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Happy New Year from Moser Realty Group

Posted by Greg Moser on January 1, 2014

Happy New Year from Moser Realty Group – I hope everyone had peaceful Holiday Season and were able to enjoy the amazing San Diego weather we’ve been having.

2013 was a great year for San Diego homeowners. We saw record home sales figures that fueled the best yearly gain we’ve seen in prices since 2006. With 2013 behind let’s hope 2014 is even better.

To get everyone up to speed for 2014 I want to touch on a few new topics. There are several new laws for 2014, enacted by updated or new federal lending regulations. These changes will affect current homeowners as well as speculative homebuyers. Several of these new laws will have a greater impact here in California as property values are higher and loan amounts are greater than any other State other than New York.

As many of you have heard the Federal Reserve has decided to taper their quantitative easing program. With the Fed’s decision to back out of the Bond buying arena investors are now seeking premiums, driving interest rates up. On Tuesday the median interest rate for a 30 Year Fixed Mortgage was 4.52%, up almost 3/4% from October. This isn’t necessarily bad news. With the increase in interest rates and lack of “equitable opportunities”, investors will be forced out of the market helping inventory levels increase as demand starts to improve. Once we start to see a firm stabilization in price points lenders will open up new lending programs that we desperately need here in California.

Several top real estate surveys are predicting that homeownership levels rise roughly 65%, just 5% percent below the record level of 70% in 2006. Appreciation rates are expected to raise between 4-6% with a median interest rate on 4.5% on a 30 Year Fixed Mortgage. That is excellent news especially when you factor the 5.4% increase we saw in 2013.

With all of the good news there’s a little bad news to go along.

The Department of Housing and Urban Development (HUD) announced that it will implement new FHA single-family loan limits on January 10, 2014, as specified by the Housing and Economic Recovery Act of 2008 (HERA). The current standard loan limit for areas where housing costs are relatively low will remain unchanged at $271,050. The new national-ceiling loan limit for the very highest cost areas will be reduced from $729,750 to $625,500, here in San Diego it goes from $697,500.00 down to $546,250.00 – OUCH.

If you are asking why, here is the answer: The higher limits that have been in place for six years were established by the Economic Stimulus Act of 2008 as emergency measures to assure that mortgage credit was widely available during a time when private lending options were severely constrained. The lower loan limits under HERA were originally scheduled to take effect in January of 2009, however, due to continuing strains in credit markets, Congress delayed implementation several times.

Now these changes in all reality will take several months to take hold (if Congress doesn’t extend again). The goal of the new mortgage rules from the Consumer Financial Protection Bureau is to better protect borrowers from the lax underwriting that wreaked havoc on people and the housing market – – so they say. The regulations are designed to ensure a borrower’s “ability to repay” a mortgage while also offering lenders protection from borrower lawsuits so long as they make safer so-called qualified mortgages. The borrowers most likely to be affected are those on the lower and higher ends of the lending spectrum. Several Housing experts that were polled said one effect of that rule could be that consumers looking for loans in the $100,000 to $150,000 range may find fewer lenders from which to choose. That’s because a loan has to go through the same amount of paperwork and underwriting, regardless of whether it’s for $100,000 or $400,000. Under another part of the rule, a borrower’s overall debt can make up no more than 43% of gross income (DTI). The effect of that provision will be muted, however, because at least temporarily, it does not apply to loans that will be purchased by Fannie Mae or Freddie Mac or backed by the Federal Housing Administration. Jumbo mortgages also could become harder to receive because they too must meet the 43% debt-to-income ratio to be considered a qualified mortgage. Here is San Diego we most likely see little if any affect at all as the median price point here is well above $400,000.00.

If you have about the new Federal changes coming in 2014, please call my or email me today. I hope everyone the best in the coming year. As always, Moser Realty Group will be here to help in any way we can.

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