Feb

22

Long Island Real Estate Market: Mortgage Interest Rate Watch

Filed Under Mortgage Matters, Sellers | Leave a Comment


The stability of the Long Island real estate market rests with the performance of mortgage backed securities. I have mentioned this key point in previous articles and I think a lot more people are paying attention.

This video below will go over in simple terms, mortgage backed securities and their relation to why mortgage rates are so low right now as well as why they will start rising in the near future.

I’ve mentioned before that homeowners looking to sell must pay close attention to what’s happening in the financial markets and the most important piece of financial information is looking closely at mortgage backed securities.

On Long Island, if the rates rise dramatically (as many economists believe), home values could drop dramatically. The more expensive it is to borrow money for a potential buyer, the less home they can afford. Thus, in order to sell your home, a buyer will only be able to afford so much.

For every 1% the mortgage rate rises, home values (in order to sell the home to a buyer) will need to drop 10%.

Please re-read the above statement. I think…no I know from experience, that most homeowners do not really pay attention to me when I say that because it sounds so unbelievable. But, not just on Long Island, but all across the country, if the money needed to borrow from a bank to buy a home goes up, especially given the countries financial challenges, the amount a buyer can afford goes down.

How? Because when buying a home, the most critical item to consider is the monthly payment. The difference between a 5% mortgage interest rate and 6% is not one percent, it’s over 16% higher. Meaning from 5% to 6%, the cost of the monthly mortgage is 16% higher. So if their mortgage interest at 5% is say $1,500, at 16%, the payment for interest would be $1,740. That’s a $240 increase. In this economy…in any economy, that’s a big difference.

The point of all this is for homeowners thinking of selling to realize that there are challenges ahead. If you want/need to sell your home, pricing it aggressively now and marketing it with the right real estate agent is imperative. Otherwise, come May/June of 2010, you could easily see your home’s value drop 10%….in literally 60 days.

(c) Copyright 2010 www.tommcgiveron.com
By Thomas McGiveron, Licensed Real Estate Salesperson
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Feb

15

What Is Going To Happen To Mortgage Rates In 2010?

Filed Under Buyers, Mortgage Matters, Sellers, Sellers & Buyers | Leave a Comment


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So the question is, what is going to happen to mortgage rates in 2010? Well, have you ever heard the saying “It ain’t over til it’s over”? The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over - and this translates to home loan rates rising in the near future.

As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.

This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane. And those who can take advantage of currently low home loan rates do not wait, as the clock on these historically low rates is ticking.

Chart: The Fed’s Purchase of MBS (By Month)
mbs-purchases.jpg

The purchasing of these MBS’s, is exactly what has kept mortgage interest rates low, as I’ve previously mentioned. Originally, I thought, as many did, that rates wouldn’t take a hit until after the complete execution of this program in March. However, the government slowing of these purchases will have an effect on the rates before March 31st!

These are historic times in real estate and I feel that many people who want to really buy, are going to miss out on an opportunity to have a 5% 30 year fixed interest rate…because they just kept waiting and waiting….and waiting.

Now is absolutely the time to buy. Prices are down over 35% in almost every area throughout Long Island. If you’ve been paying attention to certain homes on the market through your home search, you know that home is on the market now (it may not be there 3 months from now). And right now, you can obtain an historically low interest rate.

I had a closing the other day and my buyer client, with buying down his rate, got a 30 year fixed loan for 4.25%.

4.25% for 30 years. In 3 months, that will most likely be 6.25%…with buying down the rate…

The clock is ticking.

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Feb

11

How Many Homes Are In Foreclosure In Suffolk County?

Filed Under Long Island Foreclosure Stats, Sellers, Sellers & Buyers | Leave a Comment


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So the question I recently asked myself is how many homes are in foreclosure in Suffolk County, New York. Immediately, I went to work and found out that there are over 190 homes that are bank-owned in Suffolk County…under $300,000. Foreclosures in Suffolk County priced over $300,000 numbers around 50.

So to be fairly accurate, it is okay to say that there are currently 250 homes in Suffolk County that are currently bank-owned…and on the Multiple Listing Service of Long Island. This 250 number does not include all the homes that are not listed yet, in the process of foreclosure, or currently in contract.

If I were to make an educated guess, based on my experience as a BPO agent (an agent who performs broker price opinions for banks to price out homes on their books), I would that there are over 10,000 homes in Suffolk County, that are somewhere in the process of foreclosure.

I complete about 50 BPO’s per month on average. And my competition in this business (other real estate agents doing just as much or more), leads me to believe that not just Suffolk county, but all over Long Island will be facing very difficult times in 2010 and well into 2011.

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