Sunday, February 17, 2008
Where Did It Go?
A few people have asked what happened to the piece I wrote about the passing of Charlie Deal. Still others missed the link to the SF Magazine article about private schools. Click the links above to see them both. In the future, you can always click "older posts" at the bottom of the blog page for a quick trip back in time.
More on Conforming vs. Jumbo Loans
This article from today's Chron spells out what is likely happen to mortgage rates as a result of the economic stimulus bill. In a nutshell? It may be a while before the new conforming loan limits result in more affordable loans. But it will happen.
However, the piece notes, "waiting is not without risk. Mortgage rates are pretty low right now. If they shoot up in the next month or two, you could lose whatever advantage you might get from holding out for a conforming loan. There's also a chance lenders will continue to tighten their credit requirements so much that you no longer qualify for a loan. And once the new loans come out, you will probably have to get in line with lots of other eager borrowers." There have been some rumblings that the Fed's recent lowering of the shorterm interest rates may actually drive long term rates (i.e. mortgage rates) up. If this happens, it's possible that the new comforming rate will be the same as the existing jumbo rates.
Stay tuned.
However, the piece notes, "waiting is not without risk. Mortgage rates are pretty low right now. If they shoot up in the next month or two, you could lose whatever advantage you might get from holding out for a conforming loan. There's also a chance lenders will continue to tighten their credit requirements so much that you no longer qualify for a loan. And once the new loans come out, you will probably have to get in line with lots of other eager borrowers." There have been some rumblings that the Fed's recent lowering of the shorterm interest rates may actually drive long term rates (i.e. mortgage rates) up. If this happens, it's possible that the new comforming rate will be the same as the existing jumbo rates.
Stay tuned.
Saturday, February 16, 2008
Economic Stimulus and Conforming Loan Limits
Everyone wants to know how the new economic stimulus bill will impact mortgage rates, specifically when we will see the results of the new conforming loan limits. Here what the loan brokers at Union Trust (a Pacific Union affiliate) have to say:
"The bill includes higher conforming loan limits through December 31, 2008. There are still many details to be worked out so it is doubtful if any lenders are going to jump right in until more guidance is issued by HUD. We are expecting that the earliest this will realistically affect loans funding will be in the May-June timeframe (and that is only an educated guess based on how slowly things in politics work). Keep in mind the the new limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry, no interest only), and owner-occupied. ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (for example, 5/1's).
"Who will likely benefit?
Someone that has a loan amount up to $729,750 and wants a 30 Year Fixed mortgage. A note of caution is that we are uncertain what the final interest rate and closing costs will be since we can safely assume that FNMA and FHLMC will charge higher fees to compensate for the higher risk.
Today the best conforming interest rate, for someone with 720+ credit score and full documentation, is 6% with no points and 5.75% with 1 point. The market continues to be concerned about the inflationary results of the FED's lowering of their overnight rate and if the concerns continues, we will see the conforming interest rate increase.
"The "hot" loan program today is a 5/1 Interest Only Jumbo loan at 5.5-5.625% or a 10/1 Interest Only at 6%. AND these rates and loan programs are available now!"
Now you know what we know.
"The bill includes higher conforming loan limits through December 31, 2008. There are still many details to be worked out so it is doubtful if any lenders are going to jump right in until more guidance is issued by HUD. We are expecting that the earliest this will realistically affect loans funding will be in the May-June timeframe (and that is only an educated guess based on how slowly things in politics work). Keep in mind the the new limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry, no interest only), and owner-occupied. ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (for example, 5/1's).
"Who will likely benefit?
Someone that has a loan amount up to $729,750 and wants a 30 Year Fixed mortgage. A note of caution is that we are uncertain what the final interest rate and closing costs will be since we can safely assume that FNMA and FHLMC will charge higher fees to compensate for the higher risk.
Today the best conforming interest rate, for someone with 720+ credit score and full documentation, is 6% with no points and 5.75% with 1 point. The market continues to be concerned about the inflationary results of the FED's lowering of their overnight rate and if the concerns continues, we will see the conforming interest rate increase.
"The "hot" loan program today is a 5/1 Interest Only Jumbo loan at 5.5-5.625% or a 10/1 Interest Only at 6%. AND these rates and loan programs are available now!"
Now you know what we know.
Median Prices Up. Here's Why.
Two things to know about this article from today's Chron...1) It tells you everything you need to know about why the median price of SF and Marin real estate continues to rise despite dropping unit sales, and 2) James Temple, the writer of this article, is the same guy who wrote Friday's doom and gloom piece that we we linked to in our previous post.
It's this second point that illuminates our running pleas not to read too much into what you see in the newspaper. On consecutive days, the Chron's lead real estate article informed readers, first, that the market is at a 20-year low, and second, that "people are willing to pay ever higher prices for luxury Bay Area real estate." While both things are technically true, we feel that this kind of reporting makes it very difficult for owners, buyers, and sellers of Bay Area real estate to form an accurate opinion of the strength of the market. As ever, we merely wish that the papers focused more on the bigger picture and the longterm view than on headline-grabbing or heartstring-tugging case studies.
It's this second point that illuminates our running pleas not to read too much into what you see in the newspaper. On consecutive days, the Chron's lead real estate article informed readers, first, that the market is at a 20-year low, and second, that "people are willing to pay ever higher prices for luxury Bay Area real estate." While both things are technically true, we feel that this kind of reporting makes it very difficult for owners, buyers, and sellers of Bay Area real estate to form an accurate opinion of the strength of the market. As ever, we merely wish that the papers focused more on the bigger picture and the longterm view than on headline-grabbing or heartstring-tugging case studies.
Brentwood, Anyone?
If you read yesterday's Chron, you saw the article, but we'd be remiss if we didn't call it to your attention. Another in a series of very gloomy reports on the regional housing market. Once again, Marin and SF sales are down (along with every other county) and once again the median price for both areas is up. Haven't we read this before? Call us Pollyanna if you wish, but we still say that this all adds up to a rare opportunity for buyers willing to wade into the lower half of the market. The headline for this article in the print-version of the Chron was, How Low Will We Go? A fair question to be sure. What if you buy now only to find the market worsenes in the second half of '08? Also a resonable concern. But if your plan is to stay put for a while and the house you want is on the market now, we suggest you may risk more by waiting than by acting. In other words, whoever said "Buy up in a down market," probably knew what he was talking about.
Is Sub-Prime To Blame For Broader Economic Downturn?
We've written often in this space about what caused the now-famed "mortgage meltdown" and who or what bears the responsibility. Current concerns, however, are more focused on the health of the broader economy and why markets other than real estate and mortgages are on shaky ground or already failing. An interesting op-ed piece by Paul Krugman in today's Times posits an compelling argument. Krugman suggest that, "Troubles that began a little over a year ago in an obscure corner of the financial system, BBB-minus subprime-mortgage-backed securities, have spread to corporate bonds, auto loans, credit cards and now — the latest casualty — student loans." This perhaps is not a revolutionary concept, but his explanation of how the financial sickness spreads is worth a read.
Monday, February 11, 2008
When Is Your Home Not an Investment?
"Shelter. Memory Box. Labor of Love. Artform. Retirement account. Get rich quick scheme. Showcase for conspicuous consumption.
"The American home has always been a receptacle for our myriad needs and desires. Yet lately many experts have observed that the real estate boom has skewed the meaning of our homes. In the wake of stagnating incomes, regressive taxes and the expectation of Social Security collapse, middle class home owners increasingly looked to real estate as a source of financial redemption. When God, pensions, the stock market and the government failed, the humble house provided more than a modicum of security, and with any luck, several hundred thousand dollars in untaxable capital gains."
These words began Carol Lloyd's "Surreal Estate" column in this Sunday's Chron. Lloyd's column has not always been kind to Realtors, but this week we found her echoing a sentiment we've been sharing with many of our clients lately. Namely that the real estate boom of the last several years severly altered people's sense of what their home was meant to do. For far too many homeowners, their principal residence became the repository of all their financial dreams; a way to pay for early retirement, kids' college tuition, and a chance to drive that fancy car. Along the way, we forgot about a home's first and foremost purpose: a place to live.
This is not to suggest that we shouldn't view our homes as investments. Rather, we only suggest that, unike your I.R.A, 401K, C.D.s and stock options, a home is not purely a financial instrument. Seems so obvious, yet so easily forgotten.
"The American home has always been a receptacle for our myriad needs and desires. Yet lately many experts have observed that the real estate boom has skewed the meaning of our homes. In the wake of stagnating incomes, regressive taxes and the expectation of Social Security collapse, middle class home owners increasingly looked to real estate as a source of financial redemption. When God, pensions, the stock market and the government failed, the humble house provided more than a modicum of security, and with any luck, several hundred thousand dollars in untaxable capital gains."
These words began Carol Lloyd's "Surreal Estate" column in this Sunday's Chron. Lloyd's column has not always been kind to Realtors, but this week we found her echoing a sentiment we've been sharing with many of our clients lately. Namely that the real estate boom of the last several years severly altered people's sense of what their home was meant to do. For far too many homeowners, their principal residence became the repository of all their financial dreams; a way to pay for early retirement, kids' college tuition, and a chance to drive that fancy car. Along the way, we forgot about a home's first and foremost purpose: a place to live.
This is not to suggest that we shouldn't view our homes as investments. Rather, we only suggest that, unike your I.R.A, 401K, C.D.s and stock options, a home is not purely a financial instrument. Seems so obvious, yet so easily forgotten.
Subscribe to:
Posts (Atom)
