There has been a lot of bad press over the past year about real estate values declining, home loans being hard to get and foreclosure troubles with homeowners and lenders. I have to admit it’s a very challenging time in the mortgage lending business. In times of trouble there are also opportunities that present themselves and this market is certainly presenting some outstanding opportunities for luxury home buyers in Oakland County, Michigan.
• Great opportunities for buyers
I have seen some luxury homes transact at prices not seen in the past few years. It’s my opinion that we are at or near the bottom of this market and buyers are starting to realize this, so recently we’ve witnessed an increase in activity. Remember the old adage of “buy low, sell high.”
• Oakland County, MI still a highly desirable location
Recently www.Luxist.com rated the most expensive zip codes across the nation. Bloomfield Hills, MI was No. 6 in the Midwest Region with a median home price of $1,180,000. Remember the old adage of “Location, location, location.”
• Real Estate Values have Trended Higher
Luxist also reported that values have risen 113% in 48304 since 1990. Even with the recent downturn in values real estate has been a good investment with values climbing an average of almost 7% over the past 17 years!
• Jumbo Home Loans are Alive and Well
There have been a lot of rumors floating about which claim that jumbo loans are no longer available. That simply is not true. What is true is that the secondary market for jumbo loans has become a lot more conservative and that has impacted rates on some products. Many lenders are not able to offer competitive rates on jumbo loans right now and there are some really wide variations in rates for the same type of loan from different lenders. However, there are still some great rates out there. For instance, Oxford Financial is currently offering a 7 Year Arm with a rate of 5.875% and it’s possible to borrow up to $2,000,000 with a 70% loan to value! Like everything else, it pays to have the right contacts.
Centex Land Deal: And I Thought Worst Was Almost Over
Every time I want to say that the bleeding is over, I’m proven wrong. Centex
Centex Corp [CTX 25.81 1.60 ( 6.61%) ] just announced that they sold about 10 percent of their land holdings to a joint venture for what analysts compute is about 18 cents on the dollar.
18 cents on the dollar. For mixtures of land from many different regions. That doesn’t portend a strong luxury market.
No more real estate declines to be seen here.
We’re in the middle of the largest (trillions of dollars) bursting financial mania / bubble in recorded history. A Lending boondoggle of epic proportions.
Comparisons to long term historical trends are not applicable here. The default rates on most of the pools of loans made from 2005- onward are¨ historically unprecedented. As in almost 1/3 of loans 60 days late within the first two years. Never have residential loans had such a scale of payment problems.
And appreciation rates of 7% annually probably won’t be realized by YOU if you make your purchase just AFTER several years of record-level setting (20%) price appreciation. Over time, you can expect these things to regress to the mean. As in price corrections.
Look for prices to bottom when lending standards have tightened much more substantially. That happens when Wall Street finally fesses up to the trillion or so$ lost on mortgage-based bonds. So far only a fraction of those losses have been written down, by both Us and foreign financial institutions. recognition of losses will force a more substantial tightening of lending standards- because capital-impaired banks can’t write loans…
Seen any graphs of “non-borrowed reserves of depositary institutions” lately?
Hi Russ from Royal Oak,
The bad news is definetely not over yet. However, you mention lending standards haven’t tightened substantially and that is not true. Most lenders are now requiring a 10% down payment now (up from zero). Now if your credit score is under 720 (considered excellent) you will pay a higher rate and no one will be approved for conventional financing with a credit score under 580. Appraisals are receiving a level of scrutiny which borders on ridiculous. Credit standards could not be more tight.
Many of the larger developers like Centex have unloaded some properties for pennies on the dollar because sales of new construction homes are extremely slow and they simply can’t afford to pay the carrying costs for the properties.
Your statistic regarding 1/3 of loans made after 2005 having gone 60 days late is not proves by fact. If you’re referring to 1/3 of “Sub-Prime” loans then you may be on to something. Conventional loan default rates are running around 4% right now.
You’ve made some excellent points and it’s nice to see some people out there are keeping themselves well informed. Your comments are well thought out and meaningful.
The one thing we definitely agree on is that it is going to take some more time for the real estate market and the mortgage industry to heal from the mistakes made over the past 5 years.
I definitely agree with the Ken Mascia that bad days for the real estate are not yet over. I want to add some thing to the Ken Mascia, I hope there will be the good days for the home buyers who really lead the life well…looking for those days…
Greg,
Remember, everything is cyclical. When the market is down you know it’s only a matter of time before it will improve. Stay tuned. I believe that people buying homes right now in our market are going to be rewarded over the next few years.
• Jumbo Home Loans are Alive and Well
There have been a lot of rumors floating about which claim that jumbo loans are no longer available. That simply is not true. What is true is that the secondary market for jumbo loans has become a lot more conservative and that has impacted rates on some products. Many lenders are not able to offer competitive rates on jumbo loans right now and there are some really wide variations in rates for the same type of loan from different lenders. However, there are still some great rates out there. For instance, Oxford Financial is currently offering a 7 Year Arm with a rate of 5.875% and it’s possible to borrow up to $2,000,000 with a 70% loan to value! Like everything else, it pays to have the right contacts.
I wanted to make a comment on this point. The secondary market is drying up for the jumbo and Super Jumbo mortgage market. I represent a private equity firm and we’ve seen our submissions soar as the traditional banks continue to struggle. We too will lend to 70% of the homes value, but don’t have the loan amount restrictions you mention with Oxford Financial. Our rates fluxuate from 4% variables to 6.9% fixed rates. You mention “It pays to have the right contacts” and hopefully I can be a good contact for you.
Best,
David Kendall
http://www.luxmort.com
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