The link below will take you to a Fannie Mae history of 30 year fixed rate loans. The reason I’m bringing HISTORY into the argument of lower interest rates is to show Buyers and Sellers why NOT to “wait it out”. These folks mistakenly think they will see 3.5% again. It is wise to understand the dynamics OF interest rate fluctuations and to study past rate increases. For instance, In April of 1971 the interest rate was 7.31%–(42 YEARS AGO!) it would NOT fall under that rate again until July of 1993 when it hit 7.21%! Oh, and during that time frame it hit a high of 18.45% in October of 1981!
The first 11 years of my real estate career we had double digit interest rates with that big high I mentioned above. We STILL sold homes. Sure they were lower but so were wages and salaries. Fast forward to today and we see rates soaring from April to today by one full percentage point or what they say in banking as 100 “basis” points. And this is WITH the Fed taking a long term support measure for keeping interest rates “low”. What bothers me is the consumer balking at rates exceeding 5% as if THIS is a high rate! Continue reading Why WAITING for 3.5% is FOLLY and Financially Naive.→
That’s the headline–Monthly Sales DOWN–market must be cooling? Sluggish? But look closer–break out the sales by price point and it is a dramatically DIFFERENT STORY! See the following graphs:
As you can see by the above graph OVERALL Sales for Sonoma County -5%. BUT–let’s dig deeper and drill down on the price segments:
Here’s $500,000 to $750,000–UP BIG TIME Year over Year. UP +87%! The “Equity Seller/Buyer” is back. This was one of the hardest price points hit during the big heyday of the “Distressed Marketplace”. We had plenty of sellers (the banks) but they NEVER bought when they SOLD. So the “move-up” buyer disappeared and sales sagged. They have ROARED BACK.
$750,000 to $1,000,000 UP a remarkable 95%. Remember, all real estate is local and the “overall’ market number, though a good indicator does NOT reflect YOUR home and the price segment of which your home represents.
As we well know, Sonoma County, is considered a “destination” county–meaning tourists and prospective relocating companies, buyers, KNOW that this county offers a wealth of attractions, amentias NOT found in other bay area counties–consider this–we have a gorgeous, rugged Coast, Old growth Redwood Trees, some of the BEST wine appellations in the world, how about “Foodie” heaven. PLUS we are an hour away from one of the most exciting cities in the world–San Francisco with international air service, World Series Champs Giants, and the iconic Golden Gate Bridge. So this $1 Million PLUS graph shouldn’t SURPRISE anyone. Solds are up a staggering 187% over last year.
The “Wine Country” real estate market has many “micro” areas from the blistering hot demand and sales town of Sonoma with its idyllic town square, to the SW area of Santa Rosa which is seeing price recovery slower than any area in Sonoma County. I’ve taken the first six months of this year and compared it to last years first six months. The spreadsheet below demonstrates what’s going on. We broke up the Sonoma County real estate market into categories or “types” of sales. These are the usual “food-groups” from our Multiple Listing Service (MLS). Across the TOP of the sheet it show “All” which means the entire Sonoma County Real Estate market: Single family homes, Condos and Ranches/Farms. I’ve then broken them out to “Current Monthly” numbers (June). So the REO category shows the “Actives”, “Continue to show” (CTS), “Pending” and then the “Sold” is for the ENTIRE first six months. I also broke out the June “Solds” category which shows total sales of 529. You can follow this category and note the sales where MORE last year for the first 6 months and also for the Month of June. Median price shot up from $332,000 last year to $420,000 this year or 21%. Not bad. What’s striking is the REO and SS (Real Estate owned and Short-Sales) columns which show substantial declines in the distressed marketplace. This is GOOD news! Many who where under water two years ago are now “land-lubbers”. Note that “Cash” sales are identical for both years at 31% of ALL sales. What does all this mean? Cash buyers are still strong and a detriment to the first time homebuyer who maybe a VET or FHA buyer with a small down payment. More equity sellers (real homeowners and sellers) indicates folks are on the move as there is big demand and little supply pushing median up. Plunging “Distressed” homes indicate stabilizing of the default homeowner OR banks just working with folks longer with loan mods, longer default times and short-sale approvals.
So when the market TOOK OFF one of the thresholds it first encountered was the fabled $400,000 median price barrier–that was BACK in 2003. So TEN years later here we are again at another threshold? Or peak? Our median kept thundering along hitting a record $630,000 at the height of the bubble market in 2007. A whole bunch of foreclosures, loan Mods and Short-Sales later we are crossing the Rubicon once again. What can hold us back?
Europe exploding or more like collapsing under their economic woes?
What is the problem about exceeding the $400,000 Median? For many underwater households an increasing median price and price appreciation equate to a skin-diver snorkeling vs. a deep sea underwater vessel! Like when you look up while underwater and the closer to the surface you can start making out clearer object? Those underwater are saying, “Go baby! Go!” However, our crop of first time home buyers may be getting desperate as the median continues to climb. The higher it goes the less home one qualifies. FHA, VA buyers, low down folks, already snubbed for cash buyers, are seeing the dream slip through their fingers AGAIN!
At the height of the last big bubble market, 2007, our “Affordability Factor”, based on the median income of Sonoma County, was 6.5%. This meant ONLY 6.5% of families earning the income could buy a home. Our “Affordability Factor” was that of Santa Barbara with a median home price of $1,100,000. But the scariest portion of the last bubble market was the DUMB money out there. Fog a mirror—YOU’RE QUALIFIED. That is gone from the system. My friends keep telling me look out, $630,000 here we come. But I think the last 3 years of our market was all fueled by EZ lending practices and EVERYONE up the real estate food chair looking the other way. It went all the way to Moody’s who rated loan packages as A paper when the package was mixed with junk from all over the state of California and beyond. The economic boys and girls started scratching their heads when default rates, historically in the single digit range, jumped to double digits just MONTHS after origination.
But “Frank-Dodd Legislation” should make this an impossibility. Low inventory will drive the market to a point. WE shall see. Stay tuned!Below–Median Sales Price up 26% over last year and now sitting at $402,000 of TOTAL market (Condos, SFD’s and Country Property).
The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced last week that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.
(FHA makes a lot of sense for many borrowers, in some cases it’s the only option, but it’s important to note that there may be other low down-payment options available that do not require mortgage insurance. It’s definitely a conversation worth having with your Realtor or your lender…give us a call/email for more info)
Making sense of the changes;
A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.
Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.
Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.
The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.
Santa Rosa, California— RED ALERT!! On Monday, December 3, 2012 The National Association of Realtors (NAR) will launch an all member Call for Action regarding proposed changes to the Mortgage Interest Deduction.
By now you have seen numerous news reports concerning the “Fiscal Cliff.” Many of these reports speculate that a change to the long-standing policy that allows homeowners to deduct mortgage interest payments from their income taxes could be part of a “Fiscal Cliff” deal.
The Call for Action will ask REALTORS® to “remind” Congress about our position on any proposed changes to the mortgage interest deduction. NAR has been using the following statement regarding MID and suggest that you use it as well, modified for your 2013 president.
“Until Congress introduces specific legislation, there’s nothing to say about any proposed changes to the mortgage interest deduction. However, it has always been NAR’s position that the MID is vital
to the stability of the American housing market and economy and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.”
– 2013 NAR President Gary Thomas
If you have any questions or concerns please let Allison and I know.
We discussed some of these key slides this morning on our radio show and wanted to give our listeners full acess to the presentation by CAR’s Chief Economist, Leslie Appleton-Young. Here’s the Link. Just CLICK HERE to go to the presentation. What’s REALLY startling is the “Foreclosure Radar” slides for Southern California–WOW!! Enjoy and let us know if you have any questions or as always–YOUR feedback is much appreciated!
Here in Sonoma County, California–Realtors every Tuesday in Santa Rosa gather to “pitch” their Haves (Properties for Sale) and Wants (Needs of their property Buyers) to their fellow Realtors/Agents with the hopes of finding a property NOT yet on the market or a special property for a BUYER who has seen EVERYTHING! As the long-time moderater of this meeting over some 20 years I’ve seen three different marketing cycles. We are NOW entering one of scarcity of homes for sale, many buyers seeking FEW homes, overbidding and a hopefully “appreciating” marketplace. Since inflation is being held in check, we can’t use that favored vehicles to re-coup some or all of our real estate loses. It will be done the old fashioned way: Market Appreciation. Our concencus last week amongst a veteran group of Realtors/Agents–3 to 4% appreciation this year.
What the MOST in demand property type? Single family detached dwelling on a traditional sized lot (6,000sqft or bigger), 3 bedrooms, 2 baths, single level and in the NW, NE, or SE areas of Santa Rosa–price point sub $400,000 range with many in the sub $300k price point.
Next? How about $1,000,000+!! Yup! It’s a bizzarro world marketplace. Luxury homes are in demand as money from silicon valley, IPO big bucks techies plus those retiring with a country lifestyle in mind fuel this price segment.
However, our mid range is also picking up with many buyers in the $500-900K range. Single levels are always big!
Fit any of these pricing or property descriptions? Then we’d LOVE to talk to you. We are the Kelly-Norman Team and are two of the hardest working Realtors in Sonoma County. We provide advice to homeowners seeking to down size their homes BUT NOT THEIR LIFESTYLE! Give Allison and call at 707-799-3617 or shoot her an email: email@example.com
After many months of negotiation, 49 state attorneys general and the federal government have reached agreement on a historic joint state-federal settlement with the country’s five largest loan servicers:
The settlement will provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It’s the largest multistate settlement since the Tobacco Settlement in 1998.
The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law. The settlement provides benefits to borrowers whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.
About the Settlement: Learn about the settlement, who is affected and what claims may still be pursued against the banks. Find links to your state Attorney General’s Office to find state-specific information and contacts.
Help for Borrowers: Learn how to find out if your loan is affected by this settlement, the timeline for relief, how you will know if you are eligible. Find links to your state Attorney General’s Office to find state-specific information and contacts.
News: Read the national news release and find links to your state Attorney General’s Web site for state-specific news.
Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement. You may visit the following websites to learn if your loan is owned by either Fannie Mae or Freddie Mac:
Here’s what the plan will do for homeowners in specific situations;
Mortgage underwater but current with payments. More than 10 million homeowners in the U.S. owe more on their mortgages than their houses are worth. The latest plan would enable people who have been making loan payments on time to save about $3,000 a year on their mortgage by refinancing with lower-interest loans guaranteed by the Federal Housing Administration.
Mortgage underwater and behind with payments. More than $12 billion to be set aside to reduce principal for homeowners who are behind on their payments and owe more than their houses are currently worth.
Victims of foreclosure fraud. The plan will provide payments of about $2,000 a piece to approximately 750,000 families that have been the victim of improper foreclosure practices. Most commonly—routine electronic notarization of documents being transferred from one financial institution to another as part of the foreclosure process–a practice known as robo-signing.
This will most likely apply to people who lost their homes between Jan. 1, 2008, and Dec. 31, 2011.
After a bit of confusion last week, Join us THIS Sunday 2/05 as we discuss the status of the Sonoma-Marin Area Rail Transit project, better known as SMART, with General Manager, Farhad Mansourian.
Last week, SMART General Manager, Farhad Mansourian, addressed a room full of Sonoma County Realtors and affiliates. His goal was to educate the real estate community, so that we can better inform and educate our clients. I was surprised by how much I (along with many of my fellow Realtors) did not know about the many layers and details of this huge project.
Mr Mansourian, will join us on The Real Estate Hour, Sunday 9-10AM PST 1350AM, to discuss SMART’s short and long range goals, their progress, the jobs the project has and will continue to create, roadblocks they’ve overcome…and those still looming. http://www.sonomamarintrain.org/
This will not be a political discussion of the right or wrong of SMART.
Mr Mansourian was hired to see this project through in these trying times. For him,the question is not whether there should be a train. 70% of the voters in two counties decided on SMART. His job is to make it happen. We look forward to hearing what he has to say.
It will be hard for us to take phone calls for this show…SO, here’s your chance. What’s your burning SMART question?? NoDumbQuestion@gmail.com
Local Real Estate New and Information – Sundays, 9 to 10am PST, 1350AM,103.5 FM or www.KSRO.com