Coto de Caza, CA Real Estate News

By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
You know you're in the middle of an economic crisis when an accounting issue become Front Page News, and that's exactly where we're at today. Mark-to-market accounting is having its day in the sun and people in need of mortgage sometime soon would do well to pay attention.  If you've never heard of mark-to-market accounting, don't worry. Not many people have.  Mark-to-market is a method of valuing an asset based on its what-if-it-was-sold-today value.  Mark-to-market is officially known as FASB Statement 157. Mark-to-market is one reason why bank balance sheets look so awful right now.  Banks have to assign firesale-like values to their mortgage-backed assets even if those loans are performing, and even if there's no plans to sell them.  Assigning low values to assets, then, in turn, fo...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The basis of most mortgage lending is credit scoring.  In general, the higher a person's credit score, the lower his offered mortgage interest rate. Despite the many credit scoring models in use today, however, just 3 are relevant to American homeowners: The Equifax BEACON® score The Experian Fair Isaac Risk Model The TransUnion EMPIRICA® Generically, these scoring models generate what are commonly known as "FICO" scores. FICO scores are measurements of probability.  The higher a person's credit score, by definition, the less likely a person is to default on his home loan.  This is one reason why credit scoring has added importance lately -- mortgage lenders are very careful about what they're lending and to whom. Notably, minimum FICO thresholds have been added to all types of mortgage...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
USA Today ran this 2008 Foreclosures By State heatmap last week, reminding us of a simple truth: Headline statistics can be misleading. According to data compiled by RealtyTrac, 1 in 8 U.S. homes were in various stages of default or delinquency at the end of 2008.  This is a fact and it was widely reported by the press.  However, as the heatmap plainly shows, in stripping out just 35 of the nation's 3,232 counties, we can decrease the number of foreclosures nationally by half.  In other words, yes, 1 in 8 U.S. homes face mortgage trouble.  In your neighborhood, though, the ratio is likely much, much lower.  Real estate is a local phenomenon.  National statistics rarely apply.
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Hello again,  Wow!  The tidal wave of information coming in on the various stimulus programs is practically overwhelming - for everyone.  Buyers, sellers, prospective borrowers, as well as Realtors and lenders. The effect this has had is a brief slow-down of what had been an increasingly active spring market here in Orange County, to a pause, to stop and figure out whether any of these programs might be helpful to us. The fact is, depending on your situation, if you're thinking of buying, or thinking of refinancing, or worried about the mortgage you're paying on, there is something for everyone.  Just look at the titles of my blog posts over the past month. I hope you are finding my blog to be a source of possible solutions. Here is a link to my friend Steven Thomas' most recent Orange ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
If you asked an economist why home prices have broadly fallen over the past 2 years, you'd get a short lesson in Supply and Demand. Too many homes for sale and not enough people to buy them pushed values lower until a balance point can be reached. Looking at the chart at right, that balance point may be fast approaching. According to data compiled by ZipRealty, the total number of homes listed for sale fell in February 2009 in 23 of 24 major housing markets.  This is an especially important data point because home inventories typically rise in February, ahead of the Spring Home-Shopping Season.  Since 1982, February home inventory has been up 3 percent on average. Last month, it fell. So, in support of the Supply and Demand Theory, we shouldn't be surprised that the rate of price declin...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
When the White House first introduced the Making Home Affordable program in February, it was positioned as a mortgage program with two goals: To help financially-needy homeowners get mortgage relief To help homeowners who've lose equity qualify for today's low rates Wednesday, in a much-anticipated announcement, the U.S. Treasury introduced new details about Making Home Affordable.  It also created an "Am I Eligible For Making Home Affordable" form on its website. In the press release, the Treasury detailed the President's original blueprint.  Namely, it provided explicit loan modification instructions that will assist up to 4 million delinquent homeowners and their respective mortgage servicers.   The modification guidelines are a thorough 17 pages long and leave little question about ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
As part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 -- better known as the First-Time Homebuyer Credit Form. True to tax code standards, the 10-field form is accompanied by 3 pages of instructions. Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit. For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term "first-time home buyer". In addition, Form 5405 highlights the math behind the tax credit.  In general, the First-Time Homebuyer Credit is equal to the lesser of: $8,000 for homes bought in 2009 10 percent of the home's purchase price Married couples filing separately are entitled to half of the expected credit, and homes sold withi...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Mortgage delinquencies are on the rise nationwide, but the news may not be as bad as it appears at first glance. Using anonymous data from its national credit database, TransUnion reports that 4.58 percent of American homeowners were at least 60 days past due on mortgage payments last quarter. Comparing the statistic to the data from a year ago, the credit reporting agency goes on to say that mortgage delinquencies are up 53 percent. Although fair, the comparison carries a distinct, negative connotation because if we flip the data to its positive, the statistics don't seem nearly as menacing. Consider: In the last quarter of 2008, 4.58 percent of homeowners were delinquent on their respective mortgages.  The positive sign, therefore, is that 95.42 percent of homeowners were not delinque...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
In reading the headlines this morning, you'd think that last month's Existing Home Sales figure signaled more trouble ahead for the housing market.  Quite the contrary. Beyond the attention-grabbing headlines is the real story;  the one that shows -- once again -- that housing market fundaments are coming back into balance. As home values tick lower, it appears, value buyers are stepping in and snapping up supply.  It's true that the number of homes sold fell to its lowest levels in 12 years, but we can't ignore the fact that the number of homes available to buy fell, too. Banks have put the brakes on foreclosures Economic uncertainty is reducing job-related relocations Builders have all but stopped building new homes The national housing supply is as low as it's been in more than a yea...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
One popular housing theory is that -- before a bona fide housing recovery can begin -- the cost of owning a home versus renting one must return to historical levels. If that belief is a truth, a national return to rising home prices may be in store for 2009.  Falling home prices coupled with falling mortgage rates, too, have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home. This is the exact 18-year historical average and not since 2001 has the gap been this small. As reported by the Wall Street Journal, though, the study has some flaws.  For example, the data doesn't account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies.  But, combining a relatively low cost of ownership with the governme...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
There seems to be a misconception that jumbo loans - loans higher than the new higher conforming limit of $729,750 - are not available, or that the percentage rates for them are in the 7's or 8's.  This, I am happy to say - since the average price in the areas I serve is in excess of $1,500,000. - is no longer the case. At a meeting I attended Friday, one of my mortgage friends was quoting jumbo rates as 5.75%, up to a $3 million dollar loan.  That, my friends, is phenomenal!  Bear in mind that, while the Government has passed legislation that the upper limit of "conforming" loans would again go up to $729,750, most lenders are still quoting the old lower limit of $625,500., while their bosses work out the details of the pricing of the new higher limits. If the higher limit will be impo...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Everything old is new again. Conforming mortgages are limited by loan size, based on "typical" housing costs around the country.  The current conforming limit on a single-unit property is $417,000. In 2008, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increases in "high-cost" areas around the country.  In Los Angeles County, for example, a mortgage could be as large as $729,750 and still be considered "conforming". Those temporary increases rolled back effective January 1, 2009, to a maximum of $625,500. However, as part of the American Recovery and Reinvestment Act of 2009 signed into law this week, conforming loan limits in high-cost areas have been returned to their elevated levels of 2008.  You can see the text on the bottom of page 111 o...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
In Mesa, Arizona, Wednesday, the President presented the Homeowner Affordability and Stability plan, a multi-pronged effort to support the housing market. The story made the front page of nearly every newspaper in the country. The president's plan is sweeping: Incent mortgage servicers to work with at-risk homeowners before delinquency starts Let homeowners with good credit but little equity refinance to today's low rates Fund Fannie Mae and Freddie Mac to support mortgage markets It's a broad plan with many positive angles, but for now, we can't forget that it's just a plan.  Although the White House shapes and influences housing policy, Congress, Loan Servicers, and the Federal Agencies must still implement and execute it.  Until that implementation occurs, these reforms exist only on...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The just in, the President's plan to assist homeowners in trouble with their loans.  Just announced by President Obama, hours ago, in Mesa, AZ.. Wednesday, February 18th, 2009 at 9:36 am Help for homeowners The President's strategy for economic recovery is a stool with several legs, as he's said, and one of them is solving the foreclosure crisis."We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," he said yesterday as he signed the American Recovery and Reinvestment Act into law. Though communities across the country have been affected by the crisis, Arizona has been hit particularly hard -- in 2008, only two states had more foreclosures. And President Obama is there today, in Ph...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
The American Recovery and Reinvestment Act of 2009 was signed into law Tuesday in Denver, Colorado.  Also on Tuesday, stock markets fell near their November 2008 lows. The two moves are related. With each new stimulus; with each potential jumpstart of the economy, Wall Street questions whether the federal push will be enough to make an impact.  Traders ended undecided on that issue yesterday, but resolute in something else -- that whatever change stimulus bill brings, it's not going to come fast enough to help. The sell-off in equities was a boon to home buyers.  For the first time since early-December, mortgage markets gave a sustained rally, extending gains from the 8:30 AM market open through the 4:00 PM market close. Conforming mortgage rates were down on the day.  Longer-term, thou...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Consumer Confidence fell this month for the first time in three months, reflecting Americans' concern for the economy, housing, and the financial system.  The reading isn't much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy. Despite falling confidence, however, the housing industry appears to be reviving.  Sales of existing homes are on the rise and an increasing number of homes are under contract to sell.  And, if these statistics seem out of place, consider the external forces that are accompanying this "down" economy: In some markets, home values have plummeted to early-2000 levels Government intervention has brought mortgage rates to near-5 percent Congress is pledging key support to...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
New Foreclosure Moratorium for Mortgage Loans Date Posted: Wednesday, February 11, 2009 Today, Congress requested that all mortgage servicers institute a moratorium on foreclosures until details of Secretary of Treasury Timothy Geithner's foreclosure prevention plan are finalized and available - likely within a couple of weeks.   Many major lenders have agreed to follow this practice for all of the mortgage loans they own - in other words, those loans that do not require investor approval. They also are talking with investors in an effort to gain their agreement to follow this practice as well.   Talking Points: •·     Within the next couple of weeks, Secretary of Treasury Geithner is expected to announce his foreclosure prevention plan. •·      Until that point, some lenders will not p...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
With Congress reaching agreement on a $789 billion stimulus package for Americans and the President expected to sign it into law, the clock may be ticking for this year's home buyers and homeowners. The package contains two benefits related to housing. The first provision is fairly well-known.  It gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and August 31, 2009.  This is a true tax credit. To reduce misuse and abuse, however, the $8,000 credit is contingent on home buyers holding property for at least 3 years.  If the home is sold in fewer than 3 years, the tax credit must be repaid to the government.  It's also worth noting that the date range applies closings and not sales agreements.  Closings must occur within these 8 months...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
His speech was much anticipated, but it was what Treasury Secretary Tim Geithner didn't say Tuesday that helped home affordability. Mostly it was because of "safe-haven" buying on Wall Street. Safe-haven buying is when investors move cash to the safest investments possible for fear of losing their money elsewhere.  This existence of the pattern is evident in looking at yesterday's Dow Jones Index timeline.  Stock markets were down some in the morning.  Then, at 11:00 AM ET, in the moments immediately following the public release of Geither's speech as text, stock market plunged by about 2 percent. As the speech was delivered live, markets fell by 1 percent more. It's not that Geithner's speech was a bad one, per se.  It's just that Wall Street was looking for a detailed plan that includ...
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By Bob Phillips, CDPE, SFR, South Orange Co., CA
(Realty ONE Group)
Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months. Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties.  The restriction reversal does come with new minimum requirements, however.  Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae: 720 credit score 25% downpayment for a 1-unit (30% for a 2-4 unit) No mortgage delinquencies in the last 12 months 6 months of reserves for each investment property In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.  According to Fannie Mae, the change rationale is that experienced inve...
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