Craig Price’s Real Estate Update

According to a new study recently released by Bankrate Inc. the average cost of obtaining a mortgage has dropped to around 12% nationwide over the past year.

The national study stated that the average closing fees for a $200,000 mortgage, with 20% down and a 30-year fixed-rate loan, totaled $2,732, which is down from $3,118 from last year and closing costs have not been this low since 2007.

Marking the 4th-highest closing costs in the United States was San Francisco, which had an average expense of $3,117, which is down 6% from $3,321 in 2008 where San Francisco ranked 11th.

Texas and New York hold the number 1 and 2 spots respectively which is a switch from last year.

For the same mortgage mentioned above the closing costs in Texas averaged $3,855 and in

New York they averaged $3,408.

Coming in last was Nevada where their closing costs averaged $2,276.

The downward price shift in the national real estate market has created this decline in closing costs.

The information for this study was conducted by researchers who chose ZIP Codes in the largest cities in each state and averaged the closing costs for a $200,000 home mortgage.

The study showed that of all 50 states ironically California was the only state to be divided in two with Los Angeles and San Francisco the two deciding factors. Closing fees on average in Los Angeles came in at $2,861, which is down 12% from $3,250 in 2008. That put Los Angeles in the 14th position for this years study.

The national survey included lenders’ origination fees and title and settlement fees. Insurance, taxes, H.O.A. dues and other prepaid items were not part the study.

by Chris Largent – Staff Writer, 9/3/2009 (Home Trend)

Navigating Today’s Real Estate Market

Coming from Texas, my family always spoke using words to paint a picture, its quicker and more to the point than the Texas drawl rolling off your tongue in that thick humidity. That being said this current RE market is a dog fight out there right now for Buyers, a real knot if you will. If you have not looked around recently to purchase a home or investment you might be shocked to find that the market is not that easy to navigate.

Not long ago a short sale was something that happened at Macy’s or JCPenney’s in the spring time, now it can be less than inviting to a person that has had the unfortunate luck of trying to purchase or even make a offer in today’s market. Now I do not want to come off negative on a short sale because that is the environment we live in and not the point of this article. The reason I bring it up is that I feel it is imperative that we educate buyers and help them understand their strengths and abilities when making offers. Lets not forget this is business and business is competitive.

So what can you do?  If you’re buying a House for yourself then work with your Realtor to make an offer that is reasonable and would be attractive to the Seller and prove your capability of closing the deal. Since you might not have the control to close any quicker when you are getting a loan due to the banks necessary timeline and ability to work that fast but you can look better by reducing the contingency periods to start your due diligence and get the physical inspections done so that the sellers know quickly if there are going to be further negotiations for repairs, certain conditions, etc. Since financing is the real kicker in today’s market start producing double applications first to the bank of your choice and sometimes the Listing agent and Sellers may require you to get pre-approved with their lender this gives you strength and validity.

If you’re an Investor then you know you have to stick by your terms and conditions to make it a deal but be patient. The people that are buying a home to live in and want it because of other factors that are not as important to the investment mind historically will pay more. So the way to overcome that is to make your lower priced offer stand out by the terms and conditions of your offer, make it too attractive to pass up, no loan contingency, no appraisal, all cash, sometimes even certain fees that the sellers are required to pay may be waived. All in all make it easy for the Seller to say yes to your offer, because you can fill in when a home buyer falls out of escrow due to the buyer not qualifying or completing the deal, they may just give you a call to close quick.

So all in all don’t get discouraged and keep to your principles of what you want or the terms and criteria of your purchase. As my dad was quick to say about Texas weather if you don’t like it now just wait 15 minutes it will all change!!

Why rates are doing what they are doing: Reality check for U.S. bond binge

Tom Petruno, Market Beat
June 6, 2009

Here is the way it was supposed to work: Uncle Sam would borrow and spend trillions of dollars to save the economy and the financial system, but interest rates would stay near rock-bottom and nobody would worry about the potential side effects of all that spending — like, say, inflation or a devalued dollar.

Things aren’t proceeding quite according to plan. The investors who are supposed to buy all of that new Treasury debt are rebelling, driving interest rates up.

U.S. unemployment rate hits 9.4% in May…
That’s exactly what the housing market doesn’t need. The average 30-year mortgage rate rose to a six-month high of 5.29% this week from 4.91% the previous week, according to Freddie Mac.

And that was before Friday’s big jump in Treasury bond yields, which are the benchmarks for many other interest rates, including home loan rates and municipal bond yields.

The 10-year Treasury note yield rocketed to 3.86%, up from 3.71% on Thursday and the highest since November.

Compared with the many financial catastrophes of the last nine months — the failure of Lehman Bros., the partial nationalization of Citigroup Inc., the bankruptcy of General Motors Corp., etc. — a 3.86% yield on a Treasury bond would hardly seem to rank as a national tragedy.

But it’s the trend that’s important here, and the broader implications. Even as Federal Reserve Chairman Ben S. Bernanke was on Capitol Hill this week warning that the U.S. risks borrowing its way into yet another crisis, Treasury Secretary Timothy F. Geithner was in China trying to assure the largest foreign owner of Treasury bonds that its investment was safe.

Upside Surprise in Jobs Data

Investors have been concerned for quite a while about the coming supply of new debt needed to pay for all the government stimulus programs. On top of that, the economic outlook has been improving sooner than expected. The combination of these two potentially inflationary developments pushed mortgage rates higher during the week.

The economic surprise this week came from the Employment report. Although the economy lost -345K jobs in May, it was far fewer than the consensus estimate for a loss of -525K jobs. The Unemployment Rate jumped to 9.4% from 8.9% in April. A surge in people entering the labor force was responsible for the unexpected increase in the Unemployment Rate. The labor market is typically one of the last areas to show improvement during an economic rebound, so signs of a turnaround are particularly significant.

Fed Chief Bernanke supported the notion that the recession would end this year. In testimony before Congress this week, Bernanke stated that he still expects the economy to move higher later this year, although it may take a while for growth to return to average levels. He looked ahead to measures needed once the economic crisis has passed, such as containing the budget deficit and reducing government control of markets. At this point, most investors believe that the Fed is not inclined to expand the mortgage-backed security (MBS) purchase program beyond its current level of $1.25 trillion, unless economic growth falls short of the Fed’s outlook.

More evidence that the economy may be rebounding came from this week’s housing data. April Pending Home Sales rose for the third consecutive month, increasing 7% from March. Pending Home Sales are a leading indicator, meaning that future New and Existing Home Sales reports may show increases.

Also Notable:
• The Unemployment Rate rose to the highest level since 1983
• The European Central Bank (ECB) held rates steady
• Oil prices reached $70 per barrel, the highest level of the year
• The Fed purchased $26 billion in agency MBS during the week ending 6/3

Washington Report: $8,000 Tax Credit

Home builders and Realtors cheered in Washington last week when HUD Secretary Shaun Donovan announced that FHA will allow lenders and government agencies to “monetize” the $8,000 federal homebuyer tax credit, providing purchasers with downpayment cash upfront, available at closing, rather than waiting for the IRS to mail them a tax credit check.

Speaking at the mid-year conference of the National Association of Realtors, Donovan said HUD supports “bridge loan” programs designed to help first-time buyers come up with needed cash.

Under the bridge loan concept, an FHA-approved private lender, a state or local housing agency, or an FHA-approved nonprofit organization could advance as much as $8,000 for downpayment and closing costs — in anticipation of receipt of the $8,000 credit months or weeks down the road.

Sanctioning bridge loans could improve the effectiveness of the federal credit program significantly, said Joe Robson, president of the National Association of Home Builders.

Bill Riley, incoming president of the Washington State Realtors Association, estimates that half of all would-be first-time buyers lack the downpayment resources needed to complete a purchase, and therefore aren’t making use of the credit.

Who are “Equity Sellers?”

Equity Sellers are any individuals that have equity in their home. Whether one owns his or her home outright or has a mortgage and/or liens on the property that are less than the current market value, any owner with equity in his or her home can be an Equity Seller. In the present market it is most likely that a person who has owned his or her home for 8 years or more can sell and pay off any liabilities on the property. This is assuming that he or she did not refinance or if they did they did not pull all the equity out of the house.

The next logical question is: why would an Equity Seller want to sell now? For starters an Equity Seller would want to sell now for the same reason anyone wants to buy now and that is to take advantage of the current market. He or she has a want or a need for a change in their living situation or sees an opportunity to move up. Consequently, the Equity Seller may need to sell one property to purchase another. He or she takes the equity out of the sold home and applies it to another property that is at the same down market. It is a level shift. He or she sells a 3 bedroom 2 bathroom home and purchases a 5 bedroom 4 bathroom home with guest house. In ten years both homes will have recovered, and the Equity Seller will have more equity in their current home than if they had stayed in the other property. Additionally, he or she has had the use and enjoyment of the new home that better suited their needs. Think of it like an elevator: if you start on the ground floor, get off on the 3rd floor, walk across the hall, get on another elevator and take that elevator up you are still starting at the same place you got off of the first elevator. You are just riding a different elevator now and hoping that it will take you farther than the last one.

Rate Watch

After an unprecedented 5 month period of relative stability, rates shot up yesterday to levels not seen since November 2008.

Conforming 30 year fixed rates, for example, opened the day at 5.25% at 1 point on a 60 day refinance transaction and at last look are now at 5.75% at 1 point. That’s an increase of 1/2% in rate.

Why is this happening?

• Increased volatility associated with massive selling of Treasury and mortgage backed securities as well as a lack of buy side positioning to offset the declines.
• While the capital markets are extremely liquid for agency issued (Fannie Mae and Freddie Mac) mortgage securities there has been a tremendous participation by the Federal Government to step in and absorb any excess supply as it enters the system. Today this has not yet happened.

Please remember that we have had a tremendous run and by some accounts the levels that we have seen in terms of the dollar price of some of these discounted mortgage backed securities may not be seen again for years to come. Regardless, this type of pullback is to be expected. Historically rates are still low and the next several days will prove to be very interesting to see if the Fed once again steps in to support the excess supply that has hit the street.

April existing home sales inch upward, prices fall

Buyers who were brave enough to dive into the market for a bargain-priced house helped provide a modest boost to sales last month.

Sales of inexpensive foreclosures and other distressed low-end properties have even sparked bidding wars in places like Las Vegas, Phoenix and Miami. But the market for high-end properties is at a virtual standstill, mainly because it remains difficult to get a mortgage for expensive homes.

“We’re looking at a dual market right now,” said Sherry Chris, chief executive of Better Homes and Gardens Real Estate.

The National Association of Realtors said Wednesday that home sales rose 2.9 percent to an annual rate of 4.68 million in April from a downwardly revised pace of 4.55 million in March. Sales were 4.6 percent below April last year, without adjusting for seasonal factors.

Compared with January, the lowest point in the housing recession, April sales were up nearly 4 percent. But compared with the peak in September 2005, sales are still down 35 percent.

Federal Housing Tax Credit for First-Time Home Buyers

Frequently Asked Questions About the Home Buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1.  Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

2.  What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3.  How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

New Federal Law Affecting Distressed Properties

This week President Barack Obama signed into law the Helping Families Save Their Homes Act of 2009 to help homeowners and lenders avoid foreclosure. Previously included in this bill was a measure to allow bankruptcy judges to modify mortgage loans for principal residences, but the U.S. Senate did not pass this “cram-down” legislation.

The Helping Families Save Their Homes Act of 2009 contains various new laws to address the national foreclosure crisis. Major provisions that may affect California homeowners include:

• HOPE FOR HOMEOWNERS (H4H) REVAMPED:  The new law loosens the H4H program requirements to help homeowners refinance out of their troubled mortgages and into more affordable, fixed-rate FHA-insured loans. Originally launched in October 2008, the H4H program intended to help 400,000 distressed homeowners, but in the program’s first seven months, it only helped one family stay in its home. The maximum loan-to-value ratio for an FHA refinance is 96.5% of the appraised value. If refinance proceeds are insufficient to pay off existing liens, the existing lienholders must voluntarily agree to a short payoff, but a new inducement is an opportunity for them to share in the homeowner’s equity. Other changes to the H4H program include monetary incentives for both the participating servicers of the existing loans and originators of the FHA refinance. Millionaire borrowers (with net worth over $1 million) are now excluded from the program. HUD will establish the requirements and standards to implement the H4H program as revised.
• LONGER STAY FOR TENANTS OF FORECLOSED HOMES:  Effective immediately, an REO lender or buyer who acquires title through a foreclosure sale must give at least a 90-day notice to terminate a bona fide tenant as defined.