Sooner than you might think.

The FHFA (Federal Housing Finance Agency) keeps a home price index that monitors all financed home sales. In other words, the FHFA index does not track home sale transactions purchased with all cash. According to the index, home prices in financed sales were actually up in February (year-over-year) by 0.3 percent.

To us, this number suggests that prices may soon begin to find some upward momentum. Let us explain.

Banks that attempt to sell distressed properties are most interested in fast turn-around time. The best strategy to sell the home quickly is to price the home under market value. Thus, as distressed properties flood the market, prices move lower.

Enter: investors with plenty of cash.

Investors have used the opportunity presented by low home prices and swaths of distressed sales to buy up cheap real estate with cash (the method of transaction banks prefer). Lately, there has been a 65 percent increase in investment property sales, in regards to the share of total sales. The decline in the Case-Shiller number is likely accounted for by this investor activity, as they flock to the market to purchase homes at discounted prices.  For home prices to correct, we need to move through the supply of distressed properties – which negatively effect nearby property values.

The FHFA number, then, allows us to focus more on home prices derived from normal, family activity. Cash sales, meanwhile, are more likely to reflect falling home prices due to foreclosures and short-sales, as investors snap up discounted properties.

While any indicator suggesting a decline in home prices is surely disappointing, it is important to understand the composition of the index in order to form an opinion about the implications of each report.

The global economic turmoil continues to rock Europe as the European Central Bank stopped providing funds to many Greek banks.  The political situation in Greece has given rise to concerns that the country may back out of the agreed upon austerity measures to help manage its debt, which could result in Greece leaving the Euro (for more, see our rundown). Growing concerns in Spain are also helping to send investors out of the Euro and into the US Dollar.  This has helped the US Dollar to trade higher for 13 consecutive days, and has pushed stock prices lower for nearly 12 days in a row.

With the concerns in Europe growing, and the questions we still have about the strength of our own economy, the bond market has climbed to record highs, with record low yields (yesterday, the 10-year Treasury yield closed at 1.706 percent, the lowest closing level on record).  These records have driven home loan rates down to levels never seen before (See attached chart).

Take a quick look at the provided chart to get a visual of the run up we have seen the last couple of months in the bond market.  These new historic highs opened up financing opportunity doors that have never been opened before.  Renters who could not have afforded to purchase previously are now penciling out monthly payment figures that make it possible to purchase a home.  Real Estate investors are seeing an opportunity to purchase rental properties with better immediate cash flow because of the low monthly payments afforded by record low interest rates.  And anyone with an existing mortgage can almost guarantee to see a lower interest rate by refinancing.

To find out how you can take advantage of these historically low interest rates please call me and we will take the time to go over your scenario to see how you can benefit.

Jason VanDyke 805-801-2139

April housing starts increase

Housing starts rose 2.6 percent in April, rebounding from a 2.6 decline in March. The pace of 0.717 million units represents a 29.9 percent increase year-over-year. The South (11.6 percent increase) and Midwest (6.7 percent increase) showed growth, while the Northeast (down 20.7 percent) and West (down 8.1 percent) declined.

As discussed by Bloomberg News, some of the positive year-over-year data can be attributed to unusually warm weather.

April housing permits decline

In April, housing permits declined by 7.0 percent (following an 8.8 percent increase in March), but year-over-year, the trend is one of general growth.

May home builder sentiment improves

According to the National Association of Home Builders, builder confidence increased five points in May. At a reading of 29, builder sentiment is still well below the mark of 50, which is the dividing line between positive and negative confidence.

Foreclosure activity drops

More good news in April – led by drops in hard-hit states like California, Arizona, and Nevada, foreclosure activity fell nationally to its lowest level since the summer of 2007.

Mortgage applications increase

For the May 11 week, record low interest rates caused a surge in refinance applications, leading to a 9.2 percent increase in mortgage application activity according to The Mortgage Bankers’ Association.. For the week, refinance activity rose 13 percent (from a 1.3 percent increase the week before), even as purchase applications declined by 2.4 percent.

Retail sales on a year-ago basis in April are up 6.4 percent, compared to 6.6 percent in March.

Overall, the CPI has increased 2.3 percent year-over-year, which nears the Fed’s inflation goal of 2 percent.

By the time I get there it’s to late, but it’s never as bad as they make it sound. Most people do a good job of protecting their belongings, flooring, and other areas from unwanted splatter or drips. Most folks are good at rolling out a wall and often take the extra time to apply two coats. Overall, from what I can tell, the paint jobs aren’t half bad. So where do they go wrong? 

The “cut in” is the line that separates the painted area from the non-painted area. If we are just changing the color on an interior wall for example than that area would be the door casing, base board the ceiling and so on.

Hand brushing a straight line can be difficult and it takes years of practice to be fast and efficient, but that doesn’t mean that it’s impossible. Folks can give up right away on the idea of cutting their walls in with a brush, and reach first for the tape. Give it a shot! You might surprise yourself. I hand cut with a brush 90% of all my interiors so I know it can be done. I recommend spending a little extra on a nicer 2 ½ “angle sash brush.” It might take you some time to get the hang of, but you might find it effective – especially for the ceiling.

Let’s say the brush thing is just not working out: here are a couple of tape tricks you might want to try. The biggest problem with tape is what we call “bleed”. “Bleeding” occurs when unwanted paint seeps through your tape line and onto what you didn’t want painted. It is caused when the edge of the tape does not fully adhere to the area that you are protecting and then makes its way through the tiny divots and spaces that already exist in that area. The more textured an area is the more likely the tape is to bleed; for example, if you were taping out glass, “bleeding” would be less of a danger.

There are some newer tapes on the market that have adapted to this problem and are designed specifically to cut down on bleeding. Frog Tape and Scotch 3M Orange Core are a couple of examples. Frog Tape has a product in the adhesive that reacts to water, causing it to inflate so when your paint comes in contact with the tape line the product puffs up and fills the tiny void keeping your line intact.

My favorite method to keep a good tape line is called the Old Timer. This method involves a caulking gun and some low tack tape – preferably 3M Blue. First you will make your line on the surface you are protecting (lets say the base board), then make sure the edge that is being protected is tacked down good by going over it lightly with a putty knife. The caulking tube tip should be cut small, preferably at the ¼ “ line. Run a fine bead of caulking over your tape line between the wall and the base board. With a damp cloth remove the caulking from the tape line. Now apply the paint to the wall at that line lightly not to heavy. Give it about a minute to set and pull the tape before the caulking has a chance to dry. You should have a perfect line free of tape bleed. This is also a great trick for color transitions in the middle of walls or at a Bull Nose.

Could Europe’s debt problems hurt the U.S. recovery? To some extent, we have already experienced difficulties. For over a year now, financial markets have been burdened by some measure of “concern” over European debt, and this has resulted in random spikes in volatility and fluctuations in the stock and bond markets.

Last week, France’s latest round of elections put a socialist president in office. This new president will advocate for stimulus measures. With German chancellor Angela Merkel squarely in support of austerity as the answer to Europe’s debt crisis, it seems likely that the leaders of the eurozone’s two largest economies will be at odds. That is, France and Germany will have different prescriptions for the solution to the European debt problem. Coupled with the increased probability of Greek exit from the Euro (and corresponding turmoil), global markets will certainly be touched. With the tangled nature of modern financial markets and currencies, it will be important to monitor the European situation as the new governments settle into office.

As pundits try to make sense of what will happen, you are certain to hear worst-case scenarios and best-case scenarios. For now, be patient, and try not to fall into the alarmist trap of the 24 hour news cycle. Although it is still impossible to predict what will happen, I can tell you with certainty that you will hear all about it over and over and over again.

30 year fixed –

Last week:

3.500 percent (3.582 percent APR)

Today:

3.500 percent (3.582 percent APR)

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15 year fixed –

Last week:

2.750 percent (2.917 percent APR)

Today:

2.750 percent (2.917 percent APR)

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30 year High Balance

Last week:

3.625 percent (3.738 percent APR)

Today:

3.625 percent (3.738 percent APR)

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30 Year FHA

Today:

3.500 percent (4.364 percent APR)

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30 Year VA

Today:

3.500 percent (3.530 percent APR)

APR is subject to increase and terms subject to change. APRs may very depending on loan details such as points, loan amount and loan-to-value, your credit, property type and occupancy. Closed rate and APR assume a rate and term refinance of a single family detached owner-occupied primary residence, and a minimum FICO score of 760. Situations vary based on applicant.