30-year Fixed Rate Still Lower

Compared to this time last year when the 30-year fixed rate mortgage averaged 6 percent, interest rates are still lower, according to ALTA's Industry News article.

MBA's Economic Forecast

Find the Mortgage Bankers Association's forecast on their site, saying 2005 will be the third biggest year in mortgage production behind 2002 and 2003. Long-term interest rates are predicted to increase to 6.25 percent for 30-year fixed interest rates by 2007, still low compared to more recent history. Home prices are expected to increase in the more moderate ranges of 5-7% compared to much higher gains in 2004.

Southern California Economy vs. The Bubble

Another Chapter: The FDIC tells us California grew to 1.7 percent in job growth this year. But their state profile chart also shows Southern California has much lower job growth than other parts of California--excluding the Bay Area--and is also lower than the rest of the nation. However, home price growth in So Cal outpaced income growth.

"Piggyback" Loans have increased 20% since 2001

Second mortgages, also known as lender seconds, have made the West coast prices more affordable by allowing a buyer to put down a lower down payment. Another advantage is that the interest on a second mortgage, like the first, is tax deductible. Not so with PMI when the down is less than 20%. 42 percent of loans involved seconds in early 2004. PMI carriers are critical of these loans, not surprisingly, however the cost to the consumer is ultimately more using PMI. Click here for C.A.R's article.

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!