South Orange County Blog from Bob Phillips

Case-Shiller Index – The California Version

Posted in Real estate by southorangecounty on March 31, 2010

Case-Shiller Monthly Change Dec 2009 - Jan 2010

A surprisingly strong rebound in California’s real estate market helped lift a key home price index for the eighth month in a row.

That’s good news for people who plan to sell their homes this spring. Prices are now up almost 4 percent from the bottom in May 2009, but still almost 30 percent below the May 2006 peak.

Prices rose 0.3 percent from December to January on a seasonally adjusted basis, according to the Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday. Prices increased in 12 cities in the index.

The biggest monthly gain was in Los Angeles, where prices rose 1.8 percent from December. And real estate agents say there’s a distinct sense the worst of the downturn is over.

Buyers are “seeing that prices are creeping up,” said Tony Middleton, a real estate agent with ZIP Realty who concentrates on the San Fernando Valley. “They’re losing bids on homes and they have to bid again.”

Prices in San Diego, meanwhile, rose by almost 0.9 percent. Phoenix had the third-largest gain at 0.8 percent.

Compared with the same month last year, the 20-city index was off just 0.7 percent from last year at a reading of 146.32. That was the smallest decline in almost three years and in line with analysts’ expectations, according to Thomson Reuters.

Rising home prices also could boost consumer optimism. For most Americans, their home is their largest asset, so as values climb from the depths of the housing bust, homeowners feel wealthier and more comfortable spending. And, for homeowners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.

Consumer confidence rebounded in March after a February plunge, according to a survey released Tuesday. The Conference Board’s Consumer Confidence Index rose to 52.5 in March, recovering about half of the nearly 11 points it lost in February.

Still, shoppers remain cautious and there are signs that last year’s housing rebound won’t last. Home sales sank during the winter, and government incentives that have propped up the market are ending.

Another reason for the positive news is simply that the Case-Shiller index measures a three-month average of home prices. So January’s report included November’s strong home sales.

However, bargain-hunting homebuyers continue to pack open houses in California, often facing off with investors for foreclosed homes.

“We’re seeing multiple offers in most of the markets here in the San Francisco Bay area,” said David Kerr, an agent with ZipRealty in Oakland, Calif. “People are getting off the fence.”

In February, bank-owned properties made up 44 percent of all resales in the state, according to MDA DataQuick. In Southern California, they accounted for more than half of resales.

With such high demand, supply is dwindling, driving prices higher.

Meanwhile, the state’s unemployment rate has flat-lined of late, and that’s made buyers more comfortable about purchasing a home than they were just six months ago, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.

California home sales will likely get a boost in coming months thanks to a new serving of government stimulus.

Last week, state lawmakers enacted a tax credit of up to $10,000 for homebuyers that kicks in May 1. The state allotted $100 million for first-time buyers and another $100 million to anyone who buys a newly built home. California had a round of tax credits last year that proved to be popular; that program ended in July.

The latest incentive picks up where a federal first-time homebuyer tax credit of up to $8,000 is scheduled to leave off when it expires at the end of April. Should the Obama administration extend the federal tax break, that could give homebuyers in California even more reasons to buy.

Still, there remain pockets of weakness. Sales of homes priced above $500,000 are sluggish. And despite rising prices, more than one-third of all homeowners with a mortgage still owe more on their loans than their homes are worth, according to First American CoreLogic.

Among the cities showing monthly price declines in January, the biggest drop was in Portland, Ore., where prices fell 1.8 percent from December. Chicago and Seattle saw declines of 1.7 percent, while prices in Atlanta fell 1.5 percent.

LOS ANGELES — Courtesy of, 3-30-2010 – ALAN ZIBEL AND ALEX VEIGA

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Case-Shiller Shows Home Price Improvement In A Majority Of Cities Nationwide

Posted in Real estate by southorangecounty on March 31, 2010

Case-Shiller Monthly Change Dec 2009 - Jan 2010

Standard & Poors released its Case-Shiller Index Wednesday. The report shows that, on a seasonally-adjusted basis, between December and January, home prices rose in more than half of the index’s tracked markets.

The strength of this month’s Case-Shiller report, however, should be put in context.

For one, the report is on a 2-month delay; it’s showing data from January, before the start of the Spring Buying Season and before the rush to beat the tax credit. Anecdotally, buyer interest has been strong since, leading to the types of multiple offer situations that drive home prices northward.

In other words, home values may be even higher than what’s reflected in the January Case-Shiller data above.

Furthermore, the Case-Shiller Index measures home values in just 20 cities nationwide and they’re not even the 20 biggest cities. Houston, Philadelphia, San Antonio and San Jose are specifically excluded from the report and each ranks among the country’s 10 most populous areas.

Despite its flaws, though, the Case-Shiller Index remains important. Much like the government’s Home Price Index, the private-sector report helps to finger broad housing trends and housing is still considered a keystone in the U.S. economic recovery.

Even if it IS two months slow.

I’ll have the Orange County version of this report in a few minutes…..please stay tuned.

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Get Your FHA Mortgage Application Started — Fees Increase 1/2 Percent Starting Monday, April 5, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on March 30, 2010

FHA closing costs increase by 1/2 percent April 5 2010

Starting Monday, April 5, 2010, getting an FHA mortgage will be more expensive for borrowers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio. 

The changes include the following:

  1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
  2. A plan to reduce seller concessions from 6 percent to 3 percent
  3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA’s formal request, in summary:

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers. 

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

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Short Sales are Rapidly Becoming Both Easier and Faster

Posted in Real estate, short sales by southorangecounty on March 29, 2010

Short Sales are Rapidly Becoming Both Easier and Faster

NEW YORK ( — Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.

“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America, the country’s largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.

Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”

This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.

“In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.

“Things would just fall into a black hole and not come out again,” added Weintraub.

And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.

In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”

And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.

The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.

Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.

The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.

The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.

Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.

By Les Christie, staff writer,  March 29, 2010

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What’s Ahead For Mortgage Rates This Week : March 29, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on March 29, 2010

Non-Farm Payrolls Mar 2008-Feb 2010Mortgage markets tanked last week, raising rates to their highest levels in a month. 

Most of the losses occurred Wednesday in what was the worst 1-day mortgage market performance in more than 6 months. Even Friday’s rally could barely dent the losses. Most of the movement was tied to geopolitical concerns and worries of a ballooning federal debt load

The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.

This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.

The non-farm payroll report is expected to show net job growth of 187,000 in March. This is a large number as compared to last month’s net loss of 36,000 job. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for mortgage rates.  This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008. It’s reasonable that mortgage rates will rise after its end, therefore.

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Orange County median home price 5.6% too low?

Posted in home affordability, Real estate by southorangecounty on March 28, 2010

Economists at IHS Global Insight and PNC Financial conclude that Orange County homes were priced 5.6% too low in 2009’s fourth quarter.

Comparing local house-sale prices to historical real estate and economic trends, IHS-PNC estimates that Orange County homes were undervalued for the 7th consecutive quarter after being overvalued for the previous 20 quarters.

The latest 5.6% undervaluation — on par with the likes of Louisville, Ky.; Jefferson City, Mo.; Fairbanks and Abeline, Texas — was a roughly equal to the previous 5.5% in Q3. The current wave of Orange County undervaluation peaked at 11.4% in Q4 of 2008.

Also  in the IHS report

  • For historical memory sake, Orange County overvaluation peaked at 33% in 2006’s Q2.
  • Atlantic City, N.J., was the most overvalued nationally (33% too high) in Q4 2009.
  • One reason the undervaluation is shrinking locally is the rising price of homes sold. By IHS-PNC math, O.C. home pricing was up 6.4% in a year as 2009 ended — 3rd biggest gain among the 330 regions tracked nationwide.
  • The D.C. region had the largest Q4 price gain (+10.5%) while Las Vegas had the biggest loss (-19.4%).
  • The report concludes: “Two years of relentless house price depreciation finally ended in the summer of 2009. The second half of 2009 saw minimal changes in home prices, signaling stabilization at long last, if not yet recovery. … We ended 2009 with no extremely overvalued metros, a sharp contrast to 2005 when 52 metro areas were judged to be extremely overvalued.”

March 22nd, 2010, originally posted by Jon Lansner in the O.C. Register

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The HAMP Loan Modification Evaluator Tool and Questionnaire

Posted in home affordability, Loan modifications, Real estate by southorangecounty on March 28, 2010

The Administration’s Making Home Affordable Program has put a couple of great tools on their website that can help answer your questions about a possible Loan Modification. ( Part of HAMP – the Home Affordable Modification Program.)

There is an Evaluator Tool and a Questionnaire.

If you can no longer afford to make your monthly loan payments, you may qualify for a loan modification to make your monthly mortgage payment more affordable. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible.  To see if you may be Eligible fill out a brief questionnaire.  For the evaluator tool go here.

If you are having difficulty – you are not alone – check out some of these resources, for some solutions – and good luck!

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Some first time California home buyers seem poised to get $18,000 in tax credits.

Posted in Down payment assistance, home affordability, Real estate, taxes by southorangecounty on March 28, 2010

There is an interesting wrinkle with the new bill just signed by Governor Schwarzenegger, regarding tax credits for California home buyers – state bill AB 183.

Here is some language from that bill: “Requires buyers to close escrow between May 1 and Dec. 31 to qualify.” ( For an up to $10,000. tax credit.)

The interesting part of that is this: The Federal first time homebuyer tax credit of up to $8000. clearly states that “The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.” ( From the Government’s Making Home Affordable website: )

So, if I read that correctly – and remember, I am NOT a qualified tax preparer, or attorney – that seems to suggest that if you are IN escrow before May 1st, 2010, and close escrow prior to July 1st, 2010, you might qualify to receive BOTH tax credits.

If you happen to be one of those fortunate California home buyers, and you seem to qualify, you should definitely look into this potential windfall.

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Orange County median home price up 10.5% in year

Posted in home affordability, Real estate by southorangecounty on March 26, 2010

For the 22 business days ending March 8 – DataQuick’s latest homebuying report — Orange County saw …

For the 22 business days ending March 8
Slice Price Yr. ago Sales Yr. ago
Houses $500,000 +13.6% 1,559 -4.1%
Condos $288,750 +11.5% 812 +15.7%
New $523,500 +6.5% 101 +26.3%
All O.C. $420,000 +10.5% 2,472 +2.7%
  • $420,000 median selling price that is +10.5% vs. a year ago and -35% below June 2007’s peak of $645,000.
  • The most recent median is 14% above the cyclical low hit in January 2009 at $370,000 — a current bottom that was -43% below the peak.
  • Prices fell on a year-over-year basis from Sept. 2007 through August. (Worst at -31.5% in August 2008.)
  • Single-family homes resell for 32% less than their peak pricing (June ‘07) while condos sell 39% below their peak in March 2006. Builder prices for new homes are 39% below their February ‘05 top.
  • Single-family homes were 73% more expensive than condos in this period vs. 70% a year ago. From 1990-2008, the average house/condo gap was 57%.
  • In this most recent period, O.C. shoppers bought 2,472 residences — that is +2.7% vs. year-ago buying activity. (From 1997-2006, monthly sales averaged 4,304 per month.)
  • Builder’s new homes sales were 4% of all residences sold in the period vs. 3% a year ago. From 1990-2008, builders did 15% of the selling.

How did your neighborhood fare? Check our ZIP-by-ZIP data HERE!

March 26th, 2010 · from Jon Lansner, of the O.C. Register

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Home Price Index Shows National Home Values Slightly Lower, But Not Locally.

Posted in home affordability, Real estate by southorangecounty on March 26, 2010

Home Price Index April 2007 to January 2010

Home values fell again in January, according to the Federal Home Finance Agency’s Home Price Index. Values were reported down 0.6 percent, on average.

We say “on average” because the Home Price Index is a national report. It doesn’t capture the essence of a local market , or even a city market.

The most granular that the monthly Home Price Index gets is regional and January’s report shows that:

  • Values in the Mountain states rose 2.0%
  • Values in the Pacific states were flat
  • Values in the East North Central states fell 1.8%

It’s hardly helpful for home buyers entering the market, or home sellers trying to properly price a home.  Furthermore, because the Home Price Index reports on a 2-month delay, its data fails to reflect the current market conditions.

Versus January — the period from which HPI data is collected — mortgage rates are lower, buyer activity is up, and the federal home buyer tax credit is closer to expiring.  These each can have an impact on housing.

Ultimately, national real estate data like the Home Price Index is best suited for lenders and policy-makers.  National data helps to identify trends that shape formal policy, but it doesn’t help you, specifically. 

Since peaking in April 2007, the Home Price Index is off 13.2 percent.

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