Saturday, June 7, 2008

Is it time to buy in Longmeadow- Part II?

Most housing data reported by both the local and national media are lagging indicators. For example, this past week, the National Association of Realtors reported existing home sales through April 30. This data is certainly not a leading indicator… Using this information to evaluate the current real estate market is like “driving a car using the rear view mirror”.

Even though the sales data that I provide on a monthly basis is more current (earlier this week I reported Longmeadow 2008 sales figures through May 31) it still does not provide current enough information since most transactions that were reported were in process for at least 4-8 weeks.

In our April Sales Report… Good News/ Bad News post we reported seeing numerous “SOLD” and “Sale Pending” signs around town that seemed to indicate that buying activity was picking up. While the May 2008 results were up vs. April 2008 (17 vs. 8), corresponding May 2008 results vs. May 2007 were disappointing (17 vs. 21).

We have now identified a new statistic that might provide us a good leading indicator…. it is called "Sales Pending". According to MLS PIN , there were 33 Longmeadow homes in this category as of June 5 which confirms our “around town” observations. This data includes MLS sales but does not include FSBO sales which are usually are 10% of the total.

Given that there were 23 homes sold in June 2007 and 18 sold in July 2007, this latest Sales Pending data suggests a fairly active sales season for the upcoming summer as compared to last year.

Last week’s sales report also showed that 10 out of 17 homes sold for less than the official town assessment value with the median sales price at a two year low. While the current environment for obtaining a mortgage is more difficult, qualified buyers can still get one. And interest rates are still low on a historical basis.

I suggested in a post earlier this year, that 2008 might be a great time to buy a house in Longmeadow.

So….. it is still probably a great time to buy a house in Longmeadow.

Also, if you are thinking about selling your house.... don't wait too long. I suspect that once the word is out that houses are again selling in Longmeadow.... that there will be a wave on new properties being offered for sale. Consider selling your house via FSBO in order to be able to price it for today's "buyer's market".

Longmeadow FSBO

Friday, June 6, 2008

Mortgage Truth

The Truth About the Mortgage Market
By Tim Ryan, President
Ryan Mortgage Group, Inc.

Longmeadow, MA
Prime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. They've reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren't enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year. This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago. How did this happen? The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or "exotic" mortgages. These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street. Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today's tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we're now experiencing. Unfortunately, it's going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe. What does this mean to you and your mortgage? Sellers: If you're planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it's taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don't do anything that could negatively affect your credit, and make sure you get all your documentation in on time. ARMs Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don't let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be. Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals. Finally, there's an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we're experiencing now – while it seems harsh and could get much worse – is, in a sense, "natural" and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.

Tim Ryan is President of Ryan Mortgage Group, a Licensed Broker in MA, CT & FL . For a free consultation or more information about the mortgage market, contact Tim‘s Team at 413-567-1040.

Sunday, June 1, 2008

Latest Longmeadow Home Sales

The latest Longmeadow home sales results for May show a significant increase vs. April (normal seasonal increase) but the year to year monthly comparisons show sales lower than the past two years (17 vs. 21 for May 2007 and 26 for May 2006) as can be seen in the chart below:

[click to enlarge chart]
2008 YTD results are significantly lower than corresponding 2007 results (48 vs. 77 - a 37.7% decrease).

Home sale prices also continued to follow the trend established earlier last year in which they correlated pretty well with assessed property values. In May 2008 10 out of 17 homes sold for less than the current assessed value.
Median prices appeared to have leveled out at ~ $296,000- the lowest median price in almost two years- as shown in the chart below.

[click to enlarge chart]