Gary Richetelli

Commercial Real Estate

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Detroit Housing Market Not Following City’s Lead

Housing prices in Detroit continue to rise in spite of city's financial woes.

Housing prices in Detroit continue to rise in spite of city’s financial woes.

The city of Detroit has been in the news a lot lately, but for all the wrong reasons.  The city government recently filed for chapter 9 bankruptcy, which early estimates indicate is the largest municipal bankruptcy in U.S. history.  The debt totals between 18-20 billion dollars, far surpassing the previous largest bankruptcy which was declared by Alabama’s Jefferson County and totaled around 4 billion.  Things have gotten so dire in the Motor City, government officials are appraising and considering selling off some of Detroit’s most treasured works of art.  Reports are that Christies is set to appraise the 60,000 piece collection, which is entirely owned by the city of Detroit.

While Detroit scrambles for ways to begin to pay off billions of dollars of debt, an interesting statistic about the city’s real estate market has recently emerged.  According to MLive.com, a Michigan news site, Realtor.com has named Detroit a “Top Turnaround” city for the housing market.  This may seem surprising in the wake of the city’s bankruptcy trouble, but Realtor.com’s Detroit listings grew 37% in price since last year.  In addition to rising prices, the percentage of unsold homes in the Detroit Metro have decreased by about 26%.

What’s noteworthy about these statistics is that this is not a phenomenon reported only by Realtor.com.  According the the MLive article, many real estate sources have seen jumps in price when it comes to Detroit housing.  More interesting still is that while these prices have risen quickly, Detroit still has some of the lowest home prices in the entire United States.

Perhaps the most astonishing stats mentioned in the article are the amount of abandoned buildings and their prices within Detroit.  There are about 78,000 abandoned buildings with some being priced at only $500!

It remains to be seen if the housing recovery can continue in Detroit amidst the city’s financial troubles, but it seems clear that Detroit’s housing prices are a must-watch for anyone in the real estate business.

Aspire Once in Awhile: Celebrity Homes

Lance Armstrong dumps his Austin Lake home.

Lance Armstrong dumps his Austin Lake home.

When searching for the home of your dreams, it’s usually good advice to stay within your means.  If we learned anything from the housing meltdown of 2007, practicality should be one of the number one tenets of buying a new home.

That said, every once in a while it can be fun to get lost in the clouds and indulge in the world of celebrity real estate.  Whether it’s to dream about the future, or simply to gawk at the largesse of the nation’s wealthiest celebrities, keeping tabs on the lifestyles of the rich and famous can be a fun exercise.  Here’s a little run down on the latest in the world of celebrity home buying and selling.

Lately, there has been a lot more of the latter, with celebrities dumping their massive homes in favor of…other massive homes.  In Lance Armstrong’s case, he sold his Lake Austin mansion only six weeks after purchasing it.  It was apparently purchased by race car driver, Bret Curtis.  As the NBC article notes, Armstrong’s reason for selling is unknown.  What does seem clear, however, is that Curtis will be enjoying some of the more opulent features of the house.  With a private boathouse, cabana, pool, and spa among other amenities, this is clearly not your average lakehouse.

Fear not for Lance, though as money troubles do not seem to be the reason for the sale.  He recently moved into the former Lt. Governor of Texas’ 7,646 square foot home.

Armstrong isn’t the only former sports star ditching his home.  Hockey’s Great One, Wayne Gretzky , listed his Scottsdale homefor $3.395M.

Just as some of last generation’s sports legends seem to be moving out, one of this generation’s rising stars is putting his rookie contract to quick work.  Washington Redskins QB Robert Griffin III has purchased a 2.5M home to match his royal sounding name.  This is an exciting time for the young field general as he continues his rehab from an ACL tear and is set to be married this month.

That’s all for now.  Check in reguarly for more updates on the world of real estate.

Low Mortgage Rates Are a Thing of the Past

Doug Duncan: Senior Vice President and Chief Economist at Fannie Mae.

Doug Duncan: Senior Vice President and Chief Economist at Fannie Mae, says mortgages are unlikely to see such low rates again.

Historically low mortgage rates are now a thing of the past.  Hey everyone, Gary Richetelli here, and today I’d like to respond to an article recently published by CNNMoney.

Interest rates for mortgages have been steadily rising over the last month, CNN says, and over the last week, the average rate on a 30-year fixed-rate mortgage jumped 10 percentage points to 3.91%.  This is a jump from 3.3% in early May, according to mortgage giant Freddie Mac. Meanwhile, rates on a 15-year loan came to an average rate of 3.03%, up from 2.56% — a record low.

The article quotes Doug Duncan, chief economist at Freddie Mac as saying “It’s unlikely that rates will ever be that low again.”

And why are rates on the rise?  CNN provides three reasons it believes the all-time low mortgage rates are no more.

First, the Federal Reserve plans to stop bolstering the housing market. According to the article, the fed has kept rates down by purchasing huge amounts of mortgage backed securities and treasury bonds (at a rate of $85 billion a month).  The general understanding was that the fed would begin to ease off these purchases in late 2013, the article stated, but it now appears that this tightening could come as soon as September, according to Keith Gumbinger, vice president of HSH.com, a mortgage information company.

The second reason the article gives for increased rates is rather simple; the economy is not in the shape it was four years ago.  Investors and money lenders now see the housing market as strengthening, and this strengthening has had a rising effect on mortgage rates.

Lastly, the article tells us that rates at 3.3% are unprecedentedly low.  Prior to the 2008 recession, rates at 5.2% were considered the benchmark low rate.  Historically, loans average at about 5.5% or higher.  It follows, CNN argues, that a return to normalcy in the US economy will bring about a similar return of “normal” housing rates.

Although, with the unpredictability of the feds tightening policy, and the recent inconsistency of long term treasury rates, it’s near impossible to pinpoint exactly where mortgage rates will fall in the near future.

Think You Know How Mortgages Work?

Mortgage Gary RichetelliThe housing market is getting hotter, but would you be surprised if you were told that almost one third of potential homeowners didn’t know how to answer basic questions regarding how to choose a lender, financing, and terms.  The study, performed by Zillow.com, asked over 1,000 current and prospective homeowners these questions.  Some of the strangest findings were that 31% of buyers don’t think that it’s possible to get a mortgage for less that 5% down, and (shockingly) 34% of those questioned didn’t know what APR (annual percentage rate) stood for.  Also, almost 1 in 4 thought that you must close with the lender that pre-approved your mortgage.

“All too often buyers focus on negotiating a lower home price and ignore the importance of finding the right loan,” said Erin Lantz, director of mortgages for Zillow. “Buyers should always shop multiple lenders and compare rates and fees and read lender reviews in order to find the best loan for their situation.”

Another expensive mistake that home-seekers make is going shopping for houses when they already have financing in place.  They do this because it enables them to act quickly if they see a home that they want.  But 26% of these people think that once they are pre-approved they have to finalize the deal with those loans; in reality there is no obligation- if buyers see better terms elsewhere they should definitely take them.

Interestingly enough, existing homeowners aren’t excluded from these faulty lines of thinking.  Of those questioned around 20 percent didn’t know that underwater mortgages (mortgages where borrowers owe the bank more than their home is worth) can be refinanced at a lower rate than they currently have.

If you’re considering buying a home, or know someone who is, I would highly recommend that you take a look at this article and make sure that you brush up on your homeowner 101 material before moving forward.  Best of luck!

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