It’s Tuesday News Day and these are this weeks hot topics concerning the real estate market, the financial market, general market conditions, and interest rates.The LA Times – Fannie, Freddie may cut loan limits, pushing borrowers to jumbos
Borrowers are already expected to face a challenging lending environment in 2014, and potentially adding to the challenges is a reduction in loan maximums next spring. Simply put, Fannie Mae and Freddie Mac are considering reducing the maximum size of home loans that they can acquire. Critics argue that if borrowers aren’t already concerned about the maximum loan amount being cut next year, they should be because under the revised limits, they may have to pursue a jumbo mortgage. By pushing eligible loan amounts downward, many buyers could find themselves unexpectedly in the jumbo arena.
- In the jumbo area, the bar is far higher for minimum credit scores and financial reserve requirements. In addition, down payments typically must be much larger.
- Critics also suggest such borrowers may also have to settle for an adjustable-rate mortgage rather than a fixed-rate mortgage, or they may need a higher-rate “piggyback” second mortgage.
- A potential reduction in loan maximums stems from desires to lessen federal involvement in the mortgage market. Edward J. DeMarco, acting director of the Federal Housing Finance Agency, announced that he was seriously considering the strategy.
- Industry analysts suggest the maximum Fannie-Freddie loan size could decrease from the current $417,000 to $400,000 in most parts of the country. For high-cost areas, such as coastal California, there could be a reduction from $625,500 to $600,000.
- These decreased limits could take effect as early as May, which could particularly affect buyers who want to purchase newly built houses, or homes with prices above the average for their areas.
- If the loan ceilings are lowered, jumbo mortgages could become a bigger piece of the market. Since they are larger than conventional mortgages, they range from just above $417,000 to seven figures. Jumbos also typically have extra costs and underwriting restrictions.
In other news…
CNNMoney – Banks offering mortgages with only 5 percent down payments
Banks like TD Bank, Bank of America, and Wells Fargo are now offering loans with down payments that are as low as 5 percent, which will help buyers who had trouble coming up with enough cash to make a 20 percent down payment. Rising home prices have led private lenders to loosen the purse strings.
Bloomberg – Home Prices Climb in 88 Percent of U.S. Cities
The NATIONAL ASSOCIATION OF REALTORS® is reporting that prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter. There were double-digit increases in 33 percent of areas. The median transaction price rose from a year earlier in 144 of 163 metropolitan areas measured.
Bloomberg – Bernanke Giving Homebuyers Second Chance With Pledge
Since the U.S. central bank pledged last week a continuation of the bond buying program responsible for low interest rates, those rates may now hold at close to 4 percent through early next year—much to the benefit of buyers interested in entering the market. If rates remain stable, buyer confidence could be restored.
The LA Times – U.S. homeownership at 1995 levels despite housing rebound
The Census Bureau has reported that the nation’s homeownership rate was 65.1 percent, which is a small decrease from the third quarter of last year. The homeownership rate is at its lowest level in nearly two decades. The prominent role of investors in driving the housing recovery is evident in the flat rate.
Bloomberg – If It Looks Like a Bank, Regulate It Like a Bank
It has proven difficult for regulators to exert oversight on the shadow banking industry, which is responsible for trillions of dollars in banking activity that happens outside traditional banks. These financial intermediaries also convert short-term liabilities into long-term assets like ordinary banks, but without an explicit government backstop, which presents a risk to the financial system.
DSNews.com – Study: Immigrants Fared Better than Native Homeowners in Recession
Immigrant Asian and Latino homeowners were more successful at holding onto their homes during the Great Recession than native-born homeowners, according to a new study from the University of Southern California Lusk Center for Real Estate.
The Wall Street Journal – U.S. Takes Aim at ‘Forced’ Insurance
Government officials have announced that mortgage companies will be barred from accepting lucrative payments to arrange a controversial form of homeowners’ insurance. The ban will affect fees for “force-placed” insurance policies, which are forced upon borrowers whose regular homeowners’ policy has lapsed.
- Double-digit home price appreciation will continue to occur but will drop off by the end of 2014, according to the latest CoreLogic Case-Shiller Home Price Indexes. Increased housing construction and increases in existing inventories are expected to restrain price appreciation even if demand remains strong.
- National home prices were up 10.1 percent year over year in the second quarter, and the index predicts prices will rise 3.4 percent over the next five years. Currently, prices are rising in almost 90 percent of the nation’s metro areas.
- For metros with populations exceeding 950,000, CoreLogic Case-Shiller found that metros with the greatest annual price appreciation in the second quarter were in California. In fact, Sacramento experienced the greatest price growth at 25.9 percent.
If you have any questions about the current real estate market give me a call at (408) 840-3852 or shoot me an email at Thomas.Feng@gmail.com to discuss your situation and how to get the most out of the current real estate housing market.
Because of the many legal and tax situations that can arise through the sale and purchase of real estateALWAYS consult with your ATTORNEY or ACCOUNTANT before making ANY decisions in ANY transaction
Copyright 2010-2013 by Thomas Feng, All Rights Reserved. You may reblog or republish.
* THIS ARTICLE WAS POSTED AT Thomas Feng’s Bay Area Connect *