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.

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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®.

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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.

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.

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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.

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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.

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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.

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