Archive for April, 2011

Will the Cost of Buying a Home Increase Even If Prices Fall?

April 28, 2011 3 comments

Another example of giving thought to the big picture of purchasing a home comes to us today from the Keeping Current Matters Crew.  Focusing on price only may hinder your overall investment.  It is more important than ever to sit down with a REALTOR that can be a true advisor for you.  Someone that not only can assist with finding your dream home but can walk you through the Market Trends and do the best possible negotiations as well.  So, with that said…

Will the Cost of Buying Increase Even If Prices Fall?

 We want to make sure our readers understand the potential impact to the cost of financing a home these changes will have. The cost of buying a home may increase even if prices continue to soften. The total cost of a home is determined by two factors:

  • the price of the property 
  • the expense of financing the purchase (assuming you are not paying all cash)

Check with a local real estate professional to determine where prices are headed in your region for the type of home you are considering. However, even if prices are predicted to soften further in your area, the COST of the home may rise because of increased expenses in financing. These expenses could increase rather dramatically.

Interest Rates

Interest rates have remained at historic lows for over a year. As the economy improves, there will be less need for the government to keep rates low. Many are predicting interest rates will increase from 1/2 point to 3/4 of a point before the end of the year. We may also see an additional increase in rate for loans deemed ‘less qualified’.

New Mortgage Standards

The government has proposed a new definition for a ‘qualified residential mortgage’. The new standard would set a bar much higher than we have today. Anyone not meeting these requirements would not be eligible for the ‘best’ rates available. What could be the difference in interest rate? In a white paper released last week by a group that included the Center for Responsible Lending and the National Association of Realtors:

Some private estimates have concluded that 5 percent risk retention could result in a three-percentage point rise in interest rates for loans funded through securitization. In other words, today’s 5 percent market would become an 8 percent interest-rate market.

Even if the rates for these loans are only one percentage point higher than the best rate, the additional cost to a buyer could be dramatic.

Impact of Interest Rates on Mortgage Payment

The interest rate you receive obviously plays a big role in determining your monthly mortgage payment. How big a role? Here is a chart showing how your payment is impacted even if home prices fall:

 Bottom Line

You may have delayed your home purchase decision because of concern over where PRICES may be headed. To make the best financial decision for you and your family, also take into consideration where the overall COST of the purchase may be headed.

Dave & David Warner


Weekly Mortgage Rates – April 28, 2011

April 28, 2011 1 comment
Regional Breakdown30-Yr FRM15-Yr FRM5/1-Yr ARM1-Yr ARM
Average Rates 4.78 % 3.97 % 3.51 % 3.15 %
Fees & Points 0.7 0.7 0.6 0.6
Margin N/A N/A 2.75 2.76

Sorry, the Regional Breakdown banner is not working right!

Dave & David Warner


Buyer Composition: Fewer First Time Buyers, More Investors

April 27, 2011 1 comment
  • First time home buyers have recently declined to 34 percent of the total market of Existing Home Sales, down from a normal 40 percent, according to the most recent REALTORS® Confidence Index.
  • REALTORS® have reported a number of instances of investors outbidding prospective first-time buyers for discounted foreclosures by offering cash and accelerated closings.
  • In some real estate markets distressed property is reported as being absorbed relatively quickly—although at a significant discount–by the Existing Home Sales markets.


Thank you NAR

Dave & David Warner


California Mortgage Defaults Drop Again

April 25, 2011 1 comment

The number of financially distressed California
homeowners who were dragged into the formal foreclosure process declined
again last quarter, the result of turmoil and policy changes within the
mortgage industry as well as shifts in the economy, a real estate
information service reported.

A total of 68,239 Notices of Default (NoDs) were recorded at county
recorders offices during the January-to-March period. That was down 2.2
percent from 69,799 for the prior quarter, and down 15.8 percent from
81,054 in first-quarter 2010, according to San Diego-based DataQuick.

Last quarter’s activity was the lowest since 53,493 NoDs were recorded
in the second quarter of 2007. It was just over half the record 135,431
default notices recorded in the first quarter of 2009.

“Lenders and servicers have put various temporary holds on foreclosure
filings while they work on procedural issues and respond to regulatory
and legal challenges. It’s unclear how much of last quarter’s decline
can be attributed to market factors and strategic decisions, and how
much can be attributed to the formalities of the foreclosure process,”
said John Walsh, DataQuick president.

Most of the loans going into default are from the 2005-2007 period: the
median origination quarter for defaulted loans is still third-quarter
2006. That has been the case for two years, indicating that weak
underwriting standards peaked then.

Thank you , Arnold Nieto

Dave & David Warner


Flyfishing the Situk River – Sleeping Quarters

April 23, 2011 Leave a comment

Paul & Gary Settling in Can you Find Ed in the picture?

The Launch at the Cabin.

Ed with the first catch of the morning

Weekly Mortgage Rates April 21, 2011

April 21, 2011 1 comment
Regional Breakdown30-Yr FRM15-Yr FRM5/1-Yr ARM1-Yr ARM
Average Rates 4.80 % 4.02 % 3.61 % 3.16 %
Fees & Points 0.7 0.7 0.6 0.6
Margin N/A N/A 2.74 2.76

From Freddie Mac

81% Surveyed Say Buying a Home is the Best Long-Term Investment

April 20, 2011 Leave a comment


A robust 81% of adults said buying a home is the best long-term investment a person can make, according to a national survey by the Pew Research Center in Washington.

“Owning a home is really a part of the American dream, and that is just part of the American psyche and something that people aspire to,” said Kim Parker, associate director for the center and one of the study’s authors.

The study’s results were unexpected, given the deep plunge in home prices and the fallout from the mortgage crisis, she said. Homeownership topped the list of long-term financial goals for Americans, according to the study; respondents rated homeownership, as well as living comfortably in retirement, more important than sending children to college or leaving offspring an inheritance.

The public’s faith in real estate has been bruised since the last time a comparable survey asked people about the wisdom of investing in real estate. A total of 37% of respondents said they “strongly agree” that homeownership is the best investment a person can make while 44% said they “somewhat agree.” The same question was asked by a CBS News/New York Times survey in 1991, and at that time 49% “strongly agreed” and 35% “somewhat agreed.”

“The study results are surprising in that so many households still believe that homeownership is a good investment, even after the plunge in home values that has occurred over the past couple of years,” said Celia Chen, a housing economist for Moody’s “The preference for homeownership has deep roots in the history of this nation, and apparently even a severe correction in house prices can shake American’s belief in homeownership only slightly.”

The telephone survey was comprised of a nationally representative sample of 2,142 adults conducted from March 15 to March 29 by Princeton Survey Research Associates International. Interviews were done in English and Spanish. The margin of sampling error for the data is plus or minus 2.7%.

While home prices have entered a renewed decline after showing some improvements last year, many economists believe that the worst of the housing crisis is probably over. That sentiment could help to explain the resiliency in Americans’ optimism.

“People may have the feeling that the worst is behind us,” Parker said.

Though other investments such as stocks tend to produce a better return, the housing market has generally avoided the wild swings that the stock market has over time, potentially helping to explain real estate’s lasting allure, Parker added.

Homeowners in the surveywere more positive about the financial wisdom of owning a home than were renters. But even among renters, the desire for homeownership remains strong, according to the survey’s findings. Just 24% of renters surveyed said they rent out of choice and 81% said they would like to buy.

The decline in values has struck a wide swath of Americans. About half, or 47%, of homeowners said their property is now worth less than when the recession began, and 31% said the value of their home has not improved. Just 17% said their home is worth more than before the recession.

Of those who said their properties have lost value, 86% said they expect it to take at least three years for values to recover, 42% said at least six years and 10% said they expect a recovery in 10 years or more.

Despite those sentiments, 82% of homeowners who indicated their home is worth less than before the recession said homeownership is the best long-term investment a person can make.

Dave & David Waner