Positive News: U.S. homebuilders had their biggest weekly gain since 1995 as investors and analysts say the market for new homes may have hit bottom. (Bloomberg, 1/25)
The Fed cut interest rates by 3/4 point this past Tuesday, the largest adjustment in recent memory. They meet this coming Tuesday and Wednesday. Some suspect they will cut interest rates a further 1/4-1/2 points. Remember that these rate cuts affect short-term loans, such as credit cards and lines of credit, but don’t have a direct effect on home mortgage rates, which is usually correlated with the bond market. (CNNMoney, AP, 1/22, personal interviews during this week)
Economic Stimulus Package: Leaders of the House of Representatives have struck an agreement with Treasury Secretary Paulson on the structure of this package. Now, bills need to be created in the House and the Senate for the President to sign and become law. The stimulus deal may face some resistance in the Senate. Some Democratic senators are unhappy that their House colleagues gave up on the party's push to extend unemployment benefits in addition to offering consumer rebates and business tax breaks. No matter, the earliest we will see these checks will likely be May or June. And until the bills are passed and signed, we won’t know exactly how much money we’ll get back. (CNNMoney, 1/26)
State of the Union Address: The President on Monday will likely spend a bit of time talking about the state of the slowing economy and how to energize it - now and beyond. "Look for a pitch for tax-related provisions, such as opening the door for states to use tax-free bonds to help homeowners refinance out of unaffordable subprime [adjustable-rate mortgages]," said Jaret Seiberg, senior vice president at the Stanford Group, a Washington policy research firm. Seiberg added that he believes Bush may endorse a real estate industry plan to offer $5,000 tax credits to first-time home buyers. (CNNMoney, 1/26)
Increasing Conforming Loan Limits: As part of the Economic Stimulus Package, they agreed to increase conforming loan limits from $417,000 to as high as $729,750 for one year. If this passes, some homeowners with loans within this range might want to refinance to take advantage of interest rate savings of up to 1% on their mortgages. (CAR, 1/23)
IRS Provides Tax Information on Home Foreclosures: The Internal Revenue Service has recently provided information to taxpayers about the possible tax consequences resulting from a home foreclosure. The general rule is that when a lender forgives a portion of a loan, the amount of debt cancelled constitutes taxable income for the taxpayer. The IRS highlights the exceptions to this rule, so taxpayers can consider their options before their property is foreclosed by the lender. Please contact me at changhomes@gmail.com for a copy of this information.
Save on your property taxes: Because home prices have gone down quite a bit since its highs, the LA County Assessors office is sponsoring several meetings to help homeowners who would like to reduce their property taxes on their homes due to the falling values. The meeting is at the Lancaster Public Library at 10am this Wednesday, January 31.
Jobless Claims Drop: The number of U.S. workers applying for jobless benefits fell unexpectedly last week to the lowest level in four months. This may be taken as a sign that the downturn in the economy is stabilizing. (Reuters, 1/24)
Home Loan Applications still rising: Applications for home mortgages soared for a third consecutive week Jan. 18 on top of plunging interest rates, resulting in a 16.9 percent spike in the number of refinancings. Refinancings accounted for two-thirds of all applications. The rise followed a drop in the average 30-year fixed mortgage rate to 5.49 percent last week from 5.62 percent in the previous week and 6.18 percent in mid-December. The 10-year Treasury yield that roughly guides long-term mortgage rates declined by more than 0.2 percentage point since the MBA survey was conducted, suggesting 30-year mortgage rates are below levels measured on Friday. Rates on short-term loans also fell. The average rate on a one-year adjustable mortgage declined to 5.51 percent last week from 5.77 percent in the prior period. (Reuters, 1/23)
California Foreclosure Activity still rising too: The number of mortgage default notices filed against California homeowners jumped last quarter to its highest level in more than 15 years. (unknown source, CAR?, 1/22)
Existing-home sales dropped in December: The median home price dropped for the entire year, the first time that has occurred in four decades. The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units. For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. The median price for a single-family home dropped 1.8 percent to $217,000. (AP, 1/24)
Fast Facts:
* 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.)
Sources: Associated Press, CNNMoney, California Association of REALTORS, National Association of REALTORS, Reuters
Sunday, January 27, 2008
Sunday, January 20, 2008
Mortgage applications skyrocket with falling rates! - Week in Review: January 14-20
Good News: Mortgage application volume skyrocketed for the second consecutive week, rising 28.4 percent during the week ending Jan. 11, according to the Mortgage Bankers Association's weekly application survey. Application volume jumped 39 percent during the same week a year ago. Refinance volume rose 43.4 percent, while purchase volume jumped 11.4 percent. Refinance volume accounted for 62.7 percent of total application volume, compared with 57.7 percent the previous week. (via CNNmoney, 1/16)
Applications rose as interest rates continued to fall to the lowest rates since 2005 – the average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.62 percent from 5.73 percent. The average interest rate for 15-year fixed-rate mortgages -- which are typically used to refinance loans -- fell to 5.07 percent from 5.21 percent. Rates for one-year adjustable-rate mortgages fell to 5.77 percent from 6.04 percent. These numbers are different from what I see from CAR and the Baltimore Sun (CNNmoney, 1/16, Baltimore Sun, 1/18))
Sales of existing homes in the U.S. probably fell in December, capping the biggest yearly slump in almost a generation, economists said before a report this week. (Bloomberg, 1/20)
Business Week in an article predicts a home equity crisis coming up because borrowers who tapped into the equity of their properties will have their properties decrease to less than they owe. (1/18)
I mentioned before in a post 2 weeks ago, I believe, stating that homebuilders are beginning to feel positive. This week, CNNmoney reports, Home builders' confidence showed a very slight improvement in January, helped by a narrow gain in their hopes for the market early this summer, according to the latest survey. MSNBC spins this same report saying that “Home builders’ confidence near record low.” (1/16)
Commerce Department says that this past month showed the biggest drop in new homebuilding in 27 years (AP, MSNBC, 1/17)
I'm through talking about a recession - I'm seeing more interest in home buying and predict that things will pick up the 2nd half of this year. If we are/will be in a recession, it started with the home market - so the economy is slagging about 8-12 months behind the home market. As interest returns in the home market this year, it will take a while for the rest of the economy to follow. So you will continue to hear about a recession, while I'm looking beyond it.
Tax rebates – you may have heard in the news that Washington is thinking about giving us money to restart the economy. Right now, the Democrats and Republicans in Congress are hashing out a compromise, which I’ve heard will be done by the end of the month. But don’t hold your breath, you might not see the check until June, once everything is settled. (KNX-AM, 1/17, CNNmoney, 1/19)
The Fed is expected to decrease interest rates by 1/2 to maybe even 3/4 points. (Washington Post, KNX-AM, 1/14)
WaMu accused of appraisal fraud - Lawsuit claims the lender told an appraiser to offer a rosier housing outlook so risky mortgages could get approved. (Money magazine, 1/17)
The median home price in a six-county region of Southern California plunged more than 13 percent in December versus a year ago - The average median price in Los Angeles, Orange, San Diego, Ventura, Riverside and San Bernardino counties hit $425,000 last month, the lowest level since February 2005, when the figure was $420,000. December's median price for the region represents a 2.4 percent dip from November and a 15.8 percent drop from the overall peak price of $505,000 posted last spring and summer. Home sales in the region dropped 45.3 percent to 13,240 from a year ago to the lowest sales total for any December in the 20 years that the firm has been keeping track. Sales were essentially unchanged from November. (DataQuick via CNNmoney, 1/15)
As if you didn’t know: Food prices have gone up a lot! (Seattle Times, 1/17, Washington Post, 1/17)
NAR still seeking loan limit increase on Fannie Mae and Freddie Mac. Currently it's at $417k, which is below the median price for California, to 625k, as part of the federal stimulus package. The FHA Reform Bill is still in committee. (NAR, 1/18)
As U.S. falters, Mexican housing booms - Lower delinquency and declining interest rates are making the market attractive to investors. (CNNMoney, 1/20)
Leaving on a foreign note: Home prices in Spain rose in the fourth quarter at the slowest pace since 1998 after higher borrowing costs damped demand. (Bloomberg, 1/18)
Fast Facts:
* 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.)
Sources: Bloomberg.com, MSNBC, Associated Press, CNNmoney.com, California Association of REALTORS, National Association of REALTORS, Seattle Times, Washington Post, Money Magazine, KNX-AM, DataQuick, Baltimore Sun, Business Week.
Applications rose as interest rates continued to fall to the lowest rates since 2005 – the average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.62 percent from 5.73 percent. The average interest rate for 15-year fixed-rate mortgages -- which are typically used to refinance loans -- fell to 5.07 percent from 5.21 percent. Rates for one-year adjustable-rate mortgages fell to 5.77 percent from 6.04 percent. These numbers are different from what I see from CAR and the Baltimore Sun (CNNmoney, 1/16, Baltimore Sun, 1/18))
Sales of existing homes in the U.S. probably fell in December, capping the biggest yearly slump in almost a generation, economists said before a report this week. (Bloomberg, 1/20)
Business Week in an article predicts a home equity crisis coming up because borrowers who tapped into the equity of their properties will have their properties decrease to less than they owe. (1/18)
I mentioned before in a post 2 weeks ago, I believe, stating that homebuilders are beginning to feel positive. This week, CNNmoney reports, Home builders' confidence showed a very slight improvement in January, helped by a narrow gain in their hopes for the market early this summer, according to the latest survey. MSNBC spins this same report saying that “Home builders’ confidence near record low.” (1/16)
Commerce Department says that this past month showed the biggest drop in new homebuilding in 27 years (AP, MSNBC, 1/17)
I'm through talking about a recession - I'm seeing more interest in home buying and predict that things will pick up the 2nd half of this year. If we are/will be in a recession, it started with the home market - so the economy is slagging about 8-12 months behind the home market. As interest returns in the home market this year, it will take a while for the rest of the economy to follow. So you will continue to hear about a recession, while I'm looking beyond it.
Tax rebates – you may have heard in the news that Washington is thinking about giving us money to restart the economy. Right now, the Democrats and Republicans in Congress are hashing out a compromise, which I’ve heard will be done by the end of the month. But don’t hold your breath, you might not see the check until June, once everything is settled. (KNX-AM, 1/17, CNNmoney, 1/19)
The Fed is expected to decrease interest rates by 1/2 to maybe even 3/4 points. (Washington Post, KNX-AM, 1/14)
WaMu accused of appraisal fraud - Lawsuit claims the lender told an appraiser to offer a rosier housing outlook so risky mortgages could get approved. (Money magazine, 1/17)
The median home price in a six-county region of Southern California plunged more than 13 percent in December versus a year ago - The average median price in Los Angeles, Orange, San Diego, Ventura, Riverside and San Bernardino counties hit $425,000 last month, the lowest level since February 2005, when the figure was $420,000. December's median price for the region represents a 2.4 percent dip from November and a 15.8 percent drop from the overall peak price of $505,000 posted last spring and summer. Home sales in the region dropped 45.3 percent to 13,240 from a year ago to the lowest sales total for any December in the 20 years that the firm has been keeping track. Sales were essentially unchanged from November. (DataQuick via CNNmoney, 1/15)
As if you didn’t know: Food prices have gone up a lot! (Seattle Times, 1/17, Washington Post, 1/17)
NAR still seeking loan limit increase on Fannie Mae and Freddie Mac. Currently it's at $417k, which is below the median price for California, to 625k, as part of the federal stimulus package. The FHA Reform Bill is still in committee. (NAR, 1/18)
As U.S. falters, Mexican housing booms - Lower delinquency and declining interest rates are making the market attractive to investors. (CNNMoney, 1/20)
Leaving on a foreign note: Home prices in Spain rose in the fourth quarter at the slowest pace since 1998 after higher borrowing costs damped demand. (Bloomberg, 1/18)
Fast Facts:
* 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.)
Sources: Bloomberg.com, MSNBC, Associated Press, CNNmoney.com, California Association of REALTORS, National Association of REALTORS, Seattle Times, Washington Post, Money Magazine, KNX-AM, DataQuick, Baltimore Sun, Business Week.
Sunday, January 13, 2008
Short & Sweet: Get Ready to Buy! This Week’s Real Estate News, January 7-13
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
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
Sunday, January 6, 2008
Nearing Bottom, Positive Signs and a Short and Sweet Blog! This Week's Real Estate News, Dec 31, 2007- Jan 6, 2008
Positive News: Existing-home sales INCREASED 10.3 percent in November in the western U.S. (NAR, see more below)
More Positive News: Despite all you hear in the news, we are NOT in a Recession right now! No matter how it feels like, a Recession is defined by 2 consecutive quarters of negative growth, as measured by the country’s Gross Domestic Product (GDP). The last two available quarters the GDP grew by 3.8% in the 2nd quarter of 2007 and 4.9% in the 3rd quarter. Economists expect GDP for the quarter that just ended to be about 2%. I know this sounds technical, but it refutes many of the pundits you hear and see. (KNX-AM, 1/5/2008)
Economics News: Consumer confidence up slightly, job growth stalls, and unemployment rises. These numbers make it more likely that the Federal Reserve will once again cut interest rates when they meet later this month. (CNNMoney, 1/4, CAR 1/2)
Sales of new, single-family homes declined 9.0 percent in November 2007 according to new data from the U.S. Census Bureau and the Dept. of Housing and Urban Development. (CAR, 1/2)
But, Existing-home sales rose slightly in November, indicating a stabilization in housing in the wake of mortgage disruptions earlier this year, according to the National Association of REALTORS®. In the West, home sales increased 10.3 percent to a level of 960,000, but are 25 percent below a year ago. Median price: $325,800, which is 6.8 percent lower than November 2006. (NAR, 12/31)
California Builders state the worst is over: California Building Industry Association is predicting that the state's housing slump is near bottom and business will rise steadily. (SF Chronicle, 1/4)
Bush Advisor states that Housing Slump will end by mid-year (CNBC, 1/6)
Lastly, comparing foreign housing markets, as we did in prior weeks. As the Fed has recently decreased the benchmark interest rates, Australia’s central bank has raised its benchmark interest rate to an 11-year high. This has impacted their homebuilding market. In England, U.K. mortgage approvals fell to a three-year low in November, a sign demand from homebuyers is waning as banks provide less access to credit. Manhattan prices are “still crazy” (CNNMoney 1/6, Bloomberg, 1/4)
January’s Newsletter, which will be emailed Monday morning to subscribers, will feature 3 signs of predatory lending and learn the pros and cons of buying in today’s market. That along with the FAQ on how to decrease your property tax bill (legally!) this year and a summary of the housing statistics in the Tri-Valley area of Northern Los Angeles County in the Newsletter. If you wish to subscribe, please send me an email: changhomes@gmail.com. It is free of charge.
Next week's Blog will start the first in a series of Tax Tips! Have a housing-related tax question? Send it to changhomes@gmail.com to have it answered in the series by a tax professional. You might get a $25 discount on your tax return this year from H&R Block.
One of my New Years Resolutions is to keep this blog informative, yet short and sweet. How did I do to start the year off? Send your responses to changhomes@gmail.com.
Sources: National Association of REALTORS, California Association of REALTORS, CNNMoney.com, Bloomberg, CNBC, San Francisco Chronicle, KNX-AM
More Positive News: Despite all you hear in the news, we are NOT in a Recession right now! No matter how it feels like, a Recession is defined by 2 consecutive quarters of negative growth, as measured by the country’s Gross Domestic Product (GDP). The last two available quarters the GDP grew by 3.8% in the 2nd quarter of 2007 and 4.9% in the 3rd quarter. Economists expect GDP for the quarter that just ended to be about 2%. I know this sounds technical, but it refutes many of the pundits you hear and see. (KNX-AM, 1/5/2008)
Economics News: Consumer confidence up slightly, job growth stalls, and unemployment rises. These numbers make it more likely that the Federal Reserve will once again cut interest rates when they meet later this month. (CNNMoney, 1/4, CAR 1/2)
Sales of new, single-family homes declined 9.0 percent in November 2007 according to new data from the U.S. Census Bureau and the Dept. of Housing and Urban Development. (CAR, 1/2)
But, Existing-home sales rose slightly in November, indicating a stabilization in housing in the wake of mortgage disruptions earlier this year, according to the National Association of REALTORS®. In the West, home sales increased 10.3 percent to a level of 960,000, but are 25 percent below a year ago. Median price: $325,800, which is 6.8 percent lower than November 2006. (NAR, 12/31)
California Builders state the worst is over: California Building Industry Association is predicting that the state's housing slump is near bottom and business will rise steadily. (SF Chronicle, 1/4)
Bush Advisor states that Housing Slump will end by mid-year (CNBC, 1/6)
Lastly, comparing foreign housing markets, as we did in prior weeks. As the Fed has recently decreased the benchmark interest rates, Australia’s central bank has raised its benchmark interest rate to an 11-year high. This has impacted their homebuilding market. In England, U.K. mortgage approvals fell to a three-year low in November, a sign demand from homebuyers is waning as banks provide less access to credit. Manhattan prices are “still crazy” (CNNMoney 1/6, Bloomberg, 1/4)
January’s Newsletter, which will be emailed Monday morning to subscribers, will feature 3 signs of predatory lending and learn the pros and cons of buying in today’s market. That along with the FAQ on how to decrease your property tax bill (legally!) this year and a summary of the housing statistics in the Tri-Valley area of Northern Los Angeles County in the Newsletter. If you wish to subscribe, please send me an email: changhomes@gmail.com. It is free of charge.
Next week's Blog will start the first in a series of Tax Tips! Have a housing-related tax question? Send it to changhomes@gmail.com to have it answered in the series by a tax professional. You might get a $25 discount on your tax return this year from H&R Block.
One of my New Years Resolutions is to keep this blog informative, yet short and sweet. How did I do to start the year off? Send your responses to changhomes@gmail.com.
Sources: National Association of REALTORS, California Association of REALTORS, CNNMoney.com, Bloomberg, CNBC, San Francisco Chronicle, KNX-AM
Sunday, December 30, 2007
Positive News and a Happy New Year! This Week’s Real Estate News: December 24-30
I am continuing to strive for positive news to start off the weekly headlines...
Price declines in the tri-valley area of Los Angeles County are not nearly as great as the media would have you believe. The overly-negative Standard & Poor’s/Case-Shiller index shows home prices declined only 8.8% over the past quarter. More below... (AP, 12/26; LA Times, 12/27; KNX-AM, 12/27)
Los Angeles area isn’t even mentioned among the top housing decliners in a survey by CNNMoney. More below... (12/28)
High Desert area, including the Antelope Valley, continues to have the most affordable homes in the state. More below in Fast Facts (CAR, 12/27)
U.S. home prices fell 6.7 percent in October, their largest monthly drop since early 1991, according to the Standard & Poor’s/Case-Shiller index. This index surveys over 100 markets, but does not adjust for price differences between markets. It therefore tends to overestimate the swings of the higher-priced markets, such as LA. (AP, 12/26; LA Times, 12/27; KNX-AM, 12/27)
Least Expensive Housing Market: Killeen, TX, with average price of $136,725 (CNNMoney, 12/28)
Least Affordable Major City: Los Angeles, CA, only 3.7% of homes sold in L.A. during the third quarter were affordable to families earning the median income for the area ($61,700). (CNNMoney, 12/28)
Fastest Price Gains: Bismark, ND had a 12-month increase in home prices at 15.3%; Salt Lake City, UT; Yakima, WA; Binghampton, NY; and Charlotte, NC all had at least 11% price gains over the past 12 months. (CNNMoney, 12/28)
Biggest Drop in Home Price: Palm Bay, FL, followed by Sacramento, CA, Sarasota, FL, New Orleans, LA, and Hagerstown, MD with greater than 8% drops in price. Notice that although S&P/Case-Shiller showed the LA dropped more than 8.8%, the area didn’t even rank on is list, giving credence to the S&P/Case-Shiller index being overly pessimistic on LA housing price drop. (CNNMoney, 12/28)
Biggest Projected Decline expected in Punta Gorda, FL (35% from its peak to the expected trough), Stockton, CA (31.6%), Modesto (31.3%), Ft. Walton Beach, FL (30.4%), and Naples, FL (29.6%). (CNNMoney, 12/28)
Standard & Poor’s/Case-Shiller index numbers: Miami was hit with a 12.4 percent decline in the month, the most of any area. Tampa fell 11.8 percent and Detroit, 11.2 percent. Sun Belt cities have suffered deep losses with San Diego down 11.1 percent in the past year, Phoenix off 10.6 percent and Las Vegas 10.7 percent. In Los Angeles, a huge market, home prices have fallen 8.8 percent. Only Charlotte, N.C. (4.3 percent), Portland, Ore. (1.1 percent), and Seattle (3.3 percent) showed positive price growth. (CNNMoney, 12/28)
Mortgage Applications Up from Last Year: Mortgage applications fell last week but they were up nearly 10 percent compared to the same week last year, according to the Mortgage Bankers Association’s weekly survey. The seasonally adjusted mortgage application index fell 7.6 percent in the week ended December 21 to 603.8 -- its lowest reading since falling to 575.6 in the December 29, 2006 week. The applications slump this week and last, however, appears to more closely reflect the status of ailing housing sales. The MBA's seasonally adjusted refinancing applications index fell 8.5 percent to 1,915.3 last week, its weakest point since early September. Home applications trailed off last week despite falling mortgage rates. One-year adjustable mortgages tumbled 45 basis points in the week to 6.03 percent, the lowest since mid-November. Fixed 30-year mortgage rates averaged 6.10 percent last week, down 8 basis points, the association said. (AP, 12/26)
Commerce Department reported that new home sales in November plunged to their lowest level in 12 years, tumbling 9 percent to a seasonally adjusted annual rate of 647,000. (AP, 12/28)
Weak Dollar Continues – Due to uncertainty after assassination of former Pakistani Prime Minister Benazir Bhutto and a report that new home sales dropped in the United States. (AP, 12/28)
National Association of REALTORS to report existing house sales numbers on Monday 12/31. (AP, 12/26)
Orders for the big-ticket manufactured items known as durable goods fell significantly short of expectations in November, the Commerce Department said Thursday, in a disappointing report that added to the growing concerns about the U.S. economy's health. (CNNMoney, 12/27)
California Housing Starts Down 45% - The number of permits issued for new homes in California in November was 5,498, a 45-percent decline from November 2006, according to new data from the California Building Industry Association. Year-over year production of single-family homes declined by roughly 50 percent in November, and construction of multifamily units slid 36 percent. (CAR, 12/27)
Lastly Ending off in Worldwide Real Estate - U.K. Nationwide House Prices Fall for Second Month in December, Drop 0.5% U.K. house prices fell for a second month in December, indicating that higher credit costs are snuffing out a decade-long property market boom, Nationwide Building Society said. (Bloomberg, 12/28)
Fast Facts:
* 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.)
* Mortgage rates - week ending 12/20: 30-yr. fixed: 6.14%; Fees/points: 0.4% 15-yr. fixed: 5.79%; Fees/points: 0.4% 1-yr. adjustable: 5.51%; Fees/points: 0.6% (Source: Freddie Mac)
Sources: KNX-AM, Freddie Mac, California Association of Realtors, Bloomberg, CNNMoney, Associated Press, Los Angeles Times.
Price declines in the tri-valley area of Los Angeles County are not nearly as great as the media would have you believe. The overly-negative Standard & Poor’s/Case-Shiller index shows home prices declined only 8.8% over the past quarter. More below... (AP, 12/26; LA Times, 12/27; KNX-AM, 12/27)
Los Angeles area isn’t even mentioned among the top housing decliners in a survey by CNNMoney. More below... (12/28)
High Desert area, including the Antelope Valley, continues to have the most affordable homes in the state. More below in Fast Facts (CAR, 12/27)
U.S. home prices fell 6.7 percent in October, their largest monthly drop since early 1991, according to the Standard & Poor’s/Case-Shiller index. This index surveys over 100 markets, but does not adjust for price differences between markets. It therefore tends to overestimate the swings of the higher-priced markets, such as LA. (AP, 12/26; LA Times, 12/27; KNX-AM, 12/27)
Least Expensive Housing Market: Killeen, TX, with average price of $136,725 (CNNMoney, 12/28)
Least Affordable Major City: Los Angeles, CA, only 3.7% of homes sold in L.A. during the third quarter were affordable to families earning the median income for the area ($61,700). (CNNMoney, 12/28)
Fastest Price Gains: Bismark, ND had a 12-month increase in home prices at 15.3%; Salt Lake City, UT; Yakima, WA; Binghampton, NY; and Charlotte, NC all had at least 11% price gains over the past 12 months. (CNNMoney, 12/28)
Biggest Drop in Home Price: Palm Bay, FL, followed by Sacramento, CA, Sarasota, FL, New Orleans, LA, and Hagerstown, MD with greater than 8% drops in price. Notice that although S&P/Case-Shiller showed the LA dropped more than 8.8%, the area didn’t even rank on is list, giving credence to the S&P/Case-Shiller index being overly pessimistic on LA housing price drop. (CNNMoney, 12/28)
Biggest Projected Decline expected in Punta Gorda, FL (35% from its peak to the expected trough), Stockton, CA (31.6%), Modesto (31.3%), Ft. Walton Beach, FL (30.4%), and Naples, FL (29.6%). (CNNMoney, 12/28)
Standard & Poor’s/Case-Shiller index numbers: Miami was hit with a 12.4 percent decline in the month, the most of any area. Tampa fell 11.8 percent and Detroit, 11.2 percent. Sun Belt cities have suffered deep losses with San Diego down 11.1 percent in the past year, Phoenix off 10.6 percent and Las Vegas 10.7 percent. In Los Angeles, a huge market, home prices have fallen 8.8 percent. Only Charlotte, N.C. (4.3 percent), Portland, Ore. (1.1 percent), and Seattle (3.3 percent) showed positive price growth. (CNNMoney, 12/28)
Mortgage Applications Up from Last Year: Mortgage applications fell last week but they were up nearly 10 percent compared to the same week last year, according to the Mortgage Bankers Association’s weekly survey. The seasonally adjusted mortgage application index fell 7.6 percent in the week ended December 21 to 603.8 -- its lowest reading since falling to 575.6 in the December 29, 2006 week. The applications slump this week and last, however, appears to more closely reflect the status of ailing housing sales. The MBA's seasonally adjusted refinancing applications index fell 8.5 percent to 1,915.3 last week, its weakest point since early September. Home applications trailed off last week despite falling mortgage rates. One-year adjustable mortgages tumbled 45 basis points in the week to 6.03 percent, the lowest since mid-November. Fixed 30-year mortgage rates averaged 6.10 percent last week, down 8 basis points, the association said. (AP, 12/26)
Commerce Department reported that new home sales in November plunged to their lowest level in 12 years, tumbling 9 percent to a seasonally adjusted annual rate of 647,000. (AP, 12/28)
Weak Dollar Continues – Due to uncertainty after assassination of former Pakistani Prime Minister Benazir Bhutto and a report that new home sales dropped in the United States. (AP, 12/28)
National Association of REALTORS to report existing house sales numbers on Monday 12/31. (AP, 12/26)
Orders for the big-ticket manufactured items known as durable goods fell significantly short of expectations in November, the Commerce Department said Thursday, in a disappointing report that added to the growing concerns about the U.S. economy's health. (CNNMoney, 12/27)
California Housing Starts Down 45% - The number of permits issued for new homes in California in November was 5,498, a 45-percent decline from November 2006, according to new data from the California Building Industry Association. Year-over year production of single-family homes declined by roughly 50 percent in November, and construction of multifamily units slid 36 percent. (CAR, 12/27)
Lastly Ending off in Worldwide Real Estate - U.K. Nationwide House Prices Fall for Second Month in December, Drop 0.5% U.K. house prices fell for a second month in December, indicating that higher credit costs are snuffing out a decade-long property market boom, Nationwide Building Society said. (Bloomberg, 12/28)
Fast Facts:
* 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.)
* Mortgage rates - week ending 12/20: 30-yr. fixed: 6.14%; Fees/points: 0.4% 15-yr. fixed: 5.79%; Fees/points: 0.4% 1-yr. adjustable: 5.51%; Fees/points: 0.6% (Source: Freddie Mac)
Sources: KNX-AM, Freddie Mac, California Association of Realtors, Bloomberg, CNNMoney, Associated Press, Los Angeles Times.
Sunday, December 23, 2007
Positve Thinking: This Week's Real Estate News, Decemebr 17-23
Merry Christmas!
The news media has been throwing out negative news on the housing market, and I’m guilty of reporting it in this column. I am reminded that the market is NOT that bad – I am staying busy in the business, and this isn’t the early 1990s. I’m going to make an effort to at least find some positive news as I continue to relay the current news that affect your home (or your future home).
Positive Fact: 30% of homeownership is free-and-clear. (M.Lush, 12/21)
SoCal is NOT THE WORST: Battered by a declining manufacturing base, low or no population growth and low demand for housing, Michigan and Ohio rank No. 1 and 2 on mortgage finance company Fannie Mae's list of states with the largest credit losses through Sept. 30. In contrast, California had $30 million in write-offs and Florida had $21 million. (AP, 12/17)
Riverside County remains the fastest-growing county in California, although its population growth rate is declining, partially due to the housing slow-down. (Riverside Press-Enterprise, 12/20)
Fresno area real estate agents offer tours of properties in foreclosure, and there are plenty available: roughly 12 percent of those listed for sale, or about 500. (Fresno Bee, 12/20)
Foreclosure Rate Improves over prior month – Foreclosures nationally declined 10 percent in November compared with October, but were up nearly 68 percent compared with November 2006, according to RealtyTrac, a foreclosure sales and data company. The national foreclosure rate in November was one filing for every 617 households. Nevada continued to register the nation's top state foreclosure rate for the 11th straight month. A total of 6,694 foreclosure filings were reported in the state for the month, up 1 percent from the previous month and up 167 percent from November 2006. (RealtyTrac, Reuters, 12/19)
The Fed developed new rules to prevent mortgage mess from happening again, restricting lenders from penalty for paying off early, eliminate no-doc loans, and force lenders to make sure borrowers set aside some funds for taxes and insurance. Ed Smith, with California Association of Mortgage Brokers, says it’s identical to H.R. 3915, which passed the U.S. House of Representatives, and a similar one that passed the Senate and is now in compromise committee. (KNX-AM, 12/18)
On Friday, December 14, 2007, the U.S. Senate voted 93 to 1 to pass S. 2338, the FHA Modernization Act, which will reform the Federal Housing Administration (FHA). A conference committee will now meet to resolve differences between this bill and the one passed by the House of Representatives earlier this year. (Personal Email from CAR, 12/17)
President George W. Bush signed legislation into law on Thursday that will ease the tax burden for home owners who have had debt forgiven on a mortgage due to a foreclosure, short sale, or deed in lieu of foreclosure. The bill — Mortgage Forgiveness Debt Relief Act — has been supported by NAR since the 1990s. (AP 12/18)
Mortgage Applications Fall as Rates Rise - Applications for home mortgages fell 19.5 percent to 653.8 last week compared with the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association weekly mortgage applications survey. On an unadjusted basis, the index decreased 21.3 percent, but was up 1.7 percent compared with the same week a year ago. The Refinance Index decreased 27.3 percent, while the Purchase Index decreased 10.6 percent. The decrease could have been triggered in part by rising interest rates: 30-year fixed-rate mortgages increased to 6.18 percent from 6.07 percent; 15-year fixed-rate mortgages increased to 5.78 percent from 5.72 percent; 1-year ARMs increased to 6.48 percent from 6.31 percent. (Mortgage Bankers Association, 12/19)
November Home Sales in CA - Home sales decreased 36.2 percent in November in California compared with the same period a year ago, while the median price of an existing home fell 11.9 percent. (CAR, 12/21)
Sales of new homes in the U.S. fell in November, signaling no end to the housing recession that threatens to stall economic growth, economists said before a report this week. Purchases fell to an annual pace of 718,000 from 728,000 in October, according to the median forecast of economists surveyed by Bloomberg News. The 716,000 pace reached in September was the lowest since 1996. The real-estate slump, already the deepest in 16 years, shows no sign of abating as discounts fail to lure buyers and inventories swell. The risk that the slowdown will spread through the entire economy is prompting business to rein in orders for new equipment, a separate report may also show. (Bloomberg, 12/23)
How is your monthly mortgage payment? The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,111 last month, down from $2,198 the previous month, and down from $2,281 a year ago. Adjusted for inflation, the current payment is 3.6 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 15.4 percent below the current cycle's peak in June last year. (DQNews.com, 11/14)
Federal regulators are investigating whether mortgage lender Washington Mutual Inc. pressured Santa Ana-based First American Corp. to inflate home appraisals. (LA Times, 12/21)
A December reading of U.S. homebuilders' sentiment remained at a record low for the third straight month. The National Association of Home Builders said Monday its housing market index, which gauges builders' perceptions of conditions and expectations for home sales over the next six months, came in at 19 in December. The number was at the lowest level since the index began in January 1985. Upswing in building activity expected by second half of next year. (AP, 12/17)
California November 2007 Home Sales - A total of 25,578 new and resale houses and condos were sold statewide last month. That's down 0.98 percent from 25,832 for October, and down 38.8 percent from 41,809 in November 2006. Last month's sales made for the slowest November in DataQuick's records, which go back to 1988. On a year-over-year basis, sales have declined the last 26 months. The median price paid for a home last month was $414,000, down 2.4 percent from $424,000 the prior month, and down 11.9 percent from $470,000 for November a year ago. The median peaked last March/April/May at $484,000. Price declines are greatest in inland areas such as the Central Valley and Riverside County, which absorbed spillover activity during the housing boom. Prices in some core metro areas are off by a few percent. (DQNews, 12/21)
Southland prices fall again, sales perk up – Southern California home sales bucked the seasonal norm in November and rose slightly over October, thanks to bargain shopping and an uptick in new-home sales. But it remained a chilly market by historical standards: Sales were the slowest for a November in at least 20 years and the median sale price posted a record 10.3 percent year-over-year decline. A total of 13,173 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in November. That was up 2 percent from 12,913 sales in October, and down 42.7 percent from 23,005 in November last year, according to DataQuick Information Systems. Last month's sales were the lowest for any November in DataQuick's statistics, which go back to 1988. The previous low was in November 1992, when 15,446 homes sold. November has averaged 22,749 sales over the last 20 years. The number of single-family houses that resold in November was about even with October, while condo resales fell 6 percent. The sales are based on the number of escrows that closed each month. (DQNews, 12/18)
Sunday, December 16, 2007
Less than 9 days ‘til Christmas: This Week’s Real Estate News, December 10-16
The market was initially disappointed with the 1/4% drop in Federal Funds and Discount Funds Rates by the Fed on Tuesday. The Fed followed Wednesday with an agreement with world Central Banks for the opportunity for U.S. banks to “auction” for additional funds. Later in the week, Producer Price Index rose dramatically, signaling inflation. The people I hear speculate that the Fed had already known these numbers, and therefore were more conservative in its rates drop. (KNX-AM, 12/11, 12/12)
The Fed seeks to add protections to back even the riskiest borrowers, already hit hardest by the housing and credit crunches. Rules expected to be proposed Tuesday would apply to loans made by all types of lenders, including banks and brokers. The plan from the Fed, which has regulatory powers over the nation's financial system, could be finalized next year. (AP, 12/11)
More to Come in 2008: For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008. Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year. (Bloomberg, 12/14)
USGS has released mudflow maps showing the potential for destructive mudslides in the wake of the recent Southern California wildfires at http://landslides.usgs.gov/research/wildfire/07sca/. They estimate the size of potential debris flows, commonly known as mudflows, and the areas that could be affected when rainfall begins on recently-burned areas. According to the National Weather Service, hillsides that have been denuded of brush and vegetation by fire can often become unstable because they lose the root systems that hold dirt in place. Heavy rains can over-saturate the vulnerable soil which can then lead to hillsides giving way under pressure.
Recession? “Morgan Stanley became the first major Wall Street firm this week to predict a recession, a mild recession,” said KNX Business Hour host Frank Mottek. (12/11)
Fannie Mae and Freddie Mac are changing their criteria for purchasing delinquent home loans they've guaranteed, in order to reduce the number they buy from investors. (AP, 12/11)
Los Angeles city officials are considering a law aimed at curbing the building of so-called “McMansions,” by limiting the square-footage of new or remodeled houses. (LA Times, 12/11)
Robert Kiyosaki (Rich Dad, Poor Dad) says that buying foreclosures is for the experts, and even he doesn't pursue them. Foreclosure purchases may be on the rise, but reportedly they can come with many pitfalls and take much longer to complete than a traditional home sale. (KNX-AM, 12/10, LA Times, 12/10)
The NATIONAL ASSOCIATION OF REALTORS®’s revised monthly forecast calls for U.S. existing home sales to fall 12.5 percent this year to 5.67 million, but predicts sales in 2008 will be higher than the trade group predicted a month ago. (AP, 12/10)
The median price of an existing home sold jumped 43 percent between 2001 and 2005, but year-over-year price declines started in late 2006 and are expected to fall almost 2 percent this year, according to the National Association of Realtors. That would mark the first year with a decline in prices. (AP, 12/10)
What has started as the U.S. Housing Crisis has become the Global Credit Crisis (KNX-AM, 12/13)
Mortgage applications rise: Mortgage application volume increased 2.5 percent for the week ending Dec. 7, according to the trade group Mortgage Bankers Association's weekly application survey. The MBA's weekly application index rose to 811.8 from 791.8 the previous week. Refinance volume increased 4.3 percent, while purchase volume grew 1.7 percent. Refinance applications accounted for 57.6 percent of total mortgage applications during the week ending Dec. 7, compared with 56 percent during the prior week. The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week. Mortgage applications rose despite a jump in interest rates. The average interest rate for traditional, 30-year fixed-rate mortgages grew to 6.07 percent during the week ending Dec. 7, from 5.82 percent during the prior week. The average interest rate for one-year adjustable-rate mortgages increased to 6.31 percent from 6.28 percent. (AP, 12/12)
On Capitol Hill, follow-up on last week: Key senators have reached a deal to expand the nation's largest federal homeownership program in a move that could help struggling subprime borrowers avoid foreclosure, legislative and industry sources said. If the deal holds, underwriting standards at the Federal Housing Administration will be loosened so that the program can help 200,000 troubled borrowers save their homes, according to the overseers of the program. Under the deal, lawmakers have agreed to a limited debate on FHA reform that will allow the full Senate to vote on the reform package. The Senate moved Friday against the worsening mortgage crisis, voting to make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. The legislation, approved 93-1, would allow the Federal Housing Administration to back refinanced loans for borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial "teaser" levels. (AP, 12/13, 12/14)
This week in Economics: On Thursday, the Commerce Department releases its final reading on third-quarter gross domestic product. Economists are anticipating GDP to come in at 4.9 percent, as estimated last month; however, they are less optimistic about growth in the quarters to come. Late in the week will be the Labor Department's report on personal income and spending in November, which will also include the Fed's preferred inflation measure: the core personal consumption expenditures deflator. Core PCE is expected to show year-over-year growth of 1.9 percent - within the Fed's comfort range of 1 percent to 2 percent. (AP, 12/16)
Once again, like last week, I’ll close with a view of worldwide real estate, this week, we’ll focus on England. London Leads Biggest Drop in British House Prices for at Least Five Years London led the biggest drop in U.K. home values for at least five years this month as higher mortgage costs and the prospect of further declines in prices kept away buyers, a report by Rightmove Plc showed. U.K. Commercial Real Estate Returns Drop by Record Amount, IPD Report Says U.K. commercial real estate returns fell by a record amount last month as higher interest rates and a drop in bank lending pushed prices down, according to Investment Property Databank Ltd., a London-based research firm. (Bloomberg, 12/14)
Fannie Mae chief executive tells shareholders he sees no recovery in housing before 2009 - blames unaffordable prices for current housing woes. Average home prices will decline another 4 to 5 percent in 2008, according to Fannie Mae Chief Executive Dan Mudd. (CNNMoney, 12/14)
Sources: KNX-AM, Associated Press, Bloomberg, Los Angeles Times, CNNMoney.
The Fed seeks to add protections to back even the riskiest borrowers, already hit hardest by the housing and credit crunches. Rules expected to be proposed Tuesday would apply to loans made by all types of lenders, including banks and brokers. The plan from the Fed, which has regulatory powers over the nation's financial system, could be finalized next year. (AP, 12/11)
More to Come in 2008: For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008. Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year. (Bloomberg, 12/14)
USGS has released mudflow maps showing the potential for destructive mudslides in the wake of the recent Southern California wildfires at http://landslides.usgs.gov/research/wildfire/07sca/. They estimate the size of potential debris flows, commonly known as mudflows, and the areas that could be affected when rainfall begins on recently-burned areas. According to the National Weather Service, hillsides that have been denuded of brush and vegetation by fire can often become unstable because they lose the root systems that hold dirt in place. Heavy rains can over-saturate the vulnerable soil which can then lead to hillsides giving way under pressure.
Recession? “Morgan Stanley became the first major Wall Street firm this week to predict a recession, a mild recession,” said KNX Business Hour host Frank Mottek. (12/11)
Fannie Mae and Freddie Mac are changing their criteria for purchasing delinquent home loans they've guaranteed, in order to reduce the number they buy from investors. (AP, 12/11)
Los Angeles city officials are considering a law aimed at curbing the building of so-called “McMansions,” by limiting the square-footage of new or remodeled houses. (LA Times, 12/11)
Robert Kiyosaki (Rich Dad, Poor Dad) says that buying foreclosures is for the experts, and even he doesn't pursue them. Foreclosure purchases may be on the rise, but reportedly they can come with many pitfalls and take much longer to complete than a traditional home sale. (KNX-AM, 12/10, LA Times, 12/10)
The NATIONAL ASSOCIATION OF REALTORS®’s revised monthly forecast calls for U.S. existing home sales to fall 12.5 percent this year to 5.67 million, but predicts sales in 2008 will be higher than the trade group predicted a month ago. (AP, 12/10)
The median price of an existing home sold jumped 43 percent between 2001 and 2005, but year-over-year price declines started in late 2006 and are expected to fall almost 2 percent this year, according to the National Association of Realtors. That would mark the first year with a decline in prices. (AP, 12/10)
What has started as the U.S. Housing Crisis has become the Global Credit Crisis (KNX-AM, 12/13)
Mortgage applications rise: Mortgage application volume increased 2.5 percent for the week ending Dec. 7, according to the trade group Mortgage Bankers Association's weekly application survey. The MBA's weekly application index rose to 811.8 from 791.8 the previous week. Refinance volume increased 4.3 percent, while purchase volume grew 1.7 percent. Refinance applications accounted for 57.6 percent of total mortgage applications during the week ending Dec. 7, compared with 56 percent during the prior week. The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week. Mortgage applications rose despite a jump in interest rates. The average interest rate for traditional, 30-year fixed-rate mortgages grew to 6.07 percent during the week ending Dec. 7, from 5.82 percent during the prior week. The average interest rate for one-year adjustable-rate mortgages increased to 6.31 percent from 6.28 percent. (AP, 12/12)
On Capitol Hill, follow-up on last week: Key senators have reached a deal to expand the nation's largest federal homeownership program in a move that could help struggling subprime borrowers avoid foreclosure, legislative and industry sources said. If the deal holds, underwriting standards at the Federal Housing Administration will be loosened so that the program can help 200,000 troubled borrowers save their homes, according to the overseers of the program. Under the deal, lawmakers have agreed to a limited debate on FHA reform that will allow the full Senate to vote on the reform package. The Senate moved Friday against the worsening mortgage crisis, voting to make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. The legislation, approved 93-1, would allow the Federal Housing Administration to back refinanced loans for borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial "teaser" levels. (AP, 12/13, 12/14)
This week in Economics: On Thursday, the Commerce Department releases its final reading on third-quarter gross domestic product. Economists are anticipating GDP to come in at 4.9 percent, as estimated last month; however, they are less optimistic about growth in the quarters to come. Late in the week will be the Labor Department's report on personal income and spending in November, which will also include the Fed's preferred inflation measure: the core personal consumption expenditures deflator. Core PCE is expected to show year-over-year growth of 1.9 percent - within the Fed's comfort range of 1 percent to 2 percent. (AP, 12/16)
Once again, like last week, I’ll close with a view of worldwide real estate, this week, we’ll focus on England. London Leads Biggest Drop in British House Prices for at Least Five Years London led the biggest drop in U.K. home values for at least five years this month as higher mortgage costs and the prospect of further declines in prices kept away buyers, a report by Rightmove Plc showed. U.K. Commercial Real Estate Returns Drop by Record Amount, IPD Report Says U.K. commercial real estate returns fell by a record amount last month as higher interest rates and a drop in bank lending pushed prices down, according to Investment Property Databank Ltd., a London-based research firm. (Bloomberg, 12/14)
Fannie Mae chief executive tells shareholders he sees no recovery in housing before 2009 - blames unaffordable prices for current housing woes. Average home prices will decline another 4 to 5 percent in 2008, according to Fannie Mae Chief Executive Dan Mudd. (CNNMoney, 12/14)
Sources: KNX-AM, Associated Press, Bloomberg, Los Angeles Times, CNNMoney.
Sunday, December 9, 2007
Another Fed Rate Cut Almost Certain: This Week’s Real Estate News, December 3-9
Big news for the upcoming week is the expected quarter-point cut in the Federal Funds Rate: Analysts expect the Fed to trim its key rate, now at 4.5 percent, by one-quarter of a percentage point at the meeting Tuesday. Some even speculate about the possibility of a half-point cut. Stocks are spring-loaded, awaiting that next Fed move, and could no doubt rally heartily, if briefly, should the bigger cut be announced. The Fed is also seen trimming the 5 percent discount rate by a quarter point or more. (KNX-AM, AP, CNBC, multiple dates)
Two jobs growth numbers were released this past week: Both the ADP Jobs Growth in the private sector and the Labor Department numbers showed a moderate growth in jobs. (KNX-AM, 12/5, 12/7)
The big real estate news from the past week came from Washington. The Bush administration unveiled a foreclosure relief plan, includes a five-year freeze on interest rate hikes for some subprime borrowers with adjustable-rate mortgages (ARMs). The White House says it could help 1.2 million distressed homeowners. In separate announcements, President Bush and Treasury Secretary Henry Paulson said the plan will streamline the mortgage modification process for many distressed borrowers. It will offer "more relief to more homeowners, more quickly," the president said. And it will include a five-year freeze on interest rates for borrowers current with their monthly payments. (CNN Money, 12/7)
Foreclosure Relief Plan Drawbacks - I hear overwhelmingly that this plan is too limited: It excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months. It also only covers borrowers with adjustable rate mortgages (ARMs) resetting beginning in 2008 and leaves out any who are judged capable of continuing to make mortgage payments at the higher reset rates. Borrowers who can't afford the loan even at low introductory rates also will be ineligible, according to Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents lenders and mortgage servicers. Those borrowers will have to work with servicers on a case-by-case basis to determine if their homes can be saved. Additionally, the loan-to-value-ratio of the mortgage must be less than 97 percent. That is, the face amount of the loan must be less than what the home is actually worth. FICO credit scores also must not exceed 660 or have gained more than 10 percent since the origination of the mortgage. (CNN Money, 12/7; KNX-AM, 12/6; CNBC, 12/7)
Foreclosure Relief Plan Critics: Analysts also are arguing if this is the best thing for the economy and the open, Capitalist market that America is known for. Ben Stein, an economist, says it’s sad to see the government interfere with contracts between people and institutions. This Plan may go to court. Other economists and analysts are disappointed that the Plan prevents the fair market from ironing this out on its own. But in general, the consensus outside the market theorists seem to be that it is time for a bailout centered on the families and individuals, as long as we don’t bail out the lenders. Critics are also quick to note that this Plan is not a law, but a “best practices” document – not all lenders need to follow it, but the lenders that were a part of the discussions have agreed to do so. (CNN Money, 12/7; KNX-AM, 12/6; CNBC, 12/7)
The Dow is now up 9.3 percent year-to-date. Nasdaq is up 12 percent for the year, and S&P 500 is up 6.1 percent. Even in this volatile year, that’s better than your saving’s accounts and 1-year CDs! (CNN Money 12/7)
A Week of Economic Data Releases: Besides the Fed meeting, there is some important economic data expected in the coming week. Inflation data, in the form of both producer and consumer prices, are reported Thursday and Friday, respectively. Another big item is retail sales for November, on Thursday. (CNN Money 12/7)
Economists are in disagreement if there will be a recession in 2008. I’ve heard things this past week from “certainly” to “relatively remote.” See folllowing article...(CNBC, KNX-AM, 12/3-9)
UCLA Anderson Forecast states that the national economy is not technically in a recession, though the group’s economists are calling current conditions “a near recession experience.” A recession is defined as a two consecutive quarter decline in real Gross Domestic Product (GDP) and the UCLA Anderson Forecast is calling for real GDP growth to be just above 1% for the fourth quarter of 2007 and the first quarter of 2008. While acknowledging that an economy slowed to a 1% growth rate could slip further, the Forecast notes rather ironically that their near recession forecast “can be viewed somewhat optimistically.” In addition, job growth is strong and economic fundamentals all show strong numbers(AP, LA Times, 12/5; KNX-AM)
Bills for FHA Reform (Senate Bill 2338) and Freddie Mac/Fannie Mae loan limits appear to be running into some trouble in the Senate. National Association of Realtors and California Association of Realtors want people to write their Senators for passage of these bills. FHA reform will provide existing homeowners with secure and affordable refinancing alternatives and more mortgage options for first-time homebuyers. Increasing the supply of affordable mortgage money is a critical component for bringing stability to the nation’s turbulent housing markets. The other bill allows regional increases to the Freddie Mac/Fannie Mae loan limits and stress the need for quick Senate action on this vital reform. This change will make lower-cost GSE mortgage financing available to more families trying to buy homes in high cost areas and increase the supply of mortgage money. (CAR, NAR, 12/6)
According to the Mortgage Bankers Association, 5.12% of outstanding loans were in default in the second quarter, a rate about 17% higher than a year ago. (CNBC, 12/6)
GAVAR AV Market stats have not been updated yet. The figures shown on the monthly newsletter are still current.
Mortgage application volume rose 22.5 percent during the week ending Nov. 30, according to the Mortgage Bankers Association's weekly application survey. The MBA's application index climbed to a seasonally adjusted 791.8 points from 646.3 last week. That figure was revised down from a previously reported 652.5 because of an error by one of the larger reporting agencies, the MBA said. Refinance volume jumped 31.9 percent and purchase volume increased 15.2 percent. The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom. The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week. The average interest rate for 30-year fixed-rate mortgages decreased to 5.82 percent from 6.09 percent a week earlier. That's the lowest in 2 years! The average interest rate for one-year adjustable-rate mortgages increased to 6.28 percent from 6.24 percent the previous week. (AP, 12/5)
The amount of equity homeowners hold in their homes slipped in the third quarter to just above 50 percent, according to a report from the Federal Reserve Thursday. In its quarterly U.S. Flow of Funds Accounts, the central bank reported that homeowners' percentage of equity dipped to 50.4 percent from 51.1 percent from the previous quarter. On average, housing is Americans' single largest asset. (AP, 12/6)
Some 16,000 San Diego County homeowners are seeking property tax relief, either due to declining home values or damages caused by the October wildfires. (SD Union Tribune 12/7)
Two economic reports predict a dismal 2008 for California, although, so far, recession is off the table. (SF Chronicle, 12/5)
I've been saying since June 2007 that I expect the housing downturn to become positive in the Spring of 2009. Moody's Economy.com, though, states no market upturn until 2010. In its study, 'Aftershock: Housing in the Wake of the Mortgage Meltdown', Moody's Economy.com said US housing prices should reach a trough in early 2009, by which time they will have fallen 12 pct nationally according to data gathered from 381 US metropolitan areas. The US housing market is awash in unsold inventory and with home prices already down more than 5 pct from two years ago, the sector in the midst of the worst downturn since 1945. While activity will stabilize in 2009, it will not be until 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said. I think the key here is measurable improvement - when we see the changes affect the numbers. I do think people's mental state will change in 2009, numbers routinely lag behind reality. (Moody’s Economist.com, Forbes, Washington Post, Reuters,12/6)
The low point in the U.S. housing market may not come for another three to six months. Third-quarter home delinquency rates rose to the highest since 1986. (Bloomberg, 12/6)
I end today’s blog with a comparison of housing markets around the world: Australian Home-Loan Approvals Unexpectedly Fall on Higher Interest Rates Australia's home-loan approvals unexpectedly fell for a second month in October as interest rates at an 11-year high discouraged borrowing. New Zealand Home Prices Rise at Slowest Pace in Six Months on Higher Rates New Zealand's house prices rose at the slowest pace in six months in November, adding to signs that higher borrowing costs are curbing domestic demand. London Luxury-Home Prices Gain 0.1%, Smallest Advance in About Three Years London luxury-home prices rose the least for 35 months in November, as concern about the economy deterred some buyers, Knight Frank LLC said. U.K. Housing Transactions Will Drop 15% in 2008 as Prices Stall, HBOS Says U.K. housing market transactions will drop next year as prices stagnate, in a sign higher interest rates are cooling demand for homes, HBOS Plc said. (Bloomberg, 12/5-7)
Sources: Associated Press, San Diego Union-Tribune, San Francisco Chronicle, Moody’s Economist.com, Forbes.com, Washington Post, Reuters, Bloomberg, KNX-AM, California Association of REALTORS, National Association of REALTORS, CNBC, CNN Money
Two jobs growth numbers were released this past week: Both the ADP Jobs Growth in the private sector and the Labor Department numbers showed a moderate growth in jobs. (KNX-AM, 12/5, 12/7)
The big real estate news from the past week came from Washington. The Bush administration unveiled a foreclosure relief plan, includes a five-year freeze on interest rate hikes for some subprime borrowers with adjustable-rate mortgages (ARMs). The White House says it could help 1.2 million distressed homeowners. In separate announcements, President Bush and Treasury Secretary Henry Paulson said the plan will streamline the mortgage modification process for many distressed borrowers. It will offer "more relief to more homeowners, more quickly," the president said. And it will include a five-year freeze on interest rates for borrowers current with their monthly payments. (CNN Money, 12/7)
Foreclosure Relief Plan Drawbacks - I hear overwhelmingly that this plan is too limited: It excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months. It also only covers borrowers with adjustable rate mortgages (ARMs) resetting beginning in 2008 and leaves out any who are judged capable of continuing to make mortgage payments at the higher reset rates. Borrowers who can't afford the loan even at low introductory rates also will be ineligible, according to Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents lenders and mortgage servicers. Those borrowers will have to work with servicers on a case-by-case basis to determine if their homes can be saved. Additionally, the loan-to-value-ratio of the mortgage must be less than 97 percent. That is, the face amount of the loan must be less than what the home is actually worth. FICO credit scores also must not exceed 660 or have gained more than 10 percent since the origination of the mortgage. (CNN Money, 12/7; KNX-AM, 12/6; CNBC, 12/7)
Foreclosure Relief Plan Critics: Analysts also are arguing if this is the best thing for the economy and the open, Capitalist market that America is known for. Ben Stein, an economist, says it’s sad to see the government interfere with contracts between people and institutions. This Plan may go to court. Other economists and analysts are disappointed that the Plan prevents the fair market from ironing this out on its own. But in general, the consensus outside the market theorists seem to be that it is time for a bailout centered on the families and individuals, as long as we don’t bail out the lenders. Critics are also quick to note that this Plan is not a law, but a “best practices” document – not all lenders need to follow it, but the lenders that were a part of the discussions have agreed to do so. (CNN Money, 12/7; KNX-AM, 12/6; CNBC, 12/7)
The Dow is now up 9.3 percent year-to-date. Nasdaq is up 12 percent for the year, and S&P 500 is up 6.1 percent. Even in this volatile year, that’s better than your saving’s accounts and 1-year CDs! (CNN Money 12/7)
A Week of Economic Data Releases: Besides the Fed meeting, there is some important economic data expected in the coming week. Inflation data, in the form of both producer and consumer prices, are reported Thursday and Friday, respectively. Another big item is retail sales for November, on Thursday. (CNN Money 12/7)
Economists are in disagreement if there will be a recession in 2008. I’ve heard things this past week from “certainly” to “relatively remote.” See folllowing article...(CNBC, KNX-AM, 12/3-9)
UCLA Anderson Forecast states that the national economy is not technically in a recession, though the group’s economists are calling current conditions “a near recession experience.” A recession is defined as a two consecutive quarter decline in real Gross Domestic Product (GDP) and the UCLA Anderson Forecast is calling for real GDP growth to be just above 1% for the fourth quarter of 2007 and the first quarter of 2008. While acknowledging that an economy slowed to a 1% growth rate could slip further, the Forecast notes rather ironically that their near recession forecast “can be viewed somewhat optimistically.” In addition, job growth is strong and economic fundamentals all show strong numbers(AP, LA Times, 12/5; KNX-AM)
Bills for FHA Reform (Senate Bill 2338) and Freddie Mac/Fannie Mae loan limits appear to be running into some trouble in the Senate. National Association of Realtors and California Association of Realtors want people to write their Senators for passage of these bills. FHA reform will provide existing homeowners with secure and affordable refinancing alternatives and more mortgage options for first-time homebuyers. Increasing the supply of affordable mortgage money is a critical component for bringing stability to the nation’s turbulent housing markets. The other bill allows regional increases to the Freddie Mac/Fannie Mae loan limits and stress the need for quick Senate action on this vital reform. This change will make lower-cost GSE mortgage financing available to more families trying to buy homes in high cost areas and increase the supply of mortgage money. (CAR, NAR, 12/6)
According to the Mortgage Bankers Association, 5.12% of outstanding loans were in default in the second quarter, a rate about 17% higher than a year ago. (CNBC, 12/6)
GAVAR AV Market stats have not been updated yet. The figures shown on the monthly newsletter are still current.
Mortgage application volume rose 22.5 percent during the week ending Nov. 30, according to the Mortgage Bankers Association's weekly application survey. The MBA's application index climbed to a seasonally adjusted 791.8 points from 646.3 last week. That figure was revised down from a previously reported 652.5 because of an error by one of the larger reporting agencies, the MBA said. Refinance volume jumped 31.9 percent and purchase volume increased 15.2 percent. The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom. The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week. The average interest rate for 30-year fixed-rate mortgages decreased to 5.82 percent from 6.09 percent a week earlier. That's the lowest in 2 years! The average interest rate for one-year adjustable-rate mortgages increased to 6.28 percent from 6.24 percent the previous week. (AP, 12/5)
The amount of equity homeowners hold in their homes slipped in the third quarter to just above 50 percent, according to a report from the Federal Reserve Thursday. In its quarterly U.S. Flow of Funds Accounts, the central bank reported that homeowners' percentage of equity dipped to 50.4 percent from 51.1 percent from the previous quarter. On average, housing is Americans' single largest asset. (AP, 12/6)
Some 16,000 San Diego County homeowners are seeking property tax relief, either due to declining home values or damages caused by the October wildfires. (SD Union Tribune 12/7)
Two economic reports predict a dismal 2008 for California, although, so far, recession is off the table. (SF Chronicle, 12/5)
I've been saying since June 2007 that I expect the housing downturn to become positive in the Spring of 2009. Moody's Economy.com, though, states no market upturn until 2010. In its study, 'Aftershock: Housing in the Wake of the Mortgage Meltdown', Moody's Economy.com said US housing prices should reach a trough in early 2009, by which time they will have fallen 12 pct nationally according to data gathered from 381 US metropolitan areas. The US housing market is awash in unsold inventory and with home prices already down more than 5 pct from two years ago, the sector in the midst of the worst downturn since 1945. While activity will stabilize in 2009, it will not be until 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said. I think the key here is measurable improvement - when we see the changes affect the numbers. I do think people's mental state will change in 2009, numbers routinely lag behind reality. (Moody’s Economist.com, Forbes, Washington Post, Reuters,12/6)
The low point in the U.S. housing market may not come for another three to six months. Third-quarter home delinquency rates rose to the highest since 1986. (Bloomberg, 12/6)
I end today’s blog with a comparison of housing markets around the world: Australian Home-Loan Approvals Unexpectedly Fall on Higher Interest Rates Australia's home-loan approvals unexpectedly fell for a second month in October as interest rates at an 11-year high discouraged borrowing. New Zealand Home Prices Rise at Slowest Pace in Six Months on Higher Rates New Zealand's house prices rose at the slowest pace in six months in November, adding to signs that higher borrowing costs are curbing domestic demand. London Luxury-Home Prices Gain 0.1%, Smallest Advance in About Three Years London luxury-home prices rose the least for 35 months in November, as concern about the economy deterred some buyers, Knight Frank LLC said. U.K. Housing Transactions Will Drop 15% in 2008 as Prices Stall, HBOS Says U.K. housing market transactions will drop next year as prices stagnate, in a sign higher interest rates are cooling demand for homes, HBOS Plc said. (Bloomberg, 12/5-7)
Sources: Associated Press, San Diego Union-Tribune, San Francisco Chronicle, Moody’s Economist.com, Forbes.com, Washington Post, Reuters, Bloomberg, KNX-AM, California Association of REALTORS, National Association of REALTORS, CNBC, CNN Money
Sunday, December 2, 2007
A summary so long it's worth to print it out: Real Estate News Headlines 11/26-12/2
Lots of news this week but if I had to have a headline, it would center around 2 speeches by the Fed hinting at a rate cut during their next meeting Dec. 11. Jobs data, now 4.7%, hit a low of 4.4 percent in March of this year and is likely to hit 4.8 percent in November. Fed Chairman Bernanke acknowledged the weakening labor market but suggested it was consistent with a slowing economy and not particular worrisome. With the exception of revised third-quarter GDP data, virtually all the economic data released this week -– from consumer confidence to weekly jobless claims to the personal income and spending figures released Thursday –- show deterioration in two areas of the economy once thought to be the remaining areas of some strength. (CNBC, 11/30)
Foreclosures are all the rage in many conversations I have with potential clients. It hardly seems like the holiday spirit to take advantage of other people’s misfortunes, but many people claim to be getting excellent deals and tout strategies to get them. Are foreclosure homes right for you? What are they? Find out in this month’s FAQ at http://changhomes1.blogspot.com/2007/12/faq-what-is-foreclosure.html.
The rising number of foreclosures in Los Angeles and beyond has become the nation's biggest economic concern - and possibly the biggest economic problem globally, Rep. Maxine Waters said as she convened a congressional subcommittee hearing on the issue at the California Science Center. Waters said the foreclosure crisis is larger than originally anticipated. She quoted former Treasury Secretary Lawrence Summers, who has said the chances of avoiding recession are less than 50% - unless decisive actions are taken. LA Mayor Villaraigosa said 2007 has been the worst year for foreclosures in the city, with 716 foreclosures in the first quarter, 850 in the second and 1,177 in the third quarter. In contrast, there were just 115 foreclosures in the city during the first quarter of 2006, the mayor said. In Los Angeles County, 5,000 notices of default were filed in October, a 102% increase from the same time last year, said Pastor Herrera Jr., director of the county's Department of Consumer Affairs. (AV Press, 12/2)
Housing Slump's Third Year to Be `Deepest' Since WWII - Standard & Poor's 15-member Supercomposite Homebuilding Index tumbled 62 percent this year as of yesterday, the largest drop since the benchmark was started in 1995. The companies have lost about $35 billion of market value. The outlook is bleak with new home sales projected to fall 13 percent in 2008, according to estimates from the National Association of Realtors in Chicago, even as interest rates drop. Losses at Fannie Mae and Freddie Mac, the two biggest U.S. providers of mortgage financing, may restrict the availability of home loans, and chief executive officers at D.R. Horton Inc. and Centex Corp. expect another tough year. Total new home sales peaked in July 2005 and have declined for 19 of the last 28 months through October, according to Commerce Department data. Existing home sales peaked in September 2005. The median price for a new home dropped 13 percent in October, the most since 1970, and the annual sales rate for new homes in September was the lowest in almost 12 years. (Bloomberg, 11/30)
One third of adjustable-rate subprime home loans in the U.S. were delinquent as of August, according to a study by the Federal Reserve Bank of New York. The study found that adjustable-rate subprime mortgages had the highest rate of delinquencies and foreclosures. Twelve percent of 26,642 such loans sampled were more than 60 days delinquent and 7 percent were in foreclosure, according to data released today. Another 13 percent were less than 60 days overdue. (Bloomberg, 11/30)
The Treasury Department is finalizing a plan with mortgage industry leaders that will hold interest payments steady for many subprime borrowers facing higher rates and possible foreclosure. The mortgage representatives and regulators are focusing in on restructuring "2-28" and "3-27" subprime loans, which start with a fixed mortgage rate of up to three years but then reset to a much higher rate.As envisioned, the plan would effectively extend the fixed-rate period for stressed borrowers and so shield them from a payment spike that could push them into foreclosure. (Reuters, 11/30)
C.A.R. reports entry-level housing affordability at 24 percent in California - The minimum household income needed to purchase an entry-level home at $482,910 in California in the third quarter of 2007 was $99,590, based on an adjustable interest rate of 6.56 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,320 for the third quarter of 2007. At 48 percent, the High Desert region was the most affordable in the state, followed by the Sacramento region at 46 percent. Santa Barbara was the least affordable region in the state at 11 percent, followed by the Monterey region at 16 percent. (CAR, 11/29)
Home sales decreased 40.2 percent in October in California compared with the same period a year ago, while the median price of an existing home fell 9.9 percent. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in October 2007 was 16.3 months, compared with 6.4 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. Thirty-year fixed-mortgage interest rates averaged 6.38 percent during October 2007, compared with 6.36 percent in October 2006, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.68 percent in October 2007 compared with 5.56 percent in October 2006. The median number of days it took to sell a single-family home was 59.3 days in October 2007, compared with 56.5 days for the same period a year ago. (CAR, 11/28)
The cost of financing a home remains out of reach for many households in California in the wake of the Office of Federal Housing Enterprise Oversight (OFHEO) conforming loan limits for 2008, announced earlier today. The maximum 2008 conforming loan limit for single-family mortgages will remain at $417,000, unchanged since 2006. The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California. (CAR, 11/27)Single-family existing-home sales were stable in October while the condo sector was down. Lingering effects of the credit crunch were a drag on sales but the mortgage situation has improved significantly. (NAR, 11/28)
Offset mortgage may be a new program coming from Britain - You get a mortgage linked to a non-interest-bearing savings account whose deposits "offset" your loan balance. So if you owe $200,000 on your home but have $50,000 on deposit, the bank calculates your monthly interest as if you borrowed only $150,000. The bank gets its back scratched by getting to use your deposit interest-free. You pay off your mortgage faster because more of your monthly payment is applied to principal - and you can get your hands on your savings any old time. Because this deal would give you an extra weensy tax break under U.S. law, however, no offset mortgages are allowed here. But two U.S. companies - CMG Financial Services and Macquarie Mortgages USA - have introduced a version that passes muster with the IRS. (Money Magazine, 11/29)
Mortgage applications fell 4.3%. 30 yr fixed mtg 5.69% - 15 yr fixed mtg 5.27% - 30 yr fixed jumbo mtg 6.60% - 5/1 ARM 5.56% - 5/1 jumbo ARM 6.04% (Mortgage Bankers Association, 11/28)
Third-quarter home prices dropped 1.7% from prior quarter, largest drop in 21-year history. Yale economist and index co-founder, Robert Shiller conceded that most economists are still optimistic; employment is strong, consumer spending robust and the weaker dollar has increased exports. But, there's a big question in his mind whether subprime problems will lead to a retrenchment in consumer demand. According to Shiller, the current situation is unprecedented - there's never had been a housing boom quite like the one that ended last year - and how we come out of the bust is anyone's guess. (S&P Case/Shiller and KNX-AM, 11/27)
More than 50,000 lost their homes in October; foreclosure rates expected to rise in 2008 as adjustable-rate mortgages reset. For the full year, RealtyTrac expects 2 million homes to have entered the foreclosure process - including bank repossessions, default notices and auction sale notices. The national foreclosure rate for the month was one filing for every 555 households. While California foreclosure activity decreased nearly 2 percent from the previous month, the state's foreclosure rate still ranked second highest, with one foreclosure filing for every 258 households. Among city foreclosure rates, California cities took six out of the top 10 spots in October, with Merced topping the list. Stockton, Modesto, Riverside-San Bernardino, Vallejo-Fairfield and Sacramento also were in the top 10. (CNNMoney and KNX-AM, 11/29)
Mayors and public officials worry about effects of housing downturn. As home values plummet and neighborhoods deteriorate under soaring foreclosure numbers, public governments will see lower tax collections. California, for example, had been expecting a balanced budget, but because of the real estate downfall, they are expecting a shortfall now. Notice has gone out to department heads to expect and prepare for budget cut of 10% or more across the board for the next fiscal year. (CNNMoney and KNX-AM, 11/28, 11/29)
Lenders quietly began offering such freezes during the summer. Last week California officials announced a rate-freeze deal with four major lenders. And now the Hope Now Alliance, coalition of lenders, servicers, investors and community groups, put together by the Treasury Department, is working on its own version of a freeze. But for a borrower with an adjustable rate mortgage (ARM) at 7 percent on a $200,000 loan, a freeze would mean substantial savings. If the loan were to reset to 10 percent, the monthly payment would jump from $1,331 to $1,755. Judging from other lenders' plans, a reset freeze would be available only to those borrowers judged unable to make payments at the reset rates. (CNNMoney, 11/30)
Sources: California Association of REALTORS (CAR), CNNMoney, Reuters, National Association of REALTORS (NAR), Money magazine, S&P Case/Shiller, KNX-AM, Bloomberg, CNBC, Antelope Valley Press.
Sunday, November 25, 2007
Lenders agree to set lower rates for subprime borrowers: Real Estate News Headlines 11/19-25
This Week’s Real Estate News
Not as much news as last week, but it all seemed to occur on Wednesday 11/21:
House Passes Anti-Predatory Lending Measure: The House of Representatives has approved a controversial bill intended to help combat predatory lending practices, widely considered a central cause of the nation's credit crunch and rising foreclosure rates. HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, calls for the establishment of a national licensing program for all mortgage loan originators, and would force lenders to ensure a borrower's reasonable ability to repay the loan, among other requirements. (CAR, 11/21)
Mortgage Rates Continue to Fall: Mortgage rates continued to fall as the weak housing market remained a drag on the economy, Freddie Mac reported Wednesday. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan fell to 6.20 percent for the week ended Nov. 21 from 6.24 percent the prior week. At this time last year, the 30-year FRM averaged 6.18 percent. The 30-year rate has not been lower since the week ending May 10, 2007, when it averaged 6.15 percent, Freddie Mac said. Freddie Mac said rates on 15-year fixed-rate loans averaged 5.83 percent, down from 5.88 percent last week. A year ago, the 15-year rate averaged 5.91 percent. The 15-year rate has not been lower since the week ending February 2, 2006, when it averaged 5.81 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.88 percent this week, down from 5.96 percent last week. A year ago, the five-year ARM averaged 5.99 percent. One-year Treasury indexed ARMs averaged 5.42 percent this week, from 5.50 percent last week. At this time last year, the one-year ARM averaged 5.49 percent. (Freddie Mac, CNNMoney.com, 11/21)
Refi’s Prefer Fixed-Rate Mortgages in the 3rd Quarter: More borrowers who refinanced during the third quarter replaced their 15-year fixed-rate mortgages with traditional 30-year, fixed-rate loans, and 85 percent of borrowers with a one-year adjustable rate mortgage loan who refinanced selected fixed-rate loans, according to a recent report from Freddie Mac. (CAR, 11/21)
Mortgage Apps Decline: Mortgage application volume declined 3.6 percent during the week ending Nov. 16, according to the trade group Mortgage Bankers Association's weekly application survey. Refinance volume declined 5 percent during the week, while purchase volume fell 2 percent. Refinance applications accounted for 50.3 percent of total mortgage applications during the week. Application volume declined while interest rates barely moved. (AP, 11/21)
Housing Price Drops in 3rd Quarter: Housing price drops, driven by soaring foreclosure rates, accelerated during the three months ended September 30, according to the latest data from the National Association of Realtors (NAR). The median single-family house price in the United States fell to $220,800, which was down 2 percent from a year ago. Condo prices showed some resiliency: At $226,900, they rose 2 percent compared with 12 months ago. In Los Angeles-Long Beach-Santa Ana area, median home prices increased 1.1% to $588.400. (NAR, CNNMoney.com, 11/21)
Four major subprime lenders promised to give a break to California homeowners who cannot afford escalating mortgage payments, under a plan announced Tuesday by the lenders and Gov. Arnold Schwarzenegger. Countrywide, GMAC, Litton and HomeEq - which collectively service more than one quarter of subprime loans to people with poor credit - agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate. The voluntary program is designed to stem a huge wave of foreclosures. Half a million homeowners in the state have subprime mortgages that are scheduled to jump higher within the next two years after their introductory period elapses. Such loan resets, in combination with a slumping real estate market, already have led to a record number of foreclosures across California and the nation. (SF Gate, 11/21)
Sources: California Association of REALTORS (CAR), CNNMoney, AP, National Association of REALTORS (NAR), and SF Gate. Real
Not as much news as last week, but it all seemed to occur on Wednesday 11/21:
House Passes Anti-Predatory Lending Measure: The House of Representatives has approved a controversial bill intended to help combat predatory lending practices, widely considered a central cause of the nation's credit crunch and rising foreclosure rates. HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, calls for the establishment of a national licensing program for all mortgage loan originators, and would force lenders to ensure a borrower's reasonable ability to repay the loan, among other requirements. (CAR, 11/21)
Mortgage Rates Continue to Fall: Mortgage rates continued to fall as the weak housing market remained a drag on the economy, Freddie Mac reported Wednesday. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan fell to 6.20 percent for the week ended Nov. 21 from 6.24 percent the prior week. At this time last year, the 30-year FRM averaged 6.18 percent. The 30-year rate has not been lower since the week ending May 10, 2007, when it averaged 6.15 percent, Freddie Mac said. Freddie Mac said rates on 15-year fixed-rate loans averaged 5.83 percent, down from 5.88 percent last week. A year ago, the 15-year rate averaged 5.91 percent. The 15-year rate has not been lower since the week ending February 2, 2006, when it averaged 5.81 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.88 percent this week, down from 5.96 percent last week. A year ago, the five-year ARM averaged 5.99 percent. One-year Treasury indexed ARMs averaged 5.42 percent this week, from 5.50 percent last week. At this time last year, the one-year ARM averaged 5.49 percent. (Freddie Mac, CNNMoney.com, 11/21)
Refi’s Prefer Fixed-Rate Mortgages in the 3rd Quarter: More borrowers who refinanced during the third quarter replaced their 15-year fixed-rate mortgages with traditional 30-year, fixed-rate loans, and 85 percent of borrowers with a one-year adjustable rate mortgage loan who refinanced selected fixed-rate loans, according to a recent report from Freddie Mac. (CAR, 11/21)
Mortgage Apps Decline: Mortgage application volume declined 3.6 percent during the week ending Nov. 16, according to the trade group Mortgage Bankers Association's weekly application survey. Refinance volume declined 5 percent during the week, while purchase volume fell 2 percent. Refinance applications accounted for 50.3 percent of total mortgage applications during the week. Application volume declined while interest rates barely moved. (AP, 11/21)
Housing Price Drops in 3rd Quarter: Housing price drops, driven by soaring foreclosure rates, accelerated during the three months ended September 30, according to the latest data from the National Association of Realtors (NAR). The median single-family house price in the United States fell to $220,800, which was down 2 percent from a year ago. Condo prices showed some resiliency: At $226,900, they rose 2 percent compared with 12 months ago. In Los Angeles-Long Beach-Santa Ana area, median home prices increased 1.1% to $588.400. (NAR, CNNMoney.com, 11/21)
Four major subprime lenders promised to give a break to California homeowners who cannot afford escalating mortgage payments, under a plan announced Tuesday by the lenders and Gov. Arnold Schwarzenegger. Countrywide, GMAC, Litton and HomeEq - which collectively service more than one quarter of subprime loans to people with poor credit - agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate. The voluntary program is designed to stem a huge wave of foreclosures. Half a million homeowners in the state have subprime mortgages that are scheduled to jump higher within the next two years after their introductory period elapses. Such loan resets, in combination with a slumping real estate market, already have led to a record number of foreclosures across California and the nation. (SF Gate, 11/21)
Sources: California Association of REALTORS (CAR), CNNMoney, AP, National Association of REALTORS (NAR), and SF Gate. Real
Sunday, November 18, 2007
Lots of Real Estate News, 11/12 to 11/18
With Thanksgiving this week, the holiday shopping season is here too. Economists are cautiously optimistic, not knowing how the housing slump and its effects on the home equity accounts of buyers, where most wealth lies, will affect holiday shopping sales. Most are saying that it will stay stable or rise very slightly versus last year. Here are some real estate and economic headlines from the past week:
Big news of the week came from RealtyTrac, which is known for tracking foreclosures nationwide: No slowdown yet in foreclosure filings. Hardest hit cities are on coasts and in Rust Belt. Three states, California, Florida and Ohio, continue to dominate new foreclosure filings, as most of the nation saw increases in the third quarter. During the period ended Sept. 30, 77 out of the nation's 100 largest metropolitan areas reported rises in delinquencies compared with the previous three months. The report shows seven cities in California (Stokton, Riverside, Sacramento, Bakersfield, and Oakland among others) and five each in Florida and Ohio were among the top 25 metro areas with the highest foreclosure rates. Nevada has the worst rate with one filing in every 61 households, while the nationwide rate is one filing for every 196 households. Riverside-San Bernardino also accounted for the most foreclosure filings in the U.S. during the quarter. According to the Center for Responsible Lending, 7.2 million households have subprime mortgages, and more than 14 percent of those are in default. It projects that one of every five of those loans issued in 2005 and 2006 will end in foreclosure, with 2.2 million families losing their homes. Stockton may top the list of states with the highest foreclosure rates, but mortgage defaults in the city are generating business for REALTORS® in an otherwise stalled market. Cleveland is a city that is noted for being hit especially hard. (RealtyTrac.com, AP, Reuters, 11/14; Stockton Record, 11/15)
Home loan demands at 1-year high as rates stay low – it increased 5.5% for the week ending Nov. 9. Mixed signals keep mortgage rates flat: Fixed 30-year rate holds steady at 6.24 percent as consumer confidence declines and third-quarter productivity grows. Mortgage rates were flat following mixed economic signals. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan remained at 6.24 percent for the week ended Nov. 15. The 30-year rate has not been lower since the week ending May 17, 2007, when it averaged 6.21 percent, Freddie Mac said. At this time last year, 30-year mortgage rates also averaged 6.24 percent. Freddie Mac said rates on 15-year fixed-rate loans averaged 5.88 percent, down from 5.90 percent last week. A year ago, the 15-year rate averaged 5.94 percent. The 15-year rate has not been lower since the week ending May 10, when it averaged 5.87 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.96 percent this week, up from 5.89 percent last week. A year ago, the 5-year ARM averaged 6.04 percent. One-year ARMs averaged 5.50 percent this week, unchanged from last week. At this time last year, the 1-year ARM averaged 5.53 percent. (CNNmoney.com, Mortgage Bankers Association, 11/15)
Mortgage bonds remain in a long-term uptrend in its rates with multiple support floors beneath present levels – translation: mortgage rates will more likely rise from here on and not fall in the short term forecast. And in this week's planned economic releases, any scent of inflation in the reports will be very bad news for Bonds - which deliver a fixed return that is eroded by the effects of inflation - so that would spell bad news for home loan rates as well. (Mortgage Market Guide, LLC, 11/13)
Fact Facts from the California Association of Realtors (11/15):
* Calif. median home price - September 07: $530,830(Source: C.A.R.)
* Calif. highest median home price by C.A.R. region September 07: Santa Barbara So. Coast $1,667,500(Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region September 07: High Desert $271,940(Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Second Quarter 07: 24 percent (Source: C.A.R.)
* Mortgage rates - week ending 11/08: 30-yr. fixed: 6.24%; Fees/points: 0.4% 15-yr. fixed: 5.90%; Fees/points: 0.5% 1-yr. adjustable: 5.50%; Fees/points: 0.6% (Source: Freddie Mac)
Despite declining home prices as recently reflected in an S&P/Case-Shiller home price statistics survey, on average, the nation's top markets have experienced price appreciation by as much as 50 percent over the past five years, according to comparable data from the National Association of Home Builders (NAHB). "It's important to keep things in perspective," said NAHB President Brian Catalde. "The current housing price correction is most pronounced in the once super-heated markets in California, Nevada, Florida and Arizona. In most other markets, price declines have been pretty modest." According to the NAHB's comparable data tables, home prices in Los Angeles dipped 5.7 percent in the last year, but have appreciated by 88.9 percent since 2002. San Francisco home prices have declined 4.2 percent in the last year, but have seen appreciation of 46.7 percent since 2002. Home prices in San Diego have fallen by 8.3 percent in the last year, but have appreciated 54 percent since 2002, according to the report. (CAR, 11/14)
Fannie Mae changed the way the company calculates losses on home loans in its earnings releases, fueling speculation it is hiding the number of bad loans it holds to downplay its potential losses. (AP, Moody’s Economist.com, 11/16)
A ruling by a federal judge in Ohio could lead to a shift of longstanding policies regarding mortgage pools, possibly offering homeowners facing foreclosure some bargaining power. (NY Times, 11/15)
Online lender E-Loan announced it intends to cut more than 400 jobs from its Pleasanton, CA (San Francisco-area) headquarters as part of a large-scale restructuring plan. (Oakland Tribune, 11/13)
Countrywide Financial Corp. reported that October loan volume fell 48 percent from a year earlier, but said its reduction of high-risk home loans is producing credit stabilization. (Reuters, 11/13)
US business confidence remains moribund. Sentiment has not changed appreciably since plunging in August during the height of the subprime financial shock, and it remains consistent with an economy that is expanding very slowly. (Moody’s Economy.com, undated but estimated to be around 11/9)
Office of Management and Budget Director Jim Nussle offered a note of caution on how an economic slowdown could affect government finances - Nussle did not offer a specific projection for the deficit, though. (Christian Science Monitor, 11/15)
There has been a fair amount of sobering news on the economy lately. Last week, Federal Reserve Chairman Ben Bernanke said the US economy will slow "noticeably" in the final three months of the year. And this week, Augustine Faucher, an economist with Moody's Economy.com, told the Associated Press that he expected the federal budget deficit for the current budget year to rise to about $200 billion. (Moody's Economy.com, 11/15)
The West isn’t the only area reacting poorly in the housing market. Boston Globe noted Northeast economy is not projected to grow slowly through 2011 (11/14)
A perfect storm is brewing that threatens the entire mortgage lending industry. We believe that state and federal law enforcement and regulatory agencies will feel pressure to prosecute even inadvertent instances of regulatory noncompliance. Similarly, either through desperation or in an attempt to profit from public fear over what the media calls the "mortgage crisis," we believe that defaulting and troubled borrowers will increasingly take aggressive postures by challenging foreclosures through affirmative consumer claims (Bracewell & Giuliani LLP through Moody’s Economy.com, 11/13)
Goldman Sachs sees risk of recession as subprime reduces lending by $2 trillion - The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a "substantial recession'' in the U.S., according to Goldman Sachs Group Inc. (Moody’s Economy.com, 11/15)
Existing home sales seen hitting 5-year low: Sales numbers are expected to decline 12.7 percent this year, worse than expected - A modest recovery for existing-home sales is expected in 2008 as the impact of the credit crunch subsides, while pending home sales indicate near-term stability. Lawrence Yun, NAR chief economist, said the housing market will improve from a steady unleashing of pent-up demand, and from a wide abundance of safer mortgage products. “The level of pent-up demand reaching the market next year is a bit uncertain, and it is possible for even higher home sales activity than we’re forecasting if buyers regain their confidence about the long-term benefits of homeownership. Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.” The Pending Home Sales Index, a forward-looking indicator based on contracts signed in September, rose 0.2 percent to a reading of 85.7 from an index of 85.5 in August. It was 20.4 percent lower than the September 2006 level of 107.6. “Even with relatively low fourth quarter sales, 2007 will be the fifth highest year on record for existing-home sales. The median existing-home price in 2007 will have fallen by less than 2 percent from an all-time high set in 2006,” Yun said. (National Association of Realtors and AP, 11/13)
National Association of Realtors’ 2007 National Housing Pulse Survey shows Americans are more concerned about obtaining a mortgage but remain convinced that buying a home is a good long-term investment. (NAR, 11/14)
National Association of Realtors survey shows consumers very satisfied with agent performance. Both buyers and sellers value the personal touch and services real estate professionals offer. (NAR, 11/13)
S&P reports mortgage turmoil to worsen in 2008 -- The chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in U.S. mortgage bank earnings, according to a report released Tuesday by Standard & Poor's. Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency said. Loose lending standards, especially to people with shaky credit, are at the heart of the problem. (AP, Bloomberg, 11/14)
The formerly obscure ABX index has become a closely watched gauge of just how bad the market for subprime securities is getting. (CNNMoney, 11/14)
Sources: AP, Bloomberg, National Association of Realtors, Moody’s Economy.com, Boston Herald, Boston Globe, Christian Science Monitor, Reuters, Oakland Tribune, NY Times, Freddie Mac, California Association of Realtors, Mortgage Market Guide, LLC, CNNmoney.com, Mortgage Bankers Association, RealtyTrac.com, Stockton Record
Big news of the week came from RealtyTrac, which is known for tracking foreclosures nationwide: No slowdown yet in foreclosure filings. Hardest hit cities are on coasts and in Rust Belt. Three states, California, Florida and Ohio, continue to dominate new foreclosure filings, as most of the nation saw increases in the third quarter. During the period ended Sept. 30, 77 out of the nation's 100 largest metropolitan areas reported rises in delinquencies compared with the previous three months. The report shows seven cities in California (Stokton, Riverside, Sacramento, Bakersfield, and Oakland among others) and five each in Florida and Ohio were among the top 25 metro areas with the highest foreclosure rates. Nevada has the worst rate with one filing in every 61 households, while the nationwide rate is one filing for every 196 households. Riverside-San Bernardino also accounted for the most foreclosure filings in the U.S. during the quarter. According to the Center for Responsible Lending, 7.2 million households have subprime mortgages, and more than 14 percent of those are in default. It projects that one of every five of those loans issued in 2005 and 2006 will end in foreclosure, with 2.2 million families losing their homes. Stockton may top the list of states with the highest foreclosure rates, but mortgage defaults in the city are generating business for REALTORS® in an otherwise stalled market. Cleveland is a city that is noted for being hit especially hard. (RealtyTrac.com, AP, Reuters, 11/14; Stockton Record, 11/15)
Home loan demands at 1-year high as rates stay low – it increased 5.5% for the week ending Nov. 9. Mixed signals keep mortgage rates flat: Fixed 30-year rate holds steady at 6.24 percent as consumer confidence declines and third-quarter productivity grows. Mortgage rates were flat following mixed economic signals. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan remained at 6.24 percent for the week ended Nov. 15. The 30-year rate has not been lower since the week ending May 17, 2007, when it averaged 6.21 percent, Freddie Mac said. At this time last year, 30-year mortgage rates also averaged 6.24 percent. Freddie Mac said rates on 15-year fixed-rate loans averaged 5.88 percent, down from 5.90 percent last week. A year ago, the 15-year rate averaged 5.94 percent. The 15-year rate has not been lower since the week ending May 10, when it averaged 5.87 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.96 percent this week, up from 5.89 percent last week. A year ago, the 5-year ARM averaged 6.04 percent. One-year ARMs averaged 5.50 percent this week, unchanged from last week. At this time last year, the 1-year ARM averaged 5.53 percent. (CNNmoney.com, Mortgage Bankers Association, 11/15)
Mortgage bonds remain in a long-term uptrend in its rates with multiple support floors beneath present levels – translation: mortgage rates will more likely rise from here on and not fall in the short term forecast. And in this week's planned economic releases, any scent of inflation in the reports will be very bad news for Bonds - which deliver a fixed return that is eroded by the effects of inflation - so that would spell bad news for home loan rates as well. (Mortgage Market Guide, LLC, 11/13)
Fact Facts from the California Association of Realtors (11/15):
* Calif. median home price - September 07: $530,830(Source: C.A.R.)
* Calif. highest median home price by C.A.R. region September 07: Santa Barbara So. Coast $1,667,500(Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region September 07: High Desert $271,940(Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Second Quarter 07: 24 percent (Source: C.A.R.)
* Mortgage rates - week ending 11/08: 30-yr. fixed: 6.24%; Fees/points: 0.4% 15-yr. fixed: 5.90%; Fees/points: 0.5% 1-yr. adjustable: 5.50%; Fees/points: 0.6% (Source: Freddie Mac)
Despite declining home prices as recently reflected in an S&P/Case-Shiller home price statistics survey, on average, the nation's top markets have experienced price appreciation by as much as 50 percent over the past five years, according to comparable data from the National Association of Home Builders (NAHB). "It's important to keep things in perspective," said NAHB President Brian Catalde. "The current housing price correction is most pronounced in the once super-heated markets in California, Nevada, Florida and Arizona. In most other markets, price declines have been pretty modest." According to the NAHB's comparable data tables, home prices in Los Angeles dipped 5.7 percent in the last year, but have appreciated by 88.9 percent since 2002. San Francisco home prices have declined 4.2 percent in the last year, but have seen appreciation of 46.7 percent since 2002. Home prices in San Diego have fallen by 8.3 percent in the last year, but have appreciated 54 percent since 2002, according to the report. (CAR, 11/14)
Fannie Mae changed the way the company calculates losses on home loans in its earnings releases, fueling speculation it is hiding the number of bad loans it holds to downplay its potential losses. (AP, Moody’s Economist.com, 11/16)
A ruling by a federal judge in Ohio could lead to a shift of longstanding policies regarding mortgage pools, possibly offering homeowners facing foreclosure some bargaining power. (NY Times, 11/15)
Online lender E-Loan announced it intends to cut more than 400 jobs from its Pleasanton, CA (San Francisco-area) headquarters as part of a large-scale restructuring plan. (Oakland Tribune, 11/13)
Countrywide Financial Corp. reported that October loan volume fell 48 percent from a year earlier, but said its reduction of high-risk home loans is producing credit stabilization. (Reuters, 11/13)
US business confidence remains moribund. Sentiment has not changed appreciably since plunging in August during the height of the subprime financial shock, and it remains consistent with an economy that is expanding very slowly. (Moody’s Economy.com, undated but estimated to be around 11/9)
Office of Management and Budget Director Jim Nussle offered a note of caution on how an economic slowdown could affect government finances - Nussle did not offer a specific projection for the deficit, though. (Christian Science Monitor, 11/15)
There has been a fair amount of sobering news on the economy lately. Last week, Federal Reserve Chairman Ben Bernanke said the US economy will slow "noticeably" in the final three months of the year. And this week, Augustine Faucher, an economist with Moody's Economy.com, told the Associated Press that he expected the federal budget deficit for the current budget year to rise to about $200 billion. (Moody's Economy.com, 11/15)
The West isn’t the only area reacting poorly in the housing market. Boston Globe noted Northeast economy is not projected to grow slowly through 2011 (11/14)
A perfect storm is brewing that threatens the entire mortgage lending industry. We believe that state and federal law enforcement and regulatory agencies will feel pressure to prosecute even inadvertent instances of regulatory noncompliance. Similarly, either through desperation or in an attempt to profit from public fear over what the media calls the "mortgage crisis," we believe that defaulting and troubled borrowers will increasingly take aggressive postures by challenging foreclosures through affirmative consumer claims (Bracewell & Giuliani LLP through Moody’s Economy.com, 11/13)
Goldman Sachs sees risk of recession as subprime reduces lending by $2 trillion - The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a "substantial recession'' in the U.S., according to Goldman Sachs Group Inc. (Moody’s Economy.com, 11/15)
Existing home sales seen hitting 5-year low: Sales numbers are expected to decline 12.7 percent this year, worse than expected - A modest recovery for existing-home sales is expected in 2008 as the impact of the credit crunch subsides, while pending home sales indicate near-term stability. Lawrence Yun, NAR chief economist, said the housing market will improve from a steady unleashing of pent-up demand, and from a wide abundance of safer mortgage products. “The level of pent-up demand reaching the market next year is a bit uncertain, and it is possible for even higher home sales activity than we’re forecasting if buyers regain their confidence about the long-term benefits of homeownership. Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.” The Pending Home Sales Index, a forward-looking indicator based on contracts signed in September, rose 0.2 percent to a reading of 85.7 from an index of 85.5 in August. It was 20.4 percent lower than the September 2006 level of 107.6. “Even with relatively low fourth quarter sales, 2007 will be the fifth highest year on record for existing-home sales. The median existing-home price in 2007 will have fallen by less than 2 percent from an all-time high set in 2006,” Yun said. (National Association of Realtors and AP, 11/13)
National Association of Realtors’ 2007 National Housing Pulse Survey shows Americans are more concerned about obtaining a mortgage but remain convinced that buying a home is a good long-term investment. (NAR, 11/14)
National Association of Realtors survey shows consumers very satisfied with agent performance. Both buyers and sellers value the personal touch and services real estate professionals offer. (NAR, 11/13)
S&P reports mortgage turmoil to worsen in 2008 -- The chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in U.S. mortgage bank earnings, according to a report released Tuesday by Standard & Poor's. Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency said. Loose lending standards, especially to people with shaky credit, are at the heart of the problem. (AP, Bloomberg, 11/14)
The formerly obscure ABX index has become a closely watched gauge of just how bad the market for subprime securities is getting. (CNNMoney, 11/14)
Sources: AP, Bloomberg, National Association of Realtors, Moody’s Economy.com, Boston Herald, Boston Globe, Christian Science Monitor, Reuters, Oakland Tribune, NY Times, Freddie Mac, California Association of Realtors, Mortgage Market Guide, LLC, CNNmoney.com, Mortgage Bankers Association, RealtyTrac.com, Stockton Record
Sunday, November 11, 2007
This Week’s Real Estate News, November 5-11
Overall news this week is still portrays that the current buyer's market will continue...
Dollar hit new lows. Partially due to the current reduction in Federal Funds rate last week. This is promoting higher oil prices worldwide, as the trade in oil is in U.S. Dollars. Gold, silver, platinum and other precious metals are hitting record highs or are at near record highs. An economic minister with China has stated that China should move investments from the United States Bond market to those that are based on other currencies. Supermodel Giselle is demanding to be paid in Euros instead of dollars. The dollar is now at near record lows against the Euro, British Pound and Canadian Dollar, among many other world currencies. (KNX-AM, 11/5/2007, 11/6/2007, 11/7/2007)
Top lenders such as Chase, Washington Mutual, Countrywide and Wells Fargo are having difficulty competing in the stated income loan arena. It is likely the other banks will follow Chase’s policy effective Monday 11/12 to eliminate all stated income programs. Those lenders that are surviving, at least for now, are saying that clients wanting stated income must contribute at least 10% to the purchase price and “the income has to make sense with what they do (W2 or self-employed).” (Wachovia email, 11/7/2007)
Mortgage Rates Continue to Slip: Mortgage rates eased in response to the Federal Reserve's decision to cut interest rates, Freddie Mac reported Thursday. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 6.24 percent for the week ended Nov. 8, down from 6.26 percent last week. The 30-year rate has not been this low since the week ending May 17, 2007. Last year at this time, 30-year mortgage rates averaged 6.33 percent. In its latest report, Freddie Mac said rates on 15-year fixed-rate loans averaged 5.90 percent in the latest week, down from 5.91 percent last week. A year ago, the 15-year rate averaged 6.04 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.89 percent this week, down from 5.98 percent last week. A year ago, the 5-year ARM averaged 6.08 percent. One-year ARMs averaged 5.50 percent this week, down from 5.57 percent last week. They were at 5.55 percent this time last year. (CNNMoney, 11/8/2007)
Mortgage Reform Bill Progress: House Financial Services Committee Chairman Barney Frank, D-Mass., has secured two key Republican endorsements on his legislative plan to reform the mortgage industry, avoiding a potentially bruising political fight this week. Rep. Spencer Bachus, R-Ala., the panel's top Republican, and Rep. Judy Biggert, R-Ill., another high-ranking member, have both signed on as co-sponsors to an amended bill that Frank plans to introduce before a committee vote on Tuesday. Among the changes, the bipartisan amendment includes the Federal Reserve among the regulators that would be responsible for implementing the new law. Also, the bill clarifies new secondary market liability. Some Republicans have raised concerns that Frank's approach could cut off access to credit, but growing problems in the subprime mortgage market raised the proposal's profile. Once the bill clears Frank's committee, it is expected to go to a vote on the House floor within weeks. (Dow Jones/AP, 11/5/2007)
Most business-economic talk this week surrounded the ousting of Citibank’s CEO.
NY Attorney General Andrew Cuomo Probes Fannie Mae and Freddie Mac concerning mortgages they bought from banks. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual. The subpoenas also seek to find out how the government-sponsored companies handle appraisals. (AP, 11/8/2007)
A survey conducted by the Federal Reserve shows many banks reported tighter standards for traditional prime mortgages, nontraditional mortgages such as "interest only" loans and for subprime mortgages, those offered to borrowers with weak credit histories. The Fed survey, which was conducted in early October, found that 41 percent of banks responding said that they had tightened loan standards either "considerably" or "somewhat" for prime residential mortgages, those offered to borrowers with strong credit histories. The 41 percent figure was up from about 15 percent of banks who said they were tightening standards on prime mortgages in the last survey in July. The Fed's survey covered 49 banks, including many of the nation's largest. These banks account for about 75 percent of all residential real estate loans on the books of commercial banks. (AP, 11/5/2007)
Sources: California Association of REALTORS(R), Wachovia, Dow Jones, Associated Press, LA Times, Sacramento Bee, USA Today, Reuters, CNNmoney.com, KNX-AM Los Angeles
Dollar hit new lows. Partially due to the current reduction in Federal Funds rate last week. This is promoting higher oil prices worldwide, as the trade in oil is in U.S. Dollars. Gold, silver, platinum and other precious metals are hitting record highs or are at near record highs. An economic minister with China has stated that China should move investments from the United States Bond market to those that are based on other currencies. Supermodel Giselle is demanding to be paid in Euros instead of dollars. The dollar is now at near record lows against the Euro, British Pound and Canadian Dollar, among many other world currencies. (KNX-AM, 11/5/2007, 11/6/2007, 11/7/2007)
Top lenders such as Chase, Washington Mutual, Countrywide and Wells Fargo are having difficulty competing in the stated income loan arena. It is likely the other banks will follow Chase’s policy effective Monday 11/12 to eliminate all stated income programs. Those lenders that are surviving, at least for now, are saying that clients wanting stated income must contribute at least 10% to the purchase price and “the income has to make sense with what they do (W2 or self-employed).” (Wachovia email, 11/7/2007)
Mortgage Rates Continue to Slip: Mortgage rates eased in response to the Federal Reserve's decision to cut interest rates, Freddie Mac reported Thursday. The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 6.24 percent for the week ended Nov. 8, down from 6.26 percent last week. The 30-year rate has not been this low since the week ending May 17, 2007. Last year at this time, 30-year mortgage rates averaged 6.33 percent. In its latest report, Freddie Mac said rates on 15-year fixed-rate loans averaged 5.90 percent in the latest week, down from 5.91 percent last week. A year ago, the 15-year rate averaged 6.04 percent. Five-year adjustable-rate mortgages (ARMs) averaged 5.89 percent this week, down from 5.98 percent last week. A year ago, the 5-year ARM averaged 6.08 percent. One-year ARMs averaged 5.50 percent this week, down from 5.57 percent last week. They were at 5.55 percent this time last year. (CNNMoney, 11/8/2007)
Mortgage Reform Bill Progress: House Financial Services Committee Chairman Barney Frank, D-Mass., has secured two key Republican endorsements on his legislative plan to reform the mortgage industry, avoiding a potentially bruising political fight this week. Rep. Spencer Bachus, R-Ala., the panel's top Republican, and Rep. Judy Biggert, R-Ill., another high-ranking member, have both signed on as co-sponsors to an amended bill that Frank plans to introduce before a committee vote on Tuesday. Among the changes, the bipartisan amendment includes the Federal Reserve among the regulators that would be responsible for implementing the new law. Also, the bill clarifies new secondary market liability. Some Republicans have raised concerns that Frank's approach could cut off access to credit, but growing problems in the subprime mortgage market raised the proposal's profile. Once the bill clears Frank's committee, it is expected to go to a vote on the House floor within weeks. (Dow Jones/AP, 11/5/2007)
Most business-economic talk this week surrounded the ousting of Citibank’s CEO.
NY Attorney General Andrew Cuomo Probes Fannie Mae and Freddie Mac concerning mortgages they bought from banks. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual. The subpoenas also seek to find out how the government-sponsored companies handle appraisals. (AP, 11/8/2007)
A survey conducted by the Federal Reserve shows many banks reported tighter standards for traditional prime mortgages, nontraditional mortgages such as "interest only" loans and for subprime mortgages, those offered to borrowers with weak credit histories. The Fed survey, which was conducted in early October, found that 41 percent of banks responding said that they had tightened loan standards either "considerably" or "somewhat" for prime residential mortgages, those offered to borrowers with strong credit histories. The 41 percent figure was up from about 15 percent of banks who said they were tightening standards on prime mortgages in the last survey in July. The Fed's survey covered 49 banks, including many of the nation's largest. These banks account for about 75 percent of all residential real estate loans on the books of commercial banks. (AP, 11/5/2007)
Sources: California Association of REALTORS(R), Wachovia, Dow Jones, Associated Press, LA Times, Sacramento Bee, USA Today, Reuters, CNNmoney.com, KNX-AM Los Angeles
Sunday, November 4, 2007
Federal Funds Rate Reduced: Weekly News Summary 10/29 to 11/4
This article was published in my monthly newsletter. If you want to receive this newsletter, which is emailed to subscribers, please email me at changhomes@gmail.com.
Federal Reserve lowered Federal Funds Rate to 4.5%, citing concerns about weakness in the housing market. Statement also stated that it is also worried about inflation. 10/31/2007 (CNNmoney.com)
U.S. home prices down for 8th consecutive month; index of 10 large U.S. cties shows a price drop of 5% in August, the largest since 1991. 10/31/2007 (AP)
Foreclosure filings rise with more coming as interest rates jump on a record number of adjustable mortgages. 11/1/2007 (CNNmoney.com)
Mortgage rates fall to near a 6-month low –Fixed 30-year rate slips to 6.26% on weak consumer confidence and other economic worries, per Freddie Mac. 11/1/2007 (CNNmoney.com)
Mortgage applications surge as refinance volume drives 3.8% overall growth, according to the Mortgage Banker’s Association’s weekly application survey. 10/31/2007 (AP)
October federal jobs report is more than double of what was expected with a 166,000-job gain; unemployment remains steady at 4.7%. Some economists questioned the validity of gains in this report, which is subject to further revision. 11/2/2007 (CNNmoney.com)
Experts predict the wildfires in Southern California will further add to the region’s slowdown in housing sales, as buyers shy away from listings in and around burn areas. 11/2/2007 (Reuters)
Members of Congress applied more pressure on the Bush administration today to ramp up efforts to slow down foreclosure rates. 11/2/2007 (AP)
Home prices in Los Angeles and Orange counties saw steeper declines in August than most other major metropolitan areas. 10/31/2007 (LA Times)
Regulators and consumer advocates worry too many wildfire victims don’t have adequate insurance to rebuild. 11/1/2007 (USA Today)
U.S. Treasury Secretary Henry Paulson said Tuesday the U.S. economy is strong enough to overcome the housing downturn but added the recovery process could take longer than expected. 10/30/2007 (AP)
Mortgage lenders struggling to remain profitable in the wake of the mortgage meltdown are applying a heavy dose of marketing aimed at those with good credit and solid home equity. 10/29/2007 (LA Times)
Residential Construction declines 1.4% 11/1/2007 (CAR)
Consumer Confidence declined for the third straight month in October, indicating continued consumer skepticism about the economy, fueled largely by the housing and mortgage lending crisis. The Consumer Confidence Index now stands at 95.6, compared with 99.5 in September. 11/1/2007 (CAR)
Sources: California Association of REALTORS(R), Associated Press, LA Times, Reuters, CNNmoney.com, KNX-AM Los Angeles
Federal Reserve lowered Federal Funds Rate to 4.5%, citing concerns about weakness in the housing market. Statement also stated that it is also worried about inflation. 10/31/2007 (CNNmoney.com)
U.S. home prices down for 8th consecutive month; index of 10 large U.S. cties shows a price drop of 5% in August, the largest since 1991. 10/31/2007 (AP)
Foreclosure filings rise with more coming as interest rates jump on a record number of adjustable mortgages. 11/1/2007 (CNNmoney.com)
Mortgage rates fall to near a 6-month low –Fixed 30-year rate slips to 6.26% on weak consumer confidence and other economic worries, per Freddie Mac. 11/1/2007 (CNNmoney.com)
Mortgage applications surge as refinance volume drives 3.8% overall growth, according to the Mortgage Banker’s Association’s weekly application survey. 10/31/2007 (AP)
October federal jobs report is more than double of what was expected with a 166,000-job gain; unemployment remains steady at 4.7%. Some economists questioned the validity of gains in this report, which is subject to further revision. 11/2/2007 (CNNmoney.com)
Experts predict the wildfires in Southern California will further add to the region’s slowdown in housing sales, as buyers shy away from listings in and around burn areas. 11/2/2007 (Reuters)
Members of Congress applied more pressure on the Bush administration today to ramp up efforts to slow down foreclosure rates. 11/2/2007 (AP)
Home prices in Los Angeles and Orange counties saw steeper declines in August than most other major metropolitan areas. 10/31/2007 (LA Times)
Regulators and consumer advocates worry too many wildfire victims don’t have adequate insurance to rebuild. 11/1/2007 (USA Today)
U.S. Treasury Secretary Henry Paulson said Tuesday the U.S. economy is strong enough to overcome the housing downturn but added the recovery process could take longer than expected. 10/30/2007 (AP)
Mortgage lenders struggling to remain profitable in the wake of the mortgage meltdown are applying a heavy dose of marketing aimed at those with good credit and solid home equity. 10/29/2007 (LA Times)
Residential Construction declines 1.4% 11/1/2007 (CAR)
Consumer Confidence declined for the third straight month in October, indicating continued consumer skepticism about the economy, fueled largely by the housing and mortgage lending crisis. The Consumer Confidence Index now stands at 95.6, compared with 99.5 in September. 11/1/2007 (CAR)
Sources: California Association of REALTORS(R), Associated Press, LA Times, Reuters, CNNmoney.com, KNX-AM Los Angeles
Sunday, October 28, 2007
After the Fires: Summary October 22-28
I apologize for not blogging the latest news last week. As I was getting started, I was notified of brush fires in Santa Clarita, where I have majority of my clients. I spent Sunday through Tuesday calling current and past clients and assisting them as needed. Many were evacuated, but thankfully no one had major fire damage through the Buckweed, Ridge, Magic, Soledad Fires (there’s one fire name I forgot that started in Newhall), and my homes and I are fine as well.
I hope those of you in Southern California are safe, with minimal effects from the wildfires.
This week’s news:
The Federal Reserve meets this coming week. Expected to drop the Discount Rate by 1/4 point on October 31. May drop the Federal Funds Rate by the same or keep it steady.
Home sales decreased 38.9 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 4.7 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported October 24.
California stands to lose $23.6 billion in housing wealth if real estate prices continue to decline, and foreclosures rise, according to a study released by the Senate Joint Economic Committee. San Francisco Chronicle, 10/26.
Bank of America Corp. plans to discontinue offering home mortgages by Jan. 1, and slash an additional 700 jobs on top of the 3,000 job cuts announced earlier this week. Reuters, 10/26
The Commerce Dept. reported Thursday sales of new homes rose 4.8 percent in September, yet remain 23.3 percent below sales for the same period a year ago. CAR 10/24
Countrywide Financial Corp. plans to begin offering borrowers refinancing or modifications on $16 billion in loans with interest rates scheduled to reset next year. AP, 10/23
The country’s second-largest independent mortgage lender, Residential Capital LLC, a GMAC Financial Services subsidiary, plans to cut 3,000 jobs to address the housing freeze. Reuters, 10/17.
2 million empty homes: Number of vacant homes on the market nationwide equivalent to all homes in Detroit; another sign of weak housing market. CNNMoney, 10/28
Countrywide joins with Neighborhood Assistance Corporation of America (NACA), a gadfly/community advocacy group that has been its arch-enemy for years, to help borrowers with a new bailout program to prevent foreclosures.
Oct 25: Census Bureau says the pace of new home sales was weaker in September and revises August's numbers to an 11-year low. CNNMoney, 10/25
Mortgage Rates Fall: Fixed 30-year rate slips to 6.33% on market worries of a slowing economy, a weekly report shows, CNNMoney, 10/27.
Existing-home sales declined 8 percent in September, stemming from problems in credit availability, according to NAR's latest research. NAR, 10/26.
I hope those of you in Southern California are safe, with minimal effects from the wildfires.
This week’s news:
The Federal Reserve meets this coming week. Expected to drop the Discount Rate by 1/4 point on October 31. May drop the Federal Funds Rate by the same or keep it steady.
Home sales decreased 38.9 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 4.7 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported October 24.
California stands to lose $23.6 billion in housing wealth if real estate prices continue to decline, and foreclosures rise, according to a study released by the Senate Joint Economic Committee. San Francisco Chronicle, 10/26.
Bank of America Corp. plans to discontinue offering home mortgages by Jan. 1, and slash an additional 700 jobs on top of the 3,000 job cuts announced earlier this week. Reuters, 10/26
The Commerce Dept. reported Thursday sales of new homes rose 4.8 percent in September, yet remain 23.3 percent below sales for the same period a year ago. CAR 10/24
Countrywide Financial Corp. plans to begin offering borrowers refinancing or modifications on $16 billion in loans with interest rates scheduled to reset next year. AP, 10/23
The country’s second-largest independent mortgage lender, Residential Capital LLC, a GMAC Financial Services subsidiary, plans to cut 3,000 jobs to address the housing freeze. Reuters, 10/17.
2 million empty homes: Number of vacant homes on the market nationwide equivalent to all homes in Detroit; another sign of weak housing market. CNNMoney, 10/28
Countrywide joins with Neighborhood Assistance Corporation of America (NACA), a gadfly/community advocacy group that has been its arch-enemy for years, to help borrowers with a new bailout program to prevent foreclosures.
Oct 25: Census Bureau says the pace of new home sales was weaker in September and revises August's numbers to an 11-year low. CNNMoney, 10/25
Mortgage Rates Fall: Fixed 30-year rate slips to 6.33% on market worries of a slowing economy, a weekly report shows, CNNMoney, 10/27.
Existing-home sales declined 8 percent in September, stemming from problems in credit availability, according to NAR's latest research. NAR, 10/26.
Sunday, October 21, 2007
Due to So-Cal Fires, this week's news summary postponed
Due to the fires in Castaic and Agua Dulce/Canyon Country, I am unable to research and post the weekly Real Estate News Summary today.
I've received many emails and phone calls from all over the country regarding the SoCal Fires and making sure I'm okay/safe…I am, but the fires are affecting my clients and keeping me busy…
For those of you around the country, as of 10pm PT Sunday nite, there are 11 major fires in the area currently occurring (or occurred today and in monitoring stages): 1 in Ventura, 2 in Orange County, 2 in San Bernardino County, 2 in San Diego County, and 4 in Los Angeles County. Malibu is getting the attention on national TV, by what I hear, but that has died down; it's at 1200 acres and 2 structures destroyed? They expect to stay on-scene until Tuesday.
There are also major fires in LA County in Castaic (over 2000 acres) and Agua Dulce/Canyon Country (over 10,000 acres, unofficial numbers at up to 20,000, over 16 structures destroyed), which are ones affecting many of my clients and neighbors. I have been in touch with all of them and so far they are safe and their homes are safe. Many are without power due to downed power lines. Castaic is next to Valencia on the North and West-central sides of Santa Clarita, and Canyon Country is on the East. So we're taking it from both sides.
You hear about Santa Ana winds on the news…I remember hearing it when I was living in the Midwest. It's incredible to be out there in 60+ mph winds. Nearly hurricane strength…can't breathe outside and it's hard to stand. We've had much stronger gusts too: a weather station near Castaic recorded a gust around noon at 108mph.
Many of you know I volunteer with the City of Santa Clarita and LA City Fire Emergency Response Teams – today I mainly worked radio communications amongst all the agencies. We've got fire departments coming from all over California, and I still hear we're stretched thin (LA City also had a major building fire requiring 200 firefighters this afternoon). Tomorrow I am on reserve, but I will likely be activated too. Today, I've been making sure my clients are safe today and helping them out with evacuations.
I just want to thank all of you for your thoughts. If you're wanting to follow along, you can view live coverage online at cbs2.com (or kcal9.com, same website) and hear good coverage on knx1070.com.
--Wayne
I've received many emails and phone calls from all over the country regarding the SoCal Fires and making sure I'm okay/safe…I am, but the fires are affecting my clients and keeping me busy…
For those of you around the country, as of 10pm PT Sunday nite, there are 11 major fires in the area currently occurring (or occurred today and in monitoring stages): 1 in Ventura, 2 in Orange County, 2 in San Bernardino County, 2 in San Diego County, and 4 in Los Angeles County. Malibu is getting the attention on national TV, by what I hear, but that has died down; it's at 1200 acres and 2 structures destroyed? They expect to stay on-scene until Tuesday.
There are also major fires in LA County in Castaic (over 2000 acres) and Agua Dulce/Canyon Country (over 10,000 acres, unofficial numbers at up to 20,000, over 16 structures destroyed), which are ones affecting many of my clients and neighbors. I have been in touch with all of them and so far they are safe and their homes are safe. Many are without power due to downed power lines. Castaic is next to Valencia on the North and West-central sides of Santa Clarita, and Canyon Country is on the East. So we're taking it from both sides.
You hear about Santa Ana winds on the news…I remember hearing it when I was living in the Midwest. It's incredible to be out there in 60+ mph winds. Nearly hurricane strength…can't breathe outside and it's hard to stand. We've had much stronger gusts too: a weather station near Castaic recorded a gust around noon at 108mph.
Many of you know I volunteer with the City of Santa Clarita and LA City Fire Emergency Response Teams – today I mainly worked radio communications amongst all the agencies. We've got fire departments coming from all over California, and I still hear we're stretched thin (LA City also had a major building fire requiring 200 firefighters this afternoon). Tomorrow I am on reserve, but I will likely be activated too. Today, I've been making sure my clients are safe today and helping them out with evacuations.
I just want to thank all of you for your thoughts. If you're wanting to follow along, you can view live coverage online at cbs2.com (or kcal9.com, same website) and hear good coverage on knx1070.com.
--Wayne
Wednesday, October 17, 2007
The Real State of Real Estate
The Real State of Real Estate
Presented by: Gary Watts – Real Estate Economist, California Previews Retreat
Monterey, August 2007
Brief History of Real Estate
Historically, housing downturns average 27 months. We are in the 23rd month of the current downturn, so once we are past this financial over-reaction, things should improve. The national median price of a resale home is 3.4% higher than a year ago and the pending sales index is moving back up. There may just be some light beginning to shine at the end of this tunnel!
1970 to 1980
Prior to my entering real estate in 1971, a quote appeared in Business Week (late 1969) due to an increase in housing prices: “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000. “In 1972, interest rates were 7% and it would take over 24 years before a home buyer could be able to obtain those low rates once again - today, we are in the low 6’s. In 1973, banks had a run on deposits and for a period of approximately 8 months there were no lenders who were in a position to make loans to home buyers. This should have caused a collapse in the real estate market, but home prices continued to rise. In 1977, the National Business magazine stated: “The median price of a home today is approaching $50,000. Housing experts predict price rises in the future won’t be that great.”
1980 to 1990
At the end of the 70’s and into the 80’s, inflation hit 21.5% and home loans were reaching 18%! This was followed by a crash (and later bail out) of the savings & loans industry in America. Although large job losses were creating foreclosures, home prices continued to rise. By 1985, Money Magazine made this prediction about home prices: “The golden-age of risk free run-ups in home prices is gone.” With a buildup in defense spending and huge growth in manufacturing sector in the late 1980’s, increased job creation led to a boom in home construction and home prices continued to rise. Then on November 11, 1989, a dramatic event took place: the Berlin Wall came down! With the Evil Empire (the Soviet Union) breaking up, things were going to change around the world and change quickly!
1990 to 2000
In early 1990, Congress began slashing funds for defense spending. Within a very short period of time, a lot of highly paid workers in both defense and manufacturing had lost their jobs. California home prices declined about 12% by 1996 when the San Francisco Examiner said: “A home is where the bad investment is. “In the following 3 years, California home prices rose 19.7% wiping out all the losses of the early ’90’s and ended the decade with a net gain of 9.35%. The median price in California has not declined since 1996.
The Media
Today’s media plays up bad economic news now more than ever, which leads to misconceptions about economic realty. Our economy is extremely strong, profits are superb and the world economy is exploding.
• All you read and hear is that real estate is going down, yet last month, prices in the U.S. rose
3.4% from a year ago and California is up almost 1%. The Bay Area prices have gained 4.1%
over the last year and southern California median price is up 3.7%.
• Foreclosures are supposed to be at a record high - but last year 98.83% or mortgages did not go to foreclosure. Today, the Bay Area’s foreclosure rate is up only 1.5% over last year while southern
California’s foreclosure rate is up 2%.
• The media reported 53,942 notices of default for the 2nd Quarter - a near record high. They are
comparing it to the 1st Q. of ‘96 when 61,541 notices were filed but fail to mention that 2 million
more home have been built in California since then!
• What if the media’s headlines read: 99.2% of Mortgages are Not in Foreclosure?
• The media and the financial markets have greatly over-reacted, to the real problems that have
been revealed in the lending marketplace, which is typical.
The Sub-Prime Market
It may surprise you to know that sub-prime loans make-up only 5% of the U.S. total loan market and Alt - A loans (those with credit better than sub-prime but less than prime) total only 8% of all loans in the U.S.!
1. These exotic loans became a major influence in the early 2000’s, but anyone obtaining them up through 2004 had very few problems due to rapid equity growth. Many with no-money-down purchases soon found they had 20% (+) equity within a year or two!
2. Most of the problems with sub-prime loans originated in the summer of2005 through 2006. In
California, 43% of all loans funded during that time were sub-prime loans.
3. Sub-prime loan investors that needed to sell their loans were liquidating their paper for $.96 on the dollar. There has been no current data on sales since August 5th, but with the current turmoil in the financial markets, I am sure they are being “dumped” for less.
4. Here is a financial report on some of the banks that provided the sub-prime money:
• Bear Stearns 2nd quarter revenue was $2.512 billion - a new record!
• Merrill Lynch saw 2nd quarter profits rise 30.2% Morgan Stanley (holding $5.2 billion in subprime
loans) had a 60% jump in earnings.
• Goldman Saks earned $2.33 billion in the past year.
• Bank of America (#2 U.S. bank), after putting aside $1.81 billion for potential credit losses, saw
net income rise to $5.76 billion - up from $5.48 billion last year.
The media will still report about massive delinquencies and huge foreclosures in the sub-prime market, but those reports will not be accurate because they don’t explain the difference between a delinquent payment, a notice of default or a foreclosure. They tell us “Foreclosures at Record High!” but that is not accurate.
Source: Mortgage Bankers Association, National Homebuilders Association, Inside Mortgage Finance
Delinquencies vs. Notices of Default vs. Foreclosures Delinquencies
Delinquencies cover any missed payment - even if it is just for one month, it is reported as a delinquency.
1. The delinquency rate on sub-prime loans was running at 13.77%, which is up 13.44% from the
previous year. In the last quarter, the delinquency rate dropped to 12.4%!
2. The delinquency rate on Alt-A loans is only 2.69%, while prime loans are at 2.57%.
3. Combining the three rates with the loan volume gives you a delinquency rate for all loans in the U.S. of only 4.84%. The record low is 4.0%.
4. On jumbo mortgages (anything larger than $417,000) the delinquency rate is 0.37% 5. California’s delinquency rate is only 3.25%.
Notices of Default
Notices of Default are filed when lenders’ loans have been delinquent for a specific period of time. These loans begin the foreclosure process. The four states of California, Florida, Nevada and Arizona currently have the largest amount of loans in the foreclosure process. Yet, in the 1st Quarter, 24 states saw a decline in foreclosure starts and 36 states saw a decline in the 2nd quarter!
1. Only 3.23% of all sub-prime loans have entered the foreclosure process, with most of the defaults occurring on loans from Jan. 2005 to June 2006.
2. Only 1.28% of all prime loans have entered the foreclosure process.
3. In California, the last quarter saw 53,943 notices filed, with most filings being on loans from the summer of 2005 to the summer of 2006.
4. The lowest number was 12,417 in the 3rd Quarter of 2004.
Foreclosures
Foreclosures occur when the buyer has been unsuccessful in curing the debt, and either a lender or an investor has acquired the property. As of last month, there was 1 foreclosure filing for every 693 homes in America.
1. For sub-prime loans, 68% of the buyers are able to prevent the foreclosure by either refinancing the property or successfully selling their home.
2. For prime loans, the foreclosure rate is 0.86%. Last year, the U.S. saw a combined foreclosure rate of only 1.09% while California’s rate was 1.17%!
3. California now ranks #4 in the nation in foreclosures - down from #1!
The media will try to scare you with numbers like $1 trillion in loans needs to be recast this year and that foreclosures could cost lenders as much as $2.3 billion dollars! They never mention that there is $10.4 trillion of mortgages with $56 trillion dollars of equity in American households.
Add to that the wealth of the U.S. at $70 trillion, with the value of stocks between $15 and $20 trillion, while the bond market is even larger. So these loses (should they occur) should not have any great effect on home prices.
A final note about foreclosures: The #1 reason they occurred was due to fraud. The #2 reason was
unethical lending, followed by #3 - loss of job, and finally #4 was medical reasons. By the way,
mortgage insurers are in a good position to cover losses at these (high) levels.
Source: Mortgage Bankers Association, Federal Reserve, Federal Bureau of Investigation
Why the World Changed in 1979 Baby Boomers’ Impact
Never before in the history of the world has a generation accumulated so much wealth as the baby
boomers. The Internal Revenue Service will tell you that from 1945 to 1979, incomes increased at the same rate for all tax brackets. By 1979, the early baby boomers had been in the workplace for over 10 years. They were the most educated generation to enter the work force, and they had the skills for our changing world. Today, the IRS tells us that, from 1979 to 2004, the median income in the U.S. rose 18%. From 2004 to 2005, incomes grew 5.8%.
The number of taxpayers making more than $100,000 grew by 3.4 million and accounted for more than two-thirds of the growth vs. 2000! Half of Americans make less than $30,000 and two-thirds make less than $50,000.
Those making more than $1 million grew by 26% and numbered 303,817 in 2005! These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005.
The top 85% of the nation’s wealth resides with the richest 15% of Americans; the bottom 50% of Americans holds only 2.5% of the nation’s wealth. Over the next decade, there will be a 25% increase in the population over 50 years of age. They have more money than any preceding generation, due to having dual incomes, equity growth, and record inheritances (60% goes to the top 40%)! This age group is spending $2 trillion dollars annually! Last year, 2.1 million boomers turned 60, with 25% planning on not retiring.
They found a way to mix leisure with work and are not ready to fully retire - they have money and income and they are still investing in real estate.
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