Mortgage-Rate Jitters

by | Nov 16, 2010 | Interest Rates/Loan Limits, Market Conditions | 16 comments

Mortgage rates spiked up in the last two days, here’s an excerpt from Adam at MND:

Tensions remain high in the primary mortgage market as mortgage rates have extended their losing streak.  We’re in a tough spot here…

The best conventional/FHA/VA 30 year fixed mortgage rates have risen into the 4.25% to 4.50% range for well-qualified borrowers.  The best conventional/FHA/VA  15 year fixed mortgage rates have risen into a range between 3.500% and 3.875%.

This liquidation of long trading positions is a necessary evil in the recovery process. That cleansing process was once again evident today in the bond market and it might continue to play out over the next few days, but once it’s washed out, I think we’ll at least see 4.25% no cost loans on the board again. When that occurs we’ll revisit the notion of mortgage rates moving back below 4.00% again…until then we’re stuck in a waiting game…

What’s the difference?  Here are the P&I payments for a 30-year mortgage:

Rate $500,000 $697,500
4.0% $2,387.08 $3,329.97
4.5% $2,533.43 $3,534.13
5.0% $2,684.11 $3,744.33

Regardless of the situation, homebuyers always have the option to buy down their interest rate – and the seller can contribute too.  But if you think that you can comfortably afford your mortgage payment at 4%, but the thought of 5% is unaffordable, you should re-evaluate your house-buying plans.  Homeownership is expensive – there are repairs, improvements, utilities, furniture, etc. to consider, and if a couple of hundred dollars per month can make or break you, then proceed with extreme caution.

Will home prices come down if rates go up? Only with regards to the long-term trend. Sellers are already extremely resistant to lowering their price, and if you find the perfect house, don’t be surprised if the competition from other buyers erodes your ability to get a discount.

 

Flopping – Fraudulent Short Sales

by | Nov 15, 2010 | Fraud, Short Sales | 15 comments

Hat tip to SM for sending this article from the Arizona Republic – here’s an excerpt:

“Flopping is the opposite of flipping,” said Amy Swaney, regional Arizona sales managers for Citywide Home Loans and a past president of the Arizona Mortgage Lenders Association. “It is the art of profiting off the devaluation of property rather than an increase in value of a property.”

It is impossible to know how many homes have been “flopped” since short sales began to be widely accepted by lenders in the past year.

But a key indicator is how quickly short-sale homes are resold. An owner who buys in a short sale and sells the home again within a few days most likely had the second buyer lined up in advance.

In the past year, nearly 20,000 short sales closed in metro Phoenix. Of those, at least 1,000 were flops, according to an analysis by Tom Ruff of the real-estate research firm Information Market. A few examples: a Tolleson home sold for $90,000 through a short sale and then was flopped within 20 days for $106,000; a northwest Phoenix home was purchased first through a short sale for $28,500 and then resold through a flop within two weeks for $50,000; and a Scottsdale house sold via short sale for $90,000 and then for $122,000 through a subsequent flop less than a month later.

The Arizona Department of Real Estate, mortgage giants Fannie Mae and Freddie Mac and the FBI are all investigating flopping deals.

“Short-sale flopping is one of our real-estate industry’s biggest issues right now,” said Judy Lowe, Arizona Department of Real Estate commissioner. “We are all looking at the legality and ethics of these deals. And it varies by flop because it appears every deal is done a little differently.”

The full article here:

http://www.azcentral.com/business/realestate/articles/2010/11/14/20101114phoenix-real-estate-short-sale-flopping.html

Big Down Payments Still King

by | Nov 15, 2010 | Down Payments

It gets mentioned regularly how the demographics don’t support the housing prices around here.  It makes you wonder, how can so many expensive homes keep selling when the San Diego median income is around $60,000 – doesn’t something have to give?

We’ve seen it consistently over the last year or two – buyers are utilizing bigger down payments to keep the monthly payments down.

Here’s how the SFRs that sold in October were financed in three mid-range areas of the North SD County Coastal region – from the tax rolls:

Area or Town Zero Down FHA 5-19% 20%-25% 30%-49% 50%+ Cash SP=$1M+
Carlsbad SE
0
2
0
9
10
5
5
8 of 31
Encinitas
0
2
4
9
8
7
11
12 of 41
Carmel Vly
1
2
3
8
7
4
4
10 of 29
Totals
1
6
7
26
25
16
20
30 of 101

Sixty percent of the buyers used at least a 30% down payment, and only 6 FHA deals.  It lends more credence to the haves vs. havenots theory – those with ample firepower are buying, with many paying quite a bit more than those who may qualify, but are more frugal.

The three low-down sales in Carmel Valley (2 FHA, one 100% fin) were all at Manzanita Trail. Not surprised to hear that the new-tract lender is finding every available opportunity to assist with sales. 

Double-Dip Watch

by | Nov 14, 2010 | Double Dip, Market Conditions, North County Coastal, Sales and Price Check, Thinking of Buying?, Thinking of Selling? | 14 comments

What are the ingredients for a double-dip?

We could say that declining sales would be a precursor, and a downward trend in pricing would be an obvious sign.  But the best signal would be houses on the market but not selling, listed for the same of lower prices than recent comps – or last year’s comps.

Town Zip Oct ’09 Sales/$persf Oct ’10 Sales/$persf ACT listings/$persf, LP
Cardiff 92007
6/$524/sf
3/$467/sf
41/$558/sf
Carlsbad NW 92008
10/$334
12/$286
87/$523
Carlsbad SE 92009
41/$278
38/$260
172/$273
Carlsbad NE 92010
15/$238
5/$269
41/$251
Carlsbad SW 92011
19/$306
20/$292
105/$335
Del Mar 92014
13/$926
5/$509
114/$1,051
Encinitas 92024
35/$370
33/$367
155/$488
La Jolla 92037
29/$631
23/$593
246/$935
RSF 67+91
11/$402
14/$459
277/$682
Solana Bch 92075
3/$625
4/$467
47/$755
West RB 92127
42/$270
38/$267
193/$319
RP 92129
24/$276
21/$274
92/$277
Carmel Vly 92130
28/$331
28/$328
168/$377
Scripps Rch 92131
24/$283
25/$250
118/$278
Total All
300/$368
269/$334
1,886/$544/sf

The average list pricing shows how insane most active (un-sold) sellers are – they are way above market.  What is worse is that no one really knows what list price it would take to be attractive to a buyer – all we know is that their current list price is wrong.

Take a good look at 92009, 92010, 92129, and 92131 – areas where the current average list pricing is within striking range of the last two Octobers, yet a lot of homes not selling.

Squatters Hard to Evict in CA

by | Nov 14, 2010 | Market Conditions, Thinking of Buying? | 13 comments

Hat tip to RE for sending along this U-T article describing a big mistake that often happens – buyers closing escrow with the occupants still residing in the house. 

Verify the house is vacant before closing!

Ed Struiksma, the onetime San Diego councilman and acting mayor, has been flying mostly under the radar in the two decades since he left office. A dozen years ago, a U-T story said he was dabbling in diamonds (import-export). Four years ago, he was spokesman for the San Diego Auto Connection and its tent sales at Qualcomm Stadium.

Two years ago, a Wall Street Journal story had him the victim of an “advance fee scheme” by a loan company collecting nonrefundable deposits. Struiksma said he wanted a loan to buy land for a housing development. Now, it appears, Struiksma has new housing troubles.

According to David Potts, Struiksma has “filed bankruptcy in an effort to avoid eviction” from the Coto de Caza house Potts purchased earlier this year after the bank foreclosed on Struiksma.

Potts says he first agreed to help Struiksma by allowing him to occupy the house until Oct. 28, and a legal document to that effect was signed by Struiksma in September. But, he says, Struiksma has since refused to leave, with his bankruptcy filing delaying his eviction. (Struiksma didn’t responded to my messages left on his answering machine.) Meanwhile, Potts has commenced to take the story public by laying it all out on a website called evict-struiksma.com.

 

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