Month: May 2014

A private and elegant Tuscan Villa Estate: Casa Encantada! Located on top of
Nipomo mesa with unobstructed panoramic views of the valley and mountains. Live
with the finest Italian and French custom furnishings and art pieces
commissioned specifically for this home. Music room boasts a Yamaha Baby Grand
piano with Symphony Pro disc player. Relax and watch movies in the
state-of-the-art media room. The fully equipped fitness center has Health Club
grade equipment. Each bedroom is decorated and furnished after an Italian city:
Bellagio, Venetian, Portofino. The sculptured gardens are hidden behind 7′ high
hedges and triple gated for privacy personified. Enjoy seven outdoor fully
furnished venues that highlight the Central Coast sunrises and sunsets. The
Meyer Lemon orchard is contracted with and to supply Frontier’s Market in San
Luis Obispo. Walk Fairy Tale Lane and you’ll land at the large stone fire pit. A
true turn-key estate home and furnishings together total $2,730,000!

Wonderful 3 bedroom 2 bath home in San Luis Obispo. The sellers put in
approximately $100,000 in upgrades over the past two years with the intent to
stay. However, job relocations have necessitated a move. Upgrades include
beautiful walnut floors throughout; totally remodeled master bath with high-end
fixtures and cabinetry; new windows and sliding doors; updated second bath;
interior paint; and extensive landscaping. The light and airy living room
includes built in cabinets and a wood burning fireplace. . You will enjoy
relaxing in the park like backyard with a lovely garden featuring mature roses,
trees, and a new deck. The spacious trex deck is perfect for outdoor eating or
just relaxing and enjoying the view of the hills. Children’s play structure may
be included in the sale. Desirable Sinsheimer School area. This is a great
property in San Luis Obispo for under $600,000! Visit 1521LaCita.net

Welcome back from Memorial Day! We hope that your day was a relaxing one. If you missed them, our last two posts:

• Mortgage Report: the Second Lien Makes a Comeback (May 19)
• SLO County Real Estate Update (May 12)

This week, we will break down the housing and economic data released during the month of May.

National Home Sales & Prices

Home prices across the nation continue to rise, though the pace of their gains has slowed. Take a look at the top headline on CNBC.com this morning:

The month of May is nearly done, but data collected from March makes the top headline.

One of the inherent difficulties in tracking the economy is simply the data lag. Headline economic numbers do not reflect conditions that are dealt with in the present day and on the ground.

What these numbers can do, however, is give us an idea about longer-term trends that might help us prognosticate where everything might be going. So what do the numbers say?

 

S&P/Case-Shiller Home Price Index (March) – Prices rose 0.8%  from the previous month, and 12.4% from the previous year. (CNBC)

To the right, we have posted a screenshot of a graph published by Econoday. Prices continue to rise, but total gains have slowed a bit as demand has dipped. Higher home prices and higher mortgage rates have reduced what buyers can afford. As competition for property declines, sellers are not able to ask for quite as much.

Another limiting factor for real estate has been a shift in demographics and the rate at which households are formed.

The 2010 U.S. Census reported that the median age of marriage for men (28.2) and woman (26.1) rose. Young adults in the United States are delaying household formation – and  renting in the meantime.

So when you read Tweets like this…

U.S. home prices are up 24% in the last two years, but still 19% below 2006 peak, per S&P/Case-Shiller pic.twitter.com/5EW63KQXIo

— Nick Timiraos (@NickTimiraos) May 27, 2014

… consider that the new normal is not the same as the old normal. Prices rose to a 2006 peak under a different set of conditions (available, easy credit) at a time when household formation occurred at a faster pace.

 

FHFA  Home Prices (March) – The FHFA index reported that prices rose 0.6% month-over-month and 6.6% year-over-year in March. FHFA reported a slowdown in the year-over-year gains, though 2014’s first quarter still marked the 11th-straight quarter that prices had increased (FHFA).

 

NAR Existing Home Sales (April) and U.S. Census New Home Sales (April) – Existing home sales rose 1.3% month-over-month to a seasonally adjusted annual pace of 4.65 million units. Sales were down 6.8% from April 2013 levels. Notably, available inventory jumped to 5.9 months, from 5.1 (about 6 months is considered healthy)  (National Association of Realtors).

New home sales also rose, but mostly on the strength of multifamily homes. (Bloomberg)

 

Mortgage Rates

Mortgage rates have dipped over the past month. Freddie Mac’s weekly Mortgage Rate tracker placed current rates at the lowest level in seven months, with the 30-year fixed national average at 4.14%.

During the recovery, rates have typically moved at an inverse to economic outlook. When general consensus has been positive about the strength of the U.S. economic recovery, rates have increased. During periods of negativity or uncertainty, rates have improved.

So why have rates dipped, even as people generally seem to be feeling better about the economy? Rob Chrisman explains in his widely-read Daily Mortgage News & Commentary:

So why, if the economy is picking up some steam, do rates remain low? Well, it is not picking up that much steam, and the discussion among economists is centered on just how disappointing it is. Most data continue to show modest improvement but overall economic growth shows little indication of breaking out of the underwhelming trend from recent years.

Chrisman continues, speculating possible reasons for the weakness:

Blame it on the weather, on people being under-employed or dropping out of the labor force, on the Millennials not buying houses, on problems overseas, whatever. And housing is definitely not setting the world on fire: we are more than halfway through another disappointing spring selling season and we are beginning to hear more talk about new policy initiatives to boost home buying and new home construction.

At the beginning of May, we wrote about “the new normal.” Analysts continue to compare economic growth and the real estate recovery to previous economic cycles, however the underlying conditions (read: demographics) are starting to look very different. We need to figure out what “the new normal” really is, and analyze  sectors like real estate and employment on their own terms given current conditions.

As the market slows, now is a time to get creative with your home financing. As both a direct lender and a broker, Central Coast Lending has uniquely positioned itself in the industry to offer its clients home loan solutions to almost every kind of property or financial situation.

 

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Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email info@centralcoastlending.com to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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Single Story on the 18th Fairway of the San Luis Obispo Country Club. Beautiful
views. 3 bedroom, 2 bath. Open floor plan. Cathedral ceilings, Newer carpet. 3
car garage with tons of built-in storage. Close to Clubhouse/pool and tennis.

This charming S&S Home on one of the most sought after cul-de-sacs makes an
ideal home for raising a family or entertaining friends. Inviting open 1,544 sq.
ft., 3 bedroom 2 bath floor plan, offers large great room and master suit, with
bonus room for an office or working out. Outdoor spa is included. The great room
features high vaulted ceiling, charming wood-burning stove, glass block windows
and nice architectural wall detail. Central vacuum. The large backyard and side
patio are perfect for outdoor relaxing or children playing. There is an
oversized deluxe side-yard storage shed, and out of sight area for waste
containers. This home is move-in ready. See 1297San Sorrento.net for more
information.

Come and see this immaculate condo in a fantastic location! This two bedroom,
two and a half bathroom home features granite counter tops, tile and carpeted
floors, and European style viewing balconies for taking in the San Luis Obispo
mountains. It is for sale as is, and includes furniture and appliances. Close to
bike trails, Sinsheimer Park and just minutes from downtown, this affordable
condo is your chance to own a home in beautiful San Luis Obispo! Call your agent
before it’s too late!

By taking out a second mortgage on their home, borrowers can turn existing equity into cash to consolidate debt, fund home improvement projects, contribute to an investment home purchase, or build a secondary unit.

The second mortgage also offers owners creative solutions to financial problems. We have seen second mortgages (also called “second liens“) used to pay down first mortgages and eliminate mortgage insurance. We have seen owners use a second mortgage to keep a desirable first lien intact while cashing out equity to use for other purposes, such as college tuition.

The only problem with second liens is that they are hard to find – today, anyways.

“In the first quarter of 2007, there was something close to $90 billion in equity lines originated,” said Daniel Podesto, co-owner of Central Coast Lending, a mortgage lender based in San Luis Obispo County, California.

“In the first quarter of 2014, there was about 9 billion originated.”

Additional liens were common during the housing bubble – even excessively so.

“Homes were used like a credit card to purchase vacations, cars, and boats,” said Podesto. “The extra credit was easy to get. The model wasn’t sustainable.”

When the housing bubble popped loan defaults multiplied. Many second lien holders were left with nothing. Since then, lenders have been slow to offer second mortgages.

“Right now, nobody wants to be in second position,” said Podesto.

Central Coast Lending, on the other hand, offers second mortgage solutions for its clients.

[Click here to submit an online loan application or contact us to arrange a free consultation]

 

Types of Subordinate Financing

Subordinate financing can be structured in two ways:

1) The Piggy-Back (a.k.a.: Concurrent Lien, First and Second Combo)
Borrowers purchasing a home, are able to use a “piggy-back” their first mortgage in with a second mortgage to give them additional flexibility in the formation of their repayment plan.

2) The Standalone Second
Borrowers can also take out a second lien independent from the first. In doing so, the borrower can take cash out of their equity to use for other purposes while preserving their first lien.

 

Structures for Subordinate Financing

Lenders offer two structures for second liens:

1) Home Equity Line of Credit (HELOC)
The HELOC is a revolving line of credit that allows homeowners to turn home equity into cash for ready use. Some of the best uses of a HELOC allow borrowers to free up cash for debt consolidation (credit cards, car, student loans) and home improvements.

Read more about the Home Equity Line of Credit here.

2) Closed-End Second
The closed-end second lien sets a fixed interest rate and a specific payment schedule. This format offers security for borrowers with a plan that they can reliably execute.

Read more about the Closed-End Second here.

 

Second Liens in Today’s Market

Lenders are hesitant to issue subordinate financing due of the increased risk of being in junior position. The most recent housing bubble, for example, saw equity (and value) vanish rapidly. In foreclosure situations, lenders simply found that their second or third lien didn’t hold any value. Even the holders of the initial (first) lien were not able to recoup all of their initial loan.

Even as the housing market (and economy) has recovered, banks remain hesitant to offer subordinate financing. Central Coast Lending, however, is able to lend on an assortment of second lien situations, which can help borrowers consolidate debt, fund home renovations, or take out a new line of credit.

Give us a call at 805.543.LOAN or an email at info@CentralCoastLending.com with any questions. You can also set up a pre qualification appointment to learn about the possibilities that mortgage financing have to offer.

 

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Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email info@centralcoastlending.com to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

About   ||   Mortgage FAQ   ||   Market Update Blog   ||   Radio Show   ||   Contact