Financial/Mortgage Update

In the last six weeks interest rates for Palos Verdes real estate have remained fairly steady. The interest rate for a 30-year fixed mortgage going down 1/4 point to 4.75% for a conforming loan and remaining at 5.785% for a jumbo loan. A 5/1 Year ARM is 3.75% for a conforming loan and 5.125% for jumbo loans. A 5/1 Interest Only conforming loan has a 3.75% interest rate and a jumbo loan has a 5.25% interest rate.

Demand is up for U.S. Treasury Bonds. Yesterday there was 3 times as much demand compared to supply for sales of 2-year Treasury notes (investors bidding at 1.035%) . Interest rates for home mortgages have remained low. Conventional wisdom says that when bond rates go up, interest rates usually go down but at this time both are fairly low which is a mixed signal. These are interesting times.

Financial/Mortgage Update

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It was a fairly quiet week in the financial/mortgage area which is a welcome change from the last several months.

Rates are down slightly for all loans. The current interest rate for a 30-year fixed conforming loan is 5% and 5.875% for a jumbo loan. A 5/1 Year ARM is 3.625% for conforming loans and 5.125% for jumbo loans. A 5/1 Interest Only conforming loan has a 3.75% interest rate and a jumbo loan has a 5.25% interest rate. Jumbo loans (over $729,750) are down significantly since the beginning of the year.

Financial/Mortgage Update

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“The typical monthly mortgage payment for Southern California buyers last month was $1,193, up from $1,052 in May. Adjusted for inflation, current payments are 46% below typical payments in the spring of 1989, the peak of the prior real estate cycle” states the Los Angeles Times on July 16th. I checked and in 1989, the average interest for a 30-year fixed mortgage was 10.32%. That is twice as much as today’s rates!

The current interest rate for a 30-year fixed conforming loan is 5.125% and 5.875% for a jumbo loan. A 5/1 Year ARM is 4% for conforming loans and 5.375% for jumbo loans. A 5/1 Interest Only conforming loan has a 4.125% interest rate and a jumbo loan has a 5.5% interest rate.

Federal Reserve Chairman, Ben Bernanke, commented yesterday that he thought rates were going to remain low. I hope he is correct as these low rates continue to stimulate our real estate market.

Financial/Mortgage Update

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Mortgage rates have been see-sawing up and down a bit for the Palos Verdes real estate market. A 30-year fixed conforming loan is 4.875% which is a quarter percent higher than 2 months ago and a quarter percent lower than last week. A 5/1 Year ARM is 3.875% and a 5/1 Interest Only loan is 4%.

30-year Fixed Jumbo rates are 6.125% for borrowers with FICO scores over 740 and 30% down. A jumbo 5/1 Year ARM is 5.125% and a 5/1 Interest Only loan is 5.25%.

A mortgage broker I spoke with expects interest rates to continue their up and down cycle through the end of the year as the loan market reacts to the ups and downs of the stock market and consumer confidence.

Where Are The Jumbo Loans?

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The availability of Jumbo Loans have affected the sale of Palos Verdes real estateover $1,200,000. It is a little tricky because there are jumbo loans available at rates that match May of 2008 – 6.875%. However, the number of buyers who can qualify for those loans has been diminished because these loans must be have full income verification and the borrower must have FICO scores of 700 or above.

And the higher the purchase price, the larger the down payment required. A loan of less than $1,000,000 requires 20% down. A loan between $1,000,000 and $1,500,000 requires 25% down, A loan of $1,500,000 to $2,000,000 requires 30% down payment. Loans above $2,000,000 require a minimum of 35% down payment.

On a sales price of $2,000,000 with $500,000 down payment where the borrower has no other debt, that buyer will have to document $375,000 yearly income (which is 1% or less of the population) for a loan of $1,500,000. Additionally, the lender will require the borrower to have cash reserves post closing of at least $150,000 and those funds have to have been in the bank account for a minimum of 3 months (Retirement accounts do qualify as cash reserves.) The issue seems to be that probably half of those borrowers who are making $375,000 or above are self employed and write off business expenses to lower their income for income tax purposes. The net income figure on page one of the tax return is what the lenders use as documented income. Jumbo loans are available but fewer borrowers qualify because of the above parameters.

Appraisal Rules Not Smelling So Good

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Last week Area Appraisal Management Company spoke at our Palos Verdes real estate office meeting to bring us up to date on the new appraisal rules – HVCC or Home Valuation Code of Conduct that went into affect May 1st. In the Sunday LA Times, Kenneth R. Harney wrote an article on the very same subject. They both gave the same information and it is not necessarily good.

Lenders can no longer order the appraisal themselves (and thus keep an eye on appraisal fees). They are now being ordered through a third party management company. Appraisal fees have gone up and the fee being paid to the appraiser is going down. Someone in the middle is pocketing the difference.

The appraiser management companies can send out any appraiser willing to work for the lower fee which means your appraiser can be from out of the area and not familiar with local values.

Lenders may not order a second appraisal if the first one is low. You are finished with that lender and must reapply with a new lender and start the process again.

The appraisal must be paid for upfront with a credit or debit card (instead of paying for it out of the proceeds of the loan) and there could be add-on fees such as no-show penalties ($50-100) or an additional charge of $50 to $150 if the property is worth more than $500,000.

Fannie Mae and Freddie Mac passed these new rules to improve the accuracy of appraisals and keep an arms length distance between the lender and appraiser. I don’t know if this is a knee jerk reaction to the financial mess experienced last year or a well thought out plan to restore some credibility in the lending market. Time will tell but we may experience a little pain in the meantime.

Financial/Mortgage Update

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Mortgage rates are down again for the Palos Verdes real estate market. A 30-year fixed conforming loan is 4.625% – That is a record low in Freddie Mac data going back to 1971!

Fixed mortgage rates in the U.S. fell for a second consecutive week as the Federal Reserve plan to buy mortgage-back securities helped drive rates lower. 18 properties on the Palos Verdes Peninsula went into escrow in the last week. I believe Buyers are realizing what a great opportunity this is for them and they are taking advantage of these historically low interest rates.

Above mortgage rates for Palos Verdes homes are provided by Jim Kurata, Peninsula Mortgage/Chase (310-994-2769).

Financial/Mortgage Update

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Mortgage rates are down for a 30-year fixed compared to last month for the Palos Verdes real estate market. These rates are as of April 3, 2009.

Also of note, the California Association of Realtors announced “a new program designed to provide peace of mind to first-time buyers who are hesitant to enter he housing market due to concerns about potential job loss, and subsequently being unable to met their monthly mortgage obligations.” This Mortgage Protection Program is free for the first year to eligible applicants who meet the following guidelines:

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Click here for more information and for an application. Above mortgage rates for Palos Verdes homes are provided by Jim Kurata, Peninsula Mortgage/Chase (310-994-2769).

Positive Real Estate News Is Bubbling Up

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“Hope Stirs in Housing Market” was the headline in the LA Times front page on Wednesday. Peter Hong’s positive piece states “Home prices in Southern California held steady in February for the first time in nearly a year, figures released Tuesday show, as low prices brought buyers back into the market.” On top of that home construction rose nationwide.

Sales of Palos Verdes real estate confirm that forward movement. 31 properties have sold/closed escrow since the beginning of March and 30 properties sold and went into escrow since the first of the month. This is twice as much activity as we experienced in February and we have 10 days to go before months end.

“Mortgage rates down, but standards high” was the headline in today’s Daily Breeze front page. A conforming 30-year fixed mortgage is below 5% which “…was the first time the average had fallen below 5 percent since the publisher (HSH Associates) began keeping records in 1979.” Lower interest rates allow more buyers to get into the market. Lending policies are much tighter though compared to a couple of years ago and it’s better to understand the new guidelines so you are prepared as a buyer. Lew Sichelman (LA Times) has some great advice to borrowers that can be accessed by clicking here. All in all, things are looking up!

Financial/Mortgage Update

March 14, 2009

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We have had good news this week with the stock market up. Mortgage interest rates for the Palos Verdes real estate market are up slightly for a jumbo 30-year fixed loan at 6.5% versus 6.25% one month ago. As a comparison, last July the 30-year fixed jumbo was 7.75%. 6.5% is a great rate when one looks at the historical data.

Conforming loans (up to $417,000) are currently at 5.125% for a 30-year fixed loan compared to 4.75% one month ago. Last July, conforming loans were 6.5% for a 30-year fixed loan.

Above mortgage rates for Palos Verdes homes are provided by Jim Kurata, Peninsula Mortgage/Chase (310-994-2769).