FICO Scores May Mean Savings on Monthly Payment of $200

Many buyers, and property owners who want to refinance now, realize that FICO scores are important when it comes to getting a loan. But what exactly is the picture on the benefits to a higher score, and what kind of a difference will it make? Below is a general chart for score categories and interest rates.

The sample breakdown below may not be exactly like this because a borrower's other circumstances with a particular lender or a particular program could vary, so it's important to keep that in mind. But oftentimes prospective borrowers are not aware of how their decision to buy one more piece of furniture, or buying that new car, BEFORE closing escrow, may strongly impact their new monthly payment because they have added more debt.

30 year Fixed Rate Mortgage - $200,000 Loan Amount

FICO Score                APR              Monthly Payment

760-850                     4.466%          $1,009
700-759                     4.688%          $1,036
680-699                     4.865%          $1,057
660-679                     5.079%          $1,083
640-659                     5.509%          $1,137
620-639                     6.055%          $1,206

Chart courtesy of Pat Zaby

For more information on how debt and other credit issues can impact your credit score, I can forward you my Powerpoint presentation.  Also, go to http://www.myfico.com/ for objective information about credit scoring and obtaining a free credit report.

What is the Trend in Long Beach House and Condo Prices Since Sept. 2008

The two-year picture for median selling price of single family homes in Long Beach is a pretty diverse picture, just like the city itself. From September 2008 to September 2010:

Interestingly, the overall drop for the SFR from 2 years ago is only 3% from $390,000 to $379000 (per CARETS data). This is in contrast to the median price for Los Angeles County which has increased from $339,500 (Sept. 2009) to $350,000 (per CoreLogic data). There is a 30% decrease in expired house listings, and the number of sold properties is up 15% over two years ago, while the months supply of inventory is down 33%.

Condos in Long Beach have taken a bigger hit--the median sold price has dropped 22% in two years from $263,000 to $205,000 from 2008-2010, and for Los Angeles County the median price has dropped from $337,000 to $320,000 from 2009-2010. The overall median for sale condo price in Long Beach has dropped 22% in the last 2 years, but there are fewer expired properties (down 37%), and an increase in the number of sold condos in the last 2 years, by 5%. The months supply of inventory is down 32% from two years ago.

For both houses and condos, the number of properties for sale is down by 26% and 22%, a condition that eventually may contribute to more listings on the market to meet demand, driving sales volume higher and in some cases sales prices higher as inventory decreases in certain areas.

Should You Pay All Cash or Should You Carry a Mortgage?

Should you be in a hurry to pay off a mortgage? Or should you never pay it off? What reasons would you have for carrying a mortgage instead of having total equity in your property? Why do we want to make a bigger down payment, get 15-year loans, pay more money every month? If you are trying to decide what to do, save a bigger down payment or pay all cash, or make a lesser down payment, take a look at this.

When the stock market crashed in 1929, the banks called (demanded immediate payment on ) home loans in the 1920's due to the run on banks, which led to homeowners losing their homes. This is when people starting believing it was bad to have a mortgage and that it was bad to be in debt. Then, mortgage loans could be called on a moment's notice, but today, due to a change in the rule,  the bank is prohibited from paying in full without prior notice, and can only demand this month's payment. People have been trained to think of debt elimination and being debt-free due to this history.

• Mortgages don't affect home values--mortgage is not a debt, it is an asset class.
• Equity is built whether or not there is a mortgage, it is built due to market growth in value.
• A mortgage is the cheapest money you can borrow because it is secured by the property (unlike most debt which is unsecured and is given at much higher interest).
• Mortgage interest is tax-deductible.
• Mortgage interest is tax-favorable.
• Mortgage payments get easier over time, the payment never grows, but your income does.
• Mortgages allow you to sell without selling; owners have the opportunity to use the equity.
• Mortgages enable you to create more wealth than you otherwise would.
• Mortgages allow you to invest more money more quickly.
• Mortgages give you greater liquidity and greater flexibility. The 30-year loan may actually give a better return than a 15-year loan--if you save and invest the difference.

 Many people carry a mortgage even though they have the money to pay it off because they have learned to use their mortgage to create wealth. A big mortgage is not an excuse to buy a big house--Buy the cheapest house you can buy, and get the biggest mortgage. See Ric Edelman, 10 Great reasons to Carry a Big Long Mortgage

Buying a Home is An Opportunity to Leverage

Often when prospective buyer(s) think about making the change from being a renter to a homeowner, they add up all their monthly costs as a renter and then compare it to their monthly costs as a homeowner. If the amount as a homeowner is more, then they get discouraged and assume that buying is not a good deal for them. But instead of focusing on only their current role as a renter, they should go further and realize their role, and their opportunity, as an homebuyer/investor for their future:

Some people define leverage as using other people's money but another way to describe it is when a small down payment controls a large asset by placing a high loan-to-value mortgage on it. There are not many investments that allow leverage but homes certainly do and especially with FHA or VA loans.

Let's assume a couple or single buyer has the down payment and good credit that would allow them to buy a home. We'll compare some alternatives to see where their best outcome may be.

If a person put $6125 in a certificate of deposit (CD) that earned 2% annually, it would be worth $6,762 in five years and the profit would be taxed as ordinary income. If a person could take a little more risk and pick the right stock, the $6,125 might grow to $7,817 and the profit would be taxed at  the more favorable long-term capital gains rates if they held the stock for more than one year.

On the other hand, if the $6,125 were used as a down payment for a $175,000 home (possible with an FHA purchase) that went up in value only 1% per year, the equity would grow to $30,575 in the same five year period of time based on appreciation and amortization. In most cases, the gains on principal residences are excluded from income tax subject to limits. (Single person usually has an IRS $250,000 capital gains exemption and married couple usually has an IRS $500,000 capital gains exemption.)

The difference is dramatic and is one more reason that buyers should be taking advantage of the great selection of homes, the lower prices and incredibly low interest rates to fix their cost of housing for years to come. There may never be a better time to buy a home than now.

For more information on this, a rent vs. buy analysis may be obtained. Or please contact me through http://www.juliahuntsman.com/

Inspired by Pat Zaby

Has Your Home Loan Been Sold?

What if your home loan has been sold? This video interviewing Paul Leonard of the Housing Policy Council explains why mortgages may be sold, what is securitization and its function in the market, and the new banking changes which will require anyone who touches a mortgage in the future to have some responsibility for it: the Dodd-Frank Wall Street Reform and Consumer Protection Act (summary is 16 pages).

Was 2009 the Low Point of the Market?

Almost two years ago, in December of 2008, I did a post called The Cost of Waiting to Buy.  Blogger has a new stats tool for keeping track of your hits (since its inception June 1, 2010) and that particular post is the all time winner, which is interesting because it tells me there's lots of people who are at least thinking of buying, or would like to buy, or are looking for good reasons to not buy and they're having arguments with themselves or others, which means they're thinking about buying. And then someone left a comment saying they didn't think the bottom of the market had come yet, and that commentor may have been correct. Well, some people are now beginning to think that it has, and that the bottom of the market in California may have been last year, 2009.

After two consecutive years of record-setting price declines, the median home price in California will climb 11.5 percent in 2010 to $306,500 and increase another 2 percent in 2011 to $312,500, according to the forecast. CAR Housing Market 2011 Forecast.

The bottom is behind us. John Karevoll, Dataquick at CAR 2010 Expo at Anaheim.

Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years, and jumbo loans above $417,000 increased 15.7% from August 2009. DQ News.Com 9/2010.

The steady 9-month increase in median price for Los Angeles County could be another indicator.

For buyers, the price of a home and the availability and costs of a mortgage are two significant benchmarks. Is this your time? With prices still lower and, in spite of stringent underwriting by lenders, there are loans with low interest rates available. It could be your time.

A Market Snapshot for California Real Estate Activity for 2010 and 2011

The market predictions for 2011 were given out just prior to the California Association of Realtors Expo October 5-8, 2010.

The California median price for a single family house bottomed out in 2009 and in August 2010 the unsold inventory index was about 6.1 months, a market "normal". Unsold inventory by price is highest at the upper end of the market, and the lower end of the market is a 4 month supply. Affordability reached 70% in 2009 and 65% in 2010, meaning two out of three household can afford to buy an entry-level home in California. 

Median price for condos was $258,000 statewide, sales of condos were up in the Spring. First time homebuyers are 44% of the market, especially for condos. However, 20% down payment was the  median down payment statewide.

There are more non-distressed sellers coming on the market this year, comprising up to 59% of the market, while short sales are 22% of the market overall. Multiple offers (about 4) existed on 51% of properties in June, 2010. Sellers net about $35,000 in cash at close of escrow in 2010. FHA loans were used by 32% of all buyers.
Short sales or distressed property conditions were the reason for 29% of all sellers putting home on the market--a record number since the survey started.
Investors comprised about over 13% of purchasers, an active part of the economic recovery, while 5.3% were second home/vacation property purchases.
44% of buyers changed their minds after opening escrow, reflecting a great deal of fear and uncertainty about the market for many buyers.
2011 should bring a slight increase in sales volumeby 2% (to 502,000 units) and a slight increase in median home price of about 2% to $312,500 for the California median price. Interest rates are expected to remain low, with as much as a .5% increase in rates.

2011 should bring a prime opportunity to buy, but the actual number of move-up buyers and sellers is also of concern due to the number of owners with continuing negative equity in their homes who may hold off selling for a long period of time.

High cost loan limits ($729,750) will continue through September 2011, very important to the Califonria housing market, because the median home price is still significantly higher than the rest of the country.
Los Angeles County median home price is about $349,000, an increase of 2.8% over 2009. This is  also a reflection of the movement in the low end of the market where properties have moved much more rapidly than the high end where some prices have softened.


Overall, home prices in the state have either stabilized or improved.

The "shadow inventory" properties held by the banks are predicted to be in a 3-5 year window for the foreclosed properties to return to the normal market, but prices are likely to hold steady because it is not in the lenders' best interests to flood the market with properties.

There is upward movement in low-end prices where there is a lot of competition between first-time buyers and investors, more than in the $1,000,000-plus market where there is much more inventory.

Long Beach is a "microcosm" of the state -- high end areas over $1,000,000 and low end areas such as North Long Beach with a high proportion of distressed properties, and will probably mirror similar Los Angeles County area performances. The recovery for the city will not be uniform, and will be a reflection of its various internal markets.

Modest price appreciation in the future is a much more realistic expectation than the 20%-plus gains during the boom years which precipitated the market downturn.

"We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures,” Leslie Appleton-Young (CAR) said.



From the California Association of Realtors annual Realtor survey and the Housing Market Forecast for 2011.

How Many Properties Under $300,000 in Long Beach?



Ocean Blvd Condo

Today, the Southern California MLS (combined with CARETS) shows 631 properties in all areas of Long Beach. This is more than June, 2009 (431) and less than December, 2008 (737).

There are 269 single family homes of which 38 are bank-owned and 136 are short sales, the majority are in North Long Beach.  There are 340 condos under $300k,  of which 48 are bank-owned and 182 are listed as short sales. There are 13 co-ops, 4 require short sale approval and 1 is lender-owned. There are only 9 OYOs, probably because many have converted to condominium status in recent years--only 1 requires short sale approval and none are listed as bank-owned.

From these 4 categories, it's clear that short sales constitute nearly 50% of the market in this price range, while bank-owned properties, while bank-owned properties are about 14% of this category in Long Beach.

If you the buyer submits an offer on a short sale, know that they require patience and the ability to wait. The seller wants to avoid a foreclosure, and can usually only do so by obtaining short sale approval from the bank, and counting on the buyer to stick around for the entire process. Buyers should understand all of the short sale addendum terms, and be clear about the waiting period you've agreed to--if there is no waiting period (number of days) inserted in the addendum, that means you're committed to waiting until either the bank says it's not approved, or the bank says it's approved--whichever is longer. In other words, agree to 90 days and if there's no approval by that time, then it's safe to cancel and move on. A 30-day escrow including bank approval would not be realistic for almost all properties.

This is the affordable range for many people, and it also attractors investors who have a lot of cash. Some properties give a 10-day period for owner-occupants to make offers, another reason why the buyer should be prepared in advance with loan approval and funds documentation to be ready to make that offer, assuming it's the property you want. Otherwise, try to find a property being sold by an equity seller.

The future will continue to feature distressed properties in one form or another: "Sales of distressed properties are set to peak in 2011 at 2.3 million transactions before falling to more normal levels at 850,000 in 2016, according to a report from John Burns Real Estate Consulting."  Does that mean prices will continue to fall? It all depends . . . on the area and local real estate. That's why you should keep up with prices in the area of your interest, and stay in touch with a good lender and a good Realtor who can keep you updated on recent sale prices, interest rates and current lending guidelines (which can change every few months or every few weeks).

Nearby cities of Cerritos, Lakewood and Signal Hill also have properties, ranging in number from 22-27 each, under $300,000--the vast majority are condominiums with a small sprinkling of houses. Norwalk, however, has 200 properties, the majority being single family homes, so this is another area of opportunity for those willing to live a little further inland.
To see all properties of interest to you, including income property, just go to my website property search at http://www.juliahuntsman.com/. 

Going Green: Recycle Your California Appliances

Is your refrigerator getting more expensive to run? I think mine is because it's now 10 years old, and my electricity usage is going up (but cleaning the coils can also lower electrical usage too). If you're going to replace them, don't dump your old appliances or have them hauled away before you check this program first. The California Energy Commission is behind the Cash4Appliances program. Click on the link for more information.

Don't dump your old appliances, instead, recycle them, and/or get a rebate through the listed partners if you bought from them. This includes Best Buy, Home Depot, Fry's, Howard's, Lowe's, and other major chains.  I unfortunately do not see Sears on this list (where I bought my refrigerator). This program applies to residential occupants, and landlords and tenants of residential properties.

This program started in April, 2010, and will continue until funds are gone. Per their website today, there is over $11,000,000 available in funds. This program includes your refrigerator, clothes washer, room air conditioner, freezers, dishwashers, certain water heaters, and certain furnaces. As of July 28, eligible energy efficient appliances and rebate amounts available are: refrigerators $200, clothes washers $100, and room air conditioners up to $50. California Cash for Appliance PLUS rebates include: dishwashers $100, freezers $50, water heaters $300-$750, and HVAC systems: $500-$1000.

Another source for recycling refrigerators is through Southern California Edison, which will remove your working refrigerator and pay $35.

FHA Loan Right After Short Sale?

Short sales are a problem for sellers who want to get into a new home right away. Besides the probable impact to your credit score and the issue or rebuilding it, there are normally the mortgage loan guidelines that require a waiting period of 2 or more years after a short sale, depending on the buyer and the loan.

But for certain buyers, there could be an option:  If you are a borrower who has not suffered delinquent loan payments, but has suffered a market devaluation of your current home, you could be eligible for an FHA loan immediately upon sale of your current home IF:

1. You aren't selling your home and buying a new one simply to take advantage of today's lower prices;
2. You purchase at a reduced price a similar or superior property within a reasonable commuting distance;
3. The short sale is for your primary residence.
4. You are current on your mortgage payments and no 30-day late payments.
5. Your home is not pre-foreclosure (with a Notice of Default recorded against it).
6. You have no late payments on installment debt prior to the short sale.

The borrower's reasons for selling would have to be approved on the new loan's underwriter, but for example, if you're moving for school reasons for your child, or job relocation reasons for yourself, perhaps this loan is for you.
Please give me a call or e-mail me to see if this would work for you!