Gillians’s Blog & REsources Portal: A Source for Buyers and Sellers of Montana Real Estate

We’re hearing a lot about what Washington plans to do to stimulate the housing market. Here’s an overview of what the Economic Stimulus Package actually means.

On February 13, 2008, the economic stimulus package was signed into law by President Bush. This package includes many provisions which are important to the housing market — even a stable one like ours here in Livingston & Park County — most notably increasing the loan limits for Fannie Mae and Freddie Mac (GSE) and the Federal Housing Administration (FHA). The National Association of Realtors ® (NAR) has shown great support for this package and predicts a jumpstart in the housing market which will help countless families and the U.S. economy as a whole.

According to research conducted by the NAR, increasing the FHA loan limits could help 138,000 Americans get into the housing market and will also give almost 200,000 homeowners the opportunity to refinance and ideally keep their current homes. Additionally, an economic impact study estimated that increasing the GSE’s loan limits could lead to as many as 500,000 refinanced loans and reduce foreclosures by 210,000. It is also anticipated that over 300,000 additional home sales could occur; there would be a reduction in housing inventory; and the prices for homes would increase and strengthen. The belief is that by increasing the loan limits for Fannie Mae and Freddie Mac, there will be improved liquidity in to the nation’s much stressed mortgage market.

To use some numbers to put this in perspective, the FHA limit will increase to as much as $729,750 in high cost areas (to 125% of local median home prices) for loans approved on or before December 31, 2008. The GSE limit will increase up to $729,750 for loans originated after July 1, 2007 to December 31, 2008. Fannie Mae and Freddie Mac are currently topped out at $417,000. Please keep in mind these figures are estimates and not yet official figures.

For those not familiar with FHA or GSE loans and their importance to the housing market, FHA loans– which are a part of the U.S. Department of Housing and Urban Development (HUD) – are insured loans, so lenders can generally offer better deals. They are often popular to first time homebuyers with a down payment as low as 3% of the purchase price, and most of the closing costs and fees can be included in the loan.

Fannie Mae exists to expand affordable housing and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Freddie Mac purchases, securitizes and invests in home mortgages, and ultimately provides homeowners and renters with lower housing costs and better access to home financing.

Of course, the economic stimulus package is really somewhat of a short-term answer to a bigger issue. Additionally, the loan limit increases will only be in effect for the current year. The FHA and GSE Reform Bills are currently in the works, but not yet passed into law. However, this package should meet its goal of giving the housing market a boost as well as jump-starting overall consumer spending.

NAR’s President, Dick Gaylord, recently reiterated the fact that with more affordable financing options, lower housing prices, and historically low interest rates, buying a home now is more affordable than it has been in many years. Furthermore, homeownership is still the best way that most Americans can build their wealth, and is one of the best long-term investments a person can make.

If you’d like to speak to a lender about refinancing your home, do call me: we are lucky enough inLivingston to have several excellent choices. I’d be glad to pass along contact information

Foreclosures have been a topic of media attention for many, many months, but how widespread, how real, is this phenomenon? The media would have us believe that every residential neighborhood is full of distress sales with homeowners losing their most valuable asset. Of course, there has been a rise in foreclosure rates, and this trend may continue. However — and this is a big however — it is important to keep in mind that 99% of American homeowners are NOT in foreclosure situations. And even more essential is the fact that the crisis (if it is to be called that) is a regional problem, and not a systemic one at this point in time.

One good indicator of what is actually going on is to compare some year-over-year foreclosure statistics. Although the national foreclosure rate increased by an incredible 79% between December 2006 and December 2007, the overall context for that seemingly astronomical number is that the foreclosure rate was still only 1.033%. Additionally, since almost 30% of all homes are owned free and clear, this translates to 0.07% of all homes in the country being in foreclosure – not as newsworthy as many would think.

Fortunately here in Livingston and in Montana as a whole, we have not seen a large number of homes in foreclosure. Local lenders simply did not fall into the habit of “over-lending” and our fairly steady price appreciation has helped to keep homeowners out of “upside-down” equity situations. Our market here is stable, something I believe will continue for some time.

The market is getting busier. I have several new listings coming up this week, and I sold three properties just in the last week: 405 S. 12th Street listed last week for $229,00 and sold in forty eight hours, as did 526 S. 12th. With so many properties coming on the market, it’s good for you if I know of your needs ahead of time, so if you are shopping for a home, do let me know– that way I can give alert you when something new is coming up. As always, the best place to contact me is 556 6829.

Thanks, by the way, to everyong for your positive feedback & comments about my blog & website — do let me know if there are other features you’d like to see!

a>Recently, I seem to have had a number of clients who are looking for a “Victorian” era home. As I talked with them, I realized that each person was focusing on different aspects of design. Some were imagining particular details such as elaborate exterior trim and carved oak moldings. Others were simply wanting to find a home “with character” or “something a little old fashioned”.

The term “Victorian” does not describe a single style, but an architectural “time frame” from about 1840 to 1900 when advancements and innovations in production and transportation simply made it possible to build more elaborate homes. Homebuilders often turned to pattern books for inspiration, but luckily Victorian houses are like snowflakes, with no two exactly alike. Queen Anne Victorians represent the quintessential Victorian – characterized by elaborate bric-a-brac, a complicated roofline, and expansive porches that wrap around the front and side of the house. Round towers or enormous round bay windows are other tell-tale features.

Livingston has many grand old homes, but sadly, they often lose their charm as a result of one too many remodels, or fall into disrepair over the years.

However, there is an occasional remodel of an older property which is so good, so meticulous that it just plain makes you happy when you look at it, and 230 S. 7th is one such home. Seeing houses day in and day out, I usually have a top ten list of favourite properties that I enjoy showing, because of their setting, or style, or condition. This little gem on S. 7th has all of those things going for it and more.

Thomas Burns, the well known local photographer and writer who remodeled the property and is selling it himself, describes all the benefits and attributes in his marketing brochure.burnsflyer_final.pdf

Don’t wait on this one….someone is going to come along soon and snap it up — it’s not often that an older home with this sort of location, in this kind of condition, come on the market. Call Thomas at 222 3905 to arrange a showing, or if you’d like my help, call me at 556 6829.

Thumbing through the pile of books by my desk, I came across “The Automatic Millionaire Homeowner” by David Bach, and was struck by his common sense perspective. I think it’s worth reviewing, especially at a time when gloom & doom predictors are denouncing real estate as a risky investment.

In his follow-up book to the bestselling The Automatic Millionaire, Bach has taken his winning strategies to the next level with The Automatic Millionaire Homeowner, a guide to assist with building wealth through real estate. According to Bach, the plan is quite simple, it works in any market, and it has been thoroughly time tested to work. For years, Americans used their investment dollars in the stock market to grow at a steady pace. When drastic changes occurred, much of that money moved to investment in the real estate market. The purchase of primary residences, home improvement projects, and the investment in second homes all witnessed steady growth as people’s wealth became heavily tied to their homes. The bottom line of Bach’s process is to buy a home, live in it, build wealth, get great tax deductions, and retire rich. Sound too good to be true? The emphasis, however, is that to truly follow this philosophy, it is not about booms and busts in the real estate cycle or timing the market to take advantage of trends, and certainly not to get rich overnight. It is understanding the fact that real estate is not a passing trend, and “as long as you’re alive, you have to live somewhere.” The real wealth building comes from a lifetime of homeownership.

Unfortunately, people often are drawn to schemes and plans with the promise of doing little and receiving much in return. Sometimes it really works, but most of the time it ends up with less than the desired effect. Buyers who flocked to speculative real estate markets to purchase preconstruction homes in order to “flip” quite often found this out firsthand. These situations are what have received much media attention while those who use real estate wisely take the back seat.

So, how do you build real wealth in the real estate market without becoming overleveraged? The key is long term commitment, making sound decisions, and putting yourself in the right mindset.

Some basic action steps to getting on the right road are included below:

Meet with a mortgage professional, whether a mortgage banker (direct lender) or a mortgage broker (independent consultant who will shop your loan with various lenders). Find someone who is knowledgeable and who you trust.

Chose the right type of mortgage to meet your personal needs. There are many options available including fixed rate, adjustable rates, low money down, etc. Ask enough questions to know the pros and cons of each type.

Get the best deal on your mortgage. Shop rates. Know your credit score. Obtain your credit reports and review thoroughly for accuracy.

Find the right home for your situation. What kind of home are you interested in? Where do you want to live? Use the internet to assist in research. Give yourself a “dream with a deadline.”

Work with a great real estate agent. The key things your agent should do for you is listen, help you find out how much you can afford, narrow your search, educate you on the market, assist with price determination and comparable properties, assist you through appraisals, inspections and closing.

Make the mortgage payment automatic. Paying off a mortgage early can save an extraordinary amount of money in interest fees. For example, splitting a monthly mortgage payment into two biweekly payments can cut 5-7 years off of the length of a 30 year mortgage and save tens of thousands of dollars in interest. The difference in your monthly budget will be so gradual, but the payoff is immense.

With negative real estate tales at the forefront in the media, Bach gives a final bit of advice to “bubble proof” your real estate plan and survive potential downturns. First, make sure you can afford your mortgage. Don’t depend on possible sources of additional income or hope that adjustable rates will not rise. Make sure you have financial resources in place to ride out a cycle. Next, think local. Always keep in mind that the national market is irrelevant to you. Then, always get the facts. Know the local market inventory, prices that homes are actually selling for, and the amount of time that homes are staying on the market. Also, never purchase just in order to “flip” the home in hopes of a quick profit. Finally, know that in most cases, time cures all. Patience is the ultimate virtue in real estate.

As a footnote, thanks for all your encouraging calls & comments about this blog; I see that many people are visiting. Be sure & cruise the rest of the site — there’s a lot of useful information!