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by Stephen Parezo

June 13, 2005—Real estate experts maintain that the mortgage market will continue to have a healthy prognosis for the remainder of 2005 especially with interest rates lying at 40 year low levels.

“With rates being as low as they are people are still looking for long fixed-term mortgages,” said Kevin Reese, Fiducial’s mortgage manager. Over the next year and a half to two years, he says that 40-year amortization loans will also be picking up speed due to the low rates.

For a given amount, a 40-year mortgage carries lower monthly payments than a 30-year home loan. This means a 40-year mortgage allows you to afford a slightly more expensive house. On the flip side, the longer loan also has some disadvantages since you pay more interest and build equity slower.

What’s driving mortgages at the moment, Reese says, is the amount of used homes being sold at a record pace. Where new homes were once the prime mover, now more and more people are buying five to 30-year-old homes.

“I think there’s such a surplus of homes that the price has dropped and there are more people who are jumping into home ownership that the rates may be on the way up but I don’t see rates spiking any time soon,” he said.

Reese indicated that far more of the home sales are realtor-driven in the Fiducial mortgage division but he’s noticed that there’s been an increasing number of homes for sale by owners these days in the marketplace. With the help of the Internet and its available marketing tools, homeowners can create their own website and advertising to sell their home.

“You can save 6% or 7% on the sale,” he said. “On a $200,000 home they are looking to save $12,000 to $14,000.”

It’s definitely a buyer’s market

While homeowners may sell a house by themselves, Reese recommends that sellers still use a realtor who is knowledgeable in all facets of the process like warranty tax issues and negotiating. Realtors are also experienced in dealing with any defects the house may have that need to be taken care of such as mold which is a big problem in many homes.

“The realtor has a set checklist and will need to schedule a home inspection,” he said. “For the most part, they’ve got it down pat.”

Though it’s been a buyers market Reese says the rate at which homes stay up for sale has decreased, indicating that the market is becoming more balanced between buyers and sellers. Instead of staying on the market for an average of 60 to 90 days, homes in the greater Indianapolis area are now taking about 33 to 38 days to sell.

“Homes are selling and people just want to get into a house,” he said. “Eventually this is all going to run out but people want to get in before the rates go up. Right now they can buy more of a home than in five years down the road. They are getting more bang for the buck.”

For those homeowners who have a low mortgage rate it doesn’t mean that they should rule out refinancing.

“Other factors weigh into the equation for managing day-to-day debt and saving money month-to-month in such areas as student loans and car payments,” Reese said.

Fiducial will soon extend its mortgage selling reach into Oregon, Wisconsin and Michigan with Pennsylvania, Washington and Virginia coming on board within the next 60 days.

Stephen Parezo is the Media Manager for Fiducial.

Whatever your small business needs, your Fiducial tax and financial professional can analyze your situation and recommend an appropriate action plan. To locate a Fiducial office nearest you on fiducial.com, see the Zip Code Locator located in the upper right hand corner of the page. Do you have a particular topic that we should be writing about that can help your business? Please send your suggestions to: stephen.parezo@fiducial.com.

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