With the acute shortage of resale inventory across the Southwest, it’s hard to imagine prices going down, and in the short term, they won’t. Of course, circumstances could change quickly as they did this spring, so anything is possible. However, if the federal reserve can keep interest rates at record lows, and if the lending cartel can process the backlog of distressed loans without causing resale inventories to spike, then prices will not go down in the future. But is it realistic to think both of these circumstances will come to pass?
Mortgage interest rates hit all-time lows because the federal reserve took short-term treasury rates to zero and began buying 10-year treasuries and mortgage-backed securities to drive mortgage interest rates down to levels a free and unmanipulated market would never see. Over the last few weeks, a major selloff in government bonds has caused interest rates to rise, but we saw a similar correction in November of 2011 followed by a resumption of the downward trend. Is this latest correction the beginning of a new uptrend in rates? If so affordability will decline, bid competition will be far less intense, and prices may be under pressure again.
The federal reserve faces few limitations on its ability to manipulate mortgage interest rates, but the market is very large, and unless they want to buy trillions of dollars worth of overpriced mortgage-backed securities, they can’t keep rates low forever. But they don’t have to. They only have to keep rates low enough long enough for their member banks to process their bad loans. Unfortunately, there are so many of these loans, it may take a very long time; therefore, low mortgage rates may be with us a very long time as well.
So far, the lending cartel has proven adept at slowly processing their foreclosures to prevent inventory from flooding the MLS. Some markets like Las Vegas or Phoenix got out of control and crashed very hard, but many other markets like Orange County or the Bay Area have held up well despite high levels of mortgage distress. When government regulators removed any pressure to process non-performing loans with mark-to-fantasy accounting, they enabled lenders to embark on the amend-extend-pretend policy they still follow today. Until government policy changes, lenders will continue to slowly process their bad loans to keep prices high to maximize their capital recovery.
Based on the above two facts, and the acute shortage of homes caused by the policies of lenders and our government, prices across the Southwest are spiking higher, kool aid is returning to the market, and many people believe house prices will bounce back to the peak before resuming a “normal” level of appreciation thereafter. The road forward might be rockier than most imagine.
Analysis: Long road to US housing recovery despite tighter supply
By Lucia Mutikani — WASHINGTON | Wed Aug 8, 2012 12:29pm EDT
(Reuters) – U.S. home prices are inching up as an ebbing tide of foreclosures creates a shortage of properties at a time of pent-up demand, but do not expect the housing market recovery to shift into higher gear.
Tightening house supplies have turned some parts of the country into sellers’ markets, marked by intense bidding wars among buyers eager to take advantage of rock-bottom mortgage rates and still-low home prices.
“It is encouraging that demand is flowing back into the market and buyers are getting off the fence at last,” Stan Humphries, chief economist at real estate group Zillow told Reuters.
Everyone is jumping on the bandwagon about pent-up demand and other such nonsense. The data shows buyers are not getting off the fence, and demand is not flowing back into the market. Purchase applications are down 60% from the peak in 2005, and the currently hover around 1997 levels. There has been no significant increase in demand over the last two years.
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Proprietary Irvine Housing News home purchase analysis
2 LONGBOURN AISLE Irvine, CA 92603
$698,800 …….. Asking Price
$755,000 ………. Purchase Price
12/6/2004 ………. Purchase Date
($56,200) ………. Gross Gain (Loss)
($60,400) ………… Commissions and Costs at 8%
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($116,600) ………. Net Gain (Loss)
============================================
-7.4% ………. Gross Percent Change
-15.4% ………. Net Percent Change
-1.0% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$698,800 …….. Asking Price
$139,760 ………… 20% Down Conventional
3.55% …………. Mortgage Interest Rate
30 ……………… Number of Years
$559,040 …….. Mortgage
$144,321 ………. Income Requirement
$2,526 ………… Monthly Mortgage Payment
$606 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$175 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$422 ………… Homeowners Association Fees
============================================
$3,728 ………. Monthly Cash Outlays
($565) ………. Tax Savings
($872) ………. Equity Hidden in Payment
$159 ………….. Lost Income to Down Payment
$107 ………….. Maintenance and Replacement Reserves
============================================
$2,558 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,488 ………… Furnishing and Move In at 1% + $1,500
$8,488 ………… Closing Costs at 1% + $1,500
$5,590 ………… Interest Points
$139,760 ………… Down Payment
============================================
$162,326 ………. Total Cash Costs
$39,200 ………. Emergency Cash Reserves
============================================
$201,526 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
Are you ready to make an offer, but you are worried the cost of ownership is really more than you can afford? Don't make a mistake that might cost you the family home, your life savings, and your good credit! Get the advice of a seasoned professional. Contact us at info@ochousingnews.com today!
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."Comparative Market Analysis
Are you ready to make an offer, but you are worried you will either (1) underbid and miss the property or (2) overbid and pay too much? Don't make a mistake and miss your dream home, or worse yet, overpay for it! Get the advice of a seasoned professional. Contact us at info@ochousingnews.com today!
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Reports are available for properties in the Southern California MLS coverage area, and are generally delivered within 24-72 hours. If you wish to receive multiple properties, please contact us at info@ochousingnews.com, and we will prepare the reports for you.
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$849,000 11 TULLIVERS AISLE |
0 miles 3 bd / 2.5 ba 2,160 Sq. Ft. |
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$785,000 10 BRIGMORE AISLE |
0.11 miles 3 bd / 2.5 ba 2,045 Sq. Ft. |
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$725,000 12 MIRADOR #5 |
0.43 miles 2 bd / 2.5 ba 1,839 Sq. Ft. |
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$898,000 10 BARISTO |
0.43 miles 3 bd / 3 ba 2,104 Sq. Ft. |
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$799,000 12 MONTEREY #2 |
0.45 miles 3 bd / 2.5 ba 2,178 Sq. Ft. |
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$775,000 10 MONTEREY |
0.45 miles 3 bd / 2.75 ba 2,104 Sq. Ft. |
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$759,000 76 TIDEWIND |
0.49 miles 3 bd / 2.5 ba 2,000 Sq. Ft. |
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$869,000 16 SAN RAMON Dr #69 |
0.51 miles 3 bd / 2.5 ba 2,178 Sq. Ft. |
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$560,000 6 WHITEWATER |
0.55 miles 3 bd / 2.5 ba 1,961 Sq. Ft. |
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$749,900 35 COOL Brk #48 |
0.62 miles 4 bd / 3 ba 2,211 Sq. Ft. |
The banks are going to have to maintain their blighted properties in California. This law provides another incentive for lenders not to foreclose.
California Anti-Blight Bill Signed into Law
California governor Edmund G. Brown signed into law a bill to help combat neighborhood blight, state attorney general Kamala Harris announced Monday.
The bill—AB 2314—gives new homeowners additional time to fix any code violations in a home before local agencies move in to enforce the codes. It also extends indefinitely an existing provision that requires the owner of a foreclosed property to maintain the property.
“We need solutions to the problem of blight which threatens the health and safety of California communities hit hardest by the mortgage crisis,” said Wilmer Carter (D-Rialto), assemblymember and the bill’s author. “AB 2314 will ensure that local jurisdictions continue to have the tools to prevent and fight neighborhood blight due to foreclosures.”
The new law is part of Harris’ California Homeowners Bill of Rights, a series of bills designed to extend reforms first negotiated in the national mortgage settlement. Two previous bills were signed into law in July.
Other components of the Homeowners Bill of Rights are pending in the legislature. They include provisions that would enhance law enforcement responses to mortgage and foreclosure fraud and grant Harris the ability to convene a special multi-jurisdictional grand jury when necessary.
Another bill that would grant protections to tenants in foreclosed homes is currently awaiting action by the governor.