The stock market has been moving higher as economic reports continue to show improvement. It would appear that some of the predictions from the Obama camp about a second half of 2009 recovery are, indeed, accurate. As stimulus money makes its way to state coffers, infrastructure projects are ramping up, creating new jobs in the process. More analysts are saying that the recession is ending, or has ended… and while it will take some time before we feel this on the “street” the news is still positive. The Fed’s FOMC meeting announcement also indicated that the worst may be behind us, and new data from Europe shows growth in GDP for the second quarter of this year.

Mortgage lending has undergone a tremendous amount of change in the past two years. But there is some good news here also. Jumbo loans folks! Yes, that’s right. Jumbo’s for amounts above the agency limit of $729,750 are back, and rates are decent, in the 6% range. Credit scores of at least 680 are required for loans to $2 million, and although LTV limits can be somewhat low, this is still an improvement. For example, a $1.5 million loan at 75% LTV, with a FICO score above 720 will give a rate of 6.375% fixed for 30 years. Jumbo ARMs, for example, with the same scenario as above can get a 5/1 interest only ARM at 5.75%.

What about loans for people who want to buy and do not have much of a down payment? There are more options here also! Conforming loans (to $729,750) are available with a 10% down payment on purchase transactions for both fixed rates and ARMS. There are some 95% LTV loans out there also. While MI (mortgage insurance) is required for any LTVs above 80%, interest only options can lessen the payment shock. Although I don’t personally offer FHA and VA loans, I have colleagues who do. These are the new “subprime” loans and allow borrowers with FICO scores as low as 620 to qualify. But remember that the rates for these will generally be higher than Fannie and Freddie loans (which I DO offer), so higher income becomes a “must”. Condo loans are also commanding higher rates if the LTV is above 75%. Be careful with condo purchases… because the condos themselves must pass muster. The bottom line is that investors in the mortgage secondary market, which had fled en mass, seem to be returning. If regulators do their jobs properly, then this trend should continue and our market will finally rebound. So stay tuned…

After a two week stock rally ended earlier this week mortgage
rates were improving. But earnings reports released today showed better earnings than expected and this sent stocks higher again. Combined with this reports showed new jobless claims at 584,000 for the week ending July 25, an improvement over June numbers that held at more than 600,000 claims each week. This indicates a slowing of new job losses. The volume of ongoing unemployment claims is also moving lower. Unemployment continues to be a huge concern and an indicator of the overall health of the economy, with more than 6.5 million job losses since the recession began in December of 2007.

In the Bay Area there are also cautiously positive signs that a bottom may have been reached in the housing market. This article…

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/29/BU9A190BAI.DTL

… shows that data from May shows some promising signs. Data more recently seems to indicate the continued trend of foreclosure properties
finding buyers, a very good sign. While we’re not out of the woods yet, as predicted, the second half of 2009 may show light at the end of the tunnel.

First time home buyers should get serious about buying if they want to take advantage of the $8000 tax credit they can get from the IRS, and maximize their savings on property prices. This credit ends at the end of 2009. With so many properties for sale at distressed prices it is an excellent time to buy a new home or investment property.

Sellers may wish to rethink their listing prices because HVCC went into effect in June. HVCC is the bill that placed all power over appraisers in the hands of lenders. We’ve already seen huge devaluations of properties because the lenders (who are only interested in their own profits) gain when appraisals come in low by using this to justify higher interest rates charged to borrowers. HVCC opens the door to large scale manipulation of property values by the same banks that created our economic crisis! I encourage you to write to your representatives about this issue and urge this bill to be overturned. Sellers need to remember that ultimately the appraisal will determine the amount the lender is willing to lend… so a low appraisal will supersede the amount of an accepted offer, forcing prices downward.

Today Obama announced massive changes to the regulation of financial system, putting the Fed in a position of regulatory overseer of non-bank creditors, and businesses “too big to fail”. A new consumer protection agency would also be created. These reforms are poised to reshape the entire financial market and Wall Street is clearly nervous. Banking stocks were taking a dive this morning in advance of the news. The proposal still needs to make its way through congress and there will doubtless be some compromises between what the President asks for and what becomes law. But proposed changes may restrict the business methods of banks by setting interest rate caps, eliminating certain fees, and making it harder for creditors to change terms on credit cards once the account is opened. Other proposed changes will eliminate prepayment penalties on mortgages, and possibly put an end to mortgage brokerage itself by eliminating YSP and thus warehousing of loans for secondary market sales. The new regulations will cover complex financial instruments including derivatives, an investment type that has been blamed, in part, for the current economic crisis.

The recent market rally has ended. The stock sell off has continued into this week with losses especially severe in banking stocks. Eigtheen lenders, including Wells Fargo have seen their credit ratings lowered recently, and this has factored in the losses. The good news is that treasury bonds look more attractive to investors as s result, and thus mortgage interest rates have been falling since last week. Today they stand close to where they were three weeks ago. This is good news for buyers!

Housing starts, the number of permits issued for new construction, were up nationwide in April. This is significant because this is where we’ve seen previous economic recoveries begin. This is coupled with stronger sales volume recent months. In the Bay Area our recent sales have been more than 50% foreclosures. Since jumbo loans (above $729,750) are still difficult to get at a reasonable interest rate, higher priced properties are not selling as well. This skews the sales figures for median home prices lower, but the fact that the lower priced foreclosures are selling is excellent news. Once this inventory has sold the market can recover. My best advice is to hang in there! Better times are ahead…

Mortgage rates are under pressure from Treasury Bond selloffs, further complicating recovery for the real estate market. We’ve seen home purchases of existing homes rising in volume for the last few months, which is a welcome sign of a possible turn around. But this is largely due to “fire sale” pricing on foreclosed properties combined with the availability of extremely low mortgage rates. Rates have been low because the Fed has been buying treasuries to keep yields low. But now it seems questionable whether Bernanke et al will continue to do so and this has investors spooked. So corresponding mortgage rates, especially for 30 year fixed rate loans, jumped suddenly last week to whopping increases of .5% or more. I’m hopeful that a pending announcement by the Fed regarding it’s buying of additional treasuries will be made this week, and that the Fed will, indeed, continue to buy them. If this happens, rates should go back down. However, if the Fed declines to do so we may see rates continue to climb, bad news for an already struggling real estate market.

 
The national average decline in median home prices stands at -26% since the peak of July 2006. While this is obviously a troubling number, it could be far worse. Here is Marin we are faring better than many parts of California. Median home prices for all of California in April stand 54.3% lower than in the spring of 2007, which was California’s high point in the market. But in Marin Country, as of April, our median declines are -20.13% from this time last year. When one considers that more than half of the properties changing hands these days are foreclosures and short sales (with drastic price reductions), this number is not all that bad.

 
With this in mind it would seem that Marin continues to hold it’s value exceptionally well in the face of the worst economy in a century. Sales volume is steadily increasing in 2009 thus far, a welcome trend. When will prices stabilize and (gasp!) rise again? Once foreclosed property inventories have been sold, provided unemployment rates do not rise further, and wages do not deteriorate, we should see a return to a more balanced market. It’s good to remember the basics of economics so that you keep perspective, the law of supply and demand. And if there’s one thing that’s true in Marin, it’s that this area is in demand and likely will continue to be for many years to come. We certainly have a superlative location, location, location…!

About 90% of economists predict the recession will end this year. While the fallout from it, including continuing job losses, won’t necessarily end simultaneously this is still good news. Housing prices may be at or near a bottom, and the Case-Schiller Index results released this week, through March of 2009, shows price declines of 18.7% for its 20 city index.

 
Tempering this data is Data Quick’s release of the numbers for April in California. According to Data Quick (www.dqnews.com), April 2009 in California was a better month in terms of sales volume. Sales increased by 4.8% in April, up over March 2009. Median home prices in California were still showing price declines, but by 0.9%, a slowing of the downward trend. Not great news… but good news.

 
Closer to home, Marin’s numbers are showing more price declines in April, but it’s important to remember that at least half of the sales were for foreclosed properties. The dramatic price declines will last as long as sale inventory is bloated with distress sales. The good news is that these properties are being sold… and eventually this will help.

 
Banks are still not lending as they should. In spite of the stimulus money given to them, in spite of the need for affordable financing, they continue to protect their bottom lines instead of helping home owners. Most borrowers who qualify for the government programs to modify or refinance are still being denied when they apply. Chase/WAMU has set up a location in Oakland where borrowers can meet with a modification “advisor” to try to get their loan modified. While the “advisor” was not very helpful (I went there myself), at least one can have a person to contact throughout the process. I’m recommending that anyone who needs a modification contact their lender directly. I can assist as well… so give me a call if you wish.

 
Mortgage interest rates are still very low, but off the lows of the past months. There is talk of extending the tax credit for FTHBs to others, perhaps for all people who buy in 2009. This could help normal home sales, by folks who hope to move up by selling One thing I like to remind myself in the midst of all this turmoil… what goes down must eventually go back up… so don’t give up your dreams of a better tomorrow!

Last week’s stock market rally sputtered to a stop Friday and all three major indexes opened on the down side this morning as anaylsts argue about the validity of the bank stress test results released last Thursday. But this was expected, so I don’t think there will be a major collapse of stock prices this week because of the stress tests. So far this week has been fairly flat in trading.

 
Meanwhile lenders STILL aren’t lending as they should. Nor are they modifying existing mortgages as they should. If you are angry about this and want to take action, I encourage you to write and call your elected government representatives. Your voice needs to be heard!

 
The local real estate market is heating up. Although sales figures are obviously still down comparatively from peak years, activity surrounding sales is up, a good sign. Pricing of listed properties still takes a hit in this buyer’s market, but we’re seeing numbers begin to reflect a slowing of the downward trend. Low mortgage rates are a help since this allows people to better afford Bay Area sized mortgages. I think we really are starting to see a recovery on the horizon, albeit one that has some bumps in the road ahead.

 
Next on the agenda is credit card reform. Long overdue scrutiny of credit card terms is on the Obama table, despite a huge lobbying effort by revolving debt lenders. It’s interesting to note that Capital One is now eagerly raising funds to pay back the TARP funds it received, because CEOs don’t want to conform to government rules and oversight.

 
How does this affect you? The new HVCC law, (Home Valuation Code of Conduct) which puts appraisals under the control of unscrupulous lenders means that Realtors are under more pressure than ever when it comes to property listing pricing. It also means that offers and contracts should allow additional time to close… probably at least 30 days. Major lenders are very slow to process loans right now. Be sure to have backup plans in place if one lender falls through on your purchase deals! Seller carry backs are not being allowed by many lenders right now, so use caution with these if you can. Remember, everything changes eventually. So hang in there!

Low mortgage rates and the implementation of the Obama “Making Home Affordable” program for mortgage modifications are making a dent in real estate gloom. Pending home sales for March were up 3.2% from February and 1.1% over March of 2008 according to the NAR. Meanwhile, first time home buyers are showing interest in buying homes to take advantage of the new $8000 tax credit for doing so by 12/31/09. We’re also beginning to see JUMBO loans with decent rates coming back onto some lender’s rates sheets. Today Fannie and Freddie’s increased “high cost area” loan amount limits are going back up to $729,750, from $625,500. It’s nice to have some good news to share!

 
Have we reached bottom yet? The stock market is acting like it thinks so… with a solid 5 week rally through most of March and another rally today that sent the DOW up 2.6% and the S&P up 3.4% to a four month high point. Stress test results are due Thursday but these may have less impact than once thought since Washington was indicated that none of the financial institutions involved will be liquidated as a result of the test findings.

 
Big changes started May 1st affecting the way mortgages are done. A federal bill called HVCC is prohibiting mortgage brokers from ordering their own appraisals beginning May 1st. This is a terrible change that puts control of property valuations solely in the hands of lender controlled appraisers. We’ve already seen evidence that this will cause more abuse of the home valuation system… and will increase costs for borrowers. Write and call your representatives about this one since it will definitely effect you!

 
So we’re not out of the woods yet, but there are glimmers of light ahead. We still need lenders to lend. And this seems to remain the biggest hurdle for the real estate market and the broader economy. Hopefully lending will increase in May, but stay tuned for updates on this.

Finally, for those of you who are wondering, I am still here. I just needed to take a break from writing this update for a few months due to my workload. Never fear. All is well! I hope you have a great week! Remember, each day is a new opportunity…

National loan modification guidelines were announced today as part of the “Making Home Affordable” program. The Obama administration’s two part program promises to help up to 9 million homeowners. One part of the plan is designed to encourage lenders to modify the loan terms for up to 4 million homeowners, and the second arm of the plan has a goal of refinance up to 5 million homeowners into more affordable fixed-rate loans. The loan modification program runs through 2012.

How do these programs work? For the modification program, borrowers will have to provide their most recent tax return and two pay stubs, as well as an “affidavit of financial hardship” to qualify. Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1 2009, or earlier. Mortgages for single-family properties that are worth more than $729,750 are excluded, as are investment properties, second homes, and commercial properties. Lenders could reduce a borrower’s interest rate to as low as 2 percent for five years. Rates would then rise to about 5 percent until the mortgage is repaid.

Since many homeowners will not qualify for these programs companies providing loan modification services will likely be needed to help. If you want information about loan modifications, please contact me! There are a lot of scams out there so you need to be very careful. I can point you in a safe direction and also give you a free analysis to see if this is the best course of action for you BEFORE you give anyone money to modifiy your loans.

How will this affect you? Since the goverment modifications only lower rates for 5 years, if you want your loans modified then you should seriously consider contracting a law firm to handle negotiations for you so that you can get a permanent rate reduction. The cost of modification with the law firm I send my clients to costs 1% of the loan amount, less than the cost of refinancing. One does NOT need to be late on payments to modify a loan, and foreclosures can also be stopped with attorney involvement. This is a prime time to get bargains on real estate if you plan to build this type of investment portfolio. Since stock values continue to decline, moving your

The $790 billion stimulus package passed Congress and President Obama announced his plan today to use part of those funds, $75 billion to be exact, to match costs to lenders in reducing interest rates on modified mortgages. This provides an incentive to lenders to modify troubled loans rather than to foreclose. Bankruptcy law will change also, allowing judges to modify both mortgage balances and interest rates on principle residences in the future.

Timothy Geithner, our new Treasury Secretary, spoke last week outlining the ways he is approaching the problem of getting the real estate and credit markets back on track. He pledges new transparency on the way treasury money will be used and announced a new web site, www.financialstability.com, that will post all of the terms of agreements with banks who receive federal aid. The US Treasury and Federal Reserve will purchase toxic MBS from lenders, eventually reselling the assets to private investors again once the crisis clears.

The terms of further bank aid were outlined broadly last week as well; 1) banks must pass a financial “stress test” before they will be given any further liquid injections 2) an investment fund of $500 billion to start will be created to buy toxic assets (MBS), but which will also have a plan to attract investors to buy those assets from the fund so that there is no great loss to taxpayers and, 3) up to $1 trillion will be advanced to shore up consumer credit (auto loans, school loans, etc.) and to possibly supplement interest rates on these debts to enable modifications, lowering both interest rates and principle balances for consumers.

How will this affect you? We’re already seeing an increase in sales volume throughout the Bay Area as foreclosure inventory is snapped up. This helps to clear the excess inventory to stabilize the market. As this inventory gets cleared, prices should stabilize. Job losses will influence the speed of a housing recovery since property value trends follow availability of well paying jobs. The passing of the stimulus package, which gives money to states to fund infrastructure projects, schools, and other programs will be important to stem greater job losses locally. Low mortgage rates and the $8000 First Time Home Buyer tax credit, will help the real estate market rebound. Here in the Bay Area we are well positioned to make the most of a 2009 recovery.