High Prices Aren't Just in Southern California

How about a bidding war where the highest bid is 1 million pounds over the asking price? Other parts of the world are also experiencing a real estate increase, to say nothing of Scotland. In 2000, 10 homes in Scotland sold for more than a million pounds (about $1.8 million in today's currency), but last year 57 sold in the range, according to the Bank of Scotland. See BBC NEWS Scotland Million-pound house sales soaring.

$500,000 California Median Price

April prices increased 12.5 percent and sales increased 2.7 percent compared with April of 2004. Closed escrow sales in California of single family detached homes totaled over 658,000 (but did you know there are approximately 438,000 real estate licensees in this state?). The median price was actually $509,230 for April, 2005. Read CAR's article:April 05 sales/price report.

National Median Home Prices

Here is USA TODAY'S home price report for the first quarter this year. The highest median home price is in the West, but the greatest increase by percentage was in the Northeast. See this for more.

Property Flippers Beware

US Bank Home Mortgage is now carrying on with what HUD started in 2003--namely, no loan funding for properties where the seller in a conventional home purchase has held title for less than 90 days. And Freddie Mac last October started property valuation warnings on potentially fraudulent loans. Property flipping is considered growing threat and could lead to financial losses--US Bank says it is "a threat to the integrity of the residential real estate industry", in a memo this week, according to Inman News. These transactions can involve false appraisals, which can lead to a false inflation of selling prices. If you are considering a purchase or sale in the near future, take these remarks into consideration, or ask your Realtor to give you assistance with a little research and advice.

Interest Rates Held Low

Investors' waning fears about inflation helped drive down rates on 30- and 15-year mortgages this week to their lowest numbers since late February, according to market observers. Interest on 30-year, fixed loans averaged 5.71 percent this week, down from 5.77 percent a week ago; and 15-year, fixed mortgages averaged 5.27 percent this week, compared to 5.33 percent last week, according to the weekly survey from Freddie Mac. "As long as inflation is held in check there is little or no pressure to push mortgage rates higher," said Freddie Mac chief economist Frank Nothaft. Fuel prices are high, he added, but "core" inflation remains under control. Source, Chicago Tribune.

40-Year Mortgages Stretch Payments

While they've been around for a while, 40-year mortgages have only recently been seriously expanded by FNMA. Higher and higher home prices call for more products to home ownership more affordable. It will probably have the most appeal for buyers who plan on staying in their home beyond the 5-7 year mark, and don't want to run the risk of refinancing at that time. See this for more.

One Stop Shopping

This is increasingly popular: You find a Realtor and then use their lender, or their escrow, or their title affiliation, all in one place. It saves time and decision-making, but is there more to it? In the wake of probes of questionable practices by certain title companies, Colorado initiated a bill, now withdrawn. Under a federal Act known as RESPA (Real Estate Settlement Procedures Act) which binds agents and others in the real estate industry to specific guidelines, these company affiliations are legal. But some have not followed those guidelines. What many consumers don't know is that using the real estate broker's escrow company means you aren't necessarily using an independantly licensed company, but one that may be operating under that real estate broker's license. Escrow companies are required to be a neutral 3rd party in a transaction, but are they if they are not independantly licensed? There are conveniences to one-stop shopping, but the consumer should also know more. Read here for more.

Demand for California Housing

Where will the tradeoff be between interest rate increases and continued demand for housing? Housing production may exceed 200,000 new homes and apartments for the second year in a row, and builders still may not be meeting the needs of a growing population. Last year alone 210,000 new units were built, the highest number since 1989. Historic lows in rates continues which compensates for the current market prices. So where will it level off? Rising interest rates will eventually impact selling prices, but a growing population will still fuel housing demand, while a continued positive employment outlook will sustain the current level of housing prices. See this article.

When Rates Fall- or Go Up

Rates on 30-year fixed rate mortgages have fallen for three straight weeks to 5.8 or less. Although there have been frequent predictions for months, and even years, that rates will once again rise to 7 percent within a year, these predictions are also tempered with recognition about other factors. Such as, dollars earned in foreign trade would stop flowing into U.S. Treasury securities, one cause of lower U.S. interest rates, or the Federal Reserve may adopt more aggressive credit tightening to fight inflation. But, as long as rates stay low, home sales march on at a pace beyond this year's expectations. Read here for more.

Are Lenders and Buyers Too Close to the Edge?

Today's loans were not available 15 years ago, and most were not available 5 years ago. The shift in the market has underlined the necessity of getting first-time buyers a way into homeownership. In the 1990's, a zero-down loan was very expensive and very difficult to qualify for and the few sources available were very restrictive. Now, it's a different story because lenders qualify a buyer on their FICO score, a kind of universal credit risk number which they feel is a very reliable indicator of risk. But are lenders taking too much risk? Trillions of dollars are riding on a single number, and while there is still an active, very active, real estate market, a more conservative spending profile, especially for younger adults, would only be a good thing. There will be a greater return on a real estate investment than there will be on a new SUV. Read Are lenders getting too lenient? - Apr. 22, 2005.