Rentals Heat Up

Economic uncertainty and the high numbers of foreclosures are causing rental properties to become a hot commodity.

Minneapolis vacancy rates were at an incredibly low 2.5% in Minneapolis in Q4 of 2011 while nationwide rents went up 0.4% in Q4 and have gone up around 2% for all 2011.

Investors including some that normally finance and build other types of buildings have jumped into the apartment building fray leading to some speculation of a pending oversupply.

Add to this the federal government with a glut of Fannie Mae and Freddie Mac foreclosures. Some are calling for the federal government to rent these homes rather than continue to sell them which is driving down prices.

Refinance Tips

Interest rates are at all time lows so it's a great time to think about refinancing.
I use a thumb-rule of 1% to determine if it makes sense to refi. If you can lower your interest rate by 1% or more, just do it providing you have at least 7 years remaining on your mortgage. It will typically cost around 3% of your new mortgage amount in closing costs to refinance so the pay-back period for a 1% reduction in interest is roughly 3 years.

How do you choose a mortgage product? (ARM, fixed rate, 10 yrs, 15 yrs, 30 yrs, ...) Talk with your loan officer - they're the experts, and you should also decide what your personal goals are.
Get out of debt quickly? A 15 year mortgage with slightly higher monthly payments but lower interest rate may be best.
Planning to remain in your home for under 10 years? An Adjustable Rate Mortgage (ARM) which remains fixed at an attractive interest rate for the 1st 3-7 years may be best or an FHA loan which is an assumable giving you a marketing edge over the competition when you sell may be best.

What if you owe more than the home is worth?
The federal goverment, as part of a legal settlement with the big five lenders: Ally Financial, Bank of America (Countrywide), Citigroup, Wells Fargo and JP Morgan Chase, has made re-financing available if your loan was originated prior to January 1, 2009 and is serviced by one of those lenders. There is also HARP2, a federal program available only if your loan is backed by Fannie Mae or Freddie Mac. To find out, you can call your lender or use the websites:
http://fanniemae.com/loanlookup/
www3.freddiemac.com/corporate/,

Before you refinance, it's a good idea to review your credit report - you can do this free of charge once each year by requesting a copy of your credit report from each of the big three credit agencies: Equifax, Transunion and Experian or you can request the report through AnnualCreditReport.com or by calling 877-322-8228.

Market Update

Interest rates remain at AMAZING levels (around 3.75% for a fixed 30 year FHA) and prices seem to have stabilized with inventory driving this bus. New listings are down 15% week over week from a year ago. This combined with sales being up 21% has led to a decrease in inventory of 28% so quite a bit fewer homes to choose from which we were starting to feel this winter. Shadow inventory and the economy are the unknown players here. If the economy and job market begin to soften, that could put a damper on sales and even out the supply-demand curve. Likewise, with new lending regulations causing speedier foreclosure to market times, we could see a slight but noticeable increase in the numbers of foreclosed properties coming for sale which could raise the supply, again evening out the supply-demand curve. Time will tell but regardless, the combination of amazing interest rates and low prices have created home affordability not seen in quite a few years.