SubscribeFree Mortgage Payment Protection, FHA Standards Easing and Loan Mods at Absolute Mortgage Banking
November 20, 2009
Free mortgage payment insurance, really? Yes! While hosting one of my monthly mortgage market updates, which generally occur every third Wednesday of the month, I learned that CAR actually offers complimentary mortgage protection through their Housing Affordability Program (special thanks to Pam Page and Julia Keady for this information). To be eligible, the following are a few highlights:
- First-time buyers only
- Dwelling must be single-family residential
- Must close escrow by December 31, 2009
- Must be represented by a CA Realtor
- Buyer(s) have not received benefits from HAF in the past
The maximum monthly benefit is $2,250 per month for a total duration of six months, after an initial four-month seasoning period. As such, it may be worth looking in to additional providers to augment the CAR program, should additional peace of mind be desired.
So what else was good information discussed at the update on Wednesday?
- Bridge financing is available for qualified move-up buyers looking to leverage their current home and buy before they sell
- “Jumbo” money is more available today than it has been over the last year, which is primarily due to price stabilization– there are now programs offering rates below 4%, leverage as high as 90% (80% to $2mm loan amount!) and financing for investment properties
- with the elevated conforming loan limits staying in tact, rates below 5% and a total of $18,000 in tax credits available to eligible buyers, first-time buyers are likely much better off owning versus renting provided that the holding period is five years
- Move-up buyers appear to be the most motivated lately, as we are seeing twice the number of applications on “jumbo” mortgages versus conforming mortgages coming in at present
- with qualifications tightening, sellers are wise to consider offering up to 2% of the sales price as a credit toward a buyer’s non-recurring closing costs to yield a lower rate and therefore payment
- Multiple offers are back, so it’s good to know that the 21-day close is also available again
Next update presentation will be on January 20, 9:30 am and posted on the AMB website calendar– hope to see you there!
FHA Standards Easing
If you know of someone looking to puchase a condo in a new development, HUD just made it easier to obtain an FHA loan. HUD is easing up on the requirements that 50% of the units be sold (now down to 30%) and now allows up to 50% of the units to be FHA financed (up from 30%) before funding for FHA is allowed. The rule that no more than 10% of the units can be owned by one owner and that 50% of the project must be owner occupied hasn’t changed, and the developers aren’t very happy about it, but the reality is that the deal is simply not insurable otherwise.
Loan Modifications Available Through AMB
Coming soon, Absolute Mortgage Banking will have an arrangement with a reputable company that can help individuals modify their loans per the HAMP requirements, and we’ll make the process very easy with a link through our website. We are in the final due-diligence stage, and we will have a formal announcement likely before Thanksgiving.
Tax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge
November 11, 2009
Tax Credit and Conforming/FHA Loan Limit Extended
Made official on Friday, the tax credit for home purchases was extended through July 1, 2010 and the important details are exactly as they were in my post on Friday the 30th of October, which was summarized as follows:
· Effective on binding real estate contracts from December 1, 2009 through April 30, 2010, The tax credit would be $8,000 for first time home buyers and $6,500 for move-up buyers who have owned their current home for at least five years
· The tax credit expires on April 30, 2010; however, if a binding contract is reached by April 30, 2010, buyers have an additional 60 days to close the deal and still be eligible for the tax credit
· For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return
· The income limits for both first time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.
· Cost of the home may not exceed $800,000 to be eligible.
Remember that a tax credit has about THREE TIMES the impact of a tax deduction, which allows someone earning $125,000 per year to be taxed on about $102,000*. And since other items like interest and property taxes are also deductible*, that same individual may be looking at less than half of their earnings being fully taxable..!*
Add the above news to the fact HUD also extended the conforming loan limit of $729,750 in the Bay Area to December 31, 2010, and you have a “perfect storm” for every qualified first-time buyer in the Bay Area.
S&P Case-Shiller Confirming Further Improvement of Housing Prices
Released last week, the S&P Case-Shiller index confirms that housing prices continue to improve, especially in areas like San Francisco where the index moved another 2.8% in August to 132.47. This marks the seventh straight month of improvement.
Zillow also reported that their index reflected further stabilization for the third quarter, with over 26% of the metropolitan statistical areas showing signs of improvement.
Real Estate as an Ideal Hedge to Both the “W” Concern and Inflation
You may recall from my last post that we are seeing far more application activity for purchases in the $1mm+ range, especially the $1.5mm to $4mm range. These applications have been coming from our more financially-minded clients, as they not only see tremendous opportunity to obtain a more valuable home, but they are very concerned about a “W”-shaped economic recovery and subsequent inflation. As such, obtaining an upgraded home for less, cheap financing and hedging against inflation make buying a larger home an ideal move. All things being relative, the reality is that the S&P 500 currently has a rather high price-to-earnings ratio at about 19.52 versus the historical average of 15.7. As such, if we were in average economic circumstances, it’s arguable that the stock market is overvalued by about 25%. Given the fact that our current economy is FAR from being in average condition, it’s anyone’s guess just how overvalued the stock market is. All I know is that my savviest, financially-minded clients think that the stock market is due a correction and that real estate is a great asset to have as a hedge against both a market correction and inevitable inflation.
Fannie’s New Program: Deed for Lease
Announced on November 5, Fannie Mae is helping those qualified applicants to essentially sell and lease back their current home. This program is also applicable to investment-property owners who are facing foreclosure and wish to deed the property over to the lender and allow the renters to continue renting at market levels.
Rates and Activity
- Rates continue to run as low as 3.75%, depending on a number of different factors, with the conforming 30-year at just under 5% and the jumbo 30-year at about 4.75%
- 71% of our transactions last month were purchases, and the average loan was in the $500k range.
- As mentioned above, we’re seeing a heavy trend in purchase applications for the move-up market, but inventory is turning off a majority of those buyers
- We closed a deal in TWO weeks, but we still recommend a 30-day closing period
- If you or someone you know prefers to pay cash for a purchase, then finance that purchase within 90 days to protect valuable tax advantages, we can help, as we have programs that DO NOT require 6 months seasoning and pricing is based on purchase money, NOT a cash-out refinance
* Does not constitute tax advice. Please seek any qualified tax professional for proper guidance.
The Market Report – June 2009
June 5, 2009
I send my clients a monthly market update and thought I’d share it with the blogosphere. If you agree and think that I’m a genius, please comment below. If you disagree and think I’m an idiot, keep your thougths to yourself. You can send me an email to subscribe to your city of interest (Atherton, Los Altos, Los Altos Hills, Menlo Park, Mountain View, or Palo Alto), and I’ll add you to my monthly update list. The commentary is as of June 1, 2009, that data is real-time.
May brought a ray of light into the local real estate market, as consumers, boosted by the rising stock market and low interest rates, began buying up homes on the market. Both Pending Sales and Pending Prices are up (see attached chart for a historical comparison), absorption numbers have outpaced new inventory both statewide and locally, and multiple offers on homes in Los Altos and Palo Alto have come back into play. At the low end, investors are superheating the Santa Clara and San Jose markets for single-family homes under $500,000, with many bank owned properties getting 20 – 30 mostly cash or all cash offers.
In general, prices are at about 2004 levels, and interest rates continue to hover near historic lows, with conforming loans under 5% for 30 years, and Jumbo loans staying around 6%. The big question on everyone’s’ mind is, “How long will this last?”
This past week we saw rates on the 10 year bond jump 0.5%, putting upward pressure on mortgage rates, which responded by rising for the different conforming loans. To get some additional input on whether this is short-term volatility or a longer term trend, I called my favorite mortgage bankers, who all had the same opinion, and all disagree (with all due respect) with Fed Chairman Bernanke that we will be out of the woods by the end of 2009.
The abridged version is that the government is subsidizing rates on loans backed by Fannie Mae and Freddie Mac (who are backed by taxpayers), so long-term mortgage rates are unsustainably low. The funds being used to subsidize these loans are finite, and limited, so there is upward pressure on the various conforming rates to rise to the real market rate of 6% as we are seeing in the Jumbo market.
Unusually, BOTH Buyers and Sellers are facing threats from market forces, creating compelling arguments to act now:
Sellers:
- Rising interest rates cut the purchasing power of Buyers, reducing the pool of potential Buyers for a given property
- The threat of rising unemployment and continuing slowing of the economy reduces consumer confidence and spending, especially on big-ticket items like cars and houses
- The current tax incentives for buying homes are limited to 2009. Reduced government from taxes due to lower incomes and corporate earnings makes it less likely that these are extended in 2010.
Buyers:
- That unemployment thing
- Qualifying for mortgages is getting more difficult, and the regulation of the process has tightened, adding new hurdles to the underwriting and appraisal process as the market overcorrects for the Wild West of the last few years.
- Rising rates cut purchasing power
Wow, kind of heavy stuff for a Friday. The good news is that summer is less than 3 weeks away!
On to the numbers:
Atherton:
Currently, the Median Price of a Single Family Home in Atherton is $3,996,500 with a range of $899,000 to 16,800,000. 48% (versus 41% last month) of the homes in Atherton have had price reductions, as Sellers are accepting that the market has shifted, and the average number of Days on Market has risen to 133 days from 114 last month, meaning that we should see more price reductions as the market searches for equilibrium.
Los Altos:
Currently, the Median Price of a Single Family Home in Los Altos is $1,999,900. 36% (up from 32% last month) of the homes in Los Altos have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has dropped slightly to 98 days versus 96 last month.
Los Altos Hills:
Currently, the Median Price of a Single Family Home in Los Altos Hills is $3,146,500. 36% (up from 23% last month) of the homes in Los Altos Hills have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has dropped to 173 days versus 187 last month.
Menlo Park:
Currently, the Median Price of a Single Family Home in Menlo Park is $1,447,000. 38% (versus 37% last month) of the homes in Menlo Park have had price reductions, as Sellers are resisting that the market has shifted, and the average number of Days on Market has risen to 127 days from 116 last month.
Mountain View:
Currently, the Median Price of a Single Family Home in Mountain View is $899,000. 55% (versus 38% last month) of the homes in Mountain View have had price reductions, as Sellers are learning that the market has shifted, and the average number of Days on Market has decreased to 121 days from 127 last month.
Palo Alto:
Currently, the Median Price of a Single Family Home in Palo Alto is $1,595,000. 41% (versus 43% last month) of the homes in Palo Alto have had price reductions, as Sellers are resisting accepting that the market has shifted, and the average number of Days on Market has risen to 99 days from 94 last month.
Menlo Oaks: Another forested Menlo Park enclave
January 6, 2007
Menlo Oaks is a cozy and rustic 106 acre neighborhood with a country feel bordering Menlo Park and Atherton. Though often considered part of Menlo Park proper, it is officially an unincorporated neighborhood.
Menlo Oaks is family friendly, boasting the renowned private K-8 Peninsula School, occupying six acres. Public school children are also well catered for, since the area is part of the Menlo Park Elementary School District, despite being unincorporated – a testament to the active, strong, and influential neighborhood associated which lobbied to be included. Also within its boundaries are the Veteran’s Administration Hospital, and St. Patrick’s Seminary and Park.
Residents of Menlo Oaks love the fact that it has maintained a rustic feel throughout the years of development that now surround the enclave. There are no street lamps or sidewalks, and many mature, towering trees add to its wooded feel.
Menlo Oaks contains approximately 300 homes, most of which occupy half acre lots. A whole range of architectural styles, including modern, can be viewed on a quiet walk through its winding streets.
Being both further from the highway and having larger lots than neighboring Flood Park, Menlo Oaks’ prices are accordingly higher. Some of the streets – Berkeley Ave, for instance – boast large multi-million mansions, decked out with the finest touches that venture capital and high-tech riches can buy.
The Willows — a classic Menlo Park neighborhood
January 6, 2007
Draped throughout with ancient, elegant Willow, Eucalyptus, and Oak trees, the neighborhood affectionately known as The Willows is part of Menlo Park. It is bordered on the southeast side by the San Francisquito Creek, which serves as a border between Menlo Park and Palo Alto, and between San Mateo and Santa Clara counties. Its west border is Willow Road – an easy link to the 101.
The southern part of the Willows by Middlefield Road is the most sought after area, with prices reflecting its desirability. Visitors inevitably get lost in the curving streets, especially at the X-chromosome shaped intersection of Pope and Laurel – right in the middle of which a magnificent old Redwood tree, a veritable landmark, was felled by a lightning strike.
Further north the homes become more modest, with the occasional new home thrown in for good measure, the most recent example of which is a small new four home development at the corner of Menalto and Gilbert. A small portion of East Palo Alto spills across the 101, wedged between the sound barrier wall and the northern half of East O’Keefe street.
A casual walk through The Willows reveals a wide range of home styles and sizes – small wooden cottages, stucco ranch styles, “Simon Homes” – an early developer of the 50’s, and newer mini-mansions with elaborately manicured yards.
A delightful, picturesque bike path connecting The Willows to Palo Alto makes a trip into downtown Palo Alto an easy 5 minute bike ride over the San Francisquito Creek, and an easy 10 ride to Stanford and the Stanford Shopping Center.
Menlo Park’s Fair Oaks neighborhood: A touch of the rustic in the middle of suburbia
December 20, 2006
One of the hidden treasures of Menlo Park is the Fair Oaks neighborhood, nestled between Middlefield Rd, Marsh Rd, and a seldom-used industrial rail track. Squashed between the three neighboring towns of Atherton, Menlo Park, and Redwood City, it nonetheless manages to have a character all its own.
A stranger walking the streets of Fair Oaks wouldn’t help but notice a lack of sidewalks and proper drainage, and an abundance of little British-style roundabouts. Both help create the unique sense of neighborhood for which Fair Oaks residents are justly proud — a uniqueness that comes from a peculiar combination of benign neglect (as part of unincorporated San Mateo County instead of Menlo Park proper) and a strong neighborhood association (which installed the roundabouts to slow down commuters who use the neighborhood as a way to avoid the traffic on Marsh and Middlefield).
The neighborhood association also oversees Fair Oaks Park, a little gem maintained without a cent of public money and situated on a Hetch Hetchy right of way; residents keep their fingers crossed that the massive water system’s pipes will never need to be dug up.
Being part of unincorporated San Mateo County — “Menlo Park” in this neighborhood being technically only a mailing address — is a mixed blessing. On the one hand, Fair Oaks residents don’t have the luxury of access to Menlo Park’s phenomenal elementary school system; on the other hand, property values are a good 20% to 30% lower than nearby Menlo Park proper, most of the difference being accounted for by…the poorer schools. What you would pay just under a million dollars for in nearby Flood Park would set you back a mere $800,000 or so in Fair Oaks.
Many of the homes are small — 1200 sq ft or less — and sit on small lots of 4500 sq ft or less, a testament to Fair Oak’s origins as weekend country homes for rich San Franciscans and San Jose-ans in the 1920’s. There are a smattering of larger lots left, mostly a relic of spillover estates from nearby Atherton, which technically the southeast corner of Fair Oaks is still part of.
Conveniently located only minutes from the bustling downtown of Palo Alto, as well as Menlo Park’s more bucolic downtown, Fair Oaks is also only a vigorous stone’s throw from highway 101, making it a convenient location for commuting to many of Silicon Valley’s top high-tech employers.
Strange sights #1 — Fair Oaks road construction
September 5, 2006
If you’ve driven in Fair Oaks lately (the Menlo Park neighborhood near Marsh and Middlefield, not the Sunnyvale street), you’ll know the county has been giving the streets, especially 9th Avenue and Oak Drive, a much-needed makeover.The construction crews and vehicles have gone, but their handiwork on Oak Drive between San Benito and Encina looks a little suspect.
Oak Drive near Placitas — only one half paved?
As you go further northwest on Oak Drive, you get to Encina, and from there on, both sides are paved.
Oak Drive near Encina — both halves paved
Turns out the answer is pretty innocent — and quite informative about city boundaries. Though much of Fair Oaks is in unincorporated San Mateo county (with a Menlo Park mailing address), a sliver of it actually belongs to Atherton. The boundary, as it turns out, runs literally halfway through Oak Drive itself between San Benito and Encina, then runs left on Encina until it meets up with Middlefield and the rest Atherton proper.
So, the county’s responsibility is only for the northeastern half of Oak Drive between San Benito and Encina, and then all of Oak Drive northwest of Encina.
Confused? Maybe this map will help; the dark green shading is Atherton’s bit of Fair Oaks; the lighter green is the Menlo Park section.
Boundary between Atherton (dark green) and Menlo Park
We’ll have to wait for the Town of Atherton to pave the other half.
Strange indeed.
