Rays of Sunshine

Over the past couple of years, we have seen the
housing and mortgage industries going through
some bleak times, after spiraling out of control
for a while.

As we have been slogging through the upheaval
and dealing with the slumping housing market
and more restrictive lending environment, we
have been hopeful that we would see evidence
of improvement.

There are some indications that we may be turning
the corner.

1. Well-maintained and fairly priced homes that
are being offered for sale are moving much more
quickly, and in many cases receiving multiple
offers.

Although the foreclosed properties and short
sales have not been absorbed by the market, there
is some evidence that they are slowing down.

And home buyers seem to have collectively come to
the realization that now is the time to buy.

There are still buyers that want to get the rock-
bottom price and will make as many offers to
distressed sellers as it takes to get the "best
deal". But, many people who want to finally
enter the housing market at these reduced prices
are acting now, and are negotiating fair prices.

This leads me to believe that buyers are thinking
that the bottom (or close to the bottom) has been
reached. And it is this mentality as much as
anything else, that will bring us out of the
slumping home price spiral.

2. Interest rates are staying low. The conforming
loan category, those loans up to $417,000 that
Fannie Mae and Freddie Mac purchase from lenders,
are staying below 5.00% with modest loan fees.

These rates are at levels that have not been seen
for the last 40-50 years. And buyers are recognizing
that borrowing money at these rates is a bargain
not to be overlooked.

We don't know how long they will last, but it is
reasonable to assume that once rates start to go up
again, we may not see these levels for a long time.
With the new government spending programs that have
been enacted in the last 60 days, there is a real
concern for future inflation, and that would mean
higher interest rates will be coming.

3. Any time now, Fannie Mae and Freddie Mac are to
announce the new guidelines and regulations that
will enable them to purchase loans above the $417,000
conforming limit to a new limit of $697,500 in San
Diego County.

This new availability of mortgage money that will be
priced somewhere between the conforming loans and
traditional jumbo loans will add liquidity to the
market.

Even though underwriting standards have tightened
a lot in the last year and a half, they have
stabilized and become more predictable. We have
not been "chasing" guidelines like we were doing
last year, when we could not get files to lenders
quickly enough before they tightened their criteria.

4. FHA and VA lending is becoming more common.

Because conventional loans no longer allow for
minimal down payments of zero or 5% cash, many
borrowers are seeking traditional loans that
allow for these lesser down payments.

FHA loans allow for down payments as low as 3.5%.

VA loans allow for 100% financing, and no down
payment, but does require that the borrower have
earned VA eligibility by their military service.

With home prices experiencing their drop, many
more homes now fit within the FHA and VA loan
limits. Contact me if you are interested in
exploring these options.

5. Jumbo loans (traditionally those above $417,000
but soon those above $697,500) are slowly being
offered again.

The maximum loan amounts and the loan-to-value
ratios are not as aggressive as they once were,
but the lenders are recognizing that there is
a way to make these loans with high quality and
manageable risk.

There has been a void in the market serving this
jumbo category because so many of these loans were
bundled in with the mortgage-backed security pools
that went bad. Investors were very leery of buying
large mortgages that were secured by homes that
were losing value, making their risk even greater.

The fact that lenders are putting their toes in the
water gives further credence to the idea that home
prices are starting to stabilize and maybe move
upward.


If you are interested in buying or refinancing,
take the time to explore your options and develop
a game plan for taking advantage of this convergence
of low home prices and low interest rates.

There are some great opportunities available right
now!