The media continues to report significant declines in foreclosures and notice of default filings throughout the entire state of California. Existing REO or “bank owned” inventory continues to trickle to market with no big waves expected. Fannie Mae, Freddie Mac and leading lending institutions are said to have pared down their REO agent rosters. Short-Sales are filling the void as more favorable decision making policies and processes have gained momentum.

“Locally, in the 4-county areas that comprise the Greater Sacramento Market, Buyers are stressed”, said Pat Shea, President of Lyon Real Estate. “There are multiple offers in all “entry level” price points and most move up markets. Inventory and interest rates hover at historic lows while consumer confidence begins to turn. Agents are currently working with many first time buyers who feel they have waited long enough,” continued Shea. “There are also, many previous home owners entering the market after re-building their credit worthiness after a distress sale. Meanwhile, investors maintain an insatiable demand to purchase entry level homes, all cash or with large down payments, and lease them at strong market rents.”

March, newly opened sales were up double digits year over year in: El Dorado 40%, Sacramento 36%, Yolo 22 % and Placer 19%. This continues the positive year over year pattern that began in October. Equally notable, sales above $400,000 increased year over year as follows: Sacramento 55%, Yolo 52%, and El Dorado 23%. Placer experienced 7% fewer sales in this price point which is likely an anomaly given their average sales price has moved north of $300,000.

There are 1.6 months of inventory available in the Greater Sacramento area at the current rate of sales. Appreciation is well underway in the Bay Area and is starting to show signs in our market. Even in the $400,000 and above price point, we are limited to 4.3 months of inventory. That number is widely considered to be a Seller’s market metric.

The Access downpayment assistance program allows low-to-moderate income homebuyers the ability to finance most of the associated downpayment through a second loan. This means buyers can purchase a home with only a 1/2% out-of-pocket funds. Best of all, you don’t have to be a first-time homebuyer to utilize the program!

Access Benefits:

• Up to 3% of the sales price in downpayment assistance as a 2nd loan
• NO first-time homebuyer requirements
• FHA 30-year fixed 1st loan
• May own other properties (Access program must be used on owner-occupied primary residences only)
• Seller can contribute up to 6% of sales price
• Gift funds allowed
• Proceeds may be used for downpayment and/or closing costs

Access Guidelines:

• Income limits apply
• 15-year fixed rate fully amortizing 2nd loan (Monthly payment required)
• FHA 30-year fixed 1st loan

Some home shoppers today choose to hold off buying a home fearing home prices will continue to drop, and they may miss an opportunity to purchase a home at a lower price. What many fail to realize, though, is even if home prices drop, if interest rates increase by 1 or 2%, their monthly payment will actually be higher. Currently interest rates are at historic lows, but they will not stay there for long. When interest rates increase, buyer purchasing power decreases.

The chart below compares loan payments and purchasing power if both of the above were to occur at the same time. Payments are based on a 30-year fixed FHA loan with 3.5% down.

Significant, year-over-year growth in new purchase contracts continued its run straight through February and into March. This sales trend, as well as historically low inventory levels, is causing many people to believe the Greater Sacramento Real Estate Market is truly bouncing around rock bottom.

Four core counties enjoyed the following individual, new-sale increases in February of 2012 versus February 2011: El Dorado 46%, Sacramento 43%, Placer 38% and Yolo 26%. The combined counties also experienced a 1% increase in average sales price, which closed at $214,000.

Equity and Short-Sale contracts continued to grow as a percentage of both closed escrows
and new sales, while bank-owned (or REO) listings persisted in their decline. These new sales contracts for February broke down as follows: Equity 33.4%, Short-Sale 43.4% and REO 23.2%. The rates of default and foreclosure also continue a slow but steady decline both nationally and locally.

Months of inventory remains an uneasy yet compelling topic. This metric reflects how swiftly inventory will deplete at the current rate of sale and zero new listings. Our four counties currently reveal the following: Sacramento 2.0, Placer 2.1, Yolo 3.0 and El Dorado 3.5. The combined inventory is a convincing 50% less than February 2011.

There is just one additional vital sign on the rise. 303 new sales over $400,000 marked a 44% improvement over January and a 32% increase over February of 2011. “Here are the Cliff Notes: prices are low, interest rates are low, inventory is low and multiple offers are high. So if you are a Buyer, it’s definitely time to get busy,” said Pat Shea, President, Lyon Real Estate. “Homeowners with little or no equity might also consider making their move since prices and accompanying interest rates are certain to climb. It may just be the best time to secure your dream home.”

So what do you think? Has the Sacramento and surrounding area real estate markets reached bottom? Share your thoughts by commenting below.

In today’s real estate market, many buyers are opting to use FHA financing. FHA loans allow for a minimum down payment of 3.5% – making this Government insured loan especially attractive to first-time homebuyers and those re-entering the housing market. Last year, the Mortgage Insurance Premiums (MIP) were increased and many homebuyers were priced out of the market as a result.

Effective April 9, 2012, FHA has increased their Mortgage Insurance Premiums again. This change shouldn’t price people out of the market, but there is an impact to their monthly payment.

After April 9, 2012, the Upfront MIP will go up 0.75% to 1.75% of the loan size and the Monthly MIP will go up 0.10% and be calculated at 1.25% of the loan size. What does this mean?

• At $150,000 – With an Interest rate of 3.875%* (4.796% APR), the mortgage payment will increase approximately $18.
• At $200,000 – With an Interest rate of 3.875%* (4.767% APR), the mortgage payment will increase approximately $24.
• At $250,000 – With an Interest rate of 3.875%* (4.746% APR), the mortgage payment will increase approximately $31.

After April 9, 2012, you won’t have any choice but to accept these terms if you are obtaining an FHA mortgage. However, prior to that date, you may have a choice. As long as you are in contract prior to the effective date and your FHA Case Number has been assigned – you will be subject to the current, lower MIP calculations. You do not have to close escrow prior to April 9th. That means, if you’re thinking of buying a house in the next couple of months, and you’re using FHA financing, now is the time to act. Let’s get going! Get off the fence and keep some extra money in your pocket instead of waiting until after this important deadline!