Builder confidence rises in July San Luis Obispo

Builder confidence rises in July
Builder confidence in the market for newly built, single-family homes rose two points to 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July. The gain largely offsets a three-point dip recorded in June.
“We view the upward movement in the July HMI as a correction from an exceptionally weak number in June that was at least partly attributable to negative economic news and the close of a disappointing spring selling season,” said NAHB Chief Economist David Crowe. “The strong rebound in sales expectations for the next six months likewise marks a return to trend. Basically, the market continues to bounce along the bottom, with conditions in some locations beginning to improve.”
Two out of three of the HMI’s component indexes rebounded in July from declines in the previous month. The component gauging current sales conditions rose two points to 15, returning to its May level, while the component gauging sales expectations in the next six months rose seven points to 22, which is where it stood in April. The component gauging traffic of prospective buyers held even with the previous month, at 12.
Regionally, the HMI posted a three-point gain to 14 in the West, which includes California.

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California pending home sales rose in June

California pending home sales rose in June
Pending home sales in California rose in June, according to C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 119.0 in June, an increase of 1.9 percent from May’s revised index of 116.8, based on contracts signed in June. The index also was up 4.4 percent from June 2010. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“Pending home sales have improved in the last couple of months and the next few months should bring continued gains,” said C.A.R. President Beth L. Peerce. “So much depends on the direction of the economy going forward. As for the makeup of the market, distressed sales continue to be a significant part of the market with the split between short sales and REO sales varying greatly across the state.”
The total share of all distressed property types sold statewide was unchanged in June from May’s revised 47 percent. The share also was unchanged from a year prior. Of the distressed properties sold statewide, 19 percent were short sales, a decline from last month’s share of 20 percent and last year’s share of 21 percent. At 27 percent, the share of REO (real estate-owned) sales was unchanged compared with May, but was up from 25 percent reported in June 2010. Non-distressed sales made up the remaining share of home sales in June at 53 percent, unchanged from both previous month and year.

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Foreclosure activity off 29 percent for first half of 2011

Foreclosure activity off 29 percent for first half of 2011
Foreclosure filings – default notices, auction sale notices, and bank repossessions – declined 25 percent in the first six months of 2011 compared with the previous six months and 29 percent from the first half of 2010, according to a report by RealtyTrac. A total of 1,170,402 U.S. properties received foreclosure filings.
Foreclosure filings were reported on 222,740 U.S. properties in June, an increase of nearly 4 percent from the previous month, but a decrease of 29 percent from June 2010. June was the ninth consecutive month where foreclosure activity decreased on a year-over-year basis. Default notices, scheduled auctions and REOs were all up on a month-over-month basis, but down on a year-over-year basis in June.
“Processing and procedural delays are pushing foreclosures further and further out – we estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later,” said James J. Saccacio, chief executive officer of RealtyTrac. “This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.”
California registered the nation’s third highest state foreclosure rate, with 1.96 percent of its housing units (one in 51) receiving a foreclosure filing during the six months. A total of 263,500 California properties received a foreclosure filing in the first half of 2011, the nation’s highest total, but down 13 percent from the previous six months and down nearly 23 percent from the first half of 2010. California foreclosure activity decreased on a year-over-year basis for the 19th straight month in June, but default notices and REOs increased on a month-over-month basis, continuing a sawtooth pattern in the monthly numbers.

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Bank of America is temporarily suspending foreclosures nationwide.

No doubt you’ve heard the news recently that a number of major banks have volunteered to temporarily suspend foreclosures in 23 states and Bank of America is temporarily suspending foreclosures nationwide.
While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.
• In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.

• So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.

• Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).

• The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.

• These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.

• This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.

• Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.

• The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.

• Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.

• Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.

• The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
NAR has sent a letter to regulators expressing their concerns over the foreclosure issue. Please visit for the latest developments and additional information.
C.A.R. is supportive of lenders taking action to ensure homeowners are not improperly foreclosed on and that they are following state law. We hope they are able to conduct their review expeditiously so as to minimize the impact on California’s housing market.

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California REALTORS® forecast slight rise in 2011 home sales

California REALTORS® forecast slight rise in 2011 home sales
Sales of existing, single-family homes are expected to decline slightly in 2010 compared with 2009, but are forecast to rise slightly in 2011, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2011 California Housing Market Forecast.” Meanwhile, the median price of homes in California is expected to increase both in 2010 and 2011 compared with the year prior.

• Following near record-high levels of year-over-year sales increases, home sales are expected to decline 10 percent in 2010 compared with 2009, according to the C.A.R. forecast. C.A.R.’s economists predict home sales will increase 2 percent in 2011 compared with 2010.
• Home sales are expected to end the year at 492,000 units, compared with 546,500 in 2009. C.A.R. forecasts sales will come in at 502,000 units in 2011.
• The median sales price is forecast to increase 11.5 percent to $306,500 for 2010, and an additional 2 percent in 2011 to $312,500, C.A.R. announced.
• According to C.A.R. Chief Economist Leslie Appleton-Young, the Association expects a net jobs increase of approximately 1.4 million jobs in California for 2011 and an improvement in unemployment figures, which many believe are key to the economic recovery.
• Ms. Appleton-Young also noted that a lean supply of available homes for sale will drive up prices at the low end ($500,000 and less), but larger inventories and limited, less-attractive financing will cause continued softness at the high end of the market ($1 million and more).

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California home sales drop in August compared with last year

California home sales drop in August compared with last year
The median home price of an existing, single-family home in California rose 1.2 percent compared with July and 8.6 percent from a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported this week. Following two months of consecutive month-over-month declines, California home sales edged up 1.8 percent in August compared with July, but were down 14.9 percent compared with August 2009.

• According to C.A.R. President Steve Goddard, home buyers who are waiting on the sidelines should consider the opportunities available in today’s market. Favorable home prices and interest rates at or near historic lows make housing affordability the best in recent years. Anyone who is in a position to buy a home should do so before either of these key factors rise.
• The statewide median home price posted its 10th consecutive year-over-year gain in August, according to C.A.R.’s report. The median price of an existing, single-family detached home sold in California during August 2010 was $318,660, an 8.6 percent increase from the revised $293,400 median price recorded in August 2009. The August 2010 median price was up 1.2 percent compared with July’s $314,850 median price.
• C.A.R. Chief Economist Leslie Appleton-Young says California’s housing market is transitioning from the conclusion of the federal home buyer tax credit and that home sales are strongest in the higher-price range. The strength in the upper-end market combined with inventory levels that are higher, but still lean by average, has led to home prices holding steady.

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Continued Improvements to Our Economy

Last Week in Review: Home loan rates started to shift… but in which direction? Read on for details.

Forecast for the Week: With double doses of manufacturing and inflation news, plus reports on retail sales and jobless claims, plenty of action is ahead.

View: Wondering how much house you can afford? Read on for a simple formula that can help.

Despite the markets being closed last Monday for Labor Day, there was plenty of market action… and plenty of words from the Fed. So what happened, and what was said? Read on for details.

After the recent 4-month rally in the Bond markets, which has led to some of the best home loan rates in history, money has started shifting over to the Stock market. Why has this happened? Some economic reports have been better than expected in the past few weeks… such as the Jobs Report for August and Consumer Confidence. While that’s great news, it’s important to remember that good economic news – or as has happened recently, better than expected news – often causes investors to move their money out of the safe haven of Bonds to Stocks in the hopes of taking advantage of any gains.

So why does this behavior impact home loan rates? When the economy appears strong or starts to improve, and investors move their money from the safe haven of Bonds to Stocks, a decreased demand for Bonds means that Bond prices move lower. And when Bond prices move lower, it means that Bond yields – and consequently home loan rates – move higher.

In fact, given the recent better than expected economic news, St. Louis Federal Reserve Bank President James Bullard last week shifted away from previous comments he had made about deflation and said that while he sees a slowdown in the economy for the second half of this year, he predicts a pick up in 2011. He also said that the Unemployment Rate will likely fall next year, and business spending should start to rebound.

While continued improvements to our economy are good news, one big impact is that home loan rates will start to increase. And when home loan rates start to increase, they tend to increase quickly. That being said, while home loan rates ended the week about .125-.25 percent worse than where they began, they are still near some of the best levels we have ever seen!

If you or anyone you know would like to learn more about taking advantage of historically low home loan rates while they remain so, please don’t hesitate to call or email me as soon as possible. Or forward this newsletter on to anyone you think may benefit and I’d be happy to talk to them free of charge.

One of the most important actions we can take this time of year is to remember all those who were injured, lost their lives, or lost loved ones on September 11, 2001. May we never forget those we lost, and may we thank those who work everyday to keep our families safe and protected.



This week’s full economic report calendar is sure to bring plenty of action, beginning with Tuesday’s Retail Sales Report. If the news is positive, this could benefit Stocks at the expense of Bonds and home loan rates, so I’ll be listening closely for the details.

We’ll get a double dose of manufacturing news this week, with Wednesday’s Empire State Index, which looks at New York State’s manufacturing sector, and Thursday’s Philadelphia Fed Index, which is one of the most important regional manufacturing indices. Double the inflation information is also on tap this week, first with Thursday’s Producer Price Index, which measures inflation at the wholesale level, followed by the Consumer Price Index on Friday. Remember, inflation is the archenemy of Bonds and home loan rates, so any hint that inflation is increasing could cause home loan rates to worsen.

Thursday also brings another weekly Initial Jobless Claims Report. Last week, initial claims came in at 451,000, better than the 470,000 expected, and representing the lowest number since the week of July 9th. This adds to the improving trend since the recent peak at 504,000, hit a few weeks ago. Meanwhile, Continuing Claims remained basically steady at 4.5 million – which is still a very high number.

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, Bond prices and home loan rates have worsened since the end of August. I’ll be watching closely to see what happens next.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday, September 10, 2010)

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