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What’s ahead for home prices?

California remains ahead of the nation in market recovery with many first-time home buyers entering the market due to affordable home prices, low mortgage rates, and first-time home buyer tax credits from the state and federal governments.  However, credit still is tight and unemployment remains high, which could hinder a full market recovery until 2011.

• Home sales in California hit bottom more than two years, and the median home price of an existing, single-family home reached its trough in February, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  In November, the state’s median home price rose in year-to-year comparisons for the first time since August 2007.
  
  
• C.A.R.’s closely watched "2010 California Housing Market Forecast,” projects that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009. 
  
  
• Some economists are forecasting another surge of foreclosures in 2010.  However, C.A.R.’s economists expect that foreclosures will remain flat this year compared with 2009.  In 2008, many lenders flooded the market with foreclosures, and as a result, the state’s median price declined by historic levels.  By comparison, in 2009, lenders listed properties for sale at a more measured pace, which helped moderate another home price decline.
  
  
• Government efforts to maintain a low interest rate environment have stabilized the market.  However, a mortgage analyst at a financial publishing company predicts that rates likely will rise to 5.5 percent by mid-2010 and close the year at 5.75 percent to 6 percent.

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Uncle Sam’s New Guide to Mortgage Shopping

Federal rules that take effect Friday, Jan. 1, mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules are an update of the Real Estate Settlement Procedures Act, a 1974 law known as RESPA.

• Although Good Faith Estimates have been in use for many years, there never has been a standard form required of all lenders. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.
  
  
• The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s.  Lenders are prohibited from increasing the origination fee from the estimate.  Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent.  Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, aren’t subject to such limits.
  
  
• A finance professor emeritus at the University of Pennsylvania’s Wharton School recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.
  
  
• Another change includes the HUD-1 form used by settlement firms in closings.  The new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

Now’s Really the Time to Buy a Home, Many Say

Mortgage rates are hovering at historic lows, home prices are just starting to edge up from total collapse, and the government is offering tax breaks to first-time and move-up buyers.

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Make money in 2010: Your home

Following three years of declining home prices, the end of the nationwide housing slump may be in sight. Home sales consistently have been rising, the surplus of houses is shrinking, and most economists believe home values nationwide will hit bottom in the second half of 2010—but not before declining an additional five to 10 percent. That’s good news for homeowners hoping to sell or rebuild lost equity.

• Mortgage rates currently are below 5 percent, and should remain low for the next few months, partially due to the Federal Reserve’s ongoing purchase of mortgage-backed securities. However, if the economy quickly turns around and inflation fears resurface, rates could rise to as high as 6.5 percent, slowing demand and pushing down home values.

• According to one analyst, the market will remain tilted in favor of buyers over the next year, but that power gradually will be reduced as conditions in the housing market continue to improve. 

• Buyers hoping to purchase or invest in a lower-priced, entry-level home should expect some competition from investors and other buyers. To remain competitive, buyers are advised to put down as much cash as possible, as many investors are offering to make all-cash deals. Another factor to keep in mind is that offers below listing price often are outbid by others. 

• Some home sellers are postponing listing their homes until the market recovers. However, timing the market is difficult, so homeowners thinking of selling should carefully weigh their options. Congress recently expanded the federal tax credit to include some existing homeowners, but they must close before June 30, 2010 to qualify. Although existing homeowners are not required to sell their current home to qualify for the credit, those who plan to rent out their current residences should be aware that many lenders require borrowers to show they are financially capable of paying two mortgages, or show rental income for at least six months. Discretionary sellers should discuss their options with a REALTOR® before making a decision.

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Housing Bottom Behind Us, Experts Say