarter of 2010, less than 5%! Why should you worry about that? Very simple: While enjoying virtually unlimited access to billions and trillions of their taxpayer dollars, banks were able to eliminate the only serious market force that kept their mortgage rates competitive in the last decade. With brokers gone, all loan origination now goes to retail banks with their “friendly and knowledgeable” staff who don’t give a damn if you buy your 7% mortgage today or not, because they have a salary paid on their deposits. saving. and unfair bank fees, and because your only alternative is to go to a retail branch of another bank, where you will face as much competition and desire for lower rates as at the first branch. Consider this: the banks quietly managed to monopolize a market worth $ 10-15 TRILLION DOLLARS, and their profits (spread between their mortgage rate and the current Fed rate, which is 0%) per loan are the highest in history! Now, did you get a thank you postcard from your bank’s CEO last year for helping banks with some free money?
4. The homebuyer tax credit program also ends in April. It must be in escrow by April 30 and close the escrow no later than June, which means that in March / April we will see crowds of late-night buyers trying to take advantage of the program and inventory of Homes, especially in the 200-400K price range will be under serious pressure from buyers, as we saw in October and November 2009, before it was known that the tax credit program will be extended. This time it is different, there will be no more extensions. This was the final extension, and those who missed the opportunity to take advantage of this program because there was no inventory on the market will try to buy something this time.
5. Traditionally, March is the first month of San Diego’s official shopping season. In my 10-year spreadsheet, March sales represent an average 30-50% increase in the number of closed sales over February of the same year. Believe me this year will be no different. However, those who wake up late and start buying a home in March will face much tougher competition and will be forced to bid on properties beyond what they will reasonably price, forcing buyers to increase their down payment or they will be discouraged. and end up on the sidelines again.
The housing market has been hit hard enough to the point that even bitter pessimists started talking about a turnaround. Some are still talking about a massive “hidden inventory” of homes that banks are supposedly holding onto to prevent the market collapse and that when it finally arrives the market will crash, yet this talk has been perpetuated since late 2008 and no one he knows. when and if this inventory will ever enter the market. Today, banks can put four to five times more inventory on the market, where homes attract 10 to 30 deals in the first week, and buyers will just swallow it and move on.
So what should you do now to take advantage of the situation in the remainder of the true bargain hunting season?
1. Get your loan prequalified right now, don’t wait for the tax refund to hit your bank account. If you need to borrow money from a relative for the down payment, do so, you can pay it back with the tax credit money, with your tax refund, or do laundry for the next 30 years, but get your loan fully approved in the amount highest possible and have it available when you are bidding. No one is seriously considering your offers today unless you can attach a strong loan approval along with proof of funds for the down payment.
2. Make sure you have a clear idea of what you are looking for and make sure it is realistic. Don’t ask your agent to send you everything from Bonsal to San Ysidro in the 100K to 800K range and expect to work with that agent. Sit down with your agent, describe the areas, the types of properties you will be heading to, the maximum monthly payments including HOA, Mello Roos, property taxes, home insurance, utility bills and whatever else you convert on your monthly responsibility. Knowing what you want helps you get it four times faster!
3. Use technology to your advantage. There are many real estate websites that allow you to set up an automated search page and receive listings that match your criteria the moment the listings hit the market, or with any other regularity of your choosing. These automated tools give you an “unfair advantage” over most other non-technical buyers and real estate agents – if you are the first to know about listings, you have the advantage of placing your bids before everyone else.
4. Make offers, more offers and some more offers! In the price range of under $ 300,000 in most San Diego areas, it now takes 20-30 offers before one is accepted, so be patient, but also be smart about it. Bid on realistic listings, where you have the best chance that your offer will be accepted. If you have an FHA loan, do not go after the “investor investment” lists, the FHA will not allow it for 90 days after the original purchase date. Do not bid on short sale listings, where the listing agent submits ALL bids to the lender and waits six months for the lender to accept an offer, making the process a lengthy auction. Please do not submit to some REO listings if the REO listing broker insists on seeing my buyers’ firstborn son, DNA testing, and lender pre-approval of the listing broker choice BEFORE they even see your offer. (By the way, whenever the REO agent requests prior approval from your lender, please understand that it is done solely to facilitate a sales pitch by that lender, so complain to the California Department of Real Estate, tell them in your you think it goes against the spirit of California’s AB957 “Buyer’s Choice Act” of 2009, especially if you already have pre-approval from another lender! Get pre-approved by 20 lenders BEFORE you know if your offer will be accepted Sounds ridiculous doesn’t it?)
5. Be creative! If you can’t get what you want directly, find other ways to achieve the same results. Consider buying a repair home and using a rehab loan to make the repairs, consider buying a smaller home and they add square footage to the desired size of the home, consider new construction, lease options, seller’s carry-overs, or other creative ways to get in the house. Get acquainted with these creative strategies, they can be your ticket to home ownership today.
This is not the time to procrastinate and wait for your April tax refund before you start buying a home. Act now and take advantage of the last few months of the BEST time to buy a home in decades!