Fed Meets This Week: Sunday, June 22, 2008

What’s a short sale? Why does Stevenson Ranch have Mello-Roos? Readers who submitted these questions earned themselves a $20 gift card. What’s your real estate delimma? There are no stupid questions. If I publish your question in my blog, you might save on gas, coffee, groceries, or electronics! In this economic crunch, I know every little bit helps. Submit your question(s) to changhomes@gmail.com.

The Federal Reserve’s Open Market Committee will meet this Tuesday and Wednesday, June 24-25. It is widely expected that it will hold rates steady in an announcement expected Wednesday around 11:15am. (CNNMoney, 6/20)

Mixed messages in economic data often highlight a market at the peak or trough. As you listen to the news this week, consider the messages you are hearing. You might conclude the market is stabilizing at/near the bottom of this downtrend, as I have. It might be the time to jump on that first home or investment property you've been thinking about.

In Short:

• Twenty- and thirty-something renters with a downpayment are increasingly attractive to real estate agents especially in markets where home prices have fallen and having a client with a home to sell is less and less attractive, according to a recent story in USA Today. Many of these potential clients prefer to work with a technology-savvy agent from their own generation, and a growing number of brokerages are responding by creating an age-appropriate sales force adept at using social media and other technologically enabled marketing approaches to attract and serve Gen-X and Gen-Y clients. Desirable as they are, these young potential buyers can have trouble qualifying, thanks to student loans and credit card debt. With tighter lending standards, young buyers with 5 percent saved for a downpayment increasingly are turning to Mom and Dad for help meeting today's additional qualification criteria. That means agents must win over these non-traditional buyers and their baby boomer parents.
• The sub-prime mortgage crisis in the United States and resulting credit crunch has had negative implications for established countries like Great Britain. However, it hasn't stopped the real estate boom occurring in developing countries like Mexico, Brazil, the former Soviet Union, India and China, which are among the world's fastest-growing economies. Low interest rates in countries with currencies pegged to the dollar and a shortage of homes that appeal to the growing middle class are bolstering real estate and land values, according to a report issued by Fitch Ratings. Home ownership, which was rare in these countries in the past, is being buoyed by growing housing affordability and economic growth fueled by dramatic increases in disposable income.
• An allied group of mortgage lenders and servicers that calls itself "Hope Now" Tuesday unveiled a set of guidelines it says will give struggling U.S. mortgage holders a broader range of options to help them avoid foreclosure, including relief measures aimed at those with second mortgages and homeowners seeking a short sale. Alliance members pledged to offer a wider range of options to help homeowners, including loan modifications, repayment plans, and temporary suspension of mortgage payments. The agreement could include similar offers of assistance for homeowners with second mortgages or those seeking a short sale, where the amount of an offer to purchase is less than the amount owed on the loan. The new guidelines require that alliance members meet certain deadlines for acting on a borrower's request for assistance. Hope Now previously announced procedures and guidelines for determining if borrowers qualify for lower rates of interest on their adjustable rate mortgages (ARMs). Founded last year and guided by the U.S. Treasure Dept., the private sector group has helped some 1.2 million homeowners avoid foreclosure by offering lower interest rates or adjusting the loan repayment schedule. (CAR, 6/19)

Operation Malicious Mortgage snatches 400 individuals nationwide from March 1 to June 18 as part of the mortgage/banking/credit fiasco, including 4 in Southern California and 2 senior managers of the failed investment company Bear Sterns. (KNX-AM, 6/19; LA Times, n.d.)

Next Weekend: Santa Clarita Valley Fair at Saugus Speedway, June 26-29.

U.S. housing starts drop to lowest level in 17 years: May building permits fell and housing starts dropped to their lowest level since 1991 in a sign of continued weakness in the housing sector, the U.S. Dept. of Commerce reported on Tuesday. (Bloomberg, 6/17)

• Housing starts fell 3.3 percent to 975,000 in May, down from a revised 1.08 million in April. The May figure was down 32 percent from the same month a year ago and was slightly lower than the 980,000 starts expected by economists. In the West, which includes California, starts were down by 10 percent.
• Building permits, a signal of future new construction trends, fell to 969,000 ? a 1.3 percent decline but slightly better than the 960,000 level economists expected.
• The growing inventory of foreclosures, higher mortgage rates, tighter qualification criteria and continued declines in home values are behind declining builder confidence, which fell to a record low in May, according to a survey by the National Association of Home Builders and Wells Fargo. (CAR, 6/19)

73,000 homes lost to foreclosure in May: California, Nevada and Florida continue to outpace other states in the number of foreclosures as 73,000 more Americans lost their homes in May a 158 percent increase from May 2007. Foreclosure filings jumped 7 percent from April and were 48 percent higher than a year ago. May was the twenty-ninth consecutive month of increases, according to RealtyTrac. (CNNMoney, 6/13)

• 20,000 California homeowners lost their homes in May and 72,000 mortgages were at some stage in the foreclosure process. That means one of every 183 California households was affected in May, putting California right behind Nevada, with one out of every 118 households affected.
• Nine of the 10 most affected cities were in Florida or California. Topping the list was Stockton, with one in 75 households affected by a foreclosure filing. Merced ranked third, Modesto was fourth and Riverside was fifth.
• RealtyTrac expects foreclosure rates to continue to rise as Alt-A adjustable rate mortgage (ARM) loans originated during the waning months of the real estate boom begin to adjust upward. (CAR, 6/19)

Housing woes hit community banks: Heavy investment in residential real estate development throughout inland California communities during the real estate boom is taking its toll on community-based banks, as noted in a Federal Reserve regional report issued last week. (LA Times, 6/19)

• Many community banks gave up mass-market products like credit cards and mortgages in recent years in favor of the high fees they earned making loans to residential developers and home builders. As new home developments sat empty in the wake of the sub-prime mortgage crisis and both land values and home prices plummeted, community banks were left holding a portfolio of loans worth dimes on the dollar.
• Regulators are acting to require that banks write down the value of troubled loans and generate more capital to cover the write-offs. These losses are increasingly apparent in regulatory filings and shareholder earnings reports. (CAR, 6/19)

Sources: California Association of Realtors, Los Angeles Times, Bloomberg, CNNMoney, KNX-AM.

1039

McCain & Obama on Housing, Week of June 15, 2008

Happy Father’s Day to all the fathers out there!

As a reminder for those getting this blog by email, if you want to see the blog in an easier-to-read format, visit http://changhomesnews.blogspot.com/.

As promised last week, here’s where McCain and Obama stand on housing: As the race for the presidency shapes up as a contest between Sen. John McCain, the presumptive Republican nominee, and Sen. Barack Obama, who will claim the Democratic nomination, here are their initial positions on housing and related economic issues.
McCain:

• Proposes to spend up to $10 billion to allow some home owners to trade high-interest, adjustable-rate mortgages for fixed-rate loans.
• Proposes a suspension of the 18.4-cent federal gas tax and 24.4-cent diesel tax during the summer.
• Supports a middle-class tax cut by doubling the personal tax exemption for dependents to $7,000.
• Calls for a simpler tax system with two tax rates and a generous standard deduction.
• Supports making permanent the 2001 and 2003 income tax cuts and proposes cutting the corporate tax rate to 25 percent from 35 percent and allowing businesses to immediately write off capital expenses.
• Maintains that government assistance to the banking system should focus on preventing systemic risk that would endanger the financial system and the economy.

Obama:

• Calls for greater government regulation of the U.S. financial system and proposes a new $30 billion economic stimulus plan to help home owners, including a $10 billion foreclosure prevention fund to help people keep their homes and $10 billion in relief for state and local governments hit hardest by the housing crisis.
• Outlines six "core principles for reform" that would give the Federal Reserve supervisory authority over any financial institution to which it might make credit available and calls for reform and streamlining of financial regulatory agencies.
• Wants to repeal a provision in the bankruptcy law so ordinary families can modify terms of home mortgages.
• Proposes a 10 percent mortgage tax credit for middle-class Americans.(Reuters, 6/4)

In Short:

• A Reuters/University of Michigan survey reveals that twice as many homeowners expect their home value to fall in the coming year than believed their home value would drop a year ago. Twenty-eight percent of those surveyed in late April and early May said they expect their home to depreciate in value, up from 14 percent at this same time last year. Just 17 percent predicted their home will increase in value, down significantly from 35 percent in May 2007. Their outlook doesn’t improve much over the longer term: Only 58 percent reported they expect their home value to appreciate over the next five years, down from 65 percent a year ago. Concerns about month after month of home price declines and long-term prospects for inflation, energy costs and the job market were behind the more pessimistic response, survey participants said.
• Some 183,000 at-risk homeowners were rescued from the potential loss of their homes due to foreclosure in April, according to Hope Now, a coalition of mortgage lenders, servicers, investors and community groups that has offered help to troubled borrowers since July 2007. Hope Now said it completed more than 183,000 loan workouts in April, a 7.6 percent increase over March, bringing the total number of homeowners helped to more than 1.6 million. Most of the workouts involved the negotiation of repayment plans in which borrowers receive extra time to bring their loans current. However, the number of mortgage term modifications rose to 42 percent, or roughly 77,000 total workouts for the month. Even with the program, 80,926 families lost their home to foreclosure in April, the group said.
• Consumers who arrange a mortgage through a mortgage broker or who are African American, Latino or live in neighborhoods with lower numbers of college graduates generally pay more in closing costs, according to a recent study of 7,560 loans closed in May and June of 2001 through commercial lenders and insured by the Federal Housing Administration (FHA). Homebuyers who worked through a mortgage broker paid $300 to $425 more in closing costs than those who worked through direct lenders. African Americans paid an additional $415, while Latinos paid an additional $365, on average. Consumers in neighborhoods where there were larger numbers of college-educated adults paid on average $1,100 less that homebuyers paid in neighborhoods where there were fewer college graduates. The study concluded that buyers who obtain so-called “no cost loans” (where there is no cost for points, appraisals or title insurance) generally are better off than those who “buy down” their interest rate but pay more in fees or points. (CAR, 6/12)

PENDING HOME SALES UP 6.3 PERCENT IN APRIL - The number of pending sales contracts for existing homes rose 6.3 percent in April, according to the latest Pending Homes Sales Index from NAR. The Index rose to 88.2 in April, up from 83 in March. (CAR, 6/11)

Bernanke says rate “well positioned,” watching dollar (Bloomberg, 6/3): Federal Reserve Chairman Ben Bernanke Tuesday signaled he is finished cutting interest rates for now and has turned his attention to concerns about inflation in the world’s foreign exchange markets in the wake of the U.S. dollar’s 16 percent decline against the Euro over the past year. Speaking to the International Monetary Conference, Bernanke stated that, “For now, policy seems well positioned to promote moderate growth and price stability over time. We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate.”

• Observers called Bernanke’s statement a “strong defense of the dollar” and a sign that the Fed believes a weaker U.S. dollar would be detrimental. Declines over the past year against the Euro and more recent oil price surges have increased fears of inflation. These fears are one reason the Fed is not expected to pare interest rates further at least through October.
• Bernanke called financial market conditions “strained” and reiterated that U.S. consumers face challenges from declining home prices and stricter mortgage and other lending standards, a weaker job market and higher energy costs. He added that economic growth will remain limited until home prices and the housing market show clearer signs of stabilization. (CAR, 6/12)

Banks miss an easy housing fix (CNNMoney.com, 5/28): Mortgage lenders say they are there to help homeowners who are having trouble making their monthly payments but who can’t sell their home for what it is worth in today’s market. But real estate agents and others say both homeowners and the banks themselves lose out when banks are unable to close so-called “short sale” transactions.

• In a short sale, homesellers ask their lender to accept a buyer’s offer that is less than the amount needed to pay off the balance of the mortgage. Lenders who agree to a short sale also typically agree to forgive the remaining debt.
• Many call short sales a win-win for lenders and homeowners. The homeowner avoids foreclosure and banks avoid the cost of carrying the property through the lengthy foreclosure process, not to mention the hassles of selling an empty property in a market saturated with other foreclosures.
• On average, lenders lose approximately 19 percent of a mortgage’s value with a short sale but lose an average of 40 percent on mortgages that proceed to foreclosure, according to one source.
• The problem with short sales? Like other foreclosure mitigation efforts, the challenge is in determining which financial entity “owns” the loan and, thus, has the final say on a short sale offer. Banks also have been slow to ramp up internal processes needed to review and approve short sale packages. Delays and last-minute dickering often prolong or even derail transaction closings and creates frustration for potential homebuyers and their real estate agents. (CAR, 6/12)

Lose homes, pay more tax (NY Times, 5/30): Investors in second or multiple homes stand to be among the biggest losers from the housing downturn. That’s because proposed mortgage bailout programs don’t address second homes and investment properties. Many owners of multiple properties don’t realize that investments they thought would help them build long-term wealth may in fact leave them in bankruptcy and facing a sizeable tax debt.

• Homeowners who borrowed against the value of their second home, or who financed the purchase of their second home and subsequent homes by pledging their primary home or other properties as security, may be liable for taxes on the difference in value should they sell any of their properties for a price less than the value owed on the mortgage.
• Under the Mortgage Forgiveness Debt Relief Act, a homeowner doesn’t have to pay taxes on forgiven debt if the collateral behind the mortgage is owner-occupied. That provision doesn’t apply to a growing number of homeowners renting out their second home or investment property. Of some 7.5 million vacation homes, only about 10 percent are considered owner-occupied, according to the NATIONAL ASSOCIATION of REALTORS® (NAR). Many of these homeowners borrowed against the ever-increasing (or so it seemed) value of these properties to finance improvements or to buy other properties.
• There may be a way out for some, one bankruptcy lawyer counsels: Get a lender to agree that foreclosure “fully satisfies all obligations under the loan.” That might protect the seller from having to pay taxes on the forgiven debt – although one attorney said, “I sure don’t want to be the one litigating it” in court.

Modest Gain in Home Sales Forecasted from Pending Home Sales Index: A modest gain in the level of home sales is possible over the next couple of months, and an improvement is forecast for the second half of this year as more buyers are able to access affordable mortgages, according to the latest forecast. The Pending Home Sales Index rose 6.3 percent to 88.2 from a reading of 83.0 in March. It's the highest index figure since last October. (NAR, 6/13)

Mortgage Rates Climb to 8-Month High: Speculation that the central bank could reverse its rate-cutting campaign later this year sparked increases across the board. (NAR, 6/13)

Next Week’s Happenings:

• June 19-20 – Los Angeles Film Festival, Westwood Village, LAFilmFest.com
• June 20 – Celebrate Downtown Lancaster/AV
• June 21 – AV – AV Mall – Public Safety Expo

Fast Facts:

• Calif. median home price - April 08: $403,870(Source: C.A.R.)
• Calif. highest median home price by C.A.R. region April 08: Santa Barbara So. Coast $1,170.000(Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region April 08: High Desert $210,860(Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - First Quarter 08: 44 percent (Source: C.A.R.)
• Mortgage rates - week ending 06/05/08 30-yr. fixed: 6.09% Fees/points: 0.6% 15-yr. fixed: 5.65% Fees/points: 0.6% 1-yr. adjustable: 5.06 % Fees/points: 0.7% (Source: Freddie Mac)

“The best exercise for the human heart was to bend down and pick someone else up.” -- Tim Russert, 1950-2008, via his Executive Producer, Betsy Fischer, Meet the Press, June 15, 2008.

Sources: New York Times, CNNMoney, California Association of REALTORS, Freddie Mac, National Association of REALTORS, Bloomberg, Reuters


1760

Oil Prices Surge, Inflation Worries, Mortgage Rates Climbing - June 8, 2008

European central bank raises rates. Word on The Street is that the Fed might do that too when it meets June 24-25 to stem inflation. As mentioned in prior posts, what the Fed does doesn't affect mortgage rates directly, but it does influence the bond market, which will push mortgage rates around. Mortgage rates have been climbing (see last article on this blog). It's a great time to buy and lock in those rates before rates get higher.

Volatile week in oil. Early this week they were predicting retail gas prices should decline by the weekend. Then an Israeli cabinet minister stated that an attack on Iran is inevitable. That shot crude oil prices higher by record margins to a new record high on Friday, and expectations of $5 per gallon unleaded prices before the end of the year, especially if hurricanes hit the Gulf.

Next week, I'll reveal where Obama and McCain stand on housing. Don't miss it!

Bullet Points (CAR, 6/5):
· A Reuters/University of Michigan survey reveals that twice as many homeowners expect their home value to fall in the coming year than believed their home value would drop a year ago. Twenty-eight percent of those surveyed in late April and early May said they expect their home to depreciate in value, up from 14 percent at this same time last year. Just 17 percent predicted their home will increase in value, down significantly from 35 percent in May 2007. Their outlook doesn’t improve much over the longer term: Only 58 percent reported they expect their home value to appreciate over the next five years, down from 65 percent a year ago. Concerns about month after month of home price declines and long-term prospects for inflation, energy costs and the job market were behind the more pessimistic response, survey participants said.
· Some 183,000 at-risk homeowners were rescued from the potential loss of their homes due to foreclosure in April, according to Hope Now, a coalition of mortgage lenders, servicers, investors and community groups that has offered help to troubled borrowers since July 2007. Hope Now said it completed more than 183,000 loan workouts in April, a 7.6 percent increase over March, bringing the total number of homeowners helped to more than 1.6 million. Most of the workouts involved the negotiation of repayment plans in which borrowers receive extra time to bring their loans current. However, the number of mortgage term modifications rose to 42 percent, or roughly 77,000 total workouts for the month. Even with the program, 80,926 families lost their home to foreclosure in April, the group said.
· Consumers who arrange a mortgage through a mortgage broker or who are African American, Latino or live in neighborhoods with lower numbers of college graduates generally pay more in closing costs, according to a recent study of 7,560 loans closed in May and June of 2001 through commercial lenders and insured by the Federal Housing Administration (FHA). Homebuyers who worked through a mortgage broker paid $300 to $425 more in closing costs than those who worked through direct lenders. African Americans paid an additional $415, while Latinos paid an additional $365, on average. Consumers in neighborhoods where there were larger numbers of college-educated adults paid on average $1,100 less that homebuyers paid in neighborhoods where there were fewer college graduates. The study concluded that buyers who obtain so-called “no cost loans” (where there is no cost for points, appraisals or title insurance) generally are better off than those who “buy down” their interest rate but pay more in fees or points.

· Next weekend: Thunder On The Lot – Antique and Customized Cars and Motorcycles. Sat and Sunday ($5 Sat, Free Sun, $5 parking), Antelope Valley Fairgrounds. http://www.thunderonthelot.com, or 661-265-6000.
· Though outside our area, the Pasadena Chalk Festival will be happening next weekend at Paseo Colorado. 626-795-9100
· Landlord Training Class for certification under Palmdale’s Partners Against Crime Program – June 17 and 19, 6-10pm, must attend both classes, $20. Must register with Palmdale Community Safety Supervisor, Kelly Long, 661-267-5172 or Crime Prevention Officer Vicky Razo, 661-267-5181.

HOMEOWNER LOAN WORKOUTS HIT RECORD LEVELS IN APRIL - Roughly 183,000 at-risk homeowners were provided loan workouts in April, 23,000 more than in March, according to a new report from HOPE NOW, a private sector alliance of mortgage servicers, counselors, and investors working to prevent home foreclosures across the country. The April numbers represent the highest number of workouts provided through HOPE NOW since the program was launched in July 2007, according to the alliance. (CAR, 6/4)

CALIFORNIA CONSUMER CONFIDENCE SLIPS TO RECORD LEVELS ACCORDING TO NEW REPORT - California consumers' outlook on current and future economic conditions and their plans for future spending fell sharply during the second quarter on concerns over mounting gasoline prices, job security, and the broader economy, according to the A. Gary Anderson Center's California Composite Index of Consumer Sentiment. (CAR, 6/4)
Foundation Set for Healthy Housing Market - Toll Brothers CEO Robert Toll told analysts that the foundation for a healthy housing market is in place: low interest rates, a low unemployment rate, a rising population, and increasing wealth. With home prices at 2002 and 2003 levels, the stage is set. (AP, 6/4)

Clearing up traffic jams. An LA Times graphic on Sunday, June 08, shows how slowing down but not stopping as you approach a traffic jam prevents a larger backup from forming.

Hands Free In Car - On July 1, a new law goes into effect requiring adults driving vehicles to use hands-free devices while talking on the cellphone. You can still text and use the phone, but you can’t put your phone by your ear. Those under 18 are not allowed to use cellphones at all while behind the wheel. There is NO grace period where you get only a warning. You can get more information at the CHP website, http://www.chp.ca.gov, near the bottom of the main page.

"Mortgage fraud ground zero" – FBI agent in an article in USA Today states Las Vegas is “mortgage fraud ground zero.” Nationwide, MortgageDaily.com says fraudulent mortgages topped $4 billion last year from $1.6 billion the prior year. (6/3)

Most common mortgage scams –
· Bait and switch. The home owner is presented with what appears to be an application for refinancing, but in reality it's title transfer papers. Once the home owner signs, he loses his home.
· Upfront fees. Scammers ask for money to be used for locating rescue funding. Once the home owner pays, the scam artist disappears.
· Bankruptcy ploys. An attorney – or someone who pretends to be – persuades the home owner that filing for bankruptcy will save the house. The only one who wins is the person who pockets the fees he charges to file.
· Rent-to-buy. Fraudsters offer to buy the property with a provision that the home owner will pay rent while building equity. Once the title is transferred, the former home owner is locked out.
· Fraudulent refinance deals. A scammer offers to use his higher credit score to secure a refinance deal, but first the home owner has to hand over title to the house.
It pays to be knowledgeable! (Forbes, 5/23)

REOs Surging - Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm. That’s one in seven previously owned homes currently for sale nationwide. (WSJ, 6/2)

Bernanke says rate “well positioned,” watching dollar (Bloomberg, 6/3) - Federal Reserve Chairman Ben Bernanke Tuesday signaled he is finished cutting interest rates for now and has turned his attention to concerns about inflation in the world’s foreign exchange markets in the wake of the U.S. dollar’s 16 percent decline against the Euro over the past year. Speaking to the International Monetary Conference, Bernanke stated that, “For now, policy seems well positioned to promote moderate growth and price stability over time. We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate.”
* Observers called Bernanke’s statement a “strong defense of the dollar” and a sign that the Fed believes a weaker U.S. dollar would be detrimental. Declines over the past year against the Euro and more recent oil price surges have increased fears of inflation. These fears are one reason the Fed is not expected to pare interest rates further at least through October.
* Bernanke called financial market conditions “strained” and reiterated that U.S. consumers face challenges from declining home prices and stricter mortgage and other lending standards, a weaker job market and higher energy costs. He added that economic growth will remain limited until home prices and the housing market show clearer signs of stabilization.

Banks miss an easy housing fix (CNNMoney.com, 5/28) - Mortgage lenders say they are there to help homeowners who are having trouble making their monthly payments but who can’t sell their home for what it is worth in today’s market. But real estate agents and others say both homeowners and the banks themselves lose out when banks are unable to close so-called “short sale” transactions.
* In a short sale, homesellers ask their lender to accept a buyer’s offer that is less than the amount needed to pay off the balance of the mortgage. Lenders who agree to a short sale also typically agree to forgive the remaining debt.
* Many call short sales a win-win for lenders and homeowners. The homeowner avoids foreclosure and banks avoid the cost of carrying the property through the lengthy foreclosure process, not to mention the hassles of selling an empty property in a market saturated with other foreclosures.
* On average, lenders lose approximately 19 percent of a mortgage’s value with a short sale but lose an average of 40 percent on mortgages that proceed to foreclosure, according to one source.
The problem with short sales? Like other foreclosure mitigation efforts, the challenge is in determining which financial entity “owns” the loan and, thus, has the final say on a short sale offer. Banks also have been slow to ramp up internal processes needed to review and approve short sale packages. Delays and last-minute dickering often prolong or even derail transaction closings and creates frustration for potential homebuyers and their real estate agents.

Lose homes, pay more tax (NY Times, 5/30) - Investors in second or multiple homes stand to be among the biggest losers from the housing downturn. That’s because proposed mortgage bailout programs don’t address second homes and investment properties. Many owners of multiple properties don’t realize that investments they thought would help them build long-term wealth may in fact leave them in bankruptcy and facing a sizeable tax debt.
* Homeowners who borrowed against the value of their second home, or who financed the purchase of their second home and subsequent homes by pledging their primary home or other properties as security, may be liable for taxes on the difference in value should they sell any of their properties for a price less than the value owed on the mortgage.
* Under the Mortgage Forgiveness Debt Relief Act, a homeowner doesn’t have to pay taxes on forgiven debt if the collateral behind the mortgage is owner-occupied. That provision doesn’t apply to a growing number of homeowners renting out their second home or investment property. Of some 7.5 million vacation homes, only about 10 percent are considered owner-occupied, according to the NATIONAL ASSOCIATION of REALTORS® (NAR). Many of these homeowners borrowed against the ever-increasing (or so it seemed) value of these properties to finance improvements or to buy other properties.
* There may be a way out for some, one bankruptcy lawyer counsels: Get a lender to agree that foreclosure “fully satisfies all obligations under the loan.” That might protect the seller from having to pay taxes on the forgiven debt – although one attorney said, “I sure don’t want to be the one litigating it” in court.

Mortgage Rates Climbing - Freddie Mac reports a slight gain in the 30-year fixed mortgage rate to 6.09 percent during the week ended June 5 from 6.08 percent the prior week, marking a nearly three-month high. The increase can be attributed to concerns about inflation, with investors and analysts interpreting recent comments by Federal Reserve Chairman Ben Bernanke to mean an end to interest-rate cuts as the central bank moves to prevent out-of-control inflation. (via Baltimore Sun, 6/6)

Fast Facts
· Calif. median home price - April 08: $403,870(Source: C.A.R.)
· Calif. highest median home price by C.A.R. region April 08: Santa Barbara So. Coast $1,170.000(Source: C.A.R.)
· Calif. lowest median home price by C.A.R. region April 08: High Desert $210,860(Source: C.A.R.)
· Calif. First-time Buyer Affordability Index - First Quarter 08: 44 percent (Source: C.A.R.)
· Mortgage rates - week ending 05/30/08 30-yr. fixed: 6.08% Fees/points: 0.6% 15-yr. fixed: 5.66% Fees/points: 0.6% 1-yr. adjustable: 5.22 % Fees/points: 0.6% (Source: Freddie Mac)

Sources: The Baltimore Sun, USA Today, Freddie Mac, California Association of REALTORS®, KNX-AM, Los Angeles Times, Antelope Valley Press, Forbes, Wall Street Journal, Bloomberg.com, Associated Press, CNNMoney.com, New York Times.

2000

Monthly Report: Tri-Valley Housing Stats: 4 Consecutive Months of Increased Sales

This report was normally published in the monthly ClientDirect newsletter. As stated in prior blogs, I have discontinued e-publishing of the newsletter in favor of publishing such articles in this blog. Thank you to all who participated in my survey that fostered this change!

In both Santa Clarita and San Fernando Valleys, the sales numbers have been up steadily. Santa Clarita median prices are fluctuating, but up versus March. This is a typical sign of being at the bottom of a cycle, where the curve is "flat."

Current Stats in Santa Clarita:

Santa Clarita Valley Home Sales Post Strong Increases as Buyers Snap Up Foreclosed Properties

Buyers eager to capture bargains on foreclosed properties pushed sales of existing single-family homes in the Santa Clarita to their highest level in months, posting the fourth consecutive month of gains and the first year-to-year increase in 13 months, the Southland Regional Association of Realtors reported on Thursday, May 22.

A total of 178 homes changed owners last month, up 2.3 percent from a year ago and 17.9 percent higher than the March tally. Sales had been trending downward since hitting a record high of 405 transactions in June 2005, but the April total was the first time since March 2007 that the total was higher than 12 months ago.

Even condominium resales posted the fourth consecutive month of increased sales with the 67 transactions during April up 24.1 percent from March. Condo sales were 11.8 percent below a year ago.

Pending escrows – a measure of future resale activity – support the optimism that the market has turned upwards.

There were 381 open escrows at the end of April, up 34.2 percent from a year ago and 24.1 percent higher on a month-to-month basis. Activity has been steadily rising since hitting bottom in December when there were a mere 160 open escrows. The record high of 662 open escrows was set in March of 2005.

The single-family median price has been fluctuating in the mid- to high-$400,000 range with the $480,000 median in April down 19.3 percent from a year ago, but up 2.1 percent from March.

The first four months of the year saw the median slip under $500,000 for the first time in 16 months. The record high median of $643,000 was set in April 2006.

Similarly, the condominium median price of $279,000 was down 27.5 percent from a year ago, off $106,000 from the $385,000 median of April 2007. It has been slowly falling since the record high of $387,000 was set in January 2006 with the March median of $275,000 being the low point in this cycle to date.

Many factors mitigate against steep price declines, including: pent-up demand for housing in an area of the nation that will see population gains in coming years, lenders again writing loans which carry favorable interest rates, the lower cost of jumbo loans in high-cost regions now that the conforming loan rate has been increased, assistance for beleaguered home owners, which will limit the number of foreclosures, and an inventory that offers a solid selection but is not excessive.

The number of homes listed for sale declined during April compared to a year ago, down 6.8 percent to 2,014 active listings.

The inventory at the current pace of sales represents a mere 8.2-month supply, still a buyers’ market yet not all that far ahead of the 5- to 6-month supply thought to represent a balanced market. It also was the first time in months that the number of active listings dropped into single-digit range, supporting conclusions that the market is changing as the Spring home-buying season gets into full swing.

Current Stats in San Fernando Valley:

San Fernando Valley Home Sales Rise for the Fourth Consecutive Month

In a sign that the local housing marketing is beginning to rebound, sales in the San Fernando Valley of existing single-family homes increased during April for the fourth consecutive month and posted the first year-to-year gain in 30 months, the Southland Regional Association of Realtors reported on Thursday, May 22.

Not since September 2005 has the monthly total been higher than the prior year. The 547 sales closed by Realtors during April was up dramatically compared to April 2007 – 100 transactions or 22.4 percent higher.

The April total also was 31.5 percent above March and has climbed each month since January, gaining momentum as the traditional Spring home buying season gets underway and as lenders start writing loans again.

With the emphasis on single-family homes now that they are within reach of more people than at any time in many years, condominium resale activity has yet to pick up.

Condo sales are coming slower not for lack of a wide selection, but because first-time buyers generally have a more difficult time coming up with a downpayment and qualifying under today’s tougher loan restrictions.

Condominium sales during April were down 16.6 percent from the prior year and off 3.3 percent from the March tally. Condo sales have yet to exceed prior year figures even though resale prices have been falling.

The condominium median price of $300,000 was down 24.1 percent from a year ago and off 4.8 percent from March. The condo median price peaked at the record high of $415,000 in February 2006, but have been trending downward since July of 2007 and started a more precipitous decline in November.

Single-family home prices hit the record high of $655,000 in June of last year but have been inching lower at a much slower pace than condos. Last month the median came in at $465,000, down 25.6 percent from the prior year and off 1.1 percent from March. That was only the second time in this cycle that the price decline was above 20 percent.

The Association reported a total of 7,234 active listings at the end of April, up 34.0 percent from a year ago.

However, at the current pace of sales, the inventory represents a 10.4-month supply, clearly a buyers’ market, but significantly lower than the 15- and 16-month supply of recent months or the record high 23-month supply set in February 1993. During the height of the recent sellers’ market, inventory frequently dipped below a 1-month supply. A balanced market appears around the 5- to 6-month range.

Pending escrows – a measure of future resale activity – suggest that April’s strong sales numbers likely will continue into summer. Open escrows, totaling 1,082 transactions, were down a modest 4.7 percent from a year ago, but increased on a month-to-month basis by 21.2 percent. April marked the first time in a year that the pending escrow total rose above the 1,000 benchmark.

Current Stats in Antelope Valley:

Inventory Counts Report is the only current report as of 6/1/2008. Other reports, when published, will be included in the weekly blog

Residential Property

Status - Count - Average Price

Active - 4511 - 268,176

Pending - 1394 - 232,672

Total: - 5905 - 259,794

Sources: Southland Association of REALTORS® and Greater Antelope Valley Association of REALTORS®

More Evidence of a Turning Point: Week Ending May 31

It appears we are at a turning point in the market, but the recovery, as it shows right now appears shallow. If you’re on the fence to buy, now is the time to get off and be an early bird. You never know when people will jump off the fence in full force, increasing home prices greatly. I’ve already had many homes with multiple offers, causing a bidding war, with the home going to the highest bidder.

Fast Fact: Average Age of the current first-time homebuyer is 26. (RIS Media, 5/29)

Weekend of June 6-7-8: Italian Feast of Santa Clarita. Come for Italian culture, food, music and games. Experience Italian traditions, culture, food and music. Located at the Westfield Valencia Town Center. Contact Rosemary Competelli for more information. 661-904-0699 (Santa Clarita Magazine, 6/1)

Thoughts of the Week:

• · Lower-cost home improvements, such as exterior paint and updated or new windows, may provide a higher return on investment in a cool market than an expensive new kitchen or bathroom, according to a recent “Remodeling” magazine survey of real estate professionals. Nationally, major home projects today return 70 cents on the dollar, down from as high as 90 cents during the housing boom and from 80 cents in 1994. That year, a kitchen remodel fetched a 93 percent return; today, the same remodel would cost about $6,000 more and return only about 83 percent of that cost. New windows, updated energy systems and landscaping are seen as more practical upgrades in the current real estate market and also help a home show better.
• · What are some of the hottest ZIP codes for home sales right now? The answer: Those that were among the coldest markets last year at this time. Neighborhoods with large numbers of unsold homes on the market last Spring this year are sporting “sold” signs in record numbers, according to the “Sacramento Bee” and DataQuick Information Systems. A list of the capital city’s hottest ZIP codes includes 95832, which gain notoriety as one of the most default-prone areas in the state. Located in the Meadowview section of Sacramento, sales year over year have increased by 266 percent behind a 44 percent decline in the median price to $185,000. In fact, 79 percent of April sales involved foreclosed homes. Other hot ZIPs to look for if you’re looking to pick up a bargain: 95660 (North Highlands, sales up 211 percent); 95834 (North Sacramento, up 180 percent); 95823 (Meadowview, up 157 percent); 95828 (Florin neighborhood, up 143.9 percent).
• · Speaking of bargains, South Florida’s largest real estate brokerage over the Memorial Day holiday took a page from a big box retailer’s marketing manual and cut prices on all its listings by 10 percent while supplies last (in this case, 10 days). The broker behind the unique approach said the extra 10 percent off already bargain prices in foreclosure-laden Miami might encourage buyers waiting for the market to be at or near “the bottom.” Others countered that the properties included in the sale might be perceived as being over-priced, or that the discount might bring down the price of neighboring properties as a result.

California home-price cuts end sales losing streak (Bloomberg.com): Bargain hunters who bought foreclosed properties in April helped reverse a 30-month decline in homes sales and sent the median home price tumbling by 32 percent compared with a year ago, according to a report issued Tuesday by the CALIFORNIA ASSOCIATION OF REALTORS®. April 2008 home sales were 2.5 percent above the April 2007 level, but buyers looking for bargains were behind a $190,240 drop in the median price from $594,110 in April 2007 to $403,870 this April. The figures were heralded as good news for long-suffering first-time homebuyers.

• · Seasonally adjusted existing home sales rose to an annualized rate of 366,720 this April from 357,640 in April 2007. The Association’s Unsold Inventory Index, which measures how many months it would take to deplete the supply of homes at the current pace of sales, fell from 11.3 months in April 2007 to 9.2 months this April. Median days on the market stood at 53.1 days a year ago, compared with 52.1 days this April.
• · The vast majority of sales were at the more affordable end of the spectrum. Homes priced under $500,000 accounted for 64 percent of all sales in April, compared with only 40 percent a year ago. Homes from $500,000 to $1 million, meanwhile, accounted for only 26 percent of sales this April, down sharply from 45 percent a year ago. Once-fallow markets like Sacramento and Riverside saw increases in sales of more than 20 percent as bargain-hunters took advantage of favorable interest rates, lower prices and a glut of foreclosures on the market.
• · An estimated 30,000 foreclosed homes have been auctioned in California over the past year. Observers say lenders holding repossessed properties have been anxious to sell them at discounts of as much as 40 percent, and that fact is enticing buyers back into the market in greater numbers.

Single-family home prices tumble in March (Reuters): Single-family home prices fell 14.4 percent in the first quarter from a year ago, according to the Standard & Poor’s/Case Shiller index. Separately, the Commerce Department reported that new home sales rose for the first time in six months while the unsold inventory of new homes declined for the twelfth consecutive month. In other news, The Conference Board said its Consumer Confidence measure declined from 62.8 in April to 57.2 in May on consumer worries about housing, higher fuel and food costs, and the future of the economy.

• S&P’s survey of 20 markets showed a 2.2 percent price decline in March. A 10-market survey showed a 2.4 percent monthly decline and a 15.3 percent overall drop. In California, Los Angeles prices fell 21.7 percent in March compared with a year ago, while San Diego fell 20.5 percent.
• New home sales edged up 3.3 percent in April after an 11 percent drop in March to an annualized rate that remains 42 percent below last year’s levels. The good news: Inventory feel 2.4 percent to a 10.6-month supply, down from 11.1 months in March.
• Consumer Confidence fell to the lowest level since October 1992. Other measures also dropped considerably: The group’s measure of present conditions dropped from 81.9 in April to 74.4 in May, and its gauge of expectations through the end of 2008 declined from 50.0 in April to 45.7 in May. The Conference Board also reported that the percentage of consumers planning to buy a home sometime during the next six months fell from 2.5 percent in April to 2.1 percent in May.

Foreclosures in military towns surge at four times U.S. rate (Bloomberg.com): Foreclosure filings in 10 communities within 10 miles of a military facility jumped by an average of 217 percent between January and the end of April compared with the same period a year ago – a rate more than four times that of non-military towns and cities, according to RealtyTrac. Foreclosure filings near Fort Jackson, S.C., jumped 492 percent from the same period in 2007 while filings in three California communities with nearby bases also climbed significantly.

• In California, Carlsbad (near Camp Pendleton) experienced a 131 percent increase in foreclosure filings from the January-April period a year ago. Also on the list were Barstow, home of a Marine Corps logistics base (120 percent) and Twentynine Palms (73 percent), home of the Marine Corps Air Ground Combat Center. The figures compare to an overall U.S. increase in foreclosure filings of 59 percent for the period.
• Experts say military personnel who bought homes over the last few years are more likely to have received subprime loans because of relaxed lending criteria that overlooked their frequent moves, lower pay and credit scores. While Veterans Administration loans historically have met the needs of soldiers and their families, they carried more stringent qualification criteria – one reason the percentage of VA loans granted actually fell during the real estate boom.
• Military personnel are protected from losing their homes due to nonpayment of mortgages while on active duty and for 90 days after they return home. Several members of Congress, including California’s Bob Filner, are advocating the timeframe be extended to a year.

As a reminder, you will not be receiving my newsletter through ClientDirect on Monday. I’ll be integrating a couple of articles in this blog over the next couple of weeks.

A special report will follow this blog with current market stats for the Tri-Valley Region.

Hope you have a wonderful week!

Sources: Santa Clarita Magazine, California Association of REALTORS®, RIS Media, Bloomberg.com, Reuters.

1378