Westside Realty Rap

California January 2009 Home Sales

2009-03-13T12:13:00.000-07:00

An estimated 29,458 new and resale houses and condos were sold in California last month. That was down 22.1 percent from 37,836 in December and up 53.9 percent from 19,145 in January 2008. Sales have increased on a year-over-year basis for the last seven months. California sales for the month of January have varied from last year's low of 19,145 to a high of 47,138 in 2004, while the average is 30,837. MDA DataQuick's statistics go back to 1988.

The median price paid for a home last month was $224,000, down 10 percent from $249,000 for the month before, and down 41.5 percent from $383,000 in January a year ago. Around half the drop in median is due to price depreciation, the other half due to shifts in the types of homes selling, and how those homes are financed. Last month's median was the lowest since it was $220,000 in May 2001.

Of the existing homes sold last month, 60.4 percent had been foreclosed on in the prior 12 months. A year ago it was 29.6 percent.

The typical mortgage payment that home buyers committed themselves to paying last month was $969. That was down from $1,110 in December, and down from $1,790 in January last year. Adjusted for inflation, mortgage payments are 54.5 percent below the spring 1989 peak of the prior real estate cycle. They are 62.0 percent below the current cycle's peak in June 2006.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Indicators of market distress continue to move in different directions. Foreclosure activity waned in the fall but edged higher in December and remains near record levels, while financing with adjustable-rate mortgages is at an all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity has edged a bit higher, MDA DataQuick reported.

Importance of community elements

2009-02-10T13:23:00.000-08:00

Community elements essential to supporting favorable home prices over the long haul

With lower home prices and attractive mortgage rates, 2009 will present plenty of bargains for real estate shoppers. But as the historic bust continues, Americans everywhere are learning a painful lesson about home buying: property values don't always increase. As such, anyone looking to purchase a home this year should make sure they're buying into a community that can support long-term value. With the help of housing experts, U.S. News compiled a list of the top 6 ingredients of strong housing markets:

Please note that although the following factors will help support a home's value over the long term, they can't prevent short-term declines in a given market—especially in light of the ongoing real estate crash. "These would be forces that are going to impact [your home] over the next five to ten years, as opposed to next year," says Mike Larson of Weiss Research.

1. A well-groomed neighborhood: Well-maintained homes and landscaping have a positive effect on property values in that community, says Joshua Dorkin, founder and CEO of BiggerPockets.com, a real estate networking and information site. By caring for the appearance of their homes, residents help to create a more aesthetically-pleasing environment that future real-estate hunters will want to buy into. So when you're eyeing a home, make sure to take a drive through the entire neighborhood. Take note of how the neighbors care for their homes, lawns and gardens. "Run-down houses and abandoned cars are big red flags," Dorkin says.

2. Good schools: Given the importance of education, communities located within strong school districts tend to support higher home prices. Parents, after all, will want to move into the communities with the best educational opportunities. "The school district is important in terms of increasing demand for that particular area," says Richard Moody, chief economist at Mission Residential. Would-be home buyers can determine the strength of a local school system by accessing online information from local governments or community websites, Moody says.

3. Low Crime: Low crime rates also support strong home values. Since nobody wants to live in a neighborhood where they feel unsafe, crime limits housing demand in a given community. As a result, it's important to obtain crime statistics for the neighborhood you're considering moving into. The best way to do that, says Steve Dexter, a foreclosure expert and author of the book Beat the Banks, is to contact the local police department. "The police department is a public utility," Dexter says. "Most medium- to large-sized [communities] have a public information [officer] that is dedicated to interacting with the public." By contacting this office, home shoppers can get their hands on all the information they'll need to determine a community's level of safety.

4. Close to public transportation: Proximity to public transportation or commuter rails can also help boost home values, says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. He argues that Americans are increasingly willing to pay a premium for properties that allow them to be less dependent on cars. "Access to bus lines and commuter rail lines is of huge value," Phipps says. "The price of fuel is going to go up again and a lot of my clients are saying, 'O.K., how do we position ourselves to minimize that impact?'" Phipps says.

5. Favorable population trends: It's also important to look at the population trends in the city you're considering moving to, Moody says. "You want to see a track record of steady population growth, which supports growing demand for housing, which will in turn support rising home values," Moody says. Such data can be found online at the U.S. Census Bureau, or though local county or township web sites, he says.

6. Healthy employment landscape: Employment plays a key role in population trends, as workers migrate to locations where they can find jobs. Thus, a healthy employment outlook is a key component of a strong housing market. "If you are in one of these upper Midwest cities and you've got layoffs, especially in a sector like automotives where the jobs are disappearing and they are not coming back, that is a huge problem," Larson says. Home shoppers can obtain economic data from the local government or chamber of commerce, Larson says. Pay special attention to the unemployment trends and find out if any new companies are slated to move into—or out of—the area. "A lot of communities have been trying to attract the sort of economically insensitive industries like biotech and [pharmaceutical companies]," Larson says. "If you've got an area where that kind of business is being brought in—through tax incentives or other efforts—that would be a positive for your local area."

The Top 5 Housing-Market Hopes for 2009

2009-01-05T18:17:00.000-08:00

Here are the five best reasons to be hopeful about housing in 2009:

1. Cheap mortgage rates: With inflationary pressures easing and economic concerns mounting, shell-shocked investors are seeking the protection of government securities, such as 10-year treasury notes, driving down yields. The lower yields, coupled with the Fed's recently announced plans to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac have dragged mortgage rates to multi-year lows. Thirty-year, fixed mortgage rates hit an average of 5.47 percent last week, the lowest they've been since 2004, according to Freddie Mac.

To be sure, not everyone will be able to take advantage of these attractive rates: Tougher lending standards will prevent many would-be buyers from getting into the market, while homeowners whose houses are now worth less than what they owe on their mortgage won't be able to refinance. Still, the rates present a welcome incentive for qualified borrowers to step up to the plate. "Lower mortgage rates mean more people with those credentials will be able to qualify," says Patrick Newport, a U.S. economist at IHS Global Insight. While that might not make a dramatic impact on the market, it could be enough to keep home sales from declining as much as they otherwise would, Newport says.

2. Lower prices: Home prices at the national level have already fallen 21 percent from their 2006 peaks. And in certain bubble markets, the crash has been even steeper-prices have fallen more than 30 percent in Phoenix and Las Vegas over the past year alone. Although that's a big blow to homeowners-the housing bust is expected to wipe out more than $2 trillion in home values in 2008-lower prices do help stimulate buyer demand, which is badly needed to mop up the excess housing inventory. And while home prices are expected to drop further in 2009, values in certain markets are already at levels low enough to tempt bargain hunters. "Falling home prices aren't part of the problem, they are part of the solution," says Mike Larson, a real estate analyst at Weiss Research.

3. Fewer housing starts: In the face of dwindling demand, home builders have been forced to sharply pull back on new construction. The government reported Tuesday that November housing starts dropped to their lowest level since 1959, when officials started keeping the statistics. While that's bad news for the economy-because it means fewer jobs for builders and others-it's an important step in bringing housing supply back in line with demand. The cutback will limit the supply of new homes coming into the market, which helps to reduce the glut of unsold homes that is putting such downward pressure on housing prices. "In order to get rid of the inventory, builders have to cut back even further and prices have to drop," Newport says. "It's very painful, but there is no way to get around the fact that that's what you need to do to equilibrate the market."

4. Obama stimulus: In an attempt to hoist the economy out of its rut, President-elect Barack Obama has announced plans for a massive federal spending program. The initiative is expected to put between $500 billion and $1 trillion into infrastructure repair and other projects in an effort to keep Americans working. Should this program succeed in preventing unemployment from skyrocketing and keeping the economic contraction from hitting the dourest projections, certain housing markets may firm up quicker than expected, says Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School of Business. In the best-case scenario, "the housing market declines become contained to those markets where house price declines are significant," Wachter says.

5. Credit programs: It will be tough for the housing market to come back to life until the credit markets-which have been log-jammed by fear for more than a year-begin to unlock. Like the fight to limit unemployment, reviving the credit markets is a daunting challenge. But remember, the federal government has already taken a number of steps designed to do just that. The Federal Reserve has slashed its benchmark interest rate to between 0 and 0.25 percent and committed nearly $2 trillion to new lending programs, bailouts, and additional measures designed to bolster the financial markets. Meanwhile, Congress passed a $700 billion bailout and the Treasury has already injected a chunk of that money into banks of all sorts. While these efforts haven't been enough to restore the credit markets to health, they have produced results. Interbank lending, for example, has eased. And should this modest victory lead to a broader recovery in the credit markets, the economy-and the housing demand that comes with growth-could turn around quicker than expected. "Right now, panic is driving the credit markets," says Moody of Mission Residential. "If, for whatever reason, confidence were to resume and people's appetite for risk was starting to increase, then you could start all of a sudden seeing credit flowing much more freely, which obviously supports spending in both business and households."

Top 5 home-buying blunders for 2009

2008-12-31T07:49:00.000-08:00

With cheaper home prices, lower mortgage rates and big discounts on foreclosures, buyers will have plenty of incentives to get into the real estate market in 2009.

But anyone considering buying a house next year should proceed with caution. After all, a gloomy outlook for home prices, the ongoing financial crisis and a potentially historic recession create a number of potential pitfalls.

* Talk back: Will home prices keep falling in 2009?

To help you navigate an uncertain market, we've compiled a list of leading home-buying mistakes for 2009, based on conversations with real-estate professionals.
1. Buying for the short term
With home prices at the national level expected to continue declining throughout most of next year at least, 2009 won't be a good time to try to turn a quick buck in the real-estate market.

Many homes purchased in 2009 will lose value in the short term. And although they are likely to recover that value when the market rebounds, it remains unclear just when home prices will bounce back.

"If you're not planning on living in that house for more than three to five years, I wouldn't buy anything right now," says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. "Nobody knows what is going to happen to prices over the next few years."

So if you're going to buy real estate in 2009, you're better off buying a home that you plan to live in for a long time, rather than a short-term investment property.
2. Not understanding your local market
Although it's easy to get caught up in the gloomy national housing trends, prospective homebuyers should be paying more attention to what's going on in the market where they are considering purchasing property. After all, home prices in your market could be moving in the direction opposite to the rest of the country.

"Individual markets are not the national market," says Keith Gumbinger of HSH Associates. "(The real estate market) is tremendously individualized."
More from MSN Money and U.S. News & World Report
Home financing © Corbis

* How to lowball a home seller
* 5 housing market hopes for 2009
* 5 keys to finding housing bargains
* Mortgage rates in 2009: 7 things to know
* Survival strategies for home sellers
* The 15 best small businesses to start in 2009

3. Not scouring for deals
Prospective homebuyers can obtain a solid understanding of conditions in their market by talking to a real-estate professional, reading the local newspaper's real-estate section or finding a good housing blog that covers the area.

With the fall in home prices expected to persist, 2009 will be a buyer's market. As such, people considering a home purchase should understand that they are in the driver's seat and be on the lookout for deals.

"It's definitely a buyer's market," says Mark Hanson, a managing director who handles real estate and finance research for the Field Check Group. "Look for deals; go in there and lowball; look at foreclosures."

But while haggling is healthy, be careful not to go overboard. Buyers who make insultingly low offers are likely to be considered "bottom feeders" and dismissed by sellers, Gumbinger says.
Video on MSN Money
home-buying blunders © Ingram Publishing/Jupiterimages
Look out below
Home prices in October dropped by the sharpest annual rate on record and there's no sign the pain is over, according to the Standard & Poor's/Case-Shiller 20-city housing index, which fell by 18% from a year earlier. (Dec. 30)
4. Purchasing a foreclosure just because it's cheap
While foreclosures can offer homebuyers big discounts, such properties sometimes come with a great deal of baggage.

For example, the previous owners could have left the home in poor condition, requiring thousands of dollars of repairs, says Joshua Dorkin, the founder and CEO of BiggerPockets.com, a real-estate networking and information site.

"A pitfall for 2009 would be buying a foreclosure without knowing what you are getting into," Dorkin says. "Because that great deal may not be so good if you get inside and you find out that the floors are ripped up and the walls are destroyed."

* MSN Real Estate: 10 questions for first-time homebuyers

Before you decide to go foreclosed-home shopping, do your homework or contact a real estate professional with experience with such transactions.
5. Overly aggressive buying
Even if you've found the perfect property, make sure it is something you can reasonably afford.

Many economists expect the current recession to be the nastiest in decades, with some projecting the unemployment rate to hit 9%. That means that 2009 won't be a good year to try to stretch your finances.

"Just because a lender says you qualify for this much of a loan doesn't mean you should buy that much of a house, especially if that is 50% of your take-home pay," Hanson says. "What happens if you lose your job? We're going into a period of heavier unemployment, so buy conservatively."

Southland October home sales climb to highest level of the year

2008-12-11T08:42:00.000-08:00

Southern California home sales rose unseasonably last month from September as buyers shook off gloomy financial news and took advantage of often-steep discounts. The median sale price fell to $300,000 - a 67-month low - as foreclosures once again accounted for half of all resales, a real estate information service reported.

A total of 21,532 new and resale houses and condos closed escrow in the six-county Southland in October - the highest for any month this year. Last month's sales rose 5.0 percent from 20,497 in September and jumped a record 66.7 percent from 12,913 in October 2007, according to San Diego-based MDA DataQuick, a real estate information service.

Fueled by lower prices, Southland sales have risen on a year-over-year basis for four consecutive months, breaking a 33-month streak of annual declines.

October home sales dropped below September's in 11 of the past 20 years, when the change between the two months averaged -1.2 percent. October has never been the peak month for sales in any year back to 1988, when DataQuick's statistics begin.

"You could easily imagine a meaningful decline in sales last month, given the seasonal norm and the dire financial news that potential buyers had to ponder in September. But we have yet to see any big, sudden drop in the number of transactions closing escrow. It tells us there were a lot of very serious buyers in the market during late summer and early fall - buyers who consider housing a relatively good buy or investment," said John Walsh, DataQuick president.

He added: "Whether the worst of the housing correction is behind us will depend largely on the depths of this economic downturn, especially with regard to job losses. Also important will be the outcome of recently announced efforts to reverse the tide of foreclosures."

October's home sales total was the highest in 20 months but was still the second-lowest for an October since 1996. Last month's sales were 12.4 percent lower than the 21-year average for October sales.

Last month's record annual sales increase reflects two things: Very weak sales a year ago on the heels of the August credit crunch and earlier subprime meltdown, and this year's big sales gains in inland markets where prices have fallen 30 percent or more. Depreciation in such areas has triggered record foreclosures, which tend to sell at a discount, attracting bargain hunters.

Fifty-one percent of existing homes that closed escrow in October were foreclosed on at some point in the prior 12 months. That's up from a revised 50.0 percent in September and 16.0 percent in October 2007.

At the county level, these "foreclosure resales" ranged from 39.2 percent of October existing home sales in Orange County to 67.7 percent in Riverside County. In Los Angeles County foreclosure resales were 40.3 percent of sales; in San Diego 48.6 percent; San Bernardino 65.2 percent and in Ventura County 47.0 percent.

High foreclosure resale levels help explain the Southland's $300,000 median sale price in October, the lowest since it was $298,000 in April 2003. Last month's median was 2.8 percent lower than $308,500 in September and 32.6 percent lower than $445,000 in October 2007. The October median stood 40.6 percent below the peak $505,000 median reached in spring and summer of last year.

Several factors explain the plunge in the median price, the point where half of the homes sold for less and half for more: Regionwide home price depreciation; much slower high-end sales; and the rising market share of foreclosure resales, which tend to be located in mid-to lower-cost areas.

Many of the region's relatively affordable neighborhoods saw October sales more than double from a year ago. Use of FHA-insured loans allowing a down payment of as little as 3 percent represented nearly one-third of all Southland purchase loans last month, up from 2 percent a year earlier.

Meanwhile, use of larger mortgages known as "jumbo loans," common in higher-cost coastal neighborhoods, is still far below normal. Before the credit crunch hit in August 2007, 40 percent of Southland sales were financed with jumbos, then defined as over $417,000. Last month just 13.1 percent of purchase loans were over $417,000.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,413 last month, down from $1,458 the previous month, and down from $2,115 a year ago. Adjusted for inflation, current payments are 33.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 45.8 percent below the current cycle's peak in June 2006.

Indicators of market distress continue to move in different directions. Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat but might be emerging, MDA DataQuick reported.

Mortgage Rates Falling

2008-11-15T06:03:00.001-08:00

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.14 percent with an average 0.7 point for the week ending November 13, 2008, down from last week when it averaged 6.20 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.

The 15-year FRM this week averaged 5.81 percent with an average 0.7 point, down from last week when it averaged 5.88 percent. A year ago at this time, the 15-year FRM averaged 5.88 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.98 percent this week, with an average 0.6 point, down from last week when it averaged 6.19 percent. A year ago, the 5-year ARM averaged 5.96 percent.

One-year Treasury-indexed ARMs averaged 5.33 percent this week with an average 0.5 point, up from last week when it averaged 5.25 percent. At this time last year, the 1-year ARM averaged 5.50 percent.

"Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the actions of the Fed in recent weeks to assist commercial paper markets appear to be thawing part of the credit freeze that has gripped capital markets in the U.S., giving banks some breathing room. This is the second week that rates have come down for fixed-rate mortgages."

"Mortgage applications for home purchase loans fell during the final week in October to the slowest pace since the week of December 29, 2000, based on figures published by the Mortgage Bankers association. Meanwhile, the National Association of Realtors® (NAR) reported that pending existing home sales fell 4.6 percent in September, below the market consensus; however, the index was 1.6 percent above that of the same period last year." Today's Local Market Conditions Report

Turnaround in the Real Estate Market?

2008-09-19T06:39:00.001-07:00

California Leads the Way in Hot Markets

The real estate conditions are right in California -- falling prices, pent up demand, low interest rates -- to bring about a perfect storm of real estate sales, creating a hot market statewide. While some prognosticators tout the woes of price drops of up to 50 percent, buyers are seeing the devaluation as a signal to get off the fence. And they are doing just that with a vengeance.

Statewide, homebuyers purchased at an annual rate of nearly 490,000 homes in July -- up 43 percent from a year ago. July marked the third consecutive month for home sales to top the 400,000 mark, according to California Association of Realtors President William Brown.

"Year-to-year increases in the number of transactions ranged from a 6.7 percent increase in the San Francisco Bay Area to a 176.5 percent increase in the Riverside/San Bernardino region," he says on the trade group's web site. "In general, greater percentage gains occurred in lower-priced areas that had been most adversely affected by the market downturn since late 2005 and that are concurrently experiencing the biggest declines in prices."

The inventory of homes in California continues to drop from last year's levels as well. For the month of July, there is a 6.7 month's supply compared to last July's 10 month supply of homes.

30-year mortgages fall to six-week low

2008-09-01T07:53:00.001-07:00

Freddie Mac, the mortgage company, reported that 30-year, fixed-rate mortgages dropped to 6.40 percent this week, down from 6.47 percent last week. The new rate was the lowest since the week of July 17 when 30-year mortgages stood at 6.26 percent. Rates on 15-year, fixed-rate mortgages fell to 5.93 percent, down from 6 percent last week. Rates on five-year, adjustable-rate mortgages averaged 6.03 percent this week, up slightly from 5.99 percent, and one-year, adjustable-rate mortgages edged up to 5.33 percent, from 5.29 percent.

WASHINGTON

U.S.-backed loans see fees rise

Borrowers who take out government-insured mortgages will have to pay higher fees under new rules announced this week. Effective Oct. 1, the Federal Housing Administration will raise its mortgage insurance fee to 1.75 percent for a new mortgages and many refinanced loans. That's up from 1.5 percent. For a borrower with a $200,000 loan, that means a fee of $3,500, up from $3,000 in the past.

NEW YORK

Struggling Lehman plans to lay off 1,500

Lehman Brothers, the ailing Wall Street bank, plans to lay off as many as 1,500 employees, or nearly 6 percent of its work force, before it announces third-quarter results on Sept. 15, a person briefed on the plans said. Lehman has already laid off 6,000 workers since June 2007, mostly in its mortgage origination and securitization businesses. It was not immediately clear what divisions would bear the brunt of the latest cuts but virtually every Wall Street business is struggling, and investment bankers and traders at Lehman were anticipating layoffs. A Lehman Brothers spokesman declined to comment.

WASHINGTON

Banks borrow from Fed

Banks borrowed more over the past week from the Federal Reserve's emergency lending program, while Wall Street firms passed for the fourth straight week. A Fed report said commercial banks averaged $18.47 billion in daily borrowing over the past week. That compared with a daily average of $17.51 billion in the previous week.

Selling in a Buyer's Market

2008-07-06T17:27:00.000-07:00

As the supply of homes for sale continues to grow throughout the U.S., hopes that the spring and summer selling season will see a rebound are dwindling. Many experts have declared that any meaningful rebound might begin next year. Home prices continue to decline in many areas, fueled by tight lending standards and a rising supply of houses on the market. It' been a long time since home sellers have faced these conditions -- in fact, many homeowners looking to sell are in uncharted waters.

Face the New Reality -- It's a Buyers' Market

Homeowners who want to sell have a choice: sell in the current market, or wait until later, when market conditions improve. Of course, the latter assumes they can wait. But if you are determined to sell, you need to forget about the real estate market of just a few years ago and face the new reality in many real regions -- it's a buyers' market, and you will be competing with a growing supply of motivated sellers to get buyers interested in your house.

Real estate professionals say that, when trying to sell your home in a buyers' market, the two most important factors, after location, are price and condition. I'll add flexibility. Buyers know real estate prices ran up far too much during the last several years of the real estate boom, and just because you may have paid too much for your home doesn't mean buyers think they should have to pay to bail you out. With this in mind, here are some of the strategies experienced realtors typically advise to help sell a house in a buyers' market.

Price It Right: Real estate pros say the key to selling a house is to “price it right.” Set the price at what you can get, not what you think it's worth. The fact of a sellers market is that it doesn't matter what you or your realtor think your house is worth -- the only thing that matters is what a buyer is willing to pay. You don't want to over-price your house, because buyers ignore it and your listing will lose its freshness and appeal, not to mention the uncompensated effort of keeping the home spotless during the showings. Also, the “original listing price” and “current asking price” are on your home's Multiple Listing Service (MLS) listing; if you do not show some decline from the original offering price, some buyers will see it as a sign you have unreasonable expectations of what you can fetch for your home. Sellers fear pricing too low and leaving money on the table, but there is little danger of this. If a home is priced too low, far below the competition, you should receive multiple offers that will drive up the price to fair market value.

Research Local Market: The best way to know if your home is priced fairly relative to comparable houses for sale is to compare your asking price to a comprehensive market analysis. This is the first step before you list your house. Get the listings of the houses in your area, and the price range. Look at the listing for every comparable home that is or was listed in your neighborhood over the past six months. Compare similar properties, make adjustments for locations, age, upgrades and lot sizes. and come up with a range of values. Also, get a list of the recent sales prices and the original listing prices of comparable houses in the area. You can track this down on web sites such as www.zillow.com , www.realtor.com, and/or ask a local realtor to do it for you.

Interest Rates

2008-04-16T05:29:00.001-07:00

Does It Matter Why Rates Are Low?

Here's a question which ought to cause some thought: Why is it -- if we're in the middle of a mortgage meltdown -- that interest rates are both low and falling?

With fewer lenders, fewer loan products and tougher qualification standards you might reasonably expect nervous investors to want higher rates to compensate for more risk. Instead, we're seeing just the opposite.

Freddie Mac reported that interest levels for 30-year fixed-rate financing dropped to 5.88 percent plus .4 points last week. This rate is not much above the historic levels reached during the summer of 2003 when fixed rates dipped to 5.21 percent with .5 points.
The one-year LIBOR rate hit 2.51 percent in March, according to HSH.com, a financial publisher. A year ago the index was at 5.32 percent.
The ever-conservative 11th District Cost of Funds Index is at 3.56 percent -- down from 4.3 percent a year ago.

The declines we're seeing with interest rates appear to make no sense -- unless the supply of mortgage money continues to remain at exceptionally high levels. That's apparently the case, otherwise how else can one explain today's mortgage levels?

For most of us the reason why rates have fallen doesn't actually matter. What does matter is that rates are low relative to both recent levels and historic standards. Whether such bargain-basement interest levels will continue cannot be assured -- and that's reason enough to speak with lenders if you have an interest in financing or refinancing real estate at this time.

2008-03-13T17:47:00.000-07:00

March 13, 2008

Housing: Best time to buy in four years

Valuations—the difference between a home’s actual price and what it should cost—are the lowest they’ve been in four years.

MAKING SENSE OF THE STORY FOR CONSUMERS

• More than 88 percent of 330 housing markets surveyed showed price declines and improved affordability during the last three months of 2007, according to bank National City Corp. and financial analysis firm Global Insight.
• The survey covered home valuations during the last quarter of 2007, but there's reason to believe that valuations are even more favorable for buyers today, according to the authors of the report.
• The biggest gains in affordability occurred in California, Michigan and Florida, which are areas that also have been some of the hardest hit by foreclosures. Those states registered 43 of the 50 biggest price declines.

Home equity slips below 50 percent

Homeowners’ debt on their houses exceeded their equity for the first time since the Federal Reserve Board began tracking it in 1945, falling below 50 percent.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Today’s low equity is a result of lax lending standards during the housing boom, when many buyers were able to obtain mortgages with little or no money down. Although some of those buyers could not afford their homes and lost them to foreclosure, some could afford houses—with help from alternative loan models—and but for those loans would have found homeownership beyond their reach.
• The statewide median price of existing single-family homes for January 2008 was $430,370. The last time we had a comparable median price was in March 2004, when the median was $428,060. Homeowners who bought their homes before 2004 will likely have more equity than those who purchased since 2004.
• The median home price in January 2003 was $336,210. Comparing the current median to five years ago, it is now 28 percent higher. People who buy a home and hold onto it at least five years will usually come out ahead.
• A house is not a stock. It’s always been first and foremost a place to live, to raise a family or to retire. Even when prices were falling, home buyers who pursued a buy and hold strategy—retaining the property at least five years—have almost always come out ahead in the long-run. Historically, the value of single-family homes in California has increased about 9 percent a year.

Buyers jump into murky housing market

While low interest rates and depressed home prices have started to attract entry-level home buyers, the typical home in San Diego County remains out of reach for the average family.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Bleak economic news is usually followed by a downward turn in mortgage interest rates, but despite some fairly poor news this week about banks selling securitized loans at fire sale prices, the overall average of 30-year fixed-rate mortgages eased by just two basis points (.02 percent). The fact that news that would usually produce a significant decline in mortgage rates instead preceded only a modest drop could be a sign that rates may soon go up. Consumers should take advantage of low interest rates while they last.
• According to home-finance corporation Freddie Mac, U.S. house prices have climbed 6.2 percent a year over the past 30 years.
• The recently passed economic stimulus package raised the conforming loan limit to up to $729,750 in some areas. So-called "expanded conforming" loans should provide some borrowers with an opportunity to finance or refinance at lower rates than the jumbo market may currently offer, provided borrowers can meet the guidelines for a conforming loan, which are usually more restrictive than jumbo market underwriting criteria.

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Don't refinance for the wrong reasons!

2008-02-23T17:43:00.000-08:00

The economy is going through a rough patch, and the stock market is well below its all-time high. Mortgage rates have been dropping since the end of last year.

For homeowners, that can mean only one thing: It's time to think about refinancing your mortgage.

"If you can save on the interest you're paying, then it's time to do a mortgage refinance," explains Fred Glick, managing member of US Loans Mortgage LLC, a Philadelphia-based mortgage broker.

For some homeowners whose adjustable-rate mortgage (ARM) interest rates are rising, the low interest rates on 30- and 15-year fixed-rate mortgages offer an opportunity to refinance into something that's a known quantity.

"If you have a mortgage that's going to adjust, it's important to get into a fixed-rate program now," says Emma Butler, a certified mortgage planner with Mobium Mortgage Group, in Chicago.

In Freddie Mac's latest survey of mortgage rates, a 30-year fixed-rate mortgage averaged 5.72 percent with fees totaling 0.4 percent. A 15-year fixed-rate mortgage cost an average of 5.25 percent, plus 0.4 percent in fees.

A year ago, a 30-year mortgage cost an average of 6.3 percent, up more than a half percent, while the average 15-year mortgage cost 6.03 percent, nearly a full percentage point higher than what is available today.

Should you do a mortgage refinance now? Or, wait to see if interest rates drop further?

Conventional wisdom used to say that if you could shave 2 percentage points off of your interest rate, you should refinance your mortgage. But today, with zero-cost mortgage refinance options widely available, it may make sense to refinance if you can shave a half point off the interest rate you're now paying -- without lengthening the loan term.

"If you can save money by doing a mortgage refinance, you should do it. Some clients lately have saved $250 per month by refinancing," Butler notes.

But understand that with a zero-cost refinance, you won't get the very lowest interest rate for your mortgage.

"You can expect to pay an additional quarter percent in the interest rate if you want a zero-cost refinance," explains Dick Lepre, a senior loan consultant with Residential Pacific Mortgage, in San Francisco.

One problem some homeowners are having is that they had previously listed their properties for sale. Some lenders will not refinance a property that had been listed for sale within six months of the refinance. But other lenders will, Butler explains.

"Each lender has his or her own guidelines," Butler says. "Some will let you do a mortgage refinance if the property has been off the market for one day. It varies from lender to lender."

"We have three investors we work with who will do Fannie Mae loans even on properties [that] have been off MLS for one day. One of the three will not allow you to do a cash-out refinance, but the other two will," offers Lepre.

When should you do a mortgage refinance?

"Don't do it to go on vacation, buy shoes or go out to dinner. Do not mortgage your house for something like that," says Glick. "But if you're going to pay off your credit card and cut it up, or if you need to do it so you do not go into default on your loan, then absolutely you should refinance."

Glick believes you should never do a mortgage refinance just to get a tax deduction. "Don't refinance for tax purposes."

And finally, don't refinance to lower your payment but lengthen your loan -- unless you are facing possible foreclosure.

When you refinance, the goal should be to lower the amount of interest you're paying, either by lowering the interest rate or shortening your loan term, Glick adds.

2008-02-14T06:40:00.000-08:00

LOS ANGELES (Reuters) - Wyndham Worldwide Corp (WYN.N: Quote, Profile, Research) is looking to take advantage of the slump in real estate prices nationwide by picking up properties it can convert into lucrative timeshare resorts, still a strong-growing section of the vacation market.

"The silver lining in the real estate market today is that when you look at where we were a few years ago we were paying top dollar for everything... that's kind of turned around a little bit now," said Franz Hanning, chief executive of Wyndham's Vacation Ownership unit, at the Reuters Travel and Leisure Summit in Los Angeles.

Hanning, who runs the world's largest time share operation, said the company last year bought a development in Panama City, Florida, at bargain prices because sales of the units had stalled.

"It was a great deal for us. I anticipate there will be a few more of those before this turns around," said Hanning.

"Now the phone rings our way with people who either have projects that were originally built as whole-ownership condos that now they can't sell, or people aren't closing on them," Hanning added. "So there's opportunity for us out there and we have taken advantage of those opportunities to acquire product at prices that -- quite frankly -- we haven't seen in a while."

On the downside, Hanning said his company had more work making sure customers stay up-to-date with payments on timeshare properties as economic conditions deteriorate.

"Our collectors have to work a little harder now, to keep people current," said Hanning.

Conversely, the chief executive of Wyndham Hotel Group, Stephen Rudnitsky, said he hadn't seen any ill effects of the slowing economy yet.

Wyndham, which operates hotel brands such as Ramada, Days Inn and Super 8, serves primarily leisure rather than business travelers.