Lisa Thomas

Economic Recovery?

lisathomas — Wed, 21 Jul 2010 20:57:58 +0000

WEDNESDAY AFTERNOON UPDATE:
The bond market has reacted favorably to Fed Chairman Bernanke’s testimony to the Senate Banking Committee. Mr. Bernanke didn’t say anything that was a major surprise, but did hit some key points that are favorable to bonds and mortgage rates. He said that he expects key short-term rates to remain low for an “extended period,” that the economic recovery will be slower than previously estimated and that the Fed could take further stimulus action of needed. He added that inflation remains lower than earlier forecasts.

All of those points are favorable to long-term securities such as mortgage-related bonds. This is particularly true of the inflation comments because inflation erodes the value of a bond’s future fixed interest payments, making them less attractive to investors.

The stock markets have moved lower with the Dow down 134 points and the Nasdaq down 32 points. The bond market has improved from earlier levels, currently up 14/32. That is enough of a move to improve mortgage rates this afternoon by approximately .125 of a discount point. However, many lenders may opt to reflect this improvement in tomorrow’s rates rather than revising today’s pricing.

Mr. Bernanke will repeat his testimony tomorrow in front of the House Financial Services committee. He is not likely to say anything that would contradict or differ much from today’s prepared statement. The question and answer portion of the proceeding could bring something of a surprise, but it is not of much concern to me.

The Labor Department will give us last week’s unemployment figures early tomorrow morning. They are expected to say that 445,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. The higher the number of claims, the better the news for bonds. But since this data tracks only a single week’s worth of claims, it usually has a minimal impact on mortgage rates.

The National Association of Realtors will post June’s Existing Home Sales figures late tomorrow morning. This report gives us a measurement of housing sector strength and mortgage credit demand, but as with all of this week’s data it is not considered highly important. Current forecasts are calling for a decline in sales from May’s totals. A larger than expected drop in sales would be considered good news for bonds and mortgage rates because a weak housing sector will make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not cause much of a change in mortgage rates.

June’s Leading Economic Indicators (LEI) at 10:00 AM will also be posted late tomorrow. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of moderate importance to the bond market. It is expected to show a 0.4% decrease, meaning that we may see noticeable pullback in economic activity over the next few months. A larger decline in the index would be good news for the bond and mortgage markets.

Otilia Sullivan
101 Parkshore Blvd Suite 100 | Folsom, CA 95630
Ph: (916) 985-0900 • Fax: 866-248-2647
otiliasullivan@princetoncap.com

3 Economic Reports Scheduled This Week…

lisathomas — Mon, 19 Jul 2010 17:18:23 +0000

This week may be quite interesting for the bond market and mortgage rates. There are only three economic reports scheduled for the financial and mortgage markets to digest and none of them are considered to be of high importance to the markets. But in addition to the minimal economic data, we have two days of semi-annual congressional testimony by Fed Chairman Bernanke. The first day of testimony has the potential to influence changes to mortgage rates more than many of the monthly or quarterly pieces of economic data that we see regularly. Add in the fact that the 10-year Treasury Note again fell below, and closed under the benchmark 3.00% last week and we have bond market yields at a point of potential downward movement or an upward spike. This could be the week that we get that direction decided.

The first economic report of the week comes Tuesday morning with the release of June’s Housing Starts. This data gives us an indication of housing sector strength, but is not considered to be of high importance. Analysts are currently expecting to see a decline in new home construction starts. However, I don’t see this data having much of an impact on mortgage rates Tuesday unless it varies greatly from forecasts.

Fed Chairman Bernanke will speak before the Senate Banking Committee Wednesday and the House Financial Services Committee Thursday mornings at 10:00am ET. His testimony will be broadcast and watched very closely. Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation concerns that will lead to changes in key short-term interest rates. This should create a great deal of volatility in the markets during the prepared testimony and the question and answer session that follows. If he indicates that inflation may become a point of concern, we will likely see the bond market fall and mortgage rates rise.
We usually see the most movement in rates during the first day of this testimony as the Chairman’s prepared words for both appearances are quite similar to each other, meaning that the second day of testimony rarely gives us anything we did not hear during the first day. The general exception is something asked or answered during the Q&A portion of the second day’s appearance.

The National Association of Realtors will post June’s Existing Home Sales figures during late morning hours Thursday. This report gives us a measurement of housing sector strength and mortgage credit demand, but as with all of this week’s data it is not considered highly important. Current forecasts are calling for a decline in sales from May’s totals. A larger than expected drop in sales would be considered good news for bonds and mortgage rates because a weak housing sector would make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not cause much of a change in mortgage rates.

June’s Leading Economic Indicators (LEI) at 10:00 AM will also be posted late Thursday. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of moderate importance to the bond market. It is expected to show a 0.4% decrease, meaning that we may see noticeable pullback in economic activity over the next few months. A larger decline in the index would be good news for the bond and mortgage markets.

Overall, this is a moderately significant week for the bond market and mortgage rates. If we get weaker than expected economic results and Chairman Bernanke’s words do not negatively surprise the markets, we may see mortgage rates move lower for the week. However, if Mr. Bernanke’s testimony raises concerns about rapid economic growth or inflation, rates may move higher on the week. I suspect we will see them move noticeably from current levels, which could be the base for more movement in the same direction over the next couple of weeks. Therefore, even though there is not a large number of relevant reports scheduled for release, don’t underestimate the importance of this particularly week. This is especially true if still floating an interest rate.

Otilia Sullivan
101 Parkshore Blvd Suite 100 | Folsom, CA 95630
Ph: (916) 985-0900 • Fax: 866-248-2647
otiliasullivan@princetoncap.com

Antidotes to Bolster Nation’s Housing Market and Economy

lisathomas — Tue, 13 Jul 2010 17:01:12 +0000

Although the housing market has come a long way over the past year, the recovery is still very fragile. As one of our Bay Area managers put it, the market takes one or two steps forward, and then one back. This is often what often happens in an economic recovery after the initial burst of improvement. Rarely do recoveries go in a straight line, as much as we’d like them to. Federal tax credits certainly helped bring the market off the bottom, but with their expiration the question many economists are pondering is what – if anything – is needed to make sure the market doesn’t fall back into a double-dip.

One of the foremost economists the U.S., Wharton finance professor Dr. Jeremy Siegel, has suggested antidotes that I found interesting – four stimulus measures that he believes can bring our economy and housing market back to health:
• Urge the Fed to buy mortgage backed securities backed by high-grade “jumbo” mortgages and other consumer and business loans;
• Reduce the interest the Federal Reserve pays to banks on reserves to zero from 0.25%;
• Create a credit to businesses to hire new workers while also cutting jobless benefits;
• Delay for one year the hefty tax increases that are now scheduled for 2011.

The Federal Reserve’s purchase of more than $1 trillion of conforming mortgages (those under $417,000, and $729,000 in much of Bay Area) has helped keep those rates low and undoubtedly helped stabilize the housing market. The 30-year fixed rate mortgage hit another record low this week, falling to 4.57 percent, according to Freddie Mac. But the market for higher priced homes has suffered, Siegel said, as the premiums that lenders have charged for “jumbo loans” has jumped markedly.

“In some cases these mortgages are not available at any rate,” he said. “The paralysis of the higher priced housing market hurts the whole industry since it prevents owners of these homes, such as empty-nesters, from downsizing. The Fed, by providing a liquid market for jumbo mortgages as well as other high-yielding credit card and auto loans, will encourage banks to lend in these markets.”

On the fiscal side of the equation, Siegel believes the government can help the private sector create jobs by providing an incentive to employers to add new workers to their payroll by issuing a tax credit to firms who hire. “This credit can be paid by withdrawing some of the extremely generous unemployment benefits that the government has provided to the unemployed in this economic downturn,” he said. “We’ve had cash for clunkers, cash for homebuyers, and cash for appliances. Let’s now have cash for jobs.”

Siegel’s final recommendation is to defer most, if not all, of the tax hikes that will take effect in 2011. “Boosting income is the best way to raise consumption,” he said, arguing that imposing tax increases while the economy is still struggling is a dangerous move. He suggested that Congress and President Obama should consider keeping the tax rates for capital gains and dividend income at current levels for at least another year.

“Even without the further government stimulus, our economy will recover,” Siegel said. “But the government can provide a welcome shot in the arm by encouraging banks to lend and firms to hire, and by deferring big tax increases,” he said. “It’s time for the president and the Fed to take initiative to insure our recovery doesn’t stall out.”

Meanwhile, here in the Bay Area, the housing market in many areas has shown signs of cooling in recent weeks – perhaps the normal summer slowdown as more buyers are off on vacation. Additionally, the urgency among buyers is no longer there with the expiration of the federal tax credit deadline. Still, as always, market conditions vary city by city and even neighborhood by neighborhood. Some of our communities are still experiencing increased sales activity and even multiple offers on attractive properties, while other areas are seeing a definite slowdown of late.

Below is a market-by-market report from our local offices:

North Bay — The Greenbrae office reports that sales and inventory have slowed recently, probably due to the slow holiday week. But agents seem to be gearing up for a strong close to the month with new listings and renewed buyer interest. Inventory is increasing and sales have tapered off as well, according to our Northern Marin office. In Southern Marin, properties perceived as good deals continue to move quickly. A fixer/tear down in a good Mill Valley neighborhood listed at $565,000 received nine offers, the best of which was ratified with a 10 day close, all cash, well over the list price. Sausalito saw a number of new sales in the last few weeks of properties that had been on for a while at $1,399,000, then had a reduction of $100,000 got them all in escrow (still below the reduced price, but the reduced price provided motivation to at least bring in offers). Meanwhile in Santa Rosa, there are multiple offers on properties below 500k and a slow down above 500k. Buyers and sellers are slow to make decisions and quick to change them. Inventory is decreasing in Sebastopol, while sales are holding steady. It is taking price reductions to attract buyers in the high-end of the market.

San Francisco — The market has slowed down as of late, according to our Lombard office. After a good June, it has been a very slow start to July with growing inventory, slow sales, and slow open house traffic. Things are steady in the upper Market Street area. The number of listings coming to market are increasing and agents say the phones are ringing with more buyers asking for private showing – good sign.

SF Peninsula — June sales were significantly better than May in Burlingame, which hopefully reflects higher consumer confidence. In Hillsborough, there are currently 86 active listings and 26 pending sales – a significant increase in sales over the last month. Entry-level buyers are swooping in and snapping up properties listed in the $1.5 – $2.5 million “entry level” market. When you compare the minimum half acre lots, the award winning school systems and the community prestige, now could be the greatest time to buy in Hillsborough. Across the hills in Half Moon Bay, there has been slower real estate traffic these past couple of weeks with the 4th of July holiday. Very little activity over the $1m range but brisk in the $600k – $800k price range. Still needs to be the best condition, best location, and best list price. Under $1 million market in Menlo Park is doing very well and $1-2 million will move if everything lines up. There is some life but very, very picky buyers. Homes need to be good new construction or the Taj Majal to get a big number in Menlo now. Buyers will make an offer and simply walk away if the seller does not come back with something reasonable. In Palo Alto, more than half of the homes are sitting on the market, perhaps overpriced. The other half, if well priced, gets multiple offers – as many as 20 offers – as much as 20% to 30% over list price. A very contrasting market. Inventory in the high-end is extremely low in Palo Alto, while it is building in outlying areas like Atherton & Woodside. The Woodside high end segment has slowed sharply with lots of properties on the market. In Redwood City, the necessity to purchase in a timely manner seems to have slowed down. Buyers are taking their time to make a final decision. But properties that show well, have a good location and are priced at fair market value are still drawing buyers.

East Bay – The last two weeks of June were busy, according to the Berkley office, with agents writing offers and many getting accepted in multiple offer situations. Inventory is declining while sales have remained steady. The Previews luxury segment has gradually picked up as well. The Orinda office reports sales and inventory holding steady. Open home attendance has slowed due to summer holidays. In Castro Valley, open houses continue to be well attended, although the local market has slowed. Even so, there is no shortage of buyers for the listings which, if well priced, continue to go pending within days or weeks of hitting the market, always with backups. We continue to see great bargains in Hayward, San Leandro, and Oakland, especially. Still a great market for the first time buyer. The Fremont market is becoming more challenging over all, with sales dipping. Buyers are more hesitant to write offers due to economic concerns. The Livermore market has seen a 5% reduction in active inventory and a 3.5% decline in total pending sales. Agents are working harder than ever, as they have to write multiple offers for buyers to get one accepted with a number falling out of escrow. Our Pleasanton office reports that buyers still out looking but they are waiting for the right priced homes before making offers. Inventory is lower in Pleasanton than in Livermore.

Silicon Valley – It was very quiet over the fourth of July holiday weekend, according to our Cupertino office. But with buyers, sellers and agents getting back to business this week, it could translate into increased activity. One third of the sales continue to be multiple offers. With school out and vacations underway, the Los Altos office reports open houses and tours are slower with fewer in attendance. In the Previews luxury market, sales have been slow above $1.9M and very slow above $3M. Meanwhile in Los Gatos, inventory and sales are holding steady. Agents are seeing an increase in multiple offers due to a lack of inventory in certain areas and historically low interest rates. The Previews market is steadily improving. In San Jose, the Almaden market seems to be steady while sales are picking up again in the Willow Glen area with fewer REOs coming on the market. Our Saratoga office reports that properties there that are priced well and are in good locations commonly sell within two weeks. While the over $2 million market is lagging, the $1.5 to $2 million market is very active.

South County – Sales activity in the South County seems to be slowing with the summer months. Our Morgan Hill office reports that the buying public is confused (and rightfully so.) One week the media reports are positive, the next negative. Interest rates are incredibly low, but it is difficult to obtain an appraisal at sales price. Buyers are eager, but inventory remains limited. Lending guidelines seem to be a big hurdle for most buyers. The conclusion is that the market is recovering, but as many have predicted, the recovery will be a long, slow process – not suited for the “faint of heart”.

Monterey Peninsula – Our Carmel area offices are reporting more high-end sales in last two months. While short sales are still too common and REO’s becoming rare for lack of inventory, they are seeing a pick-up in “regular” sales in the higher-end properties, mostly with all cash. Our local offices just reported two sales that both closed in one week, which is unusual these days, at $8 million and $3.3 million, respectively.

If I were to generalize, I would say the current Bay Area real estate market is a study of contrasts. On the one hand, we have well-located, impeccable condition, and very attractively priced homes receiving multiple offers, often within the first few weeks. On the other hand, we have the balance of the inventory experiencing inadequate number of showing appointments, and then price reductions. Of course every seller is hoping to enter the market with the perfect economic balance of a reasonable staging expense with a prudent and wise list price. It seems you know when you’ve hit that balance within the first 10 days or so. The market speaks to you.

Idylwild Farms, LLC

lisathomas — Thu, 01 Jul 2010 19:24:08 +0000

Idylwild Farms
433 Sanford Road
Santa Rosa, CA 95401

Telephone:

VOICE: (707) 546-4177

Email:

For general contact regarding barn business:
Idylwild Farms Manager

Laura McEvoy (dressage, combined training, general riding lessons)
Laura McEvoy

Mary Ann Dowdal (Hunter-Jumper, general riding lessons)
Mary Ann Dowdall

To visit their website: http://www.idylwildfarms.com/

Closing Deadline Extended to Sept. 30 for Eligible Homebuyer Credit Purchases

lisathomas — Wed, 30 Jun 2010 17:37:16 +0000

WASHINGTON — Eligible taxpayers who contracted to buy a home, qualifying for the first-time homebuyer credit, before the end of April now have until Sept. 30, 2010 to close the deal, according to the Internal Revenue Service.
The Homebuyer Assistance and Improvement Act of 2010, signed by the President today, extended the closing deadline from June 30 to Sept. 30 for any eligible homebuyer who entered into a binding purchase contract on or before April 30 to close on the purchase of the home on or before June 30, 2010. The new law addresses concerns that many homebuyers might be unable to meet the original June 30 closing deadline.
The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit. To avoid refund delays, those who entered into a purchase contract on or before April 30, but closed after that date, should attach to their return a copy of the pages from the signed contract showing all parties’ names and signatures if required by local law, the property address, the purchase price, and the date of the contract.
Besides filling out Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, all eligible homebuyers must also include with their return one of the following documents:
A copy of the settlement statement showing all parties’ names and signatures if required by local law, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Besides providing a tax benefit to first-time homebuyers and purchasers who haven’t owned homes in recent years, the law allows a long-time resident of the same main home to claim the credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. Homebuyers claiming this credit can avoid refund delays by attaching documentation covering the five-consecutive-year period:
Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
Property tax records or
Homeowner’s insurance records.
There are three options for claiming the credit on a qualifying 2010 purchase:
If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009. Though these returns cannot be filed electronically, taxpayers can still use IRS Free File to prepare their return. The returns must be printed out and sent to the IRS, along with all required documentation. The IRS urges taxpayers claiming refunds to choose direct deposit.
If a 2009 return has already been filed, claim it on an amended return using Form 1040X.
Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.
More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov.

Commentary Report for 06/27/10

lisathomas — Mon, 28 Jun 2010 17:14:54 +0000

This week brings us the release of five economic reports for the markets to digest, but four of them are considered to be important and one of those four is arguably the most influential report we see each month. There is relevant data being released each day except Wednesday, so it will likely be an active week for mortgage rates.

May’s Personal Income and Outlays data will be posted early tomorrow morning. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.5% in income and a 0.1% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

June’s Consumer Confidence Index (CCI) is the second report of the week. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading of 62.0, down from last month’s 63.3 reading.

The Institute of Supply Management (ISM) will release their manufacturing index for June late Thursday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading above 50 means that more surveyed executives felt business improved during the month than those who felt it had worsened. Analysts are expecting a reading of 59.0. That would indicate that manufacturers felt business worsened from the previous month, when we saw a 59.7 reading. Good news for bonds and mortgage rates would be a weaker than expected reading.

The remaining two reports will be released Friday morning. The Labor Department will post June’s unemployment rate, number of new payrolls added or lost and average hourly earnings early Friday morning. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates Friday. However, stronger than expected readings could be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate rise 0.1% to 9.8%, with 100,000 jobs lost and a 0.1% rise in earnings.

The Commerce Department will post May’s Factory Orders data late Friday morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week’s report covers both durable and non-durable goods. It usually doesn’t have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts because it measures manufacturing sector strength. Current expectations are showing a 0.7% decline in new orders from April’s levels. A larger decline in orders would be considered good news for the bond market and could help lower mortgage rates slightly Friday. However, the employment data is much more important to the markets than this report is.

Overall, Tuesday and Thursday’s data should bring some volatility in trading and mortgage rates, but Friday’s Employment report is definitely the most important of the week. Its impact can single-handedly lead to an improvement or increase in mortgage rates for the week. Next Monday is when the Independence Day holiday will be recognized. There is no early close for the bond market Friday ahead of it, but it will probably be a light afternoon in trading as traders head home for the long weekend. This could lead to additional volatility during morning trading, particularly with the Employment report being posted. So, I strongly recommend that you maintain contact with your mortgage professional if still floating an interest rate.

Otilia Sullivan
101 Parkshore Blvd Suite 100 | Folsom, CA 95630
Ph: (916) 985-0900 • Fax: 866-248-2647
otiliasullivan@princetoncap.com

Federal Reserve Press Release 6/23/10

lisathomas — Wed, 23 Jun 2010 18:55:21 +0000

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.
Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

Daily Commentary Report for 06/20/10

lisathomas — Mon, 21 Jun 2010 17:03:13 +0000

This will likely prove to be a fairly active week in terms of mortgage rate movement due to the economic data and other events that are scheduled. There are five economic reports scheduled for release, but in addition to the data another Federal Open Market Committee (FOMC) meeting will be held and another round of Treasury sales are on the calendar. Together, we have the makings of a potentially volatile week in the financial and mortgage markets.

There is no relevant economic news scheduled for release tomorrow. Tuesday brings us the first data with the release of May’s Existing Home Sales report. The National Association of Realtors will give us figures on home resales late Tuesday morning. This data helps us measure housing sector strength and mortgage credit demand, but it usually takes a large variance from forecasts for it to cause a noticeable change to mortgage rates. It is expected to show an increase in sales from April to May.

Wednesday’s only report is the release of May’s New Home Sales. It is similar to Tuesday’s Existing Home Sales report, but tells us how well sales of newly constructed homes were last month. It is expected to show a decline in sales, but will likely not have much of an impact on mortgage rates because this data tracks only the 15% of home sales that Tuesday’s data does not.

There is an FOMC meeting that begins Tuesday and will adjourn Wednesday afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing Wednesday afternoon.

The only important release scheduled for Thursday is May’s Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show a decline of 1.4% in new orders from April to May. A larger decline would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing Thursday.

There are two reports being released Friday morning. The first is the final reading to the 1st Quarter Gross Domestic Product (GDP). This data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Last month’s first revision showed a 3.0% rise in the GDP, which is what analysts are expecting to see again.

The second report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. This index gives us a measurement of consumer willingness to spend. If consumers are more comfortable with their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data has the potential to affect bond trading and mortgage rates. A downward revision would be considered good news for bonds and rates, but forecasts are calling for no change from this month’s preliminary reading of 75.5.

Also worth noting is the fact that the Fed will be selling more debt this week. These sales may influence trading enough to affect mortgage rates. There are sales every day except Friday but the two most likely to affect rates are Wednesday’s 5-year Note sale and Thursday’s 7-year Note auction. If they are met with a strong demand, we could see bond prices rise during afternoon trading. This could lead to afternoon improvements to mortgage rates also. But, if the sales draw a lackluster interest from investors, mortgage rates may move higher during afternoon trading those days.

Overall, tomorrow will likely be the quietest day of the week unless the stock markets stage a rally or sizable sell-off. The most active should be Wednesday with the FOMC meeting adjourning or Thursday due to the importance of the data being posted that day. Friday’s news may also affect mortgage rates, but likely not as much as earlier days.

Otilia Sullivan
101 Parkshore Blvd Suite 100 | Folsom, CA 95630
Ph: (916) 985-0900 • Fax: 866-248-2647
otiliasullivan@princetoncap.com

May 2010 home sales, prices increase in Sonoma County

lisathomas — Fri, 18 Jun 2010 20:20:35 +0000

Sonoma County home sales increased for the fourth consecutive month, rising nearly 8 percent from April to May, but activity still trails last year.

Buyers purchased 410 single-family homes in May, up from 381 in April but down slightly from 416 a year ago.

Prices, meanwhile, increased for the first time in five months. The median price hit $362,000, up 5 percent from April and up 4 percent from a year ago.

“It shows we have a very steady growth in demand in the marketplace,” said Rick Laws, manager at Coldwell Banker in Santa Rosa, who compiles The Press Democrat’s monthly housing report.

But others said economic uncertainty was still keeping the market down. Sales have dropped nearly 9 percent in the first five months of the year, compared to the same period a year ago — despite a $8,000 federal tax credit for home buyers who signed their contracts by April 30.

“It’s just sort of a mediocre market right now,” said Mike Kelly, senior sale consultant at Keller Williams Realty in Santa Rosa, who added that unemployment and job insecurity were partly responsible.

Unemployment in Sonoma County doubled over the past two years and has hovered in double-digits in 10 of the last 11 months, receding only slightly to 10.6 percent in April.

The true impact of the federal tax credit won’t be felt until June sales figures are finalized, Kelly said. The credit extends to people who signed by the April deadline but close by the end of June.

Laws said he didn’t think the end of the tax credit would have a big impact on the housing market. The credit offered an incentive to buy, but ultimately wasn’t enough to make or break most deals, he said.

Both Kelly and Laws said the mix of sales is changing as the market settles into a more normal pattern. There has been reduced inventory in distressed properties — usually either short sales or foreclosed properties, the “rocket fuel” in much recent buyer interest, Kelly said.

In February 2009, more than 75 percent of homes sold in Sonoma County were bank-owned properties, according to Laws. In May less than 47 percent were.

As banks put fewer properties on the market, buyers are increasingly having to compete with each other, particularly for homes in the lower end of the spectrum, Laws said.

He said the market was “bifurcated.” Above $500,000, he said the situation tends to favor buyers. Below $400,000, it is generally a seller’s market with inventory not meeting demand, Laws said.

“If the value is there and the house is in good condition and in a good neighborhood and priced at market, it gets multiple offers,” said Glen Hurley with Platinum Real Estate, who is president of the Santa Rosa Chapter of Realtors.

The return of “normal sellers” who aren’t trying to unload distressed properties is encouraging, Kelly said.

When they sell, they tend to “buy up.” A short sale or foreclosure, however, is rarely matched with a corresponding purchase.

The competition is driving up home prices. The median price for a single-family home, $362,000 in May, was its highest level since December 2009.

The median is the mid-point at which half the homes sold for more, and half for less.

Sonoma County home prices peaked in August 2005 when the median hit $619,000 before tumbling to a low of $305,000 in February 2009.

Through May the median price of a single-family home sold in 2010 was $350,000, up 10 percent from the same five-month period last year.

“There is very little inventory,” said Paula Gold-Nocella, a broker with Prudential California Realty in Healdsburg. “That’s what’s driving the price up.”

Senate Backs Extending Deadline for Housing Tax Credit

lisathomas — Fri, 18 Jun 2010 17:48:23 +0000

Senate Backs Extending Deadline for Housing Tax Credit
The Senate voted Wednesday to give homebuyers another three months to settle on their contracts and take advantage of a popular tax credit that sparked a rush of activity in the housing market.
The Senate, with a vote of 60-37, accepted an amendment by Democratic Leader Harry Reid that extends the closing deadline to Sept. 30 for buyers who met the April 30 deadline to have a signed contract.
The current deadline requires buyers to close by June 30 to get the $8,000 tax credit for first-time homebuyers.
Existing homeowners buying a new primary residence are eligible for a $6,500 credit.
Reid offered the measure as an amendment to a bill that would extend some popular business tax breaks and extend unemployment insurance benefits for jobless workers.
The proposal would not have a significant impact on future home sales as the extension would be only for home buyers who already had a contract in hand by April 30.
The popularity of the tax credit has caused some anxiety because settlement offices are inundated with buyers trying to close on transactions by the end of this month to get the tax break.
Copyright 2010 Reuters.