Mortgage Rates and Timing

Mort Rates

Interest Rates: after a couple of years of hinting at an eventual hike in rates, the Federal Reserve appears ready to make a move and raise the short term rate for the first time in nine years.

The Federal Reserve has been talking about raising the short term rate for a couple of years now. They kept kicking the proverbial can further down the road. It was supposed to be at the end of last year, then it was going to be the Spring of 2015, then in the Autumn, but they never pulled the trigger.

They have fooled just about everybody, from experts to the average person on the street. They seem to be talking out of both sides of their mouths. By mid-September of this year, the entire world had already factored in an increase in the short term rate. Instead, the Federal Reserve pointed out instability in China and other global markets and decided to maintain the status quo. The U.S. and world stock markets were already volatile and they responded negatively, dropping like a rock.

The following week, Janet Yellen, the Chair of the Federal Reserve, delivered a speech at the University of Massachusetts, and, out of character for the Fed, stated something of profound substance. She said that they were going to raise the rate by the end of the year as long as there weren’t any major changes to the economic landscape. The U.S. and world stock markets soared after her speech.

The reason the world sees a rise in our rates as something good is because it indicates that the Federal Reserve has faith in the U.S. economy. Their lack of action, especially in September, proved to be too much for the worldwide psyche. “Do they know something we don’t know?” They used to change the rate every other month and sometimes in between. It would go up, down, up, up, down, up, down, etcetera. It felt as if somebody was behind the wheel of the U.S. economic bus.

They did not pull the trigger in mid-October, but all indicators are “go” for mid-December. They are looking at a quarter of a percent hike in the short term rate. They are moving off of zero for the first time in seven years and getting back behind the wheel of the U.S. economic bus. The changes in the short term rate will not be as swift as prior Federal Reserve movements in the past, but nonetheless, they are moving in a positive direction. The short term rate effects savings accounts, CD’s, commercial loans, and the rate at which banks borrow money from the Federal Bank window. As banks are charged more, long term rates, mortgages for homes, eventually go up as well.

An increase of a quarter of a point does not drastically change the monthly mortgage payment. But, as interest rates continue to climb, it certainly will put a dent in a borrower’s wallet. Remember, this is a monthly payment. So, for a $750,000 mortgage payment, the payment increases $109 per month every single month when the interest rate rises by just a quarter of a point. That’s an extra $1,308 per year. And, if the Fed continues to increase rates, we could find rates rising to 4.75% by the end of 2016. If that happens, the monthly mortgage payment for a $750,000 mortgage climbs by an extra $331 per month compared to today, or nearly $4,000 a year. That’s a lot of money. For a $500,000 mortgage at 4.75%, the monthly payment increases by $220 per month compared to today, or $2,640 per year. That’s a lot of money for the middle class family.

Keep in mind, historically speaking, 4.75% and 5% are not bad rates. We have just become accustom to ridiculously low rates complements of the Federal Reserve stimulating the U.S. economic engine for nearly a decade. The long term average for interest rates since 1972 is 8.5% and since 1990 it’s 6.6%. Eventually, down the road, interest rates will hit 5% and beyond, most likely topping at around 5.25%. For the $500,000 middle class borrower, a 5% interest rates means an extra $296 per month more compared to today. That’s $3,552 extra every single year, equivalent to a nice Hawaiian vacation every year for the term of the loan if a buyer acts NOW.

That’s right, NOW is the time to take advantage of today’s rock bottom rates. They might not be as low as they were earlier in the year, but the gift from the Federal Reserve is coming to an end.

Jerry Portrate

Gerald T. Henberger
Vice President
CalBRE # 01332379
Remax Prestige Properties
23120 Alicia Parkway, Suite 100
Mission Viejo, CA 92692
http://www.HenbergerProperties.com
jerry@henberger.com
cell: 949-874-7126

Broker Associate

 

A unique way to help children this holiday season

Dear Friends,
Yes, we are in the holiday season already!   As we approach Thanksgiving, I am trying to balance my work and social life and consider a way to help others in a meaningful way.   As you most likely know, I have always try to keep children needs close to my heart and to help those less fortunate.   Thousands of children in Festival of Children

Southern California suffer needlessly from real pain resulting in lost hours from school and from time focusing on the joy of youth – all due to problems with dental care.  Sadly, many of these children can not afford the oral health needed and suffer greatly as a result.   This year I have decided to join Healthy Smiles, an organization dedicated to solving these problems.  They, along with others have a fun way to help these children through a fund raiser called “ride for a dream!”

On November 12, 2015, Healthy Smiles for Kids of Orange County will participate in The Carousel of Possible Dreams at Disneyland in an attempt to fund their dream of increasing prevention services throughout the community. This year our team goal is $25,000!
Healthy Smiles for Kids of Orange County Tooth decay is the most common chronic childhood disease, resulting in 51 million lost school hours each year. With one in three elementary school students screened by Healthy Smiles for Kids of Orange County showing visible tooth decay, Orange County is truly facing an oral health epidemic. Healthy Smiles’ prevention program consists of two smile mobileunits that visit approximately 105 public schools throughout Orange County. A trip to the smile mobile consists of a visual dental screening, fluoride varnish, and oral health education. On average, Healthy Smiles screens about 400 children a week.

I, along with 8 other dedicated and enthusiastic colleagues, have taken on the challenge to ride the King Arthur Carrousel at Disneyland 50 times to help Healthy Smiles meet their $25,000 goal. To support, simplyclick on the link below!

I am truly grateful for your support to this wonderful organization. Your investment will make a positive and lasting impact on the children in our community!

Sincerely,

Jerry Henberger

Visit my personal page to support:
http://www.festivalofchildren.org/goto/JerryHenb

What is a Short Sale?

Short Sale

On July 11, 2011 Governor Brown signed into effect Senate Bill 458 (Chapter 82, Statutes of 2011) which took effect immediately. The provisions of SB 458 expanded the previous statute which prohibited a first lien holder from filing a deficiency judgment against a seller after a short sale, and expanded this no recourse coverage to include any junior loans secured against a dwelling of not more than four units. SB 458 also included a provision which prohibits a lender from requiring a seller to make any additional payments above and beyond the sales proceeds including a cash contribution at closing.

Among other things, SB 458 specifically:

Provides that the lender cannot obtain a deficiency judgment for any loan, without regard for purchase money or non-purchase money status or loan seniority, for loans secured by a deed of trust or mortgage on a dwelling of not more than four units, where the seller has voluntarily sold the property for less than what is owed and the sale proceeds have been paid to the lender in accordance with the parties’ agreement.

Provides that the anti-deficiency provisions cannot be waived.

Prohibits a short sale lender from requiring seller funds be deposited to closing as part of the short sale agreement, specifically, that a lender “shall not require the trustor, mortgagor or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.”

• Allows the lender to retain existing rights and remedies for recovery if the borrower has committed fraud or waste.

• Does not apply to commercial loans made to legal entities (where the borrower is a corporation, limited liability company, limited partnership or political subdivision of the state) or where a loan is secured by mixed collateral, such as a residential 1-4 unit property and a commercial property, thus allowing the lender to retain any rights under applicable laws to proceed against the other collateral to the same extent as if the dwelling had been sold by non-judicial foreclosure.

Escrow Officers are neutral third parties and cannot provide legal advice. It is up to the lender to ensure they are in compliance with State Law. Escrow Officers’ responsibilities are to ensure they are closing their transaction pursuant to the terms described in short pay approval letters and in accordance with the mutual instructions from the principals of the transaction.

Jerry Portrate

Gerald T. Henberger
Broker Associate
CalBRE # 01332379
Remax Prestige Properties
23120 Alicia Parkway, Suite 100
Mission Viejo, CA 92692
http://www.HenbergerProperties.com
jerry@henberger.com
cell: 949-874-7126

The Summer Housing Shift

The Spring Market is now in the rearview mirror, making way for

a whole new season in home sales: summer.

The Summer Shift: The expected market time has increased by two weeks longer since the prime Spring Market.

Housing tends to follow a similar cycle every year. This time of year is no different. It started a couple of weeks ago with graduation. The market slowed a bit; many houses were not selling as rapidly as they were in April and May. The explanation from the real estate trenches was that it was duDoore to graduations and the end of the school year.

Then there is our national holiday, the Fourth of July. Not as many buyers tour homes as they turn their focus to playing in the sun, barbecues, and fireworks. In housing, the holiday turns into a distraction of grand proportions and the lingering effects can be felt for a week.

As Southern California experiences summer heat waves, many will turn to the oasis known as the community pool, and others will flock to cool off in the welcoming, crashing waves of the Pacific. The heat will also distract the real estate market from performing on all cylinders.

Finally, the slower housing scene will be blamed on the family vacation. From Hawaii, to the East Coast, to the ultimate family destination, Orlando, it is the season for summer vacations. Camping, airplanes, house boats, motor homes, and road trips, just about everybody has plans. It is hard to tour homes or conduct real estate transactions when you are checking in to a Hyatt and touring the Empire State Building.

Many will blame the slower housing market on graduation, the 4th of July, hot summer days, and family vacations. It is, quite simply, the Summer Market. It happens every year. For sellers and buyers in the real estate trenches today, they are all experiencing the shift in the housing market already and we are just a couple of weeks into the official start of summer.

A Summer Approach for Sellers: with buyer traffic down and the expected market time rising, it is now more important than ever to NOT get too far ahead of the market by overpricing. Multiple offers can still be attained, but only for those homes that are priced at, or very close to, their Fair Market Values. Here’s a quick refresher for determining that value: take the most current closed and pending sale activity and carefully adjust for upgrades, location, amenities, and condition. The Fair Market Value is not determined by arbitrarily pricing a home out of thin air. Ignoring the fundamental shift in activity during the Summer Market will result in many homes being overpriced with absolutely no success; instead, they will waste valuable market time during the second best time of the year to sell.

A Summer Approach for Buyers: although competition dips a bit during the summer, buyers must respect the fact that it is still a seller’s market. Buyers are not able to call the shots. Sticking to paying the Fair Market Value determined by recent market activity is key. Also, knowing the local or neighborhood market conditions is extremely important as well. It may be the case that a certain neighborhood is a bit hotter than another and when a home comes on the market that is priced well and is in great condition, buyers must be willing to push the envelope a bit in terms of value. Paying a few thousand dollars more than the last comparable sale may be the winning strategy that will allow a buyer to beat out the competition. Grossly overpaying is not advised. Sometimes waiting for the next shift in housing, the Autumn Market, may be a wise approach as well.

For both buyers and sellers, the Summer Market shift means a new approach to the market is crucial in order to find success. Realistic, level headed, patient buyers and sellers will be rewarded from now through the first few weeks of August. From there, the housing market will experience another shift, the Autumn Market. Stay tuned…

For more information on market trends click the link below:

Henberger Properties Market Trends for July

 

Honoring Our Country

The Fourth of July is a day when we honor our country.  We honor those who have gone before us and those who make our country great.  From those who founded the United States, to those who fought for our freedoms, to those who immigrated to become part of the fabric of our lives, we salute you.

It occurs to me that there are many heroes we often overlook.  Caregivers take time each day to support our aging population and those fighting disease.  This part of our society loses many of the freedoms we take for granted. Caregivers help restore those freedoms while improving quality of life.  My friend Hass gave his time and energy to support caregivers and those less fortunate – all to honor his brother.  Tragically, his brother, a gifted cardiologist, just lost a battle to Parkinson’s disease. Thank you to all the volunteers like Hass in our country.

As the Fourth approaches, look around and consider our heroes and loved ones. Every day we fight prejudice and inequalities.  As we face these challenges, consider the words of the great Dr. Martin Luther King, Jr. ” we will prevail”.  We will continue to build an even greater society, we will cure diseases, we will do our best to fight famine and support people throughout the world.  This is our country and these values are reflected in the hearts of our youth.    As the fireworks go off, feel proud that we are a nation of freedom, hope and commitment.

Happy Fourth of July!

Jerry Henberger

CalBRE#01332379

RE/MAX Prestige Properties

jerry@henberger.com

(949)874-7126

http://www.HenbergerProperties.WordPress.com

Charity and Real Estate

School children leaving the school building

Charity and Real Estate

For those of you who know me, you most likely know that a strong passion of mine is charitable work.  The Henberger Properties Blog will have a section specially suited for you to voice your passion, helping you with your charitable goals.  Share how they benefit peoples lives and the results of your charitable work.  Real estate is of course a part of your success and part of your investment portfolio.  In the near future we will have information on how to set up a CRT or Charitable Remainder Trust.

Please contact us for information on an upcoming

               Charitable Remainder Trust Seminar.

Contact:

RE/MAX Prestige Properties

Jerry Henberger,                               Gosia Kawczynski

Broker Associate                              Broker

CalBRE#01332379                         CaclBRE#00997925

949.874.7126                                     949.230.8271

jerry@henberger.com                     gosia@gosia4re.com

Guest Speakers include: 

James D. Frey

Director, Gift and Estate Planning

Mission Hospital Foundation

Join the Discussion!

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The Henberger Properties Blog is all about sharing information important to other property owners.  Together we can provide important and timely resources to help your real estate investment stay in tip-top shape.  My goal is to help you build resources including a top real estate expert, mortgage specialists, escrow partners, title companies, handymen services, inspections services, termite recommendations, local landscapers, service reviews and other important information.

Thanks for being part of our team!

What is a 1031 Tax Exchange?

Exchange

1031 Tax Exchange

A 1032 Tax Echange is a tax-deferred exchange or a transaction to defer the payment of capital gains by “exchanging” investment property owned by an investor (“relinquished property”) for another investment property (“replacement property”) of equal or greater value.

The most common type of exchange is a delayed or straightforward type of exchange is a delayed or straightforward exchange.  By properly effectuating an exchange, the investor is able to defer the realization of depreciation tax on the relinquished property.

Choosing the Right Intermediary

An investor should be selective in choosing a Qualified Intermediary (“QI”).  Choosing a professional QI with financial strength is paramount to a successful exchange.  

Choosing the Right Broker

Make sure your broker has the resources to successfully bring the right team together to help you succeed.

For more information to sign up for a 1031 Tax Exchange Seminar,

–  contact: jerry@henberger.com  Direct Line (949)874-7126

Hosted by:

REMAX Prestige Properties

http://www.HenbergerProperties.com

http://www.ExchangeResources.com

*If your property is listed with another broker, this is not a solicitation for a listing. 

**Be sure to consult your tax advisor on any transaction that may impact your taxes.