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Geofrey Merino Flagstar Bank, FSB 8787 E Pinnacle Peak Rd Scottsdale, AZ 85255 geofrey.merino@flagstar.com 480-560-1081 888-760-8383 ext 230 http://www.flagstarloans.com/gmerino MLO: 317287 Branch/Company ID: 317287 We are dedicated to helping Americans achieve and maintain the American Dream of Homeownership. Our commitment is to provide the highest quality service while working to help our clients achieve their financial objectives within the real estate process. We are proud of our work that has made us the area’s company of choice for so many working towards their long-term goals. If you know anyone that is in the market of purchasing a home or refinancing, send them my direction. One of the greatest compliments to have is a referral. It is greatly appreciated! Calculate a mortgage payment Compare the cost of owning versus renting Lower your payments through debt consolidation

June 4, 2013

 Why Are Rates Rising — Part Two

Several weeks ago we spoke about the reasons interest rates have been on an uptrend for the most part this year. The first thing we want to make clear is that the reasons have not changed. However, because we experienced a downtrend for a few weeks in the midst of the uptrend, there is reason for additional analysis in this regard. What were these reasons? There were basically three. Rates were bouncing back from ridiculously low levels reached at the end of last year when the economy slowed down and the budget crisis threatened to shut down the government completely. Secondly, the economy seemed to be bouncing back from the pause of late last year. Thirdly, the Federal Reserve Board was making noise about ending their purchases of Mortgage Backed Securities and an ending date for stimulus activity known as Quantitative Easing (QE).

The next question is–why did the rising trend stop? It appeared that the economy was not bouncing back from the pause as quickly as we thought. Weak data included the employment report for March and there was continued negative news from Europe and elsewhere overseas. Now, several weeks of rates drifting back down has been erased in a matter of days in the wake of a stronger employment report for April and continued strong data from the real estate markets. The additional perspective? For one, the employment reports are being watched closely and we have another report which will be released on Friday. Obviously, this report has the ability to turn the markets in either direction with a surprise in the data. Secondly, we can see that rates have become very volatile. Volatility is indicative of a market which has hit bottom. The conclusion? While we can’t tell you where rates will go from here, all along we have indicated that record low rates would end and when they do, we will get no warning. Our advice is this–don’t focus where rates will go, but focus on where rates are. They are still historically low and if you want to borrow money to finance a house, car or business–now is the time to get it done.

 Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through. During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price. For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers. But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors. Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative. “I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.” But now, with home prices posting such strong gains, those strategies may not be necessary anymore. “I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman. Source: CNN/Money

The housing market may be recovering, but for many renters, things aren’t looking up. Owning a home has become more affordable, renting less so. From 2008 to 2011, renters’ housing costs increased almost 6 percent, while their income fell 3.2 percent, according to a recent report from the Center for Housing Policy. More than 26 percent of working renters spent at least half their income on housing in 2011, up from about 23 percent in 2008. One reason: There just aren’t enough affordable rental units to go around. In 2010, there were 5.1 million more low-income families than there were affordable units. In about two-thirds of the country’s largest cities, owning a home is less expensive than renting within three years or less (accounting for the upfront costs of buying), Zillow says. Source: Bloomberg

About a quarter of first-time home buyers use gifts from relatives to fund a down payment for a home purchase, according to data from the National Association of Realtors®. But lenders are carefully scrutinizing such gifts. “Basically, the banks want to make sure that you’re not getting a second loan,” Ray Mignone of Ray Mignone & Associates, a financial planning firm, told The New York Times. “If all of a sudden $50,000 pops into your account, they want to make sure it’s not a loan against the property that they’re going to put a mortgage on.” In a recent article, The New York Times provided some of the following tips in making these lenders’ checks and balances go smoother for home buyers:

• Have the money come in a check or wire transfer so that it’s traceable. Lenders often become cautious over cash gifts. 
• Have the giver provide the lender with a gift letter, which verifies the money is a gift, the specific amount being given, the relationship to the borrower, and that repayment is not required. 
• Don’t deposit the gift at the last moment.
• Consider federal gift-tax regulations: Individual gifts of more than $13,000 must be reported to the IRS and are subject to tax. 

Be aware that certain types of home loans may limit how much of a down payment you can receive as a gift. For example, with conventional loans, lenders may require at least 5 percent in the borrower’s own money that is not a gift. However, Federal Housing Administration loans — which are popular among first-time home buyers — do not have any limits on gifts and borrowers can use gifts to cover the entire down payment. Source: The New York Times

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Geofrey Merino Flagstar Bank, FSB 8787 E Pinnacle Peak Rd Scottsdale, AZ 85255 geofrey.merino@flagstar.com 480-560-1081 888-760-8383 ext 230 http://www.flagstarloans.com/gmerino MLO: 317287 Branch/Company ID: 317287 We are dedicated to helping Americans achieve and maintain the American Dream of Homeownership. Our commitment is to provide the highest quality service while working to help our clients achieve their financial objectives within the real estate process. We are proud of our work that has made us the area’s company of choice for so many working towards their long-term goals. If you know anyone that is in the market of purchasing a home or refinancing, send them my direction. One of the greatest compliments to have is a referral. It is greatly appreciated! Calculate a mortgage payment Compare the cost of owning versus renting Lower your payments through debt consolidation

May 28, 2013

 What The Lower Deficits Mean

Some good news was released by the Congressional Budget Office in the past few weeks. The astronomically high U.S. budget deficit is coming back down to earth this year. During the depths of the recession, the budget deficit approached $1.5 trillion and represented over 10% of the size of the U.S. economy. The deficit is falling sharply this year and is expected to come in below $640 billion and just over 5.0% of the size of the economy. The deficit is projected to shrink through 2015. Is this good news? Absolutely. In the long run, lower deficits will translate into lower interest rates and less pressure to raise taxes. Keep in mind that today’s rates are artificially low because of stimulus activity by the Federal Reserve Board. Thus, the rates we are talking about are in the long run. In addition, lower deficits pave the way for additional growth in the private sector.

The bad news is that the deficits are not projected to shrink forever. By the end of the decade, the government red ink will start growing again because of growth in entitlement spending as the age of the average American gets older. The good budget news this year is due to a rebounding economy and the end of stimulus and war spending. But the fundamental problems do not go away. And because the lower deficit delays the need for Congressional action on raising the debt ceiling until later in the year, there is no sense of urgency to fix the long-term problem. In other words, lower deficits are great news for the economy in the long run, but the precipitous drop in the shortfall is masking the real long-term issues.

 With the housing rebound in full swing, “pocket listings” are growing in many parts of the country as some sellers look to preserve their privacy, and brokers use them to trigger an aura of exclusivity to a listing. But some in the industry worry that exclusivity may be crossing an ethical line. Pocket listings refer to situations in which real estate agents purposely keep sales information about a home off the multiple listing services, and brokers only show that house to people they expect to actually purchase it. The National Association of Realtors® does not have an official policy on pocket listings, spokesman Walt Molony told CNNMoney. But some real estate boards say they don’t like the practice. In New York, the practice of “pocket listings” violates the Universal Co-Brokerage Agreement, which requires agents to share listings, maintains Neil Garfinkel, counsel for the Real Estate Board of New York. Some housing experts also say that pocket listings create a gray area when an agent is able to collect double commission from the deal by acting as the agent for both the buyer and seller. “If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law,” Garfinkel says. However, “most of the time, pocket listings are done ethically and fairly,” Betty Graham, president of Coldwell Banker Previews International/NRT, told CNNMoney. If the home doesn’t sell quickly as a “pocket listing,” many agents say they’ll then advise their clients to readjust their price and list the home publicly on the MLS. But some agents say a few sellers may prefer the privacy of pocket listings because they’re not highly motivated to move — unless someone offers them a “make-me-move” deal with a great price, CNNMoney reports. Source: CNNMoney

As the number of people living in a household expands, builders are responding and tweaking home designs to meet the growing needs of multigenerational households. In recent years, the number of grown children moving back with their parents and the number of elderly parents moving-in with their adult children is increasing, causing more households to re-evaluate their use of space at home. Analysts say the number of multigenerational households will likely rise even more in the coming years, particularly among ethnic groups like Asians and Hispanics who are more likely to live with extended family. More builders are debuting floor plans for single-family homes that include “semi-independent suites with separate entries, bathrooms, and kitchenettes,” the Associated Press reports. “Some suites even include their own laundry areas and outdoor patios for additional privacy, though they maintain a connection to the main house through an inside door.” Source: The Associated Press

Home owners are starting to feel freer to move where the jobs are, Reuters reports, as worries about homes that won’t sell or will sell at a loss begin to fade. Since early 2012, home prices in the major metro areas have been rising. Homes are also selling faster: It took 62 days, on average, to sell a home, compared with 91 days one year prior, according to March data from the National Association of Realtors®. The increase in mobility from the recovering housing market is expected to have a hand in lowering the jobless rate. “Until the real estate market picked up, people wouldn’t even consider a move without the certainty that they could sell their homes,” Jerry Funaro, vice president of global marketing for TRC Global Solutions, a Milwaukee-based relocation service, told Reuters. “Companies are now more inclined to make offers since we’re seeing real estate markets across the country coming back.” The number of people who moved last year increased to 35.6 million, with the mover rate climbing to 12 percent, according to the U.S. Census Bureau. That marked an increase over the 11.6 percent low set in 2011. ”It’s not a huge gain, but when you consider that for two years, we’ve had the lowest migration rates since World War II, any move up is good news,” William Frey, a demographer at the Brookings Institution in Washington, told Reuters. Source: Reuters

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