Subject to 3rd party approval (real estate, housing, rental)

[lscalder]

Banks are still doing 100% financing. The feds dropping rates is a big joke. The rate did not drop. What the bank is doing is giving hits to the rate. Hits to the rate means if the Loan amount is under 300k they add .25 then if your credit score is under 680 add .50 then if you are doign Cash out refi over 70%ltv 1.25 add to rate. if the property is located in certain area add .125. When the bank is finish adding on you are back to the same rate as before or buy down the interest rate which cost thousands of dollars. Its more of a mind game. Its mind over matter. If you believe rates have drop then you will buy.

[TeamBenya]

Vanyali- Excellent point! I should have elaboratd further on the concept of mortgage rates and their current situation. If you were able to qualify 6 months ago for a fully financed loan, there is a good chance that you many not qualify today, even if your credit score is the same and your DTI is unchanged.

2 reasons for this:

1) Rates dropped, and the criteria rose. 2 years ago you could get fully financed with a score as low as 580 in may of this year, it was 620. Now I'm seeing difficulty securing a loan with a score under 680 (not to say a loan cannot be secured, but getting a favorable rate at a lower score is very cost prohibitive, particularly when compared to the prior six months or more).

2) The depreciating market syndrome. Lenders are now determining certain regions (oddly enough not everywhere in the state of MD, but large parts) to be what they call "depreciating markets". if they decide that the home they're lending money for is in a depreciating market, they are only willing to fund 95% LTV (Loan to Value).

I don't want to give people the wrong idea here. I'm not claiming that you should be trying to buy now rather than wait. There are very good, firm financial reasons to hold out and wait for the market to continue to fall, and you may very well be able to save even more money by waiting for the market to bottom out.

What I don't think is prudent is to try to "chase the bottom". Everyone in the real estate business has their own opinion as to when the market will bottom out (myself included), but there's no way to know until it's already happened.

It's very difficult to gauge (obviously), from my own experience, I've seen my volume of business explode over the last four weeks. Do I think the market has bottomed out? NO. Simply because I'm seeing an increase in business does not mean that the market has turned around.

The reason I try to examine the risk vs. reward is because I have seen quite a few people who were on the fence about buying and wanted to wait for the rates to drop so they could purchase.

When the rates dropped in January, they found themselves priced out because of borderline credit scores that no longer qualified for an affordable loan. They rolled the dice, decided to wait, and it didn't work out for them. Now they have to wait longer to build a larger downpayment.

In regards to your comment about rates, it's anybody's guess. Nobody expected 2 drops so close together this year, but it happened. Keep in mind the the Fed Reserve Rates and Key Rate do not directly dictate mortgage rates. I've seen the fed raise the reserve and mortgages dropped, and visa-versa. Generally, there is a correlation between them, however.

What really needs to be examined is: "How are the loans being funded?". The value of morgage backed securities is a big deal here! If investors are unwilling to purchase mortgage backed securities, then the rates have to rise high enough to entice people to buy in. This is where foreclosures have a HUGE impact, aside from just their sales price.

The money that is lost when a bank sells a home "upside down", through either foreclosure or short-sale, is a loss that an investor has to absorb somehow. These securities (typically a "package" of 100-1000 loans) erode in value and elevate in risk as more money is lost due to foreclosures. If people continue to lose their money in the securities market this way, what are they going to do?

SIMPLE: Pull their money out and invest elsewhere.

How do you get them to continue to invest in these securities? Make the financial reward (i.e. interest rate) worth the finanical risk (increasing rate of foreclosure). I have not seen the full impact yet, but I have seen more and more lenders having a difficult time financing the loans (here's a warning sign), They avoid raising rates by skyrocketing approval criteria instead (another warning sign), and the question becomes: Is that enough?

I can't answer that, but I do know that banks are planning for a 70%-100% increase in foreclosure rates for 2008. I believe that will continue to deflate prices. I also believe that lenders will likely have to either raise criteria even further or raise rates to keep investors in if they are pressured to hard. In all honesty, I have no idea how to determine what the breaking point will be at this moment, so there's really no way for me to say that I think rates will hold, rise, or fall over the next 6 months. In my opinion, it's anybody's guess.

[TeamBenya]

Originally Posted by Jaded

If you have superior credit you will still qualify for 0% down. Banks are still lending to borrowers with A and B credit.

I think the problem with the housing market now has a lot to do with speculators and homeowners whose credit wasn't up to par at the time they purchased...interest rates rose on their adjustable rate mortgage and their monthly payments went through the roof...sloppy lending standards by subprime lenders. Now, they are in debt (taking out seconds and thirds assuming their homes would appreciate), and their credit probably never improved and is now worse than when they bought the home; refinancing is not even an option for most of these borrowers.

But, the Bush administration just announced that major lenders have agreed to stall foreclosures for 30 days with hopes of renegotiating the terms of the loans of those in trouble. Don't know if this will help or not.

Very right, Lenders can and will do 100% finance if the score is super high.

People assuming that ARMS and interest only notes were sound mortgages is a big part of the problem. Another big issue is people who had shaky credit then assumed that because they owned this skyrocketing asset, they could use it to pay for everything else they couldn't afford. The lenders made it too easy to buy a home, plain and simple. Is it their fault? I'm not really interested in placing blame for it. Time and energy is much better spent on educating homeowners and fixing the mess we're in rather than pointing fingers.

I read about that 30 day stall plan from Bush, and the plan is full of holes. Here's a link to the analysis of Project Lifeline.

They tried another plan that's been stalling out pretty badly due to the difficulty of term qualifications. Anyone else remember the Hope Now Announcement?

[TeamBenya]

Originally Posted by vanyali

Adding a downpayment to the calculation doesn't really change his point at all.

Exactly. If the rate goes up (due to a general increase or stricter approval guidelines), it causes the same problem. Adding a downpayment does not really change the relational difference I'm trying to explain.

[FrankLaw]

Originally Posted by vanyali

I don't see rates going back up anytime soon. At least, the Fed isn't raising rates, and since we're going into a recession, I don't think the Fed is going to start raising rates anytime in the foreseeable future. The US economy right now looks a lot like Japan right before going into a decade-long period of stagnation, during which time interest rates remained insanely low.

The prime rate that the Fed just lowered last month doesn't directly affect 30-year fixed mortgages, though. Those mortgage rates are more controlled by inflation, which is why people are still concerned about the housing market right now.

The prime rate is an overnight rate that is used to determine interest rates on short-term debt. The direct effect is to benefit the financial sector; they borrow money on short-term rates to lend out to consumers.

I believe the way it works is that a bank will borrow money on the short term at the rate based on the prime rate. It will then lend it out, in part, to individual borrowers in long-term deals such as 30-year fixed mortgages at the prevailing market rate. If the prime rate is lowered, it can give the banks more room to play with their profit margins and lower their long-term rates as a result in an effort to lure more borrowers. But the banks have to factor in inflation, as well. They have to make sure the 30-year rates at which they lend not only covers their profits, but also covers the cost of money adjusted for inflation. $500,000 today isn't going to be the same thing as $500,000 30 years from now. So the long-term rates are going to have to cover that, in addition to profit.

I admit, I don't know much about what happened in Japan, but it would seem that the government there was somehow able to keep inflation low during that period or otherwise forced banks to keep their rates low.

Hopefully, Bernanke and Congress will be able to keep inflation rates low here, too.

[jaindow]

Originally Posted by FrankLaw

I admit, I don't know much about what happened in Japan

Someone else might be able to explain more of the details, but in a nutshell Japan had gone through a period where their stock market and real estate was rising heavily. Also, Japanese people have a history of saving money so this meant there was quite a bit of money available to banks for making loans and credits. Big companies started investing in places outside of Japan. As real estate prices rose, people sought bigger loans to purchase a place to live. What was happening though, was that banks got into the business of making pretty risky loans. Somewhere I had read that they even had 100-year and multi-generational loans!

Eventually this bubble busted and investments, such as the real estate that was purchased with risky loans, lost alot of their inflated value. Banks were essentially failing. Basically their entire economy crashed, but from what I understand, this happened pretty steadily over time.

[TeamBenya]

Here's a link to the sales trend chart for Japanese home values during their rise and slump.

Japan Chart

The full article that I pulled this from can be found here.

The article was written in october, so some of the figures are out of date, but you get the idea.

[1973 Forced Busing]

Your team didn't put any money in that house. Who you trying to play?
And your "buy now" crap doesn't hold water either.

Home price declines steepen in fourth quarter - Realtors - Feb. 14, 2008

Also that housingtracker website clearly shows 25th, median and
75th prices have dropped like a rock in the last 2.5 years.

25th Median 75th
02/07/2008 $265,900 $365,000 $519,000
09/07/2005 $369,000 $499,000 $699,900

Not to mention the inventory increase
Inventory
02/07/2008 11,381
09/07/2005 4,636

Telling people to buy something that will be worth much less in two years is evil!

[1973 Forced Busing]

Here is all the data from 8/14/05 till the 7th of this month.
Shall we go over it line by line together? Or would you rather spin it solo?

Washington, DC
Including Adelphi, Arlington, Avondale, Bethesda, Bolling Afb, Brentwood, Camp Springs, Capitol Heights, Chantilly, Cheverly, Chevy Chase, Chillum, Colmar Manor, Cottage City, Crystal City, Dulles, Edmonston, Fairfax, Fairmount Heights, Forest Heights, Fort Mcnair, Green Meadow, Herndon, Hillcrest Heights, Hyattsville, Langley Park, Lewisdale, Marlow Heights, Morningside, Mount Rainier, North Brentwood, Oak Hill, Oxon Hill, Prince Georges Metro Ctr, Rogers Heights, Rosslyn, Seat Pleasant, Silver Hill, Silver Spring, Somerset, South Riding, Sterling, Suitland, Takoma Park, Temple Hills, Tuxedo, University Park, West Hyattsville


Trend 02/07/2008 1 month 3 month 6 month 12 month
Median Price $365,000 -2.0% -8.5% -12.9% -17.0%
Inventory 11,381 +11.2% -8.7% -4.6% +35.7%


Date Inventory 25th Percentile 50th Percentile
(Median) 75th Percentile
02/07/2008 11,381 $265,900 $365,000 $519,000
02/01/2008 11,198 $269,000 $369,000 $519,900
01/28/2008 11,098 $269,700 $369,900 $520,000
01/21/2008 10,917 $269,900 $369,900 $519,999
01/14/2008 10,979 $269,900 $369,999 $520,000
01/07/2008 10,232 $270,000 $372,500 $519,900
01/01/2008 10,886 $275,000 $375,000 $524,900
12/28/2007 11,107 $275,000 $375,900 $525,000
12/21/2007 11,118 $275,000 $379,000 $525,000
12/14/2007 11,351 $279,000 $380,000 $530,000
12/07/2007 11,769 $280,000 $385,000 $539,900
12/01/2007 12,664 $285,000 $385,000 $540,000
11/28/2007 12,225 $285,000 $387,000 $542,900
11/21/2007 12,253 $288,900 $389,900 $549,000
11/14/2007 12,227 $289,999 $394,000 $549,900
11/07/2007 12,461 $295,000 $399,000 $550,000
11/01/2007 12,734 $299,000 $399,000 $553,741
10/28/2007 12,659 $299,000 $399,000 $559,000
10/21/2007 12,657 $299,500 $399,500 $559,000
10/14/2007 13,232 $299,900 $399,900 $560,000
10/07/2007 12,805 $300,000 $399,950 $569,000
10/01/2007 12,897 $304,900 $400,000 $569,900
09/28/2007 12,633 $300,000 $400,000 $569,900
09/21/2007 12,213 $305,000 $400,000 $567,900
09/14/2007 12,702 $305,423 $407,900 $568,900
09/07/2007 11,878 $305,000 $406,900 $560,000
09/01/2007 12,453 $305,000 $400,000 $556,900
08/28/2007 11,853 $305,423 $405,000 $559,900
08/21/2007 12,241 $308,900 $409,000 $559,000
08/14/2007 12,141 $311,000 $415,000 $572,500
08/07/2007 11,927 $314,900 $419,000 $575,000
08/01/2007 11,839 $315,000 $420,000 $579,000
07/28/2007 11,876 $315,000 $420,000 $579,000
07/21/2007 12,517 $317,500 $424,900 $584,900
07/14/2007 12,641 $319,900 $425,000 $590,000
07/07/2007 12,550 $319,800 $425,000 $597,700
07/01/2007 12,108 $319,900 $426,500 $599,000
06/28/2007 12,330 $319,990 $429,000 $599,000
06/21/2007 12,225 $320,000 $429,900 $599,000
06/14/2007 9,965 $330,000 $442,000 $619,900
06/07/2007 12,375 $325,000 $435,000 $599,900
06/01/2007 11,589 $325,000 $437,900 $599,990
05/28/2007 11,822 $325,000 $439,000 $599,900
05/21/2007 11,667 $329,000 $439,900 $614,000
05/14/2007 11,188 $325,750 $439,990 $614,777
05/07/2007 11,019 $329,000 $444,900 $615,000
05/01/2007 10,456 $329,000 $445,000 $619,000
04/28/2007 10,745 $326,900 $442,000 $619,000
04/21/2007 10,417 $329,000 $440,000 $619,000
04/14/2007 9,957 $329,000 $443,000 $619,900
04/07/2007 9,552 $329,000 $444,900 $619,900
04/01/2007 9,222 $326,500 $445,000 $624,900
03/28/2007 9,151 $325,000 $439,999 $619,900
03/21/2007 8,967 $324,999 $439,900 $619,000
03/14/2007 8,713 $324,900 $439,900 $615,000
03/07/2007 8,376 $320,000 $439,000 $609,900
03/01/2007 8,193 $320,000 $439,500 $613,975
02/28/2007 8,243 $320,000 $439,900 $615,000
02/21/2007 8,328 $324,900 $439,900 $615,000
02/14/2007 8,427 $324,900 $439,830 $615,000
02/07/2007 8,384 $324,000 $439,900 $619,000
02/01/2007 8,130 $320,000 $439,900 $615,000
01/28/2007 8,580 $324,900 $439,900 $613,975
01/21/2007 8,445 $324,900 $439,999 $615,000
01/14/2007 8,464 $319,900 $439,000 $605,000
01/07/2007 8,177 $319,900 $436,113 $600,000
01/01/2007 8,451 $320,000 $439,000 $609,900
12/28/2006 9,066 $324,900 $439,900 $609,900
12/21/2006 9,065 $324,900 $439,900 $613,975
12/14/2006 9,512 $327,000 $448,000 $619,900
12/07/2006 9,613 $329,900 $449,000 $624,987
12/01/2006 9,634 $335,000 $449,900 $629,900
11/28/2006 10,237 $335,000 $449,900 $629,000
11/21/2006 10,597 $335,900 $450,000 $629,000
11/14/2006 10,916 $339,000 $450,000 $629,900
11/07/2006 11,143 $339,900 $453,000 $635,000
11/01/2006 11,475 $339,900 $455,000 $635,000
10/28/2006 11,621 $339,900 $455,000 $630,000
10/21/2006 11,752 $339,900 $455,000 $629,900
10/14/2006 11,804 $340,000 $455,000 $630,000
10/07/2006 11,679 $345,000 $458,777 $635,000
10/01/2006 11,475 $345,000 $459,000 $639,250
09/28/2006 11,790 $345,000 $459,000 $635,000
09/21/2006 11,735 $348,000 $459,900 $639,500
09/14/2006 11,446 $349,000 $460,000 $639,900
09/07/2006 11,150 $345,000 $460,000 $639,000
09/01/2006 10,949 $349,000 $462,500 $635,000
08/28/2006 11,727 $349,000 $463,500 $635,000
08/21/2006 11,712 $349,000 $464,916 $635,000
08/14/2006 11,950 $349,900 $465,000 $639,500
08/07/2006 11,921 $349,900 $469,500 $639,900
08/01/2006 11,706 $349,900 $469,900 $645,000
07/28/2006 12,178 $349,900 $469,900 $646,900
07/21/2006 12,111 $349,950 $474,900 $649,000
07/14/2006 12,070 $349,900 $474,900 $649,900
07/07/2006 11,827 $350,000 $475,000 $649,900
07/01/2006 12,172 $350,000 $479,000 $649,900
06/28/2006 12,439 $354,999 $479,900 $650,000
06/21/2006 12,469 $355,000 $479,900 $652,900
06/14/2006 12,152 $355,000 $479,900 $664,900
06/07/2006 11,825 $359,900 $484,900 $669,000
06/01/2006 11,391 $359,900 $485,000 $670,000
05/28/2006 11,604 $359,000 $485,000 $669,000
05/21/2006 11,740 $359,000 $485,000 $674,900
05/14/2006 11,255 $357,000 $485,000 $675,000
05/07/2006 10,310 $359,000 $489,000 $679,000
05/01/2006 10,460 $355,000 $485,000 $675,000
04/28/2006 10,169 $350,000 $484,999 $675,000
04/21/2006 9,542 $349,500 $479,000 $669,000
04/14/2006 9,541 $349,500 $479,000 $669,000
04/07/2006 9,051 $344,900 $475,000 $664,500
04/01/2006 8,927 $344,900 $475,000 $669,900
03/28/2006 8,562 $339,000 $468,000 $659,000
03/21/2006 8,451 $339,000 $469,000 $659,900
03/14/2006 8,025 $339,000 $469,000 $659,900
03/07/2006 7,563 $338,000 $469,000 $659,999
03/01/2006 7,354 $336,000 $469,000 $655,000
02/28/2006 7,442 $337,000 $467,000 $650,000
02/21/2006 7,258 $335,000 $465,000 $650,000
02/14/2006 7,034 $334,900 $459,900 $650,000
02/07/2006 6,798 $335,000 $459,900 $650,000
02/01/2006 6,675 $330,000 $459,000 $649,900
01/28/2006 6,675 $330,000 $459,500 $649,900
01/21/2006 6,497 $330,000 $459,900 $649,900
01/14/2006 6,444 $330,000 $459,000 $649,900
01/07/2006 6,103 $334,900 $450,000 $649,900
01/01/2006 6,054 $339,000 $457,900 $649,900
12/28/2005 6,367 $339,000 $450,000 $649,888
12/21/2005 6,793 $339,900 $450,000 $649,000
12/14/2005 7,140 $340,000 $459,000 $649,000
12/07/2005 7,259 $345,000 $465,000 $650,000
12/01/2005 7,337 $349,900 $469,000 $659,900
11/28/2005 7,590 $349,900 $469,900 $659,900
11/21/2005 8,011 $349,900 $469,900 $659,990
11/14/2005 8,001 $350,000 $475,000 $674,800
11/07/2005 8,000 $350,000 $475,000 $674,888
11/01/2005 7,887 $359,000 $479,900 $678,000
10/28/2005 7,822 $359,000 $479,900 $675,000
10/21/2005 7,737 $359,000 $480,000 $679,000
10/14/2005 7,392 $359,900 $485,000 $679,999
10/07/2005 7,262 $360,000 $489,000 $685,000
10/01/2005 7,157 $360,000 $489,000 $689,000
09/28/2005 6,009 $370,000 $499,900 $699,900
09/21/2005 5,885 $372,000 $499,900 $699,990
09/14/2005 5,464 $370,000 $499,900 $699,900
09/07/2005 4,636 $369,000 $499,000 $699,900
09/01/2005 5,472 $358,999 $484,900 $689,000
08/28/2005 5,455 $355,000 $484,990 $695,000
08/21/2005 5,547 $358,000 $484,900 $699,000
08/14/2005 5,347 $360,000 $489,000 $699,900

[1973 Forced Busing]

A history of NAR estimates,

Recent NAR estimates of annual existing home sales:

12/11/2006 - 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 - 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 - 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 - 6.42 million units.
Lereah "... existing-home sales ... should be gradually rising this year and next."

4/11/2007 - 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit..."

5/9/2007 - 6.29 million units.
6/6/2007 - 6.18 million units.
Yun "Home sales will ... trend upward with improving activity by the end of the year."

7/11/2007 - 6.11 million units.
Yun "Home prices are expected to recover in 2008 ... picking up late this year."

8/8/2007 - 6.04 million units.
Yun “With the population growing, the demand for homes ...just being delayed.”

9/11/2007 - 5.92 million units.
Yun “Patient buyers ... will recognize that housing remains a good long-term investment.”

10/10/2007 - 5.78 million units.
Yun "The speculative excesses have been removed from the market ...

11/13/2007 - 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment…"

12/10/2007 - 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales..."

01/08/2008 - 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 - 4.9 million units.
Thanks to "Paper Economy - A US Real Estate Bubble Blog"

Paper Economy - A US Real Estate Bubble Blog