Dawn Rivera’s Fremont & East Bay Real Estate Blog

Hi All,  I am re-posting this article written by Steve Cook…..or is it Nick at nick does loans?  Either way it is well written and informative.  It sounds to me as if the buyers who are on the fence better jump off and jump in if they want to get in at the bottom…………

In two years Real Estate will rock!

Written by: Steven Cook

Housing starts will nearly double and home prices will begin to rise in 2013, with prices increasing significantly in 2014.

Those rosy predictions come from a new semi-annual survey of 38 of the nation’s leading real estate economists and analysts by the Urban Land Institute’s Center for Capital Markets and Real Estate. The economists foresee broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014, including:

• The national average home price is expected to stop declining this year, and then rise by 2 percent in 2013 and by 3.5 percent in 2014.
• Vacancy rates are expected to drop in a range of between 1.2 and 3.7 percentage points for office, retail, and industrial properties and remain stable at low levels for apartments; while hotel occupancy rates will likely rise;
• Rents are expected to increase for all property types, with 2012 increases ranging from 0.8 percent for retail up to 5.0 percent for apartments;

These strong projections are based on a promising outlook for the overall economy. The survey results show the real gross domestic product (GDP) is expected to rise steadily from 2.5 percent this year to 3 percent in 2013 to 3.2 percent by 2014; the nation’s unemployment rate is expected to fall to 8.0 percent in 2012, 7.5 percent in 2013, and 6.9 percent by 2014; and the number of jobs created is expected to rise from and expected 2 million in 2012 to 2.5 million in 2013 to 2.75 million in 2014.

The improving economy, however, will likely lead to higher inflation and interest rates, which will raise the cost of borrowing for consumers and investors. For 2012, 2013 and 2014, inflation as measured by the Consumer Price Index (CPI) is expected to be 2.4 percent, 2.8 percent and 3.0 percent, respectively; and ten-year treasury rates will rise along with inflation, with a rate of 2.4 percent projected for 2012, 3.1 percent for 2013, and 3.8 percent for 2014.

The survey, conducted during late February and early March, is a consensus view and reflects the median forecast for 26 economic indicators, including property transaction volumes and issuance of commercial mortgage-backed securities; property investment returns, vacancy rates and rents for several property sectors; and housing starts and home prices. Comparisons are made on a year-by-year basis from 2009, when the nation was in the throes of recession, through 2014.

While the ULI Real Estate Consensus Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad, said ULI Chief Executive Officer Patrick L. Phillips. “While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years. These results hold much promise for the real estate industry.”

A slight cooling trend in the apartment sector – the investors’ darling for the past two years – is seen in the survey results, with other property types projected to gain momentum over the next two years. By property type, total returns for institutional quality assets in 2012 are expected to be strongest for apartments, at 12.1 percent; followed by industrial, at 11.5 percent; office, at 10.8 percent; and retail, at 10 percent. By 2014, however, returns are expected to be strongest for office, at 10 percent, and industrial, at 10 percent; followed by apartments at 8.8 percent and retail at 8.5 percent.

The forecast predicts a modest increase in vacancy rates, from 5 percent this year to 5.1 percent in 2013 to 5.3 percent in 2014; and a decrease in rental growth rates, with rents expected to grow by 5 percent this year, and then moderate to a growth rate of 4.0 percent for 2013 and 3.8 percent by 2014. This may be indicative of supply catching up with demand.

For the housing industry, the survey results suggest that 2012 could mark the beginning of a turnaround – albeit a slow one. Single-family housing starts, which have been near record lows over the past three years, are projected to reach 500,000 in 2012, 660,000 in 2013, and 800,000 in 2014. The overhang of foreclosed properties in markets hit hardest by the housing collapse will continue to affect the housing recovery in those markets. However, in general, improved job prospects and strengthening consumer confidence will likely bring buyers back to the housing market.

Related articles

• 2014 Real Estate Forecast, but What About Now? (lanacordier.wordpress.com)
• Forecast Upbeat on Housing Recovery (susiecammett.wordpress.com)

Mortgage rates have been hitting historic lows for five weeks in a row. But
that doesn’t mean you should refinance your mortgage just yet.

The average rate for 30-year-fixed-rate mortgages fell to 3.94% for the week
ended Oct. 6, according to mortgage-finance giant Freddie Mac—the lowest on
record. Rates on 15-year loans, meanwhile, have fallen to a record low of 3.28%.

While mortgage rates vary by region even among the nation’s biggest lenders,
they are down throughout the country for borrowers with excellent credit.
Citigroup, the third-largest U.S. bank by assets, is pitching a 4.193% rate on
30-year-fixed loans and a 3.806% rate for 15-year-fixed mortgages. EverBank
Financial of Jacksonville, Fla., is offering Cincinnati-area residents a 3.89%
rate on 30-year fixed-rate loans.

Steve Walsh, who heads mortgage lender Scout Mortgage in Scottsdale, Ariz.,
says he has seen a surge in interest among borrowers looking to take advantage
of low rates. “There’s a feeling that rates are basically at the lowest they can
get,” he says. But are they?

No one can predict the future, of course, but policy makers seem intent on
pushing rates down even further.

The Federal Reserve, for example, is trying to move rates lower by buying
more mortgage-backed securities. And Obama administration officials are talking
to lenders about ways to reinvigorate the Home Affordable Refinance Program, a
government initiative to help borrowers refinance even if they have little or no
equity left in their homes.

The goal for both: to get rates low enough so that more people will find it
beneficial to refinance. If people start doing it en masse, it could help the
economy.

“In the short term, rates could fall,” says Brad Hunter, chief economist for
Houston-based Metrostudy, a housing-market research firm. “In the longer term,
rates will rise as the economy starts to strengthen.”

If that were to play out, then refinancing now, with rates still around 4%,
could be a mistake. That’s because the chances are good that if you own a home,
and have significant equity in that home and good credit, you already have
refinanced in the past few years. Because refinancing involves costs—typically
2% of the mortgage value—it often doesn’t pay to refinance every time rates tick
down, tempting though it is.

“Don’t become a refinance junkie,” says Greg McBride, a senior financial
analyst at Bankrate.com, a consumer-information site. “You pay for it later in
the form of closing costs.”

So how far do rates need to fall before it makes sense for you to refinance?
Economists at the University of Chicago have tried to answer the question.

The ideal refinance rate must factor in closing costs, marginal tax rates,
the number of years left on the mortgage and other factors, the economists say.
Homeowners often make decisions based on faulty assumptions about rates, says
David Laibson, an economics professor at Harvard University and one of the
Chicago study’s authors. “Mortgage rates follow what we call a random walk, and don’t bounce back from
lows like most people assume,” he says.

In other words, what goes down could keep going down—even if it goes up for a
little while first. If you catch the first big dip, you can miss later ones that
offer even better opportunities.

The economists produced an online calculator, at zwicke.nber.org/refinance/, that distills their theory into a
tool that calculates how far interest rates need to fall for homeowners to
derive value from refinancing—the “optimal” refinance rate.

For example, their formula suggests that a homeowner with a $400,000 mortgage
with 25 years left on a 30-year-fixed rate mortgage at 4.75% shouldn’t refinance
until rates fall to below 3.51%, assuming 2% closing costs.

The risk of waiting for a lower rate, of course, is that it will never come.
If you are unwilling to take the gamble, your best bet is to negotiate hard on
fees.

The conventional wisdom is that it doesn’t make sense to refinance unless you
can shave at least a point off your interest rate. That’s because you don’t want
your “break-even” point—when your savings exceed your refinancing costs—to be
longer than two years or so.

But if you can persuade your lender to waive the fees, or most of them, you
might need only a half-point of savings to make a deal worthwhile, says
Bankrate.com’s Mr. McBride.

Last week, Michael Allison refinanced his $417,000 mortgage on a
three-bedroom California Ranch-style house in Santa Barbara, Calif. The
41-year-old fitness-center owner says he will save $200 a month by switching
from a 30-year fixed-rate mortgage at 4.87% to one at 4.25%.

“It’s an absolutely great deal and didn’t cost me anything,” Mr. Allison
says. His lender, Provident Savings Bank in Pleasanton, Calif., covered the
closing costs after his real-estate agent made some calls to the firm.

With a little negotiation, homeowners can persuade lenders to cover their
fees. “It’s not a free lunch,” Mr. McBride says, because borrowers get slightly
higher rates in exchange—but it is a good way to minimize your upfront
costs.

Another option that’s growing in popularity: refinancing a home at a shorter
term—say, 20 or 15 years. If you can find a rate that keeps your monthly payment
about the same as you were paying on your old 30-year loan, the decision is a
no-brainer, says Mr. Walsh of Scout Mortgage.

Lloyd Qualls, a 57-year-old accountant in Mesa, Ariz., decided to do just
that. Last month he ditched his 30-year fixed-rate loan at 4.875% for a 15-year
fixed-rate loan at 3.375%. While that boosted his payments by $89 a month, it
will shorten his payment period by 13 years and save him $104,233 on interest
over the life of the loan.

The Federal tax credit is nearing an end, and the state tax credit is just begining.   You have to be in Escrow by 04/31 to receive the Federal tax credit.  You have to close escrow after 05/01/10 to receiev the State credit.   The homes in alameda county have gone up 28% , One of my homes went from a value of 380,000 to 480,000 in the last year.  So to everyone who is waiting and sitting on the fence I say you better get on the ball and get off the fence.  The prices of homes are going  up and so are the interest rates.   Don’t miss the boat on the low rates and low prices!!

A spurt in home sales in 2009, aided by low interest rates and the first-time home-buyer tax credit, has led some economists to forecast a turnaround in the housing market this year.

Among those who see improvement in the 2010 market is Lawrence Yun, chief economist for the NATIONAL ASSOCIATION OF REALTORS® (NAR). Yun hopes that the extension of the first-time home-buyer tax credit will provide a new pool of buyers to absorb the additional foreclosures that will hit the market this year.

He expects existing-home sales to rise 13.6 percent in 2010; home prices should go up 3 to 5 percent, with wide geographic differences. The average rate on 30-year fixed mortgages will range from 5.3 percent in the first quarter to 5.8 percent by year end. This forecast assumes there will be no major economic surprises. The weak job market remains a concern.

The Mortgage Bankers Association (MBA) has a slightly different take on the 2010 housing market. MBA predicts existing-home sales will increase approximately 11.2 percent. Interest rates should be about 5.6 percent by the end of 2010. The unemployment rate is expected to peak at 10.2 percent and gradually decline in 2011. National average home prices should stop sliding during the first part of the year and stabilize, depending on area and price range. 

In my office we have seen a marked improvement in the number of first time buyers calling for help buying a home.  I have been doing floor time (answering calls) and in the last five days I have acquired 5 new clients, one a day.

Living in the San Francisco Bay area is wonderful for many reasons.  The City has many wonderful Restaurants, Hotels, and the night life is awesome as well.  On this past Thursday I went to the De Young Museum and saw the King Tut exhibit.  It was an ultimate experience.  I can not believe the wonderful craftsmanship of the artifacts.  I am talking about stuff that is over 3500 years old and looks like modern tools were used.  I was not allowed to take pictures (of course) but I have added some I found on google, just to wet your appetite.  The exhibit will only be here for a couple of weeks and will not be back for at least 35 years.  If there is any way you can go see it you should make the effort.  Our wonderful state has the best weather, wonderful diversity, also some of the best museums around.  No wonder there is a housing shortage in California, that continues to raise the price of homes even in this slow economy.  Home prices have risen 2% in the last 12 months. Looks like we have hit the bottom and are on the way back up.

In the last year with the help of the tax credit, there has been a rise in first time home buyers. The National Association of Realtors says the percentage of first time buyer is up to 47% in 2009 compared to 41% in 2008 and 36% in 2006.

The unemployment rate is close to peaking and is projected to ease to 9.5% by the end of next year.

Read more: http://rismedia.com/2009-11-17/housing-and-economy-headed-for-sustainable-recovery-first-time-homebuyers-lead-the-way/#ixzz0YN46kqLc

How to Buy a Bank owned home

This is a UTUBE video I thought you all would like. I thought it was funny and entertaining. It hits close to home in regards to bank owned homes and the “foreclosure specialists” assigned to list them..

When I first heard about the new housing bill, that would force banks to modify loans to keep people in their homes, or face stiff fines. I was excited. A housing bill that would help keep people in their homes, and slow or stop the dreaded foreclosures. Woo Hoo! How wonderful for the many people faced with losing their homes.

Then I viewed my Active Rain site and read a blog by JP Lowry of Preferred Financial Funding, titled What are We Doing America? in which he VERY ADAMANTLY stated why the bill was Disgusting, Ridiculous & Entitled. I have to say after reading it there were some very good points. Now I am not sure where I stand and was wondering what other opinions were.

I am very happy for the families that will be able to keep their homes, but at what cost? I agree that some people bought homes that they knew they could not afford, but… the lenders let them. Also as tax payers have already bailed out the banks shouldn’t the money be used for what it was intended?

The Federal Housing Administration (FHA) has delayed the implementation of rules that could make life more difficult for condo buyers across the country. The delay should be especially helpful for those hoping to qualify for the first-time buyer tax credit that expires after Nov. 30.

The new FHA rules, which were to take effect Oct. 1, 2009 will now be effective on Nov. 2. They are designed to improve the lending process, but they could cause some short-term delays in completing loans and closing purchases. The FHA was wise to delay the implementation of these changes. Now, buyers trying to close a transaction by Nov. 30 should be able to file their FHA loan applications early enough to qualify under the old regulations.

The importance of FHA financing has grown substantially in the last few years because conventional mortgage financing has become harder to obtain due to more stringent underwriting requirements. According to some estimates, 25% of homes purchased this year in the United States will use an FHA insured mortgage, up from 2% just three years ago.

About 1/3 the transactions I’ve closed this year involved FHA backed mortgages, and most of those folks were first-time buyers purchasing a condo. Many first-time buyers are short on cash and turn to FHA financing because it allows them to put down as little as 3.5%, in contrast to the 10% down payment required for most conventional loans.

The new FHA regulations now will apply to all mortgage applications received on Nov. 2 or later. Files that were initiated prior to Nov. 2 will be processed under the old regulations, even if the loan does not close until after Nov. 2.

The major reason the new regulations may slow down the purchasing process when they become effective is that they end what are known as spot approvals of individual condominium units. Instead, the entire condominium property will need to be approved before an FHA-insured loan can be used.

Many condominium properties have never received FHA approval. However, even those condo complexes that now have FHA approval will need to be recertified after Nov. 2 if their approval was recieved more than two years ago. It may be possible to expedite that certification process by seeking a loan from an institution that is also an FHA Direct Endorsement Lender. That status allows a lender to directly carry out the certification process needed to grant FHA approval to a condominium complex.

The new FHA regulations taking effect Nov. 2 also contain other restrictions that could make life more complicated for condo buyers. Here is a partial list:

-At least 50% of units in the project must be owner occupied or under contract to owners who intend to occupy them. For new construction, the 50% owner-occupied rule applies to those units closed or under contract.

-For new construction condominiums, at least 50% of the total number of units planned must be sold or under contract before an FHA insured mortgage can be closed.

-No more than 25% of the total floor area of a condo property can be used for commercial purposes.

-No more than 15% of the units can be more than 30 days past due on their assessment payments to the condominium association.

There is, however, some good news for borrowers in the new FHA regulations. For example, they eliminate the long-time prohibition against the FHA financing units in condominiums where the homeowners association retains a right of first refusal.

Another change allows the FHA to insure loans in new condo conversions for any qualified buyer. Previously, only former rental tenants could get FHA financing for the first 12 months.

The changes in FHA regulations are just one example of the current environment. It has seemed as if lending requirements have been changing on a daily basis this year.Thjose looking for a condo will benifit greatly by working with a Realtor who knows the local condominium market. An agent with in-depth knowledge of the local market offers two important advantages to buyers right now, First, they are going to know which condo buildings offer the best opportunity to secure good financing, whether it’s conventional or FHA. If you have a building where the association has financial problems or one with a high percentage of renters, it can be almost impossible to get a mortgage right now. Second, the agent will help buyers avoid the potential potholes that can come with condominium ownership. For example, before I even show a condo building now, I will study the minutes of the condo board meeting to learn what plans and problems might be on the horizon. An agent who doesn’t normally work in an area just can’t develop that kind of knowledge.

Okay, I’m going to do something I normally avoid; I’m going out on a limb and publicize my housing predictions for 2010. While I occasionally discuss general trends and opinions about the market, I think it’s important for all of us to have as much information as possible in order to properly plan our futures. And while this is only my opinion, after all, it’s the only one I can offer; it’s based on 4 decades of experience combined with careful observations of current trends and conditions. Here is what I see the future of housing:

I think the Fed will throw everything in it’s arsenal towards keeping interest rates low throughout 2010. To do otherwise would be to sabotage an economy that has been both erratic and unstable, and would prove fatal in an election year. Though the government will prefer to fight looming inflation, doing so would simply cause the economy to nosedive; and I doubt they’ll be willing to take that risk.

While it may appear that home prices have stabilized, my guess is, they have not. I predict we’ll continue to see overall prices remain at their current levels and, in some areas, to decline well into next year. Foreclosures and short-sales will keep pressure on home prices for another 2 – 4 years. I cannot foresee how we can possibly have a significant resurgence in prices for at least 5 years, with prices not returning to 2005/2006 levels for a decade or more.

Foreclosures and short-sales will make up as much as 40% of total sales for the next 30 – 36 months. And the percentage could possibly be greater, depending upon how eager banks will be to put their inventory on the market. Their preference will be to pace their release to keep prices from plummeting, but the sheer numbers may make that impossible for some banks. Even after the supply begins to dwindle, the effect upon home prices will continue for at least another year.

Unless the government passes a major and all-inclusive tax credit, sales must remain sluggish. I don’t expect another housing incentive. There is little public support for throwing more billions at the problem, knowing that whatever increase might be realized, the benefit would be limited, temporary, and far too expensive.

By spring of 2012 interest rates will rise sufficiently to negatively impact home sales. While this is not the path that politicians would prefer, approaching a presidential election, it will be necessary to keep us from unbridled inflation. This potential scenario supports the premise for a continuing housing slump, extending into the following year and beyond.

Finally, the mid-term election will be both chaotic and unsettling. Both political parties will pull out the stops as never before, one attempting to hold on to past gains, and the other to regain past losses; and they will spend more money, make more promises, and sling more mud than ever before. Political maneuvering in the coming year will certainly impact both the housing market and the economy, but it’s impossible to know what politicians are willing to do in order to maintain or gain power. While they would like for us to believe that their plans can restore the economy, there’s little remaining in their arsenal that can have a significant impact.

While many will view these predictions as meaningless negative claptrap, my intention is to share what I both see and believe to be true. If I am able to help one person make a more prudent choice, then my efforts will have been worthwhile. Take this with the proverbial “grain of salt,” but if it proves beneficial, we’ve both gained in the process.

Written by the Housing Gruru.