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Archive for December 2011


Home Sales Overestimate 14 Percent Over Previous 3 Years

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

Home sales revised 14 percent downward over last three years.

The National Association of Realtors overestimated sales for the past three years and made a downward revision of its already depressed sales numbers. Specifically, sales were about 14 percent worse than previously thought, which comes out to 3.5 million units that were “double counted”. You can read about the nuts and bolts of the mistake HERE, but the general explanation is that the numbers were “drifting” due to a big shift away from For Sale By Owner sales to Realtor sales. Homes sold by owners are not counted by the listing services tracked by the National Association of Realtors, so when a greater share of home sellers began using realtors (who use such listing services), that artificially increased home sale numbers.

CNBC’s Diana Olick reported on the revision, and made a number of good points about the “meaning” of the lower numbers.  She points out, rightly, that although fewer homes were in actuality sold, this doesn’t change all that much, including:

-         General sales rates were already low to begin with and at all-time lows.

-         The estimates of home prices and their drop since 2006 won’t change.

-         The inventory of unsold homes in month’s supply is still below average.

-         New homes built are not affected.

Even more important for the health of the housing market, the number doesn’t touch foreclosures or the number of borrowers behind on mortgage payments. Distressed borrowers and foreclosures are the main impediment to recovery.

All of this is a way of saying… don’t worry too much about the news. The number could hurt perceptions of the housing market, but doesn’t change the fundamentals of the crash, or the recovery we are starting to see today.

Jobless claims fall to a 3-year low.

Last week, unemployment claims dropped to the lowest level since April 2008. Claims fell by 4,000 to 364,000 for their third straight weekly drop. The number adds to the trend we have seen lately of positive job statistics.

A recovering economy?

Last week, the Associated Press ran an article detailing some of the positive economic metrics that suggest the probability of another recession is extremely low. The article stated that “most analysts now rule out another recession…” and that the “economy will grow at an annual rate of more than 3 percent from October through December.”  The article points to fewer unemployment benefit applications, more jobs added, more consumer spending, more consumer confidence, falling gas prices, and restocked inventories.

Interest rates continue to fall.

Last week, the 30-year fixed interest rate fell to 3.91 percent nationally, which is the lowest average rate for this fixed term since the 1950s. Many economists suggest that this rate could continue to fall. Central Coast Lending is able to beat this rate (we bring down the national average). We go as low as 3.5 percent for the 30 year fixed (3.612 percent APR) and 3 percent for the 15 year fixed (3.258 percent APR). Give us a call to discuss the points associated with those rates. Now that you are done with the shopping and gift giving of the holiday season, take advantage of these low rates to refinance and save on monthly payments.



Mortgage Matters 12/17/11

GUEST: Wes Burk – Owner, Patterson Realty

In the last Mortgage Matters of 2011, the Mortgage Experts get reflective. Momentum in the job market has built. Inflation rate has decreased. The stock market and bond market improve. In the last ten years, what products are more expensive and what products are cheaper? What will interest rates do in the New Year? What does it all mean?  Patterson Realty Owner Wes Burk joins us to talk appraisals and the double-counting mistake in the National Association of Realtors home sales numbers.


Homeowners to Pay for Payroll Tax Cut Extension [UPDATE]

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

Happy holidays! We thought we would try a slightly different format this week. Let us know if you like the presentation.

Senate pays for payroll tax cut on the back of homeowners

[UPDATE: The House voted against this bill, so we are back to the drawing board. The following information will not apply, but is still an interesting proposal that may continue to come up in discussion.]

Over the last few weeks, we have been hearing quite a bit about the expiration of the payroll tax cut.  The Senate renewed the lower rate, but it came with a price tag for homeowners. To pay for the $33 billion 2-percent payroll tax cut over the next two months, the Senate approved an increase in fees for mortgages backed by Freddie Mac, Fannie Mae, and the Federal Housing Administration (FHA).

The fee increase amounts to $15 a month more for a $200,000 mortgage ($180 a year) and $30 more for a $400,000 mortgage ($360 a year) and is built into the loan.

In addition to paying for the tax break, the fee is used to incentivize homeowners to get into the private market. Nearly nine in 10 mortgages are backed by a government sponsored finance organizations.

The two month savings for the cut is estimated to be $165 for someone making $50,000.

European debt trouble alarms markets
And now for your weekly “Europe debt issues” update – Fitch ratings announced it was considering cuts to the credit scores of Italy, Spain, Belgium, Cyprus, Ireland and Slovenia. Additionally, we received news that Ireland’s economy shrunk, France faces a recession next year, Spain struggles to cut its debt, and bankers and hedge funds are balking at forgiving Greek debt for the purpose of a bailout.  The market responded in kind with drops and general volatility.

Generally positive jobs statistics
California’s unemployment rate dropped to 11.3 percent last month, which is its lowest since May 2009. The number is somewhat misleading, however, as the state only added 6,600 jobs. Much of the drop can be attributed to the unemployed leaving the workforce, and so are no longer counted under the metric.

Nationally, the jobs outlook is a bit better. We added 100,000 jobs for a five-month stretch from July through November for the first time since 2006, and more companies are planning to add jobs since 2008. Jobless claims dropped by 19,000 to 366,000 in the week ending on December 10 for the lowest level in 3 years.

SEC announces lawsuit of ex-Freddie and Fannie executives
The Securities and Exchange Commission decided to bring a lawsuit against six former top Freddie Mac and Fannie Mae executives for misleading investors about exposure to subprime loans. The action amounts to fraud charges for authorizing misleading statements about balance sheets.

Refinance activity increases
Last fall, interest rates took a plunge to some of the lowest ever and then shot up by Christmas time. This year, rates once again hit new lows, but with Christmas just under two weeks away, we are bucking the seasonal trend and still seeing historically low rates. Accordingly, refinance activity increased 9 percent last week.

Interest rates remain low for the holiday season

30 Year Fixed 3.750 percent (3.884 percent APR), 15 Year Fixed 3.250 percent (3.489 percent APR), 30 Year High Balance 3.750 percent (3.968 percent APR), 30 Year FHA 3.5 percent (4.543 percent APR), 30 Year VA 3.5 percent (3.736 percent APR).


Mortgage Matters 12/10/11

Sloooooow steady growth. That is the forecast for the coming year, as we have seen job growth begin to pick up.  Jason and Dan have the studio to themselves for the second straight week, and the Mortgage Experts take advantage by discussing a range of topics, from a market recap, to interest rate trends, to the meaning of the no cost loan, to VA loan specifics.


Local Employment, Income Numbers and Rate Update

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

According to the Tribune, county employment numbers have gradually improved over the past three months. Since July, about 2,800 jobs have been added, which is an increase of 3 percent off the previous number.  County employment peaked in 2007 at 104,600 nonfarm jobs. After October’s gains, the number of jobs ticked up to 96,700, which is still down 8.2 percent from the peak. Despite the slight increase in jobs, unemployment actually increased to 9.7 percent from 9.6 percent in September.

The recession has hit the California middle class particularly hard. As reported by the Tribune, the Public Policy Institute of California released a study showing the proportion of “middle class” households has dropped to 49.7 percent of the population.  Middle class is defined as a yearly income of between $44,000 and $155,000.  The “upper class” accounts for 13.7 percent of households, and the “lower class” for 36.6 percent. Since peaking at 60 percent of the population in 1980, the California middle class has shrunk to the current 30 year low.

The Central Coast middle class has been hit the hardest in the state. Since 2007, median household income has declined by 17.9 percent.

Nationally, the unemployment rate is 8.6 percent. In a 60 Minutes interview, President Barack Obama indicated he thought it “possible” the rate would continue to decline and reach 8 percent come November election time.  Election prognosticators say that unemployment and job numbers will play an important factor in the campaign, as Obama entered office with an 8 percent unemployment rate that has only gotten worse amidst the global economic crisis.

The Dow dropped today on – what else – concern about European debt. Last Friday, the 17 nations that use the euro currency agreed to a plan detailing more fiscal discipline, debt protection mechanisms, and to donate 200 billion euros to the International Monetary Fund (IMF) to help eurozone members with debt problems. The market responded favorably to the announcement initially, but today (Monday) the Dow fell 162 points in part due to skepticism that the deal created a viable long-term solution. The drop ended a two week rally.

Rates are favorable this week. We have the 30 year fixed at 3.75 percent (3.884 percent APR) and the 15 year fixed at 3.250 percent (3.489 percent APR).  FHA and VA 30-years look extremely favorable as well, at 3.5 percent (4.543 percent APR) and 3.5 percent (3.736 percent APR) respectively.


Labor Market Recovery Seems to be Picking up Steam

The labor market recovery seems to be picking up speed. Weekly US claims for unemployment benefits dropped to a 9-month low last week. Jobless claims fell to 23,000 to 381,000, down from 404,000 the week before.


Professional Insight

We have reserved space on our website for real estate, home maintenance, and financial professionals to add insight and advice for our readers. Additionally, we have began a series called “Lending a Hand”, in which we address the tightening lending standards and meticulous lending process to let you know some of the difficulties your loan might go through in today’s climate. Click “More” for an Archive of the items written in this section. Read more »


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Mortgage Matters 12/3/11

Interest rates remain unseasonably low and business remains robust in a typically down season… what does it mean?  Dan and Jason have the studio to themselves this week and give you the latest from the market, interest rates, and real estate news.


Housing Numbers and Rate Update

[We post a weekly column on local realtor Keith Byrd's Real Estate Blog in which we recap recent news of the economy, real estate, mortgage, and interest rates.  What follows is that column.]

This week, we begin with a variety of recent housing numbers.

To start, 65.1 percent of U.S. households own a home, which is the lowest mark since 1996 as reported by the Tribune, according to the Census Bureau. The bubble years helped peak home ownership above 70 percent.

Foreclosure inventory sits at a record high of 4.29 percent of all loans. The time it takes for a foreclosure to get through the legal system is 631 days, a record. Foreclosure properties sell at a discount and bring down prices of nearby homes. Depressed pricing depresses investment. The supply of foreclosure properties will need to be worked through as the housing market recovers.

October posted some gains for the housing market. New home sales increased 1.3 percent in the month, up to 307,000. Overall, pending home sales increased by 10.4 percent in October, which is the highest number in a year. While positive, the numbers are still well below healthy market expectations. Economists suggest a strong housing market would have 700,000 new home sales a month. On the negative side, we had a very small number of new homes hit the market in October – just 162,000.  The number suggests builders have stopped new projects due to low demand, difficulty in obtaining financing, and a surplus of existing homes on the market.

Last week, the Dow logged large gains to erase the small mid-November slump. The largest gain occurred after major central banks around the globe took action to ease debt tension and make it cheaper and easier for banks to borrow dollars when needed. In practice, this means that European banks have better access to dollar liquidity – something they haven’t had due to concern about the European debt issue and exposure to potential losses. This action is an attempt to avoid the kind of major credit crunch we saw in 2008, which would restrict lending and investment and shrink the global economy.

The nation’s jobless rate fell to 8.6 percent in November. In some ways, the number is misleading. Employers added 120,000 jobs, true, but the 0.4% drop in the unemployment number is also due to the 315,000 people who stopped looking for work and left the workforce.

Rates have improved over the past week. Nationally, the average for the 30-year fixed is 4 percent and 3.35 percent for the 15-year fixed.  At Central Coast Lending, we offer a 30-year fixed starting at 3.750 percent (3.892 percent APR) and a 15-year fixed at 3.250 percent (3.503 percent APR). Rates are always changing, so make sure you call Central Coast Lending at 805.543.LOAN for an update about any movement.