Kenneth Rosen said current policies in Washington, D.C. are unsustainable and since mortgage rates are tied to 10 year treasury rates, “mortgage rates will go up by the end of the year and that Buyers should lock in current very low rates in the next 6 months!” The other timing concern is that Freddie Mac will be lowering their cap to $625,500, which certainly effects homebuyers in Saratoga, Los Gatos, Monte Sereno and surrounding communities. Meanwhile, house affordability is the best it has been in 30 years!

Doug Duncan expects it to take several more years to restructure our economy and the overall U S housing recovery may not occur until 2014. However, Rosen stressed the housing market is very local and areas like Silicon Valley are doing quite well.

Today Freddie Mac released the results of its Primary Mortgage Market Survey®, showing mortgage rates dropping sharply amid falling bond yields and signs of a weaker than expected economy. The 30-year fixed averaged 4.39 percent, its lowest level for 2011! Last year at this time, the 30-year FRM averaged 4.49 percent.

Frank Nothaft, vice president and chief economist, Freddie Mac noted: ”The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.”

“On a positive note, there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year. The CoreLogic® National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.”

Mortgage interest trends suggest that now might be a good time to be a home buyer in terms of affordability and risk:

Low Interest Rates - Average rate on a 30 year fixed conforming nationwide ended this week at 4.57%, which is another all time low for the fourth consecutive week!  Refinance activity has picked up at Wells Fargo and in the industry to the point where all transactions are seeing delays. If you are doing a purchase loan it is imperative to get all documentation to your lender early.

Easier qualification for new super conforming loans – Wells Fargo is introducing a new program on 8/16/10 which will complement their high balance conforming product. The new product will be called a “super conforming loan and will have easier qualification guidelines and will be applicable to loans up to $1,000,000.

Tightening Interest Only Loans – On the other hand, effective next Monday 8/16/10 all interest only product at Wells Fargo will tighten it’s underwriting guidelines. Currently, interest only products are qualified using a fully amortized (principal + interest) payment. Starting Monday, all interest only products will be qualified using a fully amortized payment + 2.4%.

Slow Economic Growth Forecast – Economic data released this past week came in slightly below expectations, but remain consistent with Wells Fargo forecast of slow economic growth with a low probability of a double-dip recession.

Inflation Benign – Consumer prices in July, 2010 showed inflation remains benign. Contained inflation is good news for two key reasons: It increases consumers’ purchasing power and gives the Fed flexibility to keep short-term interest rates low.

Weak Retail Sales – Core retail sales, which exclude autos, gasoline and building materials, is now down 0.5 percent on a three-month annualized basis. The weak showing in core retail sales is reflective of slower consumer demand. Wells continues to expect sluggish consumer spending in coming quarters. This means demand for big ticket items such as homes is likely to remain moderate so prices should remain soft.

If you are considering making a home purchase, please call me and I can put you in touch with some great lender reps with Wells Fargo affiliate Private Mortgage Advisors.

Rick Bonetti | APR Referral Network | 408-857-8800 | DRE #01237009

The low end of the distressed market in Silicon Valley has been more impacted by general decline in market values of comparable homes.  Saratoga distressed properties are more diverse and range from $2.295 million down to $399K. Most of the Saratoga foreclosures are the result of adjustable rate mortgages notes coming due without potential for refinancing.

The shadow market of properties not yet on the MLS (as identified by Matrix) shows 17 total REO in Saratoga, plus 24 in preforeclosure status.  8 homes are scheduled for auction in Saratoga, CA in August 2010.  A summary list of these properties shows the the status, address, foreclosure recording date, scheduled sale/auction date and type of mortgage; additional detail information is available by calling me.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800

Today I spoke with Dan at the title company, who told me that May is expected to be a very good month for real estate closings, based on opened escrows. April 2010 was almost double the monthly average of closings and there were many buyers who brought in checks by last Friday, April 30 in order to take advantage of tax credits.

On the financing front, Dan reported that they were now seeing a few mortgage loans above the $729,750 standard, which means they are typically being portfolioed by a few lenders such as HSBC, US Bank and First Republic Bank.

Private Mortgage Advisors (Wells Fargo) is now offering 15% down program with no mortgage insurance. This reflects a more generous, but still cautious mortgage lending environment. Home sellers need to understand that homes priced above $858,000 require substantial cash down payments on the part of buyers!

Mortgage rates continue to stay flat due to luke warm economic reports and uncertainty over the Greek crisis and potential bailout. Here are quotes from PMA from earlier this week:

Non-conforming Loans (greater than $729,750)
30 Year Fixed: 5.250%
15 year fixed: 4.375%
5/1 ARM: 4.125%
High Balance Conforming Loans ($417 K to $729.75 K)
30 Year Fixed: 5.500%
15 Year Fixed: 5.500%
7/1 ARM: 5.250%
5/1 ARM: 5.250%
Conforming Loans ($417 K and under)
30 Year Fixed: 5.125%
15 year fixed: 4.375%
7/1 ARM: 4.125%
5/1 ARM: 3.875%

Rick Bonetti | APR Referral Network | 408-857-8800 | DRE #01237009

Related articles by Zemanta

• New Homebuyer Credits Aim to Replace Expired Federal Program (time.com)
• Second Trust Deeds Coming Back In Santa Clara County (saratogavoice.com)

Not only does this improve the borrowing capacity of home buyers in communities such as Saratoga, Monte Sereno and Los Gatos, but it also signals important news that Santa Clara County is no longer considered a distressed market by Wells Fargo portfolio managers.

For more information on second trust deed and mortgage financing, please contact John Shapiro of Private Mortgage Advisors, an affiliate of Wells Fargo Bank.

Rick Bonetti | APR Referral Network | 408-857-8800 | DRE #01237009

Related articles:

• Santa Clara County Jumbo Mortgages Now Classified Less Risky

In a short sale, the borrower sells the home for less than the amount owed on the mortgage and the lender accepts a discounted payoff. They can be far less costly to the lender than foreclosures.  But, experts in transactions such as second lien holders (home equity lines are the most common form of second liens) have scuttled many deals by reserving the right to chase after the borrower for the amount of debt not covered by the home sale in states where doing so is allowed.  HAFA will attempt to change that.

Related articles:

• Have You Considered Walking Away?
• California Lawmakers Seek Foreclosure Relief
• Gov’t Aims to Help More “Underwater” Homeowners
• President Obama Officially Launches HAFA Short Sale Program On April 5th
• New Options For Homeowners – The HAFA Program (Home Affordable Foreclosure Alternatives)
• Defaults Rise in Loan Modifications

Rick Bonetti | Alain Pinel Realtors | 408-857-8800 | DRE #01237009

What does this mean for Silicon Valley homebuyers?

• Historic Low Interest Rates – Interest rates have hovered at or near historic lows for much of the past 18 months, resulting in lower payments for many borrowers.  With the Fed discontinuing its purchase program, some analysts believe a rise in interest rates could range from 0.25 percent to as much as 1 percent by the end of 2010. An article in the March 13, 2010 online version of the Wall Street Journal has a good graph showing interest rate trend.
• Federal tax credit for home buyers – this is also is scheduled to end April 30.  The tax credit combined with the expectation interest rates will increase has created a sense of urgency for many home buyers.  In fact, 23 percent of California home buyers purchased a home in 2009 due to the perception that interest rates will rise and they would be priced out of the market, according to C.A.R.’s 2009 Survey of California Home Buyers.
• Mortgage Loan Qualifications – Rising interest rates will have an effect on home buyers.  For example, a qualified couple with a combined pretax income of $100,000 per year and debt obligations (excluding mortgage) of $500 who receive a mortgage rate of 5 percent could qualify for a loan of up to $590,000, assuming a 20 percent down payment.  If the interest rate were to rise to 6 percent, as analysts at Barclays Capital predict, the same couple could only qualify for a mortgage of $540,000. These entry level loan values for Silicon Valley, but they illustrate the relative impact this will have on home buyers.

Even though inventory is low in many south bay of Silicon Valley communities such as Saratoga, Cupertino and Sunnyvale, which is resulting in frequent multiple offers, it is still a good time to be a home buyer and there should be some urgency to act now.

Please note that in my prior Saratoga Voice post this week, quoted mortgage rate slightly higher than 4.99% for conforming 30 year fixed mortgage loans, but this is with no points!  Currently, 1 point buys down about .25%, 1 and 1/2 points buys even more and these rate sheets change daily, so for the latest real world, in the market “scoop, call me at 408-857-8800 or John Shapiro of Private Mortgage Advisors at 408-913-7933.

“Fixed mortgage rates followed bond yields lower for the third consecutive week, pushing 30-year mortgages below 5 percent once more,” said Frank Nothaft, Freddie Mac vice president and chief economist.  ”The federal funds futures market indicates no increase in the Federal Reserve’s target rate following its upcoming committee meeting on January 26th and 27th.”

I publish this information weekly to help give home buyers and home sellers a feel for where the market is going and to give a perspective  on what this means for home sales in Saratoga, CA and surrounding communities such as Los Gatos and Monte Sereno. Keep in mind that because of the high value of Saratoga Homes most loans are non-conforming jumbo loans of $729,750 or above, which were at 5.7% this past week, so be careful that newspaper headlines are generally talking about statistics that do not directly apply to specific local markets.

Rick Bonetti | Alain Pinel Realtors | DRE #01237009

Last week there was very light trading in the bond markets and mortgage rates didn’t move much although we did see a little improvement last Friday.

Current rates for 30 year fixed rate, fully amortized mortgage loans according to John Shapiro of Private Mortgage Advisors are as follows:

Conforming loans ($417K and under):  5.125%
High Balance conforming  ($417K to $729,750): 5.25%
Non-conforming jumbo loans (greater than $729,750):  5.70%

Interest rates are now quite low and home prices in many west valley neighborhoods such as Saratoga, Los Gatos and Monte Sereno are expected to be relatively flat in the near future, so I believe now is a good time to be either a homebuyer and home seller.

Rick Bonetti | APR Referral Network | 408-857-8800 | DRE #01237009

Starting November 1st, getting a mortgage loan may have become a little more difficult for some homebuyers; government-backed Fannie Mae has tightened their lending standards. The required scores for good credit are rising.

A credit score (FICO) is a number representing the likelihood that a person will pay his or her debts.  Depending on the type of loan, anybody with a credit score of less than 620 will have a hard time getting a mortgage. According to Charles Capone, PhD Senior Analyst at the U.S. Congressional Budget Office, the mortgage market views a FICO score of 620 as the bottom cut off for prime loans.

To get the best rates, you will need to have a score of about 720 as well as a steady income. People with scores above 720 are considered low risk borrowers.  To check out your credit score, you can go to www.annualcreditreport.com.

Here are the current rates with Private Mortgage Advisors (Wells Fargo affiliate) as of 11/16/09:

• Non-conforming (greater than $729,750) 30-year fixed = 5.75%
• High Balance Conforming ($417 K to $729.75 K) = 5.125%
• Conforming Loans ($417 K and under) = 4.875%

Even though it may be more difficult to get a mortgage, interest rates are currently very low, so it is a good time to be a homebuyer.  With low mortgage rates and federal incentives for buyers, you or somebody you know may be thinking about buying a new home or refinancing your current home. 

My business is based on referrals from friends like you.  Please call me if you hear of somebody who is thinking about making a move now or to represent your interests in a real estate purchase or sale in Saratoga, Los Gatos, Monte Sereno and surrounding Silicon Valley communities.

Rick Bonetti | Alain Pinel Realtors | 408-857-8800