Buyers Fair Galore: Week in Review, March 17-23

Thoughts on the Current Market:
 Prospective borrowers worried about the foreclosure crisis should obtain pre-purchase homeownership counseling. A Harvard University analysis found that borrowers who received classroom and individual counseling were, respectively, 23 percent and 41 percent less likely to become 60 days delinquent than equivalent borrowers who did not undergo counseling.
 Calling the market low is a difficult task, and it's most often spotted in the rear-view mirror, according to MSN. While prices in many markets may have not yet hit their lowest point, the bottom may be near. And in other areas, only the pace of sales has been affected; prices have held firm or increased. Waiting for the absolute bottom puts consumers at risk of missing the best prices and getting caught up in a market on the upswing. (CAR, 3/20)

AV Home Show – the REALTOR® Association that covers the AV will have a booth for homebuyers and sellers March 28-30 in the Eliopulos Pavillon/Booth #46. Bring unwanted electrical items to be recycled and receive free parking. AVFair.com. (GAVAR, 3/17)

Home Buyer Fair – Southern California Home Buyer’s Fair will occur April 12-13 at the Los Angeles Convention Center in downtown Los Angeles. The REALTOR® Association that covers the SCV and SFV will help buyers access one of 20 $4000 grants and understand issues around purchasing homes in the valley. Educational seminars too. Entrance is free. HomeBuyersFair.com. (SRAR, CAR, 3/23)

Homeowners have filed suit against KB Home and Countrywide Financial Corp. alleging the companies inflated home prices through fraudulent appraisals. (SF Chronicle, 3/21)

Vast numbers of the country’s small and midsize home builders are feeling the pain form the credit crunch and housing downturn. (Wall Street Journal, 3/21)

Los Lomas Development Rejected – this 5,553-home development at the Newhall Pass was rejected by the Los Angeles City Council. (LA Times, 3/20)

California Leads US in Defaults, Price Drop, Slowing Growth - California leads the nation in foreclosures, home-price drops, and slowing economic growth. (Bloomberg, 3/20)

State Breaks Up Alleged Sub-prime Fraud Ring - Five people have been arrested and more are being sought in connection with an alleged mortgage fraud ring suspected of victimizing thousands of Californian homeowners. (LA Times, 3/19)

Capital Requirements Eased for Freddie & Fannie - Federal regulators on Wednesday eased capital requirements for Fannie Mae and Freddie Mac allowing them to pump an expected $200 billion into the troubled U.S. mortgage market. (Reuters, 3/19)

Central Valley Builders rely on the Internet to auction homes in hopes of drawing more buyers. (Fresno Bee, 3/18)

Auction firms are busy, especially in the Inland Empire region, where the number of homes repossessed by lenders in February increased nearly 21-fold in Riverside County and 15-fold in San Bernardino County compared with a year ago. (Riverside Press-Enterprise, 3/17)

Mortgage Rates Harder to Figure Out – Mortgage rates did, in fact, fall this week after the Fed cut rates again and took other steps to ease credit. But if recent history is any guide, the decline in mortgage rates may not last long. On mortgages, banking industry leaders say rate sheets often change several times during the course of a day, making the current situation all the more urgent for borrowers. Mortgages are moved by a variety of factors, with the most important in recent months being the spread, or difference, between 10-year Treasury bond rates and securities issued by secondary mortgage agencies. The difference is a direct reflection of the market's appetite for risk, and the closer the spread gets the more likely mortgage rates are likely to fall. Since the central bank lowered its Fed funds rate by three-quarters of a point Tuesday, rates for 30-year mortgages dropped from 5.96 percent to 5.66 percent, according to Bankrate.com. That's down from 6.37 percent four weeks ago. (CNBC, 3/21)

Mortgage Applications Drop - number of people applying for a home loan fell nearly 3% last week. Refinance volume fell 4.6%, while purchase volume declined 1% during the week. Refinance applications accounted for 49.7% of total applications, the first time all year that purchase application volume was larger than refinance volume. (CNBC, AP, 3/19)

Interest Rates Below 6% - Rates continued their wild swings. Fixed-rate mortgage rates plummeted, while adjustable-rates continued to skyrocket. The average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.98% from 6.37% the previous week. The average rate for 15-year fixed-rate mortgages, which are often used in refinance applications, plummeted to 5.24% from 5.72%. The average rate for one-year adjustable-rate mortgages rose to 6.95% from 6.72%, more than one percent higher than they were just two weeks ago. (CNBC, AP, 3/19)

Perspectives: S&P sees end to subprime mortgage writedowns (CNBC, per CAR, 3/20)
Standard & Poor's said subprime write-downs for large financial institutions are likely past the halfway mark, but they could still hit $285 billion.
 S&P's statement gave a boost to financial stocks and helped Wall Street indexes pare losses.
 The purging of bad loans in the subprime market through foreclosure or refinancing ultimately will strengthen everyone's ability to obtain mortgages.
 Fewer foreclosures mean fewer vacant homes, which may make a neighborhood a more desirable place in which to live. That, in turn, could increase the demand for housing.

Perspectives: Commercial real estate market is running strong (Bakersfield Californian, per CAR, 3/20)
Bakersfield's housing market is facing tough times, but commercial real estate in the area remains relatively strong, due partly to demand from the agriculture and oil industries.
 Demand for multifamily housing has surged as potential home buyers face tougher mortgage requirements, higher debt payments, and declining home values.
 The office market is solid, but warehouse and distribution sectors may slow if the economy weakens further.
 Banks have had trouble selling debt so financing is tight, but the federal government is stepping in aggressively with moves designed to protect large investment banks.

Perspectives: Bear Stearns Rescue Is `Finger in Dike,' Scholars Say (Bloomberg, per CAR, 3/20)
With Bear Stearns Cos.' rescue, the $200 billion subprime crisis joins a long history of government bailouts to preserve jobs, homes, and savings.
 Bear Stearns failing would have reverberated well beyond the investment banking sector. Large investment bankers such as Bear Stearns provide much of the capital that eventually finds its way into the pool of money used to fund mortgage loans.
 Most investment bankers are heavily leveraged. That means they fund investments by borrowing. If they invest well, they can pay off debt and still make a profit. But if no one will lend to them, investment bankers can neither pay debt nor make investments. That combination can cause an institution to fail. Bear Stearns was not the only heavily leveraged investment bank. Many other large Wall Street firms also are dependent on the ability to borrow to survive, so a loss of confidence resulting from the failure of a major player could easily have brought down several others.
 The credit crunch, or consumers' difficulty obtaining mortgage loans, is one of the greatest hindrances to a real estate market rebound. In recent months, even prospective buyers with good credit have had trouble securing a loan. If financial markets stabilize, that could help boost demand for housing.

Fed Cuts Key Interest Rate in Effort to Further Boost Economy - The Federal Reserve on Tuesday lowered the federal funds rate 75 basis points to 2.25 percent citing continued concerns about the country's softening labor market, stalled consumer spending, and turmoil on the financial markets over the mortgage credit crisis. (CAR, 3/19)

New Home Sales Declines 62% - The overall pace of new home sales across California was down just over 62 percent in January compared to the same period a year ago, according to the CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report. Sales of single-family homes dropped by 61 percent in January compared to 2007, while sales of town homes and duplexes were down 71 percent, and condominium sales fell 58 percent. (CAR, 3/19)

HUD Unveils Mortgage Reform Plan – As mentioned last week, the U. S. Dept. of Housing and Urban Development (HUD) last week proposed a plan for mortgage reform designed to help consumers better understand mortgage loan documents and make more informed decisions when it comes to the home purchase, in an attempt to help streamline the home-buying process and mitigate risk connected to the subprime mortgage crisis. HUD's proposal calls for revamping the 30-year old rules of the Real Estate Settlement Procedures Act (RESPA), and calls for changes in disclosure of the loan terms and closing costs consumers pay when they buy or refinance their home. HUD also is proposing that mortgage lenders and brokers provide consumers with a standard Good Faith Estimate. (CAR, 3/19)


Sources: CNBC, Associated Press, California Association of REALTORS, Riverside Press-Enterprise, Fresno Bee, Reuters, Bloomberg, Los Angeles Times, Wall Street Journal, San Francisco Chronicle, Southland Regional Association of REALTORS, Greater Antelope Valley Association of REALTORS.


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