Mortgage Rates Report

Canadian investors have been flocking to the California coastline and Arizona desert to buy prime American real estate at a bargain.  The strong Canadian dollar, while inopportune for Canadian manufacturing firms, is giving Canadian investors built in downside protection when they buy American real estate.  I explain that here:

 

In January of 2007, a Canadian investor, buying a $300,000 (US)  property in Long Beach, CA, , would have to pay $352,600 (Canadian).  That was based on an exchange rate of $1.17553 Canadian to $1.00000 (US).  Today, the exchange rate has dropped to $.98188 Canadian for one US dollar.  That means that the same property in Long Beach, would costs $294,300.

 

The vacuum, however, lies in the mortgage financing for Canadian investors.  Mortgage companies require as much as 35% down payment for Canadian citizens buying a vacation home in America.  In some areas (California, Arizona, Nevada, and Florida), that financing is about to be suspended.  The leading bank suspended its loan programs, for Canadian investors, in those four states, as of April 1, 2008.

 

Canadian investors are also learning that all American mortgage brokers are not created equal.  Rates for foreign nationals (which is what the American banks call Canadian citizens) are traditionally 1% higher than American residents receive.  That means that today, the mortgage rate for Canadians is between 7-7.5%; quotes from mortgage brokers, promising materially lower rates, generally don't pan out.  The result?  Frustrated Canadian investors are left at the altar like the husband in "The Runaway Bride".

 

The American mortgage crisis is causing banks and lenders to scrutinize every single loan application with a watchful eye; Canadian investors are losing out.    We advise foreign nationals to find an American mortgage broker, with a proven track record, rather than to jump at the "lowest" rate quote. 

 

Brian Brady finances investors from all over the globe.  References here.  Loan applications, for foreign investors, can be made online.

We recently financed properties in this Austin, TX community for two California investors. Investment advisory was provided by Jeff Brown, of Brown & Brown Inc, of San Diego. Local real estate consultant Benn Rosales, of Single Pointe Realty in Austin, TX assisted in the transaction.

 

The loan offered was a niche, specialized lending project because the project is in mid-stages of development; they haven't received their project approval from FNMA so the loan programs available are limited. The property cash-flows with a little as 10% down payment with a fully-amortizing loan.

 

Single Pointe's Marketing Director, Lani Anglin informs us that Austin was named the fastest growing city in America:

 

Attention investors, buyers and sellers- Austin is in the spotlight today! Forbes named Austin the #1 Fastest Growing Large Metro in America. The total GMP growth projected for 2007-2012 at 32.05%- nearly TEN PERCENT HIGHER than the #2 Fastest Growing! No city even cut a close second to the explosive growth of Austin!

 

Contact me for investment financing options and Jeff Brown for a purposeful investment plan, using real estate as a growth asset. Enjoy the tour of the Twin Creeks property below, courtesy of Lani Anglin:

The 2008 Housing Outlook article for US Investors won the Odysseus Medal this week.  I've stated before that this is quite an honor as it is an anthology of the week's best real estate opinions on the internet.

 

Excellent articles about real estate :

 

Kris Berg — Real estate blogging, The Real Reason Your Agent Should be Blogging Michael Wurzer — Advertising, Everything Is Advertising Geno Petro — Serendipity, Serendipity, straight up Jay Thompson — NAR COE, 7,373 Words - The NAR Code of Ethics Brian Brady — Market outlook, 2008 Housing Market Outlook For U.S. Investors Chris Johnson — 2011, Why 2011 might not even be the end Jim Watkins — Foreclosure, Sad Story of a Family in Foreclosure: Some things You Hate to See Mariana Wagner — RE agent, You know you’re a real estate agent if… Jim Duncan — NAR speak, Why use a realtor - decoding nar-speak Robert Ashby — Credit crunch, What Should be Done About the Continued Credit Crunch? How About Nothing? Marlow Harris — Iggy’s House, Iggy’s House and B.S. Realty Jeff Brown — Lenders lend, Lenders Clearing Deck To Blink, Uh, Lend — What Will They Think of Next? Cathleen Colins — Memories, Memories of my Dad in the house he never got to see

Home builders are professional marketers and, as such, are the most important “class” of sellers you must watch in your local market.  Home builders have a lower costs, answer to a higher authority, and are more sensitive to inventories than Mr.& Mrs. Jones of Perkasie, PA.  Let me explain what that means and why it is important to you, the Professional Realtor.

Home builders have a lower cost of funds.  In 1995,  builders were a mostly entrepreneurial bunch.  They were regional, smaller, and privately-held.  Less than 20% of the home builders were publicly-owned; their source of capital was debt.  Debt requires servicing and has a lower margin for error in pricing.  Hence, the homebuilders “marked to the market” frequently through drastic price reductions.  They didn’t fear class-action suits from homeowners because their pricing was necessary to the survival of the company.  In short, they had shallow pockets and did what the banks told them to do.

Homebuilders answer to a higher authority today; Wall Street.  The figures for publicly-held builders have flip-flopped.  Today less than 20% of the builders are privately held with the rest publicly-traded.  This has a profound effect on the pricing cycle because builders are viewed as a vertically integrated retailer now.  Did you ever wonder how these mega developments have the staying power they have now?  That staying power is a function of the cost of capital which today, is equity.  Equity financing is longer term money and requires no servicing, at least, in the near term.

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I posted about nine "special" real estate markets.  These markets are, in my opinion, somewhat impervious to the fluctuations of the real estate markets where us mere mortals live.  Basically, the affordability factor doesn't apply here.  These markets are so desireable that the wealthy will just pay cash to live there. 

 

Here are my choices:

 

The Absolutely Best:  The Big Apple; Midtown Manhattan.  Is New York beautiful?  Well, that truly is in the eye of the beholder.  I don't think it is any natural wonder but it is a wonder of man's doing.  Manhattan is the epicenter of the world.  Does it fluctuate?  Sure, a bit because the Wall Street factor is such a huge influence here. Make no mistake about it...young people should live in Manhattan...old people should live in Manhattan...EVERYONE should live there once in their life.  Midtown Manhattan real estate will always be a good bet over a five year period.

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