Friday, August 25, 2006

Mortgage Rates are Falling

The average rate on 30-year fixed-rate loans fell to 6.52 percent for the week ending Aug. 17 from 6.55 percent the week before, reaching its lowest level since April 20.

Freddie Mac said the 15-year rate was unchanged from the previous week at an average of 6.20 percent.

Five-year adjustable-rate mortgages fell to 6.18 percent from 6.21 percent last week.

The average one-year adjustable-rate mortgage fell to 5.65 percent from 5.69 percent the previous week.

Tuesday, August 22, 2006

Getting Real About the Real Estate Bubble

Fortune's Shawn Tully dispels four myths about the future of home prices.
By Shawn Tully, Fortune editor-at-large
August 25 2006: 5:42 AM EDT


NEW YORK (Fortune) -- For the past five years, the housing bulls have been trotting out one rational-sounding argument after another to explain why the boom made perfect economic sense.

Forget about a crash, they assured homeowners. Expect a "soft landing" where your three-bedroom colonial in Larchmont or Larkspur not only holds onto its huge price gains, but keeps appreciating at a "normal," "sustainable" rate of 6 percent or so into the sunset.

Americans wanted to believe, and they did. Now, the giant popping noise you're hearing is the sound of yesterday's myths exploding like balloons pumped up with too much hot air.

The newest sign that the myth-makers were spectacularly wrong is the data on existing home sales for July. Nationwide, median prices rose .9 percent.
But even that meager number masks the real story. Prices actually fell where housing is most vulnerable, in the bubble markets in the West and Northeast. In the Northeast, they dropped 2.1 percent from July of 2005, at the same time prices nationwide rose around 3 percent, meaning that houses lost over 5 percent of their value adjusted for inflation.

Homeowners just saw their wealth shrink, by a lot. The numbers will only get worse. It's time to examine the clichés that the "experts" - chiefly analysts and economists from realtors and mortgage associations - used to convince Americans that what they're seeing now could never happen. Here are the four great housing myths - and why they never made much sense in the first place.

Myth #1: As long as job growth is strong, prices can't go down

You can almost forgive the bulls for stumbling over this one. In past housing recessions, prices fell sharply in markets with severe job losses, like Texas in the mid-80s and Boston in the early 90s.

But the argument that prices can't fall in a good job market doesn't make economic sense: To be sure, a strong employment picture helps demand. But if far more houses are pouring onto the market than can be absorbed by households lured by the new jobs, and if the sellers are pressured to sell, prices will fall.

That's precisely what's happening now in good job markets such as San Diego and Northern Virginia. In this boom, prices soared to such extraordinary levels that builders kept churning out new homes, and owners of existing houses threw a record number of units on the market to cash out. The supply grew so fast that demand, even in strong job markets, simply couldn't keep up.

As usual, for the believers, it's always easier to fall back on a cliché than read the warning signs.

Myth #2: The builders learned their lesson in the last downturn

They won't swamp the market with new houses when the market turns
You might call this the OPEC theory of homebuilders. The idea was that the builders wouldn't take a chance by building lots of unsold, "spec" units that could clog the market in a downturn. They had supposedly absorbed hard-won discipline from their excessive building in past downturns.

Well, it hasn't turned out that way. Builders are still pouring out near-record numbers of new homes as sales decline, assuring a further fall in prices. "Buyers" are walking away from deposits on houses that were supposedly pre-sold, forcing developers to throw them back on the market at a discount.

The problem is that even now, margins on new homes are still pretty good, though well below the levels of a year ago. As a result, builders will just keep building until those big margins evaporate. High prices are sewing the seeds of their own demise. They always do.

Myth #3: Low interest rates will keep values rising, or at the very least, put a floor under prices

What really matters for all assets, whether it's houses, stocks or bonds, is real interest rates - in other words, nominal rates after subtracting inflation. And real rates fell sharply starting in 2001. That caused a legitimate, one-time increase in housing prices.

The rub is that prices rose far more than could ever be justified by declining mortgage rates. That's where the bubble kicked in. Today's relatively low rates are not, and never were, a reason why prices would keep rising. Once real rates drop and stabilize, the impetus goes away - again, the gain is a one-time, not a recurring, phenomenon.

Today, real 10-year rates are still extremely low. They have nowhere to go but up. When the one-time gain of 2001-2004 reverses, housing prices could take a further hit.

By the way, a decline in rates due to a fall in inflation isn't the boom to real estate it's advertised to be. Sure, rates go down, but workers also receive lower raises. So the fall in rates turns out to be a wash. As for what matters - real rates - what goes down later goes up, and housing prices go in the other direction, namely south.

Myth #4: restriction on development in the suburbs ensure low supply, and guarantee rising prices

This argument ignores that the tough zoning laws and anti-development fervor have been a feature of America's tony towns since the early 1970s. The "not in my town" phenomenon is nothing new.

Sure, it's still difficult to get new building permits in suburbs of New Jersey, New York, Washington, Seattle and San Francisco. But America's housing market is extremely fluid. People move farther from job centers, and commute longer hours, to get bargains where housing is plentiful. Then the jobs move to the areas with the cheap houses. People in their 50s and 60s cash out early in San Diego and buy a bigger house for half the money in Texas or South Carolina.

And the cities are just as enthusiastic about developing blighted areas with new, tax-paying high-rises as the suburbs are slamming the door. In the New York area, Brooklyn, Jersey City and Hoboken - and even Manhattan - are sprouting more new housing than in decades, despite a job market that's hardly robust.

A year ago, the reigning cliché was that real estate had entered a new world of "no supply." Now, a record 3.85 million homes are up for sale, and buyers are getting scarce.

No, the world hasn't changed. And the myths haven't changed either. Next time, don't believe them.


More from FORTUNE

Wednesday, August 16, 2006

Another Sycamore Village Steal!


This home was such a pleasure to work on. The home was vacant, so all it needed was a bit of TLC. A good cleaning and a fresh coat of neutral paint was all that it needed! The home is being offered at $619,000.00. For additional information, contact Nancy Hussey at 805.452.3052. You can see additional listings ahttp://www.californiamoves.com/nancy.hussey.


Aren't the floors gorgeous - real maple! The curtains are the only issue here. They are too short and a bit too frilly.


We removed those curtains and added only a few on the slider. This lets all that great natural light come through and really highlights the wall of windows. We added some fun and funky furnishings to play up the cheerful feel of the house.

This lovely house in this newer community is one of the nicest homes in the area. Close to downtown's vibrant shops, near all the new community development and clean up on Ventura Avenue, and perfect for commuters, this home is sure to sell quicker than other less impressive homes in the community.

Tuesday, August 01, 2006

Good News for June!

June pending home sales unexpectedly up

National Association of Realtors' index shows a market in transition that is seeking equilibrium.
August 1 2006: 10:56 AM EDT


WASHINGTON (Reuters) -- Pending sales of U.S. homes rose unexpectedly in June for the second month in a row, defying other recent housing market indicators pointing to a slowdown in the housing sector.

The National Association of Realtors' Pending Home Sales Index, based on contracts signed in June, rose 0.4 percent to 113.9 from an upwardly revised level of 113.5 in May.

Economists polled by Reuters had forecast the index would edge lower to 113.0 from an originally reported level of 113.4.

David Lereah, the NAR chief economist, said the index showed a market in transition that was seeking equilibrium.

"The housing market is striving for balance - a process that will take several months. A quieting in the movement of indicators should restore confidence to home buyers who have been on the sidelines, waiting for the right time to get into the market," Lereah said.

Monday, July 31, 2006

Staging in a Buyer's Market

The last few posts haven't been the best news for the real estate industry as a whole. It means that Agents have to work harder and longer for a home sale than in recent years. Selling Staging Services in this environment can be difficult for a Stager or an Agent who offers Home Staging as one of their services. However, a Staged Home can be what makes or breaks a sale! As many of you know, a Staged Home shows better and offers a competitive advantage. When a home is Staged it shows better and it will be memorable to buyers. This is important when there is an abundance of inventory on the market to choose from.

There are some common arguments I've faced when budgets are tight. I know how much Home Staging can help sell a home. So, I hate to give up on providing my services as an Accredited Staging Professional because people don't understand the value of Home Staging. I've learned to think outside the proverbial box.

Some common arguments I hear when meeting with clients are:

1. Home Staging is too expensive.

2. The seller doesn't want to put any money into a home they are leaving behind.

3. The Seller thinks they have a great style and the home will show well as is.

Here are some counters I've successfully used for these arguments:

1. The investment in Home Staging is typically less than your first price reduction. Here is an example. A home priced for $550,000.00 could cost anywhere from $2,500.00 to $6,500.00 to Stage. Price reductions typically start at $10,000.00.

2. The above argument works for this one as well. However, offering an alternative for a seller that isn't convinced by the numbers above might work. Most people buy their furnishings to suit the size and layout of the home they are currently living in. Moving to a new home might mean new furnishings are in order. I like to offer to help them purchase pieces for their new home with the caveat that we'll use them in the home we are trying to sell. This feels more like an investment to them and cuts down the cost of renting furnishings and accessories.

3. The seller may have great taste - but it's their taste. Homes need to be depersonalized. The style needs to attract the widest variety of people. So, the red dining room might be fabulous, but it could be a turn off for a potential buyer. If a buyer doesn't like red, they will see this as painting project they will have to handle. Buyers want move in ready.

This market is tough for sellers, so it's expected that they might balk a bit at spending money to make their home look it's very best. However, if Agents and Home Stagers can educated them on the necessity for readying their home for the market, then investing some money up front won't seem so difficult. And, when the home sells faster, the seller will be glad they took your advice!

How to Take Advantage of a Real Estate Buyer's Market

By ELISABETH LEAMY

Seller's Sometimes Throw in Luxury Incentives

July 31, 2006 — There are 33 percent more used homes on the market right now than there were a year ago.

In some neighborhoods there's more than one house up for sale, creating a mini-price war among neighbors.

A couple in Virginia lowered the price of their house and offered to throw in a brand-new car, just to make their home more attractive than the rest.

After several years of a seller's market, it's finally a buyer's paradise in Phoenix, Ariz., where new-home builders are trying to attract prospective homeowners with high-end appliances, swanky countertops and fancy floors.

"Builders are offering incentives because they have an overabundance of inventory," said Ed Maddox, a Phoenix real estate agent.

Homeowners trying to sell are in the same boat.

Higher Mortgage Rates One Reason

The market has gone cool in places where it was once the hottest — California, Arizona, South Florida and the Northeast.

Around the country, houses that used to sell in days are now sitting on the market for months.

In Danbury, Conn., the Bates family is hoping to cash in on an older home.

"You see a different couple of houses and don't feel like you're under pressure," Markus Bates said.

Why is it suddenly a buyer's market? One reason is higher mortgage rates. The average 30-year fixed rate is up more than a point in the last year to around 6.7 percent.

"People are going to have to come to the reality that if they want to sell their house they're going to have to lower the price," said Ivy Zelman, a real estate analyst.

With a record glut of unsold new homes for buyers to choose from, 75 percent of builders are now offering extravagant incentives to close a deal: everything from free swimming pools to first-class tickets to Hawaii are being offered.

"I have builders right now who are advertising, 'Make me an offer,' which is definitely scary," Zelman said.

Dan Glasser is trying to sell his Phoenix home. He's lowered the price twice in the 90 days it's been on the market and is anxious to sell, but he's in no hurry to buy another home.

If somebody doesn't have exactly what I want, there's five other houses to choose from," Glasser said.


So now that the tables have turned how can buyers take advantage?

Take your time. Shop around. With more homes on the market you can afford to take your time and you should. Shopping around gives you a feel for fair prices in different neighborhoods.

Hire a buyer's agent. Make sure you hire a buyer's agent who only represents you, and does not have any connection or obligation to the seller.

A builder cannot force its lender on you. If you're buying a brand-new house, keep in mind, the builder cannot force you to go with its preferred lender. Get quotes from outside lenders, too.

"Free" incentives may cost you. If the builder is offering lots of free incentives, scrutinize the deal, because those expenses may be tucked in somewhere else, like in your closing costs.

Thursday, July 27, 2006

New Home Sales Fall More Than Expected

Largest decline in months; unsold homes inventory hits a record
MSNBC.COM SPECIAL REPORT



WASHINGTON - Sales of new homes fell in June by the largest amount in four months while the inventory of unsold homes climbed to a record high, providing further evidence that the once-booming housing sector is slowing.

The Commerce Department reported Thursday that new home sales dropped by 3 percent last month to a seasonally adjusted annual sales pace of 1.131 million units. It marked the first drop since an 11.5 percent plunge in February.

Sales of both new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades. But rates have been steadily rising this year as the Federal Reserve tightens credit conditions as a way to slow the economy and keep inflation under control. Analysts are looking for home sales to drop by around 10 percent this year.

The government reported that the median price of a new home was $321,300 in June, which was up by just 2.3 percent from a year ago and was down by 1.5 percent from May.
The drop in existing home sales was slightly smaller than the 4.8 percent decline economists had been expecting.

It left the number of unsold homes at a record high of 566,000. At the June sales pace, it would take 6.1 months to sell the backlog of homes, a figure that is up sharply from the 4.3-month supply of unsold homes a year ago when the housing market was still booming.
Economists are looking for new home sales to slow further as mortgage rates continue to rise, putting increased downward pressure on prices.

In June, sales were weak in every section of the country except the West, which posted an 8.2 percent increase after a decline of 7.3 percent in May. Sales fell 11.3 percent in the Northeast and were down 7.9 percent in the Midwest and 6 percent in the South.

The weakness in sales of existing homes has been even more pronounced. The National Association of Realtors reported that sales were down in June for the eighth time in the past 10 months while the median price of an existing home sold in June was up just 0.9 percent last month compared to June 2005, the smallest year-over-year increase in a decade.

The big worry is that home sales will fall so sharply that it could send shockwaves through the entire economy, much as the bursting of the stock market bubble in 2000 contributed to the 2001 recession. But so far, economists said the decline in housing is contributing to a slowdown in the overall economy but they are not forecasting a recession.

The 3.1 percent increase in new orders for durable goods was much better than the 1.7 percent gain that Wall Street had been expecting.

Much of the strength came from an 8.8 percent surge in demand for commercial aircraft, which followed two months of big declines in this category. Last month, Boeing Co., America’s biggest plane maker, booked orders for 135 aircraft, up from 33 in May.

Analysts believe that output in the manufacturing sector will continue to rise in coming months but at a slower pace, reflecting an economy that is slowing under the impact of surging energy prices, rising interest rates and the cooling housing market.

A report due Friday on economic growth is expected to show the economy expanded at an annual rate of around 3 percent in the April-June quarter, far below the sizzling 5.6 percent rate of growth in the first three months of the year.

Federal Reserve Chairman Ben Bernanke told Congress last week that the Fed believed the slowing economy would serve to moderate inflation pressures — comments that investors took as a strong signal that the Fed’s two-year campaign to boost interest rates was drawing to a close.

For June, orders for durable goods, items expected to last at least three years, totaled $216.3 billion, an increase of $6.52 billion from the May level.
Excluding transportation, orders were up a solid 1 percent in June with strength being shown in demand for computers, communication equipment and primary metals such as steel.

© 2006 The Associated Press.

Wednesday, July 26, 2006

Most Overpriced Homes on the Market - Santa Barbara Ranks No. 1

100 cities ranked.
Despite a slowdown, some values are still out of whack. Plus: where the bargains are.
By Les Christie, CNNMoney.com staff writer
July 26 2006: 5:25 PM EDT


NEW YORK (CNNMoney.com) -- After years of local home markets getting more and more overvalued, the trend has reversed, according to an analyis published this week.

Each quarter, Local Market Monitor, which provides research to the real estate industry, assesses 100 markets, comparing selling prices to "equilibrium" values. Company president Ingo Winzer bases those values on local economic and population growth, construction costs, vacancy rates, household income in the area and interest rates.
Real Estate

The number of overpriced markets in the first quarter, defined as having a median home price more than 15 percent higher than equilibrium, fell by two to 38. In the prior quarter, the number of overvalued markets had climbed to 40 from 37.
Winzer says that 56 of the 100 markets he covers are now fairly priced, up from 54 last quarter.
The median home, however, is still overpriced by an average of more than 14 percent, Winzer judges, and homes in many markets are still way too high. This matters because those markets have much more potential for the kind of steep decline that could be disastrous for homeowners - and the local economy.

On Tuesday, the National Association of Realtors (NAR) reported that sales fell for third straight month in June -- it also said that the market had finally shifted from a seller's market to a buyer's market.

By Winzer's figuring, Santa Barbara is the most overpriced housing market in the nation (click here for complete results: http://money.cnn.com/2006/07/25/real_estate/housing_market_values/index.htm). The median home there costs $567,300, 80 percent more than it should.

Naples, Fla. is a close second - the median home there will set a buyer back $417,400, 74 percent above equilibrium. Will Naples pass Santa Barbara as No. 1? Prices there rose 38 percent during the past year versus just 11 percent in Santa Barbara.

The nation's most undervalued real estate market is Fayetteville, N.C. At a median price of $175,800, the median house costs 21 percent below equilibrium.

Texas has some of the best bargains around. McAllen homes cost a median of $123,200, 19 percent undervalued. Among the bigger cities, Dallas (-14 percent), Houston (-14 percent) and San Antonio (-8 percent) all have great buys.