Looks like things are looking up...

First-time home buyers and investors chasing foreclosures continued to fuel the housing market in Riverside and San Bernardino counties last month, pushing prices down and sales up despite worsening economic conditions, according to figures released Tuesday by a real estate information service.

In Riverside County, where foreclosures represented more than 70 percent of the market, there were almost 49 percent more sales last month than in November, 2007, although the median price of the homes that sold fell more than 38 percent to $220,000. In San Bernardino, where repossessed homes accounted for almost 68 percent of sales, the median price dropped to $185,250, down almost 44 percent from a year earlier, while sales increased almost 39 percent.

Throughout Southern California home sales outpaced last year for the fifth consecutive month in November, with 55 percent of buyers of resale homes choosing repossessed properties, said San Diego-based MDA DataQuick in its monthly report on the housing market.

"Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory. There's this renewed sense that you can score a 'deal' - something that had been missing for many years," DataQuick President John Walsh said in a prepared statement.

But last month's home sales in Southern California were still the second lowest for any November in 16 years, Walsh added.

Robert Kleinhenz, deputy chief economist for the California Association of Realtors said November sales held up remarkably considering the blows to the nation's financial market that occurred in September and October, including the federal government's takeover of lenders Fannie Mae and Freddie Mac.

Sales are being buoyed by mortgage money that the federal lenders are pumping into the housing market and by low mortgage rates and dramatically more affordable home prices, Kleinhenz said. However, the lending industry's fear of risk is making it difficult for people to qualify for mortgages, he added..

Foreclosures will continue because of high-risk loans made during the housing boom, now combined with rising unemployment, Kleinhenz said. He said he expects foreclosures, which are depressing home prices, will peak in the second or third quarter of next year. "We have not seen a bottoming out of home prices," he said, predicting that the summer of 2009 is the earliest that home prices may stop falling.

Improved affordability is providing opportunity for first-time home buyers. "A lot of people were left out in the first part of the decade," Kleinhkenz observed.

INCOME PROPERTY

Also investors are taking advantage of an attractive market for buying income properties. At today's low home prices it is easy for an investor to charge enough rent to cover the monthly mortgage, said Bruce Norris, who operates a real estate investment firm in Riverside.

However, foreclosures in the resale market are depressing sales of new homes, with home builders struggling to compete on price, said Mark Knorringa, chief executive of the Building Industry Association of Riverside County. In some cases, he said, builders are not able to sell new houses for enough to cover the cost of construction and development fees.

Changes to FHA as of the 1st of the year...

As we come to the end of a wild and crazy year full of change in real estate, we wanted to remind you of Changes to FHA Loans that will be taking place soon.

Required Down Payment Increases to 3.5%
Effective 1/1/09. *Remember- the down payment may come from borrower’s own funds or from family member’s gift and the seller may pay buyer’s closing costs, not to exceed 6% of the purchase price.

Minimum Required Credit Score 580
This was recently announced and now matches Fannie Mae and Freddie Mac’s minimum credit score requirement. The effective date will vary from lender to lender as HUD is requiring that all loans delivered to them by March 2009 meet this criterion- lenders will likely mandate the 580 minimum in advance of that date so that the loan funds and is shipped to HUD prior to the cut off. *Remember- manually underwritten loans with nontraditional credit will be exempt from this policy.

Fannie, Freddie execs turned aside warnings...

Top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans long before the housing market plunged, according to documents released Tuesday by a House committee.

E-mails and other internal documents released by the House Oversight and Government Reform Committee show that former Fannie CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they stay away from riskier types of loans.

"Their own risk managers raised warning after warning about the dangers of investing heavily in the subprime and alternative mortgage market. But these warnings were ignored" by the two chief executives, said Rep. Henry Waxman, D-Calif., the committee's chairman. "Their irresponsible decisions are now costing the taxpayers billions of dollars."

The two companies were seized by government regulators in September. A month later, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a massive quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so soon.

Lawmakers questioned Mudd about an internal Fannie Mae presentation from June 2005 that showed the company at a "strategic crossroads," at which it could either delve into riskier loans or focus on more secure ones.

Questioned about the presentation, Mudd defended his company's effort to compete against Wall Street banks that were pouring money into subprime and other exotic loans.

"We couldn't afford to make the bet that the changes were not going to be permanent," Mudd said.

Mudd and three other former executives of the two companies defended their stewardship in a hearing held by the House committee.

"It's important to remember that Freddie and its sister institution, Fannie Mae, did not create the subprime market," said Richard Syron, Freddie Mac's former CEO.

But Rep. Darrell Issa, R. Calif., blasted Syron and Mudd, along with former Fannie Mae CEO Franklin Raines, and former Freddie Mac CEO Leland Brendsel.

"All four of you seem to be in complete denial that Freddie and Fannie are in any way responsible for this. Your whole excuse for going to risky and unreasonable loans that are defaulting at an incredibly high rate is that everyone is doing it. If we don't do it, we'll be left out."

Fannie and Freddie own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt. The two companies are the engines behind a complex process of buying, bundling and selling mortgages as investments.

They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Republicans blame Fannie and Freddie, and homeownership policies of the Clinton administration for sowing the seeds of the financial meltdown. Democrats defend the companies' role in encouraging homeownership and stress that Wall Street banks - not Fannie and Freddie - led the dramatic decline in lending standards.

For years the two companies flexed their lobbying muscle in Washington to thwart efforts to impose tighter regulation.

Internal Freddie Mac budget records obtained by The Associated Press show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich and former Sen. Alfonse D'Amato of New York were recruited with six-figure contracts.

The more difficult questions, however, will come next year, when lawmakers weigh what role, if any, the two companies play should play in the mortgage market.

Options include taking the companies private, morphing them into a public utility or a federal agency, or leaving them as government-sponsored entities that have private shareholders and profits, with tougher regulations.