Among some of the proposals in Obama’s plan:

• Drop the maximum loan amount in high cost areas (which includes much of the Bay Area) from $729,750 to $625,500.

• Phase out both Fannie Mae and Freddie Mac by reducing their loan portfolios by 10% a year

• Raise fees for borrowers

• Increase minimum down payments borrowers

What This Means To Solano Home Buyers & Sellers

It’s still unclear whether the White House’s proposal to lower the maximum loan limit would really impact Solano County. Currently, for most of the U.S., the limit is $417,000. The majority of the Bay Area, though is at $729,750 — which is the amount that Obama’s plan wants reduced by about $105,000.

In Solano County, however, our limit is $557,500, which is higher than the rest of the U.S., but lower than most other Bay Area counties.

So if the White House plan reduces the loan limit for all high cost areas on a proportionate basis, then Solano County buyers and sellers could definitely feel a pinch, since buyers of homes priced above the new loan limit would be forced into higher-rate “jumbo” loans, which would no doubt kick some buyers out of the market or force some sellers to lower prices to attract conventional loan buyers.

But if the White House plan keeps our limit at $557,500, since it’s already below the proposed $625,500 ceiling, then Solano County would be spared any impact from the proposed change. I haven’t seen county-by-county specifics yet. But when I do, I’ll post them.

A Definite Impact In Contra Costa

Contra Costa County, meanwhile, will definitely feel the pinch if Obama’s plan is enacted, since it is one of the Bay Area Counties where the $729,750 loan limit is presently in place. If the maximum loan drops to $625,500, then sellers in the $700,000-$900,000 price range, could soon find it much tougher to find qualified buyers for their homes.

Obama is pushing for a change in the loan limit by this fall. And you can bet there will be a lots of lobbying and grass-roots efforts to either stop, delay or modify his proposal in the coming months.

While the jury’s still out on whether the White House plan will affect Solano’s loan limits, those other three proposals in Obama’s plan definitely would impact buyers and sellers here in Solano County as well as throughout the entire U.S.

Less Fannie & Freddie Means Higher Rates & Fees

According to estimates I’ve seen, almost three-quarters of all U.S. loans are sold to Freddie Mac and Fannie Mae. In Solano County, that percentage is probably a bit lower, since FHA loans have become increasingly popular over the past few years due to lower home prices.

But for borrowers opting for a conventional loan, Freddie or Fannie are what makes the whole money supply machine work. So if you reduce the amount of loans that those two organizations can purchase, that will definitely impact the availability and cost of that financing.

According to the National Assn. of Realtors, Credit Suisse Bank has estimated that interest rates could easily rise 2 full percentage points (to the 7%-plus range) if the government withdraws its backing of Freddie and Fannie, which would easily price many of today’s buyers out of the housing market.

Goodbye To Low Down Payment Loans?

The same would happen if the government pushed lenders to increase minimum down payment amounts.  With conventional financing, buyers have to put at least 10% down. With an FHA loan, the minimum is 3.5% down — which is huge for first-time buyers, since many have the income to qualify  but not 10% plus closing costs (about $35,000+ on a $250,000 home).

The White House’s premise — more skin in the game by the homeowner means less risk for the lender — makes sense. Before creative financing entered the marketplace back in the 1980s, buyers using a conventional loan traditionally had to come up with 20% down. Of course, back then, most Bay Area home prices were below $100,000.

There’s been quite a bit of talk about FHA increasing the minimum down payment on all of its loans. If that happens and if the same occurs with conventional financing, many buyers would find themselves unable to buy. And that would certainly cause activity to wane, inventory to climb and prices to fall.

I understand the need for mortgage reform. Nobody wants a repeat of 2007-2008. But if the sweeping changes outlined in Obama’s proposal are enacted, Solano County home buyers and sellers will definitely feel it — and not in a good way.

It’s hard to believe that we now have seven months under our belt for 2009

In early- to mid-January, buyers could still negotiate a fairly good price without much competition from other buyers. And, most sellers were more than happy to credit closing costs on top of it.

Well, sometime about mid-February, the landscape began to change and by March, we were seeing a huge increase in activity, particularly in the $300,000-and-below price range. 

Inventory was plummeting on a weekly basis, multiple offers became the order of the day, and closing cost credits were pretty much a thing of the past.

At the time, no one knew whether this was the beginning of the end of the housing meltdown or just a temporary blip on the housing radar.

Since President Obama had taken office six weeks earlier, a lot of attention had been focused on repairing the housing market. Interest rates had dropped to historic lows, big banks had agreed to extend their foreclosure moratoriums through late March, the new first-time buyer tax credit had been unveiled, and President Obama’s new Making Home Affordable program was introduced.

So nobody really knew whether all of these had simply combined to create a temporary boost for the housing market or if the market was poised to finally turn the corner.

Well, here we are four months later and the local market continues to hum along at a very brisk pace. Inventory continues to fall throughout most of the county while prices have stabilized and even started to inch upwards.

Most well-priced homes in Solano County and Contra Costa County are getting multiple offers. And with two or three dozen offers on some properties, the “winner” often ends up paying tens of thousands more than the home’s original list price.

If you’ve been following my Solano County Weekly Real Estate Report on a regular basis, you’ve had a ringside seat and have watched the current market unfold.

If you haven’t been along for the ride, I invite to do so. For nowhere else in Solano County will you find this kind of ongoing real estate news, information and analysis.

Each week, in this report, I track the inventory of homes and number of newly pending and closed sales in the five Solano County communities in our market area (Benicia, Vallejo, Fairfield, Suisun & Vacaville).

Some highlights from this week’s report:

• Suisun City saw no change in its inventory from a week ago. But for the month, its inventory was down 21%.

• For the first time this year, Vacaville’s inventory has fallen below 200. The city has 52% fewer homes than it did in early January.

• Fairfield/Green Valley’s inventory has fallen 70% since the beginning of the year — including a 23% drop in July.
  

• Vallejo’s supply is down 71% for the year — from a high of 899 to a current supply of 250 active listings.

• Benicia’s supply is down a modest 17% for the year — at least modest when compared to its Solano County sister cities.
  

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Coming Later This Week: July’s Solano Housing Numbers

Related Links

• When Were Prices Last This Low?
• 2nd Qtr Solano County Home Sale Statistics
• Monthly Solano Real Estate Report – June ‘09
• Monthly Solano Real Estate Report – May ‘09
• Benicia Home Sales — June ‘09
• Vallejo Home Sales — June ‘09
• See The Latest Market Update

New Distress Sale Listing Report Shows Similar Percentages, But Far Fewer Actual Distress-Sale Listings

Like the old song says, the more things change, the more they stay the same. At least that’s the case when it comes to comparing our latest Distressed Property Update Report to the one I prepared back in late February.

That’s because the same five cities that led our market area in the percentage of distress-sale listings in Feburary again top the list in the current report. Those ‘honors’ again go to Pittsburg, Antioch, Vallejo, Oakley and Suisun City.

In Pittsburg and Antioch, at least 90% of the active listings were distress-sales (either bank-owned “REO’s” or short sales).  The next three on the list didn’t fare much better, with 82%-85% distress sales.

The region’s highest priced cities (Lamorinda, Alamo and Danville) remained at the opposite end of the spectrum There, less than 20% of the listings are distress sales.

Here in Solano County, after Vallejo’s 85%, the next highest city is Fairfield (68%), followed by Benicia and Vacaville.

Benicia and Vacaville actually swapped places, as Benicia’s percentage climbed from 51% in February to 58% and Vacaville’s dropped dramatically — all the way from 65% to 51%.

While the percentages may be largely the same as what they were in late February, the actual number of distress sale listings is down substantially in those cities with the highest percentages.

That’s due in part to the foreclosure moratoriums that were in place through March. But it’s also due to low interest rates, the first-time homebuyer tax credit, and incredibly low prices — all of which have caused sales to surge in the below-$300,000 price range.

Take Vallejo for example. If you follow our weekly housing inventory report, you know that back in late February there were 796 homes on the market. As of Apr. 27, there were only 462 — that’s a 42% drop in the housing supply in just two months.

To see city-by-city totals for all 19 cities in our Solano and Central/East Contra Costa market area, click here. A few highlights from our custom report:

• Vallejo had the most REO (bank-owned) listings in the region with 172. That’s less than half of Feburary’s total (442).

• In Suisun City, where the housing inventory has dropped by 59% since the first of the year, 82% of its listings are still distress sales.

• The cities with the fewest REOs are Moraga (1), Clayton (3), Lafayette (3), Orinda (4) and Alamo (5).

• The most short sale listings are in Vallejo (219), followed by Antioch (214) , Fairfield-Green Valley (148), Concord (144), Pittsburg (134) and Brentwood (108).

• The cities with the fewest short sales are Moraga (3), Orinda (5), Alamo (11) and Clayton (11).

Our Distressed-Property Report is updated every 6-8 weeks. To  stay current on the market’s activity, be sure to read or subscribe to our weekly Solano County Home Sales & Listings Report, with the latest real estate listing, pending and sales statistics for each city in Solano County.

Coming later this week: How Far Back In Time Have Prices Really Fallen?

Further Reading

• See The Most Recent Weekly Report
• March ‘09 Benicia Home Sales
  
• March ‘09 Vallejo Home Sales
  
• March ‘09 Solano County Home Sales Report
• 1st Quarter ‘09 Housing Statistics
• Fairfield Claims Top Sales Honors For Entire U.S., According To Business Week
• Distressed Sale Listing Report as of Feb. 24, 2009

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Search The MLS — Click Here to search the MLS for either Solano or Contra Costa Counties.

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That means FHA borrowers in Benicia, Vallejo and the rest of Solano County will now be able to take out a $$557,500 loan, instead of the reduced $400,200 ceiling that went into effect Jan. 1.

In neighboring Contra Costa County, meanwhile, the FHA loan limits are again $729,750, up from the previous ceiling of $625,500.

Find The New FHA Loan Limits For The Rest Of The U.S.

RELATED READING

New Loan Limits Coming To Solano & Contra Costa Counties

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Those same five cities were at the top of the list back in early January, when I last prepared this report.

Pittsburg again leads the way, with a staggering 93% of its 409 listings either bank-owned (191) or short sales (also 191). A mere 27 listings are being sold by traditional sellers with enough equity to avoid selling at a loss.

Neighboring Antioch has an identical 93% distressed sales, with 45% of its 635 homes selling as an “REO” (foreclosure) and 48% selling by way of a short sale. Just 44 Antioch homes are fair-market listings.

Vallejo rounds out the top three, with 89% distressed sales. Even though Vallejo has seen a large increase in its sales activity in recent weeks, there are still 442 REOs and another 272 short sales on the market. That’s out of 798 total listings.

With REOs alone making up 55% of its listing inventory, Vallejo also has the dubious distinction of being the only city on the list with more than half its listings as foreclosed properties.

At the other end of the spectrum, Alamo (15%), Moraga (15%), Orinda (16%), Lafayette (16%) and Danville (20%) have the lowest percentage of distressed sale listings,  followed, in order, by:

• Walnut Creek (29%)
• Clayton (34%)
• Pleasant Hill (44%)
• Martinez (50%)
• Benicia (51%)
• Vacaville (65%)
• Fairfield-Green Valley (73%)
• Concord (75%)
• Brentwood (76%).

To see the full report, CLICK HERE. It details the current number of foreclosures, short sales and fair-market listings (totals and percentages) for each of the 19 communities in our market area.

Overall, very little has changed since I compiled the Jan. 7 report, as those cities with the most distressed sales back then still have similar numbers. Likewise, those communities with the fewest REOs and short sales still have very few.

Suisun City, Fairfield, Pleasant Hill, Lafayette and Moraga) all saw their percentage of distress-sale listings drop by between 5-8 percent. However, in some communities the current percentages are a tad higher than they were back in January.

On a positive note, even though their percentage of distress sale listings remains about the same as it was in January, the region’s Top Five cities all saw their total housing inventory drop between Jan. 7 and Feb. 23.

Housing Inventory Declines In The Top 5 Distress-Sale Cities (since Jan. 7)

• Suisun City — 26.8% fewer active listings
• Pittsburg — 15.1% fewer active listings
• Antioch – 13.5% fewer active listings
• Vallejo — 9.6% fewer active listings
• Oakley — 6.6% fewer active listings

The most surprising figures are for those communities with the highest prices (Lamorinda, Walnut Creek, Danville, Alamo). We’ve been hearing that the state’s highest priced cities are in for a large price correction, which should mean a rise in short sales and foreclosures in those cities.

Last week, I attended a luncheon where the chief economist for the California Assn. of Realtors gave the keynote address and she boldly predicted that those high-priced areas would see an average price drop of one to two percent a month throughout 2009.

But so, far the number of distress sale listings in those communities remains at or below what it was back in early January.

If you have any questions about these numbers or want to find out how they look in your specific neighborhood, please comment below or Contact Us.

I’ve been preparing this report about every six weeks. So look for the next report in early April. It will be interesting to see how much changes between now and then, particularly since changes called for under President Obama’s Housing Stability Plan and the Economic Stimulus Bill will by then have been in full swing for a good month.

Related Articles:

• Distressed Sale Listing Report (4-27-09)
• Weekly ACTIVE LISTINGS Report (2-23-09)
• Weekly PENDING & SOLD Report (2-23-09)
• View The Most Recent Weekly Market Update
• Vallejo January Home Sales
• Benicia January Home Sales
  
• Pre-Foreclosure Activity Down In 4th Qtr ‘08
  

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Search The MLS — Click Here to search the MLS for either Solano or Contra Costa Counties.

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For Solano County, that means both the FHA and Conforming ceilings will go up to $557,500. Since Jan. 1, they had been at $400,200 and $417,000 respectively.

In Contra Costa County, the limits will go from $625,500 to $729,750.

The new limits will mean an opportunity for buyers to obtain conventional and FHA financing on homes priced between the old loan limits and the new ones.

Our National Assn. of Realtors has prepared a table showing the new maximum limits for every county in the U.S. These limits aren’t official yet and won’t be until HUD publishes them (which should happen very soon after the bill is signed into law).

Click here for the new loan limits for the Entire U.S.

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Recent Articles:

• Breaking News: Congress Passes Stimulus Bill — Obama Says He’s Ready To Sign It

• More Stimulus Bill News: Higher Loan Limits, First-Time Buyer Credits & More

• Foreclosure Freeze By Citibank, Wells Fargo, Bank of America & Chase

• Breaking News: Compromise Stimulus Bill Axes Senate’s Proposed $15k Home Buyer Tax Credit

• If Senate Has Its Way Tax Credit Won’t Just Be For First-Time Buyers

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Search The MLS — Click Here to search the MLS for either Solano or Contra Costa Counties.

Details Still A Bit Sketchy, But Here’s What We’ve Learned So Far As It Relates To Housing

Though the actual bill itself hasn’t yet been made public, from what I’ve been reading in various real estate and general news outlets today, it looks like the Economic Stimulus Bill will, among other things, increase the maximum FHA and Conforming Loan Limits back to where they were in 2008.

Highlights of what I’ve cobbled together so far:

• As I reported earlier today, the Home Buyer Tax Credit, which up until now has been essentially a 15-year interest-free loan, will become a true tax credit. But it will remain for first-time buyers only — with income limits — and will be increased from $7,500 to $8,000 (the Senate had voted for a $15,000 credit that would be good for ALL owner-occupants, not just first-time buyers).

• Maximum loan limits for Freddie Mac/Fannie Mae and FHA loans will apparently return to what they were last year (the actual amounts haven’t been confirmed, so what’s shown here is based on the ‘word on the street’).’ In Solano County, Fannie/Freddie loans were $557,500 a year ago and are now $417,000. In Contra Costa, they were reduced from $729,750 in ‘08 to $625,500 this year. The FHA limits are $400,200 in Solano and $625,50o in Contra Costa County (same as the conforming limit). If the limits are returned to their previous ceilings, it would be easier for buyers of higher-priced homes to obtain mortgage financing.

• Local and state governments will receive funding to help offset some of the impacts brought on by the onslaught of foreclosures and abandoned properties.

• Increases the tax credit for certain energy-efficient home upgrades to $1,500 and extends the credit through 2010.

• Provides up to $1.5 billion for short-term rental assistance or other aid for families  impacted by the economic crisis.

Again, this list is by no means all-inclusive. And it’s subject to modification by lawmakers before Congress votes on it.

Once the bill is passed and signed into law by President Obama, I’ll post a follow-up article with details. And if things change again between now and then, I’ll provide an update as well.

So stay tuned…

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Related Articles:

• Breaking News: Compromise Stimulus Bill Axes Senate’s Proposed $15k Home Buyer Tax Credit
• If Senate Has Its Way Tax Credit Won’t Just Be For First-Time Buyers

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Statewide, notice of default recordings were down 7.7% during that period, but here in the Bay Area they were down 12.2%, led by Solano County, which had 20.9% fewer NOD’s recorded in the last quarter of ‘08 than during the same quarter of ‘07. Contra Costa was down 17.6%.

When a Notice of Default is recorded, that signals the “official” start of the foreclosure process. From that date, the borrower has three months to bring the loan current. If that doesn’t happen, then the lender can foreclose three weeks later.

So NOD recordings are a very reliable gauge of how many foreclosures are coming down the pike four or five months later.

On the surface that would seem to indicate that perhaps the worst is now behind us. But before you jump to such conclusions, consider a few things that could point to the contrary:

• The state passed a law prior to the fourth quarter (SB 1137) requiring lenders to contact borrowers to discuss alternatives to foreclosure at least 30 days prior to recording a NOD. So some NODs that might have normally been recorded during the fourth quarter may have simply been delayed several months by lenders complying with the new law.

• Once the moratorium on foreclosures by Fannie Mae & Freddie Mac from late November to the end of January comes to a close, the rumor on the street is that there will be a flood of new foreclosures. If that causes property values to drop further, it could force yet more people to throw in the towel, which would signal an increase in NOD recordings. And that would mean more future foreclosures.

While NOD recordings were down, Dataquick’s fourth quarter figures showed actual foreclosures up substantially during that same period of time. Statewide, there were 45.8% more foreclosures in Q4 of 2008 than 2007. Solano County, at 51.7 was a bit lower than the Bay Area average of 67.9%. Contra Costa had 48.3% more foreclosures in ‘08, almost identical to the statewide average.

For a complete county-by-county list, CLICK HERE.

Those three cities rank 1-2-3 in our market area, with distress properties accounting for 94%, 93% and 90% of their total listing inventory, respectively.

By comparison, the last time I prepared this report, back in late October, Antioch and Pittsburg each had 91% and Vallejo, 86%.

The news wasn’t much better for those right behind the Big Three: Suisun City, Oakley, Fairfield, and Concord, clocked in with 89%, 85%, 80% and 79%, respectively. Only Fairfield saw a decrease (albeit by a single percentage point). The other three cities all saw their percentages go up, including Concord, which jumped from from 72% in October to 79% today. Right behind Concord is Brentwood, at 77% (up from 76% in October).

In Vacaville, two-thirds of the listings (66%) are of the distress-sale variety, while Martinez (52%), Benicia (52%) and Pleasant Hill (49%) all have about one distress listing for every fair-market listing.

At the other end of the spectrum, even the region’s higher-priced communities are feeling more of a pinch than they were back in October. Compared to Antioch, Pittsburg and Vallejo, places like Alamo, Orinda, Moraga and Lafayette are hardly feeling the pinch. Yet, even in those towns, where you’ll find the fewest number of distress sales, the percentages are up from October.

Alamo at 13% has the lowest percentage, but that’s up from 9% in October. And Orinda (18% – 14%), Moraga (22% – 12%)  and Lafayette 24% – 7%) also all have a higher percentage of distress sale listings today than they did a little over two months ago.

Rounding out the list, Danville (24% – 16%), Clayton (33% – 25%), and Walnut Creek (31% – 24%) all also show higher percentages in early January than they did in late October.

You can download the entire current report and see all the raw numbers, including the number of bank-owned, short sale and fair market listings for each of the 19 cities in our market area. You’ll see that Vallejo again leads the region in the number of REO (bank-owned) listings, with 531, followed by Antioch (407) and Fairfield-Green Valley (334).  Those communities also are the short-sale leaders, with well over 200 short sale listings in all three communities.

As always, I welcome your comments. If you have questions about these figures or want to look at any of these communities more closely, we’ll be happy to assist you (as long as you’re not already in a working relationship with another real estate agent).

I plan to continue to compile my Distressed-Property Update on a regular basis (about every six weeks). So look for the next report towards the latter part of February...

These Antioch homes are all more than 2,200 sq. ft. and below $300,000

I’d pull up a property’s history and when they saw that the home they were about to pay $600,000 for had been purchased a dozen years earlier for $210,000, they’d say “if I’d only bought several homes back then when I had the chance.”

The ‘good ‘ol days, were long gone, with prices outpacing rents by such a long shot that any savvy real estate investor didn’t even have to crunch the numbers. Unless they were in it for a quick flip, they knew that the numbers didn’t come close to penciling out when a $550,000 home would only rent for $1,500/month.

No one expected those good ‘ol days to return anytime soon. But thanks to the subprime mess and fire-sale pricing on many bank-owned properties, in some Solano and Contra Costa communities, we’re once again at a point where the numbers are indeed penciling out again.

All you need to do is look in places like Vallejo, Fairfield or Antioch and you’ll find scores of homes in well-kept neighborhoods where current prices are down low enough to where investors are again licking their chops.

In Antioch, for example, right now there are 82 homes on the market below $350,000 which were built in the last 10 years and are at least 2,100 sq. ft. in size (more than half are over 2,500 sq. ft. and an even dozen are at least 3,000 sq. ft.).

Just a few years ago, many of these homes were selling for $600,000-plus. Most of the homes in these upscale neighborhoods are nicely landscaped, well-maintained and located amidst attractive parkways and boulevards. Some have views of rolling hills or the Delta.

And this isn’t just limited to Antioch. In Vallejo, for example, there are 67 homes on the market priced below $400,000 with at least 2,100 sq. ft. In Fairfield, there are 75. And another 24 in Vacaville.

Five years ago, if you wanted to buy something in that price range, you probably were either looking at a major fixer-upper or a small 30-year-old condominium or townhome in a complex that needed some TLC.

When the market finally turns around, homes like these in Antioch, Vallejo, Fairfield, Vacaville or Pittsburg should be well-positioned to attract buyers looking for the latest housing amenities, which could mean huge equity gains for those who recognize the opportunities that exist today.

Let’s say you invested $100,000 in a $300,000 home and were able to rent it out today for about the same as your payments. If prices go up to $350,000 five years from now, that’s a 10% annual return on your investment. If prices go up to $375,000, that’s a 15% annual return – or 75% of your money back within 5 years. Try to find another investment with the potential for such a huge upside.

Now of course, as with any investment, there always are plenty of “ifs.” Perhaps it takes 7 years for prices to go up that high. But then again, maybe it only takes 3 years. Obviously, nothing is for certain, but it only stands to reason that once the huge inventory of bank-owned homes work their way on and off the market, prices should then start moving back in the direction from which they came.

No one knows how fast they’ll go nor how high they’ll go. But it’s hard to imagine that many of these homes won’t be worth at least $400,000-$450,000 within the next 5-7 years. To me those numbers seem very reachable and VERY conservative, too. I wouldn’t be surprised to see some of these homes back in the $500,000s within the next 7-10 years.

And if that happens, as Yogi Berra says, it will be “déjà vu all over again.” Just like those buyers from 2004 and 2005 who bemoaned the opportunity they missed back in the early-to-mid 1990s, when the next housing boom finally arrives, many buyers then will be wishing they’d had the foresight to invest in real estate in 2008 and 2009.

If you ever want to explore the numbers and see what’s really available out there, as long as you don’t already have an agent, give me a call or send me an email and I’ll be happy to pull them up for you.