| Investors, don't expect home pricing to increase | | | | screw-up the mortgage market for half that amount!) |
| anytime soon. Recent events indicate that real estate | | | | And... Fannie is raising its fees. Those extra costs will |
| values will stay flat or even decline further. | | | | be passed onto borrowers as higher interest rates or |
| Why the gloomy forecast? Let me count the reasons: | | | | closing costs. It's a sure thing that mortgage rates will |
| 1. The FHA has banned down-payment grants that | | | | continue their upward trends, making it still more difficult |
| have traditionally been paid for by home sellers.. That is | | | | for home buyers to qualify for a mortgage loan. The |
| a serious blow to owners of lower priced homes. | | | | same goes for those trying to refinance. |
| Fewer people will be able to afford those homes. | | | | Fewer buyers will translate to not only more |
| Fewer buyers mean downward pressure on home | | | | foreclosures and unsold homes, but falling home prices |
| values. | | | | and tens of thousands of additional home owners who |
| 2. Those having trouble making their mortgage | | | | owe more on their mortgages than their homes are |
| payments may get some relief as provided for in the | | | | worth. |
| recently enacted housing bill. The emphasis should be | | | | Investors should be very careful about buying in this |
| placed on "may get some relief." | | | | market, even though homes are being offered at what |
| Under the bill, some will be able to convert their high | | | | seem to be bargain prices. A bargain is not a bargain if |
| interest, adjustable rate loans to a fixed rate mortgage | | | | tomorrow's value is less than what you are paying |
| with a lower interest rate. A lower interest rate means | | | | today. |
| lower monthly payments. | | | | Are there any bright spots for investors? Thanks for |
| As with anything created by Washington, don't get too | | | | asking, the answer is yes! |
| excited until you read the fine print. In this case, to be | | | | Prices for farmland in the heartland have hit a new |
| eligible to switch mortgages, your payment must now | | | | all-time high. Even with the worst housing crisis since |
| be more than 31% of your income... AND the new loan | | | | the Great Depression, agricultural real estate prices are |
| cannot exceed 90% of your home's current value. | | | | higher than ever. |
| That last requirement is the killer. With the way home | | | | The USDA says that the average U.S. farmland is |
| prices have been falling few will be able to satisfy that | | | | worth $2,350 an acre. That's up over 8% from 2007. |
| loan to value ratio. Without a new loan they won't be | | | | There's even better news for most farmland in the |
| able to stay in their current home and that will result in | | | | Northern Plains -- Kansas, Nebraska and the Dakotas - |
| more homes being offered for sale. More homes + | | | | it is up over 15% since last year. |
| fewer buyers = falling home prices. | | | | Farmland in Massachusetts boasts the nation's most |
| 3. Fannie Mae is the motor that drives the mortgage | | | | valuable dirt. It rings the bell at $12,200 an acre. |
| market. You've read about Fannie Mae's huge financial | | | | At first glance buying a farm has a great deal of |
| losses, right? Well, now that the horse is out of the | | | | appeal for many, but look out. In real life farming can |
| barn it has dawned on them that they must tighten | | | | be emotionally and financially stressful with success |
| loan requirements. They have eliminated loans to | | | | dependent upon many variables, including the weather, |
| borrowers who many have solid credit scores, but | | | | taxes, domestic and foreign competition, etc. |
| can't show proof of income or have small or no down | | | | On the other hand, as the world's standard of living |
| payment funds. | | | | grows, so does the demand for food. That can make |
| (By the way, Daniel Mudd is Fannie Mae's CEO. He | | | | farm land very valuable for a long time to come. |
| takes home $12.2 million a year. I would be willing to | | | | |