August 2007
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In this Issue:
Foreclosure Filings Skyrocket
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Foreclosure Filings Skyrocket
Many overstretched borrowers have been caught between rising interest rates and falling home prices. The Federal Reserve has cited the faltering housing market as the biggest risk to economic growth.
If the current pace were to continue, foreclosure filings would surpass 2 million by the end of the year, which would represent a year-over-year increase of more than 65 percent!
The foreclosure spikes in some of the more prosperous states with solid economies and job growth is a continuing departure from past delinquency patterns that have followed mass job losses and plant closings in industrial states.
The problem in some of the hotter markets stem in large part from a speculative frenzy that sent home prices through the roof. Homeowner were betting they could buy a house and "flip it" quickly to make a profit. But when prices fell, they were stuck with properties they couldn't move.
When the housing market was hot (not all that long ago), rising home prices also enabled strapped home owners to tap into their increased equity to keep pace with their debt obligations. They could opt for a home equity loan or a home equity line of credit for quick cash, or refinance their home for a higher amount and receive cash back.
When home prices fell, owners who had already taken out all the equity in their homes no longer had a ready source of extra cash, and many fell behind on their mortgage payments and lenders moved to collect. Foreclosures started to spike and subprime lenders, in particular, began to experience many more delinquencies.
Worries about credit quality and homeowner defaults have spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans. American Home Mortgage Investment Corp. says it can no longer fund home loans and may liquidate assets, putting its survival in doubt.
So foreclosures are not only hitting borrowers, but lenders are feeling the pinch as well.
What this all boils down to is, too many people carrying too much debt, and when the debts overtake their monthly income, something (or someone) doesn't get paid at the end of the month. Unfortunately, many are losing their homes, and perhaps their biggest investment, because of it.
Don't become another foreclosure statistic. Do something about your debt situation now before it is too late. Next month in this newsletter, we will introduce you to a program that can help you pay off all of your debt, even your mortgage, within 10 years, even if you just obtained your mortgage yesterday. Stay tuned for more next month!
Be An Intelligent Home Buyer
As most U.S. real estate markets shift in favor of the buyer, it is becoming ever more
One thing that is a direct result of this change in the industry is the fact that buyers now have many more options available to them and need to be a bit more intelligent and educated so they can spot the real deals when they come up. This should be a refreshing change to those who have been in the home market for some time and have yet to find that perfect home. Basically this has become the perfect time to buy a home.
So how can you be ready to grab that ideal home when it comes along?
The first step in any home purchase is to make sure your financial picture is in focus. Find out your credit score, repair it if necessary and get pre-approved for a mortgage. Then you can work with your real estate agent to find the homes that suit all your needs without putting yourself in over your head.
When you find an area that seems to suit you, try looking through all the information available on the homes in that area. Whether they are in your price range or not, knowing what they are offering for what price can help you better gauge prices of homes you can afford. Remember, homes are usually priced according to comparable homes for sale in the area so if you can evaluate the other homes that are for sale you should be better equipped to recognize the deals when they come along.
How Much Insurance is Enough?
We have covered this subject on several occasions before, but as we roll further into the Atlantic hurricane season, it's a subject we feel you can never be too educated on.
When deciding on the appropriate amount of homeowner’s
Your homeowner’s insurance coverage policy will be your principal policy in regards to destruction caused to your home. This policy (in most cases) will provide for damage to your home due to fire, windstorms, hail and explosions as well as vandalism and theft. When your home becomes uninhabitable due to damage covered by your policy your homeowner’s insurance will also provide the necessary funds for you and your family to live elsewhere while your home is under construction or repair.
You may want to check with your insurance agent to find out for sure what losses are not covered by your homeowner’s insurance. Some states may grant separate state-sponsored catastrophe funds like the windpool program which covers damage caused by tropical storms, hurricanes, wind and hail. Because this coverage is provided by the state some homeowner’s policies may eliminate coverage and refer you to the windpool to obtain protection against wind-related damages. Therefore, when buying a home in high-risk hurricane states such as Florida, Georgia, South Carolina, North Carolina, Alabama, Louisiana, Mississippi, and Texas you may want to consider purchasing windstorm insurance.
Another disaster that generally is not covered in most homeowner’s insurance policies is flood insurance. Flood insurance is normally available through the National Flood Insurance Program governed by the Federal Emergency Management Agency. This covers destruction caused due to high waters or flash floods. So basically if a flash flood causes water to penetrate your residence, flood insurance as opposed to homeowner’s insurance will cover your loss. If you don’t know whether or not your home is located in a flood risk area you may want to inquire with your insurance agent and adjust your policy accordingly. Over the past few years, areas that are tagged as NOT being in flood zones, have experienced flooding, so investing in a federally backed flood insurance policy is usually a wise investment.
The burden of reviewing and updating a homeowner’s insurance policy lies on the homeowner. It is important to make sure you do this periodically to ensure that you maintain adequate coverage. Remain conscience of various improvements you make to your home whether you have recently remodeled or simply purchased new furniture or appliances. You must also remain aware of inflation and rises in property value. A home that was purchased for $150,000 in 1987 may be worth $250,000 (or more) in 2007.
It is also wise to consider the year your home was built and the cost of building materials during that time. If your home was built in the 1980s, does the building code today allow for the same construction standards? Don’t get underpaid in the event of a loss because you underestimated the value of your home.
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U.S. home foreclosure filings rose 58 percent in the first six months of the year and could surpass 2 million this year as the housing market continues to deteriorate.
necessary to know your game before buying a home. In years past, sellers controlled the market and everyone was seeing rapid jumps in price, bidding wars and some buyers on their heels trying to find a home that was appropriate and affordable. As the market has become more favorable to buyers we are seeing the result of that turn, sellers who could once command almost any asking price are stumped as to why their home is not selling within a week or two. This has naturally caused many industry insiders to proclaim that the "bottom has fallen out of the real estate market!" This is not really the case. What we are seeing is more of an adjustment to reflect the current state of affairs.
insurance coverage you must first determine the projected replacement cost of your home. Then you must choose the coverage amount that suits your needs best. You may want to choose a coverage amount that is comparable to the estimated replacement cost. You may want to consider the benefits of having more than enough coverage as opposed to “just enough”, seeing as how it is almost impossible to predict the future and in these changing times what may have never happened in your neighborhood before could be the phenomenon that happens tomorrow.
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