Fed’s Mortgage Purchase Near End

The Federal Reserve announced that it will end the purchase program of mortgage backed securities as scheduled this month. I give this three hips and a giant hooray! After providing about $1.25 trillion in economic support, ending this program will force the private sector markets to fill the gap that the Fed has left. And I have all of the confidence in the world that they will do so. However, they will likely not do so at the same returns that the Fed was seeking. Rather, I suspect, the private sector will demand greater yield on their investment than did the US Government.

So what does this mean to the “average Joe” trying to buy a home? I suspect it will mean slightly higher interest rates. If the secondary markets begin demanding a higher return, it is going to force mortgage originators to write at higher rates. I don’t think this rate will have to be dramatically higher, but could be in the range of 500 basis points (0.5 percent). That’s a tough pill to swallow if you’re right on the edge of taking out a loan. If you have the option, I would recommend locking a rate quickly.

For the broader market, I think this is a promising move, thus my cheers at the beginning of this post. If the Fed is willing to cease this program, it must have confidence that the private sector will step forward to continue the function. Lacking that confidence, the program would have been extended to ensure that credit markets remained liquid. I take this as a very positive sign that the mortgage markets are healing.

It will be very interesting to see what happens with the first time home buyer tax credit at the end of April. I can feel the demand that this program is generating in the market. Homes that are in the range of both size and price to be attractive to first time home buyers are seeing significantly more demand than larger, more expensive homes. So, a final word of encouragement to those who own small homes and have been thinking about moving up – do it now!

FHA Lending Standards Tighten

FHA logo
Click logo for FHA homepage

Beginning in the spring of 2010 and continuing into the summer, The Federal housing Administration will be tightening the lending policies of one of the most highly sought mortgage loans in the country.  FHA insured loans currently comprise about 30% of all new mortgages originated in the United States, up from only 3% just 3 years ago, cites a recent USA Today article.


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So in a nutshell, here are some of the more relevant changes:

  • Credit Scores increase – to qualify for a 3.5 percent downpayment, the hallmark characteristic of an FHA loan, borrowers must have a credit score of at least 580.  Failing to achieve the 580 mark will not eliminate the possibly of obtaining an FHA loan, but it will increase the required downpayment to 10 percent.
  • The limit on Seller contributions toward closing costs, currently 6 percent of the total sale (a amount generally sufficient to cover most to all of the buyers closing costs), will decrease to 3 percent.  This is a return to a previous standard, and still offers substantial assistance to Buyers, but will in the end require the Buyer to show up with more cash at the closing table in the future than is currently needed.  The purpose of this change is to help contain appraisal values.  When Seller contributions are large, the value of the home must appraise for the sales price of the home plus the Seller contributions.  By reducing the amount of the Seller contributions, the FHA hopes that appraisals will begin to more accurately reflect market conditions.
  • The amount of prepaid mortgage insurance will rise to 2.25 percent, up from the current level of 1.75 percent.

So what’s the desired point behind all of these changes?

The quick answer is that these changes are the next attempt by the FHA to help stabilize the housing market in the United States.  “These changes are overdue,” said David Stevens, the FHA commissioner, speaking to reporters. “FHA has a responsibility to be fiscally sound” and to provide homeowners with “financing that’s going to give them the ability to live in their home long term.”

The Wall Street Journal also reports that the FHA is also announcing a series of measures to boost its ability to police lenders that originate loans with FHA backing, and the agency will ask Congress for greater authority to take action against lenders who originate loans with high rates of default.

Because It Feels Good

I received the following by e-mail. I thought I would share…



A quiz to see who is important to you and why…

Snoopy and Scouts

You don’t have to actually answer the questions. Just ponder on them. Just read this post straight through, and you’ll get the point.


  1. Name the five wealthiest people in the world.

  2. Name the last five Heisman trophy winners.

  3. Name the last five winners of the Miss America pageant.

  4. Name ten people who have won the Nobel or Pulitzer Prize.

  5. Name the last half dozen Academy Award winners for best actor and actress…

  6. Name the last decade’s worth of World Series winners.

Charlie Brown on the dock

How’d you do??


The point is, none of us remember the headliners of yesterday. These are no second-rate achievers… They are the best in their fields. But the applause dies. Awards tarnish. Achievements are forgotten. Accolades and certificates are buried with their owners.



Snoopy the artist

Here’s another quiz – See how you do on this…


  1. List a few teachers who aided your journey through school.

  2. Name three friends who have helped you through a difficult time.

  3. Name five people who have taught you something worthwhile.

  4. Think of a few people who have made you feel appreciated and special!

  5. Think of five people you enjoy spending time with.

Peanuts gang outside a house

Easier?




The Lesson

The people who make a difference in your life are not the ones with the most credentials.. the most money… or the most awards. They simply are the ones who care the most!



Peanuts Dance

If you care to, share this with those people who have made a difference in your life, like I just did.

The following quote is from Charles Schulz…

“Don’t worry about the world coming to an end today.

It’s already tomorrow in Australia !”



Proud Snoopy

Though this has little to do with real estate, it has everything to do with life! And while I spend a lot of time in the real estate world, my true vocation is fatherhood. If I do my job as a father, my children will understand this message.

May God bless and protect all those you care for, and all those who have cared for you.

Winspear Opera House Is Nothing Short of Awesome

Winspear Interior
Magnificent Interior of the Winspear Opera House, Dallas, TX

Okay, so I’m a little slow to get excited by the latest architectural masterpiece to be erected in Dallas. Fact is, I have never understood opera as an art form or why it has such a tremendous following. So when the buzz surrounding the new Winspear Opera House began to sound, I placed all the hype on ignore. Wow, did I ever miss something great!

My wife is an enormous fan of the theater, so we celebrated our 22nd wedding anniversary by attending South Pacific at the Winspear Opera House. The play was fabulous, the cast stellar, and the physical surroundings were absolutely extraordinary!! The exterior it is an impressive contemporary structure, but for my taste, it was the interior that took my breath away. The stacked vertical balconies are impressive and functional – there is no bad seat in this house. And the retractable chandelier is absolutely beautiful.

Arch Daily states “The new Winspear Opera House in Dallas redefines the essence of an opera house for the twenty first century, breaking down barriers to make opera more accessible for a wider audience. Responding to the Dallas climate, a generous solar canopy extends from the building, revealing below a fully glazed sixty foot high lobby. This establishes a direct relationship between inside and outside, enhancing transparency. Beneath the canopy, which forms an integral part of the environmental strategy – a shaded pedestrian plaza creates a major new public space for Dallas, defined by the masterplan for the Performing Arts District.”

If you have the opportunity to attend any performance at the Winspear Opera House, I strongly encourage you to take advantage of the opportunity.

Strong First Time Home Sales Make This a Move Up Market!

Over the course of the last year, I have noticed that my personal sales history shows that smaller homes are selling much faster than larger homes.  I have seen a number of 3 bedroom, 2 bath homes sell in less than 30 days, even in this austere market.  And these homes are selling for strong prices, several having appreciated in the last year.  One of the small homes that I sold in 2009 set the mark for the highest price per square foot in its Plano neighborhood.

Across the nation, the strength of smaller size homes seems to be consistent.  A USA Today article published this morning addresses this topic directly.  The article quotes statistics from the National Association of Home Builders noting that this trend has not been overlooked by those who bring new product to the market.  The median square footage of homes has dropped about 9%, from a peak of 2300 sq ft in the third quarter of 2006 to 2100 sq ft in the same period of 2009.

I believe there are a couple of factors that cause this trend to occur.  First, the general strength of the economy has everyone scrutinizing expenditures, and people are beginning to realize that they can survive on less.  The thought pattern goes something like this “We’d love to have the media room, but do I really need it?  Perhaps now is not the time – we’ll get that in the next house.”  Second, the strongest segment of the market is in first time home buyers.  People are realizing that given price levels, interest rates and tax incentives, it make sense to buy a home rather than rent for those who can qualify for a mortgage.  First time home buyers have not built up equity over the years and usually start by purchasing smaller homes.  The combination of these occurrences leads to smaller homes outperforming larger homes in the current market.

So what’s the moral of the story?  If you have been in your first home for the last several years, and are thinking that perhaps now is the time to move up, you couldn’t be more right.  Your smaller starter home will yield the best price in the market, and the home that you purchase will likely be discounted from its level of the past couple of years.  The market is taking shape to make now the best time to step into a larger home.

A $2 Million Pizza??

The Plano City Council is set to vote Monday on a $2 million economic incentive package to woo Pizza Hut from its current Addison headquarters location to a new facility to be developed in Plano.  The new development would be part of the Legacy business park in West Plano.

Pizza Hut Logo

Time for a move?

In my opinion, this is a great play by the city of Plano.  Plano has done an exceptional job of attracting corporate headquarters to its fair city, and this is another shining opportunity.  The Pizza Hut relocation comes complete with approximately 450 high paying jobs and will provide a boost to the Plano economy.

Even though the relocation distance from their current location on the Dallas North Tollway in Addison, the move to Plano should serve as a nice stimulus to property values in West Plano.  The additional jobs will create additional residential housing demand in the neighborhoods in close proximity to the Legacy Business Park.  The move will not happen immediately.  The current lease on the Pizza Hut headquarters expires in 2010, and Pizza Hut will have to ready its new facility before making the move.

Kudos to the city of Plano who in the past year has attracted approximately 20 companies and over 4,500 new jobs in the midst of the largest economic downturn our country has faced in many decades.  No recession in Plano – keep gowing!!

For more information on this story, please see the Dallas Business Journal article – Pizza Hut Incentives on Plano’s Agenda.

Something for the Rest of Us!! – Home Buyer Tax Credit Update

Did you notice the lack of the words “First Time” in the title.  Here’s a little something for those of us who already own a piece of the American dream.  If last year’s tax credit was enough to get first time buyers into the market, let’s hope that this stimulates things even more.

Congress and President Obama have seen fit to extend the Home Buyer Tax Credit into 2010, and they have significantly increased the scope of the incentive.  It is now available to anyone homeowner who meets certain income guidelines and sells their home between Nov 7, 2009 and May 31, 2010.  And the definition of sell is now translated as enter into a contract to sell by May 31, 2010 and close by Jul 31, 2010.

Homebuyer Tax Credit — Revised November 2009

FEATURE Jan. 1 – Nov. 30, 2009
Rules As Enacted
February 2009
Nov. 7 – Apr. 30, 2010
Rules As Enacted
November 2009
First-time Buyer – Amount of Credit $8,000 ($4,000 married filing separate) $8,000 ($4,000 married filing separate)
First-time Buyer – Definition for Eligibility May not have had an interest in a principal residence for 3 years prior to purchase Same
Current Homeowner – Amount of Credit No Provision $6,500 ($3,250 married filing separate)
Effective Date – Current Owner No Provision November 7, 2009
Current Homeowner – Definition for Eligibility No Provision Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years
Termination of Credit Purchases after November 30, 2009.
(Becomes April 30, 2010 on November 7, 2009)
Purchases after April 30, 2010
Binding Contract Rule None So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close
Income Limits (Note: Increased income limits are effective as of November 7, 2009) $75,000 – single
$150,000 – married
Additional $20,000 phase out
$125,000 – single
$225,000 – married
Additional $20,000 phase out
Limitation on Cost of Purchased Home None $800,000
November 7, 2009
Purchase by a Dependent No Provision Ineligible
November 7, 2009
Anti-fraud Rule None Purchaser must attach documentation of purchase to tax return

Source: National Association of Realtors

 

The tax credit to existing homeowners is up to $6,500, so if you were thinking about upgrading the homestead, now is definitely the time to act. Low interest rates, great buys available in the market, and a tax credit to boot – it’s the “perfect storm” for making the move to the larger house, or the incentive to finally downsize into the cozy home, depending on your vantage point of life.

In upcoming posts, I’ll examine some financial strategies for accessing this tax credit during the course of your transaction. Stay tuned…

Did the First Time Home Buyer Tax Credit Work?

As 2009 draws to a close, I am wondering how well the first time home buyer tax credit worked this year. Rather than simply speculate, I will look to market numbers to answer the question. According to the National Association of Realtors (NAR), first time home buyers accounted for 47 percent of all real estate transactions that were completed thus far in 2009. That figure represents an all time high percentage of first time home buyers, eclipsing the mark of 41 percent that was seen last year and the previous record high of 44 percent in 1991.

Money Picture
Up to $8000 coming back to First Time Home Buyers

Paul Bishop, NAR Vice President of Research notes, “It’s interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession.” Well, I’m all for pulling out of the recession, so I sure hope that an upward trend of home sales continues in 2010.

In addition to the tax credit received by first time home buyers in 2009, there were additional factors that contributed to the increase in the number of first time home buyers. Interest rates were phenomenally low throughout the year. I would hope that they remain low through the next year, but prolonged periods of interest rates this low have not often been observed in our economic history. Additionally, home prices in many areas fell during the past year. So, bottom line, there was a product “on sale” with very cheap financing that someone (Uncle Sam) was paying the consumer to buy. Sounds like a good recipe for success. To those first time home buyers who purchased a home in 2009, congratulations! To find out if, and how much, tax credit you received, click here.

First Time Home Buyer

Although it may seem counter-intuitive, I believe that now is an excellent time for first time home buyers in Dallas to enter the market. Many entry level homes are available at great prices in Dallas, especially if you are a first time home buyer that can do a few repairs. The number of foreclosure properties in Dallas is increasing, but these properties frequently come with a few warts. Given that the last occupant could not afford the mortgage, it is likely that they could not afford to keep up with repairs either. However, with a little TLC, Dallas homes can be spectacular again. They are all at a discount price for first time home buyers in Dallas.

Dream House Sketch
Live Your Dreams!!

So how do you go about buying a home in Dallas as a first time home buyer? How do you know if you are getting a good deal? How do you get it financed? How does the closing process actually work? How do I obtain good advice when being a first time home buyer? All of these are great questions, and the answer to most of them is “don’t do what I did when I was a first time home buyer in Dallas.” Here’s my story…

Young and relatively new to Dallas, I was ready to be a first time home buyer. A US Navy officer at the time, I knew that I could obtain financing through the VA and have little out of pocket cost. I walked into a local real estate office in and announced that I was ready to be a first time home buyer in Dallas. I was soon signing a long term representation agreement with an agent that turned out not to know very much. It was up to me to figure things out, and I made some rather large mistakes (bought a house about 300 yards from the Dallas county line. Had I crossed over the line, taxes and car insurance would have been significantly cheaper).

So here are my recommendations to any first time home buyers . First, work with a seasoned agent or broker that has years rather than minutes of experience about Dallas real estate. Get to know them before signing a long term agreement, and then only sign an agreement if you have a way out. Don’t get yourself tied up for six months. Good agents will always have clauses that will release you from the agreement. Also, if you are a first time home buyer in Dallas make sure that you really trust the person you are working with. Watch the way that they present information and ask questions until you can determine whether or not they seem knowledgeable and trustworthy. If you can get a reference from a friend, do so. If the references you use are provided by the agent, ask them hard questions.

Second, if you are a first time home buyer in Dallas get yourself qualified for a mortgage before you start a serious search. This will let you know what you can afford. No sense looking at $750,000 homes if you only qualify for a $200,000 mortgage as a first time home buyer. When it comes time to make an offer, you are going to have to prove to the seller that you can obtain financing before they will accept the offer. Going through the qualification process early as a first time home buyer in Dallas will help throughout the process.

Finally, think about the things that are really important to your life, and find a home near them. Being a first time home buyer, I purchased in the outer Dallas suburbs, but my life never moved out there. All of our friends and social events were in Dallas. Being a first time home buyer, I could have afforded to pay a higher mortgage in exchange for the fuel and wear and tear that I put on my cars.

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