$3 Gas & What It Could Mean…

While we have pondered the state of the economy and rates in the past few months, the price of oil keeps inching up. First, we should point out that the latest rise in oil prices does not seem to follow the patterns of the previous "spike." When oil spiked more than a year ago, there was a speculative frenzy and in addition a weak dollar supporting higher prices. Today, few are expecting oil to skyrocket and the dollar has been firmer in the past few months, though the present position of the dollar is a long way from being described as strong. So, what could be causing the latest rise and what could the consequences be for the economy?

Here is one quote published recently in CNN/Money: "I wouldn’t be surprised if gas goes as high as $3 a gallon or a tad over," said Mark Zandi, chief economist for Moody’s Economy.com in West Chester, Pa. "But that is not enough to undermine the recovery." Zandi said he expects gas prices to head lower again after the summer. Right now the economists are not seeing a long-term threat to the economy. As a matter of fact, one explanation for higher prices is that the markets are expecting a recovery will increase consumption of oil. Higher rates and higher oil prices could both be the result of the economic recovery. However, they both have the ability to slow down the recovery as well. Let’s hope for a happy medium.


Rates inched up this past week, however, the increase accelerated after this survey was released. Freddie Mac announced that for the week ending March 25, 30-year fixed rates averaged 4.99%, up from 4.96% the week before. The average for 15-year fixed also rose slightly to 4.34%. Adjustables also increased with the average for one-year adjustables rising to 4.20% and five-year adjustables rising to 4.14%. A year ago 30-year fixed rates were at 4.85%. “Rates inched up slightly this week as bond yields rose even further,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Rates on 30-year fixed loans, however, were still below 5 percent for the fourth consecutive week. The Federal Reserve reported that the financial obligations for homeowners declined to under 16.1 percent of their disposable income in the fourth quarter, which represents the lowest share since the third quarter of 2003. Similarly, the obligations share for renters fell below 24.4 percent, the lowest since the end of 1993.”
Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated March 26, 2010

Daily Value

Monthly Value

March 25

February

6-month Treasury Security

0.25%

0.18%

1-year Treasury Security

0.44%

0.35%

3-year Treasury Security

1.69%

1.40%

5-year Treasury Security

2.65%

2.36%

10-year Treasury Security

3.91%

3.69%

12-month LIBOR

0.852% (Feb)

12-month MTA

0.441% (Feb)

11th District Cost of Funds

1.786% (Feb)

Prime Rate

3.25%


According to the Chinese calendar, 2010 is the Year of the Tiger. But in real estate, 2010 may come to be known as the “Year of the First-Time Home Buyer.” Mark Zandi, chief economist at Moody’s Economy.com, says there will be 1.84 million homes sold to first-time home buyers in 2010, compared with 1.73 million in 2009. These buyers will invariably make some mistakes that they will come to regret a few years down the road, some experts say, including failing to use a real estate professional to help them manage the transaction. Real estate professionals have the time and the knowledge to sift through thousands of listings, creating market analyses to judge pricing and other key features, points out Ray Boss Jr., a practitioner with RE/MAX Realty Group in Maryland. "I would want someone who is going to look out for my interests first and foremost," says Boss. "Someone who knows the contracts, who has experience negotiating, and who can walk me through the entire process smoothly — step by step — and make sure I get the house that’s right for me."
Source: U.S. News & World Report

With all the bad news about underwater homeowners and strategic walkaways, you might think that American homeowners’ equity holdings are in the tank. But the least-publicized recent statistic on real estate is that, despite these scary reports, home equity is again on the rise. Is that some piece of rosy propaganda put out by housing lobbyists to stimulate more home buying? Not unless you consider Federal Reserve economists to be shills for the real estate industry. The Fed conducts massive research into loan balances and home-value changes in hundreds of local markets around the country and reports its findings quarterly. According to the Fed’s most recent "flow of funds" survey, homeowners’ net equity grew by nearly $1 trillion from the recession’s nadir in the first quarter of 2009 through the third quarter. From June 30 to Sept. 30, net equity rose by $418 billion. Source: Ken Harney, The Nation’s Housing

Vacant residential lots are looking better and better to real estate investors. The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand. "The country needs 1.2 million new units for the next 10 years just because of population growth," says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. "[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant." Source: Inman News

On Your Team,

 

Kurt Galitski

The Kurt Real Estate Group

Vice President, Weichman Realtors

877-957-6677

Posted via email from The Kurt Real Estate Group

Kurt Galitski

Meet Kurt Galitski - The Kurt Real Estate Group, your new best friend. Distinctive Strategies that Deliver Record-Setting Results. When you combine Kurt’s passion and knowledge of the real estate market, you really gain an appreciation for what makes Kurt different. But what truly sets him apart from the crowd are his 5 distinctive strategies and his property management… For Kurt, getting into real estate was not an accident, it was a deliberate and calculated decision to deliver a better experience to home buyers, sellers, and landlords that they have ever received before. Today, you could ask any one of hundreds of clients, read his Yelp reviews, or look at his track record of being featured in Orange Coast Magazine in excess of eight consecu­tive years and you too will say mission accomplished. www.KurtRealEstate.com www.KurtPropertyManagement.com 877-957-6677

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