Archive for October, 2009

Why Recession Recovery Will Be Slow

Austin is one of 79 metro areas across the country to be officially out of the recession, according to Moody’s. Although the state of Texas is still considered to be suffering the constraints of the recession, Austin and seven other Texas cities have been given the all clear. This determination was based on an index that included employment, housing starts and home prices.



In fact, the latest poll of economist says that at least 80 percent of them agree that the recession is over. Unfortunately that piece of good news may not mean whole lot as the American economic landscape looks completely different than it did two years ago. The survey by the National Association for Business Economics released recently said to expect a slow recovery. Here are some reasons the recession recovery may be slow:



Unemployment

There seems to be little doubt that the unemployment rate, which is currently 9.8 percent, will reach 10 percent by the first part of next year. Even with the number of new jobless claims down for the fourth week in the last five, layoffs continue. Federal Reserve Chairman Ben Bernanke has warned that unemployment is likely to remain above nine percent through 2010.



Consumer Spending

Worries over unemployment affect consumer spending habits, even of those Americans who have jobs and job security. The personal saving rate is up for the first time in two decades and the cautious spending that began during the height of the recession has not changed appreciably in recent months. For example, when gas prices hit the $4 per gallon mark in the summer of 2008, people significantly changed driving habits. The annual American Community Survey showed that the numbers of Americans commuting to work, a habit stared during the high gas prices, remains the highest number in more than a decade. People are generally not eating out as much or making as many big purchases. It remains to be seen if holiday spending this season will help revive the suffering retail sector.



Real Estate

The economists surveyed expect housing in 2010 to contribute to the overall growth of the economy for the first time since 2005. However, the census data shows that less people are moving these days, with population trends to the sunbelt states actually being reversed. Real Estate prices nationwide are down and the percentage of Americans owning homes dropped to 66.6 percent this year from the high of 67.3 percent in 2006.



Credit

Even with the Dow Jones industrial going over 10,000 and banks reporting billion dollars profits, credit remains tight. A recent report from the Federal Reserve shows that households have reduced their borrowing for the seventh straight month, while at the same times banks are lowering credit limits. Banks seem to be enemy number one when it comes to this recession, yet they have to play an integral part in the recovery. Until credit for both businesses and individuals starts flowing again, employment and housing is likely to remain stagnant.



Ki lives, and works, in Austin, Texas. His site provides potential homebuyers a free search of the Austin MLS. He also provides detailed information about Austin real estate on this site along with profiles of neighborhoods like Westminster Glen in central Austin.

Mortgage Rates Start to Rise

After falling for the last 6 weeks mortgage rates started to rise this week. The 30 year rate rose from 4.87 to 4.92. The 15 year mortgage rose from 4.33 to 4.37. Both arms rose as well with the 5 year arm rising from 4.35 to 4.38 and the 1 year arm rising from 4.53 to 4.60. Below are mortgage rates for the last several weeks along with mortgage rates from March 19, 2009.

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Sep 24, 2009
30-yr 5.04 15-yr 4.46 5-yr ARM 4.51 1-yr ARM 4.52

Sep 17, 2009
30-yr 5.04 15-yr 4.47 5-yr ARM 4.51 1-yr ARM 4.58

Mar 19, 2009
30-yr 4.98 15-yr 4.61 5-yr ARM 4.98 1-yr ARM 4.91

Overall its not that interesting that rates moved up. Moving up .05 points is not that significant. For the last few months the speculation has been that rates are going to eventually move up. Additionally, the federal government has been pulling back on the amount of mortgage securities it was buying (which was pushing mortgage rates down). So the question is whether this weeks rise in mortgage rates was just normal volatility or the beginning of the steady rise in mortgage rates that some have been predicting. At this point it’s an impossible question to answer for the most part we will have to wait and see.

In addition to rates it’s also interesting to look at mortgage payments. We took today’s rates and determined the mortgage payment on a 200k loan. We also did the same thing with rates from October 1st (2 weeks ago) and March 12, 2009 (6 months ago).

Oct 15

30-yr $1063.88

15-yr $1516.73

5-yr ARM $999.16

1-yr ARM $1025.28

Oct 01

30-yr $1066.32

15-yr $1515.71

5-yr ARM $1003.88

1-yr ARM $1012.18

Mar 12

30-yr $1077.31

15-yr $1544.33

5-yr ARM $1072.42

1-yr ARM $1049.33

Overall looking at mortgage rates/mortgage payments from 2 weeks and 6 months ago we are not seeing a lot of movement. Compared to March 12 (6 months ago) a mortgage payment on a 200k loan would only be $13.42 less a month or 1.24 percent less. By comparison if rates rise to 7 percent (historically about average) a mortgage payment would be 266.72 more a month or a rise of 25%. While a rise to 7 percent seems like a lot many experts are expecting rates to move up to 9 or 10 percent.

So what is our advice for people looking for a mortgage? First it’s probably best to start looking for a mortgage early on in the home buying process. It’s more difficult to get a loan and waiting to the last minute is not advisable. Additionally, it’s probably advisable to lock in a rate earlier instead of later. While mortgage rates could fall its doubtful they could drop by much at this point. On the other hand it’s possible that mortgage rates could move up dramatically. So there is more to lose than gain by waiting to lock in on a mortgage. If mortgage rates do start to rise dramatically it could deal a serious blow to the real estate recovery we are currently seeing in several markets around the country.

Ki works in Austin real estate. His site has different mortgage widgets to keep track of mortgage rates. His site escapesomewhere.com has information on Austin along with a blog focused on Austin Texas real estate

The Great Recession Has Been a Bumpy Ride

It is hard to believe just two years ago in October the Dow Jones industrial set a record high of 14,164. According to the Associated Press, just one year after that it was at 8,451 in mid October 2008. Today the Dow is around 9,800. Stocks have rallied recently on signs that retail sales are improving. The last two years have been a bumpy ride.

The AP recently broke down the economic numbers, putting into perspective just where the U.S. economy stands today. “The panic of last fall has been replaced by the resignation that the worst is over but it might be years before the economy booms again.” It seems for every gain there is something else to put in the loss column. For example, while the stock market is steadily gaining ground, the total losses in the stock market from the peak of October 2007 to the bottom of March 2009 was a mind-boggling $11.2 trillion.

A positive sign is that after steadily declining for fourteen months, retail sales increased 2.7 percent in August. But the unemployment rate in October 2008 was 6.2 percent and today it is 9.8 percent. Consumer confidence, which is measured on a scale of 1 to 100, was at a record low of 25.3 last October and this month it is 53.1. To put these numbers in perspective, two years ago consumer confidence stood at 95.2.

Some oddly positive side effects of the Great Recession have been the increase in personal savings rate from 0.5 percent in 2005, when home prices were soaring, to 6.9 percent in May 2009. Also, credit card debt held by Americans last September was a staggering $975 billion. That number is down 8 percent now to $899 billion.

To put the housing numbers in perspective, 2005 was a record year with 7 million home resales. January 2009 the annual rate of home resales was 4.5 million, but rose to 5.1 million in August. On the other hand, the median price of homes sold in 2006 was a record high $245,000. The median price of homes sold last October was $213,000 and dipped to $195,000 in August.

Some other signs of the time: Starbucks launched an instant coffee product in September. PepsiCo Inc announced recently that it will continue to offer and develop products with price in mind, feeling customers will continue to be price-conscious even after the recession ends. Retailers will need to stay creative to entice shoppers this holiday season amid rising unemployment. Wall Street may be seeing a smoother path to recovery, but it’s still a bumpy ride on Main Street.

Ki works in Austin real estate. He works to help buyers find the perfect property. His website provides general information on Austin real estate. It also allows buyers to search for homes in the Austin MLS along with providing a free mortgage calculator.

World’s Richest Real Estate Moguls

No matter what profession you are in, you will be impacted by real estate in some form or another. Whether you own, rent or sub-let, your life is impacted by real estate and the professionals or individuals that sell, manage or own it.



With that in mind, it would make sense that you just might be interested in people who have made it big in real estate. There are a select few in the entire world who have made their tremendous mark on the real estate landscape. Although, there were many struggles along the way, they arrived at that coveted spot of being a famous real estate tycoon.



Sarah Beeny is a developer and a host of Property Ladder, a British television program in the U.K. Beeny is a die-hard optimist and proponent for incorporating energy efficiency into building or remodeling.



Tim Blixseth is an American real estate mogul and billionaire businessman. He made a promise early on in his investment life to only collect assets, not liabilities, for the remainder of his life. He says he’s stuck to that promise.



Donald Bren, according to Forbes.com, is the wealthiest real estate tycoon on the planet with a $12 billion net worth. He currently owns hundreds of office buildings, along with 90 apartment complexes.



Conrad Hilton is the founder of Hilton Hotels. Hilton was known as a tremendous philanthropist who believed charity was a basic requirement for humanity.



Stanley Ho is one of the richest people in Asia. He’s a Macau and Hong Kong billionaire and casino mogul.



Lee Shau Kee is recently most famous for losing around $8 billion in net worth just in the past two years. Even with the huge losses, Kee continues to be noted as a real estate magnate as owner for Henderson Land Development. China’s greater region still considers Kee as one of the area’s richest people.



Ray Kroc is a entrepreneur who founded the McDonald’s Corporation franchise. Kroc purchased all rights to the McDonald’s name from the founding brothers Richard and Maurice McDonald. He took the franchise internationally to Japan and Germany in 1971.



Akira Mori is a famous Japanese real estate tycoon and billionaire. He’s one of the richest men in the world. President and CEO of Mori Trust, his family’s company owns real estate and hotels in Tokyo and all over Japan.



Minoru Mori is also a famous Japanese tycoon and billionaire. He and his brother Akira are sons to Taikichiro Mori.



Donald Trump is a famous television celebrity and billionaire real estate developer. Although his investments fluctuate with the waves of the sea, he always seems to come out on top.



Steve Wynn is a well-known Las Vegas casino and resort developer who developed some of the most opulent casinos and resorts in the City of Las Vegas.



Sam Zell’s net worth exceeds $6 billion. He is ranked 68th on Forbes’ list of richest Americans. He co-founded Equity Group Investments LLC that launched Equity Residential and Equity Office Properties.

Ki worked on 6th street in college. Today he has a business focused on Austin Texas real estate in the older neighborhoods of central Austin.. He also has a website, which encourages buyers to search the Austin MLS. Potential buyers can keep up with the market from afar by following his blog filled with statistics on Austin real estate.

Federal Mortgage Home Loan Programs

In need of a loan to buy a house, make repairs on your home or buy a house and make repairs on a home? Are you thinking you might not qualify, though, so you’ve not started the process? You just might be surprised. The federal government currently has a variety of 18 federal mortgage assistance programs available to eligible homebuyers. Keep in mind, however, that most are for those who have very low- to middle-income and the home mortgaged must be your primary residence.



All available federal mortgage programs and are provided below. Detail for all programs may be accessed on the govloans.gov website by selecting Housing under the Loan Quick Search section. Other websites indicated also provide information about the loan programs.



* Section 203h Mortgage Insurance for Disaster Victims – If you live in a federally declared disaster area and you are a home owner or renter, contact a FHA-approved lender in order to apply or call the FHA for more information at (800) CALL-FHA (225-5342).



* Basic FHA Loan (Home Mortgage Insurance – HUD/FHA) – You may be eligible for this program only if you are a homeowner in need of refinancing an existing mortgage. Check with a FHA-approved lender to see if you qualify and visit the FHA website for more information.



* Combination Mortgage Insurance for Manufactured Home and Lot – The loan title says it all. For more information visit the govloans.gov website.



* Condominium Unit Purchase (Mortgage Insurance – HUD/FHA) – Need assistance in buying a condominium? Visit the govloans.gov website for more information.



* Home and Property Disaster Loans – This program falls under the federal Small Business Administration (SBA) and offers financial assistance to homeowners and renters in declared disaster areas. To apply, call (800) 659-2955, e-mail DisasterCustomerService@sba.gov or visit the SBA disaster assistance website.



* Hope For Homeowners – Is your home at risk of default or currently in foreclosure? If so, this program may be just what you need to save it. For more information, visit the Hope for Homeowners website.



* Indian Home Loan Guarantee Program – Targeted for low-income Native American homebuyers, you can find more information about the program on the govloan.gov website.



* Indian Home Loan Guarantee Program (Section 184) – Native Americans are provided home buying opportunities through this program. For more information and how to apply, check out the HUD website.



* Manufactured Home Loan Insurance (HUD/FHA) – Enables the purchase of a manufactured home. For program contact information visit the HUD website.



* Mortgage Insurance Purchase of a Cooperative Housing Unit – This applies if you want to purchase a townhouse or similar dwelling. See HUD website for more information.



* Property Improvement Loan Insurance (HUD/FHA) – Get a HUD insured loan through a private lender. For more a list of lenders and brochure #2651, call HUD at (800) 767-7468 or visit the HUD website for more information.



* Rehabilitation Mortgage Insurance (HUD/FHA) – You may be eligible to obtain a loan to purchase and rehab a new or existing home. For more information, visit the HUD website.



* Rural Housing Loans – To be eligible for this program, you must have very low- to modest-income. Begin the application process by visiting the USDA website under rural development.



* Rural Housing: Farm Labor Housing Loans and Grants – Applicable to housing for farm labor, get more information by visiting the USDA website under rural development.



* Rural Housing: Housing Repair Loans and Grants – Homeowners with very low-income may be eligible for this program. For more information see the USDA website under rural development.



* Section 203k Rehabilitation Mortgage Insurance – You may be eligible to obtain a loan for a home and repairs needed with this program. Visit the HUD website for more information.



* VA – Home Loans – Interest Rate Reduction Refinancing Loan – Guaranteed loans for veterans, reservists, service members and eligible unmarried surviving spouses. Contact a regional loan center for information for purchasing or refinancing a home. See the VA website for more information.



* VA – Home Loans – Specially Adapted Housing Direct Plan – This program provides supplemental financing for the previously stated VA loan; although, it is rarely used. Visit the VA website for more information.

Ki works as a realtor in the Austin real estate market. He created a website for buyers to search for Austin homes for sale. He also maintains a blog devoted to Austin Texas real estate market which has regularly posted statistical updates.