Mortgage Rates Rising

by | Jun 5, 2020 | Interest Rates/Loan Limits, Jim's Take on the Market, Market Surge, Mortgage News, Mortgage Qualifying, Showings | 3 comments

Just like the price of gasoline, mortgage rates are very slow to come down, but they tend go up like a rocket – and with the surprising employment news today, we’ll probably get back into the mid-3s by Monday.  We’ll see if the lowest rates in history were the sole reason why showings rebounded so quickly. From cnbc:

What’s good news for the U.S. economy is suddenly bad news for mortgage rates. A far-better-than-expected May employment report only added to a growing sell-off in the bond market, pushing yields to the highest level since March. Mortgage rates loosely follow the yield on the 10-year Treasury.

Rates have been rising this week, after sitting around a record low for the last two weeks. Friday, the average mortgage shopper may see rates on the 30-year fixed as much as a quarter point higher, according to Matthew Graham, COO of Mortgage News Daily, which runs daily averages from lenders.

For those with top-tier credit and financials, they may only see an eighth of a point increase, but for those with lower scores and down payments, the jump could be as much as 0.375%.

“It’s going to be ugly,” said Graham. “Today is the first time since the Covid-19 market reaction settled down in March that interest rates truly have a reason to panic. Until further notice, this looks like liftoff.”

This is not, of course, the last word in a mortgage market that has been on a rate roller-coaster ride fueled by a massive spike in mortgage delinquencies, an initially confusing and risk-ridden government bailout, and an overstressed loan servicing system. The mortgage bailout has been clarified, with parts rewritten to help servicers, the number of borrowers in forbearance plans is shrinking and mortgage companies are on a massive hiring spree.

“Our forecast was for Treasury rates to slowly rise over the medium term, but for mortgage rates to rise more slowly, as the spread between mortgage and Treasury rates has been abnormally wide,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “I expect mortgage lenders will price more aggressively as refinance volume tails off in response to even slightly higher mortgage rates.”

And the sell-off in the bond market could easily turn around for any number of reasons in an exceedingly precarious economy. Nothing is certain on either the health or economic recovery fronts, and both the stock and bond markets follow those.

“There are past examples that have looked similarly scary for rates that have ended up being more balanced. All we have to go on is what’s happening right now,” added Graham. “Things can change, but until and unless they do, you have to treat last week’s all-time low rates as the bottom of the market.

https://www.cnbc.com/2020/06/05/its-going-to-be-ugly-analyst-says-as-mortgage-rates-suddenly-spike.html

Prefab Office Shed

by | Jun 4, 2020 | ADU, Jim's Take on the Market, Remodel Projects | 2 comments

Hat tip just some guy for sending in this article on smaller but cheaper alternatives:

With modern looks and efficient construction, prefab continues to be an alluring option for building a new home. But if you already have a house, adding a backyard structure made from components produced off-site can be an easy and practical way to make the most of your property.

Compact prefab sheds often won’t require a permit to install and their potential uses can go way beyond simple storage or workshop space—think a home office, yoga studio, writing retreat, guest house, music room, and so on.

Below, we’ve rounded up five rad prefab shed lines that you can order from right now. The estimated price ranges do not include costs associated with any permits, shipping, foundation, and installation, unless otherwise noted.

https://www.curbed.com/21267449/prefab-homes-shed-for-sale-backyard-office-studio

Carlsbad Protests This Weekend

by | Jun 4, 2020 | Carlsbad, Jim's Take on the Market, Revolution | 1 comment


One guy pops off (below), and the next thing you know Carlsbad is trending on twitter and the National Guard is rolling our way. Hopefully everyone will keep their heads!

Jumbo 90% LTV

by | Jun 3, 2020 | Jim's Take on the Market, Market Conditions, Mortgage News, Mortgage Qualifying | 1 comment

The coronavirus caused banks to pull back on lending, and one niche that was severely impacted was jumbo loans with less than 20% down payment.  In early March, you could have borrowed $2,500,000 with 10% down, and by the end of March the max was down to $850,000.

We got lucky and found Dustin at Mission Fed, who is still funding the jumbos at 90%LTV up to $1.5M!  My buyers thought he made the process simple and easy, and we closed escrow on the day Dustin predicted in the beginning.  We couldn’t be more pleased with the service.

Here is a quick snapshot of some of the out of the box programs and jumbo programs at Mission Fed. This assumes a score of 720+ on an owner occupied purchase of a single family home:

  • 0% down loans to $690,000 (*Not a VA loan. Anyone can qualify for this)
    • 7/1 ARM at 3.125% with a 1% lender credit back for closing costs
    • 10/1 ARM at 3.25% with a 1% lender credit back for closing costs
  • 30 yr Fixed Jumbos with only 5% down
    • 5% down up to a loan amount of $850,000 – Rate as low as 3.25%
    • All on one loan. No need for a high rate HELOC
  • 10% down payment up to loans of 1.5M
    • 7/1 ARM at 3.125% with a 1% lender credit back for closing costs
    • 10/1 ARM at 3.25% with a 1% lender credit back for closing costs
    • 5/5 ARM @ 2.625% with a 1% lender credit back for closing costs
    • 30 yr fixed jumbo at 3.25%

I like to help people, so I thought I’d mention him and his contact info for anyone reading who might be in the same fix.  I don’t know any other lender offering these programs at these low rates – if you know someone, pass them along.

Dustin Gildersleeve · Mortgage Loan Originator at Mission FCU

Real Estate · NMLS #13509

Phone: 619-379-0196 · Fax: 858-777-3612

dusting@missionfed.com

To apply – www.missionfed.com/dustin

Lower Supply = Higher Appreciation

by | Jun 3, 2020 | Inventory, Jim's Take on the Market, Market Conditions | 1 comment

From First American:

In April, pandemic-related pressure drove the supply of homes for sale to its lowest April supply level ever. Even in the years prior to the pandemic, the lack of housing supply for sale was a significant headwind to the housing market. A major reason for the lack of homes for sale is increasing tenure – the length of time a homeowner lives in their home. Since the Great Recession, tenure has rapidly increased from approximately seven years to currently more than 12 years, the highest it has ever been. Increasing tenure means existing homeowners, who supply the overwhelming majority of homes for sale, are not selling, which limits supply.

Prior to the pandemic, rising tenure length was the byproduct of two trends – older homeowners aging in place and many existing homeowners being locked-in with historically low mortgage rates. The pandemic-driven economic uncertainty and concerns about the potential health risks associated with showing homes to buyers have made existing homeowners more hesitant to list their homes for sale, exacerbating the increasing tenure issue.

You Can’t Buy What’s Not for Sale

The graph below shows inventory turnover, the total supply of homes for sale nationwide as a percentage of occupied residential inventory. A quick look will show that inventory hit a 25-year low point in December 2019, with a turnover rate of 1.52 percent. In other words, only 152 homes in every 10,000 were for sale, well below the historical average of about 2.5 percent, or 250 homes in every 10,000. Since then, housing supply had slowly and modestly improved. Enter the pandemic in April. Housing inventory fell once more to 1.58 percent. The chart also breaks down inventory by its components: existing-home and new home inventory for sale. Existing-home sales make up approximately 90 percent of all home sales, which means more existing homeowners must sell their homes in order for supply to increase significantly.

But existing homeowners are staying put. Historically high tenure length of over 12 years means both fewer buyers and fewer homes on the market, and a reduction in existing-home sales. In the months preceding the pandemic, there was some modest improvement in the situation as the pace of tenure length growth had slowed, falling to 7.6 percent year-over-year in February. Then came the pandemic and the annual growth rate of tenure length accelerated to 8.5 percent in March and remained that high in April. As more homeowners were reluctant to list their homes for sale amid the pandemic, the supply of homes available to potential home buyers dwindled further. You can’t buy what’s not for sale.

Existing homeowners are staying home everywhere. Average tenure length increased in April in each of the 50 large metropolitan areas we track relative to one year ago. While beginning to slow in most markets in February, annual tenure length appreciation picked up the pace in 45 of the 50 markets once the economic impacts of the pandemic hit in March and April 2020. As pent-up demand from the pandemic-delayed spring home-buying season enters the market, potential home buyers have very limited inventory to choose from. Lack of supply relative to demand is a sure-fire recipe for increasing house price appreciation.

Link to Article

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Our inventory has been very consistent in the past – there is only a 10% spread between the high and the low number of listings between 2014-2019. But now we have 20% fewer NSDCC listings than last year, and the median list price is 9% higher:

Number of NSDCC Listings Between January and May

Year
# of Listings
Median LP
2014
2,245
$1,285,000
2015
2,342
$1,299,000
2016
2,486
$1,425,000
2017
2,295
$1,445,000
2018
2,225
$1,499,998
2019
2,282
$1,550,000
2020
1,822
$1,684,448

There are additional variables in our market today that we’ve never experienced before, so maybe price will get less scrutiny? Will buyers just pay what it takes to get a house they like?

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