Real Estate Darwinism

This week's featured Palm Beach Gardens Real Estate is 108 Island Cove Way in BallenIsles.

I will be there to show the home from 2-4 PM this Sunday - 5/18/08.

 Listed at $649,500 - this single family home is a perfect example of how you can live in BallenIsles without spending a fortune.

 With 3 bedrooms / 4 bathrooms it's a perfect size for a small family.

 Click here for more details.

If you and your family have been thinking about purchasing real estate in Palm Beach Gardens, I wouldn't suggest waiting considering what the Wall Street Journal had to say earlier in the month!  There's nothing like good news....

For questions about this property - or any ohers in BallenIsles - please don't hesitate to call me at 561-282-7406.

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Jason Price at Knightlines Mortgage Services, LLC provided today’s information:

When shopping for a mortgage for your Palm Beach Gardens real estate, one can easily become overwhelmed with all the different mortgage programs that are out there:

• Fixed Rates (FRM)
• Adjustable Rates (ARM)
• Hybrids, etc.

The problem that consumers face is “which mortgage is the best?” The answer to this is: the best mortgage program is that program that best suits the individual’s needs. But how does one know which is the best, if one is not up on all the different types of mortgages?

Well, let’s break mortgages down to their very basic levels: rate and term. Rate is the interest rate that one pays to bank. Rate is determined by risk. Term is the length of time that a loan is paid back. Term is also the length of time that the rate remains fixed (We will call this the rate term). The longer the rate term; the great the risk; the higher the rate.

Now, let’s assume that all mortgages are FRMs and paid back over a 30 year term. Why? Most everyone understands the concept of a 30 year FRM: the rate is fixed for 30 years and paid back over 30 years. So, what this means is the 6 month, 1 year, 3 year, 5 year, 7 year, and 10 years ARMs are now all FRMs and paid back over 30 years. The rate is fixed for that period of time which is mentioned.

Going back to our basics, the longer the term the higher the rate. The 6 month FRM has a lower rate than the 10 year FRM. So, why would one take one of these shorter terms versus a longer term? The answer is simple: they have a general idea as to their future (they plan to move, add on, build a pool, refinance to take cash out, etc). The reward for planning ahead: a lower interest rate.

Even if a person is uncertain of where they will be in the future, if they use statistics, they can get a lower rate. Statistics show that the average homeowner refinances every 3-5 years and sells around 7 years. Let’s say someone wants to be conservative on the 7 year figure, they can go for a 10 year FRM. They still will have a lower rate than that of the 30 year FRM. But, there are those still that do not even want to consider the risk of what happens after that 10^th year of the FRM. For them, the 30 year FRM is best.

Now that I opened the can of worms on “what happens after the rate term expires,” I will make a couple quick, simple answers. Assuming one misjudged their future expectations of their mortgage, they have a couple options.

1. Refinance and base the new mortgage on the new expectations
2. Refinance and jump start the expectations
3. Ride out the adjustments.

Ride out the adjustments?Yes, after the rate term has lapsed, the rate may/will adjust. Every lender has different ways of capping what your rate can change, but they all have the same calculation on determining what the rate will be: Margin + Index. Margin is a fixed amount. It is the amount the bank charges to put it simply. Index is an adjusting rate that is determined by market factors. Enough said on this.

When does one let it ride? Simple answer: rates have dropped. Think back a couple years when rates were at record lows. One could have been in a 3 year FRM that was about to adjust. Instead of refinancing, one could have seen a drastic drop in their rate just by letting their rate ride. Even with a fixed margin, rates dropped low enough for those individuals to enjoy a lower rate without the need to refinance.

So what is the best mortgage for you? The best mortgage is the FRM that has the rate term equal to your future goals timeline and the amount of risk you are willing to take.

Now, there are variations to these FRM programs, so please call Knightlines Mortgage Services, LLC today at 352-308-7219 to talk to one of our licensed mortgage professionals.

This Sunday, 5/11, I will be showcasing more prime Palm Beach Gardens real estate by having an Open House at 1007 Grand Isle Terrace, BallenIsles -

Click HERE for the full Photo set.

'Spectacular courtyard home on nearly a half-acre of premier property is designed for dramatic lake and sunset views! Sophisticated and comfortable, this home is professionally decorated and is being offered fully furnished. Loads of custom upgrades and designer appointments. Must see to appreciate it all!

This 4 Bedroom / 5.5 Bathroom (including a 1/1 Guest / In-law suite) is listed for $1,095,000.

The list of features is extensive - call me at 561-282-7406 - better yet, come by on 5/11 - Ill be there from 2-4 PM.

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While my readers know that I typically focus on Palm Beach Gardens real estate and home loans, this morning its time to take a look at things on a national scale.  

This morning I recieved an email from Chris Griffith with a link to an article that had just come out in the Wall Street Journal.

Theres nothing like starting the day off with great news-

'The Housing Crisis is Over by Cyril Moulle-Berteaux was a well thought-out piece that explains in great detail why the worst may be behind us.

It starts with:

'The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market.’

While 'bottom may sound ominous - dont forget that the decline has to stop before the recovery can begin, so the bottom is exactly what weve been looking for.

The 'Boom that we experienced a few years ago was fantastic for those people who were skilled (or lucky) enough to buy low and quickly sell high.  But it also had the negative effect of making a home purchase way too expensive for many people.”

It was inevitable - the Boom went Bust.

'Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s.

When you combine the fact that homes are becoming more affordable with the declining inventory of available properties, you see that the price declines are likely to turn around in the next few months.

‘In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.’

These improvements dont just mean an improvement in the real estate situation -

‘This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.’

I suggest reading all of Mr. Moulle-Berteauxs article here.

It is very rare to read good news these days about the real estate industry.  The majority of the media seems to delight in doing their best to report - or construct - information that does nothing but help to spread the negativity.  Why? Because negativity sells - newspapers that is, not real estate.

I feel like this WSJ article will go a long way toward convincing people that things are - or are about to - improve.

Real estate is cyclic - but when things are bad it’s sometimes hard to remember that.  We cant fix what already happened, but the future is looking pretty bright.

This is one of those things that sounds like a bad joke - until you realize that the person that you’re talking to ISN’T kidding!

Client: “I think I’ll take my home off the market for a little while.”

Me: “Why is that? Have you changed your mind about selling it?”

Client: “Oh no, not at all - I just think that taking it off the market will ________________________________ (fill in the blank with flawed logic).”

Makes absolutely no sense.  There is still quite a bit of Palm Beach Gardens real estate for sale so the only thing this temporary change does is remove ANY chance you have of getting an offer!

Some Sellers think that this is sort of a tease - as if the people that have been tracking their ‘one-in-a-million home’ will feel like they lost out and they need to spring to action!  Not at all.

If the inventory levels were low, this might not be so laughable.  But if your home falls off the list, any potential Buyer will just move on to the next AVAILABLE one.

Remember this - we are still in a Buyers Market and misguided Seller ‘tricks’ like this (and the equally poor ‘Price Increase’) only hurt your chances of selling your home.