NO BETTER TIME THAN PRESENT FOR REFINANCING

COLLEGE STATION (Real Estate Center) – For those considering refinancing their homes, Real Estate Center Chief Economist Dr. Mark Dotzour says there may not be a better time than the present for many years to come.

“Inflation is clearly rampant all over the world, including in the United States,” he said. “When inflation is a problem, mortgage rates go up. Rates probably should be much higher right now, but they aren't.”

Why are rates so low when inflation is not a fear but a fact? Dotzour says the fear of a global collapse of the banking system is greater than the fear of inflation for the world's bond investors.

“Wall Street has a name for the phenomenon, and it's called the ‘flight to quality.’ When investors get concerned about global conditions, the United States is the haven of safety,” Dotzour said. “As investors moved money into U.S. Treasury bonds, the ten-year treasury rate dropped from 5.3 percent in August to 3.7 percent today.”

Dotzour said investors who are using U.S. treasuries as a safe haven are willing to accept a 3.7 percent interest rate even though the U.S. inflation rate is at 4.1 percent.

Once the banking system is repaired and the fear of global collapse of the banks is over, Dotzour predicts treasury rates and mortgage rates will move up, maybe substantially.

“If you believe that we are in for a global financial collapse, then don't refinance yet because interest rates will continue to fall,” he said. “If you think the U.S. government and the central banks around the world won't let this happen, then now is the time to get a fixed-rate mortgage at rates we haven't seen in the past 40 years.”

NO BETTER TIME THAN PRESENT FOR REFINANCING

COLLEGE STATION (Real Estate Center) – For those considering refinancing their homes, Real Estate Center Chief Economist Dr. Mark Dotzour says there may not be a better time than the present for many years to come.

“Inflation is clearly rampant all over the world, including in the United States,” he said. “When inflation is a problem, mortgage rates go up. Rates probably should be much higher right now, but they aren't.”

Why are rates so low when inflation is not a fear but a fact? Dotzour says the fear of a global collapse of the banking system is greater than the fear of inflation for the world's bond investors.

“Wall Street has a name for the phenomenon, and it's called the ‘flight to quality.’ When investors get concerned about global conditions, the United States is the haven of safety,” Dotzour said. “As investors moved money into U.S. Treasury bonds, the ten-year treasury rate dropped from 5.3 percent in August to 3.7 percent today.”

Dotzour said investors who are using U.S. treasuries as a safe haven are willing to accept a 3.7 percent interest rate even though the U.S. inflation rate is at 4.1 percent.

Once the banking system is repaired and the fear of global collapse of the banks is over, Dotzour predicts treasury rates and mortgage rates will move up, maybe substantially.

“If you believe that we are in for a global financial collapse, then don't refinance yet because interest rates will continue to fall,” he said. “If you think the U.S. government and the central banks around the world won't let this happen, then now is the time to get a fixed-rate mortgage at rates we haven't seen in the past 40 years.”

How to Find the Right Home

Making Pre-Purchase Decisions

Just because you may feel restricted by price ranges -- especially if this is your first or second home purchase -- don't let anybody tell you that you can't afford to be choosy when looking for a home to buy! You are unique. You have desires and needs, hopes and dreams for your new home that are different from your parent's, friend's or coworker's. OK? So let's get busy defining these homebuying parameters and writing them down.

Location & Neighborhood

• Suburbs or Country.

Pros: Generally less expensive. Often newer. Tract homes are conforming. More home for the money.
Cons: More time in traffic if driving to town for work. Further away from entertainment options cities offer.

• Urban.

Pros: Closer to many employers.

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Walking distance to theaters, restaurants, schools. Many period homes offer more distinctiveness in styles.
Cons: Often noisier. Higher crime rates. More expensive.

• Busy Streets.

Pros: Often homes on streets with more traffic are thousands of dollars cheaper. If noise doesn't bother you, don't pass up homes on busy streets. Drive by at different times of the day / week to ascertain noise levels.
Cons: These types of homes will always sell for less than others in the same area. If bedrooms are located near the front of the home, sleep may be disturbed.

• Cul de sac.

Pros: Number one choice of buyers with children.
Cons: Less privacy, neighbors know more about you.

• Corner lots.

Pros: Often larger lots. Fewer neighbors. More visibility.
Cons: More traffic noise. More vulnerable to vehicles jumping the curb. Kids might trespass at the corner. More sidewalk to shovel in winter.

Type of Home

• Single Family.

Pros: Good appreciation. Opportunity for gardens. More privacy. Quieter.
Cons: More expensive than our next category. More maintenance.

• Condos, Townhomes, Cooperatives.

Pros: Less expensive than comparable single-family homes. Generally newer so fewer repairs. Lock-n-go lifestyle. No yard or exterior maintenance.
Cons: Less privacy. Noisier. Common walls and/or floors and ceilings. Sometimes no private yard or balcony.

Number of Stories

• Single Story.

Pros: Easy wheelchair access. Some medical conditions such as bad knees make it hard for certain individuals to climb stairs. Easier to clean.
Cons: Can be noisier if stereos or televisions are located on the same floor as bedrooms. Some people feel safety is compromised if bedrooms are located at ground level. More of the lot is absorbed by living quarters.

• More than One Story.

Pros: More living space on same foundation than a ranch home. Less noise if entertaining on lower level while other family members sleep upstairs.
Cons: More trips up and down the stairs to carry stuff to bedrooms. If laundry rooms are on the second floor, washer leaks are major. Might need dual vacuum cleaners. It is difficult to maintain consistent temperatures on each level without dual heating and cooling units.

• Split Levels.

Pros: Often less expensive if purchased with lower level unfinished. Higher ceilings are appealing. Downstairs family room separates noise levels from upstairs. More square footage on same size lots as ranch homes.
Cons: Less storage space. Hassle to take trash downstairs and carry groceries upstairs or vice versa. Kitchens tend to be smaller.

Interior Specifications

• Number of Bedrooms.

Pros: Common minimum requested configurations are 3 bedrooms. Newer parents prefer bedrooms located on one level.
Cons: 2 bedrooms appeal primarily to first-time home buyers, singles or seniors. However, don't discount a two bedroom if an extra den will satisfy your space requirements.

• Number of Bathrooms.

Pros: More than one bath is preferred by most people. One bath homes are often less expensive.
Cons: Don't pass up a one bath home is there is room to add a second bath. Sometimes it costs less to put in an extra bath than it does to buy a two-bath home.

• Square Footage.

Pros: larger spaces offer more room and cost less per square foot than smaller spaces.
Cons: Don't be misled as lay-out is more important than actual square footage. Sometimes well designed smaller spaces appear larger.

• Bonus Rooms.

Pros: Extra space for media rooms, art studios, children's playrooms, gyms, den/study.
Cons: More expensive.

Garages

• Attached.

Pros: Cheaper to build. Convenient if raining or snowing.
Cons: Higher noise levels inside the home from cars. Some people feel they are an eye sore. If the garage door to the house self locks, you could get locked out at an inopportune time.

• Detached.

Pros: Can be tucked away from site lines. Quieter.
Cons: More expensive to build. Farther to walk in bad weather.

Additional Considerations

• School districts.
• Special amenities such as fireplaces, pools or spas.
• Condition of plumbing, electrical, heating & cooling units.
• Available utilities such as cable or DSL, satellite.
• Sewer, cesspool or septic connections.
• Fixers.

The Meaning of Location, Location, Location

I've seen buyers get so excited over the updates in a home that they forget about the first rule of real estate: location, location, location.

Generally, buyers will get the best return for their money if they buy the worst house in the best neighborhood. If a cosmetic fixer needs carpeting or the floors refinished, buyers might receive a discount on price. Plus, then buyers can choose carpeting or floor finishes that match their own tastes and not that of the seller. On the other hand, buyers will most certainly face a harder time selling down the road if they buy the best house in the worst neighborhood.

Yet, many buyers gravitate toward the right homes in the wrong locations. After looking at a few dozen homes, it's easy to get swept up in the excitement of finding that perfect home. That perfect home might have the right configuration and plenty of amenities but if it's in a bad location, you might want to consider passing it by. Regardless of its price . . . read more about Location, Location, Location.

Mortgage Meltdown Has More to do with Fraud than Anything Else

Recently, I was discussing the mortgage meltdown with a reporter who made the mistake of asking me who or what I believed was primarily responsible for the mortgage meltdown and housing crash of 2007. My reply consisted of a single word: “fraud.” My conservative estimates target fraud as being responsible for at least 80% of the problem, and most of this fraud was perpetrated by industry insiders (both in the Real Estate and mortgage loan industries) on the consumers.

Of course, there is plenty of blame to go around. If consumers were not so greedy, using their homes like ATM machines whenever they needed an equity fix, perhaps the problem would not be so widespread and so deep. If fiscal conservatives were in charge of running the government at federal, state, and local levels, maybe we would not have a culture built around deficit spending. If politicians hadn’t agreed to ship manufacturing jobs overseas and open our markets to free foreign competition, maybe Americans would have more money to make house payments. If we had universal healthcare coverage, people wouldn’t end up in bankruptcy whenever they needed surgery.

I could go on, but from what I have witnessed in the Real Estate and mortgage loan industry comprises a concerted effort on the part of industry professionals and insiders to fleece the consumer. Cash back at closing schemes caused a huge part of the problem. When homeowners purchased their homes, many of them would borrow in excess of the property’s true market value–sometimes hundreds of thousands or even millions of dollars more than the home was worth. They were then stuffing the proceeds in their pockets as if they had earned it.

Some might say that in this case, consumers are clearly at fault. After all, they were the ones who benefited most from the scam. However, in a huge majority of cases, professionals were advising these homeowners, telling them that this was a perfectly acceptable practice, that “everyone was doing it,” and that you were almost stupid for not doing it. The professionals would even conspire to defraud the banks, lining up appraisers who were known to appraise houses at whatever target value the buyer, seller, and agent decided. In return, the appraiser won more business, and the loan officer and real estate agent “earned” higher commissions. Everybody wins!

Another tactic that mortgage lenders used to suck in clueless buyers consisted of selling consumers on adjustable rate mortgages (ARMs) that had teaser rates. When housing prices were spiraling into the stratosphere, fewer and fewer people were able to afford to take out a conventional mortgage to purchase a home. They simply didn’t have the income and savings required to obtain loan approval at the current interest rates. Instead of denying these high-risk lenders loans, the industry simply lowered the initial interest rate, so more people could qualify. Loan officers downplayed the fact that the interest rates would probably rise significantly months or years down the road. They told the buyers that they could simply refinance if the rate was too high. Unfortunately, when credit tightened, homeowners could no longer refinance with a conventional mortgage. Foreclosure became imminent.

During the big party when housing prices were on the rise and interest rates were dropping, mortgage brokers and the loan officers who worked for them, turned away few if any applicants. If you didn’t make enough money, they would encourage you to fudge the numbers on your loan application. To boost your credit score, you could simply piggyback on someone else’s credit card (this little loophole has been fixed). In some cases, the loan officer would simply have the applicant sign a blank loan application, so the loan officer could fill in the required information later–information that would be sure to win the applicant loan approval.

And this is just the day-to-day fraud. Professional con artists are also responsible for boldfaced scams that have ripped off homeowners and lenders alike. Armed with the Internet, technology, and know-how, these fraudsters could produce forged paperwork to score millions of dollars in mortgage loans for homes they never even bought.

What we are seeing now is fraud fallout. The system has been bruised and battered for too long. The very professionals who rely on the industry to feed them and their families have caused the problem, and many of them are now nowhere to be found. They scammed the system and left hard-working Americans to pick up the tab.

Plano Homes for Sale

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