MORTGAGE RATES RISE THIS WEEK

30-year fixed-rate mortgage: Averaged 5.20 percent with an average 0.7 point for the week ending July 23, 2009, up from last week when it averaged 5.14 percent. Last year at this time, the 30-year FRM averaged 6.63 percent.

15-year fixed-rate mortgage this week: Averaged 4.68 percent with an average 0.7 point, up from last week when it averaged 4.63 percent. A year ago at this time, the 15-year FRM averaged 6.18 percent.

Five-year Treasury-indexed hybrid ARMs: Averaged 4.74 percent this week, with an average 0.7 point, down from last week when it averaged 4.83 percent. A year ago, the 5-year ARM averaged 5.49 percent.

One-year Treasury-indexed ARMs: Averaged 4.77 percent this week with an average 0.6 point, up slightly from last week when it averaged 4.76 percent. At this time last year, the 1-year ARM averaged 5.49 percent.

Freddie Sayz

Mortgage interest rates were mixed this past week with fixed-rate loans averaging somewhat higher while initial rates on ARMs were flat to down slightly, said Frank Nothaft, Freddie Mac vice president and chief economist. Federal Reserve Chairman Bernanke, during his July 22 Senate testimony, noted that mortgage rates are lower than they were last fall, in part because of the Federal Reserves actions, and housing affordability right now is the highest its been in many years.

Newly released housing indicators contain positive signs that the worst may be behind us. Home prices were down 5.6 percent between May 2008 and May 2009, the smallest 12-month decline since June 2008, based on the Federal Housing Finance Agency’s monthly House Price Index. New construction of one-family homes jumped 14.4 percent in June to an annualized pace of 470,000 units, the most since October 2008, according to the Commerce Department. In addition, the National Association of Home Builders reported that homebuilders' assessments of market conditions in July and for the remainder of this year strengthened to a 10-month high

Thanks for Reading

Howard Bell

yourpropertypath.com

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

Home Prices Turn Up

Which Cities Will Recover First

For the fourth consecutive month, there was modest improvement in home prices in May. The index of 20 metropolitan areas had an annual decline of 17.1 percent in May from the same month in 2008, an improvement over April’s 18.1 percent fall. The Federal Housing Finance Agency notes that some cities will recover sooner based on the degree of their participation in the bubble.

Home prices sky rocketed and economic wealth was largely created by a real estate bubble. Fresno, Modesto, Salinas, Bakersfield, Stockton and Los Angeles saw home prices rise to unsustainable levels and then collapse and along with it jobs. In these cities unemployment rose to 10% and still rising.

The study shows the how a cities economic make-up determines its well being. Manufacturing areas, hurt by historical changes such as mega shifts of manufacturing jobs overseas were already battered even before the recession. Detroit and Flint or Youngstown Ohio will not see much recovery until the economy is restructured. Cities with high-tech capabilities like Seattle, Huntsville, Ala., or Boulder will fair better. Cities with strong financial centers will also see slower recoveries than those with robust technology sectors.

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Howard Bell
www.yourpropertypath.com

The Great Recession and the Housing Market

Existing home sales were up 3.6 percent in June, while condo sales surged 14.0 percent. This has been the longest string of sales increases since 2004, quite a healthy upturn. Foreclosures too are looking less grim. According to NAR, distressed sales were 31% of total sales in June, declining from the 45 % to 50% earlier in the year.

We are beginning to absorb supply. Housing inventory continues to trend down, declining 15.0 percent from June 08. There is an expected new wave of foreclosures and many say it will get worse before it really begins to subside, but we seem to be in a better position to absorb inventory than before.

The housing market is showing clear signs of stabilization. The Federal Housing Finance Agency Purchase Only House Price Index rose .09% for the third month in a row. The price trend is still not positive, but reflects a decline in the downtrend.

Bernanke testified that better conditions in financial markets have seen improvements in consumer spending and the decline in housing activity has moderated. Moody's Economy.com notes that Household credit conditions should improve significantly by this time next year, based on a study of 7.5 million credit files from Equifax.
The Feds Term Auction Facilities, which loan money to banks, is reducing its auction from 125 billion to 100 billion, big banks are in better shape.

The Feds Bernanke expects positive growth in the second half of this year. Unemployment will continue to rise even as the recovery takes hold. As long as 70% of the economy is consumer based and we have a weak consumer ours is a long and fragile recovery. In the 2001 recession, unemployment did not peak until 18 months after the recession ended.

The Conference Board’s Index of Leading Indicators called the start of the this recession and its now signaling the end of a 22 month recession. If we did avoid the Great Depression, we did not avoid the Great Recession.

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

Commercial Property: Feeling the Pain

Commercial property is the next big shoe to drop. We have been focused on residential real state. This crises is due more to a bad economy rather than irresponsible lending practices. Still, the pain will be great and the bottom quite a few years away, some say three, but I no longer listen to experts....so we'll see.

During the boom years, many loans were written that will begin to roll over between now and 2012. As much as 90-1.4 trillion is at risk when due for a number of reasons.

Vacancy Rates

1. Vacancy rates: are up and will continue to rise as long as we are losing jobs. Many companies are going out of business. Commercial vacancy rates are at 20 year highs
2. Downsizing: Many companies are downsizing to meet the needs of a shrinking economy.
3. Lower Rents: The overall economy is driving rent rates down just as tenants are finding less need for large office space due to technological changes that are changing the city scape of our downtown districts.
4. Work at home: is lessening the need for office space and this will only continue to create a shift in downtown development. You can see many office towers and hotels offer condo space for downtown residential living as the market for commercial changes.

Commercial Equity and the Banks

Financing is tight because the banks themselves have so much residential inventory and are carrying loans that cannot be resold. The financial markets have seized up and their are no buyers for their collateralized mortgage securities. Add to that declining values in the foreclosure portfolios and it follows that when the commercial loans come due for a roll over that the lenders will not be stepping up. Declining equity, rental income, frozen markets and an unwillingness to take on risk at a time when the top priority of lenders will be to re capitalize and strengthen their books.

General Growth Properties

This is the shopping mall giant that filed for bankruptcy after lenders refused to refinance 27 billion in debt. Lenders have regained their business sense and will look to make healthy loans and keep a mindful eye on their own balance sheets. Some estimate that by 2012 the line of debtors will be 1.8 Trillion dollars long.

Private Equity Lenders

With financing tight, it is difficult or impossible for property owners to rollover short-term financing when it comes due. TALF has put Govt money behind some distressed owners, noting that commercial property is in much the same shape as residential property. But how can TALF or any other entity force banks to shovel more money into roperty after having made such huge blunders.

The biggest REITS with cash on hand will no doubt, position themselves to pick up distressed commercial property on the cheap. Some REITS are going into the stock market and offering new stock. The money they raise will be the war chest for buying distressed commercial properties. Investors are noticing. REITS that are cash heavy and are positioned to take advantage of a terrible commercial market are already doing well. The all return index, an index of 114 REITs is up 28% in the second quarter. REITS are betting on a recovery, even in the midst of a continuing downturn that may not have seen the worst. New alternatives to REIT investments are also cropping up, generally we see new products in up markets, I think we have some early positioning for an eventual upturn. This smacks of great expectations and gives me hope we will get through this....

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

Strategic Defaults: Foreclosures Up

Housing in a nutshell: Foreclosures up. Sales up. Prices down.

New research by Paola Sapienza of Northwestern University and Luigi Zingales from the University of Chicago, provide interesting insight into the foreclosure tsunami.

In the 1990-91 recession the study found that very few people who could afford their mortgage walked away from their homes. The magic number was 10. When equity declines exceeded 10% of the value of the home, owners started to waiver. A 10% loss and the default rate begins to rise. A 50% loss of home value and 17% of all owners preferred default to staying in the game.

The study concludes that in this cycle, a large segment of foreclosures were driven by a different metric. One in four recent mortgage defaults are strategic. Buyers of property make a business decision to walk away because they no longer like the deal. For 25% of all foreclosures, today, its not inability but unwillingness to make payments.

The study makes an interesting observation. The Obama administration is focused on cash flow to owners to keep them in their homes. This study points to a different reason for a large segment of foreclosures. Many people wont stay in their homes when the value of their mortgage exceeds the value of their home by 10% or more.

If the study is correct, then writing down the loan would significantly stem the tide. Since lenders are unlikely to do so, Im betting we will continue to see foreclosures for quite a while.

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

MORTGAGE RATES DOWN: FOR THIRD CONSECUTIVE WEEK

30-year fixed-rate mortgage: Averaged 5.14 percent with an average 0.7 point for the week ending July 16, 2009, down from last week when it averaged 5.20 percent. Last year at this time, the 30-year FRM averaged 6.26 percent.

15-year fixed-rate mortgage: Averaged 4.63 percent with an average 0.7 point, down from last week when it averaged 4.69 percent. A year ago at this time, the 15-year FRM averaged 5.78 percent.

Five-year Treasury-indexed hybrid ARMs: Averaged 4.83 percent this week, with an average 0.7 point, up slightly from last week when it averaged 4.82 percent. A year ago, the 5-year ARM averaged 5.80 percent.

One-year Treasury-indexed ARMs: Averaged 4.76 percent this week with an average 0.5 point, down from last week when it averaged 4.82 percent. At this time last year, the 1-year ARM averaged 5.10 percent.

Freddie Sayz

Average fixed-rate mortgage rates were lower than last week and were down 0.4 percent to 0.5 percent from the levels of early June.,said Frank Nothaft, Freddie Mac vice president and chief economist. For a 30-year fixed-rate mortgage, the rate reduction over the past five weeks translates into a monthly payment saving of $56 on a $200,000 loan.

The latest economic reports were influenced by recent energy-cost movements. Although higher gasoline prices fueled a 0.7 percent monthly jump in the consumer price index for June, the index was down 1.4 percent from June 2008 and represented the largest 12-month drop since January 1950. In addition, retail sales rose 0.6 percent in June bolstered by automobile sale incentives and higher gasoline prices; the average price for regular gasoline has since fallen 6.1 percent from its recent high set over the week ending June 22, according to the Energy Information Administration. And finally, industrial production fell only 0.4 percent in June, the slowest decline in eight months.


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

Commercial real estate is the next shoe to drop

Commercial property markets are beginning to show real weakness. Delinquency rates have doubled to almost 7% and the bottom isnt expected for another three years.

It no surprise that with the loss of jobs there is a great deal of downsizing and rent reduction for everyone from retail shopping malls and small business to hotels and offices. Unemployment is now 9.5%, pushing commercial vacancy rates to 17%.

The Globe and Mail reports Real estate experts and regulators warned a U.S. congressional committee that commercial real estate is headed for a crash that could eclipse slump of the early 1990s, saddling already hobbled banks with a new wave of bad loans.

Big Debts Due

Almost $1.8-trillion of commercial loans made during good times will roll over by 2012. The banks are certainly reluctant to take on more high risk property. The Fed certainly doesnt want the banks to assume more risk at this juncture.

Office towers and shopping centers are already down 35 to 45 per cent since 2007. That compares with a 32 per cent peak-to-trough decline for house prices, according to the Case-Shiller home price index.

TALF

The commercial real state crises is not only important for banks, which hold almost 2 trillion dollars of commercial loans. The commercial real estate industry also provides more than 9 million jobs and generates roughly 70 cents out of every dollar in local government budgets.

The Obama administration has a $1-trillion Term Asset-Backed Securities Loan Facility (TALF) program in place.

Because there is no secondary market for commercial mortgages, TALF will inject big dollars into a non existent market to provide liquidity abd encourage lenders and investors to participate commercial real estate loans.

TALF is expected help unfreeze credit markets that limited refinancings billions in commercial real estate debt that resulted in a wave of defaults.

At the core this is a crises caused by a credit collapse.....

Thanks for Reading
Howard Bell
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/

MORTGAGE RATES DOWN CONCERNS OVER LABOR MARKET

30-year fixed-rate mortgage: Averaged 5.20 percent with an average 0.7 point for the week ending July 9, 2009, down from last week when it averaged 5.32 percent. Last year at this time, the 30-year FRM averaged 6.37 percent.

15-year fixed-rate mortgage: Averaged 4.69 percent with an average 0.7 point, down from last week when it averaged 4.77 percent. A year ago at this time, the 15-year FRM averaged 5.91 percent.

Five-year Treasury-indexed hybrid ARMs: Averaged 4.82 percent this week, with an average 0.6 point, down from last week when it averaged 4.88 percent. A year ago, the 5-year ARM averaged 5.82 percent.

One-year Treasury-indexed ARMs: Averaged 4.82 percent this week with an average 0.6 point, down from last week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 5.17 percent.

Freddie Sayz

Interest rates for 30-year fixed-rate mortgages fell for the second week in a row to the lowest level in six weeks amid market concerns over a weakening labor market, said Frank Nothaft, Feddie Mac vice president and chief economist. The economy lost 467,000 jobs in June, more than the market consensus, and the unemployment rate rose to 9.5 percent, the highest since August 1983. Moreover, hourly employee wages increased at an annual rate of 0.7 percent on average in the second quarter of 2009, the smallest gain since records began in 1964.

The weak employment situation coupled with falling home values is adding to greater defaults on home equity loans and lines of credit. The American Bankers Association reported that the number of home equity loans that were 30-days or more delinquent rose to a record high of 3.52 percent in the first quarter and home equity lines of credit also reached a record of 1.89 percent. For comparison sake, such loans totaled $1.1 trillion outstanding in the first quarter of 2009, representing nearly 10 percent of all home mortgage debt, according to the Federal Reserve Board

Thanks for Reading
Howard Bell

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/

Property Management for Newbies

The Reluctant Property Manager Club

So you bought your property and now you cant sell. Welcome to the reluctant property manager club. Many owners have little experience with management and like it even less. Its your small business and running it does take your time. If your not a good businessperson your property can become your burden. If your are not super good with your landlord tenant relationship you can find yourself in court.

In a down market housing is very illiquid. If you are retiring and want to be closer to family or relocating for work, you may find yourself a reluctant long distance landlord. This is definitely not a good thing, dont try this at home.

Time to shop for a good property management company.
When you hire a property management firm, you are signing off and binding the manager to act in your behalf and in your best interest regarding the management of the property. Thats agency

Some important DD
In order to be sure that your new management copmpany can do a good job and has a good track record you should do some homework.

1. Require the company a current real estate license. Go to your State Dept.of Real Estate to see if it is current and that there have not been any complaints or suspensions or revocations of the real estate license.
2. Check with the Better Business Bureau
3. Be sure that the contract can be voided, without having to provide reason and without penalty with a written 30 day notice to terminate the arrangement. Be sure that your written termination date matches the hire date or you may have a deduction for early termination

Duties and Responsibilities of Managers

Property management companies often have their own handyman and you should be very clear about how this works. If a light bulb is out and the handyman has to travel back and forth and change the bulbs, there is likely a minimum one hour charge. It could cost you $45.00 to change a light bulb.

1. Require all major repairs be completed with three independent bids and receipts to back up the billing charges.
2. To protect yourself, you should establish limits on how much can be spent without having to get your approval. If the bids all seem high, we think you should have the right to bid it out yourself.
3. The management company should provide annual inspections and a written report.
4. The property management company must provide a 24 by 7 response team and there should be no extra charge for this. Its part of the basic management of a property.

There is much more to consider. Its important to understand how they qualify new tenants. There should be strict guidelines about tenant credit and ability to pay and the financial reporting responsibilities is the only way to lift the fog of the income and expense statement.

Thanks for Reading
Howard Bell
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/

Freddie Mac: Weekly Update

Lower Long Term Rates Help Housing Market

30-year fixed-rate mortgage: Averaged 5.32 percent with an average 0.7 point for the week ending July 2, 2009, down from last week when it averaged 5.42 percent. Last year at this time, the 30-year FRM averaged 6.35 percent.

The 15-year fixed-rate mortgage this week: Averaged 4.77 percent with an average 0.7 point, down from last week when it averaged 4.87 percent. A year ago at this time, the 15-year FRM averaged 5.92 percent.

Five-year Treasury-indexed hybrid ARMs: Averaged 4.88 percent this week, with an average 0.7 point, down from last week when it averaged 4.99 percent. A year ago, the 5-year ARM averaged 5.78 percent.

One-year Treasury-indexed ARMs: Averaged 4.94 percent this week with an average 0.6 point, up slightly from last week when it averaged 4.93 percent. At this time last year, the 1-year ARM averaged 5.17 percent.

Freddie Sayz
Lower mortgage rates are helping to support the housing market, said Frank Nothaft, Freddie Mac chief economist. The 30 year fixed-rate mortgage rate peaked this year over the week of June 11 and are now around a quarter-of-a-percentage point lower this week. This has led to a 7.2 percent increase in conventional mortgage applications for home purchases by the last full week of June, according to the Mortgage Bankers Association.

Howard Bell

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/

REITS Move Over

With job loss at over 450,000 for the month and still no end in site and house prices still declining, although at a slower rate we are at a telling moment.

Last year it looked as if we were going down a dark tunnel into an economic reality we have only read about. Now we have better news, yesterday Ford and Toyata called a bottom. The stock market called a bottom a few months back, in March. Housing has not really called a bottom yet. We see sales actually turning up, but home prices are still declining.

There is a lot of pent up demand for property and yes more are buying, but many are still on the sidelines. I blogged about REITS as a real estate investment that is liquid and wont take the big dollars of a down payment. Much like a mutual fund with real estate as its portfolio, you can invest and make money if you are right and if not you can get out in minutes.

MacroShares

Now we have a new paper investment to use. Most of us are familiar with MSA markets and the S&P Case Shiller index. This index is very useful because it is based on sales price not listing price. The index tracks the repeated sales of homes going back more than twenty years.

MicroShares has created an investment based on the Case Shiller index. For the first time, the housing industry will have bench marks and transparency. The MacroShares Major Metro Housing Up is designed to rise with housing prices. Its opposite, MacroShares Major Metro Housing Down, profits when real estate values fall.

Whats it Good For

For many people who would like to buy, but are still not sure, you can invest in MicroShares and test your theories about real estate markets.

For the investor in a multi family unit, you could hedge your bets by buying the MicroShares Down Major Metro Housing Down shares. If you were early in your real estate investment, you would see some profit in the paper real estate investment and put a floor under your real world loss. Their stock market ticker symbols are: UMM and DMM

Of course, some will become expert in picking the direction of the housing rices and do well with no insurance costs, mortgage interest of roof leaks.
*Chart source: cbsmarketwatch.com

Howard Bell

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/

Cost of Funds Index Rises

Wiki: A Cost of Funds Index or COFI is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans.

Why Do we Care

The COFI Index is used by mortgage lenders to set the cost of variable mortgages such as ARMs. Borrower's mortgage payments rise or fall based on COFI. The index is computed by what banks are paying on money markets, savings accounts and CDs.

The COFI tends to move far more slowly than other indexes for adjustable rate mortgages, such as one-year Treasuries or the prime rate. The 11th District Cost of Funds is more common in the West and the 1-Year Treasury Security is more common in the East. Buyers would prefer the slowly moving 11th District Cost of Funds and investors the 1-Year Treasury Security.

Cost of Funds Increase over last month, but is significantly down from last year. This month the COFI is 1.38, this time last year it was 2.918. The natural tension between increasing economic activity in a fragile recovery and the rising cost of money will determine the length and strength of the recovery.
* Chart courtesy of moneycafe.com

Howard Bell

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/