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Archive for the ‘Lending’ Category

Have we HIT the bottom of our BAD market?

April 8th, 2009
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As part of our commitment to help our clients make good real estate investment decisions, David Harts Realty has developed a number of graphs showing trends in today’s market. These graphs represent Single-family home transactions in Sonoma County over the last four years.   Residential Listing and Sales Activity by Month This first chart (See Below) shows a dramatic change occurring in today’s market. Look at the green line “Contingent/Pending” which represents homes that have been placed in the market and currently have a written agreement between the buyer and seller. These houses are in escrow right now and as they close, they will become “Sold” homes. We have never had this many homes in escrow in Sonoma County before, this is significant. Notice how in the past three years, this green line stayed fairly close to the red line which represents “Sold” homes, but early in 2008 these two lines started to separate. This is because the length of time the average home sits in the escrow process waiting to become a “Sold” home has gotten longer.  Escrow times are longer today for many reasons including more stringent lending policies and in the “Buyers market” that we have now, buyers are asking for more time to make their inspections and work through the escrow process. More significantly, however, are the large number of “Short Sales” occurring in today’s market. The escrow process for Short Sales is typically four to six times longer than a normal sale.  This longer escrow causes a disconnect between the two graph lines. In addition to longer escrows, Short Sales have a much lower success rate than a typical sale primarily due to the banking industry’s failure to develop workable processes to accommodate this type of transaction. This low success rate means that although we are seeing a much higher number of homes going into escrow, many of these escrows will fail and go back on the market, typically as bank owned properties. Still, even with an anticipated higher rate of escrow failures, I think this huge increase in the number of “Contingent/Pending” almost certainly predicts a marked increase in the “Sold” home statistic over the next few months. This increase in “Sold” homes reduces the glut of home inventory in the market today and helps us return to a more normal “Balanced” market. Stay Tuned !!!        Residential Total Listings/Sold and Months of Inventory This second chart shows the volume of “Total” listings (blue line). These are all listings in the market at any point in time and include New, Contingent, Pending listings. The red line at the bottom of the chart shows the volume of homes “Sold” over time, which by it’s very nature would be lower than the number of total listings in the market. What is important in this graph, is the RATIO between the number of homes in the market and how many of these homes sell each month. This ratio is often referred to as the “Months of Inventory” in a market. The green line in this graph represents the Months of Inventory for our market and many market analysts suggest that a “Balanced” market for Sonoma County is 5 or 6 months of inventory. Look at the level of this inventory in 2005 which was part of our “boom” market. At that time the inventory level was running very low at around 2-months of inventory. This represents a strong sellers market which tends to boost prices higher than normal and we certainly saw much of that in 2004 and 2005. Over the next few years, this line trended higher and higher as the market cooled. But look at what happened in early 2008; the inventory peaked and has been trending downward since then. While (as of 3-31-09) we were still above the “Balanced” range (we have roughly 7.5 months of inventory), look at the TREND and how much better we are today than we were at the peak of the market in 2008 with almost 16 months of inventory in the market. Over the last four months we have been hovering at around 7-months of inventory which is not too far from a return to a normal market. We will keep an eye to these trends and provide market updates on our website the Santa Rosa Real Estate Blog http://davidhartsrealty.com/wordpress/

First Time Buyers, Lending, Market Statistics, Uncategorized

Are lenders making it impossible to buy a home?

March 27th, 2009
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Money is CHEAP today with mortgage rates this week running around 5.2% for a 30-year fixed mortgage. Still, people are hesitating to buy a home because the word on the street is that loans are hard to get.

There is some truth to this urban message; According to the Mortgage Bankers Association, 40% of all loan applications are currently denied.  The minimum FICO score required to qualify for a mortgage has been rising steadily over the last year. Larger down payments are now required for a typical mortgage compared to a year ago.

So why bother? Why waste your time thinking about buying a home?

Here is why; Everything is on sale. This is the biggest sale many buyers have ever seen. Prices for real estate are lower today than they have been for over 10 years.  There is PLENTY to choose from. With the number of homes for sale at record levels, you CAN find the perfect home and get it for a great price. Sellers are WAY more willing to work with buyers and are very accommodating for qualified buyers. Asking the seller to leave their closet full of Armani suits may be a bit much, but most reasonable requests will at least be considered.

As I said above, interest rates are INCREDIBLY low. Rates are floating around the lowest rates in history, rates we have not seen since the end of World War II.

You have to live somewhere and right now in many areas, buying a home is LESS money than renting. Many renters would actually SAVE money on their housing costs buying in today’s market.

So what do you do? Do your homework. Find a good local lender and sit down with them for 20 min. and they can tell you what you will qualify for in the way of a loan. If you don’t know any great lenders call me I have many I can suggest.

Once you know what you can qualify for, find a great real estate agent. A great agent can help you identify the best deal in the best neighborhoods and walk you through all the paperwork with very little stress.

Call me TODAY at 707-327-9407 and I can answer any question you have about buying a home!!!

First Time Buyers, Lending

One-half percent down payment?

March 14th, 2009
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Lately it seems like all the real estate news is focused on the changes in the financing of a home. Perhaps that is as it should be considering how fast things are changing in this area. The Obama Administration is making changes left and right with the hope of getting some of the excess housing inventory SOLD!!!

Some of the new programs include a new one-half-percent down payment program called the “First House Program” that allows for 95.5% financing. There are quite a few restrictions to this program, so talking to a good lender is where you would want to start. If you don’t know any, I know a few and would be happy to provide contact information. One of the restrictions is the purchase must close escrow by June 5th2009, so you have to get going!!

Many of the new incentive programs have very short durations and as of today, the best ones expire at the end of 2009. The Press Democrat has been reporting increases in the number of homes sold each month, which is required for a turn around in the market. All this points to 2009 being a good year to buy a home for many people. That said, the ability to get financing for that home purchase is one of the big wild cards, which brings me full-circle to my opening statement. I expect we will be hearing a lot about new financing programs, rules and restrictions. I will try and write more as these things change.

First Time Buyers, Lending, New Laws

The 2009 Economic Stimulus Bill may help first-time buyers get a home

February 17th, 2009
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Uncle Sam wants YOU to buy a home.

In fact, they want you to buy one so badly they have added yet ANOTHER incentive for you to do so. The $790 billion stimulus package approved by the House and Senate includes benefits for any one buying a home, but is especially beneficial to first-time homebuyers. Among other things, the bill has created a true tax credit for first-time buyers that give them an $8,000 credit if they purchase a home in 2009. This credit does NOT have to be paid back as long as the buyer stays in the home for at least three years. A first-time buyer is anyone that has not owned a home in the last three years.

What this means is that for a first-time buyer, the Government will pay for a significant portion of your down payment. For example, according to BAREIS, the Median price for a home in Sonoma County in January 2009 was $290,000. If you buy a home at this price and use the FHA loan program with its low 3.5% down payment, your down payment would only be $10,150. At the end of 2009, the Government would give you back $8,000 of this money. Your effective down-payment would only be $2,150, or equivalent to less than two months rent. In addition to this, the entire down payment could be a gift from a relative.

When you combine this new incentive with the INCREDIBLE features of an FHA loan, it really makes sense for anyone that is considering the purchase of a home to take a serious look at what is available in the market today. Contact me at 707-327-9407 or by email at: davidharts@sbcglobal.net and I can help you get started in understanding today’s market and help you find a good lender that will treat you fairly and honestly.

For more information about the great benefits of an FHA loan today, read my post: The Advantages of the FHA Loan

First Time Buyers, Lending, New Laws, Tax Advantages , ,

Advantages of an FHA loan

February 12th, 2009
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Have you heard about the new FHA loan programs?

The FHA loan has quickly become the “loan of choice” for many buyers in today’s crazy market. The FHA loan pretty much disappeared in California about 15 years ago because the FHA loan limits had not kept up with the price of homes.

Well  MUCH  has changed recently. As the newspapers are quick to point-out, the price of homes have dropped significantly in the last three years, and this combined with higher loan limits for an FHA loan make this a very useful loan today. Today’s loan limits for an FHA loan are $520,950, AND the Obama administration may change this to even higher limits later this month. This means that even with a minimal 3.5% down payment, today you could have a purchase price of $539,844. That will buy plenty of home in today’s Sonoma County real estate market.

Here are some other benefits available from an FHA loan;

FHA loans are assumable!!! This means that when you go to sell your home, you can offer a qualifying Buyer the same great interest rate that you got, regardless of what the current interest rates are the day you sell your home. Today’s incredible low rates will probably not be around in a few years, so YOUR home will be very attractive to potential buyers.

 The Buyer’s FICO scores can be lower for an FHA loan than those for a conventional loan. This means more buyers will qualify.

The allowable debt ratios are higher for an FHA loan than the debt-ratio limits imposed for conventional loans.

The FHA loan requires a smaller down payment: FHA-insured loans have a low 3.5% down payment and the money can come from a family member, employer or charitable organization as a gift. Most conventional loan programs don’t allow this.

FHA has eliminated unnecessary requirements to make minor repairs on homes and the current requirements are quite easy to follow.

 The seller can contribute up to six percent of the home’s price toward the Buyer’s closing costs.

 Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance monthly premiums.

I hope this helps with your questions about the FHA loan. I do know several lenders that are quite good with FHA loans and offer very competitive rates. Call me at 707-327-9407 or email me at davidharts@sbcglobal.net if you want to learn more about the incredible opportunities in today’s market.

First Time Buyers, Lending , , ,