The following is from the California Association of Realtors. To read the news release in full, click on the link above.
C.A.R. REPORTS MEDIAN HOME PRICE INCREASED 17.2 PERCENT IN OCTOBER
The median price of an existing, single-family detached home in California during October 2005 was $538,770, a 17.2 percent increase over the revised $459,530 median for October 2004, C.A.R. reported. The October 2005 median price decreased 1 percent compared with September's $543,980 median price.
"While California is still experiencing year-over-year double-digit price appreciation, prices are starting to level off compared with the statewide peak reached in August 2005," said C.A.R. President Vince Malta. "Regionally, the median price continues to post strong gains, with the High Desert, Riverside/San Bernardino, and San Luis Obispo regions hitting record highs last month."
Closed escrow sales of existing, single-family detached homes in California totaled 621,530 in October at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 2.8 percent from the 639,570 sales pace recorded in October 2004.
Thursday, December 01, 2005
Mortgage shopping: what you should know before you begin
When they enter the mortgage market, in contrast, where their financial commitment may be 10 times larger, many consumers don't have a clue as to what they want. They look to the loan provider to guide them through the maze. This dependency is one major reason they often end up with a mortgage that is over-priced and, even worse, does not meet their needs.
This article poses eight questions that prospective borrowers should ask themselves before entering the market.
What type of mortgage should I select?
The major decision is between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). ARMs have lower payments in the early years than FRMs but expose borrowers to the risk of higher payments in later years. ARMs with the lowest early-year payments have the greatest risk of future rate and payment increases.
Which mortgage options should I select?
The major options are to waive the obligation to maintain an escrow account for taxes and insurance payments, which will cost you a little; an interest-only payment option, which also costs little; and a prepayment penalty, in exchange for which the lender will usually pay you.
How long of a term should I take?
The term of a mortgage is the period used to calculate the mortgage payment. The longer the term, the lower the mortgage payment but the slower you pay down the balance. Term selection is an issue primarily on FRMs, which are available at terms ranging from 10 years to 40 years. While 15-year and 40-year ARMs exist, most lenders offer only 30-year ARMs.
How many points should I pay?
Points are fees you pay the lender at the time the loan is closed, expressed as a percent of the loan. On a $100,000 loan, two points means a payment of $2,000. The more points you pay, the lower the interest rate. Hence, points should be viewed as an investment on which the return is higher the longer you have the mortgage.
How large a down payment should I make?
The down payment is the difference between the loan amount and the lower of the sale price or appraised value. If you have discretion over how much to put down, the down payment, like points, is best viewed as an investment. Investment in a larger down payment can yield a high return if it flips the loan into a lower mortgage insurance or interest rate category.
If I put less than 20 percent down, what type of mortgage insurance should I select?
Borrowers who put down less than 20 percent are charged for the risk they impose on lenders. However, borrowers often can choose how to pay. One option is to pay a premium to a private mortgage insurance company (PMI) selected by the lender. A second option is to pay the lender a higher interest rate, which is called lender-provided mortgage insurance (LPMI). In this case, the lender purchases insurance from a PMI, though not always. The third option is a "piggyback" arrangement, where the borrower takes out a first mortgage for 80 percent of property value, and a higher-rate second mortgage for the balance of the funds needed.
How long a lock period do I need and when should I lock?
The lock period is the period during which the lender guarantees the rate and points: the longer the lock period, the higher the price. Borrowers must choose when to lock and for how long.
What documentation requirements should I seek?
A lender's "documentation requirements" stipulate the information about the borrower's finances that must be provided and how this information will be verified, and then used by the lender. Lenders offer choices ranging from "full documentation" to "no-docs." Because the risk to the lender rises as documentation requirements become less stringent, the price of the mortgage rises correspondingly. Borrowers may or may not have any leeway, depending on what documentation they can provide.
Copyrighted 2005 Inman News
This article poses eight questions that prospective borrowers should ask themselves before entering the market.
What type of mortgage should I select?
The major decision is between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). ARMs have lower payments in the early years than FRMs but expose borrowers to the risk of higher payments in later years. ARMs with the lowest early-year payments have the greatest risk of future rate and payment increases.
Which mortgage options should I select?
The major options are to waive the obligation to maintain an escrow account for taxes and insurance payments, which will cost you a little; an interest-only payment option, which also costs little; and a prepayment penalty, in exchange for which the lender will usually pay you.
How long of a term should I take?
The term of a mortgage is the period used to calculate the mortgage payment. The longer the term, the lower the mortgage payment but the slower you pay down the balance. Term selection is an issue primarily on FRMs, which are available at terms ranging from 10 years to 40 years. While 15-year and 40-year ARMs exist, most lenders offer only 30-year ARMs.
How many points should I pay?
Points are fees you pay the lender at the time the loan is closed, expressed as a percent of the loan. On a $100,000 loan, two points means a payment of $2,000. The more points you pay, the lower the interest rate. Hence, points should be viewed as an investment on which the return is higher the longer you have the mortgage.
How large a down payment should I make?
The down payment is the difference between the loan amount and the lower of the sale price or appraised value. If you have discretion over how much to put down, the down payment, like points, is best viewed as an investment. Investment in a larger down payment can yield a high return if it flips the loan into a lower mortgage insurance or interest rate category.
If I put less than 20 percent down, what type of mortgage insurance should I select?
Borrowers who put down less than 20 percent are charged for the risk they impose on lenders. However, borrowers often can choose how to pay. One option is to pay a premium to a private mortgage insurance company (PMI) selected by the lender. A second option is to pay the lender a higher interest rate, which is called lender-provided mortgage insurance (LPMI). In this case, the lender purchases insurance from a PMI, though not always. The third option is a "piggyback" arrangement, where the borrower takes out a first mortgage for 80 percent of property value, and a higher-rate second mortgage for the balance of the funds needed.
How long a lock period do I need and when should I lock?
The lock period is the period during which the lender guarantees the rate and points: the longer the lock period, the higher the price. Borrowers must choose when to lock and for how long.
What documentation requirements should I seek?
A lender's "documentation requirements" stipulate the information about the borrower's finances that must be provided and how this information will be verified, and then used by the lender. Lenders offer choices ranging from "full documentation" to "no-docs." Because the risk to the lender rises as documentation requirements become less stringent, the price of the mortgage rises correspondingly. Borrowers may or may not have any leeway, depending on what documentation they can provide.
Copyrighted 2005 Inman News
What type of real estate makes the best investment?
By Dian Hymer
During the economic downturn of the early 1990s, a home in the Crocker Highlands area of Oakland, Calif., sold twice in two years. The house did not change substantially during this time, nor did its price. But, average prices in the neighborhood dropped about 15 percent during the same time.
Some homes hold their value better than others. It makes sense to pay particular attention to what you buy and where if you're worried that the housing market is overdue for a correction.
What did the Crocker Highlands home have that caused it to be more desirable than other listings? It had a good floor plan. There were four bedrooms on one level. The master bedroom had its own bathroom, and there were two additional bathrooms.
The house was an older home, built in the 1920s, but it had been extensively renovated with quality, high-end finishes. There was no deferred maintenance. It had a spacious eat-in kitchen/family room that opened directly out to a level, private and sunny backyard. It was a house that was easy to live in and it required no work.
The house was also located on one of the best streets in neighborhood. What made it such a desirable street? It was not a thoroughfare, so the traffic was minimal. It was quiet. Yet, it was within walking distance of the local school. The street was virtually level so children could ride bikes and it was easy for homeowners to get in and out of their driveways. There was plenty of street parking for guests.
This is not to say that you shouldn't buy a home unless it includes all the desirable qualities of this particular Crocker Highlands home. However, it does make sense to keep resale value in mind when you're considering a home purchase, particularly if you don't intend to stay there forever.
Other attributes that tend to add to resale value are good storage space, a garage, a bathroom on each level and a convenient location. Good views tend to add value, and so does easy access in and out of the house.
One-level homes are usually in high demand, especially with older home buyers. Two-story homes are often preferred by younger buyers. Homes that are on three or more levels tend to sell for less than a similar sized home with only one or two levels.
It can be difficult to find a home with a good floor plan, good indoor-outdoor living and the right number of bedrooms and baths that is also in top condition. If you're up for the challenge, consider buying a home that you can improve over time. But, first make sure that the basic structure is sound and the floor plan is good.
Also, get a handle on how much you'll need to invest in the property before you start negotiating with the seller. Don't pay an inflated price for a house that needs work.Location is one of the most important indicators of value in residential real estate.
Neighborhoods with good public schools tend to have higher property values than areas where schools are a problem. Close proximity to a major metropolitan area has a positive effect on home values, particularly if there's good transportation.
Neighborhoods where the residents are predominantly owner-occupants tend to be more desirable than neighborhoods where most of the homes are owned by absentee landlords.
THE CLOSING: The local economy directly affects home values, and so does supply and demand. Areas with a lot of building can end up with a glut of homes for sale when there is a correction in the housing market. This can depress local property values.
Copyright 2005 Inman News
During the economic downturn of the early 1990s, a home in the Crocker Highlands area of Oakland, Calif., sold twice in two years. The house did not change substantially during this time, nor did its price. But, average prices in the neighborhood dropped about 15 percent during the same time.Some homes hold their value better than others. It makes sense to pay particular attention to what you buy and where if you're worried that the housing market is overdue for a correction.
What did the Crocker Highlands home have that caused it to be more desirable than other listings? It had a good floor plan. There were four bedrooms on one level. The master bedroom had its own bathroom, and there were two additional bathrooms.
The house was an older home, built in the 1920s, but it had been extensively renovated with quality, high-end finishes. There was no deferred maintenance. It had a spacious eat-in kitchen/family room that opened directly out to a level, private and sunny backyard. It was a house that was easy to live in and it required no work.
The house was also located on one of the best streets in neighborhood. What made it such a desirable street? It was not a thoroughfare, so the traffic was minimal. It was quiet. Yet, it was within walking distance of the local school. The street was virtually level so children could ride bikes and it was easy for homeowners to get in and out of their driveways. There was plenty of street parking for guests.
This is not to say that you shouldn't buy a home unless it includes all the desirable qualities of this particular Crocker Highlands home. However, it does make sense to keep resale value in mind when you're considering a home purchase, particularly if you don't intend to stay there forever.
Other attributes that tend to add to resale value are good storage space, a garage, a bathroom on each level and a convenient location. Good views tend to add value, and so does easy access in and out of the house.
One-level homes are usually in high demand, especially with older home buyers. Two-story homes are often preferred by younger buyers. Homes that are on three or more levels tend to sell for less than a similar sized home with only one or two levels.
It can be difficult to find a home with a good floor plan, good indoor-outdoor living and the right number of bedrooms and baths that is also in top condition. If you're up for the challenge, consider buying a home that you can improve over time. But, first make sure that the basic structure is sound and the floor plan is good.
Also, get a handle on how much you'll need to invest in the property before you start negotiating with the seller. Don't pay an inflated price for a house that needs work.Location is one of the most important indicators of value in residential real estate.
Neighborhoods with good public schools tend to have higher property values than areas where schools are a problem. Close proximity to a major metropolitan area has a positive effect on home values, particularly if there's good transportation.
Neighborhoods where the residents are predominantly owner-occupants tend to be more desirable than neighborhoods where most of the homes are owned by absentee landlords.
THE CLOSING: The local economy directly affects home values, and so does supply and demand. Areas with a lot of building can end up with a glut of homes for sale when there is a correction in the housing market. This can depress local property values.
Copyright 2005 Inman News
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