Costa Mesa Real Estate Week In Review

June 8, 2010

 
All Over The World 

From Greece to Korea to the Gulf. Does that just about cover the globe? When we talk about a “global economy,” now it has some specific meaning. We have constantly talked about how hard predicting the future really is. While many did predict major volatility in the markets this year, how many predictions did you read that rates would be heading down to their absolute lows as the summer approached? Of course, who could have predicted a massive oil spill or the sinking of a military vessel in Asia? 

At this juncture, the markets are trying to answer major questions such as could the European debt crisis or the oil spill derail our recovery. We have had a few quarters of growth but the markets seem to be afraid that we could be in for a pause or an even worse scenario such as a “double dip.” The economic news continues to be positive but even the strong employment report released Friday came with an asterisk in the form of temporary census hires by the government. In the meantime, lower rates and low housing prices are providing a buying opportunity that many in America are taking advantage of. We very well may find that the end of the tax credit does not halt interest in the real estate purchases as many have predicted as well. 

The Markets. Rates were stable at very low levels in the past week. Freddie Mac announced that for the week ending June 3, 30-year fixed rates averaged 4.79%, up slightly from 4.78% the previous week. The average for 15-year fixed fell slightly to 4.20%. Adjustables were also stable with the average for one-year adjustables remaining at 3.95% and five-year adjustables decreasing to 3.94%. A year ago 30-year fixed rates were at 5.29%. “The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggests inflation will remain tame in the near term,” said Frank Nothaft, Freddie Mac vice president and chief economist. “As a result, rates held at historic levels this week. In fact, rates on 15-year fixed-rate loans set another record low for the third week in a row. There are also signs that credit conditions may be improving. The number of homeowners with private mortgage insurance who became current on their loans outnumbered those who defaulted for the third month in a row in April, according to data compiled by the Mortgage Insurance Companies of America.” 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 June 4, 2010

House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital. In June 2009, Clear Capital reported a 19.3% drop in May house prices, a “far cry” from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures house prices against those three months ago, showed a 1.8% decline, an improvement from the 5% drop in April. “We continue to see sustained price growth throughout much of the country with yearly price gains reflecting the housing recovery off of last year’s lows,” Villacorta said. “The expiration of the tax credit at the end of April has certainly contributed to the growth of prices we are observing and as more sales close before the June 30 deadline we expect that markets across the country will continue to see strengthening of prices.” The amount of REO properties on the market seems to be dropping, too, according to Clear Capital. The national REO saturation rate dropped to 27.8%, down from 41.7% last year. Source: HousingWire

Members of the military or some federal institutions who served overseas between Dec. 31, 2008, and May 1, 2010, have another year to take advantage of the home buyer tax credits. Eligible taxpayers who are in the armed forces or who are members of foreign-service or intelligence organizations can earn home buyer tax credits if they enter into a binding contract to buy a principle residence before April 30, 2011 and close on that contract by June 30, 2011. The tax credit applies to any individual (and, if married, the individual’s spouse) who served on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010. First-time buyers who meet certain income qualifications can earn tax credits of up to $8,000. Previous home owners are eligible for tax credits of up to $6,500 if they are replacing a principal residence they have owned for any five-consecutive-year period during the preceding eight years. Source: American Home Shield

The vacation rental market has improved this year compared to 2009. “Some companies have reported advanced bookings have increased as much as 60 percent to 80 percent over last season,” said Alex Risser, president of the Vacation Rental Managers Association, which manages 150,000 vacation rentals. Increasing demand doesn’t mean that potential renters are willing to settle for less than ideal properties. “It’s still a tenant market in rentals,” says Theresa Smith, director of vacation rentals for Kinlin Grover GMAC’s Vacation Rentals on Cape Cod. Source: The Wall Street Journal