More Investors, Vacationers Snatch Up Homes

Sales of investment and vacation homes surged last year, the latest evidence that investors and higher-income households are taking advantage of low home prices to scoop up bargains.

In its annual survey of investment- and vacation-home sales, the National Association of Realtors found that the number of homes purchased by investors rose 65% during 2011 to 1.2 million, accounting for 27% of all home sales. In 2010, investment properties accounted for 17% of all sales.

The number of homes purchased as second or vacation homes jumped 7% last year to 502,000—accounting for 11% of all transactions, up from 10% of all sales in 2010.

While the majority of homes sold last year went to traditional buyers who plan to use the home as a primary residence, their presence in the market declined to 61% from 73% in 2010.

During the housing boom, speculators were blamed for helping to inflate the bubble by snapping up homes, especially new homes, and then quickly reselling them as prices rose higher. That led to overbuilding. Some economists now believe that investors are helping to stabilize the market by buying up excess inventory.

While their activities could help to stabilize prices, they also are creating problems for some buyers. Real-estate agents say investors, and to a smaller extent vacation-home buyers, are outmaneuvering traditional buyers, who are less likely to have the financial means to pay cash for a home and may not devote as much time to searching for properties. The NAR survey found that nearly half of all investors and 42% of vacation-home buyers purchased their homes using cash. Traditional buyers, meanwhile, are seeing deals derailed because they can't qualify for a mortgage or because appraisals for the homes they are trying to buy or sell come in too low.

"The last two to three years has been a battle between the first-time home buyer and the investor," said Budge S. Huskey, president of Coldwell Banker Real Estate LLC, a national franchiser based in Parsippany, N.J. "Investors have won."

In some of the hardest-hit housing markets, investors are the largest category of buyers. But unlike during the boom years, when many investors were buying properties to "flip" quickly for a profit, many of today's investors buy the homes with plans to rent them out and sell them when the market improves.

"Obviously, it's a great rental market, and it's going to be a great rental market for a while," said Geoffrey Jacobs, principal at Empire Group, a developer that has amassed a portfolio of nearly 1,000 single-family homes in Phoenix since 2009. Because the typical home that he buys is only about 10 years old, "it'll compete well with a new home down the road when we go to sell the houses," Mr. Jacobs said.

Amid increased demand from investors, real-estate agents say there aren't enough foreclosed homes in good condition available in some markets, including parts of California and Florida. Buyers are "begging for properties," Mr. Huskey said. "There is an insatiable demand."

Thirty percent of vacation-home buyers said they plan to use the property as a primary residence in the future, indicating that buyers who can afford to take advantage of low prices and low interest rates to buy their future retirement homes are doing so.

In December, Sarah Donovan, who owns a home in Littleton, Mass., purchased a roughly $300,000 vacation home on Cape Cod. "My husband has wanted a house on the Cape for about 20 years," said Ms. Donovan, a stay-at-home mother who made an offer near the asking price the day she saw the three-bedroom home with a guesthouse. "The Cape market is coming back with decent housing prices, and we didn't want to miss out," she said.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit FirstCapital Online or call: 310-458-0010

Mortgage rates dip, helping homebuyers

WASHINGTON (AP) — The average U.S. rate on the 30-year fixed mortgage fell back below 4% this week, staying near historic lows.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan dropped to 3.99% from 4.08% last week. Last month, the rate touched 3.87%, the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage also fell, to 3.23%. That's down from 3.30% last week and above the record low of 3.13% hit earlier this month.

The low rates have made home-buying and refinancing more affordable at a time when the housing market is flashing small signs of improvement. Still, most economists say it will take years for the market to fully recover from the housing bust.

January and February made up the best winter for re-sales in five years, when the housing crisis began. And builders are more confident about the market. In February, they requested the most permits to build single-family homes and apartments since October 2008.
An improved job market may also be helping home sales. Employers have added an average 245,000 net jobs per month from December through February. That has helped reduce the unemployment rate to 8.3%, the lowest level in nearly three years.

Rates rose a bit earlier this month after positive economic news pushed up yields on U.S. Treasury bonds. Mortgage rates then to track the yield on the 10-year Treasury note.
An improving economic outlook can lead investors to shift money from Treasury bonds to stocks. That pushes up Treasury yields.

Even with signs of improvement in housing, home prices continue to fall. Millions of foreclosures and short sales — when a lender accepts less than what is owed on a mortgage — remain on the market. And the housing crisis and recession have also persuaded many Americans to rent instead of buy, which has led to a drop in homeownership.
To calculate the average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.
The average fee for the 30-year fixed loan was 0.7. For the 15-year fixed loan, the average was 0.8.

For the five-year adjustable loan, the average rate fell to 2.90% from 2.96%, and the average fee was unchanged at 0.8.

The average on the one-year adjustable loan dropped to 2.78% from 2.84%, and the average fee was unchanged at 0.6.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Home prices slide, mortgage rates increase

During the past several months there have been solid signs of economic improvement.  The housing sector is a critical component in most cities throughout the United States.  In the Los Angeles area it plays a vital role in diversifying the region’s economy.
As expected, housing prices continue to decline, as indicated in the monthly Case-Shiller Index, which was published earlier today.  The index is a key benchmark of housing data and has become the industry standard in analyzing sale trends.

Supply & Demand

While reduced prices are good news for those in a position to buy, most must secure a mortgage to complete the transaction.  Interest rates have increased by .500% month to month.  While that figure does not trigger any alarms, it is noteworthy because rates were well below 4.000% just several weeks ago.

The increase in rates is also another good sign of economic improvement, as it’s a basic function of supply and demand.  As the economy improves, rates will increase.  As the economy declines rates will reduce.

Steady Improvement
In the Los Angeles market, the standard 30 year Fixed Rate is currently averaging 4.290%.  On a typical mortgage of $225,000, the principal and interest payment would be $1,112.14.
Compared to six years ago when the housing market erupted and was in a free-fall, the same rate was 6.160%.  The mortgage amount would yield a monthly payment of $1,372.22, or a bottom-line difference of $260.08, per month.  Comparatively speaking, that’s over $18,000 over the time span.
It’s that type of analysis real estate professionals want you to focus on because 2012 is far more positive than 2006.

As the first quarter is coming to an end, many are predicting robust activity with the start of spring and the traditional home buying season right around the corner.
As the economy continues to rebound and sales increase, mortgage rates are forecast to remain favorable as buyers are trying to leverage their purchasing power with some great deals which are still available, as documented by the Case-Shiller report.

Aside from the analysis, rates and rates, and home prices are home prices.  There are numerous programs available to assist with purchasing or refinancing.  To key is to engage your real estate professional of what works best with your budget and financial situation.

End of 1st Quarter Mortgage Interest Rate Comparison
For traditional 30 year Mortgage

• 2012 – 4.290% (3.890% one month ago)
• 2011 – 4.840%
• 2010 - 4.970%
• 2009 - 5.000%
• 2008 - 5.970%
• 2007 - 6.160%

Sources
Standard & Poors Case-Shiller Index
Freddie Mac
National Association of Realtors
Bankrate.com

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit FirstCapital Online or call: 310-458-0010

5 Reasons to be Preapproved for a Mortgage

Real estate agents push their clients to get prequalified for a home loan all the time and in today's tough economy and tight credit market if you are seriously  considering the purchase of a home you should follow your agent's advice, since getting preapproved for a home mortgage can save you lots of headaches in the future.

The preapproval process takes just a little more work than being prequalified for a home mortgage, and takes the risk out of being denied for a home loan after you find the home you want to buy. Being preapproved for a mortgage is also a great tool to use to your advantage when it comes to negotiating the price on a home.

A lender’s full preapproval gives you a starting point for your home search by establishing the amount you can borrow, and a series of other advantages. Here are the top five reasons to be preapproved for a mortgage:

1. Affordability Getting a preapproval letter from a lender will allow you to know exactly how much home you can purchase, and streamline your home search because you won't waste time looking at homes you can't afford. Homes outside of your price range will be off grounds. 2. Motivation During your home search, you may find homeowners who have received more than one offer. In this case, they will pay closer attention to offers that include lender prequalification and preapproval letters. A preapproval letter tells them that you're already working with a lender that's willing to finance your purchase and that you can perform. This can often be a major motivator for owners wanting to sell their homes.

3. Saves Time

Since your lender has to do work in advance, including a credit check and confirmation of income to determine borrowing qualification, time is saved when you find the home you want to buy. As long as you don't make any drastic changes to your financial situation before escrow is opened, things can move ahead much faster. The bank has already agreed to finance your home purchase. Now, it's just a matter of gathering up the information for any additional data the lender requires and having the home appraised.

4. Additional Costs

Sometimes, first time homebuyers particularly aren't aware of additional costs that come with buying a home like title insurance, lender closing costs, homeowners insurance and escrow fees. With an itemized list of costs provided after being preapproved, purchasers are armed with good information so you can be ready for any additional expenses that may come your way. This may help when it comes to making decisions on buying a home that needs repairs, renovations, landscaping or other work.

5. Negotiation Advantages

Being preapproved for a mortgage lets homeowners know that you are serious about buying a home and demonstrates you have the ability to perform. This gives the buyer the advantage of strength in negotiations since your approval is as good as a “done deal” when it comes to buying a home, and allows you to offer a lower price than what a property is listed for on the market. Owners may be debating between your offer and a higher offer from a buyer who hasn't been preapproved. Your status just might motivate them to be a little more flexible with your terms.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only. First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit FirstCapital Online or call: 310-458-0010

Pour money into mortgage to dump PMI?

Dear Dr. Don,
I owe $72,000 on a condo worth $80,000. Consequently, I'm paying a $50 per month private mortgage insurance, or PMI, premium. I have $12,000 cash available to invest. Would it make sense to make a lump payment on my mortgage to bring me below 80 percent, so I can eliminate my PMI? Seems this would be by far my best return on investment when compared to investing in my 401(k), stocks, etc. Thanks.-- Jason Jump-start

Dear Jason,
Paying down the principal balance on your mortgage to get out from under PMI can make sense as an investment as long as you understand the rules. There are two sets of rules concerning terminating PMI. The first are the provisions of the Homeowner's Protection Act, or HPA, of 1998; the second are more consumer-friendly guidelines established by Freddie Mac and Fannie Mae.

The Homeowner's Protection Act requires the lender to cancel PMI when your loan balance reaches 78 percent of the original purchase/appraised value. You can petition the lender to drop the PMI requirement when your mortgage loan balance reaches 80 percent of the original purchase/appraised value.

There are other conditions that have to be met as well. You have to be current on your loan and have had no payments that were 30 days late within 12 months of the request. The lender may also require evidence that the value of the property has not declined below its original value and that there is no second mortgage on the property. Your lender is required to provide you with information about canceling your PMI at least annually. The mortgage service also is required to provide a telephone number you can call for information about termination and cancellation of the PMI policy.

Fannie Mae and Freddie Mac guidelines consider the current appraised value of the property, not the original purchase price/appraised value, in determining whether you can cancel PMI. The loan has to be seasoned, meaning you've made payments for at least two years. You can't have had a 30-days-late payment in the past 12 months or a 60-days-late payment in the last 24 months. You initiate the request to terminate the PMI policy and are responsible for the cost of an appraisal acceptable to the agency and the lender -- so don't just hire any appraiser. You can terminate PMI if the mortgage loan balance is 75 percent or less of the appraised value after 24 months or 80 percent of the appraised value after five years of making payments.

Getting out from under a $50 monthly payment by investing $12,000 in prepaying your mortgage is equivalent to earning 5.12 percent on your money on a pretax basis. Is it a smart investment? Yes, unless by spending the money you're leaving yourself with no emergency fund. It also doesn't make sense if you're not contributing up to the limits of any employer match on your 401(k) plan. In most cases, that means you're giving up a 50 percent return on your contribution, and 50 percent trumps 5.12 percent.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit FirstCapital Online or call: 310-458-0010