South Orange County Blog from Bob Phillips

Why the predicted “Wave of Foreclosures” may just be a ripple

Posted in Foreclosures, Real estate, short sales by southorangecounty on May 6, 2010

There is an interesting phenomenon going on, even while doom & gloom bloggers predict gigantic Tsunami’s of foreclosures heading our way. The following is excerpted from an article out of Texas this week.

“Every week, new home sellers are hitting the market, basing their initial asking prices on recent contracts, sales, and other active listings, and influencing active market prices.  And what does this have to do with foreclosures?  It provides a glimpse into housing market psychology.

Homeowner Henry down in Texas is underwater in his mortgage, or at a minimum, feels some personal economic strain.  He’s trying to determine if he’s in a walk-away situation or not, with his decision metrics at least partially based on his local housing market conditions.  As Henry starts to see active houses sell quickly, get multiple bids, and fetch a decent price, he starts to think – “Hey – maybe the market’s not so bad.  Things are starting to sell at a good price.  I’m going to hang on for another couple of months.  I don’t really want to move anyway, and if the market is improving, I can start to gain back some of that on-paper loss.”  Aggregating this behavior and market psychology yields fewer delinquencies and foreclosures in the short run.

Looking at delinquencies rates and housing market conditions in 2009, the peak in delinquencies were exactly correlated to the trough in home prices.  As the 2009 housing market strengthened and prices accelerated through the Spring, delinquencies fell simultaneously.

And speaking of Texas, Steve Brown of the Dallas Morning News published “Dallas-Fort Worth home foreclosure filings drop 12%” today in which he writes:  Home foreclosures have turned lower for next month’s forced sales.  The 4,861 Dallas-Fort Worth homes scheduled for foreclosure in May represent a 12 percent decline from year-earlier totals. And foreclosure filings are down 21 percent from the recent peak in March, Addison-based Foreclosure Listing Service said Thursday.  His article also provides some local data points of foreclosure rates by county in the Dallas Metro area. 

Home foreclosures have turned lower for next month’s forced sales. The 4,861 Dallas-Fort Worth homes scheduled for foreclosure in May represent a 12 percent decline from year-earlier totals.  And foreclosure filings are down 21 percent from the recent peak in March, Addison-based Foreclosure Listing Service said Thursday. 

Let’s take a look at active housing prices for these counties.  The two markets with the largest decline in foreclosure filings (a good thing) – Dallas and Tarrant County – have housing markets with median ask prices that hit an trough point in March (when foreclosure filings were higher) and are seeing an clear increase each week in the Prices of New Listings.” ( End of excerpt.)

This is a big reason why you shouldn’t be paying as much attention to dire warnings from doom & gloom bloggers, about huge waves of new foreclosures on the horizon.  As distressed homeowners – especially in the lowest price ranges – see their local markets improving, they are far more likely to hang in there, instead of giving up and going through a credit destroying foreclosure.

And because in some areas – such as my Orange County – the lower price ranges have actually increased in value by over 10% in the past 14 months, many who were considering a short sale can now actually have an equity sale, which has even stronger demand ( read higher prices.) from today’s throngs of willing buyers.  If you are a homeowner who thinks that you’re underwater, you just might have another think coming.

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Tax credit deadline ignites buying frenzy

Posted in home affordability, Real estate, taxes by southorangecounty on May 2, 2010

April 30th, 2010, · posted by Jeff Collins of the Orange County Register
 

A lot of last-minute homebuying decisions were made Friday as buyers rushed to qualify for a federal tax credit that expired that day.

Buyers needed to have a signed contracts in hand to get a credit of $8,000 for first-time buyers and $6,500 for repeat buyers. They also must close escrow by June 30.

“I think there’s definitely some last-minute scurrying around,” said Tustin agent Charles Folcke. “I’m sure that if some offers are accepted (this weekend), agents are going to backdate it.”

“Lots of quick decisions (were) made this week from our fabulous last-minute type of folks,” added Huntington Beach agent Vivian Young. “I’ve been showing property for lots of clients the entire month to quickly get them under contract before the month ends.”

Broker Steve Thomas of Altera Real Estate reported that the number of deals signed increased 6.2 percent from two weeks ago and 10 percent over the past month.

“Buyers are pushing their way into escrow, but I think the momentum will carry even after the expiration,” Thomas said.

Coto de Caza agent Bob Phillips spent part of Friday dashing from Santa Ana to Capistrano Beach, then to a listing agent’s office to get a signed contract to an East Coast bank in time for its approval.

His clients got outbid Thursday, after offering $11,000 over the asking price on a bank-owned home. His cell phone rang at 6 a.m. Friday with news that the top bidder got cold feet and backed out.

He had to drive to both clients’ work places to get their signatures, then dash over to the listing agent’s office for the bank’s approval.

“I am now going to drive to Dana Point to open the escrow before they close at 5 p.m.,” he said Friday. “It has been an exciting day.”

Several agents noted that buyers stopped looking at homes listed as short sales, or selling below what’s owed the bank, since lenders typically are pokey in responding to offers.

Thomas and others predicted that the $200,000 set aside for the California tax credit likely will be exhausted in a month, rather than in the seven months allotted for it.

“There is still a lot of confusion about the California tax credit, which will last about a minute,” Thomas said. “The first 17,500 lucky first-time home buyers win and everybody else is going to be upset.”

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Debate Rages Over the Supply of Foreclosed Homes

Posted in Foreclosures, Real estate, Uncategorized by southorangecounty on April 29, 2010

Debate Rages Over the Supply of Foreclosed Homes

Why is there such a fierce debate about whether the housing market is slowly healing or heading for another free fall? Partly because no one can estimate with much confidence how many foreclosed homes banks need to sell or how fast they are getting rid of all that property.

A huge chunk of today’s housing supply comes from homes that have been acquired by banks or mortgage investors through foreclosure, plus those that are being offered by people who hope to avoid foreclosure by doing “short sales,” selling their homes for less than the mortgage balance due. The National Association of Realtors estimates that such “distressed” situations accounted for 35% of home sales in February and March.

The latest heroic attempt to tally how many foreclosed homes are available for sale comes from analysts at Barclays Capital in New York. They estimate that banks and mortgage investors including Fannie Mae and Freddie Mac owned 480,000 homes at the end of February. That’s far lower than previous estimates. Barclays explains that it has acquired more data on mortgages and refined its methods for analyzing foreclosure trends. Under the bank’s previous methods, the estimate for February would have been more than 600,000.

Estimating the inventory of foreclosed homes is tricky because thousands of banks and others that own the properties disclose those holdings in varying ways, if at all. RealtyTrac Inc., another data provider and one of the few other firms that regularly makes such calculations, estimates that banks and mortgage investors own 758,000 foreclosed homes.

So we have a pretty big gap. Is it 480,000 as Barclays thinks, or 758,000, as per RealtyTrac? Tom Lawler, an independent housing economist who tracks reams of housing data when he isn’t tending the livestock on his farm near Leesburg, Va., figures the total is more than 550,000 but probably less than the RealtyTrac estimate.

“What is truly disturbing,” Mr. Lawler wrote in his daily housing-market commentary Wednesday, “is that given all of the economic data the government tracks, the sector it appears to track the worst is…the housing market!  Why is it that the government has not deployed more resources to better track and report data on the housing inventory, households, home sales, home prices, and, of course, foreclosures and the number of homeowners who have lost their home to foreclosure?”

(That’s an especially good question given that the U.S. government has a bit of exposure to the housing market. Inside Mortgage Finance reports that mortgages backed by government-related entities – Fannie Mae, Freddie Mac, the FHA and the VA – accounted for more than 96% of home loans originated in the first quarter.)

Whatever the number of homes that banks, the federal agencies and private mortgage investors own now, it’s likely to increase. Barclays expects the inventory generally to rise over the next 20 months, peaking at 536,000 in January 2012, and then decline gradually.

To get a rough sense of how many more households will lose their homes to foreclosures or related actions, Barclays tallies what it calls a “shadow inventory,” consisting of homeowners 90 days or more overdue on mortgage payments or already in the foreclosure process. At the end of February, 4.6 million households were in that category.

Barclays expects 1.6 million “distressed sales” of homes – mainly foreclosures or short sales – both this year and in 2011, then a slight decline to 1.5 million in 2012. Last year, Barclays estimates, such sales totaled 1.5 million. Around 30% of all home sales this year and next will be foreclosure-related, forecasts Robert Tayon, a mortgage analyst at Barclays, who says that would be only about 6% in a normal housing market.

Barclays expects U.S. home prices on average to fall another 3% to 5% over the next couple of years, adding to a decline of about 30% already recorded since 2006. That forecast assumes a gradual improvement in the unemployment rate to 8% within the next two years from 9.7% in March. The home-price picture would worsen if job growth sputters or banks “push homes through the foreclosure pipeline faster than expected,” Mr. Tayon says.

Efforts to avert foreclosures by offering many borrowers lower payments have slowed the flow of homes into bank ownership. In some parts of the country, such as the Las Vegas area and Orange County, Calif., that has left bargain-hunters frustrated by what they see as a shortage of bank-owned properties in attractive neighborhoods.

In the Las Vegas area, foreclosed homes accounted for 56% of sales in March, down from 73% a year earlier, according to MDA DataQuick, a research firm.

This article appeared in the Wall Street Journal on April 28th, 2010, written by James R. Hagerty

http://blogs.wsj.com/developments/2010/04/28/debate-rages-over-supply-of-foreclosed-homes/

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How Iceland’s Volcanoes Are Helping Mortgage Rates Fall

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 21, 2010

 

Mortgage rates react to natural disastersMortgage rates and home affordability have improved lately, thanks to an unlikely ally — Mother Nature.

In the 7 days since Iceland’s Eyjafjallajökull erupted, ash clouds have grounded planes, disrupted businesses, and stranded exports in warehouses worldwide.

It’s a drag on commerce that’s spilled over onto Wall Street. As experts debate the potential for future seismic activity, traders are taking some of their investment risk off the table. 

In trading circles, it’s called “safe haven buying”. When the market gets cloudy, investors often move their cash into relatively safe assets.  This includes government-backed securities — mortgage-bonds among them.

Demand for bonds rise, pushing up prices and driving down rates.

Conforming and FHA mortgage rates touched a 3-week low earlier this week.

Volcanic eruptions and like natural disasters remind us: mortgage rates change for all sorts of reasons. Some we can predict, most we cannot. There’s literally thousands of influences on the U.S. mortgage market.

If you’ve been shopping for a home or floating a mortgage rate, luck’s been on your side. Mortgage rates have fallen post-Eyjafjallajökull. However, as ash clouds dissipate and business resumes worldwide, investors will regain their collective appetite for risk and safe haven buying will reach its natural end.

When that happens, mortgage rates will rise.

Therefore, use the seismic uncertainty to your advantage.  Consider locking your mortgage rate sooner rather than later — while rates are still low.

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California homeowner defaults down 40%

Posted in Foreclosures, Real estate, short sales by southorangecounty on April 20, 2010

California homeowner defaults down 40%

April 20, 2010, by Jeff Collins, O. C. Register

More evidence surfaced today that home-loan defaults and foreclosures are receding from historic peaks seen a year ago. However, the pace of defaults and foreclosures remain high, especially in areas where lower-cost homes predominate.MDA DataQuick reported that lenders filed 81,054 notices of default in California during the first quarter of 2010, down 4.2% from the previous quarter and down 40.2% from the first quarter of 2009.

DataQuick’s analysis shows that the greatest year-over-year declines occurred in areas with cheaper homes, with smaller declines occurred in pricier areas.“We are seeing signs that the worst may be over in the hard-hit entry-level markets, while problems are slowly spreading to more expensive neighborhoods,” DataQuick President John Walsh said.

Notices of default are the first step in the process that can result in the sale of a home in a foreclosure auction.California foreclosures also declined during the first quarter, DataQuick reported. Homeowners in the state lost 42,857 homes at foreclosure sales. That was down 16.1% from the previous quarter and down 1.7% from the first quarter of 2009. DataQuick’s report showed also:

Area Q1-09 Q1-10 Chng
Los Angeles 27,981 15,797 -43.5%
Orange 8,427 5,270 -37.5%
San Diego 10,111 6,170 -39.0%
Riverside 16,906 8,474 -49.9%
San Bernardino 13,276 6,736 -49.3%
Ventura 2,648 1,643 -38.0%
Imperial 885 491 -44.5%
SoCal 80,234 44,581 -44.4%
Bay Area 19,438 13,517 -30.5%
Statewide* 135,431 81,054 -40.2%
  • Statewide, the default rate was 9.3 notices for every 1,000 homes. That compares to a default rate of 10.5 notices in ZIP codes with median home prices below $500,000 and 4.5 notices in ZIP codes with medians above $500,000.
  • Defaults fell nearly 43% from a year earlier in ZIP codes with median home prices of $500,000 and below. But they fell just 19% in ZIP codes above the $500,000 median level.
  • Southern California defaults fell 44.4% to 44,581 in the first quarter. They were down by nearly half in the Inland Empire.
  • Orange County defaults decreased 37.5% to 5,270 in the first quarter, the smallest percentage drop in Southern California. Foreclosures fell 7.5% in the first quarter to 1,985.
  • In the San Francisco Bay Area, defaults fell 30.5% to 13,517 in the first quarter.
  • Home loans were least likely to go into default in Marin, San Francisco and San Mateo counties. They were most likely to go into default in Merced, Stanislaus and San Joaquin counties.
  • California homeowners getting default notices were behind on house payments by a median rate of 5 months. The median amount left unpaid was $14,066.
  • Default rates were below 10% for the state’s most active lenders during the housing boom — Countrywide, World Savings, Washington Mutual, Wells Fargo and Bank of America. Those lenders, nonetheless originated the most loans that ended in default.
  • Default rates for subprime lenders exceeded 65%.

There also were signs that lenders were being more accommodating in seeking alternatives to foreclosure, either by modifying loans or by allowing the home to be sold for less than was owed on the mortgage. For example, the foreclosure process averaged 7.5 months in the first quarter, compared to 6.8 months a year earlier, DataQuick reported.

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The O. C. Market Report – This Market is Taxing!

Posted in Foreclosures, Real estate, short sales by southorangecounty on April 20, 2010

Below is the latest Orange County Market Report from my friend Steven Thomas, the President of Altera Real Estate. Steven’s reports are cited and discussed in most of Southern California’s media, as an authoritative source of local real estate information. I have slightly altered his report to make it a bit easier to read, but the context and content remains true to Steven’s report.

“The Orange County Market Report – This Market is Taxing!

Talk to an Orange County buyer, especially a first time home buyer, and you will quickly find that the real estate market is simply crazy. 

Let’s first establish that there are two different markets – below $1 million, HOT, and above $1 million, COLD. The below $1 million market accounts for 77% of the total active inventory, and 94% of demand. The lower the range, the hotter the market.  Most buyers new to the market have already formed an incorrect idea of the real estate market. They think that the market is plagued with desperate sellers waiting for a buyer to finally write an offer to purchase at a major discount and an incredible “deal” for the buyer. Instead, new, fresh inventory is scarce and buyers find that they are competing for anything half way decent that hits the market. Properties that are priced well and in good condition, garner tremendous attention and procure multiple offers.

Writing a purchase offer at the list price only to lose to three other buyers that brought in offers above the list price is common. Sales prices above list prices are common. First time home buyers losing out on properties to investors with larger down payments is common. The reality is that if a buyer is looking to bargain and negotiate, they are better off attending the local weekend swap meet. Remember, values of homes have already dropped significantly, 35% or more. Some economists have argued that values have dropped below where they should be today, which is often the case in real estate downturns. So, homes are already heavily discounted from where they were a few years ago.

Home affordability has returned to the Orange County real estate market. Interest rates are still at historical lows. Throw in buyer income tax credits and we have all of the ingredients for a major seller’s market. Buyers entering the fray in today’s market get a real quick dose of reality and, if they really want to buy, sharpen their pencils real fast. In the lower ranges and in hotter areas, homes are starting to sell for more than the last comparable sale. The only thing that is keeping values from taking off like they did before is the distressed inventory.

Housing Demand: Demand has not seen these levels since the beginning of August 2005.
Demand, the number of new pending sales over the prior month, increased by 126 homes over the prior two weeks and now totals 3,748, a 3% increase and the height thus far in 2010. Last year’s height in demand was reached in June at 3,652 pending sales. Demand is 195 pending sales stronger than last year at this time and 1,374 stronger than two years ago. It seems as if demand is beginning to hit a plateau, so we will have to watch and see if that trend continues over the coming weeks.

Developing Trends: The active listing inventory has continued to gradually increase after bottoming at the beginning of the year. Over the past two weeks, the inventory has increased by 266 homes to 9,177. We started the year at 7,165 listings and so, have added 2,012 homes to the active inventory thus far. Last year, the inventory continued to drop from mid-March to the New Year. Towards the end of last year, the drop was probably more in line with the cyclical drop in the inventory that starts in September until the end of the year.

Customarily, during the beginning of the year and into the Spring market, more and more homeowners place their homes on the market in anticipation of the strongest time of the year to sell. In the Spring market in 2006 and 2007, homeowners often tested the market and attempted to obtain values above the current fair market value. There were a ton of overpriced listings that remained on the market and which were not successful in selling – EVER.

Instead, they just clogged the inventory and it methodically grew, reaching a height in August 2007 of just shy of 18,000 listings. In 2008 and 2009, homeowners no longer tested the market and the discretionary ( “equity”.) seller disappeared. During the second half of 2009, the Orange County active listing inventory continued to shed homes and not as many new, fresh homes were placed on the market. REALTORS® in the trenches were complaining of a lack of inventory and nothing “fresh” to show their buyers.

We still hear that there is a lack of inventory, but behind the scenes, the active inventory is slowly but surely nudging upward, in every price range. It remains to be seen if the trend in an increase in the active inventory continues. Will the equity homeowner return or will more and more homeowners place their toe in the water, testing the market? We will have to wait and see. There are currently 1,384 fewer homes on the market today than just one year ago and 6,379 fewer than two years ago.


Expected Market Time: The lower the range, the lower the expected market time.
The expected market time for all of Orange County is currently at 2.45 months, a slight drop from 2.46 months two weeks ago. For homes priced below $500,000, the expected market time is 1.63 months, a deep seller’s market. For homes priced between $500,000 and $1 million, the expected market time is 2.84 months, still a seller’s market. For homes priced above $1 million, the expected market time is 9.44 months, the higher the range, the slower the market. For homes priced above $4 million, the expected market time is 38.44 months, or over 3 years.

Distressed Inventory: Again, not much has changed in the distressed inventory.
The number of active distressed homes on the market,  short sales and foreclosures combined, decreased by 33 homes to 2,781 and represent 30.3% of the active inventory. Last year at this time, there were 4,006 distressed homes on the market, representing 37.9% of the active inventory.  The number of foreclosures within the active listing inventory decreased by two homes in the past two weeks from 418 to 416. Yes, that is correct. With all of the talk of foreclosures there are only 416 on the market in all of Orange County. The expected market time for foreclosures is 1.01 months.

Short sales are a different story; there are plenty of short sales in Orange County. Short sales are where a homeowner attempts to sell a home for less than the total outstanding loans against the home, which requires the lender (or lenders in many cases) to approve the short sale, indicating their willingness to take less than the full payoff of a loan. Most short sales are not as  fast as their name would suggest, and, on average, take months to close. The number of short sales within the active listing inventory decreased by 31 and now total 2,365. The expected market time for short sales is 1.61 months, also a HOT seller’s market. Everybody’s looking for a deal, so foreclosures and short sales tend to fly off of the market.

The Most Absurd Tax Credit EVER? 

I am still scratching my head trying to understand why California approved $100 million towards a first time homebuyer tax credit. These are for transactions that close escrow on or after May 1, 2010. The $10,000 credit is spread out over three years. So, when will the $100 million run out? For every buyer, the state is counting $5,700 against the $100 million. That equates to 17,543 first time home buyers. Based upon the current wave of first time home buyer activity, the credit is forecasted to last less than two weeks. And, if there are buyers who are supposed to close at the end of this month – to take advantage of the $8000 Federal Tax Credit – and are looking to delay closing until after May 1st, the credit may end even sooner. ( End of Steven’s report.)

Like the former “Cash for Clunkers” program for automobiles, there will likely be a mad scramble for those credits – and a lot of disappointed buyers.

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Housing Starts Data Hints That Housing Will Expand Even After The Tax Credit Expires

Posted in home affordability, Real estate by southorangecounty on April 20, 2010

Housing Starts Apr 2008-Mar 2010After a strong March showing and a surprise upward-revision for February, Housing Starts are, once again, trending better.

It’s yet another signal that the housing market nationwide is stabilized.

A Housing Start is a new home on which construction has started and, over the last 6 months, home builders are averaging one half-million starts per month.

This marks the highest 6-month average since 2008 and a reading one-fifth percent better from 12 months ago.  Revisions to prior data have all been higher, too.

Even more interesting, though, is that the number of newly-issued building permits is exploding. Permits were up more than 5 percent last month and have climbed back to the levels of late-2008.

Housing permits are an important data point in housing because permits are precursors to actual housing starts.  According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

Therefore, because March’s housing permits increased, we should expect Housing Starts to continue to rise into the early months of summer.

This, too, reflects well on housing because the federal home buyer tax credit won’t be in existence this summer. The simple fact the homes are being built now shows that housing is likely to expand even after the tax credit expires.

Non-military members must be under contract by April 30, 2010 and closed by June 30, 2010 in order to claim up to $8,000 in federal tax credits. Of course, we Californians have a new $10,000 tax credit which begins on May 1st – until the alloted funds run out, anyway.

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It May Be A Good Time To Look At Adjustable Rate Mortgages

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 19, 2010

Comparing the 30-year fixed to the 5-year ARM Apr 2009-Apr 2010

Each week, government-led Freddie Mac publishes a weekly mortgage rate survey based on data from 125 banks across the country.  According to this week’s results, the relative rate of a 5-year ARM is extremely low versus its 30-year fixed-rate cousin.

Consider this comparison:

  • In April 2009, the two products ran neck-and-neck with respect to rates
  • In April 2010, the two products are split by 0.99 percent

On a $200,000 home loan, that’s a difference of $117 per month to a mortgage payment.

Adjustable-rate mortgages aren’t suitable for everyone, but they can be a terrific fit given your individual circumstance.  For example, any one of the following scenarios could warrant a 5-year ARM:

  1. Buying a home with an intent to sell within 5 years
  2. Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
  3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.

Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist.  The savings may be tempting, but there’s more to consider than just the payment.

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What’s Ahead For Mortgage Rates This Week : April 19, 2010

Posted in home affordability, mortgage rates, Real estate, Refinances by southorangecounty on April 19, 2010

 

Existing Home Sales Feb 2008-Feb 2010Mortgage markets improved last week for the second week in a row.  And, also for the second week in a row, rates were down on “safe haven” buying — just not for the same safe haven reasons as before.

If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.

Conforming and FHA rates are as low as they’ve been since March.

This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.

  1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
  2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
  3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can — and do — change quickly. 

You’ll want to time your lock accordingly.

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Is It Time To Re-Approve Your Pre-Approval?

Posted in Real estate by southorangecounty on April 9, 2010

 

Get re-approved for your mortgageAs the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers still working to get under contract.

A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

  • Maximum debt-to-income ratios
  • Minimum allowable credit scores
  • Calculation of “assets in reserve”

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.

Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.

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