February 2006 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... California home sales are up and prices are moderating. Here are some very important things to consider in making the right choices with the goal of making your real estate investment work hard for you.
Recent News :. California December Home Sales Up As Price Growth Moderates A total of 52,800 new and resale houses and condos were sold statewide in December. That's up 3.0 percent from 51,250 for November and down 9.7 percent from 58,500 for December 2004. An increase from November to December is normal for the season. The median price paid for a home in December was $458,000. That was the same as November's peak. It was up 13.1 percent from $405,000 for December a year ago. This year-over-year increase was the lowest since a 12.4% increase in March 2003 when the median reached $290,000. Prices increased at their fastest rate in June 2004 when the $382,000 median was up 23.2% from the same month a year before. The typical mortgage payment that home buyers committed themselves to paying in December was $2,156, a new peak. That was up from $2,140 in November and up from $1,785 for December a year ago. Market stress indicators are still very low. Down payments are stable, speculation buying is moderate, there are no significant shifts in market mix, and default rates are low. Earlier increases in non owner-occupied purchase activity and flipping activity have leveled off. Source: DQNews.com Conforming Loan Limits Increase To Raise Ceiling and Ease Qualification New conforming loan limits are good news for more than 28,500 households in California, but with a median home price that's 29% higher than those new levels, far more Californians remain unable to benefit from the new limits. Freddie Mac and Fannie Mae have announced the annual increase in the single-family mortgage loan limit for so-called "conforming" loans from $359,650 to $417,000 effective January 1, 2006. Conforming loan interest rates can be 0.25 percent to 0.50 percent cheaper than so-called "jumbo" rates for loans that are larger than conforming levels. The difference covers the potential for the added risk associated with a larger loan and makes the larger loan more expensive. Freddie Mac estimates that total mortgage interest savings for a borrower with a typical 30-year fixed-rate mortgage at the new conforming loan limit is as much as $24,700 over the life of the loan. The California Association of Realtors (CAR) says a home owner could save from $24,710 to as much as $39,660 over the life of a 30-year mortgage. The increase in loan limits is based on the October 2004-to-October 2005 changes in average new and existing home prices published by the Federal Housing Finance Board (FHFB) and based on guidance issued by the Office of Federal Housing Enterprise Oversight (OFHEO). Nationwide, the increase in the single-family mortgage loan limit makes it possible for an estimated 500,000 additional families to obtain lower cost mortgage financing, Freddie Mac says. CAR expects the state's share of the half million increase to be 28,590 households. CAR says the current median home price in California is $538,770, an increase of 17.2 percent compared to a year ago. California has 19 counties with a median-home price above the national conforming loan limit. Source: Realty Times Feature Article::. Credit Card Minimum Payment Rise, May Be Time To Refinance In the past, credit card companies required customers to pay an average of just 2% percent of their total credit card balance, which meant constant debt for many consumers. The 2 percent minimum payment only covered interest and other fees, so it could often take a lifetime to pay off the principal balance. Now, federal banking regulators are trying to save consumers from themselves by issuing guidelines to credit card companies and banks stating that monthly minimums should cover interest, any fees or extra charges, and at least 1% of the principal amount. This comes at a particularly bad time for Americans who are facing both higher interest rates and the new bankruptcy law that makes it harder for consumers to write off their unsecured debts. Consumer advocates say that the going may be tough for many consumers, but they will be better off in the long run because higher payments mean they will pay their balance off earlier and accrue less interest. Link here to read entire article In the Spotlight::. Owning a Home -- What’s Deductible? Realtors are quick to point out that home ownership allows a lot of tax advantages not available to someone who merely pays rent. A homeowner can deduct points used to obtain a mortgage when buying a home, mortgage interest paid during the year, and property taxes. Defining "Home" Your “home” can be a house, co-op, condominium, mobile home, trailer, or even a houseboat. For trailers and houseboats, one requirement is that they must have sleeping, cooking, and toilet facilities. Even a rental can be considered a second home, provided you live in it either 14 days out of the year or at least 10% of the number of days you rent it for, whichever is greater. Interest If you have a mortgage on your home, the loan is probably "fully amortized." This means a portion of your monthly payment actually repays the debt and another portion pays the interest. After a scheduled period of time, your mortgage is paid off. If you itemize deductions using a Schedule A, the interest portion of your mortgage payment is usually tax deductible. Your primary residence or a second home must be collateral for the loan. At the end of each year, your lender should send you a form 1098. This form tells you how much you paid in interest and points during the year. This is your deductible interest, provided you meet certain conditions. If you obtained the loan prior to October 13, 1987, the loan is considered "grandfathered." All interest paid on grandfathered loans in a given year is fully tax deductible. After that, there are conditions, but most conditions won’t apply to most homeowners. Link here to read entire article Expert Point of View::. The End of Irrational Exuberance "We are returning to a more balanced market between home buyers and sellers," according to David Lareah, chief economist for the National Association of Realtors. His statement was based on a slight downturn in the annualized sales pace of existing homes, plus a variety of other factors, including increased home inventory levels. More homes for sale, less demand. Because of low rates, easy mortgage qualifying, low down payment loans, and heavy buyer demand, experts like June Fletcher, "Home Front" reporter for the Wall Street Journal, and others feel that a "herd mentality" has developed in recent years. Homeowners and investors have come to expect rapid price appreciation. Investors and speculators have jumped into the market at four times their normal participation, further feeding the frenzy. Some have called the recent market a "housing bubble." You've seen the reports in recent months all over the media. "The 'Housing Bubble' is about to pop!" Others have likened the recent market to a balloon that may develop a slow leak, and some have said, "What housing bubble?" David Lareah says, "We feel confident that housing is landing softly as rates continue to rise." Link here to read entire article You have received a copy of the Allstate Lending Group Update if you’d like to be removed, please link heremkronsburg@allstatelg.com?subject=remove. . |
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