May 2013 - Real Estate Market Update

As the national housing market recovers we are seeing considerable increases in demand, resulting in a strong seller’s market across the country.

Currently, there is more demand than there is supply available, but “the good news is home construction is rising and low mortgage rates are continuing to keep affordability conditions at historically favorable levels,” states NAR Chief Economist Lawrence Yun.

“Homes are selling much faster,” says NAR President Gary Thomas. “Multiple bidding is becoming more common, and more homes are selling above the asking prices, so buyers need to move quickly.” With historically low interest rates and rising demand, there is an urgency to buy now during one of the most favorable times in history to buy or sell a home.

Home Salesin Millions

Home sales in March decreased slightly by 0.6% from last month to 4.92 million units. Sales are up 10.3% from year-ago levels, making this month the 21^st consecutive month of year-over-year sales unit increases. Distressed homes (which include short sales and foreclosures that traditionally sell for 15%–20% less on average compared to nondistressed homes) accounted for 21% of March sales, which is down from 25% the previous month, and down from 29% in March 2012. Regardless of the decrease in distressed sales from last year, these properties are still at above-average levels.

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Home PriceIn Thousands

The current median home price increased 6.4% in March to a seasonally adjusted $184,300, which is up 11.6% year over year. March marks the 13^th consecutive month of year-over-year price increases, and the strongest year-over-year increase since November 2005.

Inventory- Month's Supply
In Months

Inventory levels in March increased slightly by 1.6% to 1.93 million existing homes for sale. The number of homes on the market represents a 4.7-month supply, indicating a strong seller’s market. Inventory is down 16.8% below a year ago when there was a 6.2-month supply. 

Source: National Association of Realtors

Interest Rates

Interest rates this month are slightly lower from last month, at 3.41% for a 30-year mortgage. Low mortgage rates continue to keep affordability conditions at historically favorable levels.

This Month's Video

Sierra Bella is now a Go! (New Development in West Corona)

According to an article by InnerCircle Corona, the proposed West Corona community Sierra Bella is now moving forward after being put on hold since the initial Specific Plan for the project was approved back in 2005. The Sierra Bella Specific Plan has gone back to Planning & Housing Commission and to the Corona City Council this April and has completed the entitlement process. The project will now move into plan check.

“Forestar’s development shows renewed confidence in the Corona marketplace” said Daniel Rittatore, economic developer for the City of Corona "

"A brand new housing development project is under way in Corona for the first time in more than five years showing huge steps forward in our local economy."

The Project is looking to bring a new “hillside village of 249 homes clustered along the lower ridgelines, with the mountain peaks to the south providing a natural backdrop,” according to the City of Corona’s Sierra Bella Specific Plan’s Project Overview.

"Design plans for the project have yet to be submitted or approved but projections say structures should be under way in 2015 according to City of Corona’s Senior Planner Jason Moquin."

<<For more information and to sign up for updates, please click here!>>

Pending Home Sales Continue to rise in March

 Published: Monday, 29 Apr 2013 | 10:00 AM ETBy: Diana Olick

CNBC Real Estate Reporter

Contracts to buy existing homes rose slightly in March, as a historically low supply of for-sale listings nationwide continues to plague the housing market. The Pending Home Sales Index from the National Association of Realtors increased 1.5 percent month to month. It is 7 percent higher than March 2012.

These numbers represent signed contracts, not closings, and are therefore an indicator of future final sales.

"Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply," said Realtors chief economist Lawrence Yun in a release. "Little movement is expected in the near-term sales closings, but they should edge up modestly as the year progresses.

Listings were down 17 percent in March from a year earlier, according to the association, with several factors affecting inventories. Millions of Americans still owe more on their mortgages than their homes are worth, and that makes it impossible for them to move without incurring major expense.

Others are watching home prices rise and may be waiting to see just how high they go before listing their homes.

Meanwhile, home builders, while trying to ramp up production, are faced with a lack of land, labor and materials. Single-family starts were at a seasonally adjusted annual rate of just 619,000 units, an improvement from the worst of the crash but far below historical norms.


Regionally, the pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Existing home sales in March, based on closings, fell just under one percent in March. While higher than a year ago, home sales appear to have leveled off, despite this being the normally busy spring season.

Signs of Easier Money for Mortgages

 Published: Saturday, 13 Apr 2013 | 12:00 AM ET
By: Tara Siegel Bernard


What was so unusual about Phillip Ratliff's experience in getting approval for his first mortgage was that it wasn't difficult at all — even though he could afford a down payment of only 5 percent.

In the years after the housing bubble burst, borrowers had to practically promise their firstborn child to secure a mortgage.

And while the requirements are still pretty rigorous, particularly for those with less than perfect credit, there are signs that at least some regional lenders and mortgage insurers are beginning to ease up. Some regional banks and credit unions are even offering products that vaguely resemble the more aggressive financing that became all too common during the boom days and eventually got many borrowers into trouble.

The piggyback loan, for instance, is back, mortgage lenders and brokers said. That is when borrowers take out two mortgages simultaneously (or a mortgage and a line of credit) so they can avoid the private mortgage insurance required on traditional mortgages for more than 80 percent of the home's value.

And some credit unions, including Navy Federal and NASA Federal Credit Union, are offering 100 percent financing, at least in markets where home values have stabilized and appear to be on the upswing. U.S. Bank and Wells Fargo said they still allowed borrowers to use piggyback loans.

The big difference this time, lenders and mortgage brokers say, is that the loans are not being made to just anyone but to borrowers who can afford to pay them back (at least for now).

''This is all good news for consumers,'' said Guy Cecala, publisher of Inside Mortgage Finance. ''We are starting to see some loosening, but it's very specific. It's just in its infancy now, and it's not the type of piggyback loans or low down payment loans that we saw before.''

(Read More: Boomers a Boon to Urban Home Builders)
And while there were clearly too many confusingly complex loans offered to too many unqualified borrowers at the height of the housing boom, what is being offered now seems reasonable, Mr. Cecala said. How far the lenders will eventually go to stand out from the competition remains to be seen. ''The real question,'' he said, ''is, Will they be any more dangerous than what we've seen before?''

Lenders are beginning to be more accepting of merely average loan candidates, in certain circumstances. According to Mr. Cecala, traditional mortgages in the last several years were largely made to people with down payments of at least 20 percent and a strong average credit score of 760.

''That is phenomenally tough underwriting,'' he said. ''Now, what you are seeing is that lenders are willing to tinker with one element at a time. So if someone is putting at least 20 percent down, they will go down to 720. And if someone has a 760 or a 780 credit score, they might be willing to go up to a 95 percent'' financing, he added, referring to a mortgage for 95 percent of the home's value.

After 2008, many borrowers with little money to put down, and decent but not perfect credit, had little choice but to look to the Federal Housing Administration. The F.H.A., which does not make loans but insures mortgages that meet its guidelines, filled the hole left by the more traditional lenders: it extended credit to people who had as little as 3.5 percent to put down and spotty credit scores. As a result, the number of new mortgages originated by the F.H.A. ballooned.

But now, mortgage lenders and brokers say, more homeowners with smaller down payments are able to use private mortgage insurance. That is because the private insurers, which imposed even stricter qualifying standards than some banks during the housing downturn, are also becoming a bit more flexible. At the same time, the F.H.A. has been significantly increasing its fees over the last couple of years to shore up its finances and encourage more traditional lending again .

''We were frequently in the position where we could underwrite the loan but we couldn't find the mortgage insurance,'' said Brian Thielicke, a partner and senior loan officer at Cobalt Mortgage in Tukwila, Wash. ''Now, it's completely gone the other way.''

Mr. Ratliff, a 27-year-old software tester, said he had no real trouble getting a mortgage for the four-bedroom house in Seattle that he bought for $325,000. He got a 30-year mortgage with a fixed rate of 3.5 percent.

''There was money out there if you had the credit,'' Mr. Ratliff said, adding that he had a good credit score. Finding an affordable first home proved the hard part, since there were so many other buyers to compete with and few homes in his price range.

He was able to make a down payment of 5 percent, or about $16,000, because he obtained private mortgage insurance. He borrowed another $15,000 or so from his 401(k) to cover closing and other costs, including the insurance. (He paid $5,800 upfront so he could avoid monthly insurance payments.) His overall monthly payments, about $1,700 and another $200 for the 401(k) loan, will be only slightly more than what he paid in rent.

It appears that more borrowers are taking out mortgages similar to Mr. Ratliff's. Fannie Mae acknowledged, in its 2012 annual report, that it was buying more mortgages where the loan amounts were higher relative to the homes' values. Part of the reason was that the mortgage insurance companies reduced their premiums for loans with higher credit scores (the average credit score on the Fannie loans purchased was still strong at 755) and F.H.A. loans had become more expensive.

Fees on F.H.A.-backed mortgages have been inching higher for several years. Borrowers must pay an upfront mortgage premium of 1.75 percent of the loan amount, which can be rolled into the mortgage. But as of April 1, another fee, the annual mortgage insurance premium, rose to 1.35 percent from 1.25 percent of the loan, which is broken down into monthly payments. And while this monthly mortgage premium was typically canceled once the mortgage amount fell to less than 78 percent of the original loan value (after a minimum of five years), starting in June, the insurance must generally be paid for the life of the loan.

''This will be the game changer for many future borrowers,'' said Rick Cason, a branch manager at Integrity Mortgage in Orlando, Fla. ''No one is going to want to take a loan out where mortgage insurance is guaranteed for the life of the loan. You would simply have to be forced into it because there were no other financing options available and you were desperate.'' (Private mortgage insurance can be canceled once the loan amount is less than 80 percent of the home's value.)

Some lenders, including credit unions, are making more flexible loans that they are keeping in their own portfolio. Navy Federal, for instance, is offering members up to 100 percent financing without requiring private mortgage insurance, though the loans carry a slightly higher interest rate, about 4.125 percent for borrowers with good credit histories. (The average rate on a 30-year fixed-rate mortgage was 3.43 percent for the week ending April 11, along with a fee of 0.8 percent of the mortgage amount, according to Freddie Mac.)''Even through the recession, our mortgages performed very well,'' said Jack Gaffney, executive vice president of lending at Navy Federal.

NASA Federal Credit Union -- which is open to many consumers, not just NASA employees -- is offering some members with strong credit and income up to 100 percent financing, without mortgage insurance, for primary homes in Maryland, Virginia and the District of Columbia, all markets it says are on the rebound.

As for the big banks, many of them said they continued to offer mortgages with low down payments. Bank of America said it allowed up to 95 percent of the home value to be financed, with mortgage insurance, in certain regions. Citibank said it offered loans with down payments of less than 20 percent with insurance, too. Wells Fargo and U.S. Bank let qualified borrowers take out two loans -- one for 80 percent of the home's value and the second for 10 percent, along with a 10 percent down payment -- which lets them avoid private mortgage insurance.

That type of piggyback loan structure ''has become more available and we are seeing it more frequently,'' said Erik Johansson, vice president of mortgage lending at Guaranteed Rate, a mortgage lender in Schaumburg, Ill.

The problem, according to Mr. Thielicke of Cobalt Mortgage, is that some borrowers are considering home equity lines of credit, with adjustable interest rates, for the second loan. While they may be able to afford the loan now, that could change.

''It's a good short-term product if you can pay it off in two years or so,'' he added. ''But if you're not, I'm cautioning against it because the rate will adjust up substantially once rates start going up.''

Besides, he said, those loans often require borrowers to pay interest only. ''You are renting that mortgage,'' he added.

Still, for some borrowers, F.H.A.-backed loans will remain the only option since they permit people to carry a little more debt relative to their income (compared with loans backed by Fannie Mae and Freddie Mac) and are a bit more forgiving to other blemishes, like a bankruptcy within the last two years.

''It's a lot more accommodating a product,'' said Paul Reid, a market manager at Redfin, a real estate broker. ''When people are trying to make a competitive offer and find themselves in a bidding war, they oftentimes find themselves back in F.H.A. because they are trying to push the barrier of what they can afford.''

April 2013 - Real Estate Market Update

Home sales and prices confirm that a healthy recovery is continuing in the national housing market: sales have been above year-ago levels for 20 consecutive months, while prices have experienced 12 consecutive months of year-over-year gains.


"Even with rising home prices," states NAR President Gary Thomas, "affordability remains historically favorable because home prices over corrected during the downturn. This means there is still great value for buyers in the current market."

With a positive outlook on a recovering housing market and mortgage rates at historically low rates, now marks one of the most favorable times in history to buy or sell a home.