Now, facing a $16 billion shortfall, the FHA has raised premiums and will raise them yet again next month. FHA loans are becoming increasingly expensive.

(Read More: Housing Jobs Jump, Where Are the Workers?)

Meanwhile, as the housing market improves, private mortgage insurers are starting to remove overlays on higher loan-to-value loans, meaning the percentage of the home value that is mortgaged. Low LTV’s and high credit scores were the rule recently for the private insurers, but that may now be loosening, making these loans cheaper than FHA.

“FHA is certainly becoming more expensive,” noted Craig Strent, CEO of Apex Home Loans in Bethesda, Maryland. “The increase in low down payments is reflective of first time buyers coming off the sidelines and entering the market. We’re going to see more of this trend in the next couple of years as the economy improves and renters start to once again see the benefit of buying over renting. FHA has become more expensive and the mortgage insurance companies are the beneficiary of that, which is really not a bad thing as it means the private market is insuring the lower down payments rather than the government.”

(Read More: Home Buyers Are Back, but Where Are the Houses?)

The stocks of mortgage insurers like MGIC and Radian spiked in the first months of this year, as home prices improved and FHA policy changes designed to shrink its share of the market were announced. There is currently a bipartisan effort in the U.S. Senate to reduce the FHA’s role, and in the House of Representatives a hearing is being held Wednesday looking at, “the competitive advantages the Federal Housing Administration has relative to private mortgage insurers and how those advantages contribute to the crowding out of private capital in housing finance,” according to the House Financial Services Committee release.

Despite the advantages, FHA’s share is already shrinking, as Fannie Mae’s is rising. In the first quarter of 2012, loans with between 3 and 10 percent down payment made up 15 percent of Fannie Mae’s business for home purchase loans (not refinances). In the second quarter it rose to 17 percent and in the third to 18 percent. Fannie Mae has not reported its fourth quarter yet, but that share is expected to rise again. While a credit thaw is part of it, as mortgage interest rates rise and fewer borrowers apply to refinance, lenders are simply looking for more business.

Article source: http://www.cnbc.com/id/100548913

In the nine-county region, 8,579 homes were sold, up 14.2 percent from August 2011, according to DataQuick, a real estate service in San Diego. The median price paid was $410,000, up 10.8 percent from last year. It was the fifth consecutive month in which the median rose significantly compared with a year earlier.

It was the best August sales volume in six years, since before the real estate bubble burst and the credit market collapsed, according to DataQuick.

“The market is gradually moving toward normalcy,” said Andrew LePage, a DataQuick analyst. “It’s a slow, modest recovery that depends heavily on the health of the economy and how lenders manage the remaining distress.”

Tight inventory continues to push up prices, as buyers hoping to lock in record-low interest rates vie for a limited supply of homes for sale.

Akil Murali, 27, a Symantec product manager who has been house-hunting in San Francisco and the Peninsula, exemplifies the challenges faced by many buyers.

“I made quite a number of offers where there was a lot of competition and the properties went well above asking,” he said. “I lost out and never even got an opportunity to make a counteroffer. Recently I made an offer $60,000 above asking, but (lost out to) all-cash buyers who removed all financial contingencies, making them more attractive to the seller.”

‘Things are crazy’

Murali finally has a contract on a two-bedroom home in Foster City, where a previous offer fell through when the buyer didn’t qualify for a mortgage.

“Things are crazy,” said his real estate agent, Regina Puzon, Peninsula team lead agent for Redfin. “Some homes are getting 20 or 30 offers. I have a lot of clients upping their down payments and removing all contingencies to get their offers accepted.”

She and other agents said that many sellers are underpricing their homes to spur bidding wars – a tactic that was prevalent in real estate’s boom days. By contrast, “during the downturn, people were pricing houses for what they thought they would go for,” said Sandy Patel-Hilfery of Pacific Union International in Montclair.

There are also signs that inventory may be increasing, she said. “This week alone there were 50 new, good listings in Berkeley, Piedmont and the nicer parts of Oakland,” she said. “Ordinarily, I would have expected 30 new listings of nicer houses at this time of year. The agents are jazzed because everyone has buyers who are chomping at the bit.”

Homeowners who were sidelined by the downturn may be starting to list their homes for sale as the market recovers. “Sellers are finally catching on to the fact that there are buyers coming out in droves,” Patel-Hilfery said.

Regaining equity

As values slowly rise, some homeowners who were underwater are regaining equity, another reason they may now be willing to sell. Nationwide, 1.3 million homeowners who had been underwater returned to positive equity this year, research firm CoreLogic said this week. In the Bay Area, about 27,000 homeowners returned to positive equity.

The 10.8 percent rise in the Bay Area’s median price in August is in part a reflection of a different mix of homes on the market – more higher-priced homes and fewer bargain-basement foreclosures, LePage said. Sales of homes over $500,000 were up 23 percent versus last year while sales of those under $300,000 were down 6 percent from a year ago.

Bank-owned foreclosures accounted for 14.9 percent of resales in August – down from 25.7 percent a year ago and approaching the historic monthly average of 10 percent. Foreclosure sales peaked at 52 percent of resales in February 2009. Short sales – homes sold for less than the balance due on the mortgage – accounted for 18.9 percent of resales, slightly up from 18.1 percent a year ago.

Fragile equilibrium

The market’s fragile equilibrium could be upset by such factors as a deluge of bank-owned foreclosures or a downturn in the economy, LePage said. But foreclosure activity is clearly slowing, although millions of homeowners nationwide continue to struggle.

Last year, lenders repossessed California homes at an average of almost 14,000 a month, said Sean O’Toole, founder and CEO of ForeclosureRadar.com. Through August of this year, the statewide pace plummeted by one-third, to an average of just under 9,000 foreclosures a month. Mortgage delinquencies also are falling compared with a year ago, according to data from the Mortgage Bankers Association, which implies that foreclosures will continue to decline.

And mortgage interest rates, already hovering near historic lows of 3.55 percent on a 30-year fixed-rate loan, are likely to remain super-affordable, thanks to the Federal Reserve’s plan to buy billions of dollars of mortgage-backed securities announced Thursday.

Bouncing back in a big way

8,579

Bay Area homes sold in August

14.2%

Change from August 2011

$410,000

Median price in August

10.8%

Change from August 2011

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Bay-Area-home-sales-prices-up-in-August-3867301.php