Seattle is One of the Best Cities to Buy a Foreclosed Home!
June 28, 2008
Forbes magazine has named Seattle # 8 as one of their good investment cities to buy foreclosed homes. (Charlotte, N.C. was the best place in the country.)
The magazine factored in how quickly they thought the community was likely to recover from the current housing slump.
this is what it said about Seattle, “Long hailed as the exception to the national housing downturn, Seattle’s growth has steadied, though it remains a good market. Its inventory rates are the lowest of the country’s 50 largest cities, and its foreclosure rate of 0.47% is so low, it’s negligible in the context of the overall market.”
Read the whole report at: http://www.forbes.com/2008/03/19/homes-foreclosure-properties-forbeslife-cx_mw_0319realestate.html
How King County Figures Assessments
June 18, 2008
Sunday, June 15, 2008
By Cindy Zetts
Seattle Times Real-estate editor
Excerpts from the blog
Readers are calling to complain about their 2008 King County property assessments.
The upshot: “My assessment went up, but my property value has been going down. What gives?”
What gives is that assessments lag market values by about 18 months, King County Assessor Scott Noble says.
Employees of the King County Tax Advisor’s Office spend all day every day explaining the complicated assessment and levy process to confused residents.
I called the King County tax adviser, Barbara Alsheikh, for the explanation.
An assessment does not determine the dollar amount that a property owner pays in taxes. It is a tool that determines a property owner’s share of the tax burden, Alsheikh said.
In other words, an assessment determines how big a piece of the pie you get, not how much that piece costs.
The amount of taxes paid comes from budgets and voter-approved levies in each taxing district — the county, cities, school districts, the Port of Seattle, hospital districts, fire districts, etc.
Here’s a quick explanation of how assessments are figured in King County: The county is divided into about 100 assessment areas, each comprising homes that share many of the same characteristics, such as view or construction quality.
About 15 percent of the homes in each region sell in a given year, but a half of those are excluded because they are bankruptcies, estate sales, foreclosures or some other deal that is not a market-value sale between a buyer and a seller.
That means that the value of all the properties in a given area are determined by the prices of 7 to 8 percent of the homes in that area.
Values for 2008 were set Jan. 1, based on sales that occurred as long as three years earlier, Alsheikh said, because the process is complicated and takes time.
And while we can look for assessments to go down in 2010 or 2011, we won’t necessarily be paying less in taxes. Just so you know.
Questions? Visit the King County Assessor’s Web site, www.kingcounty.gov/assessor; or the King County Tax Advisor’s Web site, www.metrokc.gov/taxadvisor; or call the Tax Advisor’s Office at 206-296-5202.
Fair deal on home loans
Two years ago, it was too easy to get a mortgage. Probably everyone knows someone who got interest-only or piggyback loans to buy a place and now can barely make payments.
When I bought my first house, the maximum mortgage payment could be no more than 25 percent of my gross monthly income, and my monthly bills had to total 36 percent or less. I also had to put 10 percent down or get an FHA loan.
When I bought my second home six years later, the limits were 28 percent (give or take) for the mortgage payment and 40 percent (give or take) for total monthly bills, depending on, oh, the mood of the lender, the time of day, I don’t know.
Then I started hearing about lenders who allowed monthly bill payments to total 50 percent or more of gross income.
Lending rules became a very slippery slope. And that was before creative financing and no-doc loans.
Many people who bought homes with subprime, negative-amortization, interest-only or piggyback loans shouldn’t have. Many are in foreclosure, looking into short sales, or jumping through hoops to try to refinance into loans they can afford.
I understand the argument that everyone has a right to a piece of the American dream. But I don’t agree with it. Look where it got us.
Now the pendulum has swung the other way, and it’s hard to get a loan. With stricter lending standards akin to those in the 1980s — more money down for buyers, more equity for refinancers, higher credit scores for all — it’s difficult for borrowers to get out of the holes they’re in because of mortgages they took out a few years ago.
So I’m curious. What requirements are fair? How much should buyers have to put down? Should all loans have to pay down the principal monthly? If you could set banking policy, what would that policy be?
This material has been edited for print publication.
The Seattle Times Company
Interest Rates Cut, Loan Rates Arent’ Falling
June 18, 2008
Saturday, June 14, 2008 -
Chicago Tribune
CHICAGO — The Federal Reserve has aggressively cut interest rates. Houses are sitting around unsold. The stage appears to be set for mortgage rates to fall as lenders compete for that scarce quarry: the well-qualified home buyer.
You wish.
Rates on 30-year fixed-rate mortgages have stayed stubbornly above 6 percent for months. Interest rates on those loans are averaging 6.32 percent, mortgage investor Freddie Mac reported Thursday, an increase from the 6.09 percent the previous week.
Rates on five-year adjustable-rate mortgages rose slightly to 5.58 percent, according to Bankrate.com
Rates on jumbo loans, those larger than $417,000, were considerably higher, averaging 7.33 percent nationally Thursday, according to Bankrate.com.
Several forces are conspiring to keep rates up, economists and mortgage experts say, and they aren’t going away anytime soon.
When the subprime-lending bubble burst last summer, many large mortgage brokers went under because they could no longer find investors to buy their loans.
That means the pool of mortgage lenders is much smaller than it has been in recent years, and billions of dollars in liquidity have disappeared.
Gun-shy lenders
Also, surviving lenders are still gun-shy about rising delinquencies and foreclosures, which have forced many to take large write-offs.
“Time heals all wounds, and we haven’t had enough time yet to heal this wound,” said Diane Swonk, chief economist with Mesirow Financial in Chicago. “Banks and other lenders are being more conservative. They’re saying, ‘I need to be compensated for this risk.’ ”
But there’s even a bigger-picture reason behind the buoyancy in mortgage rates — the expectation that rising inflation is the economy’s biggest challenge.
Many people think the economy has narrowly avoided a recession and that the worst may be over. If that’s true, the Federal Reserve is unlikely to lower interest rates further and, in fact, could start raising them again as soon as October.
With commodity prices climbing, especially for oil and food, the Fed may have little choice but to tighten credit to slow inflation.
When inflation goes on a tear, investors want higher premiums for lending money, which means higher long-term interest rates.
“If people are concerned about inflation, they don’t want to hold Treasury bonds,” said Orawin Velz, senior director of research at the Mortgage Bankers Association in Washington, D.C. “If there’s a decline in demand for bonds, the price will go down, and the yield will go up.”
That’s been happening recently with 10-year Treasury notes, the benchmark for mortgage rates. But investors are fickle and skittish, Velz said, and their expectations can change with the latest economic report.
For the downtrodden housing sector, the question is whether 6.5 percent interest rates will keep homebuyers on the sidelines.
Donna Schwan, a real-estate agent with MetroPro in Chicago, isn’t worried.
“Mortgage rates going up is the best thing that could happen,” she declared. “We have a lot of people who are buying now because they want to get in before the rates go higher.”
Still attractive
Buyers spoiled by years of rates below 6 percent need to remember 6 percent is a very attractive rate, she said. Plus, with home prices falling, a buyer’s monthly payment may be the same despite that higher rate.
Mike Sante, managing editor of personal-finance Web site Interest.com, agrees.
“Historically, any time you can get a rate below 6.5 percent, you’re doing very well. We’re not at the double-digit rates of the ’80s or even the 7 or 8 percents of the 1990s.”
The exception is jumbo loans, which are commanding a much-higher rate than smaller loans that meet the standards of Fannie Mae and Freddie Mac, government-sponsored investors in mortgage loans.
A year ago, a jumbo loan might have cost a borrower an extra half point in interest over a so-called conforming loan. Now the spread is more like a point to a point-and-a-half higher, which translates into a much-larger payment.
With home prices rising by double digits annually over the past five years in some markets, lots of prospective borrowers have been pushed into the jumbo bracket.
“The spread has doubled,” Sante said. “For those folks, they have trouble.”
The Seattle Times Company
What the heck is LIBOR?
June 18, 2008
Definition: It my sound liek the name of Tony Blair’s political party, but it’s shorthand for the Lond interbank offered rate - the average interest rate at which banks in the London market lend money to one another. Libor is often used as a benchmark to set rates for loans worldwide.
The rates of most U.S. home loans are now pegged to Libor rather than to Treasuries; a typical ARM rate might equal the six-month Libor plus three percentage points. If you’re wondering why your ARM hasn’t fallen much lately, that’s why. Yes, the Fed has cut the federal funds rate by 3.25 percentage points in the past 10 months, causing the six-month Treasury rate to fall from 4.55% to 1.9%. But the six-month Libor has fallen less sharply, from 5.06% to 2.8%. Libor has been acting erratic lately, with some bank sreporting suspiciously low borrowing costs; the association that oversees Libor is discussing how to fix the problem.
But don’t bother shopping around for a Treasury-based ARM, says Keith Gumbinger of HSH Associates, a mortgage information provider. Accurately predicting how much either rate will fall (or rise) is about as tough as, well, becoming Prime Minister of Britain.
(By Joe Light in Money Magazine, July 2008 issues.)
Protected: 3 Things to Know About Buying a Foreclosed Home
June 18, 2008