As Broncos, Seahawks Face Off, Analysts Compare Markets

As the Super Bowl approaches, the sports world is abuzz with comparisons of the two teams facing off Sunday as analysts compare everything from the number of veteran players to yards gained during the season. At the same time, ZipRealty, a national online real estate brokerage based in Emeryville, California,looked at the stats to compare the two teams’ home housing markets.

"Both Denver and Seattle have elite pro football teams that fought hard on the field all season to win championships in their respective divisions, which earned them a Super Bowl berth," said Van Davis, president of brokerage operations for ZipRealty.

"But we wanted to take a closer look at these two champions to see how they perform off the field, in the housing market," he said.

ZipRealty aligned housing metrics with football metrics to determine which market "gains more yards" or has larger properties; has "the most veteran players" or has fewer new homes; "whose players move the fastest" or which market's homes are selling fastest; has the "most expensive players" or most expensive homes; and which "coaching staff is best" or which market's real estate agents perform best.

Denver’s market pulls ahead of Seattle at least marginally in four out of the five categories.

Denver’s homes are larger—averaging 74,636 square feet compared to Seattle's 60,754 square feet.

Denver has a slightly higher percentage of new construction than Seattle—5.4 percent compared to Seattle's 5.3 percent.

When it comes to speed, Denver takes a notable lead, with homes selling in almost half the time as in Seattle.

Homes in Denver spend a median 18 days on the market, and homes in Seattle spend a median 32 days on the market.

ZipRealty also compared agent ratings in the two cities, finding a very close race. Denver slipped ahead just a bit with a 4.91 out of five, while Seattle earned a 4.84 out of five.

The one category where Seattle won was "most expensive players." The median sales price in Seattle is $285,849, while the median price in Denver is $259,000, according to ZipRealty.

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

Price Gains to Diminish as REO Inventories Dissipate

On the heels of two other home price reports this week, CoreLogic released the CoreLogic Case-Shiller Indexes for the third quarter of 2013, reporting an 11.2 percent annual price gain at the national level.

The S&P Case-Shiller Home Price Indices and the Black Knight Financial Services Home Price Index both reported monthly price gains in November.

The CoreLogic Case-Shiller tracks home price movement on a quarterly basis in more than 380 metro markets across the country.

CoreLogic anticipates a substantial deceleration in home price gains this year. In fact, the firm predicts home price gains will fall just below the long-term historical norm of 4.5 percent appreciation annually, which has been maintained since 1975.

Home prices are expected to rise 4.2 percent from the third quarter of 2013 through the third quarter of 2014, according to CoreLogic.

“Double-digit price gains are unlikely to persist, but since housing is far more affordable now than it was in 2006, there is less concern that a new housing bubble will occur,” said David Stiff, principal economist for CoreLogic Case-Shiller.

Despite home price gains and rising interest rates, Stiff said as of the third quarter, the national median mortgage payment as a percentage of median family income was at a 40-year low. The ratio was 35 percent lower than it was at the height of the housing bubble, according to Stiff.

The large metro areas—those with 950,000 or more residents—with the greatest annual price gains in the third quarter were Las Vegas, Nevada (30 percent); Sacramento, California (27 percent); and Riverside, California (26 percent).

California markets made up six of the top 10 markets with the highest price gains year-over-year in the third quarter.

For example, Sacramento’s 27 percent gain reported in the third quarter will fall to a 3.8 percent gain over the following 12 months, according to CoreLogic.

The smallest price appreciation year-over-year in the third quarter took place in Philadelphia, Pennsylvania (3 percent); Hartford, Connecticut (3 percent); and New Orleans, Louisiana (3 percent).

While California and Arizona markets continued to post high price gains in the third quarter, Stiff anticipates a shift in these markets as their REO inventories dissipate and investor demand dissolves along with it.

“Investor demand and sales of foreclosed properties are dropping quickly,” Stiff said.

“Non-investor demand, although increasing, will not replace demand from investors,” he said.

Looking ahead, CoreLogic anticipates the greatest price appreciation occurring through the third quarter of this year in Oakland, California (9 percent); New Orleans, Louisiana (9 percent); and Fort Worth, Texas (9 percent).

The smallest gains are expected in the Southern markets of Nashville, Tennessee (2 percent); Orlando, Florida (3 percent); and Jacksonville, Florida (3 percent).

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

FIFTEEN FUN REAL ESTATE FACTS

Sometimes you need to know about fixed-rate mortgages, flood insurance and Fannie Mae. And sometimes you just want the fun facts.

So for no other reason than it’s just kind of interesting, here is are fifteen fun real estate facts to liven up your Thursday.

1.      Home is where the heart (and equity) is: 61.4% of the average American family’s net worth is in home equity.  

2.      A homeowner’s net worth is over thirty times greater than that of a renter.

3.      TGIF! The best day of the week to list your home is Friday.

4.      Historically, the best month of the year to sell is April. Although we would dispute that –maybe it’s the most common month, but often sellers fare better in the ‘off months’ of summer and winter.

5.      Odds are you’re going to need some help selling: Homeowners have a 120% better chance of selling their home when using REALTOR®.

6.      In 2013, NAR reports that the median age of first-time buyers was 31. On average these buyers purchased a 1,670 square-foot home costing $170,000 (guess they don’t live around here!).

7.      The typical repeat buyer was 52 years old. On average these buyers purchased a 2,060-square foot home costing $240,000.

8.      According to a NAR Community Preference Survey, 78% of respondents said that the neighborhood is more important to them than the size of the home.

9.      57% said they’d give up a home with a larger yard if they could have a shorter commute. 

10.  NAR reports that 80% of home buyers believe their home is a good investment, 44 percent saying it’s better than stocks.

11.  Buyers searched a median of 12 weeks and visited 10 homes. If you live in Greater Boston, you know this is a much lower number on both fronts.

12.  90% of home buyers who used the Internet to search for a home purchased through a real estate agent.

13.  90% of buyers financed their purchase.

14.  In Scotland, homeowners paint their front door red when they pay off their mortgage.

15.  And finally, don’t be so quick to change your brass to brushed nickel! Brass doorknobs disinfect themselves.  It’s called the oligodynamic effect: the ions in the metal have a toxic effect on spores, fungi, viruses, and other germs.

For more information contact

Jerry Gusman

The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Despite Fewer Foreclosure Starts, Distressed Sales Rose in 2013

Despite declining foreclosure starts over the year, distressed sales made up a higher percentage of overall home sales in 2013 than they did the previous year, according to the U.S. Residential & Foreclosure Sales Report released Thursday by RealtyTrac. The report also revealed an uptick in cash purchases at the close of the year.

Foreclosure sales—which include sales to third-party buyers at foreclosure auction and sales of REOs—combined with short sales to make up 16.2 percent of residential property sales in 2013, an increase from 14.5 percent in 2012, according to RealtyTrac.

“It may surprise some to see distressed sales rising in 2013 given that new foreclosure activity dropped to a seven-year low for the year,” said Daren Blomquist, VP at RealtyTrac. However, Blomquist pointed out that “there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing.”

About 29 percent of home sales in 2013 were all-cash deals, up from 19.4 percent in 2012. All-cash sales increased during the month of December and were significantly higher than a year ago. Cash deals made up 42.1 percent of December’s home sales, according to RealtyTrac, up from a share of 38.1 percent in November and just 18 percent in December 2012.

Cash purchases made up more than half of December home sales in five states, including Florida (62.5 percent), Wisconsin (59.8 percent), Alabama (55.7 percent), South Carolina (51.3 percent), and Georgia (51.3 percent).

Institutional investors were more active in the residential market in 2013 than in 2012, contributing to 7.3 percent of the year’s home sales, up from 5.8 percent the previous year. The share of institutional investor activity in December was slightly higher and was also up from the previous month. Institutional investors contributed to 7.9 percent of December’s home sales.

They were most active in December in Jacksonville, Florida (38.7 percent); Knoxville, Tennessee (31.9 percent); Atlanta, Georgia (25.2 percent); Cape Coral-Fort Myers, Florida (24.9 percent); and Cincinnati, Ohio (19.3 percent).

The percentage of home sales that were purchased by third parties at foreclosure auctions doubled over the year in 2013, rising from 0.5 percent in 2012 to 1 percent last year, RealtyTrac reported.

About 5.8 percent of home sales in 2013 were short sales, and 9.3 percent were REO sales, according to RealtyTrac. Short sales made up 5.7 percent of December’s home sales and were most common in Nevada (15.3 percent), Florida (14.4 percent), and Illinois (9.0 percent). REO sales contributed to 9.3 percent of sales in December and were most common in Nevada (18.9 percent), Michigan (18.4 percent), and Ohio (17.8 percent).

The national median home price in December was $168,391, according to RealtyTrac. Distressed homes sold for about 38 percent less than non-distressed homes. The median price of a distressed home was $108,494, compared to a non-distressed median price of $174,401.

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Housing Recovery Unmoved by Rising Interest Rates

Mortgage rates may be rising, but the housing market doesn’t seem to mind. In fact, several indicators have improved alongside rising rates, according to the HousingPulse Tracking Survey released by Campbell Surveys and Inside Mortgage Finance this week.

The lending atmosphere is becoming friendlier, especially to first-time buyers. Simultaneously, the average time on market for non-distressed properties and the average sales-to-list price ratio both improved year-over-year in December, according to the survey.

“Six months after the May-June 2013 rise in interest rates, the housing market is showing remarkable resilience,” said HousingPulse research director Thomas Popik.

“[U]nderwriting standards are getting a little looser” at Fannie Mae and Freddie Mac, as well, according to Campbell and Inside Mortgage Finance.

The average credit score for GSE loans in the fourth quarter was 743, down from 758 a year earlier. Loan-to-value ratios at the GSEs rose from 75 percent to 76 percent year-over-year in the fourth quarter.

Fannie Mae and Freddie Mac increased their share of the purchase market as well as their share of the first-time homebuyer sector. In fact, the GSEs posted survey highs in both categories, according to the four-year HousingPulse survey. The GSEs accounted to 19.2 percent of purchase loans originated over the last three months of 2013, up from 16.5 percent a year earlier. The GSEs’ share of the first-time buyer market reached 19.5 percent, up from 14.1 percent a year earlier.

Looking at the broader market, time on market over the last three months of the year averaged 9.7 weeks, a decline from 12.4 weeks recorded at the end of 2012. The average sales-to-list price ratio increased from 95.5 percent at the end of 2012 to 97.1 percent at the end of 2013.

“A year-over-year comparison of key metrics points to a housing market that was stronger at the end of 2013 than it was at the end of 2012,” Popik said.

The HousingPulse Tracking Survey relies on input from 2,000 real estate agents each month and calculates its metrics on a three-month moving average.

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

jerryggroup@aol.com

Economists Outline What to Watch for in the Real Estate Market of 2014

Experts at Freddie Mac and Equifax expect falling unemployment and economic growth to keep the housing market steady in 2014. This, despite climbing interest rates and anticipated growth in housing prices nationwide.

Unemployment dipped to 6.7 percent nationally in December, and the Federal Reserve is expecting that figure to drop below 6.5 percent later this year. If the Fed is right, it will be the first time since the Great Recession began in 2008 that unemployment will be so low.

What this spells for the housing market is greater buying power and an upswing in new-home construction, according to Ilyce Glink, managing editor of the Equifax Finance Blog. "The housing market may not return to its pre-recession 'normal' in 2014 or even 2015," Glink said, "but with more Americans employed and able to buy homes, we should see the real estate market, especially new construction housing, continue to pick up steam."

This rise in the number of employed Americans dovetails with expected growth in the U.S. economy. Frank Nothaft, chief economist at Freddie Mac, says the economy should increase by 2.5 percent to 3 percent in 2014, which should empower more Americans to buy homes.

Experts feel this double-edged uptick will be enough to overcome a 3.7 percent increase in home sale prices nationally (as predicted by the National Association of Realtors) and an increase in mortgage interest rates.

Interest rates hit historic lows in 2013 and then gradually rose a full percentage point by year's end. Freddie Mac reported that as of mid-January, rates on fixed 30-year mortgages averaged 4.41 percent; rates on fixed 15-year mortgages averaged 3.45 percent.

Economists such as Glink welcome the idea of a steady, slowly recovering housing market. "A cooling off in some of the hot markets isn't a bad thing," she said. "There were new bubbles forming and threatening to burst in some markets, and a slow-down could bring appreciation back to a more moderate rate."

What remains to be seen is just how fast market prices will rise. Equifax warns that if prices climb faster than income, the trend could push some buyers out of the market.

Another factor to consider is the number of new households created by such events as divorce, death, or young people moving out of their parents' homes after graduating college. According to Amy Crews Cutts, chief economist at Equifax, the Great Recession greatly reduced the number of new households created annually—and she doesn't expect much change in 2014, particularly among young people.

Slim job prospects and financial insecurity among recent college graduates, combined with high student loan debt, may create a void of buyers that could eventually trigger pent-up demand for homes, said Crews Cutts. While this scenario is not likely to play out this year, it's worth keeping an eye on.

For more information contact

JerryGusman, The Gusman Group

(888) 213-4208

Jerryggroup@aol.com

THE ROAD TO HOME OWNERSHIP!! EXPERTS ARE SAYING 2014 IS THE YEAR TO BUY A HOME!!

FOR MORE INFORMATION CONTACT

Jerry Gusman
The Gusman Group
(888) 213-4208
Jerryggroup@aol.com,

Which Hidden Gems Make Cut as Year's Hottest Neighborhoods?

Redfin on Tuesday came out with its annual list of the country’s “hottest” neighborhoods. The company ranked 105 neighborhoods across 21 major markets that have grown the most in popularity during the four months leading into 2014.

Following are 2014’s 10 hottest neighborhoods, according to Redfin, along with their median sale price in 2013:

#1 Bernal Heights North Slope–San Francisco, CA | $982,500 
#2 Eagle Rock–Los Angeles, CA | $539,000 
#3 Morningside-Lenox Park–Atlanta, GA | $540,375 
#4 Upper Chevy Chase–Washington, D.C. | $873,000 
#5 Desert Shores–Las Vegas, NV | $179,525 
#6 Barrington Oaks–Austin, TX | $303,750 
#7 Phinney Ridge–Seattle, WA | $502,625 
#8 Concordia–Portland, OR | $355,000 
#9 City Park–Denver, CO | $394,500 
#10 Humboldt Park–Chicago, IL | $189,450 

The company says at first glance, it appears the common threads among the top neighborhoods are highly ranked schools and scenic community parks. However, Redfin agents have found that the real trend driving neighborhood popularity in 2014 is a short commute at an affordable price. People’s top neighborhood choices offer a short drive to or easy access to a commuter rail line at prices that are not the most expensive in the city, the company explained. “After a year in which prices popped 13 percent, Americans are checking out still-close-in but often-overlooked neighborhoods in search of affordability, even if means less-fashionable restaurants or a home that needs a little more work,” said Redfin CEO Glenn Kelman.

He likened this year’s hottest markets to “the Susan Luccis of neighborhoods” that are “finally getting their due.” Kelman continued, “The buyers who have made these alternative spots so hot aren’t like the ones we saw in the last boom, who just borrowed more and paid up. Our clients in 2014 have settled on a price range, and they’re sticking to it.”

To arrive at its 2014 “hot” list, the Seattle-based, technology-centric brokerage says it turned to its website users, analyzing hundreds of millions of pages they visited and homes they added as “favorites” to monitor for price changes or sales. Redfin’s evaluation also takes into account insights about which neighborhoods are “buzzing” from hundreds of real estate agents within the 21 major U.S. cities included in the company’s coverage area.

Recognizing that most homebuyers aren’t scouring the United States from coast-to-coast to find their next home but instead focus their efforts on finding the right neighborhood within the confines of an individual city and its immediate vicinity, Redfin also compiled separate listings of what it calls “the top five rising stars” within each of the 21 markets covered in its study. The company’s analysis of 2014’s hottest neighborhoods by metro is available on its website.

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

Jerryggroup@aol.com

Bill Seeks to Extend Federal Tax Exemption for Forgiven Mortgage Debt

Congressman Bill Foster (D-Illinois) introduced the Homeowners Debt Relief Extension Act (H.R. 3856) on Tuesday. The bill would extend the mortgage debt tax exemption that’s been in place since 2007 for another two years.

The Mortgage Debt Relief Act of 2007 makes debt that is reduced or cancelled through a loan modification or debt forgiven through a foreclosure or short sale tax-exempt. Other criteria also apply, such as the indebtedness must be on a principal residence and the maximum amount that can be claimed for the tax break is $2 million.

Since 2007, Congress has extended this tax relief to homeowners so that they are not liable for taxes on the difference between the house’s value and the loan modification or between the house’s value and the amount of a foreclosure sale or short sale. This tax relief expired on December 31, 2013, however, and so far, no extension has been passed by lawmakers, though homeowner advocates are lobbying heavily to reinstate the mortgage debt tax exemption.

Foster’s bill would ensure any qualifying reduction or cancellation of mortgage debt is not considered taxable income by extending this tax relief through January 1, 2016, for debt forgiven after December 31, 2013.

Foster’s proposal calls for the costs of such an extension to be offset by repealing a tax break in the Internal Revenue Code’s Section 199 for oil and gas companies. Foster says the Section 199 deductions are no longer necessary since oil and gas companies are making billions in profits each year.

“With millions of struggling homeowners still underwater on their mortgages, now is not the time to cut off this tax credit,” Rep. Foster said. “We shouldn’t be offering up millions in tax breaks to oil and gas companies, while leaving working families, still struggling to recover from the recession, with a bigger tax bill.”

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

Jerryggroup@aol.com

Freddie Mac: Short Sales More Attainable Than Homeowners Think

When a homeowner is unable to make their mortgage payments or owes more on the home than it’s worth, a short sale can be a viable option that avoids the negative implications of a foreclosure for both the homeowner and the mortgage-holder.

However, common perceptions of short sales as difficult, lengthy, restricted to specific circumstances, and harmful to personal credit cause many to shy away from the option.

In a blog post Monday, Freddie Mac SVP Tracy Mooney aimed to set the record straight regarding Freddie Mac short sales.

While short sales have been known to drag on in the past, Freddie Mac’s Standard Short Sale requires servicers to approve or deny a homeowner’s application within 30 days. After approval, the short sale should close within 60 days, according to Mooney.

Misperceptions regarding eligibility requirements are also a barrier, Mooney says. She clarified that short sales can be an option for owners of investment properties or second homes, those with second mortgages, and homeowners who are current on their loans.

Those who are current on their loans must meet general eligibility requirements, “the property must also be your primary residence and your debt-to-income ratio must be greater than 55 percent,” Mooney said.

For those who have second mortgages, Mooney said Freddie Mac is “offering up to $6,000 to subordinate lien holders—who are like second mortgage companies—in exchange for releasing the subordinate lien, extinguishing the underlying indebtedness, and waiving the right to pursue deficiency.”

Another major source of concern for homeowners is the impact a short sale will have on their credit scores and their ability to obtain another mortgage in the future.

“While only the credit reporting agencies that calculate your credit score will know for sure, it’s possible that a short sale might be better for your score than a foreclosure,” Mooney said.

“Even if it isn’t, a short sale gives you time to find a more affordable place to live and exit gracefully from your obligation,” she added.

Mooney also assured homeowners that in most cases, they will not be on the hook for the full mortgage loan amount, though they may be required to pay a portion of the unpaid balance after the short sale closes.

When a borrower enters into a short sale, the impact on his or her ability to obtain a new mortgage depends on the circumstances, according to Mooney.

Those who enter into a short sale after a financial hardship such as a medical emergency or loss of income must wait 24 months to re-establish credit and apply for a new mortgage loan, while those who opt for a short sale due to “personal financial mismanagement” must wait at least 48 months before applying for another mortgage, according to Mooney.

Mooney recommends homeowners consider a short sale if they do not qualify for other loss mitigation options, need to move to obtain or maintain their jobs, or are underwater.

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

Jerryggroup@aol.com

JOIN IN ON THE TODAY ... THE REAL ESTATE INSIDER

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TODAY BEGINNING AT 4PM PACIFIC TIME. WE WILL BE DISCUSSING THE MARKET OUTLOOK FOR 2014 AND THE NEW FHA AND QRM GUIDELINES!!!

LISTEN LIVE ONLINE AT WWW.FINANCIALNEWSANDTALK.COM OR TUNE IN TO AM 1510 KSPA IN THE INLAND EMPIRE AND ORANGE COUNTIES.

Confidence in Real Estate Market Tempered by Credit Access Concerns

Realtors expressed overall confidence in the market tempered by concerns regarding credit availability, according to the latest Realtors Confidence Index from theNational Association of Realtors (NAR).

The survey revealed a confidence index of 59 in November, up slightly from 58 in October. A score of 50 indicates “moderate” market conditions, according toNAR.

Anticipated seasonal gains over the next six months led to an even higher score for the single-family home market. Realtors gave the sector an index rating of 64, up from 60 in October. However, Realtors did express concerns regarding the regulatory environment and buyers’ access to credit.

Among Realtors who reported transactions in November but ultimately did not close a sale, 9 percent said the homebuyer could not obtain financing, and of those, 6 percent reported the buyer gave up on purchasing the home.

Lenders continue to require impeccable credit. More than half of survey respondents reported selling homes to buyers with credit scores of 740 and above. According toNAR, if lenders returned to “normal” credit expectations, as many as 500,000 additional home sales could occur.

“Market incentives are clearly there for more lending for home purchases,” Lawrence Yun, NAR’s chief economist, said. “The big unknown, however, is coming from Washington in terms of new mortgage regulations and of the increased lawsuit risks from any small deviation from government directives.”

Yun warned that “too much regulation and too many lawsuits also carry the risk of lessening lending.” 

Cash sales continue to play a large role in the purchase market, according to NAR’s survey. About 32 percent of residential homes sold in November were purchased with cash, the trade group found.

A majority of purchases by investors and international buyers were cash purchases, 85 percent and 70 percent, respectively, NAR reported. Among first-time homebuyers, 12 percent of sales were all-cash sales.

In addition to the large percentage of cash purchases, Realtors reported a significant percentage of home sales with substantial down payments. About 37 percent of survey respondents reported down payments of at least 20 percent, while noting that “buyers who pay cash or put down large down payments generally win against those offering lower down payments.”

In the same vein, Realtors reported that first-time buyers “who generally use mortgage financing are finding it hard to compete against investors who typically pay cash.”

About 1.8 percent of Realtors sold a home to a foreign buyer in November. Foreign homebuyers tended to hail from Canada, China, Mexico, India, and the United Kingdom, according to NAR.

About 28 percent of Realtors sold a home to a first-time buyer in November, unchanged from October. Nineteen percent sold to an investor, while 12 percent sold to a buyer who was relocating, and 10 percent sold to a buyer purchasing a second home. Fourteen percent of agents sold a distressed home in November.

Realtors perceive that “many baby boomers would like to downsize, but there are not enough buyers for larger homes,” according to NAR’s report.

Both the survey’s buyer and seller traffic indexes increased in November. The buyer index rose from 53 to 56, while the seller index rose from 41 to 43.

However, respondents reported a rise in the number of days-on-market over the month, which NAR attributes to “a slowdown in demand.” The median number of days-on-market for homes sold in November, according to the NARsurvey, was 56. That’s up from 54 days in October.

Non-distressed homes sold fastest, with a median number of days-on-market of 55. Foreclosed properties spent 59 days-on-market. Short sales sat on the market for 120 days, up from 93 in October.

For more information contact

Jerry Gusman

The Gusman Group

(888) 213-4208

Jerryggroup@aol.com

FHA loan limit falls to $355,350 in 2014

  /New York Times

David Stevens, then-Federal Housing Administration commissioner, testified before a House subcommittee in Washington in October 2009. He assured lawmakers that his agency would not need a bailout , and was taking steps to manage its risks. Stevens left the agency in 2011 to become president and chief executive of the Mortgage Bankers Association.

Larry Kleasner got a memo Tuesday to prepare agents for real estate transactions that could go awry in 2014, as the new Department of Housing and Urban Development single-family loan limits for FHA-backed mortgages take effect.

The maximum Federal Housing Administration-conforming loan limit for homebuyers in Riverside and San Bernardino counties will fall 29 percent from $500,000 to $355,350, a reduction of $144,650.

“Anything that’s in escrow as a pre-qualified loan will have to be re-evaluated,” Kleasner said, as he recapped the advisory from his group, Prudential California Realty in Corona.

The Federal Housing Administration said the new single-family loan limit that takes effect on Jan. 1 is a solid sign of sustained recovery in the housing market.

“It is an important and appropriate step as private capital returns to portions of the market,” FHA Commissioner Carol Galante said in a Dec. 6 statement. “It enables the FHA to concentrate on those borrowers that are still underserved.”

Brad Yzermans, a broker with Caliber Home Loans in Temecula, said the reason for the move is understandable and predicted, but the impact from the maximum FHA-conforming loan limit reduction will not be insignificant.

He offered these reasons:

The lowered maximum will drive buyers deeper into an already shallow pool of inventory of homes priced below $350,000.

Fewer home shoppers will surface in the $360,000 to $500,000 range — a thin-down that’s bound to exert downward pressure on price.

“I think the higher-priced areas of Riverside, Corona, Norco, Temecula and Murrieta will see the biggest impact,” Yzermans said, citing data from a “tech-savvy” real estate colleague, John Butler, on 675 home sales in Temecula from Jan. 1 through Dec. 6 between $355,000 and $500,000.

Fourteen percent of those buyers used FHA financing, Yzermans said.

Coastal areas are likely to feel the effects, too: In Orange, Los Angeles and San Francisco counties, the maximum FHA loan limit will fall to $625,500.

“It will hurt sales,” agreed Realtor Freda England of Century 21 Lois Lauer Realty in Redlands. “I just closed on a home with a loan amount of $375,385, which would not happen as of the first of January.”

The FHA loan limit in the two-county Inland region was raised to $500,000 in 2008 when the Economic Stimulus Act was passed to bring liquidity and affordable FHA home financing to homebuyers, and to help homeowners latch onto low-rate home financing.

The median home price in the Inland region was in the $202,600 range at the time. For all six counties in Southern California, the median hovered at $505,000.

As of October, the six-county median posted by the real estate reporting service DataQuick was slightly under $385,000 — the highest point in five years. The October median was $270,000 in Riverside County and $229,000 in San Bernardino County.

Paul Herrera, governmental affairs director for Inland Valleys Association of Realtors, said the lowered FHA ceiling is not good news, but the intent of HUD has been — all along — to nudge consumers to become less reliant on FHA loan instruments.

“They want the private sector to take over this government role,” Herrera noted. “That said, it’s not happening without pain, or some concern. We’d like to see the higher loan limits in place longer, so it’s accessible to more people.”

“It’s a major hit anytime you start reducing a person’s ability to purchase,” said Kleasner, the 2013 president of Inland Gateway Association of Realtors.

“Ninety-nine percent of these buyers use FHA for a reason,” Yzermans said, such as a bankruptcy, foreclosure, former short sale or lack of down payment. “Essentially, this is shutting out people who are trying to get back on their feet.”

Out of an estimated 43,000 total sales involving single-family homes marketed through the Multiple Listing Service in 2013, Herrera said some 10,173 transactions in Inland Southern California involved FHA financing. Of those transactions, 1,435 homes sold at prices above $350,000.

That’s not an insurmountable number, Herrera said, but it does prompt the question: “Is there going to be enough support from the private market that they can easily turn from FHA to another provider? We’ll see that play out in the days and weeks to come.”

Other changes ahead in 2014 will make FHA loans more expensive and mortgage insurance premiums more permanent. It will be tougher for people to borrow against their homes or refinance.

Steve Manos, of Prima Vista Realtors in Lake Elsinore, said all of these headwinds hold potential to cap growth in Southwest Riverside County in 2014.

“We’ve had a nice bounce-back in the market, but with some of the offsetting forces at play, it’s delicate,” Manos said. “If jobs don’t recover in a significant way, and if consumer confidence doesn’t rebound, we may have a pause in growth.”

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208

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Market Analysts Expect Slowdown in Housing Recovery in 2014

The housing market recovery is entering a new phase, according to the analysts at Capital Economics. They say the rapid bounce in home prices seen this year, which was driven by investors and tight supply conditions, will soon start to moderate, and the next stage of the recovery will be characterized by strengthening activity among owner-occupants and mortgage-dependent buyers, as well as a much more moderate pace of house price inflation.

Overall economic growth, on the other hand, will accelerate in 2014, according to Capital Economics, from around 1.8 percent in 2013 to 2.5 percent this year. The firm notes in its outlook report that monthly employment gains have already climbed back to the 200,000 mark. As the economy’s fiscal drag fades, it should more than offset the impact of rising long-term interest rates, the company’s analysts contend.

The Federal Reserve announced in mid-December that it will begin tapering its asset purchase program this month, but Capital Economics says any further increase in long-term interest rates that results will be “modest.” After all, the Fed is trimming its monthly buys of mortgage securities and Treasuries by just $10 billion. Officials strengthened the central bank’s forward guidance to emphasize rates are not likely to rise for at least another couple of years.

“And even if mortgage interest rates edge a little higher, the recovery in housing market activity should also continue,” Capital Economics said in its report.

Higher mortgage interest rates have taken a toll on housing market activity already, but further rate increases will see the recovery slow rather than reverse, its analysts stressed. Sales activity initially dropped when rates spiked, but the latest data suggest this was a period of adjustment rather than the start of a weaker trend, which fits with the fact that housing remains very affordable, they explained.

“We envisage 30-year fixed mortgage rates ending 2014 at 5 percent and 2015 at 5.5 percent,” they share in the report. There may ultimately be an upside to higher rates, according to Capital Economics’ analysts. This upside would come in the form of a quicker loosening in mortgage credit conditions now that lenders cannot rely on the refinancing boom to boost their profits, they suggested.

The supply of homes for sale is now increasing, Capital Economics noted in its report. In addition, rising prices and a reduction in negative equity are bringing willing sellers back to the market. Alongside a reduction in the number of heavily-discounted distressed homes for sale, the firm says this will drive a seachange in the composition of supply and trigger a loosening in overall market conditions as buyer demand increases, according to Capital Economics.

The rapid run up in house prices means that housing affordability has deteriorated over the past three months. But even though valuation and affordability metrics are becoming less favorable, the overall picture is still that housing is a good value and “on the cheap side,” the firm said in its report.

The National Association of Realtors’ (NAR) affordability index suggests that the typical U.S. household now has 166 percent of the income required to qualify for a mortgage on the typical home, down from 180 percent in Q3 2013. This deterioration in mortgage affordability means that average mortgage costs are once again above average rental costs, which may deter some households from leaving the rental market for homeownership, according to Capital Economics. Still, the firm notes that “[o]ther than the past four years, at no point during the 40-year history of the NAR figures has housing been as affordable as it is now.”

Similar conclusions hold in terms of housing valuations, Capital Economics explained, adding that the simplest valuation measure compares real house prices to their long-run trend level. On this basis, housing is 12 percent below fair value, according to the firm’s analysts. That figure is down from 21 percent below fair value two years ago, but the analysts say even now, prices still have room to increase before worries about overvaluation become pressing.

A second method compares house prices to disposable incomes per capita, and it suggests that housing was 14 percent undervalued in Q3. A third valuation measure paints a slightly different picture—the house price-to-rent ratio. On this measure, housing is at the fair-value mark. As the firm’s analysts already noted, mortgage costs come in above average rental costs now.

They say it looks like home prices will be up by 11 percent for 2013 as a whole. “We expect this year to mark the peak for house price gains, and anticipate that price rises will slow to around 4 percent per annum in 2014 and thereafter,” Capital Economics’ analysts predicted.

For more information contact

Jerry Gusman

The Gusman Group

(888) 213-4208