A head’s up on seller concessions on FHA loans

Although a specific date hasn’t been announced, Kenneth Harney of the Washington Post has reported that the FHA is planning to slash allowable seller concessions sometime this summer from the current rate of 6% to 3%.

This is not good news for buyers who may only have the cash for the 3.5% downpayment.   FHA is worrying about risk and current concessions “exposes the FHA to excess risk by creating incentives to inflate appraised value”.  Although they haven’t announced the specific date, FHA said it would be “early this summer” when they will announce the change.

Right now buyers can still have the concessions up to 6%, but like Harney mentions, they should be told that the clock is ticking on this.  The deals should be completed ASAP.

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When is it time to buy or refi?

The title question is one that borrowers have always asked themselves.  Should we buy/refi now or wait?  Roger Showley of the U-T wrote on this very subject recently, and the responses he received from local experts were very good.

Lori Staehling, former president of the San Diego Association of Realtors and someone who’s opinion I value  was interviewed, “…she is concerned that holders of adjustable-rate mortgages will refinance with new ARMs rather than fixed loans.  ‘Yes, the payments are higher for fixed rates than ARMs,’ she said.  ‘But what will they do when the rates are up five points?  They’re now at the bottom.  People sometimes are very short-term sighted.’  She said many homeowners and buyers don’t realize that rates exceeded 10 percent in the 1980’s.”

Lori is spot on.  Many people, especially ones under 40, probably don’t remember that the Fed’s short term rate reached over 20% while mortgage rates hovered in the mid to high teens.  Money was expensive, and in a big way. 

When I was working in title insurance a million years ago, I remember when rates dropped below 10% and people celebrated because suddenly money became “cheap”.   Rates are at a record low, but they won’t stay there forever.  People have become a little complacent, thinking this is the “new normal”.  Rates could spike overnight and never come back down to these levels, ever.

So if you qualify for a purchase loan and feel you can afford it, buy that home in your target range.  If you’re thinking you can refi into a fixed loan, and can afford the new payment (or get that payment down significantly on an existing fixed), get pre-approved, lock at that loan and get it funded.

San Diego continues to shine with Standard and Poor’s/Case-Shiller, but

San Diego led the largest metro areas in home price appreciation in March, according the Standard & Poors/Case-Shiller Home Price Index.  Roger Showley of the U-T reported on the good news recently, saying that “the index of San Diego prices was up 10.8 percent from the previous year, the biggest increase since the heady days of mid-2005.”

Robert Shiller said he was still worred about the risk of a double-dip. 

Analysts continue to be concerned that this “may only reflect a change in the market mix…”, and were worried that prices could reverse if too many foreclosures hit the market at the same time. 

Some explanation for rising prices was that there is less inventory for lower priced homes, while at the same time higher priced homes in San Diego are finally selling.

US home sales climb in April

As far as resale homes go, April was a very good month for the US.  Bob Willis of Bloomberg News reported, “Purchases climbed 7.6 percent to a 5.77 million annual rate as buyers rushed to qualify for an expiring government tax credit…” 

Willis also said that prices surged more than they had in four years, but along with that, inventory contiued to climb.  With the end of the tax credit and increased inventories, there was concern that home values would again decrease in the near future, although continued low interest rates make this unlikely in the short term.

In a related article, Willis also reported that new home sales numbers were also very good.  Quoting, “Sales climbed 15 percent to an annual pace of 504,000…”  At the same time, the median sale price dropped 9.5 percent from April ’09.  Again, although sales were strong for new home, everyone is waiting to see what life is going to be like once the tax credit has ended.

California resales decrease as median resale price rises in April

The Daily Transcript reported recently that, “Home sales decreased 8.1 percent in April in California compared  with the same period a year ago, while the median price of an existing home rose 21 percent…” 

Breaking down the numbers, “Sales in April 2010 decreased 6.4 percent compard with the previous month.”  Adding, “The median price of an existing , single-family detached home in California during April 2010 was $306,230, a 21 percent increase from the revised $253,110 median for April 2009…The April 2010 meidan price increased 1.5 percent compared with March’s $301,790 median price.” 

CAR VP Chief Ecomomist Leslie Appleton-Young commented that the demand for distressed properties remained high in April, and that listings for the month increased, a normal occurance as people gear up to sell their homes and move at the beginning of spring.

Better news for San Diego as defaults and delinquencies fall

It’s been a LONG four years for a lot of people.  The first “early warning sign” was construction workers getting laid off of job sites in the summer of ‘o6.  That was also the last year we DIDN’T see an increase in the delinquency rate in San Diego County, until now.

Roger Showley of the Union-Tribune wrote about some postitive news recently, showing stats that the there was a drop in delinquencies in Q1 in San Diego County, and no change from March to April.  There was also the good news that California’s delinquency rate dropped slightly during the same period. 

In a related article, Showley also reported that defaults were down in April, to their lowest level since January.  An interesting stat showed that while defaults increased in 14 neighborhoods, they decreased in 71 areas.  Many of the areas that saw increases were higher end neighborhoods.

So Cal home prices hold steady in April

The housing number for Southern California as a region in April can be best described as “stable”, the word Roger Showley of the U-T used when he reported on the numbers.

The region actually saw sales dip from a year ago by 1%, although the median price of a home increased to $285,000, a 15.4% increase from April ’09.   From March to April of this year, prices remained flat with little change, according to MDA DataQuick.

Regarding foreclosure properties, Showley said, “Sales of distressed properties eased a bit in April, with foreclosure sales accounting for 36.4 percent of the resale market, down from 38.3 percent in March and 53.5 percent in April 2009.”