Mortgage rates plummet
The $800 billion infusion of federal funds into credit markets has an immediate impact on mortgage rates.
NEW YORK (CNNMoney.com) -- Mortgage rates fell sharply yesterday after the administration announced that it will pump another $800 billion into credit markets to free up frozen consumer and mortgage lending.
That number dwarfed previous government actions aimed at bolstering the mortgage lending market.
"The feds agreed to spend a half a trillion dollars to buy up mortgage backed securities and another $100 billion to fund lending for Fannie and Freddie; we're not talking chump change anymore," said Keith Gumbinger of HSH Associates, a publisher of mortgage information.
Rates averaged 5.77% for the day on a 30-year, fixed rate loan, down from 6.06% Monday, according to Gumbinger. They fell as far as 0.75 percentage points during the day, according to Orawin Velz, Associate Vice President for Economic Forecasting at the Mortgage Bankers Association.
That could save a typical homebuyer more than $90 a month on a $200,000 mortgage.
"The government action was geared to bringing mortgage rates down," said Velz, "and it did."
The drop was the largest since early September, when the administration announced that it was taking control of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), and stemmed from similar market sentiment.
Both actions sought to give confidence to the investment community. Most mortgages are sold to investors in so-called secondary markets but with foreclosure rates so high and expensive write downs of mortgage-backed securities so common over the past several months, investors had fled the mortgage market.
Instead of buying mortgage bonds, they've been snapping up Treasurys, a virtually risk-free investment. That showed up in the falling yields of Treasury bonds and the greater difference between Treasury yields and mortgage interest rates.
Normally, interest rates on 30-year fixed rate mortgages are only slightly higher than yields on 10-year Treasury bonds, about 1.5 percentage points. That difference compensates mortgage investors for taking on extra risk.
Lately, however, because investors have perceived, quite reasonably, that risks of mortgage-backed securities were far greater than previously supposed, they demanded greater reward for investing in them.
That sent the difference, or spread, between mortgage interest rates and Treasury yields to 2 percentage points or so over the past year. That had widened even more recently, to about 3 percentage points, before the government took action yesterday. Even after the big drop in rates, the spread is still more than 2.5 points.
Whether the government action will lead to lower mortgage rates over the long term remains to be seen. "In theory, it should stimulate investor demand but there are a lot of unforeseen things that can occur," said Velz.
She initially thought the Fannie-Freddie takeover would have much the same long-term impact because it meant that the government was guaranteeing all the loans the two were backing.
"But the government started backstopping almost everything," she said, "so demand for mortgages declined and the spread increased again."
This time might be different, according to Mike Larson, a real estate analyst with Weiss Research, but he's far from certain.
"There's been some short-term bang for the buck," he said. "We have to see if it sticks."
Helping it stick could be the downward pressure from deflation concerns and the still unusually wide spread with Treasurys.
"Even if the spread just got a little tighter you'd get some added horsepower," said Larson. "We could see rates in the low fives pretty soon."
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10 Easy Ways to Spruce Up Your Rental or Rehab.
#1) New Electrical Switch Plates
This is such a minor, yet overlooked improvement. Most rental owners and rehabbers paint a unit and leave the old, ugly switch plates. Even worse, some even paint over them.
New switch plates cost about 50 cents each. You can replace the entire house with new switch plates for about $20. For the foyer, living room and other obvious areas, spring for nice brass plates. They run about $5 each - not much for added class.
#2) New or Improved Doors
Another overlooked, yet cheap replacement item is doors. If you have ugly brown doors, replace them with nice white doors (you can paint them, but unless you have a spray gun it will take you three coats by hand).
The basic hollow-core door is about $20. It comes pre-primed and pre-hung. For about $10 more, you can buy stylish six-panel doors. If you are doing a rehab, the extra $10 per door is well worth-it. For rentals, consider at least changing the downstairs doors.
#3) New Door Handles
In addition to changing doors, consider changing the handles. An old door handle (especially with crusted paint on it) looks drab. For about $10, you can replace them with new brass finished handles. Replace the guest bathroom and bedroom door handles with the fancy "S" handles (about $20 each).
#4) Paint/Replace Trim
If the entire interior of the house does not need a paint job, consider painting the trim. New, modern custom homes typically come with beige or off-white walls and bright-white trim. Use a semi-gloss bright white on all the trim in your houses.
If the floor trim is worn, cracked or just plain ugly, replace it! Home Depot carries a new foam trim that is pre-painted in several finishes and costs less than 50 cents per linear foot. Create a great first impression by adding crown molding in the entry way and living room.
#5) New Front Door
You only get one chance to make a first impression. A cheap front door makes a house look cheap. An old front door makes a house look old. If you have nice heavy door, paint it a bold color using a high-gloss paint. If your front door is old, consider replacing it with a new, stylish door. For about $125, you can buy a very nice door.
#6) Tile Foyer Entry
After the front door, your next first impression is the foyer area. Most rental property foyers are graced with linoleum floors. Consider a nice 12" Mexican tile. An 8' x 8' area should cost about $100 in materials.
#7) New Shower Curtains
It amazes me that many landlords and sellers show properties with either no shower curtain or any ugly old shower curtain in the bathroom. Don't be cheap - drop $40 and buy a nice new rod and fancy curtain.
#8) Paint Kitchen Cabinets
Replacing kitchen cabinets is expensive, but painting them is cheap. If you have old 1970's style wooden cabinets in a lovely dark brown shade, paint them. Use a semi-gloss white and finish them with colorful plastic knobs. No need to paint the inside of them (unless you own a spray gun), since you are only trying to make an impression.
Americans spend 99% of their time in the kitchen (when they are not watching TV). A fancy modern faucet looks great in the kitchen. They can run as much as $150, but not to worry - most retailers (Home Depot, Home Base, etc) often run clearance sales on overstocked and discontinued models. I have found nice Delta and Price Pfister faucets for about $60 on sale.
#9) Add Window Shutters
If you have ugly aluminum framed windows, consider adding wooden shutters outside. They come pre-primed at most hardware retailers and are easy to install. Paint them an offset color from the outside of the house - (e.g., if the house is dark, paint the shutters white. If the house is light, paint them green, blue, etc.)
#10) Add a Nice Mailbox
Everyone on the block has the same black mailbox. Stand out. Be bold. For about $35 you can buy a nice colorful mailbox. For about $60 more, you can buy a nice wooden post for it. People notice these things... and they like them!
Buying Real Estate Undervalued vs. Buying UNDER VALUE!
"Undervalued" vs.. "under value"... is there a difference? by Attorney William Bronchick
People often speak of buying a property "undervalued", as if they are discovering something nobody else figured out. Stocks, land, and real estate can all be purchased undervalued, but this is different from buying property UNDER value.
Here's the difference...
Let's say you think a company is ripe to expand within the next few years. You are speculating that the value of the company's stock will increase, so you buy AT MARKET PRICE and hope you are right. You can also buy a property at MARKET PRICE and hope demand will increase and thus its value will go up. You can buy gold at today's price and hope it will go up in price. However, in all cases you are speculating that the asset will increase in value and that it is CURRENTLY undervalued.
Compare this thinking to buying a property UNDER VALUE, that is below its CURRENT market value. If a house is worth $200,000 based on similar houses that have sold recently, the market value is $200,000. It may be an "up and coming" neighborhood with a good school district that most people have not yet discovered, so you can buy it for $200,000 based on the idea that the future value will be more, so it's currently "undervalued."
Or, you can buy a property with a current market value of $200,000 and pay $150,000, in which case you are buying BELOW value, or with BUILT-IN value. Why is there built in value? Simple - you can sell it tomorrow for up to $200,000! If you buy real estate undervalued, you have to wait until everyone else realizes what you suspect to be true, that the property SHOULD be worth more.
Certainly, buying property that is undervalued can make you money in that you are speculating future demand will be higher and prices will increase for that asset. But, a safer, smarter approach is to buy under value because a particular seller has some motivation, such as a foreclosure, estate, or divorce. Instead of looking for "value plays", look for value built-in, which can always be found when a particular seller has extreme motivation and needs to sell quickly.
CITY TRANSIT LAUNCHES EMERGENCY TEXT SERVICE FOR COMMUTERS
U-Text Keeps Commuters Informed of Urgent Route Changes
This week, City of Santa Clarita Transit makes it easier for commuters to stay informed of unforeseen changes to their specific route through U-Text. U-text is a text messaging service that allows commuters to subscribe and receive mobile phone text alerts when there are urgent changes to a commuter route. “A lot can happen in the time it takes our commuter users to get from the office to their bus stop such as large detours, significant road closures, and major traffic delays. Now through U-text, the City of Santa Clarita Transit can keep our customers informed of unexpected, last-minute commuter route changes at all times,” commented Mayor Bob Kellar. To subscribe to U-text, simply send a keyword text message to 41411, select the commuter route you want, and begin receiving urgent commuter text updates from City Transit. Keyword options include: sctransit747, sctransit 791, sctransit 792, sctransit793, sctransit794, sctransit795, sctransit796, sctransit797, sctransit798, and sctransit799. U-text is only for emergency route notifications and will not replace emailed Rider Alerts and Transit e-Notify subscriptions. U-text subscribers will only receive text alerts regarding their chosen commuter route. Standard text messaging rates apply. Please check with your service provider for applicable charges. For more information regarding U-text, please contact Alisha Celestine, City Communications Specialist, at (661) 25-4307 or acelestine@santa-clarita.com. Back to Sean Seckar.com
Santa Clarita, Named a ‘Model Community’ by AQMD, WINS 2008 CLEAN AIR AWARD
The South Coast Air Quality Management District presented a handful of prestigious awards to cities in the region which have demonstrated their commitment and action to improving the air we breathe. Santa Clarita was the recipient of the Model Community Award presented to Mayor Bob Kellar.
Santa Clarita received the award for its innovative and aggressive approach to improving the air quality in our region. Some of the programs presented in the winning award application include Bike to Work Day, Transit Oriented development plans, an environmentally preferable purchasing policy, air quality advocacy, a community energy partnership, facilities energy efficiencies and the City’s urban forestry programs.
“One of the very unique aspects of Santa Clarita is our ability to effectively balance the needs of businesses and residents with our concerns about the environment. Our winning of both a Model Community Award for Air Quality and being consecutively named one of Los Angeles Top 5 Most Business Friendly Cities is a clear example of this successful balance,” commented Bob Kellar, Mayor.
October 6, 2008 by City of Santa Clarita
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What The 2008 Housing Crisis Will Mean to Buyers in 2009
What is going on with the U.S. economy right now, and how does it affect people who are trying to get a mortgage and buy a home? This article will give you a better understanding of the economic problems in this country, and how they affect home buyers.For one thing, it means you will need a better credit score to (A) qualify for a home loan and (B) get the best rate on that loan. Tougher regulations were put in place as a result of the housing crisis, and these regulations do what should have been done years ago -- they discourage banks from lending to people with bad credit (among other things).
On top of that, we are seeing financial institutions fail because of all the bad loans they made in the past. So banks today are a lot less inclined to make what they feel is a risky loan.
Let's assign some actual numbers to this explanation so it makes more sense:
I recently saw Jean Chatzky, the financial editor for the Today Show, describing how the housing crisis has affected borrowers, in terms of their credit scores. She explained something we have already talked about. Home buyers today need better / higher credit scores to qualify for mortgage loans. She then backed this up with numbers that were derived from polls of the lending industry.
* In May of 2006, a borrower needed a credit score of 620 or above to qualify for the best interest rates on a mortgage.
* Two years later, after the housing crisis and all of its fallout, borrowers would need a score of 760 or above to qualify for the best rates.
That's a significant change, and it shows you how this issue affects buyers who need mortgage loans. The bottom line is that banks are not taking any risks with subprime loans or borrowers with bad credit these days. As a result of the housing crisis, the bar for mortgage qualification has been raised.
What Can You Do?
I frequently get emails from people who say something like this: "I have bad credit but I want to buy a home. How should I go about it?" In other words, these people are asking how to get a subprime loan. Evidently, they do not watch or read the news.
My response to such questions is always the same -- don't do it! Buying a home with bad credit is virtually impossible right now. And even if it were possible, it would be the worst financial move you could make in this economy.
People with bad credit should "hunker down" and focus on improving their credit scores before they do anything else. Wait until the housing market shows signs of recovery. Wait until you have the kind of credit score that will allow you to qualify for a loan, and to get a decent interest rate on that loan.
by Brandon Cornett
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Santa Clarita Named One Of LA's Top 5 Most Business Friendly Cities
Saturday, 20 September 2008Los Angeles Economic Development Commission Recognizes City
The City of Santa Clarita has been named one of the top five most business-friendly cities in Los Angeles by the Los Angeles Economic Development Corporation (LAEDC) for 2008.
Additionally, the City is a finalist for the prestigious EDDY Award, which will be presented to the top city at a gala awards ceremony and dinner at the Beverly Hilton Hotel on November 17, 2008. The EDDY Award was introduced in 1996 by the LAEDC to celebrate organizations that demonstrate contributions to positive economic development in the region. Beginning in 2006, the EDDY’s began recognizing cities and Santa Clarita has been one of the top five finalists each and every year since the award was created.
As a business friendly City, Santa Clarita does not assess a business license fee nor does it assess a utility user tax, allowing businesses to save up to five percent or more on their electric, telephone, water, and gas bills. In addition, businesses located within the Santa Clarita Enterprise Zone enjoy state income tax savings that can reduce or virtually eliminate their state income tax altogether.
Santa Clarita aims to offer local businesses a highly educated workforce, available land for development, site selection assistance, and expedited plan reviews and permit processing. Additionally, the Newhall area of Santa Clarita has been designated as a Redevelopment Project Area providing opportunities for innovative financing and improvements.
The City of Santa Clarita has had a number of economic development successes this year including being honored by the California Association for Local Economic Development (CALED) with the Grand Prize for the Best Economic Development Program in California for the City’s Tourism program; being named by the Los Angeles Business Journal as the Best City for Industrial Development in LA County; and being recognized the California Retail Survey as one of the top 25 retail markets in California ranking higher than Santa Monica, Pasadena, and Beverly Hills.
The City of Santa Clarita Film and Tourism programs represent an industry that has experienced tremendous growth over the past few years and one that finds great success in the City of Santa Clarita. In Fiscal Year 2007/2008, the City of Santa Clarita issued 335 permits for location filming that resulted in an estimated economic impact to local businesses of $18.9 million. This increase in filming is particularly noteworthy considering the writers strike that began in 2007 negatively affecting film production industry wide for several months. In addition to the success of the film and tourism industry in Santa Clarita, the City has become a thriving center for industry clusters such as aerospace manufacturing, bio-medical, and technology.
“We are very honored to be named as one of Los Angeles’ top five most business friendly cities for a third straight year. We work diligently to make sure our City’s practices help City-based businesses thrive, while providing our residents with a choice to work locally,” commented Mayor Bob Kellar.
Information about the many economic development programs offered by the City can be found on the City’s main website at santa-clarita.com, or by visiting any one of several direct websites targeted to specific industries including: http://www.locatesantaclarita.com/ ; http://www.shopcityofsantaclarita.com/ ; http://www.scenterprisezone.com/ ; http://www.filmsantaclarita.com/ and http://www.visitsantaclarita.com/.
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The Fallout From the Fannie Mae, Freddie Mac Takeover by Dane Smith
First let's look at the reaction from the media and the general public. One would expect there to be some political fallout from the largest takeover in government history. But because of the election and Hurricane Ike the reactions have largely been muted. There have been of course the expected positive reactions that this was a shrewd move to help the real estate market and negative reactions that the government should limit its involvement. But for the most part their has not been a big reaction one way or another. I have actually seen more stories about the reactions on the takeover from the presidential candidates than stories simply about the takeover.
While the media reaction has been muted the reactions in the financial markets have not been. Not surprisingly, the stocks of Fannie Mae and Freddie Mac plummeted after the announcement. The government said before hand that the common shares of Freddie Mac and Fannie Mae would lose most of their value in the event of a government takeover. So following the news of the takeover the share promptly lost 80% of their value.
The mortgage markets have reacted very favorably to the news. Considering the Fed has cut interest rates multiple times this year mortgage interest rates have remained relatively high. The reason for this was that banks were unsure about the financial stability of Freddie Mac and Fannie Mae which provides insurance for about half of the residential loans issued in the United States. This risk has now been lowered since the government takeover. Consequently mortgage rates have plummeted in the last week. 30 Year mortgages have dropped from 6.35 to 5.93. This is after rates have moved down from 6.63 to 6.35 partially on expectations that Fannie Mae and Freddie Mac were going to be taken over. I have seen some reports that this is lowest rates have been in the last 4 months. I think this understates how low rates have come down. Besides two brief drops at the beginning of 2008 this is the lowest rates have been since 2005.
The lower interest rates should have a positive effect on the real estate market. Lower rates pull down the mortgage on a house and tend to have a positive effect on real estate values and market activity. In another positive sign although their has not been too much media coverage the coverage that has come out has been mostly positive. To be honest I was a little surprised by this. I would have expected the coverage to be a little more mixed. But regardless the favorable media reaction combined with lower interest rates should help the real estate market. And based on what I have heard from different realtors their does seem to be an upswing in activity. But we won't have any hard data on this for a month or so.
So, at least in the short term, it seems the Feds have accomplished their goals of helping the real estate market with the Freddie Mac and Fannie Mae takeover. We will of course have to wait over the next few years to see if this move turns out to be wise. But for now the Fed has finally been able to push down mortgage rates.
About the Author
Ki is a real estate broker working in the Austin real estate market. He maintains a website with a Austin MLS search
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Getting Your Home Attention in a Slow Market by Jane Karwoski
Lets face facts; trying to attract attention to your home when selling in a soft real estate market isn’t an easy proposition. But, there are some things to do to help get potential buyers to pay attention to your home even when times are tough. Buyers spend much of their time outside the front door while the real estate agent is opening the lock box. This is usually the time when people will inspect the condition of the front entrance and exterior of a home. It’s so important to make a great impression on potential buyers at this point. What buyers see as they look at the front of your home can make or break a sale.There are several tasks you can do to hurry along an offer in a slow market. First, inspect the exterior of your home thoroughly, especially the front entrance and front door. If the front door is dirty, simply wash down the door. If the paint is worn or starting to peel, a good application of exterior paint is in order.
To give eye appeal, place a new mat at the front door and make sure all door hardware is shiny. Remove any dirt and cobwebs from overhangs, corners and window screens. Thoroughly inspect the windows for any cracks or chips and make sure screens are in tip-top condition. Windows should be sparkling clean as well as screens. A clean, well-kept front exterior is a good sign the rest of the home is worth a look!
Repaint the trim around your home if it has become worn. If it is simply dirty, wash off with a hose. House numbers visibly placed on the exterior of your home is always important, but artistically placed they will make a good impression on buyers.
Make sure your front landscaping is attractive. Trim any overgrown shrubs or trees, making sure to remove any dead or ailing plants. Try planting some pretty flowers near your front door or place some pots around the walkway to give your home a cheerful and inviting look. Flowerbeds should be free of weeds and driveways clean and swept. Remove any weeds that are growing through cement cracks on front walkway or driveway. Concrete that is worn or dull looking can be stained with one of the decorative stains on the market for concrete driveways and walkways. This will invite homebuyers into your home to take a further look.
Does your home have curb appeal? Step back and take a good look at your home. The lawn should be green and manicured. The front entrance should be immaculate and appealing to the eye. Are there any areas you have missed? Make sure you take care of any problems before calling a real estate agent. This will save time in the long run and give the agent a better idea of the market value of your home.
A slow real estate market doesn’t mean you have to postpone selling your home. Even if you must wait a little longer for the right offer to come along, it may be worth it in the long run. And if you have prepared you home ahead of time, the wait might not be as long as you expected.
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Can Government Solve the Foreclosure Problem? by Attorney William Bronchick
Foreclosures are up nationwide, and will continue to rise as prices continue to go flat in many markets. For some, the problem is painful. Ask New Century Financial Corporation, the nation’s second largest subprime lender, who recently filed for bankruptcy. Ask the guy down the block from you whose house is in foreclosure.
Some pundits think the rising foreclosures will bankrupt our economy, causing pain for people who lose their business or job as a ripple effect of all these foreclosures. Others think that the rise in foreclosures is a healthy adjustment to the end of a long real estate boom, and is nature’s way of taking care of a free-market economic cycle.
Who’s right? Time will tell, but it’s alarming to see politicians trying to fix this problem. Here are some of their solutions.
Give People Money
Tax the rich, give to the poor. The federal government now wants to fund programs to help people stay in their homes.
A new bill in the Senate proposes giving money to people who can’t pay their loans. We taxpayers are confused. If these people are in trouble because they never should have been given such a loan, why should taxpayer money be used to keep them in their homes that they could not otherwise afford?
Maybe someone in Washington has the answer to that question?
Regulate Foreclosure Investors
I have written extensively about the assault on foreclosure investors that have been initiated by consumer advocate groups, resulting in a tsunami of new “Foreclosure Protection” laws across the country.
While protecting innocent homeowners from unethical investors is a good idea, new legislation is not always the answer. Enforcement of existing consumer protection laws and prosecution under existing criminal laws is certainly a better option than creating new laws that limit the options of a seller in foreclosure. The best solution to a foreclosure epidemic is a free market that allows investors to gobble up inventory. By hamstringing investors with complicated, punitive regulations, it will only discourage transactions and result in more properties in lender inventory. More lender inventory forces them to sell at lower prices, which hurts the entire real estate market.
Stop the Foreclosure Process
The Government of the State of Massachusetts recently handed the State Banking Division the authority to put up to a two month delay on any lender foreclosure. All a homeowner has to do is file a complaint with that office.
It is not year clear on how many lenders this will affect, but certainly this move is troubling. If the government’s action is based on a consumer complaint, what kind of complaint deserves the kind of government involvement that stops a lender from collecting on its debt?
Certainly, any homeowner whose legal rights have been violated under state or federal law can stop or delay a foreclosure with a court order. Opponents, of course, will argue that since these people in foreclosure can’t afford lawyers, they won’t have the means to seek this remedy. Such is life, that people who are in debt can’t afford lawyers to protect their legal rights. Do people in $1,000,000 homes deserve the same protection as people in $100,000 homes? Do lenders and their shareholders have the right to foreclose and get their collateral back?
And, think about the next logical step... will the government stop allowing landlords to evict if the problem gets bad enough?
Stop the Lenders from Lending
Nobody can seriously deny that lenders got sloppy in how they lent mortgage money over the last 10 years. As a result, many people got into loans they couldn’t pay back, and we now see the consequences.
Conversely, with the exception of gross overreaching by mortgage brokers, it’s hard to deny that most people didn’t understand the risk involved in borrowing money they couldn’t pay back. If you buy a house with no money down and a negative amortizing loan, you are gambling that you will make more money in the future and/or the price of your home will increase. If you are wrong, you lose your home. That’s the gamble. It’s like Vegas, except for one thing – the house doesn’t win when the customer loses. Everybody loses, except the attorneys who get paid to foreclose.
Should the government stop lenders from offering “risky” loans? The answer, I believe, is emphatically “NO”. If lenders go too far, they suffer financially. Thus, the market will take care of itself, in that lenders who lose profits will tighten up loan regulations, and Wall Street will downgrade or reject portfolios of risky loans.
Before you get too excited by this last paragraph, I do believe that some regulation is appropriate to protect the consumers and shareholders from getting duped in the process. Additional disclosures to both homeowners and Wall Street investors are appropriate considering the large number of defaulting subprime loans. However, if people want to borrow money under risky terms and lenders want to lend under a high risk of loss, why should the government stop them? Pawn shops, check-cashing stores and used car lots all operate on a high-level of risk.
Step Up Enforcement of Existing Laws
Instead of stopping the business, I believe the government should throw money at enforcement. Prosecute the bad people and leave the options open for people who want to do business under their own terms. There are enough existing laws that give the state and federal prosecutors plenty of room to go after bad operators, and many of them already have.
The government can put bandaids on it, but only the market can solve it the foreclosure problem. When demand exceeds supply in a given market, prices will go back up, and people will have enough equity to sell their homes. Somehow, I don't imagine people will learn their lesson and, thus will continue the same cycle in the future. But, most Americans believe it is not the government's job to stop people from willingly doing stupid things.
When it comes to your financial decisions, be responsible, read the fine print, and remember... "buyer beware".
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