Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25% of the total loan amount, up from the current level of 1.75%. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.

• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10%.

Also, the FHA is cutting the amount of aid sellers can contribute to homebuyers’ closing cost to 3% from 6% of the purchase price. The FHA said the higher 6% concession led to inflated purchase prices. The changes are set to go into effect in the first half of the year.

Daily Forecast Update

• NAR’s monthly official forecast as of January 5th
• GDP 2009 Q4: +4.3%
• GDP 2010 Q1: +3.0%
• GDP 2010 Q2: +2.5%
• Unemployment rate by the mid-2010: 9.8%
• Average 30-year fixed mortgage rate by mid-2010 2009: 5.7%

What does today’s data mean for REALTORS® and consumers?

• Refinancing activity rose solidly in the past week. But mortgages taken out for home purchases remained low.
• A majority of economists now say home prices have already bottomed. Most REALTORS® also say the same.
• As this sentiment spills over to the general public, there will be lessening consumer fear impact on home purchases.

Mortgage Applications

• Mortgage brokers were busier the past week as they witnessed 22 percent jump in refinance applications according to weekly survey by the Mortgage Bankers Association. But mortgages for home purchase barely moved, with less than one percent rise.
• Compared to a year ago, both refinancing and home purchase applications are much lower. Refinancing is down by nearly 70 percent and purchase applications down by 27 percent.
• Take caution in reading the mortgage applications data. Actual home sales are comfortably above levels from one year ago. Either more home buyers are using all-cash without a mortgage or there is something wrong with the mortgage applications data. It is possible, due to mortgage industry consolidations and several major companies going under, that the data sampling can no longer provide valid comparisons with past data.

Home Value Projections

• According to the latest Blue Chip economic forecast, based on forecast submissions by about 60 economists, 57 percent now say that existing home prices have bottomed. This is the first time in recent years to my recollection where more economists are saying that there will be no further fall in home prices.
• Separately, according to a NAR REALTOR® survey with over 3,000 respondents, 69 percent say home values will rise over the next year.
• There is something called the ‘wisdom of the crowd’ which miraculously becomes correct in many incidences.  For example, if you were to make a guess to how much I weigh (after having looked at me), you are sure to be wrong. But if I took the average of all the guesses in the room then the answer will be very close to my actual weight. One person’s forecast is wrong, but the average of many forecasts can become remarkably accurate or at least less inaccurate than most individual forecasts. With this in mind, are the home values really bottoming?
• There are great local market variations, so some markets will surely experience further price declines. But the majority may begin to see prices rise. On average, there could indeed be no further measurable price declines from this point onwards. However, knowing that forecasting is a hazardous sport, my own projection is for low single-digit price gains in 2010 and 2011.

Copyright National Association of REALTORS®. Reprinted with permission.

The $8,000 First Time Homebuyer Tax Credit set to expire at the end of November has been extended until April 30 2010. Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500

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What is a Buyer’s Representative?

Defined most simply, a buyer’s representative (or buyer’s agent) is an advocate for the buyer—not the seller—in a real estate transaction. Real estate laws and regulations vary from state to state, but buyer’s representatives usually owe full fiduciary (legal) duties, including loyalty and confidentiality, to their buyer-clients and keep their best interests in mind through the entire transaction. In some states, consumer protection legislation has been enacted that defines the assumed relationship between a buyer and a real estate agent as that of client and buyer’s representative. Regardless, to ensure that you are working with a buyer’s representative, the two of you should sign a written buyer representation agreement that defines your buyer’s representative’s responsibilities and obligations, and yours also. Consult with your local REALTOR® Association or state real estate regulatory agency for the agency laws that govern your state.

Why Should I Use a Buyer’s Representative?

The two most important reasons to use a buyer’s representative are protection and efficiency. Most likely, the seller of whatever property you buy will be represented by a listing agent who can provide expertise throughout the transaction. Don’t you want the same kind of service as a buyer? A buyer’s representative can provide you with the expertise you need through the entire transaction. According to NAR research, buyers who work with a buyer’s representative also find their homes quicker, while viewing more properties in their search, than buyers who do not engage a buyer’s representative.

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

As a real estate agent, part of my job is keeping up on current trends or news in the market. It’s a basic responsibility to my clients to remain a knowledgeable professional. I spend a great deal of time keeping up with all the changes in the industry, either through the news stories I read each day or just some conversations with my colleagues. There’s no way for me to pass along all of that information but this might be a start.

By now, everyone has heard the endless accounts of the mortgage meltdown or any number of crises. It’s in the news nearly everyday recently. However, it’s unusual that you hear the whole story unless you’re already an industry insider. Or maybe your local source is a neighbor that is having a tough time selling their home or had some bad experiences. Often it’s difficult to tell what level of truthiness you’re getting since it’s quite common to hear conflicting stories as well. It’s my goal to try and tell the rest of the story from my own perspective.

Since I’m a Realtor based in Lancaster County, Pennsylvania I’ll be posting some stories related to the conditions in the local market. Also, in the coming posts I’ll post some other general reports such as…

• The Homebuying Process
• What is the First Time Homebuyer Tax Credit?
• Home selling strategies
• Common mistakes
• Staging a property
• Questions to ask your Realtor

…. and so on. Don’t be surprised if I plug my own listings as well

That’s all for now!

-Randy