In a Slow Market, Builders Offer Big Incentives

Wall Street Journal--August 25, 2008

This is an interesting article about new home builders and the BIG incentives they are offering. Yes, Yes, I know, the market is still adjusting and you are wondering why I would encourage you to consider a new home purchase?

Answer: because new home starts have hit a 17 year low and it would be to your advantage to at least start a discussion with a builder to see what they can offer!  Many builders can offer competitive interest rates, steep discounts on prices, and most importantly, many of the builders are still willing to entertain the Nehemiah program!

One of my clients has placed over 10 offers requesting Nehemiah participation and most Short-Sale and REO lenders are no longer entertaining those types of offers.  Remember, starting October 1, 2008, the new housing laws take effect and Nehemiah will no longer be a viable option. Take advantage of the window of opportunity one still has to purchase a new home.  Builders will still work with a first-time homebuyer utilizing the Nehemiah program. Have a comment? Please share them below.

What The New Housing Law Means For You

Bankrate.com--July 30, 2008

After reading the above article, I have mixed feelings about the new housing law that was signed by President George W. Bush.

In concept, I understand that the FED had to take action to help stabilize the faltering housing market.  I also understand the need to help stabilize Freddie Mac and Fannie Mae.  Here is where the FED and I part ways.

One of the provisions of the new housing bill mandates that downpayment gifts offered through non-profit organizations like the Nehemiah program will no longer be available to firt-time homebuyers as of October 2008. 

Instead, a first-time homebuyer's tax credit of $7,500 will be offered and the first-time homebuyer will have 15 years to repay the credit.  Here is where I do not understand the logic of the FED.

Currently, most of the first-time homebuyers I assist do not have a problem paying the montly mortgage.  Most of the first-time homebuyers I work with report they cannot come up with the downpayment.  Now, the majority of the purchasers of todays market are either first-time homebuyers or investors.  Investors have vast sources of cash to work with and first-time homebuyers rely on financing that is becomming more stringent relative to lending requirements. Increased downpayments are limiting the buyers pool of first-time homebuyers. My question is: how is removing seller-funded down-payment assistance going to help stimulate sales of a stagnate resale market?

More importantly, new home starts are a critical component to jump starting the housing market.  Based on the above article, 33% of one builder's clients utilized down-payment assistance! How can eliminating 33 out of 100 sales be considered market stimulation? Why would a builder want to produce new homes when they can not sell the units fast enough? What are your thoughts?  Please share your comments below. 

Housing Bill Clears Final Senate Hurdle

Wall Street Journal Article--July 25, 2008

It is apparent that the Housing Bill designed to curb the foreclosure crisis in America will become law.  Some Americans believe this is nothing more than a government bailout that rewards irresponsible lenders and borrowers. 

According to the above Wall Street Journal Article, "lawmakers have described the bill as the 'most important piece of housing legislation in a generation' intended to stabilize the still faltering housing market".  What are your thoughts?  Please share your comments below. 

Vulture Real Estate Investors Swoop In

CNN.Com July 5, 2008

Is it a good time to buy? This is the question of much debate and depending on who you ask, you will receive varied answers.  It really comes down to risk and your motivation.

Personally, I am waiting for the prices to come down further because I have access to cash and do not have to factor interest rates going up as part of the decision making process.

On the other hand, if there are properties that I want to finance, I would be seriously considering a purchase because prices have come down to a point where "cash flowing" a property for a postive return is very possible and I would not want to erode the potential "cash flow" profit because of increased interest payments.

As the attached article illustrates, many investors are swooping in and going directly to the bank and securing strings of properties at steep discounts.  This methodology works well if you are buying a bank's  inventory wholesale and have a large bankroll of cash backing you. If you are like most people, it is probable that you will need financing, therefore, interest rates are going to weigh in the buying decision. What are your thoughts? Are bargain hunter investors helping or hurting the Real Estate market's recovery? Please share your comments below.