Talking Points Bulletin

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.