Tuesday, September 23, 2014

Los Angeles Real Estate Market - From So So to Fizzle - Except Rents

Fall sees lowered demand, fewer sales, lower prices, fewer mortgages

No one who watches the real estate market will be shocked to see fewer unit sales and overall activity in September than in July. School decisions still drive a lot of buying, and if you haven't moved into your favorite school district by mid August, you are likely to stay put until next summer.

What caught the pundits by surprise was how lackluster the summer turned out to be. Sellers were lowering prices by mid season and still the homes didn't move. While far to early to call a trend, there is plenty of evidence that Los Angeles prices are off by around 10% from highs of Spring 2014.

What are the culprits?
  • Middle class left behind in the Obama Economy
  • Young folks saddled with massive college debt
  • Family formation starting later
  • Millenials choosing to stay flexible in this job market by renting
  • Less interest in home ownership by millenials
  • Fear that economic doldrums may take us back to recession
  • International conflicts
On the other hand:
  • Rents are going higher by 7% or more in 2014
  • Mortgage rates are still at historic lows
  • Mortgages are getting easier to get
  • Home prices after dropping are more affordable
Will the good news outweigh the bad and get a countercyclical buying upturn going before Christmas? Nothing points that way at the moment. However, if the economy stays the course through the winter into Spring, there might be some pent up demand to drive folks into the market. There is also a great likelihood that current expected Fed tightening will result in higher mortgage interest rates. This commonly creates a last chance panic that might help to spur sales. As noted elsewhere, while consumers will work hard to save 1/8th of a point on their mortgage, the monthly increase in the payment for a $500,000 loan is $400 or so per month for a full percent rise in the interest rate. Many, including Goldman Sachs, would say that 5% loans are likely within 12 months.

Could this be the last best chance to purchase a home in LA? Maybe the bottom will come in December or February. Maybe the country will slide into recession again, and prices will go down even further. However, unless there is a long term fundamental change in the American way of thinking about housing, eventually the market will move upward again. If you are thinking about getting a home, playing the real estate market may be less important than finding a solid deal that you can afford. 

Tuesday, September 9, 2014

Mortgage Qualifications Are Getting Easier - But Not the Hoops


The paperwork requirements are still draconian for mortgages

No matter who you believe regarding the economic recovery, no one is claiming that housing has recovered as of this writing. Home prices are up, interest rates remain low, but overall transactions and new home starts remain very depressed. With fewer mortgages for both purchase and refinance being written, the supply demand curve is forcing financial institutions to modify their rules.

While no one thinks we are going back to the crazy Wild West rules of the mid 2000's, regulators and banks who tightened lending standards in reaction to the busted housing bubble, went much to far. Sanity is returning as the pendulum swings back towards the middle. In just the last few months for instance, credit score requirements have dropped from 640 to 600 at FHA, and some lenders are accepting 620 credit scores on conventional loans.

According to TheMortgageReports.com
23.9% of banks reported an easing of mortgage loan standards during this year's second quarter -- more than twice the percentage from earlier this year. Banks are reducing FICO requirements, lowering qualification hurdles, and bringing more loans to closing.
That's the good news. What has not changed is that your paperwork needs to be perfect! Underwriters for the banks and for the insurance companies are driving mortgage brokers and consumers nuts with their demands for details. However, if you are willing to live through a bit of frustration, now may be the best time in a decade to apply for a mortgage.

We will do our best to limit your frustrations by anticipating the paperwork and helping you to get it done right. Call today and we will help you with any questions you have, and help you make smart decisions with regard to the mortgage that will be best for you at this time.

Bill Rayman Home Mortgage

12121 Wilshire Blvd
Suite 350
LA CA 90025



Saturday, September 6, 2014

When Can I Get a Mortgage After a Chapter 7 Bankruptcy?


FHA rules require that you wait two years for a mortgage after Chapter 7

The medical bills piled higher and higher. The credit cards were maxed out, and because we'd missed some payments, they were now charging 24% interest. A consultant explained that we had no chance of paying off our debts within our lifetimes. We decided that circumstances like ours were exactly what bankruptcy was created to solve.

The attorney told us that we would be able to get credit right after the final adjudication, and he was right. Within months we received small credit lines on credit cards. Department store credit cards were also available. By year one, we were able to get a car lease, even though the upfront needed to be higher than average. But what about a mortgage.

The FHA sets the minimum. They have a rule that requires you to wait two years. Most lending institutions and other suppliers of premium mortgage insurance are going to require at least this two year standard.

Your credit report will be the next obstacle. In 2014 the banks and other mortgage lenders are requiring a 620 minimum credit score and FHA loans can go as low as 600. If you have been building up your credit during the years since your bankruptcy is is very likely that your credit score will now be in the mid 600's.

If you are hoping to purchase a new home or refinance your current home, and you've had a bankruptcy, we are ready to guide you through the process. Call Bill Rayman today to get the process started. 

Bill Rayman Home Mortgage

12121 Wilshire Blvd
Suite 350
LA CA 90025