Excessive Regulations Driving up the cost of Housing?

The U.S. Dept. of Housing and Urban Development (HUD) has taken a look at housing costs, and released a report on excessive regulations which restrict available land for development which might otherwise be used. Impact fees, environmental regulations and "smart growth" may be misused to justify limiting affordable housing production. Obsolete building codes limit more cost-effective building materials, and HUD is now requiring a review on all proposed regulations to determine their impact on affordable housing before taking effect. See this article about HUD, and then go to here to read the Wall Street Journal's article on the median price for a condo exceeding the median price of a single-family home for the first time. Condos have begun to fuel their own market as they increase in number in more expensive and up-scale urban areas. In the meantime, the FDIC attempts to review housing booms, which may or may not be followed by a bust. U.S. Home Prices: Does Bust Always Follow Boom? reports that the recent growth in home prices surpasses any of the last 25 years. A boom is an increase of 30% in three years, and a bust is a 15% decrease in 5 years, according to the FDIC, driven down by economic shocks. The change in today's credit market is uncharted territory and differs from past history--an additional factor which challenges the crystal ball readers who attempt to predict the conclusion of this current economic cycle.

Should I Buy Now or Wait?

This article says: "Numerous factors determine whether prices are in line with what people can afford and are willing to pay. These include job and household growth, inventory levels, rents, in-migration from other areas, land costs, new-home supply and discounts being offered on them, and the age of the housing stock." These factors may change suddenly, i.e., the Enron scandal, or not. Also, psychological factors about where you want to live and why weigh in strongly.

So if you plan to live in an area for two-plus years, and you can afford that area, you're better off buying, especially with present interest rates. Even though many people were hurt in the 1990's recession, those who could stay put for 7-8 years were able to ride it out. Not even the best predictors know when the market will actually turn--we've been hearing that interest rates will rise for a long time now, but they've held to the same levels. Read here for this Wall Street Journal article.

2005 Market Expected to be Second Highest on Record

Existing home sales, nationally, may decline about 2 percent from last year's record, with the economic conditions this year expected to be similar to 2004, according to the National Association of Realtors. Prices may climb upward, but at a slower rate, with interest rates, income and prices considered to remain favorable. California's current median price of about $479,000 is expected to rise over $500,000, according to the California Association of Realtors. Click here for more information. NAR is expected to post benchmark revisions based on updated census data and approval by the Federal Reserve Board on February 25.

What Does Your Credit Score Reveal?

Should your credit score (that FICO number) be used to determine the amount of your insurance premium? Most consumers would be against that, but a study in Texas claims there's a link between credit scores and filing insurance claims. Read here to see the article.

So What Really IS the BIGGEST Homebuying Mistake?

Read this and you'll find out ... It's not just one thing as this author says, because it depends on who you talk to in the real estate industry. There are so many factors in a successful home purchase, and unsuccessful ones, that it's hard to know them all at one given time. But one thing a buyer can do is, like the Cub Scout motto, "be prepared." Take the time to do research, don't fall in love with a house so much that you forget your budget. Doing the research does mean doing some of all the things mentioned in each of the categories in this article, and then find someone you trust to work with, the next most important thing. Read here about Avoiding the Biggest Homebuying Mistake

Fed Hikes the Rates Again by .25

So the Federal Reserve has raised the short-term interest rate again, but why did long-term interest rates actually go down since last June? According to this article, Fed hikes rates again, long term rates reflect worry about inflation, and apparently investors in many market sectors are not worried significantly about inflation, i.e., yields on Treasury notes. The Fed threatens to raise rates and "measured" intervals, however, rates for mortgages, auto loans, longer-term home equity loans don't respond directly to those increases. Read the article for more information.

Mortgages: What the lenders look for

Here are the 14 factors, according to Bankrate.com, that the Desktop Underwriter, a Fannie Mae program, that are looked at in judging the borrower's loan qualification. Equity, credit history, your reserves, your debt-to-income ratio, down payment source, or whether you're buying a condo or a house: These are several of the factors. Remember, this is for an automated underwriting approach, it doesn't mean that there aren't other approaches to loan qualification, but the automated approach is one lenders like to use if you qualify because of the ease of finding you the actual loan source on which to close escrow. Click here for the full article.

Homeownership and Consumer Knowledge

How do consumers keep abreast of what is offered to them with the vast array of types of loans and loan sources? That is a question the federal agencies have grappled with for some time, as the model for loan underwriting has changed in the loan industry to one of automated underwriting driven largely by FICO scores of the consumers. The stretching of underwriting criteria by Fannie Mae and Freddie Mac led to an explosion of providers, funders and approaches in the early 1990's. The huge diversity of loan programs and providers cut into the homeownership education counseling programs.

"--the homeownership counseling industry is at a crossroads. The mortgage market has radically changed and originations are dominated by risk-based pricing driven by automated underwriting. Servicing also is increasingly driven by technology. And while predatory lending practices have consumed an enormous amount of attention and effort, the legitimate subprime market is maturing and offering fair options to many borrowers previously shut out of the prime market. Consumers are presented with a dazzling array of product options, and the rise of the Internet has brought the application process into the digital age. In this context, we explore what insights modern research literature has to offer about homeownership counseling." If you want to view the entire Harvard University study, take a look here. (© 2004 President and Fellows of Harvard College.)

Long Beach in 2004

How much did appreciation did we get in 2004? According to DataQuick, which tracks real estate data, the number of single family residences and condos sold in LONG BEACH in 2004 was 5,286 at a median price of $370,000--compare that to $285,000 in 2003, an increase in appreciation of 29.82%.

For the entire state, California Association of Realtors reported on January 25, 2004, that the median price of an existing, single-family detached home in California during December 2004 was $474,480, an 18.1 percent increase over the revised $401,720 median for December 2003. The December 2004 median price increased 0.5 percent compared with a revised $471,980 median price in November.

Interest Rates Lower--Still Under 6%

According to Bankrate.Com, rates in Boston, Houston, Los Angeles and San Francisco and Dallas are all similar (depending on the points paid), around 5.7 to 5.8 percent. Rates have dropped for the third consecutive week, so we're not seeing that upward climb yet, as rates generally continue at a 40-year low. Read more.