Real estate market update
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Notice of Default

[highlight bg=”#fff199″ color=”#000000″]What’s the real estate market doing now?[/highlight]

Lots of contrasting trends. On one hand,Notices of default are up 39% .

But houses actually getting foreclosed on fell 28% from the prior quarter as short sales are becoming more common. Actual foreclosures fell 55% from last year. Default notices are more common in the lower areas= under 200k.

The median price in Southern California rose 28% in June from a year ago-most since statistics have been gathered. That puts it at $385,000 up from $300 last June. At the peak it was $505 so we have room to go.

The LA Times gives a monthly chart of prices by zip code and change from 2012.

[note color=”#fff199″][label style=”important”]YOU MUST SEE THIS[/label] Some areas are up over 75%. Remember averages are averages. There are many far above. You can view this chart by logging on to dqnews.com and check out the LA Times chart. text[/note]

All this is giving cash investors 2nd thoughts about buying at any price. The higher prices reduce their return on investment . That is good for us because they are the elephant in the room distorting everything.

If  you willing to work hard, your return is amazing. If you are not willing to work at it, you won’t find anything. You can’ at simply go to the MLS anymore. You have to learn how to find your own deals.

What’s the real estate market doing now?

Lots of contrasting trends. On one hand,Notices of default are up 39% .

But houses actually getting foreclosed on fell 28% from the prior quarter as short sales are becoming more common. Actual foreclosures fell 55% from last year. Default notices are more common in the lower areas= under 200k.

The median price in Southern California rose 28% in June from a year ago-most since statistics have been gathered. That puts it at $385,000 up from $300 last June. At the peak it was $505 so we have room to go.

The LA Times gives a monthly chart of prices by zipcode and change from 2012.YOU MUST SEE THIS. Some areas are up over 75%. Remember averages are averages. There are many far above. You can view this chart by logging on to dqnews.com and check out the LA Times chart.

All this is giving cash investors 2nd thoughts about buying at any price. The higher prices reduce their return on investment . That is good for us because they are the elephant in the room distorting everything.
[quote style=”3″]If you willing to work hard, your return is amazing. If you are not willing to work at it, you won’t find anything. You can’ at simply go to the MLS anymore. You have to find your own deals.[/quote]


Impact of mortgage rates on housing payments
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The average 30 yr mortgage rate jumped to 4.51% for the seven-day period ending on July 10th.  That is an increase from 4.29% a week earlier and 3.98% for the second week in June.  The higher rates increased monthly principle and interest payments by roughly 6.5%.  OMG the rates for 10 yr loans are the same as what 30 year loans used to be just a short time ago.

 

Rates have climbed over a full point in recent weeks mostly on speculation about when the Federal Reserve will end its purchases Treasuries.  The 10 year treasury bond determines mortgage rates. 

Applications for purchase mortgages fell 3.1% last week from the last week in June, the second consecutive decline.  However, the impact on the refinance side was much stronger.

An increase in mortgage rates will impact affordability and cause some shoppers to think twice about buying. However,  rates are still low by historical standards.  Rates were well above 4.5% until mid-2011. I remember a loan in 2000 that was 8%.   The good part about climbing rates is that the decline in refinance activity will push lenders to search out more potential borrowers and ease credit standards, allowing access to credit for many borrowers who have been shut out in recent years and unable to take advantage of low rates.


Will rising mortgage rates hurt the housing recovery?
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Rising Mortgage Rates

A rule of thumb holds that every one percentage point increase in interest rates reduces affordability by 10%, so the recent move in rates just made homes about 10% more expensive to buyers who need to finance their purchase.

“There’s no one in the business right now who doesn’t think the market hasn’t taken a step back. The evidence is all around us,” said Glenn Kelman, chief executive of real-estate brokerage Redfin. The number of Redfin customers who requested tours during the last week of June was down 5% from the average for the previous three weeks, while the number of customers making offers was down by 8% and the number of new customers edged down by 2%.

A sign that inventory has picked up is that competitive offer situations are dropping. The share of offers written by Redfin agents that faced a competing offer fell to 69.5% of offers in May, down from 73.3% in April. One year ago, some 69.3% of offers faced at least one competing bid.

Markets that have seen larger increases in listings have seen even bigger declines in multiple-bid situations.

So things are slowly going to return to normal. If you have been discouraged by the difficult situation for investors, take heart- things will get better for us.


Shadow inventory down
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CoreLogic said today that completed foreclosures ticked up slightly in May compared to April, but the number of homes in process of foreclosure, the foreclosure inventory, was down to about the same degree. Both completed foreclosures and the inventory are lower by double digits than they were one year earlier.

The National Foreclosure Report from CoreLogic said 52,000 homes were foreclosed in May compared to 71,000 in May 2012, a year-over-year decrease of 27 percent. However in May there were 2000 more foreclosures completed than in April, an increase of 3.5 percent. By way of comparison completed foreclosures averaged 21,000 per month in the 2000-2006 period, prior to the financial and housing crisis. Since September 2008 there have been approximately 4.4 million completed foreclosures nationwide.

As of May there were about 1.0 million homes in some stage of foreclosure, down from 1.4 million a year earlier, a 29 percent decrease. The May inventory represented 2.6 percent of all mortgaged homes in the U.S. While the May 2012 inventory represented a 3.5 percent rate.

CoreLogic tracks a third measure, the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure or held as real estate owned (REO) by mortgage servicers, but not currently listed on multiple listing services (MLSs). The April shadow inventory was under 2 million homes, representing a supply of 5.3 months. At its peak in 2010 the shadow inventory contained 3 million homes.

Of the less than 2 million shadow inventory properties 890,000 are seriously delinquent (2.4 months’ supply), 761,000 are in some stage of foreclosure (2 months’ supply) and 336,000 are already in REO (0.9 months’ supply). In May the shadow inventory represented 85 percent of the 2.3 million properties currently seriously delinquent, in foreclosure or REO.

The value of shadow inventory was $314 billion as of April 2013, down from $386 billion in April 2012 and down from $320 billion six months prior, in October 2012. April’s number was down 18 percent compared to April 2012 when it was at 2.4 million units.

Total delinquencies at the end of May including those 90 or more days past due, in foreclosure or owned real estate (REO) was fewer than 2.3 million mortgages or 5.6 percent of all mortgaged properties. This is the lowest delinquency rate since December 2008.

Noting the nearly five year low in the delinquency rate, Mark Fleming, chief economist for CoreLogic said, “Over the last year it has decreased in 42 states by double-digit figures, resulting in rapid declines in shadow inventory for the first quarter of 2013.”

“We continue to see a sharp drop in foreclosures around the country and with it a decrease in the size of the shadow inventory. Affordability, despite the rise in home prices over the past year, and consumer confidence are big contributors to these positive trends,” said Anand Nallathambi, president and CEO of CoreLogic. “We are particularly encouraged by the broad-based nature of the housing market recovery so far in 2013.”

The five states with the highest number of completed foreclosures for the 12 months ending in May 2013 were: Florida (103,000),California (76,000), Michigan (64,000), Texas (51,000) and Georgia (47,000).These five states account for almost half of all completed foreclosures nationally.

The five states with the highest foreclosure inventory as a percentage of all mortgaged homes were: Florida (8.8 percent), New Jersey (6.0 percent), New York (4.8 percent), Maine (4.1 percent) and Connecticut (4.1 percent).



The skinny on mortgage rates
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The pendulum is swinging back again. After years of scrooge like actions by the banks, things are changing.

Rates are up to 4.6% for a 30 year fixed. If you hear lower rates quoted its because they are charging lots of points and fees. That’s the difference between the rate and the apr. The wider the difference, you more junk you are paying. The best rates are ones that have the quoted rate and the apr as the same.

This  amazingly fast mortgage rate climb continues to be one of, if not THE most significant move in the modern history of mortgage rates (in terms of the pace of change)

The upside is that banks are now loaning more freely than they have been in the last few years. As rates climb, there is less refinancing going on so the banks are loosening up They are accepting lower downpayments and lower ficos

 In the last 2 years, there was a sevenfold increase in down payment requirements of between 3.5 and 5%/ THESE ARE NOT FHA LOANS. Even Wells Fargo is offering 3% downpayment loans.

Piggyback loans have returned. That’s also called a 80-10-10. You put down 10% and have a fisrt of 80% and a 2nd of 10%. It’s cheaper than having mortgage insurance.

In addition, the debt to income ratio is growing again. Things are not like the were before- you still have to qualify. It’s starting to look like a normal mortgage market.