The conforming 30 year fixed rate mortgage dipped slightly last week and came to rest around 6.16 at one half point.  However, tomorrow morning’s rates should be a bit better.

What’s Going On?

Recent economic reports show weakness in retail sales, consumer spending, and GDP, all perhaps a reflection of the housing slow down.  Because consumption is 71% of GDP, there is reason to be concerned about a changing consumer mood in response evaporating home equity.   But the Fed continues to worry more about inflation, and the bond market continues to trade sideways keeping rates stable. 

Today’s PCE number—the Fed’s preferred inflation gauge showed—was flat, giving the Fed a Maalox for its nervous tummy, while consumer spending rose less than expected and construction spending slowed.   The next big news comes with April’s non-farm payrolls due out Friday morning..

How’s this for divergent thinking? Granted, home builders are looking past the housing bubble as they try to anticipate future demand and position themselves in growth markets. But, if Toll is right, those who buy now will be richly rewarded.

Daily Real Estate News / April 25, 2007

Toll Bros. CEO Expects Housing Shortage

Robert Toll, CEO of luxury home builder Toll Bros., predicts that U.S. home prices will climb so high in the next five years that housing will represent 45 percent to 50 percent of household income, up from 21 percent in 2006. Why? Toll says restrictive zoning is reducing the number of new houses in the pipeline, making it likely that there will be a shortage in a few years.

Meanwhile, the business of building and selling new high-end homes isn’t easy. Commenting on the health of various markets, here’s what Toll told 3,000 executives attending the Michael Milken Global Conference in Beverly Hills:

“Boston is still in the pits and Connecticut looks better, although I don’t understand why this is the case. They’re just a few miles apart. New York’s exurbs are doing exceptionally well. We’re building in Fishkill and Peekskill – places I’d never thought I’d be in a million years. In North Jersey, things stink. Pennsylvania is OK. Florida is terrible – death takes a holiday. Texas is good; but in Phoenix, Indiana Jones did go off the cliff ­– his fingers did not hold. California was a comeback briefly but recently it has dipped. Chicago – not really. Minneapolis/St. Paul is not so good. Michigan might be a situation that never comes back.”

No sugar coating here. I love the candor!

Read the rest of this entry »

For those who missed it, the Sacramento Bee posted this article Tuesday.  The 80 or so comments that follow the article make for a lively and sometimes ugly discussion.  Not particularly cheery, but there is a silver lining.   

Foreclosures in full boom

In ominous sign of more to come, capital region default notices also hit record highs during first quarter of 2007.

By Jim Wasserman – Bee Staff Writer

Last Updated 1:11 pm PDT Tuesday, April 17, 2007
Story appeared in BUSINESS section, Page D3

There’s a new kind of “For Sale” sign appearing in the region’s neighborhoods — offering property repossessed by the banks — and there will be more, according to the newest round of statistics.

There is no denying the rapid decline in Sacramento home values and the challenge that creates helping home owners refinance into sustainable home loans.  My appraiser says he has seen a 10% decline in values in certain areas over the past 90 days.  Two agents I know that previously specialized in the REO (“real estate owned” by banks) business, are back in that business again, with around 300 bank-owned properties listed between them. 

Here are a couple of the article’s statistics:

Read the rest of this entry »

One of my agents emailed this to me today.   It’s part of a newsletter from National Realty News….

An Open Apology From The Publisher of The National Realty News

Wednesday, March 14, 2007

Last November several of our staff attended the National Association of Realtors annual convention in New Orleans. Over the course of that event, we interviewed hundreds of agents, broker owners, and managers.  During the course of these interviews, it became quite apparent that many seasoned real estate professionals, including many NAR executives and staffers, were predicting a noticeable decline in the number of agents as the real estate market continued to struggle.  

Several senior managers from large brokerages voiced their opinion that many areas in the country were saturated with real estate professionals.  A classic example of this saturation is in the state of California. In 2006, California had more licensed real estate agents than there were deed transfers in the entire state. 

The article concludes by advertising for a seminar that will give attendees the “secrets” of the top producing agents who are surviving.   I just thought the comment about California was interesting.

Read the rest of this entry »

In the scramble to address the difficulties of home owners trapped in bad loans, help may be on the way.

From the Associated Press today:

MORTGAGE GIANTS MAY HELP BORROWERS

WASHINGTON (AP) – The heads of Fannie Mae and Freddie Mac said Tuesday the mortgage finance giants are developing new types of loans to help distressed borrowers with high-risk mortgages keep their homes at a time of rising foreclosures.

A key federal regulator also urged lenders to step in now and extend flexible terms to struggling homeowners.

The moves by the two government-sponsored companies, the biggest buyers and guarantors of home mortgages in the country, came in response to the turmoil in the market for so-called subprime mortgages, higher-priced loans for people with tarnished credit or low incomes who are considered greater risks. In recent weeks, the distress has roiled financial markets and stoked anxiety that it could spill over into the broader economy.

The companies’ initiatives were disclosed by their chief executives at a hearing by the House Financial Services Committee.

read the rest of the AP article

What solutions are they contemplating?

Rumors are that Freddie Mac saw this coming and has been working on a 50 year loan with an initial 10 year interest-only period. This would certainly smooth out the ride, assuming borrowers have the equity and income to qualfiy. .

Got a comment? Leave it below.

Got a question? Send me an email.

It is said that “once sub-prime, always sub-prime.” Well…maybe not in those exact words. But you may have heard it argued that people with lousy credit don’t change their habits. If that’s true, the sub prime 2/28 loan is a mortgage death sentence.

In my experience, many people become sub prime borrowers because of illness, injury or divorce. Those people often do return to the ranks of prime borrowers. But then there are those those whose problems seem chronic, whose excuses seem endless, or whose attitude seems cavalier.

In a recent analysis of consumer payment behavior, Experian came to some startling conclusions.

Historically, home owners will protect their homes by prioritizing mortgage payments over consumer debt. This just makes sense. Mortgage debt is tied to a valuable asset. Consumer debt is tied only to the intangible asset of one’s credit.

Read the rest of this entry »

I recently wrote about FHA Access, a wonderful and safe way to obtain 103% financing. With 100% financing becoming more scarce every day, I’ve been rechecking guidelines for traditional 100% loan programs. I’ve done plenty of FHA, VA and 100% agency loans, but that was years ago, and it’s time now to reconsider programs that promote sustainable homeownership while helping borrowers who qualify but lack a down payment.

I want to share a few highlights from my conversation yesterday with an underwriter about Fannie Mae’s MyCommunity Mortgage™. This program isn’t new, but it does require that borrowers prove income. At the peak of our market here in California, people were buying homes for which they weren’t qualified—at least in traditional underwriting terms. That’s an interesting comment all by itself, isn’t it.

The link above to MyCommunity Mortgage™ is 6 months old, and Fannie Mae is nationwide. The rules can vary by state or by a particular wholesaler’s agreement with the agencies, so I called to update myself on the current local guidelines and pricing.

Read the rest of this entry »

Mortgage rates rose a smidge this week, with the 30 year fixed ending the week out west at an average of 6.22% at .6 points, according to Freddie Mac.

Behind the Numbers

The FOMC minutes were released on Wednesday and did little to raise hopes for a near term rate cut.  Although the Fed carved out a little room to respond flexibly to whatever the economy throws at it, it remains hawkish on inflation and has hinted at a possible rate hike.  Gas price spike is sucking money out of consumers’ pockets while adding to the inflationary mix.  The March labor report was strong, unemployment remains low, and the Fed continues to act like Aunt Nellie with the vapors.

The Michigan Consumer Sentiment survey fell more than expected, but everyone knows that the consumer often worries but but continues to spend anyway.  energy and food costs pushed the PPI a bit higher, but the core rate remained flat.   The stage is set for the CPI next week.  Should be a busy week.   

Today’s message from Wells Fargo on 100% stated income/stated asset loans.

Urgent notice: Wells Fargo Home Equity will continue to have SIVA (stated income/verified assets) to 100%, however, the Stated Income/Stated Asset to 100% will no longer be offered for loans locked/registered on or after Tuesday, April 17th. Monday, April 16th will be THE FINAL DAY to get your SISA 100% loans in our system (an earlier communication incorrectly approximated a final locking date of April 23). Mark your calendars now and make sure you don’t miss the final SISA 100% CLTV opportunity.