Interest Rates Plunge for Homes in Santa Cruz
September 08, 2008
In case you haven’t heard, over the weekend the free-marketeers over at the Treasury Department have taken over Fannie Mae and Freddie Mac. I’m all for it, of course. The hypocrisy kind of makes me sick - they’re all for government intervention to help out the banks and whatnot, but when it comes to helping out the middle and lower classes with, I don’t know, a tax cut or a single-payer health care system - forget it.
But I digress - I’m totally for the bailout. We just can’t afford a collapse of the whole mortgage lending system. That would just be catastrophic, and would end up hurting many more people than simple inaction and the possible collapse of Fannie and Freddie.
The good news out there for you, Mr. Middle Class Home Buyer, is that interest rates have plunged. Apparently, a confirming 30 year fixed loan is down to about 5.75%. That’s pretty good. Rates had been about 6.5% on Friday, so this is a huge drop.
Now, for those of you who are using FHA Financing (typically first-time and low-income buyers) - you’re out of luck. It seems that FHA rates will remain about 6.5% for the time being.
Of course, as you can imagine, an event of this magnitude is likely to cause quite a bit of perturbation. Rates could be this low only for a short time - they could go right up again before we know it. Or, of course, they could drop even further. Who knows?
Interest rates vary all the time, and they vary from borrower to borrower and lender to lender. But let’s assume that on Friday, your rate would have been 6.5%, and today, it’s 6% - in other words, a 1/2% drop. Let’s also assume you’re buying a median house in Santa Cruz, and you’re putting down, say, 15%. The median price these days is around $610,000 - so your loan would be $518,500 (yes, I’m assuming you have $91,500 handy for a down payment!).
At 6.5%, your principal and interest payment, for a 30 year fixed loan, would be $3,277.27.
At 6%, your principal and interest payment for a 30 year fixed loan, would be $3,108.66. That’s a difference of $168.61 a month.
Hey, calm down! Don’t get so excited! It may not seem like much - but it is a bit more than a 5% savings in monthly payments. Until you figure in tax and insurance, of course. Your tax would stay the same - about $559 per month, and insurance would be, oh, $75 a month. So your true payment with a 6.5% rate would be around $3,911.27 a month, which puts your actual savings of $168.61 at somewhere around 4.3% per month.
Still, $168.61 ought to pay for at least a few refills of the ol’ Prius, eh?
Posted by SantaCruzBroker at 2:54pm
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More about Santa Cruz and the 2008 Housing Bill
August 02, 2008
I got quite a few e-mails from my post the other day about the Housing and Economic Recovery Act of 2008. My mother wrote me (Hi Mama!) and said, what’s a GSE? What’s FHA? Good questions. Here’s a bit of a run-down on some of the acronyms used in my last post:
- A GSE is a Government Sponsored Enterprise - in this case, Fannie Mae and Freddie Mac, but there are and have been a few others. As I often do, I will refer you to the Wikipedia entry for Government Sponsored Enterprise.
- FHA is the Federal Housing Administration. You can read all about it on the Wikipedia page about the Federal Housing Administration. It’s no surprise that a major piece of the legislation that President Bush just signed addresses the FHA - together with Fannie Mae and Freddie Mac, these institutions are pretty much the only things holding the real estate market together at the moment.
- VA is the Veteran’s Administration. It used to be that we didn’t have too many VA loans in the area, but now prices have dropped in many parts of Santa Cruz and north Monterey County that VA loans are becoming increasingly more frequent.
- CDBG: that’s Community Development Block Grant.
I got an e-mail from another client asking if this would put an end to short sales and REOs. The answer to that one is a resounding no. Here’s a link to an interesting take on the housing bill:
The housing bill will likely help less than five percent of the families facing foreclosure over the next two years.
Of course, AlterNet is a commie-pinko agitator web site, so take that with a grain of salt. Don’t get me wrong - I love commie-pinko agitators as much as the next guy, but you can see from the article that the author very much favors competing legislation, H.R. 6116, the Saving Family Homes Act of 2008. Good or bad, I can predict this with a lot of confidence: HR 6116 will go nowhere.
I found another interesting article about this bill, claiming that the 2008 Housing Bill is just Crony Capitalism at its finest. This is actually a really great article, and if you are interested in the legislation just passed, I recommend you read it. Among the many questions it raises is, what is the “fair market value” of a home? I mean, the idea is that the debt gets written down to 85% or 90% of the home’s current value - how is that home’s value determined? By an appraiser, probably - but which appraiser? The bank’s? The borrower’s? I’m guessing the bank will be choosing the appraiser, and what do you want to bet the appraiser will be turning in rosy figures for the home’s value?
One of the biggest questions out there is, say you are a homeowner with a mortgage you can’t afford - how do you take advantage of this bill? Suppose you do somehow manage to qualify for the program, that you are one of the lucky 5%. Who do you call? My guess would be the lender’s loss mitigation department. And, good luck with that - they’re famously painful to deal with. It’s a messy situation still, and it appears that the Housing and Economic Recovery Act of 2008 will not be as helpful as we’d hoped to struggling homeowners in Santa Cruz county.
Posted by SantaCruzBroker at 9:07am
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Santa Cruz and the Housing and Economic Recovery Act of 2008
July 30, 2008
Well, it has finally come to pass. It looks like the Federales have finally begun to seriously address what’s going on in the housing markets and in the broader economy. People ask me all the time, “What’s in the bill going through Congress?” Here is the summary of the key provisions from NAR (the National Association of Realtors):
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Wow, that’s a lot of key provisions - it is, as promised, pretty sweeping legislation. But it looks like there’s some bad news out there for Santa Cruz families facing foreclosure, namely that the loan limit for the foreclosure rescue/refinance is $550,440. I think a lot of people facing foreclosure have loan limits that are higher than that.
Overall, it looks like a pretty good piece of legislation to me. Not a panacea, of course, for all that ails us, but I don’t think there’s a “silver bullet” out there that’s going to make all our problems go away. This is a step in the right direction, and there are provisions in the bill that will directly benefit many homeowners and future homeowners in Santa Cruz.
Posted by SantaCruzBroker at 9:06am
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Santa Cruz Gets Highest FHA Loan Limit - $729,750
March 05, 2008
Step away from the precipice, folks, no need to jump off the bridge quite yet. Has your big Uncle Sam just come rushing up on his White Stallion to save the day?
[From BusinessWeek - 14 Calif. counties get maximum FHA limit]
Counties that get the $729,750 maximum for FHA loans are likely to get that same level for Fannie and Freddie mortgages, experts said. HUD is expected to designate new Freddie and Fannie limits for other parts of the country too.
In California, the counties at the maximum level for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura. At the other end, Lassen, Modoc and Trinity counties are subject to a loan cap of $271,050 — a standard amount in an area with normal home prices.
There, if you ever doubted it before - now you have the proof. Santa Cruz must, quite simply, be one of the best places to live in the whole wide USA, and hence, by easy extrapolation, the world. If anyone doubts you when you tell them this, you can simply point out that Santa Cruz has the maximum FHA loan limit in the entire USA (and, again by easy extrapolation, the world). Sure, there are other places that likewise have high FHA loan limits, but how is the surfing there? And, do they have tens of thousands of acres of redwood forests for you to go stomping around in?
Count me a sceptic - I don’t think this is going to be any kind of panacea for our beleaguered market. But don’t worry - Apple Computer, Inc. used to be a beleaguered computer maker, and look at them now. I expect a future no less bright and shiny for the Santa Cruz Real Estate market. I think we’re a ways off from the promised land, still, but don’t lose the faith, happy times will come again. Oh, and if you do know anyone who was waiting to buy a house once the Guv’mint got its at together and raised the conforming loan limits - won’t you send ‘em my way? 
Posted by SantaCruzBroker at 7:29pm
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