Real Estate Snippets

New FHASecure Loan Program

One contributing factor in today's current mortgage crunch and rise in foreclosures has been the exotic loans introduced during our housing boom.  The exotic loans allowed more people to buy St. Paul real estate during the boom years because the qualifying guidelines were so lax.  There was little or no down payment required, low credit scores for qualifying, and "teaser" rates (really low interest rates that would adjust up at a later time) that made home buyers think they could make the monthly mortgage payments.  When the teaser rates went away with the first interest adjustment on the loan, many could no longer afford the mortgage payments.

Prior to the introduction of exotic mortgage programs, FHA (Federal Housing Administration) mortgages  had the easiest guidelines for mortgage qualifying.  FHA's goal was to encourage home ownership among those who could otherwise not buy a house.  FHA only required 3% for a down payment compared to 5% or more on conventional loans.  The qualifying credit scores on FHA were lower than conventional.  Because FHA had been the easiest type of mortgage to obtain, many first time home buyers  purchased with FHA loans.  During the housing boom, FHA loans became more and more rare.  The conventional sub-prime programs were used by buyers instead.

HUD (Housing and Urban Development) introduced a new FHA program today designed to refinance loans with delinquent payments as a result of the exotic ARM's adjusting too high for the owners to pay.  The new FHASecure loan program has the following criteria:

1. Good payment history prior to the interest rate adjustment.
2. The interest rate "reset" must have occurred between June, 2005, and December, 2009.
3. The home owner has at least 3% equity in the property.
4. The loan applicant must have had a history of continuous employment.
5. The applicant has sufficient income to pay the new mortgage payment.

The new program also will allow delinquent payments to be wrapped into the new loan as long as the owner still has 3% equity in the home.  An additional change will be made to the FHA  It is hoped that this new program will help to stabilize the real estate market and keep home owners in their homes!

Office of Federal Housing Enterprise Oversight Report

Another news release and massive report has come from the Office of Federal Housing Enterprise Oversight (OFHEO) showing changes in the Housing Price Index based on real estate sales and refinances.  The most recent HPI figures cover through June of 2007. 

Minnesota actually isn't doing too badly.  We are ranked 43rd in the nation with a one year appreciation of 1.78%, a second quarter depreciation of -.53%, a 5 year appreciation of 35.68%, and an overall appreciation since 1980 of 273.19%.  California and Florida have some areas that are really hurting drastically, but Minnesota's economy remains stable and strong which is maintaining stability in our real estate market.

The national HPI figures are shown in this chart which compares second quarter annual figures of HPI from 1997 through the second quarter of 2007.  The annual HPI figures appreciated to almost 14% in 2005, but have returned to 1997 levels this year. 

The entire report can be viewed here.  For the statistically curious person there's much more detail and many more charts to review.

My Blog Is Fixed

That which was broken is now fixed.  It took several days, several phone calls to domain host technicians, and several e-mails to Typepad tech support, but my blog is once again on the track.  If you were one of the unfortunates who checked us out in the last 2 weeks and couldn't find us or couldn't see some of the illustrations, my apologies.  It appears all has been corrected today!

My Blog Is Broken

Yes, I know I'm supposed to be writing about real estate, and I will, but right now my blog is broken!  Give me a couple days and it should be fixed.  Otherwise, I'll put it back the way it was before and move on!

Cat Funnies

If you want a good chuckle check out I Can Has Cheezburger where this picture was posted.  It's guaranteed to brighten your day even if you don't like cats!

The Great Minnesota Get Together

St. Paul is the most "happenin'" place in Minnesota for these 10 days.  The Minnesota State Fair.  Most people go.  Many go several days.  Some take time off and stay on the grounds in campers.  Some work long and hot hours until the 10 days are up.

Thousands of people are going to visit St. Paul.  Some will come from other states just to join the crowds, jostling for a yard of pavement, lining up for give-aways, resting sore feet at various band shells, and waiting in long restroom lines.

Are we all nuts?

It must be the exotic food that brings everyone.  From traditional corn dogs to corned beef and cabbage, it all comes on a stick and is fried in gallons of oil.

This super dog stand is for the "Weenie".  There's another hot dog in town, Teresa!  I wonder if it too disguises a blog!

 

Renaissanceasaurus

 

   

The Renaissanceasaurus boldly emblazons the corner of Wabasha and Kellogg.  Created by the Renaissance Artist Troupe, no detail is omitted . . . except I couldn't find the soft spot in which to shoot my arrow to fell this great behemoth.  (Oh, that's dragons, not dinosaurs.  I forgot!)  Chain mail adorns most of the exposed body.  If this detail appeals to you, you might want to visit the Renaissance Festival itself for a grand time of fun, frivolity, and participation in yesteryear!

A Clump of Dirt

There are a couple of happy sellers in St. Paul tonight because a clump of dirt was exchanged between them and a happy set of buyers.  Congratulations are in order. 

The sellers can now breathe a sigh of relief.  They can leave the house without checking to make sure every little detail is perfect.  Fluff the pillows, wash EVERY dish, straighten towels, empty the trash, and on and on.  Now the night shift worker can finally go to sleep without interruption.

Once the inspection is done, we'll be shopping for their new home as well!  Maybe we can just keep passing that clump of dirt along!

The Lovely Townhouse . . .

Once upon a time there was a lovely townhouse sitting amongst the green of its grassy slice of pie.  The lovely Maple Grove townhouse was filled with memories of happy family days having sheltered only one owner through times of joy and times of sadness, infancies and graduations, comings and goings.  The lovely townhome had been loved and cared for throughout her life. 

But a new era approached for the lovely townhome and it feared lovely would change to lonely.  Its only owners were moving on in their lives and the lovely townhome could not join them.  Whatever would she do?  Lonely was not what she wanted.  She wanted to once again shelter a family, provide an anchor for memories of little ones and grown ones, of gatherings that required her space.

"Ah," thought the lovely townhouse.  "I shall proclaim to the world the wonders of my home, Red Fox Cove!"

And thus, the not to be lonely townhouse whispered in the real estate agent's ear, "There's a pool  down the street all lovely and blue with inviting clean water heated just right.  Across from the pool is the walking path to the lake with a fishing pier, canoe storage, and a big fire ring for toasting hot dogs and marshmallows on cool fall days."

Drawing herself up ever so straight, the lovely townhome continued, "People live a long time in our friendly townhouses because they all own us.  No renters allowed.  But puppies and kittens are welcome to play."

"I don't know much about these money things that seem so important to the people who live here, but they say the association takes care of all the fun stuff for just $66.00 a month."

"Oh, and don't forget the great biking paths just blocks away.  I've not been there, but the family has come back bubbly every time they've gone that way.  I guess there's a park . . . Eagle Lake, I think, and there's lots of biking and hiking paths for adventurous types.  Even golf they say, although chasing a ball with a flat headed stick makes little sense to me!"

"Will you find a new family for me?" she asks the agent.  "Lonely I don't want to be!"

St. Paul Real Estate Market

No one is contesting that the St. Paul real estate market has changed.  We're in the midst of this market correction.  There's no denying the reality.  Many buyers have dropped out of the market in fear of buying a home that will lose value.  Many sellers are listing their homes in an attempt to sell BEFORE the prices get lower.

Chris Galler makes the following statement in a newsletter to St. Paul REALTOR® members:

Our national market correction was inevitable and predicted. Homes have been appreciating at rates that were not sustainable over the long haul. Low mortgage rates and incredibly generous qualifying ratios have turned many renters into homeowners earlier than they would normally purchased. Just like all good things, this one is coming (we still have a little ways to go) to an end.

There are key statements in Chris' quote.

• The increase in home prices couldn't continue.  Houses had reached prices that normal wage earners could no longer afford.  Since the prices had exceeded affordability, buyers stopped buying.
• Many renters became homeowners earlier than they normally would have because of the low interest rates and easy qualifying.
• The ceiling has been reached.

My thought immediately went to the renters who became homeowners earlier than normal.   Were they prepared?  Did they realize how much their ARM mortgages would cost "next year"?  Did they think about the additional cost of homeownership, i.e., utilities, maintenance, and tools for upkeep? 

Homeownership is a huge responsibility.  Some of these new owners are now becoming foreclosure statistics because they were not really ready for homeownership.  Whereas the real estate market allowed them early entrance, that early entrance may also have worked against them as they weren't totally prepared for overall expenses.  Some lost their homes.  Many will never re-enter the housing market.  Some will find it harder to re-enter than it would have been had they waited a couple more years before buying.

The cap certainly has been reached in prices.  Now, we hopefully will go more cautiously but not stop buying entirely as the interest rates are still very good.  Compared to the 17% figures  just  a couple decades ago, 6 to 7% is a breeze!