The recent sub-prime mortgage melt-down has compounded the already multi-faceted troubles in today’s real estate market.  I believe the real problems didn’t start in July when sub-prime lender s started dropping out of sight, but rather at the onset of the refi-frenzy a few years ago.  For instance, homeowners, home sellers, home buyers and even some REALTORS and appraisers have all contributed to the real estate economy we see today.

 Homeowners, who may not have really needed to take any money out of their home’s equity, saw they might get a lower interest rate if they refinanced, so they did.  Many homeowners refinanced more than once.  There seemed to be an unspoken challenge to have a rate lower than ‘the Jones’s’.

Home sellers may have also, however unknowingly, contributed by participating with less than scrupulous lenders who asked them to cooperate with an increased sale price, after the fact.  There is nothing wrong with the buyer and seller coming to whatever price and terms they wish, but when those terms are later changed in order to manipulate or misrepresent the facts to the the investor providing the funds, it can be called loan fraud.  Loan fraud has, on a grand scale, played a big part in the ‘big picture’ we now see in the real estate market.  It also tended to inflate property prices.

Home buyers, especially those who are first time homebuyers, want to make sure they know as much as possible and so they can choose from the best options before they’re ready to buy.  One of those important choices is the interest rate.  Home buyers, like homeowners, want their interest rate to be as low or lower than the one ’the Jones’s’ have.  Buyers waited for rates to drop, and when the Fed’s began increasing the rate incrementally, buyers turned to ‘interest-only’ loans and ‘ARMs’ (adjustable rate mortgages), trading the safety net of ‘fixed rate’ mortgages for the bragging rights to a low rate or a low payment.

The loan fraud I mentioned earlier was made easier with the help of (either ignorant or participating) REALTORS and appraisers.  Not all transactions involve one or more REALTORS, but virtually every transaction which depends on a loan from someone other than the seller, relies on the certified opinion of an appraiser.

Most REALTORS and appraisers I know are highly ethical and aware of their duties to the public and the industry, but there have been some major convictions over the last year and the IRS and FBI are looking into other cases even now.  The FBI is involved because the fraud has involved the possibility of interstate crime and untold millions of dollars.  I imagine the IRS is interested in meeting those who made money committing fraud, as they may need to report that income!

One mortgage lender I read about, was sentenced to prison for 39 fraudulent loans she made.  I calculate that, if the average loan amount was $250,000, the investors who provided the funds lost close to 2 billion dollars.  It doesn’t take a rocket scientist to figure out that it only takes a few few top producing ‘bad guys’ to upset the apple cart!

So how long will we langor in these doldrums?  The real estate environment we are living in today still offers very low interest rates, benefiting homeowners, sellers and buyers by helping to keep house payments low.  Buyers have never had more homes to choose from and it’s been a long time since sellers have been as motivated to negotiate.  FHA is stepping up with some viable refinance options for homeowners who need to be rescued from the ARMs.  Sellers who can wait for Spring may fare well, especially those who are first to act. 

When you’d like more information on how the market is doing in a specific neighborhood or even a specific property, contact me.

I’ve just sold a Resale - condo-townhouse property at 42 3930 Christy Heights Bldg 17 in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 4912 Garden Trail in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 2250 Calistoga Drive in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 3814 Happy Jack Drive in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 1347 Vondel Park Drive in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 7245 Campstool Drive in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

A new 2007 tax deduction is going to expand the value of homeownership for many taxpayers!  I’m talkng about the brand new ability to deduct mortgage insurance premiums, somewhat like we now are able to deduct mortgage interest.  I say somewhat because the PMI (private mortgage insurance) is only fully deductible for an AGI up to $100k. As your AGI increases, your deductibility may decrease.  Actually the original legislation for this bill passed the U.S. Senate in 2004, but was no longer present in the final draft when the House of Congress approved the bill. 

Until now, the many homebuyers used an 80/20 strategy in shopping for mortgage loans in order to avoid paying PMI.  They were typically paying a higher interest rate on the second mortgage of 20% LTV (loan to value ratio), but at least the interest could be tax deductible. One benefit of the 80/20 plan is that for homeowners interested in paying off their mortgage early, they can start by accellerating the payments on the smaller, second loan, which is also usually carrying the higher intereste rate. 

There is another pretty common strategy for avoiding paying PMI.  It’s called ‘lender-paid MI (mortgage insurance)’.  The lender waives requirement for an added monthly PMI premuim in exchange for a slightly higher interest rate.  The upside: the monthly expense is about the same and it becomes (possibly) tax deductible (regardless of your AGI).  The downside: the expense lasts for the life of the loan, which is longer than PMI. 

By the way, in case you’re wondering just how much of a tax benefit your mortgage interest deduction is, check out Scott Burn’s Homeownership Tax Benefits Calculator, or contact your tax advisor!  In case you’re not sure how much equity you have in your home, consider your options. 

Zillow™ can be an entertaining research tool, but take care to consider how they get the information they use to render a ‘zestimate’.  If they are using local property tax records, realize that tax records are often inaccurate and always history.  How old is the history?  Who knows?  An appraiser typically won’t use any sales data that is older than 6 months.  It sometimes takes 6 months for online tax records to be updated!  If Zillow™ is within 10% of being on the mark 85% of the time, then they’re wrong 100% of the time, even with the best of intentions.  If you want to know your home’s value for sure, hire an appraiser.  The next best way is FREE and is to ask a REALTOR®

I’ve just sold a Single-family property in Colorado Springs. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me. The sold home is 4735 Crow Creek, which sold for full price in only 27 days!

The 2007 real estate market in Colorado Springs is off to a great start already!  Sign up for a monthly report on your neighborhood!  Neighborhood newsletters are currently available for Springs Ranch and Victoria Village.  New neighborhoods will be added based on popular demand.  Recieve a FREE Home Valuation on your home, via e-mail, by filling out the Free Home Value request form.  Your home could be worth more than you think, or less.  While inventories of listings are still higher than this time last year, demand is keeping up with new supply and prices are actually increasing slightly —unlike many other markets in the U.S. nowadays.