Michael Creed's Blog

This morning, I was looking for inspiration on what I would share with you this week and I found this article, written just yesterday by CNNMoney.com’s staff writer, Les Christie. It’s a great, positive piece on the bright side of the housing bust: Homebuying has not been this affordable in a generation. 

NEW YORK (CNNMoney.com) -- Homes continue to be more affordable than they have been in nearly two decades.

The typical American family, making the nation's median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500).

That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable.

"The increase in affordability -- along with the $8,000 federal tax credit for home buyers -- is stimulating demand, particularly among young, first-time buyers," said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., in a prepared statement.

The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs.

The vast improvement this year is due to plunging prices and rock-bottom interest rates. The average U.S. home price has dropped more than 32% from its peak, which was set during the summer of 2006, according to the S&P/Case-Shiller Home Price index. And, for most of the three months mortgage rates were historically low, under 5% for a 30-year fixed-rate loan.

Long suffering sellers

The improved affordability comes, of course, at the expense of sellers. Real estate Web site Zillow reported that more than 30% of all homes sold during the three months ended June 30 went for less than what the sellers originally paid.

The longer they owned the home, the more likely they were to profit from the resale, but virtually anyone who bought within the past five years and sold during the quarter lost money on the deal, according to Stan Humphries, Zillow's vice president in charge of data and analytics.

Foreclosure factor

The heartbreak among home sellers is compounded by the foreclosure problem. Many of the homes on the market got there because families lost their homes to foreclosure.

Part of the reason that home prices have become so reasonable is the volume of REOs -- real estate speak for homes repossessed by banks -- has spiked. There were more than 87,000 repossessions in July, about triple the number of July 2007.

Foreclosed homes are often listed and sold at steep discounts to produce quick sales, according to Brad Geisen, founder of Foreclosure.com, which markets such properties.

"The big banks are finally pricing their properties to what people will pay for them," he said. "Foreclosure inventory is now selling at about the same rate it's coming in."

Most affordable cities

The older, industrial Midwest cities generally offer the best bargains. Indianapolis has led the NAHB's Housing Opportunity Index for 16 straight quarters. Nearly 95% of all homes sold there were affordable to those earning the area's median income of $68,100.

Other leaders were the Youngstown, Ohio, metro area, Detroit, Dayton, Ohio, and Grand Rapids, Mich.

The least affordable large metro areas were New York, where only 21% of homes sold were affordable, Honolulu, San Francisco,Los Angeles and Santa Ana, Calif. 

First Published: August 19, 2009: 1:41 PM ET

As you can see, even in the middle of all the bad news we seem to get pummeled with every day, there is some good news! 

Are you looking to buy?  Call me for a free Pre-Approval!

There are a few items that are very common in the mortgage industry as required by law, most of which are not fully understood by those that matter the most – the borrowers!  Here are some of those items; please contact me if you have any questions about any aspect of your home loan.

Quick Links: Funding | Odd Days Interest | APR

Three Day Right of Rescission

Most homeowners have heard about the three-day rescission, but do not understand how it works. The three-day rescission allows you time to review all of your documents after closing on a refinance of your primary residence to make sure the loan you got is the mortgage you were promised.

You have until midnight on the third day to cancel your loan for any reason. This serves to protect homeowners from the pressure sales and bait and switch tactics commonly used by mortgage lenders.

Your mortgage broker is supposed to inform you of your rescission rights; however, most brokers conveniently forget to disclose this to you when refinancing your mortgage. If you decide to take advantage of rescission you will need to fax the written cancellations to your mortgage broker (if any), lender, and title company involved with your loan. The three-day time-frame you have for a rescission includes any day of the week, except Sundays and Federal holidays; yes, Saturdays count unless they are a Federal holiday.

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Funding

The loan “funds” the day that the money is disbursed from the lender to the title company.  With a purchase of any property and the refinance of any property other than your primary residence, your loan will fund the same day that you sign the closing documents.  For a refinance of your primary residence, your loan will fund the next business day (Monday -Friday) after your three-day rescission period has expired.

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Odd Days Interest

Also known as “per diem” interest.  This is money that is collected (sometimes refunded when rescission periods are involved) to a borrower at closing to synchronize their closing day with the loan payment due dates.  This is required because interest accrues daily, if it wasn’t done, your first payment would be different than your normal payment amount. 

Example: If you closed on the purchase of your new home on 8/15, the lender would collect 17 days of interest at closing (31 days in the month; interest is paid for every day that you have the loan; the only days where interest is not collected is the first 14 days of the month; 31-14=17).  This closing date would, in turn, make your first payment (due 10/1) equal to all other payments (on a fixed note) because it was equalized.  Why would the first payment be due 10/1?  Great question!  Mortgage interest accrues in arrears; this means that when you make your first payment on 10/1, you are paying the uncollected interest for the month of September.

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APR

I have prepared a special PDF (Adobe File) that you can open and print that specifically addresses all the questions of this useful, yet complicated Federal Disclosure. Click here for the file.

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There’s been a whirlwind of news that has come out this week about the real estate market.  Some good and some bad; isn’t that always the case?! When you have a minute, please have a look at the following two articles as I think you will like the content they have to offer:

1.    For my large base of Wisconsin readers: the Wisconsin Realtors Association reported in a press release that the state’s housing market is showing signs of stabilization; read the release for the details. First Time Buyers – read this as “It’s time to buy while the $8,000 tax credit is still available.” See my post from July 30^th to learn more about what you can do while you still have time.

2.    For everyone – 247wallst.com reported just this morning that “The Fates Conspire Against The Housing Market.”  This writer’s opinion is short, to the point and quite agreeable.

As always, I am here to help you. Whether you need to purchase a home or you would like an authentic, frank and pressure-free evaluation as to whether I can save you money through a home loan refinance, please contact me.