The California housing market continued to reel from the joint effects of tighter underwriting standards, the ongoing credit or liquidity crunch, and a softening economy. However, home sales have improved in recent months and are now within range of pre-credit crunch levels according to C.A.R. Sales of existing detached single family homes exceeded 300,000 for the second month in a row with seasonally adjusted and annualized sales of 343,220 homes in February. Sales rose 9.5 percent compared to January when 313,580 homes were sold, but declined steeply from 480,170 sales in February 2007, equivalent to a 28.5 percent year-to-year decrease.
Sales have now increased four months in a row from a low point of 265,030 sales in October of last year, and are just shy of sales in the 350,000-range that prevailed in the summer of 2007 just before the credit crunch drove sales down. Based on C.A.R. research, the background or ‘baseline' amount of activity that occurs regardless of whether the market is in a slow or active mode is thought to be roughly 350,000 sales, given the state's demographics and stock of homes. During the worst of the credit crunch, activity fell below that range because of difficulty in securing funding for loans among buyers who otherwise could and would buy a home at this time. As time has passed, adjustments by both borrowers and lenders have enabled the market to move forward at a somewhat improved pace.
The median price, however, continued to decline by record margins in February. The median price in California was $409,240, down 4.8 percent from the January median of $429,790 and down by a record-setting 26.2 percent from the February 2007 median price of $554,280. The median price in February was 31.5 percent below the record median of $597,640 that was set in April of last year. The statewide median was last in the low $400,000 range during late 2003 and early 2004.
The credit crunch, tighter underwriting standards, and significantly higher jumbo loan rates all contributed to a steep decrease in sales of homes above $500,000 as a share of the statewide market. This affected the mix of statewide sales and gave rise to the record-setting 26.2 percent decrease in the median. -- By comparison, the average year-to-year change in median prices across the regions of California was a somewhat smaller 19.8 percent decline in February.
Even if monthly sales for the state have shown improvement in recent months, sales for all of 2008 are still expected to decrease 6 percent annually compared to 2007. Moreover, home prices face stiff headwinds because of the large number of distressed sales that are expected throughout the year. On the bright side, lower prices and mortgage rates help affordability, while higher loan limits in 2008 should provide some welcome relief from the credit crunch.
from Southland Regional Association of Realtors
Friday, April 18, 2008
Thursday, April 17, 2008
The Worst May Be Over, but...
By David Wessel
Wall Street Journal
April 17, 2008; Page A2
Watching the housing-mortgage-banking-credit crisis is like watching the goriest parts of a scary movie. You put your hands over your eyes, spread your fingers a bit, peek through the cracks and ask: "Is it over yet?"
Here's where the story stands right now: Barring any unanticipated collapse of a pillar of Wall Street or a European bank, the risk of financial catastrophe has receded, even though markets remain so far from normal that they're exceptionally hard to read. But the wave of economic pain -- the foreclosures, bankruptcies, pay cuts and layoffs -- has yet to crest.
The plot began with sinking U.S. housing prices triggering a massive disturbance in global financial markets last summer, a disturbance that continues. Yet some key measures suggest things are moving in the right direction. In markets where speculators can bet on the collapse of a big bank or company, the odds placed on a big bank going bust have fallen from implausibly high levels. The odds the markets put on a wave of defaults by nonfinancial corporations also are down. And yields on short-term U.S. Treasury bills, which plunged as money rushed into the ultimate in safe securities, have inched up, even on days when bad news about the U.S. economy ordinarily would have pushed those yields down in anticipation of further interest-rate cuts by the Federal Reserve.
The Fed's aggressive actions -- cutting short-term rates by three percentage points since September and devising new ways to lubricate money markets -- have helped. Equally important is the ability and willingness of big financial companies -- Citigroup, Wachovia, Washington Mutual and (if they keep their promises to regulators) mortgage giants Fannie Mae and Freddie Mac -- to raise billions of dollars to rebuild their diminished capital cushions. This capital-raising is essential if banks are to keep lending, instead of contracting and strangling the economy in a prolonged credit crunch. It's also a hopeful hint that some big-money players think it's time to invest in U.S. banks, albeit at bargain-basement prices.
But all is not yet well. Persistent strains in the market where banks lend to one another overnight, or for just a few days, are baffling, even to smart observers inside the Fed and on Wall Street. Banks understandably continue to be cautious about making mortgages and other loans, given how many bad loans they've made. But cautious about lending to other banks? That's unnerving to say the least.
"The fragility of short-term credit markets," Fed governor Kevin Warsh said in a speech this week, "is a powerful manifestation of...loss of confidence" in the entire architecture of the financial system. (That, too, is a bit unnerving coming from a Fed governor.) "There are some encouraging, early signs of repair, but regaining the confidence that markets require will take time, and perhaps uncomfortably to some, patience," he said.
So much for the markets. What about the rest of the economy? Employment is falling. So are housing prices. The bulk of forecasters in the latest Wall Street Journal survey foresee home prices declining into 2009; nearly one in eight say they won't touch bottom until 2010.
Prices of food and energy are rising. And a credit crunch is sure to make it tougher than usual for American consumers to borrow to keep spending. (President Bush is probably relieved he isn't up for re-election.) Macroeconomic Advisers, the St. Louis forecaster that makes a monthly guess about gross domestic product, estimates the U.S. economy contracted at a 13% annual rate in February, the sharpest monthly decline in its data since September 2001.
Offsetting that drag on the economy is the vigor of U.S. exports. And, of course, the impact of the interest-rate cuts the Fed already has made and the checks Mr. Bush and Congress decided to send to most American families this spring has yet to be fully felt. "The fiscal stimulus is in the mail," says Richard Berner, a Morgan Stanley economist. "The monetary stimulus is in the pipeline."
Nevertheless, the economy where most Americans live and work -- that is, off Wall Street -- looks likely to get worse before it gets better. Maybe credit markets already are so pessimistic that they won't turn lower on any further bad economic news.
But stocks? Predicting their direction is treacherous. If this is truly the worst financial crisis in a generation, is it plausible that the Dow Jones Industrial Average -- now down more than 11% from its October peak -- has fallen as far as it is going to fall? And if banks are groaning under the weight of bad loans now, further deterioration of the job market and consumer finances can only make matters worse and discourage them from lending.
The scariest scenes of the movie may be past, but the good guys haven't won yet.
Write to David Wessel at capital@wsj.com
Wall Street Journal
April 17, 2008; Page A2
Watching the housing-mortgage-banking-credit crisis is like watching the goriest parts of a scary movie. You put your hands over your eyes, spread your fingers a bit, peek through the cracks and ask: "Is it over yet?"
Here's where the story stands right now: Barring any unanticipated collapse of a pillar of Wall Street or a European bank, the risk of financial catastrophe has receded, even though markets remain so far from normal that they're exceptionally hard to read. But the wave of economic pain -- the foreclosures, bankruptcies, pay cuts and layoffs -- has yet to crest.
The plot began with sinking U.S. housing prices triggering a massive disturbance in global financial markets last summer, a disturbance that continues. Yet some key measures suggest things are moving in the right direction. In markets where speculators can bet on the collapse of a big bank or company, the odds placed on a big bank going bust have fallen from implausibly high levels. The odds the markets put on a wave of defaults by nonfinancial corporations also are down. And yields on short-term U.S. Treasury bills, which plunged as money rushed into the ultimate in safe securities, have inched up, even on days when bad news about the U.S. economy ordinarily would have pushed those yields down in anticipation of further interest-rate cuts by the Federal Reserve.
The Fed's aggressive actions -- cutting short-term rates by three percentage points since September and devising new ways to lubricate money markets -- have helped. Equally important is the ability and willingness of big financial companies -- Citigroup, Wachovia, Washington Mutual and (if they keep their promises to regulators) mortgage giants Fannie Mae and Freddie Mac -- to raise billions of dollars to rebuild their diminished capital cushions. This capital-raising is essential if banks are to keep lending, instead of contracting and strangling the economy in a prolonged credit crunch. It's also a hopeful hint that some big-money players think it's time to invest in U.S. banks, albeit at bargain-basement prices.
But all is not yet well. Persistent strains in the market where banks lend to one another overnight, or for just a few days, are baffling, even to smart observers inside the Fed and on Wall Street. Banks understandably continue to be cautious about making mortgages and other loans, given how many bad loans they've made. But cautious about lending to other banks? That's unnerving to say the least.
"The fragility of short-term credit markets," Fed governor Kevin Warsh said in a speech this week, "is a powerful manifestation of...loss of confidence" in the entire architecture of the financial system. (That, too, is a bit unnerving coming from a Fed governor.) "There are some encouraging, early signs of repair, but regaining the confidence that markets require will take time, and perhaps uncomfortably to some, patience," he said.
So much for the markets. What about the rest of the economy? Employment is falling. So are housing prices. The bulk of forecasters in the latest Wall Street Journal survey foresee home prices declining into 2009; nearly one in eight say they won't touch bottom until 2010.
Prices of food and energy are rising. And a credit crunch is sure to make it tougher than usual for American consumers to borrow to keep spending. (President Bush is probably relieved he isn't up for re-election.) Macroeconomic Advisers, the St. Louis forecaster that makes a monthly guess about gross domestic product, estimates the U.S. economy contracted at a 13% annual rate in February, the sharpest monthly decline in its data since September 2001.
Offsetting that drag on the economy is the vigor of U.S. exports. And, of course, the impact of the interest-rate cuts the Fed already has made and the checks Mr. Bush and Congress decided to send to most American families this spring has yet to be fully felt. "The fiscal stimulus is in the mail," says Richard Berner, a Morgan Stanley economist. "The monetary stimulus is in the pipeline."
Nevertheless, the economy where most Americans live and work -- that is, off Wall Street -- looks likely to get worse before it gets better. Maybe credit markets already are so pessimistic that they won't turn lower on any further bad economic news.
But stocks? Predicting their direction is treacherous. If this is truly the worst financial crisis in a generation, is it plausible that the Dow Jones Industrial Average -- now down more than 11% from its October peak -- has fallen as far as it is going to fall? And if banks are groaning under the weight of bad loans now, further deterioration of the job market and consumer finances can only make matters worse and discourage them from lending.
The scariest scenes of the movie may be past, but the good guys haven't won yet.
Write to David Wessel at capital@wsj.com
Monday, April 14, 2008
Consequences for 'Walk-Away' Borrowers
Daily Real Estate News | April 14, 2008
The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.
Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.
Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.
Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.
Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.
Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)
The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.
Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.
Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.
Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.
Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.
Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)
Tuesday, April 08, 2008
Bush Backs More Support for Homeowners
By DAMIAN PALETTA and JOHN D. MCKINNON
Wall Street Journal
April 8, 2008 6:19 p.m.
WASHINGTON -- The Bush administration appears set to support a significant expansion of its assistance for struggling homeowners, a move that could also forestall more aggressive action currently being contemplated by Democrats in Congress.
In a draft of testimony for a congressional hearing, Brian Montgomery, the commissioner of the Federal Housing Administration, is expected to say that a federal program that offers government insurance for mortgages created last summer "can and should be extended in a responsible way."
Many of the details about the expansion are not clear, but it seems likely that the program could become the administration's most aggressive response to the housing crisis, which has prompted Washington to reverse years of laissez-faire attitudes toward the economy.
The expansion would be focused on helping struggling homeowners who owe more than their house is worth.
Under the expanded program, lenders could get FHA insurance for problem loans in exchange for "voluntarily writing down the outstanding mortgage principal," according to the testimony. That would entail the government being responsible for an increasing number of risky loans.
Mr. Montgomery emphasizes in the testimony that "while considering any changes to FHA, we must ensure that the financial solvency of the [FHA] must not be compromised." FHA is a division of the U.S. Department of Housing and Urban Development, which didn't return calls seeking comment.
Under the original program created last year, known as FHASecure, homeowners with high-interest, adjustable-rate mortgages currently can refinance into an FHA-insured mortgage and lower their monthly payments. To date, the administration says it's served 145,000 homeowners in need, and projections show that it will likely reach more than 400,000 by year's end. A temporary expansion of the program would be expected to add significantly to that total.
The moves highlighted the deep political fault lines emerging in Washington over the housing market. Both the Republican Bush administration and Democrats in charge of Congress are eager to be seen addressing the problem. But both have ideological objections to the other side's approach so far, and both see potential advantage in casting the other side as intransigent and out of touch.
The administration proposal appeared calculated to put a conservative White House imprimatur on a basic concept that Democrats also have been weighing – using the government's power to induce lenders to reduce payments for struggling homeowners, while also providing some government guarantee that the loan, or most of it anyway, will be repaid. The administration's approach is likely to be narrower in terms of the number of homeowners who could qualify.
Write to Damian Paletta at damian.paletta@wsj.com and John D. McKinnon at john.mckinnon@wsj.com
Wall Street Journal
April 8, 2008 6:19 p.m.
WASHINGTON -- The Bush administration appears set to support a significant expansion of its assistance for struggling homeowners, a move that could also forestall more aggressive action currently being contemplated by Democrats in Congress.
In a draft of testimony for a congressional hearing, Brian Montgomery, the commissioner of the Federal Housing Administration, is expected to say that a federal program that offers government insurance for mortgages created last summer "can and should be extended in a responsible way."
Many of the details about the expansion are not clear, but it seems likely that the program could become the administration's most aggressive response to the housing crisis, which has prompted Washington to reverse years of laissez-faire attitudes toward the economy.
The expansion would be focused on helping struggling homeowners who owe more than their house is worth.
Under the expanded program, lenders could get FHA insurance for problem loans in exchange for "voluntarily writing down the outstanding mortgage principal," according to the testimony. That would entail the government being responsible for an increasing number of risky loans.
Mr. Montgomery emphasizes in the testimony that "while considering any changes to FHA, we must ensure that the financial solvency of the [FHA] must not be compromised." FHA is a division of the U.S. Department of Housing and Urban Development, which didn't return calls seeking comment.
Under the original program created last year, known as FHASecure, homeowners with high-interest, adjustable-rate mortgages currently can refinance into an FHA-insured mortgage and lower their monthly payments. To date, the administration says it's served 145,000 homeowners in need, and projections show that it will likely reach more than 400,000 by year's end. A temporary expansion of the program would be expected to add significantly to that total.
The moves highlighted the deep political fault lines emerging in Washington over the housing market. Both the Republican Bush administration and Democrats in charge of Congress are eager to be seen addressing the problem. But both have ideological objections to the other side's approach so far, and both see potential advantage in casting the other side as intransigent and out of touch.
The administration proposal appeared calculated to put a conservative White House imprimatur on a basic concept that Democrats also have been weighing – using the government's power to induce lenders to reduce payments for struggling homeowners, while also providing some government guarantee that the loan, or most of it anyway, will be repaid. The administration's approach is likely to be narrower in terms of the number of homeowners who could qualify.
Write to Damian Paletta at damian.paletta@wsj.com and John D. McKinnon at john.mckinnon@wsj.com
Sunday, April 06, 2008
Breaking News!! Association of Realtors reports sales and price decline
Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the California Association of Realtors® (C.A.R.) reported.
"Although sales rose for the fourth straight month in February by 9.5 percent compared to the previous month, they continued to be dragged down by the ongoing effects of both the credit/liquidity crunch and tighter underwriting standards that have reduced the pool of qualified buyers who can obtain a loan," said C.A.R. President William E. Brown.
"It is crucial that FHA reform legislation currently under consideration by congress include higher loan limits for high-cost states like California," he said. "The proposed legislation also includes a reduction in the down payment requirement for FHA loans and will include condominiums in the FHA single-family program, which will make it easier for buyers in the condominium market to qualify for loans."
Closed escrow sales of existing, single-family detached homes in California totaled 343,220 in February at a seasonably adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor® Associations statewide. Statewide home resale activity decreased 28.5 percent from the revised 480,170 sales pace recorded in February 2007.
The statewide sales figure represents what the total number of homes sold during 2008 would be if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during February 2008 was $409,240 a 26.2 percent decrease from the revised $554,280 median for February 2007, C.A.R. reported. The February 2008 median price fell 4.8 percent compared with January's revised $429,790 median price.
"The Federal Reserve Bank's recent action to reduce the federal funds rate will have little near-term direct effect on the housing market," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "However, Fed rate cuts should result in more favorable real estate finance rates as we move though the year."
Highlights of C.A.R.'s resale housing figures for February 2008:
C.A.R.'s Unsold Inventory Index for existing, single-family detached homes in February 2008 was 14.3 months, compared with 8.2 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Thirty-year fixed-mortgage interest rates averaged 5.92 percent during February 2008, compared with 6.29 percent in February 2007, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.03 percent in February 2008, compared with 5.51 percent in February 2007.
The median number of days it took to sell a single-family home was 68.6 days in February 2008, compared with 66.1 for the same period a year ago.
"Although sales rose for the fourth straight month in February by 9.5 percent compared to the previous month, they continued to be dragged down by the ongoing effects of both the credit/liquidity crunch and tighter underwriting standards that have reduced the pool of qualified buyers who can obtain a loan," said C.A.R. President William E. Brown.
"It is crucial that FHA reform legislation currently under consideration by congress include higher loan limits for high-cost states like California," he said. "The proposed legislation also includes a reduction in the down payment requirement for FHA loans and will include condominiums in the FHA single-family program, which will make it easier for buyers in the condominium market to qualify for loans."
Closed escrow sales of existing, single-family detached homes in California totaled 343,220 in February at a seasonably adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor® Associations statewide. Statewide home resale activity decreased 28.5 percent from the revised 480,170 sales pace recorded in February 2007.
The statewide sales figure represents what the total number of homes sold during 2008 would be if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during February 2008 was $409,240 a 26.2 percent decrease from the revised $554,280 median for February 2007, C.A.R. reported. The February 2008 median price fell 4.8 percent compared with January's revised $429,790 median price.
"The Federal Reserve Bank's recent action to reduce the federal funds rate will have little near-term direct effect on the housing market," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "However, Fed rate cuts should result in more favorable real estate finance rates as we move though the year."
Highlights of C.A.R.'s resale housing figures for February 2008:
C.A.R.'s Unsold Inventory Index for existing, single-family detached homes in February 2008 was 14.3 months, compared with 8.2 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Thirty-year fixed-mortgage interest rates averaged 5.92 percent during February 2008, compared with 6.29 percent in February 2007, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.03 percent in February 2008, compared with 5.51 percent in February 2007.
The median number of days it took to sell a single-family home was 68.6 days in February 2008, compared with 66.1 for the same period a year ago.
Thursday, April 03, 2008
Housing Relief Comes at a Cost: No More Easy Money
Fannie Mae Tightens Loan Criteria for Credit Scores
Fannie Mae's Managing Director, Brian Faith, released a statement on Wednesday that gave notice that at least one of the two government sponsored enterprises (GSEs) that play a major role in the nation's mortgage industry has decided it would be wise to protect its own interests.
Government lawmakers have increasingly focused on Fannie Mae and the other GSE, Freddie Mac, as a big part of efforts to ease the credit crunch. The Office of Federal Housing Enterprise Oversight (OFHEO) recently lifted the loan limit to make it possible for the GSEs to buy what are generally termed jumbo mortgages and reduced capital requirements to enable Freddie and Fannie to purchase more mortgages for their own portfolios.
The public statement by Faith was very general, saying in part:
"As Fannie Mae has expanded its mortgage guaranty business to serve the market's urgent need for stability, liquidity and affordability, the company has undertaken a series of steps to protect borrowers, manage the increased credit risk in the market, and fortify the company's capital position. Among these steps, our company is continually assessing and establishing new pricing, eligibility and underwriting criteria for our business that more accurately reflects the current risks in the housing market and guards against the potential for foreclosure. These changes are incorporated into our underwriting system and include adjustments to credit score criteria, loan-to-value ratios, down payment requirements, accurate valuation practices, and consideration of markets where home prices may be falling."
"Given the current state of the mortgage and housing markets, it is critical for our company to conservatively manage our business and risks through prudent pricing and underwriting, while providing sustainable liquidity to our lender customers and stability to the markets as part of our core mission. We will continue striving to responsibly strike that balance."
However, in a memo to its business partners, Fannie Mae got a bit more specific. Fannie Mae will now require a minimum credit score of 580 for most loans that it buys although it says it will still acquire loans with lower score under certain very limited circumstances. This is not a major change as 94 percent of Fannie's business last year was in loans with scores over 620. It also announced some changes in the maximum loan-to-value of loans it would purchase.
Fannie also said it would lengthen the period needed for borrowers to re-establish their credit history after a foreclosure to five years from four years with, again, some exceptions for extenuating circumstances.
What is most interesting about all of this is that it sounds as though Fannie Mae is prepared to stand its ground and protect itself and its shareholders in the face of demands that it be all things to all forces in the current crisis.
from Mortgage News Daily, April 3, 2008
Fannie Mae's Managing Director, Brian Faith, released a statement on Wednesday that gave notice that at least one of the two government sponsored enterprises (GSEs) that play a major role in the nation's mortgage industry has decided it would be wise to protect its own interests.
Government lawmakers have increasingly focused on Fannie Mae and the other GSE, Freddie Mac, as a big part of efforts to ease the credit crunch. The Office of Federal Housing Enterprise Oversight (OFHEO) recently lifted the loan limit to make it possible for the GSEs to buy what are generally termed jumbo mortgages and reduced capital requirements to enable Freddie and Fannie to purchase more mortgages for their own portfolios.
The public statement by Faith was very general, saying in part:
"As Fannie Mae has expanded its mortgage guaranty business to serve the market's urgent need for stability, liquidity and affordability, the company has undertaken a series of steps to protect borrowers, manage the increased credit risk in the market, and fortify the company's capital position. Among these steps, our company is continually assessing and establishing new pricing, eligibility and underwriting criteria for our business that more accurately reflects the current risks in the housing market and guards against the potential for foreclosure. These changes are incorporated into our underwriting system and include adjustments to credit score criteria, loan-to-value ratios, down payment requirements, accurate valuation practices, and consideration of markets where home prices may be falling."
"Given the current state of the mortgage and housing markets, it is critical for our company to conservatively manage our business and risks through prudent pricing and underwriting, while providing sustainable liquidity to our lender customers and stability to the markets as part of our core mission. We will continue striving to responsibly strike that balance."
However, in a memo to its business partners, Fannie Mae got a bit more specific. Fannie Mae will now require a minimum credit score of 580 for most loans that it buys although it says it will still acquire loans with lower score under certain very limited circumstances. This is not a major change as 94 percent of Fannie's business last year was in loans with scores over 620. It also announced some changes in the maximum loan-to-value of loans it would purchase.
Fannie also said it would lengthen the period needed for borrowers to re-establish their credit history after a foreclosure to five years from four years with, again, some exceptions for extenuating circumstances.
What is most interesting about all of this is that it sounds as though Fannie Mae is prepared to stand its ground and protect itself and its shareholders in the face of demands that it be all things to all forces in the current crisis.
from Mortgage News Daily, April 3, 2008
Uncle Subprime
April 3, 2008
Mortgage foreclosures haven't yet hit their peak, it's an election year, and Congress is back in session. Hold onto your wallets because a housing bailout is moving forward unless the White House says no.
Senators from both parties agreed late yesterday to throw about $11 billion more at the housing market, and we'll have more to say about that later. But think of Uncle Sam as the subprime lender of last resort and you are getting close to what the Beltway is contemplating. In the name of preventing foreclosures, House Financial Services Chairman Barney Frank wants to transfer the risk of further declines in home prices to taxpayers from lenders and borrowers.
Mr. Frank's idea is that, for mortgages originated between the start of 2005 and mid-2007, a lender and borrower would be able to agree on a federal refinancing plan. Lenders would have to write down their loan to no more than 85% of the current appraised value of the property – which means the banks will use this opportunity to unload the biggest stinkers in their loan portfolios.
For the borrower, the deal is even sweeter: a low fixed monthly payment and a reduction in the principal to market value. The Federal Housing Administration would then guarantee the loan, up to a total of $300 billion in total Frank Refis. The deal is so sweet that even Mr. Frank is concerned that otherwise reliable borrowers may "purposely default" to be eligible for assistance. His solution is to require borrowers to "certify" that they really, truly aren't doing this simply to get on the taxpayer gravy train.
The pols also understand, but won't admit, that you can't bail out borrowers without bailing out lenders. And on both counts, we're not talking about the most deserving recipients in the history of welfare: Those receiving bailouts will be lenders who chased high returns despite the risks, and borrowers challenging historic rates of delinquency even before rate resets. Many will also be fraudsters, given that mortgage fraud has increased more than 1,200% since 2000.
A new study from the Boston Federal Reserve destroys the myth of the victimized subprime borrower. Boston Fed economists examined 1.5 million homeownerships over nearly 20 years and found that the overwhelming reason for subprime foreclosures is not unsustainable debt foisted on ignorant borrowers or even financial setbacks. People walk out on subprime mortgages when the value of their home declines.
Homeowners who've suffered a 20% decline in home prices are 14 times as likely to default as those who have enjoyed a 20% gain. "Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages," says the Boston Fed study. In other words, even if the government moves these borrowers into FHA-guaranteed mortgages with fixed rates, but home prices keep falling, lots of borrowers will stiff the taxpayers like they've been stiffing private lenders.
Traditionally, lenders making a commitment to finance your home have demanded that you make a commitment as well: a down payment. But during the credit boom, the shrinking market share of FHA-insured loans demonstrated how much the world was changing. FHA was intended to help moderate-income borrowers afford homes by requiring merely a 3% down payment. When subprime lenders started offering loans with zero down, FHA asked Congress to let their lenders do the same. Fortunately for taxpayers, Congress resisted. In the fourth quarter of 2007, FHA loans were one mortgage category that actually enjoyed a decline in foreclosures.
That trend may not last, because Mr. Frank's bill waters down FHA underwriting standards. Today, the FHA tells lenders that a borrower should not have debt payments amounting to more than 43% of monthly income, but Mr. Frank's bill allows this figure to rise as high as 55%.
Under current FHA guidelines, lenders must also closely examine a borrower's credit history. Yet under the "flexible underwriting standards" in Mr. Frank's draft, borrowers can't be denied FHA insurance due to a low credit score. Delinquency on existing mortgages also can't be the sole reason to deny FHA insurance. Mr. Frank's bill authorizes the Secretary of Housing and Urban Development to contract out for a new underwriting system, and it should be entertaining to see what HUD's political minds can devise to appease pressure groups.
In sum, Mr. Frank is volunteering U.S. taxpayers to insure $300 billion in mortgages with underwriting standards to be named later. Connecticut Senator Chris Dodd thinks $400 billion is more like it. Quavering Republicans should do the political math. The Mortgage Bankers Association tracks 46 million mortgage borrowers, and 42 million are paying on time. More than 20 million households own their homes outright and, having worked for years to pay for them, probably don't want to pay for someone else's. Neither do 35 million renters who didn't take a flyer on nicer digs.
The good news is that a taxpayer champion is emerging from, of all places, Florida. His state is ground zero in the housing downturn, but House Republican Tom Feeney says, "My constituents are not terribly sympathetic with borrowers who made bad decisions." We're told the White House will oppose the Frank-Dodd bailout, but if there's any doubt, Mr. Bush should have Mr. Feeney in for a chat.
The lead editorial column in today's Wall Street JournalSee all of today's editorials and op-eds, plus video commentary, on Opinion Journal.
[As always, Ray Kutylo and the SCV Home Team view macro-economic decisions as well outside of our authority to influence. However, we are all influenced by these decisions in both our personal and business environments. Public policy, either good or bad, will have far-reaching effects. We pay attention to these currents and changes in directions of public policy in order to better advise our clients.]
Mortgage foreclosures haven't yet hit their peak, it's an election year, and Congress is back in session. Hold onto your wallets because a housing bailout is moving forward unless the White House says no.
Senators from both parties agreed late yesterday to throw about $11 billion more at the housing market, and we'll have more to say about that later. But think of Uncle Sam as the subprime lender of last resort and you are getting close to what the Beltway is contemplating. In the name of preventing foreclosures, House Financial Services Chairman Barney Frank wants to transfer the risk of further declines in home prices to taxpayers from lenders and borrowers.
Mr. Frank's idea is that, for mortgages originated between the start of 2005 and mid-2007, a lender and borrower would be able to agree on a federal refinancing plan. Lenders would have to write down their loan to no more than 85% of the current appraised value of the property – which means the banks will use this opportunity to unload the biggest stinkers in their loan portfolios.
For the borrower, the deal is even sweeter: a low fixed monthly payment and a reduction in the principal to market value. The Federal Housing Administration would then guarantee the loan, up to a total of $300 billion in total Frank Refis. The deal is so sweet that even Mr. Frank is concerned that otherwise reliable borrowers may "purposely default" to be eligible for assistance. His solution is to require borrowers to "certify" that they really, truly aren't doing this simply to get on the taxpayer gravy train.
The pols also understand, but won't admit, that you can't bail out borrowers without bailing out lenders. And on both counts, we're not talking about the most deserving recipients in the history of welfare: Those receiving bailouts will be lenders who chased high returns despite the risks, and borrowers challenging historic rates of delinquency even before rate resets. Many will also be fraudsters, given that mortgage fraud has increased more than 1,200% since 2000.
A new study from the Boston Federal Reserve destroys the myth of the victimized subprime borrower. Boston Fed economists examined 1.5 million homeownerships over nearly 20 years and found that the overwhelming reason for subprime foreclosures is not unsustainable debt foisted on ignorant borrowers or even financial setbacks. People walk out on subprime mortgages when the value of their home declines.
Homeowners who've suffered a 20% decline in home prices are 14 times as likely to default as those who have enjoyed a 20% gain. "Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages," says the Boston Fed study. In other words, even if the government moves these borrowers into FHA-guaranteed mortgages with fixed rates, but home prices keep falling, lots of borrowers will stiff the taxpayers like they've been stiffing private lenders.
Traditionally, lenders making a commitment to finance your home have demanded that you make a commitment as well: a down payment. But during the credit boom, the shrinking market share of FHA-insured loans demonstrated how much the world was changing. FHA was intended to help moderate-income borrowers afford homes by requiring merely a 3% down payment. When subprime lenders started offering loans with zero down, FHA asked Congress to let their lenders do the same. Fortunately for taxpayers, Congress resisted. In the fourth quarter of 2007, FHA loans were one mortgage category that actually enjoyed a decline in foreclosures.
That trend may not last, because Mr. Frank's bill waters down FHA underwriting standards. Today, the FHA tells lenders that a borrower should not have debt payments amounting to more than 43% of monthly income, but Mr. Frank's bill allows this figure to rise as high as 55%.
Under current FHA guidelines, lenders must also closely examine a borrower's credit history. Yet under the "flexible underwriting standards" in Mr. Frank's draft, borrowers can't be denied FHA insurance due to a low credit score. Delinquency on existing mortgages also can't be the sole reason to deny FHA insurance. Mr. Frank's bill authorizes the Secretary of Housing and Urban Development to contract out for a new underwriting system, and it should be entertaining to see what HUD's political minds can devise to appease pressure groups.
In sum, Mr. Frank is volunteering U.S. taxpayers to insure $300 billion in mortgages with underwriting standards to be named later. Connecticut Senator Chris Dodd thinks $400 billion is more like it. Quavering Republicans should do the political math. The Mortgage Bankers Association tracks 46 million mortgage borrowers, and 42 million are paying on time. More than 20 million households own their homes outright and, having worked for years to pay for them, probably don't want to pay for someone else's. Neither do 35 million renters who didn't take a flyer on nicer digs.
The good news is that a taxpayer champion is emerging from, of all places, Florida. His state is ground zero in the housing downturn, but House Republican Tom Feeney says, "My constituents are not terribly sympathetic with borrowers who made bad decisions." We're told the White House will oppose the Frank-Dodd bailout, but if there's any doubt, Mr. Bush should have Mr. Feeney in for a chat.
The lead editorial column in today's Wall Street JournalSee all of today's editorials and op-eds, plus video commentary, on Opinion Journal.
[As always, Ray Kutylo and the SCV Home Team view macro-economic decisions as well outside of our authority to influence. However, we are all influenced by these decisions in both our personal and business environments. Public policy, either good or bad, will have far-reaching effects. We pay attention to these currents and changes in directions of public policy in order to better advise our clients.]
Top 10 Seller Short Sale Questions..Answered
Most Common Questions A Seller Will Ask
by Tim and Julie Harris
Number 10
I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me?
Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.
Number 9
If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?
The mortgage insurance is not there for your protection, just the mortgage lender's.
Number 8
Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?
No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.
Number 7
I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?
The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California its taking 6+ months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.
Number 6
Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.
Number 5
I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?
The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.
Number 4
Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?
It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.
Number 3
How do you, my listing agent get paid...who pays your commission?
The bank will pay the commission along with all the other usual closing costs.
Number 2
Do I have to miss a payment to do a Short Sale?
No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.
Number 1
I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.
by Tim and Julie Harris
Number 10
I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me?
Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.
Number 9
If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?
The mortgage insurance is not there for your protection, just the mortgage lender's.
Number 8
Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?
No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.
Number 7
I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?
The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California its taking 6+ months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.
Number 6
Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.
Number 5
I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?
The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.
Number 4
Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?
It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.
Number 3
How do you, my listing agent get paid...who pays your commission?
The bank will pay the commission along with all the other usual closing costs.
Number 2
Do I have to miss a payment to do a Short Sale?
No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.
Number 1
I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.
Friday, March 28, 2008
How to Help the Kids Buy First Home
Helping the kids buy a first home is a time-honored tradition that has become even more significant as home prices rise and incomes flatten.
Here are three ways parents can help their children:
Cash. For parents with the means, cash is clean and easy. An individual can give $12,000 a year to a recipient without having to pay a tax on the gift. Therefore, a couple could give an adult child and the child's spouse a total of $48,000 in one year. To keep things simple, the gift is best given well in advance of the mortgage application.
Cosigning or otherwise jointly investing in the property. This can work for parents of more limited means or those who want to be paid back. The biggest risk is that the offspring will be unable to meet their obligations and it will affect the parent’s credit rating.
Knowledge and hard work are worth gold. Parents who can’t afford to help financially may be able to provide experience and even some sweat equity to help the kids make a smart housing choice.
Source: Market Watch (03/21/08)
Here are three ways parents can help their children:
Cash. For parents with the means, cash is clean and easy. An individual can give $12,000 a year to a recipient without having to pay a tax on the gift. Therefore, a couple could give an adult child and the child's spouse a total of $48,000 in one year. To keep things simple, the gift is best given well in advance of the mortgage application.
Cosigning or otherwise jointly investing in the property. This can work for parents of more limited means or those who want to be paid back. The biggest risk is that the offspring will be unable to meet their obligations and it will affect the parent’s credit rating.
Knowledge and hard work are worth gold. Parents who can’t afford to help financially may be able to provide experience and even some sweat equity to help the kids make a smart housing choice.
Source: Market Watch (03/21/08)
Thursday, March 27, 2008
40 Tips for an Exceptional, Superb & Powerful Life
Frank, a valued member of the SCV Home Team, just sent me this list. What do you think? Do you have anything to add?
1. Take a 10-30 minute walk every day. And while you walk, smile. It is the ultimate anti-depressant.
2. Sit in silence for at least 10 minutes each day. Buy a lock if you have to.
3. Buy a Tivo (DVR), tape your late night shows and get more sleep.
4. When you wake up in the morning complete the following statement, 'My purpose is to________ today.'
5. Live with the 3 E's -- Energy, Enthusiasm, and Empathy.
6. Watch more movies, play more games and read more books than you did last year.
7. Always pray and make time to exercise.
8. Spend more time with people over the age of 70 and under the age of six.
9. Dream more while you are awake.
10. Eat more foods that grow on trees and plants and eat fewer foods that are manufactured in plants.
11. Drink green tea and plenty of water. Eat blueberries, wild Alaskan salmon, broccoli, almonds & walnuts.
12. Try to make at least three people smile each day.
13. Clear your clutter from your house, your car, your desk and let new and flowing energy into your life.
14. Don't waste your precious energy on gossip, energy vampires, issues of the past, negative thoughts or things you cannot control. Instead, invest your energy in the positive present moment.
15. Realize that life is a school and you are here to learn. Problems are simply part of the curriculum that appear and fade away like algebra class .....but the lessons you learn will last a lifetime.
16. Eat breakfast like a king, lunch like a prince and dinner like a college kid with a maxed out charge card.
17. Smile and laugh more. It will keep the energy vampires away.
18. Life isn't fair, but it's still good.
19. Life is too short to waste time hating anyone.
20. Don't take yourself so seriously. No one else does.
21. You don't have to win every argument. Agree to disagree.
22. Make peace with your past so it won't screw up the present.
23. Don't compare your life to others'. You have no idea what their journey is all about.
24. Ladies - Go on and burn those 'special' scented candles, use the 600 thread count sheets, the good china and wear our fancy lingerie now. Stop waiting for a special occasion. Everyday is special.
25. Guys: Go out and golf or fish or putter around the house or whatever it is that makes you happy. No one is in charge of your happiness except you.
26. Frame every so-called disaster with these words: 'In five years, will this matter?'
27. Forgive everyone for everything.
28. What other people think of you is none of your business. And if you knew how infrequently they thought of you, you certainly wouldn't care what they thought.
29. Time heals almost everything. Give time, time!
30. However good or bad a situation is it will change.
31. Your job won't take care of you when you are sick. Your friends will. Stay in touch with them.
32. Get rid of anything that isn't useful, beautiful or joyful.
33. Envy is a waste of time. You already have all you need. God provides, remember?!
34. The best is yet to come. (In Heaven)
35. No matter how you feel, get up, dress up and show up.
36. Do the right thing!
37. Call your family often.
38. Each night before you go to bed complete the Following statements:
'I am thankful for __________. Today I accomplished _________.'
39. Remember that you are too blessed to be stressed.
40. Enjoy the ride. Remember that this is not Disney World and you certainly don't want a fast pass. You only have one ride through life so make the most of it and enjoy the ride.
LIVE, LOVE, LAUGH. LIFE'S A GIFT ... UNWRAP IT!
Have a great day.
1. Take a 10-30 minute walk every day. And while you walk, smile. It is the ultimate anti-depressant.
2. Sit in silence for at least 10 minutes each day. Buy a lock if you have to.
3. Buy a Tivo (DVR), tape your late night shows and get more sleep.
4. When you wake up in the morning complete the following statement, 'My purpose is to________ today.'
5. Live with the 3 E's -- Energy, Enthusiasm, and Empathy.
6. Watch more movies, play more games and read more books than you did last year.
7. Always pray and make time to exercise.
8. Spend more time with people over the age of 70 and under the age of six.
9. Dream more while you are awake.
10. Eat more foods that grow on trees and plants and eat fewer foods that are manufactured in plants.
11. Drink green tea and plenty of water. Eat blueberries, wild Alaskan salmon, broccoli, almonds & walnuts.
12. Try to make at least three people smile each day.
13. Clear your clutter from your house, your car, your desk and let new and flowing energy into your life.
14. Don't waste your precious energy on gossip, energy vampires, issues of the past, negative thoughts or things you cannot control. Instead, invest your energy in the positive present moment.
15. Realize that life is a school and you are here to learn. Problems are simply part of the curriculum that appear and fade away like algebra class .....but the lessons you learn will last a lifetime.
16. Eat breakfast like a king, lunch like a prince and dinner like a college kid with a maxed out charge card.
17. Smile and laugh more. It will keep the energy vampires away.
18. Life isn't fair, but it's still good.
19. Life is too short to waste time hating anyone.
20. Don't take yourself so seriously. No one else does.
21. You don't have to win every argument. Agree to disagree.
22. Make peace with your past so it won't screw up the present.
23. Don't compare your life to others'. You have no idea what their journey is all about.
24. Ladies - Go on and burn those 'special' scented candles, use the 600 thread count sheets, the good china and wear our fancy lingerie now. Stop waiting for a special occasion. Everyday is special.
25. Guys: Go out and golf or fish or putter around the house or whatever it is that makes you happy. No one is in charge of your happiness except you.
26. Frame every so-called disaster with these words: 'In five years, will this matter?'
27. Forgive everyone for everything.
28. What other people think of you is none of your business. And if you knew how infrequently they thought of you, you certainly wouldn't care what they thought.
29. Time heals almost everything. Give time, time!
30. However good or bad a situation is it will change.
31. Your job won't take care of you when you are sick. Your friends will. Stay in touch with them.
32. Get rid of anything that isn't useful, beautiful or joyful.
33. Envy is a waste of time. You already have all you need. God provides, remember?!
34. The best is yet to come. (In Heaven)
35. No matter how you feel, get up, dress up and show up.
36. Do the right thing!
37. Call your family often.
38. Each night before you go to bed complete the Following statements:
'I am thankful for __________. Today I accomplished _________.'
39. Remember that you are too blessed to be stressed.
40. Enjoy the ride. Remember that this is not Disney World and you certainly don't want a fast pass. You only have one ride through life so make the most of it and enjoy the ride.
LIVE, LOVE, LAUGH. LIFE'S A GIFT ... UNWRAP IT!
Have a great day.
Lower Long Term Mortgage Rates Spur More Loan Applications
Long term mortgage rates fell dramatically during the week ended March 20 according to the Primary Mortgage Market Survey released by Freddie Mac. Short term rates remained relatively unchanged although fees and points bumped up to the highest levels we have seen in the three years we have been tracking the Freddie Mac report.
The 30-year fixed-rate mortgage (FRM) had an average rate of 5.87 percent with 0.5 point for the week compared to the previous week when it averaged 6.13 percent with 0.5 point. Last year at this time the 30-year averaged 6.16 percent.
The 15-year FRM dropped 33 basis points to 5.27 percent. Fees and points were unchanged at 0.5. One year ago the average rate for the 15-year was 5.90 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) carried a mean rate of 5.56 percent, down from the previous week when rates averaged 5.58 percent. Fees and points, however, rose to an average of 0.9 point from 0.6 point. One year ago the 5-year ARM averaged 5.91 percent.
One-year Treasury-indexed ARMS averaged 5.15 percent, an increase of one basis point from the previous week and points increased from 0.7 to 0.8. This same week in 2007 the one-year ARM averaged 5.40 percent.
"Mortgage rates fell this week as various actions were taken to improve market liquidity," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the inflation report from the Consumer Price Index (CPI) reflected weaker price increases than consensus expectations. Unchanged in February both including and excluding food and energy costs, it is the first time the core CPI did not report a monthly increase since November 2006.
from Mortgage News Daily March 27, 2008
The 30-year fixed-rate mortgage (FRM) had an average rate of 5.87 percent with 0.5 point for the week compared to the previous week when it averaged 6.13 percent with 0.5 point. Last year at this time the 30-year averaged 6.16 percent.
The 15-year FRM dropped 33 basis points to 5.27 percent. Fees and points were unchanged at 0.5. One year ago the average rate for the 15-year was 5.90 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) carried a mean rate of 5.56 percent, down from the previous week when rates averaged 5.58 percent. Fees and points, however, rose to an average of 0.9 point from 0.6 point. One year ago the 5-year ARM averaged 5.91 percent.
One-year Treasury-indexed ARMS averaged 5.15 percent, an increase of one basis point from the previous week and points increased from 0.7 to 0.8. This same week in 2007 the one-year ARM averaged 5.40 percent.
"Mortgage rates fell this week as various actions were taken to improve market liquidity," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the inflation report from the Consumer Price Index (CPI) reflected weaker price increases than consensus expectations. Unchanged in February both including and excluding food and energy costs, it is the first time the core CPI did not report a monthly increase since November 2006.
from Mortgage News Daily March 27, 2008
Tuesday, March 25, 2008
U.S. Officials Warn of Scams Targeting Homeowners
By EVAN PEREZ
March 25, 2008; Page A3
Wall Street Journal
Federal officials say a wave of opportunistic scams are targeting homeowners trying to avoid foreclosure in the current housing downturn.
Monday, prosecutors in California unsealed twin cases against 19 people who, according to agents from the Federal Bureau of Investigation and the Internal Revenue Service, skimmed nearly $13 million in equity from 115 homeowners coast to coast under the guise of a mortgage rescue.
Real-estate scammers "took advantage of the elevated market that peaked in 2005, and here now the vultures are waiting as the market goes down," said U.S. Attorney McGregor Scott of Sacramento.
Click for Full article
March 25, 2008; Page A3
Wall Street Journal
Federal officials say a wave of opportunistic scams are targeting homeowners trying to avoid foreclosure in the current housing downturn.
Monday, prosecutors in California unsealed twin cases against 19 people who, according to agents from the Federal Bureau of Investigation and the Internal Revenue Service, skimmed nearly $13 million in equity from 115 homeowners coast to coast under the guise of a mortgage rescue.
Real-estate scammers "took advantage of the elevated market that peaked in 2005, and here now the vultures are waiting as the market goes down," said U.S. Attorney McGregor Scott of Sacramento.
Click for Full article
Wednesday, March 19, 2008
Stratfor's take on Fed Rate Cut Decision
The U.S. Federal Reserve reduced its headline interest rates from 3 percent to 2.25 percent on Tuesday afternoon. The cut, which was a quarter point less than the consensus expectation of 1 percent, followed the Fed’s March 16 redefinition of the rules of borrowing. Nevertheless, the U.S. markets did not plummet in disappointment.
It is always difficult to understand the Fed’s reasoning. A guess would be that this actually was an attempt to instill confidence in markets. A full point cut might have been perceived as ongoing panic, while a smaller cut might have been seen as too much concern about inflation — not a trivial fear, but not good for the markets. A three-quarter point cut may have been an attempt to cut interest rates while still showing some confidence.
For the most part, the Federal Reserve prefers to ignore the financial markets along with all of the noise that is a regular feature in the world of Wall Street. It is not that there is no money or discussions of economic import occurring there — far from it — but that the Fed sees the financial markets as simply one aspect of the entire economy, and a rather erratic aspect at that. Better, goes the Fed’s thinking, to focus on the nuts and bolts of the “real” economy so that the entire thing can be kept on an even keel.
The Fed in this case is worried about the equity markets. The decline in housing prices already has taken a cut out of the net worth of individuals while hurting institutions holding mortgages of various sorts. A full-blown bear market on top of the decline in home values might have concerned the Fed more than a usual downturn would have. The double whammy of housing price declines and stock market crashes could have been devastating, even to an economy as large as the United States’. Therefore, the Fed appears to be exceedingly concerned about keeping the U.S. equity markets from tanking and is paying attention to its psychology as well as the fundamentals.
In reality, the housing correction is rather mild by historical standards, and the stock markets — only down by roughly 15-20 percent since the start of the subprime problems — are not exactly terrifying compared to previous stock crashes. But tell that to the people on Wall Street who live and breathe on the day-to-day deltas in both worlds. Their panic — and the place they occupy between the Fed, the housing market and the stock markets — is forcing the Fed to take actions that it would prefer not to.
The last time the Federal Reserve felt it necessary to enact sharp cuts when the danger to the real economy was this nebulous was during the Alan Greenspan era in the early weeks after the 9/11 attacks. Then, a cascade of rate cuts — one for a full percentage point — pared rates to the bone. In retrospect, the Federal Reserve probably overreacted. The benefit of hindsight tells us that the American recovery — not recession — began in October 2001. But the perception at the time was that the system itself might have been in danger, so there was no reason to spare the horses.
Now, as in 2001, the actual threat probably is not as bad as it seems. Now, as in 2001, the Fed’s goal is to assuage panic. But now, unlike in 2001, the panic is largely constrained to Wall Street.
That distinction provides the Federal Reserve with the opportunity to draw a line between Wall Street’s expectations and reality. The Street was expecting a rate cut of 1 percent or even more. The Fed ultimately gave up “only” three-quarters of a percent. The subtext is that the Fed is not as concerned as the Street about what is going on out there. It is a subtle difference, but one that is required to prevent the likes of Enron from being more than a footnote in American corporate history.
Click Here to Send Stratfor Your Comments
It is always difficult to understand the Fed’s reasoning. A guess would be that this actually was an attempt to instill confidence in markets. A full point cut might have been perceived as ongoing panic, while a smaller cut might have been seen as too much concern about inflation — not a trivial fear, but not good for the markets. A three-quarter point cut may have been an attempt to cut interest rates while still showing some confidence.
For the most part, the Federal Reserve prefers to ignore the financial markets along with all of the noise that is a regular feature in the world of Wall Street. It is not that there is no money or discussions of economic import occurring there — far from it — but that the Fed sees the financial markets as simply one aspect of the entire economy, and a rather erratic aspect at that. Better, goes the Fed’s thinking, to focus on the nuts and bolts of the “real” economy so that the entire thing can be kept on an even keel.
The Fed in this case is worried about the equity markets. The decline in housing prices already has taken a cut out of the net worth of individuals while hurting institutions holding mortgages of various sorts. A full-blown bear market on top of the decline in home values might have concerned the Fed more than a usual downturn would have. The double whammy of housing price declines and stock market crashes could have been devastating, even to an economy as large as the United States’. Therefore, the Fed appears to be exceedingly concerned about keeping the U.S. equity markets from tanking and is paying attention to its psychology as well as the fundamentals.
In reality, the housing correction is rather mild by historical standards, and the stock markets — only down by roughly 15-20 percent since the start of the subprime problems — are not exactly terrifying compared to previous stock crashes. But tell that to the people on Wall Street who live and breathe on the day-to-day deltas in both worlds. Their panic — and the place they occupy between the Fed, the housing market and the stock markets — is forcing the Fed to take actions that it would prefer not to.
The last time the Federal Reserve felt it necessary to enact sharp cuts when the danger to the real economy was this nebulous was during the Alan Greenspan era in the early weeks after the 9/11 attacks. Then, a cascade of rate cuts — one for a full percentage point — pared rates to the bone. In retrospect, the Federal Reserve probably overreacted. The benefit of hindsight tells us that the American recovery — not recession — began in October 2001. But the perception at the time was that the system itself might have been in danger, so there was no reason to spare the horses.
Now, as in 2001, the actual threat probably is not as bad as it seems. Now, as in 2001, the Fed’s goal is to assuage panic. But now, unlike in 2001, the panic is largely constrained to Wall Street.
That distinction provides the Federal Reserve with the opportunity to draw a line between Wall Street’s expectations and reality. The Street was expecting a rate cut of 1 percent or even more. The Fed ultimately gave up “only” three-quarters of a percent. The subtext is that the Fed is not as concerned as the Street about what is going on out there. It is a subtle difference, but one that is required to prevent the likes of Enron from being more than a footnote in American corporate history.
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Why do mortgage rates go up when the Federal Reserve cuts rates?
from Brian Woolley
Countryridge Financial, a subsidiary of Metrocities Mortgage
The Federal Open Market Committee lowered the Fed Funds Rate to 2.250 percent yesterday while leaving the door open for future rate cuts.
Stock markets cheered the Fed's move; the Dow Jones Industrial Average rallied 400 points in the wake of the announcement.
Meanwhile, the cash that fueled the stock gains had to come from somewhere and one of those places was the bond market. It's no surprise, therefore, that following the FOMC's press release, 30-year fixed rate mortgages spiked by 0.250%.
Stated more clearly: The Fed cut the Fed Funds Rate and mortgage rates went up.
Every time that the Federal Reserve cuts the Fed Funds Rate, it's an explicit signal the economy needs a trickle-down jumpstart.
When the Fed Funds Rate is lower, doing business is cheaper for banks, who in turn make it cheaper for businesses to do business, who in turn make it cheaper for consumers to live life.
This process can take up to a year for each rate cut or rate hike.
Meanwhile, as the changes to the Fed Funds Rate trickle their way through the economy, carrying on ordinary, day-to-day activities gets "cheaper" for everyone in the country. There's more money left for discretionary items, or investment in capital items, or whatever.
For example, the Federal Reserve has cut the Fed Funds Rate by 3.000 percent since September.
American consumers borrow $2.5 trillion on their credit cards so the 3-point reduction equates to $75,000,000,000 in interest payment savings.
You can only imagine what the reduction can do for businesses because businesses borrow far more money than consumers.
So, when the Fed cuts rates, its hope is that most of these "savings" get pumped back into the economy somehow. This is how rate cuts can lead to economic growth .
Sometimes, though, the growth is uncontrolled.
The fancy word for this situation is "inflation" and inflation is the enemy of mortgage bonds; it erodes the value of U.S. dollars and that's the currency in which mortgage bond payments are made.
So, it makes sense that mortgage rates rise when the Fed cuts the Fed Funds Rate. By stimulating the economy, the Federal Reserve is making long-term inflation much more likely.
Some people think the Federal Reserve is foolish right now but the FOMC voters don't seem to care. They are more concerned with relieving short-term pressures on the economy and will deal with what comes later, later.
Even if it's runaway inflation.
Brian Woolley is one of our favorite lenders
Knowledgeable, Experienced, Trusted
661-290-3700
Countryridge Financial is associated with Keller Williams VIP Properties in Santa Clarita
Countryridge Financial, a subsidiary of Metrocities Mortgage
The Federal Open Market Committee lowered the Fed Funds Rate to 2.250 percent yesterday while leaving the door open for future rate cuts.
Stock markets cheered the Fed's move; the Dow Jones Industrial Average rallied 400 points in the wake of the announcement.
Meanwhile, the cash that fueled the stock gains had to come from somewhere and one of those places was the bond market. It's no surprise, therefore, that following the FOMC's press release, 30-year fixed rate mortgages spiked by 0.250%.
Stated more clearly: The Fed cut the Fed Funds Rate and mortgage rates went up.
Every time that the Federal Reserve cuts the Fed Funds Rate, it's an explicit signal the economy needs a trickle-down jumpstart.
When the Fed Funds Rate is lower, doing business is cheaper for banks, who in turn make it cheaper for businesses to do business, who in turn make it cheaper for consumers to live life.
This process can take up to a year for each rate cut or rate hike.
Meanwhile, as the changes to the Fed Funds Rate trickle their way through the economy, carrying on ordinary, day-to-day activities gets "cheaper" for everyone in the country. There's more money left for discretionary items, or investment in capital items, or whatever.
For example, the Federal Reserve has cut the Fed Funds Rate by 3.000 percent since September.
American consumers borrow $2.5 trillion on their credit cards so the 3-point reduction equates to $75,000,000,000 in interest payment savings.
You can only imagine what the reduction can do for businesses because businesses borrow far more money than consumers.
So, when the Fed cuts rates, its hope is that most of these "savings" get pumped back into the economy somehow. This is how rate cuts can lead to economic growth .
Sometimes, though, the growth is uncontrolled.
The fancy word for this situation is "inflation" and inflation is the enemy of mortgage bonds; it erodes the value of U.S. dollars and that's the currency in which mortgage bond payments are made.
So, it makes sense that mortgage rates rise when the Fed cuts the Fed Funds Rate. By stimulating the economy, the Federal Reserve is making long-term inflation much more likely.
Some people think the Federal Reserve is foolish right now but the FOMC voters don't seem to care. They are more concerned with relieving short-term pressures on the economy and will deal with what comes later, later.
Even if it's runaway inflation.
Brian Woolley is one of our favorite lenders
Knowledgeable, Experienced, Trusted
661-290-3700
Countryridge Financial is associated with Keller Williams VIP Properties in Santa Clarita
OFHEO opens floodgates of liquidity for Fannie and Freddie
Fannie and Freddie's regulator unveiled a reduction of the capital the firms must hold to 20% from 30% previously. Ofheo said the move could provide up to $200 billion in immediate liquidity to the troubled mortgage-backed securities market. "We believe they can play an even more positive role in providing the stability and liquidity the markets need right now," Ofheo Director James Lockhart said in a statement.
This reduction combined with the increase of the portfolio caps announced last month should allow Freddie and Fannie to purchase or guarantee about $2 trillion in mortgages this year. This capacity should allow them to assist in subprime refinancing and loan modifications and do more in the jumbo mortgage market which they have been granted temporary permission to enter.
Treasury Secretary Paulson lauded the move. "Additional capital will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market," he said.
For more information see: http://online.wsj.com/article/SB120593069669648325.html?mod=djemalertNEWS
This reduction combined with the increase of the portfolio caps announced last month should allow Freddie and Fannie to purchase or guarantee about $2 trillion in mortgages this year. This capacity should allow them to assist in subprime refinancing and loan modifications and do more in the jumbo mortgage market which they have been granted temporary permission to enter.
Treasury Secretary Paulson lauded the move. "Additional capital will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market," he said.
For more information see: http://online.wsj.com/article/SB120593069669648325.html?mod=djemalertNEWS
No Good Options, but Better than Doing Nothing
We live in interesting times!
The week has been historic in the financial and housing markets with all of the moves by the Federal Reserve, the Treasury, and the regulatory agencies to soften the decline in housing prices and the increase in the foreclosure rate.
Excesses in housing with cheap money and lax lending standards, as well as enough fingers of blame for all parties to make it look like a circular firing squad, has led to where we are. As I have recently written in a column titled "I'm from the Government, and I'm here to help you", all of the policy options are pretty bad, and usually when the government gets involved in markets, the pain goes deeper and lasts longer. Time will tell as to whether this will hold true. After all, Congress has not made any impact on the situation yet, other than the usual hot air of promises and more promises. They still have plenty of time during this election year to make really bad policy decisions in legislation. Given the anti-mania in the housing market, some of it will actually get passed in all likelihood. Lenders will have money to lend, and the interest rates are attractive for right now.
The brief take-away is: all of the mucky-mucks will ensure that housing and the financial markets do not collapse right before the election.
For now 'le crisis de jour' has been averted, there's lots of activity and adjustments, panic has abated, and it's OK to buy and sell property.
Give me a call at 661-287-9164 if you want to buy or sell residential real estate in our market area.
The week has been historic in the financial and housing markets with all of the moves by the Federal Reserve, the Treasury, and the regulatory agencies to soften the decline in housing prices and the increase in the foreclosure rate.
Excesses in housing with cheap money and lax lending standards, as well as enough fingers of blame for all parties to make it look like a circular firing squad, has led to where we are. As I have recently written in a column titled "I'm from the Government, and I'm here to help you", all of the policy options are pretty bad, and usually when the government gets involved in markets, the pain goes deeper and lasts longer. Time will tell as to whether this will hold true. After all, Congress has not made any impact on the situation yet, other than the usual hot air of promises and more promises. They still have plenty of time during this election year to make really bad policy decisions in legislation. Given the anti-mania in the housing market, some of it will actually get passed in all likelihood. Lenders will have money to lend, and the interest rates are attractive for right now.
The brief take-away is: all of the mucky-mucks will ensure that housing and the financial markets do not collapse right before the election.
For now 'le crisis de jour' has been averted, there's lots of activity and adjustments, panic has abated, and it's OK to buy and sell property.
Give me a call at 661-287-9164 if you want to buy or sell residential real estate in our market area.
Sunday, March 16, 2008
Seminar on how to avoid your own Mortgage Meltdown
Residents are invited to a free informational session at City Hall.
On Monday, March 17th, whether your house is in foreclosure or not, you can come down to City Hall and get some advice on how to avoid a mortgage meltdown. At the seminar, which will begin at 6 p.m., you will get a chance to talk with credit counselors, learn about your rights, and get tips on how to avoid fraud and scams.
There will be no sales pitches or come-ons, only information from experts so you can make informed decisions and avoid foreclosure. U.S. Congressman Howard “Buck” McKeon said that he hopes the session will help residents get answers to their questions. “We encourage anyone that has any questions at all about their mortgage or other things that might put them in jeopardy of foreclosure, to come down to City Hall on Monday the 17th, and hopefully they will find help there.”
Space is limited, so to reserve your spot, call (661) 298-1220.
On Monday, March 17th, whether your house is in foreclosure or not, you can come down to City Hall and get some advice on how to avoid a mortgage meltdown. At the seminar, which will begin at 6 p.m., you will get a chance to talk with credit counselors, learn about your rights, and get tips on how to avoid fraud and scams.
There will be no sales pitches or come-ons, only information from experts so you can make informed decisions and avoid foreclosure. U.S. Congressman Howard “Buck” McKeon said that he hopes the session will help residents get answers to their questions. “We encourage anyone that has any questions at all about their mortgage or other things that might put them in jeopardy of foreclosure, to come down to City Hall on Monday the 17th, and hopefully they will find help there.”
Space is limited, so to reserve your spot, call (661) 298-1220.
Thursday, March 13, 2008
U.S. to Revamp Credit Rules
from The Wall Street Journal
March 12, 2008
Top economic policy makers plan to release Thursday their broadest plan yet for avoiding a recurrence of the current credit crunch. Treasury Secretary Paulson said that recommendations, which extend to nearly every niche in the credit markets, include strengthening oversight of mortgage lenders and brokers and requiring more disclosure by ratings firms.
http://online.wsj.com/article/SB120535743939031491.html?mod=djemalertNEWS
March 12, 2008
Top economic policy makers plan to release Thursday their broadest plan yet for avoiding a recurrence of the current credit crunch. Treasury Secretary Paulson said that recommendations, which extend to nearly every niche in the credit markets, include strengthening oversight of mortgage lenders and brokers and requiring more disclosure by ratings firms.
http://online.wsj.com/article/SB120535743939031491.html?mod=djemalertNEWS
Monday, March 10, 2008
Neither a Borrower nor a Lender Be?
Ever have a friend or family member ask for a loan? It can be awkward, and for many the knee-jerk reaction is to just pull out the checkbook. But having the funds available to extend a loan is often not the point when it comes to lending money... it's knowing when or if you will ever receive your hard earned funds back.
According to a Federal Reserve survey, over 8% of Americans have loans that have been extended to friends and family. By some estimates, these loans total a whopping $89 billion and an eyebrow-raising default rate of 14%, versus just 1% for those who borrow from a bank. So before you decide to play banker with your friends and family, consider these steps to help avoid a potentially ugly situation.
Don't Commit Right Away. When asked for a personal loan, don't say yes right away, especially if the sum of money is large. It has been said that "quick to borrow is always slow to pay." So while you want to show compassion for the friend or family member and tell them you would like to help, explain that you need a few days to review your financial situation and make a decision. Perhaps another solution will come to them in the meantime.
Just Say No. If possible, try to avoid lending the money. Statistics suggest that the risk of not getting repaid is very high, which could be damaging to your relationship. HOWEVER... before you blurt out a blunt "NO," consider the amount requested, provide an explanation that will not hurt your relationship, and offer to help in a non-financial way. Or consider giving a smaller amount as a gift, with no expectations of repayment. This allows you to be generous on your own terms, and removes the potentially heated issue of non-repayment.
Be Specific. If you do decide to extend a loan, sit down with your friend or family member and set expectations. And don't beat around the bush... be very specific about the term of the loan, interest rate, payment plan, even the penalty that will be incurred should a payment be missed.
Get It In Writing. Always put the terms in writing. Seven out of ten personal loans are not put in writing... but again, consider the markedly higher default rate of non-documented loans. A written agreement reinforces that you are serious about the repayment terms discussed, and it prevents any potential misunderstandings. Promissory notes can be purchased online at www.nolo.com for a reasonable price. If the loan is large or complex it may be most beneficial to have an attorney draw up an agreement. Make sure the loan papers are filed away in a safe location, and then keep good records.
One important note, if the loan is in excess of $10,000 or the money will finance income-producing activities, the IRS expects you to charge a certain amount of interest...and claim it as taxable income, of course. To find the current rates, visit www.irs.gov and search for AFR (Applicable Federal Rates). You can also contact your trusted CPA for advice--or if you don't have one, ask me--I may be able to provide a referral.
According to a Federal Reserve survey, over 8% of Americans have loans that have been extended to friends and family. By some estimates, these loans total a whopping $89 billion and an eyebrow-raising default rate of 14%, versus just 1% for those who borrow from a bank. So before you decide to play banker with your friends and family, consider these steps to help avoid a potentially ugly situation.
Don't Commit Right Away. When asked for a personal loan, don't say yes right away, especially if the sum of money is large. It has been said that "quick to borrow is always slow to pay." So while you want to show compassion for the friend or family member and tell them you would like to help, explain that you need a few days to review your financial situation and make a decision. Perhaps another solution will come to them in the meantime.
Just Say No. If possible, try to avoid lending the money. Statistics suggest that the risk of not getting repaid is very high, which could be damaging to your relationship. HOWEVER... before you blurt out a blunt "NO," consider the amount requested, provide an explanation that will not hurt your relationship, and offer to help in a non-financial way. Or consider giving a smaller amount as a gift, with no expectations of repayment. This allows you to be generous on your own terms, and removes the potentially heated issue of non-repayment.
Be Specific. If you do decide to extend a loan, sit down with your friend or family member and set expectations. And don't beat around the bush... be very specific about the term of the loan, interest rate, payment plan, even the penalty that will be incurred should a payment be missed.
Get It In Writing. Always put the terms in writing. Seven out of ten personal loans are not put in writing... but again, consider the markedly higher default rate of non-documented loans. A written agreement reinforces that you are serious about the repayment terms discussed, and it prevents any potential misunderstandings. Promissory notes can be purchased online at www.nolo.com for a reasonable price. If the loan is large or complex it may be most beneficial to have an attorney draw up an agreement. Make sure the loan papers are filed away in a safe location, and then keep good records.
One important note, if the loan is in excess of $10,000 or the money will finance income-producing activities, the IRS expects you to charge a certain amount of interest...and claim it as taxable income, of course. To find the current rates, visit www.irs.gov and search for AFR (Applicable Federal Rates). You can also contact your trusted CPA for advice--or if you don't have one, ask me--I may be able to provide a referral.
Thursday, March 06, 2008
Home Equity in U.S. Hits New Low
from Mortgage News Daily March 6, 2008
The Federal Reserve on Thursday announced that, in 2007, American ownership in their homes as measured by equity fell below 50 percent for the first time since records were first kept in 1945.
During the 2nd quarter of 2007 the central bank reported that homeowners' equity slipped to a downwardly revised 49.6 percent and slipped further to 47.9 percent in the fourth quarter. This was the third straight quarter that equity was under 50 percent.
Home equity is a measure of the market value of the home minus the mortgage-related debt. Because Americans have repeatedly cashed out the equity in their homes through cash out refinancing, home equity loans and high loan to value mortgages, equity has steadily declined even in the midst of the surging prices of the housing bubble.
The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.
In related news, the Mortgage Bankers Association released its fourth quarter delinquency report which showed the home foreclosures and the number of homes entering the foreclosure process both rose to record highs.
Most of the foreclosures and delinquencies could be tied to subprime loans where the delinquency rate (usually loan payments 60 or more days late) was up 1 percent from the third quarter to 17.31 percent of all outstanding loans. The delinquency rate for all loans was 5.82 percent, up from 4.95 percent one year earlier and the highest since 1985. In addition, 0.83 percent of loans entered the foreclosure process during the fourth quarter. This surpassed the previous record of 0.78 percent during the third quarter. One year earlier the rate was 0.54 percent.
Late payments, those 30 or more days overdue, also set a new record of 20.02 percent of all loans in the fourth quarter. The previous record was set in the third quarter at 18.81 percent.
The Federal Reserve on Thursday announced that, in 2007, American ownership in their homes as measured by equity fell below 50 percent for the first time since records were first kept in 1945.
During the 2nd quarter of 2007 the central bank reported that homeowners' equity slipped to a downwardly revised 49.6 percent and slipped further to 47.9 percent in the fourth quarter. This was the third straight quarter that equity was under 50 percent.
Home equity is a measure of the market value of the home minus the mortgage-related debt. Because Americans have repeatedly cashed out the equity in their homes through cash out refinancing, home equity loans and high loan to value mortgages, equity has steadily declined even in the midst of the surging prices of the housing bubble.
The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.
In related news, the Mortgage Bankers Association released its fourth quarter delinquency report which showed the home foreclosures and the number of homes entering the foreclosure process both rose to record highs.
Most of the foreclosures and delinquencies could be tied to subprime loans where the delinquency rate (usually loan payments 60 or more days late) was up 1 percent from the third quarter to 17.31 percent of all outstanding loans. The delinquency rate for all loans was 5.82 percent, up from 4.95 percent one year earlier and the highest since 1985. In addition, 0.83 percent of loans entered the foreclosure process during the fourth quarter. This surpassed the previous record of 0.78 percent during the third quarter. One year earlier the rate was 0.54 percent.
Late payments, those 30 or more days overdue, also set a new record of 20.02 percent of all loans in the fourth quarter. The previous record was set in the third quarter at 18.81 percent.
New loan limits are $729,750 for both FHA and Conforming loans!
This is good news for our housing market!!
New loan limits are $729,750 for both FHA and Conforming loans!
As expected, the Department of Housing and Urban Development (HUD), announced higher loan limits yesterday for both FHA and Conventional loans. Loan limits are calculated County-by-County, based on median housing prices. These new limits are applicable to loans Los Angeles, Ventura and Orange Counties. The jump in FHA and Conventional loan limits is quite large as they were previously $362,790 and $417,000 respectively. This should mean lower interest rates for loan amounts that previously fell into the Jumbo category!
New loan limits are $729,750 for both FHA and Conforming loans!
As expected, the Department of Housing and Urban Development (HUD), announced higher loan limits yesterday for both FHA and Conventional loans. Loan limits are calculated County-by-County, based on median housing prices. These new limits are applicable to loans Los Angeles, Ventura and Orange Counties. The jump in FHA and Conventional loan limits is quite large as they were previously $362,790 and $417,000 respectively. This should mean lower interest rates for loan amounts that previously fell into the Jumbo category!
The Death Of The HELOC...Millions Of Homeowners Feeling Fear And Panic
by Tim and Julie Harris
Most major lenders are freezing access to Home Equity Lines of Credit (HELOCs) . Millions of Americans use their HELOCs as their families security blanket to weather any unplanned financial storms. If you were planning on using your HELOC for spring home improvements, medical bills or college tuition, chances are the money has been, or will be shut off.
Most major lenders have been working together in collusion. Behind closed doors, these lenders have created a secret plan to cut off access to your home equity lines of credit.
You must be aware that the lender retains the right to cut off or reduce your line of credit at their sole discretion. Lenders are now arbitrarily reassessing properties and then locking out access for homeowners when the lenders believe the property has negative equity.
What can you do about this when you are affected?
Nothing.
From Countrywide, (this is part of a letter sent to home owners):
'Important message about your loan: At Countrywide Home Loans we are committed to helping customers sustain homeownership. As part of the commitment, and in keeping with its sound risk-management and responsible lending practices, Countrywide Home Loan is reviewing and analyzing home equity lines of credit in its servicing portfolio.
As you know, home values in many areas of the country have declined. We believe that the decline in the value of your property, from its original appraised value at the time your loan was made is significant. In accordance with the terms of your Home Equity Credit Line Agreement and Disclosure Statement (Agreement), we have elected to suspend further draws against your account as of the Effective Date above.'
More Than 122,000 Have Already Lost The Right To Borrow From Their Credit Lines And We Are Just Getting Started.
On Friday, the Los Angeles Times reported that Countrywide notified many homeowners they've lost their right to borrow against their credit lines:
'Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity.
Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines. In some cases, according to the company, the borrowers are now "upside down"—the total debt on the home exceeds the market value of the property.
Calabasas-based Countrywide, the nation's largest mortgage lender, says it uses computer modeling that factors in changes in home prices to determine which customers will have their money tap shut off.'
Countrywide is not alone. This is a partial list of the Mortgage Lenders who are sending HELOC freeze letters now.
Bank of America - HELOC Freeze
Countrywide - HELOC Freeze
Chase - HELOC Freezes
CitiGroup - HELOC Freeze under review
National City - HELOC Freeze
Suntrust - HELOC Freeze
USAA Federal Savings - HELOC Feeeze
Washington Mutual - HELOC Freeze
If there was any question that consumers were feeling the financial pinch before...just wait until they are told that their homes are worth LESS than what they owe. In the words of Countrywide..."Significantly Less." What effect will this have on the economy...think this will make consumers feel more confident about housing?
Most major lenders are freezing access to Home Equity Lines of Credit (HELOCs) . Millions of Americans use their HELOCs as their families security blanket to weather any unplanned financial storms. If you were planning on using your HELOC for spring home improvements, medical bills or college tuition, chances are the money has been, or will be shut off.
Most major lenders have been working together in collusion. Behind closed doors, these lenders have created a secret plan to cut off access to your home equity lines of credit.
You must be aware that the lender retains the right to cut off or reduce your line of credit at their sole discretion. Lenders are now arbitrarily reassessing properties and then locking out access for homeowners when the lenders believe the property has negative equity.
What can you do about this when you are affected?
Nothing.
From Countrywide, (this is part of a letter sent to home owners):
'Important message about your loan: At Countrywide Home Loans we are committed to helping customers sustain homeownership. As part of the commitment, and in keeping with its sound risk-management and responsible lending practices, Countrywide Home Loan is reviewing and analyzing home equity lines of credit in its servicing portfolio.
As you know, home values in many areas of the country have declined. We believe that the decline in the value of your property, from its original appraised value at the time your loan was made is significant. In accordance with the terms of your Home Equity Credit Line Agreement and Disclosure Statement (Agreement), we have elected to suspend further draws against your account as of the Effective Date above.'
More Than 122,000 Have Already Lost The Right To Borrow From Their Credit Lines And We Are Just Getting Started.
On Friday, the Los Angeles Times reported that Countrywide notified many homeowners they've lost their right to borrow against their credit lines:
'Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity.
Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines. In some cases, according to the company, the borrowers are now "upside down"—the total debt on the home exceeds the market value of the property.
Calabasas-based Countrywide, the nation's largest mortgage lender, says it uses computer modeling that factors in changes in home prices to determine which customers will have their money tap shut off.'
Countrywide is not alone. This is a partial list of the Mortgage Lenders who are sending HELOC freeze letters now.
Bank of America - HELOC Freeze
Countrywide - HELOC Freeze
Chase - HELOC Freezes
CitiGroup - HELOC Freeze under review
National City - HELOC Freeze
Suntrust - HELOC Freeze
USAA Federal Savings - HELOC Feeeze
Washington Mutual - HELOC Freeze
If there was any question that consumers were feeling the financial pinch before...just wait until they are told that their homes are worth LESS than what they owe. In the words of Countrywide..."Significantly Less." What effect will this have on the economy...think this will make consumers feel more confident about housing?
Wednesday, March 05, 2008
Bernanke's Call: Aid Homeowners
Fed Chief Asks Lenders To Take Aggressive Steps To Address Housing Crisis
By GREG IP
March 5, 2008; Page A3
from the Wall Street Journal
Federal Reserve Chairman Ben Bernanke, raising the level of urgency in dealing with the nation's housing crisis, called on lenders to aid struggling homeowners by reducing their principal -- the sum of money they borrowed -- to lessen the likelihood of foreclosure, and endorsed a bigger role for the federal government in backing such mortgages.
Mr. Bernanke's call, in a speech to bankers, is an acknowledgement the current focus on reducing homeowner's monthly payments by modifying their mortgage rates doesn't solve the underlying problem: the increasing number of American homes now worth less than their mortgages. It also suggests Mr. Bernanke is willing to advocate more aggressive measures to address the deepening housing crisis than the Bush administration has endorsed.
"The current housing difficulties differ from those in the past, largely because of the pervasiveness of negative equity positions," Mr. Bernanke told the Independent Community Bankers of America in Orlando yesterday. With negative equity, which means a home is worth less than its mortgage, "a stressed borrower has less ability...and less financial incentive to try to remain in the home.
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure" than reducing the interest rate," he said.
A "potentially important step" to make this happen, he said, is to expand the ability of the Federal Housing Administration to guarantee larger mortgages and mortgages on which the borrower is, or is about to be, delinquent, in effect having the federal government backstop many loans that would otherwise go into default.
Mr. Bernanke has taken an increasingly activist stance on multiple fronts in battling the housing crisis. He has slashed interest rates, backed fiscal stimulus and has positioned himself between congressional Democrats, who want more government resources committed to preventing foreclosures, and the Treasury, which has focused on voluntary steps by lenders such as modifying interest rates on mortgages.
House Financial Services Committee Chairman Barney Frank (D., Mass.) called the speech an endorsement of his own proposal. "It begins with [lenders] recognizing they've lost money," he said. "Once they've done that we think the FHA should facilitate the refinancing."
During the housing boom, many homes were bought with little or no money down because both buyers and lenders bet on additional home-price appreciation to create equity.
Home prices have been declining nationwide for the last year. At the end of 2006, 7% of mortgage borrowers had negative equity, according to First American CoreLogic, a research firm. A report by economists from Goldman Sachs Group Inc. and Morgan Stanley and two academics estimates that proportion will rise to 21%, or 10.5 million households, if home prices fall 15%, as they expect. Assuming an average mortgage balance of $250,000, that would put $2.6 trillion of mortgage debt "under water," the report said.
The centerpiece of the Bush administration's efforts to stem foreclosures is Hope Now, a program under which mortgage servicers and lenders voluntarily reduce or freeze the interest rates of certain subprime borrowers. Mr. Bernanke said as a result, "workouts" of subprime mortgages rose from about 250,000 in the third quarter of 2007 to 300,000 in the fourth quarter, while workouts of prime mortgages rose from 150,000 to 175,000 in the same period. That pace picked up in January, he said.
Robert Steel, Treasury under secretary for domestic finance, declined to specifically endorse Mr. Bernanke's proposal but said it is "one of the tools" for trying to reduce foreclosures. In an interview with The Wall Street Journal, Mr. Steel said the problems posed by the housing crisis are "hard, new things" with no single, obvious solution.
He noted since the Hope Now initiative was announced last fall, the scale of the rate-reset problem has been diminished by Fed rate cuts, which means many mortgages will reset to lower rates than had previously been assumed.
Many outside experts also believe the focus on resets has been misplaced, given that most subprime defaults occurred even before lower teaser rates reset to higher levels.
Reducing the principal rather than the interest rate is a "very different framework for thinking about the problem," said Andy Laperriere, an analyst at ISI Group, a brokerage firm. He said with so many borrowers under water, "any proposal that helps them will be very expensive for either the financial institution or the taxpayer," and a large program would potentially sweep in millions of borrowers who weren't going to default anyway.
Industry reacted coolly to Mr. Bernanke's proposal. The American Securitization Forum, which represents participants in the market for mortgage-backed securities -- pools of mortgages originated and sold by banks and other lenders -- said it had already developed procedures for modifying loans, including through principal reduction. To reduce principal, firms that service MBS pools on behalf of the end investors need "a clear basis for concluding that the related borrower is unable...rather than simply being unwilling" to repay.
Steve O'Connor, senior vice-president of government affairs at the Mortgage Bankers Association, said lenders should consider principal reduction as one way of helping borrowers as long as it is "consistent with obligations" to MBS investors.
Mr. Bernanke said a principal reduction on a mortgage that's greater than the home's underlying value may make the mortgage's actual value greater by "reducing the risk of default and foreclosure."
J.P. Morgan Chase & Co. said in a statement it has "begun to review the feasibility of principal reductions for pooled loans." Any such reduction "must balance the interests of investors...and the borrowers' needs," it said.
--Damian Paletta and Robin Sidel contributed to this article
By GREG IP
March 5, 2008; Page A3
from the Wall Street Journal
Federal Reserve Chairman Ben Bernanke, raising the level of urgency in dealing with the nation's housing crisis, called on lenders to aid struggling homeowners by reducing their principal -- the sum of money they borrowed -- to lessen the likelihood of foreclosure, and endorsed a bigger role for the federal government in backing such mortgages.
Mr. Bernanke's call, in a speech to bankers, is an acknowledgement the current focus on reducing homeowner's monthly payments by modifying their mortgage rates doesn't solve the underlying problem: the increasing number of American homes now worth less than their mortgages. It also suggests Mr. Bernanke is willing to advocate more aggressive measures to address the deepening housing crisis than the Bush administration has endorsed.
"The current housing difficulties differ from those in the past, largely because of the pervasiveness of negative equity positions," Mr. Bernanke told the Independent Community Bankers of America in Orlando yesterday. With negative equity, which means a home is worth less than its mortgage, "a stressed borrower has less ability...and less financial incentive to try to remain in the home.
"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure" than reducing the interest rate," he said.
A "potentially important step" to make this happen, he said, is to expand the ability of the Federal Housing Administration to guarantee larger mortgages and mortgages on which the borrower is, or is about to be, delinquent, in effect having the federal government backstop many loans that would otherwise go into default.
Mr. Bernanke has taken an increasingly activist stance on multiple fronts in battling the housing crisis. He has slashed interest rates, backed fiscal stimulus and has positioned himself between congressional Democrats, who want more government resources committed to preventing foreclosures, and the Treasury, which has focused on voluntary steps by lenders such as modifying interest rates on mortgages.
House Financial Services Committee Chairman Barney Frank (D., Mass.) called the speech an endorsement of his own proposal. "It begins with [lenders] recognizing they've lost money," he said. "Once they've done that we think the FHA should facilitate the refinancing."
During the housing boom, many homes were bought with little or no money down because both buyers and lenders bet on additional home-price appreciation to create equity.
Home prices have been declining nationwide for the last year. At the end of 2006, 7% of mortgage borrowers had negative equity, according to First American CoreLogic, a research firm. A report by economists from Goldman Sachs Group Inc. and Morgan Stanley and two academics estimates that proportion will rise to 21%, or 10.5 million households, if home prices fall 15%, as they expect. Assuming an average mortgage balance of $250,000, that would put $2.6 trillion of mortgage debt "under water," the report said.
The centerpiece of the Bush administration's efforts to stem foreclosures is Hope Now, a program under which mortgage servicers and lenders voluntarily reduce or freeze the interest rates of certain subprime borrowers. Mr. Bernanke said as a result, "workouts" of subprime mortgages rose from about 250,000 in the third quarter of 2007 to 300,000 in the fourth quarter, while workouts of prime mortgages rose from 150,000 to 175,000 in the same period. That pace picked up in January, he said.
Robert Steel, Treasury under secretary for domestic finance, declined to specifically endorse Mr. Bernanke's proposal but said it is "one of the tools" for trying to reduce foreclosures. In an interview with The Wall Street Journal, Mr. Steel said the problems posed by the housing crisis are "hard, new things" with no single, obvious solution.
He noted since the Hope Now initiative was announced last fall, the scale of the rate-reset problem has been diminished by Fed rate cuts, which means many mortgages will reset to lower rates than had previously been assumed.
Many outside experts also believe the focus on resets has been misplaced, given that most subprime defaults occurred even before lower teaser rates reset to higher levels.
Reducing the principal rather than the interest rate is a "very different framework for thinking about the problem," said Andy Laperriere, an analyst at ISI Group, a brokerage firm. He said with so many borrowers under water, "any proposal that helps them will be very expensive for either the financial institution or the taxpayer," and a large program would potentially sweep in millions of borrowers who weren't going to default anyway.
Industry reacted coolly to Mr. Bernanke's proposal. The American Securitization Forum, which represents participants in the market for mortgage-backed securities -- pools of mortgages originated and sold by banks and other lenders -- said it had already developed procedures for modifying loans, including through principal reduction. To reduce principal, firms that service MBS pools on behalf of the end investors need "a clear basis for concluding that the related borrower is unable...rather than simply being unwilling" to repay.
Steve O'Connor, senior vice-president of government affairs at the Mortgage Bankers Association, said lenders should consider principal reduction as one way of helping borrowers as long as it is "consistent with obligations" to MBS investors.
Mr. Bernanke said a principal reduction on a mortgage that's greater than the home's underlying value may make the mortgage's actual value greater by "reducing the risk of default and foreclosure."
J.P. Morgan Chase & Co. said in a statement it has "begun to review the feasibility of principal reductions for pooled loans." Any such reduction "must balance the interests of investors...and the borrowers' needs," it said.
--Damian Paletta and Robin Sidel contributed to this article
Wednesday, February 27, 2008
Myth and Reality: Sale of Home Profits Taxed or Not?
Myth: If I sell my home for more than I paid for it, I have to reinvest the proceeds in a new home with a certain time to get the most favorable tax treatment.
Reality: Wrong. Congress erased that law in the late 1990s.
If you sell your primary residence, you typically can exclude a gain of as much as $250,000 if you're single, or as much as $500,000 if you're married and filing a joint return. To qualify for the full exclusion, you must have owned the home -- and lived in it as your primary residence -- for at least two of the five years prior to the sale. Even if you can't meet these tests, you still might qualify for a partial exclusion if you had to sell for certain reasons, such as a job change or health.
Congress recently made another change that may help some widows and widowers. Under the new law, a surviving spouse who hasn't remarried still may qualify for the up to $500,000 exclusion if the sale of the home occurs not later than two years after the spouse's death, says Robert Trinz, senior tax analyst the Thomson Tax and Accounting in New York. This change, which became effective on sales or exchanges beginning this year, gives the surviving spouse more time to sell.
~~ from the Wall Street Journal
As always, consult with your tax advisor regarding the tax consequences for you and your particular situation. We are not tax advisors, and always recommend that you consult with qualified professionals regarding tax advice.
Reality: Wrong. Congress erased that law in the late 1990s.
If you sell your primary residence, you typically can exclude a gain of as much as $250,000 if you're single, or as much as $500,000 if you're married and filing a joint return. To qualify for the full exclusion, you must have owned the home -- and lived in it as your primary residence -- for at least two of the five years prior to the sale. Even if you can't meet these tests, you still might qualify for a partial exclusion if you had to sell for certain reasons, such as a job change or health.
Congress recently made another change that may help some widows and widowers. Under the new law, a surviving spouse who hasn't remarried still may qualify for the up to $500,000 exclusion if the sale of the home occurs not later than two years after the spouse's death, says Robert Trinz, senior tax analyst the Thomson Tax and Accounting in New York. This change, which became effective on sales or exchanges beginning this year, gives the surviving spouse more time to sell.
~~ from the Wall Street Journal
As always, consult with your tax advisor regarding the tax consequences for you and your particular situation. We are not tax advisors, and always recommend that you consult with qualified professionals regarding tax advice.
Decline in Home Prices Accelerates
Fed's Efforts Have Only Muted Effect On Mortgage Rates
By KELLY EVANS, SERENA NG and RUTH SIMON
Wall Street Journal
February 27, 2008; Page A1
The decline in U.S. home prices accelerated in the fourth quarter, according to two leading barometers, compounding two of the biggest threats facing the nation's economy: faltering consumer spending and tight credit markets.
The S&P/Case-Shiller national home-price index for the fourth quarter fell 8.9% from a year earlier, the largest drop in its 20 years of data. And the Office of Federal Housing Enterprise Oversight's index -- which tracks only homes purchased with mortgages guaranteed by home-loan giants Fannie Mae or Freddie Mac -- was down 0.3%, the first year-to-year decline in the measure's 16 years.
Lower home prices threaten the economy's growth by making consumers feel less wealthy and thus less willing to spend. They also curtail homeowners' ability to borrow against the value of their homes to finance other purchases. In addition, lower housing prices erode the value of banks' collateral, prompting them to tighten their lending standards, which further damps economic growth.
A top Federal Reserve official indicated the housing slump and its broadening impact on the economy probably would keep the central bank biased in favor of more interest-rate cuts. "It appears that the correction in the housing market has further to go," Fed Vice Chairman Donald Kohn said yesterday in a speech in North Carolina. Mr. Kohn said that the downturn, after being "contained" for nearly two years, "appears to have spread to other sectors of the economy." He added that if the housing market deteriorates more than expected, "lenders might further reduce credit availability."
The Fed's efforts so far to soften the blow of the housing slump with lower interest rates appear to be having a muted effect. Since September, the Fed has reduced its target for short-term interest rates by 2.25 percentage points to 3%. But some mortgage rates are actually rising, and those that are falling haven't fallen that much.
The average interest rate on a standard 30-year fixed-rate mortgage was 6.38% yesterday, little changed from September but up from 5.61% in late January, according to HSH Associates, a mortgage-data publisher in Pompton Plains, N.J. Interest rates on so-called jumbo mortgages -- those larger than $417,000 -- were at 7.35%, also close to their September levels.
There are two reasons mortgage rates haven't responded more to the Fed's rate cuts. One is that long-term Treasury yields, which are the benchmark for most mortgage rates, have risen recently, perhaps because of increased concern about inflation as the prices of oil and other commodities soar. The other is that the spread between mortgage rates and Treasury rates has widened as investors and banks become increasingly reluctant to make home loans.
Hoping to Refinance
William Zempsky, a pediatrician who lives in West Hartford, Conn., was hoping to refinance his adjustable-rate mortgage before the rate -- which had been fixed at 4.5% for five years -- jumps to 6% or so in March. "I started to put my stuff together to refinance, but before we could pull the trigger, rates bounced up again," Mr. Zempsky said. "It seemed that with the Fed dropping rates that things would stay low, but they haven't."
If Mr. Zempsky doesn't refinance, his monthly payments will jump by about $275 a month, says his mortgage banker, Michael Menatian, president of Sanborn Mortgage Corp.
The housing-market slump also is taking its toll on consumer sentiment, which could lead to further pullbacks in spending, depressing the economy. The Conference Board, a New York-based business-research group, said yesterday that its index of consumer confidence fell sharply to 75.0 in February from 87.3 in January. The index is closely watched because consumer spending drives much of the U.S. economy.
"Consumer spending is going to take a hit," said Patrick Newport, an economist at Global Insight in Waltham, Mass. "The hit will be bigger the more home prices drop."
A growing glut of homes for sale suggests buyers have little interest in snapping up houses at current prices. Buyers "are waiting for the bottom to be there," said Vicki Nellis, a real-estate agent at Re/Max Allegiance in Burke, Va. She said this is the worst market she has seen in her 25 years in the business.
Goldman Sachs Group Inc. estimates home prices ultimately will fall by 20% to 25% from the peak of the housing boom, while Merrill Lynch chief economist Dave Rosenberg says they could fall even further. According to the S&P/Case-Shiller national home-price index, prices have fallen 10.2% from their highs in the summer of 2006. In some areas, the declines have been much steeper. Prices in the Miami area were 17.5% lower in December than they were a year earlier, and prices in Las Vegas, Phoenix and San Diego have fallen by 15% or more.
There may be light at the end of the tunnel. As prices fall, potential buyers may be tempted off the sidelines. Economists agree the key to stabilizing prices is working off the huge inventory of unsold homes. Supply is shrinking: New-home construction has plunged dramatically. But demand has fallen just as much, leaving inventories high. Sales are now far below normal trends, and on Monday, an industry trade group reported a 0.5% increase in single-family home sales in January, the first in 11 months.
The S&P/Case-Shiller and Ofheo indices have important differences. The Ofheo index is less volatile because it only tracks the prices of homes purchased with mortgages guaranteed by government-backed agencies. That excludes jumbo mortgages, subprime mortgages and other riskier mortgage products.
One reason home prices are falling: Builders are trying to unload their unsold houses. Stuart Kaye, founder of Kaye Homes Inc. in Naples, Fla., has been offering discounts, including price cuts and other incentives, of 20% to 30% on about 50 homes in his inventory. He has sold 18 of them in recent months. "We want to be out from underneath this inventory, and we have made a commitment we will be through it in a 90-day period,'' he said.
But the interest-rate environment has brought a near halt to refinancing activity. P.H. Naffah, a musician in Goodyear, Ariz., has a roughly $415,000, 30-year mortgage with a fixed rate of 6.25%. He figures he could cut his mortgage costs by around $250 a month by refinancing into a loan with a 5.5% rate. "I'm waiting for the interest rates to go down," said Mr. Naffah, who added the savings "would be significant" because his monthly income as a musician fluctuates.
Other borrowers have been hamstrung by tighter credit standards as lenders eliminate programs and set tighter requirements, particularly in markets where home prices are falling. Steve Walsh, a mortgage broker in Scottsdale, Ariz., says his firm is originating about 300 loans a month, but closing only about 65. Mr. Walsh says that about 100 applications fell apart because of problems with appraisals. Another 100 loans didn't close because of rising mortgage rates.
In addition to inflation concerns, rates are rising because the market for mortgage-backed securities is in upheaval, thanks to rising mortgage delinquencies and the collapse of the high-risk subprime corner of the mortgage business.
Upward Pressure
Investors are demanding higher risk premiums for securities they buy with mortgages attached to them. And that is putting upward pressure on the rates charged to individuals. Even bonds backed by government-sponsored enterprises Fannie Mae and Freddie Mac -- which are considered safe triple-A-rated institutions -- have declined in value, pushing mortgage rates higher.
The difference between yields on some Fannie-backed mortgage bonds and yields on Treasury notes hit around 2.46 percentage points this week. This gap -- also known as the "spread" -- gets larger when investors become more risk averse and seek safety in Treasury bonds. It is up from 2.06 percentage points two weeks ago and has reached levels last seen during the 1980s savings-and-loan crisis, according to Bear Stearns.
Of course, mortgage rates would likely be even higher if the Fed hadn't moved aggressively in the past few months. But Fed officials seem mindful of their own limits. "Financing costs have risen, on balance, for riskier credits, and almost all borrowers are dealing with more cautious lenders who have adopted more stringent standards," Mr. Kohn said in his speech yesterday.
--Michael Corkery and Sara Murray contributed to this article.
By KELLY EVANS, SERENA NG and RUTH SIMON
Wall Street Journal
February 27, 2008; Page A1
The decline in U.S. home prices accelerated in the fourth quarter, according to two leading barometers, compounding two of the biggest threats facing the nation's economy: faltering consumer spending and tight credit markets.
The S&P/Case-Shiller national home-price index for the fourth quarter fell 8.9% from a year earlier, the largest drop in its 20 years of data. And the Office of Federal Housing Enterprise Oversight's index -- which tracks only homes purchased with mortgages guaranteed by home-loan giants Fannie Mae or Freddie Mac -- was down 0.3%, the first year-to-year decline in the measure's 16 years.
Lower home prices threaten the economy's growth by making consumers feel less wealthy and thus less willing to spend. They also curtail homeowners' ability to borrow against the value of their homes to finance other purchases. In addition, lower housing prices erode the value of banks' collateral, prompting them to tighten their lending standards, which further damps economic growth.
A top Federal Reserve official indicated the housing slump and its broadening impact on the economy probably would keep the central bank biased in favor of more interest-rate cuts. "It appears that the correction in the housing market has further to go," Fed Vice Chairman Donald Kohn said yesterday in a speech in North Carolina. Mr. Kohn said that the downturn, after being "contained" for nearly two years, "appears to have spread to other sectors of the economy." He added that if the housing market deteriorates more than expected, "lenders might further reduce credit availability."
The Fed's efforts so far to soften the blow of the housing slump with lower interest rates appear to be having a muted effect. Since September, the Fed has reduced its target for short-term interest rates by 2.25 percentage points to 3%. But some mortgage rates are actually rising, and those that are falling haven't fallen that much.
The average interest rate on a standard 30-year fixed-rate mortgage was 6.38% yesterday, little changed from September but up from 5.61% in late January, according to HSH Associates, a mortgage-data publisher in Pompton Plains, N.J. Interest rates on so-called jumbo mortgages -- those larger than $417,000 -- were at 7.35%, also close to their September levels.
There are two reasons mortgage rates haven't responded more to the Fed's rate cuts. One is that long-term Treasury yields, which are the benchmark for most mortgage rates, have risen recently, perhaps because of increased concern about inflation as the prices of oil and other commodities soar. The other is that the spread between mortgage rates and Treasury rates has widened as investors and banks become increasingly reluctant to make home loans.
Hoping to Refinance
William Zempsky, a pediatrician who lives in West Hartford, Conn., was hoping to refinance his adjustable-rate mortgage before the rate -- which had been fixed at 4.5% for five years -- jumps to 6% or so in March. "I started to put my stuff together to refinance, but before we could pull the trigger, rates bounced up again," Mr. Zempsky said. "It seemed that with the Fed dropping rates that things would stay low, but they haven't."
If Mr. Zempsky doesn't refinance, his monthly payments will jump by about $275 a month, says his mortgage banker, Michael Menatian, president of Sanborn Mortgage Corp.
The housing-market slump also is taking its toll on consumer sentiment, which could lead to further pullbacks in spending, depressing the economy. The Conference Board, a New York-based business-research group, said yesterday that its index of consumer confidence fell sharply to 75.0 in February from 87.3 in January. The index is closely watched because consumer spending drives much of the U.S. economy.
"Consumer spending is going to take a hit," said Patrick Newport, an economist at Global Insight in Waltham, Mass. "The hit will be bigger the more home prices drop."
A growing glut of homes for sale suggests buyers have little interest in snapping up houses at current prices. Buyers "are waiting for the bottom to be there," said Vicki Nellis, a real-estate agent at Re/Max Allegiance in Burke, Va. She said this is the worst market she has seen in her 25 years in the business.
Goldman Sachs Group Inc. estimates home prices ultimately will fall by 20% to 25% from the peak of the housing boom, while Merrill Lynch chief economist Dave Rosenberg says they could fall even further. According to the S&P/Case-Shiller national home-price index, prices have fallen 10.2% from their highs in the summer of 2006. In some areas, the declines have been much steeper. Prices in the Miami area were 17.5% lower in December than they were a year earlier, and prices in Las Vegas, Phoenix and San Diego have fallen by 15% or more.
There may be light at the end of the tunnel. As prices fall, potential buyers may be tempted off the sidelines. Economists agree the key to stabilizing prices is working off the huge inventory of unsold homes. Supply is shrinking: New-home construction has plunged dramatically. But demand has fallen just as much, leaving inventories high. Sales are now far below normal trends, and on Monday, an industry trade group reported a 0.5% increase in single-family home sales in January, the first in 11 months.
The S&P/Case-Shiller and Ofheo indices have important differences. The Ofheo index is less volatile because it only tracks the prices of homes purchased with mortgages guaranteed by government-backed agencies. That excludes jumbo mortgages, subprime mortgages and other riskier mortgage products.
One reason home prices are falling: Builders are trying to unload their unsold houses. Stuart Kaye, founder of Kaye Homes Inc. in Naples, Fla., has been offering discounts, including price cuts and other incentives, of 20% to 30% on about 50 homes in his inventory. He has sold 18 of them in recent months. "We want to be out from underneath this inventory, and we have made a commitment we will be through it in a 90-day period,'' he said.
But the interest-rate environment has brought a near halt to refinancing activity. P.H. Naffah, a musician in Goodyear, Ariz., has a roughly $415,000, 30-year mortgage with a fixed rate of 6.25%. He figures he could cut his mortgage costs by around $250 a month by refinancing into a loan with a 5.5% rate. "I'm waiting for the interest rates to go down," said Mr. Naffah, who added the savings "would be significant" because his monthly income as a musician fluctuates.
Other borrowers have been hamstrung by tighter credit standards as lenders eliminate programs and set tighter requirements, particularly in markets where home prices are falling. Steve Walsh, a mortgage broker in Scottsdale, Ariz., says his firm is originating about 300 loans a month, but closing only about 65. Mr. Walsh says that about 100 applications fell apart because of problems with appraisals. Another 100 loans didn't close because of rising mortgage rates.
In addition to inflation concerns, rates are rising because the market for mortgage-backed securities is in upheaval, thanks to rising mortgage delinquencies and the collapse of the high-risk subprime corner of the mortgage business.
Upward Pressure
Investors are demanding higher risk premiums for securities they buy with mortgages attached to them. And that is putting upward pressure on the rates charged to individuals. Even bonds backed by government-sponsored enterprises Fannie Mae and Freddie Mac -- which are considered safe triple-A-rated institutions -- have declined in value, pushing mortgage rates higher.
The difference between yields on some Fannie-backed mortgage bonds and yields on Treasury notes hit around 2.46 percentage points this week. This gap -- also known as the "spread" -- gets larger when investors become more risk averse and seek safety in Treasury bonds. It is up from 2.06 percentage points two weeks ago and has reached levels last seen during the 1980s savings-and-loan crisis, according to Bear Stearns.
Of course, mortgage rates would likely be even higher if the Fed hadn't moved aggressively in the past few months. But Fed officials seem mindful of their own limits. "Financing costs have risen, on balance, for riskier credits, and almost all borrowers are dealing with more cautious lenders who have adopted more stringent standards," Mr. Kohn said in his speech yesterday.
--Michael Corkery and Sara Murray contributed to this article.
Monday, February 25, 2008
200 Posts and More to Come!
I've just noticed that I've posted 200 times on this blog.
It's a milestone, of sorts. Long-time readers know that I use a lot of sources of material, while also posting original commentary and observations about the market. In fact, I just received a comment from a reader (Hi, Garrett!) and I like to see my readers' comments here!
I'll keep providing material, some of which might be called 'timeless' in that I give tips on selling or buying that you can use whatever the market, and also commentary and articles about the current market conditions, which change all the time.
If there's something else that you would like to see here, just drop me an email with your request and direct it to: Ray@SCVhometeam.com
It's a milestone, of sorts. Long-time readers know that I use a lot of sources of material, while also posting original commentary and observations about the market. In fact, I just received a comment from a reader (Hi, Garrett!) and I like to see my readers' comments here!
I'll keep providing material, some of which might be called 'timeless' in that I give tips on selling or buying that you can use whatever the market, and also commentary and articles about the current market conditions, which change all the time.
If there's something else that you would like to see here, just drop me an email with your request and direct it to: Ray@SCVhometeam.com
Friday, February 15, 2008
Fannie, Freddie may have to tiptoe into 'jumbo light' market
Raising conforming loan limit not a simple task
Monday, February 11, 2008
By Matt Carter
Inman News
While Fannie Mae, Freddie Mac and the Federal Housing Administration will soon be allowed to dive into what until now has been the jumbo loan market, it remains to be seen how many borrowers will benefit.
Congress and the Bush administration have agreed to raise the $417,000 conforming loan limit until the end of the year, under a provision of the $150 billion economic stimulus package approved by Congress last week.
But the devil, as they say, will be in the details. The new formula for determining the conforming loan limit will allow Fannie, Freddie and FHA to guarantee loans of up to 125 percent of the median home price of an area.
While housing markets where the median home price exceeds $216,840 will benefit from higher limits for FHA loan guarantee programs, one analysis suggests Fannie and Freddie will be able to tiptoe into the jumbo loan business in only 19 metropolitan statistical areas (MSAs). [Our local area is at or very near the maximum loan limit of $729,750]
The first step to be taken to implement the changes will be determining median home prices. The Department of Housing and Urban Development has been given 30 days to publish median-home-price data once President Bush signs the stimulus package into law.
But where will HUD get the data? And with prices falling rapidly in many markets, will the data be updated monthly, quarterly or annually?
HUD spokesman Lemar Wooley said FHA will use a combination of existing government data sets and available commercial information to determine the median sales price. He said FHA loan limits are based on the county a property is located in, except when the county is part of a larger MSA, in which case the county with the highest loan limit determines the limit for the entire MSA.
Not only does HUD have to come up with median-home-price numbers for every housing market in America, but Fannie Mae and Freddie Mac will have to come up with credit guidelines for a class of loans that, until now, has mostly been off-limits. The government-chartered mortgage financiers will have to decide what their standards will be for the loans they will purchase, or securitize and guarantee.
As they venture into the jumbo loan market, Fannie and Freddie will have to decide if they need to be more cautious about the minimum down payments they will accept, borrower's credit histories, and the fees they charge for taking on more risk. The task will be complicated by the fact that the maximum loan size will vary from market to market, instead of the uniform $417,000 limit in place today in 48 states other than Alaska and Hawaii.
In high-cost markets, the $417,000 conforming loan limit for loans eligible for purchase or guarantee by Fannie and Freddie will be raised to 125 percent of the median home price, with an upper cap of $729,750. That formula means that the $417,000 conforming loan limit will remain in place in markets where the median home price is $333,600 or less.
While there's no time limit for Fannie and Freddie to publish guidelines for the new class of loans, the companies have promised to work with regulators to expedite the process. James Lockhart, director of the Office of Federal Housing Enterprise Oversight, told members of the Senate Banking Committee Thursday that the process could take months.
The temporary increase in the conforming loan limit is likely to have a bigger impact on FHA loan guarantee programs, because the current limits for FHA are lower. In high-cost markets, the current ceiling for FHA loan programs is $372,790, and $200,160 in other markets.
The new ceiling for FHA loan programs in normal markets will be $271,050 -- meaning that even borrowers in housing markets where the median home price is below $216,840 may be eligible for FHA-backed purchase or refinance loans up to that amount. In areas where the median home price is above $216,840, the limit for FHA loan programs will be 125 percent of the median home price, all the way up to $729,750.
Fannie and Freddie will be allowed to buy and securitize jumbo loans originated any time between July 1, 2007 and Dec. 31, 2008. That means jumbo lenders may be able to sell some of the loans they've made in the last seven months to Fannie and Freddie, freeing them up to make more loans.
One reason Congress and the Bush administration agreed to raise the conforming limit, at least for now, is that Wall Street investors will no longer buy most mortgage-backed securities that don't carry the backing of Fannie, Freddie or FHA. That means borrowers are paying about 1 percent more for jumbo loans that exceed the $417,000 conforming loan limit. [In our area, the difference has been about 1.25%]
But there's no guarantee investors will accept the jumbo loans backed by Fannie and Freddie -- which are private, publicly traded companies that face potentially billions of losses in the current mortgage morass -- as safe investments. They may also need some time to familiarize themselves with how FHA is handling the larger loans, said Jaret Seiberg, an analyst with Stanford Group Co. who follows the secondary mortgage market.
"Investors understand the risk characteristics of conforming mortgages that are securitized by Fannie and Freddie, and they understand FHA-backed loans securitized through Ginnie Mae," Seiberg said. "But they don't have experience with jumbo loans coming out of those channels. In a market with so much uncertainty, it's a real question whether investors are going to have an appetite for a new product."
If Wall Street investors don't snatch up the larger loans backed by Fannie, Freddie and FHA after they are securitized, that would limit the benefits to the secondary mortgage market and do less to ease the credit crunch than backers of the move have hoped.
As Fannie's and Freddie's losses mount and they bump up against minimum capital requirements, their capacity to purchase and guarantee loans is not unlimited. And as Lockhart noted, it takes three times as much capital to guarantee one $600,000 loan as it does one $200,000 loan.
While Seiberg is confident that HUD can implement higher loan limits for FHA programs, he said Fannie and Freddie have technological and capital issues to overcome before they become "meaningful players" in the "jumbo light" market.
As to which housing markets might benefit from higher conforming loan limits, Seiberg said Stanford Group used median-home-price data from the National Association of Realtors to analyze where Fannie and Freddie might be able to purchase or guarantee loans above the current $417,000 limit.
Stanford Group identified 19 markets -- more than a third of them in California -- where Fannie and Freddie could enter the jumbo light market.
Monday, February 11, 2008
By Matt Carter
Inman News
While Fannie Mae, Freddie Mac and the Federal Housing Administration will soon be allowed to dive into what until now has been the jumbo loan market, it remains to be seen how many borrowers will benefit.
Congress and the Bush administration have agreed to raise the $417,000 conforming loan limit until the end of the year, under a provision of the $150 billion economic stimulus package approved by Congress last week.
But the devil, as they say, will be in the details. The new formula for determining the conforming loan limit will allow Fannie, Freddie and FHA to guarantee loans of up to 125 percent of the median home price of an area.
While housing markets where the median home price exceeds $216,840 will benefit from higher limits for FHA loan guarantee programs, one analysis suggests Fannie and Freddie will be able to tiptoe into the jumbo loan business in only 19 metropolitan statistical areas (MSAs). [Our local area is at or very near the maximum loan limit of $729,750]
The first step to be taken to implement the changes will be determining median home prices. The Department of Housing and Urban Development has been given 30 days to publish median-home-price data once President Bush signs the stimulus package into law.
But where will HUD get the data? And with prices falling rapidly in many markets, will the data be updated monthly, quarterly or annually?
HUD spokesman Lemar Wooley said FHA will use a combination of existing government data sets and available commercial information to determine the median sales price. He said FHA loan limits are based on the county a property is located in, except when the county is part of a larger MSA, in which case the county with the highest loan limit determines the limit for the entire MSA.
Not only does HUD have to come up with median-home-price numbers for every housing market in America, but Fannie Mae and Freddie Mac will have to come up with credit guidelines for a class of loans that, until now, has mostly been off-limits. The government-chartered mortgage financiers will have to decide what their standards will be for the loans they will purchase, or securitize and guarantee.
As they venture into the jumbo loan market, Fannie and Freddie will have to decide if they need to be more cautious about the minimum down payments they will accept, borrower's credit histories, and the fees they charge for taking on more risk. The task will be complicated by the fact that the maximum loan size will vary from market to market, instead of the uniform $417,000 limit in place today in 48 states other than Alaska and Hawaii.
In high-cost markets, the $417,000 conforming loan limit for loans eligible for purchase or guarantee by Fannie and Freddie will be raised to 125 percent of the median home price, with an upper cap of $729,750. That formula means that the $417,000 conforming loan limit will remain in place in markets where the median home price is $333,600 or less.
While there's no time limit for Fannie and Freddie to publish guidelines for the new class of loans, the companies have promised to work with regulators to expedite the process. James Lockhart, director of the Office of Federal Housing Enterprise Oversight, told members of the Senate Banking Committee Thursday that the process could take months.
The temporary increase in the conforming loan limit is likely to have a bigger impact on FHA loan guarantee programs, because the current limits for FHA are lower. In high-cost markets, the current ceiling for FHA loan programs is $372,790, and $200,160 in other markets.
The new ceiling for FHA loan programs in normal markets will be $271,050 -- meaning that even borrowers in housing markets where the median home price is below $216,840 may be eligible for FHA-backed purchase or refinance loans up to that amount. In areas where the median home price is above $216,840, the limit for FHA loan programs will be 125 percent of the median home price, all the way up to $729,750.
Fannie and Freddie will be allowed to buy and securitize jumbo loans originated any time between July 1, 2007 and Dec. 31, 2008. That means jumbo lenders may be able to sell some of the loans they've made in the last seven months to Fannie and Freddie, freeing them up to make more loans.
One reason Congress and the Bush administration agreed to raise the conforming limit, at least for now, is that Wall Street investors will no longer buy most mortgage-backed securities that don't carry the backing of Fannie, Freddie or FHA. That means borrowers are paying about 1 percent more for jumbo loans that exceed the $417,000 conforming loan limit. [In our area, the difference has been about 1.25%]
But there's no guarantee investors will accept the jumbo loans backed by Fannie and Freddie -- which are private, publicly traded companies that face potentially billions of losses in the current mortgage morass -- as safe investments. They may also need some time to familiarize themselves with how FHA is handling the larger loans, said Jaret Seiberg, an analyst with Stanford Group Co. who follows the secondary mortgage market.
"Investors understand the risk characteristics of conforming mortgages that are securitized by Fannie and Freddie, and they understand FHA-backed loans securitized through Ginnie Mae," Seiberg said. "But they don't have experience with jumbo loans coming out of those channels. In a market with so much uncertainty, it's a real question whether investors are going to have an appetite for a new product."
If Wall Street investors don't snatch up the larger loans backed by Fannie, Freddie and FHA after they are securitized, that would limit the benefits to the secondary mortgage market and do less to ease the credit crunch than backers of the move have hoped.
As Fannie's and Freddie's losses mount and they bump up against minimum capital requirements, their capacity to purchase and guarantee loans is not unlimited. And as Lockhart noted, it takes three times as much capital to guarantee one $600,000 loan as it does one $200,000 loan.
While Seiberg is confident that HUD can implement higher loan limits for FHA programs, he said Fannie and Freddie have technological and capital issues to overcome before they become "meaningful players" in the "jumbo light" market.
As to which housing markets might benefit from higher conforming loan limits, Seiberg said Stanford Group used median-home-price data from the National Association of Realtors to analyze where Fannie and Freddie might be able to purchase or guarantee loans above the current $417,000 limit.
Stanford Group identified 19 markets -- more than a third of them in California -- where Fannie and Freddie could enter the jumbo light market.
San Fernando Valley Sales Down 35%, While Prices Post a Modest Increase
[from the Southland Regional Association of Realtors]
Home sales in the San Fernando Valley during 2007 declined a record 34.9 percent from the prior year, while the annual median price posted its smallest increase in many years, the Southland Regional Association of Realtors reported.
A total of 6,271 homes closed escrow compared to the 9,632 sales of 2006. The peak of the recent boom came in 2003 when Realtors completed 13,878 sales, but the record high was set in 1988 with 15,263 single-family transactions. Annual home sales in the San Fernando Valley have been slowing since 2004.
Realtors managed and negotiated home and condominium sales during 2007 that generated $1.76 billion for buyers, sellers and the local economy. That figure does not include the added millions of dollars home sales yield for related services, such as contractors, landscaping specialists, home improvement companies and manufacturers of furniture and appliances.
"Sales are down and prices are soft, but people have to be shaken out of their attitude that prices will plunge dramatically," said Mary Funk, the 2008 president of the Southland Regional Association of Realtors. "I just do not think resale prices will go down nearly as much as some people believe. There is no bell that goes off when the market hits the top or the bottom of a cycle, so anyone who needs a home and is waiting to catch a steal may be disappointed and may miss an opportunity."
Some of the properties listed for sale on the Multiple Listing Service operated by the Association are foreclosures owned by banks and short sales, Funk said, but the San Fernando Valley does not have nearly as many distressed properties as regions of Southern California that were hit harder by the sub-prime mortgage meltdown. Typically, the areas reporting the most problems had extensive new home construction and a high percentage of first-time buyers, unlike the San Fernando Valley which is a mature housing market with limited new home and entry-level sales.
"Sellers are finally accepting the new reality and those who are selling today are doing whatever it takes to complete a transaction," said Jim Link, the Association's Chief Executive Officer. "However, there are too many prospective buyers who think prices should be much, much lower, and think they can snag a super bargain. "But banks are not going to dramatically slash prices and take a huge loss," Link said. "Banks want to recoup their investment and that means they will list properties competitively at prices below comparable homes, but certainly not at fire sale prices."
Condominium resale activity throughout the San Fernando Valley during 2007 fell for the fifth consecutive year, down 33.2 percent drop to 2,443 condo sales. However, annual condo sales have been lower - below 2,000 transactions from 1993 to 1995, including the record low of 1,607 set in 1993. The record high of 5,041 transactions was set in 2002.
The annual single-family median price came in at $61 1,933 -the highest on record. The increase of 1.0 percent was the lowest gain on record with each year posting slightly smaller gains since the 26.3 percent increase of 2003. This year's annual median price beat the prior record of $605,917 set in 2006.
The annual condominium median price of $385,967 was down 2.3 percent from 2006 when the record high $394,917 annual condo median was posted. It was the first drop in the annual median since 1996. From 2000 to 2005 the annual condo median posted double-digit increases with the largest one of 28.7 percent coming in 2003.
"It's difficult to predict when this cycle will end and working out the limited number of local foreclosures may take some time," Link said. "Hopefully, by Spring we will see a market that is a little more predictable than today."
There were 5,671 active listings throughout the San Fernando Valley at the end of December, an increase of 8.8 percent over a year ago. At the current pace of sales, the inventory represents a 10.9-month supply - a buyers' market, but a clear improvement from recent months when it went as high as a 16-month supply. For perspective, the record high was a 23-month supply set in February 1993. A balanced market is in the 5- to 6-month range.
December single-family sales plunged 51.6 percent compared to the prior year while condo sales were off 55.6 percent. Declines in the median price of homes and condos were 12.4 percent for homes and 16.5 percent for condos. Prices are still sticky, not dropping nearly as fast as sales would indicate they should.
Home sales in the San Fernando Valley during 2007 declined a record 34.9 percent from the prior year, while the annual median price posted its smallest increase in many years, the Southland Regional Association of Realtors reported.
A total of 6,271 homes closed escrow compared to the 9,632 sales of 2006. The peak of the recent boom came in 2003 when Realtors completed 13,878 sales, but the record high was set in 1988 with 15,263 single-family transactions. Annual home sales in the San Fernando Valley have been slowing since 2004.
Realtors managed and negotiated home and condominium sales during 2007 that generated $1.76 billion for buyers, sellers and the local economy. That figure does not include the added millions of dollars home sales yield for related services, such as contractors, landscaping specialists, home improvement companies and manufacturers of furniture and appliances.
"Sales are down and prices are soft, but people have to be shaken out of their attitude that prices will plunge dramatically," said Mary Funk, the 2008 president of the Southland Regional Association of Realtors. "I just do not think resale prices will go down nearly as much as some people believe. There is no bell that goes off when the market hits the top or the bottom of a cycle, so anyone who needs a home and is waiting to catch a steal may be disappointed and may miss an opportunity."
Some of the properties listed for sale on the Multiple Listing Service operated by the Association are foreclosures owned by banks and short sales, Funk said, but the San Fernando Valley does not have nearly as many distressed properties as regions of Southern California that were hit harder by the sub-prime mortgage meltdown. Typically, the areas reporting the most problems had extensive new home construction and a high percentage of first-time buyers, unlike the San Fernando Valley which is a mature housing market with limited new home and entry-level sales.
"Sellers are finally accepting the new reality and those who are selling today are doing whatever it takes to complete a transaction," said Jim Link, the Association's Chief Executive Officer. "However, there are too many prospective buyers who think prices should be much, much lower, and think they can snag a super bargain. "But banks are not going to dramatically slash prices and take a huge loss," Link said. "Banks want to recoup their investment and that means they will list properties competitively at prices below comparable homes, but certainly not at fire sale prices."
Condominium resale activity throughout the San Fernando Valley during 2007 fell for the fifth consecutive year, down 33.2 percent drop to 2,443 condo sales. However, annual condo sales have been lower - below 2,000 transactions from 1993 to 1995, including the record low of 1,607 set in 1993. The record high of 5,041 transactions was set in 2002.
The annual single-family median price came in at $61 1,933 -the highest on record. The increase of 1.0 percent was the lowest gain on record with each year posting slightly smaller gains since the 26.3 percent increase of 2003. This year's annual median price beat the prior record of $605,917 set in 2006.
The annual condominium median price of $385,967 was down 2.3 percent from 2006 when the record high $394,917 annual condo median was posted. It was the first drop in the annual median since 1996. From 2000 to 2005 the annual condo median posted double-digit increases with the largest one of 28.7 percent coming in 2003.
"It's difficult to predict when this cycle will end and working out the limited number of local foreclosures may take some time," Link said. "Hopefully, by Spring we will see a market that is a little more predictable than today."
There were 5,671 active listings throughout the San Fernando Valley at the end of December, an increase of 8.8 percent over a year ago. At the current pace of sales, the inventory represents a 10.9-month supply - a buyers' market, but a clear improvement from recent months when it went as high as a 16-month supply. For perspective, the record high was a 23-month supply set in February 1993. A balanced market is in the 5- to 6-month range.
December single-family sales plunged 51.6 percent compared to the prior year while condo sales were off 55.6 percent. Declines in the median price of homes and condos were 12.4 percent for homes and 16.5 percent for condos. Prices are still sticky, not dropping nearly as fast as sales would indicate they should.
2007 SCV Home Sales off 31%
Annual Median Price Falls 5.4%
[from the Southland Regional Association of Realtors]
2007 was the third consecutive year that sales of existing single-family homes in the Santa Clarita Valley declined while the annual median price of homes fell for the first time on record, the Southland Regional Association of Realtors reported.
A total of 1,993 single-family homes changed owners last year, down 31.3 percent from the prior year. It was the lowest annual total since the association started keeping statistics in 1998. The record high of 3,869 home sales was set in 2004, the peak of the recent sellers' boom market.
Likewise, the condominium annual tally of 841 condo sales was the lowest on record. It dropped 32.5 percent from the prior year, with three of the last four years posting sales declines after six consecutive years of typically double-digit increases in sales.
Realtors managed and negotiated home sales in the Santa Clarita Valley last year that generated $1 -57 billion for buyers, sellers and the local economy. That figure does not include the added millions of dollars each sale yielded for related services, such as contractors, landscaping specialists, home improvement companies and manufacturers of furniture and appliances.
"I truly do not expect resale prices to go down all that much," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. "Still, sellers don't want to believe what's happening, that the market has shifted in favor of buyers. Sellers are still not being realistic."
Chastain-Shine and Jim Link, the Association's chief executive officer, said that while it will take some time to work out problems related to foreclosures and short sales in the area, the problem is not severe enough to dramatically impact resale prices.
However, the market is at stalemate because sellers cling to boom market expectations and buyers incorrectly believe they can purchase a home at a dramatically reduced price. But even foreclosed properties listed for sale by lenders are not being priced with large discounts as lenders want to recoup their investment.
"While we're seeing the effect of the subprime crisis in the overall market," Link said, "we are not in a price free fall like what might be happening in market with large amounts of new home construction and a high percentage of first-time home buyers."
The statistics for 2007 support that view: The annual median price of the 1,993 homes sold last year was $570,658, down 5.4 percent from the record high of $603,492 set in 2006. It was the first drop in the annual median since the association began keeping statistics in 1998.
The condominium annual median price of $353,333 was down 7.2 percent from the record high of $380,583 set in 2006. Just like single-family homes, the condo annual median posted the first decline on record. From 2001 to 2005 the condo annual median price posted double-digit gains with 2003 and 2004 at 28.3 percent and 28.7 percent respectively.
There were 2,100 active listings throughout the Santa Clarita Valley at the end of December, up 9.4 percent from a year ago, but down 10.3 percent from the November tally. At the current pace of sales, the inventory represents a 12.7-month supply - clearly a buyers' market, but not as large as the 15.7-month supply reported in November.
"The mind set that real estate values never go down simply is not true," Link said. "Like any commodity, real estate has it's peaks and valleys, but over time owning a home in California has always been a solid investment that continues to increase in value."
[from the Southland Regional Association of Realtors]
2007 was the third consecutive year that sales of existing single-family homes in the Santa Clarita Valley declined while the annual median price of homes fell for the first time on record, the Southland Regional Association of Realtors reported.
A total of 1,993 single-family homes changed owners last year, down 31.3 percent from the prior year. It was the lowest annual total since the association started keeping statistics in 1998. The record high of 3,869 home sales was set in 2004, the peak of the recent sellers' boom market.
Likewise, the condominium annual tally of 841 condo sales was the lowest on record. It dropped 32.5 percent from the prior year, with three of the last four years posting sales declines after six consecutive years of typically double-digit increases in sales.
Realtors managed and negotiated home sales in the Santa Clarita Valley last year that generated $1 -57 billion for buyers, sellers and the local economy. That figure does not include the added millions of dollars each sale yielded for related services, such as contractors, landscaping specialists, home improvement companies and manufacturers of furniture and appliances.
"I truly do not expect resale prices to go down all that much," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. "Still, sellers don't want to believe what's happening, that the market has shifted in favor of buyers. Sellers are still not being realistic."
Chastain-Shine and Jim Link, the Association's chief executive officer, said that while it will take some time to work out problems related to foreclosures and short sales in the area, the problem is not severe enough to dramatically impact resale prices.
However, the market is at stalemate because sellers cling to boom market expectations and buyers incorrectly believe they can purchase a home at a dramatically reduced price. But even foreclosed properties listed for sale by lenders are not being priced with large discounts as lenders want to recoup their investment.
"While we're seeing the effect of the subprime crisis in the overall market," Link said, "we are not in a price free fall like what might be happening in market with large amounts of new home construction and a high percentage of first-time home buyers."
The statistics for 2007 support that view: The annual median price of the 1,993 homes sold last year was $570,658, down 5.4 percent from the record high of $603,492 set in 2006. It was the first drop in the annual median since the association began keeping statistics in 1998.
The condominium annual median price of $353,333 was down 7.2 percent from the record high of $380,583 set in 2006. Just like single-family homes, the condo annual median posted the first decline on record. From 2001 to 2005 the condo annual median price posted double-digit gains with 2003 and 2004 at 28.3 percent and 28.7 percent respectively.
There were 2,100 active listings throughout the Santa Clarita Valley at the end of December, up 9.4 percent from a year ago, but down 10.3 percent from the November tally. At the current pace of sales, the inventory represents a 12.7-month supply - clearly a buyers' market, but not as large as the 15.7-month supply reported in November.
"The mind set that real estate values never go down simply is not true," Link said. "Like any commodity, real estate has it's peaks and valleys, but over time owning a home in California has always been a solid investment that continues to increase in value."
Friday, February 08, 2008
New Laws in 2008 Affect Realtors and Consumers
As 2008 roles in, several new laws are taking effect that are significant to real estate professionals and the general public. Here is a brief summary of a number of these new laws.
Mortgage Forgiveness Debt Relief Act: This new federal act will help some taxpayers caught in the sub-prime mortgage calamity. Under this act, taxpayers may exclude up to $2 million in income of qualified principal residence indebtedness for discharges sustained during a three-year window (January 1, 2007 through January 1, 2010). This includes obligations incurred from acquisition, construction or substantial improvement of an individual’s principle residence. Refinancing is also encompassed so long as the amount refinanced does not exceed the amount of the indebtedness. California, however, does not automatically observe the provisions of this bill. Therefore, income from forgiveness of debt still must be reported as earnings for state tax purposes. Still the act does free homeowners from a staggering and depressive federal tax obligation possibility, provides a way to sell their homes for less than what is owed on them and avoids having a foreclosure placed on their records.
Cell Phone Usage: This new state law affects every driver. As of July 1, 2008, all motorists will be required to use hands-free devices when using a cell phone while driving. Violators will face a $20 fine for the first offense and a $50 fine for each subsequent breach. The only exception is when contacting a law enforcement agency or public safety entity for emergency purposes.
Anti-Discrimination: Landlords and their agents, as of January 1, may no longer legally inquire into the immigration or citizenship status of an existing or prospective tenant.
Real Estate Appraisers: A licensed appraiser’s compensation can no longer be dependent upon or affected by the value conclusion generated by an appraisal for a real property purchase, transfer, sale, financing or development. In addition, any party with an interest in a real estate transaction is barred from influencing or attempting to influence the appraisal process for a mortgage loan.
New Disclosure for Private Transfer Fees: Beginning January 1, a seller who must provide a Transfer Disclosure Statement is required to concurrently furnish a disclosure statement of private transfer fees, if applicable. Transfer fees include any payment that must be paid upon transfer of real property as imposed by a deed, CC &Rs or other documents. The statement must include a notice that payment is required, the amount of the fee and name of the entity that is to receive payment.
Recording Private Transfer Fees: As a condition of payment of the fee, any person or entity imposing a private transfer fee must record the instrument creating the fee and a separate notice of Payment of Transfer Fee Required. Both must be simultaneously recorded at the county recorder’s office for which the property is located.
Loan Regulations: As of January 1, each of the agencies governing residential loans (all under the purview of the California Secretary of Business, Transportation and Housing) will have the authority to adopt guidelines that provide more stringent provisions on residential loans on one-to-four unit family residences for interest-only, negatively amortized and adjustable mortgage loans. We expect these new guidelines will require lenders to verify that consumers can repay their loans and will demand clearer statements concerning the likelihood that future payments will be made. Criminal penalties for failing to do so are likely to be considered. This new law also brings certain private lenders under the influence of the Department of Real Estate.
Property Tax Reassessment: As of January 1, any transfer of real property made from January 1, 2001 through January 1, 2006 between registered domestic partners is retroactively exempt from property tax reassessment. The recipient of the real property transfer must submit an application by June 30, 2009 to reverse the reassessment.
Mortgage Forgiveness Debt Relief Act: This new federal act will help some taxpayers caught in the sub-prime mortgage calamity. Under this act, taxpayers may exclude up to $2 million in income of qualified principal residence indebtedness for discharges sustained during a three-year window (January 1, 2007 through January 1, 2010). This includes obligations incurred from acquisition, construction or substantial improvement of an individual’s principle residence. Refinancing is also encompassed so long as the amount refinanced does not exceed the amount of the indebtedness. California, however, does not automatically observe the provisions of this bill. Therefore, income from forgiveness of debt still must be reported as earnings for state tax purposes. Still the act does free homeowners from a staggering and depressive federal tax obligation possibility, provides a way to sell their homes for less than what is owed on them and avoids having a foreclosure placed on their records.
Cell Phone Usage: This new state law affects every driver. As of July 1, 2008, all motorists will be required to use hands-free devices when using a cell phone while driving. Violators will face a $20 fine for the first offense and a $50 fine for each subsequent breach. The only exception is when contacting a law enforcement agency or public safety entity for emergency purposes.
Anti-Discrimination: Landlords and their agents, as of January 1, may no longer legally inquire into the immigration or citizenship status of an existing or prospective tenant.
Real Estate Appraisers: A licensed appraiser’s compensation can no longer be dependent upon or affected by the value conclusion generated by an appraisal for a real property purchase, transfer, sale, financing or development. In addition, any party with an interest in a real estate transaction is barred from influencing or attempting to influence the appraisal process for a mortgage loan.
New Disclosure for Private Transfer Fees: Beginning January 1, a seller who must provide a Transfer Disclosure Statement is required to concurrently furnish a disclosure statement of private transfer fees, if applicable. Transfer fees include any payment that must be paid upon transfer of real property as imposed by a deed, CC &Rs or other documents. The statement must include a notice that payment is required, the amount of the fee and name of the entity that is to receive payment.
Recording Private Transfer Fees: As a condition of payment of the fee, any person or entity imposing a private transfer fee must record the instrument creating the fee and a separate notice of Payment of Transfer Fee Required. Both must be simultaneously recorded at the county recorder’s office for which the property is located.
Loan Regulations: As of January 1, each of the agencies governing residential loans (all under the purview of the California Secretary of Business, Transportation and Housing) will have the authority to adopt guidelines that provide more stringent provisions on residential loans on one-to-four unit family residences for interest-only, negatively amortized and adjustable mortgage loans. We expect these new guidelines will require lenders to verify that consumers can repay their loans and will demand clearer statements concerning the likelihood that future payments will be made. Criminal penalties for failing to do so are likely to be considered. This new law also brings certain private lenders under the influence of the Department of Real Estate.
Property Tax Reassessment: As of January 1, any transfer of real property made from January 1, 2001 through January 1, 2006 between registered domestic partners is retroactively exempt from property tax reassessment. The recipient of the real property transfer must submit an application by June 30, 2009 to reverse the reassessment.
Thursday, February 07, 2008
Economic Stimulus Package Goes to President for Signature
[Just in from the California Association of Realtors...]
Thanks in part to lobbying by C.A.R. and NAR members, the Senate passed their version of an economic stimulus package today, Thursday, February 07, 2008. The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package. The House just passed the Senate version of the bill and it will now be sent to the White House. The President is expected to sign the legislation by the end of next week, ahead of the Congressional self-appointed deadline of February 15th. The increase in the conforming loan limits will last through 2008, but C.A.R. and NAR continue to lobby for FHA and GSE reform, making these increases permanent.
The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.
Increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.
Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets. For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%.
The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
Thanks in part to lobbying by C.A.R. and NAR members, the Senate passed their version of an economic stimulus package today, Thursday, February 07, 2008. The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package. The House just passed the Senate version of the bill and it will now be sent to the White House. The President is expected to sign the legislation by the end of next week, ahead of the Congressional self-appointed deadline of February 15th. The increase in the conforming loan limits will last through 2008, but C.A.R. and NAR continue to lobby for FHA and GSE reform, making these increases permanent.
The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.
Increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.
Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets. For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%.
The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
Friday, February 01, 2008
I'm from the Government and I'm here to help you
Raise and raise again
As I predicted months ago, our elected officials in this pre-election season will be coming up with all kinds of 'solutions' to the problems in the housing market. Freezing mortgage interest rates, state bonds to bail out homeowners whose monthly payments get too high to pay, giving judges the ability to change loan terms, raising the loan limits on FHA Fannie Mae and Freddie Mac loans, pumping liquidity into the system (printing mo' money!), lowering the Fed interest rates, and sending out checks to everybody are some of the latest proposals. The only things missing are declaring California, Nevada, Arizona, and Florida Federal (housing) Disaster Areas and dropping money out of helicopters.
People in the real estate business are pumped up... so is Wall Street since the financial stocks have gotten their bail outs between the Federal Reserve and Sovereign Funds. We can all party some more while kicking the can down the road, to be dealt with at some undetermined point in the future.
If you are getting the idea that I don't think this is good policy making, you would be right. However, I don't determine macro-economic policy and neither do you. Both of us are subject to these factors that are way beyond our control, and to the extent that we can make our own way for ourselves and our families, we do our best.
Between the stimulus package and all the rest, it is lining up as a terrific buying opportunity until the election in November. With four year lows in mortgage rates for conforming loans (now with an upper limit of $417,000 but soon to be raised above $700,000), this will provide a decided boost in our local area. However, the rise in the conforming limit may only last until the end of the year, as part of the temporary stimulus package now winding its way through Congress. Concurrent with this development is a tightening of credit guidelines, which will limit the numbers of people who can get the loans. The third factor to affect our housing market will be a second look at risk factors by the folks with the money. As the risk factor for lenders goes up, so do interest rates. Flooding the market with cash also tends to raise inflation and inflation fears, which also increases interest rates.
In my opinion, nobody really has a good handle on what should be done to minimize the effects of the downturn in the housing market on the rest of the economy, but the cure may be worse than the disease.
That said, we have a narrow window for action while interest rates are low. It's a buying opportunity, and for many people, it may not be this good for years. As interest rates rise as I expect they will, many will be priced out of the market with credit restrictions. For sellers who need to sell... sell. Price the home right and it will sell. However, the last call for high prices happened a couple of years ago. Expect a lower price, but if you can make it work for you, take it.
For those who want to stay in your homes and weather this storm, know your loan terms. If you have an adjustable loan or any of the exotics, you have to know what the worst case scenario is for the adjustments. Can you keep your home if the worst case happens? If not, get yourself into a fixed rate loan while interest rates are low. If you can't do that, you should consider getting out of the house by selling it before you get into trouble.
With dropping sales prices do you now owe more than your home is worth? This upside-down condition is becoming more and more common, and you may have some options than you are aware of here too. Give us a call.
For those in way over your heads (and increasingly you know who you are), give us a call at 661-287-9164 today. Our Foreclosure Avoidance Team can help you find the right solution for your particular circumstance, and the solution is certainly not 'one size fits all'. But let's start from where we are and help get you to where you want to go.
Buyers: just call us now. There are deals out there, and we know where they are. For those who choose to work with us, you will get a screamin' deal. Just call now.
In this market turmoil there is opportunity. You can miss it, or you can profit by it. For some of you, our best strategy would be to work to minimize loss. However, our training and experience is exactly tuned to this kind of market. Do yourself a favor, and let's begin right now, from where we find ourselves.
On behalf of the SCV Home Team at Keller Williams Realty, we all look forward to working with you!
~~Ray
As I predicted months ago, our elected officials in this pre-election season will be coming up with all kinds of 'solutions' to the problems in the housing market. Freezing mortgage interest rates, state bonds to bail out homeowners whose monthly payments get too high to pay, giving judges the ability to change loan terms, raising the loan limits on FHA Fannie Mae and Freddie Mac loans, pumping liquidity into the system (printing mo' money!), lowering the Fed interest rates, and sending out checks to everybody are some of the latest proposals. The only things missing are declaring California, Nevada, Arizona, and Florida Federal (housing) Disaster Areas and dropping money out of helicopters.
People in the real estate business are pumped up... so is Wall Street since the financial stocks have gotten their bail outs between the Federal Reserve and Sovereign Funds. We can all party some more while kicking the can down the road, to be dealt with at some undetermined point in the future.
If you are getting the idea that I don't think this is good policy making, you would be right. However, I don't determine macro-economic policy and neither do you. Both of us are subject to these factors that are way beyond our control, and to the extent that we can make our own way for ourselves and our families, we do our best.
Between the stimulus package and all the rest, it is lining up as a terrific buying opportunity until the election in November. With four year lows in mortgage rates for conforming loans (now with an upper limit of $417,000 but soon to be raised above $700,000), this will provide a decided boost in our local area. However, the rise in the conforming limit may only last until the end of the year, as part of the temporary stimulus package now winding its way through Congress. Concurrent with this development is a tightening of credit guidelines, which will limit the numbers of people who can get the loans. The third factor to affect our housing market will be a second look at risk factors by the folks with the money. As the risk factor for lenders goes up, so do interest rates. Flooding the market with cash also tends to raise inflation and inflation fears, which also increases interest rates.
In my opinion, nobody really has a good handle on what should be done to minimize the effects of the downturn in the housing market on the rest of the economy, but the cure may be worse than the disease.
That said, we have a narrow window for action while interest rates are low. It's a buying opportunity, and for many people, it may not be this good for years. As interest rates rise as I expect they will, many will be priced out of the market with credit restrictions. For sellers who need to sell... sell. Price the home right and it will sell. However, the last call for high prices happened a couple of years ago. Expect a lower price, but if you can make it work for you, take it.
For those who want to stay in your homes and weather this storm, know your loan terms. If you have an adjustable loan or any of the exotics, you have to know what the worst case scenario is for the adjustments. Can you keep your home if the worst case happens? If not, get yourself into a fixed rate loan while interest rates are low. If you can't do that, you should consider getting out of the house by selling it before you get into trouble.
With dropping sales prices do you now owe more than your home is worth? This upside-down condition is becoming more and more common, and you may have some options than you are aware of here too. Give us a call.
For those in way over your heads (and increasingly you know who you are), give us a call at 661-287-9164 today. Our Foreclosure Avoidance Team can help you find the right solution for your particular circumstance, and the solution is certainly not 'one size fits all'. But let's start from where we are and help get you to where you want to go.
Buyers: just call us now. There are deals out there, and we know where they are. For those who choose to work with us, you will get a screamin' deal. Just call now.
In this market turmoil there is opportunity. You can miss it, or you can profit by it. For some of you, our best strategy would be to work to minimize loss. However, our training and experience is exactly tuned to this kind of market. Do yourself a favor, and let's begin right now, from where we find ourselves.
On behalf of the SCV Home Team at Keller Williams Realty, we all look forward to working with you!
~~Ray
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