This Week in Real Estate

Although CAR reported this week that California home sales increased 84.9 percent in December compared with the same period a year ago, they also noted the flip side, that the median price of an existing home fell 41.5 percent...a continued symbol of buyers taking advantage of the large number of distressed properties currently available.
So why the sudden, so drastic surge in sales? There are a few reasons:
A lot of people who were previously priced out of the housing market can finally buy. With interest rates under 5%, a buyer’s purchasing power is at its best in more than three decades.
After months of increasing or stable inventory, we are finally starting to see the numbers fall, possibly because of increased consumer confidence, based on the new administration.
We’re seeing a lot more investors coming into the market in addition to first time buyers.
So is it too early to call it a trend? Probably. We still have a lot of distressed properties to move through before we can begin to see prices stabilize. At least for the foreseeable future, buyers will probably have the edge but we’re finally moving in the right direction. The key to all of this: buyers are ready to buy when they perceive a good value. Until then, they wait.
Open house attendance is up and there is activity with first time buyers and investors. I will have a townhouse listing open this weekend in Westside Sunnyvale, and will let you know if the combination of a dramatic price reduction, springtime weather, and Cupertino schools brings a good turnout, despite the Super Bowl.

New Features on Zirana

I've written before about the useful area information on the Zirana website.There has been a lot of interest in local crime news, and Zirana.com has added a new section to display information about registered sex offenders in each town. This information includes names and addresses of the registered offenders. Their locations are also displayed on a map of the neighborhood. Currently this information is available on Zirana only for cities in California, but we will soon cover other states also. This information is available as per Megan’s Law and only information on registered sex offenders, allowed to be disclosed under California law, appears on this web site. You can see this data by clicking on the link “Registered Sex Offenders” under News in the left column of the Home page, or from the drop down menu under News on the top bar.
The Home Foreclosures data on Zirana continues to attract a lot of users and they appreciate the fact that it is constantly updated by Realty Trac, the leading provider of Foreclosure information in the country. You can check out the latest Foreclosure information for your city by clicking on the “Foreclosures” link from the drop down menu under Real Estate.

Fans in the Winter? Brrr.

I just read this hint from Kathy Smith at Old Republic Home protection:
Most people think of ceiling fans only as a way to keep cool in the summer. But, do you know your ceiling fan can help keep you warmer and reduce your heating bill in the winter? Simply run the fan on the low setting in clockwise direction. This creates a gentle updraft that recirculates warm air trapped at the ceiling, providing an even, comfortable heat throughout your room. The recirculation of warm air will allow you to reduce the heater setting while still keeping your room warm. To change the fan blades' spin direction, flip the switch on the head of the fan or check your remote control for a button that switches the spin direction.

Gong Xi Fa Cai!

Today we started our "lender lunch" with a Chinese banquet, celebrating the Year of the Ox. Sue, our in-office lender from Princeton Properties, had lots of new information for us. We'll learn even more about this market at the Short Sale Seminar scheduled on the 10th of February.
Some new info from today's talk was: Fannie Mae is charging a half percent "risk premium" for loans on condos with less than a 25% down payment.
The maximum financing available for conforming loans(under $417,000)is 95% on single family homes, and 90% on condos and townhomes.
Lenders are watching for "red flags" on condo sales...15% or more delinquencies in homeowners' dues, and any litigation against the association. They want to see all the association documents and the certification,(cert)especially, at the time the property goes into contract.
Investors may be limited to loans under the conforming limit of $417,000, and should expect to pay at least one percent more in interest than buyers who will live in the property. They should also expect to put 25% to 30% down.
Only a handful of lenders are making true jumbo loans. These require at least a 25% down payment.

If Housing is the Key to End Recession...

...why aren't they doing more?
While the current recession will be longer and more severe than predicted, housing will help lead the country out of the downturn, Boston Federal Reserve Bank President Eric Rosengren told the Massachusetts Mortgage Bankers Association at its annual meeting. He also said the housing market could stabilize this year, which he sees as a prerequisite for recovery.
"The recent reductions in mortgage rates, in part due to monetary policy actions, have enabled more borrowers than would otherwise have done so to purchase or refinance homes," Rosengren said.
"Expansion of this effort and encouraging greater [Fannie Mae and Freddie Mac] participation, should encourage borrowers who have equity and reasonable credit scores to purchase or refinance homes," he added.
He also said that once the market stabilizes, mortgage securitization should be restructured to prevent future upheavals.
Maybe I'm expecting too much, too soon. All this rhetoric isn't helping first time buyers to qualify, or allowing the move-up buyer to get a competitive interest rate.

Fannie Mae Clarifies Condo Occupancy Rules

So many of the new listings that we're seeing in the REO (foreclosure) market are being purchased by investor/buyers that new rules needed to be written.
The Project Eligibility Review Service (PERS) for condo and co-op projects and changes to its condo and co-op project policies were recently announced by Fannie Mae. The announcement clears up how bank-owned units are treated for determining the owner-occupancy ratio. Established projects, where borrowers will occupy the unit or use the unit as a second home, are not subject to any owner-occupancy ratios, according to the guidelines. These are much more lenient than those we were used to working with.
However, Fannie Mae requires that established condominium projects have an owner-occupancy ratio of at least 51 percent at loan origination for investment properties. For projects where a borrower is an investor and that do not meet the owner-occupied ratio of 51 percent, a waiver based on the overall risk of the project may be requested.

Jumbo Loans and the Market

As I noted before, one of the current issues most affecting our market is the drop in mortgage loan limits for conventional financing as of the end of 2008. This is dramatically hurting home sales and trade-up activity in higher price ranges. According to NAR, the National Association of Realtors, “The latest existing home sales data shows transactions under $400,000 are 3 percent below a year ago. However, sales of homes priced at $750,000 or more have declined a whopping 47 percent.” Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is very slow and buyers in higher price ranges are at a severe disadvantage.
Currently NAR is pushing for the permanent increase of mortgage loan limits to that $729,750 cap. According to a statement released this week by NAR, “To illustrate in dollar terms if mortgage limits are permanently raised to $729,750…the mortgage payment on such a loan would drop by $942 per month by lowering interest rates 2 percentage points. Over the life of a 30-year loan, the homeowner would save $338,000.”
Especially here in our market, we need the increased loan limits so people in all prices are able to purchase. Every segment of the housing market needs a turnaround to spark an overall housing recovery.