WOW... what a difference a few weeks can make....I'm seeing some major changes in pricing and attitudes of buyers and sellers. Here are some quick observations about things I am noticing about the market.
Buyers: Buyers seem to be in two camps at the moment... the ones who are still waiting to see where the market is headed and those that are ready to buy but are being very choosy about what they will pay. Buyers that would have paid $XXXXX in July will now only pay $XXX. Location and condition are even more important then they were a few weeks ago. Buyers are not willing to pay a premium price for a medium house.
Sellers: Reality seems to have touched a lot of sellers in the last few weeks... even new construction is seeing some price adjustments. I recently ran some numbers on homes for sale in Manhattan Beach.. excluding townhomes.. There are currently 116 homes on the market. Of those about one-third have had price reductions, one-third are new listings ( 30 days or less) and one-third are just sitting.... There seem to be a lot of higher priced homes coming on the market.... however I am noticing that many new listings appear to be priced closer to market value then in previous months... Looks like over-priced properties have officially received the Kiss of the Black Hand..
Buyers: Buyers seem to be in two camps at the moment... the ones who are still waiting to see where the market is headed and those that are ready to buy but are being very choosy about what they will pay. Buyers that would have paid $XXXXX in July will now only pay $XXX. Location and condition are even more important then they were a few weeks ago. Buyers are not willing to pay a premium price for a medium house.
Sellers: Reality seems to have touched a lot of sellers in the last few weeks... even new construction is seeing some price adjustments. I recently ran some numbers on homes for sale in Manhattan Beach.. excluding townhomes.. There are currently 116 homes on the market. Of those about one-third have had price reductions, one-third are new listings ( 30 days or less) and one-third are just sitting.... There seem to be a lot of higher priced homes coming on the market.... however I am noticing that many new listings appear to be priced closer to market value then in previous months... Looks like over-priced properties have officially received the Kiss of the Black Hand..
Financing: Lenders are really taking a hard look at qualifications and are now verifying assets along with income and credit....You can't just say you have reserves or stock .. you have to prove it.. However they are allowing higher rations on Jumbo loans then we saw in the past.. up to 50% on the back end with good credit and asset verification. High FICO scores are going to be a must.. especially as there are going to be new guidelines from Fair Isaac over the next few months that are going to prove to be a surprise for many.
Lots of interesting commenting happening on our Local Consumer Blog.. MBConfidential and at the LA Times Blog.... You might want to see what people are saying..
7 comments:
It does seem that things are changing very quickly, especially the last few weeks. We own a "starter" home in the trees ("b" location – east of Valley), purchased in mid 90's. We did a major remodel 5 years ago, but home is still on the small side. We have been looking to "move-up" over the past 2-3 years (need room for our kids), so I have been watching the local market with interest. Property taxes have been my biggest hurdle (the increase would more than equal the cost of college education for one of my kids – now a toddler). We have plans being drawn up for another remodel (much less of an increase in property taxes) and had anticipated a start within next 6 months, but may hold off to see where rates (especially jumbos) and prices are going (and how fast). I feel very fortunate to still be in the area (south bay native) and have a choice to remodel – I really don’t know how other families can afford it.
I have a question on financing. Fico Score: 800, verifiable household income $240,000 per year, verifiable cash holdings of $150,000. Can this combination still get a 10% LTV Jumbo Loan? If so, what would be the rate and what would be the maximum loan amount? Your statements on financing provide a general trend, but it means little to me without specific examples.
Anonymous 12:32- Keep your eye on the market..prices are changing but they may not reach the level you hope to see.. so having the option to remodel again is a great choice..
Rates will get better "if" the FED decides to lower rates... but that is not a given...As a side note.. qualifying for a full doc loan is not quite as bad as many believe...
Although taxes can certainly be an issue....You may find it makes more sense to buy a larger home rather then go through the hassle of another addition.. That, of course, will depend on where prices wind up in the next few months.
Keep your eyes on the market.. Prices and rates always seem to get better toward the end of the year.
Anonymous 12:56: I forwarded you question to two lenders that I have great faith in.. I've heard back from one and should hear from the other soon...
This information is from Bob Madden at Platinum Capital...e-mail address..bob.madden@platinumcapital.com
The information is for a full doc 30 year fixed First ( 80/10/10)loan with 10% down and a 10% fixed rate second loan amortorized over 30 years due in 15.
Based on your information...The maximum price would be $1.1 million
with $110,000 (10%) down .. a first TD of $880,000 and a second of $110,000.
The First TD would be 30 yrs at 7% fixed with a payment of $5852.
The second would be fixed at 7.75% amortized over 30 yrs.. due in 15 yrs.. the payment on the second would be $787.
The total P+I payment would be $6639. Taxes would be $1145 and insurance would be $250.. for a total of $8034 per month.
Based on your current income $240,000 this would be about 40% of your monthly income.
I hope this answers your question and puts things in perspective.
Thanks for the specific example. That helps a lot. Based upon what I have seen in the beaches for that price, it would seem that spending about $1 million with 10% down and using the other $50,000 to fix up the place would be the best way to get what I want.
Anon- That sounds like an excellent plan.. There are a number of properties that would work and I suspect there will be a few more in the future
Anon: 7:11- I heard from another lender Tony Drockton at Branded Mortgage.com.. He said that if you wanted an adjustable loan you could possible go slightly higher in price close to $1.25 million but you would have to use most of your cash $125,000 as a downpayment...
Unless you are considering a newer townhome there is not much difference in what you get in a single family home between $1.1m and $1.2m.. so I would probably rather see you be a bit more conservative and stick with the original plan and do a little remodeling
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