Recently Financial experts like Christopher Thornberg are saying due to the increase in national debt loan rates will raise dramatically over the next few months!

Market News

FHA hiking premiums this spring

3.5% minimum down payment stays in place for most borrowers

By Matt Carter, Wednesday, January 20, 2010.

Inman News
The Federal Housing Administration won't raise the 3.5 percent minimum down payment requirement for mortgages it guarantees as long as borrowers have FICO scores of 580 or better.

Beginning early this summer, however, borrowers with credit scores below 580 will be required to make down payments of at least 10 percent in order to participate in FHA's mortgage insurance program.

This spring, the Obama administration also plans to raise the upfront mortgage insurance premiums paid by all FHA borrowers to 2.25 percent, up from 1.75 percent now.

The increase -- some of which may later be shifted to annual premium payments -- will help build FHA capital reserves back to statutory minimums and bring back private lending, FHA Commissioner David Stevens said today.
Stevens also said enforcement of FHA lenders will be stepped up, and that allowable seller concessions will be reduced from 6 percent to 3 percent early this summer. The current 6 percent level exposes FHA to excess risk by creating incentives to inflate appraised values, he said. Stevens said the planned changes -- previously outlined by Housing Secretary Shaun Donovan in December -- strike the right balance between "managing the FHA's risk, continuing to provide access to underserved communities, and supporting the nation's economic recovery."

The National Association of Realtors has opposed to legislation that would increase FHA's minimum down payment requirement to 5 percent, saying it would exclude many borrowers without bolstering FHA reserves.

There has been some concern that any tightening of FHA underwriting standards or increase in fees would come around the same time as two other events that could also have an impact on home sales.

The Federal Reserve will wind down a $1.25 trillion program at the end of March that's helped keep mortgage rates low, and the recently expanded homebuyer tax credit expires for buyers not under contract by April 30 and closing by June 30.

Home sales show third month of gains
By Inman News, Thursday, July 23, 2009.

Inman News

Existing-home sales rose for a third month in a row in June, and prices may stabilize in many areas by the end of the year if inventories continue to decline, the National Association of Realtors said today.

Sales of resale homes, including single-family homes, townhomes, condominiums and co-ops, rose 3.6 percent from May to June, to a seasonally adjusted annual rate of 4.89 million units -- virtually the same as a year ago, NAR said.

At that rate of sales, the 3.82 million homes on the market represented a 9.4-month supply, down from 9.8 months in May.

A six-month supply of homes is generally considered a healthier balance of supply and demand, but the "raw inventory" total, or number of homes on the market, is down 14.9 percent from a year ago.

A Wall Street Journal analysis of housing fundamentals in 28 major real estate markets during the second quarter showed considerable variation in inventory, ranging from a high of 18.1 months in Chicago to just 2.7 months in Sacramento, Calif.

"If we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” said NAR Chief Economist Lawrence Yun in a press release.

Distressed properties accounted for 31 percent of sales in June, a factor in the 15.4 percent decline in median home price from a year ago, to $181,800, the group said.

Los Angeles Times
By Peter Y. Hong
Southern California home prices may have finally hit bottom, with median values rising last month for the first significant increase in two years, new data show.
Along with the 6.4% rise in prices from May, fewer than half the sales were from foreclosures-the first time that has happened in nine months.
I think we can now say with fair degree of confidence the pace of real home price declines has slowed dramatically said Los Angeles economist Christopher Thornberg who was an early predictor of the housing bubble.

Note: Christopher Thornberg of Beacon Economics is one of the leading experts in the study of regional economies and has written many financial articles on publications and widely quoted in the media. He has appeared on NBC’s The Today Show, ABC’s Nightline, CNN, FOX News Channel, MSNBC, NPR, and is regularly quoted in major national and California dailies including the Wall Street Journal, New York Times, Washington Post, Los Angeles Times, and Chicago Tribune.
In December 2007, Dr. Thornberg was appointed to California State Controller John Chiang’s Council of Economic Advisors – the body that advises the state’s chief fiscal officer about critical economic issues facing California.

Fed Leaves Rates/Bond Purchase Program Alone … Says Recession is Easing

by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co., Inc.
June 24, 2009

To no one's surprise, the Federal Open Market Committee (FOMC) did not move the fed funds rate in either direction, maintaining its current range of 0%-0.25%. The decision was unanimous. For the full text of the FOMC's statement and a side-by-side comparison to the prior statement from April 29, 2009, click here.

The Fed also left its $1.75 trillion bond purchase program unchanged, reflecting little near-term concern about inflation, although the FOMC members did drop the prior reference to deflation being a risk.

The Fed's $300 billion Treasuries purchase plan is scheduled to end in mid-September while the Fed is also committed to buying up to $1.45 trillion of housing debt this year. At the current rate, the Fed will reach the $300 billion of Treasuries by late August.

Specifically on inflation, the statement said: "Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time."

It's not surprising the Fed wanted to ease inflation concerns in the face of the 10-year Treasury yield spike since the Fed announced the purchase program in mid-March.

Since then, the yield has jumped from 2.5% to 3.7% (as of today), and that has contributed to a rise in mortgage rates, a headwind for the housing recovery.

What does this mean? Well in the simplest terms in means your payment is likely to be going to be higher in the near future! Even if the prices were to drop further this does not necessarily mean your payment will be lower, in fact it could be higher even with a lower purchase price. As the administration continues to add foreclosure moratorium after foreclosure moratorium* inventories continue to get tighter and tighter and this places more and more competition on the existing inventory of homes that are on the market which increases bidding wars. It's a simple supply and demand scenario at play here and that is not good for buyers and it looks like it may worsen as more and more Short-Sale listed properties are being moved to a "Hold Do Not Show" status in record numbers while the banks attempt to do Loan Modifications rather than accept a Short-Sale offer, placing even greater pressure on the market.

The California Tax credit
Wall Street Journal Blog wsj.com
By Dawn Wotapka

California’s tax credit for new homes is going, going… almost gone.
That means consumers looking to tap the credit–up to $10,000 over three years–better act fast.

To aid the battered state’s economy–and, at the same time, whittle bloated inventory-the Golden State’s leaders set aside $100 million for qualified buyers of new homes. Demand has been swift since the first-come, first-served funds became available for buyers on or after March 1. As of June 10, more than 9,000 applications totaling $88.3 million have been received, according to state’s Franchise Tax Board. Do the math: Just a few million remain. And only 12,000 applications will be accepted. (More info.)

That makes waiting a gamble: It’s impossible to know how long the money will last. From May 27 to June 3 alone, roughly $10 million was claimed.

“If you’re going to buy a new house in California, you better do it now,” said David Crowe, chief economist with the National Association of Home Builders.

-If you are even considering buying a new built home it would be in your best interest to contact me ASAP. Builders are offering dramatic incentives to Realtors to bring their buyer's in and this means fantastic savings for the home buyer who is brought in by the right realtor who has this information and is willing to work with the buyer.- This combined with the federal tax credit of $8000 along with the incentives I can pass on mean a pretty sweet deal for the smart home buyer!

Waiting for the Bottom to arrive!

*UPDATE: The moratorium was extended to June 1, 2009 to allow extra time for the banks who received Tarp funds to work on loan modifications. It is expected however that at that time that the pent up inventory of bank owned properties will hit the market. Included in this inventory are properties in which loan modifications did not help. What is not known is will all this inventory hit all at once or will it be a trickle? Only time will tell. What is believed by many financial experts and economists is that despite an increase in supply that prices may stabilize due to a combination of increased buyer demand and record low home loan interest rates. There are many financial experts weighing in on this issue but at best it is all speculation at this time.

Attempting to try and time the bottom of the market and hit the exact perfect time to buy could cost you tens of thousands of dollars in purchasing power as well as making it impossible to qualify, if interest rates rise during a decline in housing prices which is more likely than not. History actually shows us that a rise in interest rates is one of the major factors that lowers home prices along with the tightening of lending guidelines which is certainly going to happen. Ask me for more specific numbers on your individual scenario.

New Homes, are there deals out there?
Those who decide to buy new homes will found builders are willing to do more and willing to deal on price and upgrades if, you know how to negotiate with them and that is where I can help.
Very few people are aware of all the tools available to get a builder down to their lowest price. So if you’re even considering a new home it would be worth your while to get me involved before you go to a new home tract to see the models. Once you’ve stepped into the models and written down your name you have eliminated my ability to help you negotiate a better deal. What most new homebuyer’s are unaware of is that the builder corporate offices email realtors offers of incentives to help them sell their homes and often times this incentive is far higher then the discounts the builder agent is willing to share with you directly.

The good news for buyers is that 2008 looks to get a bit worse in many markets. And that means deals are there to be made on favorable terms. Many industry experts are calling this the worst real estate downturn since World War II, and others claim is the worst since the Great Depression. While the market is down, it's not out. It's just that compared to the last decade, the market is moving much more slowly, giving buyers time to compare price and amenities. If you look at the past real estate market history you will find that these markets can turn on a dime and you don’t want to miss perhaps the best buyer’s markets to come along in a long time. Keep in mind the last two market changes were accompanied by much higher interest rates and that is what makes this market so special, interest rates are at near all time lows.

What can you do as a homebuyer to capitalize on this market? If you're considering buying a home this coming year, here's what you need to do:

1. Get your credit and finances in order.

Would-be homebuyers need to focus on paying down or paying off their credit cards, car loans, school loans and other forms of personal debt. While having personal debt doesn't mean you can't qualify for a loan, it can lower the amount of the mortgage a lender might be willing to give you and the rate you will be able to get. Given the current mortgage crisis, lenders are paying close attention to your credit history in addition to your credit score. Ask me for more details on this!

If you are even considering on capitalizing on this buyer’s market one thing you will need to do is choose to clean up your credit. One of the best things you can do to prepare for buying a home is to make your monthly debt payments on time. Even if you have a lousy credit history, lenders will be more forgiving if they see you've gotten your act together in the last six to 12 months.

Federal law now requires each of the three main credit-reporting bureaus (Experian, Equifax, and TransUnion) to give you a free copy of your credit history once a year. To get yours, go to www.annualcreditreport.com. At the time, buy a copy of your credit score from Equifax. The cost is under $10, or I can pull a true Tri-merge report for you for under $18 including all three bureaus, which is still less than buying it through MyFico.com or any of the other supposedly “Free” credit report sites out there.

2. Get my credit in shape.

Put a lid on your spending, perform "plastic surgery" on your credit cards, and don't max out any one card (in fact, never charge more than 30 percent of your maximum credit limit) or your credit score will suffer dramatically. Keep in mind the longer you maintain a credit account the better your credit score so don't close accounts, simply pay them down. A credit card account that you opened in 1984 is worth a lot more than one you opened last month.

Don't forget that good credit also means job stability. Most lenders require that you work for the same employer for at least a year, and maybe two, before they'll approve your home loan application. If you're self-employed, they'll want to see at least two years of tax returns before you'll qualify for a conventional loan. If you're offered a better job in your field, by all means take it. But if you want to buy a home, try not to jump from job to job within a relatively short period of time.

3. Know how much I can afford to spend before shopping for a home.

Get me involved early on to help you to take the guesswork and mystery out of qualifying for a home loan in today’s changing market. We will look at your income, debt, assets and liabilities, and come up with the maximum amount you can spend on a home. Once you know how much you can afford to spend, you'll avoid making a common, heartbreaking, home-buyer error: looking at homes you can't afford to buy.

4. Know my neighborhood, and be comfortable with it, before I buy a home there.

Everyone wants to live on the best block in the best neighborhood. Unfortunately, that location may not be in your budget. You might be able to afford the smallest home on the best block, but that won't do you much good if you need four bedrooms and that home has only two. Balancing affordability with location means you may have to compromise. While you may be willing to compromise on the size of garden you have, you may not be willing to change your children's school districts. Again let me assist you with this.

Start looking at various neighborhoods and the amenities they offer. Is there a park? Shopping? Transportation? A house of worship? Do your friends and family live close by? Be careful not to limit your choice of neighborhoods too early on in the process. Explore new areas and the housing stock and amenities they offer. Please be sure to check the Community Info section of my website for detailed community information.

Make sure you spend time during different times of the day in the neighborhoods you are interested in. Walk the streets and go into local shops. Visit the neighborhood police department and local schools. Get to know the neighborhood and its residents inside and out before you decide to focus on an area. Drive the commute from prospective neighborhoods to your job during rush hour. Remember to ask me about traffic patterns and short cuts as this may open your options of where to look.

5. About Realtors.

There are traditional agents, buyer agents, exclusive buyer's agents who represent the interests of the buyer, rather than the seller (and willing to sign exclusive buyer’s agreement with a buyer). There are large brokerage firms and small neighborhood shops. You can even choose not to use a real estate agent, although as a buyer you won't be out of pocket for the cost, so there's no reason not to use one and every advantage to using one. While many buyers today opt to not use their own buyer agent feeling that they can cut a better deal by going direct through the listing agent, studies have shown that buyers using buyer agents or exclusive buyer's agents paid less for their home than those who used the traditional listing agent. Remember the listing agent works for the seller, both in therory and by contract.

Choosing which agent to use -- or choosing not to use an agent -- can be critical to your successful purchase. Look for an agent whose philosophy and mannerisms are compatible with yours. Look for someone you can trust, someone who will be frank with you and give you the facts, and not just a yes person telling you what you want to hear. Someone with whom you wouldn't mind spending a lot of time. Look for an agent who has ample experience, and who is knowledgeable about the neighborhoods you've selected for yourself. Look for an agent who will do additional research on a property and its’ value prior to you writing an offer. Does the agent recommend using a dedicated transaction coordinator or do they tell you that they have the experience to handle everything themselves (this can be a costly mistake!)? Remember it is the agent you will be working with not the broker.

In the news...

According to a National Association of Realtors report The median resale single-family home prices fell in 88 percent of the 152 metro areas tracked in the first quarter compared to the same quarter last year, with 18 areas actually reporting price increases. Nationally, the median price of resale single-family homes dropped 13.8 percent year-over-year in the first quarter, to $169,000. The association blamed sales of REO (foreclosures) and Short Sales for "downwardly skewing median prices," noting that "distressed homes typically are selling for 20 percent less than traditional homes." However there was a bright spot in the report. Home sales jumped in several states that have been hit hard by foreclosures -- sales were up 116.8 percent year-over-year in the first quarter in Nevada; up 80.6 percent in California; 50.2 percent in Arizona, 25 percent in Florida; 12.2 percent in Virginia; and 11.9 percent in Minnesota.

The experts say trying to time the exact point at when the bottom arrives may cost you tens of thousands of dollars. Just like trying to determine whether or not we have reached the bottom of the market or not requires accumulating historical data which means in order to determine if reaching the bottom has happened or not means it would have already happened. Simple fact is we will know when we have hit the bottom of the market AFTER the prices start rising again, meaning we will have missed it!

Why wait until the listing prices come into the price range you want when you can make an offer and make your own deal? By working with a professional who gathers market value data and compares market trends you will be in a position to actually make the market yourself.
Think of it this way when the bottom of the market arrives at the price others think it is a great time to jump into the market you will have a ton of competition and have to out bid a dozen or more other buyers to get your dream home, however if you do your homework and work with a professional who knows how to negotiate for you and properly prepare your offer you may just be able to score tomorrow's deal today with less competition and at today's low interest rates! The Buyer's market is reserved for buyer's and a smart buyer makes their own luck rather relying on being lucky to time the market.

Have we seen the bottom?
While many are still sitting on the sidelines waiting for some divine signal from on high to tell them the bottom has arrived many savvy home buyers have discovered that the bottom is something that is very local community by community and almost a tract by tract event with some areas not seeing any change in value for months and others still adjusting.
This my friends is one of the signs! In LA County alone the change in annual Median price has dropped 34% while the High Desert including Lancaster and Palmdale, has seen a 45%-50% reduction but don’t count on this as anything more than a broad statement since in some areas it is higher and some lower. Those still waiting may find themselves awaking AFTER home prices begin to rise wishing they had bought something. A recent meeting at the Southland Regional Board of Realtors had many agents commenting how almost every offer they made was met with competition of multiple offers.
Another sign of the bottom in a buyer's market! We are seeing a lot of investors snapping up properties in all price ranges, doing some cleanup and placing into the now hot rental market to hold them for the next up market.
Yet another sign of the bottom in a buyer's market! While not quite as heavy as the former Seller's market it was still occurring and many transactions were selling for over asking price. Does this mean prices are on the rise? No, far from it! What is does indicate is REO transactions are controlling the market and savvy REO Asset Managers and Listing Agents have begun to practice a good basic marketing technique of "If you want to expose your product to lots of potential buyers, advertise a low below market price". In other words to use a retailer's term "On Sale". This exposes the listing to a much wider group of potential buyers. While many buyers are resistant to paying over list on a property others are sharp and using sophisticated property value tools and experts to uncover the true market value of a subject property and making their offers accordingly. Please ask me about my fail-safe method to getting accepted offers in this market without over paying!

How do I know additions, improvements, and remodel work was done by permit?
Most cities have services that allow you to check by property address. For example in the Santa Clarita Valley, the Building and Safety Department has a quick and easy way for you to check a permit on line. If the permit was issued after 1991, you will be able to view that permit if you have the property address. Simply log onto the City of Santa Clarita website and click e-permits to check the status of a permit. Here is the link: http://www.santa-clarita.com/epermits/view/default.aspx
If the work was completed prior to 1991 and if the permit was issued prior to 1991, you will have to visit the Department of Building and Saftey in person to verify the information.
Please note that any work performed without the required permits will have no value when it comes to the appraisal. For example, if a bedroom and bath addition was done on a home without permit the appraiser will simply ignore them and give them no value consideration.

The Federal Rescue Plan and other Announcements
What does this mean to me and how will it effect the market? The focus of the plan as it relates to the real estate market is actually quite simple. At present there is a huge inventory of distressed properties both on the market and coming into the market. In simple terms the plan will work to prevent more distressed properties coming into the market in the form of both REO and Short Sales by having the government back up the lending instutions and aiding existing homeowners. Using the old supply and demand principle it will both stem the downward slide in prices and dry up inventory which in turn is not good news for the home buyer looking for a deal.
Next in the first week of October Bank of America announced that it will have it's Countrywide division work with it's existing borrowers to keep them in their homes through it's own work out plans. As the largest servicer of home loans, this will have a tremenous impact on the number of distressed properties coming into the market. Again this is not good news for the home buyer looking for a deal! In addition in December there was a big push from Fannie Mae to have lenders do work out or loan modifications. This has reduced the number of REO listings thereby reducing inventories. In addition to this Fannie Mae and Feddie Mac have extended until February 28, 2009, their policy to allow renters in foreclosed properties to stay in the foreclosed property. This will further reduce the number of REO listings.
Why buy now, what if price drop lower?
With interest rates again at or near 40 years lows you are likely already getting a monthly payment lower than if the prices dropped another 10%! These rates are not here forever and there is so much presure on the fianical market that they are likely to rise dramatically over the next few months along with tightening lending policies and guidelines.
Look at it this way, a homebuyer, who purchases a $480,000 home with 20% down today, would make the same monthly payment as a buyer who purchases a $400,000 home with 20% down and interest rates rising to a more traditionally average rate of 7.5%. In other words, if home prices remained the same and interest rates rise 1-2%, the same homebuyer will experience a loss of up to $80,000 in purchasing power!
The news is worse as you go up market to higher price homes. If the interest rates just return to more normal historic levels a $800,000 home today would be like paying $945,000 if the rates rise to just 7.5% which would be like the lossing $145,000 in purchasing power not to mention much tougher loan qualifying!

It is a brutal fact, in today's tight financial market lenders are making it tougher and tougher to qualify for a home loan and putting off a purchase by attempting to gauge the "Bottom of the Market" may actually find you unable to buy due to tightened lending guidelines causing you to miss what might be what many financial experts are calling "The best Real Estate Buyer's Market in over 50 years". So in an attempt to save what may only be a few thousand dollars delaying a real estate purchase may end up costing you and your family literally tens of thousands of dollars or more!