Mortgage and Real Estate Blog

Just when you start to think that the economy simply cannot start to look any worse, you sneeze, blink or otherwise turn your head for a fraction of a second and - sure enough - it’s worse. Today the news was all about higher unemployment rate, overseas markets crumbling and an uncertainty about what’s going to happen to the housing market and, of course, the rate of foreclosures.

The more that people are losing their jobs, the more it seems likely that foreclosure numbers are going to increase and that more and more folks are going to have trouble getting approved for a mortgage in the first place. The more that houses aren’t being purchased by individuals and families and the more that properties are taken over by the banks, the more that the housing market is going to suffer.

While there’s little that can be done immediately and it’s tough to look too far into the future, there is hope for the economy with President-elect Barack Obama holding a press conference while flanked by top economic advisers. At least he is making an effort to recognize that the economy is in trouble and that someone needs to be willing to take action.

After the historic election yesterday which left many people scratching their heads and wondering what is going to happen next, Nancy Pelosi and other democratic leaders decided to call for an emergency session in hopes of providing further economic bailout. While it’s hard to say at this point whether or not anything is going to change or even if other elected officials are going to respond to the call to action, it seems unlikely that there are going to be dramatic changes.

For that matter, no matter what changes are going to take place over the next month and the next years - and it’s likely that they will be many even if they are subtle, less dramatic than some people may hope that they’ll be - it’s hard to anticipate what they will be. However, it’s hard to suspect that they will come quickly and smoothly.

While it’s good that there is a desire to do more to fix the economy (and the mortgage and houwing markets along with it), while it’s important to recognize that changes are needed, efforts to fix the economy are no more going to happen overnight than it’s likely that the world will forget Sarah Palin’s name tomorrow. However, it’s still good to know that efforts will be made.

One of the interesting things about the economic situation that we’re now in, it’s not all that uncommon for people to start wondering what got us into this position. Of course, sure, the economy did benefit from today’s news that a number of nations will be putting more money into the world economy and the Dow jumped to record heights.

In terms of the mortgage industry, the economic situation is still a bit shaky. Home prices are still dropping in areas - the Jacksonville, Florida, area, for example, reported a $20,000 drop in September - and mortgage lending is still a bit tight. But does that mean that it was just the stock market and world finances that contributed to the current economy? Was it all about inflated home prices and loose lending practices that sucked in home buyers who really couldn’t afford to be home buyers?

The reality is that it’s a combination of things that got the economy to where it is and, despite some good news today, it’s hard to believe that everything will just turn around immediately. In fact, it is far more likely that things won’t be changing quickly; before counting on anything, it’s going to be a good idea to take a look at the economy tomorrow.

Those who have had any thoughts at all about buying or selling a home (in other words, about real estate) are going to be sure that they are thinking about the mortgage industry and about the economy. After all, even those who are running on the treadmill at the gym are likely to see news about the latest economic stresses; it’s hard not to have the economy on the mind.

Of course, that doesn’t mean that everyone’s thoughts on the economy are going to be the same. Some people still believe that it’s going to get better. Others are secure in their situations and feel confident about their jobs and other circumstances. However, sellers who are secure in their positions are going to want to be thinking about the impact of the economy on buyers and their ability to get a mortgage; buyers are going to find themselves worrying about falling housing prices and the effect that they can have on sellers - leading some not to put their homes on the market after all.

The real estate and mortgage markets rely on the overall economy; it’s tough not to be feeling the pressure regardless of where you are positioned (a seller, a buyer, a mortgage broker or lender or a real estate professional). These days, it definitely seems that everyone has the economy on the mind.

Over the weekend, most everyone was all smiles about the talk of an economic bailout. Those who were certain that it was going to pass were talking about help for those who might be facing down foreclosure and details about the fact that lenders were going to have more money to put out there into the economy. Unfortunately, while the Senate was all smiles as recently as this morning, the House saw things a bit differently and, well, all hell broke loose. People sold off their stocks, mortgage lenders started to panic, and all of a sudden, no one knew what to expect.

Mortgage rates are bound to increase a bit. Home buyers are going to face some challenges when it comes to getting financed for a mortgage (and interest rates are likely to climb before they start to drop again); home owners who are looking to refinance are going to discover that refinancing isn’t as easy as they may have hoped that it would be.

As a result, things are looking pretty bleak for the big picture of the economy; but the reality is that Congress will continue to work on hammering out a bailout plan; lenders will get the money they need to focus on helping the consumers. Things may be rocky for a couple of days, but before giving up, let’s just take a few steps back and relax.

For those five people out there who don’t watch the news on TV, who never listen to the radio or read the newspaper and those few that manage to avoid every news-related blog on the web, the US economy is one of the top stories out there. There’s the discussion of the mortgage industry bailouts. There’s the current discussion of a new $700 billion (yes, billion, with a B) bailout and the fact that, in order to pay it off, just about every tax payer - including those who are losing their homes to foreclosure - would owe a little over $2000 to pay it down.

All of these changes in the economy have people wondering. There’s speculation that the high costs of gasoline and home heating oil are going to have a less than ideal impact on the overall economy. High food prices, difficulty getting a mortgage and the sense that even holiday spending is going to suffer are all being discussed.

All this talk about the economy, however, is getting people worried; should you listen to to all of the information that’s out there? Should you do your research and look into your options? Or should you just ride it out and see what happens?

When it comes to the economy, you’re going to want to be sure that you are making the right decisions for you; if you’re thinking about investing in real estate rather than the stock market, get the facts and guidance you need. If you’re thinking about applying for a mortgage and buying a home of your own, talk with your mortgage lender, think about your financial goals and explore all of your options before making a decision.

One important calculation for your monthly budget is your cost in fuel for telecommuting. If you’re like a lot of people, in the 1980s and 1990s you moved out of the suburbs and into the exurbs, or rural areas near a major metro center. That move made sense back then when gas was just a little over $1 per gallon. Now that’s it’s over $4 per gallon it could cost you a lot more to drive the distance than it would to buy a bigger house closer into town. What should you do?

Daniel McGinn has one answer. But there is a better way to figure out than simply taking one man’s advice. You can calculate how much your fuel costs would be under a certain set of circumstances and then make your decision based on real world economics.

But you’ll also want to calculate your mortgage if you did move. Would that bigger house in the suburbs cost you more each month and, if so, how much more? Would you save in fuel what it would cost you in mortgage? Isn’t it time to do the math?

(Source) Barclays, the seventh-biggest mortgage lender, said that, from today, it was increasing its rates for landlords by up to 0.5 per cent and for homebuyers and remortgagers by up to 0.3 per cent. Abbey and Bradford & Bingley increased their rates last week.

Does this mean that other mortgage lenders will follow? Will there be a ripple in rising lending rates as mortgage lenders across the country begin to raise their rates for landlords and home buyers.

If we do see further increases in lending rates then that could result in fewer housing transactions overall as rising fuel prices will discourage spending and taking on new debt. Home buyers will stop buying homes and landlords will stop offering new rentals. This could affect both the home sales market and the rental market, which doesn’t happen often.

I’d be on the look out for rising lending rates among all the nation’s mortgage companies soon, and if things continue to move in that direction then local housing prices may continue to fall as well.

Falling home prices and rising interest rates will not do much to make people optimistic about the economy.

The real estate slump started first, but oil prices have gone through the roof in the last year. Are they linked?

There may not be a direct correlation, but there is something intrinsically depressing about the current state of the economy as this article from CNN shows.

Americans are worried that the downturn in the economy is going to get worse. They are planning to drive smaller cars and many will find themselves looking for work. Many real estate agents are already out humping the streets in search of another job. And oil prices continue to rise. We will likely be at $5 per gallon by the end of the summer. Ouch!

What does that mean for real estate? If consumers are spending more on gas you can bet they won’t be spending it on real estate. Furthermore, commuters may find themselves in a situation where they will have to downsize their homes and some could end up in foreclosure due to an increase in fuel bills. What then?

It is undoubtedly time to look at the family budget and see where we can cut back. Are you doing that?