Tax Overhaul is Opposed by CAR

The California Association of Realtors has come out vehemently against the proposed changes to our tax code, which would eliminate the tax deduction for state and local taxes, as well as the deduction for mortgage interest for all loans over $500,000. Loans currently held with higher balances (up to $1 million) would be grandfathered in. Further it would eliminate the interest deduction for 2nd home mortgages. Deductible property taxes would be limited to $10,000. According to CAR the average homebuyer in the state would pay an additional $3000 in taxes annually.

Living here in the sunny state where it seldom rains, this would definitely put a dark cloud over the real estate market. Our median home price here in Orange County is $790,000 and in LA County it is $595,000. Already, home affordability rates in Southern California have fallen to the lowest level since 2008 and statewide housing affordability fell to a 10-year low as the tight housing market has driven prices higher and higher. The percentage of California home buyers who can afford a median-priced home in 3rd Q 2017 fell to 28%. These statistics do not apply to condos but to single family homes. Condos are more affordable, and 38% of Californians can afford the $440,000 median-priced condo.

To be clear, all these statistics assume a 20% down payment. With less down (including many first-timers) the affordability is lower...and with more down payment, affordability rises.

But, here in California and other high-price states such as New York, affordability will drop even more if the tax bill goes through as proposed. Real estate values will surely drop as fewer and fewer buyers can afford homes. A recent article in the WSJ notes that in NYC sales are slowing as buyers ponder the effect the tax changes could have to their disposable income.

We always advise clients as to the after-tax consequence of owning a home with a mortgage, and how the interest and RE taxes will provide them with a deduction on their tax return. We'll see!

First of Summer Update

Rates are moving south again! We’ve officially hit the lows of the 2011 on poor economic and employment reports. If you’ve been putting off a refinance, don’t wait. And, it is better than ever for home buyers with home values at a five-year low.

3% down, no Mortgage Insurance

Fannie Mae has a program for home buyers called Homepath, offering minimum down payments of 3% with no mortgage insurance, and no appraisal! This is for a new primary residence only, but they also allow 15% down for a rental property purchase. The program only applies to homes owned by Fannie Mae. Find out more at www.homepath.com

Reverse Mortgage News

Reverse loans aren’t only for refinancing…they are becoming a more popular way for seniors to buy a “retirement” home or new primary residence. I actually closed a reverse mortgage purchase loan for a client a few years ago, and I was told it was the first in California.

Depending on the buyers’ ages (and they must be 62) these loans will provide anywhere from 60% to 75% of the purchase price in a reverse loan. The buyer must provide the balance of purchase price in cash, typically from the sale of their existing residence. Assuming they own their home outright, or have a low-balance mortgage, this frees up cash for investment/liquidity, and eliminates the need to “qualify” for the payments associated with a new mortgage.
Best of all, the rates are as low as 4% fixed.

Bezerkeley

I visited my son Kenny in early May in Berkeley. He was there to present a paper at a conference in the School of Architecture. We had only a few days together, but we had a great time, and glorious weather. I’d forgotten how beautiful the UC Berkeley campus is, with the creek running through it, rolling lawns, huge old trees, and expansive views down to the Bay and beyond, to the skyline of downtown San Francisco.

Our first stop Sunday was the outdoor deck of the Paragon Café at the Claremont Resort for an afternoon cocktail and a view of San Francisco in the distance. Afterwards, we took a stroll at the Cesar Chavez State Park on the Bay. During our time Monday, Kenny preferred to hang out in coffee houses, studying and talking to students.



We had dinner Monday evening at an old favorite, ẦCộté, a charming tapas restaurant in the Oakland Rockridge district, on College Avenue. It felt a little like old home week for me, since I had visited Berkeley so often while Katie was in school there.

This was my first sighting of Kenny since last September, when he left for Europe for his graduate program. So far, he’s been to Cottbus and Berlin, Germany; Tallinn, Estonia; Lisbon, Portugal; Wroclaw, Poland, and London in-between. He’s been in each location for at least six weeks studying architecture at various universities participating in his program. He won’t be home until this September for his brother Drew’s wedding! Best Man...

Claremont Colleges

I’ve seen my daughter Katie, who lives in Ann Arbor, a number of times this spring around her visits here to Cali, most notably on her 27th birthday in April while she was out here with her team for water polo games in San Diego and Claremont. The Claremont campuses were wonderful to visit on a warm April Sunday. You sort of feel like you’re back East on an Ivy campus. Katie’s also been out to visit for Mothers’ Day and Memorial weekend. What a treat!

Local News


Sunset’s is still our favorite local haunt in Capo Beach. As the name implies, it has great sunset views and offers music and dancing every Thursday through Sunday. Walking distance from our home, we frequent it for happy hour, or after dinner and almost always run into friends there! They are hosting a special event this Saturday with music and dancing all day, a live band starting at 6:00 p.m. and a caribbean themed buffet with mojito and sangria bar. Join us! www.sunsetsbar.com

The California Wine festival at Doheny State Beach, held the end of April, was a great time as usual. They hosted even more wineries than last year’s event, more breweries, and the food selections were fantastic! We found a new local restaurant that was serving a killer salmon ceviche…the Next Door. Steve and I visited the restaurant last week and sampled the ceviche, and bacon wrapped dates stuffed with blue cheese. Yummy!

Steve continues to commute to Dallas regularly for consulting on Museum Tower, a high-rise luxury residential development. I’m planning to visit again soon, but in the meantime we have a camping trip planned to our favorite Beach campsite at El Capitan overlooking the Pacific with panoramic views. We take our kayak and bikes, and fill our days with exercise, reading, relaxing…and Steve paints. We are hoping for warm weather!

Hope your Memorial holiday weekend was wonderful! Happy June!

Rates Have Improved!

Interest rates have slowly improved since February 10th…here are the details:

Loan amounts of $150,000 to $729,500

30 YR fixed - 4.75 to 4.875%
15 YR fixed – 4.125% to 4.375% depending on loan size
5/1 ARM - 3.375% to 3.625% depending on loan size

Jumbo loan amounts – over $729,500

30 YR fixed - 5.625%
5/1 ARM - 4.25%

Rates are down and so are home prices…what are you waiting for?

I’m looking forward to the Oscars…who are you rooting for? Hmmm-- The Social Network, The King’s Speech, or the Black Swan to name a few?

New Year's State of the Union for the Mortgage Industry

I survived January with only a short bout with the flu. Unfortunately I’m not sure how the mortgage industry is going to survive the continuing wave of regulation from Washington. To quote my market research source, at www.TBWSratealert.com

“After the collapse of the mortgage and housing markets there is a push to make changes based on beliefs that servicers have not done their job well, and are responsible for extending the housing recovery. A long stretch, but that is what the industry has dealt with for the last three years; beat up the lenders but don’t tread on Wall Street as the fuel for the housing market disaster . Blame it on brokers, blame it on servicers, blame it on anyone and don’t let the smoke clear. We don’t really have to say it for our audience; originators didn’t make an Alt A loan or most of the junk originated unless they had an upstream market to sell it to.”

So, who is ultimately taking the fall for all this? The consumer, of course. It is much harder to qualify for a loan. Even if you are qualified! You’d better have perfect credit or you’ll be paying a lot more in interest rate for that new loan. You’d better have adequate equity, or refinancing is more difficult, and more costly in rate, if not impossible; your tax returns need to reflect adequate income, and it had better not be declining.

Your loan modification chances are next to nil, even though the erosion of your property value was completely out of your control and you’ve made all your payments in a timely fashion (almost worse!) but you can’t qualify for a normal refinance due to lack of equity.

I could go on and on…the government programs that were forced onto the banks (after paying them lots of bail-out $$) are parsed out in a very limited basis, and only those who scream loudest are heard, and oftentimes not even then.

Some surmise that only a few mega banks will survive… which doesn’t make for a better deal for the consumer. Who is the real winner in all this? The banks. They pay less, and their agents don’t need the licensing etc. the rest of us brokers/mortgage bankers do. Their profits are rising.

Enough whining today! Enjoy Superbowl. Go Black Eyed Peas!

October Housing Market Stats

The numbers have just been released, and they indicate rising home prices and fairly stable volume. This is primarily attributed to continued low interest rates and prices, coupled with the federal tax credit.

The median closed sale price in Orange County last month was $436,500, which is up 3.9% over October 2008.

Sales of existing homes were basically flat, but foreclosures and defaults are rising. Entry level homes are the big news—60% of sales are in the price range under $400,000 and 10% are under $500,000. Anything in the high end, over $800,000, is taking much longer to sell and represents less than 4% of total sales.

Average down payments are just under 20% meaning most successful buyers are utilizing conventional financing. Any time a bank seller is involved, whether for bank-owned or a short sale situation, they tend to avoid FHA financing like the plague.

Short sales are picking up steam and getting easier as banks are avoiding foreclosure and are more amenable to work with the property owner.