The percentage of households that could afford to buy an entry-level home in California stood at 24 percent in the second quarter of 2007, compared with 23 percent for the same period a year ago, according to a report released today by C.A.R.
C.A.R.'s First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.
At 45 percent, the High Desert region was the most affordable in the state, followed by the Sacramento region at 44 percent. Santa Barbara was the least affordable region in the state at 12 percent, followed by the Monterey region at 17 percent.
Wednesday, August 29, 2007
Saturday, August 18, 2007
FED discount window cut
The Federal Reserve has taken significant action in the last few weeks due to the credit crunch. And now they've made an unexpected move by cutting the discount window rate – which is great news.
Market movement
To date, over 120 mortgage companies have closed their doors due to reduced liquidity. The result: Borrowers who want to take out non-conforming loans have fewer, more expensive options.
Many media outlets have incorrectly added fuel to the fire by stating that mortgage lending has stopped altogether and that borrowers can't get a loan without a 20% down-payment. This is not true.
Conforming interest rates and loan programs, those backed by Fannie Mae and Freddie Mac, have not been significantly impacted by recent events. Even better, interest rates have come down from recent highs. While this is good news, the market is experiencing unprecedented volatility and changes could come at any time. Borrowers need to act swiftly and decisively in today's climate.
What did the Fed do?
Now back to the discount rate. This is the interest rate charged to commercial banks and other depository institutions on the loans they receive from their regional Federal Reserve Bank's lending facility. The Fed's decision to cut this rate provides stability in the financial markets and this can be good for all of us.
How exactly does this provide stability? Here's an example: Imagine you just wrecked your car and it requires $5,000 worth of repairs. You have a short-term need for cash to pay your mechanic. Even though you know you will eventually be reimbursed by your insurance company, you still need the cash now. So do you sell off stocks to get the cash, or tap into an equity line of credit? Most likely, you draw from that line of credit rather than liquidating a long-term investment.
This is what the banks are facing in today's liquidity crisis. And Bernanke's move helps them avoid long-term damage by supplying access to short-term cash.
It's important to note that the discount rate is different than the Fed Funds Rate, which directly impacts interest rates that you pay for Home Equity Lines of Credit, credit cards, and automobile loans. Most importantly, the discount window rate cut does not directly impact mortgage rates.
Market movement
To date, over 120 mortgage companies have closed their doors due to reduced liquidity. The result: Borrowers who want to take out non-conforming loans have fewer, more expensive options.
Many media outlets have incorrectly added fuel to the fire by stating that mortgage lending has stopped altogether and that borrowers can't get a loan without a 20% down-payment. This is not true.
Conforming interest rates and loan programs, those backed by Fannie Mae and Freddie Mac, have not been significantly impacted by recent events. Even better, interest rates have come down from recent highs. While this is good news, the market is experiencing unprecedented volatility and changes could come at any time. Borrowers need to act swiftly and decisively in today's climate.
What did the Fed do?
Now back to the discount rate. This is the interest rate charged to commercial banks and other depository institutions on the loans they receive from their regional Federal Reserve Bank's lending facility. The Fed's decision to cut this rate provides stability in the financial markets and this can be good for all of us.
How exactly does this provide stability? Here's an example: Imagine you just wrecked your car and it requires $5,000 worth of repairs. You have a short-term need for cash to pay your mechanic. Even though you know you will eventually be reimbursed by your insurance company, you still need the cash now. So do you sell off stocks to get the cash, or tap into an equity line of credit? Most likely, you draw from that line of credit rather than liquidating a long-term investment.
This is what the banks are facing in today's liquidity crisis. And Bernanke's move helps them avoid long-term damage by supplying access to short-term cash.
It's important to note that the discount rate is different than the Fed Funds Rate, which directly impacts interest rates that you pay for Home Equity Lines of Credit, credit cards, and automobile loans. Most importantly, the discount window rate cut does not directly impact mortgage rates.
Friday, August 10, 2007
Credit Crisis Cripples Markets
Just last week, American Home Mortgage and its wholesale counterpart, American Brokers Conduit, became the latest casualties of the credit crisis. Last year, this company closed over $58 billion in home loans. Despite being, by all accounts, a well-run business, market conditions forced them to file for bankruptcy, leaving nearly $800 million in loans unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies like this going under.
Clearly, with over 100 national lenders having now closed shop in the last eight months, this is no longer simply a subprime lending issue. The credit market is experiencing unprecedented turmoil that, according to Mike Perry, CEO of Indymac Bancorp, is "broader and more serious than past disruptions."
What does this mean to the real estate market?
* Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national inventories, means now is not the time to hold out for the "best" price possible.
* Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify a few weeks from now for the same exact loan. Just this week, many lenders have stopped offering no-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to change, a buyer's pre-approval status can disappear even more quickly, delaying or spoiling the deal.
* Subprime and Alt-A refi candidates, especially those with ARMs scheduled to reset over the next 12 months, need to act now - even those with a pre-payment penalty. ARMs borrowers struggling with monthly payments now might be shocked to know that monthly payments can double in some cases once an ARM resets.
Clearly, with over 100 national lenders having now closed shop in the last eight months, this is no longer simply a subprime lending issue. The credit market is experiencing unprecedented turmoil that, according to Mike Perry, CEO of Indymac Bancorp, is "broader and more serious than past disruptions."
What does this mean to the real estate market?
* Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national inventories, means now is not the time to hold out for the "best" price possible.
* Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify a few weeks from now for the same exact loan. Just this week, many lenders have stopped offering no-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to change, a buyer's pre-approval status can disappear even more quickly, delaying or spoiling the deal.
* Subprime and Alt-A refi candidates, especially those with ARMs scheduled to reset over the next 12 months, need to act now - even those with a pre-payment penalty. ARMs borrowers struggling with monthly payments now might be shocked to know that monthly payments can double in some cases once an ARM resets.
Tuesday, August 7, 2007
My Santa Cruz County Real Estate Report/August 2007
Just a short month after I last reported the appreciation numbers, we are still hanging in there. And being the eternal optimist that I am, the inventory has actually declined from last week, and compared to this same period last year has dropped 2.4%. Cause for celebration, of course not, but signs that the market may be leveling off here in our area. On the other side of the coin, pending sales were down 5.4% from last week and 11.4% from the same period last year.
Is it because of all the news relating to the mortgage market, maybe so. I hear that buyers are experiencing some changes in qualifying as well as rates being hirer. Also some skepticism exists regarding what is actually going to happen and whether lenders will still be in business going forward. An industry that had become conditioned to rules that allowed most anyone to get a loan now must turn customers away.
Survey finds half would be uncomfortable buying a home in the coming months.More than half of consumers believe problems in the sub prime mortgage market will affect the market overall, and that the government should pass legislation to help sub prime borrowers avoid foreclosure, according to an Experian-Gallup poll. The Experian-Gallup Personal Credit Index survey showed about half of consumers would be uncomfortable making a major purchase like a home or car in the next three months. About 52 percent of those surveyed expected the average price of homes in their area to increase over the next year, and another 29 percent believe prices will remain about the same. Only 18 percent said they expect prices in their area will decrease. The survey was conducted in April, May and June, before the latest turmoil in the secondary market for mortgage loans prompted many lenders to further tighten underwriting standards and eliminate the use of some risky loans altogether.
Median home prices expected to fall this year, rebound in 2008 according to NAR (National Association of Realtors).New single-family home sales are forecasted to fall 18.9 percent and single-family housing starts to plummet 23 percent this year from 2006 levels. The median price of new homes is expected to fall 2.3 percent this year, with the median existing-home price falling 1.2 percent compared to 2006, the group also reported. This latest forecast represents some changing expectations compared to previous forecasts. 'More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year,' stated Lawrence Yun, NAR senior economist. 'Mortgage disruptions will hold back sales over the short term,' Yun stated, and he expects a 'modest upturn ... for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008.'
What’s New on the Green SceneThe latest environmentally friendly home features aren’t just good for the planet — they look great and are a huge draw for conscientious buyers, too. “Interest in being green has moved across the country — it’s no longer just for wacky Californians,” says Matt Golden, who founded Sustainable Spaces Inc. in San Francisco three years ago. There are plenty of reasons why focusing on the environment has become so popular lately. Home builders, retailers, and product manufacturers are seeking to satisfy consumers’ appetites for anything green, offering everything from eco-friendly condos to water-saving toilets. Heard of any of these:
Timber framing
Copper roofs
Windows that beat the heat
Rainwater holding tanks
Chemical-free lighting
Green toilets
Solar Induction cook tops
Geothermal heating and cooling
Attic heat blocker
Reclaimed wood countertops
Nontoxic paint
Formaldehyde-free insulation
Smart irrigation systems
Green furniture
Here is what is happening in our local Santa Cruz County market, for other areas please give me a call.
----------------------------------------------------------------------
July Monthly Statistical Highlights for Single Family Homes:
* Inventory down 3.3% compared to July 2006, with an increase of 1.7% from June 2007
* Sales up 2.2% compared to July 2006, but a decrease of 11.5% from June 2007
* Days on the market decreased to 88, month prior 91, last July at 57
* Median home price increased to $799,000, and increased 2.7% from June 2006
* Sales price vs.listing price ratio increased to 96.86%
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
Is it because of all the news relating to the mortgage market, maybe so. I hear that buyers are experiencing some changes in qualifying as well as rates being hirer. Also some skepticism exists regarding what is actually going to happen and whether lenders will still be in business going forward. An industry that had become conditioned to rules that allowed most anyone to get a loan now must turn customers away.
Survey finds half would be uncomfortable buying a home in the coming months.More than half of consumers believe problems in the sub prime mortgage market will affect the market overall, and that the government should pass legislation to help sub prime borrowers avoid foreclosure, according to an Experian-Gallup poll. The Experian-Gallup Personal Credit Index survey showed about half of consumers would be uncomfortable making a major purchase like a home or car in the next three months. About 52 percent of those surveyed expected the average price of homes in their area to increase over the next year, and another 29 percent believe prices will remain about the same. Only 18 percent said they expect prices in their area will decrease. The survey was conducted in April, May and June, before the latest turmoil in the secondary market for mortgage loans prompted many lenders to further tighten underwriting standards and eliminate the use of some risky loans altogether.
Median home prices expected to fall this year, rebound in 2008 according to NAR (National Association of Realtors).New single-family home sales are forecasted to fall 18.9 percent and single-family housing starts to plummet 23 percent this year from 2006 levels. The median price of new homes is expected to fall 2.3 percent this year, with the median existing-home price falling 1.2 percent compared to 2006, the group also reported. This latest forecast represents some changing expectations compared to previous forecasts. 'More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year,' stated Lawrence Yun, NAR senior economist. 'Mortgage disruptions will hold back sales over the short term,' Yun stated, and he expects a 'modest upturn ... for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008.'
What’s New on the Green SceneThe latest environmentally friendly home features aren’t just good for the planet — they look great and are a huge draw for conscientious buyers, too. “Interest in being green has moved across the country — it’s no longer just for wacky Californians,” says Matt Golden, who founded Sustainable Spaces Inc. in San Francisco three years ago. There are plenty of reasons why focusing on the environment has become so popular lately. Home builders, retailers, and product manufacturers are seeking to satisfy consumers’ appetites for anything green, offering everything from eco-friendly condos to water-saving toilets. Heard of any of these:
Timber framing
Copper roofs
Windows that beat the heat
Rainwater holding tanks
Chemical-free lighting
Green toilets
Solar Induction cook tops
Geothermal heating and cooling
Attic heat blocker
Reclaimed wood countertops
Nontoxic paint
Formaldehyde-free insulation
Smart irrigation systems
Green furniture
Here is what is happening in our local Santa Cruz County market, for other areas please give me a call.
----------------------------------------------------------------------
July Monthly Statistical Highlights for Single Family Homes:
* Inventory down 3.3% compared to July 2006, with an increase of 1.7% from June 2007
* Sales up 2.2% compared to July 2006, but a decrease of 11.5% from June 2007
* Days on the market decreased to 88, month prior 91, last July at 57
* Median home price increased to $799,000, and increased 2.7% from June 2006
* Sales price vs.listing price ratio increased to 96.86%
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
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