Buyers Galore! – Sunday, August 24, 2008

Personal Note: Trends I’m Noticing – Okay, moving away from all the data and news, I’m noticing a lot more buyers (real estate agents are saying, “duh!”). Even when I’m trying to get a listing to sell a home, I end up more often than not with a buyer. REO (foreclosure) properties are a lot easier to deal with than Short Sales, and if priced right, my buyer’s offer might be one of 11 offers for that home. If you’re in the market, be patient and persistent. I'm seeing prices still declining in Santa Clarita and San Fernando Valleys, but sales volumes are increasing. In the Antelope Valley, there are still a lot of foreclosures coming on the market. Call me if you have any questions!

In Summary -

• Many mortgage brokers are finding that consumers do not fully understand the home loan process and as a result, make mortgage mistakes. Some common mistakes that borrowers make are: not cleaning up their credit; failing to search out first-time home buyer programs; paying junk fees; and not planning for closing costs.
• Borrowers can increase their chances of being approved for a home loan by requesting their credit report and FICO score at least six months prior to applying for a loan. This allows the consumer to dispute errors and/or pay any outstanding debt.
• Borrowers also should seek out a first-time home buyer program because they often offer better interest rates and terms, and some even are tailored to people with poor credit, or can assist those that do not have enough saved for a down payment.
• To avoid paying junk fees, such as those charged for "document preparation," for example, a borrower can use a mortgage broker or call a variety of lenders to compare loans, interest rates, and fees.
• Some borrowers are shocked when they realize that they must bring cash to the closing table, typically anywhere from 2 percent to 7 percent of the home's selling price. To avoid this "sticker shock," experts recommend that borrowers get a good-faith estimate from their lender early in the loan process. (CAR, 8/21)

Q2 ENTRY-LEVEL HOUSING AFFORDABILITY INCREASES 50 PERCENT - Nearly half of first-time home buyers in California were able to afford an entry-level home in California in the second quarter of 2008, according to a report released yesterday by C.A.R. Affordability rose to 48 percent in the second quarter compared with 24 percent a year ago. At 68 percent, the High Desert region was the most affordable area in the state. The San Francisco Bay Area region was the least affordable in the state at 32 percent, followed by the Santa Clara region at 33 percent. The Monterey, Northern Wine Country, Palm Springs/Lower Desert, Santa Barbara County, Southern California, Merced, Riverside, and Sonoma regions all reached record-high affordability levels in the second quarter of 2008. (CAR, 8/20)

HOME BUILDERS' CONFIDENCE IN MARKET INCREASES IN AUGUST - Sales expectations among single-family home builders for the next six months increased two points in August to 25, while current sales conditions increased by one point to 16, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The NAHB/Wells Fargo HMI monitors builder perceptions of current single-family home sales and sales expectations for the next six months, where a score greater than 50 indicates that more builders view sales conditions as good than poor. (CAR, 8/20)

CALIFORNIA FORECLOSURE ACTIVITY INCREASES; DEFAULT NOTICES DECLINE - California led the nation with 72,285 foreclosure filings in July, a 5 percent increase from June and an 85 percent increase from July 2007, according to a recent report by RealtyTrac®. Bank repossessions, auction notices, and default notices all increased in year-over-year comparisons. Default notices however, which are the first phase in foreclosure proceedings, declined 4 percent from June, according to the report. (CAR, 8/20)

NEW HOUSING STARTS DECREASE IN JULY - The U.S. Census Bureau reported that building permits, an indication of future residential construction, decreased 17.7 percent in July to 937,000 from 1,138,000 in June. New housing starts also decreased 11 percent in July from June, and were 29.6 percent below the revised July 2007 rate. (CAR, 8/20)

Real estate chaos hits appraisal industry - As a result of the current market and a return to proper underwriting guidelines, appraisers are finding it increasingly difficult to get lenders to accept appraisals. Some lenders even are declining low appraisals and scrutinizing loan applications more carefully than in previous real estate cycles. Whereas most lenders used to evaluate a home appraisal's credibility based on comparisons generated from their desk, now some banks are requesting that appraisals be verified by on-site visits to the property, as well as the nearby homes listed as comparables. (SF Chronicle, 8/17)

• Since real estate markets are local and prices can greatly fluctuate from one area to the next, experts recommend that sellers and REALTORS® work with local appraisers that have knowledge of the region.
• Similar to utilizing a REALTOR® versus a sales agent, it is recommended that sellers work with an appraiser that is a member of the Appraisal Institute or the American Society of Appraisers, the appraisal industry's two largest trade groups. Appraisers that are members of these organizations are required to complete more coursework than those just licensed by the state.
• Because some lenders are declining appraisals, some mortgage brokers recommend that buyers leave their financing contingencies in place until the lender has signed off on the appraisal. (CAR, 8/21)

How the Housing Law Affects Reverse Mortgages - The recently signed federal housing bill has many provisions, including changes to reverse mortgages, which are loans against a house that the borrower is not required to pay back as long as they live in the home. Some of the amendments include raising the amount that seniors, age 62 and older, can borrow using a federally backed reverse mortgage; and lowering the cost of receiving the home's equity. Some ageing experts advise consumers to be cautious before refinancing into a reverse mortgage. (USNWR, 8/18)

• Although seniors can access their home equity by refinancing into a reverse mortgage, many of these loans come with a variety of fees. Once the fees are paid, borrowers may choose to receive a lump sum payment, monthly payments, a credit line, or a combination based on the home's value. A provision in the housing bill reduce the maximum fee to 2 percent on the initial $200,000 of a home's value and 1 percent on the remaining balance, with a maximum set at $6,000. Some lenders charge less fees, so similar to finding a traditional mortgage, consumers should shop around and negotiate with their lender on these fees. In some cases, closing costs, service fees, mortgage insurance premiums, and interest rates also can be negotiated.
• Most reverse mortgages are Home Equity Conversion Mortgages (HECM), which are backed by the Federal Hosing Administration. In order for a borrower to qualify for an HECM, they must discuss the loan with a loan counselor employed by a nonprofit or public agency approved by the U.S. Dept. of Housing and Urban Development. This ensures borrowers understand all of their options and make the right decision.
• Some borrowers may not understand that although the loan does not have to be repaid, as long as they remain in the home, they still are responsible for property taxes, insurance, utilities, fuel, maintenance, and other homeowner expenses. If some of these items are not kept up to date, the borrower risks the lender calling the loan due. It is important to note that reverse loans must be paid back with the proceeds, along with any remaining equity, if the home is sold. (CAR, 8/21)

Good news for California housing - Home sales in Southern California increased in July compared with a year ago, while foreclosures decreased in month-over-month comparisons, according to a recent report. The California Legislature also is working with consumer and lending groups on a bill that would protect consumers from predatory lending and establish guidelines and restrictions on brokers and lenders. (LAT 8/20)

• Although the foreclosure rate is approximately double what it was a year ago, in month-over-month comparisons, it is 8 percent lower, indicating that foreclosures could be reaching a plateau. In a report released by RealtyTrac, default notices, which are the first phase in foreclosure proceedings, declined 4 percent from June.
• If signed, the bill will prohibit lenders from offering pick-a-payment loans to subprime borrowers; establish limits and timeframes on prepayment penalties to subprime borrowers; and prohibit brokers from leading subprime borrowers into loans with higher interest rates if they can qualify for one with a lower interest rate. The bill also would prohibit lenders from paying a financial incentive to brokers for steering borrowers into loans with prepayment penalties or higher interest rates. Additionally, mortgage brokers would be required to place the consumer's financial interests above their own. (CAR, 8/21)

Fast Facts –

• Calif. median home price - June 08: $368,250 (Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000 (Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570 (Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - Second Quarter 08: 48 percent (Source: C.A.R.)
• Mortgage rates - week ending 08/14/08 30-yr. fixed: 6.52 Fees/points: 0.7% 15-yr. fixed: 6.07 Fees/points: 0.7% 1-yr. adjustable: 5.18 % Fees/points: 0.5% (Source: Freddie Mac)

Sources: California Association of REALTORS, Los Angeles Times, San Francisco Chronicle,U.S. News and World Report, Freddie Mac.

Greenspan expects Housing to Stabilize Soon – Sunday, August 17, 2008

AV Market Right for Home Buyers – Today’s AV Press top article states lower prices now are creating unique opportunities for home buyers. Read it yourself at http://avpress.com/n/17/0817_s1.hts. (8/17)

Greenspan expects Housing to Stabilize Soon - Former Federal Reserve Chair Alan Greenspan in an interview with the Wall Street Journal this week says he expects U.S. home prices to stabilize in the first half of 2009. "Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet – and hence banks' capital – until then," he said. (8/13)

Mortgage Rates Steady - Freddie Mac reports that the 30-year fixed mortgage rate held steady at 6.52 percent during the week ended Aug. 14. However, interest on 15-year fixed loans fell slightly to 6.07 percent from the prior week. Meanwhile, the five-year adjustable mortgage rate dipped to 6.05 percent, and the one-year ARM dropped to 5.18 percent. (Chicago Sun-Times, 8/15)

California 10^th Most Expensive States for Closing Costs - The 2007 average closing cost of $2,736 has gone up to an average of $3,118 in 2008, a 14 percent increase. New York City at $4,016 is the most expensive place to close. North Carolina is the least expensive area with an average fee of $2,650. Here are the top 10 most expensive states to pay closing costs.

1. New York: $4,016
2. Texas: $3,975
3. Florida: $3,683
4. Oklahoma: $3,558
5. New Mexico: $3,465
6. New Jersey: $3,432
7. Pennsylvania: $3,411
8. Alaska: $3,409
9. Colorado: $3,358
10. California: $3,321 (bankrate.com, 8/15)

Sources: National Association of REALTORS, Chicago Sun Times, Antelope Valley Press, Bankrate.com, Wall Street Journal.

301

SCV Home Sales Increase for 5th month – Sunday, August 10, 2008

SCV Market continues to stabilize and show improvement during June – Sales of existing single-family homes increased 11.2 percent compared to 12 months ago with Realtors closing escrow on 299 transactions. The total also was 4.1 percent higher than this May. Likewise, condo sales of 75 units were 5.6 percent ahead of a year ago and equal to the May tally. While the single-family median price fell 25.6 percent from a year ago to $450,000 – a drop of $155,000 – and has been drifting downward since April 2006 when the record high of $643,000 was set, the pressure on home sellers to reduce prices is not nearly as strong as buyers presume. Condo prices also have been falling with the median off 23.0 percent from a year ago to $285,000. The condo record-high median price of $397,000 was set in January 2006. There were 1,940 active listings at the end of June, down 16.4 percent from a year ago and less than 1 percent below the May tally. At the current pace of sales, the inventory represents a 6.4-month supply, only slightly on the high side of the 5- to 6-month supply that is deemed to represent a balanced market. – Southland Regional Association of REALTORS, 7/29/08

SFV June Home Sales Slightly Behind A Year Ago - Realtors closed escrow on 671 single-family homes during June, off 19 sales or 2.8 percent below the 669 sales of June 2007. A total of 230 condominiums also changed owners last month, off 15 sales or 6.1 percent below last year’s 245 transactions. A total of 6,935 properties were listed for sale at the end of June, up 1.6 percent from a year ago, but down 2.0 percent from May. At the current pace of sales, the inventory represents a 7.7-month supply, only slightly higher than the 5- to 6-month supply deemed to represent a balanced market. For comparison, at the height of the recent sellers’ boom market the inventory frequently hovered at a less than 1-month supply. And, in the early 1990s, when a recession wracked the nation and California rebuilt its economy, the supply often soared above a 20-months, hitting a record 23-month inventory in January 1993 with total listings at nearly 15,000 in July of 1992 – double the number of properties on the market today. The median price of single-family homes sold last month was $431,000, down 34.2 percent from a year ago when the record high of $655,000 was set. The condo median price of $295,000 was off 26.2 percent. The condo record high of $415,000 was set in February 2006. Statistics support the notion that a growing number of people are entering the market. Pending sales – a measure of future resale statistics – increased 20.6 percent from a year ago and were up slightly from May. There were 1,128 open escrows at the end of June, the third consecutive month that pending sales have increased and topped the 1,000 benchmark. – Southland Regional Association of REALTORS, 7/29/08

Hooray Santa Clarita!

• SANTA CLARITA LIFEGUARDS WIN CALIFORNIA SWIM COMPETITION - Third Consecutive Year of Wins for Santa Clarita Lifeguards
• MAJOR CRIME DOWN OVER 16% IN SANTA CLARITA - First Six Months of 2008 Reveal Downward Trend for Part I Crimes --City of Santa Clarita, 8/8/08
  

Big Gain in Pending Home Sales Index - A hike of almost 10 percentage points in NAR's forward-looking sales indicator suggests strong prospects later this year. - National Association of REALTORS, 8/8/08

More Unmarried Couples Buying Homes - Unmarried couples made up 7 percent of home buyers last year, making up the second-fastest growing buyer segment. Experts recommend that each buyer have a will stating that their share of the property goes to the surviving owner upon his or her death, but they also should consider including joint tenancy with the right of survivorship in the deed. They also must understand that obtaining a mortgage requires full financial disclosure, meaning that their past credit histories will be out in the open. Moreover, buyers must understand that in the event of a breakup, the mortgage must be refinanced for it to be removed from one's credit report. -- National Association of REALTORS, Atlanta Journal-Constitution, 8/3/08

New Housing Bill 1st Time Buyer Tax Credit - Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500.

· The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.

· This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

· The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.

· High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

Alex Calder writes that you read this act at http://banking.senate.gov/public/_files/HousingandEconomicRecoveryActSummary1.pdf -- Washington Post, 8/3/08; Alex Calder, 8/6/08.

NEW STUDY SUGGESTS HOME LOAN LIMITS, NOT SUBPRIME BORROWERS, LED TO MORTGAGE CRISIS - A new study from the UC Irvine Paul Merage School of Business Center for Real Estate suggests that the private mortgage industry, not subprime borrowers who took out risky adjustable rate loans, led to the current lending crisis that resulted in the dramatic rise and fall of home prices across the country and mounting foreclosures. According to the study, had loan limits for Fannie Mae and Freddie Mac, the nation's two largest mortgage lenders, been lifted ahead of the current housing crisis, the two agencies would have been able to provide more loan products for borrowers, and the private mortgage sector would not have pushed as many subprime loan products-- loans that, for many homeowners, became unaffordable as their initial adjustable interest rates reset at higher amounts. –California Association of REALTORS 8/6/08.

McCain vs. Obama on Real Estate – third in a series summarizing the stance between the leading presidential candidates regarding topics associated with real estate:

Mortgage Giant Rescue – Both candidates say they want to go after predatory lenders. Obama introduced the STOP FRAUD Act in the Senate and now it's a part of his platform. McCain called for creating a task force to investigate criminal wrongdoing in the mortgage lending and securitization industry. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/8.html. -- CNNMoney

Fast Facts:

• Calif. median home price - June 08: $368,250 (Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000 (Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570 (Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - First Quarter 08:44 percent (Source: C.A.R.)
• Mortgage rates - week ending 07/31/08 30-yr. fixed: 6.52 Fees/points: 0.7% 15-yr. fixed: 6.07 Fees/points: 0.6% 1-yr. adjustable: 5.27 % Fees/points: 0.6% (Source: Freddie Mac)

Sources: Southland Association of REALTORS®, California Association of REALTORS®, Freddie Mac, CNNMoney, Washington Post, Alex Calder, Atlanta Journal-Constitution, City of Santa Clarita, National Association of REALTORS®.

1235

Home Sales Up, Consumer Confidence Steady, & the Fed meets Tuesday–Sunday, August 3, 2008

Interest Rates Likely To Hold Steady - The Fed meets August 5 and most market experts believe the weakness in the economy will keep the Fed from raising interest rates, an action that will probably be viewed as an admission that it is pretty powerless to do much about either problem right now. (CNN, 8/1)

In Brief:

• Homeownership is strongly related to age and socioeconomic status. The average age of first-time home buyers is 32, according to the National Survey of Families and Households (NSFH). Thirty percent of homeowners are under 31 years of age. Ownership peaks at 76.7 percent among those age 61 to 70, and then declines slightly to 68.5 percent for age 71 and older.
• Owners say they are happier and have higher self-esteem than renters, according to the NSFH.
• 86 percent of a national sample of Americans believe that people are better off owning than renting, according to the Fannie Mae National Housing Survey. (CAR)

C.A.R. REPORTS SALES INCREASED 17.5 PERCENT; MEDIAN HOME PRICE FELL 37.7 PERCENT IN JUNE - The median price of an existing, single-family detached home in California during June 2008 was $368,250, a 37.7 percent decrease from the revised $591,280 median for June 2007, C.A.R. reported. The June 2008 median price fell 4.3 percent compared with May's $384,840 median price. (CAR, 7/30)

CONSUMER CONFIDENCE HOLDS STEADY IN JULY - Consumer confidence held steady in July and now stands at 51.9, up from 51 in June, according to the latest Conference Board Consumer Confidence Index, which measures consumers' current outlook on the economy across a several business sectors and expectations for the near future. (CAR,7/30)

Mortgage Rates Drop – Freddie Mac says 30-year fixed rate fell to 6.52% with an average 0.7 point discount as the price of oil and gasoline fell this week. This is down from an average 6.63% last week, and down from an average of 6.68% recorded during the same week last year. The 15-year FRM averaged 6.07% this week with an average of 0.6 point, down from 6.18% last week, and down from 6.32% last year. Five-year adjustable-rate mortgages (ARMs) averaged 6.07% this week, with an average 0.6 point, down from last week when it averaged 6.16%. A year ago, the 5-year ARM averaged 6.29%. One-year ARMs averaged 5.27% this week with an average 0.6 point, down from last week when it was 5.49%. At this time last year, the 1-year ARM averaged 5.59%. (CNN, 7/31)

Prez signs Housing Bill - President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac. This bill was featured in last week’s blog at http://changhomesnews.blogspot.com/2008/07/housing-rescue-bill-on-presidents-desk.html. (CNN, 7/30)

McCain vs. Obama on Real Estate – second in a series summarizes the stance between the leading presidential candidates regarding topics associated with real estate:

Mortgage Giant Rescue – Both support efforts to stabilize Fannie Mae and Freddie Mac, but are otherwise vague. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/7.html. Mortgage Fraud next week.

Fast Facts:

• Calif. median home price - June 08: $368,250(Source: C.A.R.)
• Calif. highest median home price by C.A.R. region June 08: Santa Barbara So. Coast $1,035.000(Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region June 08: High Desert $180,570(Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - First Quarter 08:44 percent (Source: C.A.R.)

Sources: California Association of REALTORS®, CNNMoney.