There are so many options with regard to mortgage loans, that the opportunity to review some basic terms is the best approach before obtaining a loan. Often heard during the mortgage and home buyer experience are several references to federal mortgage corporations. Rarely are they explained in a simple clear manner. We will begin by explaining what Fannie Mae, Freddie Mac and Ginnie Mae actually are and how they apply in the industry.
Fannie Mae is Federal National Mortgage Association or FNMA – The Company was chartered by the congress, however it is share-holder owned. Currently they are the principal supplier of residential mortgage funds.
Ginnie Mae or the Government National Mortgage Association or GNMA – The Company is a part of the United States Department of Housing and Urban Development (HUD). This Government agency was created by Congress to provide mortgage funding for lenders who are purchasing with a VA or other Government owned / backed Loans.
Freddie Mac is the Federal Home Loan Mortgage Corporation or FHLMC – This Company is a shareholder run company who creates a secondary mortgage market by purchasing all forms of loans from the primary market for mortgage lenders.
Generally speaking the two share holder based companies do not have much if any federal involvement. Recently due to the Real Estate Mortgage Crisis, and the subsequent repercussions, the federal government has altered their position. They now hold influential positions with in both companies to attempt to circumvent further problems. Time will tell if this was the correct choice for the country and the real estate market place.
the Austin Real Estate Market is still going strong!
Austin has withstood the national mortgage crisis very well. Though the area has seen an increase in foreclosures and a decrease in new home sales, the overall pictures still shows that Austin has been steady throughout. The numbers here are nowhere near other markets, placing Austin high on the list of desired cities. While a recent study concluded that the local housing market is lower than it was last year, the median home prices remain steady.
In the third quarter, local home builders began construction on over 2,000 homes, which is a 37% decline from the same time period in 2007. Home closings fell 33% from last year as well. During the first nine months of 2008, there was new construction of over 7,000 homes, showing a decline of 30% from the first nine months of last year. Again, closings have also declined for that same period. While these studies do show that the Austin market has declined, a recent PMI Mortgage Insurance Co study shows that Austin is one market least likely to see a decrease in home prices. This is due to the local inventory. Most builders are keeping their inventory of new homes at about a six and a half month rate.
Six month inventory is considered a balanced rate. This means that the supply and demand for homes in Austin is still close enough to keep the market from dropping dramatically. The median home price for Austin is still a reasonable amount, and with employment rates still very high, the overall market outlook remains good. This creates the best possible environment for home buyers and sellers in the Austin/Round Rock area.
Every industry has its own jargon. The real estate market is no exception and this often leaves home buyers and sellers in a state of confusion. This can be avoided, or limited, with a few helpful definitions passed from agents to their clients.
The term ‘foreclosure’ is in the news almost daily, so that is a good place to start. Foreclosure is defined thusly: The legal approach taken by a lender which deprives a borrower of the property purchased through a loan arrangement. Foreclosure is not a haphazard legal process. This legal approach is never started unless the borrower is grievously behind on their payments, and the property purchased maintains value. Typically foreclosure ends with a forced sale of the mortgaged property, either by public auction or by private arrangement through a real estate agent.
An option out is called a deed in lieu of foreclosure. The borrower signs the deed to the mortgage lender instead of following through a foreclosure procedure. This allows the borrower to avoid the paperwork being filed for the foreclosure. This saves the borrower the taxing issue of creating a public record of the foreclosure process. The debt itself will likely appear on credit reports, however, by not going to court, it saves money, time, and public records of the foreclosure of the given property.
With the recent purchase of the nine apartment buildings from Equity Residential, Northland Investment Corporation became the top owner of multifamily housing in the Austin area. According to this article in the Statesman, Northland bought the complex from Equity Residential for $270 million and, with this sale, Equity leaves the Austin market for what they perceive to be greener pastures on the east and west coasts.
The nine apartment complexes comprise a total of 2,985 units and are scattered about the northern and southwestern areas of the Austin region. Included are Madison at Stone Creek, Madison at Wells Branch, Madison at the Arboretum, Village Oaks, Arboretum at Stonelake, Madison at Walnut Creek, Madison at Scofield Farms, Sedona Springs, and River Stone Ranch. Northland Investment, which is based in Massachusetts, was attracted to the Austin market by encouraging job and population growth rates, and the growing high tech industry in the area.
Equity cites their strategy of a focus on long term ownership and higher growth in markets where the supply of housing is limited and feel the coasts offer this opportunity. It has been the contention among many experts that the Austin area has already become overbuilt with multifamily housing and that this will drive down rents and occupancy rates.
Local market analysts have pined the apartment occupancy rate to 93.4 percent in June 2008. This rate is down only slightly from the same time the previous year. During this period rental rates have continued to rise, albeit slowly. Real Estate experts predict occupancy rates will continue to fall steadily through the end of 2008, however with new construction slowing, most believe the decline will stop over the next year. This is anticipated to put the multifamily housing market into a positive bracket again.
You are about to sell your house. Naturally, you want to make a profit, or at least enough to make the transition from this home to the next go smoothly. You also want the deal to occur quickly, with as little time on the market as possible. This can happen but only if you enter the real estate world wisely and that means avoiding several actions that may seem tempting now, but will cause you trouble in the very near future.
The first thing you don’t want to do is overprice your property. Yes, it would be nice if you could net more than is warranted, but home buyers today are informed. They know what a house, yard included, is worth. If they see you trying to add an extra zero, they won’t trust you and they definitely won’t buy your house. Further, you don’t want to base your asking price on a refinance appraisal. These appraisals often untruthfully name your property’s worth as more than it is. Again this will deter buyers. Instead, trust your real estate agent who knows Austin, knows the market and knows the buyers.
Once you’ve settled on an asking price, do not neglect the importance of actually selling your house. It won’t move if you don’t advertise the fact that it’s out there. Get real people to come and look at it. When they do, do not forget to make your house appear as pleasant as possible. Polish it. Then, approach the potential buyers with a friendly and, again, pleasant attitude, pushing a little more with the obviously serious customers. You do not want to waste your time on browsers.
Finally, do not forget that you have rights and responsibilities. The city of Austin does not cater solely to the homebuyer, nor does it leave all of the duties involved in a real estate transaction up to the buyer. The seller must take an active part as well. Know what must be done and what CAN be done, and you’ll sell your house, intelligently and within an appropriate amount of time.
In spite of slowing sales, real estate remains a valuable investment and Realtors are hoping prospective buyers continue to think so as well. Especially in the Austin city and surrounding areas.
The Austin Board of Realtors reports that the median price for single family houses was up three percent over July 2007, to $195,000. Although sales of single family homes dropped 21 percent compared with 2007, median prices continue to trend upward. Market inventory in Austin stands at just under 11,000, which translates into roughly five and a half months of available home sales.
“Austin continues to enjoy increasing home values,” touts the Chairman of the Austin Board of Realtors, Socar Chatmon-Thomas. He continues: “This, coupled with low unemployment rates and a steadily growing population, makes Central Texas a great choice for home buyers.”
Single family home sales have admittedly slumped, and leasing has increased 20 percent from 2007. These properties have also seen a modest price increase of about two percent. The average days on market of leased real estate has fallen about eight percent compared with July 2007 to just 37 days.
Real estate has been the one investment throughout the world that has almost consistently increased in value as such, it is almost always a wise choice for future growth.
Mark Dotzour, a chief economist at Texas A&M University, expects that the Austin economy will recover more quickly than the rest of the nation in the next year or so. Dr. Dotzour cites several anticipated factors that will drive this prediction: an expected additional 8,500 jobs between August of 2008 and 2009 and, with the influx of new workers, the demand for housing will increase. Dr. Dotzour expects to see a major drop in new home construction as developers labor under a tightened loan market. But he predicts that, by the fall of 2009, banks will once again loosen the purse strings and building will begin again.
Of the nine- to eleven-thousand apartment units that will become available next year, Dr. Dotzour expects that the occupancy will hover near 90 percent and landlords, desperate for tenants, will have no choice but to lower their rents drastically – to as much as 94 cents per square foot.
As far as the commercial markets goes, Dr. Dotzour predicts an 84.7 percent occupancy rate for office space, 82.4 for warehouse and industrial space, and retail space will lag as consumers reign in their spending. He expects rents to decrease in the coming year. He also predicts that commercial construction will trail off as costs rise and builders find they have empty inventory on their hands.
This all points to a market bringing itself under control and gearing up for a new period of growth in the coming years.
