Fed Rates Below 1% Possible, ShakeOut Invitation - Sunday, October 26, 2008

The Federal Reserve is widely expected to cut interest rates again next week - Many investors believe the central bank will cut rates by at least another half-percentage point following the end of a two-day meeting on Oct. 29. Rate cuts have been a key tool the central bank has used in the past to boost a weak economy. A variety of lending rates, including credit cards and home equity lines, as well as the prime rate used to set many business loan rates, are pegged to the fed funds rate.So lower rates usually lead to cheaper credit, thus spurring businesses and consumers to spend money more freely. But in the current credit crisis, with banks afraid to make loans due to worries about their firms' own need for cash in the near term, already relatively low short-term rates have done little to get credit flowing. (CNNMoney.com, 10/24)

ShakeOut Invite - The Earthquake Country Alliance has organized the Great Southern California ShakeOut, a week of special events featuring a massive earthquake drill at 10 AM on November 13, 2008, to prepare our region for "The Big One." The ShakeOut drill centers on the ShakeOut Earthquake Scenario, a realistic portrayal of what could happen in a major earthquake on the southern end of the San Andreas Fault. Created by over 300 experts led by Dr. Lucy Jones of the U.S. Geological Survey, the scenario outlines a hypothetical 7.8 magnitude earthquake originating near the Salton Sea, which would have the potential to devastate the region. Many of you know I am an emergency services volunteer for the City of Santa Clarita, LAFD and LA County Sheriff. Please join me in this training event by signing up at http://participate.shakeout.org/personalpage/changhomes. You can participate from anywhere, because you never know where or when an emergency will strike!

CONGRESS SERIOUS ABOUT LAME-DUCK ECONOMIC STIMULUS PACKAGE - The Senate, House of Representatives and the White House have all stated their willingness to work through a lame-duck session to pass a second economic stimulus package prior to the end of the year. While many ideas have been circulated, few, if any, appear certain to be included in a stimulus package. Some of the ideas under discussion include: An additional round of stimulus checks; extending the temporary loan limit of $729,750 for the Government Sponsored Enterprises (GSE) and Federal Housing Administration (FHA); infrastructure spending; financial aid for states; a temporary increase in block grants; and an extension of unemployment and welfare benefits. The primary factor determining what, if anything, will be done during a lame-duck session is the outcome of the upcoming presidential election. Should the Democrats take the White House and secure a filibuster-proof majority in the Senate, they may wish to wait till after Jan. 20 before proposing or enacting legislation. Should the Republican nominee take the White House, Democrats may feel the Bush administration is more willing to compromise in order to pass last-minute initiatives prior to leaving office. (CAR, 10/22)

FHA POSTS LIST OF LENDERS IN HOPE FOR HOMEOWNERS PROGRAM - The Federal Housing Administration (FHA) of the U.S. Dept. of Housing and Urban Development has posted a list of lenders participating in the HOPE for Homeowners program. Participating lenders have indicated an interest in refinancing loans under the HOPE for Homeowners program. The FHA plans to update the list weekly on Fridays. ( CAR, 10/22)

I have received many questions regarding the H4H program (above). Check with your mortgage lender first to see if they participate and if you qualify for the refinancing programs. To see if your lender participates, call them or go to the FHA website.

Mortgage Market Still Open for Business - Lenders emphasize that loans continue to be available for a range of potential home buyers, not just those who are putting down 20 percent and have a credit score higher than 720. Although credit underwriting is tougher and loan terms stricter, borrowers can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on some Fannie Mae and Freddie Mac loan programs with private mortgage insurance. FHA standards are designed to help people with problem credit and those with scores in the upper 600s can still qualify for loans with reasonable rates offered by Fannie Mae and Freddie Mac. (Washington Post Writer's Group, 10/18)

NAR: Home Sales Rise as Affordability Improves - Existing-home sales increased last month as buyers responded to improved housing affordability conditions, according to the National Association of Realtors®. Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September from a level of 4.91 million in August. Home sales are 1.4 percent higher than the 5.11 million-unit pace in September 2007. Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains, but there may still be market disruptions. NAR President Richard F. Gaylord says low home prices and low interest rates have helped attract buyers. Yun says that an additional housing stimulus would stabilize prices more quickly and help bring faster stability to Wall Street. A Closer Look at the Numbers:

• Total housing inventory: at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July.
• National median existing-home price: $191,600 in September, for all housing types. That's down 9 percent from a year ago when the median was $210,500.
• Single-family home sales: increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007.
• Existing condominium and co-op sales: were unchanged at a seasonally adjusted annual rate of 560,000 units in September, but are 15.7 percent below the 664,000-unit pace in September 2007. The median existing condo price was $199,400 in September, down 10.2 percent from a year ago. (NAR, 10/24)

CALIFORNIA HOUSING PRODUCTION DECLINE CONTINUES IN SEPT. - Housing production continued to decline in September, when 4,364 permits were pulled throughout California, down 32 percent compared with the same month a year ago and down 6 percent from August, according to statistics compiled by the Construction Industry Research Board. Single-family permits totaled 2,326, down 35 percent from September 2007 but up 4 percent from August. Multifamily permits totaled 2,038, down 29 percent when compared with September 2007 and down 14 percent from the previous month. (CAR, 10/22)

Mortgage Rates Drop to 5-Week Low - Mortgage rates moved south this week, reaching their lowest point in five weeks, according to Freddie Mac's nationwide survey. The company reported a drop in the average interest on a 30-year fixed loan to 6.04 percent from 6.46 percent last week and a slide in the 15-year fixed rate to 5.72 percent from 6.14 percent. Meanwhile, interest on adjustable-rate mortgages slipped to 6.06 percent from 6.14 percent for five-year ARMs but bumped up to 5.23 percent from 5.16 percent for one-year ARMs. (San Diego Union-Tribune, 10/24)

Fast Facts:

• Calif. median home price - August 08: $350,140
• Calif. highest median home price by C.A.R. region August 08: Santa Barbara So. Coast $930,000
• Calif. lowest median home price by C.A.R. region August 08: High Desert $169,200
• Calif. First-time Buyer Affordability Index - Second Quarter 08: 48 percent

Sources: CNN/Money, Washington Post Writer's Group, California Association of REALTORS, National Association of REALTORS, San Diego Union-Tribune..

Proposition 98 versus 99 Feature and Housing More Affordable in California (May 25)

Ahead of the curve… CBS Radio News (KNX-AM) Monday morning featured economists who emphasized the same thing we stated in last week’s blog: we’re at a turning point in our market downturn was carried heavily on. Rest assured, this blog keeps you on top of the market!

Existing-Home Sales Dip 1% in April: Existing-home sales slowed in April, partly because tight lending guidelines hampered home buyers. But there are some things to be happy about: A greater number of market areas are showing sales gains from a year ago, and a recent reversal in mortgage policy means the market is better positioned for a turnaround, according to the NATIONAL ASSOCIATION OF REALTORS®. (5/23)

C.A.R. REPORTS ENTRY-LEVEL HOUSING AFFORDABILITY RISES 18 PERCENTAGE POINTS IN FIRST QUARTER: The percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago, according to a report released Tuesday by C.A.R. (5/21)

U.S. LEADING INDEX UP 0.1 PERCENT IN APRIL: The U.S. leading index in April grew 0.1 percent, fueled largely by positive contributions from stock prices, favorable interest rates, and housing permits, according to new data from The Conference Board. The six-month rate of decline in the leading index for April slowed to 1.2 percent, down from 2.4 percent for the six-month period between July 2007 and January 2008. (CAR, 5/21)

NEW HOME SALES DOWN 49 PERCENT IN MARCH, BUT PACE OF DECLINE SPARKS OPTIMISM: Total sales for new homes in March were 49 percent below March 2007 levels, however, monthly year-over-year declines are beginning to narrow, according to the latest report from the California Building Industry Association (CBIA). (CAR, 5/21)

Summer Events: LAFD Air Operations Grand Opening (Van Nuys)

Now that summer has unofficially started, you know there are things to do in our Tri-Valley area every week! I expect to feature one or two events in my blog every week. Most of you know I’m an avid supporter of our Emergency Services, volunteering with L.A. City Fire Department, City of Santa Clarita, and L.A. County Sheriff. Come join me this weekend with the grand opening of the new LAFD Air Operations Building at Van Nuys Airport. Shuttles will be provided from 8050 Balboa at the NW corner of VNY airport; it’s just south of the Home Depot.

June 3 Election: Proposition 98 versus 99

With the June 3 election just over a week away, I promised last week to compare the Eminent Domain Propositions 98 and 99.

Generally, Proposition 98 bars state and local governments from condemning or damaging private property for private uses and prohibits rent controls. The fiscal effect on most governments probably would not be significant. Proposition 98 is supported or endorsed by Ventura Daily Press (April 22), California Farm Bureau Federation, California Republican Party, California Libertarian Party, and the California Taxpayer Protection Committee, among others.

Proposition 99 also bars state and local governments from using eminent domain to acquire an owner-occupied residence. The measure also would likely not have a significant fiscal impact on state or local governments. The following organizations support/endorse Proposition 99 (or oppose 98): Gov. Arnold Schwarzenegger, AARP, League of California Cities, San Francisco Chronicle (May 4), and Los Angeles Times (May 12), among others.

The differences are in the details. Prop 98 supporters say Proposition 99 is limited only to owner-occupied residences, while Proposition 98 protects all private property, including small businesses and rental property. The Prop 99 supporters, on the other hand, say that rent control will disappear if Proposition 98 passes once current tenants leave.

An interesting note: If both measures get over 50% of the vote, Proposition 99 invalidates 98. So Proposition 99 goes into law.

Los Angeles Daily News: First-time buyers find silver lining in foreclosure cloud

More than a third of Los Angeles County families had the income needed to purchase a starter home in the first quarter, a 66 percent increase over a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® reported Tuesday. The affordability figure is the highest since 2003 and was heralded as a hopeful sign for the troubled Southern California real estate market.

• Dramatically lower home prices and a .56 percent drop in interest rates are behind the improvement in the Association’s First-time Housing Affordability Index. A year ago, LA County households needed an income of $100,000 to qualify to buy a home costing $496,120, which is 85 percent of the area’s median home price, assuming a 10 percent downpayment at an interest rate of 5.65 percent. In the first quarter of 2008, entry-level buyers in the county could qualify to buy a home costing $390,450 with an income of $74,320.
• First-time buyers and those seeking homes under $500,000 are behind a 22 percent increase in home sales in the six-county Southern California region between March and April, according to a report issued Monday by DataQuick Information Systems. The report said two-thirds of homes sold were priced at less than $500,000.
• C.A.R. VP and Chief Economist Leslie Appleton-Young said she expects to see the affordability index continue to improve as additional foreclosures coming on the market keep prices at a level where more families can afford to buy.

The Associated Press: SoCal home sales jump in April but still lag year-ago period

Southern California homebuyers stepped off the sidelines in April, snatching up foreclosures and homes priced under $500,000 at a rate that was 22 percent higher than in March but down 19 percent from April 2007 and the lowest level since 1995, according to DataQuick Information Services.

· The median home price for the six-county region was $385,000, unchanged from March but down 24 percent from an April 2007 peak of $505,000. April marked the first time in eight months that the median price did not decline.

· Sales were strongest in areas hit hardest by foreclosures: Riverside County (where sales increased month to month for the first time in two years), Lancaster, Chula Vista, Anaheim, Lake Forest and Victorville experienced the strongest rebounds. Two-thirds of homes sold during the month in Los Angeles, Orange, Ventura, San Bernardino, Riverside and San Diego counties were priced under $500,000. About 38 percent of the homes sold were in foreclosure at some point during the previous year, up only 2 percent from March but sharply higher than the 5 percent reported a year ago. In Riverside County, 53 percent of sales involved troubled properties.

• The credit crunch, potential for a recession, and uncertainty over when foreclosures will peak caused DataQuick analysts to remain cautious. Lack of financing for high-value homes continues to be an issue and could forestall a recovery if the trend persists. In April, only 15 percent of Southern California home loans were above $417,000, down sharply from the same period a year ago.

The Associated Press: Forecasters see weak economy even if housing, credit improve

The worst of the housing downturn and credit crunch may end this year but unemployment will rise and the economy will continue to weaken and fall into a short-lived and shallow recession, according to a survey released by the National Association for Business Economics (NABE).

• 56 percent of economists surveyed believe the U.S. already is in a recession or will enter one this year, up from 45 percent in February. Economic growth also will slow from a projected 1.8 percent in February to 1.4 percent in the current survey – well below last year’s 2.2 percent growth figure and next years projection of 2.3 percent growth. If correct, the new prediction for 2007 will mark the slowest growth since the 2001 recession. Weakness in the housing sector was cited as the most significant factor in the slowing economy.
• The group remains hopeful that the housing downturn will hit bottom in 2008 but predict that prices will continue to fall into 2009. Economists were equally divided in their opinion of which quarter of 2008 would see a bottom for home sales.
• The group said it expects the credit crunch to soften later this year, opening the door to some improvement in the housing sector. They expect the Fed to maintain interest rates through the rest of 2008 but believe it could increase key rates from 2 percent to 3 percent by the end of 2009.

Fast Facts

· * Calif. median home price - March 08: $413,980(Source: C.A.R.)

· * Calif. highest median home price by C.A.R. region February 08: Santa Barbara So. Coast $1,140,000 (Source: C.A.R.)

· * Calif. lowest median home price by C.A.R. region February 08: High Desert $210,66-(Source: C.A.R.)

· * Calif. First-time Buyer Affordability Index - First Quarter 08: 44 percent (Source: C.A.R.)

· * Mortgage rates - week ending 05/15/08 30-yr. fixed: 6.01% Fees/points: 0.6% 15-yr. fixed: 5.60% Fees/points: 0.5% 1-yr. adjustable: 5.18 % Fees/points: 0.7% (Source: Freddie Mac)

Sources: California Secretary of State, California Republican Party, California Democratic Party, Ballotpedia.org, California Association of REALTORS, National Association of REALTORS, LA Daily News, Associated Press, KNX-AM.