TOUSA announced on January 29th 2008 that they were filling Chapter 11 Bankruptcy. In a statement they released on 1/29 they indicated that the filing includes Newmark Homes which is an active home builder in the Houston and Clear Lake area. In the League City area, Newmark builds in Westover Park, Tuscan Lakes and Friendswood Oaks. The statement from their parent company states that ONLY their title company, mortgage company and insurance company are excluded from the filing. Unfortunately, how this will impact current and future home buyers is not clear. Newmark provides a consumer question and answer page to try to answer some questions that the public may have.  If you click on the link you will notice a lot of answers that include “we are going to ask the court”.  Not exactly a reassuring statement. They also go on to say how they are in stronger financial standing today then before they filed. Most people would find that statement odd. Judge for yourself.

Here is the bigger problem. Some salespeople at Newmark developments in League City are telling home buyers and real estate agents that “our subdivision was excluded” or “it has no affect on buyers”. I was shocked when I heard this but later I  heard it from a few other agents.  This is one of the many reasons why you need to use a Realtor when purchasing a new home. We are required to be honest and truthful with consumers.  TOUSA (Newmark) may come out of the Bankruptcy stronger in the future, but it’s current financial status can have a major impact on buyers today.  Buyers need to be at least be made aware of what is going on.

I am not an attorney and I don’t play one on TV, the above statements are only my opinion of the situation. If you need legal advice consult an attorney.

MSNBC and some other media outlets have reported that top democrats in congress are backing a law that would allow bankruptcy judges to alter the terms of a 1st lien mortgage. Meaning when a homeowners files bankruptcy and goes court the judge could legally reduce the amount they owe the bank, which is currently prohibited.  No party can change the terms of your loan, not the bank, not you or any government official. We don’t want that to change. A mortgage is a secured loan, when you get a loan, a lien is placed on the property for the amount you owe. This is a guarantee that the bank will get the amount you borrowed back or they get your property. Because the loan is secured by a safe asset “real estate” borrowers can get very low interest rates and loans with good terms. If banks cannot be guaranteed that they will get back the full amount loaned or the real estate that you used to secure the loan, interest rates and down payment requirements will soar. Borrowers with questionable credit will be required to put down a substantial down payment so that a bank would feel confident that they would not lose money on their investment. Why would a bank loan a borrower with questionable credit $200,000 if a judge may reduce the amount owed by $20,000 next year if they declare bankruptcy?

What does it say to a homeowner who works three jobs to payoff their debt  so they won’t go into bankruptcy? Or someone who rented for 5 years in order to save up 20% to buy a house?  That the short cut is OK?

Congress needs to focus on creating jobs and working together to make our economy stronger, not creating long term problems for future home buyers.

On February 19 the bond prices fell by almost 2 points, which pushed interests up by almost a full percentage point. Buyers who got interest quotes two weeks ago at 5.4% were told Tuesday the new prime rate was 6.3%. That’s a huge jump that could cost a buyer considerably over the life of the loan. The lesson to learn here is when rates get historically low (Under 5.9%), lock them in.  The fee is normally very small, typically the price of an appraisal ($350-$400).  Most of the time all of the money goes towards your appraisal or other cost when you close the loan. I always encourage buyers to shop rates, but once you find a lender with acceptable fees and rate, lock it in. Also most lenders will let you get the benefit interest rate reduction, if rates fall below your locked in rate. Below is an example of what not locking in can cost you.

Principal & Interest on a $200,000  30yr Fixed  @ 5.6% = 1148.15

Principal & Interest on a $200,000 30yr Fixed @6.3% = 1237.94

Over 5 years that the lower interest rate will save the buyer $5,387.

An article from the Houston Chronicle reported today that home prices and sales are down. Unfortunately this is all most people will read. What the article fails to point out it that sales are down when compared to 2006 and 2007 the two best years in Houston real estate, ever. The market is a little softer this Feb. from last, with that said it all depends on where you are. In  the League City area we only have four months of inventory. That means if no other properties were listed after today every home would be sold in four months. The average days on market is 78 which is great. That’s a sellers, not buyers market. Also the waterfront market is very strong attracting national buyers because of our low prices.  As we always say in real estate its all location, location, location.  Your appreciation and how long it will take your home will sell depends on your local area (1 mile from your home) not what a home sold for in Katy or Dallas. Here are our January Stats for League City Homes.

Clear Lake Area

• Clear Lake single-family home sales have declined by 22 units over January YTD 2007 with 89 homes sold in 2008 as compared to 111 last year.
• Contracts written and pending to close year-to-date have also declined from last year by 14% for a total of 94 MLS recorded pending sales.
• Homes listed and on the market in Clear Lake area are up slightly by 1.37% from this time last year with 742 single-family homes on the market today as compared to 732 last year.
• Clear Lake’s Average sales price is down by 1.85% and currently stands at $173,564, as compared to $176,831 last year during the same time frame. The median sales price for January 2008 was $142,260 or 5.16% lower than the median sales price in January 2007. The median is where half the homes sold above and half sold below the median sales price during a given time frame.
• Days on the market register at 78, which represents a decline of 10-days less on the market to sell a home than last year.
• Clear Lake was ranked #6 on the January Houston Hotness Index because 12.7% of all listings went under contract during that one month! The market has only 4 months of inventory which puts the market clearly in a sellers market.

Consumers in Houston on average have the worst credit scores in the United States.  Your FICO/Beacon or your credit score, it is the largest factor lenders use to determine if you can get a loan and at what rate. You have a separate FICO score for each of the three major credit agencies.  A common question is “why would they be different?”. They can vary by more than 100 points. Not all creditors report to all three agencies, so you will have different information for each. In many cases there is incorrect information posted on your account which negatively impacts your credit rating. A few FICO points here or there and it can mean the difference between a good interest rate or a bad one. Depending what was reported incorrectly it could mean the difference between getting a house or continuing to rent.  It can take many months to clear up a credit report for incorrectly reported items. Credit Agencies do not verify what is on your report. They are supposed to by law, but they don’t because of the time it would take to do so. They simply take the word of the creditor. Why would a creditor report inaccurate information about you? Because of the large amount of data they deal with daily mistakes are bound to happen. One type “O” in your account and it could show you were late or never paid at all. Worse someone could still your identity, a crime that is growing daily. Here are some of my recommendations to make sure you credit is in order before buying a home.

First Opt Out – Opt out of the annoying credit and insurance offers you receive in the mail. Why? Because they are damaging your credit score. Credit card and insurance companies are allowed to inquire about your credit even if you did not authorize them to do so. For every inquiry it may knock your score down by as much as 5-7 points. 5-7 points is not much unless you receive 4 a month which would result in reducing your score by about 50 points. Once you opt out insurance and credit card companies are not allowed to inquire about your credit unless you requeste them to do so.

Next Request your Free Annual Credit Report – You are now allowed to request your credit report for the three major reporting companies(Experian, Equifax, Transunion). You can print them instantly or have them mailed to you. You can find them at http://www.annualcreditreport.com/ . Be sure to print the reports if you request them on-line because some services will only allow you to view them once on-line.

Review the Reports – Look for anything that maybe incorrect, take your time it is a big report. Credit reporting agencies are required to correct any incorrect items, amounts, dates, etc. If you find something wrong dispute it with them and the company that reported it to them. Dispute it in writing with registered mail or online, but do not call. There is not documented record of a phone call.  You have to be persistent and follow up. In general their first reply with be that they verified it but you have to be persistent.

Even if you are not going to buy a house in the future, it’s important to monitor your credit. Just about everyone checks your credit these days even some employers. A bad FICO score can cost you in many ways in life.  Knowing whats on your credit is taking control away from banks and putting you in control of your financial future. Below are some good websites to help you.

Credit Monitoring – www.truecredit.com

Personal Finance Website – www.bankrate.com