Declining Values | California Current

According to May and June statistics, California’s real estate market is experiencing quite a shift in home sales and mortgage activity.

In June 2008, it is estimated that about 42% of real estate transactions involved a foreclosure resale. Compared to June of last year, the foreclosure transactions only accounted for about 7% of the market. In addition, the financing and mortgage market are seeing ARMs at a six year low along with stated incomes and stated assets loans.

Market Favors Purchase Transactions over Refinances

Here in California, mortgage brokers are specifically adapting to the way borrowers are financed. With a wholesale lender exiting the business seemingly almost every week, the options and avenues are shrinking for brokers to finance homeowners. As far as mortgage activity, the financing of real estate has slid more towards purchases instead of refinances. Homeowners will often find that the declining values are hurting their loan ratios or that their current loan is outside of conforming and jumbo limits.

As a result, refinances have taken the back seat to purchases as the government is supporting this avenue a bit stronger. With FHA as a prime example, the government is supporting the purchase market as this will help to stimulate the housing economy. Refinances are still available, but those in jeopardy are finding better luck in loan modification negotiations with their lender. One thing residents of California can count on is a consistent trend towards tighter guidelines, dropping values, and even more foreclosures.

Not All Bad News

However, don’t take this all as bad news and declare doomsday - hardly. In fact, brokers who can adapt are welcoming this change in market pace. First of all, buyers can now search for deeper discounts as values continue to drop and short sales become more available. Financing is tougher, but it is still available for those who can actually qualify - this includes, good credit and a strong employment history that is verifiable (W-2’s, tax statements, and pay stubs). Long gone are the days of stated income and liar loans, but this is something we should welcome. It is part of the housing bubble correction and we should welcome the fact we are returning to a market where homeowners actually afford their homes. And while home values are predicted to decline still, you should definitely keep your eyes out and stay on your toes as this market is proving to be a strong market for keen buyers and investors alike.

Source: Dqnews