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  • Year over Year Price increase in Home Sales in the Beach Cities

    Posted on January 16th, 2014 acimetta No comments

    If you’re interested in seeing the general trend in prices, here’s the latest from DQ News, comparing prices from October 2013 to October 2012 in the South Bay:

    Average Sales Price

    City                                         October 2013             October 2012                      Increase

    Hermosa Beach                  $1,399,000                 $835,000                             67.54%
    Manhattan Beach               $1,386,000                 $1,137,500                            21.85%
    Redondo Beach                   $747,500                    $700,000                              6.79%

    Redondo Beach had 70 transactions in October, the highest number of the three Beach Cities. Manhattan Beach had 40 and Hermosa had 24.

    The trend appears to still be going up. Inventory is still low, and there’s enough demand to continue to push prices up. I don’t think we’re going to see the frenzied pace that we saw in the beginning of 2013, but there will be plenty of activity.

    The real estate industry could be tapered by the new Qualified Mortgage standards (effective as of January 10th) which require a borrower’s debt to income ratio to be no more than 43%. Of course, this could just mean that the big lenders are going to continue to grab the lion share of the business since they are less impacted by the QM guidelines; they can hold on to their loans rather than selling them on the secondary market which is dictated by Fannie and Freddie.

     

  • Qualified Mortgages Could Impact Buyers Ability to Borrow

    Posted on January 13th, 2014 acimetta No comments

    Qualified Mortgage (QM) standards kicked in as of January 10, 2014. Under the Dodd Frank Reform Act, lenders will need to meet more stringent guidelines in order to fall under the QM safe harbor, be protected from liability. Otherwise, they may be held liable for selling a loan that a borrower can’t afford. One of the major points of QM is that the borrower can’t have their total debt exceed 43% of their total income. There are many borrowers who purchased homes last week that exceeded the 43% Debt to Income ratio. Today, they would not be able to get the same loan.

    In my opinion, these new rules under QM are going to shrink the lending landscape even more. Smaller lenders may get out of the mortgage business altogether because it may prove to be too risky for them. It’s the big lenders who will benefit from these new rules. Many of them plan not to adhere to these rules because they can keep the loans in their own portfolios rather than sell them in the secondary market.  And now they will have less competition and larger share of the business.

    We will see how this all plays out in the coming weeks and months. But if you’re looking to buy a home and your debt (including the mortgage) exceeds 43% of your income, then you will probably be doing business with one of the big lenders like Wells Fargo, Bank of America, and Chase. Wells Fargo, for instance, will still go up to 50% debt to income ratio.