Economic Issues & Residential Real Estate Business Trends Forum

Posted on May 12, 2010 by Ginger Wilcox

I am in Washington D.C. this week for the National Association of REALTORS® Mid-Year Conference. Tomorrow I have the opportunity to speak at the Economic Issues & Residential Real Estate Business Trends Forum with NAR Chief Economist, Lawrence Yun and Mark Zandi, Chief Economist and co-founder of Moody’s Economy.com. At the forum, Yun and Zandi will be discussing the U.S. housing marketing recovering, the current state of the mortgage system and the role of the federal government in mortgage finance. Below are Yun’s slides from the event.

Market Outlook with Lawrence Yun

Slides provided by the National Association of REALTORS®.
If you are unable to see the embedded slideshow, please click here.

Pending Home Sales on an Upswing- NAR March Home Sales Numbers

Posted on May 9, 2010 by Ginger Wilcox

The National Association of Realtors® released March home sales figures last week. Pending sales are up 21% nationwide. NAR Chief Economist Lawrence Yun says, “Nearly every market is seeing year over year gains. The only place that has seen declines are markets with a robust year last year.” Yun predicts the housing market will decline in July and August but says price stabilization has removed the consumer fear factor in the market and may help fall and winter sales. Listen to the full interview with Yun below.

If you are unable to see the video, click here.

Video courtesy of The National Association of Realtors®

Fannie Mae Tightens Guidelines On ARMs And Interest Only Products

Posted on May 4, 2010 by Ginger Wilcox

Fannie Mae tightens its mortgage guidelinesFor the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.

The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement April 30, 2010.  The changes will roll out to home buyers and homeowners in Tiburon and everywhere else over the next 12 weeks.

The first guideline change is tied to ARMs of 5 years or less.

Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate.  For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.

The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

And, lastly, Fannie Mae is changing its interest only mortgages guidelines.

Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

  1. The home must be a 1-unit property
  2. The home must be a primary residence, or vacation home
  3. The borrower’s FICO must be 720 or higher
  4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.

California Housing Update from Economist Leslie Appleton Young

Posted on May 3, 2010 by Ginger Wilcox

The California Association of REALTORS® released the California March housing update from CAR Chief Economist Leslie Appleton Young today. As to be expected, Young says there is a lot of differentiation by region.

Video highlights:

  • The number of California home sales is up slightly over February but down slightly from a year ago at 516,690 units.
  • March media home price is $301,790, up on a year over year basis by 20.8%.  This is the largest year over year gain since 2004.
  • There is a 5 months supply of home inventory statewide.  There is a  10.9 months supply in the one million plus home price range and a 3.2 months supply for homes $300,000 & below.

Federal Reserve Statement Explained (April 28, 2010)

Posted on April 27, 2010 by Ginger Wilcox

Putting the FOMC statement in plain EnglishToday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.

In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”.  This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.

It also reiterated that business spending “has risen significantly”.

Today’s statement marks the 7th straight press release in which the Federal Reserve shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.

Threats remain to growth, however. The Fed fingered a few:

  1. Employers are reluctant to hire new workers
  2. High unemployment threatens consumer spending
  3. Consumer credit (still) remains tight

Also in its statement, the Federal Reserve re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”.  This was expected.

Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.

Mortgage market reaction has been muted thus far. Mortgage rates in Mill Valley are unchanged post-FOMC.

The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010.  The 55-day span between meetings will be the FOMC’s longest of 2010.

New Homes Sales Strong in March, But Not As Strong As News Would Have You Believe

Posted on by Ginger Wilcox

New Home Sales Mar 2009-Mar 2010The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

  • Sales of new homes rocketed up 27 percent in March (WaPo)
  • New-home sales rise fastest in 47 years (CNNMoney)
  • Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history.

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push home prices nationwide higher throughout the coming months.

New home sales don’t have a big impact on the local Marin real estate market but headlines and news do impact over all consumer confidence in the housing market.

California’s First-Time Home Buyer Tax Credit May Not Last Long

Posted on April 24, 2010 by George Crowe

You’ve probably been hearing a lot about the tax credits Governor Schwarzenegger signed into law recently, but if you want to get in on the action you might have to move quickly.  According to C.A.R.’s Economics team, if sales forecasts are accurate the $100 Million the state has allocated for first-time buyers may be depleted within the first few weeks of the program. And that’s not taking into account the potential that some buyers scheduled to close escrow in April could attempt to delay closing until May to take advantage of the credit, using up the funds even more quickly.

The law says that buyers getting into contract by the end of the year are eligible, but since the program is first-come, first-served, it looks as though the money will dry up well before the deadline and a lot of people could be out of luck.

If you need more info, C.A.R. has prepared a handy chart summarizing both the state and federal tax credits, and the Franchise Tax Board will be updating their website with application info as it becomes available.

~George

Opening Day on the Bay 2010

Posted on April 20, 2010 by Ginger Wilcox

The start of boating season kicks off this weekend on the San Francisco Bay.  Boats will be out en force for the 94th annual “Opening Day on the Bay” this coming Sunday.  Opening Day on the Bay marks the official opening of the San Francisco boating season.  The event is hosted by the Pacific Inter-Club Yacht Association,  (PICYA), an organization which represents over 100 yacht clubs in Northern California.  PICYA  was formed in San Francisco in 1896 to improve communications between yacht clubs, provide uniform racing rules, and encourage yachting.

Opening day on the bay is a spectacular sight as hundreds of boats take to the water with sails up for the season opener.

  • When: Sunday April 25, 2010, 12 noon
  • Where: Crissy Field to Pier 39
  • What: The 94th Annual “Opening Day on the Bay” decorated boat parade, hosted by the Pacific Inter-Club Yacht Association (PICYA).  The parade will feature over 120 historic workboats, fireboats, Vessel Assist towboats, classic and contemporary craft decorated to the theme. There will be both power and sail boats competing for best decoration honors. The decorated boat contest theme this year is “Building Bridges.”
  • More Information: picya.org

Remodeling in the Bay Area? Federal Statute May Require a Certified Contractor

Posted on April 9, 2010 by Ginger Wilcox

If you are considering doing remodeling work on your home before putting it on the market or  for a general home improvement project, you may need to hire a “certified contractor”.    Effective April 22, 2010, contractors performing remodeling work on properties built prior to 1978 must be certified under a new federal statute.  This new law impacts many Marin County and Bay Area homes.  The U.S. Environmental Protection Agency’s Lead Renovation, Repair and Painting rule becomes effective on Earth Day this year.

Rule Summary:

  • Impacts remodeling and renovation projects disturbing more than six square feet of potentially contaminated painted surfaces for all residential and multifamily structures built prior to 1978 that are inhabited or frequented by pregnant women and children under the age of six.
  • Requires a cleaning inspection after the work is completed
  • Prohibits open-torch burning, use of high-heat guns and use of high-speed equipment such as grinders and sanders unless equipped with a HEPA filter.
  • Establishes required lead-safe work practices, including posting warning signs for occupants and visitors; using disposable plastic drop cloths; cleaning the work area with HEPA vacuuming and wet washing; and individual certification through a training course.

Additional Information:

Photo courtesy of MyEastBayAgent.