The California homebuyer tax credit is about to make an exit

It hasn’t been in the news much, but since May 1 California has been offering a second round of its own homebuyer tax credit.  Roger Showley of the U-T recently contacted state spokeswoman Brenda Voet, who said that there have been approximately 3,000 applicants per week.  She had projected that the $100 million set aside for the tax credit would be gone by July 1.  As of this writing, it is still available.

Regarding who qualifies, “…a buyer must close escrow between May 1 (2010) and Jan 1 (2011) and cannot have owned a principal residence for at least three years.  The credits are awarded on a first-come, first-served basis to those who have closed escrow.”  Also, “This year, a second $100 million program is available to both first-timers and move-up buyers who purchase a newly built home as a principal residence.  Credits may be reserved when buyers sign a purchase contract and then redeemed upon close of escrow before August 1, 2011.” 

As far as a dollar figure for the tax credit, “For both programs the maximum credit is $10,000 or 5 percent of the purchase price, whichever is less.”

Even as foreclosures continue to fall, analysts are still worried

We’ve already reviewed the default/disclosure April numbers for San Diego County, but there are addtional voices of concern about the future of local foreclosures.  Roger Showley of the Union-Tribune spoke with analyst Andrew LaPage of MDA Dataquick recently for some thoughts on the April numbers.  LaPage commented, “We’ve been talking for a year now how a growing amount of distress will be handled outside the formal disclosure process mainly through short sales (homes sold for less than the mortgage balance) and to some extent loan modifications and other methods.” 

He also commented that the short-term trend has been uneven, “If you look at quarters, the general trend has been less going into the formal foreclosure process.  We know short-sales are up significantly, as are loan modifications, and some would argue there have not been nearly enough loan modifications, but there are more than there were a couple of years back.”

Showley also spoke with Sean O’Toole, founder and CEO of ForeclosureRadar.com who acknowledged that there is still a large amount of inventory in the pipeline and at the current pace, it’s going to take years work through it.

HUD putting the hammer down on the use of builder’s affiliated lenders

For years, US builders have offered customer incentives such as upgrades, discounts, closing costs, rebates, etc. with the stipulation that the customer uses the builder’s affiliated mortgage lender.  Kenneth Harney of The Washington Post wrote about this a few weeks ago, correctly stating that, “….in the real estate business, this is known as ‘required use’.  Under the Real Estate Procedures Act, consumers cannot be compelled to use the services of affiliates of realty firms, title companies, builders and other participants.”

Harney cites the example that a real estate broker cannot legally force you to buy or use a mortgage company that is one of its own affiliates.   Apparently, consumers have been complaining for years that they were being pushed into loans with higher rates, fees and closing costs.  If they raised a stink, supposedly builders said they could either go to close with the affiliated lender, or they could use their own lender but lose their discounts.

Harney goes on to write that the National Association of Home Builders is having a fit about it and filed a suit in federal court to block HUD’s action.  HUD withdrew its action but now wants “…a full public airing of the pros, cons and mechanics of builder rebate programs that are tied to affiliated loan deals. “

San Diego County homes sales and prices rise in May

The San Diego County housing market continued to recover in May as both prices and sales kept rising.  Jen Lebron Kuhney of The Daily Transcript reported general numbers, total residential sales came in at 2,987 units in May, a 14% increase from April and a 11% increase from May 2009. 

In an interview with Alan Gin, “Job improvement and increasing consumer confidence can be partially attributed to the bump, said Alan Gin, professor of economics at the University of San Diego’s Burnham-Moores Center for Real Estate.”  But Gin did state concern on what would happen to the market, post federal tax credit.

Roger Showley of the San Diego Union-Tribune gave more specific numbers.  The median price for single-family resales in May was $377,000, up 16 percent from May 2009.  The condo resale median price was $235,000, up 18.1 percent.  The median price for new homes stood at $399,000, down 16.2 percent, and the median for all homes sold in San Diego County in May was $340,000, a year-over-year increase of 15.3 percent.  There was a monthly increase from April of 4.5 percent.

Sales for all residential in San Diego County is May had an increase of 15.3% from May 2009.

Andrew LePage of MDA Dataquick had an encouraging quote, “Across the board, it looks like almost everything is off the bottom.  A lot of places are up a little from a year ago.”   LaPage noted one of the reason for the rise in prices was quality.  Foreclosures had a smaller market share from a year ago.  On top of that, some lenders were allowing some upgrades to foreclosed homes before they put them on the market.

Financial reform helps homebuyers (for the most part)

There is a LOT in the proposed financial reform bill (soon to be signed in to law), and it is generally acknowledged to be the most sweeping bill for the financial industry since the Great Depression.

Kenneth Harney of The Washington Post breaks down some of the highlights:

Although the bill does not ban stated loans, option ARMS or “pick-a-pay” programs, the bill really pushes lenders to offer fully documented loans.  Not only will new guidelines determine if the borrower can make the payment, they will also have to show that they can pay taxes and insurance. 

Many of the prepayment penalties will be eliminated, but “Prepayment penalties would still be permitted on income-verified standard loans, but lenders would be required to offer alternative financing without penalties for early payoffs.”

Another likely element is a “mandatory provision of credit scores when mortgage applications are turned down.”   It is also likely that mandatory arbitration clauses found deep in some documents will be elminated.  The new Consumer Protection Angency will restrict these clauses if they find them harmful to the borrower. 

On the downside, it looks like the elimination of the Home Valuation Code of Conduct was not eliminated.  This was an overshot by the Feds and does not help the consumer. It clogs up lender pipelines making it harder to close escrow.  Also, the new Good Faith Estimate needs to be revised as it is confusing to both the loan officer and the borrower.

May California resales, median prices increase

The Daily Transcript recently reported the May resale numbers for California, and it was good news.   Per their report, “Home sales increased 1.2 percent in May in California compared with the same period a year ago, with the median price of an existing home rose 23.2 percent, (per the California Association of Realtors (C.A.R.))…”

C.A.R. president  Steve Goddard said that May “…marked the fifth month of double-digit gains in the median price…”.  Supply stood at 4.6 months, well below the average of seven months.  The median price for a single-family detached home in May was $324,430, 23 percent higher than the May 2009 median price of $263,440.  The May median price rose 5.9 percent from April, where it stood at $306,230.  California sales were up 1.2 percent over May 2009. 

The Transcript also reported that escrows opened in May declined 16.9 percent, most likely because of the end of the federal homebuyer tax credit. 

The city with the highest median price was Manhattan Beach, which came in at $1.5 million.  The Inland Empire (which includes Riverside and San Bernardino Counties)  remained one of the most affordable areas.  The median price came in at $194,960.

Pending US home sales rise in April

April’s pending home sales continued to climb as people rushed to get into contract by the end of the month.  Bob Willis and Shobhana Chandra of Bloomberg News reported, “The index of pending home resales rose 6 percent, following a revised 7.1 percent gain in March…”

Breaking the numbers down regionally, the Northeast increased pending sales 30%, the West saw a 7.5% jump, the Midwest rose 4.1% but the South saw a 0.6% decline.    A year-over-year comparison, pendings where up 25% from April ’09.