The Federal Reserve Board’s looming shift in policy could escalate 30 year fixed mortgages to 6% or higher. Rates currently are enjoying rock-bottom levels at 5.02%. Last week’s stimulative decision to extend the $8,000 first-time home buyers tax credit and innovative creation of a $6,500 credit for current homeowners could be neutralized with a sharp increase in interest rates.

A $300,000 mortgage at 5.02% today for example works out to be about $1,614 a month. On the other hand, at 6% the mortgage amount would have to be $270,000 to maintain the monthly payment at $1,614. It is clearly in your best interest to buy or refinance now with so many unbelievable deals and selection at 2002 housing prices plus all time low interest rates.

Now is a great time to buy Hilton Head Island Real Estate!

I recently saw an article in USAToday that said “Foreclosure Filings were over 3 million in 2008, which was up 81% from 2007 and 225% from 2006″. 

Nevada leads the country with 7% of homes being foreclosed on – that is hard to believe.  In other words, that is a foreclosure on every cul de sac. 

There were over 303,000 that were in some stage of foreclosure during the month of foreclosure, up 17% from the previous month and 41% from December 2007.  This surprised everyone. 

People ask me what the #1 reason is why homes go into foreclosure.  This is obvious – falling home prices.

For example, say a family buys a house for $250,000, they put down 10% so they owe $225,000.  If property values drop 20%, the house is now worth $200,000 and they owe $225,000.  They have to pay a Realtor $14,000 to sell the house, so in essence, they have to bring at least $39,000 to the closing table just to sell their house.  In that case, they usually just let the house go into foreclosure.

As long as home values continue to drop, foreclosures will increase – especially because of the very liberal lending rates that we had in 2004 and 2005 when many people could get into homes for as little as 3% down.

Congress is concerned about this, but I do not think they really understand the problem.  They keep talking about all the people that they want to help keep from going into foreclosure.  What they do not realize is that the best way they can help these people avoid foreclosure is doing all they can to make a stronger market because then home prices will rise and less people will be in foreclosure.

Obviously this is good for Real Estate.

When people buy Real Estate they basically make their decision based on what their costs are.  Lower interest rates means costs are less and higher taxes mean their costs are more, high regime fees mean their costs are more and they usually look at their bottom line. 

In other words, what does it cost them to own a condo at the beach out of pocket?

Your income in this situation would be your rent and your expenses would be mortgage costs, regime fees, taxes, utilities and association fees.  Over my years of selling Real Estate I have had many people say that if they could own a place at the beach that they could use two or three times a year and it only cost me $10,000, I would consider doing it.  If that same cost was $20,000, they might not consider doing it. 

Now is a good time to keep your costs down simply because the #1 factor in your overall cost is the price of the property.  As we all know, prices have dropped somewhere between 20% and 25% since the high of June of 2005.  Therefore, the #1 cost factor would be the cost of the property.  The #2 factor would probably be the interest rate which is at an all time low.  The other costs (taxes, insurance, regime fees and association fees) are up – but they are not up as much as the others are down which means now is a good time to buy.