State's Home Sales Drop Biggest in US

State's home sales drop biggest in U.S.
Median price in county is down 10%
By AUBREY COHENP-I REPORTER
Sales of existing houses dropped more in Washington than anywhere else in the nation last quarter, compared with a year earlier, according to a new report. King County's median sale price also dropped roughly 10 percent from a year earlier.
The state's sales were down 36 percent from the third quarter of 2007, the National Association of Realtors reported. The next-largest annual drops were in Vermont and Delaware, where sales fell 33 percent.
A big reason why Washington's annual drop is larger than other states' is that its decline started later, meaning other areas had much slower markets a year ago.
"Clearly it's a reflection of what had been happening in other parts of the country spreading up here," said Glenn Crellin, director of Washington State University's Washington Center for Real Estate Research, which reported similar numbers Tuesday. "It's a reflection of the fact that economic conditions have worsened in the state. Unemployment is going up. Access to credit is still very restrictive."
Statewide, sales were down 6 percent from the second quarter, putting Washington 32nd among states and Washington, D.C.
The Washington Center for Real Estate Research reported statewide sales of existing houses dipped 5 percent from the second quarter and 26 percent from a year earlier. King County sales fell 5 percent from the second quarter and 31 percent from a year earlier.
The quarterly and annual declines in King County and statewide were smaller than the drops in the second quarter, Crellin noted. "While it is premature to suggest the worst is over for the housing market, even modest favorable changes are encouraging."
King County has enough houses on the market to last 9 months at the current sales rate, Crellin reported. "This is consistent with modest price declines but nothing significant."
Most experts consider five to seven months of supply a balanced market between buyers and sellers.
The state has 10.2 months of supply, suggesting larger declines will continue, the Center for Real Estate Research said.
King County's median sale price for an existing house was $427,000 -- down roughly 10 percent from a year earlier, the center said. That's a bigger drop than the 4 percent annual decline in the second quarter and a record fall for the center's reports, which started in 1995. The statewide median was $281,500, down a record 10.4 percent from a year earlier.
The value of a typical home may well be falling faster than the median sales price, Crellin said. "Those households willing to buy in this market have more choices and opportunities to negotiate deals than in recent periods. As a result, they may be getting more house without spending more money, suggesting price depreciation on individual homes is more severe than reported here."
The price drops have made homes more affordable. The typical King County family made 77 percent of the income needed to buy a median-priced house in the third quarter, up from 74 percent in the second quarter and 65 percent a year ago, the Center for Real Estate Research said. First-time buyers typically made 43 percent of the income needed for a starter home, up from 41 percent in the previous quarter and 36 percent a year ago.
Rising interest rates offset price drops somewhat from the second to the third quarter, and King County's affordability percentage is still rather low, Crellin said. "I don't know that it has gotten high enough to make a tremendous difference."
Statewide, the typical family made 97 percent of the income needed for the median house, while first-time buyer income was at 57 percent.
Looking forward, the slow economy will hamper a housing recovery, Crellin said. "I think we're going to continue to see a soft housing market through 2009. That doesn't necessarily mean we're going to continue to see significant reductions in value, but that does mean we won't see significant increases either."
The National Association of Realtors reported that nationwide third-quarter sales of existing houses were up a seasonally adjusted 2.6 percent from the second quarter, but down 7.7 percent from a year earlier.
The median price of an existing house was lower in the second quarter than a year earlier in 120 of the 152 metropolitan areas the Realtors track. The nationwide median price was $200,500, down 9 percent from a year earlier.
The Realtors noted that foreclosure houses and short sales -- sales made to avoid an impending foreclosure -- accounted for 35 to 40 percent of transactions in the third quarter, pulling down median prices.
"A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago," association President Charles McMillan said in a statement.
Metropolitan-area price changes ranged from a 13 percent annual increase in Elmira, N.Y., to a 39 percent drop in Riverside, Calif. Two other California metro areas, Sacramento and San Diego, posted the second- and third-largest drops, down 37 percent and 36 percent, respectively.
Such declines helped give California the second-largest quarterly sales increase, 28 percent, among states. A similar pattern occurred in No. 1 Arizona, where sales were up 28 percent, and No. 3 Nevada, up 26 percent. Nevada had the biggest annual increase, 76 percent, followed by California, up 58 percent, and Arizona, up 49 percent.
"A pattern of sharply higher sales in areas with large price declines is well-established," said Lawrence Yun, the association's chief economist. "Affordability conditions have consistently been a major factor in driving sales. Historically during recessions, buyers have responded to incentives, and it's important for government to keep that in the forefront of stimulus decisions."

Sales of preowned homes in West soared in Sept.

According to the Associated Press, sales of existing homes in the West took a huge jump in September. As a result of continued low interest rates and dscounting of foreclosed homes, sales of existing homes reached 100,000 units across the 13 state West Region.
Sales were up nearly 43 percent from the same month last year, but declined 9.6 percent versus August's total, according to the National Association of Realtors.
With sharply discounted foreclosures making up a larger slice of overall sales, the median price in the West plunged almost 19 percent from a year ago to $253,600 - slightly higher than what the median was five years ago, the association said.

To read the entire article by ALEX VEIGA of the Associated Press click on the link http://www.forbes.com/feeds/ap/2008/10/24/ap5604091.html

SEATTLE REAL ESTATE RATED #1

Survey of metropolitan areas reveals best investment value here
By DAN RICHMANP-I REPORTER
Among major metropolitan areas, Seattle's real estate is the best in the nation as a prospective investment, a national report released Tuesday says.
On an eight-point scale reflecting investment value, Seattle was ranked 6.2, according to the 30th annual study of emerging trends in real estate from PricewaterhouseCoopers and the Urban Land Institute.
That ranking reflects averaged ratings by more than 600 surveyed real estate professionals, who assigned a number of 0 to 8 to each the nation's top 10 regions. The better the location for investment purposes, the higher the rating.
"It's saying a dollar invested in Seattle real estate would be more likely to yield more than a dollar invested anywhere else -- but it says nothing about how much the yield would be, or over what time period," said Rick Kalvoda, a PricewaterhouseCoopers director.
Study participants -- including investors, developer and brokers -- supported their high rankings by pointing to the large and diverse types of companies that call Seattle home, singling out Amazon, Boeing and Starbucks.
Survey subjects also said low vacancy rates at Seattle-area shopping centers are buffering those malls against a possible consumer pullback. And they said the Puget Sound region's ports are the most attractive in the country, in part because of their low vacancy rates and low rents.
Despite Seattle's strengths, it should "brace for some buffeting," study participants said in comments they submitted along with their numerical ratings.
About 3.5 million square feet of new office space, plus increasingly tepid job growth, will increase the sub-10 percent downtown office vacancy rate, they predicted.
"Owners are scrambling to find tenants as Washington Mutual teeters and Starbucks downsizes," one respondent wrote. Though Bellevue's office-vacancy rate remains low, it's mostly because of Microsoft's massive presence there -- so that market is vulnerable to any future layoffs by the software company, others noted.
Housing demand in Seattle is slipping, and prices are dropping, while still remaining "well above the national averages." Condo sales are "falling dramatically," but the market is still rated a strong buy for apartments, with rents moving up, vacancies heading down and a limited number of new projects.
Ranked second as a real-estate investment was San Francisco, followed by Washington, D.C. New York City, which has traditionally topped the list, was ranked fourth this year, mainly because the Wall Street implosion cost jobs and created office vacancies there.
Chicago was ranked last among the top 10 markets, with apartments doing well but condos weakening as speculators leave the market.
Nationwide, real estate markets are expected to reach bottom in 2009 and to flounder in much of 2010, with ongoing drops in property value, more foreclosures and delinquencies and a "limping economy that will continue to crimp property cash flows," the study says.
"Commercial real estate was the last to leave the party, will feel the pain in 2009 and may be the last to recover," Tim Conlon, a partner with PricewaterhouseCoopers, said in a news release.
P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com.

Global Banks Unite in Unprecedented Rate Cuts

Ben Bernanke and the Fed brought financial aid to the streets, lowering the Federal Funds Rate and Discount Rate by 0.50%. In an unprecedented emergency move, central banks across the globe joined in lowering interest rates.

This move follows Washington's passing of the $700 billion Rescue Plan. From Wall Street to Main Street, a common concern has been heard by Washington. "We need money... no, let me rephrase that...we need cheap money."

Rates Could Rise From Here! Home loan rates have benefited from the weakness in the financial markets. Fixed rate mortgages remain very attractive. However, the Fed lowers short term interest rates to shore up financial markets. This could cause home loan rates to rise in the coming weeks and months if confidence returns to the stock markets.

ARM Holders Take Notice! Anyone that has an Adjustable Rate Mortgage (ARM), take note. The London Interbank Offered Rate (LIBOR) has soared from uncertainty in financial companies...And six million home loans in the United States are tied to LIBOR which determines the interest rate at the time of adjustment.

If you know someone with an ARM, let them know potential trouble lies ahead and the time to act is now. What Should You Do Now? Call me. We can go over your situation to determine how you can benefit from the actions. I look forward to hearing from you.

BAILOUT - RESCUE PLAN APPROVED!

The House of Representatives passed (and President Bush promptly signed) a $700 billion plan that'll bail out the financial system, ushering in what many saw as the economy's only hope of living to see another day.
The passage came just four days after the House voted down the original bill, causing the market to drop nearly 800 points before partially rebounding the next day. It's been quite a week in the Equity and Credit Markets this week.

GOVERNMENT RESCUE PLAN EXPLAINED

Mortgage Success Source's Barry Habib shared his opinion on the turbulent financial market and the need for Congress to pass the Rescue Plan or as some people refer to it, the "Bailout Plan".

Here are his comments: "Hi everyone. Crazy times. Whatever the political posturing, a plan needs to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market". Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle. Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this the opportunistic shorting done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process.
This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on".

Wild Markets, The Fed and Opportunities

Uncertainty in Financial Markets Could Cause Dramatic Rise in Existing ARMs at Next Adjustment If you or anyone you know has an Adjustable Rate Mortgage, this is an important point to consider. Many ARM loans are tied to the London Interbank Offered Rate (LIBOR). In fact, there are six million loans in the United States that use LIBOR to determine the interest rate and as the name suggests, many banks use this rate to lend money to each other.
But, today, banks lack confidence that the money they lend will be paid back. In light of what has happened with Lehman Brothers, IndyMac Bank and others, as well as AIG, banks are requiring much higher rates on LIBOR to offset the added risk.
The Federal Reserve Left Rates Unchanged but...The Federal Reserve met yesterday leaving the target rate unchanged at 2.00% but just like LIBOR the actual rate being charged by banks to each other is closer to 6.00%. This again suggests that those with ARM loans should consider a refinance into historically low fixed rates.
What Happened? Financial companies have been under attack. IndyMac was the largest bank to falter in twenty years. What brought IndyMac down was their exposure to defaulting loans. This sapped investor confidence and drove down the stock price until they filed for bankruptcy.
Following IndyMac, we saw Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch succumb and were either forced into conservatorship, to close their doors, or to sell themselves. AIG, the world's largest insurance company was also impacted, forced to make a deal with the U.S. government to stay in business.
What You Can Do Now?I'd be happy to go over your loan situation and help you understand how the recent events may affect you, and how you can best be protected. Additionally, chaotic times like these often present opportunities. I look forward to hearing from you.

Many will profit from Fannie Freddie failure - Will you?

Mortgages are in the news again today...but this time, the news is good! Especially for people looking to buy or refinance a home, as interest rates have dropped to the lowest levels seen since April.
You've probably heard that Fannie Mae and Freddie Mac were taken over or "bailed out" by the Federal Government over the weekend. The announcement came as the government felt that both of these institutions were potentially unable to meet their obligations. These agencies must pay off maturing Bonds every month, and they do so by selling new Bonds. But during the last twelve months, investor appetite to purchase new mortgage-backed security Bonds has deteriorated. As such, it has become more difficult for Fannie and Freddie to replenish capital to fund more loans. If both Fannie and Freddie became insolvent, the housing market as well as the mortgage market would come under further pressure.
With the Treasury stepping in to provide a "backstop" for the mortgage giants, investors now have confidence to purchase Mortgage Bonds. And the greater interest has helped lower interest rates today.
Call me today, so we can discuss what the news means to you and how you can benefit.

Market News

Unemployment Rate Jumps
Mortgage rates improved again this week as expectations for future economic growth declined. An economic slowdown typically eases inflationary pressures, which is favorable for mortgage rates. The economy had been showing signs of strength recently mainly due to a surge in exports. Since the dollar has risen against other currencies and many foreign economies are slowing, though, this pocket of economic strength is expected to decline. Investors also reacted to the slowing economic growth by selling stocks, and they moved some of the funds to mortgage securities, which added to the decline in rates.
Even with the recent strength in exports, the labor market has been weak for most of the year, and this week's economic data continued the trend. The August Employment report showed that the economy lost -84K jobs, close to the consensus forecast, and the figures for June and July were revised a little lower. The big surprise came in the Unemployment Rate, which shot up to 6.1%, the highest level since September 2003.


Also Notable:
In August, Average Hourly Earnings, an indicator of wage growth, increased at a 3.6% annual rate
The Fed's Rosengren explained that the easing in rates helped offset tighter credit conditions
The European Central Bank (ECB) made no change in rates
Oil prices fell to $106 per barrel, the lowest level in five months

Mortgage Rates Improve Despite Strong Data

This week's economic data showed higher than expected levels of economic growth and inflation. A weaker dollar has boosted the manufacturing sector and overall economic activity over recent months. Revisions made to second quarter Gross Domestic Product (GDP) showed stronger than expected growth of 3.3%, far above the original reading of 1.9%. Durable Orders and the Chicago PMI national manufacturing index also far exceeded the consensus forecasts. The dollar has risen against other currencies this month and many foreign economies are slowing, so investors expect exports to fall later in the year. Investors seem to have focused on the outlook for lower future readings, rather than this week's unexpectedly strong data, and mortgage rates improved during the week.
The story is similar for inflation. The July Core PCE price index, the Fed's preferred inflation indicator, rose to a 2.4% annual rate. The Fed would like to see this reading drop below 2.0%. With slowing worldwide economic growth and the recent drop in oil prices, many investors believe that this will happen. This week's release of the Fed minutes from the August 5 meeting confirmed that Fed officials expect inflation to moderate as well.
In the housing market, the news was mixed. July Existing Home Sales rose 3%. For several months now, activity levels have held above the recent lows. Inventories of unsold homes climbed to a record high, however. July New Home Sales fell slightly.

Seattle Home Sales Drop

Seattle and Portland were among the top 10 metro areas in the nation with the most pronounced drop in home sales last month compared with July 2007, according to The Associated Press-Re/Max Monthly Housing Report, which analyzed all home sales recorded by all local agents.
By ALEX VEIGA , The Associated Press

DON RYAN / AP
A real-estate-agents trade group says sales of existing homes rose 3.1 percent in July as buyers snapped up deeply discounted properties.

U.S. homebuilders' confidence grows slightly
Real Estate
LOS ANGELES — Homebuilders are a little more optimistic about the prospects for home sales over the next six months, but an index reflecting the sector's confidence overall remained at an all-time low, an industry trade association said this past week.
8/23/2008 seattletimes.com

Existing Home Sales Report 08-25-2008

Existing home sales, including single-family, townhomes, condos and co-ops increased 3.1% in July to an annual rate of 5.0 million units, the NAR reported today. This was the highest level of sales in five months as recent home prices declines brought buyers back into the market. Despite the increase last month, sales remain 13.2% below their year ago rate of 5.76 million. Sales rose strongly in the West and the Northeast, were up slightly in the Midwest and fell slightly in the South. Rising foreclosure rates continue to press inventories higher and prices lower across the country. The inventory of homes available for sale for all housing types rose 3.9% at the end of July to a record high 4.67 million, which represents an 11.2 month-supply at the current sales pace. House prices continue to fall with median home sale prices declining by 7.1% over the past year to $212,400 while average prices fell 8.0% to $254,000. Foreclosures and short sales, which account for more than a third of all sales, are pushing existing home sales modestly higher but are boosting inventories and weighing down prices as well. The outlook for the near term is more of the same with prices moving even lower until demand is sufficient enough to reduce inventories. Also worth noting, it may be awhile before demand returns under tighter credit and soft economic conditions.

FHA Down Payment Assistance Programs - No Longer Eligible

SELLER-FUNDED DPA PROGRAMS NO LONGER ELIGIBLE WITH FHA TRANSACTIONS
As a result of the passage and signing into law of H.R. 3221, the Housing and Economic Recovery Act
of 2008, seller-funded down payment assistance programs (e.g., Nehemiah, AmeriDream, and similar
organizations) are no longer an eligible source of funds for loans insured by the Federal Housing
Administration (FHA).

First-Time Homebuyer Tips

Buying a home can be a complex process, but it doesn't have to be. With a little preparation, you can save a lot of time and hassle by having all of your documents ready when your mortgage professional needs them.To start with, the lender will need personal information to verify employment for you and your co-borrower (if there is one). They will also need information regarding all of your debts and assets.In order to expedite the paperwork process, start gathering the following items:
Most recent paystubs for one month.
W2s from the last two years.
Signed copies of your last two years' tax returns, including all schedules that were filed.
If you are self-employed, a year-to-date profit and loss statement.
Homeowner's insurance company name and number.
Most recent bank statements for two months.
Most recent statements from any retirement and investment accounts for two months.
What costs are involved? Within 3 days of your application, your Loan Officer must provide you with a good faith estimate of closing costs. Along with any down payment, you will have to pay closing costs as well. This is a brief rundown of some of the fees that could be associated with your new mortgage:
Application/Processing Fee – Charged by the loan officer to process your loan application.
Appraisal Fee – Charged by the appraiser to determine the current value of the property.
Closing Fee – Charged by the closing agency (escrow, attorney, title) to ensure the close of your transaction.
Credit Report Fee – Charged by the credit reporting agency to provide your credit report to your loan officer and/or lender.
Title Search/Title Insurance Fees – Charged by the title company to ensure the property is free from liens or title defects.
Origination Fee – Paid to the originator to obtain a lower interest rate. This is usually expressed in the form of points. One point equals 1% of the loan amount.
Discount Points – Paid to the lender to secure a lower interest rate.
Miscellaneous Fees – VA and FHA loans may have other fees associated with them. Private Mortgage Insurance (PMI), document preparation, notary, recording and tax service are other fees which may fall under this category.
Let us help you evaluate your personal situation and assist you in finding the loan program that works best to meet your individual goals and needs.

First - Time Home Buyer Tax Credits

The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and July 1, 2009. To find basic information about the tax credit and to have your questions answered see the following link:

http://www.federalhousingtaxcredit.com/faq.php