Positive News: Over the next few months, existing-home sales are expected to hold fairly steady as indicated by pending sales activity, and then rise later in the year and continue to improve in 2009, according to NAR’s Pending Home Sales Index (NAR, 1/11)
Pending Homes Sales Index - fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but remains above the August and September readings and indicates a broad stabilization. The index was 19.2 percent below the November 2006 level of 108.4. In the west, the index fell 2.1 percent to 86.6, which is 18.5 percent below November 2006 levels. (NAR, 1/11, CAR, 1/9)
Stable Existing-Homes Sales in Early 2008, then Gradual Rise - Existing-home sales for 2007 will probably total 5.66 million, the fifth highest on record, then edge up to 5.7 million this year and 5.91 million in 2009, compared with 6.48 million in 2006. Existing-home prices for 2007 are likely to be down 1.9 percent to a median of $217,600, hold even this year and then rise 3.1 percent in 2009 to $224,400. Notice that this forecast expects this to occur no matter who becomes President. (NAR, 1/11)
Mortgage Rates Below 6% - Freddie Mac reports a drop in the 30-year fixed mortgage rate from 6.07 percent to 5.87 percent during the week ended Jan. 10, in response to a recent government report revealing a boost in the unemployment rate to 5 percent in December from 4.7 percent in November. The 15-year fixed mortgage rate fell to 5.43 percent from 5.68 percent over the same period. Meanwhile, the five-year adjustable mortgage rate sank to 5.63 percent from 5.78 percent; and the one-year ARM dropped to 5.37 percent from 5.47 percent. (1/11)
Mortgage Rates Expected to Rise - The 30-year fixed-rate mortgage is expected to rise slowly to the 6.3 percent range by the end of this year, but an additional cut in the Fed funds rate would lower short-term interest rates. (NAR, 1/11)
Bank of America buys Countrywide – this is considered a good situation from the real estate markets. It stabilizes the uncertainty due to the subprime mess. BoA will be punished in the short term as these loans may default, but in the long term, they get the well-established Countrywide network. (KNX-AM, personal interview with NAR President, 1/11)
Cleveland sues Lenders – the City of Cleveland, Ohio, which has been hit hard during this housing slowdown, says 21 banks and mortgage companies signed off of deals they shouldn’t have made (CNNMoney, 1/13)
The “R” Word – As predicted in last week’s blog, there was continued talk about recession this week. I gave the definition that a recession is 2 consecutive quarters of negative growth, but are we currently in that 1st quarter? Merrill Lynch and Goldman Sachs say we are. Goldman further predicts that the recession will be mild, lasting only 2 quarters, the minimum to formally consider it a recession. Others still state that we will squeek by without being in a recession. (CNNMoney, 1/10, KNX-AM, unknown date)
Fed expected to drop rates again – Fed expected to drop rates by 1/2 a point, that’s the push anyway, based on reports I’m hearing, when they meet January 29-30. Their concerns with high energy prices and inflation may prompt them to cut only 1/4 point. Transcript from last month’s meeting where they cut rates 1/4 point show a disagreement between the Fed regional banks with 2 regions saying rates should stay stable, and the rest split between a 1/4 and 1/2 point cut. (CNNMoney, NAR, unknown dates)
World Home Spotlight: New Zealand - New Zealand's home-building approvals fell for a third month in November adding to signs that record- high interest rates are damping demand for property, particularly apartments. New Zealand's house prices rose at the slowest pace in nine months as record-high interest rates and moderating immigration curbed demand for property. (Bloomberg, 1/11)
Fast Facts:
* LA is the 5th most expensive city to rent at $1452 per month, behind NYC ($2922), San Francisco ($1904), Boston ($1658), and San Jose ($1612). (Forbes, 1/7)
* Calif. median home price - November 07: $488,640 (Source: C.A.R.)
* Calif. highest median home price by C.A.R. region November 07: Santa Barbara So. Coast $1,075,000 (Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region November 07: High Desert $262,650 (Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Third Quarter 07: 24 percent (Source: C.A.R.)
I probably meet hundreds of people a week, but this week I had the privilege to talk with two leaders in the real estate industry: Richard (Dick) Gaylord, the current president of the National Association of REALTORS and a RE/MAX broker, and Gov Hutchinson, the lead attorney for the California Association of REALTORS. Mr. Gaylord discussed the current news of the day I saw him, about BoA buying Countrywide. Both reviewed current legal issues and contract changes that occurred with the new year. They were both very enlightening, and I look forward to meeting with them again!
Sources: National Association of REALTORS, California Association of REALTORS, Associated Press, CNN Money, Freddie Mac, KNX-AM, Richard Gaylord.
P.S. Just some figures I’m tracking from the NAR report...
Meanwhile, growth in the U.S. gross domestic product (GDP) is seen at 2.1 percent in 2007, below the 2.9 percent growth rate in 2006; GDP growth will probably be 2 percent this year.
After averaging 4.6 percent for both 2006 and 2007, the unemployment rate is estimated to rise to 5.3 percent in the second half of 2008. Inflation, as measured by the Consumer Price Index, is projected at 2.9 percent for 2007 and 3.1 percent this year; it was 3.2 percent in 2006.
Inflation-adjusted disposable personal income is forecast to grow 3.1 percent for 2007, the same as in 2006, and then grow 1.6 percent this year
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