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FHA Mortgage Changes

FHA Mortgage Changes

Posted by on Feb 12, 2013 in Finance, In the News | 0 comments

This is important news for both buyers and sellers! The mortgage insurance is going up on April 1st and on June 3rd they are going to make the mortgage insurance premium stay for the life of the loan! The increase in rates isn’t as much of a shock to me as making the mortgage insurance stick around for the life of the loan. This means that even if you have paid down the loan to 50% of the value of the house, you are still going to be paying 1.35% of the original loan amount every year for mortgage insurance. Over the 30 year life of the loan this will add up to a huge amount of money. For every $100,000 of loan a buyer will be paying $112.50 per month or $1,350 per year in mortgage insurance. That adds up to $40,500 over a 30 year loan, just for the mortgage insurance! And that is for every $100,000 in loan value, so a $300,000 loan would now cost you an extra $121,500 over the life of the loan. You can refinance out of the loan at a later date, but right now interest rates are at a record low. Who knows where they will be when you are ready to refinance out of this FHA loan. It should be obvious why this should matter to a buyer. If they are purchasing a home with an FHA loan, they need to do it quickly to avoid the increase in mortgage insurance and the mortgage insurance for the life of the loan. For a seller, there are less obvious reasons that this is important to them. Obviously, if they are going to sell one house and buy another one with an FHA loan they will need to move very quickly. But here is the less obvious impact to sellers. As more buyers hear about this impending shift in the cost of their FHA loan and the date looms closer, they will start to feel even more pressure to get a home under contract. The article below suggests that if a buyer wants to avoid the increase, they should be under contract by March 25th. If this follows a similar pattern of the federal tax credit that ended on April 31st 2010 then buyers will pick over the inventory leading up to this date and prices will get pushed up. By the last few weeks it was a bit of a feeding frenzy. Now, I don’t expect it to be quite as crazy as it was in April 2010 but I do expect it to have an impact leading up to the April 1st date as well as the June 3rd date. Then again, even though the dates are split two months apart we have been suffering with a very low level of inventory in the market for over a year...

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Sacramento A Seller’s Market Again – Nathan Sherman on Fox 40 News

Sacramento A Seller’s Market Again – Nathan Sherman on Fox 40 News

Posted by on Dec 23, 2012 in 1210 40th St, East Sac, Fab 40's, In the News, New Listing | 0 comments

A little over a week ago Fox Dennis Shanahan of Fox 40 News interviewed me to talk about how Sacramento has become a seller’s market again. This is something that us in the industry have known for most of the year, but now all the market data is out to support that. The market analyst’s over at Zillow had identified Sacramento as the third hottest seller’s market in the country! You can see the two minute news spot here. I had the good fortune to have the whole video shot in my upcoming listing at 1210 40thStreet. This is an amazing 5 bedroom 4.5 bathroom home in the Fab 40’s of East Sac. Here is the text summary from the Fox 40 site, but much more was covered in the video. Real estate website Zillow recently listed Sacramento as the third hottest sellers’ market in the country, right behind San Francisco. San Jose was listed number one. FOX40 visited with Nathan Sherman of Dunnigan Realtors in Sacramento, who confirmed what the Zillow ranking suggests. “There is not nearly enough inventory, and buyers are struggling to get a home under contract,” Sherman said of the Sacramento market. Year-over-year detached resale home prices in Sacramento County have been consistently positive over the past six months, according to DataQuick. The median price in November was $185,000. That is 17-percent higher than the price in November of last year. Potential buyers are finding themselves in bidding wars. Sherman also said it is not uncommon these days to call a listing agent when a house comes on the market, and learn that the agent already has ten offers in. People waiting for the right time to buy a home might be well advised to start looking soon, before things heat up even more. As Sherman put it, “People were waiting for the bottom of the market. That has come and gone.”...

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Less Foreclosures, Less Discounts

Less Foreclosures, Less Discounts

Posted by on Nov 12, 2012 in In the News, Sales Price, Short Sales | 0 comments

I read an interesting article in the Washington Post today.  It was about the reduced number of foreclosures and the greatly reduced discount of buying a foreclosure. These have both been obvious to any agent that is active in the Sacramento market, but it is always interesting to see the national market and media realize it too.  The quote that I like the most out of the article is “Zillow found that in Las Vegas and Phoenix, there is “no discernible difference” between foreclosure and non-foreclosure sales. Discounts have shrank to less than 1 percent in Sacramento, 3 percent in the Miami-Fort Lauderdale area and barely 4 percent in Los Angeles.” While I never refer to Zillow for specific property prices, they are a huge number crunching organization and have a vast amount of data at their command. For them to state that the discount for a foreclosed property in Sacramento is only 1% is a pretty significant statement.  The market has shifted greatly and inventory is down to less than one months supply, the lowest it has been in over a decade. Prices have been climbing since December and multiple offers are common.  To top it all off, the national news is now reporting all about the tight market.  The housing market has definitely...

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Shadow Inventory

Shadow Inventory

Posted by on Oct 12, 2012 in In the News, Ramblings | 2 comments

I don’t usually post about new articles that I see, but this one was very good and relevant to so many conversations that I’ve had recently. The article is titled “Now You See It, Now You Don’t” and it is about the “shadow inventory” and the market condition. Anyone that works in the real estate industry knows that right now we have very low inventory and lots of interested buyers. Sacramento currently has 0.8 months of inventory on the market. The Months of Inventory is a reflection of how many houses are for sale and how many are being purchased each month and how long would it take for them all to sell at the current rate. The lowest Month of Inventory durring the boom was April 2003 and the highest inventory in the bust was September 2007. 4 months of inventory is a very balanced level with numbers lower than that being considered a sellers market and anything above that being a buyers market. Now we have seen several months in a row with inventory levels lower than 2.0 and even below 1.0! What is the reason for this? Are the banks holding onto a lot of shadow inventory, covering the carrying costs, keeping the non-performing assets on their books (or just doctoring them so they don’t show up) and waiting for/manipulating the market to improve before selling them? Do they have hundreds of thousands of houses that they have foreclosed on and are going to dump them on the market when prices come up? While I love a good conspiracy theory, I also believe that the simplest explanation with the least assumptions is often the best (a version of Occam’s Razor). This article went into several detailed aspects and included that by all expert analysis there is only a minimal amount of bank owned properties that aren’t put on the market quickly. I have often seen bank owned listings that show only 1 day on market (DOM) but hundreds of combined days on market (CDOM). I look at the history and see that this was a short sale that sat on the market for months waiting for bank approval for the sale but finally ended in foreclosure. The bank then had their asset manager arrange for the clean out, new paint and carpet and listed the property for sale, all in less than 30 days (otherwise, the CDOM would be the same as the DOM). The big issue that this article pointed to is that there is a different kind of shadow inventory and it’s not what I or most people consider or refer to as shadow inventory. It is all the properties that are delinquent on their payments and will most likely never become current. It is the houses in pre-foreclosure, foreclosure or short sale status where no payment is being made, the owners are getting...

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Monthly Payments of Home Buyers Almost at 1981 Levels?

Posted by on Oct 21, 2011 in Downtown, In the News, Sales Price | 0 comments

OK, when I saw this headline I had to read the article. Monthly Payments for Home Buyers On October 6, 2011, in Economist Commentaries, by Lawrence Yun, Chief Economist A home buyer purchasing a typical American home at the prevailing average mortgage rate today would have a mortgage payment of $698 a month. This figure is not much different from what a home buyer would have faced 30 years ago. In 1981, home prices were much lower but mortgage rates were reaching 18 percent. Today, home prices have come down by about 33 percent on average from the bubble years, but prices still remain comfortably higher than those of the 1980s. However, thanks to record low mortgage rates, the monthly payment obligations have been greatly reduced. After reading the article I still didn’t believe it and had to run the numbers for myself. I decided to take real world numbers, here in Sacramento, on a listing that I currently have in Downtown. I mean, maybe this is true for a home in Columbus GA, but it can’t be true here… The condo that I have listed at 958 Q Street is listed for $195,000. When it was first built in 1982 the units in it’s complex were selling for $55,000. Back then you had interest rates at 18%. If you did a 3.5% down loan like today’s common FHA loans, factoring in average rates for tax and insurance, your payment would have been $867 per month (not counting HOA or any possible PMI). Today you can get a FHA loan at 4% (one of my buyers just locked at 3.675 with no points!). That makes a payment of $1167 per month or about $290 more today than 30 years ago. I was feeling pretty smug for about 5 seconds until I started to think about what $867 would have bought me 30 years ago compared to today. Going back to my youth when a quarter bought you a candy bar and now I think they cost a buck, I had to go to an online inflation calculator. $867 from 1981 after adjusted for inflation is $2150 today! Well, me and my short lived smug self will just have to contemplate these numbers and the buying power of today’s interest rates over a long over due candy...

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Mortgage Rates Below 4%

Posted by on Oct 13, 2011 in In the News | 0 comments

OK, being 40 years old I know of times when rates were 18% but I wasn’t yet buying houses in those years. I’m used to 8-12% for most of my adult life and seeing rates below 6% has been exciting. Now rates are dipping under the 4% mark and I’m in shock. It makes me want to run out and refinance the few properties that I have and buy several more. Given that home prices are as low as they are, I’m not sure I’ll be able to resist the urge to buy more properties… From CNN Money “Mortgage rates have never been cheaper, with the 30-year rate falling below 4% for the first time in history. The interest rate on a 30-year fixed-rate loan fell to 3.94% this week, the lowest rate since mortgage giant Freddie Mac (FMCC, Fortune 500) began tracking it. Meanwhile, the average for a 15-year fixed-rate mortgage also hit a record, falling to 3.26%. “Average 30-year conventional fixed mortgage rates fell below 4% for the first time in history this week following a sharp drop in 10-year Treasuries early in the week as concerns over a global recession grew,” said Freddie’s chief economist, Frank...

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