Alejandro Lazo
The Los Angeles Times

A National Assn. of Realtors gauge of future home purchases increases 1% to 96.6 in December compared with a month earlier.

Contracts for home purchases in December eked out a gain over the prior month, according to data out Tuesday, one sign that the U.S. housing market might muddle through in the coming months following a huge December sales plunge.

The pending home sales index, a forward-looking indicator put out by the National Assn. of Realtors based on contracts signed in December, rose 1% to 96.6 from 95.6 in November. It remains 10.9% above December 2008, when it was at 87.1.

Contracts signed in December will translate into sales in following months if the deals manage to successfully close escrow.

In November, the index fell 16.4% after surging for months as buyers rushed to take advantage of an $8,000 tax credit for first-time buyers before an original Nov. 30 deadline.

In December, U.S. home resales plunged 16.7% — the biggest drop in the 42 years the Realtors group has been measuring home sales — as the extension of that tax credit failed to keep the buying momentum going into the holiday season.

Congress in November pushed the tax credit deadline to April 30 and expanded the program to include up to $6,500 for some buyers who already own homes.

Some experts predict the national housing market will pick up again as the extended tax credit approaches its expiration and interest rates remain low. Others see weakness for months to come given the high rate of joblessness.

Economists reacted positively to the December contract rise.

“The pending sales index stabilized at the end of 2009,” Weiss Research analyst Michael D. Larson wrote in a note to clients. “That potentially sets the stage for a more positive spring selling season. Indeed, with mortgage rates low, house prices down, and the supply of homes for sale steadily falling, it’s easy to see why the market should stabilize.”

“There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded,” said Lawrence Yun, chief economist of the Realtors group. “These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth-highest monthly tally in two years.”

The West was the only part of the country that saw a decline in pending home sales. The region’s index reading fell 3.8% to 119.9 compared with November but is 18.6% above a year earlier.

The index in the Northeast rose 76.1 in December, up 2.3% from November and 14.9% above December 2008.

In the Midwest, the index increased 5.2% to 86.9 compared with November and 8.7% above a year earlier.

Pending home sales in the South rose 2.2% to an index level of 98.4 from November. That is 5.5% higher than in December 2008.

Associated Press

Washington - Most banks aren’t erecting new hurdles for people and businesses to get loans, a fresh sign that credit problems are easing.

In a quarterly survey released Monday, the Federal Reserve found that “commercial banks generally ceased tightening standards on many loan types” at the end of last year. The one exception: commercial real estate loans.

But banks aren’t ready to ease the tough loan standards put in place during the financial crisis. Banks “have yet to unwind the considerable tightening that has occurred over the past two years,” the Fed said.

Meanwhile, demand for home mortgages and other consumer loans weakened, a sign consumers are leery of making big-ticket purchases given double-digit unemployment and the fragile economic environment.

Consumers will help support economic growth, but they won’t lead it by going on spending sprees. That’s one reason the recovery this year is supposed to be modest rather than booming.

Looking ahead, “significantly fewer” banks expected widespread deterioration in the value of the loans they hold this year, the Fed said.

On the consumer end, some banks indicated that the credit quality of home equity loans and home mortgages held by prime borrowers probably would erode further in 2010.

Alejandro Lazo
The Los Angeles Times

Sales of previously owned houses fell 17% in December, raising fears about recovery

Sales of previously owned homes nationwide plunged steeply in December, raising concerns that the housing recovery could lose steam after government policies intended to support it expire in the spring.

For now, California appears to be bucking the downward trend.

U.S. sales in December fell to a seasonally adjusted annual rate of 5.45 million units, down 16.7% from November, the National Assn. of Realtors said Monday. It was the biggest drop in the 42 years that the group has been measuring home sales and comes after first-time home buyers raced to close on their purchases before a federal tax credit of up to $8,000 for first-time purchasers was set to expire Nov. 30.

Congress in early November extended the deadline to April 30 and expanded the credit to include up to $6,500 for some buyers who already own homes. The renewal didn’t pull in as many buyers in December, with first-time buyers declining to 43% of all buyers in December from 51% in November, according to a survey by the Realtors group.

“People bought homes in October and November thinking that the tax credit would expire at the end of November, and therefore the decline in December is just a reflection of that,” said Mark Zandi, chief economist at Moody’s Economy.com. “It does highlight a broader point that the housing market is on government life support, and when it is taken off that support, it weakens.”

A slew of federal policies - including the tax incentives for buyers, low interest rates driven down by Federal Reserve actions and increased access to mortgages backed by the Federal Housing Administration - bolstered the nation’s housing recovery last year.

But those props eventually will end: The tax credits expire in April, many economists expect interest rates to rise again this year and the FHA is tightening its lending standards. The question remains whether home sales and prices will fall without the government’s help. Read the rest of this entry »

The December figure is up 1.1% from the previous month and a 6% increase over a year earlier

Alejandro Lazo
The Los Angeles Times

California home prices ticked up 1.1% in December from the previous month, continuing a slow but steady improvement for the state’s housing market, according to data released Thursday.

Home sales have been driven by low interest rates and a tax break scheduled to expire April 30 for first-time buyers and certain current homeowners. In Southern California and the San Francisco Bay Area, steeply discounted foreclosure properties remain a big part of the market, though those homes as a percentage of the total have been decreasing in recent months.

The statewide median price paid for a home in December was $264,000, up from $261,000 in November. That was a 6% increase from $249,000 in December 2008, according to MDA DataQuick of San Diego, a firm that closely tracks the California real estate market.

The year-over-year increase was the second in a row after 27 months of decline.

Some experts worry that once federal policies supporting the market wind down, the California housing market could again falter.

“That is the key,” said Daniel Penrod, senior industry analyst at the California Credit Union League. “When they end, is the industry healthy enough to maintain its momentum, or are we going to see a little more of a retreat?”

California’s high jobless rate and budget woes remain a concern. The state’s unemployment rate was 12.3% in November. December figures are expected to be released by the government today. Read the rest of this entry »

Mary Ellen Podmolik
The Los Angeles Times

The Federal Housing Administration will raise mortgage insurance premiums, update requirements for so-called FICO credit scores and down payments for new home buyers and take other measures designed to shore up the agency’s low capital reserves.

The FHA, which insures mortgages, also will reduce allowable seller concessions to 3% from 6% and institute a number of measures to increase lender enforcement, the agency is expected to announce today.

The proposals were outlined last month by U.S. Housing and Urban Development Secretary Shaun Donovan.

Home buyers who want to make the minimum down payment of 3.5% on an FHA-insured loan would need a minimum FICO credit score of 580, instead of the current 500. New borrowers with scores under 580 would have to put down 10%. However, most participating lenders require borrowers to have a score of 620 or higher.

In addition, the FHA seeks to raise the upfront mortgage insurance premium to 2.25% from 1.75% of the loan amount.

E. Scott Reckard
The Los Angeles Times

Delinquencies on home equity loans and lines of credit jumped to record levels in the third quarter, a banking trade group said Thursday.

Home equity loan delinquencies rose to a record 4.3% of such accounts from 4.01% in the second quarter, the American Bankers Assn. reported.

Delinquencies on home equity lines of credit also hit a record, climbing to 2.12% from 1.92%.

The troubles with housing debt contrasted with an improvement seen with other consumer loans, the bankers group said.

Delinquency rates fell in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, reflecting a stabilizing economy as well as efforts by recession-chastened borrowers to pay down debts and moves by banks to write off dud loans as uncollectable.

The bad news on home equity debt came as Freddie Mac, the government-controlled mortgage giant, reported that the average fixed rate on a 30-year home loan this week was 5.09%, the third straight week it had been just about 5%, Freddie Mac said Thursday.

The average, which applies to loans taken out by borrowers with good credit and at least a 20% down payment or 20% home equity, was 5.14% last week and 5.1% two weeks ago. Borrowers paid an average of 0.7% of the loan amount in upfront lender charges, or points.

For much of November and December, the average 30-year fixed rate was below 5%, reflecting government support for the mortgage market, including heavy buying of mortgage-backed bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate averaged 5.1%.

The 15-year fixed rate this week averaged 4.5% with an average upfront fee of 0.7%, down from last week’s 4.54% and 4.83% a year earlier.

Kenneth R. Harney
The Los Angeles Times

For several years, the Federal Housing Administration has been the go-to financing resource for cash-strapped home buyers who can’t come up with a big down payment. It has zoomed from barely a 3% market share to nearly 30% of home purchase loans. But now, FHA-insured mortgages could be on the verge of becoming more expensive and tougher to obtain.

In the wake of an independent actuarial study that found the FHA’s insurance fund reserves far below the congressionally mandated minimum, the agency confirms that it is exploring ways to pump up its reserves - including raising insurance premiums, minimum down payments and a variety of other unspecified moves.

How might these changes affect home buyers and refinancers? FHA officials won’t discuss precisely what they’re looking at. But here’s an overview of some of the possibilities:

• Higher down payments. FHA’s current minimum cash down payment is 3.5%. On a $200,000 house, a buyer can bring just $7,000 to the table, aside from closing costs.Critics say 3.5% does not force buyers to have enough “skin in the game” to discourage them from missing payments or risking foreclosure. Rep. Scott Garrett (R-NJ) introduced legislation in October requiring a minimum 5% down payment for future FHA loans. Ed Pinto, Fannie Mae’s chief credit officer in the 1980’s and now a mortgage consultant, says FHA needs to move to a 10% minimum.

  But many lenders and mortgage brokers contend that raising the limit could scuttle FHA’s core purpose - serving consumers of modest means. Jeff Lipes of Family Choice Mortgage Corp. near Hartford, Conn., said a move to a 10% minimum “would effectively eliminate FHA as an option for first-time buyers.” A 5% standard would reduce volume, he said, but not exclude as many currently eligible borrowers.

• Higher mortgage insurance premiums. FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount. Most borrowers roll that into their loan and finance it. The FHA also charges an annual premium, paid in monthly installments, of either 0.5% or 0.55%, depending on the down payment. To rebuild reserves, FHA could tweak one or both premiums as high as the statutory maximum of 2.25%. It could also raise the annual fee, but the total premium could not exceed 3% under current congressional limits.Mortgage industry officials say raising premiums would have a gentler effect on borrowers. On a $200,000 loan, Lipes said, an increase in the upfront premium to 2% - and a move to 0.6% on he annual - would raise a monthly payment by $10 a today’s interest rates.
• Cutting home-seller “concessions” to borrowers’ loan costs. One of the big attractions of FHA financing has been the agency’s liberal allowance for seller contributions to borrowers to offset settlement and loan-related fees. The current FHA limit is 6% of the house price, which critics believe to be excessive. They say the policy allows financially marginal borrowers to buy houses they shouldn’t, raising FHA’s exposure to losses. Pinto wants Congress to order FHA to reduce maximum  concessions to 2%.
• Toughening credit standards. In the mortgage market, FHA is by far the most lenient and flexible player when it comes to evaluating applicants’ creditworthiness. It does not have a minimum credit score, though it permits lenders to impose their own FICO score minimums. FHA also has been far more tolerant of credit history peccadilloes than Fannie Mae or Freddie Mac.

But critics say underwriting generosity can lead to higher delinquencies, foreclosures and losses. Many mortgage market participants would prefer to see FHA move to the approach used by private insurers - risk-based pricing.

Paul Skeens of Colonial Mortgage Group in Waldorf, Md., says FHA should calibrate premiums to a tiered system of credit scores and down payment amounts, charging more for borrowers with low down payments and low scores, and less for those with higher cash in the deal and better scores.

Bloomberg News

Federal Reserve Chairman Ben S. Bernanke said that the central bank’s low interest rates didn’t cause the last decade’s housing bubble and that better regulation would have been more effective in limiting the boom.

“The best response to the housing bubble would have been regulatory, rather than monetary,” Bernanke said Sunday in remarks at the American Economic Association’s annual meeting in Atlanta. The Fed’s efforts to constrain the bubble were “too late or were insufficient,” which means that regulatory actions “must be better and smarter,” he said.

Bernanke said the Fed was working to improve its supervision of banks and had strengthened measures to protect consumer of mortgages and other financial products.

The Fed chief’s remarks were his most extensive on the subject since the housing market’s tumble led to the gravest financial crisis since World War II - and perhaps the worst in modern history, in his view.

Critics blame the Fed for feed that speculative boom in housing by holding interest rates too low for too long after the 2001 recession.

Bernanke didn’t discuss the outlook for the U.S. economy or Fed monetary policy in Sunday’s speech or an accompanying slide presentation.

Increased use of variable-rate and interest-only mortgages and the “associated decline of underwriting standards” were more responsible for the bubble, Bernanke said.

He left the door open to using interest rates to prevent “dangerous buildups of financial risks” should  regulatory changes fail to be made or turn out to be insufficient.

Source: The Los Angeles Times

By Tom Petruno
The Los Angeles Times

With investors less eager to buy government bonds, concerns grow that costlier mortgages could kill recent momentum in home sales.

Investors continue to have little appetite for Treasury bonds, and that’s a problem for home buyers and people hoping to refinance their mortgages.

Home loan rates have jumped since early December and may be headed higher still in the near term if they keep following the Treasury market’s lead.

The 10-year T-note yield, a benchmark for mortgages, rose to 3.74% on Tuesday, up from 3.68% on Monday and the highest since Aug. 10. The yield has surged from 3.2% on Nov. 30.

Last week, mortgage-finance giant Freddie Mac said the average U.S. rate for 30-year home loans climbed to 4.94% from 4.81% the previous week and 4.71% two weeks earlier.

The mortgage average still is well below its recent peak of 5.6% in mid-June. Still, rising rates could halt the momentum in home sales, or force home prices down. “That’s the question — how much can the housing market handle?” said William Larkin, a bond portfolio manager at Cabot Money Management in Salem, Mass.

Wall Street’s standard answer for why longer-term Treasury yields have surged: belief in a continuing economic recovery in 2010, and with it the potential for higher inflation and tighter credit.

That is encouraging some investors to sell low-risk bonds and buy stocks as they square their books for 2009. That Standard & Poor’s 500 index hit a fresh 14-month high Tuesday, closing at 1,118.02.

Not everyone buys the idea of a sustained recovery, of course. But there are other factors pushing Treasury yields up across the board. One is that another huge sale of bonds looms next week. The Treasury is expected to sell $44 billion in two-year notes, $42 billion in five-year notes and $32 billion in seven-year notes to raise cash to finance the budget deficit. Read the rest of this entry »

Compared to last year at this time…

One cannot help but notice that, despite the looming dark clouds on the horizon of foreclosures and unemployment, the momentum has definitely shifted from the financial meltdown that occurred in November of ’08.

Is the market making a come back? Have prices bottomed? It all depends. It depends on what micro market you are analyzing and then what price point you are considering.

Is the market price sensitive? Very. But inventory is low and depending on the price point it can vary from a seller’s market under $1,000,000 to a buyers market in the high-end. Listing prices matter a lot. If properties are listed too high the property languishes on the market and sells for a lower price. If the property is accurately priced, the property sells for more in a shorter time.

The statistics for the markets we track show sales volume is up in 21 out of 34 markets, the number of transactions is up in 24 out of 34, Average sales price is up in 13 markets and the average median price is up in 15 markets. 12 Micro Markets have an increase in sales volume of over 50%! This is comparing closed sales from November 2008 to closed sales of November 2009.

Star markets include Brentwood where the sales volume was up over 300%, the average sales price was up, and the number of transactions was up. Check this market out for November in our Micro Market Report.

Other markets you have to check out are Beverlywood, Cheviot Hills / Rancho Park, Culver City, Hollywood East, West, and Sunset Strip, Malibu Beach, Palms / Mar Vista, and Westwood / Century City. All of these markets have shown shifts in momentum for the same month in the prior year.

Every month, like every market, can be different due to the sampling of inventory or buyers in the market place. The markets are dynamic. We find it very useful for our clients to keep a close watch on the statistics rather than relying solely on gut instincts, the press, and experience.

The bet on the street is that the December Micro Market Report should be even better. Stay tuned.

We wish everyone a prosperous and healthy 2010.

Teles Properties

*Click to view: November 2009 Micro Market Reports on the Teles Properties website.