Boston Area Real Estate News – July 2013

Boston Area Real Estate News - July 2013

In this Issue for July 2013:

Real Estate Values Set Record Nationally

Rising Mortgage Rates Raising Concerns

Bad At Math? You're More Likely To Lose Your Home

 

Real Estate Values Set Record Nationally

Real Estate Values Set Record NationallyU.S. home prices jumped 12.1 percent in April from a year ago, the most since March 2006. More buyers and a limited supply of available homes have lifted prices in most cities across the country, a sign of a broad-based housing recovery.

The Standard & Poor’s/Case-Shiller 20-city home price index released recently also rose 2.5 percent in April from March, the biggest month-over-month gain on records dating back to 2000. Prices rose from a year earlier in all 20 cities for the fourth straight month. Twelve cities posted double-digit gains.

The housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some of the drag from higher taxes and federal spending cuts. Steady job gains and low mortgage rates have encouraged more people to buy homes.

David Blitzer, chairman of the index committee, said the housing recovery should continue even with mortgage rates rising. Borrowing rates have jumped after Federal Reserve Chairman Ben Bernanke said recently that the Fed could slow its bond-purchase program, which is intended to keep long-term interest rates low.

Prices are rising because demand is up and fewer homes are available for sale. That's made builders more optimistic about their prospects, leading to more construction and jobs.

The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The April figures are the latest available.

 

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Rising Mortgage Rates Raising Concerns

Rising Mortgage Rates Raising ConcernsAlthough still low by historic standards, the recent increase in mortgage rates have put a damper on a home refinancing boom and will make buying a home noticeably more expensive for borrowers. What's more, some experts say, the rapid run-up could pose a threat to consumer confidence, delivering a blow to the recovering housing markets and even beyond.

Mortgage rates have jumped a full percentage point above their recent record lows, raising costs for borrowers and questions about the housing recovery.

A standard 30-year fixed-rate home loan hit an average of 4.63% recently before backing off just slightly. That's up from 3.49% on May 3rd and an all-time average low of 3.44% during a week in December.

Regardless of whether the jump in rates reflects a new reality or just volatility in a skittish market, refinance volume is likely to fall further. Home purchases have been on the upswing, but not enough to make up for the decline in refinancing.

Higher rates have an instant effect on family budgets. At 3.5%, a borrower who bought a home for May's median price of $368,000 would have a principal-and-interest payment of $1,322, assuming a 20% down payment. At 4.5%, that payment rises to $1,492.

At 6%, still a decent rate by historical standards, the payment goes up to $1,765.

Despite the run-up in rates, homes remain affordable in most markets across the nation with prices still about 25% off their peak during the housing bubble.

Higher mortgage rates tend to have the immediate effect of pricing certain stretched borrowers out of the market. But it will likely take rates rising to 6% over the next 12 months to depress home purchases and prices.

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Bad At Math? You're More Likely To Lose Your Home

Bad At Math? You're More Likely To Lose Your HomeAccording to a study released last week, math-challenged borrowers were five times more likely to default on their loans.

The study examined several hundred borrowers who held mortgages issued in 2006 and 2007 — right before the mortgage meltdown. Of the study subjects, 25% of the borrowers who scored in the lowest bracket for math skills had defaulted on mortgage payments within five years of getting the loans. Meanwhile, only 5% of those in the top tier for math skills defaulted.

The survey sample included homebuyers from a variety of backgrounds, from blue collar workers to corporate professionals. Their math ability covered the gamut — from those with very limited abilities to a mathematician with a six-figure salary.

The researchers controlled for differences in overall intelligence by measuring for verbal and general IQs, as well as math skills, and controlled for socioeconomic factors, such as age, sex, income, ethnicity and local labor market conditions.

Surprisingly, it did not seem to matter what kind of mortgage the borrowers had, the researchers found.

The researchers asked the survey participants a series of five basic questions. The simplest question asked them how much a $300 sofa would cost at a half-price sale. The most difficult asked how much a savings account of $200 would grow to after earning 10% interest for two years.

Determining why those with poor math skills default on mortgages more often than others will take more research, but previous studies suggest that people who struggle with simple math also struggle with handling their finances. This group tends to budget less carefully, misuse credit cards and mishandle financial emergencies, such as temporary income losses. When they hit a rough financial patch, they may not understand the math well enough to negotiate the most favorable settlements with lenders.

The report suggested that benefits could come from improved financial education. The more homeowners understand money matters, the less likely they are to mishandle them.

Foreclosed Properties Hold Back US Economy

Most economists agree the housing crisis remains the biggest obstacle to economic recovery in the US. But there’s no consensus on how best to fix it and the rate of foreclosed properties has hit a record high.

Comments or questions about this video? We’d love to hear from you. Just click the comment link below and tell us what’s on your mind.

Avoid Foreclosure and Keep Your Home

If you are having trouble paying your mortgage for any reason, or expect problems, you should work with your loan servicer (the company that collects payments on your mortgage) or other experts to find a solution now. If you fall behind and don’t take action, the lender will foreclose on your home. If that happens, you may lose your home and all of the money you have already invested in it. The sooner you act, the better the chances you will avoid foreclosure.

Talk To Your Lender

Talking to the lender, or loan servicer, the company that collects the payments, should be one of your first steps. The earlier you call, the better your chance to work out a solution.

Here are some options:

Loan Modification. Loan servicers can help you catch up on late payments or amend your mortgage to make it more affordable. For homeowners who face losing their home, a loan modification is often the most effective way to avoid foreclosure. The options include:

  • Adding all the missed payments to the loan amount and changing the monthly payment to cover the larger loan.
  • Giving you more years to pay off the loan, lowering the interest rate, and/or forgiving part of the loan, to lower your monthly payment.
  • Switching from an adjustable rate mortgage to a fixed rate mortgage, so you can avoid higher monthly payments.
  • Requiring amounts for taxes and insurance to be included with your monthly mortgage payment so you avoid big bills in addition to your mortgage.

Other options include:

Repayment Plan. If you can start making payments to catch up, the lender may let you pay an additional amount each month until you are caught up.

Forbearance. Lenders may let you make a partial payment, or skip payments, if you have a reasonable plan to catch up. Tell your lender if you expect a tax refund, a bonus, or a new job.

Reinstatement. Reinstatement refers to making a payment that covers all your late payments, usually at the end of a forbearance period.

Sign Over the Property to the Lender in Exchange for Debt Forgiveness (often called “deed in lieu of foreclosure”). This can hurt your credit, but is better than having a foreclosure in your credit history.

Watch out for companies that ask you to sign papers that waive your right to pursue legal actions against them—especially if you expect to continue struggling with your home loan.

For immediate advice, call 888-995-HOPE to speak to a counselor on how to avoid foreclosure. Available in English and Spanish, 24/7. Or visit www.995hope.org for more information.

Facing Foreclosure – What You Should Do Now

Do you see trouble ahead for making your mortgage payments? Here are some things to do now to make it through…

If you have questions or comments about this video… please use the comment link below to contact us. We’d love to hear from you.

Stop Foreclosure: Things You Should Consider to Save Your Home

The threat of facing a foreclosure is a not a trivial thing. It can lead to anxiety or depression. The thought of losing your precious home can be frustrating and embarrassing especially if it’s your biggest investment.

A foreclosed home attracts more buyers who want to invest in cheaper, but good properties, and grab a superior investment opportunity. Seeing your home in public auctions is the worst thing that can happen to any homeowner.

Overcoming a foreclosure is difficult and the truth is you are actually caught in a situation faced by many homeowners. In fact, foreclosure rates have significantly increased during the past few years. Homeowners are beoming overwhelmed with the process and worried about their situation that they find it really tough to pull themselves out of all the financial anxieties.

Fortunately, there are a few companies offering stop foreclosure assistance—things you need to learn to save your home. But make sure you opt for legitimate services so you won’t get hooked on scams. Doing thorough research online can help you find legitimate services. Aside from getting information and solutions from a reputable organization, you can also consider some efficient tips or tricks on how to stop foreclosure and secure your home.

One of these tips is to learn about the things you should NOT do if you want to prevent the foreclosure procedure.

In reality, lenders are more willing to give you a list of options that can help you save your property as opposed to you having to sell your home in a public sale or spending thousands on a complicated foreclosure process. They are even more interested to know what caused your failure to pay your credit and if you can still remedy the situation.

So, don’t ignore their calls because they won’t just go away by you not doing anything. Don’t file a bankruptcy right away if you haven’t yet talked with your lawyer or tried other options. Don’t be in too much of a hurry to settle everything with loan modification if you can’t assure you can afford the interest rate. While getting modified loans is another way to protect your home, you should be aware that some companies want to benefit from this option so they occasionally adjust the interest rates.

Don’t spend on things you don’t really need. Instead, make plans to boost your income. These days there are lot of easy tips that can help you earn money even if you’re at home.

To summarize, talk to your lender, DON’T ignore the past due payments. You may be surprised how willing they are to work with you.