We have seen the spring market heat up in all three counties. Spring always seems to bring the buyers out of winter hibernation; however, this year spring buyers we able to also take advantage of interest rates at an all time low and, for first time home buyers a $8000 tax credit as an extra incentive.

As the interest rates started to decline from its high at the beginning of the year, hitting an all time low at the beginning of May ‘09, the Long Island Real Estate market has experienced  an increase in buyer activity. Ever since that low interest rates have skyrocketed almost 1 full point in less the 30 days. As interest rates increase buyers are either forced out of the market or have to buy homes at lower sales prices.

Interest rates have a direct effect on the value of real estate as I discussed in an earlier post ( Permanent Link to What Causes Real Estate to Appreciate- ) that a one percent increase in the interest rate could affect the value of a property by as much as 10%. The good news is it looks like interest rates are falling again.

PMI’S May 2009 analysis of economic, housing, and mortgage market conditions

Click Here To View Report

Making Home Affordable is part of President Obama’s comprehensive strategy to get the housing market back on track. Through the Making Home Affordable Program, up to 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

Click Here For Q & A’s

Click Here For Website

If all works as drawn, a mortgage rescue plan unveiled by the federal government last week will help millions of homeowners avoid foreclosure, and millions more could see a reduction in their monthly payments. For those who may need help, here’s an outline of both components of the “Making Home Affordable” plan and some points of advice to consider before calling your mortgage company.

Be persistent

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Trying to jolt a lethargic housing market, the Town of Babylon announced yesterday it will give middle-income families a $15,000 down payment match toward the purchase of their first home.

Those who earn 81 to 120 percent of the area’s median income will qualify for the program. For example, a single buyer can make up to $81,550 and a family of four up to $116,500, Supervisor Steve Bellone said. The home must be purchased within the town, and while the program is open to all of Long Island, priority will be given to those who are already town residents.

“We’re not going to get out of this [economic] crisis without stabilizing and fixing the part that was the source of this crisis and that is our real estate market,” he said. “[This program] is intended for us to do our part in helping to stabilize our housing market here and hopefully help move it into a positive direction.”

The $15,000 payments will come from a revolving fund that uses money from the town’s affordable housing trust fund.

Developers who do not set aside 20 percent of their units for affordable housing pay into this fund. The town initially will use $1.05 million to assist 70 families, Bellone said.

The money must be repaid, he said, when the home is either sold or refinanced. Home buyers must also take part in a one-time mortgage counseling session with the Long Island Housing Partnership so they understand home ownership.

“This is not a handout, this is a help up,” Bellone said. “People will not be put into homes if they’re not able to sustain those homes.”

Purchased homes must undergo an energy audit as part of the town’s Green Long Island Homes program, which updates homes’ energy efficiency.

Peter Elkowitz, president of the Long Island Housing Partnership, called the program unique because most HUD-funded programs only provide housing assistance to families who earn 80 percent or less of the area’s median income. Under such guidelines, a family of four could not exceed an income of $77,700. Elkowitz said several families who came into his office in recent months did not meet the HUD income guidelines but would meet Babylon’s new guidelines.

“This is the first down payment assistance program that goes that high,” he said of the town’s cap of 120 percent of median income. “That’s a real number for a family of four.”

Phil Weiden of the Long Island Board of Realtors said there are 1,336 homes for sale in the town and the median selling price is $359,000. He said he hopes Babylon’s program paves the path “for other towns across Long Island to come up with their own version of what they can do.”

Buyer qualifications

Applicants to Babylon’s housing assistance program for middle-income families must:

Be HUD-defined first-time home buyers.

Have a total household income between 81 and 120 percent of area median income – from $77,701 to $116,500 for a family of four. Occupy purchased home as a principal residence.

Not be in contract to purchase before the start of the program (March 2).

Contribute $15,000 toward the down payment.

Buy a home in Babylon town for up to $396,150.

Participate in the Long Island Green Homes Program, which updates homes’ energy efficiency, within six months of purchase.

Attend a one-time mortgage counseling session with the Long Island Housing Partnership.

For additional details contact:
Coldwell Banker Residential Brokerage of Babylon at 631-422-5511 and ask about the Babylon Down Payment Match Program.

Source: NEWSDAY.COM BY DENISE M. BONILLA
http://www.newsday.com/business/ny-lihous056058093mar05,0,3361743.story

I am glad to see the filings of Lis Pendens has slowed down, I am not sure if this is because there are less mortgages going delinquent or due to morgagee’s making a greater effort to work out loan modifications with the mortgagor.

Factors that influence real estate values:

• Interest Rates
• Income
• Insurance Rates
• Property Taxes
• Financing
• Supply
• Demand

Interest Rates:
A one percent change in the mortgage financing rate can change the value of real estate by as much as 10%

A $300,000 mortgage financed at 5% for 30 years costs 1610.46 (Principle and interest)

So a monthly mortgage payment of 1610.46 at 6% for 30 years gives you a mortgage of $268,611.22 or 10% less.

Income:
I think that is self explanatory, as the average income goes up the buyer can afford more of a mortgage payment. The opposite is true if income goes down or the cost of living increases faster then the median income.

Insurance:
A large increase in insurance premiums will take away mortgage buying power from the purchasers, like we have seen with waterfront properties. Now if by chance insurance premiums go down it would have the reverse effect… but don’t hold your breath.

Taxes:
Acts the same as insurance, increases in taxes reduce the mortgage buying power of a purchaser… again don’t hold your breath.

Financing:
Banks being more liberal with there lending policies will cause prices to increase, as with credit scores (which will bring more buyers into the market creating a higher demand) and qualifying ratios (which will allow buyers to borrow more with the same income). Both of these will cause property values to go up but with disastrous consequences.

The tightening of these policies will have the opposite effect, which the market is currently experiencing.

Supply:
An over supply of homes (which is considered when there is more then 6 months of inventory on the market) will allow buyers not to push their affordability and houses will flatten or depreciate.

Demand:
Will cause real estate to appreciate at healthy rates when it is caused any combination of the following: a stable or growing economy, affordable housing, increases in household income, favorable or stable interest rates and financing availability. Recently (2002 – 2006) we have witnessed demand increase by the lowering of lending standards with is un-healthy.

What causes a healthy appreciation of real estate values?

Healthy appreciation of real estate is really caused by 2 elements:

• Interest Rates
• Income

The price of the home is determined by what the buyer can afford!

Allowing the buyer to afford more by changing the qualifying ratios and lowering credit rating standards is not true appreciation of real estate values. These practices caused the un-healthy real estate appreciation that occurred between 2002 & 2006.

The subprime bill will help save thousands of New Yorkers from losing their homes. Data from the New York State Banking Department shows that approximately one in 200 New York homes is in the foreclosure process. Some areas of New York – such as Queens, Brooklyn and Long Island – are being disproportionately impacted.

The immediate focus of the bill is on existing homeowners facing foreclosure:

The bill requires lenders to send a pre-foreclosure notice to borrowers at least 90 days before foreclosure proceedings may be initiated. This will encourage homeowners to seek help prior to the initiation of foreclosure proceedings. The bill would also require lenders to list in the notice government approved housing counselors serving the borrower’s area.
The bill establishes a mandatory settlement conference for foreclosure proceedings involving homeowners with certain subprime loans. For homeowners who cannot afford an attorney, the court under certain circumstances, may appoint one.

Though this sounds good I have a couple of thoughts and concerns:

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