Housing Rescue Bill On President’s Desk - Sunday, July 27, 2008

Housing Rescue Bill has passed both chambers of Congress when it passed the Senate on Saturday. Points of the bill:

• Goes into effect October 1 and President likely to sign it to law this week
• Borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA)
• Qualified borrowers must live in their homes
• They must have loans that were issued between January 2005 and June 2007
• They must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.
• They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.
• They must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.
• Requires case-by-case approval from the FHA
• Total debt cannot exceed 95% of the home's appraised value at the time
• The program is voluntary, so the original lender(s) must agree to rework the loan before a homeowner starts the application process. Each loan must be underwritten by an FHA-approved lender and will be evaluated on a case-by-case basis. Homes will be re-appraised and banks will verify income statements, bank accounts, job histories and credit scores.
• Although there are little up-front costs for borrowers, consumers receiving a refinanced loan must agree to certain terms, including paying an insurance premium of 1.5 percent of the principal annually to the FHA.

In addition, the measure also would permanently increase the cap on mortgage loans guaranteed by Fannie and Freddie to a maximum of $625,000 from $417,000. (CNNMoney, 7/26; CAR, 7/23)

In Short:

• Two of the most commonly reported barriers to homebuying are high down payment requirements and high home prices. The majority of Americans feel that it has become more difficult to obtain mortgages and that the application process is more difficult than a year ago. Consumers also believe that the terms they are offered are too demanding given the weak economic conditions. Many of today’s loans require home buyers to put down at least 5 percent, but most market experts recommend a minimum of 10 percent. Areas with high foreclosure rates may require 20 percent down and markets that have been severely impacted by foreclosures such as Reno, Nev. may require a 25 percent down payment. However, home buyers have reason to be optimistic. If signed by President Bush as expected, the American Housing Rescue and Foreclosure Prevention Act would allow states to issue an additional $11 billion to first-time buyers and homeowners with subprime mortgages.
• Although interest rates remain low by historic standards, concerns over the sustainability of Fannie Mae and Freddie Mac have contributed to an increase in interest rates. Investors who purchase these loans are wary and are demanding higher interest rates to offset the added perceived risk. The average 30-year, fixed-rate loan was up nearly a point two weeks ago, to 6.37 percent, compared with the year’s low of 5.48 percent, which was set in January.
• Credit ratings are playing an ever-increasing role among consumers seeking to purchase a new home or refinance an existing one. By improving their credit scores, Americans can save billions of dollars annually on interest payments. As of June 1, buyers with credit scores of less than 620 that put down less than 30 percent must pay a fee of 2.75 percent of their mortgage principal. Consumers with higher credit ratings were previously rewarded by not having these up-front fees imposed. Now, those with a credit score between 680 and 720 may be required to pay a 0.5 percent fee. Consumers can boost their credit scores and receive more favorable rates by keeping credit card utilization rates below 50 percent and avoiding exceeding the maximum limit on credit cards. (CAR, 7/25)

MORTGAGE INTEREST RATES DECLINE - Interest rates on the 30-year fixed-rate mortgage (FRM) averaged 6.26 percent with an average 0.6 point for the week ending July 17, down from an average of 6.37 percent the previous week and 6.73 percent a year ago. There is speculation that the Federal Reserve may not raise the overnight bank-lending rate this year after all. (CAR, 7/23)

HOUSING STARTS IN CALIFORNIA INCREASE 9.2 PERCENT IN JUNE - Building permits issued for single-family homes in California rose 9.2 percent to 3,954 in June compared with May but remain 54.9 percent below where they were for the same period a year ago, according to new data from the California Building Industry Association. (CAR, 7/23)

According to the Leading Real Estate Companies of the World®, a national network of about 700 brokers across the country, 59 percent of brokers report seeing stronger market conditions between May and July. Some 20 percent of the respondents also reported declines in inventory during this period and more buyers moving forward with serious home searches than in prior months. (CAR, 7/23)

Treasury Secretary Paulson calls bank system secure - Following the collapse of IndyMac, consumers are questioning the security of the U.S. banking system, although only a small percentage of banks are expected to fail. A bill aimed at stabilizing the housing market will assist borrowers and will allow the Treasury Department to increase its line of credit to Fannie Mae and Freddie Mac and purchase stock in the companies, if necessary. Reports show that both companies stand a better than 50 percent chance of weathering the current market without government aid. (LA Times, 7/21)

• Paulson assured IndyMac consumers that all funds fully insured by the Federal Deposit Insurance Corp. (FDIC) guarantee of $100,000 and below will remain safe. Several thousand depositors had accounts exceeding the FDIC guarantee and may not have been fully insured depending on how the accounts were structured. Deposits above $100,000 will be paid out at 50 percent of the value.
• Fearful of future loan defaults, investors have rapidly sold off shares in Fannie Mae and Freddie Mac. Combined, the two banks own or back approximately half of the nation’s $12 trillion in mortgage debt. Paulson is supporting a plan to ease the ability of Fannie and Freddie to borrow from the government, which in turn allows the Treasury Department to acquire stakes in both.
• Experts remain divided on when mortgage defaults will subside. Median housing prices have declined for 22 consecutive months, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR). Some economists predict that the market will bottom out mid-2009, while others think the market is at or near the bottom now. (CAR, 7/25)

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

Foreclosures - Obama wants the government to step in to help homeowners facing foreclosure. McCain has gradually broadened his position to support government intervention, but wants stricter requirements for borrowers seeking aid. For greater details, check http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/6.html

Fast Facts:

• Calif. median home price - May 08: $384.840
• Calif. highest median home price by C.A.R. region May 08: Santa Barbara So. Coast $1,199.000
• Calif. lowest median home price by C.A.R. region May 08: High Desert $200,740
• Mortgage rates - week ending 07/17/08 30-yr. fixed: 6.26 Fees/points: 0.6% 15-yr. fixed: 5.78 Fees/points: 0.6% 1-yr. adjustable: 5.10 % Fees/points: 0.5% (CAR, 7/23)

Sources: California Association of REALTORS, CNNMoney, LA Times, RISMedia.

1277

Mixed News at the Trough, Sunday, July 20, 2008

Economic news this week show inflation pressures in the Consumer Price Index and retail prices. Despite the doldrum news from the Fed and Bernake’s testimony in Congress, many figure, stats, and actions show that we are bound for a turn-around. We often find such mixed news at the top and the bottom of an economic cycle. Look at the last couple weeks’ blogs and a summary of a Barron’s Magazine article below.

In Short:

• The nation’s banks are in less danger of failing today than they were during the savings & loan crisis of the late 1980s and early 1990s, when more than 1,000 financial institutions failed and taxpayers funded a bailout totaling more than $125 billion. How does the current crisis compare? To date this year, only six lenders have failed and the Federal Deposit Insurance Corporation (FDIC) has only 90 banks on its "watch" list, compared with 575 banks in 1994. However, former FDIC Chair William Isaac recently called bank failures a "lagging indicator" rather than a "leading indicator" and predicted there will be more bank failures this year as lenders cope with subprime lending losses.
• Banks and loan servicers may be beginning to catch up with troubled loan workouts, but the numbers of borrowers who require assistance continues to rise. During the first six months of this year, Countrywide says it modified the terms of 86,000 loans, and Bank of America, which recently acquired Countrywide, reports that counselors are completing more than two workouts for every completed foreclosure. Hope Now, an alliance of lenders, says it conducted 70,000 loan modifications in May, although an estimated 85,000 families lost their homes that month. Even if loans are modified borrowers still may not be able to make their mortgage payment if they have lost a job, for example. According to a working group of the Conference of State Bank Supervisors, 32,000 loans that were modified in recent months already are delinquent again. That may be because few loan modifications actually result in lower monthly payments due to a cut in the principal loan balance. In California, only 1.3 percent of loan modifications involved such a reduction.
• IndyMac Bancorp’s new management, the Federal Deposit Insurance Corporation (FDIC), has halted foreclosures and said it is focusing on modifying existing loans to make them more affordable for IndyMac borrowers. The bank has about $15 billion in mortgage loans in its own portfolio and manages servicing for another $185 billion in mortgages owned by other institutions. FDIC officials said they were examining troubled loans contained in the broader servicing portfolio loan by loan to determine whether they can be modified. However, borrowers serviced by IndyMac who need help may want to move quickly: The FDIC hopes to sell the troubled thrift and its assets within 90 days. IndyMac reopened under federal oversight on Monday after regulators closed its doors on Friday. Last year, it ranked as the tenth-largest mortgage lender and eight-largest mortgage servicer in the county. (CAR, 7/17)

Upcoming weeks: more on where McCain and Obama stand on the economy, foreclosures, gas prices, health care and more.

Mortgage Rates Fall Again - Rates on 30-year fixed mortgages fell for the second week in a row on increased speculation that the Federal Reserve will not raise interest rates before the end of the year, according to mortgage backer Freddie Mac. 30-year fixed-rate mortgages averaged 6.26% with an average 0.6 of a point in the week ending Thursday, down from 6.37% last week. Last year at this time, the 30-year loan averaged 6.73%. The 15-year fixed rate mortgage this week averaged 5.78% with an average 0.6 of a point, down from last week when it averaged 5.91%. A year ago at this time, the 15-year fixed rate mortgage averaged 6.38%. Five-year adjustable-rate mortgages (ARMs) averaged 5.80% this week, with an average 0.6 of a point, down from last week when it averaged 5.82%. A year ago, the 5-year ARM averaged 6.35%. One-year Treasury-indexed ARMs averaged 5.10% this week with an average 0.6 of a point, down from last week when it averaged 5.17%. At this time last year, the 1-year ARM averaged 5.72%. (CNNMoney, 7/17)

Bottom’s up: This real-estate rout may be short-lived - Home sales and prices may be down, foreclosures may be mushrooming and the blowback from the subprime mortgage crisis may be threatening banks and secondary mortgage lenders, but there are some early signs the real estate market is trending in a more positive direction -- although you may not know it if you rely on the mainstream media for your real estate news. (Barrons, 7/14)

• Recent data suggest real estate market pessimism may be overblown. Even economist Karl Case, father of the S&P/Case Shiller Home Price Index, admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. An example: Home prices actually increased slightly in eight of 20 Case Shiller markets between March and April. Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve.
• Transaction-related indices may be skewed at present by a far larger than normal share of subprime-derived default and distress sales. In the San Francisco Bay Area, for example, more expensive homes (those priced over $721,548) have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.
• Even new housing construction numbers suggest an improvement, according to Case. He notes that housing starts, which fell to 975,000 in April from 2.27 million in January 2006, have fallen by similar percentages three times during the last 35 years. Case observes that each previous time this has occurred the market has staged a surprising upturn within a quarter. Only a slide into a recession would temper his optimism about the potential for a similar recurrence of this trend. (CAR, 7/17)

Fed stiffens restrictions on mortgage lenders - The Federal Reserve is clamping down on what it called "deceptive acts and practices" by some mortgage lenders that it says helped lead to the subprime mortgage crisis. The new rules, which apply to all banks and other lenders and specifically target subprime loans and borrowers, will take effect Oct. 1. (LA Times, 7/15)

• The new rules "are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben Bernanke.
• The new rules will prohibit loans to borrowers who can’t repay the loan from income and assets other than the home’s value and will require lenders to verify the borrower’s income and assets. Prepayment penalties are banned for the first four years of any adjustable rate subprime loan and for the first two years on other subprime loans. Lenders also must establish escrow accounts for property taxes and insurance for all first-lien loans
• Also banned are seven misleading advertising practices, including use of the word "fixed" to describe a rate or payment that changes at any time during the loan term. Other prohibited practices include loan comparison advertising (unless all payments and rates are disclosed), foreign-language ads where disclosures are presented in English, and encouraging appraisers to misrepresent a home’s value. The rules also will require lenders to credit payments on the date of receipt, prohibit pyramiding of loans, and require a good faith estimate of costs and payments on any loan application for a home secured by its value (including home equity loans and refinancings) within three days. Further, borrowers cannot be charged any fees other than to obtain a credit report before receiving that estimate. (CAR, 7/17)

Bush offers plan to save Fannie, Freddie - Eroding confidence in the nation’s two largest mortgage finance companies led President Bush to ask Congress to approve a rescue plan that would provide billions of dollars in investments and loans to the two companies. Separately, the Federal Reserve said it would make funds available to Fannie Mae and Freddie Mac on a short-term basis, if necessary. The dual rescue efforts came over the weekend after stock prices for the two quasi-governmental companies plunged late last week, potentially jeopardizing a planned debt offering by Fannie Mae and sending shock waves through the nation’s equity markets. (NY Times, 7/14)

• The White House plan calls on Congress to raise the national debt limit and to allow the Federal Reserve to determine how large a cash reserve the two companies must have on hand. The proposals are expected to be attached to a housing bill that will be voted on by Congress as early as this week.
• Both Fannie Mae and Freddie Mac have existing credit lines of $2.25 billion that were set 40 years ago by Congress when Fannie Mae held about $15 billion in outstanding debt. It now has about $800 billion in debt; Freddie Mac debt totals about $740 billion.
• Despite concerns that the program will protect shareholders and investors while asking taxpayers to foot the bill, Treasury Secretary Henry M. Paulson, Jr. reiterated that the failure of either Fannie Mae or Freddie Mac would have a devastating impact on the world economy because their debt is held by investors around the globe. (CAR, 7/17)

Census lists 5 CA cities in fastest-growing - While there are signs of a slowdown in migration to the West and sunbelt region, California continues to see steady population growth, placing five cities on the list of the 25 fastest-growing large municipalities in the country between 2006 and 2007, according to new population estimates from the U.S. Census Bureau. According to the report, Victorville, Calif. saw a population increase of 9.5 percent to 107,232 in 2007, putting the San Bernardino County city second on the list of the nation's fastest-growing large cities with populations of 100,000 or more. New Orleans ranked number one on the list, with a population increase of 13.8 percent to 239,124 after a seeing its population in 2005 dwindle to half in the wake of Hurricane Katrina. The other four California cities that made the list are Bakersfield; Irvine; Moreno Valley; and Visalia. (CAR, 7/16)

Although local sales have been increasing in May and June, California May sales have decreased 51% since a year ago. (CAR, 7/16)

Fed Approves New Rules For Mortgage Lenders to Protect Consumers - The Federal Reserve Board on Monday approved a set of new rules, effective Oct. 1, 2009, pertaining to home mortgage loans aimed at better-protecting consumers and ensuring responsible lending practices. The new rules prohibit unfair, abusive, or deceptive home mortgage lending practices and restrict certain other mortgage practices. In addition, the rules establish a new set of advertising standards for the mortgage lending sector and require certain mortgage disclosures to be given to consumers earlier in the home-buying transaction. (CAR, 7/16)

State Enacts Law to Protect Homeowners Facing Foreclosure - the California Legislature enacted a set of foreclosure reforms to address the adverse effects of high foreclosure rates. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30 days before filing a notice of default. The law also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties, and extends from 30 to 60 days the time for residential tenants to vacate properties that have been foreclosed upon, unless other laws apply. (CAR, 7/16)

Sources: California Association of REALTORS, New York Times, Los Angeles Times, Barrons, CNNMoney.

1850

Housing Inventories Fall, Sunday, July 13

Big news of the week was the Fed’s takeover of Pasadena-based IndyMac Bank. This upcoming week, stats for 2 inflation measures will be released – Consumer’s Price Index and Producer’s Price Index. People are also watching Monday for Freddie Mac’s sale of securities. Lack of private investors to Freddie Mac’s sale may prompt the federal government to intervene and “save” Freddie Mac and Fannie Mae.

In Short

• Looking at trends in the average number of days a home stays on the market before an offer is received is one way to view the health of a real estate market. June figures from Altos Research and RealIQ show that, with the exception of San Diego, metro California markets are in better shape than those in many other struggling cities around the country. San Francisco homes over the past three months averaged 73.7 days on the market, less than half of the 153 days a home was on the market in Miami and well below the 131-day average in Detroit. San Jose averaged 79.3 days and Los Angeles remained steady at 94 days on average between April and the end of June. The lone leap in time on the market among the four California markets studied was San Diego, which jumped from 89 days in May to 114 in June and boosted its three-month average to 93.6 days.
• Continued stress in the housing market and a slowing economy were behind a sharp increase in the percentage of delinquent home equity lines of credit (HELOCs) during the first quarter of 2008, according to the American Bankers Association. HELOC payments more than 30 days past due increased 14 basis points to 1.10 percent between the end of 2007 and March 31 – the highest level since 1997 and the largest increase since the ABA began tracking delinquencies about 20 years ago. The news wasn’t all bad, however. Home equity loan delinquencies improved slightly from 2.39 percent at the end of 2007 to 2.34 percent in the first quarter of 2008, while late payments on property improvement loans fell from 1.81 percent to 1.78 percent. Bank credit card delinquencies, meanwhile, increased 13 basis points to 4.51 percent, just above the five-year average delinquency rate of 4.41 percent. The ABA expects delinquencies of all types to remain elevated in future quarters as higher gas and food prices eat away at consumer paychecks. (CAR, 7/10)
  

Pending Home Sales Fall Nationally - Pending home sales fall 4.7 percent, after posting a sharp gain in April, NAR’s Pending Home Sales Index for May slipped by 4.7 percent and was 14 percent below 2007 levels. While the decline reflects continued softness in the market, there was some good news in the West, which includes California. There, pending sales slipped only 1.3 percent in May and were 2 percent higher than a year ago. (AP, 7/8)

• The national index registered 84.7 on a scale where 100 equals the rate of pending sales during 2001, when the index was initiated. It stood at 98.5 in May 2007. The national decline was driven by the South, where the index fell 7.1 percent to 84.5, 22 percent below last year’s figure, and the Midwest, which experienced a 6 percent decline to 78.6, 13.8 percent lower than a year ago.
• Despite the higher-than-expected national decline, the West region index fell to 97.5 in May led by Sacramento, which experienced double-digit gains in pending sales as homebuyers continued to take advantage of favorable home prices and interest rates.
• NAR President and Long Beach REALTOR® Richard (Dick) Gaylord noted that the current market offers short-term benefits and long-term value for homebuyers. He warned that buyers should consider the potential that interest rates may increase slightly should inflationary fears arise. (CAR, 7/10)
  

Fed to clamp down on exotic and subprime loans - Signaling that it sees no end to the housing downturn in the foreseeable future, the Federal Reserve Tuesday said it will issue new lending rules next week that are expected to limit exotic mortgages and loans to high-risk individuals, and that it may extend its program of low-cost overnight loans to investment banks beyond September in a further attempt to normalize the nation’s credit markets. (NY Times, 7/9)

• On July 14, the Federal Reserve is expected to present a revised set of rules governing mortgage lending. Proposed rules issued in December drew significant criticism from lenders, who fear that tougher standards at a time when credit already is tight could make many mortgages more costly by increasing paperwork and creating additional legal issues. At the same time, consumer groups argue that the proposed rules already are too weak and that efforts to alter the proposal could make it ineffective.
• Starting in March 2008 during the near-collapse of Bear Stearns, the Fed initiated what was expected to be a six-month program to avert further bank defaults among the 20 top investment banks that regularly trade Treasury securities. Under federal law, the program may continue beyond September 2008 only if "unusual and exigent circumstances" exist in the financial markets. Under the program, the government may hold a wide variety of investments, including hard-to-sell mortgage-backed securities, as collateral for the overnight loans.
• Speaking Tuesday, Fed Chairman Ben Bernanke reiterated his support for the proposed overhaul of Fannie Mae and Freddie Mac. "If these firms are strong, well-regulated, well-capitalized and focused on their mission, they will be better able to serve their function of increasing access to mortgage credit, without posing undue risks to the financial system or the taxpayer," Bernanke said. (CAR, 7/10)

Mortgage Rates Rise - Freddie Mac reports a slight jump in the 30-year fixed mortgage rate to 6.37 percent during the week ended July 10, from 6.35 percent the prior week. The five-year adjustable mortgage rate also moved up, climbing to 5.82 percent from 5.78 percent. However, the 15-year fixed rate fell to 5.91 percent from 5.92 percent; and the one-year ARM was unchanged at 5.17 percent. (Chicago Sun-Times, 7/11)

Housing Rescue Bill Has Hurdles - Once it passes the Senate, the Senate version faces substantial opposition from the House of Representatives. The White House also is still threatening veto. Roadblocks include Rep. Barney Frank (D-Mass.), the Financial Services Committee chairman who won House approval of his version in May. He has made it clear he doesn’t plan to accept the Senate proposal without changes. Speaker Nancy Pelosi (D-Calif.) is working to quell a revolt in the House by representatives who insist that housing tax breaks and any spending in the package must be paid for with tax increases or spending cuts to prevent an increase in the deficit. There is also a push by some lawmakers for far more money for fixing up foreclosed properties. The Congressional Black Caucus also opposes language in the Senate bill that bars the FHA from insuring mortgages obtained by borrowers whose down payments were paid by the seller. (AP, 7/9)

Housing Inventories Fall in Major Cities - Los Angeles among major U.S. cities seeing inventories decline:

• Boston: -10%
• Dallas: -10.6%
• Houston: -2.4%
• Las Vegas: -18.5%
• Los Angeles: -7.4%
• Minneapolis: -4.8%
• Orange County, Calif.: -15%
• Orlando: -3.1%
• Phoenix: -2.6%
• Sacramento: -22.4%
• San Diego: -6.7%
• Tampa, Fla.: -7% (Wall St. Journal, 7/10)

Sources: California Association of REALTORS, Associated Press, Wall Street Journal, Chicago Sun Times, New York Times.

1230

Local Numbers Improve over Last Month, Sunday, July 6

Short blog tonight, as it's getting late...Hope everyone had a wonderful holiday!!

Southland Association of REALTORS(R) released May stats for both the Santa Clarita and San Fernando Valleys. Both show that prices and number of sales have improved over the prior month. So, it look like we're at a turning point!

Mortgage rates fall, applications rebound - Rates on 30-year fixed mortgages fell for the first time in three weeks after the Federal Reserve said last week that it expects inflation to level off, according to mortgage backer Freddie Mac. Mortgage application volume rose 3.6% during the week ended June 27, according to the trade group Mortgage Bankers Association's weekly application survey. (CNNMoney, 7/2 and 7/3)

Single-Family Homes Sales in the Santa Clarita Valley Increase 23%, Posting 5th Consecutive Month of Gains

Sales of existing single-family homes picked up during May in the Santa Clarita Valley, posting the fifth consecutive month of increases, the Southland Regional Association of Realtors reported on Thursday, June 26.

Realtors closed escrow on 220 homes, an increase of 22.9 percent over a year ago May and 23.6 percent higher than the tally reported this April. May also marked the first time since June 2007 that more than 200 homes sold in a single month. Every month since January has seen more homes sold than the prior year.

With more activity coming in the lower price ranges, the median price of the single-family homes sold during May slipped by 14.1 percent from a year ago to $450,000.

The condominium median price of $305,000 was down 14.1 percent from a year ago, but up 9.3 percent from the April median.

Pending sales – a measure of future resale activity – increased 19.0 percent from a year ago to a total of 339 open escrows. However, pending sales fell 11.0 percent compared to this April.

Surprisingly, the inventory of homes for sale is dropping, hitting levels that are close to levels where industry experts believe the market is balanced between buyers and sellers. At the current pace of sales, the inventory represents a 6.6-month supply. A balanced market appears when the inventory offers a 5- to 6-month supply.

San Fernando Valley Home Sales Rise for the Fifth Consecutive Month

The residential real estate market in the San Fernando Valley faired better than other regions of the state during May as buyers negotiated enough bargains to post the fifth consecutive month of sales increases, the Southland Regional Association of Realtors reported on Thursday, June 26.

Increased sales activity in the lower price ranges continued to bring the median price of homes sold down while also reducing the inventory of properties listed for sale.

A total of 669 single-family homes closed escrow throughout the San Fernando Valley during May. That was an increase of 6.4 percent from a year ago and 22.3 percent higher than the April sales total. While overall activity remains low by historical standards, every month since January has seen more sales consummated with the help of Realtors.

Following traditional buyer preferences, condominium sales were down 32.8 percent from a year ago to a total of 168 closed escrows. However, condo sales did rise on a month-to-month basis, posting a 15.1 hike over April.

The median price of single-family homes fell 30.8 percent to $450,000 as buyers focused on properties priced under $500,000.

Likewise, the median price of the 168 condos sold last month fell by 22.7 percent to $299,000.

Pending sales – a reliable measure of future sales activity – suggest that sales will remain strong through the coming months as buyers show ongoing faith in the local economy and the residential real estate market.

The pending sales total of 1,122 open escrows was up 19.9 percent from a year ago and 3.7 percent higher on a month-to-month basis.

Indeed, the 7,078 properties listed for sale throughout the San Fernando Valley was a surprisingly low number. It was up 5.7 percent from a year ago, but down 2.2 percent from the April tally.

At the current pace of sales, the inventory represents a mere 8.5-month supply. That is still a buyers’ market, but the inventory is down from the double-digit supply of recent months and close to the 5- to 6-month supply deemed to represent a balanced market.

For comparison, the number of properties listed for sale during the 1990s hit a record high of a 23-month supply. Even at the worst point in the current cycle, the highest the inventory rose was to a 15.1-month supply.

Sources: Southland Regional Association of REALTORS(R), CNNMoney

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®