Tami GlassFernandes
Crossline Capital, Inc Ontario California Branch
Lending and Mortgage news and industry updates with Crossline Capital Inc. Business Development Manager Tami Glass Fernandes
Wednesday, August 14, 2013
The California housing market is providing us with two different pictures. First, home prices have surged and inventory is still very low (although increasing from the spring low). However, the homeownership rate continues to decline from the peak reached in 2006 of 60.2 percent. Today the California homeownership rate is 54.5 percent. How big of a difference is this? Since 2007 California has added a net of 500,000 renter households while losing a net of 233,000 homeowners. Yet the market continues to boom in the face of a declining homeownership rate. As we look at the market today we start seeing a slowdown in the speed in which flips are being accepted and inventory is rising. With higher interest rates and the fall season just before us, will the market thaw or continue to accelerate?
Taking account
It might be useful to take into account what has occurred in the last few years in regards to the status of occupied-housing in California:
California has added a significant number of renters over this period. Many of these people lost their homes via foreclosure and simply shifted to renting their place of occupancy. What is interesting is the number of renters being added has only increased. The above data is from the Census ACS that came out in September of 2012 (the full 2012 data should be out in fall of 2013). The above figures were calculated when California had a 55.3 homeownership rate (the latest figure is 54.5 percent):
One of the big reasons for this shift has certainly come from investors purchasing homes for rent. In more typical markets, a home is sold and then another one is usually bought (two transactions are generated). In the recent market with many foreclosures, you had someone losing their home and then someone buying it from the bank (which was a one-and-done transaction if it then became a rental). This was likely the case in many areas including the Sacramento area and also the Inland Empire. I know of a few people that bought in Los Angeles and Orange County for these purposes but their rental yields were extremely low.
This trend to a lower homeownership rate is not only specific to California. It is a nationwide trend:
The homeownership rate today is back to where it was in the mid-1990s or if you go further back, to what it was in the late 1970s. In California home prices are in a manic like acceleration upwards. The median home price in the state is up a record 28.5 percent over the year:
Median price:
May 2012 $274,000
May 2013: $352,000
Home prices went up by $78,000 across the state while incomes look like this:
To put it another way, a California family would do better by simply sitting in their home generating “equity” instead of working. This is starting to sound very familiar since many of the ancillary businesses are now starting to rev up and once again have become very real estate dependent. For example, banks are living high on the hog with low rates and a continual stream of refinances. Fees and leverage allowed for record profits once again. We are even seeing a few of our favorite loans cropping up once again as well.
Yet the change in California is symbolic of a bigger trend nationwide. Fewer and fewer people will be able to live what they think of as a middle class lifestyle in more expensive regions. And the legions of poor are also growing. In 2008, California had 2,220,127 people of food assistance. Today it is closer to 4,000,000 (a jump of 80 percent in roughly four years). This is in the same state that saw an overall median price jump of 28.5 percent.
The unsold inventory index is down to around 2.9 months which indicates tight conditions for anyone looking to buy. While the talk is heating up, the facts show that hundreds of thousands of Californians have now become renters versus homeowners. A few open houses seemed a bit calmer this month but only by a little.
What are you seeing in your local real estate market?
Taking account
It might be useful to take into account what has occurred in the last few years in regards to the status of occupied-housing in California:
California has added a significant number of renters over this period. Many of these people lost their homes via foreclosure and simply shifted to renting their place of occupancy. What is interesting is the number of renters being added has only increased. The above data is from the Census ACS that came out in September of 2012 (the full 2012 data should be out in fall of 2013). The above figures were calculated when California had a 55.3 homeownership rate (the latest figure is 54.5 percent):
One of the big reasons for this shift has certainly come from investors purchasing homes for rent. In more typical markets, a home is sold and then another one is usually bought (two transactions are generated). In the recent market with many foreclosures, you had someone losing their home and then someone buying it from the bank (which was a one-and-done transaction if it then became a rental). This was likely the case in many areas including the Sacramento area and also the Inland Empire. I know of a few people that bought in Los Angeles and Orange County for these purposes but their rental yields were extremely low.
This trend to a lower homeownership rate is not only specific to California. It is a nationwide trend:
The homeownership rate today is back to where it was in the mid-1990s or if you go further back, to what it was in the late 1970s. In California home prices are in a manic like acceleration upwards. The median home price in the state is up a record 28.5 percent over the year:
Median price:
May 2012 $274,000
May 2013: $352,000
Home prices went up by $78,000 across the state while incomes look like this:
To put it another way, a California family would do better by simply sitting in their home generating “equity” instead of working. This is starting to sound very familiar since many of the ancillary businesses are now starting to rev up and once again have become very real estate dependent. For example, banks are living high on the hog with low rates and a continual stream of refinances. Fees and leverage allowed for record profits once again. We are even seeing a few of our favorite loans cropping up once again as well.
Yet the change in California is symbolic of a bigger trend nationwide. Fewer and fewer people will be able to live what they think of as a middle class lifestyle in more expensive regions. And the legions of poor are also growing. In 2008, California had 2,220,127 people of food assistance. Today it is closer to 4,000,000 (a jump of 80 percent in roughly four years). This is in the same state that saw an overall median price jump of 28.5 percent.
The unsold inventory index is down to around 2.9 months which indicates tight conditions for anyone looking to buy. While the talk is heating up, the facts show that hundreds of thousands of Californians have now become renters versus homeowners. A few open houses seemed a bit calmer this month but only by a little.
What are you seeing in your local real estate market?
Tuesday, August 13, 2013
FHA 203K The perfect loan for a fixer upper
Call Tami with Crossline Capital Inc.
for the perfect loan for a fixer upper!
Monday, August 12, 2013
| Last Week in Review: The housing market continues to improve, plus the tapering talk carried on. Forecast for the Week: A busy week is ahead, with important inflation, manufacturing and housing news being released. View: Staying sharp is important for today's busy professionals. Check out the simple tips below. |
Last Week in Review  |
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"Every day you make progress." Winston Churchill. And the housing market continues to progress in the right direction. Read on for details. Last week, research firm CoreLogic reported that home prices across the U.S. rose by nearly 12 percent from June 2012 to June 2013. By comparison, home prices only rose 3.76 percent from June 2011 to June 2012. In addition, research and analytics firm Clear Capital said that prices rose 9.3 percent in the year ended in July.The housing markets have turned the corner to greener pastures, but it's important to note that this pace of growth may be unsustainable. With home loan rates rising over the past several months, this rate of appreciation could slow. In labor market news, Weekly Initial Jobless Claims rose by 5,000 in the latest week to 333,000, but this was below the 340,000 expected. This followed the Jobs Report for July, which was a bit of a disappointment with less jobs created than expected. What does this mean for home loan rates? One of the biggest questions on everyone's mind is: When will the Fed start tapering their Bond purchases? Remember that the Fed has been buying $85 billion of Bonds a month to help stimulate the economy and housing market. This includes Mortgage Bonds, to which home loan rates are tied, and these purchases have helped home loan rates remain attractive. The Fed has said the rate of their purchases will continue to depend on economic data, and could be increased or decreased accordingly. Last week, several Fed members spoke out in favor of tapering these purchases as early as the Fed's meeting in mid-September. However, with our economy growing at sub 2 percent, economic data between now and September will be a key factor in this decision. The bottom line is that home loan rates remain attractive compared to historical levels and now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients. |
| Forecast for the Week |
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| The Mortgage Market Guide View... |
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| Brain Breakthroughs Many people think intellect is a matter settled at birth, and mistakenly believe there's no way to boost their brain brilliance. But scientific studies prove just the opposite. In fact, small lifestyle adjustments combined with a few mental gymnastics can not only increase intelligence, but also improve general brain health, helping prevent aging disorders, such as Alzheimer's disease. According to most neurologists, the key is staying mentally active, whatever your age. The following tips will help boost your mental acuity and increase your intelligence. All You Have To Do Is Dream. An adequate amount of restful sleep is an important component of brain function (its effect on memory and learning is contested among scientists). Restful sleep provides energy as well as the ability to focus, both vital factors in achieving mental stimulation. Some studies have also shown the reverse to be true, that is, that more mental stimulation during the day gives you better sleep at night. Jumpin' Jack Flash Memory. Exercise brings oxygen-rich blood to the brain and regulates blood-sugar levels. Exercises such as aerobics, dance, and martial arts all require memorization and are great for promoting mental stimulation. They also help to develop the rhythm and timing circuitry that runs across multiple regions of the brain. Playing Those Mind Games Together. Crossword puzzles and Sudoku, board games and card games are all excellent for mental stimulation--now you can add video games to the list. Each type of game makes various demands on brain function such as recall, hand-eye coordination, attention, memory, logic, and pattern recognition. The key here is to keep upping the skill or level of challenge as you progress. Don't forget to pass these helpful tips along to your clients and colleagues.
Economic Calendar for the Week of August 12 - August 16
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Wednesday, August 7, 2013
Tuesday, August 6, 2013
Housing news dominated the headlines this morning with positive home price data hitting the wires. First up was CoreLogic reporting that its national Home Price Index on a year-over-year basis in the month ended in June rose by nearly 12% as the sector continues to improve. From May to June, prices rose by almost 2%. In addition, home prices are expected to rise by 12.5% year-over-year basis in July. However, prices are still down 19% from their peak hit back in April 2006. All of the figures include distressed sales.
To further bolster price appreciations in housing, Clear Capital reported that national home prices surged 9.3% in July 2013 from July 2012 and gained 1.6% over the last quarter. Clear Capital did say that prices remain 33.4% below peak values. For the last half of 2013, the firm sees a moderation in home price trends.
President Obama will be in Phoenix, Arizona later today speaking on the housing market and in particular, the future fate of Fannie Mae and Freddie Mac. The government bailed out the two mortgage giants to the tune of nearly $200 billion after the housing market collapsed in 2008 and the plan is for their roles to diminish and let private sector capital take on a bigger role in the mortgage market.
Wednesday, July 31, 2013
Positive News Today
Economic data was abundant today and the reports were slanted towards the positive side.
First up was the advanced reading for second quarter Gross Domestic Product (GDP) showing that growth in the quarter rose by a rather dismal 1.7%. That was better than the 1.1% that was registered in the first quarter and above the 1.1% expected. The 1.1% in the first quarter was revised lower from 1.8%. The 1.7% reflected an uptick in inventories and as consumer spending eased. GDP measures the market value of goods and services produced by labor and property in the United States.
Over in labor market news, ADP reported that private employers added 200,000 new jobs in July, above the 175,000 expected while the June number of 188,000 was revised higher to 198,000. The gains were seen across the board in businesses of all sizes. The ADP precedes the government's monthly jobs report that will be released on Friday morning.
The highly anticipated Federal Open Market Committee statement will be released this afternoon at 2:00pm ET and will be closely scrutinized by market watchers around the globe. In particular, players will be looking for any hints of an ease in the Bond buying program enacted by the Fed to accelerate U.S. growth and to support the labor markets and to keep interest rates low.
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