FHA to Drop Upper Mortgage Limits Jan. 1

On January 1, the FHA is reducing the size of loan that it will insure for its 3.5% down mortgage program in "high cost" areas like ours (FHA to Drop Upper Mortgage Limits Jan. 1).  The new limit will  be the previous limit of $625,500, which had been temporarily boosted to $729,750 in an effort to stimulate home buying.

Translation: With 3.5% down, a homebuyer will be able to purchase a home valued at up to $648,186 instead of $756,217.  Right now in the Beach Cities + El Segundo + Torrance, that reduces the number of affordable single family homes and townhomes homes on the market from 96 to 60.  Excluding Torrance, it reduces the number of affordable homes on the market from 35 to just 14!!!

-David

Housing Affordability Soars to Record High | Realtor Magazine

Nationwide, housing affordability is now at Record Highs.  In the South Bay, our market has really heated up, having stabilized last year.  YOU WON'T READ THAT IN THE NEWSPAPERS, because good news doesn't sell newspapers.  Better to look at the actual facts, which you can find continually updated in the "South Bay Market Data" tab at the Beach City Digs blog!  Or give me a call for the straight scoop in the Beach Cities.

A few teasers: 35% of our current sales are ALL CASH (these are smart buyers who know what they are doing).  And about the same percentage are multiple offer situations.  All of this going on while interest rates are at 50-year lows.- David

P.S.  Know of someone who needs to buy or sell a home in the South Bay?  Give me a call with their name and number and I'll take great care of them (yep, that was a shameless plug). -D

Do the Research: South Bay Home Inventories are Not High!

Do the research! Here are the actual levels of single family homes for sale in the South Bay Beach Cities and El Segundo.  

Note that although many factors would characterize this as a "Buyers Market," the level of inventories is low.  This represents an opportunity for sellers to list their properties at a time when competition is quite limited, and when low interest rates make mortgages affordable to your target buyers.  This is a "seam" in the marketplace that smart sellers can use to their advantage. 

Charts like this and in much greater detail, updated daily, are always available at www.BeachCityDigs.com by clicking on the "South Bay Market Data" tab.   - David

Even the LA TIMES Thinks Now May be the Time to Buy!

Any time the LA Times writes about real estate, it's difficult to know whether to expect which theme will dominate: "doom" or "gloom."  So when they publish an article saying Now may be the time to buy a home, something big must be going on (or the business editor was vacationing).  There is: interest rates are on the upswing as we've been saying for some time.

Don't lose sight of the fact that higher rates reduce affordability, so potential sellers should be as interested in this news as potential buyers.

Now if you check the reader-submitted comments accompanying the Times article online, you're bound to see the doom and gloomers arguing for waiting till rates go up, thinking this will cause prices to crash.  These folks miss two critical points: the crash already happened (not sure how anyone could have missed that), and affordability is hugely impacted by rates.  - David

Why real estate price padding doesn't work in today's market

Answers: Because the market is not yet resilient, because qualifying is still difficult for many buyers, because listings not received well by the marketplace quickly become stale unless the price is adjusted downward.

Question: Why real estate price padding doesn't work in today's market - Inman News

- David

Extreme Home Foreclosure Trouble - WSJ.com

This is a little sad, but it's a fair reflection of one of the biggest elements of the mortgage crisis.

Extreme Home Foreclosure Trouble - WSJ.com

While the intentions are no doubt positive when Extreme Makeover Home Edition does it's thing, the result has been quite similar to when mortgage lenders did their thing a few years ago: putting families in homes they couldn't afford. OUCH! - David

HAMP: Permanent loan mods up 45% | Inman News

Loan modifications are on the rise! This is good news for homeowners and the real estate market as a whole, because it means greater market stability and less foreclosures ahead.

Quoting from the Inman News article, "Borrowers who make their monthy payments on time for a year are eligible to earn up to $1,000 applied to their outstanding mortgage balance." - David

Where Rates are Headed (According to the Mortgage Bankers Assn)

Where are mortgage rates headed?  Here's what the Mortgage Banker's Association predicts for the coming quarters: 6% by end of 2010! 

If you're thinking of buying or selling, this impacts affordability, so based on this info it's time to act now. - David

What Buffett Thinks about Housing

Want to know what Warren Buffett predicts for the US housing market?  Then you need to look at paragraphs 4-7 on Page 12 (Page 14 of the pdf) of the 2009 Annual Report of Berkshire Hathaway Inc.  Since Berkshire Hathaway owns several real estate interests, Buffett weighs in on the housing market in his Chairman's letter. - David

C.A.R. releases "2009-2010 Survey of California Home Sellers"

What was the motivation for 67% of homesellers in California last year?  Ouch: According to a report by the California Association of Realtors, they could no longer afford their mortgages. - David

Mortgage Bulls Bid Fed Adieu - WSJ.com

What impact will be felt by the Fed's announced pullout from investing in Treasury Securities by March 31? Very substantial, in the form of rising rates, unless other factors and players pick up where the Fed's rate mitigation efforts leave off. Key quote:

"The optimistic view hinges on the government remaining an enormous presence in the mortgage market, both through its mortgage-backed securities holdings and the widespread expectation that it could jump back in if the market falters."

Mortgage Bulls Bid Fed Adieu - WSJ.com

I believe we'll see rates begin to rise,

Existing Home Sales Plummet In December, But It Was Expected

Just one month after from blowing away Wall Street, December's Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.
Don't be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.

When November's Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time,

FHA Aims to Tighten Credit Without Hurting Economy - WSJ.com

David Stevens, the first FHA chief in decades to have private sector experience, is making adjustments to FHA lending programs. 

FHA Aims to Tighten Credit Without Hurting Economy - WSJ.com

Here's a guy whose own home has gone down in value, and he understands why! Moreover, he anticipates the FHA to be profitable in future years due to more cautious lending practices. - David

The Bad Jobs Report Wasn't All Bad -- Mortgage Rates Fell

Despite the headlines, it's important to remember that December's jobs report wasn't all bad news.

Sure, the economy shed 85,000 jobs last month and the Unemployment Rate failed to dip below 10%, but for home buyers and rate shoppers , the news was just fine. The soft employment data led mortgage rates lower, making homes more affordable for buyers.

There are two sides to every economic coin.