North Redondo Beach, CA - Home Sales July 2010

As mentioned in an earlier post, SOCAL Sales Up 08 to 09, while Prices Level or Fall Off - July 31, 2010 inventory is up, sales are down. As you will see in the graph below however, the number of properties "pending" (e.g. in escrow) has continuted to climb. This is, no doubt mostly due to continued drops in interest rates. There are some fantastic buys out there right now and with historically low interest the savings, over 15 to 30 years are significant!

Source: Trendgraphix, Inc.

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

Rate on 5-year ARM falls to record low

Interest rates continue to be the best single reason to be in the housing market. Whether you're buying or need to sell, historically low financing is a huge benefit...

Rate on 5-year ARM falls to record low
But mortgage rates' weekly move proves minimal: Freddie Mac
MarketWatch June 18, 2010
By Amy Hoak , Real Estate writer

Mortgage rates changed little this week, but the 5-year adjustable-rate mortgage managed to slide enough to break its record low, according to Freddie Mac's weekly survey of conforming mortgage rates, released on Thursday.

Five-year Treasury-indexed hybrid ARMs averaged 3.89% for the week ended June 17, down from 3.92% last week and 4.97% a year ago. It's the lowest the ARM has been since Freddie Mac started tracking it in January 2005.

One-year Treasury-indexed ARMs also fell, averaging 3.82%, down from 3.91% last week and 4.95% a year ago. It's the lowest that the ARM has been since the week ended May 6, 2004, when it averaged 3.76%.

But fixed-rate mortgages inched up this week, with the 30-year fixed-rate mortgage averaging 4.75%, up from 4.72% last week; it averaged 5.38% a year ago. And the 15-year fixed-rate mortgage averaged 4.20%, up from 4.17% last week; it averaged 4.89% a year ago.

To obtain the rates, the fixed-rate mortgages and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

"Mortgage rates were little changed this week amid preliminary signs that the expiration of the home-buyer tax credit in April may have led to a slowdown in new construction," said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.

"Starts on single-family homes fell 17% to an annualized pace of 468,000 units in May from April's 20-month high. In addition, permits on one-unit homes fell to the slowest pace since May 2009," he noted. Read story about housing starts.

"Finally, builders became more pessimistic in their near-term outlook in June, according to the National Association of Home Builders/Wells Fargo Housing," he said. Read about builder pessimism.

But Nothaft added that household balance sheets have been improving over the last year: "In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve.

"In addition, homeowners have regained $1.1 trillion in home equity over the same time period," he said

For more information regarding this post or other real estate information contact Robert Dixon at RE/MAX Palos Verdes Realty (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed.

Interest rate lower still...

Among the list of reasons for buying a home now verses later are historically low interest rates. Even if the market remains somewhat flat or depreciates again, rising interest rates would help to equalize any loss/gain. 

How low can they go? 15-year fixed rates set new record

LA Times May 27, 2010

By E. Scott Reckard

Anyone out there still have the old-fashioned notion to retire their mortgage sooner rather than later?

Homeowners able to refinance were finding lenders offering 15-year fixed-rate mortgages at an average of 4.21% this week, according to Freddie Mac -- the lowest rate since the mortgage company started tracking the 15-year loan in 1991.

Heavy demand for 10-year U.S. Treasury bonds has pushed their yield to the lowest level of the year. That's the typical benchmark for fixed mortgages -- and boy have rates followed, with Freddie Mac reporting the average for a 30-year fixed home loan falling to 4.78%.

That's down from 4.84% a week earlier and not far from the record low of 4.71% set back in December.

Since the Freddie Mac survey reflects what lenders are offering, not actual contracts for loans, the rates obtained by well-qualified borrowers are often slightly lower, experts say.

Freddie Mac gathers information about rates available to well-qualified borrowers who make a down payment of at least 20% or have equivalent equity in their homes if they are refinancing. The borrowers in this week's survey would have paid 0.7% of the loan balance to the lenders in upfront fees and discount points, Freddie Mac said.

Last year, the experts expected residential mortgage rates would be rising by now, as federal housing and home-loan support programs expired, home prices stabilized and inflation became more of a concern.

Then the latest default scare reared its head -- this time involving not U.S. home loans but the debt loads carried by Greece and other weaker European economies. And just like that, the flood of money began to the safe haven of debt issued by Uncle Sam.

"Just when we thought we were finally experiencing [the anticipated rate increase] we got the PIGS," said Stew Larsen, head of mortgage banking operations for Bank of the West, referring to an acronym for the nations Portugal, Italy, Greece and Spain.

For those hungry for lower rates, is this the last big chance to head to the trough?

Big Banks want MORE!!!

Big Banks and Financial Companies, the same institutions that set the stage for our current downturn, got billions in tax-payer bail-outs and are already becoming profitable (while many American’s continue to struggle or worry) would like yet another pound of flesh from those caught in the cross-fire.


It’s important to note that most of the recent and pending foreclosure activity IS NOT subprime, but prime loans and mortgages. These are A-paper borrowers succumbing to extreme economic challenges.


The piece below, from the CALIFORNIA ASSOCIATION OF REALTORS® provides information and background.


When is Enough, Enough?
The Big Banks are Opposing C.A.R.'s Bill to Protect Borrowers

C.A.R. is sponsoring SB 1178 (Corbett) to extend anti-deficiency protections to homeowners who have refinanced "purchase money" loans and are now facing foreclosure. Most homeowners didn't even know that when they refinanced they lost their legal protections, and now may be personally liable for the difference between the value of the foreclosed property and the amount owed to the lender. SB 1178 will be voted on soon by the entire Senate.

One can't help but think, "when is enough, enough?" Banks have already foreclosed upon a family's home and now lenders can continue to hound them for additional payment. How much more money can today's families afford to pay when they've already lost their homes and most likely their jobs? Are they never to have the opportunity to begin again?

Action Item
Call Senator Rod Wright Today at 1-800-672-3135
Urge him to vote "Yes" on SB 1178.
Non-C.A.R. members enter PIN number -- 182003468

Background

California has protected borrowers from so called "deficiency" liability on their home mortgages since the 1930s, but the evolution of mortgage finance requires the statute to be updated.

Current law says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner's liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers who are brought down by financial crisis to get back on their feet.

Unfortunately, the 1930s law does not extend the protection for purchase money mortgages to loans that re-finance the original purchase debt -- even if the re-finance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to re-finance their mortgages, yet almost no one realized that by re-financing their mortgages to obtain a lower rate, they were forfeiting their protections. These borrowers became personally liable for the balance of the loan.

C.A.R. is Sponsoring SB 1178 Because:

SB 1178 is fair. Home buyers, and lenders, entered into the purchase with the idea that the mortgage would be non-recourse debt, and that the lender would look to the security (the house) itself to make good on the debt if the borrower cannot. It meets the legitimate expectation of the borrowers, who have no idea that they are losing this protection by a re-finance. Homeowners didn't know that their re-finance exposed them to personal liability, and new tax liability, on the note. It would be unfair to allow a lender, or someone that has purchased a note from a lender, to pursue the borrower beyond the value of the agreed upon security.

SB 1178 is consistent with the intent of the orginal law and simply updates it for modern times. Current law was intended to ensure that if someone lost their home to foreclosure, they wouldn't be liable for additional payment. Since the law was passed over 70 years ago, homeowners re-financing from the original loan to lower their interest rate has become commonplace. The 1930s legislature didn't anticipate how mortgages would change over time.

Lenders could pursue families to collect this "deficiency" debt years down the road. Under current law, lenders have up ten years to collect on the additional debt after a judgment has been entered on the foreclosure. Years after a family has lost their home, they could find themselves in even more financial trouble. Lenders could even sell these accounts to aggressive collection agencies or even bundle them into securities. The end result would be banks who didn't lend responsibly in the first place coming after families for even more money that they don't have.

SB 1178 does NOT apply to "cash-out" re-finances, unless the money was used to improve the home and it doesn't apply to HELOCs.

All good things...

I received my Weekly Mortgage Market Update today from Victor Samaan, our Bank of America rep and as anticipated the threat of higher interest rates on home loans could be just around the corner. It's been my contention that one of the best reasons to buy now, even with the specter of further devaluation in coming months is interest rates. How much would a point add to your payment?


"ALL GOOD THINGS MUST COME TO AN END..."

Or so the popular saying goes. And last week, the Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program...the program that has helped keep home loan rates low for much of the last year...will end on March 31, 2010 as previously stated. Here's the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

Last Wednesday during their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it "just right."

Along with this decision, the Fed emphasized and reminded that their MBS purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let's look at the numbers from last week to get an idea. The Fed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down - it's Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed's purchases, home loan rates will naturally be likely to increase.

Source: Victor Samaan at Bank of America