Surge in Rates Have a Huge Impact on Housing

According to Bloomberg report, the S&P/Case-Shiller index of property values increased 12.1 percent from April 2012, the biggest year-over-year gain since March 2006, after advancing from 10.9 percent increase last month.  CoreLogic, a company that provides comprehensive data, analytics and services to real estate professionals, forecasted a 13% increase in year over year home prices for next month. 

Low inventory, historic low mortgage rates and an improving job market - combined all that with increasing demand are what drive the home prices up.

Based from Freddie Mac data, the average rate on a 30-year fixed mortgage was 3.93% in the week ended June 20, compared with an average 3.55% so far in 2013. Rates have been going up because the Federal Reserve has warned that it might cut back on buying mortgaged-back securities and end the purchases around the middle of 2014.  If that happens, lenders can possibly, charge higher rates to make the securities more attractive to private buyers.

Home buyers that didn't take advantage of record-low rates have missed the boat.  Fannie Mae's chief economist Doug Duncan said that, "It's unlikely that rates will ever be that low again".  But there's still time to take the opportunity of still historic low mortgage rates.  It might not be as low as 3.31% recorded last year, however, it is still considered low. The table below shows the estimated payments for different mortgage rates.

Home Value	Loan Amount (10% DP)	Interest Rate (30-yr fixed rate)	Monthly Payment	Total 360 Payments	Total Interest Paid	% of Interest Paid to Total Payments
$250,000	$225,000	3.5%	$1,270.77	$457,476.20	$132,726.20	29%
$250,000	$225,000	4.0%	$1,334.60	$480,456.39	$155,331.39	32%
$250,000	$225,000	4.5%	$1,400.46	$504,165.10	$178,571.35	35%
$250,000	$225,000	6.5%	$1,682.57	$605,725.10	$278,162.60	46%
$350,000	$315,000	3.5%	$1,779.07	$640,466.68	$185,816.68	29%
$350,000	$315,000	4.0%	$1,868.44	$672,638.95	$217,463.95	32%
$350,000	$315,000	4.5%	$1,960.64	$705,831.14	$249,999.89	35%
$350,000	$315,000	6.5%	$2,355.60	$848,015.14	$389,427.64	46%
$500,000	$450,000	3.5%	$2,541.53	$914,952.39	$265,452.39	29%
$500,000	$450,000	4.0%	$2,669.20	$960,912.78	$310,662.78	32%
$500,000	$450,000	4.5%	$2,800.92	$1,008,330.20	$357,142.70	35%
$500,000	$450,000	6.5%	$3,365.14	$1,211,450.20	$556,325.20	46%

Avoid paying 46% of your total mortgage payments to paying off the interest. Take advantage of the low mortgage rates NOW!!  The economy is still on its way to recovery, once the economy returns to its robust health, mortgage rates will naturally go up!  If the interest rates keep climbing, then buyers currently in transactions should ask their lender about locking in those rates.  Buyers and sellers need to act fast! Talk to a realtor now, while homes are still affordable. 

Tips for 1st Time Real Estate Investors

In the current growing housing market, many people are thinking of investing in real estate while interest rates remain low.  If you are tempted to try your luck in real estate investing, here are few things you needs to know: 

1. Know What You want! Decide whether you want to be a fixer upper, a buy and hold investor or a flipper. Once you know what you want, you'll know your plan of attack.  In the current market, home prices are going up. The longer you hold the home, the value increases. 

2. Know Your Budget.  Start small and don't invest all your money in real estate. Real estate investing should be a supplement to your existing plans, not a replacement.  People encounter troubles when they invest too much in the beginning, but they fail to recoup it. 

3. Network. There are great investor groups online and in person.  You can get a lot of advice from investor forums online and other investors to help get you started. You will gain valuable information just by consulting with them.

4. Choose Well Maintained Property In A Good Area.  Make sure to go around the neighborhood first before choosing your property. Is it close to schools, shopping, parks or business districts. These are the usual consideration of renters when they look for a home. And should you decide to sell your property, the location will also matter to the potential buyers. 

Avoid homes with high maintenance features, remember that the newer generation of home buyers prefer smart homes to luxury homes.  They prefer small but functional homes than the bigger houses where they need to spend a lot of time in maintaining it.  They would rather spend their precious time with their families or do other productive things.

If you are interested in investing in real estate, please contact me for more information.

Generation Y Go For Smart Homes

Generation Y or Millennials (population belonging to the age bracket from 18-35), as they call it, prefer smart homes instead of the luxury homes preferred by their parent's generation.  Even if it means living in a smaller home as long as it is functional. 

The millennium generation has grown up with new technology that they cannot live in a home without it.  Although curb appeal is important, they believe home technology advancements are equally as important. According to a Better Homes and Gardens (BHG) Real Estate survey, 64% of those surveyed would pass on a home if it's not equipped with the latest technology, wiring and capabilities.

59% prefer extra space in the kitchen for a TV rather than,  a second oven. And about 41% of Gen Y'ers would likely be fond of a home automation system rather than a newly renovated kitchen. 

The Millenial generation want each room to have a multiple function rather than have it for decoration.  For example, a dining room can also serve as home office. And the living room can also be transformed into a home theater. 

One of the most common technological advancements present at home is the home security system.  Installing a home security system can protect the family and possessions against burglars. Furthermore, it can also decrease monthly insurance payment.  Installing a security system at home can also increase the value of the property should the owner decide to sell it in the future. 

A smart home would have smart household appliances that make it easier for people to do their chores faster, so they can spend more time with their family. Examples are vacuum cleaner, dishwasher, washing machine and dryer to name a few. Not only they make your jobs easier but the newer models are energy saving and eco-friendly.  Not only it lowers the electricity bill but it is earth friendly as well. Smart TVs nowadays have multiple functions, it's a TV, a computer and movie player rolled into one.

Whether it's through home security system, state of the art entertainment centers, or just an automatic-flushing toilet, the contribution of technology at home is endless. 

If you need advice on how to have a smart home, I have a list of experts that may be able to help you.

How to Save on Home Insurance

Home insurance is an important aspect in home ownership.  Home owner's insurance isn't just a requirement when you buy a house, but it is also a vital part to keep your home safe. Generally, home owners' insurance covers damage from fire, theft and more.  The insurance can protect you in case someone is injured in your home.  It is a wise investment for your financial safety.

Fortunately, there are some ways you can do to reduce your home owners' insurance rates:

1. Install a Home Security System. Special burglar alarms can prevent losses and therefore make your house less of an insurance risk.  This can reduce your home insurance policy by 15% depending on the provider. Security system that connects directly to police and fire departments are most likely to give you the most discount. Some providers also give discounts for homes with dead-bolt locks.  Dead-bolt locks are very inexpensive compared to the possible insurance savings it can give. 

2. Install Smoke Detectors and Carbon Monoxide Detectors.  Also for fire protection, a sprinkler system, heat detectors, fire escapes and plenty of fire extinguishers are also important.

3. Ask for Policyholder Discounts. If you haven't filed a home insurance claim in the last 10 years, your provider might give you as much as 20% reduction. If you are older and retired, you may also be entitled to a senior discount. 

4. Stop Smoking. Insurers not only look at the condition of the house when they insure it, they also look at the people living in it.  If the home owner is a non-smoker, they pose the least risk as compared to smokers that may cause accidental fires. Insurers often give a discount for non-smoking households. 

5. Bundle your Home Insurance with Other Insurance. You'll get a package discount if you insure your home and car with the same company. 

6. Have a Healthy Credit Rating. A lot of companies are checking your credit and base your policy on what is on the record. Make sure that you credit is in good shape. If you don't have a healthy credit rating, look for insurance companies that do not do credit checks.

Home insurance is a competitive market. If you shop around, you may find great deals depending on your needs. Check consumer guides, insurance agents, companies and online insurance quote services.  If you have any questions, please feel free to contact me.

HARP Extended Until December 2015

HARP or Home Affordable Refinance Program will allow its borrowers with loans backed by Fannie Mae and Freddie Mac to obtain new loans until December 31, 2015. HARP was originally set to expire at the end of 2013. 

More than 2.2 million borrowers have benefited from the program so far. The program allows its borrowers to cut loan payments by refinancing at record low interest rates and at smaller monthly payments even if their homes have lost value. 

To qualify for the upgraded HARP, homeowners must meet the following criteria: (Source: www.realtytimes.com)

- The loan must be backed by Fannie Mae or Freddie Mac
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. 

- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

- The current loan-to-value (LTV) ratio must be greater than 80 percent.

- The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

If you have any questions about HARP, please don't hesitate to contact me.