Just in case you missed the article in the Sacramento Bee about median home prices, I thought I would post a note about it here.  The bottom line is that everyone seems to be getting on board (even the media!) with the idea that first time home buyers are be offered what may be the opportunity of a lifetime. 

Here is a bit of the article in case you missed it....

... few places beat Sacramento, according to a new report from the California Association of Realtors.

CAR says 80 percent of Sacramento County first-timers could afford a median-priced entry-level home in the first quarter of 2009.

The same quarter in 2008 it was 65 percent – considered then to be amazing.

Only the high desert region of Southern California and the San Joaquin Valley's Merced County – which has seen a median entry-level price tumble to an astonishing $89,040 – were more affordable than Sacramento County. (Median is where half the homes cost more and half less.)

In California, 69 percent of buyers could afford a median-priced entry-level house at $213,040, CAR said.

The report, issued Thursday, pegged Sacramento County's entry-level median at $143,870, requiring a qualifying income of $25,720 based on 10 percent down and a 4.96 percent interest rate. Sacramento County tends to do well in CAR's affordability index with its relatively good public-sector salaries and its inland California home values.

Median sales prices for all existing homes sold in Sacramento County have dropped by a third in the past year to $160,000, according to researcher MDA DataQuick. They're off 57 percent from an August 2005 high of $374,000.

The Sacramento Business Journal is reporting that legistlation sponsored by the California Building Industry Association would extend the $10,000 new construction credit.  More than half of the money for the program has been used in the first two months.

The tax credit was enacted to pay up to $10,000 or 5 percent of the purchase price of new home in order to spur homebuying. There was $100 million allocated for the credit, which began to be available March 1.

The new Assembly Bill 765 would provide an additional $200 million for the tax credit program.

NOTE:  Lenders are still trying to figure out how and if they will participate in this program.  We'll keep you posted as we get updates.

Just in case you didn't hear yesterday, the Obama administration has worked to encourage HUD to permit the use of the $8000 new home buyer tax credit as a downpayment.

Read NAR's the press release below for more detail....

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Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment.

Donovan’s remarks came in an address to several thousand Realtors® gathered this morning at The Real Estate Summit: Advancing the U.S. Economy, a special daylong session at the Realtors® Midyear Legislative Meetings & Trade Expo here.

Secretary Donovan said that important changes, which the National Association of Realtors® has been calling for, will help consumers purchase a home. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment,” Donovan said. According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Donovan said the Obama administration plans to further stabilize the housing market. “I do think we have some early signs hat the market overall is stabilizing,” said Donovan. “Since January we’ve seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said, “As the leading advocate for housing issues and homeownership, NAR continues to take a leadership role in promoting ideas for improving our economy by stabilizing the housing and real estate markets. Today we have the best of the best to begin a dialogue, develop solutions and initiate action toward real estate and economic recovery.”

The morning session included a panel discussion that was moderated by CNBC’s Ron Insana. The 13 panelists and Realtors® in attendance examined cutting-edge solutions necessary to promote and preserve homeownership and real estate development, stimulate the economy, and protect the nation’s taxpayers. They also shared their ideas on what the role and responsibility of the federal government is in the revitalization effort.

The list of distinguished panelists include Dr. Martin Feldstein, professor of Economics from Harvard University; Dr. Barry Bluestone, professor of Political Economy from Northeastern University; John Taylor, CEO of the National Community Reinvestment Coalition; Maria Kong, president of the National Association of Real Estate Brokers; and Sarah Rosen Wartell, executive vice president for the Center for American Progress.

“Right now the Federal Reserve is the market,” said Jay Brinkman, chief economist for the Mortgage Bankers Association. “What will be the effect when the Fed stops buying?” Brinkman explained that an exit strategy must be planned for the long-term; the federal government cannot continue to support the mortgage markets indefinitely.

“We must make sure FHA and the GSEs are supported,” added the Wharton School’s Susan Wachter.

“We are thrilled that so many high-caliber individuals were able to join us today at this important meeting to promote stability in the housing market and the U.S. economy,” McMillan said. “We look forward to an ongoing dialogue and action toward this goal, during our midyear meetings this week and beyond.”

• 69% worry about the price of homes going up soon
• 85% think homes are “affordable”
• 68% think it’s a better time to buy than 6 months ago
• Nearly half don’t know about the $8000 tax credit
• Whether they knew before the survey or not, 77% said that the $8000 credit made them more willing/interested in buying a home in the next 6 months
• Among renters – 91% would buy within 6 months if they found a home that cost within $250 of rent

Still want more data....here is the article.

First-timers worry about jobs, credit

By Inman_News
Created 2009-03-27

Most prospective first-time homebuyers know interest rates are low and believe that homes are affordable. But nearly half don't know about the $8,000 tax credit available to first-time homebuyers through the end of November, and three in four say it's hard to get a loan.

Those are some of the key findings of a survey of 1,000 prospective first-time homebuyers conducted in early March for Century 21 Real Estate LLC.

Only people who said they were likely to buy a first home in the next two years were included in the survey, with about one in four saying they planned to purchase in the next six months.

While 42 percent of those surveyed said they'd be comfortable buying a home in the current market, 48 percent said they are waiting for prices to go down further.

Among renters, 91 percent said they would be likely to buy a home in the next six months if they found an acceptable home with monthly mortgage payments within $250 of their current rent.

About 85 percent of all of those surveyed said they consider current home prices to be affordable, and 68 percent think now is a better time to buy than six months ago.

Among those looking to buy in the next six months, 69 percent said they were worried about home prices rising if they didn't act soon.

But three out of four potential first-time homebuyers think it's difficult to get a loan, and only 41 percent were aware of a first-time homebuyer tax credit that's available [1] through the end of November.

The credit -- equal to 10 percent of the purchase price up to a cap of $8,000 -- is available to anyone who meets income eligibility limits and hasn't owned a primary residence in the last three years.

Whether they'd heard about the credit or not before being surveyed, 77 percent said it would make them more likely to buy a home in the next six months.

Interest rates on loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac have hit historic lows, although borrowers seeking loans too large or risky for Fannie and Freddie may pay higher rates (see story [2]).

While only 62 percent of those surveyed said they think mortgage rates are lower than a year ago, 72 percent said rates are affordable or very affordable.

Nevertheless, half of those looking to buy in the next six months said they were worried about coming up with enough money for a down payment, and 68 percent said getting an affordable mortgage was a concern.

Concerns about the economy were also a factor, with 90 percent saying they were worried or very worried. But 78 percent think it's a good time to buy.

Fifty-eight percent of those looking to buy in the next six months said they worried they would no longer be able to pay their mortgage if they lost their jobs or were forced to take a pay cut.

"Our research shows that while consumers still have concerns about the future of the economy, many are actively considering their options as we move into the spring selling season," said Tom Kunz, Century 21 Real Estate president and CEO, in a press release summarizing the survey's results.

Homebuyers who have a stable job history of at least two years, solid credit (620 and above) and down-payment money as minimal as 3.5 percent on FHA-guaranteed loans "are well positioned to secure a mortgage" today, said Marshall Gayden, senior vice president of Century 21 Mortgage.

Quality schools and proximity to work and stores, restaurants and parks are often said to be key considerations for buyers, though those factors were less likely to be rated "very important" by those surveyed than a home's price and condition, the safety of the neighborhood, property taxes, and yard size.

Nearly six in 10 potential buyers rated their understanding of the process of buying and selling a home as only "fair" or "poor." But when asked who they would turn to for advice about purchasing or searching for a home, those under 40 were more likely to identify their parents than a real estate agent, spouse, neighbor or coworker.

Most potential first-time buyers said they'd browsed real estate listings (66 percent), talked to friends or family (60 percent), and conducted research online (58 percent).

Real estate company Web sites were identified most often (53 percent of those surveyed) as a source of information when you need advice on purchasing or searching for a home, followed by aggregator sites like Realtor.com, Trulia and Zillow (43 percent), real estate company offices (42 percent), newspaper and magazine articles (38 percent), word of mouth (37 percent), and books on real estate (21 percent).

While many real estate professionals believe newspaper advertising has been providing diminishing returns in recent years, more than half of prospective first-time homebuyers said they turn to or expect to turn to newspapers for listings.

Real estate company Web sites were identified as a top source of information for listings (for-sale properties), at 64 percent, followed by newspapers (55 percent), online classifieds including Craigslist (43 percent), real estate yard signs (42 percent), aggregator Web sites (41 percent), and real estate company offices (39 percent).

Sacramento's Public Radio (Capital Public Radio) reports that home buyers are snatching up $10,000 tax credits at a faster than expected rate.  By April 1, 2009 more than 26% of the available funds have been utilized.  The state expects that they may even run out of funds by the end of summer!

Listen to the article here

Read the article here

Interesting note that supports our views on the unlikelihood of rates moving much lower - last Friday, Jack Koskinen, interim chief executive of Freddie Mac, said that home loan rates are near the bottom and that any further decreases will be small.

Mr. Koskinen commented on mortgage rates after he attended the meeting between President Obama and the CEO's of the financial services companies on Capitol Hill.

So...get the word out to clients who are sitting on the fence waiting for that 4% rate...now is the time to purchase or refinance as rates are at historically low levels, and not likely to move much lower.

This update from Mortgagee Letter 2009-09 establishes appraisal requirements for declining markets. Here are the 10 things your appraiser must do or provide for all FHA appraisals done after April 1st, 2009:

Click to read more ...

While pending home sales declined on a soft economy, housing affordability is at the highest point since the numbers have been tracked in the 1970's.

read the full report on NAR's site.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s ironic with the weak housing market that affordability conditions have improved dramatically. “Housing affordability is at a record high – the buying power of a typical family has risen significantly,” he said. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and which will help prices stabilize in many areas by the end of this year.”

Here we go again...

For a few months now we have been trying to give our clients early notice of is again being noticed and reported on by the national media.  This time it is the Wall Street Journal.

According to the journal...

The relative cost of owning versus renting is swinging back in favor of homeownership in some U.S. markets, buoyed by several quarters of sharp declines in home prices.

At the height of the housing boom, as home prices surged, demand for rentals started to rise as the gap between owning and renting widened significantly. Even after the housing market soured, apartment demand grew as former homeowners became renters, allowing landlords to push healthy rent increases.

Now, after two years of rapid home-price depreciation, the relationship between the cost of rental payments versus after-tax mortgage payments is tilting toward ownership in a number of metropolitan areas.

Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments, according to Green Street Advisors, a real-estate consultancy based in Newport Beach, Calif. In 2006, at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. But by the end of 2008, average monthly rent for the largest 50 metropolitan areas was $1,045, compared with after-tax mortgage payments of $1,300, assuming a rate of 5.5% on a 30-year fixed mortgage. That means mortgage payments averaged just 24% more than rent payments, the narrowest gap since 2001.

read the full article here