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High Balance Loan Limits Set to Expire for Tri-Valley and the Rest of the U.S.

On September 30, 2011, the high balance loan limits are set to expire.  Currently, for “high cost” areas like the Tri-Valley area, the high balance loan limit is set at $729,750.  This limit was originally established as part of the Economic Stimulus package of 2008. This amount will be adjusted down to $625,500 for high cost areas. For the Tri-Valley housing market, this reduction in the high balance loan limit could have dramatic impacts. Loans could be subject to tighter credit conditions.  

For one, the interest rate you are securing will most likely be at a higher amount.  For example, if you are shopping for a home and have determined that you will need a loan amount between $625,500 and $729,950 that loan will now be secured at a higher interest rate.  As of this article, a jumbo loan rate is about ½% higher than a conforming 30 year fixed rate according to Bankrate.com.

Another impact is that a loan over the $625,500 mark will require a down payment of at least 20%.  The option to put less than 20% down for loans between $625,500 and $729,950 will be no longer.

Both factors could mean weaker demand for homes in the high cost markets.  This eventually could lead to downward pressure on prices.

Tri-Valley Area 2010 Real Estate Review and 2011 Predictions

I am envisioning him now – a fraction of the man he used to be.  This is no dig on Al Roker for his amazing weight loss.  Strictly an opportunity to use a phrase he casts out to millions of viewers on a daily basis, “Here’s what’s happening in your neck of the woods.”  The goal of this article is to give you a clearer understanding of what happened in your “neck of the woods” (the Tri-Valley area) for real estate in 2010 and to offer my predictions for 2011. Let’s dig in. 

The Tri-Valley area has been a very interesting place to conduct real estate transactions over the last year. Not only is every transaction more difficult to complete, there are numerous outside influences impacting the real estate trends in the Tri-Valley.  I feel there are four primary factors that influenced Tri-Valley real estate in 2010 and these items will continue to impact the real estate market in the near future.  These four factors are the number of foreclosures/short sales in the market, interest rates, lending ability and inventory numbers. 

The wave of foreclosures/short sales has taken its toll this year on the market.  For most of the year in the Tri-Valley, the percentage of active homes that were foreclosures/short sales was between 40 and 50 percent at any given time.  In some specific subdivisions, those numbers were closer to 75 to 90 percent at times. For instance, in the Tassajara Creek, Tassajara Meadows and Roxbury neighborhoods of Dublin, 9 out of the 10 currently active/pending homes are foreclosures or short sales.  What contributed to this high percentage in the Tri-Valley?  It is my belief that it is directly related to the large number of homes purchased between 2005 and late 2007.  This was during a time period when home prices were at their highest and loans were being handed out with little scrutiny.  Despite the tightening of nationwide lending practices and the fact that we have seen a significant decrease in home prices, I still expect the percentage of short sales and foreclosures to continue at around the 40 to 50 percent range well into 2011. This is based on my current discussions with sellers and other Realtors around the area.

Secondly, interest rates have been at historic low levels for most of 2010.  Bankrate.com shows the current interest rate as of construction of this article at 4.96 percent.  I expect a slow and steady increase of rates to continue into 2011.  However, I have mixed feelings about how this will impact buyer demand.  First, I do believe that there are a number of individuals currently living in the Tri-Valley area who have only been accustomed to interest rates in the 4 and 5 percent range.  These individuals have relocated to the area from out of the country or have only become interested in home ownership in the last few years.  The fact that they have only experienced interest rates at these low levels will create a greater “sticker shock” as interest rates continue to rise in the future and may sideline many of these buyers in the short term.  However, once interest rates reach a certain higher level, it would seemingly have to Read more

Mortgage Rate Update Ending 11/24/10

Bankrate.com  conducts a weekly national survey on the interest rates for the five most common consumer banking products.  Here’s the outcome for 11/24/2010:

• 30 Year Fixed Rate: 4.58 percent
• 15 Year Fixed Rate: 3.97 percent
• 5/1 ARM (Adjustable): 3.66 percent

According to the Mortgage Bankers Association:

Foreclosures Halted in all 50 States – TriValley Impact?

Earlier in the week, attorneys general in all 50 states agreed to investigate whether banks and other lenders have used false signatures and documents to substantiate foreclosures. What does this mean for the housing market across the country and in particular right here in our own backyard – the Tri-Valley area?  I believe that this is only delaying the inevitable both locally and nationally.  These homes, at some point, must come on the market.  Are we to believe that during this moratorium of foreclosures that no other homes will fall into a delinquent status and also eventually succumb to foreclosure?  This has been the situation for a few years now and will continue to be the case into the near future.

The answer is analogous to blowing up a balloon to its extreme.  More and more air fills the balloon until eventually the balloon pops letting out an explosion of air.  The only other option for the balloon is for someone to slowly let the air out.  The key is going to be in the management of how the banks distribute the foreclosure inventory to the marketplace once the moratorium is lifted.  If the banks disperse the foreclosures all at once or in heavy loads we can be in for a major impact to the housing market.  If the banks slowly roll out the foreclosures the immediate impact to the market might not be as great.  However, I believe this will only prolong the real estate market’s troubles for years to come.

On CNBC recently, former Fannie chairman and CEO Franklin Raines commented that loans that remain out there should be restructured “so that we can get out of this mess of people who are having a drag on the economy, a drag on confidence by consumers.”

“We need to have a major restructuring of the outstanding mortgages so that we can move forward with confidence and vigor,” Raines said.

Mortgage Rate Update Ending 8/4/2010

Bankrate.com  conducts a weekly national survey on the interest rates for the five most common consumer banking products.  Here’s the outcome for 8/4/2010:

• 30 Year Fixed Rate: 4.66 percent
• 30 Year Fixed Rate Jumbo: 5.34 percent
• 15 Year Fixed Rate: 4.11 percent
• 5/1 ARM (Adjustable): 3.95 percent
• 1 Year ARM (Adjustable): 4.80 percent 

According to the Mortgage Bankers Association:

• Mortgage applications rose 1.3 percent when compared to a week earlier
• Refinance applications shot up 1.3 percent when compared to a week earlier
• Applications for new purchases increased 1.5 percent

According to the National Association of Realtors:

• Pending home sales fell 2.6 percent in June when compared to a month earlier
• Sales were also down 18.6 percent year over year.

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