Talking Points Bulletin

There was some interesting news this past week: the “experts” were looking for a 1% decline in home sales during the month of May. Actually, the number of sales increased by 2% that month!

And, if you haven’t noticed, the number of homes on the market continues to decline. All of this is good stuff for homeowners and their equity, but a warning bell for potential buyers who continue to wait.

Interest rates ticked down again in some programs last week. Where loan rates will begin the week of June 31.

Wow! Certain segments of the market (bargain-priced below $550,000 and especially below $500,000) have become hot! Properties in these price ranges, if attractive and priced right, are often attracting multiple offers. (How different than what was happening in 2007!) When multiple buyers try to buy the same properties, price will either stabilize or go up. But remember: these sales are distressed and below market value, so the median price will continue to drag along the bottom.

Interest rates ticked down in most instances last week. FHA conforming/jumbo 30-year fixed (which is where so many of the loans are today) is down 1/8% over the previous week. Where loan rates will begin the week of June23.

Active real estate agents recognize a change in market activity months before the media reports on it. Now, in June, the LA Times finally recognized the startling uptick in sales that began last March/April. But the sales tend to be first-time buyers taking advantage of low-priced bank-owned properties. This drives down the median sales price, something that will continue for some time to come.

Unfortunately, the Fed’s concern about inflation helped push rates on 30-year fixed-rate mortgages to an 8-month high during last week.(Potential buyers worried worried about a larger house payment should pay attention.)  Where all loan rates will begin the week of June 16.

What an incredible market in which to find bargains! At the moment, there are a dozen bank-owned properties in the east side of Long Beach with an average list price of $465,000. Add to this list the number of other distressed sales that are taking place, and it is truly a first-time buyer’s paradise. The people snapping up these homes couldn’t begin to afford areas of choice in 2005.

However, rising interest rates are slightly offsetting reduced prices: for the 3rd or 4th week in a row, interest rates continue to inch upward. Conforming/jumbo 30-year fixed is up another 1/8% over the previous week. Where loan rates will begin the week of June 9.

How can we tell that the market is at the bottom? Because homes are now selling. Trouble is, the sales are distressed and below market value. So, while the number of sales is increasing the median price continues to go down. The LA Times tried to explain the phenomena in a recent article.

Interest rates continue inching upward. Conforming/jumbo 30-year fixed is up 1/8% over the previous week. Where loan rates will begin the week of May 20.

Inman News just reported the first decline in NAR membership since 1998: There are 100,000 fewer agents today than there were 12 months ago. But this is just the tip of the iceberg. I expect that there will be 200,000-250,000 fewer agents two years from now. (But I’ll still be here. Count on it!)
Although I don’t wish hard luck on anyone, I don’t feel badly about people who came into my industry and stuck their toe in the water during the “gold rush” without truly making a commitment to their clients or the reputation of Realtors.

Interest rates ticked up slightly last week. Where loan rates will begin the week of May 26.

April housing starts are up 8.2%, the biggest gain since 2006, but the gain is entirely in multiple unit buildings. Single-family starts are still the lowest they have been in years.

As of today’s date, Long Beach has a total of 178 bank-owned properties on the market.

Interest rates continue to fall. For example, the 30-year fixed conforming jumbo is at 5.875%, down 1/2% from just 2 weeks ago.

Where all loan rates will begin the week of May 19.

The OC Register and the Wall Street Journal have printed articles that say the housing market has reached the bottom of the cycle.

The Register notes a sharp decline in the number of distressed properties (short sales and foreclosures) entering the market, and the The Wall Street Journal notes that affordability is back to where it was in the 1990s. Both articles note that the down market has lasted just under 3 years (about as long as they usually last) and that the inventory of unsold homes is dropping.

It may take a month or two, but the Press Telegram and Los Angeles Times will also begin to reflect the market shift.

To see where loan rates began on the week of May 5, click here.

With the media in full throttle, using terms such as “meltdown,” “crisis,” and “ravaged” to describe the housing market, it’s easy to understand why many buyers feel a little skittish. With terms like “recession”, “stagflation” and “global slowdowns” being thrown around, it’s easy to understand why some people lack confidence in the market.

News flash! Wealth is created during downturns because the goal of economic gain is to buy low and sell high.

Nelson Rockefeller was, in his time, the wealthiest man in the world. He stated that the time to buy real estate was when the blood was flowing in the streets. That was as true for the turn of the 20^th century as it is today in the 21^st century. The current market is what opportunity feels like for a buyer!

Some of the biggest news from last week is that the consumer confidence level has dropped to its lowest point in 26 years. Given the price of gasoline and food, and the media harping on everything bad, this is hardly a surprise.

The media didn’t report it, but the month-to-month median price for home re-sales was higher in March 2008 than it was in February 2008. Instead, the media reported on the year-over year decline which, of course, was down.

Interest rates edged up slightly last week by 1/8% almost across the board. To see where all loan rates will begin the week of April 28, click here.

Last week, DataQuick (a nationwide information service that compiles data from hundreds of MLSs and issues reports on home sales around the country) announced that median home prices are still falling sharply. The fall is due to lots of short sales and bank-owned properties in the market, and these typically sell at discounts. Even so, March sales levels were more than 36% higher than February!

When median prices fall, mortgage-backed securities are less attractive to investors. When more investors want to sell their holdings than buy additional securities, mortgage interest rates go up. Indeed, last week saw a 1/8-1/4% increase.

To see where all loan rates will begin the week of April 21, click here.

There is lots of talk about the Senate and House bills that are aimed at solving the housing enigma, but reconciling these two approaches will be so difficult and time-consuming that an analysis may not have much to do with what actually happens.

Much more importantly, last week a private investment group bought $12B in leveraged loans from Citigroup. This sale shows that there is a market for these loans, which may lead to more lending by banks. More lending equals more people being able to buy houses. Right on top of this news is a smartly rising number of new loan applications, just as we head into the traditional buying season.

The rate for the conforming/jumbo 30-year fixed (up to a loan amount of $729,750 in A and Orange counties) dropped 1/4%. To see where all loan rates will begin the week of April 7, click here.

Last week’s new held some figures that give pause: Some 80,000 jobs were lost in the month of March and new car sales were slow (duh!). But the big news happened in Congress: buyers (not current owners) of foreclosed properties may get a $7,000 tax credit over the next two years. The goal is to get foreclosures off the market so prices can stabilize.

The overall result of the week’s events cause loan rates to drop about 1/8%. To see where loan rates will begin the week of April 7, click here.

In order to reach the bottom of the housing cycle, two things must happen: the number of unsold homes must decline, and the number of sales must go up. And guess what? Last week, the LA Times last week reported a 9.5% increase in the number of sales in LA County in February over January 2008, and the OC Register reported the number of unsold homes in OC is at an 11-month low. This is a trend to watch!

Last week, the FHA loan rate jumped from 5.875% to 6.375%, but the 30-year conforming fixed rate was unchanged. For all rates that prevailed at the start of business on Monday, March 31, click here.