Market Rate Update...and A Healthy Fun Fix!

Rates continue at very attractive levels, but are not expected to last here for long. The current 30 year fixed rates are hovering at 4.75% for loans under $417,000 and 4.875% for those that are up to $729,000.

Five year adjustable rates are still between 3.5% to 3.75%, based on loan amount. Of course these rates depend on a number of factors, such as FICO score, Loan-to-value, total debt ratios, property type, purpose of loan, i.e. purchase, cash-out refinance, etc.

Speaking of loan-to-value, although values appear to be stabilizing in most areas of Southern California, I am still seeing appraisals resulting in values lower than property owners expect. Be advised that appraisers must put the most emphasis on recent sales (primarily in the last 3 months) that are comparable in terms of age, size and amenities. Unfortunately, as we all know, the majority of sales are foreclosures or short sales.

Now for the Fun Fix…
For those of you who don’t know me well, I love Zumba. Well, to be honest, I love to dance. And Zumba class satisfies my itch in addition to providing a fabulous workout.


Cumbia has become my favorite dance, then Salsa, but Samba is the most aerobically demanding. I read an article in the Wall Street Journal today about an author who swears by Zumba and its health benefits. Read about her at www.wsj.com/workout.

I usually take classes at 24 Hour Fitness, but they are offered at many gyms and YMCA's etc. You can locate a class or an instructor anywhere in the world, at the Zumba website by just plugging in a City, Zip Code, or an Instructor name. www.zumba.com

Zumba uses a whole bunch of muscles we don’t normally use here in the good ‘ole USA, with a LOT of hip action. I hope to see you there sometime! You can’t miss me, I will be the one laughing!

Under Water Properties Still Spell a Seller's Market

Online real estate tracker Zillow www.zillow.com reports that the share of Orange County single-family homes with mortgages larger than the current value of the home — so-called “negative equity” or “underwater” — was 14.4% percent in the 4th quarter of 2009, barely up from Q3’s 14%.

If that percentage sounds low, it is because according to Steve Thomas at Altera Real Estate, distressed properties now represent 33% of the market in Orange County.
But the Thomas numbers are active sales. Zillow’s math covers all single family homes in O.C., including those not on the market. (About a quarter of homes here have no mortgage to begin with.)

“We estimate 62,988 single-family homes in negative equity in Q4 out of an estimated 436,163 single-family homes (with mortgages) overall in Orange County,” said Jill Simmons of Zillow.

The number of homeowners losing their homes to foreclosure across the country peaked in December, with more than one in every thousand homes being repo’d, a high since Zillow began recording this foreclosure data in 2000.

Back to Orange County statistics, Steve Thomas of Altera Real Estate writes,

“Current statistics…do not reflect that there are fewer distressed homes coming on the market; rather, they mean that increased demand is eating up the active distressed inventories. Over the past month, the number of distressed and non-distressed homes to hit the market has been increasing, but many are going off the market as pending sales just as quickly as they are coming on.

“The number of foreclosures increased in the past two weeks from 355 to 375. The expected market time for foreclosures is a sizzling 0.90 months, a deep seller’s market. Foreclosures garner so much activity that they are like individual mini auctions and the successful buyer is really the successful bidder.

“The number of short sales on the active inventory decreased by 69 and now totals 2,249. The expected market time for short sales is 1.63 months, also a deep seller’s market. 33.7% of the active inventory is distressed. Last year at this time 44% of the inventory was distressed.”

For the breakdown, go to the Mortgage Insider Blog

What does this mean for buyers? I have a number of pre-approved buyers with 20% down and better who have made multiple offers, but can't get one accepted. They are running into all-cash buyers, or buyers with higher down payments. It is extremely tough to get an offer accepted. It is important to provide a complete package at the offer stage and put as much down as possible to sweeten the deal in the eyes of the seller.

First Thursday Laguna Beach - Art Walk

I’ve been a big fan of Laguna’s monthly Art Walks for years. This Thursday is the twelfth anniversary of the event. It runs from 6:00 to 9:00 p.m. and is always entertaining, not only for the art but the people-watching. Plein air painting abounds, as it is very popular in Laguna, along with many other styles suitable for almost any appetite. Steve oftentimes gets new ideas, and completed a four-painting series last year that was inspired by the painting of Linda Christensen, who had a show at the Sue Greenwood Gallery. www.suegreenwoodfineart.com

Speaking of the Greenwood Gallery, my friend Sally Storch shows there regularly and always sells out! We met in college, at USC, and her openings typically are a great time to catch up with old friends.

I can’t make it this month due to Steve’s accident (it’s hard to get around Art Walk on crutches) but will look forward to March’s event!
www.firstthursdayartwalk.com

Rates, Credit Score Hints, Sales Stats and Risk Factors

Interest rates continue to be very attractive…in the 4’s to low 5’s depending on loan amount, loan-to-value, purpose of loan, and credit scores. But they have nowhere to go but up, and the market reacted poorly this week to the news that the government is definitely ending the purchase program for mortgage-backed securities as of March 31, 2010.

Speaking of credit scores, I have seen a number of credit reports recently where my client’s scores were hurt because they had closed credit card accounts. They THOUGHT they were doing the right thing, but they inadvertently hurt themselves. If you pay off a credit card, it isn’t smart to close the account. Keep it open, with a zero balance, and use it once every few months for minimal purchases such as gas or food, and pay it off. In this fashion you are increasing the credit “available” to you, but not using it. The goal is to have all balances on revolving credit at or below 30% of total credit available. High balances to total credit available are the primary culprit in driving down FICO scores, right behind collections or delinquent payments.

Interest rates today are very sensitive to FICO scores, and you will pay a price for any score below 720, and in some cases with larger loan amounts, scores below 740. It is tough out there!

Sales stats for Orange County show that home sales at the “low end” of the housing market – below $500,000 – consisted primarily of foreclosures and short sales, and accounted for all of the sales gains (increases in volume) seen in the last year.

The median sale price for single family homes in Orange County was $496,070 in December. Newport Beach posted a median price of $938,500 and Laguna Beach was at $1.23 million. The sales at the higher end of the spectrum, although much lower in volume, still helped to push the median prices up.

DataQuick reported that 20% of homes sold are going to investors (vs. primary housing) and almost 25% of homes sold to all-cash buyers.

What’s The Risk?

The recent terrorist attempt on a Northwest flight bound for Detroit hit close to home for me. My daughter, who lives in Ann Arbor, Michigan, was in Europe at the time and heading for Amsterdam where the fateful flight originated. Further, she was flying home to Detroit after the holidays.

So, what are the real chances of being involved in a terrorist event on an airplane? In the decade of the 2000’s, the only American fatalities occurred on 9/11, and including those stats, only one passenger in every 25 million was killed in a terrorist attack on an American airplane during the past ten years.

Contrast that with the chance of being hit by lightening…one in 500,000 each year. Further, the stats show that these violent passenger incidents –bombing, hijacking or sabotage- were five times less common in the 2000’s than in any decade from the 40’s through the 80’s. Source: Nate Silver http://www.FiveThirtyEight.com.

Mr. Silver opines that we would be more rational to focus on prevention of a nuclear terrorist attack that could affect millions.

So the bottom line, as I always reminded my children, is to be far more worried and cautious when driving your car than flying. And don’t stand under trees in a lightening storm!

Rate Update and Remedies for Post-Holiday Blues

Rates improved nicely by the end of last week. A new 30 year fixed rate loan, up to $729,000, is going to be somewhere south of 5%, down to 4.75% if your loan amount is below $417,000.

Five year fixed rates are still at or below 4% for loans up to $729,000. The CPI figures that came out at the end of the week were lower than expected, helping keep interest rates down, and the government spending spree for mortgage backed securities is also providing assistance.

However, keep in mind these rates won’t last since we have repeatedly been reminded that the mortgage-back securities buying program will end by the end of the first quarter this year. In addition, as soon as inflation raises its ugly head it will bode ill for interest rates.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

My prescription for the end-of-the-holidays blues is great food, wine and music.

On a recent Sunday afternoon we drove to downtown San Clemente and strolled the length of Del Mar for some window shopping. Yes, we bought some touristy gift-cards too! We headed for the San Clemente Wine Company to check it out after reading a few reviews in the local newspaper. This wine shop offers a comfortable tasting area in the back of the store, where for $15 you can taste a flight of 6 wines. We had cheese, crackers and some great reds…Pinot Noirs, Cabs, and Syrahs.

The SC Wine company specializes in moderately-priced wines from California, Australia and New Zealand. The owners are currently visiting in New Zealand to locate new wines for the shop. They regularly host vintners for special tasting events, and are open 7 days a week.

Next on my “fight the blues” list is Iva Lee’s restaurant, on Camino Capistrano in San Clemente. Offering outrageously good food and music, the theme is southern-style N’awlins all the way. Gumbo, catfish, fried green tomatoes, sweet potato fries and the like are all on the menu. Blues is the obvious music of choice, and we were lucky to catch the Blue Machine Band. They play regularly on Thursdays at Iva Lee’s but also appear in other Orange county venues.

If you love Blues and Cajun cooking, you can’t miss Iva Lee’s.
The restaurant was busy for a Thursday night, so call for a reservation. After it cleared out a bit, we took advantage and danced in the dining room near our table, and in the bar. Weekend crowds might make that a bit difficult however.

Last, but not least, we dined with friends at Bistango, an old favorite in Irvine near the airport. We were celebrating three birthdays, and as always the food was outstanding and the dancing was a blast. Bistango has live music every night, with a real live dance floor. We appreciated not only the cuisine, but the art as well, which is inspiring (at least inspiring for artists like the one I live with.) Definitely my special occasion choice!

I think I have beaten the blues. Now if only the hurricane will stop so I can go outside again!

Capo Beach Sunset

I took this photo in late December from our balcony in Capo Beach. The sunset is over the ocean, looking towards San Clemente Island and the southern tip of Catalina, and was one of the most spectacular we've seen!

Renter's Paradise?

The latest vacancy rates, 8% nationwide, reflect that the U.S. is a renter’s market. Rental vacancy rates are at a 30 year high, primarily due to the economy, but also due to competition from a wave of new supply that hit the market last year. The oversupply came from a lot of condo projects gone bad, that had to be converted into rental property.

If you are renting, now might be a good time to renegotiate your lease. Many landlords are offering enticements to tenants to renew.

Orange County is number seven on the list of biggest rent declines in the country, behind San Jose, Seattle, San Francisco, Las Vegas, New York and LA. Our decline in rental rates is just under 5%.

Thanks to falling home prices, and record low mortgage rates, it now costs less in most markets to own than over the last decade, on a mortgage-payment-to-rent-payment basis. Of course, this doesn’t take into account the down payment required for ownership.

Remember-- the Homebuyer Tax Credit currently expires in June of 2010, and must be under purchase contract by April 30th to qualify. I understand the State is considering a renewal of a statewide tax credit that may pick up the slack, at least here in California. That is, if they don’t run out of money like they did last time!