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