Ed's Blog

I wanted to give you several observations on how the mortgage market is behaving lately.

1) Mortgage Markets Are Still Unsettled. Despite strong actions from the Fed, mortgage market rates for anything except traditional conforming loans ($417,000 and under for SFR’s) remain sticky on the high side. In Wall Street jargon, “risk is being repriced.” Anything other than traditional conforming loans is priced from 1%-2% higher than it has been historically. Ouch!

2) Underwriting Is Getting Tighter. Sounds like déjà vu all over again as Yogi Berra used to say. Most programs are more restricted than even a week or two ago. Some loans are gone altogether. For example, Fannie Mae and Freddie Mac have discontinued conforming “stated income stated asset” loans effective the end of this month.

3) New Conforming Jumbo Update. We have been getting pricing and guidelines on these over the past 10 days or so. The good news is that the rates on these are a little better than jumbo rates have been. But the underwriting is strict. Full doc only for instance.

4) Deals Are Still Happening! Despite some of the problems outlined above, deals are still happening! Don’t be discouraged by the negative news you read. Underwriting may be more restrictive, but there is still a lot of money to lend out there. And the people who are buying are happy with the deals they’re getting. In some markets that means incredible prices. In other markets that means less competition. But the feeling is the same- they’re happy to be buying!

Another day, another confusing housing report. Last week the National Association of REALTORS® released a report announcing that existing home sales rose last month for the first time since July 2007. Of course, this good news didn’t make headlines.

This report was buried deep within other reports proclaiming that the drop in home prices has reached an epic level. How are home buyers, homeowners or sellers to understand the implications of these reports, when they are about as easy to understand as quantum physics? That is, they can completely set your mind spinning!

That’s frankly why I take to this blog regularly. As a 25+ year veteran in the mortgage and real estate industry, I strive to minimize the hype by providing objective updates on market conditions.

Whether the housing reports are good (home sales were up last month), bad (see my last blog), or lie somewhere in between, it is my goal to report all of the news, to help you decide for yourself if a home or investment property purchase or refinance is right for you.

While I do try to blog frequently, sometimes things are happening so fast, that I don’t have time to report every little change. But, please remember that the entire team at Smith Craine is constantly studying all of the changes in the market, and watching the rates with hawk-eyes.

So, if there is something you have a question about that isn’t covered in my blog, I encourage you to give us a call at (415) 406-2330.

Until next time…

Hold on to your hats, because things are changing quickly in the mortgage market, and it all adds up to good news!

It hasn’t even been 24 hours since I blogged about the fact that fixed rate loans have risen a bit in the last week. No sooner had that blog posted than word was released that the FED has been pumping liquidity into the bond market. Rates are already coming down!

That coupled with the fact that HUD released the new conforming loan limits a full week of schedule is setting the stage for low rates on conforming loans to become available in no time. FHA also followed suit and matched the new conforming limits, opening up even more possibilities for buyers from coast to coast.

But, there’s even more great news! Smith Craine has already begun receiving pricing and guidelines from lenders on these new loans. (Incidentally, these new loans -which are above $417K, but below the limit for a particular County- are being referred to as “Jumbo Conforming Loans.”) No one in the mortgage or real estate industries expected the guidelines or pricing to be released this soon. In fact, most of us were certain it would take at least a few months. Many lenders are way ahead of schedule, and the others will almost assuredly be ready sooner than expected as well!

The good news keeps coming though! The rates for these new “Jumbo Conforming Loans” are just .5% over traditional conforming loans, making them.5% less than Jumbo Loans. Now, of course I’d love to see them even lower, but I concede this seems pretty fair.

I’ve said it many times, but it bears repeating. If you are even considering buying a home, get started on compiling your loan application. We also recommend that you contact a trusted REALTOR® and have them start looking for a home for you.

If you’re a homeowner, start getting your paperwork together to refinance into a low fixed rate loan. We’ve got everything here for you to make that process a piece of cake!

For information on the new Conforming and FHA limits in your area, give us a call at 415-406-3220. We’re here to help!

The FED has made some monumental interest rate cuts over the past few months. They’ve cut the FED Funds Rate 5 times, the Discount Rate 6 times, and there is speculation that the rates will be cut once again in just a matter of days. So why then, have interest rates on 30-year mortgages increased over the past month?

Unbeknownst to many, when the FED cuts rates, it sometimes has the opposite effect on the Bond market which drives mortgage rates. So, while rates for consumer debt have declined (credit card interest rates, car payments, etc.) fixed mortgage rates have risen over the last month.

I don’t think this is anything to worry about, though since this is not unusual and often fixed rates settle down again when this happens.

There is still great news, in spite of the spike in interest rates. The conforming loan limits were published last week, and the new conforming limits rose from $417K to

$729,500 in many counties in California (including San Francisco.) Areas that didn’t rise to the maximum limit still realized marked increases with some areas raising the limits to $580K, (such as Sacramento County.) This early publication of the new loan limits is great news, as it means that lenders will be ready to begin funding these loans in a matter of weeks.

Other good news? FHA increased its limits to match those of the conforming loan limits, and is offering incredible buyer incentives, including 3% down purchases on homes.

With home prices remaining low, an incredible selection of homes to purchase, the new higher loan limits, and the opportunities to buy and invest currently; don’t let the fluctuating rates deter you from purchasing a home. In our current economic environment, I believe rates will drop again before we know it. And in the meantime, new loan limits will still be in place through the end of 2008.

For information on the new conforming and FHA limits in your area, or to talk about current interest rates, give us a call at 415-406-3220 or email me at ecraine@smithcraine.com. I’ll be glad to explain all of the exciting opportunities presented today!

Many clients have come to me recently asking if it is a good time to buy a home. The answer is “YES!” In fact, often the best time to buy a property is when the media has deemed the real estate market “doomed,” “in a downward cycle” or “weak.” But it takes courage and preparation!

The truth is that when everyone is talking about how bad the housing market is, savvy investors are scooping up properties in droves. The reason? Real Estate has always been a sound long term financial investment. As land and properties are limited commodities, by purchasing a property now when prices are so low, you will likely earn a great profit in the long run.

However, the key to success in real estate, and I’ve said over and over again, is to be committed to investing for the long term. Home flipping is not going to be your best strategy. But purchasing a property with the intention to own it for at least five years is a brilliant strategy in today’s market.

Just last week, my advice to potential buyers was echoed in Time Magazine by the respected and famous Peter Lynch, one of the top money managers in the country. Lynch boldly declared that smart investors ignore the headlines. That is, when the headlines are saying what a dismal state the housing market is in, that’s precisely where there is the most money to be made by investors or even first time home buyers. The article seconds that notion by quoting John D. Rockefeller, who encouraged buyers to buy during so-called down markets.

In other articles, Sam Zell and Donald Trump, two of the country’s most famous and successful real estate investors, were quoted as saying that residential real estate is a good buy because of the lower prices we’re seeing.

Consider this: if you’re toying with purchasing a home right now, remember that the abundance of bad news actually presents amazing opportunities for those who seize the day. You will be buying at what will likely be considered bargain prices one day.