30-year fixed rate vs. HELOC

The 30-year fixed mortgage rate is still under 6%, while the average home-equity loan is over 7%, which makes this still a good time to cashout.

Alan Greenspan and Loans

The West Coast market has been identified numerous times as a market of faster and greater appreciation than other national markets. Alan Greenspan has once again stated his concerns about some banks taking risks on unsafe lending practices in order to make loans in extreme markets which may be part of a local market bubble. Elsewhere, this market is not considered a bubble that will "burst" but one that will slow with lower appreciation over a longer period of time than seen in the recent past.

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.