Daily Real Estate News, December 20, 2010
Economists are surprisingly positive about the impact of rising interest rates on home sales.
The consensus is that while rates are up from where they were, they are still at historically low levels and rock bottom rates are only a part of what encourages people to buy homes. More important factors could be jobs and other financial issues, which appear to be improving.
“Since the recent rate increases have essentially just undone the declines from earlier months, it is hard to see why sales should drop significantly further from current levels,” wrote Goldman Sachs economist Ed McKelvey in a research note published Thursday evening.
Source: The Wall Street Journal, Nick Timiraos (12/17/2010)
Monday, December 20, 2010
Commercial Real Estate on the Mend
Daily Real Estate News, December 20, 2010
Despite predictions of Armageddon in the commercial real estate industry, the segment remains a moneymaker.
Commercial Mortgage Backed Securities (CMBS) were among the top-performing assets classes this year. "A year or two ago these were priced for the second Depression and then some," said Arne Espe, vice president of fixed income research at USAA Investment Management in San Antonio. "We haven't seen the huge defaults a lot of people were expecting."
Analysts counsel patience. "If you can give it some time, employment will bounce back and then commercial real estate will start rising," said Greg Michaud, who heads real estate finance at ING Investment Management.
Source: Fortune.com, Colin Barr (12/20/2010)
Despite predictions of Armageddon in the commercial real estate industry, the segment remains a moneymaker.
Commercial Mortgage Backed Securities (CMBS) were among the top-performing assets classes this year. "A year or two ago these were priced for the second Depression and then some," said Arne Espe, vice president of fixed income research at USAA Investment Management in San Antonio. "We haven't seen the huge defaults a lot of people were expecting."
Analysts counsel patience. "If you can give it some time, employment will bounce back and then commercial real estate will start rising," said Greg Michaud, who heads real estate finance at ING Investment Management.
Source: Fortune.com, Colin Barr (12/20/2010)
Friday, December 17, 2010
Job Market Keeping Real Estate Down
Daily Real Estate News, December 17, 2010
The University of San Diego's 11th annual residential real estate conference this week was focused on jobs and how unemployment is preventing people from buying homes.
Leslie Appleton-Young, chief economist at the California Association of REALTORS®, said, "Jobs are really the key. That's where the focus needs to be."
University of San Diego economist Alan Gin said companies of all sorts, including those in the real estate industry, are poised to expand. “They’re waiting for signs that the economy is firming before jumping in,” he said.
Source: The San Diego Union-Tribune (12/15/2010)
The University of San Diego's 11th annual residential real estate conference this week was focused on jobs and how unemployment is preventing people from buying homes.
Leslie Appleton-Young, chief economist at the California Association of REALTORS®, said, "Jobs are really the key. That's where the focus needs to be."
University of San Diego economist Alan Gin said companies of all sorts, including those in the real estate industry, are poised to expand. “They’re waiting for signs that the economy is firming before jumping in,” he said.
Source: The San Diego Union-Tribune (12/15/2010)
10 States Losing the Most Residents
Daily Real Estate News, December 17, 2010
Using data from Moody’s Economy.com, Forbes identified the top-10 states where more residents are leaving than arriving.
The factors that encourage outbound migration from these states are mostly economic — high employment and high cost of living — although both Louisiana and Mississippi have been affected by natural disasters.
The 10 states that have said goodbye to the most residents are:
1. New York
2. Illinois
3. Ohio
4. Nebraska
5. Kansas
6. Iowa
7. Louisiana
8. North Dakota
9. South Dakota
10. Mississippi
Source: Forbes, Jenna Goudreau (12/08/2010)
Using data from Moody’s Economy.com, Forbes identified the top-10 states where more residents are leaving than arriving.
The factors that encourage outbound migration from these states are mostly economic — high employment and high cost of living — although both Louisiana and Mississippi have been affected by natural disasters.
The 10 states that have said goodbye to the most residents are:
1. New York
2. Illinois
3. Ohio
4. Nebraska
5. Kansas
6. Iowa
7. Louisiana
8. North Dakota
9. South Dakota
10. Mississippi
Source: Forbes, Jenna Goudreau (12/08/2010)
Rise in Yields Pushes Up Rates
Daily Real Estate News, December 17, 2010
A sudden and unexpectedly quick bounce in Treasury yields has jolted the financial markets — including mortgage rates, which have risen rapidly in response.
Freddie Mac puts 30-year home loan interest at an average of 4.83 percent for the week ended Dec. 16, up from a record bottom of 4.17 percent a month ago.
Although the rate is still favorable by historical norms, any jump in borrowing costs is certain to pinch housing demand, prevent refinancing, and motivate sellers to reduce asking prices.
Source: The Wall Street Journal, Nick Timiraos and Mark Gongloff (12/17/10)
A sudden and unexpectedly quick bounce in Treasury yields has jolted the financial markets — including mortgage rates, which have risen rapidly in response.
Freddie Mac puts 30-year home loan interest at an average of 4.83 percent for the week ended Dec. 16, up from a record bottom of 4.17 percent a month ago.
Although the rate is still favorable by historical norms, any jump in borrowing costs is certain to pinch housing demand, prevent refinancing, and motivate sellers to reduce asking prices.
Source: The Wall Street Journal, Nick Timiraos and Mark Gongloff (12/17/10)
Wednesday, December 15, 2010
Fed Leaves "Rates" Unchanged (as expected)
from Mortgage Market Guide
As anticipated, the Fed Announcement yesterday didn't contain any surprises. The Fed Funds Rate was left unchanged - and we don't see that changing until early 2012. Additionally, the language in the Policy Statement was virtually identical to the one following the prior meeting. So what happened? Why did Bonds, which went into the Meeting down sharply, plummet further on the announcement?
Here's the story.
Although they are stating that inflation is not a present concern, which is good news for Bonds their continued pledge of economic support prompted Stocks to move higher in response. In fact, the Dow reached levels not seen since Lehman collapsed over two years ago and this all came at great expense to Bonds.
Negative economic news serves to help Bond prices improve and rates decline, including home loan rates and this is all helpful to have when the economy is struggling, as buyers of all products - including homes - need the extra incentive of a low interest rate to be encouraged to buy. But now, the sharply higher expectations for future economic growth has caused rates to climb - particularly including home loan rates, as you well know - and all at a time when the housing market recovery is still on somewhat wobbly legs. This is one of the negative unintended consequences of QE2.
In this morning's news, the Empire State Manufacturing Index was reported at 10.57, far above expectations of 3.0. This was a very nice manufacturing reading, and a whole lot better than what economists were expecting. While this is just one report - it again underscores that the economy is on the mend. The Bond market reacted negatively to this release.
The inflation measuring Consumer Price Index was tame on a month over month basis, showing a climb of 0.1%. With volatile food and energy prices removed, the Core CPI also rose 0.1% for it's first gain since July. The year-over-year headline CPI rose 1.1% - still below the Fed's target - but it is worth noting that this is the fifth consecutive month of increases in the headline CPI number. For now - deflation fears have left the building, and the Fed appears to be on track with their goal of stimulating a bit more inflation.
Where will rates go from here?
In the short-run, the Bond is attempting to hold at support at $98.03 - and only time will tell if that floor will hold. But there is an extremely negative sentiment towards Bonds right now. Look no further than the major outflows being seen from Bond mutual funds. The amount of money leaving the Bond market over the past two months is the most in a few years and what this means is that investors are not only not adding to their Bond positions but they are also selling off current holdings. This is another reason why the selloff in Bonds has been so significant over the past several weeks.
As anticipated, the Fed Announcement yesterday didn't contain any surprises. The Fed Funds Rate was left unchanged - and we don't see that changing until early 2012. Additionally, the language in the Policy Statement was virtually identical to the one following the prior meeting. So what happened? Why did Bonds, which went into the Meeting down sharply, plummet further on the announcement?
Here's the story.
Although they are stating that inflation is not a present concern, which is good news for Bonds their continued pledge of economic support prompted Stocks to move higher in response. In fact, the Dow reached levels not seen since Lehman collapsed over two years ago and this all came at great expense to Bonds.
Negative economic news serves to help Bond prices improve and rates decline, including home loan rates and this is all helpful to have when the economy is struggling, as buyers of all products - including homes - need the extra incentive of a low interest rate to be encouraged to buy. But now, the sharply higher expectations for future economic growth has caused rates to climb - particularly including home loan rates, as you well know - and all at a time when the housing market recovery is still on somewhat wobbly legs. This is one of the negative unintended consequences of QE2.
In this morning's news, the Empire State Manufacturing Index was reported at 10.57, far above expectations of 3.0. This was a very nice manufacturing reading, and a whole lot better than what economists were expecting. While this is just one report - it again underscores that the economy is on the mend. The Bond market reacted negatively to this release.
The inflation measuring Consumer Price Index was tame on a month over month basis, showing a climb of 0.1%. With volatile food and energy prices removed, the Core CPI also rose 0.1% for it's first gain since July. The year-over-year headline CPI rose 1.1% - still below the Fed's target - but it is worth noting that this is the fifth consecutive month of increases in the headline CPI number. For now - deflation fears have left the building, and the Fed appears to be on track with their goal of stimulating a bit more inflation.
Where will rates go from here?
In the short-run, the Bond is attempting to hold at support at $98.03 - and only time will tell if that floor will hold. But there is an extremely negative sentiment towards Bonds right now. Look no further than the major outflows being seen from Bond mutual funds. The amount of money leaving the Bond market over the past two months is the most in a few years and what this means is that investors are not only not adding to their Bond positions but they are also selling off current holdings. This is another reason why the selloff in Bonds has been so significant over the past several weeks.
Tuesday, December 14, 2010
Number of Underwater Mortgages Declines
Daily Real Estate News, December 14, 2010
The number of people with underwater mortgages has fallen to 10.8 million, representing 22.5 percent of Americans with a mortgage at the end of September, down from 11.3 million at the beginning of 2010, according to CoreLogic, a real estate research firm.
If home prices decline again, as some analysts believe they will, the number of underwater mortgages will climb again.
"It's a giant anchor that's holding back the economy," says Sam Khater, senior economist at CoreLogic. "Until that negative equity recedes, the housing market is not going to recover. It's as simple as that."
Source: The Wall Street Journal, Nick Timiraos and S. Mitra Kalita (12/14/2010)
The number of people with underwater mortgages has fallen to 10.8 million, representing 22.5 percent of Americans with a mortgage at the end of September, down from 11.3 million at the beginning of 2010, according to CoreLogic, a real estate research firm.
If home prices decline again, as some analysts believe they will, the number of underwater mortgages will climb again.
"It's a giant anchor that's holding back the economy," says Sam Khater, senior economist at CoreLogic. "Until that negative equity recedes, the housing market is not going to recover. It's as simple as that."
Source: The Wall Street Journal, Nick Timiraos and S. Mitra Kalita (12/14/2010)
No Correlation between Fed Funds Rate & 30 Year Fixed Rates
The FOMC in Layman Terms
The Federal Open Market Committee is a government group that makes monetary policy. It's job is akin to the gas-and-brake pedals on a car -- speed up or slow down the vehicle that is the U.S. economy. The FOMC has 12 members and is headed by Chairman Ben Bernanke. 8 times annually, the Fed gets together to discuss a host of economic issues and, when the meeting is done, the members vote on whether to raise, lower, or leave unchanged an interest rate called the Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks lend money to each other overnight. Simplified, when the Fed Funds Rate is high, banks end up paying a lot of money in interest payments and are less inclined to borrow from one another, thereby slowing down the economy. When the Fed Funds Rate is low, borrowing is cheap, and the economy is spurred forward. Because the Fed Funds Rate is directly related to Prime Rate, the basis of business and consumer borrowing, the FOMC's vote carries huge implications for the economy as a whole.
The FOMC Does NOT Vote on Mortgage Rates
The FOMC usually meets on a Tuesday and adjourns at 2:15 PM ET. This week, thee group is expected to leave the Fed Funds Rate unchanged within its current range of 0.000-0.250 percent. This is the lowest Fed Funds Rate is history and the Fed has said that the Fed Funds Rate will stay near zero for "an extended period". However, by 2:30 PM, news stories will surface about how the Fed voted to "leave rates unchanged", or "raised rates" today.
The proper verbiage from the press would be "the Fed voted to leave the Fed Funds Rate unchanged today", but they'll just say "rates". This is a big deal only because most Americans think that the Federal Reserve controls daily mortgage rates. It doesn't. But because of this misconception, when Americans read about the FOMC and "rates", they just assume the story is about mortgage rates. It's not. The FOMC doesn't control mortgage rates.
The Fed Funds Rate is untied from mortgage rates because the Fed Funds Rate is an short-term "overnight" rate while the 30-year fixed rate is a long-term rate. Borrowing money is much different over 8 hours as compared to 263,000 hours.
Despite the near-universal belief that the Fed Funds Rate will not be changed, there's always the chance that the Fed says something "good" for the economy, causing mortgage rates to spike. It's happened in the past and it could happen again. So, if you're shopping for a mortgage, talk to your loan officer in advance of the Fed's 2:15 P.M. ET announcement on a Tuesday because from here on out, inflation will result in rising mortgage rates and you should want to "lock-in" the most favorable rate BEFORE they rise, again.
The Federal Open Market Committee is a government group that makes monetary policy. It's job is akin to the gas-and-brake pedals on a car -- speed up or slow down the vehicle that is the U.S. economy. The FOMC has 12 members and is headed by Chairman Ben Bernanke. 8 times annually, the Fed gets together to discuss a host of economic issues and, when the meeting is done, the members vote on whether to raise, lower, or leave unchanged an interest rate called the Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks lend money to each other overnight. Simplified, when the Fed Funds Rate is high, banks end up paying a lot of money in interest payments and are less inclined to borrow from one another, thereby slowing down the economy. When the Fed Funds Rate is low, borrowing is cheap, and the economy is spurred forward. Because the Fed Funds Rate is directly related to Prime Rate, the basis of business and consumer borrowing, the FOMC's vote carries huge implications for the economy as a whole.
The FOMC Does NOT Vote on Mortgage Rates
The FOMC usually meets on a Tuesday and adjourns at 2:15 PM ET. This week, thee group is expected to leave the Fed Funds Rate unchanged within its current range of 0.000-0.250 percent. This is the lowest Fed Funds Rate is history and the Fed has said that the Fed Funds Rate will stay near zero for "an extended period". However, by 2:30 PM, news stories will surface about how the Fed voted to "leave rates unchanged", or "raised rates" today.
The proper verbiage from the press would be "the Fed voted to leave the Fed Funds Rate unchanged today", but they'll just say "rates". This is a big deal only because most Americans think that the Federal Reserve controls daily mortgage rates. It doesn't. But because of this misconception, when Americans read about the FOMC and "rates", they just assume the story is about mortgage rates. It's not. The FOMC doesn't control mortgage rates.
The Fed Funds Rate is untied from mortgage rates because the Fed Funds Rate is an short-term "overnight" rate while the 30-year fixed rate is a long-term rate. Borrowing money is much different over 8 hours as compared to 263,000 hours.
Despite the near-universal belief that the Fed Funds Rate will not be changed, there's always the chance that the Fed says something "good" for the economy, causing mortgage rates to spike. It's happened in the past and it could happen again. So, if you're shopping for a mortgage, talk to your loan officer in advance of the Fed's 2:15 P.M. ET announcement on a Tuesday because from here on out, inflation will result in rising mortgage rates and you should want to "lock-in" the most favorable rate BEFORE they rise, again.
Monday, December 13, 2010
Sellers: Price to Your Market
Daily Real Estate News, December 13, 2010
In this tough market, price reductions are more acceptable than they used to be, real estate broker and author Dian Hymer says.
Certainly, they are more common because sellers have more difficulty setting reasonable prices, especially when prices change frequently.
With buyers ignoring properties they believe are overpriced, it is especially important for sellers to quickly correct noncompetitive pricing, according to Hymer.
Sellers should be prepared to lower their price more than once if they are out of sync with the market. The best measure is the sale prices of comparably priced properties that closed after the house was put on the market.
Source: Inman News, Dian Hymer (12/07/2010)
In this tough market, price reductions are more acceptable than they used to be, real estate broker and author Dian Hymer says.
Certainly, they are more common because sellers have more difficulty setting reasonable prices, especially when prices change frequently.
With buyers ignoring properties they believe are overpriced, it is especially important for sellers to quickly correct noncompetitive pricing, according to Hymer.
Sellers should be prepared to lower their price more than once if they are out of sync with the market. The best measure is the sale prices of comparably priced properties that closed after the house was put on the market.
Source: Inman News, Dian Hymer (12/07/2010)
Condos Face FHA Deadlines
Daily Real Estate News, December 13, 2010
An estimated 2,200 condominium projects nationwide last week lost their eligibility for Federal Housing Administration-guaranteed sales and refinancing.
Unless condo officials take action, another 23,000 residential condos with housing units numbering in the tens of thousands will lose their eligibility by spring. That means that buyers of units in these buildings won’t be eligible for FHA financing.
This situation was the result of an effort by the FHA to guarantee that condos and their underlying home owners associations have adequate budgets, legal documents, and other things that lead to financial stability.
In 2009, the FHA spelled out tough standards that required that condo projects approved for FHA financial before 2007 have their approvals renewed by Dec. 7, 2010. About 25,000 projects missed the cutoff. Because there were so many, the FHA extended the deadline, setting new deadlines through out 2011. The only losers were the 2,200 projects that had the oldest approvals.
The FHA urges all condominium owners to get in touch with their associations and push them to meet the revised deadlines.
For more information, or to check the status of a condo project, visit (select by state): https://entp.hud.gov/idapp/html/condlook.cfm.
Source: Charlotte Observer, Kenneth R. Harney (12/11/2010)
An estimated 2,200 condominium projects nationwide last week lost their eligibility for Federal Housing Administration-guaranteed sales and refinancing.
Unless condo officials take action, another 23,000 residential condos with housing units numbering in the tens of thousands will lose their eligibility by spring. That means that buyers of units in these buildings won’t be eligible for FHA financing.
This situation was the result of an effort by the FHA to guarantee that condos and their underlying home owners associations have adequate budgets, legal documents, and other things that lead to financial stability.
In 2009, the FHA spelled out tough standards that required that condo projects approved for FHA financial before 2007 have their approvals renewed by Dec. 7, 2010. About 25,000 projects missed the cutoff. Because there were so many, the FHA extended the deadline, setting new deadlines through out 2011. The only losers were the 2,200 projects that had the oldest approvals.
The FHA urges all condominium owners to get in touch with their associations and push them to meet the revised deadlines.
For more information, or to check the status of a condo project, visit (select by state): https://entp.hud.gov/idapp/html/condlook.cfm.
Source: Charlotte Observer, Kenneth R. Harney (12/11/2010)
Rising Rates Could Get Buyers Moving
Daily Real Estate News, December 13, 2010
Ironically, it could be rising interest rates that finally push home buyers off the fence and into the market.
While Congress is debating the tax-cut compromise, the financial markets have interpreted the proposal as a development that will likely push mortgage interest rates higher than they have been for months.
Analysts are predicting that buyers will move quickly when it looks like rates are going up and are unlikely to come down. "Once people see this might actually be the bottom, they’ll go for it," says Paul Dales of Capital Economics.
The average rate for a 30-year fixed loan increased to 4.61 percent in the week ended Thursday, Dec. 9, from 4.46 percent the previous week. The average 15-year rate rose to 3.96 percent from 3.81 percent.
Source: Fortune, Nin-Hai Tseng (12/10/2010)
Ironically, it could be rising interest rates that finally push home buyers off the fence and into the market.
While Congress is debating the tax-cut compromise, the financial markets have interpreted the proposal as a development that will likely push mortgage interest rates higher than they have been for months.
Analysts are predicting that buyers will move quickly when it looks like rates are going up and are unlikely to come down. "Once people see this might actually be the bottom, they’ll go for it," says Paul Dales of Capital Economics.
The average rate for a 30-year fixed loan increased to 4.61 percent in the week ended Thursday, Dec. 9, from 4.46 percent the previous week. The average 15-year rate rose to 3.96 percent from 3.81 percent.
Source: Fortune, Nin-Hai Tseng (12/10/2010)
Wednesday, December 8, 2010
Purchase Applications Rose for Third Week
Daily Real Estate News, December 8, 2010
Applications for mortgages to purchase homes rose 1.8 percent last week compared to the previous week on a seasonally adjusted basis. On an unadjusted basis, purchase applications rose 21.3 percent compared to the previous week, which included Thanksgiving. Applications were up 12 percent compared to the same week a year ago.
This is the third week that applications to purchase homes have increased, reaching the highest level since early May.
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.66 percent from 4.56 percent, while 15-year fixed-rate mortgages increased to 3.98 percent from 3.91 percent.
Source: Mortgage Bankers Association (12/08/2010)
Applications for mortgages to purchase homes rose 1.8 percent last week compared to the previous week on a seasonally adjusted basis. On an unadjusted basis, purchase applications rose 21.3 percent compared to the previous week, which included Thanksgiving. Applications were up 12 percent compared to the same week a year ago.
This is the third week that applications to purchase homes have increased, reaching the highest level since early May.
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.66 percent from 4.56 percent, while 15-year fixed-rate mortgages increased to 3.98 percent from 3.91 percent.
Source: Mortgage Bankers Association (12/08/2010)
Monday, December 6, 2010
U.S. Orders End to Dual-Track Process
Daily Real Estate News, December 6, 2010
Acting Comptroller of the Currency John Walsh last week told banks to stop foreclosure proceedings if the borrower is starting or in the midst of a loan-modification program.
This dual-track system has hastened foreclosure for many borrowers who were caught between instructions to pay lower payments during a loan-modification trial period and punishing fines for failure to pay the full amount if the loan mod failed.
One regulator disagreed with the change, saying that lenders needed to be able to press forward with foreclosures, especially when borrowers clearly weren’t going to meet loan-modification standards.
Source: Associated Press, Alan Zibel (12/01/2010)
Acting Comptroller of the Currency John Walsh last week told banks to stop foreclosure proceedings if the borrower is starting or in the midst of a loan-modification program.
This dual-track system has hastened foreclosure for many borrowers who were caught between instructions to pay lower payments during a loan-modification trial period and punishing fines for failure to pay the full amount if the loan mod failed.
One regulator disagreed with the change, saying that lenders needed to be able to press forward with foreclosures, especially when borrowers clearly weren’t going to meet loan-modification standards.
Source: Associated Press, Alan Zibel (12/01/2010)
Friday, December 3, 2010
Mortgage Rates Continue Upward Climb
Daily Real Estate News, December 3, 2010
Freddie Mac reported that fixed-rate mortgages rose for a third consecutive week during the period ended Dec. 2.
· Interest on 30-year loans inched up to 4.46 percent from 4.4 percent.
· Rates on 15-year mortgages averaged 3.81 percent, an increase from 3.77 percent a week ago.
Adjustable-rate mortgages were slightly higher as well:
· One-year ARM rose up to 3.25 percent from 3.23 percent
· Five-year ARM moved up to 3.49 percent compared to 3.45 percent.
Source: Inman News (12/03/10)
Freddie Mac reported that fixed-rate mortgages rose for a third consecutive week during the period ended Dec. 2.
· Interest on 30-year loans inched up to 4.46 percent from 4.4 percent.
· Rates on 15-year mortgages averaged 3.81 percent, an increase from 3.77 percent a week ago.
Adjustable-rate mortgages were slightly higher as well:
· One-year ARM rose up to 3.25 percent from 3.23 percent
· Five-year ARM moved up to 3.49 percent compared to 3.45 percent.
Source: Inman News (12/03/10)
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