This, from Jon Lansner, in today's
Orange County Register:

For the 22 business days ending
February 5 - freshest numbers from DataQuick - our region-by-region analysis of
homebuying shows Orange County slices up geographically speaking this way

• DataQuick identified 570 homes selling in Orange
  County's north-inland ZIP codes in this most recent period, +12% from a
  year ago. Median selling price? $450,000 in these 23 ZIPs. This most recent
  median price change was +8.4% vs. a year ago.
• Mid-county ZIPs - median selling price $352,500 - had
  630 sales, -12% from a year ago. In these 24 ZIPs, the freshets median
  price change was +4.9% vs. a year ago.
• Combined, total homes sales in ZIPs in the north and
  mid-section of Orange County were -2.2% vs. a year ago as homebuying in
  the rest of the county ran +31.3% vs. 12 months earlier.
• North/mid-county homes accounted for 57% of residences
  sold in the most recent period vs. 64% a year ago.
• 325 homes sold in beach cities' 17 ZIP codes in the
  most recent period, +16% from a year ago. Median selling price? $722,500
  in these 17 ZIPs. Newest median price change was +4.9% vs. a year ago.
• South inland ZIPs - median selling price $493,250 - had
  578 sales, +41% from a year ago. In these 19 ZIPs, the latest median price
  change was +16.7% vs. a year ago. (
  This is the area where I've done most of my business, for the past 33+
  years.)
• All told, countywide sales were +8% vs. a year ago. The
  median selling price was +15% in the past year.

End of Jon's article.

I can feel the hubbub of activity,
and see the multiple offers on properties, but it feels good to see it in
print.

This, from Jon Lansner, in today's
Orange County Register:

For the 22 business days ending
February 5 - freshest numbers from DataQuick - our region-by-region analysis of
homebuying shows Orange County slices up geographically speaking this way

• DataQuick identified 570 homes selling in Orange
  County's north-inland ZIP codes in this most recent period, +12% from a
  year ago. Median selling price? $450,000 in these 23 ZIPs. This most recent
  median price change was +8.4% vs. a year ago.
• Mid-county ZIPs - median selling price $352,500 - had
  630 sales, -12% from a year ago. In these 24 ZIPs, the freshets median
  price change was +4.9% vs. a year ago.
• Combined, total homes sales in ZIPs in the north and
  mid-section of Orange County were -2.2% vs. a year ago as homebuying in
  the rest of the county ran +31.3% vs. 12 months earlier.
• North/mid-county homes accounted for 57% of residences
  sold in the most recent period vs. 64% a year ago.
• 325 homes sold in beach cities' 17 ZIP codes in the
  most recent period, +16% from a year ago. Median selling price? $722,500
  in these 17 ZIPs. Newest median price change was +4.9% vs. a year ago.
• South inland ZIPs - median selling price $493,250 - had
  578 sales, +41% from a year ago. In these 19 ZIPs, the latest median price
  change was +16.7% vs. a year ago. (
  This is the area where I've done most of my business, for the past 33+
  years.)
• All told, countywide sales were +8% vs. a year ago. The
  median selling price was +15% in the past year.

End of Jon's article.

I can feel the hubbub of activity,
and see the multiple offers on properties, but it feels good to see it in
print.

Earlier this week, the private-sector Case-Shiller Index showed home prices slightly lower between November and December. Thursday, the public-sector Home Price Index showed the same.

Publishing on a 2-month lag, the Federal Home Finance Agency said home prices fell by 1.6 percent nationally in December. And that’s an average, of course. Some regions performed well in December as compared to November, others didn’t.

• Values in the Middle Atlantic states improved slightly
• Values in New England were essentially unchanged
• Values in the Mountain states sagged, down 3.5%

These aren’t just footnotes. They’re an important piece toward understanding what national real estate statistics really mean. In short, “national statistics” are just a compilation of a bunch of local statistics.

For example, if we dig deeper into the FHFA Home Price Index 70-page report, we find that cities like Terre Haute, IN, Buffalo, NY, and Amarillo, TX posted year-over-year home price gains. You won’t see that in a “national” report.

Furthermore, it’s a sure bet that those same cities, you could find neighborhoods that are thriving, and others that are not. Just because the city shows higher home values overall, it won’t necessarily be the case for every home in the city.

Every street in every neighborhood of every town in America has its own “local real estate market” and, in the end, that’s what should be most important to today’s buyers and sellers. National data helps identify trends and shape government policy but, to the layperson, it’s somewhat irrelevant.

So, when you need to know whether your home is gaining or losing value, you can’t look at the national data. You have to look at your block — what’s selling and not selling — and start your valuations from there.

The meltdown sent interest rates soaring and availability shrinking, but rates are declining and lenders are more willing to make loans that top the limits for Freddie Mac, Fannie Mae and the FHA.

By E. Scott Reckard The Los Angeles Times February 24, 2010

Phil Kelly had 18 more months to go before the fixed rate on his $2.5-million mortgage became adjustable.

But when Kelly, a former computer executive living in Rancho Santa Fe,learned he could knock his interest rate down by a full percentagepoint by refinancing, he went for it.

“It’s always tough to pick the exact bottom or top of anything,” Kellysaid. “But I think this rate is about as low as you’re going to get.”

Rates on jumbo mortgages — loans of more than $729,750 in countieswith the highest-cost housing — shot up during the financial crisis aslenders and loan investors shunned anything tainted with even a whiffof higher risk. Rates on big mortgages were especially high relative tothose on smaller loans.

But in a boon for borrowers in California’s expensive housing markets, the jumbo-loan market is starting to return to normal.

Two weeks ago, the average interest rate on 30-year fixed-rate jumbosdropped to 5.79%, a nearly five-year low, according to rate trackerInforma Research Services of Calabasas. It edged up to 5.88% onTuesday, still very attractive by historical standards. The average isdown from well above 7% in late 2008.

Rates are even lower on so-called hybrid adjustable mortgages, on whichthe rate is fixed for, say, five years and then adjusts annually.Kelly’s new loan is a five-year hybrid adjustable identical to his oldone, except that he’s paying about 5%, down from 6%.

Banks are also relaxing slightly some of their requirements for jumboloans. That’s an encouraging sign because the market for jumbos, incontrast with the rest of the mortgage business, isn’t being propped upby Uncle Sam.

The lower rates and somewhat easier terms reflect newfound confidenceamong banks in the housing market. That’s because, by definition,jumbos are too big to be bought by Freddie Mac and Fannie Mae or to beinsured by the Federal Housing Administration. Plus, the private marketfor mortgage-backed bonds dried up when the meltdown hit. So lendersmaking jumbo loans these days must be willing to take the risk ofkeeping them in their portfolios.

The maximum amounts for Freddie Mac and Fannie Mae “conforming”mortgages, and for FHA mortgages, are set by Congress. The cutoff forsingle-family homes was $417,000 from 2006 until February 2008, whenlawmakers increased it temporarily to $729,750 in certain high-costareas, including Los Angeles, Orange and Ventura counties. Conformingloans top out at $500,000 in Riverside and San Bernardino counties and$697,500 in San Diego County.

The increased upper limits, which have been extended until the end ofthis year, have created a three-tier system in expensive areas,mortgage professionals say: loans of up to $417,000, which are theeasiest to obtain and carry the lowest rates; “conforming jumbos” from$417,000 to $729,750, which are somewhat harder to get and haveslightly higher rates; and true jumbos, with the toughest standards andhighest rates.

In the boom years of 2005 and 2006, interest rates were typically nomore than a quarter of a percentage point higher on jumbo loans than onconforming loans, according to Informa Research. That widened as themortgage meltdown intensified and home prices dropped in late 2007. Thespread ballooned to nearly 1.7 percentage points in early 2009 afterthe entire credit system froze.

But this year the rate spread has narrowed to less than a percentagepoint. It could shrink more if conforming-loan rates rise as expectedafter the Federal Reserve wraps up a $1-trillion-plus program tosupport the market for conforming loans next month.

In addition to lower rates, down-payment requirements are being relaxedin some cases. For example, to write a jumbo loan in coastal areas ofLos Angeles and Orange counties, Wells Fargo Home Mortgage looks for a20% down payment or that percentage of equity, down from 25% last year,said Brad Blackwell, a national mortgage sales manager at the lender.

The reason: Wells believes high-end home prices are stabilizing inthose coastal counties. But the bank still requires higher downpayments in the Inland Empire and other battered housing markets suchas Florida, Nevada and Arizona, where prices for jumbo-size homes don’tappear to be stabilizing, he said.

Jumbo loans remain much harder to get than before the credit crunch andrecession. Borrowers typically must have a credit score of at least700, compared with boom-era minimums in the 600s, though Laguna Niguelmortgage broker Jeff Lazerson said at least one lender was again makingsub-700 jumbos available.

What’s more, unless their down payments are very large, borrowers mustprovide evidence of high income, have sizable bank accounts as acushion against the unforeseen and occupy the houses themselves.

But there are clear signs that the jumbo market has loosened. One is anincreasing availability of “stated income” loans — those that don’trequire proof of income — of as much as $2 million to borrowers withat least a 40% down payment, said mortgage broker Gary Bluman, owner ofReal Estate Resources in Brentwood.

Also, instead of a true jumbo loan, some “piggyback” second loans areavailable again to help certain borrowers with 25% down payments payfor high-priced homes, Lazerson said.

Of course, adjustable, stated-income and piggyback loans were bigcontributors to the mortgage meltdown. But such provisions are lessrisky if a borrower has 25% to 40% equity.

Despite the confidence in the market that such terms imply, lenders andmortgage investors are still dealing with piles of bad jumbos madeduring the boom.

Delinquencies of 60 days or more on prime jumbo loans that werepackaged into securities jumped to 9.6% in January, up from 3.7% a yearearlier, Fitch Ratings reported this month.

The jumbo delinquency rate in California climbed to 11.3% from 4.1% a year earlier.

For now, the jumbo market remains limited to the volume of loans thatbanks are willing and able to keep on their books. But there is hopefor a return to private outside funding.

Although no jumbos have been turned into securities for at least twoyears, packages of delinquent jumbos have begun to be sold again to”vulture” investors, a sign that the secondary market for the loans mayrevive, said Michael Fratantoni, vice president of research at theMortgage Bankers Assn.

“The ice sheet,” he said, “is starting to crack here and there.”

Saving Face, If Not the House ( From
Tuesday's American Banker Internet.)

After years of talking about
“preserving homeownership,” the mortgage servicing industry has a new
buzzword: finding a “graceful exit” for seriously delinquent homeowners
who do not qualify for loan modifications.

To move these borrowers out of their homes with a minimum of
delay, friction or embarrassment, Fannie Mae and Freddie Mac are telling
servicers to increase the use of alternatives to foreclosure such as short
sales and deeds-in-lieu.

“Some people just are unwilling
or unable to be helped,” Eric Schuppenhauer, a Fannie senior vice
president, said Wednesday at a Mortgage Bankers Association servicing
conference in San Diego. “They now must go to some form of liquidation and
hopefully a graceful exit from the home.”

Foreclosure timetables “got a
little crazy last year,” he said, as servicers held off on filing default
notices or taking title to properties while offering borrowers a chance to
rework loan terms through the government’s Home Affordable Modification
Program.

Ingrid Beckles, Freddie’s senior
vice president of default asset management, told the conference there is
greater “recognition that we need to come to some closure on the
decisioning process.”

More than 30% of the seriously
delinquent loans held by Freddie are backed by vacant homes, she said. Many
states have courts clogged with foreclosure filings.

“We’re standing in line in
Florida,” Beckles said.

MBA Asks for a ‘Bridge’ Loan.

None of this is to say the industry
has given up on keeping borrowers in their homes - or on getting more
government assistance in that endeavor.

The MBA unveiled a proposal Tuesday
to have the Treasury Department lend money to servicers so they can grant
forbearances to homeowners who have involuntarily lost their jobs. Such
borrowers could get their payments reduced for as long as two years (though
their situations would be periodically re-evaluated). The MBA called the plan a
“bridge to Hamp”: borrowers would be considered for the loan-mod
program once they found new jobs or when the forbearance period ended.

During that period servicers would
need to advance principal and interest to mortgage investors, taxes to
municipalities and premiums to insurers. That’s where the Treasury financing
would come in. “There are hundreds of smaller servicers who won’t have the
cash or capital to make pass-throughs over a prolonged period,” said John
Courson, the MBA’s president. The size of the proposed facility is yet to be
determined.

Can such a plan fly given the public
rage over government assistance to the financial industry and to delinquent
homeowners? “This is not a bailout,” Courson said. “This is a
loan” that servicers would repay with interest. And while “strategic
defaulters” who walk away from their homes are raising hackles, “I
don’t sense any pushback to trying to help the unemployed.”

John Denney, the MBA’s associate
vice president of public policy, said the Treasury had not yet committed to the
proposal.

Quotable
“If we don’t get a suicide threat once a week, it’s a good week.”

- John Parres, the first vice
president of customer service and collections at OneWest Bank FSB, at the
conference, on dealing with distressed homeowners. OneWest, built from the
ashes of IndyMac, has recently outperformed most other servicers in this
rough-and-tumble business. ( End of article.)

This is just one additional factor ensuring
that the alleged 'shadow inventory' will disappear for good - in the shadows. Any buyers waiting for that prediction of a 'tsunami
of foreclosures' is going to have a v e r y l o n g wait. At least here in South Orange County, California.

The housing recovery showed particular weakness in the New Homes Sales category last month — good news for homebuyers around the country.

A “new home” is a home for which there’s no previous owner.

New Home Sales fell 11 percent from the month prior and posted the fewest units sold in a month since 1963 — the year the government first started tracking New Home Sales data.

Right now, there are roughly 234,000 new homes for sale nationwide and, at the current sales pace, it would take 9.1 months to sell them all. This is nearly 2 months longer than at October 2009′s pace.

The reasons for the spike in supply are varied:

• The original home buyer tax credit expired in November
• Weather conditions were awful in most of the country in January
• Weak employment and consumer confidence continue to hinder big ticket sales

Now, these might be less-than-optimal developments for the economy as a whole, but for buyers of new homes, it’s a welcome turn of events. Home prices are based on supply and demand, after all.

As a result, this season’s home buyers may be treated to “free” upgrades from home builders, plus seller concessions and lower sales prices overall.

It’s all a matter of timing, of course. New Home Sales reports on a 1-month lag so it’s not necessarily reflective of the current, post-Super Bowl home buying season. And from market to market, sales activity varies.

That said, mortgage rates remain low, home prices are steady, and the federal tax credit gives two more months to go under contract. It’s a favorable time to buy a new home.

I
learned something interesting from my preferred lender this morning.

About
a year ago, enterprising people started a new phenomenon which later became
known as a 'Buy and Bail'. Some, who were increasingly upside down in their
present home, saw how low prices were getting on a bigger or better house, (
maybe even across the street.) and so they made an offer on the new house,
stating to the lender that they would be renting out their former house - a common,
and valid tactic – until last year.

After
closing escrow on the new house, however, they simply stopped making the
payments on the old one, making that lender foreclose on the property. Hence buy, (
new.) then bail.( from the old property.)
After about 6 months of this situation, lenders wised up and instituted
new tougher guidelines, wherein a buyer had to have at least 25% verifiable
clear equity in both properties - that qualification brought buy and bail
transactions to a screeching halt - and rightfully so.

This
new stricter policy has ended buy & bail, but it has also stopped a lot of
people who would really have rented their old place out, from being able to qualify
for such a transaction. Most move-up
buyers are pulling equity from their old place, to use as a down payment on the
new one, and in most cases, doing so didn't leave at least 25% equity in the
old property, or provide a 25% down payment on the new property.

Stymied
by such a scenario? Here's a different
thought, and possible solution.

If you move out of your present house, and put a tenant in it, say on a year's
lease – after 6 months, the buy & bail policy no longer applies - meaning
you DON'T need 25% equity in the house you moved out of - in order to obtain
your financing on a new house.

So,
where do you live for the 6 to 9 months it takes to establish that 'seasoning'?
Well, you can either lease a house for a year, and after the obligatory 6
months have passed, be in a perfect position to purchase the new house with no
such restriction – and NO contingencies.

OR,
if you're really lucky, you could find a house that is suitable, now, and if
it's on both the rental and for sale markets - as many houses are, these days -
make them a lease option offer, planning to close escrow well after the 6
months of renting the old house.

You
could also put a stipulation into a regular one year lease, that, towards the
end of the lease, if the owner was interested in selling, they would give you
the first opportunity to buy the property. That happens more frequently than
you might imagine.

Looking
for a Realtor capable of thinking outside the box? With over 33 years of successful local
experience, it would be my extreme pleasure to add your name to my list of
happy clients.

Using data compiled in December, Standard & Poors released its Case-Shiller Index Tuesday. The report shows home prices down just 2.5% on an annual basis, a figure much lower than the 8.7% annual drop reported after Q3.

According to Case-Shiller representatives, the housing market is “in better shape than it was this time last year”, but some of the summer’s momentum has been lost. 15 of 20 tracked markets declined in value between November and December 2009.

Meanwhile, it’s interesting to note the 5 markets that didn’t decline — Detroit, Los Angeles, Las Vegas, Phoenix and San Diego. Each of these metro regions were among the hardest hit nationwide when home prices first broke. Now, they’re leading the pack in price recovery.

For some real estate investors, that’s a positive signal. But we also have to consider the Case-Shiller Index’s flaws because they’re big ones.

As examples:

1. Case-Shiller data is reported on a 2-month lag
2. The Case-Shiller sample set includes just 20 U.S. cities
3. There’s no “national real estate market” — real estate is local

That said, the Case-Shiller Index is still important. As the most widely-used private sector housing index, Case-Shiller helps to identify broader housing trends and many people believe housing is a key element in the economic recovery.

If the markets that led the housing decline will lead the housing resurgence, December’s data shows that full recovery is right around the corner.

You can’t get your mortgage rates from the newspaper. Last week proved it. Again.

Friday morning, headlines and around the country read that mortgage rates were down 0.04 percent, on average, since the week prior.

A sampling of said headlines includes:

• US Mortgage Rates Drop For 2nd Straight Week (Reuters)
• Mortgage Rates On 30-year US Loans Fall To 4.93% (Business Week)
• 30-Year Fixed Mortgage Rate Falls Farther Below 5% (Marketwatch)

The story behind the headline was sourced from the Freddie Mac Primary Mortgage Market Survey, am industry-wide mortgage rate poll of more than 100 lenders. The PMMS has reported mortgage rate data to markets since 1971 and is the largest of its kind.

Unfortunately, rate shoppers can’t rely on it.

See, unlike governments and private-sector firms, when consumers are in need mortgage rate information, they need the information delivered in real-time; for making decisions on-the-spot. Consumers need to know what rates are doing right now.

The Freddie Mac survey can’t offer that.

According to Freddie Mac, the survey’s methodology is to collect mortgage rates from lenders between Monday and Wednesday and to publish that data Thursday morning. The survey results are an average of all reported mortgage rates. The problem is that mortgage rates change all day, every day. The PMMS results are skewed, therefore, by methodology.

And, meanwhile, the issue was compounded last week because mortgage rates shot higher Wednesday afternoon — after the survey had “closed”. The market deterioration ran into Thursday, too — again, unable to be captured by Freddie Mac’s PMMS.

Although the newspapers reported mortgage rates down last week, they weren’t. Conforming mortgage rates were higher by at least 1/8 percent, or roughly $11 per $100,000 borrowed per month. In some cases, rates were up by even more.

Newspapers and websites can give a lot of good information, but pricing is far too fluid to rely on a reporter. When you need to know what mortgage rates are doing in real-time, make sure you’re talking to a loan officer. Otherwise, you may just be getting yesterday’s news.

Here is the latest Orange County Market Report from my friend Steven Thomas, the President of Altera Real Estate:

“Short
sales, sales of homes for less than what is owed on the mortgage, are creating
a backlog of pending sales that seem to take forever to close. Here's
a definite fact: 2010
is rapidly becoming the year of the short sale.

With an enormous glut of
foreclosures in 2008, the Federal government stepped in and in 2009 virtually
strong armed big lenders to modify loans. The problem is that not everybody
qualifies for a loan modification and many successful loan modifications
default again on their loans down the road. Yet, there are still a tremendous
number of homeowners in trouble. Both the government and banks are in
agreement, that they don't want to foreclose unless there is virtually no other
alternative. And, there is a better alternative – short sales.

There are many advantages to short
sales for the homeowner; including, the ability to purchase again sooner. For
the lender, they get to take advantage of pride in homeownership, the homes are
not dilapidated and, unlike foreclosures, do not require thousands of dollars
to fix nor do they have significant holding costs. So, at the end of November
2009, the US Treasury put together a short sale directive that outlines a new
process that begins on April 5, 2010, for all Fannie Mae and Freddie Mac loans.
In the interim, lenders have been scrambling to address the new program and
modify their current processes that have been ineffective thus far.

Currently, the short sale process is
NOT working and has resulted in a deluge of pending sales that take forever to
close. There are currently 6,706 outstanding pending sales in all of Orange
County. Of those, 4,154, or 62%, are short sales. The problem is that almost
70% have been pending for over one month. Many have been pending for months.
The reason these do not close within a short period of time is because they
require lender approval. And, if there is a second loan, the process is even
longer. Throw in the fact that many short sale homeowners have stopped paying
their homeowner association dues, and they too have to sign off on the deal if
they are obtaining less than what is owed.

Often, the buyer of a pending short
sale grows so frustrated that they cancel and look elsewhere. The short sale is
then placed back on the market and is often placed right back into pending
status in a short period of time, and the wait for lender approval continues.
With short sales, the buyer, seller and offer must all qualify. The buyer must
qualify for the new loan. The seller must qualify to obtain the short sale -
there must truly be a hardship. Finally, the offer to purchase must be at or
near fair market value. With demand so hot, lenders are taking a closer look at
value and not willing to sell at a major discount.

The current process for short sales
is an absolute crapshoot. Real estate agents, buyers and sellers enter into a
pending sale with no definitive timeline. Some lenders are better than others.
Some second lenders are better than others. Some Realtors® are better than
others. 2010 promises to be the year of the short sale.

It is the year where a lot of the distressed
backlog, often referred to as the 'shadow inventory,' will finally be properly
diminished in the form of short sales. Yes, there will still be foreclosures.
Some short sales simply will not go together. Some homeowners will just walk
away from their obligations. But, banks and the government have their sights
set on going the short sale route. It is in everybody's best interest. Buyers,
sellers and agents have had their sights set on short sales for about a year
and half now.

As 2010 rolls along, the process is going to get better and
better. It will not be perfect, but it will be better than it is right now.
Short sales will finally result in more successful closed sales.

So, how do the rest of the Orange County numbers look? The active inventory increased over the past two weeks
by 278 homes, or 4%, to 8,135. The active inventory last year was at 11,541,
3,406 additional homes compared to today. Two years ago it was at 15,392, 7,257
additional homes. Demand, the number of new pending sales over the prior
30-days, decreased by 4 to 3,244.

There are 425 additional pending sales compared to last year
and 1,424 compared to two years ago. Demand typically rises at a quicker pace
in the middle of February, so we will have to see if this trend continues. Part
of the problem is that there simply is not a lot of new inventory coming on the
market. The biggest complaint from agents down in the trenches is that they
need fresh inventory for the many buyers that they are working. The expected
market time for all price ranges in Orange County increased slightly from 2.42
months two weeks ago to 2.51 months today. At the current pace, the overall
market is a seller's market without much appreciation at all. The number of
distressed homes within the Orange County housing market is keeping a lid on
appreciation.

On the other hand, the higher end price ranges are
experiencing a deep buyer's market, the higher the price range, the deeper the
buyer's market. The hottest price range is homes priced between $250,000 and
$500,000, with an expected market time of 1.75 months. Contrast that with homes
priced above $4 million with an expected market time of 33.89 months. The
active distressed home market, all short sales and foreclosures combined,
increased by 54 homes to 2,705. The number of foreclosures within the active
listing inventory increased in the past two weeks from 377 to 380, a gain of
only three.

The expected market time for foreclosures is a sizzling 0.95
months, a deep seller's market. Foreclosures are HOT. The number of short sales
within the active listing inventory increased by 54 and now totals 2,705. The
expected market time for short sales is 1.68 months, also a deep seller's market.
There are a lot more short sales than foreclosures. In 2010, short sales are
going to be KING.” ( End of Steven’s report.)