Joe Wilson's Silicon Valley Real Estate Blog

In addition to First Look, buyers using Neighborhood Stabilization Program (NSP) funds from the U.S. Dept. of Housing and Urban Development's (HUD) Community Development Block Grant (CDBG) program, HOME Investment Partnerships Program funds from HUD, local housing trust funds, or charitable foundation funds also may qualify for additional benefits, including:

• Deposit waivers
• A reserved contract period, and
• Extra time for closing

For more information about Fannie Mae's First Look initiative or the company's programs for public entities, contact publicentity_reosales@fanniemae.com. For more information about Fannie Mae-owned properties for sale, please visit www.HomePath.com.

Overall satisfaction among mortgage customers has declined to 739 on a 1,000-point scale, down 18 index points from 757 in 2008, as a result of tighter underwriting standards and longer turnaround times. The average time required to approve and close a loan has increased to nearly 47 days, compared with approximately 30 days in 2008, primarily due to increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. This increase in turnaround time has a considerable impact on satisfaction, as satisfaction averages only 723 when the time from application to approval takes six or more days, compared with 798 when the process takes less than six days. Similarly, satisfaction drops from 772 to 736 when the time from approval to closing takes 14 or more days.

In addition, lending criteria has tightened, as the study finds that credit scores are higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably to 45 percent in 2009 from 33 percent in 2008.

I've been thinking about this lately because I've been holding open houses for the past few weeks and meeting a lot of prospective first time buyers.  After they've had a chance to walk through the home I'll usually engage them in a conversation about their home search requirements, their financing pre-approval status and how long they've been looking.  What I've noticed is that many first time buyers are savvy enough to have gotten pre-approved and they've been doing internet searches to find listings, but the listings they're looking at are only the ones that are open on Saturday or Sunday. Many of these buyers haven't yet hooked up with an agent and seem to be reluctant to do so because they "haven't found the right home yet". Here's the problem with this strategy: 

1) The best homes at the best prices will almost always sell quickly, sometimes before the first open house.

2) Only a small percentage of the available listings are held open on any given weekend. Some are never held open due to seller restrictions.

3) Great listings at competitive prices that do have an open house will usually draw offers on the Monday or Tuesday after the first open house.

So, if you're only looking at homes that are held open, you'll miss out on the majority of the available inventory and if you do find a great home at a competitive price at an open house, you're very likely to run into competition from other buyers when you submit your offer after the weekend. What's the solution?

1) Rather than waiting, partner with an experienced Realtor as soon as you begin your home search. Your Realtor will help focus your search and set up an automated listing alert to notify you of all new listings meeting your search criteria. 

2) Review the daily new listings as soon as they hit the market. If any look particularly good, then schedule a tour preferably within a day but no more than two days.  Your Realtor will schedule a personal showing for you on your lunch hour, after work or on the weekend. If you're too busy to see the home right away, your Realtor can preview the home for you and even e-mail you a video walkthrough. 

3) After touring the home, decide if you want to make an offer as soon as possible...ideally, before the first open house.

4) If it's a great home at a competitive price, make a good offer and try to lock it up before the competition sees it. You still have financing, appraisal and inspection contingencies so if you find something you don't like or the seller won't correct, you can cancel. Likewise, your lender won't let you overpay...if the home doesn't appraise, you can renegotiate the price or cancel.

So, while open houses are fun to walk through and they can help you decide what you want or don't want, focusing on open houses as a home buying strategy is inefficient, frustrating and unlikely to yield the results you're hoping for. 

The Senate yesterday approved a bill that extends the first time buyer tax credit but also expands the program to include existing home owners. The existing $8000 tax credit for first time Buyers will now be extended to buyers whose transactions close escrow by June 30, 2010. The bill also raises the income limit for qualifying Buyers to $125,000 for singles and $225,000 for couples (up from $75,000/$150,000 in the current law). For existing home owners who have lived in their home for five years or longer, the bill provides a $6500 tax credit.  For both programs, the maximum purchase price is capped at $800,000. The bill now moves on the the House of Representatives which is expected to quickly pass it and forward it to Obama for his signature. 

So, my question for buyers still lingering on the sidelines is "what are you waiting for"? Interest rates have nowhere to go but up and these stimulus programs will go away as soon as the economy starts building up a sustainable head of steam. Right now, home prices are still relatively low, Sellers are still willing to negotiate, interest rates are near historic lows and the government will throw in $8000 as a one-time credit and substantially more in recurring tax savings. If you plan to buy a home when the time is right...this is the time. 

It appears today that a bi-partisan agreement is taking place in the Senate that would both extend the existing $8000 federal tax credit for first-time buyers and expand the program to include a $6500 credit for existing homeowners who have already lived in their current home for five of the last eight years.

To qualify for the full credit, homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly). In addition, the credit would only apply to homes sold for $800,000 or less. Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.

Things are happening fast and a deal could be announced any time now so stay tuned. 

A day hardly passes without some further bleak news story about the sorry state of the California economy, the dearth of new jobs, and more companies moving out of state (or country) for greener pastures. So it makes sense that Californians are heading for the exits in a mass exodus, right? Wrong! Contrary to the myth of the California exodus, the Pew Research Center designated California as a “sticky state.” A sticky state retains a high number of residents born in the state. California is the 4^th highest in the nation with a 69% retention rate.

This retention is not swelled by low-income residents who cannot afford to rent a truck and leave the state. A TNS Market Research report lists the top ten counties with the highest number of millionaire residents in the nation. Four California counties monopolized the list, pointing to California’s ability to retain high income residents. Los Angeles County, Orange County, San Diego County and Santa Clara County all made the list with Los Angeles County (containing roughly 3.2% of the nation’s population) topping the list with 3% of the entire nation’s millionaire population.

And not only does California retain, but it attracts ever more individuals. The Federal Reserve Bank of St. Louis created a list of the top five metropolitan areas with the most business amenities and a list of the top five metropolitan areas with the most consumer amenities. Four out of the top five metropolitan areas in both lists were from California.  San Jose, San Francisco–Vallejo, Oakland and Santa Cruz top the list as regions with the most business amenities while Santa Cruz, San Francisco–Vallejo, Salinas–Sea Side–Monterey and Santa Barbara–Santa Maria–Lompoc topped the list as regions with the most consumer amenities.

Due to immigration, migration, births and retention, California’s population has steadily increased since the ‘90s. While a relative few might be crossing state lines in a vain attempt to discover the low-tax, high-service Promised Land, don’t be fooled by their stories and lore. The vast majority of us are not going anywhere, and plenty of people are coming to join us. The shimmer of the Golden State is well known.   

by Kenneth R. Harney - Realty Times, 11/19/08

With all the turbulence and losses in stocks and bad economic news in the headlines lately, you can easily lose perspective on what's really going on in the real estate sector.

For example, new mortgage applications increased last week by 12 percent, according to the Mortgage Bankers Association. Applications from people looking to buy houses with FHA loans were up by 15.3 percent, while applications from purchasers seeking conventional mortgages rose by six and a half percent.

How could that be, with all the grim economic news? Well, remember that there is a huge pent-up demand simmering away out there for housing -- especially from first-time buyers who want to scoop up low-priced deals.

When fixed interest rates drop -- and last week they were down by a quarter of a percentage point -- those buyers start doing the math and getting into the market with offers.

Fixed thirty year rates fell from six and a half percent to 6.24 percent during the week. Fifteen year rates broke below six percent to 5.9 percent, down from 6.14 percent.

Another piece of positive news you may not have noticed: Pending home sales were higher than year-earlier levels for the second straight month -- 1.6 percent higher than September 2007.

Although pending sales contracts were down slightly for the month, in the western states they were up by 3.7 percent, and now stand at an extraordinary 39.7 percent higher than they were at the same time in 2007.

At the National Association of Realtors' convention in Orlando, chief economist Lawrence Yun, warned the delegates not to expect a housing recovery overnight, certainly not with unemployment on the rise. But he projected a slow, steady, multi-year upward trend, with 5.02 million total sales this year, 5.3 million for 2009, and 5.6 million for 2010.

Already sales are up significantly in major markets in many parts of the U.S. Yun specifically mentioned the west coast of Florida, the Phoenix area, Virginia, Long Island New York, Kansas City, Minnesota and Idaho.

So here's the key point to keep in mind as you try to make sense of the headlines: The stock market is NOT the housing market. It's on a whole different set of tracks. And it's been in a highly volatile state for more than a month.

Housing, on the other hand, has already endured its painful correction for two and a half years… is now pretty much stabilized … and is slowing moving toward its cyclical recovery.

Mortgage News Daily, October 25, 2008

Alphonso Jackson, Secretary of Housing and Urban Development (HUD), Friday released a proposed mortgage reform package designed to help consumers better understand the terms of the loans they are considering and offering guidelines for shopping for different products.

The changes, if enacted after a mandatory period of public comment, will reform the 30-year old Real Estate Settlement Procedures Act (RESPA). Chief among the reforms; for the first time HUD is proposing that mortgage brokers and lenders provide consumers with a standard Good Faith Estimate. Jackson said that by offering consumers clearer, more certain cost estimates the average borrower will save nearly $700.

"A lot of the mortgage problems we see today are directly related to the fact that few people fully understand this (the home buying) process," the Secretary said. "Buying a home can be very intimidating. Consumers have had no assurance that the loan terms and closing costs they are offered will reflect what they confront at the settlement table, and that's been one of the factors driving the current housing downturn. Our proposal fixes that. We owe it to the American homebuyer to give them the information they need to make smart choices."

HUD said that the proposed Good Faith Estimate (GFE) will substantially enhance disclosure of all important aspects of the loan, including:

• The interest rate and monthly payment;
  
• Whether the interest rate and principal balance can increase and by how much; and
  
• Whether the loan has a prepayment penalty or balloon payment.

HUD released a draft both of the proposed GFE and of a revised HUD-1, the settlement statement given to all borrowers at the closing on the loan. The GFE is remarkable clear for a government document. It consolidates closing costs into major categories to prevent "junk fees" and displays total estimated settlement charges prominently on the first page so the consumer can easily compare loan offers. In addition, HUD's new proposed rule would specify the charges that can and cannot change at settlement. If a fee changes, HUD proposes to limit the amount it can change. Modifications to modify the HUD-1 settlement statement are mainly to assist consumers to compare actual charges on the HUD-1 with prior estimates on the GFE.

One feature of The Good Faith Estimate is not going to make lenders happy. It would require that lender payments to mortgage brokers (often called Yield Spread Premiums) be disclosed. Lenders have already come out strongly against such a change since it was first proposed by consumer activist groups. HUD said it is its belief that these payments are directly dependent on the interest rates that consumers agree to and therefore ought to be disclosed. However, to ensure that HUD's new proposal would not create a consumer bias against brokers, the Department said it did rigorous consumer testing and found the proposed Good Faith Estimate helped consumers to select the lowest cost loan more 90 percent of the time, regardless of whether the loan was originated by a lender or a broker.

Finally, HUD is proposing that settlement agents read a "closing script" to borrowers at the settlement table and that a copy be provided to the borrower. Each proposed script - there is a different one for each loan type - restates in a clear and specific manner every loan term and also provides a graphic showing borrowers which numbers can change from that provided in the GFE and by how much. This script will provide a ready post-closing reference to the loan.