Financial Weekly Market Update – December 22, 2010

Report by Gina Kemsley – Loan Consultant, Terra Mortgage Banking

 www.terramortgagebanking.com/loan-officers/gina-kemsley

LAST WEEK IN REVIEW

“All good things must come to an end…” or so the popular saying goes. And right now, many people are wondering if this sentiment holds true for the historic low rates we’ve seen this year. Here’s what last week’s news suggests.

First, it’s important to understand that home loan rates are based on Mortgage Backed Securities, which is a type of Bond. Bonds typically help provide some built in “assistance” when the nation is suffering economic headwinds. For example, negative economic news serves to help Bond prices improve and rates decline, including home loan rates. This is helpful to have when the economy is struggling, as buyers of all products – including homes – need the extra incentive of low rates to be encouraged to buy.

But now, the sharply higher expectations for future economic growth has caused rates to climb – particularly including home loan rates, since the Fed announced its second round of “Quantitative Easing” or QE2 on November 3rd. With QE2, the Fed will purchase $600 Billion in Treasury Securities through mid-2011 to keep our economic recovery on track.

But is there any likelihood rates can rebound? Many experts expect that home loan rates will continue to move higher over time because:

  • At its meeting last week, the Fed left the door open for further QE programs if our economic recovery requires which, like QE2, could hurt Bonds and home loan rates.
  • Congress passed the $858 Billion Tax Cut Bill, and while this is a good economic stimulus, in the short run it adds to the ever-growing deficit – also bad for Bonds and home loan rates.
  • Last week’s Producer Price Index and Consumer Price Index Reports showed that the Fed appears to be on track with their goal of stimulating a bit more inflation. Inflation erodes the value of the fixed return provided by a Bond, which causes home loan rates to rise.

It’s important to understand that rates don’t simply rise in a straight line. In fact, Bonds and home loan rates did have a late-week rally last week, and that trend of rates worsening with improving dips here and there like we saw last week may be what’s in store for us in the weeks and months ahead. At the end of the day, the ongoing and potential addition of further stimulus from the Fed, combined with the stimulus from the tax cuts, will make it tough for Bonds and home loan rates to return to the levels seen earlier this year.

But the good news is that home loan rates are still extremely attractive right now. If you have been thinking about purchasing or refinancing a home, call or email me now to get started. Or forward this post on to someone you know who may benefit from today’s historically low rates.

 

 

FORECAST FOR THE WEEK

It will be a holiday shortened week, with the Bond Market closing at 2:00pm ET Thursday and both the Stock and Bond Markets closed Friday in honor of the Christmas holiday. But there will be plenty of action first, including:

  • A double dose of housing news with Wednesday’s Existing Home Sales Report and Thursday’s New Home Sales Report.
  • Wednesday also brings a read on the economy with the Gross Domestic Product Report, which is the broadest measure of economic activity.
  • Big inflation news comes on Thursday with the Personal Consumption Expenditure (PCE) Index, which is the Fed’s favorite gauge of inflation, plus there’s also the Personal Income and Personal Spending Reports, which give us some information on the consumer perspective of the economy.
  • Thursday’s Initial and Continuing Jobless Claims Reports will also tell us if the good trend continues – last week’s Initial Claims was the second lowest number seen during 2010, and also the third decline in four weeks.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Bonds and home loan rates rallied at the end of last week. Now would be a great time to call or email me if you have any questions about your situation!

Economic Calendar for the Week of December 20-24, 2010

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Date ET Economic Report For Estimate Actual Prior Impact
Wed. December 22 08:30 Gross Domestic Product (GDP) Q3 2.7% 2.6% 2.5% Moderate
Wed. December 22 08:30 Auto Sales Q3 2.3% 2.1% 2.3% Moderate
Wed. December 22 08:30 Existing Home Sales Nov 4.65M 4.68M 4.43M Moderate
Thu. December 23 08:30 Jobless Claims (Initial) 12/18 424K   420K Moderate
Thu. December 23 08:30 Personal Consumption Expenditures and Core PCE Nov NA   0.9% HIGH
Thu. December 23 08:30 Personal Consumption Expenditures and Core PCE Nov 0.1%   0.0% HIGH
Thu. December 23 08:30 Personal Spending Nov 0.5%   0.4% Moderate
Thu. December 23 08:30 Personal Income Nov 0.2%   0.5% Moderate
Thu. December 23 10:00 Consumer Sentiment Index (UoM) Dec 75.0   74.2 Moderate
Thu. December 23 10:00 New Home Sales Nov 303K   283K Moderate

 


Would Your Kitchen Pass A Health Inspection?

Americans spend a lot of time cooking and eating in their kitchens. What are you doing to keep yours germ- and bacteria-free?

In this two-part, 6-minute video from NBC’s The Today Show, you’ll first ride alongside a county health inspector as he visits a home and inspects its kitchen. The tested areas include the refrigerator, the cutting boards, the sponges, the utensils, the ovens, and more. Ultimately, the home “passes”, but not before the inspector points out some problems from which we all can learn.

Then, in the video’s second part, you’ll learn how to keep your own kitchen clean and healthy.

  • How much bleach to dilute to clean sinks, and how often to clean them
  • Why “time-to-evaporate” is an important metric when shopping for disinfectants
  • Comparing wood vs. glass vs. plastic cutting boards, and how to sanitize them, respectively

Keeping a germ-free kitchen requires constant attention and a routine cleaning schedule. Thankfully, it’s a simple process. Follow the basic steps as outlined by The Today Show, and your home would pass inspection.

 

About the author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi.  I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789.  I specialize in residential real estate in beautiful Marin County, just north of the Golden Gate Bridge.

 

I am here to help you make the smartest real estate move and build wealth, providing you with reliable real estate information and advice you can trust.

 

My knowledge and passion for Marin County are equaled by my commitment to helping you successfully navigate the process of buying and selling a home.  My business model enables me to provide superior service and a better client experience.  I know the neighborhoods, the schools, the amenities; I know where you want to live.  I know and love Marin County! 

 


Marin County Real Estate Market Report for November 2010

  

The big picture – National vs. Bay Area vs. Marin Real Estate Markets: 

National Real Estate Home Prices: You may have recently read the headline “Home Prices decline for 3 months in a row. “  According to an index maintained by mortgage data aggregator CoreLogic, October home prices fell for the third straight month, decreasing by 3.93 percent year-over-year.  The CoreLogic National Home Price Index has declined by 30.2 percent from its April 2006 peak and by 20.9 from the peak excluding distressed sales.  

According to Inman News, “[C]ontinued home-price weakness reflects the lingering impact of the artificial support provided by homebuyer tax credits in the spring, and their subsequent withdrawal…  Stubbornly high unemployment and seasonal factors are also coming into play.”  

Bay Area Real Estate Home Prices: Locally, the Bay Area median sale price dropped for the second month mostly because on average fewer higher priced homes are selling and in some markets 50% or more of the inventory is made up of distressed properties. The median price is the point at which half the homes sell for more and half sell for less. Fewer expensive homes are selling due to difficulties in obtaining jumbo financing. 

According Marin IJ’s Will Jason, “Bay Area-wide single-family home sales dropped 7.5 percent year to year in November to 4,533 and the median sale price remained nearly flat at $400,000.  Marin’s median sale price [, $772,000] remained the region’s highest, coming in 10.3 percent higher than San Francisco’s price of $700,000, which was the second-highest.” 

Interestingly Trulia, a top real estate site, has identified San Francisco as the best American city in which to invest your real estate dollars in 2011.  The 10 cities were selected by Trulia’s analysts as best positioned to thrive in 2011 on the basis of the site’s data.  San Francisco ranked first on the list before Austin, TX, Madison, WI, Raleigh-Durham, NC, San Antonio, TX, Oklahoma City, OK, Des Moines, IA, Salt Lake City, UT, Fort Collins, CO and last, Omaha, NE.  San Francisco’s low unemployment rate—9.7% vs. the California jobless rate of 12%–  is one of the reasons San Francisco tops the list. 

Marin County Real Estate Prices: Unlike the national and Bay Area home prices, Marin County home prices rose in November, rising 11.2 percent year-over-year to $772,000.  

A closer look at the numbers for each Marin community tells the specific story for that particular micro market and illustrates that sometimes we have too few sales to really be able to ascertain the market trend in a particular area of Marin.  Two cases in point are Belvedere and Larkspur where prices have not gone up or come down, respectively,  by over 50% since last year. Price per square foot is usually a more accurate way to track market trends when there are only a handful of sales.  

NOVEMBER SALES ACTIVITY – Single Family Homes

  Prices

  Unit

      Change from last year

 
  Median

Price/sq.ft.

Sales

DOM

SP/OLP

SP/LP

Median

Price/sq.ft.

Sales

Marin

$820,000

$494.70

146

99

89.20%

95.00%

16.80%

9.00%

-9.30%

Sausalito

$1,600,000

$691.22

7

104

91.10%

95.90%

23.10%

-15.00%

133.30%

Belvedere

$3,462,500

$1,014.69

4

163

88.80%

93.90%

57.40%

22.00%

33.30%

Tiburon

$2,100,000

$765.77

11

96

85.50%

91.20%

0.00%

26.00%

266.70%

Mill Valley

$1,270,000

$574.62

25

93

88.00%

96.40%

2.40%

4.00%

8.70%

Corte Madera

$752,450

$512.55

6

80

92.90%

98.20%

-12.80%

-7.00%

-25.00%

Larkspur

$900,000

$590.55

5

90

89.10%

94.10%

-52.60%

2.00%

150.00%

Greenbrae

$0

  0

0

0.00%

0.00%

n/a

  -400%

Kentfield

$1,928,563

$649.54

4

114

89.50%

96.50%

21.30%

9.00%

0.00%

Ross

$1,375,000

$615.07

3

126

87.70%

95.80%

-50.80%

-14.00%

50.00%

San Anselmo

$1,123,500

$459.63

10

86

92.80%

96.10%

39.60%

-3.00%

-33.30%

Fairfax

$714,000

$392.33

7

102

91.00%

97.00%

24.20%

-13.00%

0.00%

San Rafael

$665,000

$358.98

32

89

91.10%

96.50%

5.40%

-11.00%

-30.40%

Novato

$576,000

$281.19

20

109

90.30%

95.00%

0.30%

-10.00%

-44.40%

  

*SP = Sales Price – OLP = Original List Price – LP= List Price 

Overall, a closer look at Marin County numbers shows that home values have not actually gone up, but rather that more higher-priced homes are selling in Marin, bringing up the median price, as shown in the following graph:  

MARIN COUNTY HOME SALES (in $1,000’s)

  Nov-09

% Total

Nov-10

% Total

0-$999

163

76.53%

133

69.63%

$1,000-$1,999

36

16.90%

40

20.94%

$2,000 & up

14

6.57%

18

9.42%

Total

213

100.00%

191

100.00%

 

 This reflects a steady trend throughout the year of increased activity in the over one million price range and a more timid surge in activity in the over 2 million range.  As more homeowners feel comfortable selling to trade up and take advantage of today’s discounted prices, we should see even more activity in the middle priced part ($1-2 million) and the upper priced part of the market ($2 million and up.)  

Victorian Home in Larkspur, CA

While Marin real estate prices went up, sales of Marin single family homes overall declined in November for the second straight month, falling 14.1 percent compared to the same month last year.  This is due to the fact that many sellers are waiting to sell until prices go up again. 

As inventory is relatively low, demand is building up and at some point the market will kick back into gear.  I have noticed an increasing number of San Francisco buyers (mostly renters and first time home buyers) attending open houses in the past few months.  Attracted by the highest affordability in years in the Marin market and our excellent public schools, many San Francisco young families with school age children are crossing the bridge to look for their dream home, and many are buying their first home on our shores. 

Generally however, my experience working with buyers has been that they are very selective; buying only when they feel they have found the perfect house.  Many do not feel any need to compromise because they believe time is on their side, arguing that the market has not bottomed out yet and interest rates are going to stay at their historically low levels for some time to come.  Others are worried about the economy, afraid they might lose their job and uneasy to make such an important financial and emotional commitment.  And yet others have unreasonable expectations, having been misled by the media and various websites promising totally unrealistic “deals.”  One client called me last year after having seen a Mill Valley foreclosure on a website supposedly for sale for $16,000! 

So where is the market heading? I do not have a crystal ball; neither does anyone else as far as I am concerned.  What I do see is that consumer confidence has increased to a six month high in December, growth in retail sales in November was twice the consensus forecast and industrial production showed the biggest gain since July. But it will take time for the trend to spread to the housing market.   While consumers have started spending more on “luxury” items such as women’s wear and jewelry, and automobiles, buying a home requires a much larger leap of faith.    

The increased consumer confidence and spending, and the extension of Bush-era tax cuts, are boosting growth prospects which will likely result in increased hiring.  And there we have it: job creation is the most important factor that will drive a recovery in the residential real estate market.   

Signs of Growth lead to increased interest rates: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. What will happen as the economy continues recovering is that rates on fixed rate mortgages will continue rising, as they have for the 5th week in a row.  While they are still near historic lows, there are indications that those unbelievably low home loan rates may be behind us.   

Short sales and Foreclosures: I cannot conclude my monthly report without addressing the issue of distressed properties—short sales and foreclosures which is closely connected to job creation and economic recovery.    

On a national basis, about 22.5 percent of homeowners with mortgages had negative equity in the third quarter of 2010, meaning that they owe more on their mortgage than their house is worth.  “Negative equity is a primary factor holding back the housing market and broader economy,” according to CoreLogic Chief Economist Mark Fleming.  The catch now is that as negative equity is declining slowly, price declines (due to foreclosures and short sales) are accelerating in certain areas, putting a stop or reversing the recent improvement in negative equity.  

In Marin County, distressed sales still represent a significant share, accounting for 25.7 percent of total sales for the month of November, up slightly from 24.9 percent in November 2009.  

Distressed properties continue to affect values in neighborhoods, putting downward pressure on the prices of nearby homes.  They continue to attract investors and buyers willing to buy properties in less than desirable condition as underwater homeowners behave more like renters, failing to maintain their properties because they have no stake in them.  

While omnipresent in all of Marin, including in the most posh communities, distressed properties remain concentrated in northern Marin and particularly in Novato, where 37.2 percent of Marin’s distressed properties are on the market and 55 percent of all current listings are distressed.  

Stay tuned for my yearend report next month. 

In the meantime, feel free to contact me with any questions or comments about Marin County’s real estate trends. 

Happy holidays to you and your close ones. 

I welcome calls and text messages at 415-505-4789 and emails at Sylvie@YourPieceofMarin.com.


Financial Weekly Market Update – December 15, 2010

Report courtesy of Gina Kemsley, Loan Consultant – Terra Mortgage Banking

www.terramortgagebanking.com/loan-officers/gina-kemsley

THIS WEEK’S MORTGAGE RATES:

Click on this  link for this week’s Weekly Rates 12-13- 10.

LAST WEEK IN REVIEW

“Where do we go from here?” That question from Alicia Keys’ song is on the minds of many Americans, as they wonder where home loan rates are headed after the recent negative news for Bonds.

Last week, Congress was busy at work on negotiations to extend the Bush-era tax cuts. That news kept a lid on any improvement for Bonds and home loan rates, due to the prospect of an ever-increasing deficit.

And adding to the troubles for Bonds and home loan rates last week was news that inflation is growing in China… and growing fast. How does that impact us? Remember, it’s a global economy, so Bond prices all over the world worsen on news of inflation, which is bad for home loan rates.

So the big question is: Will home loan rates go back down?

Although rates are still near historic lows, they have been headed up… and indications are that those unbelievably low home loan rates may be behind us. In fact, there are only a few things that would bring back the lows that we saw in early November:

  • If the tax cut package doesn’t get passed, it would be very bad news for the economy and Stock market – but it would help interest rates.
  • If the Fed’s recent round of Quantitative Easing falls on its face and doesn’t meet its mission of creating inflation, boosting Stock prices, lowering unemployment and creating consumer demand – Bond prices could make some gains as the threat of deflation reemerges. But this is a long shot.
  • If the financial problems in Europe worsen significantly – which would drive investors into the safe haven of the US Bond market – it could help Bond prices, but probably only modestly.

Realistically, the chances of these events happening are unlikely – and in the end, rates may see some brief and fleeting improvements, but many experts believe they will likely continue to creep up over time. And when you include the stimulative action of extending the present tax rates and adding further cuts, it’s tough to see Bonds or home loan rates improving much.

The good news is that home loan rates are still extremely attractive and are still near historic lows for now. If you or someone you know has been thinking about purchasing or refinancing a home, NOW is the time to call or email to get started.

FORECAST FOR THE WEEK

Get ready for a busy week of economic reports and news that could impact home loan rates!

  • We’ll start off Tuesday morning with the Retail Sales report for November, as well as the Fed’s final FOMC Meeting and Policy Statement of the year.
  • We’ll also see new inflation reports starting on Tuesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. The very next day, we’ll see the Consumer Price Index (CPI) with a look at inflation on the consumer level. With all of the recent talk over inflation concerns in the future, it will be important to see what these reports reveal – since inflation is the archenemy of Bonds and home loan rates.
  • We’ll also get a dose of manufacturing news in the Empire State Index, which looks at New York State’s manufacturing sector, and is a good gauge of manufacturing overall. On Thursday, we’ll also see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the US.
  • Thursday brings the Initial and Continuing Jobless Claims Report. Last week, Initial Jobless Claims came in at 421,000, which was below expectations. That was encouraging news, but we still need to see consistent readings below 400,000 before real confidence in the labor market can take hold.
  • Finally, we’ll see more housing news this week, when reports on Housing Starts and Building Permits in November are released on Thursday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Fortunately, there’s still time to lock in at near historic lows. It only takes a few minutes to see if this makes sense for you, or one of your friends, family members, neighbors, clients or coworkers. Call or email today, and I’ll be happy to help right away.

 Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of December 13 – December 17

 
Date ET Economic Report For Estimate Actual Prior Impact
Tue. December 14 08:30 Producer Price Index (PPI) Nov 0.5% 0.8% 0.4% Moderate
Tue. December 14 08:30 Core Producer Price Index (PPI) Nov 0.2% 0.3% -0.6% Moderate
Tue. December 14 08:30 Retail Sales Nov 0.8% 0.8% 1.7% HIGH
Tue. December 14 08:30 Retail Sales ex-auto Nov 0.6% 1.2% 0.8% HIGH
Tue. December 14 02:15 FOMC Meeting 12/14 Unch   0.25% HIGH
Wed. December 15 08:30 Empire State Index Dec 3.0   -11.14 Moderate
Wed. December 15 08:30 Core Consumer Price Index (CPI) Nov 0.1%   0.0% HIGH
Wed. December 15 08:30 Consumer Price Index (CPI) Nov 0.2%   0.2% HIGH
Wed. December 15 09:15 Industrial Production Nov 0.3%   0.0% Moderate
Wed. December 15 09:15 Capacity Utilization Nov 75.0%   74.8% Moderate
Thu. December 16 08:30 Jobless Claims (Initial) 12/11 425K   421K Moderate
Thu. December 16 08:30 Housing Starts Nov 545K   519K Moderate
Thu. December 16 08:30 Building Permits Nov 558K   550K Moderate
Thu. December 16 10:00 Philadelphia Fed Index Dec 12.5   22.5 Moderate
Thu. December 16 10:00 Index of Leading Econ Ind (LEI) Nov 1.2%   0.5% Low

Simple Real Estate Definitions : Loan-Level Pricing Adjustments

Loan-level pricing adjustments add to mortgage costsLoan-level pricing adjustments are mandatory loan fees based on a borrower’s specific default risk.

First introduced in 2008, LLPAs were Fannie Mae’s and Freddie Mac’s logical response to massive balance sheet losses. At the time, the housing market was deteriorating and mortgage delinquencies were rising.

To “better align with loan risk characteristics”, the two entities created specific fees to be associated to specific loan traits, to be charged to all borrowers.

LLPAs are still in existence today.

Today’s loan-level pricing adjustments can be grouped into 5 basic categories. Application exhibiting any of the 5 traits can trigger LLPAs, adding to a borrower’s loan fees:

  1. Credit Score (i.e. the borrower’s FICO is below 740)
  2. Property Type (i.e. the subject property is multi-unit)
  3. Occupancy (i.e. the subject property is an investment home)
  4. Structure (i.e. there is a subordinate/junior lien on title)
  5. Equity (i.e. mortgage insurance is required by the lender)

In many respects, loan-level pricing adjustments are similar to auto insurance. All things equal, the driver of a “fast” car will pay higher costs than the driver of a “safe” car.  The same is true for mortgages.

Loan-level pricing adjustments are public information. Fannie Mae publishes the complete LLPA matrix on its website. The chart can be confusing, however. If you have questions about how LLPAs work, talk with your loan officer.

Corte Madera Bike Path

 

About the author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi.  I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789.  I specialize in residential real estate in beautiful Marin County, just north of the Golden Gate Bridge.

 

I am here to help you make the smartest real estate move and build wealth, providing you with reliable real estate information and advice you can trust.

 

My knowledge and passion for Marin County are equaled by my commitment to helping you successfully navigate the process of buying and selling a home.  My business model enables me to provide superior service and a better client experience.  I know the neighborhoods, the schools, the amenities; I know where you want to live.  I know and love Marin County! 

 


How To Install Motion-Detector Lighting On Your Home

Activated by infrared waves, motion-detector lighting can illuminate a dark driveway, a dark sidewalk, and a dark yard, thwarting would-be thieves while also giving homeowners a lit, safe path to their own front or back door.

If your home is not already equipped with such lighting, this video from Lowe’s will be helpful. It’s a step-by-step tutorial on how to install motion-detector lighting on your home.

The basic steps are as follows:

  1. Cut the power at the circuit breaker
  2. If applicable, remove the existing light fixture
  3. Install the mounting strap
  4. Connect the junction box wires to the light fixture wires
  5. Mount the fixture to the mounting strap

Lowe’s marks the skill level to complete the job as “intermediate.”  So, if you don’t want to tackle the job yourself, or if the idea of working with electricity frightens you, reach out to a handyman.

Motion-detector lights sell for as little as $25.

Egret in Mill Valley, CA

_________________________________________________________________________

About the author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi.  I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789.  I help people move in and out of Marin County, just north of the Golden Gate Bridge.

I am here to help you make the smartest real estate move and build wealth, providing you with reliable real estate information and advice you can trust.

My knowledge and passion for Marin County are equaled by my commitment to helping you successfully navigate the process of buying and selling a home.  My business model enables me to provide superior service and a better client experience.  I know the neighborhoods, the schools, the amenities; I know where you want to live.  I know and love Marin County! 

I service the following towns in Marin County: Sausalito, Tiburon, Belvedere, Mill Valley, Corte Madera, Larkspur, Greenbrae, Kentfield,  Ross, San Anselmo, San Rafael, Fairfax, and Novato.