Home mortgage, real interest rate and current housing market.
To say the current housing market is in recovery is not an exaggeration. At the end of June 2013, home prices across the nation were up 12.2% from a year earlier, according to Renwood Realtytrac. Foreclosures were at just over 57,000 last month, the lowest level in 7.5 years. Low interest rates, increased job opportunities, and improved consumer confidence have all contributed to this development.
While “flipping” (buying a home, fixing it up, and quickly reselling it) is still prevalent, it is moving from marketplace to marketplace, depending on availability of undervalued properties. This would usually be in areas of high foreclosures, which, at present, defines Miami and several other Florida cities, New York, Washington DC, and Chicago; cities being left in the rearview mirror include San José, Phoenix, Las Vegas, and Atlanta.
Even though inventory is very tight in most metro areas (2 month’s worth is not uncommon), the market is showing signs of heading for more balance, where buyers and sellers have more equal bargaining positions, and growth in prices is somewhat slower. In the current housing market, the mortgage borrower is having difficulties, as many buyers pay cash. FHA Mortgages provide a good low down home mortgage, and this financing must become more prevalent as we move forward. Consumers once again have the ability to pay mortgages!
A few words about buying foreclosed homes; the easiest approach is to use a hard money-lender. You will need 20% down, minimum, and you will pay a mid to high teens interest rate, but it’s only for the short-term, while you are buying, fixing, and selling/renting. Once you decide to keep or sell, you can re-finance into a low-down mortgage, if you’re keeping it (a common strategy when price growth slows a bit), and pay the mortgage off early if you change your mind.
The Commercial Business market (office, industrial, business, apartments, etc) has improved considerably. One index, influenced by larger transactions and tracking with high quality core real estate prices, has now increased by 41% from recent lows in 2010. This seems to be true of all sectors of commercial sales and leases. One interesting trend is toward smaller and lower quality assets, and the pricing is rising in tandem with investment grade space. Real estate investment, in popular tourist destinations, such as New York, Florida, and Las Vegas, has always been a boon for those cities. It seems that other cities have benefited also in our recent downturn; large investor pools were involved in some of the less touristy areas. Good news, since it has helped stabilize those markets more quickly. All in all, everything looks good, and we seem to be heading in the right direction.