Holiday Update

November 23, 2011 in Uncategorized

The Best Places to Celebrate the Holidays

The holiday season is fast approaching, and that brings many opportunities to give back to our community enjoying our special corner of the world.

Thanksgiving provides an occasion to reflect on the virtue of gratitude. It’s a chance to again thank you for your continued feedback, ideas, and referrals – it lights up my life. But gratitude in action is generosity. Material gifts to the less fortunate are always welcome, so if you are looking for a way to share your bounty with others during these holidays, please consider a donation to Toys for Tots and One Warm Coat.

As for Christmas, Hanukkah and Kwanzaa, the winter holidays all share imagery of light: its coming, its waning, its return, and its endurance. The Bay Area offers several festivals of lights. Consider these to entertain the young and not-so-young:

• In Palo Alto, Christmas Tree Lane
• In Fremont, Niles Merchants’ Association’s 11th Annual Festival of Lights and Parade (Nov. 25)

By the way, a greener, more sustainable way to light up your holidays is to opt for LED lights. While a bit more expensive, they burn longer, are more durable, consume about 15% of the energy used by incandescent bulbs, have more intense colors, and create less risk of fire due to their cooler temperatures.
Let the holidays begin!

What Does the New Refinance Program Mean To You?

With 30-year mortgage rates at an all-time low, refinancing your home can save you hundreds each month. But why aren’t more homeowners taking advantage? The answer lies in your LTV (loan-to-value ratio). Your LTV can be calculated very simply by dividing your total loan amount by the market value of your home.

For example: a $400,000 loan on a home with a market value of $500,000 would yield a LTV ratio of 80% (400,000/500,000 = .80)
Banks generally require a LTV ratio of 80-90% or lower to consider refinancing. If the value of your home has decreased, your ratio will skyrocket.

For example: the same loan of $400,000 and a reduced market value of $420,000 yields a LTV ratio of 95%.

The Obama administration previously increased the LTV restriction to 125% through the Home Affordable Refinance Project (HARP) but that limit still presented challenges for many homeowners who have seen a significant drop in their homes’ value. The most recent proposal, sometimes called HARP 2.0, will allow borrowers to refinance regardless of their LTV; it will also streamline the appraisal and underwriting process (assuming your loan is owned by a government agency). Click these links to see if your mortgage is owned by Fannie Mae or Freddie Mac and whether you could qualify for a HARP 2.0 refinance.

While banks will continue to operate within their own individual guidelines, lifting this restriction will most certainly provide many underwater borrowers the opportunity to reduce their mortgage payments and remain in their home.

Feel free to contact me if you would like more information regarding the market value of your home or the recent changes to refinance requirements.

Monthly Market Snapshot

While the Bay Area housing market has had its ups and downs much of this year, a couple of segments of the market remained resilient through much of 2011. In previous columns, I’ve talked about the strong rebound in the luxury market from Silicon Valley up through Marin. But one other sector has also played an important role in keeping the overall real estate market going: the investment segment.

According to DataQuick, the La Jolla-based real estate information service, absentee buyers – real estate investors for the most part – bought one out of every five single-family homes and condos in August. Buyers paying cash accounted for more than a quarter of sales. And short sales – those transactions where a home sells for less than the homeowner owes on the mortgage – added up to another 20 percent of sales.

However, real estate investors – many of whom are paying all cash for entry-level properties – are making it hard for some first-time buyers and others to compete for those homes. Given the choice, it’s understandable that a seller would opt for a cash offer that’s likely to close quickly rather than take their chance that a buyer can secure mortgage financing.

Realtors who work with these buyers say that many are first-time investors who like the long-term potential of investing in real estate over other investment vehicles. With prices and interest rates this low, they reason, there may never be a better time to jump in.

As we head toward the end of 2011 and the new year, I suspect more “average” buyers will come to the same conclusion.

Mortgage Rates

The deteriorating financial situation in the euro-zone threatens to produce a major world-wide economic crisis. As long as the threat of a euro-zone collapse prevails – dollar denominated assets will be broadly favored as a place to safely park capital – and that is good news for the prospects of steady to perhaps fractionally lower mortgage interest rates here in the States.

The latest chapters in the unfolding euro-zone debt saga include the prospects for new government formations and promises by global financers that additional rescue funds will soon be forthcoming. The nearly minute-to-minute influence of financial headlines from Europe is almost completely overshadowing U.S. economic data. Mortgage investors barely noticed last week’s data from the Labor Department indicating initial claims for government unemployment benefits posted a larger than expected decline. It was the second straight week of improvement in the labor market – certainly nothing suggesting a new trend is in place – but it is a step in the right direction.