Down Payments Declining in Changing Mortgage Scene

Good news for homebuyers: Average down payments are declining, a sign that lenders are serious about easing  home-loan requirements.

Many buyers assume they need to put down at least 20 percent of the purchase price in order to qualify for a loan, but the average down payment for a 30-year, fixed-rate mortgage in the first quarter of 2014 was 15.78 percent, according to data compiled by LendingTree. That’s down from 16.01 percent in the fourth quarter of 2013.

Also, average credit scores for LendingTree customers dropped 6 percent year over year, suggesting that lenders are more willing to consider a wider pool of borrowers.

“As the housing market improves and refinance activity declines, lenders are adapting their guidelines to improve credit accessibility for borrowers,” Doug Lebda, LendingTree founder and CEO, said in a statement.

“Relaxed lending guidelines translates to a larger pool of qualified homebuyers that could boost the housing recovery,” Lebda said. “While lenders still need proof that a borrower has the financial ability to repay the loan, lenders have started to accept lower down payments and credit scores from potential borrowers.”

Average down payments by state in the first quarter ranged from 12.31 percent in North Dakota to 19.36 percent in New Jersey. Unsurprisingly, California residents dropped the third largest down payments in the U.S. — 18.21 percent — slightly lower than buyers in New York, who put down an average of 18.54 percent.

The LendingTree data supports another recent study that found lenders have lowered borrowers’ minimum FICO credit scores and debt-to-income ratios over the past year to attract more business.

First-time buyers, who generally face the closest scrutiny from lenders, would do well to talk with a real estate professional for help finding a lender and prequalifying for a home loan before entering negotiations with a seller.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success. 

(Image: Flickr/Lucas Stanley)

Bay Area Median Sales Price at Highest Level in More Than Six Years

A lack of inventory pushed the March Bay Area median sales price to its highest level since 2007, but the shortage also held back the number of properties sold.

The median sales price across the nine-county region jumped 23.2 percent from a year earlier to $579,000, according to figures released this week by the research firm DataQuick. That’s the highest since December 2007, when the median was $587,500.

The numbers show median sales prices have now climbed to three-quarters of their precrisis zenith.

The Bay Area median peaked at $665,000 in the summer of 2007, then dropped to a low of $290,000 in March 2009 amid the nationwide recession.

Since then, the median has increased on a year-over-year basis in each of the last 24 months.

Every Bay Area county posted double-digit year-over-year median price increases in March, ranging from 13.5 percent in San Mateo County to 30.4 percent in Solano County. Across the nine counties, all-cash deals made up 25 percent of all transactions, down 3 percent from February and 6 percent from last March.

Like all-cash purchases, Bay Area sales volume declined year over year, falling by 12.9 percent. The 6,308 homes sold make last month the slowest March since 2008.

Solano County had the biggest drop-off in transactions, 28.3 percent, while Napa County posted the smallest decline at 8.5 percent. In San Francisco sales volume expanded by 8.2 percent, the only Bay Area county where buyers purchased more homes than they did the previous March.

So just how tight is inventory in the Bay Area as the spring buying season heats up? According to MLS data as of April 16, the months’ supply of inventory for single-family homes declined year over year in six of Pacific Union’s eight Bay Area regions in March. Generally speaking, an MSI between 4.0 and 6.0 is considered a balanced market, with numbers above 6.0 favoring buyers and those below 4.0 slanted toward sellers.

The chart below breaks down the yearly MSI change in each of our Bay Area regions for single-family homes:



DataQuick closed its report by noting that our region’s housing market continues to recover, pointing to factors such as a yearly drop in foreclosures, a low rate of multiple mortgages, and stable down-payment amounts.



(Image: Flickr/Woodleywonderworks)

Real Estate Roundup: California Posts Highest Home Price Gains in Country

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

HOME PRICES INCREASE FOR 24TH CONSECUTIVE MONTH
Home prices across the country increased in February by 12.2 percent, the 24th straight month of year-over-year appreciation, according to CoreLogic’s most recent Home Price Index Report.

Breakout statistics included in the report show that California leads the country in price gains, both including and excluding distressed sales. Counting distressed sales, Golden State prices are up 19.8 percent from February 2013; without them, gains register 15.9 percent.
Even with that kind of market lift, home prices in the country and the state still have quite a ways to go before they return to peak levels as measured by the index.
Prices in the U.S. are still 16.9 percent below their April 2006 apex, according to CoreLogic. California prices, which topped out the following month, are currently 19.8 percent less than their highs.
Dr. Mark Fleming, CoreLogic chief economist, said in a statement that the company expects home prices to level off in the next year as more owners regain equity and put their homes on the market, easing supply constraints.

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OVERSEAS HOMEBUYERS FAVOR U.S. BY HUGE MARGIN
International homebuyers overwhelmingly prefer the U.S. over any other country, California Association of Realtors data shows.
The association’s survey found that 85 percent of overseas buyers considered only the U.S. as a potential place to buy a home. Respondents’ cited our country’s favorable location and climate and a desire to live closer to family and friends as the main reasons for their decision.
In California, 69 percent of international buyers paid all cash, and more than one-third of those listed Chinese as their primary language. International buyers showed near equal preferences for purchasing primary homes (32 percent) as they did for nabbing investment properties (33 percent).

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HEALDSBURG SECOND ON LIST OF AMERICA’S BEST SMALL TOWNS
The rest of the world now knows what we in the Bay Area always have: Sonoma County’s Healdsburg is one of the greatest small towns in the U.S.
Smithsonian.com recently ranked Healdsburg No. 2 on its list of America’s 20 best small towns. The organization not only lauds Healdsburg for its wineries and farm-to-table cuisine but also touches on the city’s museums, history, and stunning scenery.
But if you want to live in Healdsburg, it’ll cost you. Home prices in the city were up an astounding 83 percent from the previous year, according to MLS data collected on April 3. In March the median price for a single-family home in Healdsburg was $870,000, the highest level recorded in two years.

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PRIME BAYSIDE MARIN COUNTY ACREAGE SOLD TO DEVELOPER
A San Rafael-based real estate development firm has purchased 101 acres in southern Marin County and plans to build both apartments and a school on the site.
SFGate reports that North Coast Land Holdings acquired the land — one of the largest undeveloped plots in the Bay Area — from Golden Gate Baptist Theological Seminary for an undisclosed sum. The land is located in the unincorporated community of Strawberry, parts of which jut out into Richardson Bay between Sausalito and Tiburon.
Although Marin County officials will review any buildings proposed for the land, the developer hopes to construct about 100 rental units there. However, the article also notes that residents of Strawberry – where homes command more than $1 million – have fought development plans in the past.
(Photo: Flickr/Christina Welch)

Bay Area Home Prices Highest in U.S. in Fourth Quarter

A pair of recent reports – one from the National Association of Realtors and another from a Southern California real estate consulting firm – recount an exceptional 2013 in Bay Area residential real estate and deliver an optimistic forecast for the coming year.
According to NAR’s recent fourth-quarter report, two Bay Area metropolitan areas led the country in terms of median sales price as 2013 drew to a close. The San Jose area had the highest median single-family home sales price in the U.S., at $775,000, while San Francisco ranked No. 2 at $682,400. Two of the other top five priciest housing markets were also in California.
San Jose and San Francisco both posted double-digit year-over-year price hikes, along with 40 other U.S. markets of the 164 included in the report. Prices grew by 15.0 percent in San Francisco and 13.1 percent in San Jose.
NAR chief economist Lawrence Yun said that slim inventory was responsible for the double-digit appreciation in many markets, adding that new home construction could help alleviate rising prices.
A short supply of available homes and vigorous price growth across Northern California also took center stage in the January 2014 Regional Analysis and Forecast published by John Burns Real Estate Consulting.
The report divides the country into 10 regions and ranks each based on a combination of five factors: job growth, resale transaction volume, resale supply, supply of unsold homes, and year-over-year price gains. As of January, the report puts Northern California as the No. 1 real estate market in America, up one position from the previous month.
According to the company, Northern California leads the country in smallest months’ supply of inventory for both resale and unsold homes: 1.9 and 0.6, respectively. Constrained inventory appears to have heavily affected home resale activity in the East Bay market, which the report says had the smallest resale volume in the country for the trailing twelve months ending November 2013.
Northern California was one of just three markets that the report believes is heading up, noting healthy price appreciation and employment growth as particular strengths.
Our overall region was tied for first place when measuring year-over-year home price growth, which the Burns report places at 20 percent. Additionally, the company ranks two Bay Area subregions within the top 10 in the country for year-over-year job growth: San Jose and San Francisco each added nearly 27,000 jobs over the past year, gains of 3.0 and 2.7 percent respectively.