Coto de Caza, CA Real Estate News

The Pareto Principle is a statistical concept most commonly known as the 80/20 Rule.  It says 80 percent of the effects come from 20 of the causes. Apparently, the 80/20 Rule applies to foreclosures, too -- at least according to data compiled by foreclosure-tracking firm RealtyTrac. Based on data from May, 11 states accounted for 80% of the country's foreclosure activity. The remaining 20% was spread across the 39 others. That's 80/20 almost to the tee. The disparity goes deeper that that, though.  The top three states in RealtyTrac's list -- California, Florida, Nevada -- were home to half of May's foreclosure-related actions. Clearly, foreclosures are concentrated in certain geographies. But, no matter in which state you live, foreclosures still impact you.  This is because mortgage l...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Tighter mortgage guidelines since late-2008 are forcing home buyers to make bigger downpayments.  Anecdotally, the change has led to a surge in buyers taking gifts of cash from family members. If you're among those accepting a cash gift from family, it's important to know that you can't just deposit the money in your bank account.  There is a proper way to accept a cash gift and it requires 3 distinct steps: Complete and sign an acceptable gift letter Document the gifter's withdrawal of funds with teller receipts Document the giftee's deposit of funds with teller receipts See, mortgage lenders pay close attention to gifts-for-downpayments.  For one, lenders have to make sure that downpayment cash is "clean" (i.e. not laundered).  And, secondly, they want the gift to really be a gift and...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Since Memorial Day, conforming mortgage rates have jumped by more than 1.125 percent, adding thousands of dollars to the annual cost of homeownership. To the casual observer, the moves may seem random.  There's a reason this is happening, however.  It starts with inflation. As an economic force, inflation erodes the value of the U.S. Dollar.  Left unchecked, it drives up the Cost of Living as each dollar "buys less" at the supermarket, gas station, or anywhere else. But with respect to mortgage rates, inflation's impact is more immediate.  Because inflation devalues the dollar over the long-term, it renders long-term mortgage bonds a less attractive investment for traders.  If bond investors are repaid in U.S. Dollars, after all, it would make the investment worth less if the dollar is ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The number of homes under contract to sell soared in April, climbing nearly 7 percent nationwide versus a month ago. It's the third straight month in which the Pending Home Sales Index gained and the biggest monthly jump since October 2001, the month prior to the end of the Early 2000s Recession. A "pending" home sale is one that's under contract to close, but has yet to do so. The Pending Home Sales Index is an imperfect statistic because not every home under contract makes it to closing, but the data can a reliable indicator of home buyer activity. It's not tough to understand why homes-under-contract are spiking: There's a $8,000 tax credit for first-time home buyers Conforming and FHA mortgage rates are hovering near 5 percent Home prices are still soft nationwide These elements are...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Mortgage rates soared again Monday, tacking on a half-percent in a day for the second time in under a week. Each half-percent adds $62 to a $200,000 home loan's monthly payment, or $744 per year. For home buyers recently under contract, it's a gut-wrenching time to be shopping for a home loan.  Morning mortgage rates have been typically gone by early-afternoon and -- in some cases -- lenders have changed rates five times in one-day span. The reasons for surge in rates are varied, but each is related to the idea that the economic recession may be nearing its end. Consumer optimism is as high as it's been all year Consumer spending is falling at a slower pace than in months prior China's factories reported an expansion in business Each of these points bodes well for the economy and pushes...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Most often referred to as just-plain "points", discount points are an up-front fee charged by a mortgage lender in exchange for a lower mortgage rate.  The dollar value of one point is one percent on the loan size.  Discount points appear on Good Faith Estimates and HUD-1 Settlement Statements on Line 802. Historically, each 1 point paid by a borrower lowers an offered interest rate by a quarter-percent.  Since the late-2008, however, this relationship is skewed.  Depending on market conditions, 1 point paid by a borrower can lower a mortgage rate by up to 0.875 percent. As an example of how points work, a $200,000 home loan may be offered at 5.500 percent with 0 points.  With 1 discount point paid at closing -- $2,000 -- the mortgage rate may lower to 5.125 percent.  In addition to low...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
As this week's signal that homebuyers are returning to the market, both Existing Home Sales and New Homes Sales posted improvement versus month-prior figures this April. According to the National Association of REALTORS, the number of Existing Home Sales rose by 130,000 units in April. New Home Sales rose by a modest 1,000 units in April. As a twist in the story, however, although sales activity is rising, the available housing inventory is rising faster.  Versus March 2009, there were 300,000 more homes for sale in April -- an increase of 9 percent.  In addition, the "housing supply" rose to 10.2 months, its highest level since October. This is good news for home buyers, of course, because home prices are a product of Supply and Demand.  Depending on local conditions, buyers may find t...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Conforming mortgage rates rose by 0.625 percent Wednesday.  Yes, you read it right.  Zero-point-six-two-five percent. The surprise surge in pricing started shortly after 1:00 P.M. ET, then continued all the way until the market's closing.  It was the sharpest one-day surge in mortgage rates in recent history. Perhaps ever. For mortgage rate shoppers swept up in the surge, monthly payments are now higher by $29 per $100,000 borrowed. That's a significant shift. For as rare as Wednesday's events were, though, middle-of-the-day, 0.625 percent rate changes don't just happen.  Yesterday, the action was the result of a confluence of factors, including: Rising oil prices and gas prices Optimistic predictions about the end of the recession Concerns over the U.S. total debt load Fears of longer-...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Each month, researchers measure home values in 20 large U.S. cities, then compile their findings in a report called the Case-Shiller Index.  It's a popular measurement of housing health across the country, but it's far from perfect.  As 3 examples: It gives more weight to expensive homes than inexpensive ones Its sample set includes just 37 states of 50 states Real estate isn't a "national" market -- it's local All that said, however, the data is still important.  The Case-Shiller Index helps identify broader trends in housing and it's widely believed that the economy won't recover until the sector starts to stabilize. We may be at that recovery point now. Despite newspaper headlines blaring about 19 percent drops from March 2008, the month-to-month values appear to be stabilizing and ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Rates go up, rates go down.  Catch them while you can. After Wednesday's mortgage market rally drove rates down by a bunch, Thursday's sell-off pushed them right back up. This has been a common pattern in the skittish world of mortgage rates this year. With the U.S. economy still teetering between recession and growth, markets are looking for signals anywhere it can find them.  Thursday's clue came from a government report showing that more Americans are collecting unemployment benefits than at any point in history. Strangely, mortgage rates rose on the news. We call it "strange" because weak economic data has tended to draw mortgage rates lower lately to the benefit of prospective home buyers and would-be refinancers. Lower rates make homes more affordable. Thursday, though, the patter...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Mortgage rates fell after the Federal Reserve released its April 28-29, 2009 meeting's internal notes Wednesday. Officially known as "Fed Minutes", the report is an in-depth account Federal Reserve's last get-together, detailing the discussions and decisions that create our country's monetary policy.  It's the lengthy companion to the Federal Reserve's brief, post-meeting press release. For comparison's sake, the Federal Reserve's April 29 announcement contained 383 words.  The minutes of that same meeting held 5,754 words.  The extra words offer extra details about what the next monetary steps might be for the nation's policymakers.  This is a big deal to markets because investors are always looking for clues about what's next -- especially considering how the April Fed Minutes showed ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
A "housing start" is a new home on which construction has started and, for the fourth straight month, single-family home construction remained flat in April. For the battered housing market, this is the latest in a series of signals that a long-awaited turnaround is coming. The number of homes under contract to sell are rising The national housing inventory is down by nearly 1 million from March 2009 Home values are rising, according to a government report The current plateau in Housing Starts may indicate that builders are more confident in the economy, and that Americans are, too.  Especially in light of the freefall over the past few years. Single-Family Housing Starts have hugged the 360,000 mark since January 2009. However, there is a footnote to the story. As noted by the Commerce...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
One third of the way into the year and we have an interesting real estate market that has developed in South Orange County - both for buyers, and sellers.  Of course you have heard about distressed houses being a good 50% of sales for the past 12 months or so.  So, has this market turned into a good time to buy, sell, or perhaps both?  The answer depends on your point of view.  Buying in today's market.  As strange as it may sound, the higher the price, the better opportunity for buyers.  How can that be?  Well, the lower price range - where the majority of sales are happening - is extremely competitive.  It is not unusual for there to be 10 offers on houses priced under $450,000.  That is producing sales at higher than list price - and more than a reasonable share of frustrated potenti...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Getting approved for a home loan isn't getting easier, but it doesn't appear to be getting much more difficult, either. In its quarterly survey to member banks, the Federal Reserve asked senior bank loan officers whether "prime" residential mortgage guidelines had tightened in the last 3 months. Nearly 50 percent of banks said guidelines tightened last quarter, a much lower figure than during all of 2008 and a signal that mortgage lending may be turning a corner. Guidelines remain restrictive, however.  Versus 18 months ago, lenders subject would-be borrowers to all of the following: Higher minimum credit score thresholds Larger minimum downpayments Lower debt-to-income requirements Mandatory fees based on certain loan traits In addition, the availability of subordinate financing has al...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Home affordability improved again Wednesday after the government reported worse-than-expected results for April's Retail Sales. Mortgage rates edged lower for the third consecutive day. The impetus for the rate rally this week may be a long-awaited stock market correction.  After touching multi-year lows in mid-March, the Dow Jones added 30 percent going into last Friday.  It has since lost close to 300 points and as those dollars leave the stock market, they're finding their way toward bonds.  The demand is pushing bond prices up which, in turn, causes rates to fall. Yesterday morning, the rally in rates picked up steam on the heels of April's Retail Sales report.  With figures off a half-percent from March and roughly 7 percent from 2008, investors are concerned that consumer spending...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
For the second month in a row, the country's foreclosure activity was dominated by a small number of states. As shown by the latest stats from RealtyTrac.com, more than half of the country's foreclosure actions from April were concentrated in just 3 states: California Florida Nevada Those 3 states are home to but 19 percent of the U.S. population. No matter in which state you live, however, it's important to understand the far-reaching ramifications of foreclosures. Although real estate is local, mortgage lending is not.  Fannie Mae and Freddie Mac insure loans in all 50 states and when those mortgages go into default, the government entities often take losses.  This is the primary reason both Fannie and Freddie asked for government aid to the tune of $19 billion and $6 billion, respect...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
After a series of increases starting April 30, mortgage rates finally took a dip Monday.  It was a welcome surprise for home buyers that went under contract over the weekend.  Same for homeowners looking to pull the refinance trigger. Versus mortgage rates on Friday afternoon, many lenders were already showing lower rates Monday morning before a late-afternoon rate sheet reprice even lower. The drop in rates lowered annual mortgage payments by roughly $180 per $100,000 borrowed. Rate dips like this aren't expected, of course, bringing us to the one of the most important axioms of shopping for a mortgage rate: You can't shop for good luck. This is because mortgage rates are inherently unpredictable.  On some days, rates are higher On some days, rates are lower On some days, rates are unc...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The economy shed 539,000 jobs in April, raising the 6-month total to nearly 4 million jobs lost. And while the April data may look bad, it's actually 10% better than what was expected. As a result, it's turning into a bad day to be shopping for mortgage rates. After bottoming out early last week, conforming, 30-year fixed rate mortgages have risen in cost by as much as three-quarters of a percent. Today's good-for-the-economy report may push costs higher still. Now, it may seem odd to categorize 539-thousand lost jobs as "good-for-the-economy", but it's important to remember that on Wall Street, expectations are everything.  Investors are constantly buying and selling securities based on what they think will happen in the future.  And, up until this morning, there was an expectation tha...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The retail price of gasoline is rising nationwide, now up 30 percent since the New Year. It's a similar run-up to what we've seen for retail gas prices in each of the last 5 Spring Seasons. For people trying to time the mortgage market's bottom, clues about the future of mortgage rates may be at the local gas station. Rising gas prices are indicative of the rising cost of energy and, indeed, crude oil is closing in on its 2009 highpoint.  As these energy costs grow, so do inflationary pressures on the U.S. economy. Inflation, of course, is awful for mortgage rates. When it's present, mortgage markets deteriorate and rates tend to rise -- often sharply and with little advance warning. So, for today's homebuyers-in-process and would-be refinancers, prices at the pump may foreshadow bad ne...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Both mortgage guidelines and the economy have tightened since 2006, bringing more attention to "joint homeowners" -- non-spousal partners that buy and share a home as roommates. The practice is not new, but, anecdotally, co-purchasing is becoming more common. In the video above -- filmed two years ago but still on-target today -- real estate expert Barbara Corcoran provides good advice for co-purchasing partners.  Like any business relationship, it's important to plan ahead. Hire an attorney to draft contracts and agreements Have a plan for when one or both parties wants to move or sell Consider life insurance policies on each other The over-riding theme for co-purchasing arrangements is to be prepared.  Done right, however, they can create two proud homeowners where there would have o...
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