MORTGAGE RATES REPORT

San Diego County Houses For Sale Down. Is This a Head Fake?

Jeff Dowler reports that Oceanside supply (number of properties available) is dropping precipitously.  This phenomenon is happening all over San Diego County causing new home buyers to get into bidding wars for aggressively-priced, bank-owned properties:

At the end of May 2009 there were 726 Oceanside homes for sale (380 detached and 346 attached) a decline of 7% from the end of April (this includes the homes with Contingent status). This represents an inventory of only 1.8 months for detached homes and 3.7 months for detached homes based on the current rate of sales over the last 6 months, both of which declined again from the previous month.  These absorption rates continue to be impressive when compared to many other parts of the country, some of which have over 2 years of inventory. Indeed we are seeing more multiple offers, not only on distress sales but also on regular sales, especially below $400,000. 

In May we saw 162 homes come on the market, 31% fewer than in April (and almost half the number of new listings in March) . During May 211 homes went pending, about 20% fewer than in the previous month. So coupled with another decline in inventory (with fewer new homes for sale) we saw an increase in volume, which has resulted in the low absorption rates noted above.

Is this the bottom of the real estate market or, as Greg Swann referred to this phenomenon in Phoenix, a "Fools Gold Rush" ?

Here's what's really going on: Last fall FannieMae and FreddieMac, along with some of the bigger private mortgage banks, declared a moratorium on new foreclosures.

So for four months, homes that would have been foreclosed on sat on the sidelines of the real estate market.

And for those same four months, inventories of already-foreclosed homes declined. In March of 2009, for example, a total of 7,621 listed homes were sold in the Phoenix area, of which 5,066 -- two thirds! -- were lender-owned homes.

That sounds good doesn't it? Even better, as I write this, only 7,607 lender-owned homes are listed as being Active in the MLS database. That's just a month-and-a-half's supply. Happy days are here again!

Not quite. That Fannie/Freddie moratorium on new foreclosures ended on April 1st. In the first three weeks of April, there were 2,460 new lender-owned listings. And there are still two years of foreclosures in the pipeline.

What we're seeing is a Fool's Gold Rush. The perceived shortage of housing is an illusion, an artifact of a normal number of buyers competing for an inventory that seems to be declining rapidly. It isn't. Instead, even now the inventory of lender-owned homes is surging.

Head fake or hard numbers?  The federal foreclosure mortatorium is over but the State of California just initiated a like measure for ninety days.  Are these moratoria government's efforts to delay the inevitable or are bargains really available to the San Diego County home buyers?  Keep in mind that lenders will have been forbidden to pursue a defaulted San Diego County homeowner for seven out of twelve months this year.  This could lead to an onslaught of inventory after Halloween.  That might just be okay because we're seeing lots of pent-up demand to mop up that excess supply.

A first-time home buyer tax credit, combined with relatively low mortgage rates still might make today's property offerings a bargain.  You might analyze each property the way we do so that your downside is limited.  Certainly, property prices should be higher in 2020 than they are today.  Just be careful to do your homework.

Whichever you decide, Jeff Dowler is a pretty sharp North County real estate agent.  Use his Search tool to look at the properties offered.

What Wired Mortgage Brokers Are Saying About June Mortgage Rates

The first week in June inspires thoughts of lazy afternoons on the beach, stunning sunsets, camping, and family vacations.  The mercury on the thermometer is not the only thing rising; so are retail mortgage rates.  If you've been reading, you'll notice that mortgage rates jumped almost one full percentage point since Memorial Day weekend.

It spooked me to the point of changing my overall bias towards locking-in loans at application rather than cautiously floating rates to try and "snag the bottom".  Here's a look at what mortgage professionals who maintain an online presence are saying:

Dan Green from Cincinnati highlights why folks should shop for lenders, not loans:

The frenzied pace of change is making it next to impossible for mortgage applicants shop for "the lowest mortgage rate".  By the time a buyer talks to competing lenders and gather the rate quotes, it's time to start the process over again.  It's giving Skyline-style heartburn to home buyers in Cincinnati, for one.

Rhonda Porter from Seattle ponders a penniless Fed, still trying to keep rates low:

The New York Fed purchased another $25.8B in mortgage backed securites to attempt to keep rates at their artifical lows…it makes me wonder how much higher today’s rates would be if when they run out of the allocated funds or if they just decide to change plans and stop buying MBS.

Justin McHood in Phoenix reminds us that higher mortgage rates mean less buying power:

Although I don’t remember what 10%-20% interest rates felt like, I can remember well what 7% interest rates felt like – it wasn’t that long ago! If interest rates rise to 7%, the P/I payment on a $200k loan will go up by $327 per month.

Are we going to see 10% interest rates in the foreseeable future? I don’t know, I will leave that to the experts to pontificate about. What I can say for certain though is that as interest rates rise, people are going to buy “less of a house” than they are currently buying.

Orlando's Chris Brown explains why you have to shop for a loan quickly:

As markets worsened, selling begat more selling, amplifying Wall Street’s total losses. As mortgage bond prices fell, mortgage rates went up. By a lot.

Mortgage markets are notoriously fickle and yesterday’s events proved it. Days like Wednesday are precisely why insiders recommend shopping for mortgage rates in a compressed timeframe. The faster you finish, the lower the risk of losing low interest rates to new market conditions.

If you're shopping for a home loan, you can see that the loan quotes you receive are less important than the lender who issues them.  Find a lender with whom you feel comfortable.  If you choose to work with me, you can:

Apply online now.  It's really simple and should take about 20 minutes.

Sunday Mortgage Advice: September 21, 2008

I'm adding a new category on the sidebar; Lazy Day Sunday.  A few times a year, I link to some well-written mortgage advice from folks across the country.  Here's the inaugural offering of Lazy Day Sunday:

Rhonda Porter, from Seattle, talks about why declining values are good for borrowers and bad for homeowners, looking to refinance:

If you're a home buyer in this market, you're in the drivers seat...and sitting pretty at that.  Listings are up 18.3% in King County (condos and houses) as compared to August of 2007; giving you plenty of choices.  Sellers are more likely to contribute towards your closing costs and prices are more attractive than recent years.

Dan Green, from Cincinnati, outlines why the Wall Street collapse has been great for mortgage rates:

The government's takeover of Fannie Mae and Freddie Mac rendered mortgage bonds among the safest investments in the world.  Therefore, when political or economic uncertainty exists, mortgage rates should fall in safe haven buying.

Bob Ashby, in Florida, shows that while you may not have a mortgage against your home, you might not REALLY own it:

Part of the reason you can never truly “own” your home is that the government can take your home, basically whenever they want.  That power was given to them through imminent domain laws.  Typically, the government pays you off to take your home, but that may be below market value, creating loss of home equity, not to mention the fact you have to find another place to live.

On the other side of Florida is Dave Shafer.  He shows us that ARM holders are faring better than their fixed-rate counterparts (even after the rate adjustment):

Interest rates are so low that many of those variable rate loans that are resetting this year are doing it at or below their current levels. So those that follow the strategy of using variable rate loans (they have inherently lower rates than 30 year fixed rates) have saved themselves thousands of dollars in interest!

Tom Vanderwell, our midwestern mortgage banker friend, reports that all is..well,as well as can be expected considering the virtual nuclear bomb that exploding on Wall Street this week:

So how do things look from here for the housing  and mortgage market?  A couple of observations:

1. Due to the massive amounts of money that the  government is going to have to borrow to fund all of this intervention, I don’t  see mortgage rates dropping lower.  I expect that we’ll see “relatively stable” rates in the near future but 6 to 12 months from now, I anticipate that it’s going to be more expensive to borrow money than it is now.

2. I believe that we are going to continue to  see credit requirements tightening for not only mortgages but virtually all types of credit.   I think one lesson that was learned from this week is that “we” (collectively) made credit way to easy to get and it came back and bit us in a BIG way.

3. While I think this action by the government  stabilized the credit markets, I don’t believe it put a bottom in the housing  market.    The only way that they could do that is for them to…… (I’m not even going to go there!)   I think we need to continue to work through and eventually burn off the excess inventory until we reach a bottom and then things will start building back up.

All good articles about this week in mortgages, from around the country.  My SoCal readers know that I can suffer from "tunnel-vision" here in the eye of the credit hurricane so I want to offer some other opinions..  I hope you'll enjoy this "new" feature.