From our President

There's some interesting speculation that Fannie Mae and Freddie Mac may start to refinance mortgages with loan-to-value ratios above 105% at very favorable terms. These opportunities are aimed at homeowners who have been paying their mortgage on time, but who are finding themselves owing more than their home is worth.

Currently, opportunities to refinance with favorable terms exist for borrowers with loan-to-value ratios up to 105%. Though raising the permitted loan-to-value ratio is being considered by the administration, there's no firm date for when this will happen.

A recent article in Bloomberg News explores some logistics of an .expanded mortgage refinancing scheme

A recent article from RIS media reports that an unexpected burst in real estate activity around the country is a signal that the long expected "bottom of the market" has come and gone. The harbinger of better times comes in the form of fantastic market figures from those U.S. regions with the highest rates of mortgage defaults and foreclosures, where, for the longest time, an overabundance of devalued housing stock stagnated on the market while anxious buyers sat on the sidelines waiting for the market to hit bottom.

Many commentators believe that improvements in those regions where property values and real estate transactions have decreased the most will be the catalyst for the recovery of the U.S. real estate market as a whole.

Property is selling, and although these sales are being driven by fire-sale prices, the important fact is that the market is working again in those parts of the country where it had come to a distressing halt. We can't expect to see property values rise again if nothing ever sells.

Mortgage defaults have transformed lending institutions into unwilling owners of houses with very uncertain prospects of future value. Banks, not being in the business of owning property, sought to get rid of their real estate as quickly as possible, even at bargain basement prices. Now, there's talk that stabilization in these worst of markets will motivate banks to ease off on dumping property, instead shifting their priorities to minimizing losses by pricing foreclosed property more aggressively, moderating how much they bring on market at any given time and being more amenable to pre-foreclosure short sales. This chain of events makes me cautiously optimistic that property values in the hardest hit markets will cease to plummet, and that this will have a positive effect on the national real estate market, and eventually our economy as a whole.

In fact, April figures for pending home sales nationwide show an increase of 6.7%, representing the biggest monthly gain in more than seven years according to figures from the National Association of Realtors.

The Associated Press reports that pended home sales increased by a surprising 6.7% last month This is news that we've all been waiting for.

The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.

The flip side of the coin is that median home prices decreased, but that's an unfortunate but necessary consequence of the fact that a great deal of these pended sales are steeply discounted foreclosures and fire sales. But the good news is that these properties are selling and that there are people out there willing to buy them. For the longest time, we've been confronted with the iconic images of a suburban Middle-America street lined with for sale signs in front of houses that weren't selling.

Will this momentum be enough to drive the rest of the market?

There's been some concern recently that changing lending guidelines will make it more difficult for many home buyers to qualify for a mortgage. It's true that many lenders are adopting stricter lending rules, but it's an absolute myth that financing has dried up.

Even if you can't make a 20% down payment, you can still qualify for a competitive mortgage. MassHousing, a public authority chartered by the Commonwealth of Massachusetts to increase home ownership in the state, offers a portfolio of very attractive mortgages for borrowers with decent credit and stable incomes. They even offer no-money-down financing, home improvement loans and mortgage insurance that covers you if you become unemployed.

Their easy-to-use mortgage calculator lets you figure out what you can afford and which of their programs you qualify for.

You can review the selection of their loan programs, including MyCommunity and MassAdvantage.

These programs are only available from certain banks and credit unions. If you want to get this process started, call the office (617-864-5400) and we'll be happy to recommend some excellent loan officers at local banks that specialize in MassHousing loans.

Cambridge has made it into Boston Magazine's Best Place to Live (again!) This year Cambridge is singled out as one of the 10 most recession proof places in the Boston area. Single-family prices show double-digit gains over last year, while the condo market shows only a minimal price drop.

What these statistics don't show is activity, which is an equally significant indicator of a market's vitality. While Cambridge condo prices have "adjusted" since the peak market, this adjustment has been quite small in comparison with national averages. As far as activity goes, there's definitely pent-up demand for condos in specific price points. Buyers in Cambridge are finding that inventory is limited and are becoming more aggressive about securing desirable property. It's very likely that the Spring condo market in Cambridge will be a seller's market.

A full list of guidelines for putting in effect President Obama's assistance program for at-risk homeowners have been released by the Treasury this morning. The objective of this program is to allow homeowners previously unable to refinance at this Winter's favorable rates to renegotiate a lower interest rate mortgage.

Here's a summary from the Wall Street Journal, which outlines
eligibility and stronger verification rules. The full mortgage-modification guidelines are available from the United States Treasury.

It's the middle of a blustery February, the daffodils have yet to poke their way up through the soil, and the spring real estate market is in full swing in Cambridge and Somerville. Certain kinds of properties (condos in Mid-Cambridge, for example) are so sought after, that demand exceeds supply. Naturally, sellers of these properties are able to command a favorable price, often as buyers compete to put in the highest bid. I'm not making this up.

With all these buyers poised and ready to pounce, selling prices remain steadily high. But besides simple supply-demand mechanics, there's another force behind prices of goods in general that applies itself well to real estate: inflationary pressure.

There is a good chance -- good enough not to be ignored, that is -- that the swell of money about to released into our economy by the latest stimulus legislation will result in inflation. On paper, it seems impossible for this not to happen. Inflation is a dirty word of sorts, but it's also an unavoidable side effect of rebuilding the economy. The least we can do is take advantage of it. Here's how.

The bottom line is that "home prices won't be this low again in your lifetime," a conclusion made by Mike Parker for RIS media. He reviews the history of inflation in America since the Carter administration and applies the finding that inflation can result in a tremendous profit for whose who buy real estate before the inflationary period and sell after.

Low interest rates, low real estate prices and a good chance of inflation form a compelling trinity of factors that say: if you can buy real estate now, do it!

Alexis McGee, a national foreclosure expert, weighs in on the prospects for the 2009 real estate market. Housing is becoming more affordable and mortgage money is cheap. It's going to be easier to qualify for a mortgage, especially when it's a conventional loan. That's going to make a home purchase possible for more people.

There's also a great deal of hope that the swelling tide of foreclosures will be brought under control. Policy makers are planning alternatives to foreclosures.

Read the prognosis here.

Out of a desire to cultivate an optimistic outlook, we've been using the r-word sparingly in this blog. But that's not to say that we've been ignoring the gamut of opinions and prognoses about the future of the economy. We've been following it all, from soaring optimism to the grimmest despondency, selecting the most compelling analysis to share with you. So, about this recession of ours:

Wells Fargo economists predict that by the third quarter of 2009, even by this summer, consumer confidence and a diversified economic stimulus program will coalesce, creating intense momentum in economic growth. Jim Paulsen, senior economist at Well Capital Management, employs a powerful analogy. "It's like you're at a cookout and you're trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes poof!"

The root of this economic renaissance: the real estate market. "The sector that led the economy into the morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out."

A recent NY Times article, It May Be Time to Think About Buying a House, makes a strong argument for buying real estate now, particularly if you plan to stay put 7 to 10 years. The opportunity to lock-in a low mortgage rate for the next thirty years makes this especially compelling for first time buyers who aren't tied down from moving by an unsold home. How our economy performs in the next year is certainly uncertain, but uncertain prospects aren't a good reason to let good deals, tax credits and favorable mortgage rates pass you by. It is, however, a time for prudent & sober decision making. Simply put: buy only what you can afford, in a promissing location and start building up your equity.