Real Estate Information

I often get questions from clients like “How’s the market?”….”Is it a good time to buy?.....”How do I know when or where is the bottom is?’…..”What can I watch?”

 

These are all good questions.  I personally watch 3 main economic indicators when making financial decisions.  They are as follows:

 

Check the 3 month TED spread.  This is the difference between the interest banks charge each other when borrowing from one another (known as LIBOR) and the 3-month treasury rate (T-Bill).  The wider the spread, the more cautious banks are about their lending.  Currently this number is at 3% which is far above historical levels.  A number below 1% is considered a normalized credit market where banks are comfortable making loans. Go to www.Bankrate.com and search for Libor rate and 3- month T-Bill rate.  Subtract T-Ball rate from the Libor rate.

 

Track Real Estate home inventory.  The number of months of home inventory on the market has historically been a reliable predictor of home prices.  A 6 month inventory supply is considered in balance.  Anything above 6 months is generally considered a buyers market.  Nationally inventories are around 13 months and locally in Austin current inventory is around 8 months.  The National Association of Realtors posts this information around the 25^th of each month and this can be found www.Realtor.org under research.  For local Austin inventory levels by neighborhood call me! I am happy to share that information. 512.306.1001

 

Follow initial jobless claims. The number of NEW folks filing for unemployment benefits is released by the US Labor department each Thursday.  Currently on a national basis we are running 475K – 535K a week.  When that number starts to come down and then stabilizes below 400K that is a good indicator most of the pain could be over and the job market is rebounding.  You can find the info on the home page of the Labor Department under statistics at www.dol.gov .

 

Now you know.

 

 

 

 

 

 

 

 

 

 

 

 

 

Thanksgiving is about giving thanks. 

 

It is not about food, nor sports, nor the start of Christmas shopping.  It is about: expressing appreciation to a wonderful God who provides for us, thanking God for His love, thanking God for our lives, and thanking God for making eternal life available to anyone who will believe. It is about thanking God for others, for homes, for food, for health, for dear friendships, for the people who enrich our lives, for eyes to see, ears to hear, and lungs that work.   It is about thanking God for our parents, for our husband or wife, for our children and grandchildren.  It is about thanking God for our jobs and income, and for shelter from the cold. 

 

Thanksgiving is about giving, not about taking. Too often we make the whole flow of events surrounding Thanksgiving Day geared to fulfilling our selfish desires, rather than blessing others.  Thanksgiving is about others not ourselves. It is about intangibles as well as tangibles. It is about attitude.  It is giving, and it is appreciating what has been so graciously provided to us by God.  Giving thanks moves outwards, not inwards. It requires sharing and expressing love.

 

You may think that things are going so bad for you this year that you have no reason to give thanks.  Think again!  The truth is that the more difficult our life situation becomes, the greater is our need to give thanks. Those with much often depend upon themselves rather than God.  Those will little understand that God is the source of their daily bread and provisions.  The less you have, the more you value it, and the One who made it possible.

 

Why not spend some time giving thanks this year?

 

After all, Thanksgiving requires giving thanks.  

FREDDIE MAC SUSPENDS ALL FORECLOSURE SALES OF OCCUPIED HOMES FROM DAY BEFORE THANKSGIVING UNTIL JANUARY 9, 2009

McLean, VA – Freddie Mac (NYSE: FRE) today announced it has ordered its national network of mortgage servicers and foreclosure attorneys to suspend all foreclosure sales and evictions involving occupied single family and 2-4 unit properties with Freddie Mac-owned mortgages between November 26, 2008 and January 9, 2009. The suspension will help servicers implement the Streamlined Modification Program recently announced by Freddie Mac, Fannie Mae, the Federal Housing Finance Agency (FHFA), HOPE Now and 27 mortgage servicers. The temporary suspension is also expected to give servicers more time to help borrowers avoid foreclosure.

Specifically, Freddie Mac servicers and foreclosure attorneys were told to contact as quickly as possible an estimated 6,000 borrowers with foreclosure sales scheduled between November 26, 2008 and January 9, 2009. If the property is occupied, the servicers and foreclosure attorneys will halt the sale. This temporary suspension of foreclosure sales will not apply to vacant single family properties. Additionally, no evictions will be completed between November 26 and January 9.

“By working closely with FHFA and our servicers, Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year,” said Freddie Mac Chief Executive Officer David M. Moffett. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”

Moffett said that by delaying these foreclosure sales, the nation’s servicers will have the opportunity to work with more borrowers who could qualify for a modification under the new Streamlined Modification program scheduled to begin by December 15.

“Today’s announcement has the potential to enable more families struggling in these extraordinary times to take advantage of this vital new initiative developed with FHFA, the Treasury Department and the mortgage finance industry,” said Moffett.

Moffett also emphasized that lenders servicing Freddie Mac-owned mortgages will continue to work with borrowers to consider all workout options Freddie Mac employs to help distressed borrowers who can and want to stay in their homes, such as permanent rate reductions and mortgage term extension modifications.

This year, Freddie Mac expects to approve 84,000 workouts for the estimated 140,000 who are delinquent on Freddie Mac-owned mortgages. (For more about Freddie Mac workout options, see freddiemac.com/avoiding_foreclosure.)

Freddie Mac's temporary suspension of foreclosure sales is the latest in a series of efforts to help troubled borrowers. Other recent initiatives have included, delegating expanded workout authority to servicers, doubling the amount of money servicers are paid for successful workouts, and paying non-profit organizations to reach out to worried borrowers.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

This housing report is from Dr. Ted Jones, Chief Economist, Stewart Title, reports on the Housing Industry for November 2008: HOUSING REPORT VIDEO

Home prices are off 9% from this time last year.

There is no thing as a National Real Estate market. All real estate is LOCAL. That’s why you want to check with your local Realtor on current prices and inventory of homes for sale in your area. Ask for a CMA for the areas you want to invest in or if you are thinking about selling. Keep in mind home sales here in Austin are down about 20%, and it’s much higher in other markets around the U.S. So with more competition, price will determine how fast you can get a home sold.

Watch the video for the Full Report

I just returned from a Prudential Real Estate quarterly meeting where Mark Sprague with Residential Strategies, Inc was the guest speaker.  Residential Strategies, Inc data and opinions I personally hold in high regard.

Mark shared that Austin area homebuilders started 2,382 new houses and closed 2,732 units in 3^rd quarter of 2008 which was one third slower than the same quarter in 2007.  As a result theannual start rate fell to 10,541 units and annual closings to 11,903 units through 3^rd quarter 2008.

Mark shared that the Austin market has now experienced about a year of more restrictive mortgage qualification standards in the wake of the collapse of the subprime mortgage market and there continues to be tightening in the mortgage lending market, especially with the elimination of the Down Payment Assistance Programs and higher equity requirements for jumbo loans, however there has been a stabilizing trend of sales activity at the current moderate pace.”

 Overall new housing inventory in Austin stands at a 6.3 month supply where a 6.0 month supply is considered equilibrium. This is a stark contrast, the national inventory of new homes for sale stands at a 10.9 month supply. While it feels like Austin area builders are battling a weak housing market our region remains in much better shape than most other areas of the United States Sprague shared.

 It was projected during this meeting that it will take the national real estate economy 3-5 years to show signs of recovery and the Texas economy 18 – 24 months.  Austin is a much brighter picture.  Austin is expected to begin to show signs of recovery by next summer and is currently one of only 3 cities in the country sited by Forbes magazine as one of only 3 cities in the country to “buy now”. The others are Chicago and New York.

 So in other words if you are an investor type, in Austin, looking for the bottom…don’t blink.

Dr. Mark Dotzour of the Texas A&M Real Estate Center gave a Market Outlook presentation yesterday in Austin.  In general, Dr. Dotzour has some serious concerns about the government’s proposed solutions to economic woes, but does think the Central Texas economy is holding steady, particularly with respect to jobs, property values and population growth. Below are highlights of his specific comments:

• Dr. Dotzour began with an indictment of local news media, and a recent headline in Austin that projected a decline in real estate values.  Dotzour said that the “evidence” is merely speculation on the part of two analysts, and that the headline should have read “Two guys speculate that home prices could possibly drop sometime in the future.”        

• He cited Austin MLS statistics that show that prices have historically remained on a slow and steady increase for people willing to hold onto property at least 3-5 years, and concluded that anyone who tells a buyer with the desire and means to purchase property to wait is doing them a great disservice.

• Regarding inventory of homes for sales in Austin, Dotzour said we’re holding at 6-6.5 months, which he said is the point where we consider a market “balanced” between the interests of buyer and seller.  According to Dotzour, there is no time in the last 18 years when home values did not rise overall in Austin.
  

• He said there will continue to be a lot of homes sold in Texas, where we still have positive job growth, and a population that is expected to grow 13-million by the year 2030.

• Dotzour said we should react positively to national and local news that building permits are down.  This means that we’re adjusting the inventory to meet demand, which will help prices stabilize.

• On the national economic front, Dotzour said there are several “shoes” that have to drop on the banking community before we hit bottom, including the full picture of the effects of the sub-prime lending debacle, defaults on credit cards and auto loans, and the real extent of credit default swaps.  This last issue is just now starting to emerge into the light, and could dwarf the problems created by sub-prime loans.

• Dotzour was not in favor of many of the economic stimulus proposals in Washington, and suggested that more useful elements would be a tax credit for home purchases, and a 0% capital gains tax for investors who will hold property for 5 years.

• He projected some favorable economic shifts in April or May, as corporate profits begin to recover, oil prices stabilize, foreclosures pass their peak and the political uncertainty is resolved.

• Despite all of the national headlines, property values in The Austin and Central Texas market - surprising - continue to gain in value (though sales have slowed) - Click here for the full article.
  
• A third party entity called The PMI Group has recently ranked the four major Texas cities as the "least likely to decline in value in the coming year" with a less than 1% chance of decline. Click here for the full article.

Countrywide Mortgage has just started a new program in light of the current market scenario.

The program starts December 1, 2008 for current Countrywide customers only, and owner occupied customers only.
 
The centerpiece of the program is a proactive loan modification process to provide eligible borrowers who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts. Various options will be considered for eligible customers to ensure modifications are affordable and sustainable.

First year payments of principal interest, taxes and insurance will be targeted to equate to 34% of the borrowers income.. Modified loans feature limited step-rate interest rate adjustments to ensure annual principal and interest payments increase at levels with minimal risk of payment shock.
Other Modification options include: FHA financing under the HOPE for Homeowners Program, Principle reduction on Pay Option adjustable rate mortgages and possible rate reductions. Countrywide has committed up to 8. 4 Billion dollars to help up to 400,000 families.

Customers who have questions about their eligibility and wish to retain their home ownership should call 1-800-669-6607 or log onto www.countrywide.com