30-year fixed rate mortgage still down

As of June 23, the 30-year rate was down again from last week when it averaged 5.63 percent, to 5.57 percent. At this time last year it averaged 6.25 percent. Existing homes sales, nationwide, in May were at the second highest lever ever recorded, fueled by low mortgage rates, and this pattern may well continue into the foreseeable future, according to Freddie Mac's vice president Frank Nothaft.

The Upside of Higher Prices

California property taxes are based on the current home selling price, starting at approximately 1.25 percent. The counties's collections have profited from the increase in prices, the low interest rates, and the current turnover rate. Property tax collections are up 9 percent in Los Angeles County, meaning an extra $223 million in revenue which will be used for more sheriff's deputies and hopital system improvements. Property taxes account for 70 percent of LA County's revenue. In a market downturn, property owners can request reassessment of their properties at the current market value--many owners did this in the 1990's recession to reduce their tax payments.

Foreclosures Not Any Time Soon

With all the talk about the real estate bubble, especially in certain markets, questions of foreclosures come up too. According to the Mortgage Bankers Association, the delinquency rate for loans was lower than the first quarter and fourth quarters of 2004. The U.S. economy grew at almost 3.5 percent in "annualized real terms" during 2005, adding 180,000 payroll jobs per month, according to the MBA. Also, the precentage of loans "seriously" delinquent, those past 90 or more days or in foreclosure, was 1.89 percent, which was 18 basis points lower than the 4th quarter of 2004 and even lower than the first quarter of 2004. See MBA's article.

Has L.A.'s housing profile changed in 20 years?

Economy.com has supposedly looked at what people could afford in major metropolitan areas starting in 1980. This very interesting graph shows Los Angeles, New York, and San Francisco in that time have occupied the lower line of housing affordability when compared to income. The recession years gave a boost to L.A.'s affordability, but starting in 2000, it returned to almost the same level by 2004.

California Median Price at $509,230 in April

Minimum household income need to purchase was $120,290, according to C.A.R., in California. Nationwide the minimum household income needed to purchase was $48,660 for the median priced home of $206,000. California's housing affordability stands at 17% of the buyers being able to buy a home; it has declined 3 points since April of 2004. The California index is a housing measure based on statewide data, and varies from county to county. The Los Angeles County median, according to DataQuick, was $445,000 during April, a new record. Southland buyers' typical monthly mortgage for April purchases was $2019, up from $1,760 for April, 2004.

Some Seller Tax Breaks

In 1997 sellers got a really big break on capital gains: "the home-sale tax burden eased for millions of residential taxpayers. The rollover or once-in-a-lifetime options were replaced with the current per-sale exclusion amounts." Some people still are not aware of this, however, but remember, if you're single, the capital gains exclusion is $250,000; for married couples, the exclusion is $500,000. This capital gains exclusion applies to principal residences only. And, there is no longer, since 1997, a requirement to buy another property within a certain period of time. Bankrate.com's Capital gains and your home sale explains more, the important thing to remember is always check with your accountant or tax advisor for complete advice!

Prices Coming Down?

One approach some people are thinking of now is sell and then rent for a while so that all their gain can be invested in a cheaper home when the prices come down. But as this says, that may be nothing more than speculation, especially when you're dealing with your primary residence. If you have an investment property, a rental, a second home, that strategy may work, especially if you're considering a 1031 exchange. It's not recommended for your principal residence if you're planning on staying in the same area.

Why are long-term interest rates declining?

The 30-year fixed is at 5.09%, and what does this mean for now? It means a reduction in your monthly mortgage payment, and this is a great time to take advantage of that. Click here for Bankrate.com's analysis, but see me, your Realtor, for how to take advantage of this great opportunity. At a time when adjustable rate mortgages make up 63% of new loans, take advantage of getting a fixed rate loan at the lowest rates ever.

National Association of Realtors is concerned about the Realtors' right to do business in these bills and rightly so. Allowing banks to conduct real estate brokerage business, under their guise of offering financial services, is an attempt to reduce or eliminate the consumers present choice in how they purchase and whom they use in purchasing their homes. The business of banking is nothing but a growing exercise in consolidation, and the "fairness" and "competition" in these bills will not be for the consumer or for the real estate professional, or the local financial professional, but for the large bank(s) only:

"Bill to Allow Banks in Real Estate IntroducedFinancial Services Chairman Mike Oxley (R-OH) and Ranking Member Barney Frank (D-MA) introduced H.R. 2660, the "Fair Choice and Competition in Real Estate Act" on May 27th, 2005. This bill would allow huge megabanks to operate real estate brokerage, leasing and management firms. There are no additional cosponsors on H.R. 2660.Meanwhile, H.R. 111, the "Community Choice in Real Estate Act" has gained a majority of cosponsors in the House. With 221 cosponsors, the bill has more than enough votes to pass if Chairman Oxley brings the bill to the floor. NAR will again ask for hearings on both bills, and to testify at any hearing that is held."

40-year mortgages go mainstream

As this article says so well, these mortgages were not a player in the market because investors would not buy them. FNMA is now buying 40-year mortgages. But "It's not a sure bet that 40-year loans will catch on for at least three reasons. First, the interest rates are slightly higher -- usually an eighth to a quarter of a percentage point. Second, tacking 10 years onto the payment schedule doesn't save all that much money every month. Third, interest-only mortgages have exploded in popularity in the last two years, and they offer even lower initial monthly payments than 40-year loans." With rising prices, however, it gives the consumer another choice. See this article 40-year mortgages join the mix.