What's In Store for Military Howeowners?
Nationally, 2010 promises more opportunity for buyers and a far improved year for sellers. Buyers will continue to see very favorable home prices, historically low interest rates, and the extended tax credit for first time buyers, and many repeat buyers.
And for sellers, although we're still years from a full recovery of prices, inventory declined with the increased buyer activity, which clearly stabilized home prices and in some cases, resulted in appreciation. This reduced inventory also means a more balanced negotiation on the prices, too. In many areas, there are still a considerable number of future foreclosures that will slow recovery, but it should be better than 2008 and 2009.
But, the Fed announced the end to the Debt Purchase Program on April 1, 2010 with a clear hint that interest rates will jump immediately by x percent. This could increase the monthly payments for buyers and could slow home sales.
In a much needed reform, the new New Real Estate Settlement Procedures Act (RESPA) rules -- effective Jan.1, 2010 -- will provide more clarity and transparency in the loan process. Essentially, what the lender offers in the Good Faith Estimate (GFE) must match, with few exceptions, the actual settlement charges on the HUD 1 final settlement accounting form. We expect the learning curve and variations in interpretation by settlement companies and lenders to initially cause disruption in the process.
Here's a heads up on how this new procedure can really throw a wrench in the process:
Certain changes to the GFE can trigger a mandatory, non-waiverable, three-day disclosure period during which settlement can?t take place. For instance, if a buyer locks-in the interest rate a few days before settlement, the settlement could be postponed past the original settlement date. This could be very ugly with the movers sitting in the driveway of your new home and it could cost the buyers more than extra pizza! This could snowball to a major problem for the seller who may need the proceeds from the sale to settle on their new home. Litigation comes to mind.
VR SAM strongly encourages buyers in the first half of 2010 to plan their household goods shipment / move in for several days after settlement. Hey, it will give you time to paint. Likewise, we strongly encourage sellers to plan a subsequent settlement on their new home for several days after the settlement date on their existing home to allow for unanticipated glitches and settlement delays in the new process.
Regarding the extended tax credit, a credit for repeat home buyers (certain restrictions apply) of $6,500 was added to the first-time home purchasers -- a credit of $8,000. To get the credit, you must be under ratified contract by April 30 and settled by June 30, 2010. Be certain that this will create a backlog for both lenders and settlement companies as these dates approach, so the old early bird approach may benefit your bank account.
I have a friend who "bought smart and held" three homes throughout his 30-year Navy career. During that time he rented these homes to other military families who of course have an excellent reputation as responsible tenants. Now in retirement, he enjoys a very sizeable passive income from these rentals that are now mortgage free. Yes, I know that everyone is gun shy from the debacle of the past three years. But, when the "herd" is running in one direction, stop to consider the contrarian perspective. Is this a good time to buy smart and hold?