Dawn Rivera’s Fremont & East Bay Real Estate Blog

After a recent spike seen in mortgage rates, some consumers are wondering whether they’ve missed their chance to refinance into an ultra-low rate. Fear not: While the conforming 30-year fixed-rate mortgage hit a daily average of 5.81% last Thursday 06/18/09, it averaged 5.53% on Tuesday06/23/09, and it’s possible that rates could continue to fall. Predicting interest rates is like predicting who is going to win the World Series in January,I feel the recent spike is somewhat of an aberration, I expect rates will continue to drift down.

Why the recent run-up in rates? Over the past month or two, the economic skies have brightened somewhat, and the threat of trillion-dollar budget deficits for the foreseeable future, the potential for significant inflation, and few clues as to how the government might extricate itself from intrusions into markets created a landscape that was not appealing to investors.

Now, rates are retreating partly because inflation doesn’t seem as immediate as investors feared. In my opinion, nothing fundamentally has changed in the economy over recent weeks to warrant the rate rise, yet he expects volatility through the remainder of the year as investors debate the economy’s health. Realistically, I think that the rates will drift under 5% again. It may take a month, may take two months.

It’s also important, however, to realize that extremely low rates likely won’t be around forever. Luckily, we have seen rates drop some this week, which should help many consumers breathe a little easier. But the fact remains, the government’s plan of purchasing mortgage-backed securities cannot go on indefinitely, and when it ends, we will most certainly see a spike in rates. The hope is that the Fed can keep rates low long enough to kick-start a housing recovery. Whether that will work remains to be seen.

Make sure your home is in top condition so you have a better chance to get a good appraisal………

Less than a week after putting his newly renovated house on the market, “Rick” accepted a full-price offer of $242,900 on the 1940 bungalow. But the appraisal on the 1,780-square-foot home came in at just $206,000. The buyer couldn’t come up with enough cash to make up the difference and Rick wasn’t willing to drop the price, so the deal fell through.

On top of sluggish home sales, are appraisals becoming the newest threat to the local housing market?

Real estate experts say sales are collapsing as appraisers are being more conservative and valuing homes for less than what buyers have agreed to pay. Owners can’t refinance because appraisers say their homes are worth less than they had counted on.

In the example of Rick’s home, the low appraisal affected the would-be buyer’s ability to get a mortgage for the contracted price. Their lender naturally, wouldn’t approve that. Many Real estate brokers have seen a number of sales fall through because of low appraisals, and that has the potential to hurt property values, too.

Part of what’s at issue, a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.

The rule falls under the new Home Valuation Code of Conduct, the result of an agreement between Freddie Mac, Fannie Mae, the Federal Housing Finance Agency and the New York state attorney general to enhance the independence and accuracy of the appraisal process. It applies to lenders that sell single-family mortgage loans to the government-sponsored enterprises.

The rule was meant to prevent inflated appraisals like those that proliferated during the housing boom.

Unfamiliar with the area

One of the unintended consequences of this system, however, is the chance that a management company, will hire an appraiser who isn’t familiar with the neighborhood where the house is being evaluated. When you have appraisers coming from different parts of town and not knowing areas, they aren’t doing justice to the people that are trying to refinance or sell, It really skews the whole appraisal process.

Happy thursday! here is some more info on the existing home sales. Some good some bad news.

Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions

and a first-time buyer tax credit, according to the National Association of Realtors®. May’s increase

was the first back-to-back monthly gain since September 2005.

Existing-home sales-including single-family, townhomes, condominiums and co-ops-rose 2.4 percent to a

seasonally adjusted annual rate of 4.77 million units in May from a downwardly revised level of 4.66

million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008.

Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very

affordable even with a recent uptick in rates. First-time buyers also are being drawn off the

sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in

sales is less than expected because poor appraisals are stalling transactions. Pending home sales

indicated much stronger activity, but some contracts are falling through from faulty valuations that

keep buyers from getting a loan.

Total housing inventory at the end of May fell 3.5% to 3.80 million existing homes available for sale,

which represents a 9.6-month supply2 at the current sales pace, down from a 10.1-month supply in

April.

The appraisal problem is serious. Lenders are using appraisers who may not be familiar with a

neighborhood, or who compare traditional homes with distressed and discounted sales. In the past

month, stories of appraisal problems have been snowballing from across the country with many contracts

falling through at the last moment. There is danger of a delayed housing market recovery and a further

rise in foreclosures if the appraisal problems are not quickly corrected.

A NAR practitioner survey in May showed first-time buyers accounted for 29% of transactions, and that

the number of buyers looking at homes is nearly 10 percentage points higher than a year ago.

The NATIONAL MEDIAN existing-home price for all housing types was $173,000 in May, down 16.8% from a

year earlier. Distressed properties, which declined to 33% of all sales in May from 45% in April,

continue to downwardly distort the median price because they generally sell at a discount relative to

traditional homes.

First-time buyers are concentrated in the lower price ranges, which include most of the distressed

sales.

Single-family home sales rose 1.9% to a seasonally adjusted annual rate of 4.25 million in May from a

pace of 4.17 million in April, but are 3.0% below the 4.38 million-unit level in May 2008. The median

existing single-family home price was $172,900 in May, down 16.1% from a year ago.

Existing condominium and co-op sales increased 6.1% to a seasonally adjusted annual rate of 520,000

units in May from 490,000 in April, but are 8.9% below the 571,000-unit level in May 2008. The median

existing condo price4 was $173,800 in May, down 21.9% from a year earlier.

Existing-home sales in the Midwest jumped 9.0% in May to a pace of 1.09 million but are 4.4% below May

2008. The median price in the Midwest was $145,800, which is 10.4% lower than a year ago.

In the South, existing-home sales were unchanged at an annual pace of 1.74 million in May but are 8.9%

below a year ago. The median price in the South was $157,400, down 9.9% from May 2008.

Existing-home sales in the West slipped 0.9% to an annual rate of 1.14 million in May, but are 11.8%

higher than May 2008. The median price in the West was $197,700, down 30.6% from a year ago.

Hi loyal readers, here is some new market info for you. Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7% to 90.3 from a reading of 84.6 in March, and is 3.2% above April 2008 when it was 87.5.

The Pending Home Sales Index in the Northeast shot up 32.6% to 78.9 in April and is 0.8% above a year ago. In the Midwest the index rose 9.8% to 90.4 and is 11.1% above April 2008. The index in the South slipped 0.2% to 93.0 in April but is 3.5% higher than a year ago. In the West the index rose 1.8% to 94.8 but is 2.9% below April 2008.

There are numerous buyer assistance programs around the country. Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location.

Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger downpayment. Buyers who are wondering about their options should contact a Realtor®, who can advise consumers on the housing assistance programs and resources available in a given area.

NAR’s (national asso. of realtors) Housing Affordability Index is in record territory. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.

A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.

The relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons, Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.

The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline.

For more information, visit http://www.realtor.org.

Hi all, I just heard June is National Homeownership Month! and, like many other consumer advocates, I urge consumers to get informed as they prepare to buy a home. Today, there are a growing number of obstacles for home buyers, including a higher credit score standard and more restrictions on credit. Despite current challenges in the secondary mortgage market, home loans are available to credit-worthy buyers and banks stand ready to assist prospective home buyers.

Whether you live in California, Oregon, New Jersey, or anywhere else in between, it’s crucial that you have a thorough understanding of the changing market when shopping for a mortgage. Here are seven tips to help you do exactly that:

1. Learn about first-time home buyer programs. Consider taking a first-time home buyers course or visit with your local banker to find out about programs available to you, such as the new federal $8,000 first-time home buyer credit for 2009 home purchases.

2. Get pre-approved. Know the difference between “pre-qualified” and “pre-approved.” Getting pre-qualified is a casual process where the lender tells you how much you should be able to borrow based on how much money you make, how much debt you have and how much you have to put down on a house. Pre-approval occurs only after you actually apply for the loan and the lender gives you in writing the amount you can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once you find a mortgage that is best for you, get pre-approved before you start making offers on a home.

3. Be honest with the lender and yourself. You don’t want to borrow more than you can afford. Your bank can provide a calculator to determine if you can afford to borrow and if so, how much. The American Bankers Association has several home financing calculators available at www.aba.com

4. Look at the basics of the loan. Don’t get distracted by all the bells and whistles. Choose the type of loan that makes the most sense for you.

5. Know your credit situation. Obtain a copy of your credit report and FICO score or VantageScore at least six months before you apply for a mortgage. This should give you enough time to challenge and remove any errors on your credit report and take care of anything that’s hurting your credit score. To obtain a free copy of your credit report, visit www.annualcreditreport.com.

6. Consider all the costs. A lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, you are responsible for those additional costs – there won’t be a landlord to call.

7. Organize your finances before you go to the bank. While each bank may require different documentation, at a minimum you will need:

- Pay stubs.
- Tax returns.
- Financial statements (one that is less than 60 days old).
- Copies of additional monthly payments such as car loans, credit cards, student loans, etc.
- Any additional information (such as proof of additional income) that you think will help your banker to positively evaluate your credit request.

 The Obama Administration has announced efforts to help bring more relief to responsible homeowners under the Making Home Affordable Program. There has been an effort for greater affordability, for homeowners, by reducing interest rates on their second mortgages as well as a set of measures to help underwater borrowers stay in their homes. Treasury secretary Tim Geithner said “With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the Administration’s housing plan.”  “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is critical to stabilizing our financial system overall.”

The Second Lien Program, one of the new details, will work together with first lien modifications offered under the Home Affordable Modification Program to deliver a more conclusive, affordability solution for struggling borrowers. Second mortgages can create huge challenges, even when a first lien is modified. Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. The second mortgage always has a higher interest rate than the first lien.

Under the Second Lien Program, when a Home Affordable Modification is initiated on a first mortgage lien, servicers participating in the Second Lien Program will automatically reduce payments on the second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury.

Separately, the Administration has also announced steps to join the Federal Housing Administration’s (FHA) Hope for Homeowners with Making Home Affordable. Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home’s market value removes a borrower from a position of being “underwater” to having equity in their home. By increasing a homeowner’s equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify.

Under the recently announced changes and, when qualifying borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancings similar to those offered for Home Affordable Modifications. These additional supports are designed to work together and take effect with the improved and expanded program under consideration by Congress. The Administration supports legislation to strengthen Hope for Homeowners so that it can function effectively as an integral part of the Making Home Affordable Program.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners. Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately. Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75% of all loans in the country are now covered by the Making Home Affordable Program.

Continuing to bolster its outreach around the program, the Administration also announced a new effort to engage directly with homeowners via MakingHomeAffordable.gov. Homeowners will have the ability to submit individual questions through the website to the Administration’s housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov.

For more information, visit www.MakingHomeAffordable.gov.

Mortgage rates have fallen again in the last two weeks. Rates for 30-year fixed mortgages declined to 5.92%, down from 6.03% the week before, as stated on the Zillow Mortgage Rate Monitor, compiled by real estate website Zillow.com(R) 15-year fixed mortgages rates decreased to 5.69%, down from 5.76% while 5-1 adjustable rate mortgages rose to 5.87% from 5.85%.

The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates quoted on Zillow Mortgage Marketplace  www.zillow.com) by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow.

Rates for 30-year fixed mortgages fell even further on Monday evening with the average rate on Zillow Mortgage Marketplace at 5.71%.

At a state level, the 30-year fixed mortgage rate in Pennsylvania saw the biggest decrease, falling from 6.06% to 5.88%. Rates on 30-year fixed mortgages were lowest in the states of Oregon (5.79%) and Georgia (5.81%) and, while Missouri (6.11%) and South Carolina (6.05%) had the highest rates. The table below shows the interest rates for the last 37 years.