Costa Mesa Real Estate Week In Review

It is rare that we have the Federal Reserve Board reporting on the economy and a State of the Union Address in the same week, let alone the same day. Yet, that is just what happened last week. First the Fed met and released a statement. The fact that they left rates where they were was no surprise as said that they will "stay the course" and keep rates low despite the fact that the economy is starting to recover. The Fed repeated its earlier forecast that conditions are "likely to warrant exceptionally low levels of the federal funds rate for an extended period." There is no indication that the recovery will be anything but moderate and fragile and increasing rates now could put this recovery in jeopardy. The Fed did say that they will let some stimulus measures expire, including halting their purchase of securities backed by home loans. Potentially, this could cause rates to increase on these loans if the markets can’t absorb the supply.

The State of the Union Address also did not contain many surprises. The President’s focus was jobs. The recovery can’t sustain itself until it starts to produce jobs. While we were losing hundreds of thousands of jobs on a monthly basis 12 months ago and the losses are much lower now, the economy must start creating jobs. This is a tall order, especially considering the fact that we have already spent trillions trying to rescue the economy from oblivion. There are just not enough resources left to provide significant future stimulus. It is expected that future measures will be very specific and focused upon job creation, such as the proposed employee tax credit specifically for small businesses. If last year was a year of survival, this year will be the year of making sure we build a strong foundation to sustain a long-term economic recovery. The market’s initial reaction to the government’s statements were not positive when mixed in with other news, partially because they have heard this song before. One day later, the strong 4th quarter preliminary economic growth figures released did not reverse that negative trend. Look for the employment numbers due to be released at the end of this week as the next big statistical release.

The Markets. Rates were slightly lower in the past week. Freddie Mac announced that for the week ending January 28, 30-year fixed rates averaged 4.98%, down from 4.99% the week before. The average for 15-year fixed eased to 4.39%. Adjustables were also slightly lower with the average for one-year adjustables falling to 4.29% and five-year adjustables falling to 4.25%. A year ago 30-year fixed rates were at 5.10%. “Rates held steady this week ahead of the Federal Reserve’s (Fed) policy committee meetings, " said Frank Nothaft, Freddie Mac vice president and chief economist. “The Fed announced on January 27th that economic activity has continued to strengthen. It also noted that with substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time." 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 January 29, 2010

The proximity to a city center combined with the walkability of its neighborhood increases the value of a home. A study published last summer by C.E.O.’s for Cities examined sales of 90,000 properties in 15 markets and concluded that homes in neighborhoods with above-average walkability in cities like Charlotte, N.C., Sacramento, and San Francisco commanded as much as a $30,000 premium. Zillow.com’s Chief Economist Stan Humphries reached similar conclusions when he looked at concentric circles of major metropolitan areas. In almost all cases, walkable neighborhoods closer to the city center held their value better in the housing downturn. One anomaly is Detroit where fires, vandalism and crime have devastated neighborhoods near the city center. But generally, closer and more walkable is always better, Humphries says. “If you are a rational actor trying to maximize your dollar, you may have to pay more,” he adds. Source: The New York Times

Trulia reports a decline in the number of home sellers lowering their asking prices at least once to 21 percent as of Jan. 1 from 22 percent in December and 25.6 percent in November, marking the lowest level since April. The average discount held steady at 11 percent. Trulia reports a 50 percent drop in cities with price reductions of 30 percent or more on average, with only seven major cities reporting such cuts at the beginning of the month. Regionally, 20 percent of listings in the South and 22 percent of listings in the West, Midwest, and Northeast experienced price cuts. Trulia CEO Pete Flint says, "I expect reductions to rise again as the tax credit extension deadline approaches but I also expect mortgage rates to rise, so they may cancel out the savings from list price reductions. Source: Reuters

Fewer Americans moved in 2009 than any other year this decade, the U.S. Census Bureau reported this month. Population also grew less this year than any other year since the turn of the 21st Century. It reached 307 million on July 1, up less than 1 percent from a year earlier, the bureau says. About 850,000 people immigrated from other countries, down 15 percent compared to 2006. The losers in this trend included Florida, which lost 31,000 people to other states, a first for the Sunshine State, which used to be No. 1 in attracting new residents. "The middle of the decade’s huge surge to the Sun Belt stopped on a dime," says demographer William Frey of the Brookings Institution. Demographers say the real estate market is one of the big reasons people are staying put. Source: USA Today

Best Regards,

Kurt Galitski

The Kurt Real Estate Group

Weichman Realtors

714-957-6677