CREST Team Blog

We need to take a break from discussing Real Estate Market conditions along with the Do’s and Don’ts of buying and selling. For this article we want to share information about one of the communities in our area, San Juan Capistrano. If you are a Horse owner or just like to be around horses this is the place to be. San Juan Capistrano is well known as a world class equestrian destination, attracting many people to South Orange County, and specifically to San Juan Capistrano. With a large concentration of stables, boarding facilities and the Oaks Blenheim Equestrian center where Olympic trials are held, San Juan Capistrano is a horseman’s paradise. San Juan, on its own Web page puts it in context by calling itself the Equestrian Capital of the West Coast. Surrounded by Beach communities and residential areas it is an ideal location. You will be amazed at how many miles of riding trails there are among the many parks, neighborhoods, and open spaces. Recently many residents and visitors enjoyed the Open Space Trail Ride and Barbecue. The City’s Open Space Committee and J.F. Shea Therapeutic Riding Center hosted the trail ride. Residents had the pleasure of riding among the rolling hills and grassy fields. The ride ended with a Barbecue and celebration of the City’s open space areas.

Is this a good time to buy? That depends. A better question would be “for whom is this a good time to buy?”   It is a difficult task to make a case for good buying climate without creating fairy tale expectations for potential buyers who are not yet in a position to buy.  As we have said in the past, buyers with a down payment, good credit, and pre-arranged financing, this can be a very good time to buy.  If any of those areas are lacking you may want to wait until you can confidently check off each item before you proceed.  It is unfortunate for many hopeful buyers but the reality is that we are in a period of careful and responsible lending by banks and mortgage companies.

There has always been a gap between what a seller wants to get and what a buyer wants to pay.  In declining markets that gap seems to widen. Sellers are clinging to the high end while buyers are looking for the incredible deal. The challenge for both parties’ is to know when they have arrived at the threshold that will seal the deal.  Many buyers feel that banks will short sell or sell repossessed homes for much less than they will actually take.  Keep in mind, if you were the owner of that bank you know the market will come back eventually.  Banks are just not going to slash prices and dwindle away assets. 

If you are in the market to buy and have the financial resources available you can find some good deals in this market.  For the month of June we have arranged our Web Site to provide a wealth of information and help for potential buyers.  If, after reviewing our Web Site, you have more questions we hope you will contact us. We will be happy to answer any additional questions or concerns.

This month we have re-arranged our Web Site to focus on the seller. What follows are some of the reasons why we are dong that.

A couple of weeks ago as I was looking for material to write about I read that home prices continued to fall. I read that Banks were hoarding cash due to their recent losses. The analysis was that Banks are trying to recover from recent losses due to short sales and defaults. At that time the Fed had made their seventh rate cut since September. As of last week I guess it is now eight rate cuts. Standard & Poor’s of New York at that time was predicting U.S. home prices may decline as much as 20 percent by the end of 2008 from their peak of 2006. Data Quick reported Orange County home sales were down 39.9% from a year ago. The National Association of Realtors reported the first increase in sales of existing homes in seven months. OK, that’s a bit of positive news.

Since some unplanned events interrupted the writing of that article I sat down today to update my information and post a new article. The information I found continued along the same lines. Data Quick reported that last Quarter Foreclosures were at their highest level in the last 15 years, March 2008 recorded the lowest number of sales in Data Quick History, and sales are down 46.9% over a year ago. Prices are down 19.6% over March of 2007.

OK, there has to be some more good news in here somewhere.  Nope, the Fed lowered their rates to Banks but CAR reported that Mortgage Rates on a 30 year fixed increased to just over 6%. The Orange County Register today reported that vacancy rates for rental properties are up. One Bedroom rentals have the highest vacancy rate. CNNMoney.com is reporting that mortgage applications fell by 11.1% for week ending 4/25 and quoted the Mortgage Brokers Association as their source. The same article reports Refi apps are down 16.7% and Purchase apps are down 4.8%.

Finally I found some small but encouraging news bites. The Daily Rate lock on our Web site, as of Friday May 2nd, quoted a Labor Department report of stronger than expected employment rates. The Dow is up 66 points, Nasdaq is up 2 points, and factory orders are up slightly. Who can say what the news will be on Monday?

So what can we take away from all this information?

My “take away” is that if you are planning to sell, be well informed, be prepared, and get good help. Unfortunately, you can no longer depend on putting a sign in the front yard and waiting for multiple offers to arrive.  Start with complete and thorough information on your property. A well researched CMA (Comparative Market Analysis) by an experienced Realtor is a good idea but an actual appraisal by a professional appraiser would be better. Remember, your house is only worth what a qualified and willing buyer will pay.

Get a good Realtor that will aggressively market, advertise, and show your home. Read the tips and use the checklists on our Web Site. Spruce up your home and make it look as good as possible. If you are facing a short sale or foreclosure our sympathies are with you, but don’t do it alone. Work with your lender, work with a Realtor, but don’t work alone. Of course we would be happy to be your representative, but whoever you choose must do a thorough job of marketing, advertising, and presenting your property.

Granted, these are not ideal conditions for selling a property. With good preparation and the right help you can complete the sale.

No longer is anyone questioning whether or not there is a crisis in the housing industry. Instead, we are being extended a helping hand from the culprits who helped get us all in to this situation. I am not interested in assessing blame for our problems but there certainly were some missteps by the leaders of our financial markets. At any rate, responsible parties are making an effort to correct the situation. We already know that the “Rate Freeze” announced back in early December was a voluntary plan. It certainly didn’t eliminate foreclosures but in some areas it did help slow them down, if only a little.

We now have the Economic Stimulus Package, which is not a magic pill, but is a welcome addition to the recover plan. The plan incorporates the revised limits on Fannie Mae and Freddie Mac loans allowing these two agencies to buy mortgages up to 75 percent more expensive than the current $417,000 limit. Fannie Mae and Freddie Mac would be allowed to purchase loans up to $730,000. However, the limit would differ based on the median home price in a particular metropolitan area. Freddie and Fannie changes will help borrowers with good credit and/or buyers with some down payment money. However, the changes are planned to only be in effect through December.

For the buyers with less attractive credit and little or no money down, Federal Housing Administration limits have also been revised. Changes to FHA limits would be permanent for FHA-backed loans, which had been capped at $367,000.

In an effort to add more spice to the plan we are now hearing of the President’s initiative to give tax rebates. As of this writing the plan is not final but estimates are that rebates could run as high as $800.00 for each taxpayer. Details are expected to be announced during the State of the Union message on January 28^th.

I have heard many times that these changes are “too little and too late”. While that may be true, I welcome any help we can get. The stimulus package coupled with reported declines of home prices over the last year should add some stimulus to our local housing industry and bring some buyers out for the all important spring buying season. It’s still a buyers market, so if you have the need and the resources to buy this is your time to move.

Call the C.R.E.S.T. Team today for help in planning your strategy.

The Senate FHA Modernization Bill referred to in my last article was approved on December 14^th by a 93 to 1 vote. The Bill calls for an increase in loan limits from $362,790 to $417,000. The Bill also contains a provision for allowing the FHA to insure refinanced loans for borrowers who are delinquent on mortgages as a result of balloon payments on subprime loans. The third major portion of the Bill would reduce the minimum down payment on a FHA insured loans from 3 percent to a flat 1.5 percent of the appraised value of the home.

A separate but similar House Bill passed last September raises the FHA loan limit to $729,750 , or 175 percent of the Conforming Loan Limit. This Bill is providing for a 0 percent minimum down payment. The two bills are in agreement when it comes to categorizing Condominiums. Both Bills categorize Condos as Single Family units.

These two Bills will be reviewed by a conference committee who will come up with a final draft. The finished bill will then be given to the President to be signed.

While these are important measures hailed and welcomed by Realtors and Realtor Trade organizations throughout the country, their impact on the overall housing market in California will likely by minimal. The Senate Bill limits loan guarantees to $417,000. This won’t be much help to first time buyers in California where the median home price was reported by the California Association of Realtors to be at $497,000 as of October 2007.

First time buyers in Orange County, where C.A.R. reports median home price for November 2007 is $661,580, will see even less benefit from the Senate Bill. Hopefully the conference committee will present a Bill to the President with a ceiling limit closer to the House Bill version of $729,750.

The other Act referred to in my previous article was the Mortgage Debt Relief Act, which was signed into law by President George W. Busch on December 20^th. As previously mentioned, this law allows borrowers to escape taxes on debt forgiven by their lender on a mortgage for a principal residence. There are other conditions, so check with your accountant or lender before making any final decisions.

A Steady Pulse for Housing

Americans remain convinced that buying a home is a good long-term investment. Nearly nine out of 10consumers believe that buying a home is a good financial decision, according to the 2007 National Housing Pulse Survey, released earlier this month. The survey, which measures how affordable housing issues affect consumers, also shows that 59 percent of respondents think that now is a good time to buy. That number is even higher at 64 percent in areas where home prices have recently declined.

Government Help

The Bush administration and the mortgage industry are working out a proposal to temporarily freeze interest rates on certain troubled subprime mortgages. If adopted, it would be the biggest action taken to cope with the current problem.Some of the provisions of the proposal may be highlighted in a speech by Treasury Secretary Henry Paulson. The speech is scheduled to be presented to a national housing conference on Monday.

Interest Rates

Federal Reserve Chairman Ben Bernanke on Thursday suggested that another interest rate cut may be needed to bolster the economy. Some news agencies are suggesting it may be as much as a half percent drop in interest rates. Whatever the amount, the Fed may lower interest rates when it meets on Dec. 11, its last session of the year.

Expanding American Homeownership Act of 2007

The U.S. House of Representatives passed H.R. 1852 on September 18 2007. The bill is called the “Expanding American Homeownership Act of 2007.” This Bill provides an amendment to increase the FHA loan limit to 125% of an area’s median home price, capped at $729,750.00. The intent is to allow the FHA Mortgage insurance program to compete in the current housing market. Other improvements in the bill are:

1. Extend mortgage term length from 35 to 40 years;
2. Allow FHA to insure zero-down mortgages in certain circumstances;
3. Allow FHA to use risk-based pricing when setting mortgage insurance premiums;
4. Increase mortgage counseling for home buyers to help them use the program and avoid foreclosure;
5. Increase the number of reverse mortgages lenders may do.

The passage of this Bill by the House clears one more hurdle for Realtors Associations supporting this legislation to get this bill through the Senate.

Mortgage Debt Relief

Another bill being supported by Realtors Associations is the Mortgage Cancellation Debt Relief Legislation. Under certain circumstances homeowners may be able to avoid being taxed on the amount of debt forgiven in a short sale. This Bill has passed the House Ways & Means committee and is now headed to the full House for a vote.

For additional information on any of these topics please call us or send an email.

In every Industry, when times get tough, all aspects of the industry segment come under scrutiny at some point.  This week it seems the area of the troubled Real Estate Market being analyzed is the Mortgage Broker.  Mortgage Brokers are being called in to question and some banks are even disassociating with them.  Like any area there are some good and some not so good.  And like any other area it is the conusmers responsibility to do their homework.  If you decide a Mortgage Broker is the way to go then make sure you are using a trusted and reputable Mortgage Broker. 

How do you know?  

Start by asking friends and relatives for references.  If they have used a Mortgage Broker in the past you will likely get an earful, whether their experience has been good or bad.  If they had a bad experience with a broker who took too long or changed the terms late in the transaction you will hear about it.  If they used a broker who got a better rate than the borrow could at the same bank you will hear about that as well. 

Don't forget your Real Estate Agent.  Agents are close to many clients who use a variety of lending options.  While there is no guarantee their referals will be good, you at least have a chance of narrowing down the field to a list of good potential mortgage brokers.

Look for options.

Whoever you are using as a lender, if you find terms start to change late in the transaction, look for options.  Work with the Realtors in the transaction and the seller to see if you can negotiate a solution.  More time, change the fees, better rate, or lower payment.  But most importantly, if there are changes that make you feel uncomfortable then look for another lender.  There are too many good lenders and brokers available to settle for a bad loan.