Elizabeth Newlin - Arizona Real Estate Agent

I just wanted to address Amanda’s comment on my last post about refinancing really quickly. I think there’s going to be a lot of people wondering about refinancing right now with rates as low as they are.

Basically, what you want to find out is whether it will cost you less money to refinance, or to stay with your higher rate. The bank will charge you some fees (loan origination, etc) to refinance your loan, even though they may roll those fees into your new loan. So even though you might not be out of pocket any cash at the time that you refi, you will owe more money on your loan that will have to be paid off when you sell (or after the life of your loan). So you want to find out how much lower your mortgage payment per month will be with the lower rate, and then how much the closing costs (bank fees) will total. Then divide the closing costs by the monthly difference and find out how long it will take you to recoup that loss. If you plan to stay in the house much longer than it will take you to make the refi costs up, then go ahead and refinance.

Here’s an example:

You owe $100,000 on your loan and your current interest rate is 7.5%. Your monthly payment is $700. You can refinance for a rate of 5.5% and your new payment will be $568 a month for a difference of $132 a month (wow!). Your closing costs are $2500, so it will take you 19 months, or just over a year and a half to recoup the loss. If you plan to stay in your house another five years, this would obviously be a smart move.

There can be more complicating factors, such as, if you bought in 2005 and put little or no money down and now you owe more than your house can be sold for. A bank would most likely not be willing to refinance you in this case (it would be an extremely high risk loan for them). Or, if you bought in 2002 and have lots of equity in your home, but are still paying PMI (private mortgage insurance, which is an extra monthly fee you pay to help insure the mortgage company against your defaulting on the loan if you haven’t put down at least 20%), then you could be eligible to have that PMI removed from your payment, which would save you even more.

The point is, when to refinance isn’t always crystal clear, but lower interest rates often signal a time when researching the right option for you is smart. So if you want more information, email me or contact a mortgage representative.

Unless you live under a rock you’ve heard about the Federal Reserve Board cutting the prime rate by 3/4 of a point this week. And I’m sure if you have any involvement with the stock market you’ve been glued to the CNN channel watching all the number scroll past.

Well, even though it’s had a negative impact on stock values (at least the last few days), this has all had a really positive impact on loan interest rates. My mortgage gal, Bridget Morey with Century 21 Mortgage, told us today at our weekly sales meeting that her national average best rate is at 5.5%! Whew! That is just an awesome rate.

I’m telling you, with prices sliding down and interest rates staying fabulous or getting better, I really have the home buying itch! I’m dying to rent out our current house (which we bought long enough ago that we could rent it for more than what we pay in the mortgage) and buy something bigger before the great prices go away.

Anyone else thinking along those line?

If you haven’t read this article about the future of Phoenix real estate, you should; it’s interesting (if not a bit on the alarmist side).

Right now so many people are looking for answers about what is going to happen to the value of their homes. People who bought investment properties in the last few years are wondering if they’re ever going to see a return, or even break even, or if they should just cut their losses and walk away. People who refinanced when their houses were shooting up in value are now worried that they’re stuck in their houses forever because they can’t sell for what they owe. People who bought in 2005 and now want to upgrade, or just need a change of scenery are underneath their loans and and wondering if they will ever have any other options.

Lots of industry experts are making lots of different predictions. Some are saying we’ve hit the bottom, and others says the bottom is still 6 months to 2 years out. Ultimately, I think it’s important to remember that none of these experts is a fortune teller. If they really could tell exactly what is going to happen to house values in Metro Phoenix, then they would have sold in 2005 and rented until now. Roughly five people actually did that, and I’m pretty sure it was a fluke.

What you can depend on, are the cold hard facts of what is actually going on right now. Here is what we’re seeing right now:

1. We are still in a state of extreme oversupply. There are currently 54,906 properties on the market. This is more than an 18 month supply of homes.

2. Foreclosures and short sales make up as much as 50% of the market in places like Queen Creek and Maricopa that were so popular with investors back in 2005. Rock bottom prices on bank owned properties are forcing all houses on the market to lower prices to compete.

3. Buyer activity has started to pick up. Buyers looking for a deal have started to smell the blood in the water.

4. The majority of the activity we are seeing right now is in the $150K - $250K price range. People who couldn’t buy in the last two years are now finding things more affordable. People who would typically buy in price ranges higher than that most likely have a house they would need to sell first, and are more hesitant.

So basically, #3 and 4 are what we need to have happen as the first step to a recovering market. #2, however, is an unknown entity. The ARM debacle in the mortgage industry may lead to many more foreclosures in the next year, and if it does, they will continue to push prices down until it is resolved.

Right now, it’s a wait and see situation.