Archives for February 2011

2011-2012 Housing Predictions- What happens in Vegas will happen in California

We are often asked what national markets are good early indicators of things to come for real estate.

#1 is Las Vegas.

Why Vegas? Back in 2006 the very first indications of the bubble bursting happened in Vegas. The inventory of homes for sale changed from a sellers market…into a buyers market. Almost over night the inventory shifted from not enough homes for sale into far too many homes for sale. Days on the market shot up, values leveled off.

Next, the epic fall in values. Vegas like most of the US hit bottom…and continues to hit bottom…hard. Very hard.

Much of Las Vegas has seen at least 50% in home value depreciation since 2007. In some communities home values have fallen over 70%. Its common to find condos that sold for $800k now selling for less than $300k. There is no reason to believe there won’t be significant continued price drops for all but the least expensive Vegas housing markets.

But, there is a shift happening in Vegas. Maybe a reason to hope. If history is to repeat itself….what happens in Vegas will happen to the rest of the US. No promises here but the information is a good indicator of what we hope is to come.

That shift is…a huge increase in all cash buyers who are buying and holding. They are keeping these homes as long term investments. Investors buying will put a floor on the market.
Here is the video watch the entire segment

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Demand for Orange County Homes surge 26%

OC Register, February 7th, 2011 Reports-

Demand, the number of new pending sales over the prior month, increased by 26% in the past two weeks, adding an additional 564 homes, and now totals 2,718 pending sales. Thus far this year, demand is a mirror image of 2009, prior to any artificial government stimulus. Last year, there were 530 additional pending sales; but, remember that demand was being propped up by the $8,000 first time home buyer tax credit. (written by Steve Thomas)

Thomas calculates a “market time” benchmark tracking how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made. By this Thomas logic, as of last Thursday, it would take:

  • 3.82 months for buyers to gobble up all homes for sale at the current pace vs. 4.75 months two weeks ago vs. 2.42 months a year ago vs. 4.31 months two years ago.
  • Homes listed for under a million bucks have a market time of 3.47 months vs. 8.72 months for homes listed for more than $1 million.
  • So, basically, it is 2.5 times harder to sell a million-dollar-plus residence!
  • And just so you know, the million-dollar market represents 16% of all homes listed and 7% of all homes that entered into escrow in the past 30 days.
Slice Listings Deals Time (month) 2 week ago 1 yr. ago 2 yr. ago
$0-$250k 1,836 554 3.31 4.10 1.72 3.26
$250k-$500k 4,007 1,238 3.24 4.08 1.63 3.08
$500k-$750k 2,091 559 3.74 4.75 2.60 4.19
$750k-$1m 935 205 4.56 4.87 3.52 6.81
$1m-$1.5m 573 102 5.62 6.28 4.41 11.47
$1.5m-$2m 331 46 7.20 11.97 10.63 20.89
$2m-4m 433 35 12.37 15.36 18.28 45.07
$4m+ 277 2 138.50 67.25 29.70 60.00
All O.C. 10,389 2,718 3.82 4.75 2.42 4.31
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Costa Mesa Real Estate Market Update

In This Issue…

Last Week in Review: Food and fire for the housing market. Read below to discover what happened.

Forecast for the Week: High-impact reports hit the markets…with the big news coming this Friday!

Special Video View: Don’t pay more than you have to in taxes. Watch this special video now!

Last Week in Review
“A house is not a home unless it contains food and fire for the mind as well as the body.” – Benjamin Franklin. Last week, the housing market received some food and fire for the mind, but not everyone was at home with the news.

First, the good news. The housing market received a serving of good news last week, as New Home Sales reportedly rose 17.5% in December to come in better than expectations. Overall, the report demonstrated that housing continues to recover – albeit slowly. Despite that good news though, the markets were keyed in on another more important event last week: the release of the Fed’s Interest Rate Decision and Monetary Policy Statement.

As expected, the Fed made no change to the Fed Funds Rate and even the Policy Statement was pretty much the same. But that didn’t stop the markets from getting a little fired up about the release. Let’s take a look at why.

It’s important to understand that the Fed has to be very careful with how bullish their economic comments are, as they don’t want to see long-term rates move higher. Well, the Fed’s comments certainly were not bullish as they said “employers remain reluctant to add to payrolls” and “the housing sector remains depressed.”

So why did Bonds initially improve nicely on the news and then crumble later in the day? The answer is, not everyone in the trading pits is buying what the Fed is saying. Instead, some people believe the Fed is talking down the true underlying strength of the economy, so that it can justify injecting the full $600 Billion of Quantitative Easing into the economy.

Speaking of comments that impacted the markets… President Obama delivered his State of the Union Address to members of Congress last week. Although the President’s call for a freeze on discretionary spending for 5 years may appear to be Bond bullish in that any reduction in the deficit would be good for Bonds, the reality is that so much more has to be done to really get our long-term debt in check. And some of last week’s weakness in Bonds was likely attributed to the feeling that the speech came and went without any real sense that the deficit is going to be reduced in a meaningful way, especially in the near term. The Bond market probably would have liked the word “cut” in spending rather than “freeze,” since a “freeze” suggests only a temporary halt in spending at current levels.

In the end, the news last week demonstrated that economic conditions are improving, but they are doing so gradually. As a result, the market remains volatile, as Bonds and home loan rates move up and down depending on what reports or speeches hit the news wires. The good news is that despite the volatility, home loan rates remain extremely low for now and present a tremendous opportunity for buyers who lock in at the opportune moment.

To learn more about the volatility and how you or someone you know can benefit from a knowledgeable advisor like myself, please call or email today. I’ll be happy to discuss the current economic climate and what it means to your unique situation.

Forecast for the Week
 

The markets will continue to watch the political unrest in Egypt closely this week. In addition, a number of high-impact reports will hit this week with the big news coming this Friday!

  • We start off right away Monday morning with reports on Personal Spending and Personal Income, as well as the Personal Consumption Expenditures (PCE) Index, which is the Fed’s favorite gauge of inflation.
  • Manufacturing will also be in the news this week. On Monday, we’ll see the Chicago PMI, which surveys more than 200 Chicago purchasing managers about the manufacturing industry and is a good indicator of overall economic activity. Then on Tuesday, the ISM Index will be released. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.
  • The big topic of the week will be employment. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment.
  • The ADP report will be followed by another round of Initial Jobless Claims on Thursday. In last week’s report, Initial Jobless Claims came in well above expectations. We shouldn’t read too much into that spike, since weather could have played a sizable role in the jump. However, if readings over the next couple weeks don’t settle back down closer to the 400,000 level, there may be reason for concern.
  • Finally, the busy week culminates in the all-important Jobs Report on Friday. This report features new data regarding Non-Farm Payrolls, the Average Work Week, Hourly Earnings and the Unemployment Rate. Needless to say, this report can be a big market mover!

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds received a bit of a bump at the end of last week, helping home loan rates recover from losses earlier in the week. This boost was prompted by political turmoil in Egypt that had investors seeking the safety of Bonds. As a result, home loan rates are still near historic lows, making this a perfect time to see how you or someone you know can benefit! Call or email today to get started.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jan 28, 2011)
Japanese Candlestick Chart
The Mortgage Market Guide View…
Click Here to view the latest Video.

The Power of Tax Planning

No one wants to pay more in taxes then they have to. And believe it or not, the tax code actually contains plenty of opportunity to save…but you must plan correctly. Check out this video from Kiplinger.com to put the power of tax planning to work for you.

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Economic Calendar for the Week of January 31 – February 4, 2011

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of January 31 – February 04

Date ET Economic Report For Estimate Actual Prior Impact
Mon. January 31 08:30 Personal Income Dec 0.5%   0.3% Moderate
Mon. January 31 08:30 Personal Spending Dec 0.6%   0.4% Moderate
Mon. January 31 08:30 Personal Consumption Expenditures and Core PCE Dec 0.1%   0.1% HIGH
Mon. January 31 08:30 Personal Consumption Expenditures and Core PCE YOY NA   0.8% HIGH
Mon. January 31 10:00 Chicago PMI Jan 65.0   68.6 HIGH
Tue. February 01 10:00 ISM Index Jan 58.2   57.0 HIGH
Wed. February 02 08:15 ADP National Employment Report Jan 150K   297K HIGH
Thu. February 03 10:00 ISM Services Index Jan 57.0   63.5 Moderate
Thu. February 03 08:30 Jobless Claims (Initial) 1/29 425K   454K Moderate
Thu. February 03 08:30 Productivity Q4 2.2%   2.3% Moderate
Fri. February 04 08:30 Non-farm Payrolls Jan 150K   103K HIGH
Fri. February 04 08:30 Unemployment Rate Jan 9.6%   9.4% HIGH
Fri. February 04 08:30 Average Work Week Jan 34.3   34.3 HIGH
Fri. February 04 08:30 Hourly Earnings Jan 0.2%   0.1% HIGH
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
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Application guidelines for NEW STUDENTS to attend Davis Magnet School (K-6) for Fall 2011

Application guidelines for NEW STUDENTS to attend Davis Magnet School (K-6) for Fall 2011

Guidelines for Applying to Davis Magnet School (K-6): Fall 2011

 Current Davis Magnet School (DMS) students do NOT need to reapply.

  • Students attending DMS must provide their own transportation to and from school.
  • Acceptance into DMS is determined via lottery, not on a first-come, first-served basis. If the number of applicants (who must submit applications between March 1 and March 31, 2011) at a particular grade level exceeds the number of seats available, a lottery process will be used.
  • Siblings of current and continuing DMS students receive priority.

 For NEW students applying for the opportunity to be in the lottery for attendance at DMS.

·       Proof of residency in Newport-Mesa Unified School District is required of all students.

·       Please read the New Student Enrollment form for address verification instructions.

·       Address Verification: Dates TBA at Besst Center, 2045 Meyer Place, Bldg. D, Costa Mesa. Phone 949.515.6743

 When may I applyfor the opportunity to be in the lottery for attendance at DMS?

  • Online applications only. Go to the Davis Magnet School website to apply — DMS Application Window: March 1 to March 31, 2011.  If completing an online application is impossible, make an appointment with the DMS Office and we will be happy to assist you to complete an online application between March 1 and March 31, 2011 at the DMS Office. Call 714.424.7930.
  • Computerized random lottery to be witnessed by independent observers.
  • Email notification of acceptance into DMS or placement onto a grade-level-specific wait list will be sent out electronically on April 8, 2011.

 What if my child’s name is NOT drawn in the lottery for a seat, and s/he is not accepted into DMS?

If your child’s name is not drawn in the lottery, his/her name will be placed on a grade level wait list with a numbered ranking assigned by the lottery. You are encouraged to immediately enroll your child at his or her home school in N-MUSD so that your child will be enrolled in N-MUSD. We cannot guarantee that a wait list designation will lead to subsequent admission to DMS.

 What if my child’s name IS drawn in the lottery, and s/he is accepted into DMS?

By no later than May 31, 2011, if your child’s name has been selected via lottery to attend DMS, you will be required to complete the Registration Papers, which will be available both online and in the DMS Office. You must call 714.424.7930 to make an appointment to return the Registration Papers and also bring with you:

·       Child’s original Birth Certificate

·       Completed Physical Form or verification of appointment with your doctor before school entry. Your child will need a physical – dated March 6, 2011 or after – to comply with state requirements for Kindergarten entry in September 2011.

·       Immunization card (yellow) with current records signed or stamped by your doctor’s office.

 For the latest information on DMS:

·       DMS Website: http://davismagnet.nmusd.us/

·       NMUSD Website: http://web.nmusd.us/

·       Email Principal, Dr. Kevin Rafferty: krafferty@nmusd.us

·       Call the Davis Magnet School Office at 714.424.7930

 You’re Invited to Open House!

You’re invited to Davis Magnet School’s Open House on Wednesday, June 8, 2011 from 6:00 to 7:30 p.m.

Open House is a celebration of our learning science, math, and technology!

 The first day of school for 2011-2012 is Tuesday, September 6, 2011.

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2011 Real Estate Forcast

What Should You Expect in 2011, Part 2
Forecasts for Inflation, the Housing Market, and Home Loan Rates

What Should You Expect in 2011, Part 2Forecasts for Inflation, the Housing Market, and Home Loan Rates

Last month, YOU Magazine shared Part 1 of our 2011 Forecast, focusing on the economy and employment. But what’s ahead for inflation, the housing market, and home loan rates this year? Read on to find out.

Inflation
One of the major topics that we need to watch in the coming months is inflation. The Fed and the markets keep a close eye on inflation because it impacts so many aspects of the economy, including home loan rates. In fact, inflation is considered the archenemy of home loan rates!

Why is this the case? It’s because home loan rates are tied to Mortgage Backed Securities, which are a type of Bond – which means home loan rates improve when Bond prices do. But when inflation – or even just fear of inflation – grows, Bond prices fall, meaning home loan rates rise. That’s because lower Bond prices are needed to give Bond investors juicier yields that will help outpace inflation.

Here’s an analogy to help illustrate this point further. Think of inflation as the ocean and interest rates as a boat. As inflation (or the ocean’s tide) rises, interest rates (or the boat floating atop the ocean) have to rise as well. In other words, interest rates (or boats) must always be higher than inflation (or the ocean) in order to compensate investors.

With that in mind, let’s take a look at what’s going on with inflation and what you should keep an eye on in the coming months.

At the end of 2010, the Fed initiated its second round of Quantitative Easing (QE2), which is the concept of the Fed becoming a buyer of Treasuries and Bonds. They took this step in a bid to stimulate the economy by: creating inflation, lowering the unemployment rate, and raising Stock prices. While those goals may be good for the overall economy, remember that inflation is very unfriendly to Mortgage Bonds and home loan rates.

In the end, as a result of the Fed’s QE2 and other stimulative actions, we predict a 1.5% increase in consumer inflation by the end of 2011. That should still be within the Fed’s comfort zone of 1 – 2%, so inflation should not be too much of a threat this year. However, the unprecedented amount of debt accumulation on the part of the U.S. could spark significant inflation down the road.

Housing Industry
Home prices began to stabilize during 2010, and homes sales showed some signs of encouragement. We expect more of the same in 2011, although there will be some additional headwinds.

After a modestly good start to the year, home prices could actually decline slightly in some areas, particularly depending on the health of the local job market. Another headwind that could weigh on home prices is the overhang of several million distressed properties. The moratorium on foreclosures has ended and all of the major lenders have resumed foreclosure procedures.

At the end of last year, three million homes were in foreclosure activity, with over one million repossessions. Overall, we expect to see accelerated rates of foreclosures in the first quarter until things settle to normal during the second quarter and rest of the year. This could extend the housing downturn a couple of months longer.

That being said, we still expect to see home prices move higher in the year ahead, especially in the latter half of the year.

Home Loan Rate Outlook
Now for the big questions: Where will home loan rates go in 2011? And why?

Let’s start by looking at where we are right now. Although rates are still near historic lows, they have trended higher since early November, and indications are that those unbelievably low home loan rates seen during 2010 may be behind us. In fact, there are only a couple things that would bring back the lows that we saw in early November 2010:

  1. If the Fed’s recent round of Quantitative Easing falls on its face and doesn’t meet its mission of creating inflation, boosting Stock prices, lowering unemployment and creating consumer demand. If that happens, Bond prices could make some gains as the threat of deflation reemerges. But this is a long shot. As the saying goes: “Don’t fight the Fed.” This means that if the Fed wants to raise inflation, it most likely will.
  2. If the financial problems and uncertainties in Europe that we saw in 2010 worsen significantly in 2011. This would drive investors into the safe haven of the U.S. Bond market, which would help Bond prices and therefore home loan rates, but probably only modestly.

Realistically, the economy is improving, and as it does home loan rates will gradually increase over time. We expect rates to stay relatively low during the beginning of the year, but gradually rise higher.

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