New Stimulus Law and Outer Cape Cod Real Estate

The long awaited stimulus package is now law. But how will this impact our local housing market here in Provincetown, Truro and Wellfleet? Although the finer details of the housing plan will not be released until March 4th, there are definite components of this law that may help our local housing market.

Up to four million homeowners nationwide who have mortgages owned by Fannie Mae and Freddie Mac will be able to refinance to a mortgage product in the 5% range. This is directed at homeowners who are in negative equity situations and have not been able to refinance due to current strict qualifying criteria and low appraisals. There are homeowners on the Outer Cape who find themselves in this position. The double benefit here will be helping struggling homeowners keep their homes from foreclosure, thus protecting home values. The other plus is the potential extra monthly cash that may be spent at our local businesses.

The government will also step in to prevent foreclosures on millions of homeowners. There will be a potential modification of monthly payments for seriously delinquent homeowners to an estimated 31-38% of their income. Lenders who cooperate with this plan will receive a co-payment from the federal government. An additional incentive for homeowners to stay current and Lenders to participate is a potential yearly bonus set in place for five years of up to $1,000 per annually. This will serve our community by preventing foreclosures and preserving home values.

Fannie Mae and Freddie Mac will each receive $200 billion from the government. The US Treasury will continue to purchase their mortgage backed securities in order to keep rates low. This is good for the resort market. Low mortgage rates combined with low prices and the potential of vacation rental income make a second home purchase in Provincetown, Truro or Wellfleet palatable for many seeking an alternative investment to the faltering stock market.

There is a tax credit of $8,000 for first time homebuyers purchasing a primary residence. This isn’t as pertinent on the Outer Cape. However, for those of us who live here year round, you can qualify for this tax credit if you haven’t owned a home in three years. The definition of first time homebuyer has been adapted.

The next few weeks will be telltale and should provide a clearer picture of how all this will ultimately impact the real estate market. The true test will be in the months ahead.

Why Sell in this Market?

As a real estate broker I get the following same question asked at nearly every social function I go to these days. “Why would anyone want to sell their home in this market?”

Good question. There are three groups of sellers who have their properties on the market right now.

The first is one who has a large amount of equity in their home. They have identified a larger home, smaller home, waterfront, waterview, better location or whatever the reason, they want to move. Based on their equity position, they price the property right and sell it. 

The second seller is the homeowner who is in trouble and needs to sell. Let’s face it, the recession has claimed it’s victims and once you lose your job, your savings dwindle and you can’t make a mortgage payment, the options slim down. As loan modification is being worked on, some homeowner just want out. In most cases these days, the home is worth less than what the seller paid. Some sellers are facing foreclosure and are motivated to work a short sale or entertain any realistic offer. This is where the true opportunity is in today’s marketplace. 

The third seller is usually someone who just puts the house on the market in hopes of selling at an inflated, unrealistic list price. These homes practically never sell and become stale. You’ve seen them.

Ultimately, a seller sells when they need to. Whether it is financial, spiritual or life circumstances when a homeowner is ready to leave, the "for sale" sign goes up.

The Number 13

Oh my its Friday the 13th. Feeling superstitious?

In real estate the number 13 has been an interesting one to avoid by developers and realtors alike.

Next time you enter a building with more than 12 floors, check the elevator panel. Some developers avoid the 13th floor and create a 12A or go directly to the 14th floor. Even if the landlord or developer is not superstitious themselves, they realize that the value of square footage can be adversely impacted by a superstitious tenant. So, do you think this is all crazy tomfoolery and a bunch of hullabaloo? Are you loudly stating out loud or to yourself right now that every building you’ve been in has a 13th floor? Well, based on an internal study by Otis Elevators (click here), an estimated 85% of buildings surveyed with elevators did not have a 13th floor named the 13th floor. Hmmm, makes you think.

Realtors have also been known to move closing dates one day earlier or later than the 13th of the month. Especially in this market where deals are dying at the closing table, every bit of luck for the buyer and seller is needed.

On a brighter note, tomorrow is Valentines Day! So why not buy 12 roses today on the 13th and present them to your lover on the 14th.

Good News from Wells Fargo

Good news coming from Wells Fargo Home Mortgage this week.

No, it’s not that the President’s Club, a group of wealthy top producing Wells Fargo mortgage brokers are going to Las Vegas after all, that all expense trip has been cancelled.

There is more important information. It has been really difficult for homebuyers to make a purchase based on the tighter lending requirements. Those guidelines are mainly good credit and a strong debt to income ratio. Where opportunity now exists is with the down payment. As of early last year, 90 to 95% financing was all but dead and relegated to first time homebuyers, if even them. Well according to Brian Farley with Wells Fargo Home Mortgage, homebuyers of primary residences are now able to make a purchase with 10% down. The drawback is that there will be PMI, that nasty item called private mortgage insurance.

This is something we in the industry have not had to deal with in quite awhile. Mortgage insurers are just as critical in analyzing applicants as the actual underwriter for the loan. So it still is not an easy road. Applicants still need to be qualified. PMI can cost around $175 per month for a loan amount of $325,000. Creative ways for a buyer to make the monthly payment more financially palatable is to roll the PMI into the interest rate. This creates a higher payment, but with rates as low as they are, it can be negligible. Another choice is to ask the seller to pay the PMI. This of course, may not go over too well, but you never know in this market.

It seems as though creative financing is available to make certain purchases. Let’s see if rates go down as Republicans are pushing a 4% across the board interest rate. If this happens, we may see a plethora of creative purchases.