Thursday, February 28, 2008



The Market is Waking Up In Ventura County For Home Buyers

I spoke with Bob Curtiss the Regional Sales Director for Property I.D. today. This company provides natural hazard property disclosures to home buyers. Without getting too deep, this company researches a home to see if it is in a flood hazard, fire hazard, or earthquake hazard area and discloses this and much more information to buyers and sellers so they can be aware of what environment the home is in. They are the best at what they do in my experience. They are always in demand by realtors for their excellent service to our home buying clients.

Bob gets around, and I enjoy speaking with him because he is the harbinger of news in real estate for a large area in Southern California. He had just returned from a business trip to Lompoc, Santa Maria and the Solvang, Santa Ynez area. The word from Bob is that business in home sales is booming in those areas. That has not always been the case, but especially in Lompoc this is a big change.

Yesterday I was helping some folks who were in the process of finishing up their escrow and were signing their loan documents at one of our local Title and Escrow companies. As you may already know, these folks represent a neutral third party provider of escrow services. They manage the money and paperwork flowing between the home buyer and the home seller. When nobody is buying a home, they aren't working. When the industry is busy, they put in some very long hours.

In this case I was discussing our local market with Margaret Kelly of LandAmerica Lawyers Title. Margaret is a beautiful lady and an awesome talent with a 20 year track record of success in our local market. By the time Margaret becomes involved in a transaction, it means that a realtor has been working with prospective home buyers to determine their needs, locate their dream home and negotiate a purchase agreement with the home sellers. This process can last a few weeks or it can last upwards of a year or more. My point is, by the time Margaret sits down with my clients, the market shift has already matured a month or so.

Margaret says the last 3 or 4 weeks - most of the month of February - have been markedly busier than previous months. She is busy once again. People are making up their minds to get off the fence and make their home choice now. The conditions are wonderful for some awesome home opportunities and buyers have seen it, made their decision and are now a month into the process with Margaret.

I wrote of this market change several weeks ago. Now many service providing professionals like Bob and Margaret are confirming these observations. I can't wait to see what all the newspapers say about our market when next month's reports on this month's sales show the increase. All the rhetoric about our market continuing to wither for another 2 years we hear from "economic experts" will be difficult to reconcile with the facts.

Is our market healed now? I don't think so, but I think it is beginning to heal. I think we must define our market first. Let's say our market is made up of home buyers and home sellers.

The home buyers are now beginning to come out in force. They are taking advantage of current high inventories, low prices and falling interest rates. They are dialing in the new changes to FHA, Fannie Mae and Freddie Mac programs and seeing huge opportunity for themselves and their families.

Home sellers continue to suffer. They are seeing more buyers at open houses, but the buyers are fussy. As prices continue to fall and foreclosures continue to scue neighborhood prices, sellers continue to suffer long listing periods and declining equity. Much of this is driven by the continued foreclosure problem, but some of this is also due to more restrictive lender requirements as well as generally negative news coverage of our market.

I think all of these negative market forces are slowly beginning to correct themselves.

Mortgage programs requirements are more restrictive than a year ago, but there are new, higher lending limits from all the federal lenders. Combining these programs with CAL-HFA programs from the state, gives some well qualified first time home buyers real hope again for finding affordable housing. I think lender programs will continue to improve and become more user friendly in coming months. Don't look for stated income loans to make a strong come back any time soon though!

As home sales continue to increase and lending practices standardize over the coming months, I think we will begin to see a gradual shrinking of our home inventories. Developers are slow to build when prices are soft, so our inventory of homes will tend to build very slowly. As demand continues to build, the relatively fixed number of homes available will slowly drive prices back to stable market values.


I think this process will accelerate once the foreclosure problem eases.


Unfortunately, we don't appear to have a good solution on how best to ease the foreclosure crisis. Foreclosures will have a continued dampening effect on our market until that problem can be effectively addressed or has time to work it's way out. Sort of like trying to fight a large forest fire. Eventually it will burn itself out, but we all would like to minimize it's damage and find a good way to fight it.

News media coverage will begin to shift back closer to reality as sales numbers increase once again. No thanks to them.

The article I have included in this blog comes from the Ventura County Star and illustrates my point. I expect we'll see more of these articles in the coming months as newspapers and other media finally pull their heads out of the sand and look around at the real world again.

Mark Thorngren
http://www.markthorngren.com/




Good news on the real estate, mortgage front
Jim Woodard, ColumnistSunday, November 11, 2007

Despite discouraging news on the financial front, the sluggish home sales market should bottom out by the end of the first quarter of this coming year, it was noted in a recent study and report from the National Association of Home Builders.

The housing market will start to turn around next year for a number of reasons: the overall economy and job growth will continue to move ahead at a decent pace, core inflation is under control, the credit crunch in mortgage markets is showing signs of easing, the supply-demand equation will be better balanced as builders begin to whittle down their excess inventories, and another Federal Reserve interest rate reduction of a quarter-point on Oct. 31 will help keep mortgage rates low.

That's the prediction of David Seiders, chief economist for the NAHB.

"With the housing sector facing a large backlog of unsold inventory, new construction starts and permits won't begin to move forward until sales firm up. Home sales should bottom out by the end of the first quarter of next year, and housing starts will be up in the third quarter, assuming the inventory overhang stabilizes," he said.

The tightening standards for home mortgages will not derail a national recovery in the housing market, according to the NAHB. However, it will complicate the system for a while.
The negative impact of the new standards on housing markets comes in two forms. First, tightening lending standards have reduced the availability of some loans and raised the price to riskier borrowers. Second, it creates the potential for a cycle of defaults and price declines, depending on the local home price environment and strength of the local economy, the NAHB study report noted.


NAHB's short-term forecast is based on several assumptions: skillful management of monetary policy by the Federal Reserve, maintenance of solid growth in personal income and employment, a manageable wave of home mortgage foreclosures and better performance of mortgage markets going forward.

The report observed that the long-term potential for housing activity is very good. "By the end of 2009, we may be at a pace of 1.5 million units of new housing production (including manufactured homes). Once we are out of the woods, we should see good growth in front of us — maybe 2 million units per year," it stated.

While there is much press coverage about today's troubled real estate markets, there are many markets throughout the country that have minimal subprime mortgage exposure and are now experiencing a stable market.

These markets experienced modest and sustainable home price appreciation during the boom years and have relatively strong local economies. The markets are positioned to outperform the national trends with earlier and stronger recoveries than the more troubled markets, according to NAHB's chief economist.

These little-publicized markets are primarily located in the Pacific Northwest, mountain states and in the Southeast. The areas are now recording single-family home construction permits at or above pre-boom levels.

"The contrast between the strongest and weakest markets across the country points out substantial regional variation and suggests that steep nationwide home price declines and mortgage defaults are unlikely," Seiders said.

There's more good news on the mortgage front. More people are managing to keep up with payments on mortgage loans made in recent months, according to data from First American Loan Performance, a research firm.

The trend reflects more conservative lending policies adopted by mortgage companies this year in the wake of a surge in defaults and foreclosures, said Mark Carrington with First American. "Even so, defaults continue to rise in proportion to the overall number of home loans outstanding nationwide, mostly those made between 2003 and 2006 when lending standards were growing more lax," he said.

An increasing number of parents of college-bound offspring are purchasing a condo or small house in the area of the college for their student's residence while attending the college or university. In some cases, it appears to be more cost-effective than paying for a room in a dorm.
The student will often rent out a portion of the purchased unit to another student to minimize the investment. When the student's attendance at the college is completed, the unit will be sold, hopefully at a profit.


There are now about 3 million campus houses and condos that have been purchased by students or their parents, according to a report from the National Association of Realtors. That represents about 8 percent of the nation's 37.4 million investment properties, but excludes 6.8 million vacation homes.

In addition to the possible financial advantage, owning such a residence gives the student more freedom, and a choice of roommates. For parents, it offers a chance to recoup some of the rising costs of higher education, assuming it turns out to be a good investment.

Many parents are spooked by the unknowns in such an arrangement. Can the extra space be rented at the projected rental amount? Will the student handle his extra freedom responsibly? Will the property later sell at a profit? These and other concerns tend to keep the dorms fully occupied.

(Jim Woodard, a Ventura resident, writes a nationally syndicated column and freelance features in addition to his Star columns. He also is a storyteller with a Web site at: www.jimwoodard.net. E-mail: Storyjim@aol.com.)

Monday, February 4, 2008

FHA Changes To Shake-Up Home Mortgage Industry

This article was sent to me today by one of our local government loan program experts - Wendy Mueller - an awesome Mortgage Broker with Platinum Home Mortgage (Formerly Pinnacle Financial). She is probably the most knowledgeable person I've met concerning government home loan programs. The fact that she is still busy helping people while 1/3 of her competitors have gone out of business this last year says something about her abilities also. By the way, Wendy is one of my company's competitors - I still listen to her.

Mark Thorngren
http://www.markthorngren.com


Hello, please read below, with all the great changes that are coming we need to be prepared as this is not only going to help buyers become home owners it will also ease up some of the jumbo market. Don’t forget that FHA can be combined with CALHFA for an extra down payment assistance benefit.

I. Stimulus Bill: FHA and GSE Mortgage Limit Increases

We are increasingly confident that the Senate will pass the stimulus package this week. The timing of the President’s signing of the bill will depend on whether the Senate passes any amendments to the stimulus bill. There are no amendments expected on the mortgage limits. If the Senate passes amendments to the tax incentive portion of the bill, it will require the House and Senate to have a conference before the final bill can then be passed by Houses of Congress and be sent to the President for signature.

A. Timing of the legislation

We expect the stimulus bill to be passed by the Presidents’ Day recess on February 15th. It could happen sooner if the Senate passes the stimulus bill without any amendments this week. We would expect the President to sign the bill almost immediately after passage (within a couple of days after passage by the Congress if not sooner).

B. Content of the legislation

The mortgage limit provisions should remain intact. An amendment might be proposed to lower the FHA maximum amount but we would be very surprised if it passed. See our email from last week for additional details about the provisions.

As we have discussed, the legislation proposes four temporary changes for FHA:

· Raises the base loan limit (“floor”) to 65% of the current GSE limit ($417,000) = $271,050

· Raises the maximum FHA loan limit from $362,750 to $729,750 (175% of the GSE base limit - $417,000

· Increases the calculation factor from 95% to 125% of area median sales price for determining “high cost” areas

Attached is a chart demonstrating the impact of this change in a portion of the metro areas around the country. As a reminder for any area w/ a current FHA limit above $206,000, the area will benefit from this change.

Calculation Process

Take the current mortgage limit and 1) divide the limit by .95 to determine the median sales price and then multiply the median sales price by 1.25 to determine the new FHA limit.

· Implements Fannie Mae/Freddie Mac ratios for calculating maximum loan amounts for two-, three- and four-family units in all of the above categories

Fannie Mae and Freddie Mac two-,three- and four family unit properties increase the same percentage that the single family limit increases. In 2006. the GSE single family limit increased 15.95% and the mortgage limits for multiple units increased 15.95%.

This change should result in a significant increase in FHA limits for multi-unit properties. In the past, FHA used fixed percentages of the single family limit (i.e. 107% of single family for two family unit, 130% for three-family unit and 150% for four-family units). For example, under the new provision, if the single family limit increases slightly over 100% in a “high cost area” (from $362,790 to $729,750), we would assume the multiple unit amounts would increase the same percentage (slightly over 100%).

C. Implementation schedule

The bill requires HUD to publish the new mortgage limits and data on area median sales prices in 30 days from enactment. However, since Mortgagee Letter 2008-2 was published on January 18, 2008, FHA should be ready to publish limits the day the President signs the bill. Regardless, the new “floor” and areas w/ mortgage limits below the current FHA maximum limit ($362,750) can be determined from available data as we did in the attached document.

We believe it is appropriate to start preparing for the mortgage limit increases as we have outlined above (i.e. training, materials, etc.)

Fannie Mae & Freddie Mac

The bill states that the GSE limits should follow the HUD process. Accordingly, the major difference is Fannie Mae and Freddie Mac will have a higher “floor” ($417,000). While the statute appears clear and unambiguous that the GSEs should use HUD data for this process, it is important to remember that the GSEs have a regulator (OFHEO) that could play a role in the implementation process that could delay usage. However, because of the significance of the issue, we expect implementation will occur expeditiously barring some unforeseen issue.

II. FHA Modernization Bill

We now expect the FHA bill will be enacted in February and possibly by February 15th. We understand that negotiations are underway on the contested items. We are uncertain as to how the issues will be resolved. It is expected that the Senate requirement for minimum cash investment of 1.5% will be adopted.
Thank You

You’re First Time Home Buyer Expert

Wendy Mueller
Platinum Home Mortgage
(Formerly Pinnacle Financial)
(805) 907-3136 Cell



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