“In the short run, over the next half decade to decade, it’s going to be extremely unlikely, virtually impossible for that to happen because all the programs that created the bubble are outlawed now,” said David Stevens, CEO of the Mortgage Bankers Association. “What really concerns me is how are people going to behave outside the QM protection.”

(Read more: Why shut down Fannie and Freddie now?)

Lenders can still operate outside the QM rules but don’t get the same legal protections in cases of default, and they cannot sell the loans to Fannie and Freddie. They need to hold on to the risk. Still, the non-QM market is growing even before the QM rules take effect in January.

The leader of this movement is Date himself. He formed a firm, Fenway Summer, to launch the new mortgage products.

“I think the best credit models, the ones that really pay for themselves in terms of risk-adjusted returns over time, are the ones where you make great credit decisions and then you actually bear the risk of those decisions working out well or working out poorly,” said Date, adding that he is optimistic about this new market.

Loans outside QM will be more costly but will offer investors greater returns. They will still have to comply with ability-to-repay but not the QM standards. Therefore, borrowers who may have very large assets but little to no income could qualify. Interest-only, adjustable-rate mortgages would also fall into this category.

“I am quite confident that a senior funding market will develop for non-QM loans—I have no doubt about that at all,” Date said. “It is simply too big of a market.”

Wells Fargo will also operate outside QM for some loans.

“When you look at the entire profile of the borrower, we can be comfortable they have the ability to repay even though their income by itself may not fall into the standard dictated by the qualified mortgage,” said Codel, who added that non-QM loans may be an even safer product because lenders will hold more risk and be subject to legal action in the case of a loan failure.

(Read more: Map: Tracking the recovery)

Still, the non-QM market does open the doors for lenders seeking higher returns through higher risk, which is how much of the recent trouble began, at least in the mortgage-backed securities trading space. Regulations for investors in loans are still being finalized, but recent proposals follow the QM standards.

“That is where I think drawing the boundaries around the rules can be a good thing but it can also set up bad behaviors outside those boundaries, and we’re going to see those kinds of institutions being created, I’m confident of it,” said Stevens.

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/101036630

A total of 9,339 new and resale houses and condos changed hands in the nine-county Bay Area in July – up 13.3 percent from July 2012, said DataQuick, a San Diego real estate research firm. The median paid was $562,000, a 33.5 percent increase from the same time last year.

Pent-up buyer demand, an improving regional economy and low interest rates have propelled home prices upward for many months. But a dearth of homes for sale meant the number being sold fell on a year-over-year basis every month since January. That trajectory reversed course in July.

“It was a really strong month,” said Andrew LePage, a DataQuick analyst.

Rising inventory shows the real estate market regaining equilibrium.

“Sellers want to jump on the train by putting their properties on the market, which levels supply and demand,” said Tanja Beck, an agent with Zephyr Real Estate in San Francisco.

Fewer bids

More inventory, as well as rising interest rates, should soon rein in the sharp price increases. Although bidding wars still occur, many agents say multiple offers now are measured in smaller numbers – perhaps three bids instead of a dozen.

While San Francisco is the nation’s most competitive market, with 80.5 percent of successful home buyers facing other bids, multiple offers in the city dropped nearly 10 percent from June to July, according to a report from real estate firm Redfin.

Nationwide, fewer bidding wars “points toward the strong sellers’ market beginning to shift toward more balance, giving frustrated home buyers a bit of relief,” Redfin said.

Distress sales are down sharply, another sign of a return to normal. Foreclosure resales were under 5 percent of the total – their lowest level since August 2007, before the credit crunch hit. In February 2009, foreclosure resales were 52 percent of the market, DataQuick said. Their historic monthly average in the Bay Area is about 10 percent of sales.

Short sales – properties sold for less than is owed on the mortgage – were 10 percent of July resales, down from 23.7 percent a year earlier.

Fewer distress sales also mean that people who sell their homes are likely to turn around and buy another property, creating a positive upward spiral.

“There was a time when more than half the sales were the lender pocketing money (in a foreclosure resale) so they just ended there,” LePage said. “Now a greater and greater percentage are traditional sellers, who will move up and buy from someone who themselves will move up.”

Upward mobility

Jessica and Josh Rowe exemplify that move-up buyer. The couple, along with their toddler and two French bulldogs, wants to move from San Francisco to the South Bay to live closer to their jobs. They listed their condo in Haight-Ashbury, a three-bedroom remodeled Victorian, at $949,000. It’s likely to go for well above asking price.

“To go from being sellers to being buyers, your confidence gets crazy-hacked,” said Jessica Rowe. “As a seller, you’re on top of the world, you make all this money – but as a buyer you can’t afford to get (something comparable) to what you just sold.”

The Haight condo itself illustrates the market turnaround. When the Rowes bought it three years ago – near the market’s bottom – the previous owners were on the brink of foreclosure. After unsuccessfully listing it at $799,000 for a month, they slashed the price to $755,000, which is what the Rowes paid.

The Bay Area’s median price is now 15.5 percent off the $665,000 peak it reached in summer 2007, LePage said. During the downturn, its nadir was $290,000 in March 2009.

The median represents the middle value of homes sold, meaning half sold for more and half for less. DataQuick said about three-quarters of the median’s increase stems from rising home values, the remainder from a shift in market mix.

More high-end homes and fewer inexpensive ones sold in July. Just over half (51 percent) of sales had mortgages above the old jumbo limit of $417,000, compared with 38.6 percent a year earlier and the low point of 17.1 percent in January 2009.

Federal Housing Administration loans, mostly used by first-time buyers, were 10.6 percent of purchase mortgages in July, down from 16 percent a year earlier. First-time home buyers consistently report getting squeezed out by investors and others paying all cash.

All-cash sales continued to be a strong force, accounting for 24 percent of July purchases, DataQuick said. In February, they peaked at 32.3 percent of sales.

Absentee buyers, who are mainly investors, snapped up 20.9 percent of Bay Area homes in July. Their market share also peaked in February, at 28.7 percent.

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

Article source: http://www.sfgate.com/business/article/Bay-Area-home-prices-sales-climb-in-July-4736589.php

The experts at RealtyTrac told 7 On Your Side that home prices have increased 28 percent in the Bay Area from the time the housing market hit bottom in February 2012. In San Francisco, the prices have risen even more dramatically.

Brian Miller saw first hand how frantic the housing market in San Francisco can be right now.

“I found myself being constantly outbid, putting in offers of 20 percent over asking, getting outbid at 50 percent over asking in cash,” Miller said.

That type of activity didn’t surprise Serena Kokjer Greening of Guarantee Mortgage. She says the small number of homes for sale combined with the improved employment picture is leading to bidding wars.

“You’ll see properties getting six, eight, even 20 offers which, you know, hadn’t happened in four to five years here,” Kokjer Greening said.

All those offers mean rising prices taking us closer to the bubble, the point when homes are considered overpriced.

The Vice President of RealtyTrac Daren Blomquist says we’re still 21 percentage points below the peak of the housing bubble in the Bay Area.

“But then if you focus in on the city, that’s where we’re very close actually to the peak of the housing bubble in San Francisco,” he said.

Blomquist says San Francisco is just 6 percentage points from reaching that bubble stage.

“I think it’s pretty dangerous,” he said.

“Today I received probably my eighth denial of a modification,” San Francisco resident Gale Rosboro said.

Rosboro wrote President Barack Obama and the White House forwarded her case to the Treasury Department to assist her in getting a modification from Wells Fargo. So far, even that hasn’t helped.

“They’ve made no move towards working with me to get a modification,” Rosboro said.

In an email, Wells Fargo told 7 On Your Side, “We have worked with Ms. Rosboro for nearly three years and will continue to try to identify options that are appropriate for her individual financial circumstances. Our foreclosure rate is less than 1 percent.”

Ironically, rising home values could make it even more difficult for struggling homeowners to get modifications.

“I think that people are barely hanging on. There have been a lot of cuts and its been very difficult for families,” Alliance of Californians for Community Empowerment spokesperson Grace Martinez said.

Blomquist predicts another round of foreclosures in San Francisco in the coming months.

“Four of the last five months in San Francisco foreclosure starts have increased from the previous month,” he said.

Blomquist advises home buyers to be patient and not feel you have to buy right now.

Miller waited and found something he could afford. “It feels great, I mean I’m very excited, he said.

RealtyTrac says the next wave of foreclosures in San Francisco won’t be an overwhelming flood, but it does expect an uptick.

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Article source: http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=9196447

Buying ain’t easy. First prices soar, then they slow down, but rising interest rates make up the difference.

Blanca Torres
Reporter- San Francisco Business Times

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The rapid rise of home prices may be slowing, but too bad interest rates are now creeping up.

In the Bay Area, home prices are still growing, but not as fast, according to Trulia, the San Francisco-based online real estate marketplace.

The firm found that while home prices jumped 17.2 percent in the month of July compared with July 2012, price growth slowed down during the last six months. From January to March, prices rose by 6.5 percent and from April to June, they went up 3 percent.

“The biggest price slowdowns have come to some of the hottest local markets,” said Jed Kolko, Trulia’s chief economist. “California and Nevada remain the Wild West for asking home prices, with some of the sharpest drops during the bust, strongest rebounds over the past year, and now biggest slowdowns in the past quarter.”

Nationwide, asking home prices dropped slightly— 0.3 percent — in July compared with the previous month. It’s the first time since November 2012 that prices didn’t go up.

They are still up 11 percent for the month of July compared with the same month last year.

One major factor deflating home prices is rising interest rates during the past six months.

In the past couple of years, historically low interest rates boosted sales and skyrocketing price growth, but higher rates are now dampening the mood.

“Asking home prices are now starting to lose steam as mortgage rates rise, inventory expands and investor demand declines,” said Trulia in a recent market report.

A year ago, a buyer could afford to pay a higher asking price because interest rates were low. Now, buyers may end up paying the same per month, but more of their payment will go toward interest versus the principal value on the loan.

So even if prices level off or go down in the months to come, buying a home in the Bay Area will still be just as costly if not more.

Blanca Torres covers East Bay real estate for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/real-estate/2013/08/bay-area-home-price-growth-leveling-off.html

“Rising interest rates and increasing cost of new supply will help keep that supply down and will allow us to continue to increase rates on our existing residents,” says Neithercut.

A subset of multi-family, the lesser-watched student housing sector, could also benefit, specifically the largest, American Campus Communities (ACC). Since it has so little competition, it benefits from a cheaper cost of capital.

(Read More: Map: Tracking the US Real Estate Recovery)

“We actually have a very favorable comparison in terms of yields. The development transactions that we’re undertaking typically are 7 to 7.25 yield, a nice spread to multi-family, so we tend to have more cushion in that regard,” says Bill Bayless, CEO of American Campus.

For the overall REIT space, however, analysts are questioning whether this is a long term cyclical change tied to improving gross domestic product. If so, sectors with shorter-term leases, like multi-family, self-storage and health care may fare better than office or industrial, which have longer-term leases.

Article source: http://www.cnbc.com/id/100793087