May 1995

Interest Rate Trends.

Gently declining interest rates have continued to lend encouragement to the weary real estate market (see below.) The flattening of the nations economic growth, coupled with a severe decline in the demand for the re-financing of existing mortgages, has left an abundant supply of desperate lenders, however; Buyer beware. The desperate approach of a lender in trouble "giving" below market interest rates, and waiving fees that are true costs, may be tempting. But, if something seems to good to be true ....

The Real Estate Market.

Good news / bad news. The bad news -- the sale of existing and newly constructed residential real estate is expected to remain flat as compared to 1994. The good news -- the first quarter of 1995 was so bleak that the rest of the year is expected to be stronger.

New Construction.

The wide swings in commodity prices (particularly lumber and copper) have made it difficult for builders to maintain control over their costs. Continued volatility is expected through the summer.

Credit Standards.

If you can remember back to the mid-eighties, there was a substantial change that took place concerning underwriting guidelines and lending practices. The back lash against very loose lending resulted in an across the board tightening of credit. The beginning of 1995 has shown us a reversal in thinking. Fannie Mae, Freddy Mac, and Housing and Urban Development (FHA) have all eased there underwriting standards.

Following are several of the benefits:

  • the ability to buy more house with the same income
  • the ability to put less money down
  • the ability to use income to qualify that was previously considered unacceptable
  • the ability to obtain financing with less than perfect credit

    Why everyone is not taking advantage of the looser lending and lower interest rates, is a mystery. Since the federal agencies assigned to monitor the banking environment have recently warned lenders to "tighten-up," this easy money could be here today and gone tomorrow.

    DANIEL BROUSE
    E-Mail brouse@membrane.com
    (800) 783-9333 x192
    (610) 397-0330 x192
    Beeper 215-960-5556