The threat of rising interest rates sometime in the coming year appears to be spurring on mortgage applications this month. This week, mortgage applications increased 8.2 percent over the week prior, with the refinance index increasing 9 percent and hitting its highest level since mid-March[1]. However, points out Michael Fratantoni, the Mortgage Bankers Association (MBA)’s vice president of research, that is still about 50 percent lower than “levels seen last fall.” Home sales in the past few months have been up, with March sales exceeding February by 3.7 percent and most analysts predicting that the trend will continue as national median home prices continue to fall[2]. Most experts agree that the decline in home values and subsequent increase in sales is necessary for the recovery, although not necessarily the best news for homeowners or the economy in the short term. Average home prices have fallen 5.9 percent over last year.
Ultimately, what is really holding buyers back is the difficulty of getting a mortgage, reports RealtyBizNews. Mortgage companies are requiring a credit rating of 760 to grant a mortgage according to one reporter’s sources. In 2007, that rating was 720. As a result, “It doesn’t even matter that buyers are able to snap up the deal of a lifetime right now,” said BMO Capital Markets’ Douglas Porter to investors last week. “We are still swimming in a sea of foreclosed properties.”
With the demand for financing up and the ability to get financing down, many investors believe that now is the ideal time to be renting properties or using creative financing methods like subject-to transactions and lease-options. What do you think these numbers mean for your personal investing strategies?
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[1] http://nationalmortgageprofessional.com/news25060/mortgage-apps-rise-82-percent-over-last-week
[2] http://realtybiznews.com/home-sales-rise-in-march/9872504/
I agree with your sentiment about investors leaning to rentals and lease/options as well as creative financing Bryan. After all, if we can’t sell the homes in our inventory we’d might as well have cash-flow instead of liabilities right? As a micro-investor myself, the lease/option route is the one I’m most seriously considering. I think that more and more investors will be offering financing on their properties soon as a way to reduce their inventories and fill the voids left by the lending institutions. As always, when the system doesn’t work, creative investors are the ones that offer-up the solutions. We have always succeeded in performing a needed service when the government run and/or controlled
entities fail to perform that service. It’s what makes this country great and keeps us going. If the banks and underwriters won’t do their job, we’ll do it for them and make a living while providing a neccessary service to the American public at large.