3 Ways To Purchase Foreclosed Properties

The process of buying a foreclosed home is slightly different from the process of buying a non-foreclosure home.  If you want to invest in Minneapolis foreclosures, therefore, it is important to understand the different ways by which to purchase a foreclosed home.

There are three main ways to buy a foreclosed home.

Buying before the auction
Some delinquent homeowners may want to sell their homes before facing an actual foreclosure.In this instance, the homeowner, in agreement with the lender, agrees to sell the home for less than the amount owed on the mortgage.This is called a short sale. Short sales are "pre-foreclosures", of sorts. By broadening your home search to include short sales, you can identify homes that may be sold at a discount.

Buying at the auction
Another way by which you can invest in foreclosure homes is by buying the home at auction. From area to area, the legal requirements for the sale of a foreclosed home at auction may differ. If you plan to buy at auction, you'll want to be familiar with your area's customary judicial proceedings.

Buying after the auction
Buying after the auction means buying bank-owned properties. This can be the most lucrative and safest means of investing foreclosure properties. This is because lenders often reduce the sales prices of their home inventory in order to "sell it quickly". It can be expensive for banks to own foreclosed homes, and few banks are equipped for managing owned homes. Check with your local real estate agent to see what, if any, bank-owned homes are available for sale in your area.

The process of buying a distressed home is different from the process of buying a "traditional" one. Therefore, regardless of which path you follow to buy a foreclosed property, have an experienced real estate professional on your team.

Homebuilder Confidence Rises For 9th Straight Month

The National Association of Home Builders (NAHB) released its Housing Market Index (HMI), showing another monthly gain -- its ninth in a row.

The HMI -- a gauge of homebuilder confidence -- rose 1 point to 47 in December 2012, lifting the index to its highest levels since April 2006.

Readings under 50 indicate unfavorable housing conditions for builders. Readings over 50 signal "good" conditions. Coincidentally, the last time that the HMI read above 50 was April 2006, too.

The Housing Market Index is based on a survey which the NAHB sends to its members. The survey asks the nation's builders to rate the current housing market conditions.

In December, home builders reported gains in two of the three areas surveyed:

• Current Single-Family Sales: 51 (+2 from November 2012)
• Projected Single-Family Sales: 51 (-1 from November 2012)
• Buyer Foot Traffic: 36 (+1 from November 2012)

It's noteworthy that buyer foot traffic has climbed over nine straight months and is now at it's highest reported level in nearly 7 years. Low mortgage rates and rising home prices throughout Minneapolis have compelled today's renters and existing homeowners to consider their home buying options.

This was none more apparent that in the Northeast Region in which builder confidence grew twelve points to 42. The Midwest Region also showed a strong improvement, climbing 2 points to 53. The West and South regions fell slightly between November and December.

For today's buyers, rising builder confidence may be a signal that home prices are headed higher. Confident home sellers -- including the nation's builders -- are less likely to make price concessions into an improving market, or may be less likely to offer free upgrades to buyers.

Therefore, if you are in the market for a newly-built home, consider that you may get the best "deal" by acting sooner rather than later. Mortgage rates are rising and home prices are, too. Six months from now, your costs of homeownership may be higher.

Short Sales Outnumber Foreclosure Sales For Third Straight Quarter

Foreclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.

In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales -- also known as "short sales" -- climbed 22% on a year-over-year basis.

For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.

The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender's losses, and foreclosed properties be expensive to manage.

Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :

• Average sale price of a residential property in short sale : $191,025
• Average sale price of a residential property in foreclosure : $161,954

It's not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks. 

For homebuyers in Minnesota , the banking industry's shift toward short sales is welcome news.

Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they're getting faster and more efficient. This makes it "easier" for a buyer to buy a home in short sale.

However, don't buy a short sale without the help of an experienced, licensed real estate professional.

The negotiation process is different for a short sale than with a "traditional" home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.

What's Ahead For Mortgage Rates This Week : December 17, 2012

Mortgage bonds worsened last week, moving mortgage rates higher. Economic news was mostly positive and the Federal Open Market Committee (FOMC) changed some of Wall Street expectations for future monetary policy.

Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.32 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points plus closing costs. The average 15-year fixed rate mortgage rate was listed at 2.66 percent nationwide with an accompanying 0.6 discount points plus closing costs.

Both mortgage rates had climbed by week's end, however. Mortgage rates made their best levels Monday afternoon. Between Tuesday and Friday, mortgage rates in Plymouth climbed.

Also last week, the National Association of Homebuilders/First American Improving Markets Index (IMI) reported 201 improving metropolitan economies nationwide. This index uses data including local employment statistics and home values to determine whether an area's economy is "improving".

76 new areas were added to the IMI list in December as compared to November. The geographic diversity the newly-added markets suggests an overall improvement in the national economy.

Last week's major event, however, was the 2-day Federal Reserve meeting, which adjourned Wednesday.

The post-meeting press release after included the Fed's commitment to hold the Fed Funds Rate near zero percent where it's been since December 2008. However, the Fed announced a change to in its plans to raise the Fed Funds Rate from near-zero at a future date.

Previously, the Fed had said it would raise the Fed Funds Rate beginning in mid-2015. Now, the Fed says it will start to raise rates when the national unemployment rate reaches 6.5 percent.

This week, mortgage rates have a lot to move on including Housing Starts (Wednesday) and Existing Home Sales (Thursday) from the housing sector; Jobless Claims (Thursday) from the Labor Department; and a key inflation reading from the Department of Commerce. Each has the capability to move mortgage rates.

Markets will respond to Fiscal Cliff discussions, too.

Improving Market Index : Up To 201 Cities For December 2012

Last week's National Association of Home Builders/First American Improving Markets Index (IMI) brought positive news about U.S. housing markets and the broader U.S. economy, in general.

According to the IMI, there are now 201 U.S. markets which can be considered "improving".

To meet this standard, a local area economy must exhibit at least six consecutive months of improvement in terms of local employment, single-family housing permits and area home prices; and, at least six months must have passed since each of these readings were at their respective low points, called troughs.

The Improving Market Index added 76 metropolitan areas in December as compared to the month prior. 45 states are now represented on the list, in addition to the District of Columbia.

The cities deemed "improving" aren't limited to recent, high-profile hot spots such as Detroit, Michigan; and Phoenix, Arizona, either. Several of the newly-included areas for December were :

• Atlanta, Georgia
• Bloomfield, Illinois
• Ithaca, New York
• Riverside, California
• Seattle, Washington

The geographic diversity of this month's Improving Market Index suggests a nationwide economic recovery in progress. More jobs, a steady supply of available homes, plus rising home prices helps communities thrive.

Unfortunately, it may also mean less opportunity to buy homes as rock-bottom prices.

As sellers and home builders gain confidence in the economy, it may be more challenging for today's Plymouth buyers to get a "great deal".  In addition, an improving, post-recession economy will likely lead mortgage rates higher, robbing home buyers of their purchasing power.

Freddie Mac says that the average 30-year fixed rate mortgage rate is 3.32% nationwide. In a fully-recovered economy, that rate could be 5 percent or higher. The impact on monthly housing payments would be palpable.

The National Association of Homebuilders expects more markets to join the Improving Market Index list through 2013. Today's home buyers may want to lock in today's low rates before economic improvement leads mortgage rates higher.

Simple Explanation Of The Federal Reserve Statement (December 12 , 2012)

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the tenth consecutive meeting, the FOMC vote was nearly unanimous. Richmond Federal Reserve President Jeffrey Lacker was the lone dissenter in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that, since its last meeting in late-October, the U.S. economy has expanded "at a moderate pace" despite "weather-related disruptions". It also acknowledged that "strains in global financial markets" remain a threat to U.S. economic growth.

This comment is in direct reference to the Eurozone, its sovereign debt concerns, and its nation's economies.

The Fed included the following observations in its statement, too :

1. Growth in employment is expanding but unemployment is elevated
2. Inflation pressures are stable, and below the Fed's target range of 2%
3. Business spending on equipment and structures has slowed

In addressing the housing market, the Fed said that there has been "further signs" of improvement and the group re-affirmed its commitment to the $40-billion monthly QE3 bond buying program.

QE3 is meant to suppress U.S. mortgage rates from rising too high, too quickly.

Lastly, the Federal Reserve announced an explicit economic target for when it will begin to consider raising the Fed Funds Rate from its current target range near 0.000%. When the national Unemployment Rate reaches 6.5%, the Fed said, it will likely move to start raising its benchmark borrowing rate. 

Previously, the Fed had provided only a date-based target of mid-2015.

The 6.5% Unemployment Rate target may be pre-empted by rising inflation rates. The Fed does not expect price pressures to mount prior to jobless rates dropping from the current 7.7% levels, however.

Mortgage rates in Plymouth are rising post-FOMC announcement. Many lenders raised mortgage rates mid-day Wednesday in response to the Fed's statement. 

The FOMC's next scheduled meeting is a two-day event scheduled for January 29-30, 2013.

Mortgage Rates Rising On 26 Straight Months Of Jobs Growth

According to the Bureau of Labor Statistics (BLS) and its November 2012 Non-Farm Payrolls report, the U.S. economy added 146,000 net new jobs last month.

November's job growth exceeded Wall Street expectations of 90,000 jobs added for the month, and was a small increase from October's 138,000 jobs added.

Three job sectors in which employment rose in November include :

• Retail : 58,000 jobs added
• Business and Professional Services : 43,000 jobs added
• Healthcare : 20,000 jobs added

It appears that the effects of Hurricane Sandy were muted, although they may be temporarily overshadowed by seasonal factors.

After losing more than 7 million jobs in 2008 and 2009, the U.S. economy has since recovered more than 4.6 million jobs. Job growth has reached 26 consecutive months and is expected to remain consistent through 2013.

In addition, the BLS report showed the national unemployment rate dropping 0.2 percentage points in November to 7.7 percent. This is the lowest Unemployment Rate since January 2009.

Growing employment is a strong indicator of economic expansion, which traditionally leads to rising mortgage rates.

When mortgage people work, more income is earned and more taxes are paid. This often leads to higher levels of both consumer spending and government spending, both of which spur additional hiring and economic expansion.

When the economy is in expansion, equity markets often gain and bond markets often lose. When bond markets are in retreat, mortgage rates in Maple Grove rise. This relationship takes on added importance this week with the Federal Reserve's Federal Open Market Committee (FOMC) scheduled to adjourn.

The Non-Farm Payrolls Report is a top economic indicator and is a key part of economic and policy decision made Capitol Hill and within the Federal Reserve. As one example, recent Federal Reserve stimulus has been specifically aimed at lowering the national Unemployment Rate. As the economy improves and as jobs are regained, the Fed may be less likely to support low rates.

If you're floating a mortgage rate, consider locking in. Rates can't stay low forever.