Options for Homeowners in Foreclosure

The following are strategies a homeowner can use to avoid foreclosure.  Not every solution works for every homeowner, but there is most likely one that can work for you if you are willing to invest the time and effort necessary for success.

 

Reinstatement

If the reason you missed payments was temporary and it has been resolved, then you have the option to reinstate your mortgage right up until the bank sale. 

 

In order to reinstate a mortgage, you must pay all missed payments, late fees, and legal fees that are due up until the date that the loan is reinstated.  You request this amount from the mortgage company in the form of a reinstatement letter.  This letter will typically expire after 30 days since the amount owed is time-sensitive. 

 

A simple reinstatement will require a onetime payment of all delinquent funds in full.  Once you make this payment, the mortgage is reinstated and you are free to make payments as you have before.

 

Forbearance or Re-Payment Plan

If the issue that caused you to miss payments was temporary but you are unable to make a onetime reinstatement payment, you may be able to negotiate a forbearance or repayment plan.

 

If you do not have the means to repay all of the missed payments and legal fees, then this is another option that also reinstates the mortgage.  The lender allows you to pay the missed amount over a period of time or they place the missed payments at the end of the amortization of the loan.  It is much more likely that you will be given a period of time in which to pay delinquencies.

 

This option usually requires income documentation from you showing that you are unable to comply with terms of a repayment plan.  Typically, a mortgage is not fully reinstated through a forbearance plan until all payments are made in full.  If you miss just one payment, you can end up right back in the same stage of the foreclosure process that you were facing when the forbearance agreement was created.

 

Sell the Property

If you have equity in your house, you can sell it and cure the foreclosure.  Unfortunately, many sellers believe that they have to sell much faster than actually have to and they end up taking the first offer that comes along. 

 

If you are working with a licensed agent, he can help you harvest from the home sale as much of your hard-earned equity as possible.  However, you need to make sure your agent understands the foreclosure process, is aware of the foreclosure timeline in your unique situation, and he prices and markets your property accordingly.

 

Many homeowners think they have equity in their home only to find that it will be wiped out by a prepayment penalty or a secondary lien on the property.  Once again, a qualified real estate professional can help you navigate through a sale as quickly and profitably as possible.

 

Rent the Property

In rare cases, you may have mortgage payments low enough to allow you to rent your property and keep up your mortgage payments.  Usually this is just a short-term solution. 

 

It is difficult to keep good tenants in a rental property if you don’t have the capital necessary to handle repairs and general maintenance.  That doesn’t even take into consideration what you would do to keep afloat if there is a vacancy.  Additionally, if your taxes and insurance are not escrowed into your loan, they become a huge burden when they come due.

 

Refinance

If you have sufficient equity and income and your credit has not been too badly damaged, you may be able to refinance.  This is also typically a short-term solution since payments on the property usually go up considerably due to the refinance.  If the issue that made you late on your payments in first place has been resolved then this option will sometimes work.  But in many cases, this is just a foreclosure waiting to happen.

 

Mortgage Modification

In some cases where you do have the means to afford your mortgage payments or very close to your mortgage payments, the bank may qualify you for a mortgage modification.  This is very similar to a lower interest refinance where the lender lowers the interest rate on the existing loan in order to lower the payments.

 

You will have to qualify for a modification by sending in proof of income and expenses.  If this option is available, it offers a great opportunity to keep your home.

 

Short-Refi

This relatively new phenomenon shows just how far some mortgage companies and lenders are going to avoid foreclosing on properties.  This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well.  You will have to apply for this process both in showing a hardship as well as demonstrating the ability to pay the new mortgage through a fully documented qualification process.  Unfortunately, lenders have been reluctant to offer this program in places like Tennessee that have not been ravaged by foreclosure like some other areas of the country.

 

Deed-in-Lieu of Foreclosure

This option is sometimes referred to as a “friendly foreclosure” since you essentially give the deed to your property back to the bank.  This action may prevent the lender from having to go through a lengthy foreclosure process; in exchange the bank will sometimes forego its rights to a deficiency judgment.  The mortgage company agrees to take the deed back in exchange for the property and it typically has no further recourse.

 

This solution only works in cases where there is one mortgage and there are no liens (or very small liens) on the property or in rare cases where the first mortgage holder is willing to negotiate with junior mortgage holders.  This happens infrequently and was previously unheard of before the current mortgage crisis.

 

If you have equity in your house, this is not a good option since you will give up any right to the property and any equity when using Deed-in-Lieu as a solution.

 

Bankruptcy

A bankruptcy may stop a foreclosure and allow you to reorganize your debts and keep your property.  The reality however, is that most of the time this is not the case and the bankruptcy only stalls the foreclosure.  If you are unable to make payments after bankruptcy, the house will foreclose anyway.

 

The other major drawback to bankruptcy is that it makes it very difficult for you to sell your property once you enter the process.  And it makes it nearly impossible to negotiate a short sale.  The only possibility is if the trustee for the bankruptcy agrees to release the property from the proceedings and allow it to be sold.

 

Servicemembers Civil Relief Act (SCRA)

Signed into law on December 19, 2003, the SCRA provides certain protection to military personnel that are in foreclosure in specific situations.  The law also provides Servicemembers other protections

 

As it applies to mortgages, the law reads:

 

Mortgages:  The SCRA can also provide temporary relief from paying your mortgage.  To obtain relief, a military member must show that their mortgage was entered into prior to beginning active duty, that the property was owned prior to entry into military service, that the property is still owned by the military member, and that military service materially affects the member’s ability to pay the mortgage.

 

It is important to note that this relief is only temporary and in many cases the most prudent course of action is to sell you property.  However, this is a personal decision based on your specific financial situation.

 

Short Sale

When you owe more on a property than it is currently worth and one of the above solutions do not apply to your situation, you have the option of pursuing a short sale.

 

You are “short” when you owe an amount on your property that when combined with closing costs and commissions is higher than the current market value.

 

A “short sale” occurs when a negotiation is entered into with your mortgage company or companies to accept less than the full balance of the loan at closing.  A buyer closes on the property and the property is ‘sold short.’

 

In the past it was rare that a bank would accept a short sale.  However, due to overwhelming market changes, lenders have become much more negotiable when it comes to these transactions.  Recent changes in policy within many organizations have made the chances of getting a short sale approved even higher.

 

Even with banks more open to entering into the process, you will need the help of a real estate professional who is patient, organized, a good communicator, and highly knowledgeable in this area in order to complete a successful short sale.

 

Regardless of what some opportunists in the marketplace have been saying, a short sale is not a “get out of my mortgage free” card.  If someone suggests otherwise, the next step will likely be to send “get creative” (read: lie) with the financial information you send to your lender.  This is also known as mortgage fraud.  The bottom line is that a bank will only approve a short sale for someone who is already in or obviously headed for foreclosure.  This means that you must have a valid financial hardship for why you can’t pay your mortgage.  If you have the means to maintain your mortgage or bring cash to closing, the bank does not consider you to have a valid financial hardship and therefore will most likely not approve a short sale for you.

 

If you are in the Murfreesboro TN or Rutherford County area and are facing foreclosure call our toll free 24 hour info line for FREE recorded information 1-800-239-2513 ext. 2044, visit www.TheHomeSaverGuys.com, or simply email us at John@JohnCJones.com

Foreclosure Demystified

There is a common misconception that once a homeowner misses a payment he is immediately in danger of foreclosure. The reality is that foreclosure is a legal process that a lender must go through in order to take possession of a property for which it holds a mortgage.

The Foreclosure Process in Tennessee

The below information covers the most common foreclosure process used by most lending institutions in the state of Tennessee. It would be impossible to completely cover foreclosure law in this space. You are encouraged to consult a real estate attorney if you desire to go more in-depth.

 1. Default: The homeowner must miss a payment. Default on payment is the only way a property can enter the foreclosure process. This can also be a missed payment to a local taxing authority, a condo association, or homeowners association. A lender usually has the right to start the foreclosure process following a single missed payment. However, most mortgage companies typically wait until a homeowner is three or more months behind before formally getting started. Most deeds of trust in Tennessee contain a “power of sale” clause that allows the lender to conduct a non-judicial foreclosure. In essence, when they sign the loan at closing, borrowers pre-authorize the lender to sell off the property in the event of default.

2. Legal Notice: The lender or foreclosing party must notify the owner that they are entering into the foreclosure process. In the non-judicial process, a notice of sale must be published at least three times in a newspaper regularly published in the county where the home is located. Additionally, if the borrower is still in possession of the property, he must be served with a notice of sale at least 20 days before the scheduled foreclosure sale.

3. Bank Sale or Auction Date: The lender normally appoints a substitute trustee who conducts the foreclosure auction with the property going for cash to the highest bidder. Typically, the bank makes the initial bid on the property and ends up buying the house if no investors make a higher bid.

4. Redemption Period: In Tennessee, the redemption period has largely gone the way of the dodo once banks began having borrowers waive their right of redemption when they signed the original deed of trust.

Deficiency Judgment

In Tennessee, the lender can obtain a deficiency judgment against a homeowner for any amount they are unable to recover through a foreclosure or short sale. This means that if you have a mortgage for $200,000 and the bank forecloses and sells the property at auction for $125,000, they could possibly obtain a deficiency judgment for $75,000. This allows the bank to pursue collections against the homeowner for $75,000. In most cases this does require an additional legal action against the homeowner to obtain a judgment. This is another reason that it is so important to exhaust every option a homeowner may have to avoid foreclosure. This does require a separate action to be filed in court, causing the mortgage company to incur further expense. The lender is also acutely aware of the borrower’s inability to pay so they often see further collection efforts as fruitless.

The Opportunity Window – Pre-foreclosure

The period of time between the first missed payment and the final bank sale date is called “pre-foreclosure” since the process has begun, but the owner has not lost control of the property. This is a critical time for the homeowner since he can still legally list the house for sale, sign contracts, and do what he can to avoid foreclosure. Also, a short sale typically brings more money for a property than the mortgage company can get from an investor at auction, which means a smaller deficiency judgment against the homeowner, if the bank pursues that option.

Opportunity Lost – REO Property

If a property makes it all the way through the foreclosure process, one of two things happen at the end: it is either sold to the highest bidder at auction, or very often it is taken over by the bank as an owned asset. REO stands for Real Estate Owned. The bank does not want to take over a homeowner’s property, however when the foreclosure timeline runs out and the house does not sell at auction, the bank has no other choice. At that point, the bank’s REO or Owned Asset department takes control of the property and there is no further opportunity for the homeowner.

The other major issue with REO property is that once a lender takes over a property and puts I back on the market, many times they do so at highly discounted rates. These properties will often be the lowest priced in a neighborhood, meaning the bank will likely receive much less from the ultimate sale of the house than they would have from a short sale.

Reasons to Avoid Foreclosure

Surprisingly, many homeowners facing foreclosure simply throw in the towel because they don’t understand the process, think they have no options other than foreclosure, or the mental and emotional strain of pending foreclosure simply beats them down until they no longer care what happens. Here are some reasons why you should fight to avoid foreclosure.

• You will always have to disclose that you have had a foreclosure on any mortgage application and many job applications that you submit in the future. This can have ad adverse affect on your future mortgage rates. This is the only credit item that is asked specifically and does not rely on what is on an individual’s credit report. So even though the foreclosure drops off your credit report in about 10 years, it really stays with you forever.

• Credit scores will be lowered by 300+ points and a foreclosure is the most devastating credit issue you can have in relation to future credit availability. • A foreclosure is the one credit report item that is impossible to have “repaired.”

• Your lender can seek a deficiency judgment against you and collect for any amount they do not recover at bank sale.

• Many employers run credit checks and a foreclosure can put a current position in jeopardy. • Security clearances and government positions, including but not limited to military and law enforcement, can be jeopardized by a foreclosure.

• You may be responsible for any deficiencies after foreclosure for an indeterminate period of time; this can land you in never-ending collections.

• We at John Jones Real Estate are ready, willing, and able to help you explore every available option and work with you towards achieving the most positive outcome possible.

• While it may not seem like it now, there will come a time where your current financial troubles will pass. You will feel much better knowing that you did everything you could to avoid this devastating financial consequence so many people face today.

• Avoiding foreclosure takes only effort and paperwork on your part.

Call our 24 hour info line 1-800-239-2513 ext. 2044 for FREE recorded info or visit our website http://www.johncjones.com

Causes of Property Distress

It is estimated that most American Families can only maintain their current living expenses for 60 days or less when income is interrupted for any reason.

 

If you have gotten behind on your mortgage, you need to understand that you are not alone.  Many people across the country are facing foreclosure for a variety of reasons.  Below are just some of the situations that cause homeowners to get into trouble.

 

Payment Increase or Mortgage Adjustment

This is the single largest reason for distress in today’s market.  Although mortgages increase on a schedule and owners know the higher payments are coming, many people don’t or can’t react until it’s too late.  Or worse, they do nothing because they think they have no options.

 

Loss of Employment

When an individual loses employment, the loss of income is most often immediate.  Financial distress can occur very quickly and seem insurmountable.

 

Business Failure

For a small business owner, the devastation of a business failure is often followed by the inability to pay mortgage payments and the loss of their home.  In our area especially, contractors and subcontractors involved in the home-building industry have been hit especially hard.

 

Damage to Property

Many times insurance companies do not cover the full amount of damage to a property and homeowners are unable to make repairs.  Some homeowners have to use insurance funds to survive and find new living arrangements.

 

Death of a Family Member

The death of a family member is devastating in many ways other than financial.  However, if the person who passes was also one of the—or the only—wage earner, financial distress will almost always be added to the family’s troubles.  Even if that person was not a wage earner, his or her death can still throw the family into emotional and financial turmoil.

 

Severe Illness

Severe illness or injury and the medical bills involved, as well as the time it takes away from a family’s productivity, can cause bills to be missed and homes to go into distress.

 

Inheritance

Rarely does someone think of an inheritance as a means for distress, however heirs are left to pay mortgage bills, utilities and maintenance that they did not expect.  Imagine a son who makes $60,000 per year whose parents pass away and leave him a $700,000 mortgage and payments on a $1.5 million property.  He will quickly need to find a payment solution (which there may not be) or liquidate the property to satisfy the mortgage.  As you can see, even properties with significant equity can get into danger of being lost to foreclosure if a timely solution is not implemented.

 

Divorce

It goes without saying that divorce is one of the most common reasons for financial distress in the real estate market.  Even when amicable, these situations can become challenging, especially for third parties (such as Realtors) because both spouses have to be involved and in agreement in order for solutions to be implemented.

 

Separation

When a couple decides to separate even though they are not actually divorcing, the cost of maintaining two households can lead to the loss of the primary residence.

 

Relocation

Homeowners do not always have control over where they live; many relocations are necessities, not choices.  This can quickly cause unexpected distress since very few homeowners can support two households for any significant length of time.

 

Military Service

Except for the relief provided in very specific situations by the Servicemembers Civil Relief Act (SCRA), military service can lead to unexpected financial issues.  Servicemembers who have had their periods of active duty extended are suffering a tremendous amount of financial pressure.

 

Insurance or Tax Increase

For many homeowners, just the increase in taxes on an annual basis or the increase in an insurance payment can cause a family to lose a home or go into financial distress

 

Reduced Income

If a person is in a commission-based business (real estate, insurance, auto sales, etc.) and the economy suffers, often times their income suffers as well.  Also, many businesses are reducing employee compensation or cutting hours to make up for lost revenues companies have suffered.

 

Too Much Debt

For a family with credit card debt, even minor increases in their interest rates can mean the difference between paying their bills and missing payments

 

Incarceration

Time in jail means loss of income and freedom, and usually includes sizable legal bills.  Obviously, no income and additional debt puts the home at risk.

Call our 24 hour info line 1-800-239-2513 ext. 2044 for FREE recorded information or visit our website http://www.johncjones.com

The Mortgage Crisis: What You Need to Know (6 Part Series)

Over the last decade or so, money available for mortgage loans became easier and easier to come by.  The result was the advent of many exotic and high-risk mortgage programs. 

 

Many homeowners purchased much more property than they could afford which led to the current real estate market meltdown.  Some of the issues that have resulted in falling prices and tightening credit are outlined below:

 

·       

Prices in many areas were artificially inflated by the increased buying power of those individuals that previously could not qualify.  Artificially because so many of the mortgages that were issued used introductory or temporary rates that increase so borrowers can no longer afford the payments.

 

·       

In many areas, new construction was pushed to all-time highs.  This again caused an artificial inflation of the market due to speculative investors purchasing new construction properties for resale.

 

·       

Many individuals purchased second homes either as investment or as true second homes, which again created a false appreciation in the residential market.

 

o       In 2004, 36 percent of all homes sold were investment or second homes.

o       In 2005, vacation and investment home sales accounted for almost four out of every 10 residential sales.  Investment homes accounted for 27.7 percent of all purchases and vacation homes were 12.2 percent of all sales.

o      

In 2006, second home sales dropped, however they still accounted for 36 percent of all residential property sold.

 

·       

In the rush to invest, many individuals actually purchased more than one property, building inventories of residential houses for which there was not a second purchaser

 

·       

Since late 2006 when issues in the market started to become apparent, 276 major mortgage lenders have gone out of business.

 

·       

Company closures have significantly decreased the options that homeowners have when purchasing a new or investment home.

 

·       

Many borrowers are defaulting prior to mortgage resets—often times within the first few months after a mortgage is written.

 

·       

In addition to company closures, those lenders that are still in business have reduced their product offering and in many cases eliminated entire categories of loans that were previously driving residential sales.

 

·        In many areas distressed homeowners are either selling short or have already gone through the foreclosure process and these bank or investor-owned listings are on the market, further depressing property values.

 

 

Where Do We Go From Here?

The question everyone is asking today is, “What happens now?”  While some adjustments may be made to this market collapse through government intervention, the reality is that only time can heal this market. 

 

This crisis, like many others in US and world economic history, will simply have to play itself out.  When the excess housing inventory is depleted and consumer confidence in the real estate market returns, demand for residential homes will increase and prices will begin to rise again.

 

Call our 24 hour info line for FREE recorded information 1-800-239-2513 ext. 2044 or visit our website http://www.johncjones.com

 

http://www.thehomesaverguys.com

 

I am Looking forward to 2009, but man I really miss ‘06

Well 2008 has come and gone and the real estate market in Rutherford County has experienced the second consecutive year of declining sales since the mountaintop year of 2006.  But hey, what did we really expect after 14 years of  a “let the good times roll” market?  Economists say that most vibrant real estate cycles usually last 7-8 years max. Middle Tennessee’s ran full throttle for a decade and a half without so much as a catnap!

 

You really had to scratch your head when you pulled up to the red light and right next to you the roofing contractor was revving up his new Ferrari, or when your plumber just bought his second home in Aspen, (interest-only baby).  Let’s not forget us Realtors who ran through Hummers and Harleys faster than a Chris Johnson 40-yard dash. Oh those were the days!  When the only qualification to become a builder was to have king cab-duelly and a cell phone. Two by four, two by three?  Who really cares? Land developers were buying jets quicker than you can say “King Air!” 

 

Okay, so I am exaggerating a little bit… well, not much.  We in the business knew it would not last forever; we just figured it was always three years off.  I never really understood when mom would say, “Grandpa is frugal because he grew up during the depression.” But now as I am collecting cans on the side of the road, I am starting get it. I feel ya, Grandpa.

 

Back in 2006, I actually thought something was amiss when I attended a closing where an exotic dancer and her muscle-bound boyfriend closed on a million-dollar home in the prestigious Governors Club. Business was booming. Pacman was in town.  Did I hear someone say, “Let it rain!”?

Pacman Jones - Make It Rain

 

The lending industry became a contest to see which bank could give away the most money the fastest. They had this product called a “stated income” loan where the liar, oops I mean borrower, simply had to state what they earned without any verification.

 

“Hmm, lets see.  Put me down for $250,000 a year and my wife, well let’s see. She’s working part-time; just put her down for a cool fifty-K.” 

 

“Well congratulations Mr. and Mrs. Dumba#%.  You qualify for a $500,000 mortgage.”

 

The couple sighs.

 

“But hey, if you go with the adjustable-rate product we can probably increase your purchasing power to $750,000.  How does that sound?”

 

“What if the rates go up?”

 

“Don’t worry about it, we can refi you to a fixed in a couple of years.”  Forgot to tell them about the $20,000 prepayment penalty.

 

I’m sorry; I’m getting a little over the top, but it was pretty crazy! The truth of the matter is that what we are going through here in Rutherford county pales in comparison to the much of the country. We simply did not have the appreciation run-up that many areas experienced; therefore our fall won’t be nearly as great.

 

In reality, we actually did the same numbers this year as we experienced in 2001, which at the time was a good year.  The only difference: we had built up a supply of homes to support 6,300 sales, not 3,700. We are going through a correction period right now and that’s okay.  It has to happen. Although I do miss my weekly massages and quarterly back wax treatments.  Sorry, dreaming about 06, again!  No really, I would not trade our market for any other in the country! We have been blessed here in Middle Tennessee and our market will strengthen before most others. 

 

In my opinion, 2009 will be similar to this year! Although we have sold off or foreclosed off much of the new construction, bank-owned and short sale homes have kind of taken their place. The inventory of homes is basically the same as it was at this time last year, which is an 8.2-month supply. Experts are speculating that Obama will pass a pretty healthy housing stimulus package and that should help! I do not know if we are at the bottom; nobody ever does ‘til six months after we’ve left it, but my gut tells me we are in the valley!

 

I wish everybody a great 2006… I mean 09. There I go again living in the past!

 

January 2009 Rutherford County TN Market Report

December 2008 Rutherford County TN Market Statistics

When Does Re-financing Make Sense?

Now that rates have hit some 40-year lows in the past week, I have been asked by several past clients and friends the same thing, “should I re-finance?” The answer to that question is different for each person depending on their particular situation. But because we are seeing some of the best interest rates of my lifetime, I have decided to make a cheat sheet for all my friends and clients. (Actually I am stealing it from a great Realtor friend of mine)

Let me preface, I am not a mortgage broker, I am a Realtor. However, I do try and stay abreast of the overall economy and the ever-changing mortgage market. So I am giving you a basic overview of my opinions, by all means please do not take my word as the gospel.

This is straight to the point and I must give some credit to my good friend, Michael Maher, a Realtor in Kansas City. Thanks Michael!

In General! You should re-finance if:

• your rate is 6% or above on a 30 year mortgage
• you are in any kind of adjustable rate product (possible exception below)
• you are in any kind of interest only product
• you are planning on staying in your home for two or more years
• you want a chance to go from a 30-year mortgage to a 15-year mortgage
• you want a chance to go from a 15-year mortgage to a 30-year mortgage in order to save some money
• you want to consolidate some debt at a higher rate (credit cards, other loans,etc.)
• you want to skip a monthly payment during the next two months to pay down Christmas bills (when you re-fi, you typically have about 45 days without payment because mortgage interest is usually in arrears) DO NOT use the windfall money for disposable income, use it for some bill!
• If you have 20% equity in your home and this gives you the opportunity to knock off the private mortgage insurance (PMI)
If you have any further questions on whether this would be a good time to re-fi, please email me at johhn@johncjones.com and we will contact you promptly.

In General! You should not re-finance if:

• your current rate is fixed in the low 5’s
• you will moving in the next two years
• you are one of the lucky ones who have a mortgage that is tied to the prime rate (usually investor loans), some adjustable rates are also based on prime or a margin plus prime.
• your existing mortgage has a pre-payment penalty that the mortgage co. won’t waive
• the value of your home is less than your mortgage ( you are upside down)

There are exceptions to these rules!

A quick example to determine your break-even point

$200,000 loan
Current rate: 6%
Re-fi rate: 5%
Current Monthly payment: $1199.10
Re-fi payment: $1073.64
Monthly savings: $125 That’s GOOD!
Est. fees to re-finance: $3000 ( I can probably help you do better-think volume here)
Break even: 3000/125= 24 Months
• In this case, if you are planning on staying in your home for over two years it may be wise to investigate your re-finance options.
• Disclaimer: above mentioned fees and rates are estimates and your rate, fees and mortgage could differ based on your credit score, credit history and other factors. I am just here to help and council.

Rates could go lower ( I know of some 4.875% quotes as of Friday 12/19/08), but I do know the market has anticipated some of these low levels. The bond market usually adjusts ahead of when the public is hearing the Feds have lowered rates. So it is anybody’s guess if they will go lower. I do know that they are historically low right now! I just want try and help as many friends and clientele as I can by giving you this information. Hopefully this helps some of you take advantage of this incredible mortgage market.

Maybe, just maybe, the federal government has given you and your family a terrific gift this Christmas. That is my hope!

God Bless,

John Jones
John Jones Real Estate
john@johncjones.com

Fed Lowers Rates….What does that mean?

Like the old saying goes, “if you live long enough, you are likely to see just about everything”. That was the first thing that came to my mind as I watched the Feds lower the ‘overnight rate’ yesterday to an unprecedneted 0-.25% rate. The government is using every possible tool at their disposable to try and get this country out of recession and I applaude them for it.

The Fed’s are making this rate cut in hopes of stimulating consumer and business lending which,in turn, should help the flow of many back into the economy. This cut should prompt home mortgages to continue their downward surge.  They are currently around 5-5.25% and could trickle down in the four-range according to most experts. Wow!!!!

What does this mean for the Rutherford County real estate market? Lower mortgage rates in Middle Tennessee, hopefully, should encourage any renter that can buy-to buy. This will lower inventories which will help stabilize values. The lower rates will also encourage many homeowners to refinance their existing mortgage to lower their monthly debt burdens. In some refinance situations, the borrower  may pull out some equity which they will put back into the economy.

Here is a great ‘Q and A’ article from the USA Today that really helps explain the Fed’s thinking.

http://www.usatoday.com/money/economy/2008-12-16-fed-rate-cut-qna_N.htm

Rates are Good, but may get Better!!!!!

Rates are creeping down in the  5% vicinity for the first time this year, which in my opinion is a good thing for the Murfreesbor0 real estate market.  But is that alone, enough to deal with all the different nuances that we are facing right now? New construction has slowed down over 50% in Rutherford County and foreclosures have risen drastically in the Middle Tennessee area, as well. However, our problems here is still  pale in comparison to the rest of the country.

When you look at the national real estate picture, it really gets scary. Median home prices are 11.3%  lower than a year ago nationally, and foreclosures are up another 28% from 2007.

The government is getting involved, but where do they start. I just read a great article that addresses the US government’s options and the different courses of action they may take. Here is the link to the CNBC.com article. I thought it was well written and covered the “big picture” issues very effectively.

http://www.cnbc.com/id/28195322

If the government does a lot of these things to help bail out markets far worse than the Rutherford County real estate  market, it only makes sense that it will allow us to recover  more rapidly than normal.

Rutherford County home starts drop more than 50 percent

According to this story in the Daily News Journal, Rutherford County and its three cities (Murfreesboro, Smyrna, and LaVergne) issued to home builders just 1,177 single-family home permits from January through November, 2008, compared 2,391 issued during the same 11-month period in 2007.

 

As we see it, this news means two important things for the Rutherford County real estate market:

 

1.) This slowdown in home building had to happen in order for the glut of inventory to get cleared out of our real estate market.  As the inventory gets smaller, buyers and sellers will become more balanced, resulting in more stable home values.

 

2.) Time is running out to take advantage of one of the best buyers’ markets in Rutherford County history.  Prices are low; interest rates are low; and inventory is high, meaning there are plenty of homes to choose from.  Fear is the only thing keeping buyers from scooping up one of the many great deals now available.  Once the inventory clears out, prices will begin to rise and the window of opportunity will close.  If you’ve been thinking of buying, this is your chance to get in at the bottom of the market and reap the rewards in your net worth as prices go back up.  Give us a call or check out our No-Hassle Home Search to see homes for sale.