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Wht China Matters to Southern California Real Estate

You have heard me talk about China and it's effect on California real estate a lot.   Just two years ago,  I was on TV, talking about the oversized influence Chinese nationals had on Southern California real estate.  Since then, a trade war with China escalated and the Chinese government cracked down on capital leaving Mainland China. The result has been lower mortgage rates and lower real estate prices in areas where Chinese nationals were buying properties.

Chinese buyers aren't as active as they were two years ago:

A big reason Chinese investors are retreating from the American housing market is that Beijing has placed tight limits on how much capital can leave the country in the wake of a devaluation in the yuan a few years ago. 

“In China, each family member has been restricted to $50,000 or less,” says Steven Ho, senior loan officer at Quontic, a New York City-based bank. That makes it tougher for Chinese investors to elbow out American buyers with all-cash offers.“A few years before, these restrictions were not so stringent.”

The government toughened capital controls last year as the Chinese economy weakened, Ho says.

Also, China's slowing economy itself has dampened the confidence and purchasing appetite of Chinese buyers, Yun says. The Trump administration's trade war with China, he says, has further chilled investment in U.S. housing.  

Meanwhile, more Chinese homeowners have been selling their American houses and condos because they can’t pay the maintenance costs with their money trapped in China, says Jeff Lu, vice president of Fidelity National Title Insurance.

President Trump's tariff war, with China, is causing global unrest.  Investors are flocking the US treasury bonds, driving US mortgage rates lower:

U.S. Treasury yields have plunged since the July meeting and the gap between 2-year and 10-year yields has inverted, a typically reliable indicator of an impending recession.

Thirty-year mortgage rates have dropped about 100 basis points since late last year and are expected to stay below 4% over the next several years, around 60 basis points lower than forecast just three months ago.

You may love or hate China.  You may love or hate Trump.  You can hold either or both opinions but to ignore Chinese buyers of real estate or US treasury securities is to let youor opinion cloud your judgement when making a real estate purchase

FHA Condo Regulations Ease

The long-waited Federal Housing Administration (FHA) rule regulating condominium lending was finalized last week.The new rule, which becomes effective on October 15, will allow a homebuyer to obtain an FHA mortgage for an individual condo unit in an unapproved condominium project if that project is completed and meets the following criteria:

 

• In a development with fewer than 10 units, no more than two can be insured by FHA.
• In a development that exceeds 10 units, a maximum of 10 percent can be insured by the FHA.
• A minimum of 50 percent of project units must be owner-occupied.

 

The rule change also extends the certification period from two to three years and expands the eligibility criteria for mixed-use units. HUD estimates the new rules will make an additional 20,000 to 60,000 condo units eligible for FHA insured loans each year

2019 VA Refinance Rule Changes

This set of questions came in from a veteran about recent rule changes for VA Interest Rate Reduction Loans:

1- What is the "36 month rule"?
2- Do you have to have a year in the old loan to refinance again?
3- Is there a funding fee for refinanced VA loans?

There are two types of refinance loan for the VA:  

The VA Interest Rate Reduction Loan (IRRL) permits the veteran to refinance the loan balance with no cash returned to the veteran.  It has a funding fee of .5% of the loan amount unless the veteran has a VA-rated disability.  It does not require an appraisal.  A veteran is eligible refinance his/her loan after he/she makes six monthly payments.  If the lender is not paying the veteran's closing costs, the closing costs paid or financed (including the funding fee) must be "recouped" within 36 months.  In other words, if the veteran is paying or financing $3600 in closing costs (including the funding fee), the motnhly savings must be $100 or greater.

A full VA refinance loan permits a veteran to "cash out" up to 100% of the appraised value.  It has a funding fee of 3.3% of the loan amount unless the veteran has a VA-rated disability,  It does require an appraisal from a VA-assigned appraiser.  A veteran is eligible refinance his/her loan after he/she makes six monthly payments.