Mortgage Rates Fall But Few Buyers Benefit

Thinking of investing in real estate in the U.S.? Mortgage rates have never been better!

But there's a catch.

Getting a mortgage is still really, really tough. According to a recent Wall Street Journal blog, major lenders report that many potential buyers are having trouble raising the 3.5% downpayment that is required now to even start the lending process. Most mortgage lenders have tightened their standards, and Fannie Mae has also tightened standards for what kind of mortgages they are willing to buy and under what conditions they will buy them, making lenders even more skittish.

In 1945 the interest rate on a conventional mortgage was 4.7%. After the Fed bought up $300 billion in U.S. Treasury notes on Wednesday of this week, mortgage rates fell from 5% to 4.75%, and a number of analysts expect rates to fall as low as 4.5% in the not-too-distant future.

It might not be enough to get people out and buying. People who don't have jobs don't have shopping for a new home at the top of their priority list. While lending standards have tightened up, the number of people in default or behind on auto loans and credit cards is rising steadily, so much so that American Express is offering select customers $300 to pay off and close their account; a move that amounts to an invitation to move the debt to another lender so Amex doesn't get stuck with it later when the cardholder goes into default.

A bigger problem (as if those aren't big enough problems in themselves) is that many buyers are still waiting out the market for signs that home prices have stabilized and are not going to keep falling once they make their move. Nobody wants to purchase a property today and find themselves upside down on it next year.

Buying investment property in the U.S. is still tricky for other reasons. A NYT article that ran today talks about new challenges for second home owners in finding renters for their vacation homes.

Second home buyers have always relied on being able to rent out their vacation properties while they are not personally using them in order to defray the costs of ownership, but in recent months so many vacation rentals have jumped into the pool for the first time (due to owner job loss, money shortages, and so forth) that owners looking to rent them have had to start offering special perks and cutting rates.

The vacation rental market is getting much more competitive fast; bad news for investors, who prefer to see the reverse trend for obvious reasons. Some second home owners out of work for the first time are now dependent on the rental money from their vacation property as their primary source of income. That's not a bad thing in and of itself,  but it certainly drives down rental prices and makes the vacation rental market difficult.

Meanwhile, what passes for good news in some real estate markets has been scaled down so far that press releases are becoming unintentionally comical. For example, in a March 18th press release, William Lyons Homes in Southern California announced that in only three weeks time it had sold a "phenomenal 39 homes" and declared that surely this was a sign that the housing market was thawing as fast as the arctic tundra.

In other U.S. real estate investing news, the State of Florida is reporting increasing problems with a plague of giant snakes.

Yes you read that right.

Apparently, last year during one of the Florida hurricanes, a number of pet stores were destroyed, releasing their Burmese Pythons into the Florida wilderness. It turns out the pythons like the Florida weather and are finding lots to eat: rats, dogs, alligators (the can eat alligators), and even small deer.

Taking up residence at first only in the Everglades, the Pythons are now so prolific they are extending their range northward and showing up in suburban housing developments. (But can they get mortgages!?!) A Burmese python can easily grow to 16 feet and weigh as much as 150 pounds. According to one naturalist featured on a recent Daily Show episode, the snakes can comfortably live as far north as Washington D.C. and are moving in that direction. Eventually the snakes could make themselves at home in the entire lower third of the U.S.

Which just goes to show there's a bright side to everything.

Especially if they get the vote.