Timely Real Estate News………………………………………………….1 September 2014
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Back to school and the ‘drivin’ should be easier……
Labor Day has now passed and here we are — entering Fall and that means it’s “Back to School” for thousands of families on the Westside. And it also means thousands of automobiles scrambling through our neighborhoods, leaving off/and picking up children at both public and private schools. So it’s “Watch Out For The Kids” Time!!
Actually most of the work on the 405/Sepulveda construction project is nearly done (we have some closures continuing at night). For the most part, we have found new life on the 405 and the on/off ramps, where some landscaping and final touch-ups remain. After four years, we are now driving on California’s newest state-of-the-art freeway sections that feature some really beautiful structures, especially the on/off ramps for the 405 at Wilshire. Was it worth the trouble, wait? Yes, I think so. After all, time heals all wounds. Even with CalTrans.
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There are signs and there are signs….home sales rise more than expected.
A sign of growing strength in the housing recovery continues according to the National Association of Realtors (NAR). Sales climbed 2.4% from June to a seasonally adjusted annual rate of 5.15 million, the NRA reported in their monthly activity report. The July sales level, the highest of the year, beat analysts’ projected rate of 5 million. A steadily improving job market, coupled with more options for buyers, drove sales higher last month, said Lawrence Yun, the trade group’s chief economist.
“The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” he said.
This is a very positive report —- it’s just the latest sign that the housing market may be turning a corner after starting to slow last summer amid higher mortgage rates and prices. A few days earlier the Commerce Department said builders in July broke ground on new homes at a 15.7% higher pace than in June. And although existing home sales remain below year-ago levels, they are steadily improving. July marked the fourth straight month that sales, adjusted for seasonal swings, climbed from the previous month.
Industry leaders are now viewing the news that housing finally appears to be gaining solid footing. Helping drive that improvement are mortgage rates that have fallen from last year’s highs, economists say. The average interest rate on a 30-year fixed-rate loan is at the lowest level of the year, Freddie Mac said in its weekly survey of lenders.
“We are, indeed, seeing positive signs on the Westside as prices are not climbing as fast as they have in the past,” according to Carole Schiffer. “We’re still seeing median sales prices increase marginally each month in all five communities I report on, which is a good sign. And most importantly, we are seeing an increase in inventory — and that’s the best sign yet!” The SchifferLine will be reviewing specific sales performance and data in the mid-September issue.
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Case-Shiller: Home-price gains slowed in June in all 20 major cities
As I have said sooo many times, although it’s nice to know that housing values throughout the country are up or down, the figures often have little meaning when it comes to what’s happening on your block or in your neighborhood. We continue to see stories abound about how home prices are up/down and sales activity is doing the same. Endless chatter it seems.
The reality is this: Home prices are slowing, not falling. And that is a healthy thing according to the experts.
Home price slowdown
All 20 cities in the Case-Shiller Index show slower price growth for first time in six-plus years. Home prices continued to cool off in June, according to new figures out last Tuesday.
The Case-Shiller Index reported that home prices grew just 6.2% in June compared with a year earlier. All 20 cities that the index tracks saw price gains slowdown in the month, the first time that’s happened since February 2008. In Los Angeles, prices grew 10.5% year over year, Case-Shiller said. That’s a relatively strong gain, but far slower than the pace seen a year ago. From May to June, prices in Los Angeles climbed 0.6%, barely half as fast as they did from April to May. Nationally, prices grew 0.9% in June compared with May.
This trend of slowing but not falling prices, taken with other measures of the market, is probably a healthy thing, analysts say.
“Home price gains continue to ease as they have since last fall,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Other housing indicators — starts, existing home sales and builders’ sentiment — are positive. Taken together, all of these point to a more normal housing sector.”
The sharp home price rise of 2013 was in many ways welcome, as it helped millions of Americans get out from being underwater on their mortgages and put prices more in line with long-term fundamentals like incomes and price relative to rents. But if the prices were to keep rising at that pace, we might rapidly find ourselves back in a situation in which home prices would be out of whack with incomes and rents. There are signs that key coastal markets like San Francisco and Los Angeles are already inching close to or even past that point.
Home prices can’t rise faster than incomes forever. So if the trend of the last few months continues, and the rate of price increases continues to come down to earth, it will be a sign that maybe, just maybe, we’ve put this long, horrible boom-bust cycle behind us.
We continue to see strong buyer interest as inventory is freeing up on the Westside according to Carole Schiffer. “And quite frankly, the market is becoming more competitive as sellers are seeing more competition. This is, of course, a sign of a very healthy market. And, I for one, am gratified to see this taking hold.”
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Wonder how you can qualify for a home loan — here’s what insiders think
The first step I always take with prospective buyers is: Have you been pre-approved for your loan? That is a critical first step in seeking to buy a new home. Unless you are not planning getting a loan, you have to go through this process before you even start looking for property. However, for many home buyers, qualifying for a mortgage not only is a tough challenge but one that can end unhappily – no loan approval.. I always have my clients work with my guy Simon from First Capital Mortgage.. he always seems to be able to” pull that preverbal rabbit out of the hat” and comes through, even though at times I really don’t see how he does.
The reasons for the turndowns typically involve multiple factors, including below-par credit scores, inadequately documented income to support the monthly payments, and little savings in the bank. However, a new survey by credit-score giant FICO offers buyers a rare peek inside the heads of credit-risk managers or underwriters at financial institutions across the country.
Researchers asked a representative sample of the underwriters what is the single most factor in an application makes them most hesitant to approve a loan request — in other words, what’s most likely to prompt them to say no. The results provide practical insights to anyone who is thinking about applying for a mortgage. Top on the list? Surprise, it’s not your credit scores. It’s not how much you have for a down payment or what’s in the bank. It’s your “DTIs” — your debt-to-income ratios. Nearly 60% of under writers in the FICO study rated excessive DTIs as their No. 1 concern factor — five times the percentage who picked the next biggest negative. Nearly 60% of risk managers in the FICO study rate excessive DTIs their No. 1 concern factor. I cannot tell you the gyrations prospective buyers have gone through including turning in a leased car to get their DTI’s down.
Many buyers have only a rough idea in advance of an application — even for a pre-approval letter — about their own DTIs, how lenders view them, and what sort of limits they’re likely to encounter. The new FICO survey found that the second leading cause of concern for loan officers is “multiple recent credit applications.” Lenders spot these on your credit reports and take them as signals that you are seeking to add on even more debt, which could affect your ability to repay the mortgage money you’re asking them to give you. If you are considering purchasing a home, you cannot also be making any other major purchases, a car, appliances, furniture, any item that would require someone to run a credit report on you…. Also taken to the
next step…ONCE YOU HAVE GOTTEN LOAN APPROVAL FOR THAT LOAN FOR YOUR NEW HOME… DO NOT BUY ANYTHING UNTIL ESCROW CLOSES. Lenders in fact run your credit score again before the close of escrow, and if they see that you have made a new big purchase that will impact your DTI they can and have pulled their loan approval.
In third place as an instant negative: your credit scores. Most lenders want to see FICO scores well above 700 — Fannie and Freddie averages were in the 755 range in May; FHA average approved scores were a more generous 684.
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Your FICO score gets a “re-do” that helps some….perhaps
We don’t always get “good news” when it comes to financial institutions who control the flow of mortgage funds to help buyers get into their new home. Now comes some good news from Fair Issac Corp., developer of the FICO credit score, who just announced the debut of a new score version that no longer would penalize consumers who have medical debt-collection issues in their credit files.
The announcement hit the front pages of newspapers and was highlighted on national TV network news. Steve Brown, president of the National Assn. of Realtors (NAR), was so enthusiastic about the new score’s potential that he predicted it would “make a real difference in the lives of millions of Americans who have been shut out of the housing market or forced to pay higher mortgage interest rates because of flawed credit scores.”
That does not mean the good news is likely to get into place any time soon. That is because the two dominant financing sources in the mortgage market — Fannie Mae and Freddie Mac — are not planning to use the new score in evaluating loan applicants for the foreseeable future. Major banks and mortgage companies aren’t jumping to adopt it either. None of this detracts from the merit or potential value to consumers of FICO’s new score. The company says that by separating out medical debt-collection issues — which are commonplace negatives in millions of consumers’ credit files — from other types of collection actions, the FICO 9 model will more fairly rank the actual risks posed by some applicants compared with others. For borrowers whose sole major negative credit file account is an unresolved medical debt, Fair Isaac estimates that the new model will increase scores by a median 25 points.
In the credit scorecard business, this is a “big deal” according to watchers of mortgage lenders and how this new concept will fly with major lenders. So far, the new FICO 9 model has generated a lot of positive reviews, but one of the reasons that the major lenders, such as Wells Fargo, JPMorgan Chase, Fannie and Freddie — are dragging their feet on this proposal is the cost to retool a very complex automated underwriting systems.
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The Commerce Department has it’s own point of view….
On another front in the housing recovery story, the US Commerce Department reported that sales of new single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and a moderation in price increases should help to stimulate demand in the months ahead.
So, what does this have to do with you? Simply put, the housing industry includes the sales of both new and existing homes, and the combination of these two housing sectors affect interest rates and mortgage availability. It must be noted, however, that while this piece of news might put a damper on the news above (increase in existing home sales), the new housing market is notoriously fickle and volatile.
The weak new home sales pace is at odds with other data that have suggested the housing market recovery is back on track. New house sales data, however, is volatile month-to-month because of a small sample. Data showed a jump in new home construction in July and sales of existing homes also rose to a 10-month high in July. So, we’re getting — again — mixed signals, but it’s all part of the housing recovery story.
An example of California’s recovery, the I-5 corridor of housing chaos since the Great Recession began in 2007 stretched from Stockton/Modesto south to Riverside is finally making a strong comeback. Prices of existing homes are now getting near their 2007 price levels and new home tracts are actually under construction in Lodi, which was the heart of the equity loss experienced by thousands of homeowners who lost as much as 75% of their equity during the past seven years.
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What are my personal observations and experiences about the state of the local real estate market today? I am currently working with some clients for luxury condos in Brentwood and that is a very active market. Twice in one week we lost lovely properties that were sold in multiple offers over asking. That price range $1.500,000. The same thing is happening in the single family residence market in Santa Monica, Venice, Mar Vista, Rancho Park area. It is the same price range. The well priced/well done homes are selling in days, and the others are lingering. In both cases, the properties are “done”, staged and crisp and clean. I am listing a lovely Canyon home in Bel Air Crest and will be holding it open on Sunday the 7th of September from 2 – 5. Please stop by and say hello!
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