Monday, December 04, 2006

An Inverted Yield Curve

The U.S. economy, interest rates, and the housing market are frequent topics on the nightly news. Viewers are told about leading economic indicators, how the stock market has performed, and whether the Federal Reserve is planning on changing interest rates. What isn't explained is how these items are interrelated and how they may impact which home loan is best for you.

The Federal Reserve attempts to keep the U.S. economy healthy through its use of monetary policy. As fears of inflation increase, the Fed will raise certain short-term interest rates such as the federal funds rate, which is the interest rate banks pay each other for overnight loans. Such an increase causes a ripple effect, with banks raising their prime lending rate. This, in turn, causes an increase in Adjustable Rate Mortgage (ARM) rates and the indices they're tied to, such as the 12-Month Treasury Average (MTA), the 11th District Cost of Funds Index (COFI), and the 1-Month London Inter Bank Offering Rates (LIBOR).

Under normal circumstances, long-term interest rates would also increase even though they are determined by market trading of bonds and mortgage-backed securities rather than monetary policy. However, in certain instances, the market responds in an unexpected manner.

Long-term interest rates are driven by a desire to place money in a steady vehicle that will provide a decent rate of return. When the stock market is underperforming, many corporate and individual investors will sell stocks, and invest their money in bonds. Typically, the longer the holding period of a bond, the higher the yield it will offer. This makes sense because the longer an investor's money is tied up in that investment, the more they should receive for it. However, when there is an increased demand for bonds, the law of supply and demand comes into play. As the demand for bonds increases, the need to attract investors decreases, so the yield offered on those bonds declines.

When the Federal Reserve pursues an aggressive policy and raises short-term interest rates repeatedly over an extended period, and the bond and mortgage-backed securities markets are booming so their yields are lower, an unusual situation arises. Short-term interest rates are high while long-term interest rates remain lower. This leads to a shift in the usual yield-versus-term paradigm, known as an inverted yield curve.

Wednesday, November 29, 2006

Conforming Loan Limit to Stay the Same in 2007

The maximum conforming loan limit will remain $417,000 for most homes that sell in 2007 because the average home price in October 2006 was lower than the average price in 2005, the Office of Federal Housing Enterprise Oversight says.
OFHEO sets this limit annually, capping the amount that government-chartered secondary mortgage market companies Fannie Mae and Freddie Mac can buy or guarantee. Generally, conforming rates are lower than “jumbo” loan rates that exceed the limit.
Alaska, Hawaii, Guam, and the U.S. Virgin Islands are recognized by OFHEO as ‘high-cost’ areas and the limits in parts of those states are higher.

Tuesday, November 07, 2006

Negative Media?

The National Association of Home Builders has begun to offer a new PR kit for members to help pump up sales. The need for such an effort is obvious. As NAHB explains, the kit "provides a starting point for public relations campaigns to galvanize prospective home buyers who have been discouraged by negative reports in the media to go out and see for themselves the range of opportunities that have opened up in today's slower marketplace."

Yes folks, the reason more buyers are not snapping up homes is because of those negative, gloomy news reports. Real wages don't count, affordability is not important and reduced speculation is not a factor. It's the damned media.


It seems to me that the past few years have been pretty good for real estate. Existing home prices rose from $139,000 in 2000 to $220,000 this September, according to the National Association of Realtors. If it's true that negative news reports are causing the downturn of 2006, is it not equally true that "positive" news reports must have been the sole and only cause of the booming real estate market seen during the past five years? If yes, shouldn't reporters and columnists get free houses or something for their good work? Where are the keys to my new home from a grateful constituency?

Let's say home sales slowed and that reporters and columnists did their part and hid such trends from the public. Does anyone believe the public would not notice that homes in many areas are on the market longer or that prices are stagnating? Can it be the public follows in sheep-like fashion whatever it is that appears in the media? Judging from my email, there are lots of smart readers ready to discuss and debate just about any topic, often with great insight, wit and knowledge.

There are any number of reasons why the real estate market has slowed, none of them having to do with the musing of a few real estate writers.

"A faster-than-anticipated decline in housing following its unsustainable boom during the past three years has become a major drag on U.S. economic growth," said David Seiders, NAHB's chief economist, "and it is likely to subtract about a full percentage point from the Gross Domestic Product during the second half of this year and half that amount during the opening quarter of 2007."

Imagine that! The boom has been unsustainable according to NAHB's own chief economist. Now this is a piece of news that should be kept from the public.
Here's another one: "Recent declines in mortgage interest rates and energy prices have buoyed consumer attitudes and home buyer demand," Seiders said a few days ago. "Surveys of consumer sentiment show that increasing numbers of households view this as a good time to buy homes."

Is the evil media to blame for the growing number of households who believe this is a good time to buy homes? How did such buy-now attitudes evolve in the face of ongoing negative press reports?

Could it be that the public simply wants a better deal from new home builders? What would happen if home prices were cut? Here's what:
"More than three out of four builders are offering substantial sales incentives to move their product and limit cancellations, and this aggressive strategy is working -- making this an opportune time for home buyers to enter the market," said NAHB President David Pressly, a home builder from Statesville, N.C. "The market correction appears to be approaching the bottom in terms of sales volume, and we expect the supply-demand balance to improve considerably before long."

Is it fair to report that when builders lower prices -- whoops -- when builders offer "substantial sales incentives" -- that buyer interest goes up? Doesn't this seem like a fairly-obvious example of cause and effect, supply and demand?

Alternatively, some could believe there IS a cabal of evil real estate reporters and columnists. If so, it might work like this:
A bunch of journalists meet at my place about once every two weeks to set mortgage rates and then decide whether home sales nationwide should rise or fall. We cause such marketplace changes by deciding to produce positive or negative media coverage.
We can also levitate. We each have Swiss bank accounts and we're all members of an ancient cult. We know who will win football championships and horse races months in advance and bet accordingly -- that's how we finance operations, get money for political contributions and control the government.

Perhaps I've said too much ... . No doubt every paranoid blogger will soon be quoting the two paragraphs above as if they were something other than a joke.
Instead of mooing about "negative reports in the media" homebuilders ought to read their own news releases and data. Too many new homes are priced beyond what people are now willing to pay. The result is that unit volume will fall unless prices are reduced, regardless of what scribes and scriveners might write.

If you don't believe it, come to the next meeting. Party with the press. Learn how to levitate ... .
by Peter G. Miller

Monday, October 02, 2006

Pending-home sales rise 4.3% in August- Market may be stabilizing

Market may be stabilizing, realtors group says...

WASHINGTON (MarketWatch) -- Pending sales of U.S. existing homes rose by 4.3% in August, indicating the housing market may be stabilizing, the National Association of Realtors said

Monday. Pending-home sales are down 14.1% in the past year, the real estate industry group said.
"Our sense is that home sales may have reached a low in August," said David Lereah, chief economist for the NAR in a statement.

"With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms," Lereah said.

The pending-sales index rose 9.2% in the West, 4% in the South and 3.6% in the Northeast. The index was flat in the Midwest.

Sales are recorded as "pending" when a sales contract is signed; they are recorded as "sold" when the sale closes, usually one or two months later.

Existing-home sales fell 0.5% in August to a seasonally adjusted annual rate of 6.30 million, the lowest since January 2004. Meanwhile, median sales prices fell 1.7% on a year-on-year basis, the first decline in 11 years. The inventory of unsold homes rose to a 7.5-month supply, the most in 13 years.

In other reports released Monday, the Institute for Supply Management said its manufacturing sentiment index fell to 52.9% in September, the lowest since May 2005, signaling slower growth in the factory sector.

The Commerce Department said construction spending rose 0.3% in August despite a 1.5% drop in spending on housing.
By Rex Nutting, MarketWatch

Friday, September 15, 2006

Appraisals Get Tricky in a Cooling Market

The housing slowdown is making it increasingly difficult for appraisers to use comparable sales data in calculating a home's worth.
Gary Crabtree of Bakersfield, Calif.-based Affiliated Appraisers says he now takes into account pending sales, current list prices, supply and demand, time on the market, price fluctuations, defaults and trustee's sales, incentives, and the market perceptions of real estate agents.

Crabtree says valuations become complicated when real estate practitioners engage in "the re-list game," in which a home that has sat unsold for a long period of time is removed from the multiple listing service and re-listed with a new price and MLS code to make it look like a new listing.

"Just looking at historical data can be perilous," says Appraisal Institute spokesman John Bredemeyer, who explains, "You've got to answer the question: 'Where are we in this cycle?' And you've got to factor that into your valuation."
Source: Baltimore Sun, Ken Harney (09/15/06)

Prevent Foreclosure From Cashing You Out Of Home Ownership

While a growing number of consumers are looking to cash in on the changing real estate market, another group is trying to figure out how to keep from cashing out.

The 115,292 homes nationwide entering some stage of foreclosure in August remains historically low, but the rate of increase in the number is becoming alarming. August foreclosures represented a 24 percent increase from July -- the second highest this year -- foreclosures are up 38 percent for the year so far and 53 percent compared to where they were this time last year.

Blame it on those nasty mortgage IEDs (Improvised Equity Devices) -- high leverage, high risk loans that are easy to come by, but financially explosive as time goes by.
Mortgage IEDs are typically ARMs, in a host of varieties, that typically start off with low rates, but, in this market, continually adjust upward. Along with the higher interest rate, so goes your monthly mortgage payment.

When the loans come with interest-only payment terms, if you only pay the interest and your home value shrinks, your mortgage could become larger than your home's value giving you no room to bail out without coming up with the cash to cover the difference.
"With home price appreciation continuing to decelerate and billions of dollars in adjustable rate mortgages projected to reset in the next few months, this month's increase could be the beginning of an upward shift in the foreclosures market," said James J. Saccacio, chief executive officer of RealtyTrac.

In August, states with both greater statistically significant numbers of homes entering foreclosure and high rates of increases in those numbers, included Colorado, Nevada and Florida.

Colorado foreclosure activity spiked nearly 60 percent in August from the previous month and the state documented the nation's highest state foreclosure rate for the sixth month in a row, with one new foreclosure filing for every 301 households. The state reported 6,079 properties entering some stage of foreclosure during the month, more than twice the number reported in August 2005 and the seventh highest number reported by any state.

With one new foreclosure filing for every 430 households, Nevada posted the nation's second highest state foreclosure rate for the third straight month, due largely to bad bets on housing made in and around Las Vegas. The state reported 2,016 properties entering some stage of foreclosure, a 24 percent increase from the previous month and more than three times the number reported in August 2005.

Once crawling with speculators who are now abandoning the Sunshine State, Florida saw foreclosure activity jump to its highest level of the year so far, with 16,533 properties entering some stage of foreclosure in August -- the most of any state and an increase of more than 50 percent from the previous month. The state's foreclosure rate of one new foreclosure filing for every 442 households ranked as the nation's third highest state foreclosure rate.
Five states, Florida, Texas, California, Ohio and Illinois accounted for 50 percent of the nation's foreclosure activity in August.

What should you do if you face the possibility of a late mortgage payment for the first time and want to avoid foreclosure?
Swallow your pride.

A head-in-the-sand approach will leave what's likely your No. 1 asset exposed to foreclosure. Contact the lender and discuss what you can do. Your goal should be to stop any lender action that could damage your credit and ultimately cost you your home and prevent you from owning another one in the immediate future.

A Freddie Mac/Roper survey found that 75 percent of delinquent borrowers recall being contacted by their mortgage servicer -- the company (the lender or the lender's agent) that collects mortgage payments, but 68 percent of them never call back.
Given most lenders take months before moving to foreclose, you have ample time to seek some kind of work out.

Once you make contact with your lender or servicer in a return call or a call you initiated, stay in touch with that contact until you are current. Document your contacts in writing so you and the lender have a documented record of your efforts.

If possible, consider restructuring or refinancing your loan -- but not to borrow more money. If you are saddled with two mortgages, do the math to determine if consolidating them will help. Likewise consolidate non-mortgage debts. Also consider extending a 15 year mortgage to 30 years or a 30 year mortgage to 40 years or longer. Examine how any restructured debt will play out if your situation worsens or improves. In each case, determine if restructuring is your best move, preferably before you miss a payment and damage your chances of landing a new loan.
Watch out for scams. When you are down on your dollars you are most vulnerable to debt-removal come-ons. You likely didn't get in over your head over night. Don't expect a quick fix.
Get financial counseling. Certified (by state and federal agencies and recognized trade groups) consumer credit counseling services are often free or offered for only a nominal fee. They will teach you your rights and work with you and your creditors, say, to temporarily reduce payments or otherwise work out a payment plan that will keep you housed and your credit relatively intact.

Know your rights. If you are in the military, you have special relief under the Soldiers and Sailors Civil Relief Act to stop the foreclosure and you may be eligible for a reduction in the interest rate. Similar relief is available to those affected by hurricanes, earthquakes and other natural disasters.

Procedural errors in the lender's foreclosure effort or lender errors when you acquired the loan could permit you to file a lawsuit to enjoin or stop the procedure.

If all else fails, bankruptcy is an option that can stop foreclosure, at least temporarily, and give you some leverage to resolve the foreclosure. Today's bankruptcy law also forces you into counseling. That's a good thing.

Selling the property is another end-game option. Consider selling the property out right as quickly as possible or deeding it to the lender in exchange for ending the foreclosure and minimizing the negative comments on your credit report.
Published: September 15, 2006

Thursday, September 07, 2006

Realtors expect home prices to fall

WASHINGTON (MarketWatch) - U.S. home prices will probably fall temporarily as the housing market corrects, the National Association of Realtors said Thursday.

Prices should bounce higher in a few months, said David Lereah, chief economist for the real estate group "as the market works through a build in housing inventory."

Median existing-home sales prices should rise about 2.8% this year and 2.2% next year, the realtors said in their monthly economic outlook. Median new-home prices are expected to rise 0.2% in 2006 and 2.4% in 2007.

Existing-home prices have risen at an average of 9.6% annually in the past four years. New-home prices rose 13.3% in 2004 and 9% in 2005.

"This year sales are slowing, homes are plentiful and sellers are negotiating," Lereah said. "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."

Lereah said home prices typically appreciate at the rate of inflation, plus one or two percentage points. Buyers who plan to stay in their homes should see those gains, but "people who purchased last year with the intent of flipping are likely to get burned," he said.
Consumer prices excluding shelter costs have risen 4.4% in the past year.

The group is forecasting existing home sales to fall 7.6% in 2006 and a further 1.7% next year. New homes sales are expected to fall 16.1% in 2006 and 7.1% in 2007. Housing starts are projected to fall 9.6% this year and 9.8% next.

The forecasts are slightly below the group's projections from a month ago.

Compared with the group's forecasts at the beginning of the year, the expected declines in existing-home sales and housing starts for 2006 are about twice what was expected, and the expected drop in new-home sales for 2006 is about three times as severe. Rex Nutting is Washington bureau chief of MarketWatch.

Realtors expect home prices to fall

WASHINGTON (MarketWatch) - U.S. home prices will probably fall temporarily as the housing market corrects, the National Association of Realtors said Thursday.
Prices should bounce higher in a few months, said David Lereah, chief economist for the real estate group "as the market works through a build in housing inventory."
Median existing-home sales prices should rise about 2.8% this year and 2.2% next year, the realtors said in their monthly economic outlook. Median new-home prices are expected to rise 0.2% in 2006 and 2.4% in 2007.
Existing-home prices have risen at an average of 9.6% annually in the past four years. New-home prices rose 13.3% in 2004 and 9% in 2005.
"This year sales are slowing, homes are plentiful and sellers are negotiating," Lereah said. "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."
Lereah said home prices typically appreciate at the rate of inflation, plus one or two percentage points. Buyers who plan to stay in their homes should see those gains, but "people who purchased last year with the intent of flipping are likely to get burned," he said.
Consumer prices excluding shelter costs have risen 4.4% in the past year.
The group is forecasting existing home sales to fall 7.6% in 2006 and a further 1.7% next year. New homes sales are expected to fall 16.1% in 2006 and 7.1% in 2007. Housing starts are projected to fall 9.6% this year and 9.8% next.
The forecasts are slightly below the group's projections from a month ago.
Compared with the group's forecasts at the beginning of the year, the expected declines in existing-home sales and housing starts for 2006 are about twice what was expected, and the expected drop in new-home sales for 2006 is about three times as severe. End of Story
Rex Nutting is Washington bureau chief of MarketWatch.

Friday, August 18, 2006

Mortgage Rates Continue String of Declines

Freddie Mac reports a drop in the 30-year fixed mortgage rate to 6.52 percent during the week ended Aug. 17, marking the fourth-straight decline.

Rates are still 72 basis points higher than a year ago. A basis point is 0.01 of a percent.

Five-year hybrid adjustable-rate mortgages, which carry fixed rates for the first 5 years and then float, fell 3 basis points to 6.18 percent. One-year ARMs declined 4 basis points to 5.65 percent.

The 10-year Treasury yield, the benchmark for mortgage rates, has fallen as well due to data that shows moderate inflation and weakness in the economy.

Source: Investor's Business Daily (08/18/06)

Friday, July 28, 2006

Prediction: The Fed is done raising rates

The Fed is done raising rates.
Interest rates appear to have peaked. The 10-yr Treasury closed below the 5% barrier today (July 28th). The Fed funds futures contract is now predicting a pause at the August 8 FOMC meeting.

Monday, July 17, 2006

Federal Real Estate and Mortgage Tax Incentives

What's the mortgage interest deduction worth to the typical homeowner who claims it at tax time? Nearly $10,000 on average, according to a provocative new analysis of federal incentives for homeowners nationwide.

But there are many parts of the country where the "typical" tax deduction for mortgage interest is far bigger, and plenty of others where it is considerably smaller. Take, for example, California's 14th congressional district in and around high-cost Silicon Valley. The average taxpayer there took a whopping $35,000 in mortgage interest deductions during the year covered by the research -- more than six times the average mortgage interest writeoff taken during the same period by residents of Oklahoma ($5,710).

The homeowners of the 14th district took an aggregate $3.2 billion worth of mortgage interest deductions and that total was about the same as all the mortgage interest writeoffs claimed by all the homeowners in seven states -- Alaska, Montana, North and South Dakota, Vermont, West Virginia and Wyoming -- combined.

The new research study by the National Association of Home Builders used the latest available IRS tax data -- tax year 2003 -- and broke deductions down by the state and congressional districts of the taxpayers. The report was prepared in part to demonstrate the size and economic importance of the mortgage interest and real property tax writeoffs to individual congressional representatives.

To illustrate: Confronted with the $3.2 billion writeoffs taken by 14th district constituents in a single year, any savvy congressman would be loath to cut back on the deduction, even to reduce the federal deficit.

In tax year 2006, according to estimates by Congress's joint committee on taxation, homeowners will claim a total of $81 billion in mortgage interest deductions. By 2009, the writeoffs are expected to hit $100 billion a year. The deduction is available on all qualifying principal residences where the mortgage amount does not exceed $1 million and home equity debt does not exceed $100,000. As a practical matter, homeowners can write off interest annually on home mortgage debt totaling $1.1 million.

They can also write off local real property taxes paid on a principal residence during the tax year without limit. In 2006, according to congressional estimates, $15 billion in "local real" will be deducted by homeowners.

The highest property tax deductions, not surprisingly, go to homeowners in high tax areas, especially in the northeastern states. For example, the residents of New York's 3rd congressional district on Long Island, took an average $11,884 in property tax writeoffs during 2003, a total of $1.25 billion for the district. That aggregate writeoff was more than all the property tax deductions taken in 2003 by homeowners in eight states combined -- Wyoming, West Virginia, Hawaii, the District of Columbia, Delaware, South and North Dakota and Arkansas. (For federal tax purposes, the study treated D.C. as the equivalent of a state.)
The NAHB research found that the highest states for property tax writeoffs were New Jersey (an average $6,005 per homeowner), New York ($5,187), New Hampshire ($4,830), Illinois ($4,129) and Vermont ($3,845). The highest states for mortgage interest writeoffs on average were California (($14,217), Hawaii ($12,766), the District of Columbia ($11,759), Nevada ($11,522) and Washington ($11,223).

The lowest states for mortgage interest deductions were Oklahoma ($5,710), Iowa ($6,754), North Carolina ($6,808) and Maine ($6,888).
Jerry Howard, executive vice president and CEO of NAHB, said "The report shows that millions of working families around the nation use and depend upon these important tax incentives to help them maintain their current standard of living. Because the mortgage interest and real estate deductions significantly reduce federal tax liabilities for homeowners, they are important tools for promoting homeownership."

The not-so-subtle message to Congress from NAHB: Don't mess with these writeoffs. They're too important to the people who elected you … and can throw you out of office if you cut their deductions.

by Kenneth R. Harney / Realty Times

Friday, June 30, 2006

Housing's $457 billion tax savings

Average U.S. household deducts $9,650 in mortgage interest

Thirty-five million taxpayers used the home-mortgage deduction in 2003, deducting a total of $338 billion, or an average of $9,650 per household, according to an analysis released on Thursday by the National Association of Home Builders. About 39 million deducted real estate taxes that year, totaling $119 billion in deductions nationwide, or an average of $3,000 per tax filer.

Monday, June 12, 2006

June FED News

meaning once the words are out there, they are out there, and are very hard to recall. And with last week's light news calendar, all ears were straining for any words from the Fed. Chairman Ben Bernanke had wanted a more open, understandable, clear Fed message - and it appears that the Fed Governors and Presidents took that message to heart, leaking their own opinions on the economy and inflation and rate hikes in just about every lecture that they give. And their words have been leading to rampant rumors and speculation in the markets over the Fed's next move due on June 29th - will they hike the Fed Funds Rate yet once again, or will they pause and provide a chance for all the recent hikes to "catch up", and be fully felt in the economy before going any further?

Historically, the Fed always goes too far, especially when there's a new Fed Chair in the house. When Alan Greenspan took over as Chairman in 1987, he felt the need to show he was tough on inflation, and over seven months persistently raised the Fed Funds Rate. And most of us know what happened next…in October of 1987, the stock market crashed, unemployment rates rose and home prices began to decline in many areas of the nation. Bernanke doesn't want to repeat any mistakes his predecessor made…but being under the gun to show that he'll fight inflation, is he destined to repeat past history? He's certainly in the crosshairs of the market - and perhaps he's rethinking all this open, understandable Fed Policy business…it's probably caused him some headaches of late.

Tuesday, May 30, 2006

Apartment rents expected to rise 5%

If you're a renter trying to save for a down payment, or you're just trying to move out of your parents' home, it'll likely get harder this year. Rents are rising faster than they have in six years.

Apartment rents are expected to increase 5.3% this year - about double last year's increase - the National Association of Realtors says. That's the highest jump since 2000, when the Internet boom created lots of jobs for young adults out of college. In April, rising rents were largely to blame for a sharp jump in consumer inflation.

"This is going to be the highest rental increase year since 2000, and it's going to be a broad-based increase in rents, not just limited to a few markets," said Hessam Nadji, who manages research for Marcus & Millichap, a real estate firm in Northern California.

"Renters are already facing higher energy prices and relatively moderate wage growth," Nadji says. "This is going to really squeeze a lot of households."

No one needs to tell Rosa Shephard. The $1,600 rent she pays for a two-bedroom apartment in Laguna Beach, Calif., will rise by $100 a month this Friday. It's a 6.3% increase, and Shephard's salary as an administrative assistant isn't rising as much, so she's trying to find a cheaper place to live.

"I'm trying to find a one-bedroom for $1,200," says Shephard, 53. "It just doesn't exist."
There are four driving forces:

•Job growth. U.S. businesses have generated 4 million new jobs in the past two years. New hires typically look for rental property.

•Rising home prices. From 1980 to 2000, the median price of a home was 12 times higher than the annual average rent. By this spring, it was 21 times higher, Nadji said. The median-priced home now costs $223,000, making the American dream a fantasy for more renters, whose competition for apartments then drives up rents. There's little relief in sight in such areas as Phoenix and South Florida, where home prices soared more than 30% in the first quarter of this year over the same quarter last year.

• Condo conversions. When the housing market was at its blazing peak, many investors who owned apartment buildings kicked out tenants and sold the units as condos. One out of three apartment buildings sold last year were converted into condos for sale. That took 191,400 apartments off the market, according to the NAR. In addition, the number of new apartment buildings under construction is down this year.

• Hurricane Katrina. About half the 100,000 displaced families in the New Orleans area haven't returned. Most of them were renters, says Lawrence Yun, an NAR economist, and "that's putting additional pressure on rental units throughout the country."

Friday, May 19, 2006

Boom May Be Over, But Landing Will Be Soft

Boom May Be Over, But Landing Will Be Soft(May 19, 2006) -- WASHINGTON – The five-year boom in home sales may be over, but strong demographics and job growth promise only a short-term slowdown in most U.S. markets, NAR’s Chief Economist David Lereah told REALTORS® at Thursday’s Economic Issues & Residential Real Estate Business Trends Forum. His presentation took place during the 2006 REALTORS® Midyear Legislative Meetings & Trade Expo.

Speculators and rising interest rates have ended the largest acceleration ever in existing-home prices, but the process is “a needed cleansing” that will help restore balance, said Lereah. Nationally, homes appreciated a remarkable 12.5 percent on average in 2005. Appreciation for 2006 will cool to 5.7 percent. But even with the slowdown, 2006 will be the fourth best year ever for residential real estate sales with an estimated 6.62 million existing homes sold, Lereah noted.

In 2007, Lereah expects to see existing-home sales rise slightly to 6.7 million units but appreciation to slow to 4.2 percent. To help the industry track performance, NAR’s Research Department is working to develop a real-time pricing tool, “a real estate ticker,” that will update national average home prices every 15 minutes based on data from MLSs, Lereah told the crowd.

To some degree, the next year or two will be “a tale of two cities,” said Lereah. Cities such as San Diego, Miami, and Naples, Fla., that have seen high price appreciation will see sharp drops in sales. Already, between first quarter 2005 and first quarter 2006, existing-home sales declined by 15 percent to 20 percent in Florida, California, and Arizona, he said.

On the other hand, markets that didn’t see exuberant appreciation during the boom are actually experiencing shorter days on market. Lereah pointed to Charlotte, Dallas, and St. Louis as examples of this trend. Even declining markets should remain healthy as long as they have diversified economies and strong job growth, he said.

“As long as days on the market don’t extend beyond six months, there’s no need to be concerned,” he said. The possible exception might be California, where a high number of adjustable-rate and interest-only mortgage loans might combine with a price downturn to create problems.

Other possible clouds on the real estate horizon: inflation, high oil prices, and rising interest rates. Yet, Lereah said he doesn’t expect a recession. Strong business spending and a sound economy that should grow 3.5 percent in 2006 promise a positive outlook for real estate. And mortgage interest rates should stay low; Lereah said he expects two more rate hikes from the Federal Reserve in 2006, but rates won’t rise above 7 percent for the year.

“The real estate market got ahead of itself, but now we’re going back to fundamentals and a more balanced market,” he concluded.

— By Mariwyn Evans for REALTOR® Magazine Online

Thursday, April 13, 2006

Boost Curb Appeal, Add Drama With Lighting

New lighting can enhance curb appeal and update the look of a home without putting a big dent in the owner's pocketbook. Michael Berman, a designer from specialty lighting company Lamps Plus in Chatsworth, Calif., says home sellers often don't think about lighting when preparing for an open house. "But using the proper lighting can make your home stand out to buyers," he says.

Berman offers these tips for brightening up the inside and outside of a home with lighting.

To make interior space seem more spacious, extend the room by adding add outdoor post lights. The lighting will make the yard and patio visible from inside — even when it's dark outside.

Update the look of the kitchen and bathroom, two areas that get lots of attention from buyers. Replace dated fixtures with art glass wall sconces that add splashes of color.

Replace dated lamp shades with something more modern. A new shade of color or design can add color and texture to your space.

Position a torchiere floor lamp or a small spot light at the base of a wall so that the light throw washes up the wall. This emphasizes the height of the room and creates a dramatic visual focal point.

— REALTOR® Magazine Online

Wednesday, April 12, 2006

Housing Market to Stay on High Plateau

WASHINGTON (April 11, 2006) – Home sales should generally level-out and remain at historically high levels, according to the National Association of Realtors®.
David Lereah, NAR’s chief economist, said mortgage interest rates are trending up but will remain favorable. “Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect,” Lereah said. “Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record.” He expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year.
Growth in the U.S. gross domestic product is forecast at 3.7 percent in 2006, while the unemployment rate should average 4.8 percent.
Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year – both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.
NAR President Thomas M. Stevens from Vienna, Va., said home prices are expected to cool, but not as much as in earlier projections. “Although housing inventories have been improving, the balance is still a bit more favorable for sellers and annual appreciation remains in double-digit territory,” said Stevens, senior vice president of NRT Inc. “Even so, the market is in a process of normalization – appreciation will return to normal single-digit patterns, providing solid investment returns into the future.”
The national median existing-home price for all housing types is likely to increase 6.4 percent this year to $221,700, while the median new-home price is expected to rise 2.3 percent to $242,700.Inflation as measured by the Consumer Price Index is seen at 3.4 percent in 2006. Inflation-adjusted disposable personal income should grow 3.8 percent this year.The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #
When NAR releases March existing-home sales data April 25, it will revise national and regional median existing-home prices back to 1999. The fixed reporting sample of representative multiple listing services has been updated to reflect geographic changes over time so that the monthly samples for regional price measurements are as accurate as possible. The changes in price patterns will be consistent with previously reported data.

Monday, April 10, 2006

Pricing your Property more an Art, than a Science

Pricing property can be more art than science in today's market. New home builders probably have the easiest time of it -- at least without shocking the buyers -- because everything is new. There are no bare areas in the carpet, fingerprints on the appliances, nicotine stained ceiling tiles in the rec room -- and definitely no cat and dog odors that are promised to be dealt with by installing new carpet after the buyer moves in.

With resale homes, the first weapon to use in the battle to sell the home is to price it correctly. The challenge for sellers is that they want as much as the last sale, however, in today's market that's not as guaranteed as it was a year ago. The seller can still walk away with hundreds of thousands of dollars in gain, but maybe not the absolute highest amount of gain ever in the community.

Thus, pricing is the key. There are only a few ways to price a home for sale and sellers who don't want to wait around on the sale of their home need to adapt to the accepted modes of pricing and get over the fact that their house may not be worth as much as it was 12 months ago.
The first model is probably the most popular -- the comparable. By pulling up only the sales of your particular model, the Realtor can determine a trend price for your home. The challenge in a slowing market is that your particular model may only have three sales in the last year. Such a low number of houses selling does not really create a trend line, especially if the last sale was 6 months previous. Thus, you turn to the second pricing model.

Your home is then dissected to create comparables across a few neighborhoods or even a whole zip code that match your local community. Several aspects of your home will be plugged into the comparable model: style of home (split level, colonial, etc.); number of levels; number of bedrooms and baths; extra rooms; year built; square footage; and more. Then the averages on these parameters are tabulated and you'll have a target price. Keep in mind to remove the highs and lows.

Finally, another way to price your home is to come up with a tax assessment model. This one takes a little bit more homework and data mining. It's tedious, but it can present one of the most accurate pictures of home values in your community. The first step is to pull up all the sales in the community in the last 6 to 12 months. Tabulate the sales price total (let's say it comes up to $10 million) and then tabulate the tax assessment total (our model will use $8 million). Divide the tax assessment into the sales price and you come up with a tax assessment-sales price ratio. In this case, the community ratio is 1.25. Multiply your tax assessment by the ratio figure, and it will determine your target asking price. For example, if your tax assessment is $250,000, multiply it by 1.25 and you'll arrive at $312,500 as a target asking price. Again, be careful to pull out the anomalies that represent overbuilt properties. The largest, biggest house in the community could affect your price, as well as the pre-foreclosure sale.

You're looking for average prices with average situations for average results.
If you're having to use all three models to arrive at a price, then your real estate professional should weigh in with all three models to determine the price.

The biggest challenge in pricing the home is a seller's greed level. Sorry to be so blunt, but sellers always want more than the last sale, regardless of the market condition. My blunt advice is to "get over it." Waiting around for the "right" buyer is just plain foolishness in the world of real estate. If you're putting your home on the market, don't wait around and waste your time, the buyers' time and the agents' time with an unrealistic asking price.
-Realty Times

Friday, March 24, 2006

Ways you can lose your home

There are times and ways that people lose their homes through foreclosure or possession. The way many rags-to-riches seekers pursue the quick buck is through the foreclosure sales. Nevertheless, there are several other ways homeowners or investors can lose property. Below are at least six ways a homeowner can lose their property to the auction block.

*Don't pay your mortgage. Generally, quit paying your mortgage and you'll end up getting past due notices, followed by foreclosure proceedings notices and then a visit from the sheriff's office to "assist" you in removing all your property from the household.

While there may appear to be a lot of foreclosures out there, the Mortgage Bankers Association reports that less than 1 percent of mortgages in 2005 went into foreclosure (down 12 basis points from the year before.) However, the number of mortgagees in default rose the last reporting quarter to 4.70 percent.

The increase comes as no surprise to the group's chief economist, Doug Duncan. "We have been expecting an up-tick in delinquencies due to a number of factors: the seasoning of the loan portfolio, the increased shares of the portfolio that are ARMs and subprime mortgages, as well as the elevated level of energy prices and rising interest rates," he said on the group's website.

*Don't pay your taxes. For homeowners who pay their own taxes, (not paid through a mortgage service provider), a tax sale could be in their future if they fail to pay taxes on the property. Though most tax sales are through local governments, both state and federal revenue agencies can confiscate real estate for not paying taxes.

If this happens, it's not as simple as just paying the back taxes and getting your property back. For some, it includes also paying penalties and interest, which many times can bypass the actual amount of the back taxes balance.

If your local taxing jurisdiction is anything like mine here in good old Fairfax County, Virginia, then the confiscation of your home is a last resort -- first they will have tried various other methods of tax collection, such as garnishing wages, confiscated money from your bank, booting and towing your car, then of course, selling your house on the auction block.

*File bankruptcy. In the past, filing bankruptcy usually gave the homeowner some protection from losing his home to creditors. With the revamped bankruptcy laws passed last year, creditors may now have the upper hand in bankruptcy situations, according to Herbert Addison, co-author of "How to Save Your Home" and a certified housing counselor. He contends on that while the new law allows for 180 days for the consumer to work out payment plans with the creditor, it does not stop the foreclosure process, which could be a shorter period of time than the payment workout plan.

*Surety for other debts besides mortgage. Creditors are in business for one thing -- to make money off consumers through interest and fees collected during payback of loans. If the consumer fails to pay off those loans, the creditors can go after assets to satisfy the debts. Your house could be one of those assets.

*Failure to pay homeowners dues. If you get into an argument with your homeowners association, withholding the homeowners dues paid each month should not be one of your strategies. HOAs can also auction your house to satisfy past due homeowners HOA fees.

*Illegal activity. The American Civil Liberties Union contends that 80 percent of homeowners who have had property forfeited by the federal, state or local government have never been convicted of a crime, rather law enforcement officials only need to prove probable cause that the homeowner either used the property in committing a crime or purchased the house through funds created through illicit behavior.
(Realty Times)

Thursday, March 16, 2006

Why St. Patrick's Day Is Important To Americans

Green beer and buckled hats aside, St. Patrick's Day is not a bank holiday, but most Americans celebrate it with gusto anyway. What is St. Patrick's Day and what does it mean to Americans? Here are some ideas, courtesy of research by the U.S. Census.

March is Irish-American Heritage Month, and March 17 is St. Patrick's Day. He was the saint who introduced Christianity to Ireland in the fifth century, and March 17 is the day that St. Patrick is believed to have died.

The day is chosen for many Americans to celebrate their Irish lineage, and although it isn't an official federal holiday, many communities participate in the fun with parades and other celebrations. The reason? About 34.5 million U.S. residents claim Irish ancestry (roughly nine times the population of Ireland itself (4.1 million.)

Here are some of other facts for your "Top 'o the mornin'":
Nearly one in four (24 percent) Massachusetts residents claim Irish ancestry -- about double the national percentage. (Source: American FactFinder)

In three states, Delaware, Massachusetts and New Hampshire, Irish is the leading ancestry. The number one ancestry named by U.S.residents is German. Irish is among the top-five ancestries in every state but two (Hawaii and New Mexico). (Source: U.S. Census)
About 25,870 U.S. residents speak Irish Gaelic at home (Source: U.S. Census)

There are about 128,000 U.S. residents who were born in Ireland, excluding people living in group quarters. (Source: American FactFinder)

Since 1820, the earliest year for which official immigration records exist, there have been 4.8 million Irish immigrants lawfully admitted to the United States for permanent residence. By fiscal year 1870, about half of these immigrants were admitted for lawful permanent residence. Only Germany, Mexico, Italy and the United Kingdom have had more immigrants admitted for permanent residence to the United States than Ireland. (Source: Department of Homeland Security Table 1)

Four places in the United States are named Shamrock, the floral emblem of Ireland. Mount Gay-Shamrock, W.Va., and Shamrock, Texas, were the most populous, with 2,623 and 1,821 residents, respectively. Shamrock Lakes, Ind., had 162 residents and Shamrock, Okla., 126. (Statistic for Mount Gay-Shamrock is from Census 2000; the other statistics in this paragraph are 2004 estimates.) (Source: American FactFinder and

Nine U.S. burbs are named after Dublin, the capital of Ireland. Since Census 2000, Dublin, Calif., has surpassed Dublin,Ohio, as the most populous of these places (36,995 compared with 34,301, respectively, as of July 1, 2004). (Source: American FactFinder and

Corned beef and cabbage is a traditional St. Patrick's Day dish. The corned beef celebrants dine on may very well have originated in Texas, which produced 7.3 billion pounds worth of beef, while the cabbage most likely came from California, which produced 558 million pounds worth. In 2004, the U.S. produced 41.5 billion & 2.5 billion U.S. beef and cabbage production, respectively, in pounds. (Source USDA)

On St. Patrick's Day, you may be able to order green-dyed beer at one of the nation's 48,050 drinking places, some of which may be Irish pubs. See Table 201, Statistical Abstract of the United States: 2006 .

About 93.3 million people planned to wear green last St. Patrick's Day.(Source: National Retail Federation, via Hallmark.)

Monday, March 13, 2006

Selling your home in a shifting market

March 2006
The bidding wars are dying down. Cat fights, heartbreaking personal letters and other strategies employed by desperate buyers are fading into the past. While a freakishly warm winter in the Midwest and East has kept sales hotter than we'd expect to see in January, there have been plenty of signs that things are cooling down. Most economists expect sales of existing homes as well as new construction to sink from last year's record levels. Mix in rising interest rates, and things may start to look grim to anyone pondering a home sale.

But this doesn't mean you have to stay put. You may just need to work a little harder to reel in your buyer. Fortunately, there are plenty of creative, crafty, and just plain logical things you can do to help your home look exceptionally appealing in an inventory-heavy market.
Make a good first impressionYou want potential buyers to fall in love with your home the instant they pull up in front, which is why curb appeal is everything. It's absolutely vital that the yard is immaculate, the flowerbeds are fresh, and the garbage cans are nowhere in sight. Little improvements make a big difference. Freshen up paint, and buy a new welcome mat, doorknocker, and mailbox.

Get lostWhen an agent calls to say they're bringing someone over to see the house, get out. Take a walk, do an errand, get a cup of coffee, twiddle your thumbs, whatever it takes. When the owner is in the home, potential buyers feel uncomfortable exploring and asking questions, and will likely cut their visit short. While you may desperately want to provide a guided tour, listing all of the wonderful things about the house and improvements you've made, that's the agent's job.

De-clutterYou have too much stuff in your house. We're sure of it. We're not just talking about those jeans that haven't fit since college. We're talking big stuff, too. Thinning out furniture will make the home look larger and brighter. Get rid of extra chairs, messy bookshelves, unnecessary end tables, and anything else you can shake loose.

Donate or discard everything you don't need any more, and store the rest in a kindly neighbor's garage, if possible (don't put it in yours—that's what we call cluttershifting, and it doesn't fool anyone). If you need to, rent a storage unit.

De-stinkA less-than-pleasant odor—or really any odor at all—can make your home an instant no-thank-you. If you smoke, do it outside. If you have pets, take them with you during showings. Clean litter boxes religiously. Even the idea of animals is enough to make some buyers flinch.

Throw in a perkEven a small freebie can turn a ''looky-loo'' into an ''offer-loo,'' and make them feel really good about the deal they're getting. In the long run, it's sure to cost you less than the stigma of having your home sit on the market another month. While you'll want to work with your agent on the details, here are a few ideas to get you started:
Got a large yard? Offer to cover your buyer's landscaping fees for a year.
Kitchen hopelessly dated? Have a kitchen designer draw up some plans, and place them in a notebook on the kitchen counter. Provide a ''get started'' bonus for the remodel.
Moving to a smaller home, or one with a different configuration? Grab the opportunity to be generous with your existing furniture. If you won't need that gigantic dining room set in your new place, leave it behind.

While nobody knows exactly what the market will do, those mythic folks in the know feel fairly confident that we're headed for a dose of reality. But an impending slowdown doesn't mean you can't get a fair, or even favorable, price for your home. A little ingenuity, mixed with a bit of elbow grease can put you on the road to a successful sale.
(Courtesy of Washington Mutual)

Thursday, March 09, 2006

Homeowners anticipate further home price appreciation


Americans believe home prices will continue rising in the coming years, according to a recent "Los Angeles Times"/Bloomberg poll. Nearly 50 percent of respondents believe their home values will increase by 5 to 15 percent in the next three years, while 25 percent expect home prices to rise 16 percent or more over the same period. "I think the 'bubble' talk is hyped," said Diane Harvey of Foster City, Calif., one of the participants in the poll.

Though the majority of respondents showed optimism about future home price growth, the poll revealed some concern about the impact of rising mortgage interest rates on adjustable-rate mortgages. Roughly one in seven respondents have an adjustable-rate mortgage, and more than 25 percent stated they are "not too confident" or "not at all confident" about their ability to make their mortgage payments if adjusted higher.

The "Los Angeles Times"/Bloomberg poll also found that 16 percent of respondents had tapped into their home equity in the last two years. Completing home improvements, paying off other debts, and buying new cars were among the top uses for the cash obtained.

Monday, February 27, 2006

Home Repair Scams

Fight Back: Home Repair Scams

Elderly low-income seniors long have been a favored target among home repair scam artists, who sell unnecessary and overpriced "home improvements" and even go so far as to attach liens to the homes of seniors who refuse to pay for shoddy or incomplete work, according to the National Consumer Law Center. Seniors can protect themselves from unscrupulous contractors by following these tips:
􀂄 Never purchase home improvement services from a door-to-door contractor or on the basis of a television commercial.
􀂄 Always get a second estimate for the same job from another contractor before you sign a contract for work to be performed.
􀂄 Always get a written contract or estimate that describes the job, the price, the hourly rate for any additional work and the contractor's clean-up responsibilities.
􀂄 Get references and call them.
􀂄 Visit other job sites to review work previously preformed by the contractor.
􀂄 Watch out for bait-and-switch tactics and shady financing schemes.

Source: National Consumer Law Center

Thursday, February 23, 2006


With rising interest rates curbing refinancing activities, which homeowners often use to fund remodeling projects, the remodeling market slowed during the fourth quarter of 2005, according to the National Association of Home Builders' Remodeling Market Index (RMI). For the first time since the first quarter of 2003, the RMI components dipped below 50; indices above 50 indicate more remodelers view market conditions as good versus poor.

During the fourth quarter of 2005, the current market conditions component, based on existing home additions, alterations and repairs being completed, declined 4.3 points to 46.6, while the future expectations index, determined by factors such as the amount of work committed for the next three months and the backlog of remodeling jobs, slipped to 47.5 from 51.8. Regionally, the West reported the strongest remodeling activity with the current and future RMI components increasing to 58.5 and 63.5, respectively. Remodeling activity declined in the South, Northeast, and Midwest regions.


The U.S. leading index rose for the fourth consecutive month in January, increasing 1.1 percent to 140.1 (1996=100), The Conference Board recently reported. Six of the 10 indicators composing the leading index rose in December, including initial claims for unemployment insurance, real money supply, building permits, vendor performance, stock prices and interest rate spread. A key barometer of economic conditions, the leading index has increased in five of the last six months, suggesting economic growth is "likely to pick up in the near term," according to the report.The coincident and lagging indices, which reflect current and past economic activity, respectively, also increased in January. The coincident index edged up 0.2 percent to 121.7, while the lagging index rose 0.7 percent to 122.8.

Wednesday, February 08, 2006

30-year U.S. Treasury bonds - why is it coming back now and who wants it.

**The last sales of 30-year bonds, known as the "long bond," were made in August 2001. On Oct, 31, 2001, then-Treasury Under Secretary Peter Fisher announced: "We do not need the 30-year bond to meet the government's current financing needs, nor those that we expect to face in the coming years."

**At the time, Treasury was stepping up its short-term borrowing in the wake of Sept. 11, 2001, terror attacks that had deepened an economic downturn and helped wipe out a brief period of budget surpluses. But Treasury maintained it did not need the bond because it felt the long-term budget outlook was strong.

**Since then, U.S. budget deficits have continued to soar as wars in Afghanistan and Iraq and relief to hurricane-hit U.S. Gulf Coast states have climbed, leading to a projected $423 billion deficit for fiscal 2006 ending Sept. 30. On May 4, 2005, Treasury said it was considering bringing the long bond back to give it a broader borrowing range. "We're doing this, really, because times have changed," said Treasury Assistant Secretary Timothy Bitsberger.

**Sales of 30-year bonds started in 1977 to create a very low-risk debt instrument. The bond became a risk-free gold standard by which much private-sector debt was priced. While the size of auctions shrank in the late 1990s and the early part of this decade, making it less of a benchmark for setting other interest rates, it is still highly prized by investors ranging from individuals to pension funds that want or need it to add certainty to long-term planning.

Monday, February 06, 2006

30 Year bond is back after 5 years.

After nearly a 5-year hiatus, the United States Department of the Treasury will reintroduce 30-year Treasury Bonds. On February 9th, 2006 the Long Bond will be up for auction. But many interest rate followers are fearful that the added supply of paper will cause overall bond prices to decline and home loan rates to rise. Are those fears justified? Let’s take a closer look.
Bonds are essentially a form of debt and are sold by companies and governments to raise money. In turn, an investor who purchases bonds receives a return on the investment in the form of interest payments. For example, let’s say the city where you live is proposing to build a new sports stadium but does not have the funds available for construction. They sell bonds in order to raise the funds needed.
The same goes for the government. When the government is in need of funds, they offer bonds to investors and pay interest over the life of the bond. The US uses Treasury Bills (maturity of 1-year or less), Notes (maturity of more than 1-year up to 10-years) and Bonds (maturity greater than 10-years) to raise cash.
Back in October of 2001, the US government suspended issuance of 30-year bonds due to a budget surplus. However, since 2001 the government has undergone many expenses (e.g., funding of the war in Iraq, and increased costs for Medicare and Medicaid) that require additional funding via sales of Treasury securities.
So, will the reintroduction of the long bond push home loan rates higher? Not materially. The reintroduction of the 30-year bonds was announced in August 2005 and it is likely that the market has already reflected this news. The amount to be auctioned is $14 Billion dollars…sounds like a lot, but a relatively small amount that should be easily absorbed. And even if rates blipped higher, it should be temporary.

Thursday, February 02, 2006

Fed raised Fed Funds rate

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/2 percent.

Tuesday, January 24, 2006

The Appraisal Process

The appraisal process often baffles consumers. They may feel their home is worth a higher dollar amount, and the appraised value doesn't always make sense to them. It is important to know that appraisal guidelines are dictated by the lenders, and in some states, it is a requirement to also disclose what the appraisal will be used for because there are different rules to follow depending on the purpose.

In effect, lender guidelines force appraisers to put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value. For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at full value in newer homes, because the only way to get those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because the home had value in its original condition, and again, the value of the upgrades must be supported by comparable examples within the same marketplace.

These comparisons must be drawn from current market activity within the last six months, and some lenders will want to look at both closed and pending sales, to see if there is any room for negotiation. This is a safeguard to prevent appraisers from attaching too high a value to the home in question. This guideline further states that appraisers can only base their opinion on the value of homes that have actually closed escrow. Any supporting comparison from pending sales will reinforce the reference to the closed sale given.

However, when property values are increasing drastically within a marketplace, the appraiser is generally permitted to make a concession and put more weight on the evidence provided by comparisons to pending sales and listings, allowing for a “real time” appraisal.

Although there is no formal standard to speak of, most lenders give the appraiser a 5% margin of error. If the file is reviewed and the appraiser is off by 8%, there is a good chance the value will be cut by the full 8%. It is in the best interest of both the appraiser and the homeowner not to try to push the value up higher than the market will support, otherwise the property evaluation would then be exposed to a severe appraisal review.

Provides by James Gill, a senior loan executive with Peninsula Mortgage 310 375-6456

Friday, January 20, 2006

Reverse Mortgages

This was an interesting article from "Market Watch"The number of Americans over age 65 is expected to double in the next 30 years to 70 million. And those older Americans will be living longer. But with one of the lowest savings rates in the world, just what will they live on?

In the years to come, more and more retirees are likely to be looking to tap one of their largest assets to get by financially -- their home equity. Reverse mortgages are one option they might consider.

Wednesday, January 18, 2006

Good Heating system advice

Experts advise that you hire a licensed professional to give your home heating and cooling systems the once over at least once a year.
When properly maintained, home heating systems are not only safer, but work more efficiently to help offset the rising costs of fuel. Clean, efficient systems also last longer.

Monday, January 09, 2006

The new Federal estate tax exclusion for 2006

Some good news – the new Federal estate tax exclusion increased in 2006 to $2 million per person. In the past ten years, that amount has increased over 230 percent, as the figure is up from $600,000 in 1996. Count on this tax exclusion figure to remain in effect until 2009, then the amount is scheduled to increase one more time to $3,500,000 per person. After 2010, it will supposedly be repealed altogether.

Estate tax differs from income tax in that income tax is owed every year on any revenue. Estate tax is owed on the net value of your estate at the time of your death if you leave your assets to any beneficiary other than your spouse. To break this down, let’s say you pass away and leave your entire estate to your children. Your estate is made up of everything you own and includes such items as residential property, life insurance proceeds, IRAs, automobiles, jewelry, cash accounts, etc. If you total the amount of all assets and subtract any debts that you may owe against property or automobiles, the remaining value is known as your "net estate value" and that is the “net value” that could be subject to estate tax.

Important: Your C.P.A. is the best person to educate you about estate taxes.

Thursday, January 05, 2006

2005 California housing market stats... FYI

2005 California housing market eclipses previous records
LOS ANGELES (Dec. 28) – The California residential real estate market in 2005 will be one for the record books, eclipsing the annual sales and median home price records set in 2004, according to the California Association of REALTORS® (C.A.R.).
Here are some highlights from 2005 and a look ahead to 2006: - Sales of detached, existing single-family homes are expected to reach 635,000 in 2005, an increase of 1.8 percent over last year’s record sales of 624,700. Sales are anticipated to decline by 2 percent in 2006. - 2005 will be a record year for home prices. The median price of a single-family home in California crossed the $500,000 threshold for the first time in April 2005. The annual median is expected to reach $523,150 in 2005 and increase 10 percent to $573,500 in 2006. - The median price of a single-family home increased by double-digits for the fourth consecutive year in 2005, though the pace of price appreciation slowed from the 18 to 21 percent annual gains of the previous three years to 16 percent in 2005.- C.A.R.’s Unsold Inventory Index averaged 3.3 months in 2005. Inventory levels are expected to rise moderately in 2006 but will remain low by historic standards, fueling continued price appreciation in the California market. - The interest rate for a fixed-rate mortgage (FRM) remained below 6 percent for much of 2005, only surpassing 6 percent in the last months of the year. For all of 2005, the FRM averaged 5.8 percent. In 2006, the interest rate for the FRM is projected to increase but remain low by historic standards in the low- to mid-6 percent range. - The interest rate for a one-year adjustable-rate mortgage (ARM) averaged 4.5 percent in 2005, finishing just over 5 percent at year-end. The interest rate for the one-year ARM is expected to remain within the low- to mid-5 percent range during 2006. - With home prices reaching record levels, more homebuyers extended themselves financially in 2005 by utilizing alternative loan products. The share of homebuyers who used adjustable-rate and hybrid loans increased from 11 percent in 2003 to 43 percent in 2005, while the share of fixed-rate loans dropped from 89 percent in 2003 to 57 percent in 2005. The last time more than 40 percent of homebuyers used adjustable-rate loans was in 1994. - Fannie Mae and Freddie Mac increased the single-family conforming mortgage loan limit from $359,650 this year to $417,000 in 2006, which could benefit more than 28,590 families in California. However, the increase in the loan limit is still far too low to benefit most homebuyers in California, as the median price of a home in California is 29 percent higher than the new loan limits. Nineteen counties in California have a median home price above the new limit. - Internet use by homebuyers and sellers continued to climb in 2005. Based on C.A.R.’s “Internet Versus Traditional Buyers Survey,” the percentage of homebuyers using the Internet increased from 56 percent in 2004 to 62 percent in 2005. - The share of sellers who used the Internet in their homeselling process surpassed 50 percent for the first time, rising from 47 percent in 2004 to 57 percent in 2005, according to C.A.R.’s “Survey of California Home Sellers.”
Leading the Way...® in California real estate for 100 years, the California Association of REALTORS® ( is one of the largest state trade organizations in the United States, with more than 180,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
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Monday, January 02, 2006

Patriot Act extended.

With the U.S.A. Patriot Act set to expire at the end of 2005, the Senate decided on December 21 to extend the Act for six months so the House and Senate could make revisions to the Act next year. The House voted to reauthorize the Patriot Act for four years before it adjourned for the holidays the prior week.