Real Estate BLOG
Mortgage Rates Fall With 15-Year at Lowest on Record
April 28, 2012 - Mortgage rates in the U.S. fell, with the 15-year average hitting a record low last month, as weak job growth and concern about Europe’s debt crisis drove investors to the safety of the Treasuries that guide home loans.
The average rate for a 30-year mortgage declined to 3.88 percent from 3.98 percent, Freddie Mac (FMCC) said in a statement. The rate was 3.87 percent in February, the lowest in Freddie Mac data dating to 1971. The average 15-year (NMCM15US) rate dropped to 3.11 percent from 3.21 percent. The previous low was 3.13 in March, according to the McLean, Virginia-based mortgage-finance company.
The 10-year Treasury yield, a benchmark for mortgages, fell below 2 percent for the first time in almost a month on April 10 as yields on Spanish and Italian bonds increased. The U.S. Labor Department said April 6 that employers added 120,000 jobs in March, the fewest in five months and less than the most pessimistic estimate in a Bloomberg News survey of economists.
“There was a tempering of optimism,” said Keith Gumbinger, vice president of HSH Associates, a mortgage-data firm in Pompton Plains, New Jersey. “The market was getting a little ahead of itself about where the economy was domestically and globally.”
Home-loan applications in the U.S. dropped for the eighth week in the last nine as fewer homes were refinanced. The Mortgage Bankers Association’s index decreased 2.4 percent in the period ended April 6, the Washington-based group reported yesterday.
If you would like more
information, please
give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762..
Source: Century 21 Select Real Estate and Bloomberg.com
California’s Home Affordability Index Rises
March 21, 2012 - Housing affordability continued to increase in all but three of the state’s metropolitan areas included in the report and reached the highest statewide level since the California index was developed in 2007, the California Building Industry Association announced this month.
On a statewide basis, the National Association of Home Builders/Wells Fargo Housing Market Index (HOI) found that a family earning the median income could have afforded 66.2 percent of the new and existing homes that were sold during the fourth quarter, up from 63.5 percent in the third quarter. It was the highest statewide affordability level recorded since the California-specific HOI began in 2007 with the previous high being set in the first quarter of 2011 with a level of 64.6 percent. In contrast, the lowest statewide level was recorded with the inaugural state index in the first quarter of 2007 with an affordability reading of 11.2 percent.
Mike Winn, CBIA’s President and CEO, noted that the sharp rise in affordability was good news for those who qualify and can take advantage of low prices coupled with record-low interest rates.
“The glut of foreclosures that has flooded the market in recent years has really brought prices down for both new and existing homes and is the primary reason for these historically high affordability levels,” said Winn. “Clearing out unsold inventory and getting job-generating home construction back to healthy levels would give a much-needed jumpstart to our overall economy. While lending standards remain incredibly strict, now would be an opportune time for those who qualify to take advantage of low prices and record-low interest rates as we may finally be turning the corner on this housing downturn.”
The San Francisco, San Mateo and Marin County metro area was once again California’s least affordable metro area for the 13th consecutive quarter, and third in the nation, with just 37.1 percent of the homes sold being affordable to a family earning the median income, up from 32.9 percent in the third quarter. Orange County was California’s second-least affordable market, and fourth in the nation (47.4 percent), followed by Los Angeles County (48.3 percent) as the state’s third-least affordable market. The New York City metro area continued to hold the title of the nation’s least-affordable market for the 15th consecutive quarter with 29 percent affordability, followed by Honolulu, Hawaii, in second with 34.3 percent affordability.
Of the state’s 28 metropolitan areas included in the report, the three that showed decreases in affordability were Tulare County, Imperial County and Butte County.
Sutter and Yuba counties were again California’s most affordable metro area with 92.5 percent affordability, up from 89.3 percent in the third quarter. Stanislaus County was the state’s second-most affordable market with 91.5 percent affordability, followed by Merced County with 91.2 percent affordability.
Nationwide, 75.9 percent of new and existing homes sold in the fourth quarter were affordable to families earning the national median income, up from 72.9 percent in the third quarter and the highest level recorded in the 20-year history of the index. Kokomo, Ind., was the nation’s most affordable housing market with an affordability ranking of 99.2 percent, followed by Fairbanks, Alaska, with a ranking of 97.5 percent.
If you would like more
information, please
give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762..
Source: CBIA and Century 21 Select Group
10 Credit Don'ts During the Loan Process
March 7, 2012 - It is important for home buyers to know to keep up on your credit, even after you’ve received pre-approval for your home loan or mortgage refinance. A loan underwriter checks an updated credit report, verifying there is no new activity since the original approval was issued. Many times, if the borrower has a lot of new activity on their credit report, the new debt will disqualify the buyer. You should always practice financial responsibility, but some of these tips might surprise you about what NOT to do with your credit until after the loan process is 100% done and you have closed on your home.
Don’t Apply for New Credit. This includes those “pre-approved” offers that you receive in the mail or online. You should also avoid credit cards that offer “no payments for…” 60 days, 90 days, or even 6 months to a year. Applying for new credit not only lowers your credit score, but it can still negatively affect your credit even if payment doesn’t have to be made. Every time your credit is pulled by a potential creditor or lender, you immediately lose points from your credit score. New credit may also increase your debt ratio.
Don’t Pay Off Collections or Charge Offs. During the loan process, anyway. Unless you can negotiate a delete letter, paying off collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off an old debt, do it through escrow at closing.
Don’t Max Out or Overcharge on Credit Cards. This is the fastest way to bring your scores down 50-100 points. Try to keep credit card balances below 30% of their available limit at all times during the loan process. If you pay down on balances, do it across the board. For example, pay balances to bring your balance to limit ratio to the same level on each card. (i.e. every card balance is below 30% or 40%, etc.)
Don’t Consolidate Your Debt onto One or Two Credit Cards. When you consolidate all your debt onto one card, it appears you are maxed out on that card and the system will penalize you as mentioned in #3. If you want to save money on credit card interest rates, wait until after closing.
Don’t Close Credit Card Accounts. Closing a credit card account causes you to lose available credit and it will appear to FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score, such as length of credit history. If you have to close a credit card account, wait until after closing.
Don’t Pay Late. Stay current on existing accounts. Under the FICO scoring model, one 30-day late can cost you anywhere from 50-100 points and the points lost for late pays take several months, if not years, to recover from.
Don’t Dispute Anything on Your Credit Report. Once the loan process has started. When you send a letter of dispute to the credit reporting agencies, a note is put onto your credit report. When the underwriter notices items in dispute, they may not process the loan until the note is removed and new credit scores are pulled. This is because sometimes credit scoring software will not consider items in dispute into the credit score, which results in the lender receiving false data.
Don’t Make a Major Purchase. This one gets borrowers in trouble more than any other item, especially first-time home buyers who want to buy all new furniture for their new home. Wait until the loan is closed before buying a new refrigerator, washer and dryer, TV, furniture, TV, etc.
Don’t Do Anything That Raises a Red Flag. This includes adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the process the better.
Don’t Lose Contact with Your Mortgage and Real Estate Professional. If you have any questions about whether or not an action will affect your credit reports and scores during the loan process, your mortgage or real estate professional should be able to help. They can supply you with resources to help you avoid making mistakes that could drop your credit scores, or possibly cause you to lose the loan.
Most buyers know to keep an eye on their credit before they apply for a loan, but many are surprised to know that they need to continue that even after pre-approval. If you would like more information regarding the loan process, please give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Source: Century 21 Select Real Estate
Why a Long-Term Loan Makes Sense
February 26, 2012 - A fixed-rate mortgage at today’s low interest rates may give you flexibility. When it comes to home loans, we’re a nation of debt-phobes. It is easy to understand why — we are still digging out from a credit crisis caused by too much (or mismanaged) mortgage debt. It is not surprising, then, that borrowers are choosing shorter-term loans when they can. Of those who refinanced a 30-year fixed-rate loan in the third quarter of 2011, 40% chose a 15- or 20-year loan, the largest percentage since 2003. With high volatility and uncertain returns in the stock market, paying down your mortgage delivers a relatively generous, guaranteed return.
But many financial experts say the mortgage burners are misguided.
“The 30-year fixed-rate mortgage is one of the great gifts to the American middle class,” says Mark Helm, a planner at Helm Financial Advisors in Falls Church, Va. No one is suggesting that you load up on debt you can’t afford, but a long-term mortgage at a fixed rate so low you’re unlikely to see it again in your lifetime can work to your advantage.
A mortgage keeps your assets diversified, says Debra Morrison, a financial planner at Trovena. “I don’t recommend that clients prepay principal because I don’t want a disproportionate amount of their net worth tied up in their homes,” she says.
Next, consider the tax break. Someone in the 28% tax bracket with a 30-year mortgage at 4% will average more than $1,300 a year in tax savings over the life of the loan, according to Bankrate.com, whittling the after-tax mortgage rate to 2.9%. Nothing in the stock or bond markets is guaranteed, but a well-balanced portfolio has a good shot of beating that rate of return in the long term, especially in a tax-advantaged account.
You can save a lot of interest by choosing a 15-year loan over a 30-year — about $63,000 after taxes on a $200,000 loan for someone in the 28% tax bracket. But ask yourself whether you can really afford the higher monthly payment — in this case, $1,420 versus $955. Have you maxed out your 401(k) and built up an emergency fund? Paid off credit cards? Funded insurance policies and, if you desire, college savings? If you haven’t, choose the 30-year loan. And if you have, choose the 30-year loan anyway and put the difference between the two payments in a savings or investment account. You’ll build up a nest egg that might keep you afloat — and in your house — if you lose your job or get sick. The strategy requires discipline; setting up automatic payments helps.
Few hedges against inflation are better than a mortgage. If inflation rises, so will interest rates. But you’ll have borrowed at a low, fixed rate while savings rates climb and you’ll pay the loan back with increasingly cheaper dollars. It’s a deal even retirees can embrace, says Bert Whitehead, a Cambridge Connection adviser. But he concedes that a mortgage is a tough sell with that group.
If you would like more information, please give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Sources: Century 21 Real Estate and MSN.com
What’s Ahead for Homes Prices in 2012
February 20, 2012 - The median home price in the U.S. has plunged nearly 40% in a little over five years, but the worst is definitely over: The market has finally wrung out the last excess valuations born of the housing bubble. Before you break out the party hats, note that this doesn’t mean prices across the nation are poised to rebound anytime soon. Alex Villacorta, director of research and analytics at Clear Capital, a provider of real estate data and analytics, says the housing market is in a suspended state, with positive and negative factors offsetting one another. But he doesn’t expect another free fall in prices, assuming things are left to work themselves out and there are no further shocks to the economy.
Although the percentage of sales of distressed homes will rise, the federal government’s latest loan-modification program might allow as many as 1.5 million to two million homeowners to refinance, estimates Mark Zandi, chief economist at Moody’s Analytics. Zandi says that further home-price declines nationwide will be limited to 3% to 5% and that 2012 will be the year that prices finally stabilize — setting the stage for gains in 2013.
Short-lived spikes in prices will affect some cities sooner. When housing markets touch bottom and begin to stabilize, price appreciation tends to be spread unevenly, creating a lot of confusion about where the recovery is occurring and when, says David Stiff, chief economist at Fiserv Case-Shiller. Even within a single city, more desirable neighborhoods will stabilize first, while prices in other neighborhoods may fall at a rapid pace
Touching bottom
In the year ending September 30, home prices across the U.S. fell by 2.6%, and the median home price stood at $171,250, according to Clear Capital. That comes on the heels of a 2.5% decrease from September 2009 to September 2010. In the five-plus years since the peak of the market, home prices nationally fell by 38.1%.
Theoretically, low rates should help push buyers to act. The average interest rate on 30-year fixed mortgages fell to 3.94% in the first week of October 2011, according to Freddie Mac. The past couple of years, predictions that rates would rise were based on the premise that the economy would improve, says Guy Cecala, publisher of Inside Mortgage Finance, an industry publication.
Other positive signs: Existing home sales increased during the summer and early fall of 2011, according to the National Association of Realtors, after a deep slump following the expiration of the first-time home buyer tax credit. Although the inventory of homes on the market and in foreclosure remains high, a lull in home building over the past three years is gradually easing the surplus.
The lure of affordability and low mortgage rates hasn’t increased buyer demand as much as one might expect. Some would-be buyers can’t get a mortgage, given lenders’ stiffer requirements. Many more are hesitant to pull the trigger on a home purchase, for fear that home prices will continue to fall or that their job prospects are uncertain. Although the recession has technically ended, the economy doesn’t feel better to many.
But Celia Chen, director of research at Moody’s Analytics, says that both corporate and household balance sheets are healthier and should lead to stronger economic growth and improved confidence. She anticipates more robust growth by the second half of 2012, assuming that Congress follows through on its debt-ceiling deal, the Fed keeps interest rates low, and there are no new shocks to the economy.
The foreclosure problem
The dark cloud of foreclosures still hangs over the housing market. The pace of foreclosures has slowed as lenders, loan servicers and regulators have sorted out paperwork and procedures in the wake of the robo-signing controversy that emerged a year ago. But RealtyTrac, which monitors the foreclosure market, says that foreclosure filings have begun to ramp back up.
Nevada, California and Arizona — among the epicenters of the boom and bust — still suffer the highest rates of foreclosure. Georgia, Florida, Utah, Michigan, Idaho, Illinois and Colorado round out the top ten. Among metro areas, Las Vegas still tops the list.
Currently, about 1.84 million home loans are 90 days or more delinquent (a strong predictor of foreclosure) but not yet foreclosed on, and 2.17 million have finished the foreclosure process but haven’t yet been offered for sale, according to Lender Processing Services (LPS).
Of course, the longer lenders take to work through the foreclosure glut, the longer it will take for home-price appreciation to return to its normal pace of 2% to 4% a year. To hasten the process, the federal government may introduce more policy initiatives — although whether they’ll have any meaningful impact or come soon enough is debatable. In October, Fannie Mae and Freddie Mac, along with their regulator, the Federal Housing Finance Agency, expanded the Home Affordable Refinance Program to allow more underwater borrowers to refinance out of their mortgages into more manageable loans. The FHFA, the Department of Housing and Urban Development and the U.S. Treasury have called for ideas to handle the foreclosures they own, such as converting them to rental properties for purchase by investors.
If you would like more
information, please
give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Sources: Century 21 Real Estate and Kiplinger.com
FHA Loans 101
February 1, 2011 - Are you interested in purchasing a home, but find it daunting to come up with the down payment? FHA might be your answer. FHA (Federal Housing Administration) loans have been helping people become homeowners since 1934 and they could be just what you are looking for.
Some of you feel that you have to save, save and save for your down payment. On the contrary, FHA allows for a small down payment of 3.5% (i.e. $200,000 = $7,000). The down payment can come from personal liquid assets, like checking and savings, borrowed against a 401(k) with typically very good terms, or from a gift from a family member. With the options available to you, it is easy to see that savings for months at sometimes very small increments is not necessary.
The down payment with FHA is not the only selling point either. FHA provides competitive interest rates with lower FICO scores; where is if you were applying for a conventional loan and had sub-par credit you would be subject to a much higher interest rate, and also a much larger down payment. FHA rates are usually at or sometimes even better that a conventional rate, be it a fixed or adjustable rate. FHA provides 30 Year Fixed, 15 Year Fixed, Adjustable Rate, and high balance loans.
Do you have the desire to renovate or re-design a home? You may find a home that needs updated appliance, new flooring or lighting or perhaps a facelift – FHA offers a great rehabilitation loan called a 203K. Another loan that is closely related; however a bit simpler is known as the Energy Efficient Mortgage (EEM). An EEM is used where the buyer may want to finance energy conservation improvements up to 5% of the purchase price. In most cases the increased cost of the energy improvements is made up in the monthly utility bill – it just makes sense.
You can see that FHA loans have some great perks when financing your home. If you would like more information, please give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Market Statistics
January 11, 2012 - On the national level, inventory of for-sale single family homes, condominiums, townhouses and co-ops declined by -4.84% from October compared to November, and is now down by -21.30% compared to one year ago.
While the median age of the inventory in November increased by 3.64% compared to October–a largely seasonal effect that reflects the end of the home buying season–the median age of the inventory was 114 days, down -3.39% compared to a year ago.
Median list prices, which have remained essentially unchanged since June, are up by 4.05% nationally on a year-over-year basis. Each of these developments can be viewed as a positive sign that some markets continue to recover and stabilize.
Patterns differed across the 146 Metropolitan Statistical Areas (MSAs) monitored by Realtor.com. Over the past several months, an increasing number of markets have registered year-over-year increases in median list prices while fewer markets have experienced year-over-year list price declines, suggesting a growing optimism on the part of sellers about 2012 market conditions.
If you would like more information, please give me a call at 916-939-7762 or send me an email. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Sources: Century 21 Real Estate and Realtor.com
Five Wise Improvements ..... and One Bad One
January 1, 2012 - Home improvements are a great way to increase value in your home, and assist in making your home last through the years. Improvements make it easier to sell your home when the time comes to put it up on the market. Some homeowners may think that every single improvement will increase value and increase their pocketbook on resale. In most cases, this is true. However, not always. The following are good examples of five wise improvements .. and one bad one.
Wise Improvements
- Kitchen: Whether it’s a major renovation or a simple makeover, putting a fresh face on your kitchen is the best investment. Maximize your return by investing no more than 20% of the value of your home. Expect an 85% return on your investment.
- Bathroom: An outdated bathroom can spoil a sale. Current trends have homeowners installing large showers instead of garden tubs. A major update could cost less than $20,000, but it should yield an 80% return.
- Decks: A new deck could cost a few thousand to tens of thousands of dollars, depending on size and materials used. Before you build, look at other homes in your area and build accordingly. If the deck is in good shape, your return could be more than 80%.
- Siding: If your home’s façade is siding and it’s not in good shape, replacing or repairing the siding can bring instant freshness. You’ll likely spend at least $10,000, but you should get at least 80% back.
- Window Replacement: The energy efficiency of windows is a clear benefit to switching out older windows, but in some cases, it’s a safety feature too. Costs depend on the number of windows you’re replacing, of course, and the type of window you install. Expect a return on investment of at least 70%.
One Bad Improvement
- Pool: Unless your home is the only home on the block without a swimming pool, you’ll rarely get back even half of the money you pay to build one, and you can scare prospective buyers who don’t want the responsibility or liability of a pool. In-ground pools are expensive and can range from less than $20,000 to more than $60,000, depending on size, design, and materials.
Feel free to contact me anytime to discuss what home improvements you may want do to, and maybe I can guide you on how much monies you should or shouldn't put into the improvement to make sure you get a return on your investment. You can call or email me anytime. I'm always here to help. Cheri Elliott, Senior Executive Broker-Associate, Century 21 Select Real Estate, 4601 Post Street, El Dorado Hills, CA 95762.
Sources: Century 21 Real Estate and Angie’s List
