Michael DiVita publishes a weekly mortgage report which is updated every week. How is this affecting the San Francisco real estate market? Read our weekly and monthly market reports. Here’s what Michael says:

RENT v. BUY

Surging rents, depressed home prices and record low interest have tipped the scales advancng buying over renting a home in most metropolitan areas today. Factor in that mega-finance Co. Fannie Mae posted a first-quarter profit of $2.7 billion, the largest since 2007 and a positive sign that the housing market may have hit bottom.

In Los Angeles, tune in to Toni Patillo, KTLK Radio 1150 AM, Saturdays at 3pm for a full hour of real estate discussion by professionals. We partner with the show to provide informed data on market conditions and loan solutions.

Call Michael for loan pre-approval and a free credit report. That puts you in a buyer’s position if you find a home of interest in the CA real estate market. Ask about 3.5% down FHA and no down VA loans.

Michael G. DiVita
CA Department of Real Estate 01372066
NMLS ID # 241655

Median rents rose 2 percent from February 2011 to February 2012, but home values declined 4.5 percent during that period, according to the February Zillow Real Estate Market Reports.

The Zillow Rent Index showed year-over-year gains for nearly 68 percent of metropolitan areas covered by the index. By contrast, only 8 percent of the metro areas covered saw home values rise.

Foreclosures continue to be a key driver in keeping home values down. Foreclosure resales accounted for 20.3 percent of all sales in February, slightly higher than their previous peak of 20.2 percent of all sales in March 2011. Foreclosure re-sales made up 19.1 percent of all sales in February 2011.

In the short term, national monthly rents declined slightly from January to February, falling 0.5 percent to $1,212. Home values fell 0.5 percent during the same period to $145,400.

More info

CNN Money – Renting used to be cheaper than buying, but in many U.S. cities that’s no longer the case as rent continue to climb and home prices stagnate.

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Wall Street Journal – Rising rents, coupled with slumping home prices and interest rates near record-lows, are boosting demand for homes at entry-level prices.

Making sense of the story

• Increased buying activity from investors and second-home purchases may be factors behind the recent pickup in home sales, but real estate agents say they are fielding more calls from anxious tenants complaining about rising rents.

• Average apartment rents rose by 2.7 percent last year, while the national vacancy rate dropped below 5 percent for the first time since 2001, according to a quarterly survey released Wednesday by REIS Inc., a real estate research firm.

• The largest rent increases came in San Francisco and San Jose, Calif., which saw increases of 5.9 percent and 4.9 percent, respectively.  Such increases are one reason why industry analysts believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year.

• Historically, the cost to rent an apartment has been about 10 percent lower than the after-tax cost of owning a home.  That rental discount began to fall in 2010 and disappeared entirely last year, according to analysts at Deutsche Bank who track housing costs. By the end of 2011, the bank’s research found that the cost to rent an apartment was about 15 percent higher than the cost to own a home.

• It isn’t always easy for home buyers to make it to the closing table though. Lending and appraisal standards remain tight, keeping many would-be buyers out of the market.  And aspiring buyers are competing with savvy investors who have turned buying and reselling foreclosed homes into a business.

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After years of home price declines and tightening rental markets, homeownership is now more affordable than renting in all but two of the 100 largest metros – even in expensive real estate markets such as New York, Los Angeles and Boston, according to Trulia. Only in Honolulu and San Francisco is renting often a better deal than buying. However, buying a home in these markets might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.

Trulia’s Winter 2012 Rent vs. Buy Index, which tracks whether it is more affordable to rent or buy a home in America’s 100 largest metropolitan areas, is based on asking prices for rental units and for-sale homes on Trulia.com between December 1, 2011, and February 29, 2012. The index reveals the relative cost of renting versus buying for similar homes in similar neighborhoods.

In the San Francisco Bay Area, homeownership is most expensive relative to renting in San Francisco, the Peninsula (San Mateo County) and in the South Bay (Santa Clara County). In the East Bay (Alameda County and Contra Costa County), where vacancies are higher and foreclosures more common, buying looks even better relative to renting than in the rest of the Bay Area. But the region overall has become more affordable, especially in San Francisco and San Mateo counties, where the price-to-rent ratio dropped more than three points between Winter 2011 and Winter 2012.

Even in real estate markets where buying is generally cheaper than renting a home, renting might actually be a better deal on a larger house. In most major metros, the price-to-rent ratio is lower for smaller homes, so buying seems even more affordable relative to renting for a one-bedroom or studio home than for a home with three or more bedrooms. In fact, renting a home with more than two bedrooms can be less expensive than buying in New York, NY-NJ and San Francisco. Size, however, factors less into the rent versus buy decision in Chicago and Miami.

More info

CNN Money – In 98 of the top 100 housing markets, buying a home is more affordable than renting, according to the online real estate company Trulia. Only Honolulu and San Francisco buck the trend.

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Curbed SF (Hint, it’s because of rent control!) - Open House Madness via Abby Pontzer] A report put out by RealFacts, a company that analyzes rental data, shows that average rental prices increased by 10.4 and 12.2 percent in 2011 for the greater San Francisco and San Jose markets. This should come as no surprise. The latest tech boom means there’s an influx of wealthy renters looking to nest in the city, and they can afford to pay… read more…

By an overwhelming margin, American voters strongly value homeownership and would oppose efforts to weaken or eliminate the mortgage interest deduction or diminish a federal role to help qualified home buyers obtain affordable 30-year mortgages, according to a national survey conducted on behalf of the National Association of Home Builders.  The survey gauged voters’ attitudes towards homeownership and housing policy issues.

The poll shows that three out of four voters – both owners and renters — believe it is appropriate and reasonable for the federal government to provide tax incentives to promote homeownership. This sentiment cuts across regional and party lines.

Highlights of the survey include:

• Two-thirds of respondents say that the federal government should help home buyers to afford a long-term or 30-year, fixed-rate mortgage.
• Nearly 75 percent of voters oppose eliminating the mortgage interest deduction.
• Sixty-eight percent would be less likely to vote for a congressional candidate who proposed to abolish the deduction.
• Ninety-six percent of homeowners are happy with their decision to own, and 84 percent who are “underwater” expressed the same sentiment.
• Job uncertainty and saving for a downpayment and closing costs are the biggest barriers to buying a home.

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New York Times – First-time home buyers planning to purchase a house later this year may have a better chance of qualifying for a mortgage if they have had a history of paying their rent on time.

Making sense of the story

• Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people.  The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
• Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
• Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau.  Those with average or higher scores did not experience major movement.
• Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
• People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
• However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report.  Rent may not have been paid, for example, because the furnace was left unrepaired for months.

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Yahoo Finance – After falling nearly 35 percent from their 2007 peak, nationwide house prices are finally approaching “normal” levels on two key valuation measures: The “price-to-rent ratio,” which measures house prices relative to what the houses might rent for, and the “price-to-income-ratio,” which measures house prices relative to average incomes.

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