November 2005 This Allstate Lending Group update is sent to you as a free news service providing information regarding the mortgage industry, refinancing, and our company. In this issue... The residential real estate market continues to sizzle. What does that mean for you? In this issue, we provide the latest stats, tips for taking advantage of opportunities, and some expert analysis.
Recent News :. Median Price of a Home in California at $543,980 in Sept., up 17.3 Percent from Year Ago; Sales Increase 3.9 Percent The median price of an existing home in California increased 17.3 percent in September and sales increased 3.9 percent compared with the same period a year ago, the California Association of REALTORS(R) (C.A.R.) reported today. Closed escrow sales of existing, single-family detached homes in California totaled 650,780 in September at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR(R) associations statewide. Statewide home resale activity increased 3.9 percent from the 626,210 sales pace recorded in September 2004. Read entire aritcle here Feature Article :. Affordable Loans for Unaffordable Homes Unless you’ve lived in a bubble over the last few years, you know home prices in California have skyrocketed to record levels. One major contributing factor fueling this phenomenon is historically low mortgage interest rates. Economists had predicted an increase in long-term mortgage interest rates beginning this year to about 7%. They were wrong. As home prices increase faster than incomes, lenders have had to scramble and come up with a creative array of hybrid mortgages. These hybrid loans would allow the average borrower to qualify for a home loan for which they might not otherwise have been qualified. These hybrid loans (or option arms) have a fixed interest rate component for the first 3, 5, 7 or 10 years, and then assume an adjustable rate. As short-term interest rates dropped, this type of loan became very popular since these rates were lower than the conventional 30-year fixed interest rates. Take for example a $600,000 loan at 6% interest for 30 years. The principal and interest payments would be $3,597.30. However a $600,000 loan at 5.25% interest on a 5 year option arm is $3,313 for the first 5 years, allowing a borrower to qualify for a larger mortgage because of the lower qualifying monthly mortgage payment. Since short-term interest rates have been increasing as of late, the difference between the 30-year fixed rate and the option arm interest rates are negligible. Read entire article here As recently seen in the Santa Monica Daily Press, Rosamond News, Lake Los Angeles News and Acton/Agua Dulce News. Visit our web site for more articles and press coverage. In the Spotlight :. Why Your Credit Rating Matters and How To Keep It Healthy Why do some lenders turn down a mortgage application while others consider it fit for approval? The answer may well lie in your credit report and credit score, which play a crucial role in loan sanctioning. As part of the pre-approval process, a detailed evaluation is made of your finances, credit history and investments. Your debt ratios are compared with the lender’s standard. Too much debt or a poor credit rating is a common reason for turning down a mortgage application. Even if you are not rejected altogether, you may have to settle for a loan amount lower than what you anticipated. Your credit (or FICO) score is a numerical rating of your credit worthiness and ranges from 300-900, with most people’s falling between 600 and 700. Higher credit scores make you more appealing to the lender. Read entire article here Expert Point of View :. Excerpts from remarks by Federal Reserve Chairman Alan Greenspan to the American Bankers Association Annual Convention, Palm Desert, California, September 26, 2005 Over the past decade, the market value of the stock of owner-occupied homes has risen annually by approximately 9 percent on average, from $8 trillion at the end of 1995 to $18 trillion at the end of June of this year. Home mortgage debt linked to these structures has risen at a somewhat faster rate. This enormous increase in housing values and mortgage debt has been spurred by the decline in mortgage interest rates, which remain historically low. Indeed, the thirty-year fixed-rate mortgage, currently around 5-3/4 percent, is about 1/2 percentage point below its level of late spring 2004, just before the Federal Open Market Committee (FOMC) embarked on the current cycle of policy tightening. This decline in mortgage rates and other long-term interest rates in the context of a concurrent rise in the federal funds rate is without precedent in recent U.S. experience. Regardless of the precise mix of factors that explains the decline in interest rates, the associated run-up in housing values has left households with a substantial pool of available home equity. According to data recently developed by Jim Kennedy of the Federal Reserve Board staff, and me, discretionary extraction of home equity accounts for about four-fifths of the rise in home mortgage debt. As I noted earlier, we can have little doubt that the exceptionally low level of home mortgage interest rates has been a major driver of the recent surge of homebuilding and home turnover and the steep climb in home prices. Read entire article here You have received a copy of the Allstate Lending Group Update if you’d like to be removed, please click here. |
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