-The starter market average sales price was up from the previous year.  Last month (May, 2012) had an average sales price of $247,100.  May, 2011, had an average sales price of $229,400. This represents an increase of about 7.7% ($17,000) year over year.  This is the second straight month of 7%+ appreciation.

-The current average list price for homes is $272,100.  This compares to $268,000 for  the previous month.

-Closed transactions continue to be very low due to lack of inventory.  There were 23 closed transactions in May, 2012, compared to 43 closed transactions in May 2011.  There is a current pattern of multiple offers with many buyers bidding over list price in the current market.

-Inventory remains extremely low with only 37 active listings at this time.  This  number is down from 41 actives in April.

-The pattern of sales was more balanced in May with fewer flip properties closing escrow. The closed transactions for May were:

May 2012 (23)                May 2011 (43) 

REO                                            8                                   16

Short sales                               8                                  14

Traditional sales                   5                                    7

Flip properties                       2                                    6

-Some interesting properties on the market in May.  3506 Skylark was the highest priced  flip property for the month.  It was very nicely remodeled and closed with a full price contract of $285,000.  There were two high-priced short sales (3803 Walnut $379,900 and 1683 Clayton Way$415,000). These helped to boost the average sales price for the month.  3707 Vancouverturned out to be one of the best buys for May.  It was an REO which needed some work and was listed at $223,300.  Although there were plenty of showings on the property, it closed escrow at $215,000 ($8,300 below list).  Another nice buy for the purchaser was 2701 Edward Avenue.  This property sold at the list price of $180,000.  It had 3 bedrooms, 2 baths and a corner lot.  Edward Avenuehas had some nice remodels on it and is one of the better streets in the neighborhood.  Great find for the buyer!

The current market continues to present a great opportunity for serious buyers. As always, smart buyers must be financially prepared to make an offer (note: see a lender first) AND have an experienced agent who can find property and provide the aggressive representation necessary to secure the home at the best price (note: see your real estate broker).

If you have specific questions about theConcordstarter market or I can help you in any way, please email or call Terry (925-286-4619).

Conventional mortgages are the most basic types of loan products. They are the most in demand because in most cases they do not contain mortgage insurance. Although in some cases, with consideration less than 20% equity, they can a small monthly mortgage insurance amount, but a substantially lower premium than government loans, such as FHA mortgages.

FHA/VA and USDA mortgages are government loans which contain higher mortgage insurance premiums, thereby making the loans more costly than standard conventional mortgages.

Conventional mortgages are tougher to qualify for, but offer the lowest cost of debt.

Comparing a conventional mortgage to an FHA mortgage using $350,000 as our purchase price/value.

Conventional Mortgage Characteristics:

20% down equates to $70,000

Loan amount $280,000

Monthly principal and interest payment on a 30 year fixed-rate mortgage at 4.0% $1337

Monthly fire insurance $50

Monthly property taxes $365

Total house payment $1751.

FHA Mortgage Characteristics:

3.5% down equates to $12,250

Loan amount $337,750

(FHA loans have upfront mortgage insurance premium of 1% and a monthly mortgage insurance premium of 1.15%)

Financed loan amount $341,128

Monthly principal and interest payment on a 30 year fixed-rate mortgage at 4.0% $1629

Monthly fire insurance $50

Monthly property taxes $365

Total house payment $2353

As you can see, the numbers on the same purchase price, on the same interest rate looking at conventional mortgage versus an FHA mortgage, the monthly savings is $600 per month using a conventional mortgage loan.

In exchange for an extra $57,750, there is $600 per month benefit of the use of those additional funds. Simply put, if you are going to be living in the property and/or having that mortgage loan for 96.25 months which translates to eight years, go with conventional the conventional mortgage. If you might refinance the property, sell or transfer the property going with the FHA loan still makes more sense, despite the higher monthly payment.

How to get the best conventional mortgage loan in your purchase or refinance scenario.

In order to maximize the velocity of your dollars at work, try to secure conventional financing with 20% down and/or 20% equity. The whole 20% down payment can come in the form of a gift for purchases.

*Mortgage Tip: Note if you are buying a house enter putting less than 20% down and are receiving gift funds, 5% of the funds must come from your own funds as the borrower.

Be prepared to deal with tighter debt to income ratios to qualify. For primary residences most mortgage lenders want a debt to income ratio to not exceed 43%. In some cases debt to income ratios can be upwards of 45%. On investment properties and second homes, the ideal debt income ratio requirement is 43% or lower.

To secure the best interest rates on conventional mortgages, the mid-credit score of the qualifying borrower typically needs to be 740. To be in the game, a 700 mid-credit score is required, but the best possible rates are for 740 mid-scores and above. If you qualify for financing, with a sub 740 credit score, work with the interest rate that you can secure with the credit score that you presently have. Trying to increase your credit score 10 points or more higher to save .125% in rate could backfire.

Want to consider going with a conventional mortgage rather than FHA financing?

• Talk to mom and dad or the grandparents about gift money
• Pay off debt to save money on mortgage insurance
• Keep your debt in check-don’t carry high credit card balances if you can avoid it
• Get an appraisal done on the property
• Avoid taking losses on filing income tax returns
• Pay all bills on time (previous old derogatory accounts can sometimes cause hiccups securing conventional financing)

Conventional mortgages usually contain the best and lowest rates available.Get a free mortgage rate quote.Take advantage of The Trend To Conventional Mortgages.

The Wall Street Journal reports:

“From the very beginning, we’ve thought of this as eventually becoming a public company,” says Justin Chang, a principal with Colony and acting CEO of Colony American Homes, the private-equity firm’s new rental REIT. “This is a big opportunity, the beginning of an asset class.”

In its early stages, Colony’s effort, which started buying up distressed single-family homes about four months ago, looks fairly similar to the strategy pursued by Beazer and other single-family rental investors.

Colony says it has raised about $750 million so far, mainly from institutional investors, and has bought about 600 homes s in Arizona, Nevada, California and Colorado. The company expects that by the end of June, it will have bought more than 1,000 distressed homes, and it plans to expand by the end of the summer to Texas, Georgia and Florida. An IPO could happen in the next 12 to 24 months.

But it gets worse. Colony (and others, like Carrington) are only able to make their models work because they can buy bulk properties at discounts from Uncle Sam.

The other main difference for Colony is that the company has access to thousands of single-family properties that might work as rentals through its deals with the federal government. Colony has bought distressed loans valued at more than $4 billion in seven separate transactions with the Federal Deposit Insurance Corp. over the last few years. Hundreds of these loans have been distressed single-family home loans, which Colony now owns in partnership with the FDIC. Mr. Fuhrman said putting those homes into the new REIT could be an option.

This institutional real estate investor space is going to continue to get more crowded. Reuters is reporting:

Oliver Chang, head of U.S. housing strategy at Morgan Stanley, who has written more about foreclosed homes as an investment opportunity than any other Wall Street analyst, is leaving his firm to start his own buy-to-rent housing fund.

Chang announced his decision on Monday in a resignation letter he submitted to Morgan Stanley obtained by Reuters.

“Having followed this market for the past several years, I believe it represents one of the most compelling investment opportunities available across all asset classes today,” Chang wrote in a letter to his former Morgan Stanley colleagues.

Chang’s move comes at a time when many hedge funds and private equity firms are raising money to acquire foreclosed homes with the intent to rent them out for several years before selling them as the housing recovery takes hold.

As a recent example, asset management firm TCW, which specializes in fixed-income securities and oversees $128 billion in assets, recently launched the TCW Home Place Partners fund, as an opportunity for wealthy investors to invest in the “housing turnaround” by buying foreclosed homes from banks and federal government agencies.

And Beazer Homes USA, Inc in early May announced Beazer Pre-Owned Rental Homes, Inc. (BPRH)– founded by the company and includes an investor group led and arranged by affiliates of private equity ship Kohlberg Kravis Roberts & Co. The Beazer fund will acquire, refurbish and lease recently-constructed, previously owned single-family homes on a large scale in select markets in the United States.

The wave of new funds marks an indication that investor interest in foreclosed homes is widespread. Some of that interest has been spurred by an initiative by the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, to accept bids from investment groups seeking to buy an initial round of 2,500 Fannie-owned homes in cities like Atlanta, Chicago, Los Angeles and Phoenix.

All of this will lead to reduced supply of homes for local investors and first-time home buyers. To say that this will prop up prices “artificially” probably isn’t correct, but this certainly isn’t a free-market organic recovery.

To me, this stinks. Crony capitalism strikes again as a few well-connected fund managers will get rich as the rest of us are left out in the cold. Millions of homebuyers will end up paying more for homes over the next few years because of this “solution.”

On the bright side, if you already own a lower-tier home, expect home prices to continue to strengthen.

This isn’t the market I wanted because it’s not a real, organic recovery. But it is what it is. We’ve got to accept the market we have. Andrew Jeffery recently wrote:

Minyanville’s Todd Harrison is apt to say, “we must trade the tape we have rather than the tape we want.” Housing bears clinging to either past glory in predicting the market’s demise or hopes of future glory predicting another collapse would be well to remember this quip. It may be true that falling home prices could be a boon for the middle class, as prospective homeowners could get in at lower prices. Indeed, the quicker backlogged inventory clears, the quicker the market can get back to trading truly on fundamentals.

But we live in an environment where an imminent collapse in home prices is just not likely. In fact, it could now be considered a Black Swan, if it weren’t for the fact that everyone is looking for it, rendering it no longer as such.

True dat.

http://lowes.inman.com/newsletter/2012/05/24/news/188861