Roth on Real Estate December 8, 2009, 4:01PM EST BUSINESS WEEK
If You Don't Buy a House Now, You're Stupid or Broke
Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth
By Marc Roth
Well, you may not be stupid or broke. Maybe you already have a house and you don't want to move. Or maybe you're a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don't act soon, you will regret it. Here's why: historically low interest rates.
As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.
In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.
And it is exactly that, based on what the graph shows us. Let's look at the point on the far left.
In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers.
But they weren't happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.
Interest Rate Lessons
And when rates started to decline after that, they took a long time to recede to previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We've since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable.
So, what can we learn from the historical trends and numbers?
First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.
Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.
Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.
Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let's assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.
Loan Costs
Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.
Let's put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is "more stable" and it's safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.
If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you're borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.
What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.
Monday, December 14, 2009
Sunday, November 22, 2009
Is a foreclosure deluge on it's way? Hmmmmm?????
Bay Area median sale price tops year-ago level for first time since ‘07
November 19, 2009La Jolla, CA.----
The Bay Area’s housing market continued to ease back toward normalcy last month as fewer distressed properties sold and $500,000-plus sales accounted for a greater share of transactions than a year ago. The result: The nine-county region posted a modest year-over-year gain in its median sale price – the first in nearly two years, a real estate information service reported.
The median price paid for all new and resale houses and condos that closed escrow rose to $390,000, up 6.8 percent from $365,000 in September and up 4 percent from $375,000 in October 2008. The last time the median sale price rose on a year-over-year basis was in November 2007, when it gained 1.5 percent, according to MDA DataQuick of San Diego.
Last month’s median was the highest since it was $395,000 in July this year, but it was 41.4 percent below the $665,000 peak reached in June and July of 2007.
“The regional price statistics mainly reflect the fading of the foreclosures and the uptick in high-end activity in recent months,” said John Walsh, MDA DataQuick president. “Down at the neighborhood level, different things are happening depending on location, but the big picture is that prices in many areas appear to be bouncing along bottom. Whether that bottom is permanent is the subject of endless debate right now.”
In addition to the Bay Area overall, three counties – Santa Clara, Marin and Sonoma – saw their median sale prices rise year-over-year last month. The last time that more than one county posted an annual gain in the median was November 2007. Also last month, Alameda, Santa Clara, San Francisco and the nine-county region overall posted single-digit annual gains in their median price paid for a specific home-type: resale single-family detached houses.
A total of 7,933 new and resale houses and condos closed escrow in the nine-county Bay Area last month. That was up 0.7 percent from 7,879 in September and up 4.2 percent from 7,613 in October 2008.
Last month’s sales were 10.2 percent below the October sales average of 8,833 since 1988, when DataQuick’s stats begin. October sales have ranged from a low of 5,486 in 2007 to a high of 13,392 in 2003. The average change in sales between September and October since 1988 is a gain of 0.9 percent.
Sales in the region’s higher-cost counties – Marin, San Francisco, Santa Clara and San Mateo – represented 42.2 percent of October sales, up from 35.3 percent a year ago, when more sales were concentrated in the lower-cost inland areas rife with deeply discounted foreclosures. Sales over $500,000 made up 36 percent of all sales last month, up from 34.9 percent a year ago and a low this year of 22.7 percent in January.
October’s overall increase in sales from September and a year ago came even as fewer foreclosed properties sold. Foreclosure resales – homes sold in October that had been foreclosed on in the prior 12 months – made up 31.9 percent of all resale activity. That was down from 32.3 percent the prior month and 44.0 percent in October 2008. It was the lowest since foreclosure resales were 29.9 percent of all resales in June 2008. Foreclosure resales peaked at 52 percent of Bay Area resales in February this year.
Between January 2000 and December 2007, foreclosure resales averaged only about 1 percent of all Bay Area resales each month. Since January 2008, the monthly average for foreclosure resales is about 37 percent.
The recent decline in foreclosure resales follows a generally downward trend this year in the number of homes being foreclosed on. It’s mainly because lenders and loan servicers have increasingly pursued short sales and loan modifications as an alternative to the costly foreclosure process. The declining inventory of lower-cost foreclosures has been key to stabilizing the housing market, along with the federal government’s efforts to boost housing demand through lower mortgage rates, tax incentives and plentiful, low-down-payment FHA financing.
Federally-insured FHA loans, a popular choice among first-time buyers, made up 25.9 percent of all Bay Area purchase loans last month. That was up from 24.9 percent in September, 19 percent a year ago and less than 1 percent two years ago.
Meanwhile, the availability of financing for pricier homes continued to show mild signs of improvement, but such “jumbo” loans remained relatively expensive and difficult to obtain.
Mortgages above $417,000 – formerly the definition of a jumbo loan – made up 30.1 percent of all home purchase loans last month. That was up from 29.6 percent in September and 25.9 percent a year ago. More than 60 percent of Bay Area purchase loans were over $417,000 before the August 2007 credit crunch hit.
Another fuel source for high-end sales – adjustable-rate mortgages (ARMs) – continues to be used far less than what’s been normal historically, but has trended higher lately. In October, 8.1 percent of Bay Area purchase loans were ARMs, up from 7.9 in September and 7.4 percent a year earlier. ARMs fell to a record low of 3.0 percent in January this year. ARMs had averaged 61 percent of the region’s purchase loans this decade up until the August 2007 credit crunch.
San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda and San Mateo counties.
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $1,665 last month, up from $1,578 the previous month, and down from $1,837 a year ago. Adjusted for inflation, current payments are 36.7 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 53.3 percent below the current cycle's peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity is off its recent peak but remains high by historical standards, with mortgage default notices flattening out or trending lower in some areas but edging higher in others. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average in some markets, MDA DataQuick reported.
Source: DataQuick Information Systems
Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534
Copyright 2009 DataQuick Information Systems. All rights reserved.
Friday, November 20, 2009
Is the real estate market still so volatile
from the WSJ, Nov. 17, 2009
By JAMES R. HAGERTY
The U.S. housing market has been in a slump for the past four years. When will it ever end?
In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space.
Here is a guide to navigating a fractured and volatile market:
Neighborhood Market Watch
1. Is the housing market getting better?
It has shown some signs of healing this year, but the much-touted recovery is tentative and fragile.
Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.
But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.
While the supply of middle-class homes on the market has declined somewhat, it remains ample in most places. And there is a huge glut of high-end houses for sale in many areas. That means prices of high-end homes might still have a long way to fall.
2. When will housing bottom out?
There probably won't be any clear turning point. Monthly indicators, such as home sales and prices, tend to bounce erratically from month to month, making it hard to discern the underlying trend. And the housing bust will end at different times in different places. House prices already might have bottomed out in the coveted Virginia suburbs with short commutes into Washington, D.C., for instance. But it probably will be years before all of the unsold condos find buyers in parts of Florida.
Generalizations about states or metropolitan areas don't say much about what is happening in your neighborhood. In Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. In Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.
3. What signals should I watch to determine whether my local market is improving?
One way to get a sense of supply is to ask a good local real estate agent for stats on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply. Anything over about six months generally is considered high, meaning that sellers might have to cut prices. Another way to get a sense of a neighborhood's health is to count the number of for-sale signs and vacant houses. If there are more than a couple vacant homes in a block, that might be a bad sign, particularly if no one is taking care of them.
The supply of homes listed for sale has fallen very sharply in some areas. But the supply is likely to balloon again in many areas with a renewed surge in foreclosures. Many local newspapers provide information on foreclosure filings.
Demand depends heavily on the job market. The U.S. Bureau of Labor Statistics provides unemployment rates by metropolitan area. In September, they ranged from 2.9% in Bismarck, N.D., to 30% in El Centro, Calif. State and local agencies provide job-market data, too. Celia Chen, a housing economist at Moody's Economy.com, says help-wanted signs can be a useful local indicator; if you start seeing more of them around your neighborhood, that is a sign that business in your area could be starting to recover.
4. How can I figure out the value of my home?
You never know for sure what a home will fetch until you put it on the market, and then it is partly a matter of luck. Will the eager buyer who shares your taste in home style and neighborhood show up on day one or day 200?
Some Web sites -- including Zillow.com, HomeGain.com and Cyberhomes.com -- provide estimates of individual home values. These estimates are largely based on recent sales of nearby homes, and in some cases they are wildly off the mark. But they often provide a ballpark idea of a home's value.
You might come closer to the real value by talking to a local agent and looking at recent prices for homes that you know are very similar to yours. If you want to be more scientific and don't mind paying a few hundred dollars, hire a professional appraiser.
View Full Image
Associated Press
For-sale signs were displayed outside new condominiums in Lincoln Park, Mich., in April.5. Does it matter whether I'm "under water"?
At least you have plenty of company. About 20% of owners of single-family homes with mortgages owe more than the current estimated value of their homes, according to Zillow.com.
If you can afford your monthly payment and don't need to move soon, that might not be a big problem. But it is hard, and sometimes impossible, to refinance a mortgage if you are under water, and you will take a bath if you have to sell the home now. Some people who can afford to make their monthly mortgage payments are deciding it doesn't make sense to do so because they don't expect their home values ever to recover to past peaks, and they could rent similar houses for much lower monthly costs.
6. If I lose my home to foreclosure, how long will it take to repair my credit record?
It probably will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time. The foreclosure will remain a blot on your credit record for seven years, likely raising your interest costs even if you do get another loan. If you pay bills on time, keep your credit-card balances low and don't apply for too many cards, you can make a "slow, gradual improvement" in your credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which provides tools for analyzing credit records.
7. If I'm renting, is now a good time to buy a house?
It may well be. Prices in most areas are well below their peaks, even if they haven't hit bottom. Don't kid yourself that you can time the bottom of the market perfectly. But don't feel any pressure to buy in a hurry, because the supply of housing is likely to remain ample for years in many areas.
Generally, it doesn't make sense to buy unless you expect to remain in the house for at least four or five years, because the transaction costs -- including commissions for real estate agents and mortgage fees -- are heavy.
But now is clearly a good time to rent. Many landlords need tenants badly. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. So landlords are cutting rents and offering such sweeteners as free flat-screen televisions or several months of free rent to retain or attract tenants. Some owners of condos will "cut their throats to get some kind of rental income to cover part of their expenses," says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.
8. Can I get a tax credit if I buy a home now?
Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30 and complete the purchase by June 30. The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years. The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.
9. Can I get a mortgage on attractive terms?
Only if you have a good credit record, a moderate amount of debt in relation to your income and the ability to fully document your income. That last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people with incomes that vary substantially from year to year.
A borrower with a strong credit score of 740 or higher (on the scale of 300 to 850) and the ability to make a down payment of at least 20% could get an interest rate of about 5% with no origination fees on a 30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker in Boulder, Colo. But if your credit score is 680, the rate jumps to about 5.5%.
People who can't make a down payment of at least 20% generally are being funneled into loans insured by the Federal Housing Administration. That means paying extra fees for the FHA insurance.
Borrowing costs are steeper at the high end of the housing market. For so-called jumbo loans -- those above $729,750 in areas with the highest housing costs or $417,000 in places with the lowest costs -- interest rates on 30-year fixed-rate mortgages last week averaged 5.95%, according to HSH Associates, a financial publisher.
10. Should I invest in foreclosed homes?
Probably not. A lot of investors chase these properties, and only the most experienced know how to deal with all of the pitfalls. Homes auctioned at trustee or sheriff sales are sold on an as-is basis, and there is no provision for an inspection before you take ownership. If after buying you find out that termites have been treating the floor joists as an all-you-can-eat buffet, that is your problem. You must pay for the full price within a day or two, so you need a lot of cash or access to special short-term loans for investors that come with interest rates of around 18%. This is a pursuit best left to people with a lot of time, nerve, cash and knowledge of the local market.
By JAMES R. HAGERTY
The U.S. housing market has been in a slump for the past four years. When will it ever end?
In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space.
Here is a guide to navigating a fractured and volatile market:
Neighborhood Market Watch
1. Is the housing market getting better?
It has shown some signs of healing this year, but the much-touted recovery is tentative and fragile.
Home sales have increased from the severely depressed levels of 2008. The inventory of unsold homes listed for sale also is down. Bidding wars are breaking out for foreclosed homes in the sorts of neighborhoods (near jobs and decent schools) that attract both first-time buyers and investors seeking rental properties.
But more than 6.7 million U.S. households with mortgages, or about 13%, are behind on their payments or are in the foreclosure process, according to the Mortgage Bankers Association. Eventually, many of them will lose those homes, sending more supply onto the market. Unemployment has continued to rise, and the housing market is unlikely to show a sustained recovery until job growth resumes.
While the supply of middle-class homes on the market has declined somewhat, it remains ample in most places. And there is a huge glut of high-end houses for sale in many areas. That means prices of high-end homes might still have a long way to fall.
2. When will housing bottom out?
There probably won't be any clear turning point. Monthly indicators, such as home sales and prices, tend to bounce erratically from month to month, making it hard to discern the underlying trend. And the housing bust will end at different times in different places. House prices already might have bottomed out in the coveted Virginia suburbs with short commutes into Washington, D.C., for instance. But it probably will be years before all of the unsold condos find buyers in parts of Florida.
Generalizations about states or metropolitan areas don't say much about what is happening in your neighborhood. In Summit, N.J., known for good schools and an easy, 45-minute train commute to Manhattan, the median home price in September was up 1.2% from a year earlier, according to Otteau Valuation Group, an appraisal company. In Atlantic City, N.J., which suffers from too much speculative building of condominiums and weak demand for vacation homes, the median price is down about 12% from a year ago.
3. What signals should I watch to determine whether my local market is improving?
One way to get a sense of supply is to ask a good local real estate agent for stats on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply. Anything over about six months generally is considered high, meaning that sellers might have to cut prices. Another way to get a sense of a neighborhood's health is to count the number of for-sale signs and vacant houses. If there are more than a couple vacant homes in a block, that might be a bad sign, particularly if no one is taking care of them.
The supply of homes listed for sale has fallen very sharply in some areas. But the supply is likely to balloon again in many areas with a renewed surge in foreclosures. Many local newspapers provide information on foreclosure filings.
Demand depends heavily on the job market. The U.S. Bureau of Labor Statistics provides unemployment rates by metropolitan area. In September, they ranged from 2.9% in Bismarck, N.D., to 30% in El Centro, Calif. State and local agencies provide job-market data, too. Celia Chen, a housing economist at Moody's Economy.com, says help-wanted signs can be a useful local indicator; if you start seeing more of them around your neighborhood, that is a sign that business in your area could be starting to recover.
4. How can I figure out the value of my home?
You never know for sure what a home will fetch until you put it on the market, and then it is partly a matter of luck. Will the eager buyer who shares your taste in home style and neighborhood show up on day one or day 200?
Some Web sites -- including Zillow.com, HomeGain.com and Cyberhomes.com -- provide estimates of individual home values. These estimates are largely based on recent sales of nearby homes, and in some cases they are wildly off the mark. But they often provide a ballpark idea of a home's value.
You might come closer to the real value by talking to a local agent and looking at recent prices for homes that you know are very similar to yours. If you want to be more scientific and don't mind paying a few hundred dollars, hire a professional appraiser.
View Full Image
Associated Press
For-sale signs were displayed outside new condominiums in Lincoln Park, Mich., in April.5. Does it matter whether I'm "under water"?
At least you have plenty of company. About 20% of owners of single-family homes with mortgages owe more than the current estimated value of their homes, according to Zillow.com.
If you can afford your monthly payment and don't need to move soon, that might not be a big problem. But it is hard, and sometimes impossible, to refinance a mortgage if you are under water, and you will take a bath if you have to sell the home now. Some people who can afford to make their monthly mortgage payments are deciding it doesn't make sense to do so because they don't expect their home values ever to recover to past peaks, and they could rent similar houses for much lower monthly costs.
6. If I lose my home to foreclosure, how long will it take to repair my credit record?
It probably will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time. The foreclosure will remain a blot on your credit record for seven years, likely raising your interest costs even if you do get another loan. If you pay bills on time, keep your credit-card balances low and don't apply for too many cards, you can make a "slow, gradual improvement" in your credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which provides tools for analyzing credit records.
7. If I'm renting, is now a good time to buy a house?
It may well be. Prices in most areas are well below their peaks, even if they haven't hit bottom. Don't kid yourself that you can time the bottom of the market perfectly. But don't feel any pressure to buy in a hurry, because the supply of housing is likely to remain ample for years in many areas.
Generally, it doesn't make sense to buy unless you expect to remain in the house for at least four or five years, because the transaction costs -- including commissions for real estate agents and mortgage fees -- are heavy.
But now is clearly a good time to rent. Many landlords need tenants badly. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. So landlords are cutting rents and offering such sweeteners as free flat-screen televisions or several months of free rent to retain or attract tenants. Some owners of condos will "cut their throats to get some kind of rental income to cover part of their expenses," says Jack McCabe, a real estate consultant in Deerfield Beach, Fla.
8. Can I get a tax credit if I buy a home now?
Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30 and complete the purchase by June 30. The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years. The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.
9. Can I get a mortgage on attractive terms?
Only if you have a good credit record, a moderate amount of debt in relation to your income and the ability to fully document your income. That last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people with incomes that vary substantially from year to year.
A borrower with a strong credit score of 740 or higher (on the scale of 300 to 850) and the ability to make a down payment of at least 20% could get an interest rate of about 5% with no origination fees on a 30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker in Boulder, Colo. But if your credit score is 680, the rate jumps to about 5.5%.
People who can't make a down payment of at least 20% generally are being funneled into loans insured by the Federal Housing Administration. That means paying extra fees for the FHA insurance.
Borrowing costs are steeper at the high end of the housing market. For so-called jumbo loans -- those above $729,750 in areas with the highest housing costs or $417,000 in places with the lowest costs -- interest rates on 30-year fixed-rate mortgages last week averaged 5.95%, according to HSH Associates, a financial publisher.
10. Should I invest in foreclosed homes?
Probably not. A lot of investors chase these properties, and only the most experienced know how to deal with all of the pitfalls. Homes auctioned at trustee or sheriff sales are sold on an as-is basis, and there is no provision for an inspection before you take ownership. If after buying you find out that termites have been treating the floor joists as an all-you-can-eat buffet, that is your problem. You must pay for the full price within a day or two, so you need a lot of cash or access to special short-term loans for investors that come with interest rates of around 18%. This is a pursuit best left to people with a lot of time, nerve, cash and knowledge of the local market.
Friday, November 6, 2009
Home Buyers Tax credit extended until April 30, 2010 Also previous home owners can now be eligable for a $6k tax credit
http://money.cnn.com/2009/11/05/news/economy/Extending_unemployment_benefits/index.htm?postversion=2009110611
Tax break for buying a home
The legislation also will extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.
The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure will apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.
The credit will be available only for the purchase of principal residences priced at $800,000 or less.
The bill will raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
"It's gonna put people back to work, the home builders, put people in the real estate business," said Sen. Chris Dodd, D-Conn. "The kind of jobs that can make a difference."
The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.
Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.
By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.
"The data on the present home buyer tax credit show that the credit has had its intended impact -- sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably," said Ron Phipps, the association's first vice president, in Senate testimony last month.
Tax break for buying a home
The legislation also will extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.
The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure will apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.
The credit will be available only for the purchase of principal residences priced at $800,000 or less.
The bill will raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
"It's gonna put people back to work, the home builders, put people in the real estate business," said Sen. Chris Dodd, D-Conn. "The kind of jobs that can make a difference."
The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.
Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.
By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.
"The data on the present home buyer tax credit show that the credit has had its intended impact -- sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably," said Ron Phipps, the association's first vice president, in Senate testimony last month.
Wednesday, October 28, 2009
San Francisco Home prices up / Condo prices slightly down
Single family home prices in San Francisco were slightly up in August as compared to July, up 2.8% COndo prices on the other hand dip slightly from July to August .5%. How it all shakes out as far as single family houses is as follows: Homes with prices under $299,828.00 were up 3%, homes between $299828. and $558,379. were up 1.8% and homes over $558,379. rose a very modest.2%. But any gain is a good sign. The last thing anyone wants to do is buy in a failing market. Why, you ask? Well, if you buy in a market that is falling and might fall more the possibility of your gaining equity anytime soon would be hard won. The trick is to find that “sweet spot” where the market has hit the bottom and now looks like it’s heading up again. It’s a very good time to jump into the market. We may not see “runaway” equity growth as we saw in previous years, but we probably don’t really want that. That got us into this mess. We want to see gradual and steady growth of our investments.
Saturday, October 24, 2009
Some ZIPs drawing more bidding wars
Carolyn Said, Chronicle Staff Writer
Saturday, October 24, 2009
The Bay Area locales where homes sell the most above asking price tend to be relatively affordable, according to a report from ZipRealty released Friday.
That underscores the sway that investors and first-time home buyers hold in today's real estate market, where bargain homes bring out multiple bids that drive up the price.
The highest offers (measured by sales price-to-list price ratio) were clocked in the East Bay's 94608 ZIP code, which includes Emeryville and part of Oakland. Homes there on average sold for 105.65 percent of the asking price in the third quarter, said ZipRealty, a national real estate brokerage with headquarters in Emeryville.
That ZIP stood out as one of the top 10 "hottest" U.S. areas in terms of offers exceeding asking price, Zip said.
"The housing stock there is single-story Craftsmen style two-bedroom one-bathroom homes built in the 1920s through 1940s," said David Kerr, a Zip Realtor who specializes in the East Bay. "The homes are in the $200,000 to $300,000 price range. I've been writing offers there like nobody's business and getting beat out, often by cash offers."
All-cash offers are the telltale mark of investors. Kerr said a fair number of homes on the market in Oakland were foreclosures that investors bought, fixed up and flipped. "I've seen the same house picked up at a (foreclosure) auction go back on the market and sell higher than the highest comparable sale in that area because it's been rehabbed," he said.
The third "hottest" Bay Area ZIP code, 94606 in central Oakland, is similarly affordable with a median price of $279,000, he said.
Of both ZIP codes, Kerr said: "Homes here were selling in the $400,000s and $500,000s at the height of the market and now you're picking them up in the $200,000s and $300,000s."
The second hottest Bay Area ZIP, 95122 in South San Jose, is one of the region's foreclosure hot spots, where bargain-priced bank repossessed homes are readily available.
On the other side of the spectrum, the "coldest" ZIP code in the Bay Area, where homes sold for the most below asking price, was Los Gatos/Monte Sereno, where the average list price is currently $2.5 million, according to Movoto.com. Homes there on average sold for 92.26 percent of their asking price in the third quarter, Zip said.
The sales ratio was also low in the much more affordable Rio Vista, a troubled town in Solano County, where homes sold for 93.47 percent of their asking price, according to the report.
Nationwide, the hottest ZIP code was in the Rancho Bernardo community of San Diego, where homes sold for 125 percent of list price in the third quarter, Zip said. The coldest ZIP was Denton, Texas, where homes went for 30 percent of their asking price.
Hot ZIPs
These are the Bay Area ZIP codes where houses sold for the highest ratio to their asking price in the third quarter.
City ZIP Ratio
Emeryville 94608 105.65%
San Jose 95122 105.22
Oakland 94606 105.06
Berkeley 94703 104.78
San Lorenzo 94580 104.45
Cold ZIPs
These are the Bay Area ZIP codes where houses sold for the lowest ratio to their asking price in the third quarter.
City ZIP Ratio
Rio Vista 94571 93.47%
Napa 94558 93.45
Alamo 94507 93.07
Half Moon Bay 94019 92.94
Los Gatos/ Monte Sereno 95030 92.26
Source: ZipRealty
E-mail Carolyn Said at csaid@sfchronicle.com.
Saturday, October 24, 2009
The Bay Area locales where homes sell the most above asking price tend to be relatively affordable, according to a report from ZipRealty released Friday.
That underscores the sway that investors and first-time home buyers hold in today's real estate market, where bargain homes bring out multiple bids that drive up the price.
The highest offers (measured by sales price-to-list price ratio) were clocked in the East Bay's 94608 ZIP code, which includes Emeryville and part of Oakland. Homes there on average sold for 105.65 percent of the asking price in the third quarter, said ZipRealty, a national real estate brokerage with headquarters in Emeryville.
That ZIP stood out as one of the top 10 "hottest" U.S. areas in terms of offers exceeding asking price, Zip said.
"The housing stock there is single-story Craftsmen style two-bedroom one-bathroom homes built in the 1920s through 1940s," said David Kerr, a Zip Realtor who specializes in the East Bay. "The homes are in the $200,000 to $300,000 price range. I've been writing offers there like nobody's business and getting beat out, often by cash offers."
All-cash offers are the telltale mark of investors. Kerr said a fair number of homes on the market in Oakland were foreclosures that investors bought, fixed up and flipped. "I've seen the same house picked up at a (foreclosure) auction go back on the market and sell higher than the highest comparable sale in that area because it's been rehabbed," he said.
The third "hottest" Bay Area ZIP code, 94606 in central Oakland, is similarly affordable with a median price of $279,000, he said.
Of both ZIP codes, Kerr said: "Homes here were selling in the $400,000s and $500,000s at the height of the market and now you're picking them up in the $200,000s and $300,000s."
The second hottest Bay Area ZIP, 95122 in South San Jose, is one of the region's foreclosure hot spots, where bargain-priced bank repossessed homes are readily available.
On the other side of the spectrum, the "coldest" ZIP code in the Bay Area, where homes sold for the most below asking price, was Los Gatos/Monte Sereno, where the average list price is currently $2.5 million, according to Movoto.com. Homes there on average sold for 92.26 percent of their asking price in the third quarter, Zip said.
The sales ratio was also low in the much more affordable Rio Vista, a troubled town in Solano County, where homes sold for 93.47 percent of their asking price, according to the report.
Nationwide, the hottest ZIP code was in the Rancho Bernardo community of San Diego, where homes sold for 125 percent of list price in the third quarter, Zip said. The coldest ZIP was Denton, Texas, where homes went for 30 percent of their asking price.
Hot ZIPs
These are the Bay Area ZIP codes where houses sold for the highest ratio to their asking price in the third quarter.
City ZIP Ratio
Emeryville 94608 105.65%
San Jose 95122 105.22
Oakland 94606 105.06
Berkeley 94703 104.78
San Lorenzo 94580 104.45
Cold ZIPs
These are the Bay Area ZIP codes where houses sold for the lowest ratio to their asking price in the third quarter.
City ZIP Ratio
Rio Vista 94571 93.47%
Napa 94558 93.45
Alamo 94507 93.07
Half Moon Bay 94019 92.94
Los Gatos/ Monte Sereno 95030 92.26
Source: ZipRealty
E-mail Carolyn Said at csaid@sfchronicle.com.
Tax credit fuels rise in home sales
"By CONOR DOUGHERTY and JOHN D. MCKINNON
Sales of existing homes surged 9.4% in September to a seasonally adjusted annual rate of 5.57 million units, as lower prices and the looming expiration of a federal tax credit lured more buyers into the market.
More
Economists React: 'Blockbuster' but What Now? Econ: Bankruptcies in 'Middle-Class Recession' Housing: Extend the Home Buyer Tax Credit? Not So Fast News Hub: Flaws in the Home Tax-Break Program
2:23
Amid alleged fraud and administrative problems in the first-time homebuyers tax-credit program, the News Hub panel discusses whether it should be extended.
The data, released Friday by the National Association of Realtors, portrayed a housing market that continues to stabilize across the country and gives ammunition to those trying to extend the $8,000 tax credit for first-time home buyers.
Prospects for extending the credit remain mixed. On Capitol Hill, there are deep concerns about the program's cost. While many lawmakers support some form of extension, they want the credit's substantial cost to be offset by tax increases or spending cuts.
Extending the current credit would cost about $1 billion a month, according to congressional estimates. Some lawmakers are backing an expanded credit that would last through June and cost about $16.7 billion.
Senate Majority Leader Harry Reid of Nevada has been trying to reach an agreement for a 13-month extension that would provide up to the full $8,000 for four months, and gradually reduce the credit's value over the remainder of 2010.
Aides say Mr. Reid aims to have a vote on the measure as part of next week's debate over extending federal unemployment insurance benefits. The package also is likely to include bigger tax refunds for businesses that have suffered operating losses during the downturn.
The new sales data could help backers of the credit, scheduled to expire Nov. 30. But the improvement also could undercut a key argument of backers -- that the recovery remains fragile enough to require an extension. It also doesn't alleviate concerns the credit has been subject to widespread abuse, as the Internal Revenue Service pursues more than 100,000 suspected improper claims.
Existing homes sales were up across the country, the NAR reported. The median price of an existing home has fallen 8.5% year-over-year, but prices have stabilized from their free-fall during the worst months of the recession.
The spike in demand reduced housing inventories to a two-year low. Housing inventory was down 7.5% to 3.63 million homes in September, reducing the nation's housing supply to 7.8 months from 9.3 months in August, assuming the current sales pace.
The housing market is still in rough shape: The supply of homes is still about three months bigger than normal, and distressed sales, such as foreclosure auctions, continue to drag down prices. But many analysts say the broad rebound in sales shows the market is being driven by more than first-time buyers lured by the tax credit.
Sam Khater, senior economist for First American CoreLogic Inc., said sales would likely decline only marginally if the tax credit were allowed to expire. He argued that other programs of the Federal Reserve and Federal Housing Administration have played a larger role in luring buyers.
—Jessica Holzer contributed to this article.
Write to Conor Dougherty at conor.dougherty@wsj.com and John D. McKinnon at john.mckinnon@wsj.com
Printed in The Wall Street Journal, page A2 "
Sales of existing homes surged 9.4% in September to a seasonally adjusted annual rate of 5.57 million units, as lower prices and the looming expiration of a federal tax credit lured more buyers into the market.
More
Economists React: 'Blockbuster' but What Now? Econ: Bankruptcies in 'Middle-Class Recession' Housing: Extend the Home Buyer Tax Credit? Not So Fast News Hub: Flaws in the Home Tax-Break Program
2:23
Amid alleged fraud and administrative problems in the first-time homebuyers tax-credit program, the News Hub panel discusses whether it should be extended.
The data, released Friday by the National Association of Realtors, portrayed a housing market that continues to stabilize across the country and gives ammunition to those trying to extend the $8,000 tax credit for first-time home buyers.
Prospects for extending the credit remain mixed. On Capitol Hill, there are deep concerns about the program's cost. While many lawmakers support some form of extension, they want the credit's substantial cost to be offset by tax increases or spending cuts.
Extending the current credit would cost about $1 billion a month, according to congressional estimates. Some lawmakers are backing an expanded credit that would last through June and cost about $16.7 billion.
Senate Majority Leader Harry Reid of Nevada has been trying to reach an agreement for a 13-month extension that would provide up to the full $8,000 for four months, and gradually reduce the credit's value over the remainder of 2010.
Aides say Mr. Reid aims to have a vote on the measure as part of next week's debate over extending federal unemployment insurance benefits. The package also is likely to include bigger tax refunds for businesses that have suffered operating losses during the downturn.
The new sales data could help backers of the credit, scheduled to expire Nov. 30. But the improvement also could undercut a key argument of backers -- that the recovery remains fragile enough to require an extension. It also doesn't alleviate concerns the credit has been subject to widespread abuse, as the Internal Revenue Service pursues more than 100,000 suspected improper claims.
Existing homes sales were up across the country, the NAR reported. The median price of an existing home has fallen 8.5% year-over-year, but prices have stabilized from their free-fall during the worst months of the recession.
The spike in demand reduced housing inventories to a two-year low. Housing inventory was down 7.5% to 3.63 million homes in September, reducing the nation's housing supply to 7.8 months from 9.3 months in August, assuming the current sales pace.
The housing market is still in rough shape: The supply of homes is still about three months bigger than normal, and distressed sales, such as foreclosure auctions, continue to drag down prices. But many analysts say the broad rebound in sales shows the market is being driven by more than first-time buyers lured by the tax credit.
Sam Khater, senior economist for First American CoreLogic Inc., said sales would likely decline only marginally if the tax credit were allowed to expire. He argued that other programs of the Federal Reserve and Federal Housing Administration have played a larger role in luring buyers.
—Jessica Holzer contributed to this article.
Write to Conor Dougherty at conor.dougherty@wsj.com and John D. McKinnon at john.mckinnon@wsj.com
Printed in The Wall Street Journal, page A2 "
Friday, October 23, 2009
Mortgage Interest Rates Inching up
updated 8:31 a.m. PT, Thurs., Oct . 22, 2009
"Rates for 30-year home loans have inched up, hitting 5 percent for the first time in nearly a month after bond yields edged up.
The average rate on a 30-year fixed mortgage was 5 percent this week, up from 4.92 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the highest average since the week of September 24, when rates averaged 5.04 percent.
While above the record low of 4.78 percent hit in the spring, rates are still attractive for people looking to buy a home or refinance.
To prop up the housing market and help the economy recover from the worst recession since the 1930s, the Federal Reserve has been engaged in an extraordinary level of support, spending $1.25 trillion on mortgage-backed securities, which has driven down rates on home loans.
Last month, Fed Chairman Ben Bernanke and his colleagues agreed to slow down the pace of the program to buy mortgage securities from Fannie Mae and Freddie Mac. Instead of wrapping up the purchases by the end of this year, the Fed now plans to do so by the end of March.
Despite the government's effort to support the housing market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.
The average rate on a 15-year fixed-rate mortgage rose to 4.43 percent, from 4.37 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.4 percent, up from 4.38 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.54 percent from 4.6 percent.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans. "
"Rates for 30-year home loans have inched up, hitting 5 percent for the first time in nearly a month after bond yields edged up.
The average rate on a 30-year fixed mortgage was 5 percent this week, up from 4.92 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the highest average since the week of September 24, when rates averaged 5.04 percent.
While above the record low of 4.78 percent hit in the spring, rates are still attractive for people looking to buy a home or refinance.
To prop up the housing market and help the economy recover from the worst recession since the 1930s, the Federal Reserve has been engaged in an extraordinary level of support, spending $1.25 trillion on mortgage-backed securities, which has driven down rates on home loans.
Last month, Fed Chairman Ben Bernanke and his colleagues agreed to slow down the pace of the program to buy mortgage securities from Fannie Mae and Freddie Mac. Instead of wrapping up the purchases by the end of this year, the Fed now plans to do so by the end of March.
Despite the government's effort to support the housing market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.
The average rate on a 15-year fixed-rate mortgage rose to 4.43 percent, from 4.37 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.4 percent, up from 4.38 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.54 percent from 4.6 percent.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans. "
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