Monday, January 25, 2010

Re-Election of Federal Chairman Ben Bernanke

This week the Senate will vote on the re-election of Fed Chairman Ben Bernanke, and will most likely be confirmed to a second term, as the Chairman will need 60 Senate votes to break a procedural delay, and 51 to be confirmed.

More importantly, the Chairman’s reelection is needed to help continue our current mortgage and housing recovery, with two major issues at hand, which will be addressed in this week’s meeting.

The first issue is the Fed's line that has appeared within all Policy Statements during 2009, saying that present economic conditions should "warrant exceptionally low levels of the Federal Funds Rate for an extended period." This has helped to fuel the carry trade, where institutions can buy securities including Mortgage Bonds by borrowing at exceptionally low rates, with little money down to make the purchase, and financing the rest. This allows for enormous gains, but should the Fed signal that they may be thinking about a change to their accommodative policy, this carry trade will begin to unwind and Mortgage Bonds will sell off causing home interest rates to increase.

The second issue deals with the upcoming expiration of the Mortgage Backed Security purchase program. The Fed has been telling us, and signaling to the markets, that this program will end as planned on March 31st. But there has been speculation that the Fed may add to their purchases and extend the deadline. With the expiration close by, the Fed's guidance on this topic will be very important to the direction of Mortgage Bond prices.

Sunday, January 10, 2010

A Decade of Dramatic Developments

At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage.

What a difference a decade makes

“The real estate industry has seen tremendous change and evolution over the past decade,” said NATIONAL ASSOCIATION OF REALTORS® President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, REALTORS® have not only anticipated and adapted to the evolving needs of their clients and customers, but also have influenced industry trends and innovations that will carry us into the future.”

In 1999, buyers who went online in search for a home were in the minority – only 37 percent of buyers used the Internet in their home search, according to data from the NAR Profile of Home Buyers and Sellers. Today, 90 percent of buyers are searching online, and the real estate industry has responded. Sites like, which attracts nearly 12 million total visits every month, have evolved to gives today’s buyers what they want – not just property listings, but multiple photos, online videos, mapping features, and comprehensive neighborhood information, as well.

Median home values over the past decade have increased more than 25 percent, from $137,600 in November 1999 to $172,600 in November 2009 (the most recent existing-home data available). Fewer people are buying detached, single family homes – 82 percent in 1999 compared to 78 percent in 2009 – but more people are buying homes in suburban neighborhoods – 46 percent in 1999 compared to 54 percent today.

Buyers themselves have also changed. A smaller proportion of married couples are buying homes these days; while married couples comprised 68 percent of all home purchases at the beginning of this century, they represent 60 percent of all buyers today. Single men and women have made up the difference – single men purchased 10 percent of all homes last year, compared to only 7 percent 10 years ago. Single women now represent more than one-fifth of all home buyers – 21 percent, up from 15 percent in 1999.

Other things haven’t changed. The median age for home buyers last year was 39, just as it was in 1999. Neighborhood quality, affordability, and convenience to work and school have consistently been top priorities for both past and present buyers. And eight out of 10 recently surveyed consumers believe that owning a home is an investment in their future.

“REALTORS® have been around for more than 100 years, but one constant during that time has been the persistence of homeownership as the American Dream,” said Golder. “As the first decade of this century comes to a close, NAR stands ready to meet the many challenges and opportunities that lie ahead by helping our REALTORS® members better serve their clients and communities and ensuring that those dreams of homeownership remain possible for all who want to achieve it.”

Source: National Association of Realtors

10 Strategies For Significant Savings For 2010

1) Pick a friendlier credit card
“Being on the wrong card can cost people thousands more a year in interest rates and fees,” says Schwark Satyavolu, a co-founder of comparison tool “Even if you pay off the balance in full each month, you could be leaving hundreds of dollars on the table in rewards.” Terms and conditions are changing rapidly as banks add fees and jack up interest rates in preparation for the new federal regulations that go into effect on Feb. 22. After that date, compare your options using a site like or to make sure you have the best card for your financial situation and spending habits.

2) Track your cash
Shoppers can’t account for an average $21 spent each week, according to a September survey by Visa (V). Tallied up, that’s $1,092 per year in mystery purchases. Sign up for a free financial management site like or, which sync with your bank accounts to automatically sort and track purchases. You can also set budgets for individual categories, and receive email or text alerts when your spending nears that pre-set limit.

3) Join loyalty clubs
Retailers offer benefits in loyalty programs, knowing that most customers are apt to forget their cards or otherwise miss out on perks, says Larry Chiagouris, a marketing professor at Pace University in New York City. Don’t make that mistake: Keep cards in your wallet or on a key-ring, or add the account numbers to your smartphone. Loyalty programs can cover varied purchases, including books, movie theater excursions, restaurant meals and even flu shots.

4) Hunt for coupon codes
The marketing strategy of offering coupon codes to cement customer loyalty is increasingly popular with retailers. Take advantage. Step 1: Type a retailer’s name and “code” into Google. Step 2: Use the results to save significantly on your in-store and online purchases.

5) Shop the grocery sales circular
Though many products on circulars only come up on sale once every 10 to 12 weeks, by shopping smart, you can still cut your bill by more than 50% with a combination of coupons, weekly grocery store sales and store rebates. “They’ll practically pay you to take that bag of potato chips out of the store,” says Cindy Chapman, a spokeswoman for social networking site

6) Pay cash
Buy-now-pay-later of credit cards sound friendly, but are designed to entice you to spend more. A 2008 study by researchers at the University of Toronto and the Federal Reserve Bank of Kansas City found that the opportunity to earn rewards led more consumers to pay by credit, even if they were already carrying a balance. Instead, flash bills. It will keep you in check and might also lead to discounts on everything from health care to jewelry to gasoline.

7) Reassess your phone plan
Carriers constantly offer new plans and promotions -- which may mean a better deal than your current selection. Use tools at and to compare available options against your current plan. Infrequent talkers (fewer than 200 minutes a month) may save more in the long run by paying an early-termination fee and switching to prepaid service.

8) Cut spending on pets
The fuzziest members of your family need to adhere to the household budget, too. In 2008, pet owners spent an average $670 per dog and $447 per cat on vet care, food, grooming, treats and toys, according to the American Pet Products Association. Pay less by shopping around. Petco offers its signature plush dog toy for $5.97, while Wal-Mart has a three-pack of a similar toy for $7 -- roughly $2.33 apiece.

9) Haggle
“When times get tough, consumers have to get aggressive,” says Scott Testa, an assistant professor of business administration at Cabrini College in Radnor, Pa. “On a high-priced item, you’re crazy if you don’t haggle.” It doesn’t take a hard-line negotiation in most cases, either – you just have to ask if there’s any chance for a better price, he says. For example, 68% of landlords said they would lower rents or give a month or more free to retain tenants, according to a recent survey. Collective buying groups like serve as haggling on training wheels, offering prenegotiated discounts if a certain number of shoppers buy in.

10) Seal up your home
Don't let the air you're paying to warm in the winter and cool in the summer escape through cracks around windows, doors, electrical outlets and other places. Enough sealing products like caulk and weather-stripping to block drafts would set you back just $25 to $50. In return, you’ll see your home’s energy efficiency improve by up to 20%, according to the Environmental Protection Agency. For the average household, that could amount to more than $400 annually.

Trouble for Commerial Loans in 2010

Banks holding commercial real estate loans will feel more pain in 2010, with real estate values having plunged.

 Industry observers say a majority of loans due through 2014 may be underwater, meaning more banks will be forced to restructure loans to avoid costly foreclosures. U.S. banks had a historic $1.3 trillion of commercial mortgages outstanding as of Sept. 30, with about $60.5 billion of them delinquent.

Approximately $650 billion in banks' boom-time CRE loans are coming due over the next four years, with more than $150 billion maturing in 2010. "Everyone's view is pretty much consistent on this: there are significant numbers of commercial mortgage loans that are underwater because real estate property values have dropped significantly," says Robert Gordon, a partner at the law firm Mayer Brown LLP. "Even for loans that are performing on a cash-flow basis, when they hit maturity, it is going to be difficult to refinance them without additional equity."

However, some industry watchers say concerns of a credit meltdown may be overblown. "Everything is dependent on the economy and how quickly do we see a recovery taking place," says Keith Leggett, the senior economist at the American Bankers Association. "That will be a key factor affecting the commercial real estate market. Because [when] you have high levels of unemployment, you're probably also going to see higher vacancy rates. This is going to put pressure on rents.

"Source: American Banker, Matthew Monks (12/29/09)
REALTOR® Magazine-Daily News-Trouble for Commerial Loans in 2010 

New RESPA Laws Go Into Effect - Mortgage Disclosure Improvement Act

On July 30th, 2009 the Mortgage Disclosure Improvement Act was passed into law in order to provide a greater level of protection and disclosure for potential mortgage borrowers. This act has been implemented in stages, with the final sections taking effect on January, 1st 2010.

How will this affect you as a home buyer besides meaning you have even more paperwork to sign at closing? Well the answer is mainly it can change the entire time line of the closing. One of the main changes is that when a lender has to make changes to the terms of the loan such as rate, or closing costs, etc they have to reissue the good faith estimate (GFE) and the buyer must take 3 business days to review the new GFE. So if for some reason there was a change at the closing table, the closing would be automatically pushed back 3 days. You can see how this could potentially cause big problems at closing.

The main point to remember for Buyers as well as Agents is the 3/7/3 rule
1. "You are not required to complete this agreement merely because you have received thse disclosures or signed a loan application" Must be stated clearly on the Truth In Lending (TIL)

2. The buyer must wait 7 business days after receiving the initial disclosures to close on the loan. So the buyer must receive the GFE and the TIL which must disclose the final Annual Percentage Rate (APR) at least 7 days prior to closing.

3. Lenders can collect no fee's other than the credit report fee (loan App fee's, Appraisals, ETC) until the TIL has been delivered, and if it has been delivered by mail, they must wait 3 business days to do so.

4. If the final APR deviates from the initial GFE by more than .125% the TIL must be re-disclosed and the 3 business day waiting period starts over.

These new regulations make it more important than ever that you have a Realtor who is a full time professional agent who is able to understand and guide you through the entire home buying process. If you can find one who also used to be a very successful loan officer that would be even better (hint, hint). Having the right agent can mean the difference between moving into your new home or having all your furniture stuck in the back of a moving truck for 3 days in the hotel parking lot.

Straight from HUD
HUD Government News Release

Loan Modifications Hit Credit Scores

Applying for a mortgage modification and being in a months-long trial period can devastate a home owner’s credit score.

Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.

Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers’ mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.

Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.

Source:, Tami Luhby (12/28/2009)

U.S. home prices are flat, with Bay Area Showing Most Improvement

Prices overall see a tiny gain in October, a closely watched report says.
  • San Francisco rises 1.7%,
  • L.A. is up 0.7%.
  • Tampa, Fla., has the worst showing.
  • Las Vegas is still on the losing side.
San Francisco and Tampa, Fla., sit at opposite corners of the country and at opposite ends of the housing recovery.

As home prices are picking up nationally, the San Francisco Bay Area has shown improvement for seven consecutive months and posted the strongest gains in home prices in October out of 20 metropolitan regions, according to the Standard & Poor's/Case-Shiller index, a closely watched national measure of home prices, which was released Tuesday.

A moderate building pace and less aggressive lending during the boom years have helped the Bay Area gain ground, experts said, and some developers are buying up land and preparing building plans there.

At the other end of the spectrum lies Tampa, where home prices in October showed the steepest drop. The decline reflects a metropolitan area ravaged by the fallout of overbuilding and an economy that was heavily reliant on the building industry.

The stark differences between the two areas reflect the progression of the housing recovery: Clear winners and losers are emerging, even as concerns are growing that all regions could stumble anew next year as government support expires and foreclosures put pressure on prices.

The index of home prices in 20 metropolitan areas inched up 0.4% in October, but the relatively flat performance indicated that the housing recovery is faced with a chilly winter slowdown. Eleven cities posted gains on a month-over-month basis, eight cities recorded declines, and one was unchanged.

All 20 cities continued to show improvement on a year-over-year basis, with annual price declines moderating. The index was down 7.3% in October compared with October 2008 and was off 29% from its July 2006 peak.

San Francisco posted the strongest October price increase: 1.7%. UC Berkeley economist Kenneth Rosen said the Bay Area numbers have improved as bank-owned properties have increasingly made up a smaller percentage of housing stock for sale.

"We had a lower percentage of foreclosures," Rosen said. "We didn't have as much building, first of all, and we didn't have as much of the aggressive lending."

Unemployment in the Bay Area remains high, with San Francisco's jobless rate hitting 9.7% in November, but the dearth of housing stock has helped prices regain momentum, said Richard Gollis, principal at real estate consulting firm Concord Group.

As a result, developers are buying land for future opportunities, Gollis said."You are starting to see developer and capital-market interest in the Bay Area," he said.

Home prices in the Southland, which sustained one of the nation's biggest declines, have also risen, propelled by buyers eager to snatch up deals on deeply discounted foreclosure properties. Los Angeles was up 0.7% and San Diego, 1.1%.

"You might have thought that California would be one of the worst-performing states," said Robert J. Shiller, a Yale University economist and co-creator of the index. "But on the other hand, Californians have learned to think like real speculators over the years, and speculators know you buy when the news is still bad and market timing means you don't wait until the market starts going up."

Gus Faucher, director of macroeconomics at Moody's, cautioned that though California's bigger metropolitan areas have improved, places such as the Inland Empire and the Central Valley are likely to continue to see trouble.

"It is the outlying areas that remain a problem," Faucher said.
On the other side of the country, Tampa-area home prices dropped 1.2% in October.

Similar to Tampa, Las Vegas is paying the price for its affair with overbuilding during the boom years. Las Vegas remains the one major metropolitan area in the country that has shown no sign of improvement this year, the index showed.

On a macro level, many experts worry that once certain policies and programs wind down -- among them low interest rates, tax incentives for buyers and an increased accessibility of mortgages backed by the Federal Housing Administration -- the housing market could again falter next year.

"All in all, this report should be described as flat," said David M. Blitzer, chairman of the index committee at Standard & Poor's. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip."

Source:  Los Angeles Times, December 30th Article:  Alejandro Lazo

To Tax Or Not To Tax -

How will local governments respond to the current fiscal crisis?

As local governments in California struggle to survive the impact of the state’s current, ongoing financial meltdown, some may be surprised to learn that their city and county bureaucracies have no intention of raising taxes to bring in much needed revenue. In fact, for many local governments, it is the last thing on their lists.

At least, that is what they say in response to questioning. According to a recent survey by the California Public Policy Institute, California Public Policy Institute  more than 85 percent of the responding cities and counties indicated that they are very or somewhat unlikely to raise taxes to address their fiscal problems. On the other hand, the same respondents indicated that they are much more likely to address shortfalls by cutting back programs, imposing hiring freezes and eliminating positions. This still poses problems for real estate professionals. For example, according to the survey, planning and zoning services will experience some of the largest cuts at the county level.

However, if the recent past is an indication, local governments and their residents will have more new taxes in their future. According to the website, California City  November 2009 municipal elections featured 57 measures concerning taxes, fees or bonds for cities, counties, special districts and schools. That represented exactly half the total number, 114, of local ballot measures during the election cycle.

Passage rates for the 57 tax and fee measures were similar to the passage rates in previous years. Nearly two-thirds of those requiring a majority vote, municipal tax measures, passed. Slightly more than half of the special tax and bond measures requiring a two-thirds majority vote were approved. Also, two-thirds of the school parcel tax measures requiring two-thirds vote and all of the school bond measures requiring 55% voter approval were passed.

Also of note, all five municipal parcel tax measures passed, but three out of four municipal business license tax measures failed.