“Painfully Slow Growth”: Week in Review, February 18-24

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Thoughts to consider about homeownership:
• Teenage students raised by home-owning parents are less likely to drop out of school than teens raised by renters, according to the “Journal of Urban Economics.”
• Homeowners are less likely to be crime victims than renters because neighborhoods where owners have a stake in the community are more stable, according to “Social Forces.”
• Equity—the value of a property after all debts have been paid—is an important component of wealth building because it can be a safety net for emergencies or hard times. It also can be used to launch a business or pay for college tuition, both of which have the potential to create future earnings. (CAR, 2/21)

Painfully Slow Growth for California and Southern California in 2008-2009, with “Spot” Recessions – While the economies of California and Southern California overall are not expected to fall into recession in 2008-2009, it will be a painful period for several industries and metro areas, according to the Los Angeles County Economic Development Corporation. (LAEDC, 2/20)

California Home Sales January 2008 - A total of 19,145 new and resale houses and condos were sold statewide last month. That's the lowest number for any month in DataQuick's records, which go back to 1988. It was 25.2 percent lower than December's 25,585 and 41.0 percent lower than 32,425 for January last year. (DataQuick, 2/18)

Commercial real estate market activity - expected to decline moderately with fewer business opportunities for commercial practitioners in the months ahead. (CAR, 2/20)

Fed Hints at More Rate Cuts - Minutes from the Federal Reserve meeting in January that were released Thursday suggest that more rate cuts could be in the offing. The minutes show that at the Jan. 29-30 meeting, the most recent, Fed officials decided that keeping interest rates low “appeared appropriate for a time to counter the factors that were restraining economic growth." (Wall Street Journal, 2/22)

Entry-Level Housing Affordability at 33% - The percentage of households that could afford to buy an entry-level home in California stood at 33 percent in the fourth quarter of 2007, compared with 25 percent for the same period a year ago, according C.A.R.'s First-time buyer Housing Affordability Index. CAR calculates affordability based on the minimum household income required to make a 10 percent down payment and secure an adjustable interest rate loan at 6.21 percent. Average monthly payment including taxes and insurance was $2740 for the 4th quarter of 2007. (CAR, 2/20)

New Home Sales Decline 30% in 2007 - The pace of new-home sales across California fell more than 30 percent in 2007 compared with 2006, according to recent data from the California Building Industry Association (CBIA). (via CAR, 2/20)

Consumer Price Index Rises 0.5% in January – This index is often related to inflation, so with this rise, economists are getting wary about inflation pressures. The index for housing climbed 0.2 percent in January, and the index for shelter remained unchanged from December at 0.3 percent. (CAR, 2/20)

Perspectives: More buyers moving in to first homes – Fresno Bee
Declining prices and interest rates and a large number of homes for sale are enticing potential first-time home buyers off the sidelines, experts say.
• Although this story is specific to the San Joaquin Valley, it applies to many regions around the state where prices have declined. Now may be an ideal time to buy an entry-level home.
• If enough first-time home buyers gain entry to the housing market, middle- and upper-tier homeowners will be able to sell and upgrade, and that can only help the economy. (CAR, 2/21)

Perspectives: Group says more Californians can afford to buy their first home – San Francisco Chronicle
As mentioned above, some 33% of households in the state were able to afford their first home in the last three months of the year.
• As the median home price declines, many potential home buyers who had previously believed an entry-level home was out of reach may now find themselves in a position to buy.
• The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.
• Prospective buyers for the most part need not worry about the bidding wars that drove up home prices during the housing boom.
• First-time home buyers needed to earn an annual income of $82,200 to buy an entry-level home in California in the fourth quarter of 2007, down 15 percent from the $96,600 annual income needed to buy during the last three months of 2006. (CAR, 2/21)

Mortgage rates inch above 6% - Fueled primarily by inflation concerns, interest on long-term mortgage rates moved higher for the week. Freddie Mac reported a rise to 6.04 percent from 5.72 percent last week on 30-year fixed loans, which broke the 6-percent threshold for the first time in seven weeks. Rates on 15-year loans, which are popular in refinance deals, bumped up to 5.64 percent from 5.25 percent; while five-year adjustable-rate mortgages settled at 5.37 percent, up from 5.19 percent. One-year ARMs, however, resisted the downward trend and slipped to 4.98 percent from 5.03 percent in the week-to-week survey. (Freddie Mac 2/21; Baltimore Sun, 2/22; CNNMoney 2/21)

Mortgage Applications Tumble - Volume of applications dropped more than 22% as most interest rates increased sharply. (AP, CNNMoney, 2/20)

Southland Rents Rise Despite Falling Home Prices - Apartment rents across Southern California have increased 4.5 percent over the last three months compared to where they were a year ago, despite falling home prices. (LA Times, 2/22)

Foreclosure Prevention Plan Under Attack - Lenders trying to derail legislation that would allow bankruptcy judges to reduce mortgage balances for home owners. (CNNMoney, 2/21)

Subprime Loans Defaulting Even Before Resets - It turns out that massive interest rate spikes aren't the problem; many borrowers couldn't afford these mortgages even at the low, introductory interest rates. (CNNMoney, 2/20)

Fast Facts
* Calif. median home price - December 07: $475,460(Source: C.A.R.)
* Calif. highest median home price by C.A.R. region December 07: Santa Barbara So. Coast $925,000 (Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region December 07: High Desert $244,330 (Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Fourth Quarter 07: 33 percent (Source: C.A.R.)

Sources: Los Angeles Economic Development Corporation, DataQuick, California Association of REALTORS, Wall Street Journal, Freddie Mac, Baltimore Sun, CNNMoney, Los Angeles Times, San Francisco Chronicle, Fresno Bee, Associated Press.

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Economic Stimulus Bill Signed: Week in Review, February 11-17

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Quick Bullets:
• It is more important than ever for potential home buyers to have a good credit score. Consumers should obtain a credit report and take care of any outstanding issues that can be fixed or improved prior to applying for a loan. According to a recent Federal Reserve survey, some 53 percent of lenders tightened requirements for prime-quality borrowers, 72 percent for sub-prime borrowers, and 85 percent for non-traditional mortgage borrowers, including PayOption ARMs, loans with interest-only payment structures, and other such products.
• Whether or not they have children, consumers may want to consider a home in a neighborhood with excellent schools. Homes in good school districts typically are a bit more "recession proof" and appreciate faster than homes near weaker schools, according to MSN Money. (CAR, 2/14)

Bush signs Economic Stimulus Plan – raises conforming loan limits and puts rebate checks in Americans’ hands. For details on this legislation, see http://changhomesnews.blogspot.com/2008/02/special-economic-stimulus-bill-awaits.html (AP, 2/13)

Project Lifeline offers 30-day foreclosure reprieve – Six lenders joined the Treasury Department and the Department of Housing and Urban Development to offer seriously-overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loans. The lenders are Bank of America, Citigroup, Countrywide, JPMorgan Chase, Washington Mutual, and Wells Fargo. All are involved in Hope Now, an effort to freeze rates on some high-cost subprime mortgages for 5 years to aid borrowers whose teaser rates are jumping sharply higher. More details below in Perspectives. (CNNMoney, AP, 2/11)

Home Buyer Fair - C.A.R., in participation with the Los Angeles Times, will present the Southern California Home Buyer's Fair for consumers Saturday, April 12, and Sunday, April 13 at the Los Angeles Convention Center in downtown Los Angeles. The Southern California Home Buyer's Fair will feature more than two dozen educational seminars presented in English and Spanish for consumers, designed to address many of the concerns of first-time home buyers and arm them with all of the practical information they need to know as they begin the road to homeownership. (CAR, 2/11)

Bush Budget seeks $38.5 Billion for HUD - The Bush Administration's FY 2009 budget seeks $38.5 billion for the U.S. Dept. of Housing and Urban Development, a boost of $1 billion more than HUD's current budget. The budget package includes "significant increases for housing counseling, homeless assistance and affordable housing programs," according to HUD Secretary Alphonso Jackson. (NAR, 2/13)

Beginning this week and continuing through September, HUD's Federal Housing Administration (FHA) is mailing 850,000 letters to at-risk borrowers who have already faced or are experiencing the first reset of their adjustable rate mortgages, and live within geographic locations that are currently subject to FHA loan limits nationwide. If this has the intended effect of keeping those at risk out of foreclosure, it could help shore up the housing market and the state’s economy. (CAR, 2/14)

Perspectives: New program aims to forestall foreclosures – Washington Post
Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under “Project Lifeline,” an initiative the Bush administration announced Tuesday.
· The attempt to diminish the number of homes repossessed could have a broad impact since six of the nation’s largest financial institutions are participating. Together they service almost half of the nation’s mortgages. Fewer foreclosures improves the strength of the housing market.
· The program will be available to borrowers of all types of mortgages, not just the high-cost subprime loans that previous relief efforts targeted.

Perspectives: Southern California home sales drop to a 20-year low – LA Times
Fewer than 10,000 homes were sold in the six-county Southern California region in January, DataQuick Information Systems said Wednesday. That's the first time sales have been at this level since DataQuick began keeping records in 1988.
· The newly passed economic stimulus package could aid sales of more expensive homes previously encumbered by the higher interest rates of non-conforming jumbo loans.
· Repeated Federal Reserve interest rate cuts continue to put downward pressure on mortgage rates, which are at about 5.6 percent.
· Lower interest rates might boost sales and prevent foreclosures by allowing more homeowners to refinance.
· Declining home sales have contributed to lower prices, making homes more affordable.

Latest Pending Home Sales Index and Forecast – Soft market conditions continue for existing home sales in the months ahead, with notable improvement expected by the 2nd half of this year as loan limits increase. (NAR, 2/14)

Metro Areas Home Prices Mixed, Half Show Gains - Roughly half of metropolitan areas continued to show rising home prices in the fourth quarter of 2007, according to the National Association of REALTORS. (2/14)

Home prices fell faster nationally in more places over the last part of 2007. (CNNMoney, 2/14)

The real-estate auction market rose 5.3 percent in 2007, generating $58.4 billion in revenues 39 percent more than it did in 2003, according to the National Auctioneers Association. (NAR, 2/13)

Greenspan says no recession yet – Former Federal Reserve Chairman said the American economy is on the “edge” of a recession, pointing to the slump in the country’s housing market as the primary cause. (CNNMoney, 2/15)

Bernanke optimistic for late 2008 – Current Federal Reserve chairman says the central bank is likely to slash rates further in the coming months, with the benefits of the rate cuts likely appearing in the second half of the year. (NAR, 2/14)

Job losses point to recession – California’s Index of Leading Employment Indicator decreased in the fourth quarter of 2007, marking the seventh consecutive quarterly drop and indicating further declines over the next six months, according to a report released Monday by the A. Gary Anderson Center for Economic Research. The primary factor feeding the decline, according to the report, is the slump in California's construction spending. (CAR, 2/11)

The Consumer Confidence Index fell nearly three points in January. While consumers were more positive about job prospects in January, the sampling from the January household survey of those who view business conditions as "bad" rose to 20 percent from 18.8 percent in December. (CAR, 2/11)

Mortgage Rates Rise to Highest Level in 5 Weeks - 30-year fixed-rate mortgages averaged 5.72% this week, up from 5.67% last week. Rates on 15-year fixed edged up to 5.25% versus 5.15% last week. 5-year adjustable-rate mortgages (ARMs) dipped to 5.19% from 5.21% while 1-year ARMs remained unchanged at 5.03%. One year ago, 30-year mortgages stood at 6.30%, while 15-year were at 6.03%, 5-year ARMs at 6.01% and 1-year ARMS were at 5.52%. Mortgage applications fell during the last week. (AP, 2/14; Mortgage Bankers Association via CNNMoney, 2/16)

Countrywide's Overdue Mortgages Increase to 7.47%; Highest in Six Years Countrywide Financial Corp., the biggest U.S. mortgage lender, said late loans were at their highest level in at least six years during January, adding to evidence that the U.S. housing slump is getting deeper. (Bloomberg, 2/15)

Fast Facts:
* Calif. median home price - December 07: $475,460(Source: C.A.R.)
* Calif. highest median home price by C.A.R. region December 07: Santa Barbara So. Coast $925,000 (Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region December 07: High Desert $244,330 (Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Third Quarter 07: 24 percent (Source: C.A.R.)

Web Spotlight:
CrimeReports.com posts crimes from police departments in 16 states, including California. You can join to receive free regularly-scheduled crime reports via email. You can also choose to receive time sensitive crime alerts, neighborhood and community policing program bulletins and other crime awareness and prevention information as they become available. (Charlie Turner, MarketWatch, KFWB-AM, 2/16; AP, 2/4)

Sources: California Association of REALTORS, Bloomberg, National Association of REALTORS, CNNMoney, Washington Post, Associated Press, MarketWatch, KFWB-AM, Los Angeles Times.

Economic Stimulus Bill Passed: Week in Review, February 4-10

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Bush to sign Economic Stimulus Bill on Wednesday – Legislation that gives $300-$600 per person passed both the House and Senate the same day. For details on the legislation, please see my Special Report at http://changhomesnews.blogspot.com/2008/02/special-economic-stimulus-bill-awaits.html or send me an email for a PDF version. (CNBC, 2/10; other sources noted on Special Report)

The stimulus package temporarily raises the maximum size of mortgages that Fannie Mae and Freddie Mac can purchase and market as securities from $417,000 to as high as $729,750 in expensive parts of the country like New York City and California. (AP, 2/8; NAR 2/8)

Homeowners Confident on Market - Despite plenty of evidence to the contrary, 77 percent of homeowners believe that their homes are worth as much or more as they were in 2006, according to a Harris Interactive survey conducted for Zillow.com. And 36 percent say their homes increased in value in 2007. The slow market also isn’t discouraging homeowners from major transactions. Despite what they read and hear about the real estate market, 34 percent say they are equally or more likely to consider selling their homes this year, and 35 percent are just as likely as before to take out a home equity loan. 36 percent would consider a second mortgage. Homeowners continue to forge ahead on projects that they believe improve the value of their homes. (Zillow, 2/7; NAR 2/7, CNNMoney 2/7)

Statewide MLS being established in California - C.A.R.'s board of directors has approved a plan to establish a statewide hybrid multiple listing service for California (the "California MLS"), which will be owned and operated by C.A.R. This effort is focused on providing the most innovative and cost effective MLS services delivered to members through their local association or regional MLS. Its goal is to provide statewide coverage of listing data to all those who choose to participate. (CAR, 2/6)

Home Prices Spark Suit - Two California couples are suing KB Home and mortgage lender Countrywide Financial, contending the companies collaborated with home appraisers to inflate home prices. (San Jose Mercury-News, 2/8)

Home Sales Flat Before Rise - A continuation of soft market conditions is forecast for existing-home sales in the months ahead, with improvement expected by the second half of this year if loan limits are increased, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®. New-home sales are likely to decline 17.7 percent to 637,000 in 2008 before rising 7.6 percent to 685,000 in 2009. (2/7)

Pending Home Sales Fell 1.5% in December - The NATIONAL ASSOCIATION OF REALTORS® reports that pending sales of previously owned homes trended further downward than expected in December, falling by 1.5 percent. (Reuters, 2/7)
Construction Spending Falls 2.8% in December - Reflecting builders' continuing efforts to balance bloated inventories against a nationwide decline in home sales, residential construction spending in December fell 2.8 percent to $462 billion from the revised November estimate of $475.1 billion. (CAR, 2/6)

Las Vegas tops foreclosure list – the Nevada area has 7 of the top 10 zip codes hardest hit by the housing meltdown (CNNMoney, 2/5)

Stockton highlighted in National News - The CBS news magazine "60 Minutes" recently identified Stockton as “ground zero” for the nation’s foreclosure crisis. (Stockton Record, 2/3)

Freddie Mac Looks at Apartment Financing - Freddie Mac is looking to expand into financing multi-family buildings in an effort to bolster its competitive edge with Wall Street. (NY Times, 2/4)

Mortgage Rates Forecast to Rise Slowly This Year - The 30-year fixed-rate mortgage is forecast to rise slowly to the 5.9 percent range in the fourth quarter, and then average 6.3 percent in 2009. (NAR, 2/7)

Banks Tighten Mortgage Loan Standards - The rise in mortgage defaults and construction costs are making the process of obtaining a home or building construction loan more difficult, according a Federal Reserve survey released Monday. More than half of the U.S. lenders who responded to the January 2008 Senior Loan Officer Opinion Survey reported having tightened standards for prime mortgages during the quarter, an increase of 40 percent from the Fed's survey conducted during the previous quarter. (CAR, 2/6; NAR, 2/5)

Harder to get Refi – Lenders are studying applicants credit scores and the home’s appraisal numbers in much more detail than before. (CNNMoney, 2/8)

Mortgage Rates Flat – on news of slowing service sector report earlier in the week, the 30-year fixed-rate loan averaged 5.67% for the week ending Thursday, down from 5.68% last week, and still well below rates at this time last year Freddie Mac noted. At this time last year, the 30-year fixed-rate mortgage averaged 6.28%. 15-year fixed-rate loans averaged 5.15%, down from 5.17% last week. A year ago, the 15-year rate averaged 6.02%. Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.21%, down from 5.32% last week. The 5-year rate averaged 5.99% at this time last year. One-year Treasury-indexed ARMs averaged 5.03%, down from 5.05% last week. At this time a year ago, the 1-year ARM averaged 5.49%. Mortgage application volume increased 3% during the week ending 2/1. (CNNMoney, 2/7; MSNBC, 2/6)

Fast Facts:
* Calif. median home price - December 07: $475,460(Source: C.A.R.)
* Calif. highest median home price by C.A.R. region December 07: Santa Barbara So. Coast $925,000 (Source: C.A.R.)
* Calif. lowest median home price by C.A.R. region December 07: High Desert $244,330 (Source: C.A.R.)
* Calif. First-time Buyer Affordability Index - Third Quarter 07: 24 percent (Source: C.A.R.)

Perspectives: “Foreclosures up 75% in 2007” – RealtyTrac.
* Foreclosures were lower prior to last year, and that causes the numbers to appear to be soaring only when looked at purely in terms of percentage gains.
* RealtyTrac reports defaults on loans, not on properties, so one household that defaults on a primary loan and an equity line will be counted as two defaults, even though both loans were for the same house. This could artificially inflate foreclosure statistics.
* A foreclosure filing includes default notices, auction sale notices and bank repossessions. One home may fall into each of these categories as it moves through the long foreclosure process. RealtyTrac counts each step along the way separately. This also skews foreclosure statistics.
* The overwhelming majority of homes are not in danger of foreclosure. If slightly more than 1 percent of U.S. homes were in some stage of foreclosure last year, then 99 percent of homes were not. Although some of the hardest hit communities with high concentrations of defaults are suffering, those communities do not reflect California overall.
* There are tremendous differences between counties and cities as well as neighborhoods in the same town—all the more reason consumers need a REALTOR® who is a local community expert. (CAR, 2/6)

Perspectives: “Even in today’s market, homeowners needn’t have a stratospheric down payment and the squeakiest of credit histories to get into a house.” – USA Today
* Clients who don’t have 20 percent to put down will find a 10 percent down payment is often acceptable with good credit.
* Loans for 100 percent of the purchase price are extremely rare but are still available for a conforming loan of $417,000 or less and for consumers with a credit score of 700 or higher.
* Congress is considering loosening rules on the Federal Housing Administration’s mortgage-insurance program, which gives buyers with imperfect credit better odds of approval.
* Over the long-run, the median home price of an existing single-family home in California has increased about 9 percent a year since 1969, according to the CALIFORNIA ASSOCIATION OF REALTORS®.
* The Mortgage Bankers Association in Washington said Wednesday that its index of total mortgage applications rose 3 percent last week to its highest level since March 2004, and applications were up 73 percent from a year earlier. This could be a sign that potential buyers are regaining confidence in the market.
* Homeowners accumulate significantly more wealth than renters. According to the most recent Federal Reserve Survey of Consumer Finances, the median net wealth of a renter household is $4,800, while the median net wealth of a homeowner household is $171,700. (CAR, 2/6)

Web Spotlight:
RottenNeighbor.com is a Web site that lets people dish about their neighbors — both the good and the bad. Type in any address and if someone has posted something negative about it, a bright red house pops up on top of the satellite image. Green house icons show up where the nice neighbors live. (Orlando Sentinel, 2/1; NAR 2/4)

Overseas Spotlight:
British Housing Repossessions Rose to Highest Level Since 1999 Last Year - U.K. housing repossessions reached the highest since 1999 last year and will increase further this year as banks curb lending and the economy slows, the Council for Mortgage Lenders said. (Bloomberg, 2/8)

Ending with Interesting News:
Bear Stearns Makes $1 Billion Bet That Subprime Market Will Continue Slide - Bear Stearns Cos., the U.S. securities firm that posted its first-ever loss last quarter on mortgage writedowns, has more than $1 billion of trades that profit if subprime home loans and bonds continue to deteriorate. (Bloomberg, 2/8)


Sources: CNBC, Associated Press, National Association of REALTORS, San Jose Mercury-News, Reuters, Stockton Record, New York Times, California Association of REALTORS, Zillow.com, CNNMoney, MSNBC, Orlando Sentinel.

SPECIAL: Economic Stimulus Bill Awaits President’s Signature

Economic Stimulus Bill Awaits President’s Signature
Passes House and Senate Same Day

In an unprecedented move, the House of Representatives passed the same legislation as one that passed the Senate within hours of the Senate’s vote on Thursday, February 7.

A summary of the $170 billion economic stimulus bill:
* $600 per person with adjusted gross income between $3,000 and $75,000 plus $300 per child
* Couples earning up to $150,000 in 2007 will receive $1,200.
* Tax filers who do not owe income taxes because of various credits and deductions but have at least $3,000 in income in 2007- which can include Social Security and disability payments - will get $300 rebates per person or $600 per couple.

An example: A couple with one child and $100,000 in AGI will get a rebate of $1,500 ($1,200 + $300). If they have two children, they will get $1,800 ($1,200 + $600).

If you make more than the limits above, you may be eligible for a partial refund.

Not included in this legislation:
* Extension of employment benefits
* Checks for people aided by the food stamp program and the low-income home energy assistance program

The Senate bill also fixed a “glitch” that would have allowed illegal immigrants to receive checks.

The IRS will handle the “rebate checks” after the bulk of the tax season. Most news reports estimate that first checks will be mailed in May. You must file a federal tax return for 2007 to be eligible for these rebate checks. “Some people are normally not required to file a return,” says CNN. “To get the rebate, however, they have to file a federal return.”

The checks are an advance on next year's refunds, and most, if not all of the money, will be deducted from taxpayers' refunds next tax season, says CNBC. CNN states, “Your rebate is a one-time tax cut - an advance on a credit you'll receive on your 2008 return.” As I haven’t seen the actual legislation (and even if I did, it doesn’t mean I can understand it), I don’t know what the effect of the rebate is on next year’s taxes.

Nearly half (46 percent) of Americans said they plan to use the rebate to pay off debt and a quarter (28 percent) would save the money, according to the International Council of Shopping Centers and UBS Securities, which jointly commissioned the study of 1,005 households between January 31 and Sunday.

Some are using the bills’ new housing provisions to buy their next home or to refinance. The bill temporarily raises conforming mortgage loan limits from $417,000 to as high as $729,750 in areas such as California. People with homes between these figures who currently have jumbo loans are looking to refinance to the cheaper conforming loans. Conforming loans are mortgages that can be sold to Fannie Mae or Freddie Mac in the secondary market and carry interest rates of up to 1% less than jumbo loans.

There is also a similar change for loans backed by the Federal Housing Administration, a government agency that insures loans to borrowers with poor credit. They would be able to back $10 billion in additional loan guarantees with higher limits through 2008.

The impact of the Federal Housing Administration change is likely to be smaller. The Congressional Budget Office estimated the agency could back $10 billion in additional loan guarantees through 2008 with higher limits - a tiny fraction of the more than $2 trillion in new mortgage loans made last year.

Written and Edited by Wayne W. Chang with information from CNN.com, CBS Radio, CNBC, and the Associated Pres as of 11pm PT, February 8, 2008. Revised February 10.


The following text comes from an “eNews” from HR Block released February 8, 2008:

Economic Stimulus Act of 2008 (HR 5140)

Congress has passed the Economic Stimulus Act of 2008 and it is expected that the President will sign the bill to law shortly. The major provision of the Act is the advance refund or “rebate” provision. Treasury Secretary Henry Paulson has indicated that the IRS will begin preparations for processing rebate checks immediately and the checks will be issued starting in May.

RECOVERY REBATES

Amount of Rebate
* $600 ($1,200 for joint returns), or
* Net income tax liability, if lower, but not less than $300 ($600 for joint returns)
* Rebate increased by $300 for each qualifying child (generally, a child that qualifies for the child tax credit)
* Fully refundable

Eligible Individuals:
* Must have either
(1) Qualifying Income of at least $3,000 - Qualifying income is defined as earned income, social security benefits and/or disability benefits paid to veterans and surviving spouses, or
(2) Net income tax liability of at least $1 and gross income that is more than the applicable standard deduction + 1 exemption amount (2 exemptions for MFJ) - Generally, net income tax liability is the regular tax + AMT (if any) less allowable credits other than the child tax credit and refundable credits, such as EIC
* Does not apply to nonresident aliens, individuals who could be claimed as dependents, individuals who do not have valid SSNs, and estates and trusts.

Phaseout:
* Reduced by 5% of AGI over $75,000 ($150,000 for joint returns)
* Thus for taxpayers without children, maximum rebate is fully phased out at $87,000 ($174,000 for joint returns)

Timing and reconciliation:
* Generally, based on 2007 return
* Checks ASAP; no later than 12/31/08 (expected to start in May)
* Actual credit to be calculated on 2008 return
* Taxpayer will receive any additional credit due
* Excess credit will not have to be repaid

BUSINESS PROVSIONS
* Section 179 deduction increased to $250,000 (phaseout to start at $800,000) for 2008
* 2008 amounts would have been $128,000 and $510,000 respectively
* 50% bonus depreciation for property placed in service in 2008
* Both provisions apply to 2008 only

Heavy News Week Wraps Up January: Week in Review, Jan 2

... but I worked hard to keep the Summary short!

Housing Facts from CAR (1/31):
• Interest rates continue to remain near their historic lows. The fixed-rate mortgage was 6.10 percent in December, below November’s 6.21 percent, and slightly lower than 6.14 percent from December 2006.
• December’s fixed-rate was at its lowest level in the past five months, having peaked in July 2007 at 6.7 percent.
• Month-to-month sales increased for the second month in a row, rising 4.7 percent in December compared with November.
• The time a home remained on the market prior to selling improved to 67.2 days in December compared to 72.1 days for the same period a year ago.
• In December, it would have taken 14.5 months to sell all the homes on the market at the current sales rate, an improvement compared with November, when it would have taken 15.4 months.
• Although seasonally adjusted sales fell 33.4 percent year to year in December 2007 compared with 2006, they were above the 300,000-unit level for the first time since August 2007.

Fed Cuts Interest Rates by 1/2-point. This is in addition to a 3/4-point cut last week. Can you believe that interest rates went down 1.25% in less than a week? (Washington Post, via CAR 1/31, 1/30; CNN, 1/30)

Mortgage Interest Rates Rise this week, ending 5-week decent, but still well below historical averages, per Freddie Mac. If you read last week’s blog, you would have expected this. (CNNMoney, 1/31)

FBI Probes 14 Companies in Subprime mess. New York Attorney General and the SEC also conducting probes. WSJ names UBS and Merrill Lynch as being under New York’s and SEC’s scrutiny. (MSNBC, 1/30; CNBC, 1/30; Reuters, 1/30; and Washington Post, 1/30)

House passes $146 billion economic stimulus package on Tuesday, January 29. It includes a provision increasing conforming loan limits. As mentioned in last week’s blog, it would help people who got homes between $417k and $729k to get up to possibly 1% lower interest rates by moving from a Jumbo Mortgage to a conventional one. Senate Finance Committee is to vote this Wednesday, February 6 on its version. This stimulus plan is expected to spark the housing market. (CAR, 1/30; CNNMoney, 1/25 and 1/29;.NY Times, 1/30)

Foreclosure Bill Rejected in CA Senate by 1 vote. (LA Times, 1/30)

New $20 billion subprime bailout being proposed in the U.S. Senate. Senator Chris Dodd proposes setting up a fund that would buy defaulting subprime mortgages and restructure loans for borrowers. (CNNMoney, 2/3)

Housing Slump gives rise to Repo Tours. NBC’s Michael Okwu reports potiental buyers can take bus tours of repossessed homes. (MSNBC, 2/3)

UCLA’s Anderson Forecast Center still says no recession. GDP for the 4th quarter showed a growth of a measly 0.6%. (KNX-AM, 2/3)

Home Sales decreased 33.4% in December in California compared with the same period a year ago, while median price of an existing home fell 16.5%. (CAR, 1/29)

Sales of New Homes down 26.4% for the year, down 4.7% for December, per U.S. Commerce Department, and down 40.7% year-over-year. Dr. Lawrence Yun of the National Association of REALTORS says that this is a proper adjustment that is needed and is positive. Existing home sales will pick up. (KNX-AM, 1/28; AP, 1/28; CAR 1/30)

Riverside and SB counties’ foreclosure rates among the worst in the U.S. (Riverside Press-Enterprise, 1/29)

Home ownership plunges 1.1%. U.S. Census Bureau reports homeowners accounted for 67.8% of occupied homes in the 4th quarter, down 1.1 points from the prior year and the largest year-over-year decline on record (CNNMoney, 1/29)

Construction Spending Drops by record 2.6%, driven by 18.3% drop in residential projects by private companies, per U.S. Commerce Department (CNNMoney, 2/3)

Most Middle Class Still Cannot Buy Home. Prices have fallen but not by enough to make it possible for nurses, fireman or teachers to buy homes of their own. (CNNMoney, 1/30)

Beazer closes mortgage division and promotes Countrywide as preferred lender. (CNNMoney 2/3)


Sources: Associated Press, MSNBC, CNBC, CNNMoney, Reuters, Washington Post, Wall Street Journal,California Association of REALTORS, National Association of REALTORS, CNN Money, Riverside Press-Enterprise, Los Angeles Times, KNX-AM.

Surprise Fed Cut fuels increase in mortgage apps: Week In Review, Jan. 20-27

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

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.

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

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

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.

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)

Sources: M. Lush, KNX-AM, California Association of REALTORS (CAR), Associated Press, Mortgage Bankers Association, RealtyTrac, Reuters, Bloomberg, DQNews.com, Fresno Bee, Los Angeles Times, Riverside Press-Enterprise.

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.

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

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.