Mortgage Rate News

There is a good chance that we will see more bank failures in the next two years, say some experts in the financial field. This is because smaller banks and private banks are starting to see some troubles from the current economic climate. CNBC reports on the possibility of more more failed banks:

Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, who became CEO of BankUnited when his firm bought the bank and is the former chairman and CEO of North Fork bank.

“Government money has propped up the very large institutions as a result of the stimulus package,” he said. “There’s really very little lifeline available for the small institutions that are suffering.”

We have seen the big guys get all sorts of Federal help. Their special financing has allowed many of the struggling big banks survive. Indeed, these banks were able to turn large enough profits in the last couple of quarters that they have been able to pay back their bailout funding with interest.

The news about continued bank failures for smaller institutions could affect businesses and would-be homeowners. With the big guys refusing to loan, many have turned to smaller regional and local banks. Up until now, many of these have been doing okay, since they did not engage in some of the risky practices seen by the biggest banks. However, the recession is taking its toll. And without these smaller banks to provide financing things get harder for business and individuals who need some money.

It will be interesting to see whether 1,000 banks really do fail in the next two years. So far, 81 banks have failed this year. The pace would really have to pick up for 1,000 to be reached. But it is still something that bears some thought.

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The recent housing market problems have led to a situation where home values have fallen far enough in some areas that it just doesn’t make sense to rent. While it still costs a little less to rent in some places, the difference is small enough that you might as well buy and capitalize on the mortgage rate tax deduction and the possibility of appreciation when the housing market picks up. In the top two real estate markets on the following list, though, it actually costs less money than it does to rent. Here is the list, from BusinessWeek, of real estate markets that offer great buying opportunities right now:

1. Detroit Metro, MI
2. Pittsburgh Metro, PA
3. Rochester Metro, NY
4. Memphis Metro, TN (also MS and AK)
5. Tampa Metro, FL
6. Cleveland Metro, TN (apparently the OH side isn’t that great)
7. Dayton Metro, OH
8. Columbia Metro, SC
9. Orlando Metro, FL
10. Dallas-Forth Worth Metro, TX
11. Las Vegas Metro, NV
12. Riverside Metro, CA
13. Providence Metr, RI (also MA)
14. Miami-Fort Lauderdale Metro, FL
15. Little Rock Metro, AK
16. Atlanta Metro, GA
17. Jacksonville Metro, NC
18. Boston Metro, MA
19. St. Louis Metro, MO (also IL)
20. Minneapolis-St. Paul Metro, MN (also WI)

Of course, you have to be moving to these areas to make it work for a primary residence, and who knows whether you have available jobs there. For example, Detroit has the highest unemployment in the country. How can you get even a cheap house if you can’t find a job?

Of course, if you are looking to buy as an investment, renting it out for cheap and then hoping to sell it on the recovery, it might be worth it. But it can be difficult to manage investment property from a distance if you don’t have a management company to help you out. In the end, it’s about what you think will work best.

However, if you are planning to buy sometime soon, you can find good deal almost anywhere — not just in these metro areas that have been the hardest hit.

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Just a couple of years ago, Utah was among the highest ranking real estate markets when it came to home appreciation. I know. I live in Utah. My cousin’s condo appreciated $20,000 in one year. Of course, all of that came crashing down just prior to the recession. AllBusiness.com reports on Utah’s fall from grace:

Utah’s comparatively low rankings contrast sharply with its stellar performance less than three years ago. The state first topped the nation in appreciation in the fourth quarter 2006 and remained at either No. 1 or No. 2, with double-digit annual increases in home values, until late 2007.

But by last year, smaller appreciation numbers gave way to no appreciation, and now, falling prices.

Interestingly, though, in a case of “real estate is local”, the city I live in actually saw an increase in home values. Indeed, Logan saw 0.7% increase in the past year. Which explains why the county assessor says my property taxes are heading higher.

Utah housing market suffers from mortgage market crash

Utahns have a reputation for thrift and for living within their means. However, it appears that, just like in other areas of the country, getting an “affordable” home “with one’s means” meant some fancy financing involving things like ARMs with teaser rates and interest only home loans. The enticing thing about these types of loans is that it appears as though you can by a home you can afford, but in reality you can’t. As you discover when the interest rate resets or you have to start paying on the principal. All of a sudden the payments are unmanageable. And you lose your home, and home values plummet as the market sees an excess of supply.

It is vital that you make sure you can afford a home and that you carefully consider the costs of home ownership before taking the plunge.