Refinancing Your Home Loan Can Be Rewarding, But Potentially Difficult in Today’s Credit Climate

By Alicia Lanier, REALTOR

In her recent Wall Street Journal article, A Battle Plan for Refinancing Your Mortgage, Karen Blumental, explains why - even with mortgage rates holding below 5% - the re-fi process has never been more difficult for homeowners than in today’s tight credit climate. Says Blumental:

In the Sacramento, Calif., area, Michael McGee of Winchester McGee Financial estimates that one in four of his customers can’t get a loan approved. In Plano, Texas, Rodney Anderson, a mortgage lender, says the rate sheet of mortgage programs he can offer customers has shrunk to two pages from 42 during the housing boom.

“That doesn’t mean you shouldn’t investigate your options. Lowering your mortgage payment — or at least locking in a long-term low rate — can free up cash for other needs, such as repaying other debt or replenishing your retirement accounts, while reducing your financial stress.

“In addition, if you’re older than 40, shortening your mortgage term now could help leave you mortgage-free in retirement, reducing the income you’ll need to generate from your battered 401(k). “

If you have been considering re-financing, I suggest you read this illuminating article.

And, If you – or someone you know – plans to buy or sell a home or investment property now or in the near future, call me today at 408-491-1634 or e-mail me at Alicia@AliciaLanier.com

FAQ: $8,000 Tax Credit for 2009 Home Buyers

By National Association of Realtors

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies?
First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?
The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?
The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer’s income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Related Blogpost, March 7, 2009: California Home Buyers Get $10,000 Tax Credit

Don’t miss this window of opportunity! If you are planning to buy or sell your home or investment property now or in the near future, call me today at 408-491-1634 or e-mail me at Alicia@AliciaLanier.com

More Signs of Silicon Valley Housing Recovery?

By Alicia Lanier, REALTOR

In his weekly sales and inventory report for May 8, 2009, one of Coldwell Banker’s longtime managers, Fred Hibbert, says home sales continue to be robust in most price ranges and the listing inventories are declining each week.

“The DOM (days on market) continue to decline as properties are selling more quickly. April stats showed the same increase in sales in the over $2M price range as March did. All good news!” he says, adding that property classes of both single family homes and  condominiums- townhomes showed an increase in absorption rate for April to just 2.3 months.

“Remember C.A.R. and many economists point to 6 months as a balanced market. We are officially in a Seller’s Market in most price ranges!”

Rick Turley, our region’s Coldwell Banker president, said for the same week that the San Jose Almaden Valley office reported distressed sales continue to dominate its market, with 11 of the week’s 13 sales being for well-priced foreclosures or short sales. The San Jose Main Office has had brisk activity and sales in the price range of $550,000 down, with many multiple offers on $250,000 to $550,000 single-family homes and condos.

“Sales are up but listings continue to lag,” says Turley. “The Saratoga office notes we’re still experiencing a slow upper end, but seeing some multiple offers on REOs (bank-owned foreclosures) and well priced lower end properties,” Turley concluded.

Don’t miss a window of opportunity! If you are wondering whether it’s time for you to buy or sell your home or investment property, call me today at 408-491-1634 or e-mail me at Alicia@AliciaLanier.com

‘Things are looking up in Silicon Valley’

Here’s the weekly Coldwell Banker Marketwatch from Rick Turley, the new president of our Silicon Valley region:

“Last week I reported on positive indicators in the first-time homebuyer market. New mortgage applications for home purchases and refinances were up 77 percent from the same week in April 2008. Mortgage rates continue to average well below 5 percent – 4.7 percent last week on average for 30-year fixed rate loans and 4.5 percent for 15 year loans. Rates like these are a major factor pushing applications. Nearly 600,000 home buyers have already claimed either the $7,500 tax credit from last year or the $8,000 credit for this year, according to IRS data cited by the National Association of Home Builders.

“Statewide, CAR reported improvement in both sales numbers and median price. March existing home sales were up 64% from prior year, and median price had the first month-over-month increase since August of 2007. California’s inventory of unsold homes also fell in March to five months, down from 12.2 months in March 2008, making March ‘09 a three year low for existing inventory.

“Locally, I want share what’s going on in the East Bay (Alameda and Contra Costa Counties) which has been one of the markets hardest hit by foreclosures and price declines. We are starting to see some real positive news in this market. Specifically (as displayed in the graph below), when comparing accepted offers to new listings, we are currently at 112% which is a 69% increase year over year and an 86% increase from this time two years ago.

“The positive trend in the East Bay numbers above are impacted greatly by the brisk sale of distressed properties; REO properties are selling at a faster pace than new bank-owned properties are getting released. Good news from our local branch offices in the East Bay is that entry level priced homes which are not bank-owned and not distress sales are also selling faster than new listings are being brought to the market. This is also what we are seeing in our Sonoma County offices and our Santa Clara County offices – the entry level is really moving.

“With regards to the luxury market, we’ve had a flurry of high end sales in our San Francisco offices, so I took a look at some recent luxury market statistics. As per the San Francisco MLS, April 2009 was the third consecutive month of increased sales activity over $2 million. With 29 San Francisco $2M+ pending sales in the month, April’s high end activity was more than twice that of March 2009. The same trend occurred in San Mateo and Santa Clara Counties in the $2M+ market, although not as dramatic month-over-month increases.

“The note of caution here is that while the numbers of sales are increasing in the high end – we still have a 21 month’s supply of inventory in San Mateo and Santa Clara Counties in the $2M+ market, which is nearly triple the 7.6 month’s supply we had in April ‘08. And San Francisco currently has 19 month’s supply, versus 5.5 a year ago; also nearly triple the MSI for the $2M+ market. Agents in all three counties say that it is the really competitively priced new listings, and the dramatic price reductions of older listings which are causing our recent sales activity in the high end, with a lot of other inventory just sitting.

“Silicon Valley—The Cupertino De Anza office reports this is the highest number of pending sales for a single week in the last several years in Cupertino. The Cupertino Stevens Creek office concurs noting that it seems like things are picking up; the last two weeks we’ve seen a lot of action. Our San Jose Almaden office reports that 16 out of this week’s 21 sales were distressed properties. The San Jose Main office reports buyer interest continues to be brisk and we’re seeing excellent open house traffic in the $250,000 to $600,000 price range. Increasing interest in upper priced properties mostly due to lower interest rates. Listing inventory continues to decrease which is producing more multiple offers on available properties. Our Willow Glen office reports that the office is busy and buyers are coming out of the woodwork. We don’t want to jinx anything, but things are looking up in Silicon Valley! ” ~ Rick Turley, President, San Francisco Bay Area, Coldwell Banker Residential Brokerage

Golden State Mortgage Defaults Jump to Record High

La Jolla, CA.–Lenders filed a record number of mortgage default notices against California homeowners during the first three months of this year, the result of the recession and of lenders playing catch-up after a temporary lull in foreclosure activity, a real estate information service reported.

A total of 135,431 default notices were sent out during the January- to-March period. That was up 80.0 percent from 75,230 for the prior quarter and up 19.0 percent from 113,809 in first quarter 2008, according to MDA DataQuick.

Last quarter’s total was an all-time high for any quarter in DataQuick’s statistics, which for defaults go back to 1992. There were 121,673 default notices filed in second quarter 2008 and 94,240 in third quarter 2008, during which a new state law took effect requiring lenders to take added steps aimed at keeping troubled borrowers in their homes.

“The nastiest batch of California home loans appears to have been made in mid to late 2006 and the foreclosure process is working its way through those. Back then different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low- down-payment loans, interest-only loans, stated-income loans, etcetera. But if you combine these elements into one loan, it’s toxic,” said John Walsh, DataQuick president.

The median origination month for last quarter’s defaulted loans was July 2006. That’s only four months later than the median origination month for defaulted loans a year ago, in first quarter 2008. That suggests a period where underwriting criteria were particularly lax.

Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far. Of the 3 million in 2006, 8.5 percent have so far resulted in default. A particularly toxic period appears to have been August through November 2006 which had more than a 9 percent default rate. Of the 2.1 million loans made in 2007, it’s 4.6 percent – a percentage that’s likely to rise significantly during the rest of this year.

The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6 percent). Of the major lenders, IndyMac has a default rate on those loans of 18.9 percent, World Savings 8.0 percent, Countrywide 7.7 percent, Washington Mutual 6.3 percent and Wells Fargo 3.4 percent. Less than 1 percent of the home loans originated in late 2006 by Citibank and Bank of America have since gone into default.

Many, if not most, of the loans made in 2006 are owned and/or serviced by lending institutions other than those that made the loans (mortgages are often sold off after the initial lender originates the loan, and are often serviced by a different entity). Many of the originating lending institutions no longer exist.

While most first quarter 2009 foreclosure activity was still concentrated in affordable inland communities, there are signs that the problem is slowly migrating into other areas. The affordable sub-markets, which represent 25 percent of the state’s housing stock, accounted for more than 52.0 percent of all default activity in 2008. Last quarter it fell to 47.5 percent.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,926 on a median $346,400 mortgage.

On home equity loans and lines of credit, borrowers owed a median $4,229 on a median $63,600 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 135,431 default notices were filed last quarter, they involved 130,718 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in Marin, San Francisco, and San Mateo counties – the historical norm. The probability was highest in Riverside, Merced and San Joaquin counties.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 43,620 during the first quarter. That’s down 5.5 percent from 46,183 for the prior quarter, and down 7.6 percent from 47,221 for first-quarter 2008. They reached 79,511 during last year’s third quarter before dropping because of lenders’ temporary policy changes (e.g. a temporary foreclosure moratorium).

In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state’s all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in the state.

Foreclosure resales have emerged as a significant market factor, accounting for 58.1 percent of all California resale activity last quarter. A year ago it was 33.1 percent. Foreclosure resales varied significantly by area, from 13.0 percent in San Francisco County to 80.8 percent in Merced County. ~ SOURCE:  April 22, 2009 ~ DQNews.com

Alicia Lanier’s note: Notices of default for condos and single-family homes in Santa Clara County were up 33.1% during the first quarter of 2009 compared to the same period last year. They were up 36.2% in San Mateo County and 35.5% in San Francisco County.