Archive for the 'Sac Real Estate' Category
Despite the weak housing market, or maybe in a strange way because of it, Sacramento has made Kiplinger’s 2008 Top Ten Best Cities to Live, Work, & Play.
If you ask Sacramentans where they are from, you’ll get a surprising array of responses. As a Bay Area transplant myself, it never surprises me to encounter other S.F. Bay Area people who have moved for quality-of-life reasons to this once quiet enclave of rivers, hills, bike trails, and growing number of restaurants, wine bars, theaters, and clubs. After all, we were all driving past the place for years on our way to Tahoe before we ever decided to get off the freeway and explore its tree lined streets. The place doesn’t yield its secrets to those who rush by intent on other destinations.
The ones that catch me off guard are the Sacramentans whose journey began in distant places like Eastern Europe, Southeast Asia, and Scandinavia. How in the heck…? But as they say, it’s a small world, and growing smaller.
In any case, word is out. And it’s no longer accepted as fact that Sacramento’s only attribute is it proximity to interesting places. It has become a destination with lots to do and enjoy. And with the recent deflation of the real estate bubble, it’s more affordable and attractive than ever. Go Sacramento!
read comments (2)Even as the Sacramento real estate market’s lower price range turns frothy once again with first-time buyers and investors slugging it out over for bank foreclosures, the lending noose draws a little tighter.
The Pitfalls of Buying Auction Properties
A client called last week. She had purchased a home–a condo actually–at auction last November, and she got a great price. However, she was unable to arrange a loan because the condo was “non-warrantable”, a term that means the condo project didn’t meet Fannie/Freddie requirements. After paying late fees and penalties for failure to close on time, and not wanting to lose their deposit, she pulled money from their home on an equity line and paid cash for the condo.
Now she wants to refinance the condo and pull some of her cash back out. The trouble is, lenders have reinstituted “property seasoning” requirements and tightened up the cash-out rules. Fannie Mae and Freddie Mac now require 12 months “seasoning” before she can refinance and get any cash back out of that condo.
Moral of the Story
I hear frequent tales of all-cash buyers in the market. It makes sense. Some of these bank-owned properties are so trashed that banks won’t lend money on them. The only solution is to buy for cash, fix the place up, and then get the loan when the property is in decent shape.
Now, that game is over. I think lenders want to finance responsible investmentments, and they’re sick of “flippers” and people trying to make a quick buck. So, watch your step. And if buying for cash was going to be your strategy, plan to have your money tied up for a bit longer.
Sacramento Real Estate & Mortgage: A New Day
After 3 1/2 years of a real estate market in full retreat, affordable prices have once again sparked a frenzy of buying activity. Buyers are back. Some are first-time home owners previously sidelined by an overpriced market or frightened off by the free-fall in values. Some are investors who can now achieve a break-even cash flow while buying at the nadir.
Banks, heavily laden with foreclosures, are taking advantage of this turn of events by stoking the bidding fire with aggressively priced REO properties. Its the eBay syndrome. Draw people in with low prices and let their emotions carry the price up. It works.
I am amazed too at the money that has emerged to take advantage of this. Reports of all-cash buyers (investors mainly) are frequent, and I have refinanced homes for clients, withdrawing enough cash to purchase investment property without financing restrictions. That is almost a necessity in cases where the property condition would preclude new financing.
So with prices bouncing off a hard floor and the sudden release of pent-up demand, the bottleneck seems to be with financing. Lenders are still reining in LTVs, raising credit score requirements, demanding repairs on rough properties, and generally behaving the way you or I would if we were worried about being able to sell these loans to investors.
Still, for those who can document income and good credit, there are still options. And a little down payment can do wonders. In fact, its a lot like it was a decade ago. And that makes pretty good sense.
Real estate buying activity in Sacramento is highly concentrated in the foreclosure sector. Makes sense. Buyers want the best deal they can get, and bank-owned properties appear to offer the best chance for that. But financing those REOs isn’t always easy, especially as shrinking bank liquidity pulls the lending noose tighter.
The Problem with “As Is” Sales
Many bank owned properties have been abused or poorly maintained. The banks who now own them would prefer to sell “as is” to avoid throwing good money after bad. But you can bet those same banks wouldn’t finance those homes now if asked. Prices are even lower if the bank hasn’t had to spend money on fix-up, but securing a loan on a roughed-up property is a growing challenge
Traditionally, lenders are concerned with two categories of repairs: habitability and health & safety issues. Conditions that impair habitability include kitchens lacking appliances or cabinets, non-functional sink or toilet fixtures, damaged or removed flooring, or a leaky roof. Health & safety issues are self explanatory but can include even minor items like missing electrical outlet covers. Banks have always required that these items be repaired prior to close. But it’s getting tougher as banks balance sheets dry up, leaving them extremely vulnerable if they originate a loan that cannot be sold off immediately in the secondary market.
A Few Possible Solutions
Here are a few ways to deal with this challenge.
Sacramento Real Estate: Prices Find the Bottom
What emerged as a brief flurry of activity appears to have developed into buying trend. Sacramento prices–at least in some areas–may have finally found a bottom.
How do we know this? Although the activity seems highly concentrated in the bank-owned property arena, it has become common for buyers to have competition. Investors and first time buyers are competing for properties at the bottom, often driving up prices beyond that asked by the bank/owner. According to agents I know, there are many all-cash offers among the buyers out there.
Sacramento Mortgage Rates: The Local Market Heats Up
Today’s jobs report continued the 3-month trend of losses. In a rather ominous sign, the service sector– responsible for 80% of the economy’s job growth–failed to produce any increase. To make things more dreary, January and February’s losses were revised lower still by a combined 68,000 jobs, for a total of 232,000 jobs lost year to date. Unemployment edged up to 5.1% to no one’s surprise, but on the on the heels of further banking losses and home foreclosures, expectations rose slightly for a 50 basis point Fed cut on the 29th.
Yesterday, Freddie Mac reported a weekly average 30 year fixed rate of 5.88% with one-half point, although we’re getting a bit more improvement today. Inflation worries have been sidelined this week by further concerns about the economy. The debate still wages between those who think the economy can weather the financial and housing crisis and those who think we will have a full blown recession before it gets better.
Sacramento Real Estate Heats Up
In an odd sort of paradox, the Sacramento housing market has heated up. Although activity is highly concentrated around bank-owned properties, multiple offers and competitive bidding has replaced the near absence of buyer traffic. I have several all-cash buyer clients who have had offered on numerous properties only to be outbid buy investors and first time buyers. While lending guidelines tighten and change every day, the trophies will go to those who are still well enough qualified to snake through the lending gauntlet.
Prices are still in decline according to my appraisers, but they have obviously reached a threshold of affordability, and buyers are coming out to check out the merchandise.
New FHA & Conforming Loan Limits Announced
The new, temporary FHA and Conforming Loan Limits for 2008 were announced today by the Office of Federal Housing Enterprise Oversight (OFHEO). For the Sacramento Metropolitan Statistical Area (MSA), the new loan limit for single family homes is $580,000, a substantial increase over the current conforming loan limit of $417,000 and the current FHA loan limit of $362,790. You don’t live in Sacramento? Check your area here.
Weird Math
This a nice surprise! I was pretty sure that with a median price in the low $300k range as reported by DataQuick and NAR, the new limit wouldn’t offer Sacramento home owners much relief. But here’s the part that was not apparent in the language of the bill. This is from the OFHEO list:
the maximum temporary loan limit is calculated as 1.25 times the median house price for the highest priced county in the property’s metropolitan or micropolitan area
Ah! That makes a big difference.
The Final Puzzle Piece
So the last piece of the puzzle fits into place when we learn how the lenders will price the “jumbo conforming” loans. FHA says there will be no premium charged for the higher-than-normal FHA loan limits, but Freddie Mac has already declared that the new conforming loans will be segregated into different pools based on the increased risk of early payoffs.
Stayed tuned for that pricing, but let’s get your jumbo loan dialed in and ready to go. Rates are on the upswing, and we may not see rates fall any further.