Ron T Weems Jr : Latest Blog Posts

Housing Prices Declining

Thu, 29 Jul 2010 07:46:22 GMT

By Patrick Killelea
Last updated 29 June 2010 (minor changes)

Because house prices will keep falling in most places. Prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with 20% downpayment. Landlords say a safe price is a maximum of 15 times the house's annual rent. Yet on the coasts, both those safety rules are still being violated. Buyers are still borrowing 6 times their income and putting only 3% down, and sellers are still asking 30 times annual rent, even after recent price declines. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that prices will keep falling for a long time. Anyone who bought a "bargain" this time last year is already sitting on a very painful loss.

Because it's still much cheaper to rent than to own the same size and quality house, in the same school district. On the coasts, annual rents are 3% of purchase price while mortgage rates are 6%, so it costs twice as much to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 9% of purchase price, which is three times the cost of renting and wipes out any income tax benefit. Buying a house is still a very bad deal in the richer neighborhoods, but it does make sense to buy in some relatively poor neighborhoods where prices have already fallen into line with salaries and rents. Check whether you should rent or buy in your own area with this NY Times calculator.
The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's safe to buy for yourself because then rent could cover the mortgage and all expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:
```
annual rent / purchase price = 3% means do not buy
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy
```
So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling house prices.
Because it's a terrible time to buy when interest rates are low, like now. Realtors just lie without shame about this fundamental fact. House prices rose as interest rates fell, and house prices will fall as interest rates rise, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down. The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy at a time of low interest rates and high prices like now is a mistake.
It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.
- A low price gives lets you pay it all off instead of being a debt-slave for the rest of your life.
- As interest rates rise, house prices must fall.
- Your property taxes will be lower with a low purchase price.
- Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house. Then you will not be able to refinance because then you'll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.

Because buyers already borrowed too much money and cannot pay it back. They spent it on houses that are now worth less than the loan. This means most banks are actually bankrupt. But since the banks have friends in Washington, they get special treatment that you do not. The Federal Reserve prints up bales of new money to buy worthless mortgages from the most irresponsible banks, slowing down the buyer-friendly deflation in prices and socializing bank losses.
Big bank cash flow will never run out as long as the Federal Reserve exists. The Fed exists simply to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.
As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers, to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get paid back.
It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor. This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.

Because buyers used too much leverage. Leverage means using debt to amplify gain. Most people forget that debt amplifies losses as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or a mortgage rate adjustment, he lost 100% in the real world.
The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.
Higher-end houses especially are now set up for a huge fall in prices, since there is no more fake paper equity from the sale of a previously overvalued property. Without that equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.
It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is 6% because of the realtor lobby's corruption of US legislators. On a $300,000 house, that's $18,000 lost even if prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.

Because the housing bubble was not driven by supply and demand. There is huge supply because of overbuilding, and there is less demand now that the baby boomers are retiring and selling. Prices in the bubble, even now, are entirely a function of how much the banks are willing and able to lend. Most people will borrow as much as they possibly can, amounts that are completely disconnected from their salaries or from the rental value of the property. Banks have been willing to accomodate crazy borrowers because banker control of the US government means that banks do not yet have to acknowledge their losses, or can push losses onto taxpayers through government housing agencies like the FHA.

Because there is a massive and growing backlog of latent foreclosures. Millions of owners have simply stopped paying their mortgages, and the banks are doing nothing about it, letting the owner live in the house for free. If a bank forecloses and takes possession of a house, that means the bank is responsible for property taxes and maintenance. Banks don't like those costs. If a bank then sells the foreclosure at current prices, the bank has to admit a loss on the loan. Banks like that cost even less. So there is a tsunami of foreclosures on the way that the banks are ignoring, for now. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price. One day, those foreclosures will wash over the landscape, decimating prices, and benefitting millions of families which will be able to buy a house without a suicidal level of debt, and maybe without any debt at all!

Because first-time buyers have all been ruthlessly exploited and the supply of new victims is very low. From The Herald: "We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."
House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Buyer should be rioting in the streets, demanding an end to all mortgage subsidies. Canada has no mortgage-interest deduction at all. It can be done.
The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.
Because boomers are retiring. There are 70 million Americans born between 1945-1960. One-third have zero retirement savings. The oldest are 64. The only money they have is equity in a house, so they must sell. This will add yet another flood of houses to the market, driving prices down even more.

Because there is a huge glut of empty new houses. Builders are being forced to drop prices even faster than owners, because builders must sell to keep their business going. They need the money now. Builders have huge excess inventory that they cannot sell at current prices, and more houses are completed each day, making the housing slump worse.

Debit or Credit

Sat, 05 Jun 2010 09:21:49 GMT

Via

ConsumerReports.org

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Debit cards now rule in the world of plastic. Americans reach for them more often than credit cards when shopping, a trend that's expected to continue. But for some types of purchases, swiping your credit card makes more sense. Here's when you should and shouldn't use each kind of plastic.

Use a credit card...
For big purchases
You don't want to buy, say, a laptop or other big-ticket item with a debit card, especially if you purchase it online. Credit cards allow you to withhold payment if something goes wrong with your purchase, and the card issuer often investigates the problem for you. With a debit card the cash is deducted from your checking account immediately, and it may be up to you to resolve any problems with the merchant.

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Some credit cards, including all American Express cards, add up to a year to the manufacturer's warranty on the products you buy with them. You may also get additional protections against fraud, damage, identity theft, or plain old theft. Many credit cards also offer complimentary travel insurance, car rental loss and damage insurance, and 24-hour travel, roadside, and emergency assistance.

For gas, hotels, and car rentals
Some hotels, gas stations, restaurants, auto rental companies, and retailers put a hold on the money in your checking account until a debit transaction is processed, which might take up to several days for signature-based payments. What's more, the amount that's blocked can significantly exceed the amount of your purchase. These holds can prevent you from accessing the funds in your bank account and result in bounced checks, declined transactions, or overdraft charges.

To earn rewards
Fewer debit cards have rewards programs, and the programs of the ones that do aren't as good as those of credit cards. Using your debit card won't maximize the amount of cash back or points you can earn. Rewards credit cards, however, tend to have the highest interest rates, so unless you pay off your balance in full each month, you shouldn't use one.

When safety is paramount
Under federal law, your liability for fraudulent charges on a debit card can be greater than it is for a credit card. You're responsible for up to $50 in unauthorized purchases on your credit cards. But with a debit card, you can lose up to $500 if you don't report the theft or loss of your card or PIN within two business days of discovering the problem. And if you fail to report the unauthorized charges within 60 days of the date of the statement that lists them, you could be held liable for any unauthorized withdrawals after that date. Those include the full value of credit lines and funds in savings linked to your checking account for overdraft protection.

In practice, Visa and MasterCard have "zero liability" policies that go beyond the federal law by exempting debit cardholders from liability in most cases when a bank investigation confirms a transaction is fraudulent. But there are loopholes in those policies. People who create fake ATM or debit cards by stealing your PIN and other account data can simply pull cash from your bank account. Using a technique known as skimming, they set up equipment that captures magnetic-stripe and keypad information when you enter your PIN at ATMs, gas pumps, restaurants, and retailers.

When you do use a debit card, don't type in your PIN at the pump; sign for the transaction instead. Use only ATMs inside banks, and monitor your account online for abnormal activity.

Use a debit card...
For budgeting
Debit cards are fine for small purchases, such as groceries and other everyday purchases. You may be inclined to spend less using debit, since you generally know how much money you have in your bank account. Debit cards may also curb the tendency to spend more to earn rewards, a problem for some people with credit cards.

Debit cards have become even better for budgeting now that new federal rules require banks to get your permission to allow overdrafts made with debit and ATM cards and charge fees for those transactions. But the rules, which take effect for new cards on July 1 and for existing accounts on Aug. 15, don't cover overdrafts from checks or recurring transactions, such as automatic bill payments.

Tax credit

Mon, 03 May 2010 07:12:11 GMT

For those military families that had spouses overseas for ninety days or more. Your tax credit has been extended to June 30, 2011. If you served in the military from Dec 1, 2008 to May 31, 2010. You may qualify for the buyer tax credit. The following needs to be done to qualify for the tax credit. You are in the market to purchase a new home and you qualify for the tax credit just have your purchase and sale contract signed by you the buyer and the seller by April 30, 2011 and close by June 30, 2011. This is a great benefit for military families. With the interest rates at history low's, it is very important to take advantage of this opportunity. Give us the opportunity to earn your business. Call us today. 425-218-7674.

Home Buying Tax Credit

Fri, 05 Mar 2010 07:37:49 GMT

With the housing market in it's curret condition. It is the perfect time to purchase your first home. Especially, while the government has extended the home buyers tax credit. For the first time buyer you may qualify for a 8,000 dollard tax credit. If you own your home for the last five years and lived in it for the last three years, you may qaulify for the extended tax credit. You have until April 30, 2010 to be under contract and unitl June 30, 2010 to close your transaction. Don't sit on the fence thinking you are going to get more the and housing market is going to decline more. You have less than two months left to purchase your home. Call me if you have any question about the home buying process.

Mortgage Applications Decline Slightly

Thu, 18 Feb 2010 07:42:17 GMT

Mortgage applications decreased 2.1 percent last week compared to the previous week on a seasonally adjusted basis, according to the weekly Mortgage Bankers Association survey.

On an unadjusted basis, applications were down only 0.5 percent. The unadjusted purchase index increased 1 percent compared with the previous week, but was 18.4 percent lower than it was the same week a year ago.

Interest rates mostly held steady:

30-year fixed-rate mortgages remained unchanged at 4.94 percent.
15-year fixed-rate mortgages remained unchanged at 4.33 percent.
1-year ARMs decreased to 6.67 percent from 6.68 percent.

Source: Mortgage Bankers Association (02/17/2010)

Introduction

Thu, 18 Feb 2010 07:37:28 GMT

Hi,

I am Ron Weems, I am the team leader of a team. We love what we do for your clients. We are agents that educate our clients so they can make a educated decision. We know that buying or selling real estate is the third most stressful thing in your life. In our business, we want to take that stress off of our clients. The more educated you are during the process the less likely you will be totally stress out during the process. Give us the opportunity to earn your business call us today. 425-218-7674