California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

In California this year, nearly one out of five homes was purchased completely
with cash and nearly half the sales in that state were to first-time buyers,
who generally have a harder time coming up with cash than repeat buyers, according
to the California Association of Realtors.

According to the Association, the large numbers of California buyers who are
scraping together the cash are doing so not because they have no better uses
for their money but because the system of mortgage finance is failing them.

The Association has heard that buyers of all types are complaining about the
difficulties they face getting financing from lenders with standards that
change, documentation requirements that seem excessive, problems with appraisals
in the wake of the controversial Home Valuation Code of Conduct along with slow
response and rates that change between those quoted when they qualify and when
they close. Of the sales that fell through last year in California, the inability
of the buyer to get financing was the leading cause comprising 40.5 percent of
failed closings.

The National Association of Realtors annual profile of home buyers and sellers
released Friday in San Diego found that 12 percent of buyers said financing their
first home was more difficult than expected. Thirteen percent of successful
buyers said they had experienced a purchase agreement that was canceled, terminated
or fell through; and 8 percent had been rejected by a lender. "This raises the
question of how many potential buyers were unsuccessful because of problems with
appraisals or loan qualifications," said Paul Bishop, NAR vice president of research.
"The market would be even stronger without these problems."

The near term prospects for buyers are not encouraging. The number of banks tightening
prime standards slightly increased during the third quarter according to the latest
survey of senior loan officers by the Federal Reserve. A survey of 2501 consumers
in August by the Bank Administration Institute found that 31 percent indicated access
to mortgages is worse now than six months ago, while only 5% said access has improved.
The projections indicate 12 percent of respondents expect access to improve in the
next six months, while 15 percent expect access to worsen.

I am Tim Johnson and this has been the California Business Minute.