South Orange County Blog from Bob Phillips

Three Tips To Get The Best Financing On Your Second Home Purchase

Three Tips To Get The Best Financing On Your Second HomeAre you buying a property as your second home? Perhaps you are looking for a small cottage or apartment where you can escape to for your vacations, or maybe you want to have another home closer to your relatives?

Maybe you want to rent out your second property and make a steady income from your investment. Whatever the reason, a second piece of real estate can be a fantastic investment. However, sometimes getting a mortgage on your second home can present a challenge.

Generally, a mortgage lender will have tougher standards for vacation home — or second home — loans than primary home loans. This is because usually when you are buying a second home your finances will be stretched thinner and you will have less money to spare due to already paying a mortgage on your primary home.

This additional risk may mean that your second home mortgage can be more difficult to close and likely could carry a higher interest rate.

Here are three tips to keep in mind that will help you to get the best mortgage on your second property:

Build up a decent amount of savings.

Your mortgage lender will want to be able to see that you have a large amount of savings in reserve so that you will have enough to pay for the mortgage even if you were to lose your job or other income source.

Pay off any credit card or installment debt.

Many lenders will be hesitant to approve your second home mortgage if they see that you have a lot of debt on your credit card. They will want to see that you have a low debt to income ratio so that you will be able to pay back the loan.

Use your primary home as a resource.

If you have always made your payments on time and you are well on your way through paying off your first house, you may have equity to borrow against for some or all of your second home purchase. Be careful here though.  There is a little known IRS regulation that requires the second home be financed under it’s own home loan within 90 days of closing to get the best tax advantages.

These are just a few tips to keep in mind in order to make getting a mortgage for your second property as easy as possible.

To find out more about investing in a second home or vacation property, give me a call or text – 949-887-5305 – or shoot me an email:

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Zillow: Housing inventory turnaround begins

Posted in Existing Home Sales, New Home Sales, Pending Home Sales, Real estate, Real Estate Trends by southorangecounty on June 19, 2013

Zillow: Housing inventory turnaround begins

By Megan Hopkins, of    • June 14, 2013

Although year-over-year, housing inventory was down in June, it has improved since the beginning of the year as the spring selling season brought with it an increased inventory, according to Zillow.  This report comes a day after released its own inventory report, which also indicated a lessening in the inventory crunch.

Overall, the number of listings on Zillow dropped 12.2% year-over-year earlier this month. This is slightly brighter than the 17.5% shortfall seen in January.

June’s year-over-year inventory levels improved compared to January in 70 metros. Among the 30 largest metros covered by Zillow, those with the highest degree of year-over-year inventory improvement between January and June were Phoenix and San Diego, with 31.9 percentage point improvement and 14.9 percentage point improvement, respectively.

Between January and June, inventory shortages worsened in 29 metros, and in 11 of the top 30 largest metros.

Las Vegas, Chicago and Washington D.C. were the large metros that saw inventory constraints tighten the most since the beginning of the year, decreasing by 21.8 percentage point, 12.3 percentage point and 9.8 percentage point, respectively.

“As the recovery has progressed, inventory constraints have played a major role in rapidly pushing up home values in many areas, as increasing demand for homes ran headlong into limited supply. It has always been just a matter of time before more supply came on the market to meet this demand, as homebuilders built more new homes and sellers entered the market to capitalize on recent robust appreciation in their own homes,” said Zillow Chief Economist Stan Humphries.

He added, “Inventory will likely remain below year-ago levels for a while yet, as builders ramp up capacity and sellers wait to squeeze every drop of equity from their home before listing. But a corner has been turned. Going forward, as this new supply makes its way to market, we expect the pace of home value appreciation to slow down from unsustainably high annual levels of 5% or above to more moderate levels closer to historic norms of 3% or 4%. ”

The greatest year-over-year decreases were seen in more expensive homes across the country. Bottom-tier properties for sale on Zillow nationwide fell only 2.5% in early June compared to June 2012.

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Home Builder Confidence Jumps By Widest Margin Since 2002

Posted in Housing Analysis by southorangecounty on June 19, 2013

Home Builder Confidence Jumps By Widest Margin Since 2002U.S. housing markets are gaining as demand for homes exceeds available supplies in many areas. The National Association of Home Builders/ Wells Fargo Housing Market Index (HMI) for June increased by eight points over May’s reading to achieve a positive reading of 52. This last happened in August-September of 2002, when HMI monthly readings also jumped by eight points.

Any reading over 50 indicates that more builders consider housing market conditions positive than negative. June’s reading was the first time the HMI reading surpassed a reading of 50 since April 2006.

Limited Inventory Drives Sales Of New Homes

Rick Judson, NAHB Chairman, cited short supplies of existing homes as a factor driving sales of new homes. As demand for homes grows and inventories of available existing homes fall, buyers are increasingly buying new homes.

Sales of existing homes continue to be impacted by factors such as homes worth less than the mortgages held against them and sellers taking a “wait and see” attitude toward listing their homes for sale.

All three of the components of June’s national HMI gained:

  • The reading for current sales conditions rose from 48 to 56.
  • Expectations for future sales gained nine points to 61.
  • June’s reading for buyer foot traffic in new homes gained seven points for a reading of 40.

Regional Home Builder Confidence Grows In 3 Of 4 Regions

The 3-month rolling average readings for regional home builder confidence showed increases in three of four regions:

  • Northeast: Builder confidence increased by one point to 37.
  • Midwest: Builder confidence rose by one point to 47.
  • South: Builder confidence rose by four points to 46.
  • West: Builder confidence dropped by one point to 48.

High demand and a shortage lots available for building new homes contributed to the West’s slight decrease in builder confidence. Overall, increasing home builder confidence is a sign of economic recovery, but as the economy gains momentum and home prices continue rising, mortgage rates can be expected to rise as well.

Housing Starts Up 28% Annually In May

The U.S. Department of Commerce reported Wednesday that national housing starts rose by 6.80 percent from April’s revised reading. May’s reading of 914,000 housing starts was reported on a seasonally adjusted annual basis. May’s reading was 28.80 percent higher than for May 2012.

Single-family housing starts (one to four units) fell short of investor expectations of 953,000 but exceeded April’s revised reading of 856,000.

Multi-family housing starts surpassed single-family housing starts, but any additions to low inventories of single-family homes could ease the difference between high demand and low inventories of available homes. Meeting demand for homes would temper rising home prices, which could help potential buyers qualify for mortgage loans.

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California home prices soar to new highs

Posted in Home Values, Mortgage Rates, Real estate, Real Estate Trends by southorangecounty on June 18, 2013


California home prices soar to new highs

By Christina Mlynski,   • June 17, 2013 

California home prices increased by the most in 33 years as a result of strong sales growth in higher-priced markets and continued housing supply shortage, pushing up median home prices in May, the California Association of Realtors said.

Closed escrow sales of existing, single-family detached homes totaled a seasonally adjusted annualized rate of 431,370 units, the report noted.

Meanwhile, sales were up 1.9% in May, up from a revised 423,420 units in April, but down 3.6% from a revised 447,530 last year.

The statewide figures represents what would be the total number of homes sold during 2013 if sales maintained the May pace throughout the year and is adjusted to account for seasonal factors that influence home sales, CAR explained.

“It’s encouraging to see median home prices across most parts of the state continuing to recover. The Bay Area, in particular, has been experiencing strong price appreciation, thanks to the region’s robust economic growth, extremely low housing inventory, and an increasing demand from international buyers,” said CAR President Don Faught. 

He added, “San Francisco County’s median home price, for example, increased 28% from last May and has just surpassed its previous record high reached in May 2007.”  

The median price of an existing, single-family detached home rose to $417,350 in May, up 3.6% from $402,706 in April and also rose 31.9% from the previous year, marking 15 straight months of annual price increases, CAR noted.

The year-over-year increase was the highest since at least 1980, when CAR began tracking the data.

“While home prices are increasing at levels above those observed in 2006-2007, the fundamentals of the housing market are much more solid than what we experienced a few years ago,” said CAR chief economist Leslie Appleton-Young. 

She added, “More home buyers are putting down larger down payments, and many of them are opting for more stable loan products.” 

However, not all cities within California are showing such positive housing recovery news.

For instance, Mortgage Resolution Partners recently entered into contracts with additional municipalities to form the use of eminent domain programs, including Richmond, Calif.

The use of these programs is to seize or restructure underwater residential mortgages, many of which are bundled into private-backed securities.

The available supply of home for sales dipped in May, and was down markedly from a year ago. 

The May Unsold Inventory Index for existing, single-family detached homes was 2.6 months, down from 2.8 months in April and down from a revised 3.6 months from the previous year.

Meanwhile, homes sold quicker in May, with the median number of days it took to sell a single-family home decreasing to 27.1 days in May, down from 27.9 days in April and also dropping from a revised 45.7 days last year, the report noted.

Mortgage rates ticked up in May, with the 30-year fixed-mortgage interest rate averaging 3.54%, up from 3.45% in April, but down from 3.8% a year earlier, according to Freddie Mac

“Historically low mortgage rates have reduced monthly mortgage payments substantially, making owning a house more affordable, even with rising home prices,” Appleton-Young concluded. 

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RealtyTrac Foreclosure Report Shows 28% Decrease From May 2012

RealtyTrac Foreclosure Report Shows 28 Percent Decline From May 2012

Foreclosure actions increased by 2.0 percent in May from April’s 75 month low point for foreclosure activity according to RealtyTrac’s U.S. Foreclosure Market Report released June 11. However, the good news is that May 2013 foreclosure filings were still 28 percent below May 2012 filings.

RealtyTrac reports that approximately one in 885 homes were in some stage of foreclosure in May. This does not mean that 1 in 885 homes was lost to foreclosure, but it does indicate that documents related to some phase of foreclosure (Notice of Default, Notice of Trustee Sale, and Bank Reposession) were filed.

Actual lender repossessions (REO) increased by 11 percent in May, but were down by 29 percent as compared to May 2012. 33 states reported increases in REOs with North Carolina, Oregon and Wisconsin having the highest numbers of REO properties added.

Judicial Foreclosure States Lagging In Clearing Foreclosure Inventory

Foreclosure starts were up by 4 percent in May, but were 33 percent lower than for May of 2012. States using judicial foreclosure proceedings were 5 of the top 6 states for foreclosure filings. The state of Nevada, which uses non-judicial foreclosure proceedings, was second after Florida and ahead of Ohio, South Carolina and Illinois.

In general, judicial foreclosure proceedings take longer to complete than non-judicial foreclosures. This results in homes being unavailable for sale for longer periods of time. Lenders are required to complete the foreclosure process and in some cases, they must await expiration of a redemption period before a foreclosed home can be repaired and sold.

In states using non-judicial foreclosure proceedings, the time between the initial foreclosure filing and the foreclosure sale can be as little as three to four months. Quickly turning over foreclosed homes is helpful for improving regional housing markets and making more homes available for purchase. Economists have recently cited low inventories of homes as holding back housing markets in some areas.

California is NOT a judicial foreclosure state, and bank owned properties are a very small percentage of our present inventory.

A lot has been said – by doom and gloom bloggers, and their followers – over the past few years, about the so called “shadow inventory” of foreclosure houses, just waiting for prices to come up before being unleashed upon the public – thereby pushing prices back downward.

If such a myth was anywhere close to being accurate, this past 12 months of lower housing inventory WOULD have been the ideal time for lenders to have taken advantage of.  Instead, the reduction of the number of the REO’s ( Bank owned properties.) coming onto the local California real estate market has actually worsened the problem – helping to make prices rise, in almost unprecedented fashion.

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What’s Ahead For Mortgage Rates This Week – June 17, 2013

Posted in Consumer Confidence, Housing Analysis, Mortgage Rates, Real Estate Trends, Weekly Review by southorangecounty on June 17, 2013

What's Ahead This Week - June 17, 2013Last week’s news was relatively quiet with no data significant to the mortgage lending released until Wednesday, when the federal government announced a $138 billion budget deficit for May.

According to the U.S. Treasury this figure is 11 percent higher than for May of 2012, but the federal budget is expected to come in with less than a -$1 trillion deficit for the 2013 fiscal year, which runs from October to September.

The Treasury estimates that the 2013 budget deficit will come in at approximately -$642 billion, well below fiscal 2012’s deficit of -$1.1 trillion. The federal budget has been running deficits over -$1 trillion since 2008.

Employment Market Continues To Strengthen

On Thursday, the Weekly Jobless Claims report brought good news; jobless claims fell from the prior week’s 346,000 jobless claims to 334,000 jobless claims. This was also less than expectations of 350,000 jobless claims. As more workers gain steady employment, this will enable more would-be home buyers to become active buyers.

May Retail sales also showed slight improvement as they moved from 0.60 percent from April’s 0.10 percent.

According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), the average mortgage rate for a 30year fixed rate mortgage rose from last week’s 3.91 percent to 3.98 percent with discount points unchanged at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose from last week’s 3.03 percent to 3.10 percent with discount points holding at 0.70 percent.

Whats Coming Up This Week

Next week’s economic news schedule has a number of reports due including Wednesday’s FOMC statement and Fed Chair Ben Bernanke’s press conference. This meeting and press conference are significant as any move by the Fed to reduce or cease its current quantitative easing (QE) program could cause mortgage rates to rise further.

Monday’s news includes the Home Builders Index for June. Tuesday brings the Consumer Price Index (CPI) for May and the Core CPI, also for May. The indices measure prices paid by consumers for goods and services; the Core CPI eliminates the volatile food and energy sectors included in the CPI. Rising or falling consumer costs influence how much discretionary income consumers have for saving toward buying a home.

No news is scheduled for Wednesday other than the FOMC statement and press conference.

Thursday brings the Existing Home Sales Report, Weekly Jobs Report, Freddie Mac PMMS and Leading Indicators. These reports are expected to provide news about U.S. housing markets, mortgage rates and economic influences impacting consumers.

There is no economic news scheduled for Friday.

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Orange County a Bright Spot in Economic Outlook, Economists Say

Posted in Housing Analysis, Real estate by southorangecounty on June 14, 2013

Orange County a Bright Spot in Economic Outlook, Economists Say

Cuts in federal spending and insurance company losses won’t hold back a surging Orange County economy largely thanks to a robust local housing market, Chapman economists forecast.

Posted by Paige Austin, California Patch (Editor), June 13, 2013 at 07:03 pm

 A revived housing market will propel a continuing economic recovery for the state and Orange County in 2014, with only the federal government proving a drag on the revival, Chapman University economists said this week.

“Our economy — California and Southern California — has been underperforming the U.S. growth since 2007, since the recession started,” said Esmael Adibi, director of the university’s Anderson Center for Economic Research. “But last year was the first year that job creation surpassed job creation at the U.S. level, and this year and next that trend is going to continue mainly because our biggest drag was in the housing market and now it’s coming back.”

The housing market’s resurgence also boosts other markets such as construction and retail with homes being built and residents filling them with furniture, Adibi said.

“The only sector to be under pressure is the federal government with sequestration,” Adibi said, referring to the automatic spending cuts approved by federal lawmakers.

“In the short term that’s going to be negative for the economy,” Adibi said. “But over the long term it is healthier for our government to have a reduction in the deficit.”

The “only sector that’s going to show job losses is the federal government, which some people say is a blessing because they’ve grown too much,” Adibi added.

Federal money will fund the state-managed Affordable Care Act, which will expand insurance coverage, but that too will offer mixed blessings to the economy, Adibi said.

“Like anything else you have positives and negatives,” Adibi said. “Some people will gain and some will lose. Hospitals will benefit from the Affordable Care Act, which will really kick in 2014, but insurance companies in some areas will suffer a little bit.”

Physicians should see an increased demand, but small business owners will have to pay more to cover employees, Adibi said.

“Some (small business owners) will be able to pass it on to consumers, but some will have to eat it,” Adibi said.

Orange County’s economy will also benefit from an improving tourist industry, Adibi said.

“Obviously we see strength all over the state, but Orange County is going to benefit proportionally better than the state as a whole … with other sectors outperforming the state such as healthcare, leisure and hospitality, thanks to destinations like Disneyland and Knott’s Berry Farm,” Adibi said.

Chapman’s economists say housing affordability is at an all-time high nationally.

Job growth was above average at 2.3 percent last year, the economists say.

Construction spending is expected to increase by about 16 percent in the coming fiscal year, the economists say.

The Chapman forecast projects a gain of 32,000 jobs in Orange County, or a growth rate of 2.3 percent, and 307,000 jobs in the state, or 2.1 percent higher, this year. Construction jobs should increase at 4.3 percent in Orange County, the experts predict.

The median family income in the county is expected to rise from $83,000 last year to $88,000 in 2014.

Low mortgages rates and home prices coupled with rising income will fuel higher demand for housing, the experts predict. A corresponding increase in housing prices will follow.

Home prices are forecast to rise by 8.8 percent in Orange County, compared with 7.8 percent statewide.

– City News Service 

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Why It’s Critically Important To Have A Home Inspection

Posted in Home Buyer Tips, Home buying, Home How To, Home Maintenance, Real Estate Tips by southorangecounty on June 13, 2013

Why It's Critically Important To Have A Home InspectionMany home buyers have found the perfect house, signed on the dotted line and may think they’ve watched enough home improvement shows to know if the home they’re getting is in good shape. Unfortunately, some buyers make the mistake of skipping a home inspection in order to save a little cash.

Even if a home has already stolen your heart and you’re ready to pay for it as-is, you need to bite the bullet and hire a home inspector to let you know what repairs and financial repercussions await you.

Why You Should Hire A Home Inspector

You might know a thing or two about home remodeling and repairs. However, most people are not experts on the inner workings of a home. That is why it’s important to hire a professional to search for potential furnace issues, electrical wiring mishaps, plumbing weaknesses or roofing deterioration to name a few.

While a home might look like it’s in perfect condition on the surface, there could be major issues hiding beneath its façade. That’s why it really is imperative for your safety that you hire an inspector to scrutinize the bones of your home. Understanding any imperfections may also help you budget for immediate and future repairs.

When to Schedule the Home Inspection

Once you’ve signed a purchase contract, you’ll want to schedule a home inspection before the inspection period has ended. Even though you’ve signed the offer, an inspector could just find something that you just cannot live with or afford to fix.

While you would normally schedule an inspection after you’ve signed a contract, it’s important to have an inspector or two picked out beforehand. Ask your real estate professional or friends and family for referrals and then contact the inspectors for pricing and a list of what they will and will not cover at the inspection.

Once again, remember that the cheapest price may not be the best deal on home inspections.  Have a good understanding of what, and who, you are investing in.

Even if you do know a lot about the structure, plumbing and wiring of houses, don’t let your ego get the better of you. It’s important to shell out the additional money to hire an inspector and cover your assets. You’d hate to end up with a home that needs major renovations and not have known about it.

For more information on hiring a professional for your South Orange County home inspection, shoot me an email or give me a call.

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Homeowners — Are You Making These Mistakes Planning Next Year’s Taxes?

Posted in Around The Home by southorangecounty on June 12, 2013

Planning For Your Next Year Tax Deductions

Filing your taxes can be a complicated and confusing process. If you are a home owner you may have many different home tax deductions and credits to consider.

Since we recently passed the filing date for 2012 taxes, it may be a good time to plan for next year and get your tax tracking systems in place. Check carefully to make sure that you are not making any of these common homeowner tax mistakes – which could cost you money or get you in trouble with the IRS.

Miscalculating Your Home Office Tax Deduction

If you work from home, you will be able to deduct a percentage of your housing costs for your home office. However, most people don’t know how to calculate this and don’t realize that it also has to be recaptured when you eventually sell your home. You will only want to claim it if it is worth it, so make sure you know exactly what you can write off.

Failing To Keep Track Of Home Expenses

Don’t forget to keep a record of home maintenance, repair expenses and any other relevant documents as you go along.   The money you spend on improving your property can help offset future capital gains tax. Keeping good records will save you a lot of headaches when tax time comes around.

Forgetting To Pay Tax On Capital Gains

If you have sell your primary residence this year, you will need to pay capital gains tax on any profit that you have received. Capital gains are the amount that you gained on the property’s value – so if you bought it for $150,000 and sold it for $300,000, your capital gains are $150,000. You may be able to exclude $250,000 of any profits for taxes, or $500,000 if you are a married couple if this exclusion stays the same as in 2012.

Deducting The Wrong Year For Property Taxes

Remember that you must take the tax deduction for your property taxes in the year that you have actually paid them. No matter what the date is on your property taxes bill, you should enter the amount that you paid in the calendar year. If you confuse this part, you might end up claiming the incorrect amount for the year.

These are just a few of the common mistakes that home owners can make when filing their taxes. Avoiding these mistakes will ensure that you pay the right amount and avoid any hassle from the IRS.  Also, please double-check all of these suggestions with a qualified, licensed tax preparer in the South Orange County  area.

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Increasing May Jobs Report Shows Strengthening Economy

Posted in Financial Reports by southorangecounty on June 11, 2013

Increasing May Jobs Report Shows Strengthening EconomyThe U.S. Department of Labor released its Non-Farm Payrolls and National Unemployment Rate reports Friday showing 175,000 jobs were added in May, which surpassed expectations of 164,000 new jobs and April’s reading of 149,000 jobs added. The jobs added in May were largely from the private sector.

However, the national unemployment rate for May was 7.60 percent, one-tenth of a percent higher than expectations and the April reading of 7.50 percent. The rise was attributed to more people entering the workforce as opposed to people losing jobs.

420,000 workers joined the workforce in May, which pushed the civilian participation rate in the labor market to 63.4 percent; the highest participation rate since October 2012. A rising participation rate suggests that more workers believe they can find jobs and have joined or returned to the labor market.

Economists Pleased With Increasing Jobs In Difficult Environment

Economists were pleased to see jobs increasing against an environment of higher taxes, a soft global economy and budget cutbacks in the U.S. government.

A lingering issue for U.S. labor markets is the number of people looking for full time work, but who are unable to find full-time employment. When these workers are added to the ranks of the unemployed who are actively seeking work, the actual unemployment rate almost doubles to 13.8 percent for May.

The national unemployment rate is based on workers who are actively seeking work. Many U.S. workers stopped looking for work after years of unemployment.

Fed May Review Quantitative Easing Program Soon

These reports don’t provide a clear indication of what the Federal Reserve may do regarding its current monetary policy; the Fed is currently purchasing $85 billion a month in U.S. Treasury bonds and mortgage-backed securities (MBS). This effort is intended to keep long-term interest rates, including mortgage rates, lower.

The Fed has indicated that it will review its quantitative easing (QE) policy relative to improvements in the economy. In recent months, the Federal Open Market Committee of the Federal Reserve (FOMC) has discussed lowering or eliminating its QE efforts, but so far is maintaining its current level of QE and maintaining the federal funds rate at 0.250 percent.

While housing markets are improving, the jobs sector is moving at a slower pace. This suggests that home prices could rise even faster if more consumers had sufficient income for buying a home.

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