I had all of my clever Halloween puns planned for the week—“It was a Spooky Week on Wall Street”—or “The Market Takes Another Ghoulish Hit”—but alas, I am pleasantly surprised to say my puns are for not as things were definitely looking up for the market this week.
For starters, the central bank cut the federal funds rate, a key bank lending rate, by half a percentage point to 1%, a low last seen in June 2004. The funds rate has not been lower since 1958 when Dwight Eisenhower was president.
Just one day later the government released the latest GDP report which showed that the economy shrank at a slower pace than expected in the third quarter (though, to keep things in perspective, it did endure its biggest decline in seven years).
And if all of this news wasn’t good enough, negotiators for the Treasury and Federal Deposit Insurance Corporation announced that they are nearing an agreement on a plan to have the government guarantee the mortgage of millions of distressed homeowners. The plan could cover as many as three million homeowners in danger of foreclosure. If this plan were to pass, it will help us deplete our bank-owned inventory and subsequently should help stabilize home prices nationwide.
As an aside, our parent company Realogy is doing its part to support the stimulation efforts by this week releasing a statement that proposed a short-tern government buy-down in mortgage rates to stimulate the housing market and accelerate broader economic recovery. In a statement released to media on Tuesday, Realogy called for a short-term government buy-down of mortgage rates of at least 4.5%, or lower, for a 30-year fixed rate mortgage (down from current rates of approximately 6.04%). This homebuyer incentive would apply to the purchase of all new and/or existing homes sold up to $1 million in price. Only time will tell if this solution is adopted but it is commendable to see our parent company working so hard on our behalf to stimulate the housing market.
Thursday, Wall Street reacted to the week’s good news with the Dow Jones Industrial Average gaining 190 points or 2.1%, The Standard & Poor’s 500 index rose 2.6% and the NASDAQ composite (COMP) gained 2.5%.
But is all of this enough to revive an economy hit by a long list of problems stemming from the most severe financial crisis in decades? It’s definitely a start.
Earlier this week Time Magazine reported that there is a sign that we are bottoming out noting “The rate of sales decline slowed in August, according to Case-Shiller, and in September existing home sales rose 5.5% nationally, which means buyers are finally being lured to the market by low prices.”
As you’ll recall, President Bush said prior to signing the Emergency Economic Stabilization Act of 2008 that all of the recovery plans in store would take time to work. And only time will tell whether or not these plans are successful. But we are starting to see some positive stories with some better than expected results which is a good sign for all of us.
Next week we’ll learn who our new President will be, which, historically speaking, should lessen some of the concerns and (hopefully) settle some of the unrest on Wall Street. Once investors know who will be running the government for (at least) the next four years, they’ll feel more apt to making longer-term investment decisions.
Now, let’s take a look at this week in real estate. My overall assessment is that after a slow couple of weeks due to the economic woes on Wall Street, Main Street’s real estate is looking brighter and buyer interest is increasing.
Silicon Valley—Though buyers are still cautious, things seem to be brighter in Silicon Valley. Our Cupertino Stevens Creek reports “Sales continue to improve with good news looming in the media.” Our San Jose Main office concurs noting “Our immediate market continues to be brisk. Excellent open house traffic reported this weekend. Entry level homes and REO properties continue to receive the greatest attention and most reported sales are in the $350,000 to $550,000 range.” The upper-end has definitely taken a hit and the consensus is that it is slow all the way around in this niche. Our Almaden office reported that a buyer was about to pull out of one transaction this week unless the seller dropped his price from $2.2 million to $1.975. The seller reluctantly agreed. Definitely a sign of the times.
South County—The South County market continues to be driven by REOs The luxury market is South County is very slow with properties over $1 million seeing the following statistics:
Morgan Hill (100 listed, 9 pending)
Gilroy (53 listed, 5 pending)
San Martin (24 listed, 1 pending)
Overall, it was a good week for the Bay Area and momentum continues to build after a very rough September. Our market continues to be challenged by some buyers who are waiting to see what the market is going to do. Buyers should be reminded of the fact that waiting could cost them plenty in terms of higher prices, lower inventory and higher interest rates. It’s just a matter of time before we move from a buyer’s market to a more normalized exchange between buyers and sellers and we need to educate our buyers now that if they don’t act, they will reduce their purchasing power and may lose out on a bigger and better home!
Have a great week and a Happy Halloween,
Please feel free to contact me for any real estate questions you may have.
Monica Manocha Re, CMRS
408 399 1495
monica.manocha@cbnorcal.com
www.mmgproperties.com
Friday, October 31, 2008
Friday, October 24, 2008
South Bay Home Sales Are Up!
Home Sales Are Up…But Can Someone Tell the Stock Market That?
It was an interesting week in news. More specifically, it was a great week in news for real estate—but in its third consecutive week (yes, I’m being kind) of volatility, the stock market did little to support the cause.
Let’s start with the good news. NAR released its Pending Home Sales Index—a forward-looking indicator based on contracts signed in August—noting pending homes “jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.”
Days later, DataQuick News reported “Bay Area home sales soared last month above the record-low levels of a year ago, marking the largest gain in over six years. The median sale price did the opposite, diving to $400,000 - 40 percent below its summer 2007 peak - as more sales shifted to lower-cost inland markets laden with foreclosures…Last month's 45 percent year-over-year sales gain was the highest for any month since April 2002, when sales shot up 49 percent.”
What the heavy foreclosure sales figures are telling us, however, is most important. The dramatic increase in sales suggests that more investors are deciding that prices have fallen to bargain levels and they are now getting into the market. Historically speaking, it is investors who determine where the bottom is. When they think prices have reached a point where they can potentially buy low, wait a bit and in a few years turn a profit, they’ll swoop in. We’re starting to see this now and that is welcome news to many.
Of course housing recovery as a whole is dependent on the course of the overall economy which had less than stellar news this week. By Thursday, the Dow rallied back after two days of declines—including a loss of 500 points on Wednesday—but the NASDAQ slipped to its lowest point in more than five years.
Locally, what the volatility on Wall Street is doing for many consumers is causing concern. We have a lot of buyers and sellers who are watching their portfolios each day and are concerned about taking action in purchasing a home until the volatility subsides. In more than one instance we’ve seen buyers back out of contracts in fear of what may happen—even if they were having no issues with gaining the loan.
And while I think we all understand the reasoning and the concern, what I do remind consumers of is the fact that we are in one of the best buyer’s markets of our generation and despite what you may be reading, home mortgages are available. Couple that with the fact that despite the turmoil in the world’s financial markets, we remain in one of the most desirable and historically speaking, stable real estate environments in the world. With bank owned properties so prominent, interest rates falling and time-sensitive benefits available through the newly enacted economic stimulus package, we have what may be the perfect storm for buyers. It’s just a matter of time before we start feeling the flow of credit, the ease of purchasing and consumer confidence restored. Buyers need to be properly counseled on these complexities (and opportunities) before they miss out.
Let’s take a look at this week in real estate:
· Silicon Valley—Silicon Valley changes from week to week and from neighborhood to neighborhood. This week our Cupertino office is reporting that although sales are treading steady, new listings that are coming on to the market are slow. Buyers continue to come through in waves looking for the under valued deal. We are seeing increased buyer activity and stronger sales, mostly in the REO price range. We are also seeing increased traffic at open houses. Entry level homes seem to get the best traffic. Overall I’d say that things are slowing down quite a bit but buyers are out there. They’re just looking for the best deals and then they act.
Before I leave you, I thought I’d share a final, interesting note released by NAR this week—projections for 2009. NAR Chief Economist Lawrence Yun “expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as the housing market begins a steady improvement.”
This is a good sign for all of us and for buyers—if you are thinking about staying in your home even for just a few years—now may be the perfect time. Now’s the time to get out there and take advantage of the best buyer’s market of our generation, before it is too late.
Until next week.
Monica
Tuesday, October 21, 2008
Is the Bay Area real estate market turning for you?
Is The Market Taking a U-Turn?
It was a week of decisive action by the U.S. government as it worked to fix the problems affecting Wall Street and the ever expanding global economic unrest. Earlier this week, President Bush announced a historic and reworked financial-rescue plan, confirming that the U.S. will take equity stakes in nine banks (among them Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, to name a few), backstop virtually all non-interest-bearing bank accounts and guarantee most new loans between banks.
The White House plan marks the first such deep government intervention in markets since the Great Depression.
The plan found support among economists and experts. “This is finally the comprehensive and detailed plan that the market has been looking for,” said Jaret Seiberg, financial institution analyst for the Stanford Group. “It addresses the biggest problems that banks face, which is a capital crunch, and it attempts to fix the short term debt markets, plus it reduces the risk of liquidity runs on banks. That’s a pretty powerful first punch.”
In layman’s terms, this plan means that the government will now own a stake in several private U.S. companies—something that has many Americans rightfully concerned—though for now provides a stable backing in an effort to increase the availability of financing for consumers and businesses. Without this backing, consumer and business spending was shrinking which ultimately leads to businesses cutting jobs or worse yet, closing their doors. In theory, this plan should allow us to restore more normal market functioning and (hopefully) reinvigorate the financial markets.
One day after announcing his plan, the Dow tumbled to its second worst session ever on a point basis. The slide of 7.9% was the Dow’s 9th worst ever. In fact, according to CNNMoney, the decline wiped out $1.1 trillion in market value on the Dow Jones Wilshire 5000, the broadest measure of the stock market.
So what has this week’s rollercoaster ride on Wall Street meant for our local housing market? It seems consumers are over the initial shock of the current economic crisis and starting to realize that life will go on. Some continue to sit back and watch but others are emerging following a few weeks of silence. Let’s take a look…
Silicon Valley—There are two types of buyers out there right now—those who see this as an opportune time and are acting on it and those who have adopted the wait and see philosophy and are afraid to act. For the most part, our Silicon Valley offices are reporting that buyer interest has slowed with floor calls and open house activity decreasing. However, our San Jose Main office disagrees noting that buyer activity at open houses this week actually increased. The market that seems to be fairing the best is the entry level and continued success lies in the bank-owned arena where REO properties continue to generate multiple offers. There are two types of clients who are seeing success in today’s market (the rest languish so clients of all regions take note):
Buyers who see real estate as a long-term investment and this market, in particular, as an opportunity and are acting on it
Sellers who price their home right, stage it and are motivated
There is our market in a nutshell. Overall, things seem to be steady.
It was a week of decisive action by the U.S. government as it worked to fix the problems affecting Wall Street and the ever expanding global economic unrest. Earlier this week, President Bush announced a historic and reworked financial-rescue plan, confirming that the U.S. will take equity stakes in nine banks (among them Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, to name a few), backstop virtually all non-interest-bearing bank accounts and guarantee most new loans between banks.
The White House plan marks the first such deep government intervention in markets since the Great Depression.
The plan found support among economists and experts. “This is finally the comprehensive and detailed plan that the market has been looking for,” said Jaret Seiberg, financial institution analyst for the Stanford Group. “It addresses the biggest problems that banks face, which is a capital crunch, and it attempts to fix the short term debt markets, plus it reduces the risk of liquidity runs on banks. That’s a pretty powerful first punch.”
In layman’s terms, this plan means that the government will now own a stake in several private U.S. companies—something that has many Americans rightfully concerned—though for now provides a stable backing in an effort to increase the availability of financing for consumers and businesses. Without this backing, consumer and business spending was shrinking which ultimately leads to businesses cutting jobs or worse yet, closing their doors. In theory, this plan should allow us to restore more normal market functioning and (hopefully) reinvigorate the financial markets.
One day after announcing his plan, the Dow tumbled to its second worst session ever on a point basis. The slide of 7.9% was the Dow’s 9th worst ever. In fact, according to CNNMoney, the decline wiped out $1.1 trillion in market value on the Dow Jones Wilshire 5000, the broadest measure of the stock market.
So what has this week’s rollercoaster ride on Wall Street meant for our local housing market? It seems consumers are over the initial shock of the current economic crisis and starting to realize that life will go on. Some continue to sit back and watch but others are emerging following a few weeks of silence. Let’s take a look…
Silicon Valley—There are two types of buyers out there right now—those who see this as an opportune time and are acting on it and those who have adopted the wait and see philosophy and are afraid to act. For the most part, our Silicon Valley offices are reporting that buyer interest has slowed with floor calls and open house activity decreasing. However, our San Jose Main office disagrees noting that buyer activity at open houses this week actually increased. The market that seems to be fairing the best is the entry level and continued success lies in the bank-owned arena where REO properties continue to generate multiple offers. There are two types of clients who are seeing success in today’s market (the rest languish so clients of all regions take note):
Buyers who see real estate as a long-term investment and this market, in particular, as an opportunity and are acting on it
Sellers who price their home right, stage it and are motivated
There is our market in a nutshell. Overall, things seem to be steady.
Bank owned properties continue to drive much of our activity. Make no bones about it, however, homes are selling. It just takes a little time, diligence and professionalism in today’s market.
Until next week. Make it a great one!
Until next week. Make it a great one!
Monday, October 6, 2008
House passed the $700 billion Emergency Economic Stabilization Act of 2008!!
It Passed!
Second time was certainly a charm! With a vote of 263 to 171, the House passed the $700 billion Emergency Economic Stabilization Act of 2008 today. The Senate approved the same bill Wednesday night by a vote of 74-25. Soon after, the President signed the bill, officially passing the far-reaching legislation.
I know the question we are all asking ourselves right now is how is this going to affect all of us. How will it affect our retirements? How will it affect the mortgage crisis? How will it affect our portfolios? The answers to these and other questions will only be answered over time but what I can tell you is that the legislation is a critical step toward stabilizing our markets. The main goals of the act are to:
- Shine a new light of scrutiny and accountability on Wall Street including a curb on executive pay for companies selling assets or buying insurance from Uncle Sam. For example, any bonus or incentive paid to a senior executive officer for targets met would have to be repaid if it's later proven that earnings or profit statements were inaccurate. The bill also underlines the Securities and Exchange Commission's power to change accounting rules on how banks and Wall Street firms value securities, and directs the agency to study the issue. Some observers argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the so-called mark-to-market rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector.
- Let financial institutions sell to the government their troubled assets, mostly mortgage related which would allow the Treasury access to the $700 billion in stages, with $250 billion being made available immediately.
- Provisions that support taxpayers including one that would direct the President to propose a bill requiring the financial industry to reimburse taxpayers for any net losses from the program after five years. And the Treasury would be allowed to take ownership stakes in participating companies.
- The bill would set up two oversight committees. A Financial Stability Board would include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary. A congressional oversight panel, to which the Financial Stability Board would report, would have five members appointed by House and Senate leadership from both parties.
- The bill calls on federal agencies to encourage loan servicers to modify mortgages by a number of means - including reducing the principal or interest rate. It also extends a temporary provision that exempts from federal income tax any debt forgiven by a bank to a borrower in a foreclosure.
- Provide tax breaks for the middle class including three key tax elements. It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels. The legislation would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns. In addition, the bill includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."
I agree with NAR’s stance on this subject that we are gratified that the government recognized the importance of passing the Emergency Economic Stabilization Act of 2008. The health of the nation’s housing market is critical to the financial well being of every household in the country and that, of course, is front and center here in California. I believe the legislation will help restore the liquidity in the mortgage market, which will stabilize the housing market and protect home owners.
With this good economic news now in our hands, let’s take a look at last week in real estate:
- Peninsula—People seem to be unsure during this uncertain economic times but savvy buyers are contacting their Agents and many feel now is the perfect time to make an offer. We are starting to see more upper-end listings come on the market which is a good thing as our upper-tier has been plagued by low inventory. Half Moon Bay is reporting that listings are up at the highest level in several years and at the same time there are at least six distressed properties on the market. According to our Half Moon Bay Manager, “This is the best time to buy on the coast in years.” Our Menlo Park El Camino office called this market “A tale of two buyers…Confident and not confident.” It’s business as usual for those who have confidence and those who don’t may miss out on one of the best buyer’s markets in generations.
- San Francisco—Our Lakeside office is noting that we are getting more listings and navigating through more obstacles in transactions. Our Market Street office noted that some buyers backed off this week due to the issues in the finance sector but now that things have worked themselves out we expect them to return. Our Van Ness office noted that we remain on a reasonable pace for the current climate with five out of nine deals this week under $900,000 and one large sale for the week.
- Silicon Valley—Consumer confidence seemed to be hindered this week as many of our Silicon Valley consumers awaited news of today’s act. In doing so, this week floor calls slowed a bit as did open house activity. But I believe now that we can all get off the couch and away from our TVs (awaiting the act’s approval), we can get back to work and we’ll start to see more deals closing.
Overall I think this new Emergency Economic Stabilization Act of 2008 puts us on the right track. No, it isn’t an overnight answer but I believe the efforts of our legislation are pointing us in the right direction and are putting us on the right path towards long-term economic growth and long-term prosperity.
The government’s resolve to take action that is focused on fixing the credit crisis is to be commended, particularly because these major moves to add greater liquidity to the market should have a beneficial effect on homebuyers/sellers and the real estate industry as well. Keep in mind housing represents 20 percent of the GDP so it remains an important part of our national economy.
Let’s watch as the details unfold over the next few weeks and we’ll wait to see whether the $700 billion in aid is our nation’s answer to prosperity.
Until next week,
Monica
Feel free to pass this on to others too.
Second time was certainly a charm! With a vote of 263 to 171, the House passed the $700 billion Emergency Economic Stabilization Act of 2008 today. The Senate approved the same bill Wednesday night by a vote of 74-25. Soon after, the President signed the bill, officially passing the far-reaching legislation.
I know the question we are all asking ourselves right now is how is this going to affect all of us. How will it affect our retirements? How will it affect the mortgage crisis? How will it affect our portfolios? The answers to these and other questions will only be answered over time but what I can tell you is that the legislation is a critical step toward stabilizing our markets. The main goals of the act are to:
- Shine a new light of scrutiny and accountability on Wall Street including a curb on executive pay for companies selling assets or buying insurance from Uncle Sam. For example, any bonus or incentive paid to a senior executive officer for targets met would have to be repaid if it's later proven that earnings or profit statements were inaccurate. The bill also underlines the Securities and Exchange Commission's power to change accounting rules on how banks and Wall Street firms value securities, and directs the agency to study the issue. Some observers argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the so-called mark-to-market rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector.
- Let financial institutions sell to the government their troubled assets, mostly mortgage related which would allow the Treasury access to the $700 billion in stages, with $250 billion being made available immediately.
- Provisions that support taxpayers including one that would direct the President to propose a bill requiring the financial industry to reimburse taxpayers for any net losses from the program after five years. And the Treasury would be allowed to take ownership stakes in participating companies.
- The bill would set up two oversight committees. A Financial Stability Board would include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary. A congressional oversight panel, to which the Financial Stability Board would report, would have five members appointed by House and Senate leadership from both parties.
- The bill calls on federal agencies to encourage loan servicers to modify mortgages by a number of means - including reducing the principal or interest rate. It also extends a temporary provision that exempts from federal income tax any debt forgiven by a bank to a borrower in a foreclosure.
- Provide tax breaks for the middle class including three key tax elements. It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels. The legislation would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns. In addition, the bill includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."
I agree with NAR’s stance on this subject that we are gratified that the government recognized the importance of passing the Emergency Economic Stabilization Act of 2008. The health of the nation’s housing market is critical to the financial well being of every household in the country and that, of course, is front and center here in California. I believe the legislation will help restore the liquidity in the mortgage market, which will stabilize the housing market and protect home owners.
With this good economic news now in our hands, let’s take a look at last week in real estate:
- Peninsula—People seem to be unsure during this uncertain economic times but savvy buyers are contacting their Agents and many feel now is the perfect time to make an offer. We are starting to see more upper-end listings come on the market which is a good thing as our upper-tier has been plagued by low inventory. Half Moon Bay is reporting that listings are up at the highest level in several years and at the same time there are at least six distressed properties on the market. According to our Half Moon Bay Manager, “This is the best time to buy on the coast in years.” Our Menlo Park El Camino office called this market “A tale of two buyers…Confident and not confident.” It’s business as usual for those who have confidence and those who don’t may miss out on one of the best buyer’s markets in generations.
- San Francisco—Our Lakeside office is noting that we are getting more listings and navigating through more obstacles in transactions. Our Market Street office noted that some buyers backed off this week due to the issues in the finance sector but now that things have worked themselves out we expect them to return. Our Van Ness office noted that we remain on a reasonable pace for the current climate with five out of nine deals this week under $900,000 and one large sale for the week.
- Silicon Valley—Consumer confidence seemed to be hindered this week as many of our Silicon Valley consumers awaited news of today’s act. In doing so, this week floor calls slowed a bit as did open house activity. But I believe now that we can all get off the couch and away from our TVs (awaiting the act’s approval), we can get back to work and we’ll start to see more deals closing.
Overall I think this new Emergency Economic Stabilization Act of 2008 puts us on the right track. No, it isn’t an overnight answer but I believe the efforts of our legislation are pointing us in the right direction and are putting us on the right path towards long-term economic growth and long-term prosperity.
The government’s resolve to take action that is focused on fixing the credit crisis is to be commended, particularly because these major moves to add greater liquidity to the market should have a beneficial effect on homebuyers/sellers and the real estate industry as well. Keep in mind housing represents 20 percent of the GDP so it remains an important part of our national economy.
Let’s watch as the details unfold over the next few weeks and we’ll wait to see whether the $700 billion in aid is our nation’s answer to prosperity.
Until next week,
Monica
Feel free to pass this on to others too.
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