Everyone is asking around Lancaster County and Central Pennsylvania – what’s going to happen with home prices, and when will we see the “good times” for sellers? It all comes down to, would you believe it, economics…

Supply and demand. Demand and supply.

Let’s pretend the home market is at a certain level of activity – prices and supply of homes for sale. Now, something happens to change the level of buyer activity (rates dropping for mortgages, silly tax credits, etc) and homes begin to sell. Now, buyers become a bit frantic and sellers (and realtors) sense this and price start rising. Multiple offers, same-day sales, overall a sense of craziness. Sound familiar? That was 2003 -2007 in a nutshell.

Now, something happens to the market (say, a crash?) that puts a damper on buyer activity. All of a sudden there are “too many” homes on the market and the prices are still trying to go up, but the buyers are not playing that game (neither are the appraisers for the banks, BTW). As the number of signs in yards grows, the sellers are the ones who get frantic.

Finally, sellers give up and start lowering their prices to get the home sold and move on. Or, they default for whatever reason and the distressed property sells for a cut rate. Now the “race to the bottom” of the real estate cycle has begun.

Lancaster PA home sales are in this last phase now. Where is the bottom? No one can say for sure but I predict prices will have to fall another 10% to get close to a “reset” point in the market here (prices have already fallen about 8-10% on average). Obviously, good economic news and job creation through small business expansions will be a huge factor in resetting the market.

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(c) 2011 Jeff Geoghan

Jeremy discussed how, by paying just $200 extra a month, you can cut your payoff time nearly in half on a 30 year $120,000 mortgage at 5% interest.  In fact, he points out how that $200 really is a great investment at 5% locked in for the life of the loan.

Any of my Lancaster PA real estate clients would benefit from a serious look at paying even a little extra on their mortgage each month.  If you are interested in how to get started, reach out to Jeremy at Jeremy@barefinancial.com and he’ll get you on the right track.

Questions? Comment?  Just want to say hi? Email me at jeff@yourlancasterhome.com

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(c) 2011 Jeff Geoghan

Today I’m in Denver, PA at the offices of Fulton Mortgage Company speaking with manager Gary Seidel about what mortgage reps actually do, and why it’s so important to talk to one early on in your home search.

Gary points out that mortgage reps have a critical role in getting you the house of your dreams:

1) The mortgage rep pulls your credit report and review your credit history & scores. This is an important discussion, since most people have a somewhat inflated view of their credit worthiness and often some corrective action is needed to get ready for a mortgage.

2) The mortgage rep works with you to get your ideal payment and savings numbers, then applies his knowledge of the various mortgage products (FHA, Conventional, RHS and others) to figure out which product will work best for your needs. Then he works up an estimate of costs that is so critical to make you comfortable with the buying decision.

3) The mortgage rep is on top of the rapidly changing mortgage market, espcially important today in 2011 as government guidelines and regulations are constantly afftecting interest rates, tax questions and many other factors that will keep your plan up to date.

As I say so often, it’s very important to get your mortgage plans in place EARLY – no mortgage, no house. Nobody wins when a prospective buyer overestimates their ability to afford a home and ends up frustrated. If you’re thinking of buying a home, I encourage you to reach out to Gary at 717-629-7257 (cell) or gseidel@fultonmortgagecompany.com today.

Questions about buying a home in Lancaster, PA? I’d love to hear from you at jeff@yourlancasterhome.com or by commenting below. Hope you’ve enjoyed this episode of yourlancsterhomeTV!

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In today’s episode I’m mentioning a phenomena in real estate – how potential home buyers get it backwards.

Quite often, buyers first get excited by homes they find online or by driving by a sign somewhere. This may go on for some time, until they decide to contact a real estate agent to set up a showing. However, they have neglected to properly research their finances and ability to purchase the home they want. Once I meet with them, either at a home or my office, the first question I ask is if they have a prequalification letter and/or have done homework on the financing.

Not knowing your financial picture thoroughly can lead to frustration, especially if you find your heart is set on a certain home that ends up being financially out of reach. Trust me, this is not an uncommon phenomena. The good news is if you’ve done your homework up front you can OBJECTIVELY confront your homebuying scenario rather than SUBJECTIVELY reacting to your own emotional frustrations. Me, I like objectivity. There’s plenty of room to get excited about the house of your dreams later…so do your homework and don’t “get it backwards”.

I’d love to hear your comments below and would appreciate your subscription here if you like my show! Contact me at jeff@yourlancasterhome.com

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(c) 2011 Jeff Geoghan

You would think this doesn’t happen that much anymore, but even today home buyers find themselves dealing with “competing offers“. You’ve completed your offer and delivered it to the listing agent to present to the seller. Then you get the call from your buyer’s agent that another offer is coming to the seller, a competing offer to your own. What to do?

In Pennsylvania the convention is that buyers will put their “best foot forward” when submitting an offer. If there are multiple interested parties, then the listing agent needs to tread carefully with how they notify each party and present the offers to the seller. An ethical Real Estate agent will not attempt to “play” one buyer against another in PA – it’s a strongly discouraged practice here. Instead the listing agent will merely advise the buyer’s agents involved that competing offers exist, leaving the content of the offers to imagination of the buyer.

In this case, the buyer needs to look at their motivation. Odds are, their initial offer price was lower than the price they would ultimately agree to to secure the home. Now that they face elimination in a competing offer scenario, are they REALLY willing to “let it go” at the low initial offer price? Probably now, and I advise buyers to up their offer to a number (or other contract terms) that they, having lost the competition, would still feel comfortable that they’d offered their best.   I’ve had times where buyers, not having done this, later regretted not upping their offer price. Keep in mind that this may not be the ultimate price for them – just as much as they feel will give them an advantage and/or give them comfort should they lose out.

If you have any questions or comments I’d love to hear them at jeff@yourlancasterhome.com.

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Today we take a look about the mailings coming into our homes around the area from mortgage sellers that bear a striking resemblance to an official government mailing, and that purport to offer solutions to homeowners. Don’t be deceived…if you have seen any of these or have comments feel free to comment here or email me at jeff@yourlancasterhome.com.

As of March 31, 2010 the Federal Reserve ended a nearly 15-month-long, $1.25 trillion campaign of buying up mortgage-backed securities (MBS).  The program’s goal was to reduce borrowing costs for homebuyers.

The Fed’s efforts appear to have worked.  Rates were around 6.33 percent when the Fed announced that the program would start in November 2008.  Rates have fallen steadily ever since, hovering near historic lows for many months.  The Fed has officially stalled the program as of yesterday. What can we see as far as interest rates for the upcoming months?

You have probably seen everywhere that rates will rise because of the Fed’s decision to halt MBS purchases.  But why? MBS are tied to the bond market.  The bond market has many private investors who purchase and sell these securities on a daily basis.   In the days and weeks ahead, the private investors left to support new originator loan supply will be looking to find a yield spread level that puts the supply and demand of MBS into equilibrium.  Specifically, these traders will be trying to figure out (as we all are), based on demand from other traders, just how risky mortgage securities will be to buy and sell. MBS investment risk will be higher since the Fed’s exit (in fact the Fed will start SELLING mortgage backed securities!).  To compensate for a higher risk in the mortgage marketplace, investors will demand a greater return.  This greater return will congeal itself via moving rates higher on a gradual scale.  Investors also do not know the exact future of MBS supply so they will be going through a “feeling out” process.

BOTTOM LINE: The Fed’s exit could create higher rates because MBS investors want more for their risk of investing.  The “feeling out” period will make intraday trading volatile because supply and demand could change hands several times during a trading day.

To make things even more complicated, we must also account for economic news that has a firm grip on the movement of mortgage rates.  Things to look out for in the up and coming months are unemployment reports, supply and demand for new homes and jobs reports.  Remember, on a general scale, anytime you see good economic news it is generally bad for home mortgage rates because they are tied to the bond market.  Bonds and stocks have an inverse relationship.

BOTTOM LINE: With all evidence pointing to rates gradually rising, it is best to lock in and forget about it, especially if a settlement is going to occur in the next 30-45 days.  It is not worth the risk to possibly save $12-25 a month when you could lose out on a volatile market.

Actually, there’s a fair amount of good news here:

1) While the number of closings decreased by 6%, the number of pending sales shot up by double that percentage (+12%).

2) The number of new listings jumped up significantly (+16%) from last year Jan/Feb.  More homes for buyers to choose from.

3) Good news for sellers – While the average list price held steady, the average sold price jumped 12% over last year.

4) The average days to sell dropped almost 10% – always good news for everybody.

So how does the emerging 2010 Lancaster PA real estate market fare against history?  Here are two snapshots of home sales:

Pending home sales are up from 2009 as noted above, but remain well below 2007 and even 2008 levels.

Sold homes started out better than last year but February was the lowest number in recent years.

What about home prices versus history?  I’ve got that for you too:

What I want you to see in this chart is the 12-month average prices (the Orange and Blue lines).  Note that the sold price has been climbing for three straight months after a continuous decline since 2007.  This is good news and I think a key indicator of the health of the Lancaster homes market.  Also see that the list price has seemingly bottomed out and is starting to rise again, which is good news for sellers.

So, there is good reason (based on facts) to say that, as of March 2010, the Lancaster PA real estate market is not in decline but staging a sales and price rally.  If you’re looking to buy now is really a great time to do it: low rates and the tax credits which run through April.   Call me at 717-799-0851 or visit my Facebook page for the latest comments on the market.

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For Lancaster PA homes for sale click here. Jeff Geoghan is a top real estate expert in Lancaster County, PA, and an involved community member. Jeff’s work has been featured in the Lancaster Newspapers, WGAL Channel 8, PA Business Journal, CNN Money and Wall Street Journal. Jeff’s blog on Lancaster County and its homes is nationally-featured. Contact Jeff for more help with your Lancaster PA Real Estate needs. Jeff is also a photographer – view some of his lancaster pa photography portfolio. Comments are welcome!

If there is one thing you probably know about the current mortgage environment, it is the fact that there seems to be an ever growing compilation of challenges to getting people into homes. Whether it is appraisal issues, buyer credit problems, no funds to close, etc, a challenge usually pops up on every deal. I like to think it is an excellent opportunity to prove your wizardry in today’s complex mortgage arena. The mortgage arena in Pennsylvania has some unique programs that all buyers and Realtors should be aware of.

The Pennsylvania Housing Finance Agency (PHFA ) was created to help enhance the quality and supply of affordable homes and apartments for older adults, persons of modest means, and persons with disabilities. PHFA operates home ownership programs, rental housing development initiatives, and a foreclosure prevention effort.

PHFA currently has some very attractive homebuyer programs. One of the most eye catching is the tax credit advanced loan for first time homebuyers. Those who are eligible for the First Time Homeuyer Tax Credit may borrow up to $5000 to use toward a down payment and closing costs ($6000 if it is a new construction property). This can be combined with a USDA, VA, FHA or Conventional mortgage.

Another interesting caveat to the PHFA loans is the underwriting flexibility. Almost all lenders now require a minimum credit score of 620 for FHA mortgages. To reiterate, this is not a FHA requirement but a lender requirement. It is very likely that people under the 620 can be approvedas long as it clears the Fannie Mae Desktop Underwriter program. I recently had a client with a 582 credit score approved for a PHFA-FHA loan. You will want to check with a mortgage professional to get the ball rolling with this program.

Just when you thought it could not get any better, PHFA also has a special program right now for new construction or previously occupied homes. A no point 4.5% interest rate loan for any new construction or previously unoccupied property! Again, you can combine this with a USDA, VA, FHA or Conventional Mortgage.  PHFA provides flexibile options for those clients with credit issues or funds to close. Some of the programs have income and purchase price limits by county. Again, you will want to check with a PHFA approved lender to get started with the process.