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Beach towns suffer deepest O.C. home-price dips

July 22, 2009

“Analysis of MDA DataQuick’s June report shows Orange County’s beach-close communities — the priciest of four geographic slices of the county — suffered the biggest price drops last month. Curiously, that resulted in only an roughly average gain in homebuying …

  • DataQuick identified 504 homes selling in beach cities’ ZIP codes last month, +16% from a year ago. Median selling price? $676,000 in these 17 ZIPs. Last month’s median price change was -19.3% vs. a year ago.
  • South inland ZIPs — median selling price $483,000 – had 788 sales, +23% from a year ago. In these 19 ZIPs, last month’s median price change was -7.3% vs. a year ago.
  • North inland ZIPs — median selling price $461,250 – had 698 sales, +11% from a year ago. In these 23 ZIPs, last month’s median price change was -10.3% vs. a year ago.
  • Mid-county ZIPs — median selling price $343,750 – had 908 sales, +33% from a year ago. In these 24 ZIPs, last month’s median price change was -13.9% vs. a year ago.
  • All told, countywide sales were +17% vs. a year ago. The median selling price ($418,000) was -11% in the past year.”

July 21st, 2009 by Jon Lansner

Home Affordable Refinance eligibility expanded to 125 percent LTV

July 8, 2009

Fannie Mae last week announced the Home Affordable Refinance Program (HARP) will be expanded to permit refinancing of existing Fannie Mae and Freddie Mac loans with current loan-to-value ratios (LTVs) up to 125 percent, an increase from the current LTV limit of 105 percent. Fannie Mae characterized the expansion as a move to help lenders serve more borrowers with a demonstrated track record of paying their mortgages, but who have been unable to refinance due to significant property value declines. Loans with LTVs above 105 percent will be eligible for a same-servicer refinance under the Refi Plus manual underwriting option, and the new loan must be a fully amortizing fixed-rate mortgage with a term greater than 15 years, up to 30 years. Fannie Mae is evaluating potential updates to Desktop Underwriter to allow LTV ratios above 105 percent.

In conjunction with the LTV expansion, Fannie Mae also announced it is offering a 0.50 percentage point reduction in the loan-level price adjustment (LLPA) charged for manually underwritten Refi Plus loans with LTVs above 105 percent and loan terms greater than 15 years, up to 25 years.  Refi Plus mortgage loans with LTV ratios that exceed 105 percent are eligible for whole loan purchase or delivery into MBS on or after September 1, 2009. Please refer to Announcement 09-23 for information about a new MBS prefix and other operational and delivery details for loans with LTVs above 105 percent.

Freddie Mac announced Read more…

Home Buyer Tax Credit Can Be Applied to Purchase Costs

June 3, 2009

U.S. Dept. of Housing and Urban Development (HUD) Secretary Shaun Donovan recently announced that the Federal Housing Administration (FHA) will allow home buyers to apply the administration’s new $8,000 first-time home buyer tax credit toward the purchase costs of a FHA-insured home. The American Recovery and Reinvestment Act of 2009 offers home buyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent down payment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of the announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate.

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Bidding wars are emerging on foreclosures

May 1, 2009

newspaperThe Wall Street Journal

Real estate industry experts are reporting that favorable home prices in many parts of the country, including California, have ignited bidding wars as first-time buyers compete with investors for many of the same foreclosed properties.

MAKING SENSE OF THE STORY FOR CONSUMERS

  • While the inventory of homes for sale still outpaces demand in many areas, inventory is shrinking and some middle class neighborhoods are running into shortages of moderately priced homes. C.A.R.’s Unsold Inventory Index (UII) stood at 5 months in March in California, compared with 12.2 months in March 2008.
  • Although home prices in most areas of the country are still lower than a year ago, the Federal Housing Finance Agency (FHFA) reported last week that home prices nationwide rose a seasonally adjusted 0.7 percent in February from January, led by gains on the West Coast.  While this is a positive sign for the market, it could mean that the window of opportunity for first-time home buyers is narrowing.
  • Many economists and housing analysts predict that the most hard-hit areas of the country, such as Sacramento and San Diego, will be among the first to recover.  According to an executive with Lyon Real Estate, if sales of foreclosed homes in Sacramento maintain its current pace, the supply will be exhausted in about one month.  For non foreclosures, the executive at Lyon Real Estate speculates that the inventory will be exhausted in about eight months.
  • It is important to note that many banks and sellers favor all-cash bids or offers from buyers who seem certain to qualify for financing.  In some cases, sellers may choose the offer least likely to fall through rather than the highest bid.
  • In some instances, buyers should make offers that are at or above the asking price of a home.  If the home is extremely desirable or in a neighborhood that previously was out of many buyers’ price ranges, putting in an offer slightly higher than the asking price may help to seal the deal.

To read the full story, please click here

U.S. expanding foreclosure prevention plan

May 1, 2009

Yesterday, the Obama administration announced additional efforts to stem foreclosures by offering lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion.  The U.S. Treasury Dept. also wants lenders and their customer-service agents to agree to modify both first and second mortgages as part of a comprehensive solution.

Details of the foreclosure prevention plan include:

  • Decreasing second-mortgage interest rates to as low as 1 percent for five years for some borrowers.
  • Reviving a Federal Housing Administration effort to persuade lenders to reduce loan balances so that borrowers again have equity in their homes.
  • Funding from the program will come from a previously authorized $50 billion allocation from the $700-billion Treasury Dept. rescue fund established by Congress last year.
  • The plan would provide cash incentives to both loan officers and borrowers for successful second-mortgage modifications.  A loan officer would receive $500 upfront, plus $250 annually for up to three years as long as the loan remains current.  Borrowers who make payments on time will receive $250 a year for up to five years.

Read the full story

First-Time Buyer Protection

April 23, 2009

mortgage_protectionJust when we thought the incentives for first-time home buyers could not get any better, the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) Housing Affordability Fund announced a new mortgage program to help provide first-time home buyers peace of mind when purchasing a home.

Through the C.A.R. Housing Affordability Fund’s Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

For more information including eligibility requirements and information on applying for the C.A.R.H.A.F. Mortgage Protection Program, please visit www.car.org/aboutus/hafmainpage/carhafmortgageprotection/

To qualify for the mortgage protection program the applicant must meet the following criteria:

  • Be a first-time home buyer – someone who has not owned a home in the last three years.
  • Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009
  • Use a California REALTOR® in the transaction
  • Purchase the property in California
  • Be a W-2 employee (cannot be self-employed)

Couple this with the $8,000 tax credit, interest rates at historic lows, affordability rates higher than they have been in years, and the availability of 3.5% down payment FHA loans for credit scores down to 620, and it’s beginning to become clear why so many buyers are out looking right now.

Demand Surging for Orange County Housing

April 6, 2009

Orange County Housing Report: Demand Suddenly Surges

1

Coinciding with a drop in interest rates and a Wall Street rebound, demand for Orange County housing increased by 22% in just two weeks. Demand, the number of new pending sales over the past month, increased from 2,670 pending sales two weeks ago to 3,247 today, a 577 home increase.  Last year’s high of 3,060 pending sales was reached on June 12.  Orange County demand has not reached this level since September 2005, the beginning of the current downturn.  Last year there were 962 fewer pending sales, totaling 2,285, and two years ago there were 1,114 fewer, totaling 2,133.  The active listing inventory shed 580 homes in the past two week, a 5% decrease, totaling 11,026.  The active listing inventory has not seen these lower levels since the beginning of April 2006.  Last year there were 15,474 homes on the market, 4,448 additional homes compared to today.  Two years ago there were 14,010 homes on the market, 2,894 additional homes.  The expected market time dropped from 4.35 months two weeks ago to 3.4 months today.  The expected market time last year was at 6.77 months, and two years ago it was at 6.57 months.  This is the lowest expected market time since March 2006.  The distressed homes inventory, foreclosures and short sales, dramatically changed over the past two weeks, dropping by 581 homes to 4,092.  The height of the distressed inventory, 5,950, was achieved on August 7, 2008.  There are 1,858 fewer distressed homes on the market compared to the height, a 31% drop.  The distressed inventory now represents 37% of the current active inventory, dropping from 40% two weeks ago.  Foreclosures now have an expected market time of 0.77 months, or three weeks.  There are 170 fewer foreclosures on the market, totaling 731.  Demand for foreclosures is at 953 pending sales.  The foreclosure market is extremely hot.  Buyers can expect to compete with multiple offers and sales prices above their list prices.  The short sale inventory shed 391 homes in the past two weeks to 3,379 homes.  The short sale inventory height, 4,701, was reached on August 7, 2008, coinciding with the total distressed inventory height.  There are 1,322 fewer short sales on the market today.  Demand for short sales increased by 205 pending sales, totaling 967.  Since short sales are subject to lenders approval and are often not changed to pending status until lender approval is received, this may be a sign that lenders are gearing up to curb foreclosures through the accommodation of short sales.  Total Orange County pending sales continues to reach record heights week after week.  I started tracking the statistic back in September of 2006.  After increasing by 355 homes over the past two weeks, the total pending count has reached 4,905 pending sales.  Last year at this time, total pending sales totaled 2,852, 1,698 fewer than today.  Two years ago it was at 3,047, 1,858 fewer.
2

Word within the trenches is that there is tremendous activity out there in the lower ranges and with distressed properties.  Many buyers first enter the market with anticipation that they are going to somehow be able to obtain a property for tens of thousands less than the asking price.  They are quickly learning that there is a lot of competition in the lower ranges and all distressed homes.  There just is not enough news highlighting this aspect of the real estate market.  The activity in the lower ranges has reached such a high level, that it is starting to reflect in the median sales price for Orange County, which posted its first month over month increase, from January to February 2009, in eight months.  Lower interest rates, a lot of stimulus, the massive return of the first time home buyer, the return of investors, have all equated to a sharp uptick in the current Orange County real estate market.

3

There is a major difference between the lower and upper ranges. For all home below $750,000, the expected market time has been dropped considerably.  The best range in Orange County is homes between $250,000 and $500,000, with an expected market time of 2.09 months.  60% of the inventory within that range is either a short sale or foreclosure.  The expected market time for homes below $250,000 is 2.46 months.  For homes between $500,000 and $750,000, the expected market time is 3.46 months.  It shoots up to a 6.4 month expected market time for homes between $750,000 and $1 million.  From there, the expected market time blossoms to a stagnant market.  The expected market time ranges from 13.11 month, homes between $1 million and $1.5 million, and 43.44 months, homes above $4 million.  What this helps illustrate is that the government’s focus on freeing up conventional financing, loans up to $729,750, is working within the real estate market.  For jumbo financing, where loans are much more difficult to obtain and are at a higher rate, especially above $1 million, demand has just come to a crawl.  With no focus from the government on higher ranges, it will not be until a bottom is reached in the lower ranges, which some are predicting during the second half of 2009, and confidence is restored in the financial markets, that decent demand will return to the upper ranges.

Written by Steven Thomas of Altera Real Estate
Quantitative Economics and Decision Sciences, B.A.