Wednesday, December 17, 2008

Oh So Much Happen In One Day . . . For Real Estate

Okay lots to write about today. So much has happen in the Real Estate world in the last 24 Hours, so here are some of the headlines.

Interest Rates

The biggest story is the Fed lowering interest rates (related SF Gate Story). The central bank on Tuesday, reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October.

This is great news for anyone looking to buy now. Freddie Mac reported Thursday that average rates on 30-year fixed-rate mortgages dropped to 5.47 percent from 5.53 the previous week. The rate is the lowest since March 25, 2004, when it averaged 5.4 percent. The Fed announcement sent the average rate down to 4.99% for a 30-year fixed loan on conventional new loans.

This is a good reason for people to start looking at homes again,  It is also an opportunity for people to refinance. All this is dependant on if the banks start handing out loans, but some economist think that banks will still hold back and give loans to only those with perfect credit and big downpayments. So it is a good time to begin watching rates.


NAR Pushes for 4.5% Interest Rate

A federal mortgage interest buy-down program would help spark the housing market, the National Association of Realtors® said in a letter sent today to James B. Lockhart, chairman of the Oversight Board of the Federal Housing Finance Agency. NAR seeks a 4.5 percent mortgage interest rate buy-down program financed through the U.S. Treasury Department’s Troubled Asset Relief Program.

In the letter to FHFA, NAR shared three potential implementation procedures for a federal buy-down plan:

  • TARP would fund the payment of points at the individual level.
  • The Federal Home Loan Banks would raise funds by selling below-market-rate bonds to the Treasury Department for them to make the 4.5 percent interest rates available to lenders.
  • Fannie Mae and Freddie Mac would purchase mortgages at the 4.5 percent interest rate but pay lenders the market rate.

NAR has calculated that a 1 percentage-point decrease in mortgage rates would result in an additional 500,000 home sales.

In addition to suggesting that TARP assets be used to buy-down mortgage interest rates, NAR has recommended other principles that would help create long-term stability by ensuring that safe and affordable mortgages are available throughout the nation:

  • The higher loan limits passed in the economic stimulus bill earlier this year should be made permanent.
  • The federal government should ensure sufficient capital to support mortgage lending in every type of market.
  • The temporary $7,500 tax credit for first-time home buyers should be extended to all home buyers and the repayment requirement eliminated.

Two Trillion Dollars reported more bad news as they calculated the loss that homeowners will suffer in 2008. Zillow states that American homeowners will collectively lose more than $2 trillion in home value by the end of 2008

"Underwater" was the real estate buzzword of the year. U.S. home values(2) lost $1.9 trillion from the first of the year through the end of the third quarter, and were likely to fall further in the fourth quarter, leaving approximately 11.7 million American households owing more on their mortgage than their homes are worth. One in seven of all homeowners (14.3 percent) were underwater by the end of the third quarter.

For Alameda: Zillow reported in the third quarter Zindex of $ 600,000, a one year change: -7.8%. Nationally, Zillow calculated that home values have dropped 8.4% year-over-year during the first three quarters of 2008, compared with the same period of 2007.

Link to press release:

New Housing Starts Fall to Record Lows

The Commerce Department report found new ways to lump onto the poor housing market. New housing starts and permits reported a huge decline to record lows in November. Housing starts fell 18.9 percent to a seasonally adjusted annual rate of 625,000 units from 771,000 units in October.

Wall Street analysts expected 740,000 starts for November. New building permits, which give a sense of future home construction, plummeted 15.6 percent to 616,000 units from 730,000 units in October not meeting Wall Street expectations.

Another government report showed the cost of living in the U.S. fell in November by the most since record-keeping began in 1947. Consumer prices dropped 1.7 percent last month as the price of gasoline and other energy costs plunged, the Labor Department said.

Bloomberg Story Link

People Balking on Foreclosure

A study commissioned by Trulia and RealtyTrack shows a shows decreased enthusiasm in buying foreclosed properties. Buyers are concerned about the hassle involved in the process, hidden costs and falling home values.

"What's significant about our findings is that just as the market is being flooded with more foreclosures, homebuyers are more hesitant to buy them," said Pete Flint, co-founder and chief executive of, a real-estate search engine that released the study with foreclosure tracker RealtyTrac.

"The results of this study are eye-opening and highlight the need for consumer education about foreclosures," added RealtyTrac senior vice president Rick Sharga. He noted increased hesitancy to buy foreclosed homes in the current climate "is somewhat counterintuitive, although not totally unexpected."

The survey shows a decline in November with 47% of adults saying they would consider purchasing a foreclosed home, down from 54% in April.

The CNNMoney Story

Fannie Mae Foreclosure Policy

On Monday, Fannie Mae announced that it will let renters stay. This should come as a welcome relief to about 4,000 renters who live in properties foreclosed on by Fannie Mae. The government-controlled mortgage giant announced it would not evict tenants of foreclosed properties who were current on their rent. It not a set in stone policy, but Freddie Mac is considering the idea.



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