Aundrea Beach-Greco Blog

HOW INTEREST RATES MOVE AND WHAT YOU SHOULD KNOW!

2.9.10
If you are in real estate or thinking of buying real estate, you need to watch this video!

How many of you have an understanding of:

• The connection between interest rates and mortgage backed securities
• What you are monitoring to stay in front of price/rate changes and why it shouldn't be the media
• How the Fed works and what they are doing today to keep rates low

Now more than ever - we understand the importance of not just watching mortgage backed securities, but getting great guidance - and letting you know that we are the experts you can count on!!

To help you better understand how interest rates move, we'd like to share a short 7 min. video that will help you get your arms around this phenomenon.

http://www.youtube.com/watch?v=vj8bZGkMST0

Talk to an expert and get the right advice!

Aundrea Beach-Greco
The Beach-Greco Team
(702) 326-7866
info@aundreabeach.com

Those Who Wait to Buy a Home Until Spring, Will Pay Thousands More!

1.27.10

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate you and your business.

Sincerely,

Aundrea Beach-Greco
Mortgage Advisor, CMP, CMPS
(702) 326-7866
info@aundreabeach.com

1.18.10
GREAT NEWS!!!

FHA 90-Day Seasoning Waiver Expanded

This update from FHA was released on Friday January 15th, 2010, as an excerpt from the CFR (Code of Federal Regulations) without a corresponding Mortgagee Letter and contains information about FHA's policies regarding the waiver of the 90-day seasoning required for sellers.

Here are the 6 things you need to know about these changes:

1. Waiver takes effect February 1st, 2010 for a period of one year unless extended.
2. Investors are now exempt from the 90-day seasoning rule.
3. All transactions must me arms-length.
4. No identity of interest can exist between buyer and seller.
5. If sale price is 20% or more of the seller's acquisition cost, the lender must:
   a. provide supporting documentation and/or a second appraisal and
   b. order an inspection of the property and provide it to the buyer.
6. The waiver is limited to forward mortgages only.
   

To read the text of this waiver and specific details: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

To read this press release in its entirety, please visit: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011

Please call me with any questions on this new FHA announcement.

Aundrea Beach-Greco
702-326-7866
info@aundreabeach.com

Special Report: Barry’s Detailed Forecast for 2010
1.13.09
Compliments of my friend, Barry Habib of MMG

The past couple of years have been challenging for the mortgage and housing industries, as well as the global economy as a whole.  So what does the future have in store?  Let’s first look back to see how we did on our forecast for 2009.

Scorecard for 2009 Forecast:

• After accurately forecasting a down year for the Stock market in 2008, we hit the nail on the head again by forecasting an up turn in 2009.
• Our predicted hot Stock picks – which included a variety of financial companies as well as oil – were on the mark again this past year.
• We also predicted that the Federal Reserve would hold the Fed Funds Rate where it was for the year, and sure enough, they did.
• On the employment front, we accurately stated that the job market would get worse; with the unemployment rate rising at least into the 8% range…and that turned out to be an understatement as unemployment topped 10% late in 2009.
• We saw the US Dollar weakening during 2009 before stabilizing and even strengthening. The Dollar did in fact weaken, and has strengthened a bit at the end of 2009.
• In the housing market, we predicted home prices would begin to stabilize and that consumers would start buying again during 2009…and this appears to have been the case.
• Most importantly, our home loan rate forecast was on target. We predicted rates would remain in a range of 4.5 - 5.5%, with the lower end of that range coming in the earlier part of the year and then moving toward the higher end of the range later in the year.  Rates did remain lower longer than we thought, thanks to additional Fed buying – although they did begin to creep toward the upper end of the range at the end of the year.  

What’s Next? What Should You Expect in 2010?

After a couple of rough years, the big question again this year is the global economy.  In 2009, Stocks helped put us on the path of recovery with an amazing run after Congress addressed the mark-to-market accounting rules.  For example, Stocks have soared since hitting lows in March of 2009.  In fact, between March and December, the Dow was up close to 60%, and the NASDAQ climbed over 70%.  Unfortunately, the market is still fragile, which means any negative surprises will take the wind out of the sails quickly and make it tough for Stocks to eke out significant gains this year. 

The sector I like best for growth this year is healthcare, since it hasn’t rebounded as much as other sectors and is due for a bump.  American demographics show that the country is aging, which means more medical attention will be needed.  Additionally, any Healthcare Bill that insures more people should translate into more volume for healthcare providers.

Having almost doubled during 2009, oil prices are still half of what they were in July of 2008.  This wild range for oil makes it hard to forecast.  There is plenty of supply, which will weigh on prices.  But the US Dollar may continue to struggle, which will help buoy the price of oil.  Overall – we see oil making its way higher by the summer.

Gold has had a huge run higher – and although prices declined at the end of the year, we see Gold resuming its uptrend.  A lack of confidence in sovereign debt, a struggling Dollar, and the overhang of inflation in the future should help Gold make new highs and push toward $1400/ounce.

As far as the Dollar goes, it had declined significantly during 2009, and will likely decline a bit more in 2010.  The endless supply of debt from government programs and low interest rates will weigh on the Dollar. 

In the job market, we’re not nearly out of the woods yet.  Even in the waning months of 2009, we still saw unemployment rates at 10% and nearly 500,000 new jobless claims coming in each week.  The fact is…we need to see Initial Claims drop beneath 400,000 before we see stabilization in the labor market and unemployment rate. 

There are about 154M people in the US labor force.  And the size of the labor force rises on average by 125,000 per month, due to population growth.  That means we will need to create very close to 125,000 new jobs each month to simply keep the unemployment rate stable.  In order to get the unemployment rate to decline – significantly more jobs will need to be created.  For example – if we would like to see the unemployment rate get back down to the 6% level that had been the norm in recent years, an additional 6 Million jobs would need to be created.  If this were going to happen over a five-year period, that’s an additional 100,000 jobs per month over and above the 125,000 per month needed to keep up with the population.  That means we’d need to see positive job growth of at least 225,000 jobs created per month, just to reach that 6% level within five years.  Is this easy to do?  Well, in the entire history of the United States, it has only happened one year – during 2006.  This leads us to believe that the new normal will be higher unemployment rates for quite some time.

And consider the almost 800,000 workers who are not even categorized as unemployed, but simply as “discouraged”, as they have not actively searched for a job in the past four weeks.  There’s a lot that can be assumed here, but it’s hard to imagine that these people would not reenter the ranks of those seeking employment if conditions improved a bit.  That means that these people would need to be absorbed into the system before the actual unemployment rate could decline. 

Additionally – perhaps the largest category that could skew the numbers are those individuals who are accepting part-time work but would prefer full-time employment.  A whopping 10 Million people are in this category.  You have to think that many employers would take these current part timers and give them full-time work, before hiring someone new.  Again, this will make it very hard to see the rate of unemployment make any meaningful decline this year.  

Home prices began to stabilize during 2009, and homes sales showed some signs of encouragement.  We expect more of the same in 2010, although there will be some additional headwinds: higher rates and expiring tax incentives will likely create a lull during the summer months.  After a modestly good start to the year, home prices could actually decline in some areas by 5% to 7% once the temporary stimulus expires.  In the end, however, home prices should eventually and slowly begin to firm up toward the end of the year.

The Fed will have their hands full during 2010, and a big question will be whether the Fed can retain their independence in the face of political pressure.  Remember, the long-term best interests of the country often conflict with the short-term reelection interests of politicians. 

It’s highly likely that the Fed will be “on hold” for rate changes during most of 2010.  The Fed will have to try and play Goldilocks…and get it “just right” for the amount of time they leave interest rates at these historically low levels.  Hike rates too soon, and it could derail an already fragile US economic recovery.  And let’s remember that the government has literally spent Trillions to try and provide stimulus to spark that economic recovery.  And the Fed will likely err on the side of keeping rates lower longer, as they certainly would not want to send the US into a double-dip recession, making all the stimulus appear to be a wasted effort.  And the Fed will have an excuse to keep rates low, so long as unemployment shows no sign of improving.  But there is a very big risk in keeping rates too low too long…and that is inflation.

While inflation doesn’t appear to be a present concern, it can be very difficult to control once it takes hold.  And its effects can be very damaging.  Inflation is the enemy of all Bonds – and if it does take center stage, the Fed will have to hike rates very aggressively to attempt to keep it at bay.

This low interest rate environment in the US has provided fertile ground for what is known as the carry trade.  This is where large investors can borrow at very low rates, and leverage into higher yields, resulting in huge returns. 

Let’s take an example:  An investor wishes to purchase $1M in Bonds yielding 4.5%.  This would provide $45,000 as an annual return.  In order to make the purchase, the investor puts up only 10% of $1M, or $100,000 in cash – and borrows the other $900,000 at current low rates offered to large investors, such as the 3 month LIBOR currently at 0.25% plus .75%, bringing them to a total borrowing cost of 1%.  This investor borrowed $900,000 at 1%, which means their interest costs are only $9000.  When the $9000 is subtracted from the $45,000 investment return, this leaves them with a $36,000 return on their $100,000 investment – or a whopping 36% “carry trade” return – on a very stable Bond investment vehicle.

At some point in the future, this carry trade will be unwound as short-term rates begin to move higher.  The results will not be pretty – and many will get caught in the buzz saw.  This also means that Bond prices will come under pressure as the investments are sold.

2010 is a big election year, and politicians will be doing their best to influence the Fed to keep rates low.  With 36 of 100 Senate seats being contested and all members of the House facing re-election, there could be some interesting changes ahead.  Currently, the Senate is made up of 58 Democrats, 40 Republicans, and 2 Independents. But, as mentioned above, 36 of those positions are up for re-election.  In the House, there are 256 Democrats, 178 Republicans, and 1 vacancy…and they all face re-election.  When the votes are counted, I see Democrats losing a number of seats…but probably not enough for Republicans to regain control.

Now for the big question… where will home loan rates go during 2010 and why?  We’ve been forecasting rates for a long time, and this is by far the easiest call we have ever had.  Rates are going higher in 2010.  We do not think that the low rates seen during 2009 will be seen again.  There will be more supply coming to the market in the first quarter, while the Fed’s purchases will be winding down.  The overall trend for rates during this period will be higher, but as usual, this will never happen in a straight line.  There will be waves and cycles moving up and down – but the trend is clearly up for rates. 

Once the Fed’s Mortgage Backed Security buying program has expired at the end of March, it is likely that rates will edge higher still towards the summer.  Eventually, supply will decline as origination volume slows – and mortgage rates should stabilize.  But if there are hints that the Fed will be looking to hike rates, thus signaling the end of the carry trade, mortgage pricing will significantly worsen.  The range for rates during 2010 is wide, with the lower end just above 5% toward the very beginning of the year.  The upper end of the range could be as high as 6.5%, with rates being very volatile throughout.  It is typical to see prices worsen more rapidly than they improve…but 2010 will exaggerate that characteristic, with pricing losses coming far more quickly and sharply than pricing improvements.  

Final Words of Wisdom

Overall, 2010 will look better than 2009.  But, good economic news is a double-edged sword, as it increases the risk of rising taxes and rates.  Many people don’t understand the relationship between rates and the economy – that is why you need someone with expertise on your side.

The Homebuyer Tax Credit is still available - don't miss this opportunity.  Remember, rates are about 1% lower than they would be if Fed weren't buying all those Mortgage Backed Securities.  On a 200K mortgage, that would mean about $8,000 would be needed to buy your rate down that 1%.  Of course, you also have to factor in the Homebuyer Tax Credit – which is $8,000 for new homebuyers or $6,500 for current homeowners who are moving up.  When you combine the 1% lower rate with the tax credit, you see that homebuyers stand to gain between $13,500 and $16,000 on a home in the mid-200K’s. That’s a big incentive for homebuyers to act now, while both incentives still exist.

Finally, in today’s wired world of Internet news and social networking sites…don’t confuse data with insight.  Remember data is everywhere – anyone can regurgitate economic report numbers.  But trusted insight and advice is a valued commodity.  

The forecast for 2010 is challenging and realistic.  But through it all – there is reason to be optimistic.  Each economic condition described above offers an opportunity for us to capitalize on, whether it be by trading the markets or education, there are ways to come out ahead.  

While we often wish for conditions to be better – we should be mindful that conditions could always be worse.  Make the most of the current market conditions you are in – and have a great year ahead.

All the best to you! 

Aundrea Beach-Greco
The Beach-Greco Team
(702) 326-7866
info@aundreabeach.com

12.15.09
Think your paying too much on your property taxes?

Challenge your property taxes.

Deadline to file an appeal is January 15, 2010.

Click here to find out how...

Have a great Holiday!

Aundrea Beach-Greco
The Beach-Greco Team
(702) 326-7866
(877) AUNDREA
info@aundreabeach.com

Year-End Tax Tips

12.6.09
Courtesy of Legal Zoom, Author(s): Katherine Butler
 

With the year winding down, we can expect that it will not be known as one of the most prosperous years for our economy. However, that does not mean that we have to forfeit all hope when it comes to our tax bills. Ultimately, there are some great steps you can take to minimize your yearly tax bill.

Tax Credits

First, determine if there are certain tax credits that you can use. According to Elaine B. Morgillo in an article she wrote for SeaCoast.com, tax credits are more valuable than tax deductions, because they reduce your income tax liability dollar for dollar. If you are in the market for a new home, you may qualify for a tax credit of up to $8,000. Taxpayers with income below $75,000 (single) or $150,000 (joint) may receive this credit for the purchase of a new home - if they have not owned a home in the past three years. If you are in need of home improvements, you can receive tax credits for installing Energy Star-friendly windows, doors, and skylights.

Deductions

And there is more. According to tax and accounting giants Thomson Reuters, if you have purchased a new car, including a light truck, SUV, motorcycle or motor home, you can deduct state and local sales taxes paid on up to $49,500 on the purchase price. You just have to make the purchase by December 31, 2009. The tax break phases out in for income is $125,000 for single filers or $250,000 for joint filers. Also, you cannot take the deduction next April if you decide to deduct state and local sales taxes instead of state and local income taxes.

You can donate to charity. Thomson Reuters writes that if you are 70 ½ or older, you can put up to $100,000 per year from your IRA into a qualified charity without paying any tax on the distribution. (This must be done before the end of 2009.)You can also deduct the full market value of most property you donate. However, if you donate a car, the deduction you are allowed is limited only to the amount the charity receives once they sell the car.

Business Expenditures

Do you own a small business? Small businesses can write off for capital expenditures to $250,000. Further, businesses can recover the costs of some capital expenditures by "immediately writing off 50% of the cost of many types of depreciable property acquired in 2009 for use in the U.S." according to Thomson Reuters.

If you are closer to a lower income bracket, you might want to consider deferring your end of the year payments. Self-employed? Don't bill until the New Year. Therefore, you will be responsible for the payments in 2010. If you are going to cash out savings bonds, wait to do so until after January 1. Lucky enough to get a year-end bonus? Ask for the check to be issued in 2010. This will delay the tax payment for another year.

Investments

You can offset your capital gains by selling some of your lower-performing stocks. Net losses can be deducted in full against other income up to a $3,000 annual maximum write-off. Consider putting in the maximum to retirement accounts. Do you have a 401k? If so, contribute the enough to get the maximum from your company. Doing anything less is essentially throwing away free money. Do the same for your IRA - traditional and Roth. You can make contributes for 2009 all the way through April 15, 2010. But know that if you defer payments, it is just less time to for your money to grow.

Finally, if your company offers you a flexible spending account, use them up before the end of the year. This way, you can take tax-free money to pay off medical or child care expense. You can also set up an account to pay for child care while you work or attend school.

Happy Holidays!
Aundrea Beach-Greco
The Beach-Greco Team
(702) 326-7866 | info@aundreabeach.com

President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.

NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June 2010. Homebuyers must sign a contract before April 30, 2010 and close by June 30, 2010. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

"The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.

"This bill will shift demand from the second half of 2010 into the first half," said Pat Newport, a real estate analyst with IHS Global Research. "As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second."

That's not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It's important to stabilize real estate markets quickly to help bring the economy out of its tailspin.

The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.

But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.

Furthermore, buyers do not, in reality, receive the entire benefit. "The credit helped prices stabilize," said Newport. "So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it."

The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.

The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional "move-up" sales.

That did not happen, according to Lawrence Yun, NAR's chief economist.

"It did not have the chain reaction impact it was supposed to," he said. "Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers."

So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.

"Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending," said Yun. "They're more likely to go out to the stores or buy a new car. That provides a boost to the overall economy."

For more info and to see what you qualify for call me!

Aundrea Beach-Greco
Mortgage Advisor, CMP, CMPS
(702) 326-7866
info@aundreabeach.com

The Obama administration blessed the proposed extension of the $8,000 tax credit for first-time home buyers on Thursday 10/29/09 as the Senate neared a compromise that would extend the credit to more potential buyers.

Here’s a primer on who might be able to get the expanded credit, and what it might do for the housing market:

Who gets the credit, and how much can they claim? First-time home buyers are eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of the bill creates a new credit of up to $6,500 for homeowners who have lived in their homes for five years. That provision would start on Dec. 1.

How long will it last? The tax credits would expire on April 30, 2010, but home buyers under contract by April 30 would be able to qualify as long as they complete the sale within 60 days. Keep in mind, this would be the third iteration of a home buyer tax credit that has been in place since mid-2008. Sen. Johnny Isakson, the Georgia Republican who has been a staunch advocate of the credit, promised that this would be the “last extension” of the credit, according to Dow Jones Newswires’ Corey Boles. “Tax credits like this only work by creating the sense of urgency to take advantage of it,” Sen. Isakson said.

Will the tax credit do anything for the high-end of the market? Probably not. The tax credit phases out for home buyers with incomes above $125,000 for single filers and $225,000 for married couples. Also, homes that cost more than $800,000 aren’t eligible for the credit. Overall, the tax credit is likely to generate only a modest further increase in home sales, says Tom Lawler, an independent economist in Leesburg, Va.  For many well-paid people, he says, it won’t make a big difference: “A household earning around $150,000 is likely to buy a home of $500,000 plus, so a $6,500 credit won’t be much of a factor in pushing such households off the fence.”

What other limits does the credit have? Toddlers are out of luck. Last week’s congressional hearings spotlighted concerns about misuse of the credit, including some 500 tax filers under age 18 who had claimed the credit.

So will the expanded tax credit help sales? That’s a point of debate among housing analysts and economists. Alec Phillips, economist at Goldman Sachs, notes that expanding the credit to people who already own homes doesn’t necessarily make a big dent in the supply of housing on the market. “If these ‘step-up’ buyers already own a home and sell it to finance the new one, that hasn’t reduced the amount of inventory for sale,” he says.

But Mark Zandi, chief economist at Moody’s Economy.com, thinks the extension is a big deal. Based on a preliminary analysis, he said it should mean at least 500,000 in additional sales, atop the 400,000 he estimates already have been generated by the tax credits (twice the Goldman estimate). “The tax credit is not a very efficient tax cut, but not extending it would do significant damage to the still fragile housing market,” Mr. Zandi said.

Readers, what do you think?  Is this going to help the market, or is it simply reinflating a bubble?

As of October 1st, 2009 all FHA appraisers have to be state certified.  Since many appraisers lost their FHA status, lenders nationwide are scrambling to find FHA approved appraisers.  Plus, with dozens of strict new appraisal independence rules arriving almost daily from every financial regulator, the way you communicate with appraisers is coming under intense scrutiny. 

Why risk non-compliance and delays in your transactions when Castle & Cooke Mortgage and The Beach-Greco Team makes it easy?  Streamline your processes, avoid unneccessary expenses and comply with FHA rules and more – all in just minutes.

Need help? Have questions?

Call or email me.
Aundrea Beach-Greco
Mortgage Advisor, CMP, CMPS
(702) 326-7866 | (877) AUNDREA
info@aundreabeach.com