Month: April 2014

You may have noticed that Spring is a windy time of year for the Central Coast. The sun will be out and shining and the beach beckoning, but persistent cool gusts of wind interrupt any dreams of lounging comfortably in the sand.

Local meteorologist John Lindsey explained why the weather shifts as it does in a recent guest column for the Tribune. The explanation includes words like “pre-frontal winds” and “Coriolis force”, but the gist of the thing is pretty simple. As inland temperatures jump, the “surface air” heats up and rises. To balance everything out, air is sucked in from cooler coastal and ocean areas.

The housing market too has a nifty little nose for balance. Over the past 24 months, the Central Coast real estate market has rapidly shifted gears.

Initially, favorable affordability conditions prompted heavy demand for property. But as purchases soared, available real estate supply rapidly declined. Prices adjusted to the imbalance in supply / demand by rising; over the past 24 months, the median home price is up over 22% for single-family residential properties, according to Byrd.

Currently, we are in another adjustment period. Over the past year, the  30-year fixed mortgage rate rose up from record low levels (between 3.25% to 3.50%) by about 1.0% to the mid-4.50% levels. The ongoing Federal Reserve “tapering” (reduction) of quantitative easing – its stimulus bond-buying program – is erasing the downward pressure that had been keeping rates so low.

Through the first few months of 2014, higher rates, higher prices, and limited supply are depressing home buying, both locally and across the nation.

Morgan Stanley has revised its estimated pace of home buying in 2014:

Morgan Stanley takes down its estimate for existing home sales by 11%, to 4.75M-5M, from 5.25-5.75M. No changes on new home sales & prices.

— Nick Timiraos (@NickTimiraos) April 28, 2014

Through the first quarter of 2014, mortgage lending dropped to a 14-year low in dollar volume. Pending home sales dipped 7.9% in March from the previous year.

Even given these changes, we see the housing market as moving towards a healthy place. Consider:

1) The economic recovery hasn’t been particularly flashy, but in general job growth has steadily progressed. More jobs and a stronger economy will help put more people in a position to purchase a home.

2) Many people have already purchased / refinanced. The window of low rates and affordable prices accelerated mortgage activity beyond what is typical. The housing market is cyclical, and many qualified folks have taken care of their home purchases / refinances for now.

3) The second wave. Price appreciation has helped bring owners out from underwater. Soon enough, the growth will put move-up buyers in a position to sell. As supply loosens, the market can accommodate more purchases.

4) Another reason supply has dipped: fewer foreclosures and short sales. Distressed sales contribute just 8% of total listings through Q1 of 2014, up from 35% during Q1 of 2012.

The temperament of the housing market currently matches the Spring season and the cold coastal winds. This is a time of transition for real estate. Rates will continue to inch upward as the Fed decreases its stimulus-based mortgage-backed security purchases. Lenders are adapting to the post-refinance boom landscape. Owners are coming out from underwater and realizing their options.

As the market continues to churn forward into the summer and into fall, expect for the crosswinds to slow and the market to find a healthy balance.

Track weekly mortgage rate movement on our website www.CentralCoastLending.com in the Mortgage Rate section. Follow the latest market news on our Market Update blog, and subscribe to our biweekly newsletter by emailing rylan@centralcoastlending.com the text “subscribe.”

Last week, Freddie Mac’s weekly survey put the national average of the 30-year  fixed at its lowest level since February 6 (4.27%). Though there have been small fluctuations, rates have  changed very little over the past 10 months, and the 30-year fixed remains about 1.000% above the record lows set in late-2012. Rates will tick up as the Federal Reserve reduces its stimulus program.

As we wait for rates to move, we have shifted our focus to addressing issues that real buyers face in today’s housing market. This week, we take a look at buyers who want to borrow to buy a home after a recent negative credit event (foreclosure, short sale, or bankruptcy).  

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The puncture of the housing bubble and the subsequent recession caused many owners to lose their homes to foreclosure, short sale, or bankruptcy. As of February 2014, CoreLogic estimated that 4.9 million foreclosures were completed since September of 2008, with the majority occurring between 2009 and 2011.

Through the first quarter of 2014, the housing market is well on its way through the recovery process. In San Luis Obispo County, prices have increased 31% since 2011 and in 2012 single-family residential sales had their best year since 2005. Distressed properties take up just 8% of all listings.

For buyers who recently lost their homes from foreclosure, short sale, bankruptcy, or deed in lieu, now is also the time to think about a fresh start. For many, that time can come a lot sooner than they may think.

“Most of the time, people have been told they have to wait seven years to buy a home after a major negative credit event,” said Jason Grote, co-owner of California-based mortgage lender Central Coast Lending.

“The reality is, people can buy a home a lot sooner than that. Sometimes in as little as one year.”

We have put together a guide below to help people have have recently had a foreclosure, short sale, bankruptcy, deed in lieu, or loan modification to figure out the timeline for when they are next able to purchase a home.

CLICK HERE TO READ THE FULL ARTICLE.

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Mortgage applications have declined by 14.0% over the previous year, according to the Mortgage Bankers Association. Less refinance activity is primarily responsible for the drop. About one year ago (the week ending April 26), refinance applications took up a 75% share of mortgages. Today that number is 51%.

Refinance activity has declined partially because rates are higher. The average 30-year fixed mortgage rate is about 28.6% higher year-over-year, according to Freddie Mac, jumping from 3.43% to 4.41%. Central Coast Lending’s 30-year fixed rose from 3.326% to 4.349% – a 30.8% jump – for borrowers paying one point in cost.

Also over the past year, median home price rose 9.1% nationally, according to the National Association of Realtors (NAR). Over the first three months of 2014, the SLO County median jumped 18.3%, according to Keith Byrd.

As rates and prices have risen, the supply of homes on the market continues to hover around 5 months, according to the NAR. Six months is considered healthy.

So to recount, prices are higher, rates are higher, and supply continues to be slightly constrained. Will buyers see any relief?

One positive is that mortgage rates have been fairly steady over the previous 10 months. Most recently, they have dropped as U.S. stock markets have struggled. At the beginning of July last year, Freddie Mac reported the 30-year fixed average at 4.46%. Today, the average of 4.41% is slightly lower.

Another positive for buyers is that investors are scaling back activity. The top twenty investment firms buying California real estate have dropped purchases 70% since January of 2012. As sellers come back to the market, single-family buyers will have more opportunities to find a home.

Conditions remain beneficial for buying a home. Though rates are 1.0% higher, they are still on the low end of the historical spectrum. Even in their rise, SLO County’s median home price is still 17.4% off peak.

Mortgage rates will be in for more slight jumps as the Federal Reserve continues to reduce its bond-buying program called quantitative easing. Follow mortgage rate movement online: we give weekly mortgage rate updates for 10 loan programs on our website.

Need financing scenarios for a potential buyer or an open house? Central Coast Lending offers competitive pricing and mortgage solutions for the most hard-to-loan properties. Feel free to give us a call at 805.543.LOAN with any questions.