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The trend in interest rates has been heading slightly higher over the last 6 months. We believe this trend will continue as we move through the year. During this period there has been and most lightly will continue to be short term drops which create "windows of opportunity" to refinance existing mortgages. We are in one of these right now. Additionally, we are seeing some relaxation of loan to value requirements and some "niche products" beginning to be rolled out by the mortgage bankers. These programs include "Verification of employment only" for W2 employees and higher number of financed properties allowed under investor properties. While guidelines remain tight, we are definitely moving in the right direction.

In Mid May the mortgage market was hurt badly by a sudden surge in treasury bond yields. This move took fixed 30 year interest rate mortgages up a full 1-1.25% in a two week period. The talk was that the recession was ending and inflation would follow. The interest rate move persistently stayed up for 6 weeks. But the week before the 4th of July weekend saw the interest rate trend begin to move downward. In the last 4 days we have seen a series of treasury bond auctions do well. During this period 35 Billion in 3 yr bonds, 19 Billion in 10yr treasury bonds, and 11 Billion in 30yr treasury bond sales ending today. All these auctions have been met with strong demand. This for now has strengthen the downward trend in interest rates. With so many borrowers left stranded in May's run up the time is now to move on those loans again. If you try to wait for a new bottom most likely you will miss out on some great interest rates. Lenders get backed up quickly so you have to get in line faster.

#1 Expansion of Home Improvement Tax Credit. The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of a $1,500 Credit.

#2 Expansion of First-time Home Buyer Tax Credit. The credit available to first-time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. No pay back required if home is lived in for three years.

#3 Higher Reverse Mortgage Loan Limits. The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country- not just the higher cost areas.

#4 $729,750 FHA and Conforming Loan Limits Restored in High Cost Areas. The $729,750 Maximum loan limit had been in force throughout 2008, but was reduced to $625,500 in 2009. The economic stimulus package restores the $729,750 maximum.

Two weeks ago the Federal Government announced that it intends to purchase up to 600 Billion in Mortgage backed securities which have been a huge drag on Banks balance sheets. Today the Federal Reserve cut it's Federal Fund target interest rate to a .25% which is the lowest since tracking of this interest rate began. The combination of these two moves has brought down conforming interest rates on average of between .50% and .75%. This in turn is closing the gap between the medium income and the medium prices of homes across the country. As we move into the next year, if interest rates remain this low we may begin to see some price stability begin the return to the Real Estate market.  

While the temporary increases in Fannie Mae and Freddie Mac loan limits for 2008 are expiring, new permanant limits for 2009 have now been set. These permanant increases should create a winfall of new loan programs which will fall under these new limits. This should make financing of single family 1-4 unit properties much easier as jumbo financing which is more expensive will not be required as often. The new limits in Southern California are as follows...

Los Angeles and Orange County, 1 unit limit $625,000 /2 unit $800,000/

3 unit $967,000/ 4 unit $1,202,925

Ventura County 1 / $598,000 /2 $765,550 /3 $925,000 /4 $1,138,950

Santa Barbara Co 1 /$603,000/ 2 $772,900 /3 $934,250 /4 $1,161,050

San Diego Co 1 / $546,250 / 2 $669,300 / 3 $845,300 / 4 $1,050,500

All other Southern California counties remain unchanged from 2007 limits

Within all the doom and gloom that has been a steady drumbeat the silver lining of the dark cloud maybe showing. Across the nation and in California the number of sales of existing homes is rising. Yes, prices are still falling and we may not have posted the bottom yet, but this is a encouraging sign. As the foreclosures have made prices more attractive buyers who can qualify for financing should begin taking a closer look at getting off the fence and into some good Real Estate. Even if we are to enter a prolonged recession Real Estate should prove to be a good long term investment at these prices. Sellers are more willing to negotiate and buyers who step forward will most likely look back in a few years and be grateful that they pulled the trigger and made the purchase.