Month: July 2014

The first matter of business to discuss is our weekly 10 program Mortgage Rate Update. It has come to our attention that a formatting issue has made the rates hard to see for some folks. We have fixed the problem.

And in the spirit of the fix, we have posted a completely updated set of rates for Monday, July 28. (Sneak preview: rates have dropped across the board from our last calculation… especially notable were USDA, VA, FHA improvements).

 

About Last Week…

For housing news, existing home sales and new home sales dominated the discussion, and painted two different pictures about the real estate market.

Existing home sales rose by 2.6% in June to a 5.04 million yearly pace. The nation’s median sales price rose to $223,300. It was the 28th straight month of price gains.

Perhaps even more important, the inventory of for-sale homes expanded to 5.5 months. Inventory is now 6.5% higher than last year, and is at its “highest level in over a year,” according to the National Association of Realtor’s chief economist Lawrence Yun.

Low supply has been one reason that sales have dropped back a bit in 2014 (higher prices being another).

Other statistics from the report:

• 11% of sales were from “distressed” property (15% last year)
• 28% of buyers were first-time
• 32% of sales were cash

New home sales, meanwhile, dropped by 8.1% over the previous month and 11.5% over the previous year. The dip was unexpected, especially after weeks of solid housing news.

Builders listed lack of available land and a dearth of qualified labor as reasons for the dip. Also to blame: slowing household creation and millenials abstaining from home purchases.

Last week major stock indexes (Dow Jones Industrial Average and S&P 500) were largely unchanged. The 10-year Treasury Yield fell slightly. Mortgage rates dipped.

 

Mortgage Rates…

More positive news on the Mortgage Rate front.

At the beginning of the year, most people expected mortgage rates to rise. The 30-year fixed conforming rate was expected to sit in the mid-5.000% level by now.

Instead, over hallway through 2014, the 30-year fixed is down between the high-3.0% and low-4.0% level.

See the rest of our July 28 update here.

With rates still a bargain, now is an excellent time for buyers, and for any current mortgage holders who missed the refinance window in 2012 and 2013.

 

First-Time Buyers…

The combination of higher home prices and low supply is making life difficult for first-time buyers. Central Coast Lending offers many options for the first-time buyer that can make qualifying easier and more affordable. Give us a call at 805.543.LOAN to set up a free prequalification session.

On the topic of first-timer buyers, the FHA Hawk program will be arriving in the fall of 2014 and will drop Mortgage Insurance payments for new borrowers. The savings? Up to $20,000 over the life of the loan. Click here more information. The Mortgage Credit Certificate also offers new buyers thousands in savings. Click here for more information.

 

This Week…

… has plenty of important pieces of data that could swing the market. Depending on the news, July Employment, U.S. GDP, and the Federal Open Market Committee meeting could all shift rates. We will cover any major movements on our website – www.CentralCoastLending.com.

 

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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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Using the SqFt dashboard, which is updated quarterly, we can look at market trends of specific types of houses, in this case houses that are larger than 3500 square feet. The total number of these huge houses that sold in 2013 was 114, and so far in 2014 there have been 48 that have sold.

Where are these houses?? The cities with the most extra large houses are Arroyo Grande (28 in 2013, 12 in 2014), Atascadero (17 in 2013, 7 in 2014), Paso Robles (13 in 2013, in 6 2014), and San Luis Obispo (15 in 2013, 8 in 2014).  The remaining 41 homes in 2013 and 15 homes in 2014 are spread around the county, with just a few selling in each city.

These houses have the same percentage of foreclosures and short sales, when compared to all houses sold so far in 2014. They tend to sit on the market longer, with an average days on market of 163 so far in 2014. In comparison, when all sqft ranges are combined, the average days on market so far in 2014 is only 76.

Click Here for the detailed 3500+ Statistics Dashboard

In our weekly Mortgage Rate Update last Wednesday (July 16), rates were mostly unchanged from the previous week. Conventional loan rates rose and dipped slightly:

Government-backed programs (FHA, USDA, VA) all increased slightly. You can see the full update here.

Unfortunately, I am out of the office this week, and not able to post the usual full market update. Below, I have included a few notes from the week that was (July 14 – 18):

July 14 – July 18:

• Housing starts (construction) fell 9.3% in June to an annual rate of 893,000, according to the Commerce Department. But for the good(ish) news, much of the slowdown came in a single region – the South. Construction activity in other regions appeared much more robust.
• Mortgage applications dropped by 3.6% during the week of July 11.
• Construction down? Purchase applications down? Are we panicking yet? A Fiscal Times article by Marine Cole goes the other way, and explains “Why There’s Hope for a Stronger Housing Recovery.” In short: foreclosures are down, mortgage rates are very low, the labor market is improving, and builders believe that better times are on the horizon. Read the full article here.
• Another positive for buyers: the government supports you! The Mortgage Credit Certificate (MCC) offers new/returning buyers a dollar-for-dollar credit to reduce their federal income tax bill based on their mortgage interest payments. The MCC will save you thousands! To qualify, buyers must be “first-time” (haven’t owned a home for three years), and meet income and price specifications. Learn more here!
• The SLO County real estate market is a challenging one in 2014. Demand is sky-high, but inventory just isn’t as available as it was during the “boom” years of 2012 and 2013. As a lender, we have challenged ourselves to find products for a diverse and exotic array of properties. For example: Hobby Farms and Farm and Ranch programs. We are also pretty excited about this one-year income qualification offer, which is great for the self-employed whose fluctuating income might complicate the loan qualification process.
• Here is a chart with information about more special loan programs for unique properties!

Please feel free to call us (Central Coast Lending) at 805.543.LOAN or email (info@CentralCoastLending.com) with ANY and ALL questions about mortgage rates, mortgage pricing, mortgage pre qualification, mortgage programs… really ANYTHING real estate related, we have you covered!

The North Coast is on FIRE! Median home prices are increasing significantly so far in 2014.

Here is an overview of the first 6 months of 2014 versus the first 6 months of 2013. All statistics are based on Stick Built homes, and include foreclosures and short sales.

	Median Home Price 2013	Median Home Price 2014	Number of Sales 2013	Number of Sales 2014	Days on Market 2013	Days on Market 2014
Cambria	$  490,500	$  572,000	72	66	112	110
Cayucos	$  660,000	$  797,500	19	27	132	85
Los Osos	$  350,000	$  435,000	84	69	49	54
Morro Bay	$  415,000	$  500,000	67	76	66	111

Estate Sale! Three bedroom, 2 baths, and almost 1500 sq. ft. of living space on
the edge of farmland. Mature fruit trees and lots of potential in a great
neighborhood. As-is sale. For more go to www.1159flora.net

 

Rents continue to rise in the United States…

Through June of 2014, Rents rose 5.5% across the nation’s 25 largest metro areas, according to Trulia.com. Over the past 12 months, Rent growth has outpaced pay growth, and as Rents rise, metro areas are more and more unaffordable.

 

Is now a better time to buy?

CNBC real estate reporter Diana Olick doesn’t think so. She recently wrote a column titled “Housing Still too Expensive Despite Positive Signs.”

Olick poses the question: why have home sales have slowed year-over-year despite favorable mortgage rates, slowing prices gains, and improved employment?

For starters, even as price gains “slow”, 97 of the largest 100 metro areas still saw yearly increases. Overall, Trulia estimated that the median price for home sales was up 8.1% in June over the previous year.

Beyond the price increases, Olick points out (with some alarm) that the 2014 implementation of the Qualified Mortgage (QM) rule by the Consumer Financial Protection Bureau might be hurting the very same buyers / consumers it professed to help.

“New mortgage rules, designed to protect borrowers, set strict limits on the amount of loan debt that can be carried as a percentage of a borrowers’ income – 43 percent. This so-called debt-to-income ratio has kept some renters out of home ownership…”

The QM rule regulates loan products that fall outside of conventional guidelines by capping lender fees, restricting “risky features”, and creating qualified borrower limits (the 43% debt-to-income max).

 

So… is the QM rule hurting homebuyers?

Perhaps a bit, but not by much.

First of all, most home loans do not need to meet the 43% DTI “QM” restriction. Why? Because the QM rule makes an exception for government-backed mortgages like Conventional loans (Fannie- and Freddie- backed), FHA loans, VA loans, and USDA loans.

These loan program make up the vast majority of new originations, and have much more flexible DTI ratios.

Central Coast Lending offers the following DTI qualifications:

• Conventional (Fannie and Freddie): 50% DTI (LINK)
• FHA: 57% (47% of which can be for real estate) (LINK)
• USDA: 43% (29% of which can be for real estate) (LINK)
• VA: 60% (LINK)
• Mobile Homes: 45% (34% of which can be for real estate) (LINK)
• Jumbo: 43% (LINK)

Debt-to-income (DTI) ratio describes the borrower’s total debt, as calculated by adding the minimum payment for everything that shows up on their credit report. Relevant debt includes student loans, installment loans (cars, RVs, boats, etc), and real estate loans. Payments for smaller items like utilities or cell phone bills do not count towards total debt unless they become collections.

The real estate portion of the DTI is calculated by adding the the total monthly payment (Principle Interest Taxes and Insurance – PITI) and comparing it to gross monthly income.

For example, the DTI for a borrower with a $5,000 gross monthly income (pre tax) and a $1,600 monthly mortgage payment would be 32%. Adding in a $300 monthly car payment and a $200 monthly student loan would bring the total monthly debt to $2,100 and the DTI to 42%.

Most borrowers qualify under one of these popular programs. Borrowers (and properties) that do not qualify are able to seek out “non-qualified” mortgage products (non-QM) from lenders who are willing to take on greater risk.

In our non-QM product overview, we wrote:

Lenders take on greater risk by underwriting non-QM loans, so they require very specific qualification standards to asses the borrowers ability (and likelihood) to repay the loan. Specifically, lenders offering non-QM loans must maintain a minimum 5% stake in that loan for the life of the loan rather than selling the loan entirely as is typically the case with QM loans.

Lenders might be more strict in qualifying borrowers for a non-QM loan, but the fact is that these loans do exist to meet demand.

To recap, is it true that the QM rule is slowing the housing market? Perhaps to a small degree, but only for the most borderline borrowers.

Several weeks ago we wrote about “millenials” as a key to the changing housing market. Millenials are going to school longer and delaying household formation. Rampant student debt is also hurting the home loan qualification process (increasing DTI, for one).

“Give it time” is a clear solution here, but luckily for San Luis Obispo County, we are already in a good position to weather the storm. A recent Tribune headline proclaims “SLO County among top 10 areas in U.S. for millennial job growth.”

There is nothing quite like a good job and regional economic development to fortify the housing market.

 

Mortgage Rate Update

Over the past month, mortgage rates have dipped and jumped a bit based on the major headlines of the day (poor GDP, positive employment), but as the smoke clears, nothing much as changed. Rates are just slightly lower than they were in June, and very close (or at) 2014′s lowest levels.

See our latest update of mortgage rates for 10 loan programs here.

This week, housing starts / home construction data will lead housing market headlines.

 

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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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