“The Giant Pool of Money”…Something Worth Listening To

This coming Friday at 2pm, Capital Public Radio will air an episode from This American Life titled “The Giant Pool of Money.”  Anyone interested in the current housing, mortgage and economic situation should listen to this program.  It is amazingly informative; maybe the best single piece of media on the mortgage market crash.

If you can’t check it out Friday, be sure to visit the This American Life website and listen to it there.  Below are links to the Capital Public Radio and This American Life websites. 

http://www.capradio.org/programs/programdetail.aspx?programid=344&ShowDate=8/29/2008

http://www.thislife.org/Radio_Episode.aspx?sched=1242

Mortgage rates lower despite large jump in consumer prices…

Yesterday’s Producer Price Index numbers indicated that wholesale prices increased in July by 1.2% over the prior month.  This was the largest jump since the early 80s and more than twice the increase forecasted.  Generally speaking, inflation puts upward pressure on mortgage rates.  However, rates are now down as compared to the beginning of the week. Why is this? 

One explanation is that oil and other commodity prices have come down.  The huge inflation numbers from yesterday are a product of higher commodity prices from a couple months ago.  It takes time for higher prices to be passed down the line and it takes time for falling prices to filter through too.  Now that commodity prices have dipped, we can at least hope that inflation presures will mellow out in the coming months.  This is helping rates now and could help rates in the future.

“Hole in the Ground” is still in great shape…

The ever popular and always fun “Hole in the Ground” trail on Donner Summit is still in great shape.  On Saturday morning I rode it with a couple of friends and was impressed by how well it is holding up.  Anyone looking to avoid the August dust and ride an amazing trail should check it out.  The photo above is Arne Backstrom riding one of many, many great granite features. 

What to do on the hottest days of the year? Remember the best ski days…

In Tahoe last winter, the best ski days were in late January and early February.  The snow was deep and cold and summer was a long ways away.  This helmet camera video is from an incredible early February day skiing “The Bubbles” on Donner Peak with Jeremy Benson, Jay Lynn and Rylan Cordova.  Music by the Go Team.  Enjoy.

Mortgage Pricing Special: ¼ Point Credit

I am offering a short term mortgage pricing special.  Any loans registered with a sales contract or placed in Pre-Purchase Rate Protection by month’s end will receive a 1/4 point credit.  Purchase and refinance mortgages are eligible and this credit can be applied to either loan cost or rate. 

If applied to cost on a $400k loan, the credit is $1000.  Who would pass up $1000?  Not me.  Anyone interested personally or for friends or family should give me a call.  (Please visit one of my business websites below for contact information.  This special applies only to Californian loans.)

Wisdom in securing an interest rate now…

Mortgage rates are currently volatile and generally trending higher.  With this in mind, it makes sense for home buyers to secure an interest rate now if they plan to purchase in the near future.  The link below is to an article from the Money / CNN website further explaining why this makes sense. 

http://money.cnn.com/2008/08/04/real_estate/mortgage_rate_lock/index.htm?postversion=2008080408

PHH / Coldwell Banker Home Loans, my employer, offers a program that allows buyers to secure an interest rate before they find a property and also have the opportunity to lower their rate if the market improves.  This is called Pre-Purchase Rate Protection and it is a great option for buyers in this market.   Anyone interested in this program can follow the links below to either PHH Home Loans or Coldwell Banker Home Loans for my contact information.

Tahoe / Truckee real-estate continues to become more affordable…

 

If we look at back to the height of the market as compared to today, the improvement in affordability is quite significant.  Take for example a property that sold for $500k in 2006.  20% down on this home was $100k, which made for a loan amount of $400k. At an interest rate of 6.5%, the monthly mortgage payment was $2528. Tax on this home was $6250 annually. 

 

If we choose to be modest and figure 15% depreciation, this same home would sell for $425k today.  20% down is $85k, hence a loan amount of $340k.  Again using 6.5% interest, the monthly mortgage payment is $2149. This is $378 dollars less than two years ago. Annual taxes are $5312.  This is $938 dollars less. 

 

The most relaxed mortgage underwriting guidelines generally require debt-to-income ratios (how much you owe monthly vs. how much you make monthly) below 45%.  Using this figure, a buyer would need to make about $1000 less per month to qualify for the home in question this year than two years prior. 

 

Examining distressed portions of the market, the opportunities are even greater.  Last month a bank owned property near Donner Lake sold for under $230k.  This low a price is still rare, but homes in the $300k range are becoming more common.  In this price range, more options become viable.  For example, FHA financing becomes realistic. This means much smaller down payment requirements and relaxed guidelines with regards to assistance from family.   

 

Folks with 20% down for a $300k purchase can realistically own for under $2000 a month including mortgage, insurance and tax bill, even with a traditional fixed and amortized loan.  This is real affordability, something much different than the temporary affordability created by interest only and negative amortization loans during the boom.  Something for buyers to think about.

 

It is winter in the Southern Hemisphere. Just a reminder.

Skiers should keep in mind that it is winter in the Southern Hemisphere.  If time and resources allow, I would recommend taking a trip to ski in Chile or Argentina.  It can be really, really good.  Here are some photos from a few years ago. 

      

Rates Higher Today…

As expected, yesterday’s stock market run has pushed mortgage rates higher.  Current 30 year fixed pricing is now slightly above 6.7% with no points – near the highest levels of 2008. 

Homeowners that want or need to refinance in the next 18 months would be wise to apply now and find out if they qualify.  This is especially true of people with ARM loans.  Everyone with an ARM should know the following things:

1.) When their loan will adjust.  

2.) What it will adjust to in terms of rate and payment.  Many interest only ARM loans become amortized (you have to pay principle) after they adjust. 

3.) Whether or not they can refinance and at what terms. 

Anyone with questions can follow the links to my business websites and contact me.  I am happy to help.

Grouse Ridge Mountain Biking…

Last Sunday I went with a friend, Jason Abraham, to ride in the Grouse Lakes area off Highway 20 near Nevada City.  Neither of us had ever been in this area, so the ride was definitely an adventure.  Our route took us from Carr Lake to the Round Lake Trail and then to the Grouse Ridge Trail.  We followed the Grouse Ridge Trail north and then looped back around heading south past Penner Lake along the Crooked Lake Trail. (Not listed on linked map.)  

The riding was varied, technical and for the most part totally enjoyable.  Some sections of the Crooked Lake Trail were amazing, with terrain that could be described as part Hole in the Ground, part Lakes Basin.  There were a lot of down trees on the Grouse Ridge Trail and a significant hike-a-bike section heading to Penner Lake,  but otherwise the riding was great. 

Another big positive for this area is that you can cliff-jump and swim at Emerald Pools after riding. 

Here’s a map of the area.  http://www.fs.fed.us/r5/tahoe/documents/rec/grousemap.pdf