The Bains

the borrowers owe more on their mortgages than their homes are worth.  Texas has 10.1% and 5.4 in near-negative equity loans at the end of 1st quarter 2011, according to CoreLogic data compiled by Real Estate Center Research Economist Dr. Jim Gaines.  Nationally there were 22.7% of residential properties with a mortgage with negative equity.  Down a bit from 4th quarter 2010.  Additionally 2.4 million borrowers have less than 5% equity, referred to as near-negative equity.  Negative equity and near-negative equity mortgages accounted for 27.7% of all residential properties with a mortgage nationwide.  Texas ranked 33rd out of 44 states for which the data was reported.

A recent analysis by USA TODAY concluded that following a recent cut in Social Security tax stemming from a December 2010 budget deal between Republicans & Democrats, Americans are currently paying the smallest share of their income for taxes since the 1950′s.  The total tax burden which includes all federal, state & local taxes, DROPPED from 27% to 23.6%.  The USA TODAY’S analysis was not limited to personal income tax, but included Medicare, Social Security, property tax for schools, etc.   This means a great amount will stay in OUR pockets, but less for the U. S. Government & they are struggling to pay bills & not go further in debt.  As a country, we are perpetuating a vicious cycle of borrowing more to pay the interest on the debt, etc.  It is like your personal finances – at some point it has to maintain a balanced income to debt ratio.  The government CANNOT MANAGE ITS DEBT.  Somehow this will have to dealt with & it may be out of our pockets.

Tyler area home sales were down 3.9% in May, compred to the same time last year.  The median home price ws down to $137,000 in May 2011 or 4.2 %  less than a year ago.  Home inventory in the Tyler area is 14.5 months with a TX average of 7.6 months.  Home inventory deals with how long – based on the past year’s sales rate – it would take to clear out existing  inventory, with no more introduced on the market.  This depresses the market!    Realtors maintain that home ownership has a significant impact on net worth, educational achievement, civic participation, health & overall quality of life.  Home ownership also helps create job & many analysts say the housing market is the key to recover.

Overlays are intended to ensure that loans are offered only to borrowers who have the ability to make the payments, according to Tom Goyda, a spokes for Wells Fargo in St. Louis.   The lender has to ensure the people loaning the money that the borrower can afford the payments and will pay.  Those with higher credit scores and down payments  -  loans and interest rates likely will get better deals as opposed to folks who are not as qualified.  FHA will still do 3.5% cash down loans, but credit score could be a minimum of 500, but more likely a 640 gets it now.   The FAH overlays may have the greatest impace on borrowers who are on the margin of qualifying an FHA-insured loan.

Why does one buy?  For a place to raise & educate children, a place where the family will feel sale, plenty of living space and to have control over that space.  PRICES COULD CONTINUE TO FALL, but will hit bottom soon & have in some price ranges & locations + interest rates are still low, so DO IT NOW.  It will probably be into 2014 or 2015 before we will see an appreciate in homes, but in the meantime you have a place to live that you like and put your money into.