New Major changes for FHA Loans April 5th

For all loans that start after 5 April FHA has changed a fee and a regulation. After that time the maximum seller contribution to help pay closing costs is now 3% of the loan-the same as with conforming loans. Also, they are raising the UFMIP (a one time charge to do the loan through FHA) from 1.75 to 2.25%. This means that on an average home loan of 150,000 the fee added to the loan goes from 2625.00 to 3375.00.

Note on the trends in home buying

Yesterday's comments were about housing sales going up for the past few months. Today's news is that NEW home sales are down a lot. Just another indication that the values available with existing construction are huge.
I don't think that people should ever buy a home with the expectation that the home will increase in value short term (2-3 years) but as the glut of homes disappears and as interest rates go back up (thanks to the government rates are artificially low) homes will increase in value.

Seasonally adjusted home prices up in December

S&P/Case-Shiller Home Price indices track what is happening in the 20 major statistical areas (MSA's) of the country. The raw data shows prices falling by .2%, but when you factor in the seasonal influences (fall and winter are the slow time for housing) they were up .2% in November and .3% in December. Very welcome news indeed.

I have noticed a big increase in the number of people coming to this website and asking me to contact them. This is an indication that homes will sell much better this spring than last year.

Comments from David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s:

“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now. However, the rate of improvement seen during the summer of 2009 has not been sustained,” “In the most recent months we are seeing fewer and fewer MSAs reporting monthly gains in prices. Only four cities saw month to month improvements in December over November, when you look at the raw data.

"We are in a seasonally slow period for home prices, however, so it is not surprising to see better statistics in the seasonally-adjusted data, where 14 of the markets and the two monthly composites all rose in December."

Housing is going through a seasonally slow time, so unadjusted price declines are not necessarily setting off alarm bells. What does increase skepticism about the health of housing is the fact that home buyer demand has really failed to react to outlooks for rising interest rates and the soon to expire home buyer tax credit (which might be extended again).

This is still a buyer's market, just becoming less so as time goes on.

FHA Rehab loans

The FHA 203(k) loan program is gaining in popularity for several reasons. The main reason seems to be the purchasing of so many homes that have been abandoned or are purchased from banks as foreclosures. Many times these homes need some or a lot of work to make them meet the expectations of the buyer and/or of the lender. Here is where the Rehab loan comes into play. The total loan size can be 96.5% of the value after the repairs/upgrading has been done.

For example, a home is purchased for 100,000 and when fixed up will be worth 135,000. The loan can be for as much as 130,275. In this case as long as the work costs less than 30,000 the buyer purchases a home that they want for the price they can pay. The great thing is that normally investing 20,000 into a 100,000 home increases the value at least 30%.

Another sign that Housing is getting better

For the past year it seems that the only news articles about the Real Estate market was negative. Now it seems that 2 out of 3 news "sound bites" are positive. And when the sound bites are investigated closely, the news really is positive. Take todays comments:

The National Association of Home Builders reported that housing starts jumped 2.8% in January to an annual rate of 591,000, which was more than expected.

Housing starts were expected to have reached an annual rate of 580,000 units in January, according to a Briefing.com consensus of economist forecasts.

Building permits, a measure of houses yet to be built, fell 4.9% to an annual rate of 691,000 units in January, which was better than expected. The rate of permits was expected to have slipped to 620,000 in January.

It is interesting to me that once interest rates start going up, people get more confident that the time to buy/refinance was yesterday and they better get back into the market. As this happens the housing market will really have reached the bottom, making this the perfect time to buy. Rarely do we have a mix of historically low interest rates and the lowest home values in years.

HUD 100 Down

This is an FHA lending program that is a win-win. When a home is foreclosed on that has an FHA loan on it the loan is taken over by HUD. HUD checks out the property to see the condition and has an appraisal done to determine the value. Many times in order to sell the property if the buyer gets an FHA loan, the minimum down payment is only 100.00. Awesome, but there is more to the program that makes it even better for the buyer. Typically HUD will accept an offer that has most or all of the closing costs paid for by the seller (HUD) FHA rules are that these costs can be as high as 6% of the sales price. But here is another added plus. Many times the homes are listed and sold for less than the value that HUD appraised it for. The loan can be as high as that appraised amount.

For example.

Home appraises for 150,000

HUD accepts a sales contract for 125,000 but will only allow 3% of that to be paid for closing costs by HUD.

The loan can be for as much as 150,000 to cover the closing costs not paid for by the 3% allowance.

Currently there are lots of homes available in Salt Lake and Utah counties that will work with this program. For more information give me a call or shoot me an email.

Why is the rental vacancy rate rising in Salt Lake City?

From MortgageDailyNews

"For two days in a row the news about housing has looked at least a little bit hopeful. On Monday the national real estate firm REMAX announced an increase of 6.5 percent in the sales of existing homes in December and Tuesday the National Association of Realtors® reported that pending sales were up 6.3 percent that month.

So perhaps home prices and interest rates have both fallen to the point that we will, when nice weather arrives, see a flood of potential homebuyers into the market - or maybe December just represented a fluky blip.

But there is another measure of what may be going on in the housing market; the number of rental vacancies.

A few weeks ago an acquaintance reported that the small mid-range apartment complex he lives in seemed unusually quiet; the parking lot very empty. He inquired of the super who told him that they had hit a staggering 75 percent vacancy rate. One after one the tenants, some of them long term had bought houses in the area. The gossip was, the super said, that his place wasn't alone. The big luxury complexes in town were so heavily hit that several were reported to have lowered rents.

Anecdotal information to be sure, but there is evidence that this is going on all over the country.

Business Week recently paired with Axiometrics.com, a Dallas apartment data company to gauge the state of the rental market. They came up with a list of 25 metro areas where not only are vacancy rates growing, but rents are falling.

Top on their list is Salt Lake City, Utah where the vacancy rate in the fourth quarter soared from 3.1 percent a year earlier to 6.8 percent, rents dropped and effective 5.7 percent over the year (an actual decline of 2.3 percent following an increase of 3.3 percent in 2007.) Landlords are reported to be offering over two weeks free rent on average."