Housing Counsel: Looking Forward in 2007
by Benny L. Kass

At the end of each year, some people look back — while others look to the future. The past, as the saying goes, is prologue; other than to learn from our mistakes, there is nothing we can do to change or modify 2006.

So let’s look forward. How will 2007 impact on the American homebuyer?

Interest rates: Last December, many “experts” predicted that mortgage interest rates would be at least 7 percent by the end of the year. They were wrong. However, many feel confident that interest rates will rise as we move into the new year. The state of our economy is still fuzzy, which typically means that rates will start moving upward in the months to come.

Purchase and sales contracts: If you read the newspapers, you will learn that real estate sales are down in some areas of the country, especially for condominium units. Developers who are now faced with many unsold units are offering everything from free plasma television sets to free car rentals for a couple of years to induce buyers to submit contracts. However, there are anomolies, especially here in exploding real estate areas such as metropolitan Washington, and many areas of Texas. I recently learned that a cooperative apartment generated five contract offers. That may be unusual in todays marketplace, but is not uncommon. That doesn’t mean it’s a bad thing for the buyer either. In Austin, for example, a great deal of the purchasing frenzy is from investors–knowing the population is booming and the ability to house the influx of Austinites can’t keep up, they see an investment “ala old California” that’s hard to pass up for monetary gain.

As for Washington, a whole bunch of new Congresspeople are coming to Washington, and that will clearly generate a good number of sales. We all know that when Congressmen or women lose an election, they often stick around to become lobbyists. Thus the new people — and their new staff — will be looking for good places to live, and that’s good news for this area.

Foreclosures: Unfortunately, too many Americans did not listen to former Fed chairman Alan Greenspan when he warned consumers not to obtain no-money down, interest-free mortgage loans unless guided by an experienced loan officer that shows the areas where this loan should be used–not just to get in a typical loan. According to the Mortgage Bankers Association, about 4.7 percent of homeowners were late on their mortgage payments in July through September of 2006. This was up slightly from 4.4 percent in the same period for 2005.

According to Gray Buffington, President of Buffington Mortgage, and a 20 year veteran in ensuring Austinites find their best financial loan fit: “If you have a old adjustable rate mortgage that will “adjust” in 2006 (or even in 2007) you should seriously consider refinancing while rates are still hovering below 6%. Furthermore, you should carefully read your “interest-free” loan papers. There are many instances, (such as buying a home to remodel & sell within a year or two) where these save the buyer thousands. But if you find a lender who wants to put you in loan such as this for long-term living, you will soon learn that it contains a variable rate, which can adjust on a daily or monthly basis. It also may turn into a fixed- rate loan within the next year or two — and the rate will be based on the then-current mortgage rate. Be warned and, better yet, prior to signing–look for a lender with many years experience to know all loan options, and one who offers you a consultative approach to finding the best financial fit for your own needs. Doing so could save you thousands. Sometimes tens of thousands.”

RESPA violations: The Real Estate Settlement Procedures Act (known as RESPA) prohibits kickback between service providers, including mortgage lenders, title companies and even attorneys. Meaning, for example, a realtor will not receive a gift of any kind if they recommend a lender or attorney to a buyer. They certainly may do so–with the knoledge of who is a good and experienced professional in their area–but they cannot receive compensation for doing so.) In recent months, it enforcement has increased–including violations for mere tokens of appreciation from those referred, including just a car wash. This actually helps everyone in the industry because only the strongest professionals now are being referred–not the strongest “gift givers”.

New home sales contracts: If you decide to buy a new-built house, the developer will present you with a form contract. Because, in many areas, the market has softened, often the contract stipulations have as well. This means that homebuyers might receive more incentives, or other changes fr0m contracts of the past. However, if sales are booming in the areas you plan to buy, another buyer or two could have their contract signed while you are looking yours over. As it as always been in real estate, it still remains: Location is king.

Homebuying seems to be increasing throughout the country and, although some things have changed, many are standard operating procedures. Your best bet for finding all the ins and outs of your area, in particular? As it has also always been in real estate: Contact your local real estate professional.