California home sales fall 24 pct in January

The declines reflect a weakening in consumer confidence and a rise in mortgage interest rates, according to the California Association of Realtors,

Carper, Castle Unveil $6 Million Program for First-Time Homebuyers in Delaware

U.S. Sen. Thomas R. Carper and U.S. Rep. Michael N. Castle today announced a more than $6 million program called First Front Door that will help lower-income first-time homebuyers across Delaware with down payment and closing costs. See firstfrontdoor.com for details.

Why Those in the Real Estate Business Will Always Put a Positive Spin on the Real Estate Market

1. Buyers' agents get nothing if there is no sale, so they want their clients to wildly overbid, the exact opposite of the buyer's best interest.
2. Mortgage brokers take a percentage of the loan, so they want buyers to take out the biggest loan possible.
3. Appraisers need mortgage brokers for their business, so they are going to give the appraisals that brokers and agents want to see, not the truth.
4. Banks get origination fees but have been selling most mortgages, so they take no risk on those loans. They do not care about the potential bankruptcy of borrowers, so they will lend far beyond what buyers can afford. Banks sell most loans to Fannie Mae or Freddie Mac. The conversion of low-quality housing debt into "high" quality Fannie Mae debt with the implicit backing of the federal government is the main support for the housing bubble. That is going to end as Fannie Mae shrinks.

Even for loans that banks keep, they have a motive to lend beyond what buyers can afford. Banks designate interest as "income" whether they receive it or not. As long as borrowers do not actually default, additional borrower debt is counted as bank income, and banks can claim higher "earnings". That is going to end when those borrowers cannot even make the principal payments.
5. Newspapers earn money from advertising placed by Realtors®, so papers have a strong motive to publish the Realtors'® unrealistic forecasts.
6. Owners themselves do not want to believe they are going to lose huge amounts of money.

What is their argument for buying vs. renting, even in a down market?

"There are great tax advantages to owning."

Nationwide rate update

Rates on 30-year, fixed-rate mortgages slipped to 6.26 percent from 6.28 percent last week, Freddie Mac reported in its nationwide survey. Last week's rate marked a two-month high.

Rates on 15-year, fixed-rate mortgages fell to 5.89 percent from 5.91 percent. One-year adjustable rate mortgages dipped to 5.32 percent from 5.36 percent. However, rates on five-year hybrid adjustable rate mortgages edged up to 5.96 percent from 5.95 percent.

Rates do not include add-on fees known as points. The 30-year, 15-year and five-year hybrid adjustable each carried a nationwide average fee of 0.6 point this week. The one-year ARM carried an average fee of 0.7 point.

A year ago, 30-year mortgages averaged 5.69 percent, 15-year mortgages stood at 5.22 percent, one-year adjustable-rate mortgages were at 4.16 percent and five-year hybrid adjustable rate mortgages averaged 5.05 percent.

New site offers free estimates of home values

Check out zillow.com which simply takes an address, uses information from the county’s tax appraiser’s office, and come up with an estimate. However, before you bet the farm on the valuation you get from zillow.com, be sure to get a second opinion from your local realtor.

California Luxury Home Values Increase in 2005... duh

Luxury home values rose to all-time highs in Los Angeles, San Diego and San Francisco in 2005 on the strength of double-digit gains, but appreciation slowed significantly in the fourth quarter, according to the First Republic Prestige Home Index™ by First Republic Bank, one of California's leading providers of full-service banking, investment management, and trust services.

The Index, which has tracked luxury homes since 1985, found:

-- Los Angeles values rose 0.7% from the third quarter of 2005 to the fourth quarter of 2005 and rose 16% for the year. The average luxury home in Los Angeles is now a record $2.29 million, up $316,000 from a year ago.

-- San Diego values rose 0.7% from the third quarter of 2005 to the fourth quarter of 2005 and were up 13.3% for the year. The average luxury home in San Diego is now a record $2.09 million, up $245,000 from a year ago.

-- San Francisco Bay Area values rose 1% from the third quarter of 2005 to the fourth quarter of 2005 and gained 13.2% for the year. The average luxury home in San Francisco is now a record $2.88 million, up $336,000 from a year ago.

CA to help first-time home buyers qualify for 40- year loan with $0 down

Up till now, first-time California buyers trying to stretch financially to purchase a house with a 40-year mortgage - instead of the standard 30-year loan - had to turn to the private sector.

But soon the state of California will offer a helping hand. The California Housing Finance Agency says it plans to offer its own 40-year home loan this spring with a fixed, below-market interest rate.

While CA residents will not need a down payment, they will have to qualify as first-time buyers and meet CalHFA's income requirements and other criteria. The agency says its 40-year mortgage is for people who can't afford to buy a house with a 30-year loan and are averse to risky financing that threatens future payment shock, such as adjustable-rate, interest-only loans.

For example: A household using a zero-down, 30-year CalHFA mortgage would need to earn about $72,500 a year to buy a home selling for $355,000. The same family using a 40-year loan could qualify with an income of about $68,400.

CalHFA has offered traditional fixed-rate, 30-year mortgages for nearly three decades. Last year it launched a fixed-rate, 35-year loan with interest-only payments for the first five years. That plan now accounts for 40 percent of its mortgages.

CalHFA promises interest rates that officials say they try to keep at least one-half to one full percentage point below prevailing market rates. But borrowers must qualify as first-time buyers and fall within CalHFA's income and home price caps, which vary by region.

Though they're new for CalHFA, 40-year loans are old news among private lenders, who last pushed them in a big way during the height of the previous real estate cycle in the late 1980s and early 1990s.

More lenders have begun to offer 40-year loans as a way to attract borrowers who are having a harder time qualifying for the riskier forms of financing. With the rise of short-term interest rates over the past year and a half, such loans have gotten more expensive. And many lenders are simply searching for something different to attract borrowers amid the recent slowdown in refinancing and home purchases.

However, CalHFA's 40-year loan does have some drawbacks:

* The agency expects the interest rate to be roughly one-eighth of a percentage point higher than its 30-year loan. As of last week the 30-year loan had a rate of 5.5 percent.

* Borrowers won't pay down the principal nearly as fast when compared with a traditional 30-year mortgage. This means the cost of the 40-year loan will be significantly higher over its full term.

CalHFA officials predict their 40-year loan will account for 15 percent to 20 percent of the agency's loan business within the first year.

Debt Consolidation Home Loans Now Available with First Guarantee Mortgage

Debt Consolidation Refinance “Payment Buster” Program to Help Homeowners Reduce Credit Card Debt

Debt consolidation home loans can help consumers take control of their credit card debt load by paying off their credit card balances with a home refinance loan.

First Guarantee Mortgage a home mortgage refinance expert resource and multi-state mortgage broker located in Winter Park, Florida is now offering a “Payment Buster” debt consolidation home loan program to help homeowners with high credit card debt to refinance and gain tax benefits as well as lower monthly mortgage payments.

With the “Payment Buster” debt consolidation refinance program homeowners now have the opportunity to consolidate all their high interest credit cards payments into one low tax-deductible payment.

The benefits of consolidating credit card debt with the “Payment Buster” home refinance program are:

- Make one monthly payment instead of three or four
- Your payment may now be tax deductible
- Increased disposable income
- Gain control of your budget
- Cut your credit cards up

Homeowners can quickly apply online with the debt consolidation loan application and receive a loan offer in one hour and close within two weeks.

First Guarantee Mortgage is a debt consolidation home loan refinance expert resource and professional multi-state mortgage broker that provides a one-stop shop for consumers looking to refinance or make a new home purchase. FGM has over 550 highly trained loan specialists ready to research hundreds of lenders and home loan programs to find the right home loan solution to fit each consumer’s individual financial needs.

Percentage of home ownership is leveling off

After climbing steadily for the past 10 years, the nation's homeownership rate appears to have leveled off. Recent data released by the U.S. Census Bureau puts the homeownership rate at 69% in the fourth quarter of 2005, down from 69.2% a year earlier. This is the third quarter in a row that the rate hasn't posted a year-over-year gain; and it's the first time since 1994 that the rate at year-end hasn't increased from the previous year.

Some economists say that the new data could be a sign that declining affordability is taking its toll on first-time homebuyers. Economic weakness in the Midwest may be a significant factor, where the homeownership rate is down to 72.8 percent in the fourth quarter, from 73.7 percent a year earlier.

The portion of U.S. population who own homes climbed in the mid-1990s, thanks to moderate interest rates and strong economic growth. In the past 5 years, homeownership moved higher, thanks to low interest rates & creative mortgage financing. The homeownership rate reached an all-time high of 69.2 percent in the second quarter of 2004, up from 63.8 percent a decade earlier.

Concurrently, home prices have surged. The median price for an existing single-family home was $213,000 in the fourth quarter of 2005, up 13.6 percent from a year earlier, according to the National Association of Realtors. A record 72 of 145 metro areas showed double-digit annual increases in median prices for existing single-family homes.

It will take several more quarters to determine whether the homeownership rate has actually peaked; as the Census Bureau estimates are based on a monthly survey of roughly 61,000 occupied homes, there's also the possibility of a sampling error.

Still, today's homebuyer is faced with rising home prices and higher mortgage rates. In 25 of 143 metro areas nationwide, homes were so expensive in the fourth quarter that a family earning the median income couldn't afford the median-priced home, based on conventional lending standards. Two years ago, 13 of 151 metro areas were considered unaffordable. Affordability has even dropped in the Midwest, where home-price growth has been modest.

Faced with ever-rising prices, many borrowers have turned to creative mortgage products, including: loans with low teaser rates, interest-only mortgages and piggyback loans, which allow borrowers to buy a home even if they lack the money for a traditional down payment. But rising short-term interest rates have made some of these products less attractive.

The National Association of Realtors' Affordability Index now stands at 115.8, the lowest level since the third quarter of 1991. When the index stands at 100, a family earning the median income has just enough money to afford the median-priced home, assuming a 20 percent down payment and current interest rates. Forty-three percent of first-time homebuyers purchased a home with no money down, according to the Realtors group.

There are signs that rising home prices may be leading some to choose renting over buying. The rental vacancy rate declined to 9.6 percent in the fourth quarter, compared to 10 percent at the end of last year and a high of 10.4 percent in the first quarter of 2004, according to the Census Bureau. The disconnect between record home sales and a stagnant homeownership rate could suggests that the recent growth in sales is being fueled in part by investor activity. Investors accounted for 9.5 percent of mortgages to buy homes in the first 10 months of 2005, according to LoanPerformance, a unit of First American Corp.

Home Starts Rise to Highest Since 1973

Feb. 16 (Bloomberg) -- Builders in the U.S. took advantage of the warmest January on record to break ground on the most new houses in more than three decades.

Construction began on homes at an annual rate of 2.276 million, up 15 percent from December's revised 1.988 million and the most since March 1973, the Commerce Department said today in Washington. The increase follows the best year ever for sales.

Economists argued over whether the housing market owes its resilience entirely to a warm winter or an economy that's rebounding from a fourth-quarter slowdown. The outcome may determine how much the Federal Reserve raises interest rates after 14 consecutive increases since June 2004.

``Housing is in the process of slowing down,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``Whenever you get record warmth in January and builders can get out there and do their thing, it's going to affect the numbers.''

``Don't bet the ranch on that scenario,'' said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. While weather was a factor, ``you really shouldn't sell the American consumer short and housing is one aspect of that.'' A decline in starts this year will be gradual, he said.

A separate report today showed manufacturing in the Philadelphia area accelerated this month, another sign the economy is gathering momentum. The Fed Bank of Philadelphia's general economic index rose to 15.4, the highest since August, from 3.3 in January. Readings above zero signal expansion.

`Significant Rebound'

Fed Chairman Ben S. Bernanke told the Senate Banking Committee today that ``it appears that the first quarter will see a significant rebound from the fourth quarter'' in terms of economic growth.

Shares of builders climbed after the report. The Standard & Poor's 400 Homebuilding Index rose 1 percent at 12:20 p.m. in New York to 522.83. The S&P 500 gained 0.42 percent.

Last month was the warmest January in more than 110 years in much of the country. Starts were expected to rise to a 2.02 million annual rate from December's previously reported 1.933 million, based on the median forecast in a Bloomberg News survey of economists.

``While some of the strength in January can be attributed to favorable weather, it's nonetheless clear that construction is extremely strong,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland.

Building Permits

Building permits, an indicator of future construction, unexpectedly rose 6.8 percent to a 2.217 annual rate.

Starts of single-family homes rose 13 percent last month to a record 1.819 million-unit rate. Construction of multifamily homes such as townhouses rose 22 percent to a 457,000 rate.

Construction increased throughout the country. Housing starts rose 29 percent in the Northeast, 24 percent in the Midwest, 17 percent in the West, and 8.7 percent in the South. Starts at an annual rate of 1.177 million in the South were the highest since February 1984.

The broad-based regional gains imply ``some underlying support from non-weather factors,'' said David Greenlaw, chief U.S. fixed income economist at Morgan Stanley in New York. ``We expect to see only a gradual cool-down.''

In other reports today, prices of imported goods into the U.S. rose 1.3 percent, the first increase in three months. The number of people filing first-time claims for jobless benefits Rose to a level that still points to a robust labor market.

Warmer Weather

Temperatures in January averaged 39.5 degrees nationwide, the highest in more than a century of record-keeping at the National Climatic Data Center in Asheville, North Carolina.

``Historically, construction and starts have been highly sensitive to weather conditions during the winter months,'' Robert Mellman, an economist at JPMorgan Chase & Co. in New York, said in a note to clients.

The number of homes under construction in January rose 1.2 percent to 1.421 million, the highest since February 1974.

January housing completions rose 1.1 percent to 1.971 million units at an annual rate, from 1.95 million. In a sign construction may cool in coming months, the number of housing units authorized but not yet started, fell 3.8 percent to 218,200.

Home order cancellations increased the first two months of KB Home's fiscal year and net orders for new homes are lower than a year earlier, the sixth-largest homebuilder by stock market value said in its annual report on Feb. 10.

Affordability

``If the current trends do not improve, we may be required to moderate our revenue guidance,'' KB Home said in the report. The company sells most of its houses from February through June.

Housing affordability fell to the lowest level in more than 14 years in the fourth quarter, according to the National Association of Realtors. Higher mortgage rates and prices probably will slow sales of new and existing homes to a combined 7.91 million from 2005's record 8.354 million, the group said.

The average rate on a 30-year fixed mortgage was 6.15 percent in January, according to Freddie Mac. While that was below December's 6.27 percent, it exceeded year-earlier levels and has risen so far this month.

The 30-year mortgage rate probably will rise to 6.9 percent by the end of the year and the median price of a new home will increase 5.7 percent, a slower gain than last year's 7.4 percent, the National Association of Realtors said on Feb. 7.

`Not Smoking Hot'

The Mortgage Bankers Association's weekly index of mortgage applications to purchase or refinance homes fell last month and has continued to decline in February, dropping 7.3 percent last week.

``It's not smoking hot as it was four months ago but the bottom definitely has not fallen out,'' of the housing market yet, Anthony Hsieh, president of Lending Tree.com in Charlotte, North Carolina, said in an interview.

Changes in housing starts can lag fluctuations in sales by several months, economist said. Housing accounted for 55 percent of the rise in gross domestic product in 2005 and the effect of rising prices on wealth accounted for $120 billion of consumer spending, Merrill Lynch economists said in a report on Feb. 10.

The U.S. economy probably will grow at an average 3.3 percent rate this year, slower than 2005's 3.5 percent, according to a Bloomberg survey taken from Jan. 31 to Feb. 8.

Washington Mutual to cut 2,500 jobs

Washington Mutual announced 2,500 job cuts at its home-loan business, another sign of a cooling real-estate market. The bank, one of the largest mortgage lenders in the U.S., said its network of processing offices that provide administrative support to its home-loan businesses will be reduced to 16 from 26. The job cuts represent more than 4% of Washington Mutual's total workforce of about 60,000.