What Costs How Much Where in San Francisco Low, High & Median Sales Prices & Average Dollar per Square Foot SF MLS Home Sales: February 15, 2010 – August 15, 2010 Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by “unusual” events in any particular period or by changes in buying trends, as well as by changes in market values. Dollar per Square Foot ($/sq.ft.) is based upon the home’s interior living space and does not include garages, unfinished attics and basements, rooms and apartments built without permit, decks, patios or yards (all of which can still add significant value). These figures are usually derived from appraisals or tax records, but can be unreliable or unreported altogether. (Out of every 10 sales, perhaps 6 – 8 gave square footage, from which the average is calculated.) In the charts below, neighborhoods are listed in order of median sales price. A price followed by a “k” references thousands of dollars; if followed by an “m”, it signifies millions. “REO” refers to the sale of bank-owned properties, typically pursuant to foreclosure. Low Price & High Price are self-explanatory, but be aware that the low price listed might be for a home that needs significant work just to be habitable, while the high price sale may be for an Architectural Digest quality, panoramic-view home. All things being equal, a house will have a higher dollar per square foot than a condo (because of land value), a condo will have a higher $/sq.ft. than a TIC (quality of title), and a TIC will have a higher figure than a multi-unit building (quality of use). All things being equal, a smaller home will have a higher $/sq.ft. than a larger one. When comparing median prices and average dollar per square foot, remember that the average size (and quality) of houses or condos of the same bedroom count can vary widely by neighborhood (usually due to era and style of construction). Thus one neighborhood’s 3-bedroom house can have a higher median price and yet a lower average dollar-per-square-foot than another neighborhood — because its 3-BR houses are significantly larger. Distress Sales: During this 6-month period, 19% of the 1232 HOUSE sales through MLS were either bank-owned (REO) or known short sales (lender reduced outstanding loan amount to allow the sale to close). However, though such sales are now scattered throughout the city, fully 71% of these 229 distress house sales took place in the less affluent, southern band of neighborhoods running from Bayview to Oceanview. For CONDOS, 14% of the 1117 sales through MLS were REOs or known short sales, and 62% of these 160 distress condo sales took place in either the eastern neighborhoods with lots of big newer developments (SOMA, South Beach) or the southern border neighborhoods. Median and average statistics are generalities subject to fluctuation due to a variety of reasons: how they apply to any specific property is unknown. Averages may be distorted by one or two sales substantially higher or lower than the norm, especially when sample size is small. Sales not reported to MLS – such as many new-development condo sales — are not included in this analysis. All figures should be considered approximate and are derived from sources deemed reliable, but may contain errors and omissions, and not warranted.    Update Report | SF Open Homes | Market Dynamics Charts | Online Resources | Property Search Contact us anytime for assistance, information and resources regarding San Francisco real estate. Paragon Real Estate Group 415.738.7000 | 415.565.0500 | www.paragon-re.com

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So how is the San Francisco economy shaping up? It seems so fragile and uneven — mirroring the economy nationwide. The San Francisco business times reports, it’s a “mixed bag.”

Ted Egan, San Franciscos chief economist, gave a presentation Tuesday at a San Francisco Chamber event and summed up how the city and nation are doing.

Here are the highlights:

On the troubling side, Egan said, A worrying sign continues to be housing. I cant say where were at in terms of the housing market right now. So its not at all clear when home prices will finally start a steady increase, which would bolster consumer confidence.

On national employment, Egan said, Were not seeing sustainable job growth. Indeed employment has been flat for three months now after rebounding late last year.

Still, Egan found reason for optimism for San Francisco.

Despite the citys 9.7 percent unemployment rate, it is in better shape than every other major city in the state. Oakland has a 17.7 percent unemployment rate and San Jose has 12.6 percent unemployment.

San Francisco has been resilient, Egan said, because of several different areas of job growth despite the downturn.

Consider: Between the second quarter of 2008 and the fourth quarter of 2009, the following job categories have grown more than 20 percent: software, internet publishing, intellectual property transactions, directory publishers, translation services and performing arts promotion and management.

Meanwhile, venture capital investments, the fuel behind most San Francisco startups, has returned to pre-recession levels of almost $3 billion spent in the second quarter, Egan said.

Its only a matter of time before these economic engines restore the overall regional economy to health, according to Egan.

The question no one can answer yet, however, is how long that will take.

 [San Francisco Business Times] Share and Enjoy:

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Jumpy Rate Market Response To GDP & Home Sales Reports
Rates dropped 0.2% early last week then rose Friday to end the week even. The $109b in Treasury auctions throughout last week caused mortgage bonds to sell off slightly, and July’s record low New Home Sales (down 32.4% year-over-year) and Existing Home Sales (down 25.5% year-over-year) helped mortgages rally— rates rise on bond selloffs and drop on rallies. But then two factors caused a huge 59 basis point selloff Friday:

(1) The second of three 2Q2010 GDP readings showed the economy grew at 1.6% versus expectations of 1.4%. This was a big drop from both the first 2Q reading of 2.4% and the final 1Q reading of 3.7%. Normally economic weakness of this magnitude would cause a mortgage bond rally, bringing rates down. But the opposite happened because traders didn’t think the 1.6% number was weak enough.

(2) St. Louis Fed President and voting FOMC member James Bullard told CNBC that he thinks the Fed has “done as much as we’re going to do” in supporting the mortgage bond market. Remember: the Fed bought $1.25 trillion in mortgage bonds from January 2009 to March 2010, which has been the largest contributor to low rates since credit markets froze in 2007. Mortgage traders take Bullard’s comments seriously because, until now, Kansas City Fed president Thomas Hoenig has been the only FOMC member voting for tighter rate policies.

Rate Factors Week of August 30
Next week is packed with data: July consumer inflation, income and spending Monday; June S&P Case Shiller Home Prices, consumer confidence, and minutes from the August 10 Fed meeting Tuesday; payroll provider ADP’s jobs report Wednesday; June Pending Home Sales from the NAR Thursday; and the critical August BLS jobs report Friday.

After last week’s report that June-to-July Existing Homes Sales were down 27.2%, Robert Shiller (co-creator of the Case Shiller Home Price Index) said “this was the recording the month after the original closing deadline for the [homebuyer] tax credit, so it’s an anomalous month, but I do think that opinions about the market are weakening, and it may result in another decline in home prices going forward.”

Given the weight markets put on his Case Shiller Home Price Index, this Tuesday’s number should move mortgage bonds more than normal. As for Friday’s jobs report, estimates call for 105k job losses in August.

Weaker figures on next week’s data would normally help rates drop. But last week’s mortgage bond market reaction to the GDP figure shouldn’t be ignored: it was a very weak number but not weak enough in the mortgage traders’ eyes, so rates actually rose. Same goes for all data next week.

As discussed in the previous two WeeklyBasis reports, mortgage bonds are overbought, very jumpy, and looking for any little reason to sell off—which would push rates up.

CONFORMING RATES ($200,000 – $417,000) – 0 POINT
30 Year: 4.375% (4.49% APR)
FHA 30 Year: 4.375% (4.50% APR)
5/1 ARM: 3.25% (3.37% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 0 POINT
30 Year: 4.75% (4.87% APR)
FHA 30 Year: 4.5% (4.62% APR)
5/1 ARM: 3.75% (3.87% APR)

JUMBO RATES ($729,751 – $2,00,000) – 1 POINT
30 Year: 5.125% (5.24% APR)
5/1 ARM: 3.875% (3.99% APR)

Related posts:

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But with statistics, context is everything, and these articles show a fundamental lack of understanding of current context and specifically what’s going on in SF.

The first chart below is of the last 2 years’ home sales in SF. July 2010 is indeed well below May 2010, as well as well below July 09 and July 08. However, this is almost completely a function of the fact that deals that would have naturally and typically accepted offers (ratified) in May 2010 were rushed into April so as to meet the Federal Tax Credit deadline. Because of that crush of April ratifications, closed sales in May and June soared way over the sales rate of past years, AND May ratifications this year were much lower than normal. Typically May is one of the highest ratification months of the year; low May ratifications translated to lower July closings. Typically, July is one of the highest closed sales months because of the high May ratifications. With the unusual events this year, the numbers were thrown off – which created the dramatic percentage declines everyone is chattering on about.

Remember: closed sales are 30 – 60 days behind the market (the time of offers being accepted). To get a sense of current market activity, one looks at ratifications, as in the second chart below.

In the third chart below, the Months’ Supply of Inventory for SF  houses and condos is shown over the past 2 years. MSI, at a moderately low 3.8 months of inventory, hasn’t budged in three months – again one can see the effect of the April tax credit rush on the chart — and it is almost exactly the same as in July 08 and July 09.  (The lower the MSI, the hotter the market.)

Closed Home Sales in SF over the past 25 Months:

Below, we see the huge surge of ratifications in April which (stealing normal early May ratifications) led to the large decline in May. Thus May’s number of accepted offers is below past years. But June 2010 ratifications are above last year’s. And July’s ratifications are above July 2009 and July 2008. That is not an indication of a collapsing market. Yes, the market surged in April due to the expiring tax credit, but except for the initial effect on May ratifications (and the resulting effect on July closings), the expiring tax credit hasn’t affected June and July ratifications at all.

Accepted Offers on SF Homes over the past 25 Months:

Since the SF home market started recovering in spring 2009 from the “crash” of autumn 2008, Months’ Supply of Inventory has been very stable, delineating a relatively stable market, running typically between 3 to 4 months of inventory. This is generally considered a moderately low MSI, signifying a relatively strong and consistent buyer demand. Again, it is unchanged for three months, and almost identical to the MSI recorded one year ago and two years ago.

Months’ Supply of Inventory: San Francisco Houses & Condos

None of this is to say that the market might not change tomorrow. It is to say that the most recent statistics don’t currently indicate any dramatic change in market conditions in San Francisco.

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$1,200,000 //Bernal North Slope // Peralta BR/BA: Two Flats each 2/1 PKG:  2 Brief Description: Two-unit building, Owner Occupied, City Views, Original detailing 

$1,150,000 //Hayes Valley // Oak Street BR/BA: 0/0 PKG:  0 Brief Description:  Hayes Valley Triplex, Top Floor Vacant Owners Unit, 3 Large Flats, Period details throughout, Perfect for owner-occupier or investor Property Website (if any):  www.533Oak.com

 $1,070,000 //Duboce Triangle //  Belcher St. BR/BA: 2/2 PKG: 1 Brief Description: Top floor contemporary condo, in 3-unit building, built in 2007. Open living/dining room areas with state-of-the-art kitchen. Spacious bedrooms with a bonus room; perfect for a den/office. Private deck and roof top terrace. Property Website (if any):  www.66Belcher.com 

$999,000 //Lower Pac Heights // Sutter  BR/BA: 2/2 PKG:  1 Brief Description:  Newer Condo in a 3 unit building, bright, spacious open floor plan, large private roof top terrace  

  $875,000 // Noe Valley//Alvarado BR/BA: 2/2 PKG: 1 Brief Description: Great mid century top-floor condo on Alvarado and Noe, close to 1300 square feet with direct access to outdoor space 

 $759,000 //Lower Pacific Heights/  Buchanan BR/BA: 2/1 PKG: 0 Brief Description:  Lovely 2bd 1ba PLUS large office condo located just steps from Fillmore Street.  Period details throughout, open floor plan with leased and deeded patio – great for entertaining!   Property Website (if any):  www.1940buchanan.com

 $739,000 // Miraloma Park //  El Sereno Court BR/BA:  2/1 PKG:  1 Brief Description:  Incredibly charming home nestled in a very special cul-de-sac with breathtaking views from the living and dining rooms. Lots of unfinished space off the garage. First time on the market since the original sale 

 $649,000 //Cow Hollow // Van Ness BR/BA:  1/1 PKG:  1 Brief Description:   Remodeled Kitchen, Wonderful views of the GG Bridge from Living, Kitchen and Bedroom. 

$599,000 // Lake // 6^th Avenue BR/BA: 3/1.5 PKG: 0 Brief Description: Shingle-Style Edwardian TIC flat with updated kitchen and baths and shared yard.  3^rd year in condo lottery -  Great seller financing – Low rate and OK for 10% down buyers.  FIRST OPEN-Sunday 8/29 

 $580,000 //Potrero Hill // 23^rd St.BR/ BA: 1/1 PKG: 1  Brief Description: Really pretty Victorian condominium in 2-condo bldg.  This is lower unit.  Really charming shared garden in rear.  Big extra storage space and big parking space for this unit. 

 Pocket Listings:

$1,599,000 // Glen Park // 181 Randall BR/BA: 3/3 PKG:  2  Brief Description: Grand, restored Victorian view home on a quiet street with sustainably landscaped walk-out garden.  Great Noe adjacent location

 $499,000 //Union Square //  666 Post Street # 1001 BR/BA:  1 / 1 PKG: 0 Brief Description: Beautiful Art Deco Bldg-10th Floor-City Views- Remodeled One Br./One Ba.-COOPERATIVE Apt. at the Crown Towers located in the heart of San Francisco-two blocks from Union Square! (leased pkg. available 1 block away)

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Sunday, September 12th, 1-4PM

Tuesday, September 14th, 12:00-1:30PM

Sophisticated top floor condominium, located steps from Duboce Park, offers all of the amenities and conveniences of city living, with the comforts of home. This stunning home has been immaculately kept since it was constructed in 2007 with a focus on indoor/outdoor living.  There are 3 bedrooms, including a lovely master suite, along with 2 full baths. Entering this home you can feel the attention to detail that went into the planning and construction.  The southern outlooks and spacious floor plan allow for an abundance of natural light in the home.  The scale of the living space is ideal for entertaining and includes the chef’s kitchen with custom cabinets, top of the line appliances, and a breakfast island.  Dining area is perfect for dinner parties and is adjacent to the formal living/sitting area, which is centered around the gas fireplace.  The bedrooms are nestled at the rear of the condo and the master suite boasts designer finishes with a double vanity, jetted tub, and separate shower. Large deeded walk-out deck, in-unit laundry, and one car independent parking.

Close to fabulous restaurants, cafes, and shops, it offers quick easy access to both downtown San Francisco and freeways. Sweeping views of San Francisco and beyond are enjoyed by the deeded roof top deck, making this the ultimate home for entertaining!

The Essentials:

• Three bedrooms and two bathrooms
• Modern construction built in 2007
• Open Living/Dining Areas
• Master suite with designer finishes
• Deeded private deck and roof deck
• One car garage parking
• Walk Score of 97

Offered at $1,070,000

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Upcoming listing:

$2,225,000 //Telegraph Hill //Francisco St. BR/BA: 3/2.5 PKG:  2 BriefDescription: Spacious three level, Mediterranean villa townhome.  Two fireplaces, extraordinary water views, private terraces. Located right below Coit Tower Property Website (if any):  www.TelegraphTerrace.com 

 $985,000 //Potrero Hill // Arkansas BR/BA:  2/1 PKG: 1 Brief Description:  FAB location, sweet home, gorgeous deck and garden Property Website (if any):   www.363Arkansas.com 

 $799,000 //Inner Richmond //Confidential Address BR/BA:  2/1 PKG:  1 Brief Description: Top floor Marina style remodeled condo 

 $699,000 // SOMA // Dow Place  BR/BA: 1/1.5 PKG: 1 Brief Description:    This 2 level loft condominium has almost 1,300 SF and the largest floor plan in the building. Set at the Southeast corner of the building with downtown views and loads of light. Property Website (if any):  http://zannelli.com/property_detail.php?property_ID=58.

$695,000 //Central Richmond //Confidential Address BR/BA:  2/1.5 PKG:  2      Brief Description:  Top Floor Marina Style remodeled condo, all remodeled

 $575,000 //Cole Valley // Confidential Address BR/BA: 1/1 PKG:  0 BriefDescription:  Gorgeous condo in heart of Cole Valley in 6 unit building.  Lsd pkg within building, has been secured since purchase in ’04- will remain

 Pocket Listings:

$2,150,000 // Noe Valley // Confidential/ Call Agent BR/BA:  4/2.5 PKG: 2 Brief Description:  Expertly designed by award winning Zack/De Vito Architects in 2004, this dramatic light infused 4 bedroom, 2.5 bath modern townhouse consists of clearly organized spaces with a focus on details and timeless finishes.  The immense living space is impressive and is accentuated with polished concrete floors, soaring ceilings, exposed steel beams and opens to the landscaped tiered gardens  Coming Soon!   

 $1,095,000 // Lake District // 7^th  Ave   BR/BA: 3+/1.5   PKG:   2 Brief Description: Large two story 3+  bedroom top-floor condo in a gorgeous Arts & Crafts building on a beautiful block just off Lake St. Remodeled kitchen & bath, excellent floor plan, bright & open, 2 large decks, office/family room, in-unit w/d, large shared yard, and close to Mt Lake Park.  Easy to show

 $799,000 // Sunset // 19^thAve (x Kirkham) BR/BA:  3/2 plus studio penthouse PKG: 1 Brief Description:  Built in 2000, this bright and spacious 3bd /2ba (plus studio penthouse) condo is just a block away from Irving St. shops and restaurants.  Great layout, ~2,000 sq.ft., in-unit w/d, 2 roof decks. Condo will be vacant and studio penthouse w/separate entrance is currently tenant occupied at $1,200/mo.  Easy to show 

 $795,000 //Lower Pacific Heights //Confidential/Call Agent BR/BA: 2/1 PKG: 0 Brief Description:  Lovely 2bd 1ba plus large office condo located just steps from Fillmore Street.  Period details throughout, open floor plan and deeded patio – great for entertaining!  Leased parking

 $TBD // Potrero Hill // 1216—19^th Street BR/BA: 3/2 PKG: 1 BriefDescription:  3200 square-foot contemporary home on Potrero Hill’s North Slope with spectacular panoramic views. Very convenient to shops and restaurants of 18^th Street.    

 $TBD// Russian Hill // 1356-58 Broadway BR/BA: 3/2 & 2/1 PKG: 1 Brief Description: Fabulous Edwardian 2 units with original woodwork & large lot. 1 vacant 1 tenant occupied. Great Location. Ready end of month Property Website:  Coming Soon!

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The San Francisco Home Market   August 2010 Update   Despite the constant news of dramatic changes in the real estate market – Values soar! Values crashing! Market up or down ___% from last month! Double dip recession! – the home market in San Francisco has exhibited a remarkable stability over the past year. As shown in the charts below, median prices for both houses and condos are virtually unchanged from one year ago; buyer demand remains steady; months’ supply of inventory remains steady; foreclosure sales are stable; low interest rates continue. Statistics jump around within a relatively narrow percentage band: there has certainly been no definitive trend up or down. It is neither a crazy buyers’ market nor a crazy sellers’ market: it’s a relatively healthy, balanced market, where the basic rules of real estate generally apply: well-priced, well-prepared, well-marketed homes typically sell quickly and homes without those characteristics don’t. Statistics are broad-brush generalities subject to fluctuations due to a variety of reasons. Median prices in particular may be affected by other market factors besides changes in value. All information contained herein is derived from sources deemed reliable, but may contain errors and omissions, and is not warranted. Sales not reported to MLS are not included in these analyses.  click for larger image Homes Accepting Offers The number of SF homes – houses, condos and TICs – accepting offers is remaining stable, though running a little higher than this time last year. (April was an abnormally busy month due to the expiring Federal tax credit.)   click for larger image SF House Median Sales Price The Median Sales Price is that price at which half the properties sold for more and half for less. Though it has gone up and down a bit over the past year, the median sales price for SF houses in July 2010 was virtually unchanged from that in July 2009: no definite trend up or down has manifested itself. The average median for the past 13 months is $756,000.   click for larger image SF Condo Median Sales Price The median sales price for SF condos has remained remarkably stable for the past 12 months, with the average median sales price for the past 13 months being $675,000. Certainly no definitive trend in value up or down is apparent from the median price.   click for larger image Distressed Home Median Sales Price Distressed properties are those that are being sold by banks pursuant to foreclosure, and short sales, which require banks to reduce the outstanding loan amount for the transaction to close. The median price for such sales has generally fluctuated between $450,000 and $525,000, which, looking at the earlier charts, one can see is a substantial discount from overall median house and condo prices in San Francisco. However, the majority of such sales are located in the less affluent neighborhoods of the city.   click for larger image Luxury Homes: For Sale vs. Under Contract The red bars show the number of active luxury home listings in any given month (in this case, defined as houses and condos with list prices of $1,500,000 and above), and the blue line shows the number of listings which accepted offers. In July, the percentage of higher-end listings which accepted offers was about 15%   click for larger image Inventory of Homes for Sale The dark red bars show the total number of homes that were for sale during the given month, with the lighter bars showing how many were actively for sale on the last day of the month – the difference being those listings that accepted offers, expired or were withdrawn. As we get deeper into summer, both numbers have declined slightly.   click for larger image Average Days on Market (DOM) This chart measures the average number of days between going on market and accepting an offer. The average in July was 55 days, the lowest in 13 months but basically unchanged since March. In July, houses had the lowest average DOM with 48 days; condos were at 59 days; and TICs were at 75 days: this reflects the respective heat of each market segment. The average days-on-market for “For Sale” homes is 79 days, since it tracks those listings that have not received an acceptable offer.   click for larger image Months’ Supply of Inventory (MSI) MSI is defined as the number of months it would take to sell the current inventory of homes for sale, at the current rate of sale: the lower the MSI, the greater the demand. MSI for all SF homes has stayed generally stable at 3-4 months, which is considered moderately low. However MSI varies widely by property type: for houses, the MSI is a low 2.9 months; for condos, 4.4 months; for TICs, 5.4 months; and for 2-4 unit buildings, a relatively high 7.4 months of inventory.   click for larger image Distressed Homes as % of Sales The hash-marked sections delineate the number of distressed property sales (bank-owned and known short sales) against total home sales. The percentage of such sales is noted at the top of each bar: generally jogging up and down between 14% and 17%. Since 2010 began, within any given month, there are usually 400 – 450 distressed properties for sale; 110 – 130 distressed-home new listings; 80 – 100 accept offers; 55 – 75 close escrow; and 30 – 40 expire without selling.   click for larger image Percentage of Listings Under Contract This chart shows the percentage of home listings which accepted offers within the given month. Except for the surge in April and the doldrums of the holidays, that percentage has typically remained between 16% and 20%. In July, houses had the highest percentage under contract (22.5%), followed by condos (15.4%), TICs (13.5%), and 2-4 unit buildings (10.7%): the higher the percentage under contract, the hotter the market segment.   click for larger image Sales Price to Original List Price The darker blue bars show the percentage of original list price , typically about 100%, achieved by SF home sales that occurred without a price reduction, i.e. they sold quickly. The lighter bars show the percentage of original list price achieved by those listings that went through one or more price reductions before selling. The difference is typically 10 – 13% of the original list price amount. (January’s numbers are almost certainly caused by faulty reporting.) A well-priced, well-prepared and comprehensively marketed home (of general appeal) will usually sell quickly for the highest price.   click for larger image New Listings The number of new listings in the city are up a little over July of last year, but down from the peaks of the spring selling season. Usually, the market will see a surge of new listings after Labor Day.   click for larger image Homes Sold vs. Listings Expired & Withdrawn The green bars denote sold homes and the purple bars denote expired and withdrawn listings. In July, when many of the spring listings that did not sell expired, the number of expired/ withdrawn listings was almost equal to the number that sold. Listings expire or are withdrawn typically due to being perceived as overpriced.     SF Open Homes | Online Resources | Property Search Contact us anytime for assistance, information and resources regarding San Francisco real estate.

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Effort designed to encourage principal write-downs for responsible borrowers

WASHINGTON – In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today provided details on the adjustment to its refinance program which was announced earlier this year that will enable lenders to provide additional refinancing options to homeowners who owe more than their home is worth. Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lenders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA’s refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner’s primary residence. And the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

For more information on FHA Short Refinance option, read FHA’s mortgagee letter.

FHA LAUNCHES SHORT REFI OPPORTUNITY FOR UNDERWATER HOMEOWNERS – [U.S. Department of Housing and Urban Development]

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This “WeeklyBasis 8/14/10: Full Tilt Credit Boom” is provided by Julian Hebron, Vice President, Mortgage Consultant
RPM Mortgage. Take it away Julian…

Normally this report is measured, but it’s hard to temper the current situation: we’re in an unprecedented government credit explosion. Low rate bonanza. Full tilt refi boom. Best time for homebuyers who select the right deal.

The ironic reason for this boom is that is that global developed economies are so unstable because of the last credit boom. But the late-1990s to 2007 credit boom wasn’t just loose monetary and fiscal policies, it was also loose credit standards born out of sweeping financial deregulation. We all know the story: Home loans made to unqualified (mostly U.S.) borrowers underpinned bond funds around the globe and countless derivatives were created from those bonds—and it all crashed when home prices plummeted.

At least this time credit guidelines are more strict, as any homebuyer or refinancer knows all too well. Getting a mortgage funded involves painstaking scrutiny of borrower and property profiles. The rewards, of course, are the rates. You can view current rates below and see the attached chart for historical perspective from 1971-Present.

But back to the irony. While it’s painstaking for a borrower to procure new debt, the government issues billions in new Treasury debt every other week, and global markets readily absorb it. Here are three reasons why Treasury and mortgage debt (which is, in essence, government debt too since Fannie and Freddie were taken over 2 years ago) has rallied so much recently:

(1) From January 2009 to March 2010, the Fed bought $1.25t in mortgage bonds to bid prices up and rates down.

(2) Then a European debt crisis from April to July caused bond investors to sell European bonds and buy U.S. Treasury and mortgage bonds.

(3) And the U.S. economy has posted two months of weaker jobs, GDP, home prices, retail sales, and consumer sentiment, causing money to move from stocks to Treasuries and mortgage bonds.

The result is record high mortgage bonds and record low rates.

This simply can’t last. Look at Europe. Right now we’re the beneficiary of their (many would say) profligate government debt issuance, but our gross federal debt is 75% of nominal GDP, according to Kansas City Fed President Thomas Hoenig. In a worst case, we’d eventually have a debt crisis of our own which would cause huge mortgage and Treasury selloffs, resulting in a very sharp rate spike.

Even in a moderate scenario where mortgages and Treasuries simply experience a market correction off current record highs, it would push mortgage rates up .25% to .5%. But for now, it’s full tilt credit boom, and qualified mortgage borrowers are beneficiaries.

CONFORMING RATES ($200,000 – $417,000) – 0 POINT
30 Year: 4.375% (4.49% APR)
FHA 30 Year: 4.375% (4.50% APR)
5/1 ARM: 3.25% (3.37% APR)

SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 0 POINT’
30 Year: 4.625% (4.74% APR)
FHA 30 Year: 4.5% (4.62% APR)
5/1 ARM: 3.5% (3.62% APR)

JUMBO RATES ($729,751 – $2,00,000) – 1 POINT
30 Year: 5.25% (5.37% APR)
5/1 ARM: 4.125% (4.24% APR)

DAILY CONSUMER-FRIENDLY COMMENTARY
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Related posts:

1. Current Market Rates – Update From RPM Mortgage
2. Is Economy Weak Enough For Rates To Go Even Lower?
3. RATE UPDATE!