You are here: Home / Archives for Economy

December 31, 2010 by Leave a Comment

Happy New Year Orange County and the World!

And what a crazy world it has been this 2010.  I am glad this year is coming to a close!  I’m sure I’m not the only one that says it feels like another year of just holding on!  However, I already know that 2011 is going to be a better year. There are signs of it everywhere. The stock market is doing better. Retail sales might have had their best Christmas sales season ever.  And real estate sales began to pick up steam toward the end of the year after having slowed down for the second half of 2010. There was such a big deal made about the $8,000 tax credit for purchasing a home before the spring deadline ended and it did get buyers to respond. However, the credit was 10% of the purchase price. To get $8,000 you had to buy a $800,000 home.  If you bought a $400,000 home your credit was only $4000.  If you skipped the tax credit in the spring and bought a home in the fall season and obtained a loan in October, you are going to potentially save thousands of dollars more than the tax credit due to hitting the lowest interest rates in 60 years.  Rates have gone up a little since October but have nudged down again just a little bit lately.  We still have historically low interest rates due to government intervention but they will not last forever.  Inflation will begin to take root in the system and rates will have to rise!  The window to catch the best affordability period in our lifetimes will be coming to a close. This is the case for first time buyers as well as move up buyers trying to find a better school for their kids or individuals dreaming about their buying their Dream Home.  The biggest fly in the ointment is are you able to qualify for a loan?  I have talked to numerous  people that would like to refinance and get a lower interest loan, but are not able to, due to their financial situation or due to the fact that they have no equity or negative equity in their current home.  Some individuals have enough assets to lease out their current home and take advantage of this unique market.  If you have any of these concerns please call me and I can make some recommendations  for various lenders and options that you may have.  Well, that’s it for now.  I think I will go grab my kids and get outside to enjoy some of this brisk California winter weather we are having. HAPPY NEW YEAR!

Filed Under: Economy Tagged With: , , , ,

Bank of America Stops Foreclosures in All 50 States

October 15, 2010 by Leave a Comment

In the case of president Obama they are stopping foreclosure in all 57 states.

How would you like to get up tomorrow and not have a mortgage payment? I’m sure many people would.  How would you like the security of a home that is free and clear? About one third of the population of the United States owns their homes free and clear and that means no mortgage payment. There are many other Americans that will get up tomorrow and not make a mortgage payment.  These people are in a totally different camp all together.  They do not have a mortgage payment right now,  however,  these people do not have the security of staying in their homes long term either.  It’s a terrible position to be in.  I personally know some  people that have been in their homes not making a payment for almost 2 years now!  With this freeze on foreclosures by several large institutions who knows how much longer this will go on.  Many believe, we need to foreclose on these non performing loans  in a timely manner and get the properties on the market, and sold to new buyers that will make the payments, before the market can begin to recover.  This current roadblock will only prolong the inevitable.

Just recently Fannie Mae and Freddie Mac have instructed the banks to start speeding up the foreclosure process and get rid of the shadow inventory on their books. Truth is, once the banks start certain foreclosure processes they are required to have greater and greater reserves on hand to meet those loan losses.  If the banks put too many properties into foreclosure all at once they quiet simply would not have enough reserves and the Feds would  have to drive up in their large black American  SUV’s  and cart away all their records. The free market as far as banks are concerned would be over.  The banking system would have to be nationalized. There is a very fine line for the banks to keep profits positive and stock prices up so that they are stable enough put away x amount of  reserves to handle x amount of foreclosed loan losses. This is why we have shadow inventory and why we are unable to get an accurate number on it. Matter of fact, do we really want to know?

This procedure error of not reading the foreclosure documents properly and signing in front of a notary will get resolved.  Whether by the banks or the administration it will get resolved. The country must move forward and housing is a big key in doing that. Many people have their wealth tied up in or to their homes and values must begin to stabilize and even begin to appreciate.  In the lower price ranges we have already hit the bottom and prices are moving higher. As the correction takes place,  people will feel better about their nest eggs and consumer confidence will begin take off.   Now is the window period to become a home owner for the first time or to move up!

Filed Under: Economy, Foreclosure, Loans, Shadow Inventory Tagged With: , ,

Why Aren’t Higher Priced Homes Selling?

October 7, 2010 by Leave a Comment

The New Frugality, Less Equity and Tighter Loan Qualifications.

There are several reasons why higher price homes are not selling as they have in past markets.  First of all, you need to keep in mind that higher priced homes are for the most part discretionary purchases.  Generally but not always, they are a type of luxury purchase and in our current frugal environment, luxury is not a necessity.

In addition, according to the California Association of Realtors latest survey, the current median cash proceeds  received by the seller at the close of escrow in California  is at an all time low of just $35,000 compared with $220,000 in 2005. This is a real game changer due to the fact that the real estate market operates on a pyramid type structure.  At the bottom of pyramid are the lower priced properties (condos and small starter homes) and then moving up the pyramid are the mid priced (move up homes) and finally up the pyramid even further are the more expensive (luxury homes).  For this system to function properly, the smaller homes sell giving those sellers equity to move up the pyramid and so forth and so on.  Because the equity position coming out of these sales is so small today, the typical move up pyramid paradigm is unable to function in it’s normal fashion.

Another factor for the slower pace of sales in the upper end are the tighter loan qualification parameters. Because lenders are so conservative and have such an aversion to risk, full documentation loans to the nth degree are the order of the day and there is virtually no loan product above $729,750. Therefor, the gradual move up market in luxury homes is stalled.  Liquidity has been sucked right out of the market place due to the investment communities loss of interest in purchasing newly originated loans.great schools,

Having looked at the reasons as to why this market segment is stalled, an astute buyer still has to ask the question, is it the right time for me to purchase a luxury home?  If you’re financially secure and your prospects of employment are stable, this may be literally be a once in a lifetime opportunity to take advantage of the luxury home market.  Home prices are down,  property taxes are down,  interest rates are at historically   low  rates and the selection in this price range is as good as it gets.  But most importantly,  if you have a traditional family, blended family, extended family or are thinking of having a family, a luxury property is not so much a luxury but a necessity.  Along with a luxury property comes great memories at home , a safe neighborhood, community and the simple fact that your children are able to attend the best public schools.

Filed Under: Economy, Real Estate, Schools Tagged With: , , , , ,