May 2010

Beware: Lenders will add an extra step before close of escrow.

You are in escrow? Don’t apply for any new credit!

You have been seaching for months to find your deam home in a decent location and you think you have it in the bag, having outbid multiple offers along the way and you are now safely in escrow. Everything is going great, you are a few weeks away from closing and you are already shopping around for all of the home furnishings you will need to buy but, hold on! According to the Los Angeles Times, lenders will now order a new credit report just before the close of escrow, effective beginning of June.

Why? It seems that Fannie Mae wants to crack down on buyers who max out their the credit card while about to buy a property. If you purchase big ticket items on credit during your escrow period, understand that the purchases could jeopardize your lending ratio and throw off your application. And we all know how tight banks are today with their money.

So, if you are tempted by a new car to commute between your work and your new house, think twice. Be patient and wait that escrow has closed. Then you can go and have fun enjoying your place.

How Affordable is Los Angeles Now?

Buying a home for sale in the Los Angeles area is getting cheaper, but it can still be pricey proposition. A recent article published by the California Association of Realtors shows that the entry-level housing affordability is 66% for California for the first quarter of 2010. The entry-level housing affordability measures the percentage of households that can afford to buy an entry level property. That index translates to a $246,270 price tag. While the index reached 84% for the High Desert, it hovers at 56% in Los Angeles (San Luis Obispo is the state’s least affordable with 52%). For Los Angeles County, it implies an a $281,700 entry level price, meaning a buyer would need a minimum income of $47,510 and a monthly payment (tax and insurance included) of $1,580. However, in the San Fernando Valley, properties can be found for less than the entry level price. I have a buyer who in in escrow on a nicely redone 3 bedroom/2 bath fixed up condo for $200,000. Not that long ago, another one of my buyesr scorde a 3 bedroom 2 bath condo for a $124,000 price tag. That one was a fixer, but still a great deal. Give me a call if you’d like me to find you your own great deal.

Double Dipping?

A recent article published by the California Association of Realtors examines whether we are headed for another decline in house prices. According to the article, the sale of homes decreased by 11.7% from February 2010 to February 2009, while the median price rose to $279,840. Are we gearing towards another dip? The C.A.R. says it is unlikely based on the following elements:

- affordability is twice the level of 2007;
- inventory, although increasing, is still below historical norms.

The big “ifs” that remain are:

- Can the housing market sustain itself once the tax credit are off the table on June 30?
- What effect will recent improvements to the federal home loan modification program have?
- How long will the Fed keep interest rates at rock-bottom?

Others have identified the “shadow inventory” of foreclosed homes not yet released to the market as a possible negative factor.

What do you think? Please read the original article included in this post:
Double [Dip] or Nothing?