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Interest Rates are Below 5% for a 30 Year Fixed Rate Mortgage

Interest Rates are Below 5% for a 30 Year Fixed Rate Mortgage

My clients just locked in a 4.85% interest rate loan on a new home purchase in San Marino.  Not only is this home loan under 5%, but it has NO points.  A point is what a bank charges to reduce your interest rate.  1 point is 1% of the home mortgage amount.  1/2 a point is 1/2 a percent and so on.

According to Freddie Mac, 30-year-fixed-rate mortgage average fell further to 4.87 percent with an average 0.7 point for the week ending Oct. 8 from 4.94 percent last week. “Such low rates are spurring mortgage demand,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.

“Interest rates for 30-year fixed-rate loans were the lowest since mid-May; 15-year FRMs were at a record low since data were first collected in 1991 and 5-year ARMs also hit an all-time record starting in 2005. Compared to a year ago, consumers could shave almost $134 off their monthly mortgage payments on a 30-year fixed-rate loan for $200,000 by refinancing.

In addition to spurring mortgage demand, applications were up to a 19-week high over the week ending in Oct. 2, according to the Mortgage Bankers Association – applications to purchase a home were at the strongest pace since the beginning of 2009.

Read More:  When Opportunity Knocks Are You Listening?

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Posted on October 11th, 2009
Posted by: Irina Netchaev

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California Real Estate Home Sales Statistics for August 2009

California Real Estate Home Sales Statistics for August 2009

Interested in seeing how California real estate is performing?  Real estate statistics for the month of August were just released by California Association of Realtors.

California median home price

– August 09: $292,960 (Source: C.A.R.)

California highest median home price by C.A.R.

(California Association of Realtors) region August 09: Santa Barbara So. Coast $828,750 (Source: C.A.R.)

California lowest median home price by C.A.R.

(California Association of Realtors) region August 09: High Desert $111,770 (Source: C.A.R.)

California First-time Buyer Affordability Index

– Second Quarter 2009: 67 percent (Source: C.A.R.)

Mortgage rates

– week ending 10/01/09 30-year fixed rate home loan: 4.94% Fees/points: 0.7% 15-year fixed home loan: 4.36% Fees/points: 0.6%

1-yr. adjustable: 4.49% Fees/points: 0.5% (Source: Freddie Mac)

If you are interested in local Pasadena real estate statistics and results, please visit Pasadena Real Estate Market Reports for the latest information on Pasadena California and surrounding cities.

You may also want to sign up to receive weekly emails of the latest real estate data here.  This service is FREE and is provided to my readers as a courtesy through a subscription with Altos Research – a premier real estate statistics service.

To search for homes for sale throughout Southern California, please visit Search MLS for FREE or start your home search below.

Posted on October 7th, 2009
Posted by: Irina Netchaev

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California Real Estate Home Median Prices for week ending September 17, 2009

California Real Estate Home Median Prices for week ending September 17, 2009

California median home price – July 09: $285,480 (Source: C.A.R.)

California highest median home price by C.A.R. region July 09: Santa Barbara So. Coast $885,000 (Source: C.A.R.)

California lowest median home price
by C.A.R. region July 09: High Desert $110,650 (Source: C.A.R.)

California First-time Buyer Affordability Index – Second Quarter 2009: 67 percent (Source: C.A.R.)

Mortgage rates – week ending 9/17/09 30-yr. fixed: 5.04% Fees/points: 0.7% 15-yr. fixed: 4.47% Fees/points: 0.6% 1-yr. adjustable: 4.58% Fees/points: 0.5% (Source: Freddie Mac)

Interested in seeing how Pasadena homes for sale statistics compare to California’s median statistics? Read Pasadena Real Estate Home Statistics for August 2009.

READ MORE
:
Pasadena Dusty Deals

Posted on September 25th, 2009
Posted by: Irina Netchaev

2 Comments »

Non-Jumbo Loan Amounts Extended for Pasadena Home Buyers

Non-Jumbo Loan Amounts Extended for Pasadena Home Buyers

For those who are considering taking advantage of the $8,000 tax incentive for first-time homebuyers which is included in the president’s economic stimulus bill, there is some more good news that could make doing so easier and more accessible.

An extension is now officially in place on the higher loan limits for mortgages in the tier that lies just below what is considered a “jumbo” loan.

First established last year, and now extended through the end of 2009, limits on this additional tier provide opportunities for many who are looking to either refinance or, better yet, take the plunge into first time home ownership and grab a piece of the highly publicized $8,000 tax incentive.

Here are some key points about this higher loan limit extension, announced by the Fair Housing Finance Agency this past week:

The non-jumbo, middle tier of home loans begins at loan amounts greater than $417,000 for single-unit homes.

The top end for this tier is $729,750 for single-unit homes.

The rates for these loans will again be slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.

This higher limit on the non-jumbo tier is available in Los Angeles and 249 other counties across the United States.

If you are not sure if you if you can take advantage of the $8,000 tax incentive, here are some examples to help you better understand the income limits and phase-out structure.

The $8,000 incentive starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000 and is phased out completely at incomes of $170,000 for couples and $95,000 for single filers.

To break down what this phase-out means, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out threshold is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer incentive to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible to reduce the tax liability by $2,800. Remember, these are general examples. Borrows should consult a tax advisor to provide guidance relevant to their specific circumstances.

Posted on March 2nd, 2009
Posted by: Irina Netchaev

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Changes in the Tax Break for New Pasadena Home Buyers

Changes in the Tax Break for New Pasadena Home Buyers

Last week, I wrote about the $7,500 tax credit when purchasing your new Pasadena home.

With the new stimulus package there have been some significant changes. The Housing and Economic Recovery Act of 2008 allowed first time home buyers to receive up to $7,500 tax credit which would then need to be repaid over the next 15 years.

Obama’s Stimulus package raised this amount to $8,000, BUT this tax credit does not need to be repaid.

Here’s a quick summary of the Stimulus Bill credit:

The tax credit in the Stimulus Bill has been scaled down to $8,000 from its previous level of $15,000, or 10% of the value of the home for any first time homebuyers who purchase homes from the start of the year until the end of November.

It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000, and Pasadena home buyers will have to repay the credit if they sell their homes within three years.

Obama’s administration is still trying to come up with a new program to subsidize mortgages to fight the credit crisis. The plan would seek to help homeowners before they fall into arrears on their loans, whereas current programs only assist borrowers that are already delinquent. There are no details yet on this plan, but I will be monitoring this news closely in the weeks ahead.

Posted on February 17th, 2009
Posted by: Irina Netchaev

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Is Refinancing Your Pasadena Home in Your Future?

Is Refinancing Your Pasadena Home in Your Future?

Are you thinking of refinancing your Pasadena home or buying a new one, but think the mortgage rates are still going to move down?

AVOID THIS COSTLY MISTAKE
If you’ve been following the financial news, you’ve probably heard that the Fed’s been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have picked up on the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer.

But is that really what it means? No.

The truth is, the Fed has been buying Mortgage Bonds. BUT… more precisely, they’re buying a lot of FNMA 30-yr 5.0% and 5.5% Bonds. Many of the mortgages in these pools are outstanding home loans with rates between 6.0% and 6.5%, as the rate that a borrower pays is different than the coupon rate given to an investor buying into that mortgage pool, with the difference being taken by Wall Street firms and government agencies. The loans in these pools the Fed is buying hand over fist are likely be refinanced and paid – because current rates make it very attractive to refinance a loan over 6.0% – and thus giving the Fed a quick recoup on some of their investment.

Bottom line: The Fed’s purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today’s low rates.

The Problem Is…
Many Pasadena consumers are in situations where they can refinance now and save hundreds of dollars a month on their mortgage payments. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they’re waiting, rates could turn higher – and this window of opportunity could pass them by entirely.

Here’s the Clincher:
Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That’s because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

READ MORE: Pasadena Real Estate and Economy Review for week ending Feb. 8, 2009

I don’t want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let’s talk further on this. Call or email me, and let’s discuss what this might mean for you.

Posted on February 8th, 2009
Posted by: Irina Netchaev

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What does the Federal Reserve do Anyway?

What does the Federal Reserve do Anyway?

WHAT DOES THE FEDERAL RESERVE DO ANYWAY?

With the economy in the news every day, more attention is being focused on the Federal Reserve than ever before. Let’s look at some of the facts, and understand exactly what they do and how they do it.

The Federal Reserve System was created on December 23, 1913 by President Woodrow Wilson to act as the central bank of the United States. It was created to provide the nation with a safer, more flexible, and more stable monetary, banking and financial system.

The Federal Reserve System is made up of twelve Federal Reserve Banks, overseen by the Board of Governors. The Board of Governors is located in Washington DC and is comprised of just seven members, who are appointed by the President and confirmed by the Senate. The full term of each member of the Board of Governors is 14 years, and the appointments are staggered such that one term expires on each even-numbered year. This system ensures that “fresh blood” will be brought to the Board every two years. When your term is up as a Board Governor, you are done, and cannot be reappointed. But if a member leaves the Board before his or her term expires, the person appointed to fill the remainder of the term can be reappointed for another full term. The terms for the Chairman and Vice Chairman are four years, but may be reappointed for additional four-year terms. The current Chairman, Ben Bernanke, and Vice Chairman Donald Kohn lead the Board of Governors.

So What Does the Fed Do on a Daily Basis?

The main responsibilities of the Fed include:

  1. Researching US national and regional economies
  2. Providing financial services to depository institutions, the US government, and foreign official institutions
  3. Supervising and regulating banking institutions to ensure the safety of the nation’s financial system and protect the credit rights of consumers
  4. Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy (i.e. hiking or cutting the Fed Funds Rate, as they did recently) in pursuit of maximum employment, stable prices, and moderate long-term interest rates
  5. Communicating information about the economy via publications, speeches, seminars and websites

But the communication method that typically grabs the attention of most individuals is the statement given by Federal Chairman Ben Bernanke, following the eight formal meetings that take place about every six weeks throughout the year. At these meetings, the Fed has the opportunity to make changes to the Federal Funds Rate, and make their decision by reviewing economic and financial conditions. They can also make adjustments to the Fed Funds Rate outside of these meetings, but rarely do so because they don’t want to deliver a surprise that could rattle the financial markets.

Overall, the Fed’s main responsibility is to keep the economy growing at a steady pace by keeping inflation stable and rates moderate.

When inflation is low and stable, businesses and households can spend, knowing that their purchasing power can remain strong.

Teaching Moment for Children…

While you’re watching the news on television or listening to it on your car’s radio, your kids can probably hear–but not completely understand–the news too. That means now’s a perfect time to turn the current economic news into a lesson on money and finances. One terrific website can be found at www.federalreserve.gov/kids, which gives a very simple overview of the Fed and what they do, including a great definition of inflation that any small child can understand.

Posted on January 18th, 2009
Posted by: Irina Netchaev

2 Comments »

Pasadena Mortgage Rate Update: January 1, 2008

Pasadena Mortgage Rate Update: January 1, 2008

The average Pasadena mortgage rate on a 30-year, fixed-rate mortgage dropped to 5.14 percent last week to a new record low, according to Freddie Mac.

A year ago, the rate was 6.17 percent for a comparable loan.

As a result, mortgage applications last week jumped to the highest level in five years, with more than 80 percent of the applications for refinancings.

There also was an 11 percent increase in applications for home purchase loans.

If you have questions about any of these Pasadena homes for sale, call Irina, Pasadena Real Estate Agent at 626-629-8439.

Posted on January 1st, 2009
Posted by: Irina Netchaev

7 Comments »

Pasadena Real Estate Outlook for 2009

Pasadena Real Estate Outlook for 2009

A lot of folks are happy to see 2008 come to an end.  It’s been a difficult year for many given the financial crisis and the natural disasters that occurred making it one of the deadliest years on record.

Is there a reason for optimism in Pasadena for 2009?

There’s an interesting overview of what caused the financial crisis by Barry Habib of Mortgage Success Source which provides an easy overview of the “whys”, “hows” and “whats” coming up in 2009.  Here’s his perspective:

The financial crisis we are in today was not caused by mortgages or housing, although they were both catalysts. The real reason was an accounting rule called “Mark to Market” (also known as FASB 157).

Few people have a strong grasp of this rule, and even those who do have a tough time explaining it on air due to time restrictions. So let’s take a few minutes to break it down, so you can have the inside track on this very important concept and understand why it represents some great opportunities.

Why does ‘Mark to Market’ exist?

Let’s go back to the stock market crash, which occurred between 2000 and 2002. With the S&P down 49% and the NASDAQ down 71%, many people lost much of their life savings and they were very angry.

Companies like Enron and Arthur Andersen were able to find ways to make their books looks more attractive, which was reflected in an artificially inflated stock price.

Both the public and Congress had a call for more transparency in business and hastened the passage of “Mark to Market” accounting.

This is the notion that all assets should be valued as if they were sold on a daily basis. Under the letter of the law, failure to do this conservatively can now result in jail time.

So what’s the problem?

Before we get into what this means for banks, let me make a quick analogy using a scenario that should make perfect sense to you.

Let’s imagine that you own a house in a Pasadena neighborhood where all of the houses are priced at around $300,000. Unfortunately, your neighbor, who owns his home free and clear, falls ill and needs emergency cash quickly. Because he is under duress, he must sell the home for $200,000 in order to get the cash he needs right away, even though the home is worth considerably more.

 before-and-after-house

Now would this mean that your home is now worth the same $200,000 that your neighbor sold his for? Of course not, because you are not forced to sell under duress. It just means that your new neighbor got a great deal.

However, if you were a publicly traded company and had to abide by Mark to Market account rules, you and the rest of your neighbors would now have to say, by law, that your home was worth only $200,000 – not the $300,000 you would get for it if you actually sold. So what’s the big deal? Read on.

So how does this principle apply to banks?

Let’s say we decide to start a bank . . . call it XYZ Bank. We raise $2 Million to open our doors. Remember that our capital account is $2 Million. Banks make money by taking in deposits and paying low rates of interest to those depositors (maybe throw in a toaster too). We then take that money and make loans with it at higher rates. We keep the difference.

So, we turn that money into $30 Million worth of loans. This puts our ratio of loans to capital (our Capital Ratio) at 15:1 ($15 Million in Loans to $1 Million in Capital). This level is acceptable, as long as we can shoulder some losses and recover.

Because we are very conservative here at XYZ Bank, the loans we make require a minimum down payment of 30%, a credit score of 800 or better (that’s nearly an 850 which is perfect), proof of income and assets, a reserve of at least two years of mortgage payments (normal is two months) and income requirements that only allow 10% of monthly income to cover all expenses (normal is 40%).

bank-before-and-afterWe do this and our loans perform perfectly. We make lots of money. Nobody is paying late and our clients are sending us holiday cards. They love us . . . it’s a party. You and I are celebrating as we see our stock price soar.

But real estate values decline and, even though all of our loans are paying perfectly, we must re-assess the loan portfolio to account for the decline in real estate values, which leaves us with less of an equity cushion. We had a minimum 30% down payment, which means the loans were 70% of the value of our assets – until we account for the decline in the market. Now, our position goes from 70% to 90%. That’s riskier and, therefore, worth less than when our loans had a 70% safety position.

Our accountants tell us that we must “Mark to Market” or risk jail. They say our value is now reduced by $1 Million. Whoa!

We must take (or write down) this loss against our capital account. It is a paper loss – we don’t write a check, we have no late payers, no defaults, no bad business decisions. Still, we must reflect this $1 Million paper loss in our Capital Account, which drops from a $2 Million to $1 Million in value.

Here’s where things get problematic.

At this level, with $30 Million in loans outstanding, we now have a capital ratio of 30:1. At
this level of leverage, alarms begin to sound.

Our ratios are out of the safe zone; we could go under with just a few losses, deposits are in jeopardy. Hello FDIC examiner, we are on the watch list, the Securities and Exchange Commission (SEC) is asking questions and our stock starts to tumble. The business networks are showing coverage of our now troubled bank. We are in big trouble.

The problem, we are “over leveraged”. The solution? We have to “de-lever” . . . and do so
quickly. But there are only two ways to do that, and one of them isn’t really an option.

The first way is to raise capital, but that’s not going to happen when our ratios are out of whack and we are in serious trouble as well as on the FDIC watch list. It is unlikely that anyone will be willing to invest cash in XYZ Bank.

The other option is that we can sell assets, like the outstanding loans, which are increasing our capital ratio. Like your neighbor, who owned his home outright but needed cash for medical bills, we are now under duress. The paper we are holding has a lot of value, but we have to sell it quickly and, because of that, cheaply. So, we offload the loans at a loss, which exacerbates the problem because those losses further reduce our capital account.

Very quickly, like a flushing toilet, things start to spiral – we are going down.

The problem multiplies

 

The problem doesn’t stop there. The fire sale we just had on our loans makes things worse – even for the banks that bought them up and thought they were getting a great deal.

bank-workflow

 

Under Mark to Market, the loans we just sold must be included in the comparables that other financial institutions use to value their assets. This is how the problem spread and got so bad so fast. Other good institutions, with good loans, have to mark down. Just like us, they become over-leveraged. It’s a chain reaction, all triggered by a well intentioned, but over-reaching accounting rule.

Financial institutions fold, sell, or freeze. Credit – the life blood of our economy – is cut off at the source. Because of a lack of available credit, home sales and refinances crawl, auto sales drop and jobs are lost. Additionally, the economy enters a recession.

During the last recession in 2001, the economy recovered relatively quickly thanks to $3 Trillion worth of home equity withdrawals. But, more restrictive programs, a lack of available credit, and lower home values will make it difficult for us to use home equity to help pull us out of a recession this time around.

Fixing the problem

The Federal Reserve has passed a rescue plan, which, over time, will provide some level of help. Some banks will get money to infuse into their capital accounts. Others can sell some assets to the government in an effort to “de-lever”.

But, the big thing that is not talked about, not well understood, is the part of the rescue plan that traces this financial crisis back to the source.

The US Congress has given the SEC its blessing to modify “Mark to Market” accounting. And by January 2, SEC Chairman, Chris Cox has to get back to Congress with ideas, if any, on how to fix Mark to Market accounting.

It won’t be eliminated, as we will not want to go back to the Enron days. But he is likely to adjust the Mark to Market provisions.

Here’s one potential solution – even rental or commercial real estate properties can be valued two ways:

1. The comparable sales method, which determines the value based on what other assets have sold for, which is the way Mark to Market work currently.
2. A cash flow method, which values the property based upon cash coming in.

If we see Mark to Market modified to use cash flow to value assets, without requiring a large percentage discounting mechanism – wow! What a shot in the arm that would be. We’d likely see the stock market rally, with financial stocks leading the uphill charge.

Consider that, in today’s market, fund managers are holding 27% of their assets in cash, compared with just 3% they held in cash when the stock market peaked in October of 2007. That means there is a lot of money on the sidelines that can push stock prices higher.

Additionally, think about the redemptions from hedge funds that eventually need to be put
back to work. That’s another reason to be optimistic about stocks in the first quarter of 2009 – provided that Chairman Cox modifies Mark to Market accounting in a meaningful way. And a good stock market helps individuals feel better about purchasing homes.

Additionally, stronger balance sheets for financial institutions will allow them to lend more money.

The bottom line

With some potentially very good news around the corner, there might be reason for optimism as we head into 2009.

It’ll be interesting to see what happens and we’ll keep you updated on the changes to the Mark to Market accounting rule.

In the meantime, I’ll take this opportunity to take my 2009 crystal ball out and share my Pasadena real estate market predictions with you:

  1. Pasadena mortage rates will remain under 6% through the 2nd quarter of 2009 and will begin to rise in the 3rd quarter of the year.
  2. We will see an influx of REO (bank-owned) properties hit the Pasadena real estate market around March and April of 2009. 
  3. A lot more Pasadena sellers will try to negotiate a short sale with their banks which will provide opportunities for first time buyers and real estate investors.
  4. Pasadena housing units available for sale will begin increasing as more foreclosures and short sales hit the real estate market.
  5. Pasadena SFR (single family homes) have seen a drop of 10.5% in price per square foot from 2007 to 2008.  I believe the market will continue to see a decline in prices through June of next year of another 4 to 5%. 
  6. We will start seeing a turn around in the market place by July of 2009 with the changes in the Mark to Market rules, additional first time housing programs and availability of conventional programs.

READ MORE:  Pasadena real estate market comparison between 2006 and 2007

What do you think of my Pasadena real estate predictions?  Agree or disagree?  Put your 2009 predictions in the comments below.

Would love to hear from you.

Posted by: Irina Netchaev

1 Comment »

Pasadena Mortgage Rates hit record low!

Pasadena Mortgage Rates hit record low!

A couple of weeks ago, I urged all my friends and clients to review their existing financing.  Pasadena mortgage rates have been dropping steadily and are now way below 5% if you have good credit.

30 Year Fixed Pasadena Mortgage Rate Hits Record Low. In the most recent survey period, mortgage rates plunged amid fading inflation concerns, more economic bad news and the Fed’s historic rate cut.

The Fed’s next meeting is scheduled for January 28, at which time we expect the Fed rate to stay unchanged.

Here’s a rate sheet from Wells Fargo with Pasadena mortgage rates as of December 19,2008

       
Maximum 1 pt. Rate 0 pts. Rate
     
30 Yr. Fixed $417,000 4.5 4.875
15 Yr. Fixed $417,000 4.375 4.75
5/1 Fixed $417,000 5.25 6.625
30 Yr.  Fixed $417,001 – 625,500 4.75 5
15 Fixed $417,001 – 625,500 4.625 5
5/1 Fixed $3,000,000 5.5 5.875
30 Yr. Fixed $3,000,000 6.5 6.75
       

If you are interested in refinancing and need a referral to a mortgage rate consultant, please email me at irina@Irina4realestate.com

And, don’t forget, the same rates apply when you are buying your Pasadena home or Pasadena condo.  Give me a call to see if now is the right time for you to buy your home.

Irina Netchaev is a licensed California real estate broker and has a team of Pasadena realtors.  Irina can be reached at 626-627-7107 for a private consultation.

Posted on December 22nd, 2008
Posted by: Irina Netchaev

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