Real Estate Sales Are Heating Up!

I have seen this headline two or three times now in the local papers and, compared to 2002 sales, it’s true. Unfortunately, when looked at in a historical context, it begs a different spin.

According to the Santa Cruz Board of Realtors, the total number of homes sold in Santa Cruz County (including condos) in 2003 was 3018. In 2002 there were 2,824 homes sold. This increase represented almost a 7% increase in sales from one year to the next. In 1998, there were a total of 3,354 homes sold, so we actually see a decrease of 10% in number of homes sold over the last 5 years! And yet, during this time the total number of homes available for sale has decreased by only 3%. In other words, about the same number of homes are coming to market, but fewer are actually selling.

And one last statistic, which is truly alarming, is that during this same 5-year period, home prices have increased from $299,500 to $542,250! A whopping 80% increase! I don’t have the information on what wages and payroll have done in the county, but I’ll bet it has nowhere near kept pace.

This increase in home equity is wonderful for those of us lucky to already own our own homes- the house value looks really nice on the balance sheet. With this asset, we can tap the equity for our retirements, investments, travel, education or any other dream we may have. There are many mortgage programs available from equity lines to reverse mortgages. But, the option that may be disappearing faster than any of us care to acknowledge is that of selling our home. What the statistics above show is an alarming affordability gap that is widening every year and promises to get worse.

What about the generation of homebuyers coming up who haven’t bought yet, either because they just haven’t but can afford it, or those who can’t afford it and don’t see how they will ever will?

First, if you can afford a home and just haven’t gotten around to purchasing: do it now or risk joining the second group. And to those who think they can’t afford it and that they never will be able to do so: get to a financial advisor, mortgage professional, parent or someone who can help chart your financial course to home ownership.

Give me a call and I’ll be happy to help.

Fixed rates for conforming loans (under $333,700) as of 2/20/04 (p.m.) with 0 points are:
30 year fixed: 5.5% (APR 5.59%) payments are $1,894.71/mo.
15 year fixed: 4.875% (APR 5.03%) payments are $2,617.20/mo.

Rates are down- For how long?

Mortgage rates have slid slightly lower over the past week- conforming 30 year rates are in the mid 5's for no points with the 15 year rates staying in the upper 4's. There are some heavy economic reports coming out this week: cpi, ppi, etc. that may cause the rates to move up sharply depending on their tone.

Going out on a very weak limb, I'll give a guess that if 4 out of 5 reports show little bias one way or the other, Wall Street will focus on that 5th report and react accordingly, and it won't be down. To that end, I'm locking all my client's loans in to protect against the rates soaring up. After all, the old saw of interest rates go up like a rocket and down like a parachute has a basis in fact.

More Important Than Rates!!

Fannie Mae recently began a more "traditional" type of credit underwriting. Now to the average person, this doesn't sound very exciting, but to a homeowner, or prospective homeowner, this could be the pot of gold at the end of the rainbow.

Let me break this down into regular terms. This program is only about credit; income and property guidelines must still be met. If you have had some credit problems in the past, and your credit scores are under the magic 620 score that Fannie or Freddie normally require; then, with good documentation and explanation on why you were late you may still get today's great rates. Yes, there will be a slight add on to the points; generally not more than an extra quarter point. Now if you have at least a 590 credit score you are no longer automatically relegated to sub-prime mortgages that can run 1 to 2 percentage points higher in interest rates.

This is a limited program and not all lenders have it. Giive me a call and we can discuss your personal circumstances