Freddie Mac Weekly Update: Almost Two Points Lower Than Peak In October

30-year fixed-rate mortgage: Averaged 4.78 percent with an average 0.7 point for the week ending April 30, 2009, down from last week when it averaged 4.80 percent. Last year at this time, the 30-year FRM averaged 6.06 percent. The 30-year fixed-rate mortgage now equals the record low that was set the week of April 2, 2009. It has never been recorded lower in Freddie Mac's survey, which goes back to 1970.

The 15-year fixed-rate mortgage: Averaged 4.48 percent with an average 0.7 point, unchanged for the third week in a row. A year ago at this time, the 15-year FRM averaged 5.59 percent. This is tied with the last two weeks for the lowest the 15-year FRM has been since Freddie Mac began tracking it in August 1991.

Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 4.80 percent this week, with an average 0.6 point, down from last week when it averaged 4.85 percent. A year ago, the 5-year ARM averaged 5.73 percent. This is the lowest the 5-year ARM has been since Freddie Mac began tracking it in January 2005.

One-year Treasury-indexed ARMs: Averaged 4.77 percent this week with an average 0.7 point, down from last week when it averaged 4.82 percent. At this time last year, the 1-year ARM averaged 5.29 percent.

Freddie Says:

The housing market may be edging towards a bottom. Existing home sales stayed near its four-month average in March while new home sales were stronger than the market consensus. More importantly, the inventory of unsold new homes fell to the lowest number since January 2002. And, the S&P/Case-Shiller® 20-city composite index did not show a record year-over-year decline in February for the first time since December 2006. Finally, housing affordability hit record highs in the first quarter of this year, according to figures from the National Association of Realtors, which date back to January 1971.

Thanks for Reading

Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
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Rates Come Down for Jumbo Loans

The new fiscal-stimulus bill temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in some of the most expensive markets, heavily concentrated in California, Florida and the Northeast. The new congressional rules allowed the companies to enter the jumbo market to begin buying "super-conforming" loans of up to $729,750.

The impact from Fannie Mae and Freddie Mac’s entry into the jumbo loan market is already flowing through to the markets. Entry into the most expensive tier of the housing markets has seen Jumbo rates fall by about half a percentage point, obtaining these loans are more affordable and accessible for borrowers. Unfortunately, the program is available only to Fannie and Freddie participants.

But the focus is only on Fannie and Freddie loans, owners with other large loans in expensive areas wont be helped by this program.

New Money Flows Into the High End

Markets in expensive areas have been hard hit because money hasnt been available for buyers. Things have changed. The new program has created a thaw in the jumbo markets. Fannie and Freddie have been joined by B of A, Wells and ING. New money should help ease the markets but it wont be easy for buyers to enter. Bank of America requires six months of principal, interest, property tax and insurance payments held in reserve. No one is taking any chances yet, but the competition is a welcome sign of economic health.... remember?

Thanks for Reading

Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
http://yourpropertypath.blogspot.com/
Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

You can add this page to your favorite Social Bookmark site:

The stock market tells us we are bottoming. The banks are making money and home prices are rising or at least not declining so fast, according to some indexes. The info coming from these indexes seems contradictory or non confirming. The numbers are all over the map and so its hard to tell what is really happening.

The FHA Index was released today and it sent the market up on the good news that homes declined less in price this quarter. Prices rose a seasonally adjusted 0.7% in February after a revised 1% increase in January, the agency said. Prices rose in six of nine regions in February, led by a 3.8% gain in the Pacific region.
The focus was on the fact that U.S. home prices rose in February for the second straight month, but are still down 6.5% in the past year. Case Schiller reports homes are down 19% year over year in January.

Why the Big discrepancy

FHA Index is loosely based on the Case Schiller index. They both measure pruchase prices, not listing prices for homes. The FHA index measure includes the entire U.S. while the Case Schiller Index measures 20 Metropolitan Areas. The largest majority of the foreclosures are in a handful of states led by California, Nevada and Florida. These three of 20 measured areas, for the Case Schiller Index, account for the larger declines reported by Case Schiller. The FHA Index measure the entire country and as such the foreclosure states are more diluted. The second reason is the FHA Index measures only FHA loans although its breadth is wider, its depth is not, tracking only 70% of the market and less of the high priced markets because of the jumbo loan limitations.


Its hard to determine exactly what is happening, but precise numbers aside, I think its fair to say the worst is behind us. Its also fair to say that we are very broken and that it will take years before we recover. The IMF chart indicates the world economy still shrinking in 2009. Recoveries can take years and I think this one will....its not your ordinary recovery,

Obama is doing nothing less than a restructure of the basic economic engine. We will be moving from a consumer based, borrow and spend economy to one much smarter, leaner and cleaner.

Thanks for Reading

Howard Bell
www.yourpropertypath.com
A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF
http://yourpropertypath.blogspot.com/
Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

You can add this page to your favorite Social Bookmark site:

Most Mortgage Rates Recede This Week

30-year fixed-rate mortgage: Averaged 4.82 percent with an average 0.6 point for the week ending April 16, 2009, down from last week when it averaged 4.87 percent. Last year at this time, the 30-year FRM averaged 5.88 percent.

15-year fixed-rate mortgage: Averaged 4.48 percent with an average 0.6 point, downfrom last week when it averaged 4.54 percent. A year ago at this time, the 15-year FRM averaged 5.40 percent. This is the lowest the 15-year FRM has been since Freddie Mac began tracking it in August 1991.

Five-year Treasury adjustable-rate mortgages ARMs: Averaged 4.88 percent this week, with an average 0.6 point, down from last week when it averaged 4.93 percent. A year ago, the 5-year ARM averaged 5.48 percent. This is the lowest the 5-year ARM has been since Freddie Mac began tracking it in January 2005.

One-year ARMs: Averaged 4.91 percent this week with an average 0.7 point, up from last week when it averaged 4.83 percent. At this time last year, the 1-year ARM averaged 5.10 percent.

From The Freddie Mac Site

Mortgage rates on fixed-rate loans and some ARM products eased this week,said Frank Nothaft, Freddie Mac vice president and chief economist. The housing industry is starting to exhibit some positive signs, albeit scarce and too early to tell how permanent. In its April 15th regional economic report, the Federal Reserve reported that better-than-expected buyer traffic led to a scattered pickup in home sales in a number of its Districts over the 6-week period ending on April 6th. Factors such as home buyer tax credits, low mortgage rates, and more affordable prices were cited as leading to more potential buyers. This may have added to the rise in homebuilder confidence in April, which rose to the highest level in six months, according to the National Association of Home Builders. Moreover, confidence increased in each of the four regions, led by the Northeast and Midwest

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

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Parsing Housing Makets or How to Look Past the Numbers

If you look at these two charts they tell an interesting story. In real estate there are few benchmarks and so its hard to see what's really going on.

The NAR chart is telling us that housing has now returned to its 1976 median price. Meaning that if you bought a home in 1976 you would now be under water. Your mortgage may be paid off, but you have lost all your equity. Dismal!

Terrible, yes, but maybe not quite as bad as all that. Zillow had a great blog that dug a little deeper. The national averages include the most devastated markets. Its clear the worst markets are dragging down the numbers.... The problem with averages.

This zillow chart looks specifically at San Francisco and points out that there are really many markets. Here the chart separates foreclosed home sales from home sales of non foreclosed homes.

The non foreclosed sales (the black line) have held up better than foreclosed homes . The black line looks to have reverted to 2004 prices, while the red line 2001 prices. And the black line is turning up, pointing towards market strength. Its important to understand that averages mask the local market and that low ball sales may have little to do with your property. So, dont let pressure talk you into the lower price for an easier sale. Look a little closer at the data- it may not be representative of your property....

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

http://yourpropertypath.blogspot.com/

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Rent Boards, Rent Control and GRM

The San Francisco Rent Board sets price controls on residential housing effectively

acting as a price ceiling, except when an apartment becomes vacant. Then the owner/manager can bring rents up to market rate. If the unit was occupied for 10 or even 20 years, eventual increases to the prevailing market rate represents a spike in cash flow.

In fact when a building with long standing tenants comes up for sale it’s a great selling point. It’s not hard to see future value when you are looking at a few units renting for $350 that would easily rent in today’s market for $1,500.

Not Everything Is Rent Controlled

In San Francisco, limits to rent increases are mandated and administered by the Rent Board with some exceptions:
1. New Construction: Mandated by state law, all building constructed after June of 1979 are exempted
2. Subsidized Housing: such as HUD housing projects.
3. Dorms, monastery’s and nunnery’s
4. Residential Hotels: If you have less than 28 days of continuous tenancy.

How it Works

Base Rent: A landlord can increase the tenant’s base rent by an annual allowable increase. This year its 2.2%. So, if a tenants rent was $1000, the most you can increase in 2009 is $22. Next year the rent board will declare the maximum allowable increase for 2010. There are other types of rent increases such as capital improvements, increased operating and maintenance expenses and utility costs, but they need rent board approval.

Managing Declining Rents & GRM

The trick now is to respect the trend, keep the unit occupied and preserve equity.

Here’s the problem: You have a vacancy or a recent tenant wants a rent reduction and the unit rents for $1500. But similar units are now going for $1400. Its bad enough to have to forgo $100 a month, but if lower your base rent you may be paying for that long after the market has recovered, perhaps even 10 or 20 years.

Here’s why: lets assume your base rent was $1500 and it becomes clear that you have to reduce it by $100. At $1400 (assuming this years maximum annual increase of 2.2%) it might take you three years just to get back to $1500. One down year affects the entire future income stream if you use a lower the base rent to accommodate new market realities.

Preserving GRM

Keeping the higher base rent in tough times

1. Attractive Gifts: Keep the rent at $1500, but offer gift certificates or other amenities. A rent reduction to $1400 is a $1200 annual loss. Maybe an offer of a new Dell notepad ($350) is attractive enough. If this worked, you would have kept your base rent at $1500 and saved $ 850 this year. In forward years, rent board increases would be based on $1500 and not $1400.

2. Skip a Month: Offer one month free rent. Tenants are open to this and it allows you to preserve your $1500 base rent. Never make it the first months rent, since you may find yourself with a tenant that doesn’t pay in the second month either and now you have a squatter.

3. Improvements: A really great idea is to offer amenities that will increase the value of the unit. Consider amenities tenants can’t take with them such as: stackable washer/dryers, microwaves or dishwashers. Tenants really do like the added convenience and it adds value to the unit. A good win-win choice.

4. Increase Market Depth: Consider pets. You can reduce risk by asking for a pet deposit in addition to the security deposit. Be sure not to exceed 2 x rent for unfurnished or 3 x rent for furnished rooms rules for San Francisco.

5. Section 8: Increase your applicant base by considering Section 8 . .

6. Advertise: Maximize your marketing presence by using Craigs List and an internet listing company such as apartments.com

7. Hire a property management company: If it saved you just one month, because of their leasing expertise or visibility, you would be ahead of the game.

** A note to home buyers: Preserving the base rent for future rent increases also skews the GRM. It’s important to compare the rent roll to actual rental income reported, when buying or representing buyers.

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

http://yourpropertypath.blogspot.com/

Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

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Mortgage Rates Fall, Another Record Breaking Low

Freddie Mac today released the results of its Primary Mortgage Market Survey

30-year fixed-rate mortgage: Averaged 4.78 percent with an average 0.7 point for the week ending April 2, 2009, down from last week when it averaged 4.85 percent. Last year at this time, the 30-year FRM averaged 5.88 percent. The 30-year FRM has not been lower in the life of Freddie Mac’s weekly survey, which dates back to 1971 for the 30-year FRM.

15-year fixed-rate mortgage: Averaged 4.52 percent with an average 0.7 point, down from last week when it averaged 4.58 percent. A year ago at this time, the 15-year FRM averaged 5.42 percent. The 15-year FRM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 1991 for the 15-year FRM.

Five-year Treasury adjustable-rate mortgages ARMs: Averaged 4.92 percent this week, with an average 0.7 point, down from last week when it averaged 4.96 percent. A year ago, the 5-year ARM averaged 5.59 percent. The 5-year ARM has never been lower in the life of Freddie Mac’s weekly survey, which dates back to 2005 for the 5-year ARM.

One-year ARMs: Averaged 4.75 percent this week with an average 0.6 point, down from last week when it averaged 4.85 percent. At this time last year, the 1-year ARM averaged 5.19 percent. The 1-year ARM has not been lower since the week ending September 29, 2005, when it averaged 4.68 percent.

From the Freddie Mac Site

Mortgage rates followed other interest rates lower this week amid reports of slower economic growth” said Frank Nothaft, Freddie Mac vice president and chief economist. The final estimate of economic growth in the fourth quarter was revised lower and personal incomes fell 0.2 percent in February, below the market consensus.

On a positive note, pending existing home sales rose 2.1 percent in February, marking the second increase in three months as potential homebuyers are taking advantage of historically low mortgage rates and falling home prices. Serving as a spur to sales, housing affordability reached an all-time high in February 2009 since the series' inception in 1971, according to the National Association of Realtors®. By region, sales surged by nearly a third in the Northeast and Midwest, but fell in the West

Thanks for Reading

Howard Bell

www.yourpropertypath.com

A web site of over 450 articles related to real estate focused primarily on property management.

Your Property PathSF

http://yourpropertypath.blogspot.com/

Trade talk for the San Francisco real estate industry. Your source for property management tips, policies and market trends.

Your Property Path Amazon Store

http://astore.amazon.com/yourpropertypath20-20