YEAR END REFLECTIONS - GOOD RIDDANCE 2023!

Well, what a year we’ve had!  As 2023 winds up, we are glad to see her in the rear view mirror!  2024 should bring lower rates and more inventory for home buyers to choose from! 

MARKET AND RATES

While the volume of home sales hit a record low this year, prices have continued to rise in most of Southern California.  If you are planning a home purchase, we strongly recommend that you move sooner than later.  We will experience a buying frenzy as soon as rates get a bit lower (they have already softened in the last month) and buyers will come off the sidelines in droves.  With lower rates, more homeowners will list their homes.  One might think more homes on the market would mean prices will drop.  But, there is so much pent up demand there is no indication that home prices will come down.  Don’t delay!

A REAL STORY  

In the last week, two different clients called us, ready to make an offer on a property.  They had gone to an open house, and loved the home.  However, in both cases, they were not yet pre-approved.  We had not had time to collect data and strategize with them.   By the time they provided us the documentation required (income and asset information primarily) so we could pull a credit report and run automated underwriting, the home was already in escrow and pending close.  Get Pre-Approved ahead of time!  Don’t delay and miss out on your dream home!  We work with some buyers over a year to prep ahead of time.

GOOD NEWS FOR 2-4 UNITS

Until last month, buyers or owners of 2-4 units needed to have a minimum of 15% down or more.  The Agencies (FNMA and FREDDIE) have reduced the minimum down payment required for 2-4 unit properties to 5%, so long as one of the units is owner-occupied.  This is fabulous news.  Remember, you will receive credit for 75% of the imputed rental income for the other units, so this actually helps qualify for a purchase!!

NEW INCREASED CONFORMING LOAN LIMITS

Conforming loans meet FNMA and FHLMC guidelines.  These guidelines are more lenient vs. Jumbo loan programs, so the rise in the loan limits is good news.  Many counties throughout California have different loan limits-- so we always need to check, depending on property address. 

$1,149,825 – LA and Orange County; San Diego is slightly lower.

$766,550 – Riverside and San Bernardino

TAX RETURN REMINDER

Please don’t file your federal returns for 2023 until we can review them, if you plan to buy or refi next year.  This can make or break a successful transaction.

MERRY CHRISTMAS and HAPPY HANNUKAH TO ALL.  REMEMBER TO BE SAFE, BE KIND, AND CHERISH YOUR LOVED ONES.  WE LOST A DEAR FRIEND THIS MONTH.

As always call us with any questions or concerns you may have.

Karen, Katie and Stephanie

TRICKS, TREATS AND TURKEY!

Well, that was fast!  Halloween has come and gone, and daylight savings is over.  Personally, I dislike the darkness in the late afternoon.  Time to get out my light therapy lamp! 

INTEREST RATES

Rates have come down a bit over the past week, a welcome relief.  They are back down towards the mid-7’s but as always, the rate you receive is dependent on a number of factors. Why the downward trend?  Although the economy is still chugging along, new jobs numbers were lower than expected and unemployment figures are up.  We see consumer spending on the rise coupled with higher consumer credit use, and savings rates down.  Please stop discretionary spending so inflation can slow!  😊

The Fed did not raise their rate this month but has left the door open to a future increase...

HOME VALUES

Here in Southern California, along with most of the country, home prices are still rising due to the low inventory nationwide.  Be assured that an investment in real estate in Orange County is a solid investment for future growth.  Although rates will come down further at some point, home prices will not.  Buy now, Refi later is the Mantra of lenders and realtors alike.  Marry the Home, Date the Rate!

ATTENTION VETERANS!

Both VA loans and CalVet loans offer lower interest rates and up to 100% financing of the purchase price.  The CalVET program has rates lower than anything out in the market today, plus they offer down payment/closing costs assistance with a “silent second” that carries no payment for the first ten years.  We salute our Veterans on Veteran’s Day this November 11^th.  Thank you for your service!

ACCESS EQUIITY WITHOUT TOUCHING YOUR LOW-RATE MORTGAGE

Almost every day we hear from clients who want to access cash out of their home without touching their low-rate mortgage.  We are here to help!  You can use a personal loan to quickly access cash by clicking here:  Personal loan link

You can also access cash using a HELOC (Home Equity Line of Credit) and these come in floating rate lines or fixed rate loans.  Your choice depends on your needs.  We have programs available to assist you, so reach out!

Last but not least, you can access equity with a Reverse 2^nd Mortgage.  As an example, your home is now worth  $1.5M.  Assuming  you are age 70, and your current loan balance is $350,000, you can access up to $200,000 in a reverse loan in 2^nd position with no payment required.  These programs come in a few different setups.  One requires interest only payments for ten years, and then converts to no payment required.  The other is standard, with no payment from the get-go. 

THANKSGIVING

This is the time of year when we reflect on all that we have to be grateful for.  With all the turmoil in the world, we are exceedingly lucky to live in such a beautiful and relatively peaceful place.  From our Team to your family, we wish you a fabulous holiday with your family.

ADVERSITY, OPPORTUNITY AND FAST CASH!

 

MARKET UPDATE - ADVERSITY

The latest news for multi-family housing is developers have slowed/stopped new construction.  This is primarily due to higher interest rates coupled with greater difficulty qualifying for loans.  This will translate into higher rents, particularly in the coastal areas of California where housing is already in short supply and high demand.

Translation:  Prospective buyers should not wait for rates or prices to come down, as neither is likely in the next 12 months.  No one anticipates home values to decrease.

OPPORTUNITIES

We are offering a personal loan program – NOT a Mortgage loan – for auto loans, remodels, swimming pools, debt consolidation, recreation and more.  This is not recorded on your home and has no effect on the low rate first mortgage most of our clients have. The turn time on these loans is extremely short, even overnight, and offers a quick and easy way to access fast cash.

Loan amounts can vary from $5,000 to $100,000.  Loans are underwritten based on income, assets, and credit.  The process is completely digital and there are no up-front fees or prepayment penalties.

Click here for the link to a quick qualification process:  Personal Loan Link

REMINDERS

Real estate taxes are coming due, and must be paid by December 10^th to avoid penalties  The second half taxes are due by April 10th.  Such great timing for Christmas and tax time, huh?

Self-employed borrowers should have their taxes reviewed by us prior to filing if they are considering making a home purchase or refinance in the next two years.  Writing off too many expenses can kill a home purchase or refi, unless you want to use a bank statement loan which carries a higher rate.

PERSONAL UPDATES

I’m writing this from Madera (just north of Fresno)  where I am temporarily staying with my sister who suffered a stroke.  My sister lives alone and we were extremely lucky her daughter sounded the alarm when she could not contact her one morning. 

She is improving daily, and we expect a full recovery.  This has been a big wakeup call and reminder to be grateful every day, keep your loved ones close, always do your best and be kind to all.  And, take good care of your health.

As always, call us with any questions or concerns.

 

Labor Day Blues! Fall Market Update

Summer is almost over, and the children are all back to school. How did it possibly go by so fast? We had a lot of rain and cold, and then a month of hot, muggy summer.

Now we suddenly have the beaches all to ourselves again (for those who live near the beach) while the kids’ sports and school activities are getting very busy!

Unfortunately, not so for the Real Estate market! We are still experiencing some of the lowest loan application rates seen in 28 years. And rates continue to rise. We are well over 7% for most conventional loans today. Now, if you look at history 7% + is near the average, but what a sudden jump from 2022. And the short-term outlook isn’t rosy as inflation is bouncing up again. This, more than anything, has a direct effect on mortgage rates.

There have been seven rate hiking cycles from 1968 to 2008/09 that ended in a recession. It has taken on average 22 months from the first hike to the start of the recession. There were two cycles that didn’t end in recession. So, who knows?

INSURANCE CRISIS?

State Farm, the largest home insurer in California has stopped writing new policies as of June. Others including AIG and Chubb are both NOT renewing policies in the state. AmGuard, Kemper and Allstate are out now also. Farmers is limiting its new policies.  Why? There are multiple factors, primarily climate change, more fires, and higher costs to rebuild due to inflation. The California State regulatory guidelines for insurers have not helped.

Don’t hesitate to contact us if you are experiencing insurance woes. We have a number of experts we can refer you to who can find your homeowner’s policy a new home.

What does this spell for the long term? It will make qualifying for a home loan more difficult with prices rising, particularly in certain zip codes which are labeled as high fire hazard areas. You know who you are!

FUN FAMILY STUFF

We rounded out the end of summer with a lot of time spent at the ArtAFair in Laguna Beach, where Steve showcased his plein air and impressionist landscapes. For a neophyte he did very well and also obtained some new commissions. What is leftover is coming back home and I get to move my art in our home around a bit, which I enjoy. Changing up the landscape, so to speak!

We enjoyed some great music at various outdoor venues including the Art Festival and the Dana Point Concert series and attended the Pageant of the Masters in the Laguna Bowl, which is always entertaining.

Labor Day weekend brought out a huge crowd to the Dana Point Harbor, on various watercraft including surfboards, SUP’s, floaties, kayaks, and all manner of boats to hear our favorite David Allen Baker with the Kicking Giants band. What a hoot!

HOT, MUGGY HEAT WAVE AND RATE HIKES

 RATE OUTLOOK

The recent heat wave has brought not only higher temperatures across the country but also higher interest rates.  I guess you could say “careful what you wish for”…we were so tired of the cold, but we were not looking forward to a rate rise.

With the recent Fed rate hike of another .25%, up to 5.5%, it brought Prime Rate to 8.5%.  This is the highest Prime Rate since 1991.  What is Prime Rate?  It is the rate generally used by banks to lend to customers with good credit and is oftentimes used as an index for floating rate loans such as a Home Equity Line of Credit.

Mortgage rates have risen as a result and should level off as we don’t anticipate any more Fed Funds rate hikes.  Recession hopes (or fears) are lessening and a soft landing seems to be on the horizon.  What does that mean for interest rates?  They are likely to ease more slowly than we anticipated earlier in the year.  They will eventually come down, but it may take longer so don’t hold your breath for rates in the 3’s or 4’s again. 

Essentially, we’ve just about hit the average mortgage rates for the last 50 years.  Back when I had to walk miles through the snow to get to school, they were almost identical to today before they shot up in the early 80’s (18%!) and proceeded to generally decline over time from that point until July of 2021.

PROPETY VALUES

While low inventory continues, there is little downward pressure on home prices.  It is now apparent that few homeowners with a rate in the 2’s or 3’s have any motivation to sell, unless they are moving out of state or are experiencing a life change-- (job change, divorce, or death) There are rumors of stagnation in the “luxury” market, i.e. slower pace of selling for homes over $2 to $3 Million. Home prices have risen as of the latest sales in most Southern California markets.

CONSTRUCTION LOANS

Did you know…we have a construction lending department that can provide construction loans for rehab purposes as well as new construction.  They are a bit more complicated as funds are doled out as work is completed and invoices provided, and there is a lot of up-front planning that takes place such as approval of architectural plans, appraisal, contractor, etc.

BEACH TIME and FAMILY UPDATES – Sailing and Swimming!

We recently spent four days camping in Carpinteria on the beach.  We had most of the family there, which was a real treat.  Barbeques, sitting around the campfire, playing in the ocean and on the sand, and taking beach walks in the morning was all part of the experience. We had to watch for the raccoons who were voracious and got away with an entire carton of eggs one evening in our presence!  They are sneaky and fast!

Grandson Theo in San Diego has been killing it in his sailing races.  He just competed in the Jr. National Sabot Championships in Newport at NHYC and came in 19^th overall out of 150 sailors.  He was also in the top 10 in the preliminaries.  WOW!  WAY TO GO THEO.

My granddaughter Kay (AKA Karen, my namesake) is age 6 and just finished her very first swim meet and won both her events – the 25 free and 25 fly.  Big surprise as her mama, my partner Katie, was a very competitive swimmer through high school, although college was all about Water Polo. Go Bears!

As always, we are here to help with any questions! 

 

SUMMER FINALLY ARRIVES FOR THE 4TH!

We hope everyone had a Happy and Safe 4^th of July!  Ours was eventful with visiting children, Water Wars in the Harbor, and a traditional barbeque crowned by the fireworks in Dana Point.

INTEREST RATES

Interest rates have risen to recent highs, due to continued new job growth, dropping unemployment, and the Fed’s news that they will yet again raise rates to slow inflation further.  Although inflation has lowered to 4%, it has not yet hit the desired target of 2 to 3%. 

Most economists do expect rates to come down in the next six months, but they are not expecting as steep a drop as before.  Our advice is to prepare for the “new normal.”    Once rates stabilize, we will likely see rates in the 5’s for some time.

MARKET UPDATE

Home prices are very slightly off their highs of last May.  Orange county still has a $1 million median price, down from $1.05 million, while LA county has a median of $800K, down from the $860K high a year ago.  And, homes are again selling over list price!

The biggest issue continues to be a very low sales volume, which can primarily be attributed to the paucity of listings.  Of course, interest rates play into the volume of sales, but there are so few listings there is little downward pressure on home prices, if any.

MOVING OUT OF STATE?

We are part of a large network of loan officers licensed in all states in the country, save New York.  We can assist our clients with financing when moving or buying a second home out of the state of California.

The most common states to move to?  Nevada, Arizona, Oregon, Idaho, and Texas.  Lower taxes seem to be a large part of the equation!  There is also a migration out of cities and into suburban or rural environments.

THIS AND THAT

We continued our holiday celebration last Wednesday with a pool party with dear friends.  It was lovely weather for the pool, and even better times with old friends!  And, my sister joined me for a long weekend to visit and attend the art festivals in Laguna!  She is a new member of the Madera County Grand Jury.  Pretty impressive stuff!

JUNE GLOOM -- MARKET GRIDLOCK

 

I know you will all agree with me that the gloomy wet weather needs to depart Southern California, so we can return to Sunny SoCal!

RATES AND MARKET UPDATE

Home prices continue to rise, albeit more slowly.  We are seeing a stronger return to the market for buyers for the spring home buying season.  However, we continued to be plagued with low inventory which is causing a shift again to a strong seller’s market with multiple offers being received for most properties.

For those property owners who might consider selling but are held back by higher interest rates for a purchase, remember this:  rates will come down and mortgages can and will be refinanced. 

MORTGAGE INDUSTRY NEWS

·        Some pesky fees for certain loans have been reversed by the Agencies, e.g. Fannie and Freddie.  This is great news for homebuyers who would have faced higher rates for some loans.  There was a great outcry by the mortgage industry and the additional fees were removed.

·        Bank statement loans for self-employed individuals are gaining in popularity as their rates are now competitive with standard full-documentation home loans.

·        Buying investment property is gaining in popularity and made much simpler with Debt Service Coverage Ratio loans.  These programs qualify the buyer for financing based on the anticipated rental income coverage of the Mortgage payment, taxes and insurance.   The buyer does not qualify for a loan based on her or his income, but on the property cash flow.

·        Income from an ADU may now be considered when qualifying for a mortgage.  We have construction loan programs that can finance the construction of an ADU.

THIS AND THAT

We are off for a quick weekend visit to the wine country north of Santa Barbara.  We have a couple of tasting events scheduled in the Foxen Canyon area, and will be tent-camping at El Capitan with friends in their new RV. 

We also have a family camping adventure scheduled for late July at Carpinteria State Beach.  All the kids and grandkids will be joining us.  Can’t wait for some fun in the sun on the beach with games, biking, swimming etc.

We just spent the Memorial Weekend celebrating our fallen warriors with the Dana Point Yacht Club.  There were many boats anchored in the marina to make space for visiting sailboat racers.  The raft-up is always filled with fun, food and live Music on Sunday. 

Please reach out to us with questions!  We are here to help!

Karen

Market Updates, Panama Canal and Scuba Diving

 THE MARKET

We just returned from our Company Summit meeting, with industry updates, information about new programs, a variety of speakers, and great information coupled with a lot of fun!  New technology allows us to have files quickly and completely approved within 24-48 hours to allow realtors to avoid lengthy contract contingencies.  Good news for buyers and agents alike! 

We also have been using our Mobile App more and our clients love it.  They can do everything on their file right from their phone, from uploading documents, to signing required items. Wow!

Rates are moving up and down a bit with no indication yet of a real direction.  We continue to expect rates to decrease by year end, as recession finally takes hold of the economy.  Home prices are holding  steady, at least here in Southern California.  As of now there is still so little inventory that there is no downward pressure on prices.  And, when rates do drop, there will be more buyers ready, willing and able to step up competition for the homes that are on the market.  So, why buy now?  Because when rates drop there will be more competition for your dream home.

PANAMA CANAL AND SCUBA DIVING

We escaped the local cool March weather and rain to complete a “bucket list” trip through the Panama Canal and up to the Cayman Islands over the last four weeks.  We joined friends on their 55’ sailboat in Panama City, awaiting clearance to go through the canal.  The locks were quite an experience, as we went first up, and then down to get through to the Atlantic from the Pacific Ocean over about 14 hours.  

We then sailed to the San Blas islands which are inhabited by the Guna peoples.  These tiny tropical islands are picture-postcard beautiful, and the people are friendly.  They live in very primitive circumstances and seem happy as clams!

Next we sailed to the island of San Andres off the coast of Nicaragua (although it is Columbian) and spent a couple days there resting/regrouping before our longer passage to Grand Cayman.

After our arrival at Georgetown yacht Club, and general boat clean-up, we moved off the boat to the Sunset House Dive Resort for the last week of our trip.  We only saw a couple of sharks and turtles-- but had a great time diving and touring Grand Cayman. 

The sailing was harrowing at times with a couple of mishaps involving sails and a lost kayak, but overall it was the adventure of a lifetime. 

FHA AND VA LOANS LOOKING BETTER!

BIG NEWS ON FHA AND VA LOANS!       

HUD has finally reduced the monthly Mortgage Insurance (MI) premiums for FHA loans. We’ve been anxiously awaiting this correction since they had amassed a rather large overage of funds collected for this insurance, which basically protects the lender from losses on high loan-to-value loans.

This is great news for first time homebuyers with low down payments.  The drop in monthly MI of 35 basis points presents a big savings in the monthly payment, particularly for those with 3.5% to 5% down, on purchases up to $1.1 million.  Savings is in the range of over $3000 annually.

VA has reduced their upfront Funding Fee, which is a fee charged by the VA for all VA loans.  This fee is paid directly to the VA and is typically added to the loan balance so it is financed over time as part of the loan payment.  This reduction makes it more attractive for repeat uses of VA loans, which offer lower interest rates and higher loan-to-values, without any Mortgage Insurance. 

WHO WANTS TO SELL?

Our inventory of homes for sale is shrinking again locally.  This means that sales volume has dropped quite a bit.  Many homeowners who might like to sell are postponing a move, as they don’t want to lose that low interest rate loan they currently have.

But it also means that home prices are just not going to drop much at all, at least locally.  Demand is currently about equal to or exceeding supply.  We aren’t seeing multiple offers on properties, but we also aren’t seeing big price drops.

We still see this as a great opportunity for those homebuyers with the stomach for higher rates, as they have little competition.  And those buyers who move in now will have the opportunity to drop their rates and refinance sometime later in the year, or early next year, when we anticipate rates to drop.

PET UPDATE

After quite a long hiatus, we decided to adopt two cats (siblings) last July.  It has been an adjustment but they have settled in and we are enjoying their company.  The only thing we forgot is now we have to have cat sitters while we are out of town!  Isabel and Theo are here:

As always please reach out with questions on these programs.

GIFT FUNDS --- AND ARM LOANS

 ARE YOU TAXED ON GIFT FUNDS?

One of the most common questions we hear from home buyers is about gift funds.  You can use gift funds from a relative towards a down payment and in most cases, there is no tax consequence to the donor.

The current annual amount that is tax-free, or excluded from taxes, is $17,000 per donor per individual.  For example, a couple may gift to their child $34,000 tax-free.  ($17K per donor) They may also gift $34,000 to their child’s spouse.  And, to all their other children and spouses, grandchildren, etc. at $17,000 per donor per recipient. 

But, what if they gift a larger sum, $200,000 or more?  Right now, the lifetime exclusion for gift tax is $12,920.000.  Yes, almost $13 million per individual.  A gift larger than $17,000 per individual must be reported to the IRS on form 709 and yet, no tax is due unless and until the donor passes the threshold of $12.92 million.   However, this threshold expires in 2026.  At that point it will likely revert back to $5 or $6 million.  Funds already gifted over that threshold will be “grandfathered” and no gift tax will be due.

We always suggest consulting with a professional CPA, tax preparer or estate attorney on these matters.  But, for most of the “hoi polloi” (the common people, or the masses) this will likely not present a future tax issue.  If you are a Hoi Oligoi (elite or the few) you may owe taxes for larger gifts.

RATES and ARMs

You’d think that short term ARMS (Adjustable Rate Mortgages) would have lower rates, right?  Not in this environment.  Since the market anticipates more volatility in the short term-- and that rates will drop sooner than later, short term rates, for 5- and 7-year ARMs are HIGHER than for 30 year fixed rate loans right now.  This is the dreaded “inverted yield curve” foretelling recession on the horizon. 

INCOME TAXES

Yes, it is that time of year again! We are in the process of sending out the final closing statements for all clients who closed a loan in 2022.  This is necessary when prepping for your 2022 tax return.  This year the due date is April 18 for individual federal tax returns. The IRS is already accepting filings. REMEMBER IF YOU PLAN TO BUY OR REFINANCE THIS YEAR, HAVE YOUR LOAN OFFICER REVIEW DRAFTS PRIOR TO FILING.

Recently a client reached out with a complaint regarding capital gains on the sale of a rental.  This in turn affected her Medicare premiums.  A quick review of her taxes revealed her CPA had entered the wrong basis for the property upon inheritance, which means she overpaid by a hefty amount on her taxes.  Good news:  Amending the returns will result if a refund of over $30,000 and an attendant reduction in the Medicare premiums.

REVERSE FOR PURCHASE LOAN

Yes, you can use a reverse loan to buy a home.  This increases your buying power, and there is no monthly payment required for the loan. Please reach out to us for more information.  These are a very useful tool in the retirement planning process.

Rain, Rain, and....Rates!

Happy New Year!  2022 was a humdinger!!!   The start of 2023 has brought a lot of cold weather and rain here in California.  We need the rain and snow, so we can’t complain too much.  We need to sit back and enjoy sweater weather.

RATE AND HOUSING OUTLOOK

Interest rates have remained relatively flat for the month of December and show no signs of coming down…yet!  Most “experts” are banking on a drop by the end of this year.  Home prices are on a downward trend with the median home price in both Orange and Los Angeles counties dropping a bit.  Orange County is down to $960,000 and La County is down to $865,000.

Many buyers are either using a permanent “rate buydown” paid by either buyer or seller, or a 2-1 buydown paid by the seller.  This has the effect of reducing the rate and payment to a more affordable level.  Most homes are not receiving multiple offers, so the buyer is in the driver’s seat today.

BUY/FI Program

We offer a program where any client who closes a purchase before April 30^th can refinance that loan with us – at a lower rate, as anticipated by next year, with NO LENDER FEES.  We will waive all lender fees so long as the refinance is completed by end of 2024.  This provides a great motivation to buy now, and refinance later to lower your interest rate.  Less competition + lower prices = good timing to buy now, and refinance later.

HOMEBOT

This is a cool service providing a monthly digest including a lot of information about your home value and neighborhood.  It will also note opportunities to sell or refinance.  Our clients love it, and if you aren’t receiving it yet you can click here to sign up: Home Owners

For prospective buyers, it is also a useful tool for watching market activity and values in a specific area.  Potential buyers should click here to sign up: Home Buyers

HELOCS

Home Equity Lines of Credit are very popular currently for homeowners who want to pull cash out of their home for home improvements or revolving debt payoff, but don’t want to touch their low interest rate mortgage.  We have some competitive programs to offer to our clients.

WE LOVE REFERRALS

We work hard for our clients and do our utmost to provide clear information and choices, and great communication.  We truly care about our clients and always try to provide the best experience for their home loan. Please think of us when you hear of a friend or relative who could use our help.  We love referrals.