Housing and the Federal TARP money

People all want to refinance or take out a new mortgage at the bottom of the market. Well, I wasn't sure before, but, based on what I've learned about the government's stimulus program, the time to get a mortgage is NOW. It turns out that the TARP money being given to banks isn't free. In the same way that the first-time homebuyer's tax credit sounds as though you don't have to pay it back, the TARP money has been characterized as a bailout, leading us to think that the banks are being granted the funds. But we were wrong--they have to pay it back, with 5% interest for the first number of years, and 7% interest after that.

So, while I previously thought that interest rates would just keep being forced down until people bought real estate, I now think we're at--or even past--the rate bottom. If a bank has to use money that it's paying 5% for, how many loans can it make for less than that, or even for the same amount, without incurring losses? In our WP mortgage joint venture with Webster Bank, we've seen rates, which had been at 5% with no points for a 30-year fixed mortgage, start to creep up. That now makes sense to me, and it's a call to action.

As I've said before, what you pay as a mortgage rate will matter more on the margin than what you pay for the property, so, if you have the money to buy a new home, buy it now! By the time you realize that rates are heading up, they will be higher yet.

Summing up 2008

As the new year begins, we're taking stock of how we ended last year. The news is not quite as bleak at H. Pearce as one might have thought. We're down a little over 15% in commissions earned from the year before. Since that takes into account that prices fell, reducing commissions due, plus that numbers of sales fell, we did very well compared to the market as a whole. One of the agents brought in a check on December 31st and told me that 2008 was her best year ever. More agents than I would have thought could say the same thing. In fact, a couple of months ago I checked an earnings report, and noted that 52% of our agents were ahead at that point of their earnings from 2007. That may have changed somewhat by the end of the year, but probably not by that much. It shows that, in this difficult market, whom you choose to sell your property matters. Good agents are more valuable than ever.

We're still waiting to see whether we made a profit as a company in 2008. It's close enough that we can't tell yet. That's good news in this economy! We look forward to making money in 2009, in part by concentrating on the things that will increase: relocation; rentals; appraisals; refinancings; and short sales, in addition to our regular business.

On another note, the running season began with a very cold and snowy Frostbite 5K in Guilford on Thursday morning. The sun was bright, but the snow wasn't all melted and the winds were whipping across the Guilford fairgrounds and the town dock, so all the times were slow. Well over 300 people braved the elements, though. Joel Galvin represented H. Pearce with his wife, Nan, as they helped to man the Guilford Rotary benefit race.