BrinkTank

Fed Rate Cut

Wed, 19 Sep 2007 12:18:05 GMT

The Federal Reserve cut its Fed Funds Rate yesterday for the first time in 4 years by 1/2 point. In speaking with a couple of the lenders that I work with and trust the consensus is that borrowers waiting for lower fixed rate mortgages will probably be disappointed. The opinion is that cuts in the FFR generally just don't translate into cuts in fixed rate mortgages.

So who does this benefit? According to these lenders, possibly those looking to get a lower rate via refinancing (possibly those trying to get out of an adjustable rate mortage). Additionally those with a HELOC (home equity line of credit) or credit cards ties to the Prime Rate should experience a benefit.

Although Austin's real estate market is not suffering, it is clear that the US market still is and the rate cut was probably the appropriate course of action to tap the breaks on the skid, especially since the news was released yesterday that housing construction fell to a 12 year low and that the number of foreclosure filings reported in the US doubled from August 06 and are up 36% from July.

Investing in Austin, Part 2

Tue, 9 Jan 2007 14:53:44 GMT

As I mentioned in my last blog on Investing in Austin, I attended a class on investing which piqued my interest because I found a source for 100% financing on investment properties. Combine that with other strategies and you could be looking at being able to buy investment properties with no downpayment and no money out of pocket for your closing costs. Before I get too far down that path, let me back up a little...

Most people I talk with want to buy investment property but most I speak with have something that is holding them back. Here are the common obstacles and answers to those obstacles:

"I don't know what to look for" - I do, I am the expert, and that's why I am here to help you. As your Realtor it is my job to monitor the market and find the properties that I believe will work for you and your investment goals. I also consider it my job to educate you to the point that you feel comfortable and confident in the decisions you make.

"I feel unsure/insecure about the future of real estate" - That's an easy question to understand right now with the news dominating the national headlines. Know this though, real estate in Austin has appreciated at an average rate of over 6.5% annually over the past 30 years and the outlook for the Austin market appears to be strong well into the future. The 50 year growth trend line for real estate in the United States is also 4.5%. If your investment goals include building wealth, investing in real estate should be a part of your investment strategy.

"My budget can't handle negative cash flow" - I certainly understand, that is why I will help you find a property that will minimize those risks and help you structure the deal so that you can have positive cash flow in your first year.

"I can't afford the downpayment" - Most people believe they need 20% down for an investment property. That isn't the case in most instances. As I've mentioned, I now have a source for lending that can obtain 100% financing which means no money out of pocket for your downpayment.

"I don't have time to manage it" - There are plenty of capable management companies in town who will manage your property for a small fee. Frankly, I think its a fantastic idea to let someone else manage it.

"I have past credit issues" - The lending industry has loan products for almost any situation. Don't let this fear hold you back from exploring your options.

The reasons people buy investment properties vary. Some of the main reasons for buy investment properties are:

Accumulate wealth

Retirement Income

Capital Preservation

Capital Appreciation

Rental Income

Career Opportunity

What reasons are important to you? That is a critical question to determine so that you can assess what the best type of property is for you and what the best strategy is for you. Not every property works for every situation. Each client's situation is unique and every property is different.

Questions? Call me, James Brinkman, West Elm Properties, at 512.698.3525 or email to Brink@WestElmProperties.com

Austin and National Home Statistics for September

Fri, 27 Oct 2006 22:06:30 GMT

It's time to do a little catch-up on the week that was in real estate, given that some interesting national statistics were released this week.

According to the US Commerce Department the median price of a single family home was down 2.5% from September 2005 to $219,800, the largest year-over-year price decline in records going back four decades.(from the National Association of Realtors). Even more staggering was the news for new home sales, which saw a decline of 9.7% on the median price to $217,000 (also the largest year-over-year decline since 1970). The number of new homes sold did rise 5.3% in September but new home sales are down 14.2% in the past year. Nationally there was a 6.4 month inventory/supply of homes, given the sales rate in September. Mortgage rates inched up to a 6.40% average for the week of October 26. I read recently that rates were thought to be headed to 7% by the end of the year but now the thought is that it won't get to that point, at least not yet. The Federal Reserve's decision Wednesday not to raise rates was at least part based on the housing market slowdown.

September in Austin looked like this:

Current Market Summary

September 2006

All Single Family Sales

2006

2005

2,341

2,280

+ 3%

All Active Single Family Listings

2006

2005

8,203

7,835

- 5%

Single Family Median Price

2006

2005

$167,000

$161,750

+ 3%

Single Family Pending Sales

2006

2005

2,332

2,030

+ 15%

The average home price in Austin was up 6.5% year-over-year to $227,948 from $213,946. These are all certainly respectable numbers in light of the sharp declines in national numbers. Of course, as I always say, all real estate is local. It is interesting however to keep track of how the national averages shake out. It will also be interesting to see how long this downturn in the national numbers will continue.

Credit Scores in Texas

Tue, 10 Oct 2006 15:12:20 GMT

I recently read in the September/October 2006 issue of Texas Realtor magazine that Texas' average credit score ranks 50th among U.S. states. The average credit score in Texas is 648. In South Dakota, the highest ranked state, the average credit score is 711. The 'brief' in the Texas Realtor magazine states that a person with a top credit score might pay $231 less per month than a person with a poot credit score based on a $216,000 mortgage. I don't know why they chose $216,000 but it certainly demonstrates how important credit scores are to the lending process and how much these scores can impact the real estate market in Texas.

If you are keeping track, the $231 per month is equivalent to $2,772 per year or, over the life of a 30 years mortgage, $83,160. It's also said that an extra $6/month in mortgage payment buys you approximately $1,000 more house. That's $38,500 more of a home that would be available to someone with a better credit score at the same payment.

Texas Realtor magazine cited Experian and "myFico savings example using a 30 year mortgage with prevailing national rates in August 2006"

3 Mortgage Monday

Mon, 18 Sep 2006 23:25:44 GMT

Here are three articles on mortgages for you on a Monday. The terms you are able to lock in on a mortgage can be equivalent of over $10,000 in sales price so it's good to take a look at your options when buying a home.

1. More and more seniors are getting reverse mortgages to use the equity in their home. A reverse mortgage lets someone 62 or older use the equity in their home to secure a loan. Every month they receive a check and the loan is not due until they sell their home or die. Another advantage is that the IRS considers it a loan so the money is not taxable. It definitely seems like an idea that is picking up steam as nationally there were nearly 400% more of these loans originated in 2005 as there were just five years prior in 2000. Although Austin is thought of as a relatively 'young' city, this is still an idea that many residents could use if it makes financial sense.

2. Energy efficient mortgages are an idea that has been around for a while but sound more appealing than ever. The gist behind it is that if the monthly amount of energy you save from a repair you make with the loan is equivalent to the monthly payment for that repair then the loan is approved (obviously all the other loan conditions must be met as well). This is a great way to get new windows, insulation, heating and/or air for your home and also take a step toward reducing the amount of energy you consume. I will look into whether this can be combined with the City of Austin energy rebates and incentives, which would make it an even better home investment.

3. Saved the most universal topic for last - Mortgage Insurance. Eck. Just the words make me think of money flying out the window. Simply put, mortgage insurance is put into place to mitigate the lender's risks/costs if the buyer were to default on the loan. Private mortgage insurance (PMI) is basically required for anyone putting less than 20% down on the home. The buyer/homeowner pays for it and the lender gets the benefit. One way we in the real estate industry helped our clients around PMI was to suggest a second lien of anywhere between 5-15% depending on how much the buyer was putting down. Most commonly you hear these referred to as 80/10/10s or some such. The first number, in this case 80, is the first lien of 80% of the sales price. The second number is the second lien and the third number is the buyer's downpayment. By taking out a second lien the first lien meets the 80% criteria (helping to mitigate the lender's risk) and the buyer is able to avoid having to pay mortgage insurance. Typically over the past few years it has made financial sense for buyers to do this as, with interest rates low, the interest being paid on the second lien was less than the mortgage insurance. Changes in the packaging and terms of mortgage insurance as well as increases in the interest rate have caused this not to always be the sure-fire way. Given these changes, make sure you examine carefully which of the two options (second lien vs. mortgage insurance) makes the most sense when buying your new Austin area home.

If you have any questions about this or any other item related to Austin area homes and real estate, please don't hesitate to call me or email me. I would be happy to help you determine whether mortgage insurance or a second lien makes the most financial sense for your new home purchase.

Bedtime Reading

Sun, 20 Aug 2006 23:52:16 GMT

A couple of Statesman article links for you on this Sunday:

50 Year Mortgages - Aaack! - Count me among those who doesn't really see much good, but a whole lot of potential bad, about these types of loans. In a perfect world, I would love for all of my clients to be able to put 20% down and have 15-20 year mortgages for their personal home. Of course, it's not a perfect world so I think there are still plenty of benefits to home ownership with much lower amounts down, but I do think it is pretty important to stay within your means, and much of the time interest only loans, and, by extension, 50 year mortgages, are used to stretch the amount of home a buyer can afford. Call me silly, but I'd much rather have a client who is able to comfortably make their mortgage payments and actually have a little money to enjoy their life than a client who has to use special financing to stretch themselves into a more expensive home and then be stressed out about having to make the payments every month. Maybe its just me...

Here's a story regarding what Mark Dotzour, chief economist and director of research at the Texas A&M Real Estate Center, predicted for Austin and Central Texas real estate in 2007. Good stuff.

Nothing my clients don't already know, but the story here covers the continuing strength of the Central Texas real estate market. Beyond the overall monthly statistics, I found the jump in sales of high end houses to be particularly interesting, with sales of homes priced over $1,000,000 up nearly 50%. The article also reference that Travis Heights experience a 27% jump in median prices. I actually know that to be true as I had a past client who bought in the area email me with a couple real estate related question and then thank me profusely for helping find such a great deal in the Travis Heights area before it popped up again.

If you are looking at buying or selling a home in Travis Heights, or any other Austin neighborhood, I would welcome the opportunity to talk with you about it. I think it wouldn't take long until you would realize why our past clients keep referring to us and why we say West Elm Properties - just better!

Sunday Real Estate Links

Sun, 13 Aug 2006 22:51:10 GMT

Some local Austin stories from the Sunday Stateman:

Housing Starts Stay Strong in Central Texas

Mortgage Rates Fall as Economy Slows