Higher Mortgage Rates or Changes in Prices: The Great Trade-Off
At the current statewide median price of $297,500 for October and mortgage rates in the five percent range, how will higher mortgage rates affect your monthly payment? What about price fluctuations? How will this trade-off impact buyer’s affordability?
In the last several months, the median home price has hovered just below $300,000. For the purpose of this analysis, a home price of $300,000 was used as well as a 20 percent downpayment. With those underlying assumptions the monthly payment including taxes & insurance (PITI) at the current mortgage rate of five percent equals $1,630. What will happen to the PITI if interest rates rise to 6 percent or higher? At a 6 percent mortgage rate, the monthly PITI would go up by $150 to $1,780 all else equal. If the rate were to go up to 7 percent, the PITI would shoot up by more than $300 (all else is held constant). Based on this analysis, the general rule of thumb is that a one half of a percentage point (0.50 percent) rise in the mortgage rate will increase the monthly payment by about $80. Generally, the monthly payment is much more sensitive to changes in mortgage rates than to price fluctuations.
What happens to the monthly PITI if the price rises or falls by 5 percent? Well, a similar rule of thumb applies in this case: holding everything else the same, a 5 percent rise in the price of a home will tack on about $80 to the monthly payment. Suppose instead that there is a 5 percent decline in the median price ($285,000), and a 1 percent rise in the mortgage rate to 6 percent. The monthly PITI will go up by $60 to a mortgage payment of $1,690. The effect of the decline in price was more than offset by the effect of the increase in interest rates, resulting in a higher monthly payment. The bottom line is that if we expect further fluctuations in the home prices, fluctuations in mortgage rates can be a deal breaker for some households. The trick is to get the right house at the right price with the right mortgage rate. Along with the recently extended and EXPANDED home buyer tax credit of up to $8,000 for qualifying first-time buyers and up to $6,500 for qualifying existing home owners, it is an opportune time to buy a home. Please contact me today for more information.
* Courtesy of the California Association of Realtors / Market Snapshot
Affordability at Historic Highs in 2009
By: Sara Sutachan, Senior Research Analyst & Oscar Wei, Senior Research Analyst
Seasonally adjusted and annualized sales in the third quarter of 2009 increased to 537,690 units, up 1.7 percent from the previous quarter sales figure of 528,580 homes and up 7.7 percent from the year ago figure of 499,110 units. The size of the year-to-year percentage gains has been gradually diminishing since the beginning of this year, as sales level of 2008 continued to recover in the second half of the year. Although sales gains continue to be driven in part by large shares of deeply-discounted distressed sales in the low end of the market, the high end market has been improving. In fact, sales of million dollar homes in the last month of the quarter experienced their first year-to-year percent increase since the mid of 2007.
Even as home prices in California began to show some signs of stabilizing since hitting a recent quarterly bottom in the first quarter of 2009 at $247,800, the median price at $290,760 in the third quarter was still 15 percent below that of a year earlier. However, this was a far cry from the year-over-year price declines in the 30-40 percent range in the five consecutive quarters prior to the current quarter.
In the third quarter of 2009, lower prices across the state had sent affordability in the state to record high levels. C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI), which measures the share of all households that can afford the entry-level home, hit 64 percent in California. That meant that nearly two-thirds (64 percent) of California’s households could afford a home at an entry-level price of $247,150 (defined as 85 percent of the median home price). While this affordability index only goes back to 2000, other affordability measures indicate that affordability has been at a historically high level in 2009 even compared to the 1980s and 1990s. In fact, the FTB-HAI reached a historic high in the first quarter of 2009 at 69. In other words, during the first three months of the year close to seven in 10 households could afford the entry-level home priced at $210,630. The index is calculated based on an entry-level home price, a 10 percent downpayment, an ARM effective composite rate, and a 40 percent debt-qualifying ratio.
The monthly mortgage payment including interest, taxes, and insurance (PITI) in the third quarter—based on a 10 percent downpayment and the prevailing mortgage rate of 4.79 percent—added up to $1,450. That is $340 less than the monthly PITI of $1,790 a year ago, when the entry-level home was priced at $290,490 and the mortgage rate was 5.30 percent. The FTB-HAI was nine points higher than the third quarter of 2008 when only 55 percent of the households were able to afford a home.
With lower prices and relatively low mortgage rates, affordability has improved dramatically in 2009, creating great opportunities for well-qualified buyers with a steady job and stable income situation. In addition, the extension of the Homebuyer Tax Credit will also make buying a home more affordable to home buyers in the coming months. However, constraints on inventory as well as the tighter underwriting standards and qualifying thresholds remain to be a huge barrier today’s housing market.
* This article is courtesy of the California Association of Realtors website.
California Real Estate Fast Facts
Fast Facts
- Calif. median home price – October 09: $297,500 (Source: C.A.R.)
- Calif. highest median home price by C.A.R. region October 09: Santa Barbara So. Coast $970,000 (Source: C.A.R.)
- Calif. lowest median home price by C.A.R. region October 09: High Desert $118,580 (Source: C.A.R.)
- Calif. First-time Buyer Affordability Index – Third Quarter 2009: 64 percent (Source: C.A.R.)
- Mortgage rates – week ending 11/25/09 30-yr. fixed: 4.78% Fees/points: 0.7% 15-yr. fixed: 4.29% Fees/points: 0.6% 1-yr. adjustable: 4.35% Fees/points: 0.7% (Source: Freddie Mac)
I can show you any home for sale in Big Bear.
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Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
5 New Bank Owned REO Homes for Sale in Big Bear 11/29/2009
As of this morning, we have 54 bank owned homes (REO’s) on the market, that’s only 7.40% of the 729 active listings. Please call or email if you want to purchase a bank owned home in Big Bear,
I will get you the best deal.
I can show you any home for sale in Big Bear.
Search the Big Bear MLS (Multiple Listing Service)
Search the Southern California MLS (Multiple Listing Service)
Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
Market Condition Report for the Big Bear Area 11/15/2009
Market Condition Report provided by "Chicago Title"
Please call me if you would like to discuss the Real Estate Market here in the Big Bear Area.
I can show you any home for sale in Big Bear.
Search the Big Bear MLS (Multiple Listing Service)
Search the Southern California MLS (Multiple Listing Service)
Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
8 New Bank Owned REO Homes Avaialble in Big Bear 11/14/2009
As of this morning, we have 53 bank owned homes (REO’s) on the market, that’s only 7.14% of the 742 active listings. Please call or email if you want to purchase a bank owned home in Big Bear,
I will get you the best deal.
I can show you any home for sale in Big Bear.
Search the Big Bear MLS (Multiple Listing Service)
Search the Southern California MLS (Multiple Listing Service)
Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
11 Homes Sold this Week in Big Bear 11/1/09 – 11/7/09
Click Here to see the details for these homes
I can show you any home for sale in Big Bear.
Search the Big Bear MLS (Multiple Listing Service)
Search the Southern California MLS (Multiple Listing Service)
Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
NOD’s and Trustees Deeds Filed in California 2005 – 2009
By: Robert Kleinhenz, Deputy Chief Economist
The median price in California continued to increase in September, driven by lean inventory levels, while home sales remained on track with expectations for the month. The median price of a detached existing single family home was $296,090 in September, up 1.1 percent from the August median of $292,960, but down 7.3 percent from the September 2008 median price of $319,310. Barring a sudden decline in home values over the next few months, the statewide median price will register year-over-year gains by year end, although it will still be well below the mid-decade peak.
Sales in California hit 530,520 homes in September, up 0.6 percent from August sales of 527,120 homes, and up 2.1 percent from September 2008 sales of 519,530 homes. With sales expected to stay in the low- to mid-500,000 range through the rest of the year, annual sales for 2009 will finish about 20 percent higher than the 2008 annual sales figure of 439,830 homes.
Given recent price gains and sales levels, as well as lean inventory numbers that have averaged just over 4 months for the past 3 months, one should conclude that the California housing market is edging back toward its normal state. Indeed, these numbers are welcome developments for a housing market that was among the hardest hit in the country. But a look behind the topline numbers suggests that current conditions have resulted from a heavy dose of policy intervention and from efforts by lenders – who currently dominate the supply side of the market – to manage the flow of troubled mortgages and properties at all stages of the ‘foreclosure pipeline’ from delinquencies to REOs.
The number of defaults in California escalated rapidly in the last couple of years, with 111,700 defaults in the third quarter of this year and a record high of 135,400 defaults in the first quarter of 2009. Normally, the trend in foreclosures corresponds approximately to the trend in defaults with a one to two quarter lag so the number of foreclosures should be on the rise as well. Instead, the level of foreclosures has been steady at roughly 50,000 per quarter since the last quarter of 2008. This seems to be the result from the combination of policy intervention, including foreclosure moratoria last year and early this year as well as the federal loan modification program, and efforts by lenders to deal problem loans on a case-by-case basis. As a result, market supply has held steady at levels that have stabilized the median price at the state level and in most California markets. In a number of markets, there have been some modest price gains compared to earlier in the year.
With current government policies and lender practices in place, home prices in much of the state should hold steady, aside from normal seasonal fluctuations in prices between now and next spring. In the end, price stability is necessary for discretionary sellers, as opposed to distressed sellers, to return to the market and drive the supply side of the market to more normal conditions.
6 New Bank Owned REO Homes Avaiable in Big Bear 11/1/2009
As of this morning, we have 49 bank owned homes (REO’s) on the market, that’s only 6.51% of the 752 active listings. Please call or email if you want to purchase a bank owned home in Big Bear,
I will get you the best deal.
I can show you any home for sale in Big Bear.
Search the Big Bear MLS (Multiple Listing Service)
Search the Southern California MLS (Multiple Listing Service)
Steve Hirschler
Associate, The Tim Wood Group
Coldwell Banker Mountain Gallery
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
Fax 909 866-3531
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Big Bear Skinny- Big Bear Foreclosure Numbers – August 2009 September 25, 2009Foreclosure numbers in Big Bear slowed a bit in August though they still remain near record highs. The foreclosure filings in August 2009 (219) were down 10% from July 2009 (244), but were still up 27% from August 2008 (173). Foreclosure filings are made up of Notices of Default, a recorded document that starts the foreclosure process, [...]Tyler Wood
- Is The Big Bear Real Estate Market Headed Toward The Perfect Storm? September 8, 2009I believe it could be. The current state of the real estate market in Big Bear reminds me of a scene in the movie, “The Perfect Storm”. Near the end of the movie, after the fishing boat and its crew battle huge waves and horrible weather, things clear up. They think they made it through. But, the [...]Tyler Wood
- Big Bear Home Sales – August 2009 September 6, 2009Big Bear Home Sales Big Bear home sales dropped in August from the 2-year high we saw in July. Home sales fell 14% when compared to the July numbers (75 v. 87), but were up 25% when compared to August 2008 (75 v. 60). Even with the drop in sales month over month, sales are [...]Tyler Wood
- Paying Cash In Big Bear? Save 1%! August 31, 2009Yeap, that’s it. The impression with most buyers is that because they are paying cash, they should get a big discount off of the asking price. That is just not the case. (Click here to see embedded video) Cash buyers in Big Bear are only saving 1% for paying cash as compared to those buyers that are getting [...]Tyler Wood
- Buying Or Selling A Home In Big Bear? 3 Critical Contingencies To Keep In Mind. August 23, 2009The California Association of Realtors (C.A.R.) residential purchase contract (RPA) has three standard contingencies built into the contract – Loan Contingency, Appraisal and Buyer’s Inspections. Most of the problems that come up in a real estate transaction fall under these 3 contingencies. If the contract is left unchanged, the period of these […]Steve Hirschler
- Big Bear Foreclosure Numbers – July 2009 August 23, 2009Foreclosure numbers in Big Bear are still on the rise. The foreclosure filings in July 2009 were up 16% from June 2009, and 81% from July 2008. Keep in mind, foreclosure filings are made up of Notices of Default, a recorded document that starts the foreclosure process, Notices of Sale, a recorded document that sets the [...]Tyler Wood
- Big Bear Bank Owned Fixers – Some Pointers August 21, 2009With prices for real estate in Big Bear at an all time low, many folks are seriously considering buying a bank owned fixer. On the surface, it seems like a really great idea, and if done correctly, it can be. However, like most things, it is a little more complex than it appears to be. There are [...]Izzy Barden
- Big Bear Home Sales July 2009 August 9, 2009Big Bear Home Sales Big Bear home sales hit a two year high in July 2009. Home sales rose 9% when compared to the June numbers (84 v. 77), and 35% when compared to June 2008 (84 v. 62). This is great news for the Big Bear real estate market as it is the second strong month [...]Tyler Wood
- Big Bear Foreclosure Numbers – June 2009 August 6, 2009Sorry for being a little late with these. The number of Big Bear properties that went back to the bank (future bank owned listings) in June 2009 was an all time high at 52, 8 more than the previous high of 44 set in May. In total, the foreclosure filings for the month of June 2009 were [...]Tyler Wood
- Actions Speak Louder Than Words In Real Estate August 4, 2009Click here to see the embedded video. I see a lot of sellers in Big Bear saying they are motivated to sell, yet they continue to ignore the market reality and overprice their home. “Seller motivated, bring all offers” is pretty commonplace in the agent comments of the Big Bear MLS or other real estate [...]Tyler Wood
- Big Bear Foreclosure Numbers – August 2009 September 25, 2009
- Big Bear Lakefront Homes Information
- Back on Market: 651 Cove Drive Falls Out of Escrow December 1, 2009 Mike Wochner
- Pending Sale: 39364 Aurora, Big Bear Lake, CA 92315 November 29, 2009The home at 39364 Aurora just went into escrow. Nice property (click here to see multiple photos and a property description). Major reno a year or so ago with panoramic views and deep water. I thought this was the best value for the money, next to 39997 North Shore Drive but it sits on the [...]Mike Wochner
- Got Snow? Big Bear Lake Gets it’s First Decent Snowfall this Winter November 28, 2009Get your snow shovels out….our first decent snow fall occurred this morning as we got 4-5 inches of snow. None of the roads have been plowed yet so be extra careful driving up the mountain and make sure you bring snow chains for your car. RELATED ARTICLES: No Business Like Snow Business (Big Bear Grizzly 11/25/2009) Updated Weather [...]Mike Wochner
- Price Reduced: 39997 North Shore drops Price Again November 24, 2009The owners of 39997 North Shore Drive reduced the price of their home again….this time down to $1,750,000. I wrote about this property back on October 1st (click here to view multiple photos and to read a property description). I like it. It’s rustic, it has plenty of square footage to sleep multiple families, and [...]Mike Wochner
- Improving the Ecosystem around Big Bear Lake November 19, 2009The article below, written by Kathy Portie of the Big Bear Grizzly, is a good example of what our local MWD does to help keep Big Bear Lake safe. Yes they oversee the dock situation and make sure everyone is in compliance with the rules and regulations…..but they also ensure that the quality of our [...]Mike Wochner
- Recent Sale: 39427 Silver Pine Court November 12, 200939427 Silver Pine Court closed escrow yesterday. This was a short sale and had multiple offers on it. It previously sold on 2/6/2006 for $1,700,000. The seller put it back on the market a year later for $2,299,000 and has chased down the market ever since (it was on the market for 695 [...]Mike Wochner
- Big Bear Lake is Off Limits During the Wintertime November 10, 2009Saw this on the Jay Leno Show last night. This is a painful but funny reminder that Big Bear Lake partially freezes over during the Winter. This was a frozen lake over in Europe not Big Bear Lake but hopefully you get the picture. Big Bear Lake is off-limits during the Winter season for [...]Mike Wochner
- Two Big Bear Lakefront Price Reductions This Week November 10, 2009Two price reductions to report. Maybe someone read “To Reduce or Not Reduce” regarding price changes last week? That, or it’s just that time of year when sellers either reduce their price or hold firm and hope for the best. I’m guessing many sellers have given up on the thought of selling their lakefront property [...]Mike Wochner
- Pending Sale: 39645 Lake Drive, Big Bear Lake November 6, 200939645 Lake Drive went into escrow today. I was planning on showing it tomorrow….guess we’ll cross it off the list! It needs a little bit of updating but I think it has the potential to be a good rental. It’s close to Holloway’s Marina, it has a lot of square footage (3570 square feet with [...]Mike Wochner
- Pending Sale: 651 Cove Drive, Big Bear Lake, CA 92315 November 3, 2009651 Cove Drive went into escrow today. This was IMO the best property in the $1.5m range. It had deep water, was sold partially furnished and was priced well below what the sellers paid for the property back in March of 2007 (click on the links below to view detailed property info and to view [...]Mike Wochner
- Big Bear REO Blog
- REO Urban Legends November 13, 2009 bigbearreo
- Big Bear Short Sale Update October 27, 2009 bigbearreo
- Big Bear Bank Owned Listing October 22, 2009 bigbearreo
- Big Bear Lake Lakefront Sale October 20, 2009 bigbearreo
- Bank Owned Furnishings October 19, 2009 bigbearreo
- Big Bear Lake Bank Owned Info September 22, 2009 bigbearreo
- Short Sale? Be Careful. August 6, 2009 bigbearreo
- Big Bear Bank Owned Condo's For Winter and Summer. June 29, 2009 bigbearreo
- Big Bear Bank Owned Properties With Garages June 8, 2009 bigbearreo
- Big Bear Lakefront Sale June 6, 2009 bigbearreo
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