Rainmaking after the tax credit is gone.

27 09 2010


Well, the tax credit programs officially end this Thursday.  And once again there is talk of starting a new round of credits to stimulate the housing market.  It’s no surprise we still need something to lead us out of this post-recession, but I’m not sure another shotgunned tax credit is the solution, for a few reasons: 

  •  The peak of sales activity during the final version of the tax credit program was lower than during the second version.  
  • The market plunged further after the final program ended than it did after the prior version.

This leads a tentatively rational mind to suspect things would only be worse for yet another tax credit program.  So what can I do today to make my own tax-credit environment, so I can make rain whether or not Congress approves another housing shopping spree?

  • Focus on housing value; it what is motivating buyers these days anyway.  Mortgage rates are staying at their lowest levels in 54 years.  Show how much more your clients’ dollars buy than 3 years ago. 
  • Focus on the value of your listings.  Most sellers expect to pay closing costs.  But if they apply that money towards lowering the buyers’ rate, it can open up the pool of qualified buyers and, more importantly, raise a huge flag over your listing that says, “Best value in the neighborhood.”  Plus, it can save your sellers 3-9x as much money, allowing them to net more money.
  • Focus on your value as a professional.  A knowledgeable, professional realtor is worth as much as a great doctor, attorney, or CPA.  What would you do differently in your business if you believed this?      
  • Focus on giving value to your prospects and past clients.  Let them know about the FHA MI premium changes, credit score changes, area housing trends, school district reviews, the list goes on and on.  But they won’t realize your value until they receive it. 

I look forward to working with the shrinking group of real estate rainmakers- agents who do what it takes to make a great living in this industry that changes daily.  I’d love to meet this week to share ways I can help you increase your value.  Thank you.


The Case-Schiller Index vs. Home Price Index: Who will win?

13 09 2010



The private-sector Case-Shiller Index reported home values up 5 percent nationwide in June. The government’s own Home Price Index, however, reached a different conclusion.

According to the Federal Home Finance Agency, month-to-month home values fell 0.3 percent in June, and values are down by 1.7 percent from June 2009.

So, as a home buyer and/or homeowner in Edmond, by which valuation model should you make your bets? Perhaps neither.

This is because both the Case-Shiller Index and the Home Price have inherent methodology flaws, the most glaring of which is their respective sample sets.

The Case-Shiller sample set, for example, comes from just 20 cities across the country — and they’re not even the 20 most populated cities. Together, the Case-Shiller cities represent just 9 percent of the overall U.S. population.

That’s hardly representative of the housing stock overall.

By comparison, the Home Price Index tracks home sales everywhere — every city in every state — but it specifically excludes certain properties. The Home Price Index does not track sales of homes for which the financing comes from agencies other than Fannie Mae or Freddie Mac. This means that as FHA loans grow in popularity, the pool of Home Price Index-eligible homes is reducing.

The HPI ignores homes backed by “jumbo” loans, too.

Therefore, the “right” model for home values cannot come from national data at all — it can only come locally. Neither Case-Shiller nor the government has the tools to get as granular as a neighborhood. A real estate agent in the area does, however.

The best way to get a pulse for what’s happening in markets right now is to talk to somebody with good data, and data based on your market.

FHA mortgage insurance premiums change again.

7 09 2010


HUD has released their new mortgage insurance premiums, effective for all case numbers pulled after Oct 4th.  As HUD foreclosures have increased, HUD’s reserves have dropped.  So to put more “money in the pot” to continue insuring new FHA loans, HUD has changed their MI premiums. 

The upfront premium will actually be dropping from 2.25% to 1%.  The monthly premium, however, will almost double from .55% to .90 – .95%, depending on loan to value. 

Click HERE for the Mortgagee letter from HUD.

This change can have a huge impact on borrowers who need FHA financing with tight monthly budgets, as the monthly payment will increase drastically under the new premium guidelines.  If you have borrowers looking to buy with FHA financing, let’s work together to get them under contract and closed before the changes hurt our clients.