Monthly Archive for November, 2009

San Jose Weekly Mortgage Market Commentary 11/29/2009

by
Shashank
on November 29, 2009
in Mortgage Rates
.  Leave a reply

The week that was:

  • federalreservesystem-sealThe minutes from the 11/4 FOMC meeting were released. Fed’s minutes reiterated the Fed isn’t anywhere close to increasing interest rates.
  • Fed governors and regional bank presidents predicted the jobless rate will range from 9.3% to 9.7% in next year’s fourth quarter.
  • Oct personal income increased 0.2% and spending was up 0.7%.
  • The University of Michigan consumer sentiment index was 67.7 from 70.6 on the final read in Oct and slightly better than 66.0 two weeks ago.
  • Oct new home sales  jumped 6.2%. There is a 6.7 month supply based on current sales, the lowest level since 12/06.
  • The Mortgage Bankers Association reported for the week ending November 20, 2009, mortgage loan application volume decreased 4.5%  from one week earlier. The Refinance Index decreased 9.5% from the previous week The Purchase Index increased 9.6% from one week earlier.
  • The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.82% from 4.83%, with points increasing to 1.19 from 1.18 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.

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Affordability Index Dropping in Santa Clara - Why is that a bad news for First-Time Buyers

by
Shashank
on November 29, 2009
in First Time Home Buyer and Real Estate Trends
. 1 Comment

Affordability Index has been dropping in Santa Clara county. California Association of Realtors (C.A.R.) measures First-time Buyer Housing Affordability Index (FTB-HAI) on a quarterly basis. This measures the percentage of households that can afford to purchase an entry-level home in California. The higher the index, more affordable it is for a first time buyer to buy a home. Before getting into the numbers, lets first quickly understand how it is calculated. The measurement is based on three main factors:

  1. Median Price of existing Single-Family homes (based on C.A.R.’s monthly existing home sales survey)
  2. Effective Interest Rate (based on the one-year, adjustable-rate mortgage (ARM) from Freddie Mac’s Primary Mortgage Market Survey)
  3. Median Household Income (Projected percent change obtained from Claritas)

As seen in chart below the index has been dropping in last 2 quarters in Silicon Valley after peaking in Q1, 2009.

fthb_affordability_index

Lets look at possible reasons for Santa Clara county:

  • The effective interest rate has been stable to lower over last 2 quarters, so that can not be a possible cause.
  • However, the median price of existing single family homes has steadily climbed form $448,750 in March 09 to $550,000 in June 09 to $553,000 in Sept 09.
  • Also the rising unemployment rate from 10.9% in March 09 to a current level of 11.8% could be a possible reason, as this affects possible change in median household income.

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FHA waives 2nd appraisal requirement for Bay Area

by
Shashank
on November 28, 2009
in FHA Loans
. 1 Comment

house-dollarsEffective immediately, FHA has rescinded the second appraisal requirements for properties located in San Jose and rest of the Bay Area (Considered declining markets). For Bay area borrowers where loan amounts can generally exceed $417,000 2nd appraisal requirement was a problem on 2 counts:

  • Increased fees towards appraisal (2 appraisals hence double the fees)
  • Danger of loan getting declined or loan amount reduced if the value of the second appraisal came lower at the last moment

The 2nd problem was a bigger risk if the borrower had removed his/her appraisal or loan contingency. It could potentially result into loss of earnest money deposit.  The new rule would make it easier for borrowers to bring in the minimum down payment of 3.5% even if the loan amount is >$417,000 and not worry about 2nd appraisal.

Here are the highlights of the new rule:

  • For properties located in declining markets, FHA no longer requires second appraisal for loan amounts greater than $417,000 and LTVs greater than 95%.
  • Cash-out refinance transactions no longer require second appraisals for loan amounts greater than $417,000 and properties located in declining markets.
  • Effective for all FHA loans registered on or after Monday, November 30, 2009, some lenders may still require an appraisal from a lender-approved appraisal management company when any loan amount exceeds $417,000 and the property is located in a declining market. However, a second appraisal will no longer be required.

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First Look by Fannie Mae - Great News for First Time Home Buyers in Bay Area

by
Shashank
on November 24, 2009
in First Time Home Buyer
.  Leave a reply

making_home_affordable2Fannie Mae announced a program called “First Look” which will help First Time Home Buyers compete with investors for foreclosed homes in San Jose and rest of the Bay Area.

Under the program, dubbed First Look, Fannie plans to consider offers only from potential owner-occupants and certain public-housing entities during the first 15 days in which a foreclosed home is on the market.

Many investors can move faster on home purchases because they are able to pay cash and don’t have to wait to qualify for a loan and get an appraisal. If you are a First Time Home Buyer, a lot of you would be going through the hassle of making offers on several properties and often losing bidding wars to investors.

In addition to the 15-day head start, home buyers using Neighborhood Stabilization Program funds, HOME Investment Partnerships Program funds, local housing trust funds, or charitable foundation funds may also qualify for reduced deposit requirements of as low as $500, reserved contract periods in which buyers can renegotiate their offers, and up to 45 days to close, up from the usual 30 days.

A Freddie Mac spokesman said that company has similar pilot programs and is helping owner-occupants pay closing costs.

Both the companies said these types of buyers would better stabilize neighborhoods.

If you are a first time home buyer, do you think this program gives you a better chance to get your offer accepted? Feel free to post your comments below.

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Existing Home Sales Jumps 10.1%

by
Shashank
on November 23, 2009
in Real Estate Trends
.  Leave a reply

Home sales jumped in October, rising far more than expected as  First Time Home Buyer Tax Credit offset fears about joblessness.

Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors (NAR) said Monday.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September.

“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,”  NAR chief economist Lawrence Yun said.

Even though the US unemployment rate is at 10.2% and rising, the tax credit, low prices and mortgage rates have drawn in buyers.  The median price for an existing home continued to take a dip last month. It was $173,100, down 7.1% from $186,400 in October 2008. The average 30-year mortgage rate was 4.95% in October, down from 5.06% in September, Freddie Mac data showed.

Related Post - New & Improved Home Buyer Tax Credit

Where do you think the real estate market in your area heading? Feel free to post your comments below.

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San Jose Weekly Mortgage Market Commentary 11/22/2009

by
Shashank
on November 23, 2009
in Mortgage Rates
.  Leave a reply

The week that was:

  • Oct retail sales were +1.4% overall and ex autos +0.2%. Retail sales are increasingly of interest to markets as we move into Christmas shopping ( the politically correct reference is Holiday shopping).
  • NY Empire State manufacturing data; the overall index declined to 23.51 from 34.57 in October.
  • Housing starts crumbled like a fresh saltine, down 10.6%, permits -4.6%.
  • With mortgage rates well below 5.00% (with a fee) purchases were down and re-finances were lower according to the MBA data released on Wednesday.
  • Mortgage prices and mortgage rates were literally unchanged this week.

Last week Bernanke’s speech Monday to the NY Economics Club he reiterated he would keep rates low; essentially admitted he has little insight as to how the economic recovery will unfold and remarked “The best thing we can say about the labor market right now is that it may be getting worse more slowly.” In layman speak, he isn’t sure the unemployment situation is at its bottom.

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San Jose Weekly Mortgage Market Commentary 11/15/2009

by
Shashank
on November 15, 2009
in Mortgage Rates
.  Leave a reply

The week that was:

Not much in the way of economic measurements last week; it was a four day week for the bond and mortgage markets with Veteran’s Day falling on Wednesday.

  • Weekly MBA mortgage applications index was +3.2% from last week; it was all re-finances, its index up 11.3% while purchase applications dropped a huge 11.7% to its lowest level since Dec 2000.  The refinance share of mortgage activity increased to 71.5% of total applications from 66.1% the previous week. The average interest rate for 30-year fixed-rate mortgages decreased to 4.90% from 4.97%, with points increasing to 1.03 from 1.01 (including the origination fee) for 80% LTV.
  • Weekly jobless claims continued to decline last week, down another 12K for the previous week but still at 512K new unemployment claims filed.
  • The Reuters/University of Michigan preliminary sentiment index decreased to a three-month low of 66 from 70.6 in October.
  • A report from the Commerce Department showed the trade deficit widened in September by the most in a decade as rising demand for imported oil and automobiles swamped a fifth consecutive gain in exports.

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Update to FHA Condo Approval Process for San Jose

by
Shashank
on November 11, 2009
in FHA Loans
.  Leave a reply

This update contains the temporary changes to the FHA Condo Approval Process for San Jose and rest of the Bay Area as outlined in Mortgage Letter 2009-46 B.

Here are the 6 things you need to know about these changes:

1. These temporary changes are effective on December 7th, 2009 through December 31st 2010; except for Spot Loan Approvals.

2. Spot Loan Approvals will be eliminated as of February 1st, 2010.

3. FHA loan concentration may be increased to 100% if the following criteria are met: a. Project construction has been 100% complete for at least 1 year, b. All units have been sold and no single entity owns more than 10% of the units, c. Project holds 10% of the budget in reserves for capital expenditures and deferred maintenance, d. Control of Home Owner’s Association has been transferred to the owners, and e. Owner-occupancy is at least 50%.

4. FHA requires a 50% owner-occupant ratio but bank-owned units that are either vacant or tenant-occupied are not required to be included the calculation.

5. New construction pre-sale requirement is temporarily reduced to 30%.

Read these letters in full.

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Video: New Home Buyer Tax Credit for Bay Area Buyers

by
Shashank
on November 11, 2009
in First Time Home Buyer
. 2 Comments

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San Jose Weekly Mortgage Market Commentary 11/08/09

by
Shashank
on November 8, 2009
in Mortgage Rates
.  Leave a reply

The Week that was:

After the dust settled interest rates ended the week about unchanged from the previous week; the stock market gained on continued better data from manufacturing and services sectors (DJIA +311). Two events marked the week:

  1. The FOMC policy statement on Wednesday and Friday’s employment report. The Fed in the statement at the conclusion of the FOMC meeting reiterated there is no concern on the Fed’s part that inflation has any chance in the immediate future, and that the Fed will allow interest rates (the Fed funds rate) to remain low for “an extended” period of time. The statement was no different than what the Fed has been saying in past three FOMC meetings.
  2. Friday’s employment report for Oct revealed more jobs lost than was expected, -190K; it however, was offset with revisions to Sept and Aug non-farm jobs that added back a total of 91K from the original releases. The unemployment rate jumped substantially more than economists were expecting, to 10.2% frm 9.8% in Sept; a sizeable increase.

umemployment_oct_09 Read more..

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San Jose Conforming & FHA Loan Limits extended through 2010

by
Shashank
on November 7, 2009
in FHA Loans and First Time Home Buyer
. 3 Comments

dollars-changePresident Obama signed the congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including San Jose. The counties of Santa Clara, Alameda, San Mateo, San Francisco & Contra Costa in the Bay Area will have the maximum loan amount at $729,750. Yesterday’s actions extends the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.

The floor for FHA is $271,050; the floor for Fannie Mae and Freddie Mac conforming loan limits is $417,000.

“Home sales have shown significant movement upwards in the past six months and reduced inventory in some segments of the housing market, but not in all. Home purchases in the middle-income and higher brackets have not moved much, and those markets must improve before we can experience a fully sustained housing recovery. These higher loan limits will help motivate qualified home buyers to purchase in those markets,”  NAR president Charles McMillan said.

These loan limits determine the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee” and also the Loan Amount that FHA can insure.

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New Home Buyer Credit for San Jose Buyers

by
Shashank
on November 7, 2009
in First Time Home Buyer
. 1 Comment

dollar-house-see-sawThe $8000 first time home buyer credit has been extended and expanded for San Jose and rest of the Bay Area buyers. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?

The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions

Here are answers to some commonly asked questions about the tax credit.

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Government’s role in Housing, How far will it go?

by
Shashank
on November 2, 2009
in First Time Home Buyer and Mortgage Rates
.  Leave a reply

This year Government has announced a ton of programs to prop up the Housing Market. Some of the major programs have been geared towards Foreclosure Prevention by launching 125% refinance program and incentivising Loan Servicers for modifying loans for struggling home owners. The Higher Conforming Loan Limits up to $729,750 would also be extended through 2010. Of course, all this has come with increased regulation. My focus on this blog is to talk about 3 actions that has had the most impact:

fed_buying_mbsAction #1 – Buying Mortgage Backed Securities (MBS)

The Government earlier this year decided to buy $1.25 trillion of Mortgage Backed Securities by Dec 31, 2009. On top of that Fed also planned to buy up to $200 billion in debt issued by Fannie Mae and Freddie Mac. Last month, the Fed decided to slow the process and extend it to March 31, 2010. Note that they haven’t increased the volume that they plan to buy.

Current Status: The Fed is more than two-thirds done into buying these securities. Because of heavy government intervention in the mortgage market, interest rates remain near their lowest levels in decades. Housing affordability index measured by National association of Realtors is at its highest point since 1970 in most of the areas.

Outlook: How much mortgage yields rise when the central bank ends its purchases will depend in part on how the Fed communicates its plans and how private investors respond.

If the Federal Reserve Board suddenly stops purchasing agency mortgage-backed securities, rates could jump by 30 basis points to 50 bps, according to Fannie Mae chief economist Doug Duncan. I wouldn’t be surprised if Government continues buying MBS through 2010 albeit at a much slower pace.

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95% LTV in Bay Area Now Available on Conventional Loans

by
Shashank
on November 1, 2009
in First Time Home Buyer
.  Leave a reply

Borrowers in San Jose and rest of California may now get 95% Loan on Conventional Mortgages.  The increased Loan to Value Ratio (LTV) is available on following programs:

  • Freddie’s Home Possible (Fixed Rate only)
  • FNMA MyCommunity  (Fixed Rate, 5 yr ARM and 7 yr ARM)

The Loan must meet the following criteria:

  • Must be a First Time Home Buyer
  • Purchase Transaction only
  • 680 Minimum Score Requirement
  • 1 unit property only (SFR and PUDs.  Condos maxed at 90% LTV)
  • 2 months PITI reserves required after loan closing
  • Full appraisal required
  • 3% Seller Concessions maximum allowed; Downpayment can come from gift
  • Must complete Homebuyer education course
  • Income limitation requirements

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San Jose Weekly Mortgage Market Commentary 11/01/2009

by
Shashank
on November 1, 2009
in Mortgage Rates
.  Leave a reply

The week that was:

A good week for the interest rate markets. Mortgage interest rates declined about 10 basis points. Treasury once again successfully sold $123B of notes in four auctions. Consumer confidence measured by The Conference Board declined more than expected, implying consumers may not be as convinced of a recovery as the equity markets.

cons_conf

Personal spending in Sept declined, new home sales were expected to be up slightly in Sept but declined 3.6%. Finally the stock market ended the week on what looks like the beginning of the long over-due correction that even the most bullish have been expecting for the past month. The DJIA declined 259 points last week, the rate markets benefited.

The week that will be:

2 Big news awaited: The industry is hopeful that the High Balance Conforming Limit and FHA Jumbo limit of maximum loan amount $729,750 will officially be extended this week through 2010. Also, there is a lot of buzz about First Time Home Buyer Credit being extended till April 30. Stay tuned!

There is an increasing buzz among traders that the Fed will alter the policy statement a little to take away market perception that the Fed will keep interest rates (FF rate) low for a “considerable” period; removing “considerable” with verbiage that allows the Fed more flexibility in the future. On Friday we will get the October employment report; estimates are for job losses to be a lot less than in the past year. Everyday this week markets will contend with economic reports of substance; ISM manufacturing on Monday, Oct auto and truck sales on Tuesday, ISM services on Wednesday (and the FOMC statement), Thursday weekly jobless claims. We expect market volatility to remain high.

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