The days of zero down for real estate in Santa Rosa are over as we experience the end of the financial market collapse. The good news is that home prices are very attractive now so for families that have saved a down payment, or investors with cash on hand now is a great time to pick up deals.
Over the past 18 months, the mortgage market has changed more rapidly than in any comparable period since the Great Depression. From the standpoint of borrowers, two changes are of paramount importance. The first is an increase in day-to-day price volatility. The second is a tightening of underwriting requirements, with higher down payment requirements the centerpiece. That is the subject of this article.
When the market turned and home prices began to decline in late 2006 and 2007, down payment requirements had to be drastically revamped. Just as rising prices generate homeowner equity, falling prices destroy it. There are no zero-down loans anymore, except the VA loan for veterans. FHA loans remain available at 3 percent down for smaller amounts, but conventional loans now generally require 10 percent down, and in some areas it is higher. On top of this, lenders now want most borrowers to have good credit scores and to fully document their incomes.
Well,no one knows for sure when Santa Rosa real estate will bottom out but some models suggest that we may be getting close. Lets all keep our fingers crossed that Santa Rosa home prices will start back up.
The New York Times asked economists across the country to share the data they use to figure out how much houses in regional markets are overvalued, a calculation that approximates where the bottom may be. Models built on these variables show that while some markets — such as California — are on a road to recovery, others — such as south Florida — have a way to go.
Southern California reports some interesting news in July real estate numbers. Massive reduction in median home prices (31%+) boosted home sales by 16%. But the interesting part is the fact that 44% of all sales were for foreclosed properties. When you put this into human terms, we're talking about a huge number of families in trouble. The social costs of the real estate meltdown will be felt for years to come.
The median price for all homes and condo sales — including new and existing models — dropped to $348,000 in the six-county region last month, down from the market peak of $505,000 in July 2007 and down slightly from $355,000 in June, MDA DataQuick said.
Foreclosures accounted for 43.6 percent of all resold properties last month, up from 7.9 percent in July 2007 and a revised 41.8 percent in June.
"Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009," former Federal Reserve chairman Alan Greenspan said Thursday.
"The correction isn't over," the TD Bank analysts said, adding that prices have further to fall, particularly in "cities such as Los Angeles, Las Vegas, and Miami which saw the largest price gains."
"The rising share of foreclosed homes in overall sales bodes negatively for home prices," said Ethan Harris, chief US economist at Lehman Brothers, who sees prices falling between 25 and 30 percnt in the correction phase of a cycle he sees ending in late 2009.
"The light at the end of the tunnel is a faint and distant one. Further, the risks to this outlook weigh heavily on the downside, with the main risk being the potential for financial markets to unravel further," said Celia Chen, director of housing economics at Moody's Economy.com.
I ran across an article that had a certain bright side (sort of) to the real estate downturn. It seems that it is keeping families together because they can't afford to sell their house at a loss. Now the reality is this is a big mess. If your relationship is over and you can't afford to sell the house to divide your assets I don't think this will make a happy home life. But maybe, just maybe, some of the couples will work through this hard time an come out stronger.
But lawyers and financial planners anecdotally say they are seeing more clients staying married – if only for the time being – simply because they cannot afford to break up.
“Truthfully, it’s a mess,” says Carol Chumney, a family-law attorney in Memphis, Tenn. “There are a lot of folks who want to get a divorce, and the house is an impediment because nobody wants it.”
Of course, not all divorcing couples are able to get along well enough to minimize their losses. “A lot of times both of them cannot agree on what to do,” Chumney said. “It can be a huge financial mess. In the past a lot of times folks wanted to keep the house, and lately, that’s not the case.”
Fannie Mai just posted larger than expected losses and essentially got out of the Alt-A mortgage market. This will translate into tighter standards for borrows which has downward pressure on home prices.
Fannie Mae is raising fees, which will be passed onto borrowers as higher interest rates, and abandoning "Alt-A" borrowers because those loans are defaulting at an alarming rate. These high-risk loans -- made to borrowers with solid credit but little proof of their income, or small or no down payments -- made up about 11 percent of Fannie's portfolio but accounted for more than half of its credit losses in the quarter.
If Freddie Mac follows Fannie Mae and stops buying Alt-A loans, "it means that market is not going to exist at all. It's barely hanging on now," said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication.