Archive for category Help for Buyers, Sellers & Homeowners

A mixed bag for local San Gabriel Valley housing

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 29th, 2009

By Ryan Carter, Staff Writer

San Gabriel Valley Tribune

 

 

For the fourth month in a row, the median price of a single family home in California rose in June as first-time local home buyers and cash-ready investors took advantage of low prices - which continued creeping up. But in some San Gabriel Valley cities, strapped by rising unemployment, prices continued to fall.

Home sales across the state rose 20.1 percent in June, compared to last year, according to the California Association of Realtors, which issued its monthly report on Friday. And while the median price of a home declined more than 26 percent, in June it rose to $274,740 - a 4.2 percent rise from May’s $263,600 median price, according to CAR.

CAR officials and other real estate experts said the bolstered market was fueled by a continued surge of first-time homebuyers who took advantage of state and federal tax credits to move in.

The question is, will the momentum they created last, said Delores Conway, director of the Casden Real Estate Economics Forecast and professor at USC.

“These are the prices of sales in June … so probably people bought these in May, which means people are taking advantage of the stimulus,” she said, referring to the $8,000 federal tax credit. “But California is no longer taking applications.”

It remains to be seen what effect limited rebate funding will have on inventory, Conway said. Shrinking inventory has driven the median price up. And while the market is showing signs of recovery, there are other headwinds to watch out for, such as more foreclosures and rising unemployment.

Another surge of foreclosures is expected later this year, CAR’s Senior Economist Leslie Appleton-Young said. If demand for homes remains strong, the market may be able to absorb the surge. If not, the median price will fall.

Much depends on jobs.

Worries about unemployment not only spark foreclosures, but they also create timid buyers.

“It’s not just people who are unemployed,” Conway said. “It affects people who are nervous, potential buyers who might want to take advantage of these prices ….”

The unemployment picture seemed to link up with the housing picture in some areas of the San Gabriel Valley.

For instance, El Monte - at 14 percent unemployment - bucked the state trend of rising prices. The city saw its home values fall 7 percent from May to $270,000. La Puente’s home values held steady compared to May at $230,000. Whittier continued falling from $305,000 in June to $295,000 in July. So did Covina, which went from $291,500 in May to $281,000 in June.

But other cities mirrored the state’s trend.

In May, the median home price in Pasadena was $503,000, according to CAR. In June, it was $521,500. In all cases, across the valley, home values are much less than what they were in June 2008.

That has attracted buyers looking for deals, and those with ready cash have an advantage.

“There’s a lot more cash offers,” said Victoria Chen, who with her partner Charles “Buck” Stapleton at Masters Realty in San Marino is seeing values reaching 10 percent above asking prices as bidding wars spark up on homes.

“It’s definitely turning around,” she said.

Nationally, new home sales jumped in June by the largest amount in more than eight years as buyers took advantage of bargain prices, low interest rates and a federal tax credit for first-time homeowners.

But whether the housing market had recovered - or when it would - was something Chen could not say.

Uncertainty about jobs may be why.

“Can we say the housing market is stabilized yet?” Conway asked. “We need to see unemployment stop rising. But it’s better than the alternatives.”

The Associated Press contributed to this story.

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In East Bay, not all assessed values of property dropping

Posted by Chas W. Leeper, SRA in California Home Values and Market Trends, Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 28th, 2009

Alameda Journal

They’re the East Bay’s elite eight — cities where assessed property values have bucked downward trends and eased the pain city governments are feeling from the recession.

Alameda, Piedmont, Albany, Berkeley, Emeryville, Lafayette, Moraga and Orinda have all seen their assessed property values increase, albeit slightly, according to data from the Alameda and Contra Costa counties’ assessors’ offices.

The increases are from 1.5 percent to 5.4 percent, but they buck a trend that has seen assessed values decrease by 2.24 percent in Alameda County and 7.2 percent in Contra Costa County.

Property tax assessments are calculated by county assessors’ offices and are used to determine property taxes to be paid for a given parcel. Property values, on the other hand, are set by what a house or parcel would fetch on the real estate market. The two are distinct and separate numbers, and property values can drop even when property tax assessed values rise.

“I suspect it’s because we are not suffering the same foreclosure rates as other communities,” said Lisa Goldman, Alameda’s deputy city manager. “We also have a lot of older properties that tend to hold their value.”

Some observers suggest that in cities with fewer home sales, houses usually are also reassessed less often.

Steve Reiser, president of the Contra Costa Association of Realtors, said Lafayette, Moraga and Orinda are three cities where homes change ownership less often. When people stay in their homes longer, he said, the value of the property is more likely to increase when they eventually sell.

 

“You’re probably going to see overall the adjustments go up because there’s not a lot of turnover,” he said.

In areas where there has been more turnover, assessed values were driven up faster and so are more likely to decline in the recession, Reiser said.

Alameda County Chief Deputy Assessor Russ Hall agreed, pointing to lower turnover as a possible factor in increased assessed values.

He said cities where taxable valuation has increased are those with values that were, on average, higher to begin with.

“Those folks, they buy those very nice houses and they’re happy,” Hall said. “They don’t sell them.”

In Piedmont, the average sale price has dropped as the economy has slumped, despite the assessment values remaining about steady, said Mark Bichsel, the city’s finance director. The average price is now $1.4 million, compared to $1.7 million a few years ago, when the market was booming.

Regardless of what has caused the assessed value increases, city officials are happy to have the additional property tax money — or at least to not see another revenue source dwindle.

“It certainly helps,” Goldman said. “But there are so many factors that play into our budget that it’s hard to say how it will affect things.”

This year Alameda could lose about $2.2 million in property taxes — part of the money the state wants from local governments to help bridge a $26 billion deficit — under the latest budget proposal from Gov. Arnold Schwarzenegger.

Lafayette had budgeted for about a 3 percent increase in property tax revenue, just less than the 3.31 percent increase now expected, said Administrative Services Director Tracy Robinson. The monetary difference is small, about $50,000, but Robinson said the extra cash is more than welcome.

“Fifty-thousand dollars is $50,000,” she said.

At the other end of the spectrum, Antioch officials were told their property tax revenues would be reduced nearly 22 percent, much larger than the 4 percent reduction that had been budgeted, for a total hit of $3.25 million.

“It means we can’t maintain operating in the current manner, even in the current fiscal year,” said City Manager Jim Jakel. “We’re going to have to make significant operational changes.”

Staff writers Hilary Costa and Peter Hegarty contributed to this story.

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So Cal Home Foreclosures strike in waves

Posted by Chas W. Leeper, SRA in California Home Values and Market Trends, Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 28th, 2009

INLAND EMPIRE–Riverside and San Bernardino counties posted Southern California’s only decrease in foreclosures during the spring quarter.

In San Bernardino County, the drop was 8.2 percent compared to the second quarter of last year.

But, Andrew LePage at the DataQuick real estate information service points out, “In late June across the state, foreclosure activity started to pick-up again. It’s difficult to say if the worst is behind us.”

Foreclosure activity picked up the fastest last quarter in such large counties as Los Angeles and San Francisco.

Story Date: July 28, 2009
 

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US new home sales in June above expectations

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers, Help for mortgage pros on July 28th, 2009

By Armando Duke

(AXcess News) Houston - New home sales in June rose 11 percent, its highest one-month gain in eight years, according to the latest US Department of Commerce Report.

Last week data showed that existing home sales in June rose 3.6 percent, adding to the level of demand for US property purchases.

On a seasonally adjusted annualized  basis 384,000 properties were sold in June, with May new home sales figures revised upwards to a rate of 346,000 units.

Credit was given to the tax break provided to first-time homebuyers of up to $8,000 for the number of new homes sold in June.

Real estate pundits on average expected to see a total of 360,000 units sold in June.  But with homebuyers having to take advantage of the tax credit, sales need to be completed by November, which may be why the rush for properties is taking place.  Still, tax credits aside, the price of homes have dropped considerably since the onslaught of the recession.

The median price of a new home sold in June was $206,200, which is down 12 percent from the same period last year when the median home price was $234,300.  But compared to May, the median home price dropped 6 percent from $219,000.

Despite June’s strong showing in home sales, the National Association of Realtors (NAR) insists that appraisal problems are affecting sales and if the issue is dealt with, even more homes would have sold.

“Our members were experiencing delayed and lost sales because of poor appraisals conducted often by inexperienced appraisers who were not familiar with the area,” said NAR President Charles McMillan in a statement issued July 23, 2009 when the Realtor’s group praised the Federal Housing Finance Agency’s move to clarify confusion over the new Home Valuation Code of Conduct for home appraisers implemented this past May.  The FHFA had instructed Fannie Mae and Freddie Mac to take action.

“The ramifications were so great to our members and to the housing industry that I personally met with the New York Attorney General’s office and with the head of the FHFA to share our concerns,” explained McMillan.

“In those meetings I shared an NAR survey that found 76 percent of our members, representing both buyers and sellers, had experienced an increase in appraisal time since the new HVCC rules were enacted. Similarly, 71 percent of Realtors noted an increase in the use of appraisers who were not from the local area. These factors often adversely affected the sale or the sales process, which occasionally resulted in the loss of a sale or a homeowner’s inability to refinance into today’s lower rates. I expressed our serious concern in the meetings.”

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Economic indicators begin pointing up for San Diego real estate

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers, Help for mortgage pros on July 27th, 2009

by Jerry Kalman

Entering the final week of July, economic indicators show the US economy headed toward positive territory, and many local real estate signs look positive as well.

Southern California real estate appears to be in a stabilizing mode as the flow of foreclosed properties has diminished slightly while short sales appear on the increase again as some lenders abide by the recently enacted California Foreclosure Prevention Act, which adds another 90 days to the foreclosure process. San Diego continues to have a higher proportion of foreclosed properties than all but three other counties in the region.

An early look at July results for one North County area shows encouraging signs as the number of foreclosed and short sale transactions dropped below 50 percent of all closed escrow in the month. Of note, home prices of regular transactions were 18 percent higher than the gross in the first part of July. Similar results show in the distribution of new escrows in the period as regular transactions were more than half the total

Fallbrook and Bonsall, the two communities in North San Diego county that form one market, reflect larger regional trends. July inventory remains steady, well off peak levels hit in 2008. Comparing current activity to prior periods, closed escrows in July 2009, should eclipse a robust June 2009 in volume and price.

Volume in this market already shows a 28 percent increase versus July 2008, while prices lag by 11 percent after recording many months of 20 to 30 percent year-over-year declines. Compared with month-earlier prices, July 2009 shows a 12 percent increase over June. The number of new escrows in July could exceed the mark set in June, auguring well for the remainder of the summer.

Many economists forecast the national recession bottoming out late in the current quarter or early in the fourth quarter. With a reversal of the jobless rate in the San Diego area and continued low mortgage rates, the real estate market could keep pace with the overall economy with prices bottoming during the last half of 2009.

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New home-appraisal rule brings turmoil to real estate industry

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers, Help for mortgage pros on July 24th, 2009

The HVCC is bad regulation, please join me in contacting your congress person to let them know.

Thanks,

chas

 

By Julia Prodis Sulek

jsulek@mercurynews.com

When David and Penny Mann decided it was time to move to a retirement community, their real estate agent told them that in this rough market, it could take months to sell their downtown San Jose Victorian.

So they were thrilled to receive back-to-back offers in the first week, and they accepted the first offer of $560,000, from an enthusiastic young couple buying their first home.

“Things were sailing through,” said David Mann, 65, a retired minister.

But just days before the sale was to close, an appraisal required by a new federal code came in $100,000 below the sale price, torpedoing the deal and sending the buyers and sellers into an emotional tailspin. It’s just one example of the turmoil this new rule — intended to prevent fraud — has caused: Appraisers say it is forcing many of them out of business while pushing up fees and derailing sales, all at a time when the real estate market can ill afford such problems.

The new rule, which took effect May 1, forbids brokers from hiring their own appraisers and requires intermediaries? — called appraisal management companies — to choose them instead.

The change was intended reduce the possibility that brokers and lenders would pressure appraisers to raise house values to match sale prices, regardless of the true value. It affects all loans backed by Fannie Mae and Freddie Mac.

The rule meant the Manns’ first appraisal, which came in at the full sales price and was conducted before the rule took effect, was invalid, and they needed a new one. The second appraiser, based in Oakland and sent by an appraisal management company, told the Manns’ agent he had never worked in San Jose. When his appraisal came in $100,000 below the offer price, the lender wouldn’t approve the buyers’ loan.

 

Buyers, sellers hit

“That’s when the drama began,” Mann said.

“There is something so wrong in all this,” said Georgie Huff, president of Capital Properties in downtown San Jose, who represented the Manns. “And a lot of qualified buyers and sellers are being victimized.”

No one is tracking the precise results of the new rule, but Bill Hillestad, strategic director of Think Big Work Small, which provides resources for the real estate industry and is pushing to have the rule repealed, says his research offers some clues.

In his online poll of industry professionals, about two-thirds of respondents said they had had at least one appraisal come in under the purchase price since the new rules took effect, with the average difference being more than $13,000. And 90 percent of respondents said they had lost at least one transaction.

Hillestad said the code has the potential to kill the country’s budding real estate recovery by depressing prices even more than the foreclosure crisis. If willing sellers and buyers agree on a price, the appraisal shouldn’t scuttle the deal, he said.

“We are exactly the kind of sale which our country needs in order to begin getting housing sales moving again,” Penny Mann wrote in a letter to the lender for the couple who wanted to buy their home.

As David Mann put it, the deal he struck “was a new stake in the ground to revive this neighborhood. We were damn well not going to give in.”

The new rule, called the Home Valuation Code of Conduct, is part of the settlement of a lawsuit filed by New York State Attorney General Andrew Cuomo, who had accused Washington Mutual of pressuring appraisers to inflate home values.

Accurate appraisals are necessary to prevent fraud in home sales and to protect lenders in case a loan holder defaults and the property has to be sold. Washington Mutual, however, was accused of inflating values to make more money on higher-priced loans.

While the intent was noble, the policy has had devastating consequences for some appraisers, many of whom have signed a petition (www.hvccpetition.com) to try to repeal the rule — a cause taken up by U.S. Rep. Gary Miller, a Southern California Republican who is co-sponsoring legislation asking for an 18-month moratorium.

A Santa Cruz appraiser who used to have about 10 jobs a month says she is now lucky to get just one, as the management companies change the way work is doled out. And instead of being paid between $350 and $500, she might get just $200. The management company pockets the difference.

“I’m sure there were a lot of crooked appraisals. But to put every appraiser basically out of business is not OK,” said the appraiser, who didn’t want her name used for fear that she would jeopardize future work. “After having my business for 20 years, I’m about to lose my house.”

Qing Jiang, a San Jose appraiser, said the new rule is also having a chilling effect as appraisers, “to protect themselves, to avoid being accused of pushing values up, are putting the value at the lower end. This will push the housing values down and have a huge effect.”

For traditional home sellers like the Manns — both retired clergy with the United Church of Christ — the rule nearly cost them their retirement. The couple were waiting to take a tour of their new Southern California bungalow, near their children and grandchildren, when their agent called with the news that the deal was unraveling because of the second appraisal.

“We postponed the tour for an hour,” Mann said, “and went to a neighborhood park and cried.”

Loan trouble

The buyers were equally devastated when their loan company balked at funding their mortgage. They had spent months looking for the perfect house, walking through at least 40 and viewing hundreds more online.

The Manns’ century-old Victorian on 15th Street was ideal for Michael Schlemmer, a 33-year-old Palo Alto lawyer, and his partner, Gui Alvarenga, a student. So the young lawyer was undeterred.

“I’m an educated person. “… I’ve lived in the Bay Area my whole life,” he said. “I had no question it was worth $560,000-plus. Neither did my agent or the mortgage broker or the first appraiser who approved it.”

Nor, as it turned out, did a third appraiser. After Huff insisted the management company send someone with a 408 area code, the value came in at the sales price. Early this month, after weeks of hand-wringing, the deal closed.

The two couples recently celebrated at the house. Schlemmer brought wine and flowers, and together they ate peaches from the backyard tree — just the way it should have been.

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Ventura County Home prices, sales rise in June

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 20th, 2009

By Allison Bruce 
Thursday, July 16, 2009

Ventura County home prices and sales continued to climb in June, matching a pattern seen across Southern California.

The median price for new and existing homes and condominiums rose to $365,000 in June, MDA DataQuick reported Wednesday. That’s up from $355,000 in May, though down 13 percent from $420,000 a year ago. The median price marks the point at which half the homes sold for more and half for less.

The market has edged up since hitting the housing slump’s low point in February, when the county’s median dipped to $327,000 and sales totaled 545.

DataQuick attributed the boost in the June median in Southern California to buyers responding to price cuts on mid- and high-end homes, as well as more available financing than in previous months.

What’s happening with the median price may be misleading, said Doug Michie, adjunct professor at California Lutheran University.

The foreclosure inventory has thinned out, causing an upward movement in price. While foreclosures represented 45.3 percent of Southern California sales last month, they were down from May and at the lowest level since July 2008, when foreclosures made up 43.7 percent of sales, according to DataQuick, a real estate information company.

A lot of lenders appear to have worked out temporary modifications for homeowners, keeping that inventory off the market, Michie said. But the key point is that they are temporary.

“For the homeowners, it’s a placebo,” he said. “They might have two or three years or an even longer period of time where their rates are lower.”

But reality is that they eventually might face higher interest rates than today’s low rates.

And even if the 7.5 percent to 8 percent rates that Michie anticipates three years from now are in line with historical mortgage rates, it won’t make it any easier for people who are having trouble making payments with a 5 percent rate, he said.

DataQuick reported June’s median of $265,000 for Southern California was the highest since December, but down 47.5 percent from the peak of $505,000 in 2007.

“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum,” DataQuick President John Walsh said in a statement.

Sales in high-priced neighborhoods were so low, an uptick shouldn’t come as a surprise, he said. With the recession and problem mortgages, there is more high-end distress, leading to more “bargains,” he said.

Distressed properties — such as those that have been foreclosed upon or sell for less than the loan amount to avoid foreclosure — have continued to drive the lower end of the market.

Twenty-three percent of homebuyers have been seeking Realtors with expertise on purchasing foreclosures, short sales and other distressed properties, according to the California Association of Realtors 2009 survey of homebuyers that was released last week. That wasn’t reported as a reason for selecting a real estate agent in previous years.

The report found people were buying because of good prices, low interest rates and a belief that rates would rise.

Among buyers surveyed, 68 percent said lower prices motivated them to buy.

This motivation has been reflected in the bounce in sales over last year, though sales numbers remain low compared with where they were at the height of the hot housing market.

In Ventura County, sales in June were up 10 percent from a year ago, with 844 homes sold — the highest total since 876 sales were reported in December.

Across Southern California, sales increased 29 percent from June. Sales have increased year-over-year for 12 consecutive months and June’s sales were the highest for that month since 2006, though they remain nearly 18 percent below average June sales since 1988, DataQuick reported.

Ventura County is in a transition period, said Jeff Haring, branch manager for the Coldwell Banker Ventura office.

The low end of the market is selling very briskly, and the mid-range market is starting to pick up, he said.

“The market, I believe, is at a turning point in Ventura County,” he said. “We’re seeing a lot of activity, a lot of excitement.”

Coldwell Banker Residential Mortgage launched its “CB View” magazine last week in Ventura County. A print version of the magazine is distributed through newspapers and in public locations, such as movie theaters and bus stop kiosks. An online version can be found on Facebook and Twitter.

“Buyers are coming from all different directions now,” said Betty Graham, president and chief operating officer of Coldwell Banker Residential Brokerage in Greater Los Angeles.

Graham said a real estate rebound is inevitable, likening it to a check mark, with a steep fall and then a slow, gradual rise.

There is some indication that people are increasingly able to get large jumbo loans, defined as more than $417,000, in the DataQuick report, but credit still is tight for more expensive homes.

Even if housing prices bottom out this year, Michie said the credit cycle is far from its bottom — and people can’t buy homes if they can’t get loans.

Because of that, he’s not expecting much upward movement in home prices beyond inflation until 2013 — plenty of time for those looking for homes to take their time, save for a down payment or bring up their credit, he said.

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Buyer Activity Increases In SoCal And Bay Area Real Estate

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 20th, 2009

 

Monday, July 20, 2009

Austin Kilgore

     
 

There is cautious optimism in California real estate, as sales have improved across multiple regions of the financially troubled state. Encouraging numbers are coming out of markets from San Francisco to San Diego, which may have been helped by perceptions of a price bottom. For more, see this article by HousingWire.

Improvements in mortgage availability and the belief that prices have hit rock bottom has buyers moving in the Southern California and the San Diego Bay area, according to La Jolla-based data analyzer MDA DataQuick.

In So Cal, buyers are responding to price cuts on mid- to high-end homes and the availability of credit for pricier homes. There were a 23,262 total new and existing homes and condo sales completed in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties in June, up 12% from May.

While foreclosures are still having an impact on the SoCal market, the effect is weakening. Foreclosure sales made up 45.3% of resales in June, down from 49.7% in May and the February peak of 56.7%.

Fewer foreclosure sales meant resale of homes priced $500,000 and above rose to represent nearly 20% of all sales in the SoCal region. It’s the first time that segment of the market made up more than 19% of all sales since October 2008, and comes after that figure had dipped to a low of 13.4% in January.

The increase in pricier home sales helped increase the median sales price for the second consecutive month to $265,000, up 6.4% from $249,000 in May.

DataQuick president John Walsh said the numbers should be viewed with cautious optimism.

“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum,” he said in a press release. “Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise.”

Walsh added: “The recession and problem mortgages are fueling more high-end distress, hence more high-end ‘bargains.’ What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes.”

In the nine-county San Diego Bay area, sales were up 16.1% from 7,447 in May to 8,644 in June. The median price paid for those homes and condos was $352,000 last month, up 3.1 percent from $341,500 in May, the highest since the median was $375,000 in October 2008.

The percentage of foreclosure sales dropped to 37.3% in June, down from 40.5% in May, and is at its lowest point since August 2008 when foreclosure sales made up 36% of all transactions.

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Home price shows signs of life in region

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers on July 20th, 2009

Median cost up slightly as a vigorous market emerges.

By J.N. SBRANTI
The Modesto Bee

Merced County home sales prices rose an average of $5,000 in June to a median of $110,000.

“There was an overcorrection on the way down, just like there was when prices were going up,” said Craig Lewis, president of Prudential California Realty. “We’ve hit the bottom. I don’t think prices will move up rapidly, but they’ll rise slow and steady now.”

Credit a classic case of supply and demand.  

“There are plenty of buyers at these prices, but not enough homes,” explained Lewis, who said his 300 agents sold a record number of houses during the last year.

Any house in decent condition priced less than $250,000 is getting multiple purchase offers. Some homes have more than 40 people competing to buy.

That competition is pushing up values.

Though prices rose 3 percent in June, there’s a long way to go before most homeowners will be happy. The median price paid for a Stanislaus home was $396,000 in December 2005.

Virtually every home purchased since 2001 is worth less now than it was then.

The same is true in Stanislaus and San Joaquin counties.

Stanislaus County home sales prices rose for the second straight month in June, jumping $4,000 to a median $139,000.

That’s the first two-month rise since the housing market began crashing 3½ years ago.

According to statistics released Thursday by MDA DataQuick, San Joaquin homes sold for a median $152,000 in June, which was the same as May but up $6,500 from April.

Northern San Joaquin Valley home values have fallen further than about any other region in America, and prices have been recovering more slowly.

Statewide, for example, the median-priced home sold for $246,000 in June, up 7 percent from May. Bay Area homes rose 3 percent to $352,000.

Just as it did a decade ago, the hefty difference between Northern San Joaquin Valley home prices and those elsewhere in California is attracting buyers to Stanislaus, San Joaquin and Merced counties.

“There are lots and lots of investors buying here. They think it is the time to get into the market,” said Chad Costa, a Re/Max Executive agent in Modesto who sold 500 homes last year.

Stiff competition Costa said investors making all-cash offers are tough for first-time buyers to compete with because they don’t have to convince lenders or appraisers that homes are worth what they’re willing to pay.

Home values are changing so frequently that appraised values can vary dramatically, and lenders won’t issue loans for more than what their appraiser determines a home is worth.

“If you get five appraisers, you’re going to get five different values,” said Costa, noting how frustrating that can be for buyers trying to close a deal.

Another big problem with the current market, Costa said, is that many vacant, foreclosed properties haven’t been put up for sale yet. Many bank-owned homes sit empty for months without any attempt to find a buyer.

But that’s starting to change.

Costa lists foreclosed properties for 30 banks, and he said those listings are increasing. Recently he has been listing two or three bank-owned homes for sale each day, which he said should help meet pent-up buyer demand.

“Don’t give up hope,” Costa advised buyers. “There’s going to be plenty of homes on the market in the next three to six months. The market is going to balance itself out.”

There certainly are plenty of homes in the process of being foreclosed on to quench buyers’ thirst.

During June alone, 749 Stanislaus homes were lost to foreclosure and more than 1,000 additional homeowners were told their homes are in jeopardy of foreclosure unless they catch up on delinquent mortgage payments.

Nearly 14 percent of all Stanislaus homeowners with mortgages are 90 days or more behind on payments.

Foreclosure activity is up in Merced County as well. In May, 17.4 percent of homes here were in some stage of the foreclosure process.

For the last couple of years, nearly all of the used homes sold in Stanislaus have been foreclosed properties or those at risk of being foreclosed on.

But that, too, is changing.

Increasing numbers of homeowners who aren’t in mortgage trouble are choosing to sell their current homes so they can buy elsewhere.

“It’s a secret in the real estate business: The very best time to buy a move-up home is during a down market like this,” Lewis said.

Here’s why: Even though homeowners must sell their current homes for relatively low prices, they may get even bigger bargains buying their next homes.

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New FHA Reverse Home Mortgage a Boon to Seniors

Posted by Chas W. Leeper, SRA in Help for Buyers, Sellers & Homeowners, Help for Realtors / Brokers, Help for mortgage pros on July 15th, 2009

By Bernie Komer • Bankrate.com
 

Highlights
  • Seniors can buy new home on reverse mortgage and not sell old home.  
  • New FHA plan helps seniors save thousands on closing costs.
  • Little-known program features higher cash access this year only.

A new Federal Housing Administration, or FHA, reverse mortgage program can help senior homeowners relocate or downsize to a new home without giving up all their savings — and save them thousands of dollars in the process.

They don’t even have to sell their existing home first.

The program comes at a time when many financially strapped seniors are trying to boost their monthly incomes after being hit especially hard by the economic downturn: stock portfolio values plummeted, interest on investments shrank, and costs for health care and home repairs skyrocketed.

But help is now available through a new, but little known, FHA reverse mortgage program, known as the Home Equity Conversion Mortgage, or HECM, for Purchase Program which gives seniors new ways to use equity in their homes. HECM loans have been available for several years.

The FHA developed the program because it noticed seniors were selling their homes, buying smaller, more affordable homes and then taking out reverse mortgages on the new properties. That meant they were paying closing costs twice — first on the real estate closing, and a mortgage if they needed one to make the purchase, and then again when they switched to a reverse mortgage.

Program combines costs

But now, the new HECM for Purchase Program allows seniors to buy a home directly with a reverse mortgage — paying closing costs only once, says Bill Glavin, special assistant to the commissioner of the FHA. A sale of an existing home is not necessary and is not part of this transaction.

The new HECM program allows using a reverse mortgage to buy a single-family home, a condo or a small multifamily residence, and allows them to convert some of the equity in their existing home to cash. They never have to make a single payment. Instead, they would collect monthly payments out of the equity on a tax-free basis as long as the home serves as their principal residence. If they did not sell their previous home, they could get additional income out of renting that property.

Under the plan, you can choose to take the money either in monthly payments, as a lump sum, a combination of the two or even in a line of credit that you can access whenever you need cash.

Higher amounts this year only

What’s more, this year, seniors can access up to $625,500 — up from $417,000 last year. In 2010, the amount reverts to $417,000.

Eligible homes can be one- to four-units, a condo approved by the U.S. Department of Housing and Urban Development, or HUD, or a manufactured home that meets FHA requirements. You must agree to pay your taxes and make any necessary home repairs. No credit check or income verification is required — despite the current tight credit market.

To qualify for the program’s reverse mortgage, a senior, age 62 or older, must:

  • Agree to live in the house as a primary residence.
  • Own the home outright or have enough equity to pay off any existing mortgages and equity lines with the proceeds from the reverse mortgage. Those with more equity may be able to access even more cash.
  • Not be delinquent on any federal debt.
  • Participate in a consumer information session given by an HUD-approved counseling agency or HECM counselor.

Most reverse mortgages range from 35 percent to 55 percent of the home’s equity. You can, however, take out a reverse mortgage as low as $10,000, though it is not recommended because of the costs involved, says Eric Bachman, CEO of Golden Gateway Financial, a firm specializing in matching lenders with borrowers. “Many times, seniors are just looking to pay off their forward mortgage and cover closing costs (usually less than $10,000) with a reverse mortgage, to get out from under monthly mortgage payments,” Bachman says.

Regardless of your income, the reverse mortgage pays you. The amount you can borrow depends on your age, current interest rates, and the appraised value of your home or FHA mortgage limits for your area, whichever is less.

How much you can borrow

Generally, three factors will affect the amount you can borrow:

  • The value of your equity (the higher the better).
  • Your age (the older the better).
  • Interest rates (the lower the better).

Here are some hypothetical examples of how it can work:

  • Julia is a 72-year-old who wishes to sell the home, worth $450,000, she owns free and clear in Ohio and wishes to downsize to a smaller home in Florida for $185,000, to be closer to her children and grandchildren. She decides to use the HECM for Purchase Program to buy her new home and will have more money leftover than if she used a straight purchase transaction. After she sells the house in Ohio, she can buy the Florida home using a $116,000 reverse mortgage and $69,000 cash. Now she owns the house in Florida and does not have to make any mortgage payment and has the $381,000 remaining from the sale of the Ohio home to invest, giving her extra income.
  • Richard and his wife, both 75 years old, wish to move from their home in Georgia to a new home in New Mexico. Richard is concerned he won’t get a fair market price for his home because of declining home prices and wants to wait until prices rebound. They decide to use a HECM for Purchase Program reverse mortgage to buy the new home and retain the old home. This way they will not have to make mortgage payments on the new property, for which they paid $185,000. They also plan to rent out their current home as a way to generate additional income. They qualify for $116,000 reverse on the new property in New Mexico, so they pay the $69,000 difference from existing cash assets.

An additional benefit to the “for purchase program” is that you can’t outlive the loan because you can never owe more than the value of the home at the time you or your heirs sell the home. When you sell the home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees to the lender. Any remaining equity belongs to you or your heirs.

These government-backed “for purchase” reverse mortgages are “no-recourse” loans, meaning if the borrower defaults, the lender’s recovery is limited to the sale value of the house. For example, if real estate values have declined at the time the loan comes due, and the home no longer is worth as much as the amount loaned, the FHA pays the lender the amount of the shortfall.

HUD recently clarified that the borrower cannot choose between paying the loan balance or paying an amount equal to the value of the home. Instead, when the loan is due, the borrower must either pay the balance due or default on the loan, in which case the bank sells the house and uses the proceeds to satisfy the loan.

However, even if that happens, you or your heirs will never owe more than the value of the home.

HECM loans are available only through an FHA-approved lender.

There are numerous calculators on such sites as AARP and Golden Gateway Financial that can help you determine which reverse mortgage is best for you.

Further information, including a list of FHA-approved lenders, is available free from the FHA.

One added cost to a reverse mortgage is an extra insurance premium, usually more than a conventional mortgage, which has to be paid by the homeowner to insure the lender against the possibility the homeowner lives longer than anticipated, says Bachman.

The insurance guarantees you will never pay more than a stated amount despite increased borrowing costs over time. More than 90 percent of all reverse mortgages in the United States are also HECM loans insured by the federal government through HUD. The insurance applies to the FHA mortgages. This insurance is what makes a reverse mortgage more expensive than a conventional or straightforward mortgage.

On a positive note, interest rates on reverse mortgages today are similar to conventional mortgages. In addition, fees associated with a reverse mortgage cannot exceed 2 percent of the first $200,000 and 1 percent of the balance, with a maximum of $6,000.

There’s another potential upside to having a reverse mortgage. “If the house appreciates in value, you benefit from the appreciation and can refinance the reverse mortgage for a higher amount and benefit from a larger revenue stream,” Bachman says.

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