LOS ANGELES (Aug. 29) The percentage of households that could afford tobuy an entry-level home in California stood at 24 percent in the second quarter of2007, compared with 23 percent for the same period a year ago, according to areport released today by the CALIFORNIA ASSOCIATION OF REALTORS®(C.A.R.).

C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI) measures thepercentage of households that can afford to purchase an entry-level home inCalifornia. C.A.R. also reports first-time buyer indexes for regions and selectcounties within the state. The Index is the most fundamental measure ofhousing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at$504,080 in California in the second quarter of 2007 was $101,550, based on anadjustable interest rate of 6.29 percent and assuming a 10 percent downpayment. First-time buyers typically purchase a home equal to 85 percent ofthe prevailing median price. The monthly payment including taxes andinsurance was $3,380 for the second quarter of 2007.

At 45 percent, the High Desert region was the most affordable in the state,followed by the Sacramento region at 44 percent. Santa Barbara was the leastaffordable region in the state at 12 percent, followed by the Monterey region at17 percent.

Quarterly FTB-HAI historical data from 2003 – 2007 is available on C.A.R.Online at http://www.car.org/index.php?id=MzY0ODU.

Leading the way...® in real estate news and information for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® ( file:///C:/exchweb/bin/redir.asp?URL=http:/www.car.org/) is one of the largest state trade organizations in the United States, with nearly 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

C.A.R. FIRST-TIME BUYER HOUSING AFFORDABILITY INDEX *

NAR: Existing-Home Sales Stabilize in July

Existing-home sales were essentially unchanged in July, with increases in the West and Northeast offset by a decline in the Midwest, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — slipped 0.2 percent to a seasonally adjusted annual rate of 5.75 million units in July from an upwardly revised pace of 5.76 million in June. They are 9 percent below the 6.32 million-unit level in July 2006.

Lawrence Yun, NAR senior economist, says the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he says. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.”

However, the rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is a promising sign, especially since this was the first region that underwent sales and price weakness after the boom, Yun says. “Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path,” he notes.

Regional Sales

Here’s how existing-home sales fared across the country:

* West: rose 1.8 percent in July to an annual pace of 1.12 million, but are 15.2 percent below a year ago. Median price: $349,400, up 0.9 percent from July 2006.

* Northeast: increased 1 percent to a level of 1.02 million in July, but are 2.9 percent lower than July 2006. Median price: $290,900, up 5.9 percent from a year ago.

* South: unchanged at an annual rate of 2.26 million in July, but are 10.7 percent below a year ago. Median price: $186,300, down 3.2 percent from July 2006.

* Midwest: fell 2.2 percent in July to a level of 1.35 million, and are 5.6 percent below July 2006. Median price: $173,800, which is 1.8 percent below a year ago.

Single-Family Home Sales Slip, Condos Rise

Overall, single-family home sales dipped 0.4 percent to a seasonally adjusted annual rate of 5 million in July from an upwardly revised level of 5.02 million in June. Those numbers are 9.3 percent below the year-ago pace of 5.51 million units. The median existing single-family home price was $228,600 in July, down 1 percent from July 2006.

On the other hand, existing condominium and co-op sales rose 1.4 percent to a seasonally adjusted annual rate of 750,000 units in July from 740,000 in June. But condo an co-op sales are 7.5 percent below the 811,000-unit level in July 2006. The median existing condo price was $230,600 in July, up 2.4 percent from a year ago.

NAR President: A Good Time to Buy

NAR’s latest research on July housing figures also revealed:

* The national median existing-home price for all housing types was $228,900 in July, down 0.6 percent from July 2006 when the median was $230,200 — the highest monthly price on record. The median is a typical market price where half of the homes sold for more and half sold for less.

* Total housing inventory rose 5.1 percent at the end of June to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. That number is up from an upwardly revised 9.1-month supply in June.

* The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.7 percent in July, up from 6.66 percent in June, according to Freddie Mac. The rate was 6.76 percent in July 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.52 percent.

“For buyers able to qualify for conventional financing, there are ample opportunities in the current market,” says NAR President Pat V. Combs. “Availability and pricing of conventional loans are reasonable, and FHA-insured mortgage applications have been rising as low- and moderate-income buyers seek alternatives to subprime loans. If buyers are in it for the long haul, now can be a good time to get into your home.”

But Combs says it’s important to boost FHA’s viability. “NAR is advocating for a stronger FHA to help creditworthy borrowers who may be trapped in subprime loans with unfavorable terms,” she says. “We’d also like to see the elimination of prepayment penalties, which can trap borrowers in mortgages they can no longer afford.”

— REALTOR® Magazine Online

Mortgage Crisis: What Went Wrong?

Nearly 2 million mortgages are scheduled for rate increases this fall, which is expected to send foreclosures soaring.

President Bush has blamed the failure of borrowers to read the fine print. But many experts say the problem runs much deeper. The mortgage business has long been a tug of war between a social commitment to broad homeownership and the efforts of private financial operators to earn money.

Robert Kuttner, co-editor of The American Prospect and a senior fellow at Demos, a New York-based think tank, says the government should resume directly subsidizing starter mortgages and construction of homes for moderate-income buyers. He says these programs need to combine careful credit assessment with counseling, rather than relying totally on the private mortgage industry. He says he also would prevent irresponsible, speculative lenders from selling mortgages in the secondary market.

“We've now had an experiment in the claims made for mortgage deregulation, extending over three decades, and deregulation flunked," Kuttner says. "America needs to restore a system in which government supports homeownership — and makes sure that mortgage lenders serve as responsible creditors, not predators.”

Source: The Associated Press, Nathan K. Martin (08/19/07)

Fed Cuts Discount Rate, Promises More

In an effort to stabilize financial markets, the Federal Reserve last Friday cut the discount rate that it charges to make direct loans to banks from 6.25 percent to 5.75 percent.

The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year, but it sent a strong signal in the wording of its statement that it was prepared to cut that rate as well.

In making the reduction the Fed stated, "the downside risks to growth have increased appreciably." It didn’t refer to inflation, which was the concern that previously kept it from cutting the federal funds rate.

"They provided a much needed response to the growing market turmoil today, but they will have to do more," said Mark Zandi, chief economist at Moody's Economy.com.

The move to cut the discount rate will not have a major impact on consumer interest rates in the way that cutting the federal funds rate triggers an immediate drop in banks' prime lending rate, the benchmark for millions of consumer and business loans.

However, Friday's move was expected to help with a severe cash crunch facing many businesses, including mortgage companies, which are having trouble getting loans for short-term financing needs.

Source: The Associated Press, Martin Crutsinger (08/17/2007)

Buy Retirement Home Now, Move in Later

With prices in many areas at a low ebb, it might make good financial sense for Baby Boomers to buy their retirement homes now, even if they're still years away from actually moving. They can find renters who will pay the bills until they're ready to live there.

Here’s some advice for people who are considering this strategy:

* Shop carefully. It's best to buy a home that can be rented for a rate that, after tax considerations, will cover the mortgage, real estate taxes, and insurance.

* Study up on housing trends. Ask the local or state planning department for demographic and economic data. The information can reveal facts that will influence whether or not to buy. For example, big companies going out of business or military base closings can be bad news.

* Don’t forget maintenance. Consider who’ll take care of the house in the owner’s absence. Property managers charge 6 percent to 15 percent of the monthly rent. Family members may be willing to do the job for free, but they could be ill equipped to do the job if the don't have any experience.

* Consider financing. Boomers with sufficient equity in their current homes can tap it to either buy their retirement home outright or secure a much lower mortgage rate compared with a loan at the rate often offered to buyers of investment property.

Source: The Washington Post, Belly L. Kass, Esq. (08/11/2007)

Kinder, gentler lenders

Mortgage servicers are finding ways to treat delinquent borrowers more patiently to avoid foreclosures.

NEW YORK (CNNMoney.com) -- The light at the end of the subprime tunnel seems a long way off, but some lenders are trying to get there without losing too many customers.

A flood of hybrid adjustable rate mortgages (ARMs) comes up for reset this fall - peaking in October with more than $50 billion due, with more delinquencies than ever expected. Foreclosures could explode, which would hurt everyone on the food chain: Borrowers lose their homes; lenders lose their payments; local governments lose tax base; and neighborhoods lose resiliency.

Rather than head straight to foreclosure though, many lenders are finding ways to help troubled borrowers -- although assistance is still less than universal.

"Servicers are beginning to understand that they're better off renegotiating," said Bruce Dorpalen, director of housing development for the Association of Community Organizations for Reform (ACORN), a non-profit community development group. Their average loss on a foreclosure for a lender is now $58,000, he said.

Lenders are beefing up mortgage mitigation departments and instructing staffs to offer more concessions, according to Vicki Vidal, Senior Director of Government Affairs for the Mortgage Bankers Association (MBA). Many of the concessions have been around for years, but they're now getting more play.

The first is a simple forbearance. Lenders allow delinquent borrowers to repay arrears later.

Say a borrower has a one-time money drain, like a large hospital bill. If he's $2,400 behind, the lender will accept an extra $200 a month for the next 12 months. Or, it can tack the $2,400 on the end of the loan, either as a one-time payment or as extra months of bills.

Forbearance is less useful for borrowers facing hybrid ARM resets. They may have fallen behind after their initial "teaser rates" expired, and their payments jumped. Forbearance can't help because the new payments are simply unaffordable.

Lenders can modify the mortgage, however, by changing the loan's length or its interest rate; they can even switch it to a fixed-rate loan from an ARM, all of which lower payments. Borrowers who've demonstrated good credit by keeping current with their bills during lower rate years are the likeliest candidates.

Another mitigation option is open only to delinquent borrowers with mortgages issued and insured by the Federal Housing Administration (FHA). They may be eligible for partial claim payments, one-time payoffs from the FHA's insurance fund that wipe out arrears.

Other foreclosure prevention options may help save borrowers' credit, but they don't keep them from losing their homes.

A deed in lieu of foreclosure has owners signing their deeds over to lenders, allowing them to walk away without obligation. You lose the house, but it doesn't appear as a foreclosure on your credit report.

Lenders can also encourage "short sales," third-party transactions in which new buyers offer less than the mortgage debt in exchange for properties. The practice has been around, but what's new, according to Vidal, "is that companies are looking more closely at how deep they can go."

In the past, a substantial difference between the loan balance and the third-party offer would derail a short sale. But with prices falling and inventories growing, lenders are more willing to accept lower short-sale prices.

An ounce of prevention

Even before emergency efforts are needed, lenders are taking new steps to keep borrowers out of trouble. Many are joining non-profit agencies, such as ACORN and NeighborWorks to reach out to risky borrowers.

Doug Robinson, a spokesman for NeighborWorks, said, "Lenders, like Countrywide in particular, have stepped up their borrower outreach efforts. They want to contact borrowers before the problem grows unsolvable."

Amy Schur, ACORN's national campaign director, said her organization is working with 35 mortgage servicers on a home ownership preservation initiative. Partners include the biggest names in mortgage lending: Countrywide (Charts, Fortune 500), Citibank (Charts, Fortune 500), Wells Fargo (Charts, Fortune 500) and JP Morgan Chase (Charts, Fortune 500).

"It's a case-by-case system where we all work very hard to get the best outcome for home owners," she said. In some cases, lenders have even forgiven arrears and just allowed borrowers to resume payments.

Counseling often focuses on lifestyle changes: helping a borrower figure out how to cut back on unnecessary or wasteful spending. That's sometimes enough to free up sufficient cash for the mortgage payment.

Some lenders are even hiring employment specialists to find new jobs for clients, according to Vidal.

The biggest hurdle, however, is simple communication. According to NeighborWorks, nearly 50 percent of all owners of foreclosed properties never once talked to their lenders before losing their home. If they had, the outcomes may have been different.

By Les Christie, CNNMoney.com staff writer
August 6 2007: 1:03 PM EDT

Lenders Get Creative With Delinquent Borrowers

In an effort to talk with delinquent borrowers who have not answered their numerous phone calls, mortgage servicers are getting creative.

Quantum Servicing Corp. plans to mail out 100 prepaid cell phones at no cost to borrowers, although they will have to first make contact with the company in order to activate the phones for personal use.

While some experts believe such a move is cost-prohibitive, Quantum executive Joe Caravetta says the company can save upwards of 70 percent of the mortgage's value by helping borrowers avoid foreclosure.

A face-to-face approach is preferred, meanwhile, by Marix Servicing LLC of Phoenix, which will send representatives to borrowers' doors and present them with a cell phone already connected to a loss-mitigation worker.

Source: American Banker, William Launder; Kate Berry (07/18/07)

Survey: Borrowers Say Lenders Are Less Patient Today

Lenders are less accommodating to mortgage customers who pay late than they were in 2006, according to a consumer survey by J.D. Power and Associates.

The survey measured customer satisfaction with their mortgages company based on four primary areas: the administration of the customer's account, the billing process, the payment process, and the process of contacting the mortgage servicer.

The study determined that mortgage companies are more flexible in rescheduling payments than they were a year ago, but are less likely to be understanding or patient when customers pay late.

The 2007 Primary Mortgage Servicer Study is based on responses from 11,481 home owners regarding their experiences with their primary mortgage servicer. The study was fielded in three waves in November 2006, February 2007, and May 2007.

Here are the 10 mortgage companies that scored highest, based on a 1,000-point scale:
BB&T (Branch Banking and Trust), 860
M & T Mortgage, 828
Citizens Bank, 825
Countrywide Home Loans, 824
SunTrust Mortgage, 822
First Horizon Home Loans, 818
Wells Fargo, 817
GMAC Mortgage, 816
Regions Mortgage, 807
CitiMortgage, 805

— REALTOR® Magazine Online