Restructuring: part one of the plan makes available $75 billion of U.S. Treasury funds to restructure the loans of homeowners who are behind, or likely to fall behind, on their mortgage payments. The intent is for lenders to lower the borrower’s monthly payment to 31% of the borrower’s monthly gross income. This does not imply a principal reduction, but could include a reduction in interest rate.

This plan does not apply to investors, or those of us with jumbo mortgages, and the Treasury will not subsidize any mortgage adjustments that require an interest rate below 2% to get to the aforementioned 31% threshold.

Refinancing: the second part of the plan helps homeowners refinance into cheaper loans even if the homeowner is “upside down” on his mortgage. Fannie Mae and Freddie Mac, the quasi-government housing agencies, will refinance up to 105% of the value of the homes already held or guaranteed by Fannie and Freddie.

Recapitalizing: part three adds $200B to the money allocated to Fannie and Freddie in order to keep all this going.

So there you have it: the three-part plan from our national government. Now, of course, the Federal Reserve Bank is working through its monetary policy to backstop and stimulate with trillions; the Congress has also just approved a stimulus/bailout/spending plan for another trillion, so bucks are being borrowed and spent in order to soften the already hard landing we have been feeling in the real estate market.

Conclusion: does any of this directly or indirectly affect you? The answer is maybe directly, and probably indirectly. Neighborhoods with low turnover since 2005 have been less affected by foreclosures and short payoffs, as compared with other neighborhoods where turnover was high near the top of the market. If you and your neighbors have been in your homes for many years, that’s probably a good thing for all!

Some of us may be able to take advantage of the new bailout plan, which is supposed to be available beginning March 4th, when additional details are also supposed to be available. If you are interested in finding out how this all applies to your home mortgage – give us a call at (949) 240-5892, or drop us an email.

Just this past Friday, for the first time, I received an announcement via email for a mortgage, with the interest rate quoted at 4.375% with a typical 1-point origination fee (4.5% APR). That rate applies to a conforming loan under $417,000; higher rates apply to larger mortgage amounts.

Four-something for a 30-year fixed? That is a benchmark of historic proportion! It could be the beginning of the much needed bottom in Orange County housing prices, if the opportunity for rates like those lasts awhile, and if lenders regain their footing in the market.

It’s condo time! Investors, first-time buyers, and parents who want their kids to be nearby after graduating high school or college (but not THAT nearby…), now might be a great time to make an investment in the future.

Owner-occupied (think: the kids) purchases can be made with very little downpayment. VA and FHA-insured loans are available with only a small investment, but are accompanied by higher monthly payments, of course.

But with a larger downpayment and a conventional mortgage, break-even cash flow is closer to reality than any time in a decade.

Here’s another thought, for those of you who are inclined towards single family homes rather than condos: 20 percent downpayment will buy a single family residence in Orange County, and still get under the magic conforming figure of $417,000 to get those great 4.x% loans. And rates are still extremely low for loans above $417,000….lower than any time in the past few years.

Have we piqued your “interest?” Rates in the “fours” won’t last forever. What an opportunity! Call us at (949) 240-5892, or send us an email, and let’s start strategizing and building a real estate portfolio!

Not every account or account holder is eligible. Those of us with self-directed IRA’s are among those with the option of investing our retirement funds in a variety of products other than stocks, bonds and mutual funds.

For many years, it has been possible to benefit from the real estate market through investment in real estate investment trusts (REIT’s). REITs have been attractive for many reasons, including professional management, high dividend payouts, and appreciation of the underlying assets (the shopping centers, apartment buildings, office complexes, and so on). But now, in addition to REITs, investors can take a more direct route to owning the underlying property.

Of course, there are restrictions and rules. But some of the categories of real property, eligible for these programs, include:

• Single-family and multi-unit homes
• Apartment buildings & co-ops
• Condominiums
• Commercial property
• Improved or unimproved land

This article on real estate investing within retirement accounts from Investopedia is a good starting point for more information about this topic. Contact us or give us a call at (949) 240-5892 to discuss your goals and visions for increasing your real estate portfolio while prices are low.

Earlier in the year, the investment firm, Bear Stearns, was “bailed out” through actions of the Federal Reserve Bank and the U.S. Treasury Department. More recently, and with direct impact upon our real estate market, the Federal Government took control of both Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are (were) what is (was) known as GSE’s, or governement sponsored entities. In other words, these GSE’s behaved like private corporations (badly), but were implicitly backed up by the strength and credit of our Federal Government. So the new owners of Fannie and Freddie are, you guessed it, you and us!

This week brought even more turmoil, and finally, some “resolution” as well, when the Treasury Secretary announced the planned formation of a government entity to purchase and process bad loans, similar to the Resolution Trust Corporation that was formed after the savings & loan debacle in the 1980’s. How does all of this relatively bad news all affect your home’s value?

Inventory of homes for sale on the market is high, but what’s worse, the inventory is dominated by bank-owned foreclosures and properties subject to lender short-payoff (more on “short pays” in a later column). Despite the argument that Uncle Sam (all of us, again) should not be in the business of buying bad debts from dumb lenders, the efficient disposition of these loans and properties should help to lessen their impact on our residential resale market in Orange County. The sooner we get back to a “normal” market of buyers and sellers, helped by lenders who happily make loans to qualified purchasers, the better off we will all be as homeowners.

Today’s headlines were bleak:

1. KB Home Swings to Third Quarter Loss, Sees Worsening Market in 2008
2. New Home Sales Tumble to 7-Year Low
3. Foxtons May File for Bankruptcy

“We expect housing industry conditions to continue to worsen through the end of the year and into 2008,” according to Jeffrey Metzger, CEO of KB Home.

Sales of new homes dropped by 8.3 percent in August from July, the Commerce Department reported Thursday, driving down sales to a seasonally adjusted annual rate of 795,000 units. That was the lowest level since June 2000.

Foxtons, one of our nation’s large discount real estate brokers, announced that it was “releasing” 350 of its 380 employees, and “may be filing for bankruptcy protection in order to close the business in an orderly fashion.”

(I feel sympathy for the employees, who were salary-based agents in this low-cost model. More so, I’m concerned about the chaos that faces Foxtons’ current customers, reportedly numbering 4400 sellers on the East Coast. The moral of the story: hire an agent that has been around a long time, through good and bad markets. Christe and I have been in business for nearly twenty years, including the down market of the early ’90’s. And we’ll be here for a long time to come!)

On the brighter side: Interest rates continue to fall from their panic peak of August. The LIBOR index, which is the basis of many adjustable mortgage rate mortgages, has dropped to nearly 5.1%, from nearly 6% when the panic hit last month.

National housing trends are not NECESSARILY the same as those in Orange County. Have you heard the expression, “all politics is local”? Well, the same principal applies to real estate. Some regions will fare better than others; in Seattle, for instance, prices have actually been climbing selectively this summer.

Is O.C. immune from a national decline? Of course not. To be sure, the trend is definitely DOWN right now. Inventory in some price ranges, and in some neighborhoods, is high. In others, inventory is lower. So even within a local market such as ours in O.C., there will be gradients of supply and demand across the spectrum of price and location which will ultimately determine sales price.

Would you like more data? Our Market Update section presents only a brief snapshot of active listings and this year’s sales, in the production homes, and amongst the custom homes and homesites. Want more? Let us know what you need, and we will happily provide to you additional facts and figures. Market evaluation of your home? Of course. It would be our privilege to do so.

It is our pleasure to feature this month on CovenantHills.info one of the community’s most recently completed estate homes, and one of its finest. The estate at One San Jose Street is a gorgeous Spanish Revival, ready for occupancy, complete with salt-water pool & spa, outdoor cook center, and lush mature landscaping. Walking through the home, I have been charmed by the the elegant appointments and quality materials chosen by the architect and builder. Even outdoors, there is an obvious sense of serenity and refinement, thanks in part to a centralized music system and the privacy afforded to the property by its end of cul-de-sac location and gated motorcourt. It would be our privilege to provide prospective home buyers with a private tour of this fine home. Contact us today »

We welcome your help! If you have information or perspective to contribute, please do! Contact us with your suggestions, or corrections, and as is typical with weblogs, posts and articles are open for comments. And if you, or a family member, friend, co-worker, or neighbor, is interested in selling a home, in Covenant Hills, or elsewhere, give us a call at (949) 240-5892.

Coming soon to CovenantHills.info: more in-depth “info” about your Realtors, and more detailed “info” about the homes of Covenant Hills.

At your service,

Mark & Christe Roknich