"ALL GOOD THINGS MUST COME TO AN END..."

Or so the popular saying goes. And last week, the Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program...the program that has helped keep home loan rates low for much of the last year...will end on March 31, 2010 as previously stated. Here's the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

"IT'S A RECESSION WHEN YOUR NEIGHBOR LOSES HIS JOB; IT'S A DEPRESSION WHEN YOU LOSE YOURS." Harry S. Truman.

Very true words indeed - and last week brought some market action when Fed Chairman Ben Bernanke discussed the recession, commenting that our economic recovery still faces "formidable headwinds." As you can see in the chart below, the current recession we have been in has been the longest in nearly half a century.
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Chart: Post World War II Recessions

“Your dreams are alive...they live through you...take good care of them.” -- Kobi Yamada

Home Maintenance Tip - HEALTH & SAFETY: Safety Tips for Holiday Decorating The holiday season is here...and with the holidays comes decorating! The following tips and suggestions will help ensure safety as you get in the holiday spirit. Decorate only with lights that have a NOEL or U/L testing agency label. Check wires, plugs and sockets for signs of wear or defects. Remember: If in doubt - throw them out. Do not overload outlets and extension cords. Never tie together more than three extension cords. Be sure decorative lights used outside are approved for outdoor use. When decorating outdoors, be aware of all power lines. Don't work near overhead power lines or anywhere there is a possibility of contacting an overhead power line, either directly or indirectly, with a ladder or other piece of equipment. Place Christmas trees away from fireplaces, radiators, television sets, and other sources of heat that may prematurely dry out the tree and make it more susceptible to fire. Make sure the tree has a sufficient amount of water at all times. Don't burn wrapping paper or boxes in the fireplace. These types of materials ignite quickly and may burn uncontrollably. HOUSEHOLD TIP: Calculating Holiday Energy Costs It's that time of year when houses shine a bit brighter. Ever wonder how much the decorative holiday lights add to a monthly electric bill? Here's an easy way to help calculate energy costs this holiday season. Count the bulbs on all of your decorative indoor and outdoor lights. Check the wattage per bulb. Multiply watts per bulb by number of bulbs. (1 watt per bulb x 1,000 bulbs = 1,000 watts). Convert watts to kilowatts - 1,000 watts = 1 kilowatt (kw). Estimate the hours per month the lights are on. (5 hours per day x 30 days = 150 hours) Multiply the total kilowatts by the total number of hours the lights will be on to get the total kilowatt-hours (kwh). For example, 1 kw x 150 hours = 150 kwh. Multiply the total kilowatt-hours by the total cost of electricity per kwh. (150 kwh x $0.14 per kwh = $21) In this example, the cost of holiday lighting would be an additional $21 per month. Reprinted with permission of RISMedia, publisher of Real Estate Magazine

"HI HO, HI HO, IT'S OFF TO WORK WE GO!"

And even those who have been feeling grumpy about the weak labor market found something to smile about last Friday. The official Jobs Report for November was released - and the improving numbers were a big surprise to the markets.

According to the Labor Department, only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. As you can see from the chart below, this marks the least number of jobs lost in nearly two years - since December 2007. Adding to the favorable news, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level.

While the news was good for the economy and helped Stocks improve sharply, it wasn't so favorable for Bonds...and as a result, home loan rates moved slightly higher on the news, continuing their worsening trend for the week overall.

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Chart: 2009 Job Growth/Losses (In Thousands)

In other news, based on early numbers, 195 Million shoppers hit the stores and websites on Black Friday, which was up from last year's 172 Million. Cyber Monday - the online equivalent of Black Friday - also showed an increase in web shoppers, up by 6% from last year. It appears that the shopping traffic was up, but the dollars-per-shopper may be down a bit. This might be indicative of not only consumers being conservative...but also the fact that with all the deep sales taking place to incent buyers, fewer dollars may be spent to get the very same merchandise as a year ago.

"BOTH OPTIMISTS AND PESSIMISTS CONTRIBUTE TO OUR SOCIETY. THE OPTIMIST INVENTS THE AIRPLANE, AND THE PESSIMIST - THE PARACHUTE." G.B. Stern.

The media's recent analysis of the economy has run the gamut of late, some optimism, some pessimism...but also some confusion as they attempt to decipher recent economic reports, particularly relating to the job market. Let's look at a few of the recent reports, and get behind the headlines to decipher what they really mean.

Last week's Initial Jobless Claims Report showed that 505,000 people filed for unemployment benefits, which was about what was expected, and represented a ten month low for the report. The Continuing Jobless Claims Report, which indicates the total number of people collecting unemployment benefits, fell by 39,000 to a total of 5.61 Million.

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Chart: Continuing Unemployment Claims

The media often spins this data as good news - but the labor market remains in exceptionally tough shape. The Continuing Claims number declining from a record high of 6.82M in June to last week's 5.61M is the result of only two potential things happening: People are finding jobs and no longer need unemployment benefits, or they have been unemployed for so long that their benefits are running out before they've been able to find a job. With a 10.2% Unemployment Rate looking like it will move higher still, it is most likely the latter. Another clear sign of a very troubled labor market was back on November 6th, when President Obama signed a bill that will extend unemployment benefits by an additional 20 weeks...there would be no reason to do this if jobs were being created.

In other news, October Retail Sales were weak overall, which is concerning for several reasons. One somewhat overlooked impact is that tax receipts from retail sales help both the individual states and the country as a whole. If the consumer doesn't spend - perhaps due to job loss or lower family income - and there are therefore less tax receipts from retailers, the government runs an ever-deeper budget deficit. The only way to get out of a deficit is to either raise other taxes or cut spending - and neither option is very popular. Many states are in poor fiscal shape because of soaring budgets and lower tax receipts.

There aren't any easy answers - but it's clear that the labor market needs to see some serious improvement for the economy to recover in a significant way.

"A STEP IN THE RIGHT DIRECTION...BUT DON'T PUSH YOUR LUCK."

Barbra Streisand obviously wasn't singing about Bond prices or interest rates in her 1980's song. But those lyrics were fitting last week when the Federal Reserve stepped in with more buying of Mortgage Backed Securities (MBS), helping Bond prices recover from news of a weak Treasury Auction. Overall, home loan rates bounced around last week and ended the week very slightly improved.

But that said, we can't "push our luck" and think the Fed will continue to step in and help support home loan rates...we have to remember that the Fed is actually winding down exactly this type of buying support.

As you can see from the chart below, the Federal Reserve's purchases of MBS peaked at an average of $25 Billion per week back in May - and they are getting closer every day to being done spending their allotment of $1.25 Trillion. Since they announced that their remaining purchases would be rationed out until the end of March 2010 - but that they wouldn't be making any additional purchases beyond the original commitment - the average purchases per week have been moving lower, down to $14 Billion per week so far in November.

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Chart: Fed's Purchase of Mortgage Backed Securities (Weekly Averages Per Month)

Why is this important? Because home loan rates are based on MBS - so when the Fed agreed to be a big buyer, it helped provide a market and helped keep MBS prices high and home loan rates low. So as the Fed's program wraps up and eventually stops, home loan rates are quite likely to be on the rise. So while rates are still very good, they may not be for long. Let's be sure to talk if you haven't yet explored how the current rate environment might benefit you or someone you know.

More employment news arrived, and it is interesting to hear the media and other experts proclaim it to be "all good news". Initial (or First Time) Jobless Claims came in at the lowest reading in 10 months and Continuing Unemployment Claims also fell lower as well - and at first blush, this seems to be very good news. But looking closer, we see that the lower Continuing Claims number was probably the result of unemployment benefits expiring before people could find work - rather than people dropping off of benefits because they found a job. Now that unemployment benefits have been extended by new legislation, we should get a more accurate look at how many people are actually unemployed.

"TIME IS MORE VALUABLE THAN MONEY. YOU CAN GET MORE MONEY, BUT YOU CANNOT GET MORE TIME." Jim Rohn.

And while this is certainly true, home buyers and folks receiving unemployment benefits both got the word that a bit more money and time is coming their way.

Just on Friday, President Obama signed into law a bill that extends unemployment benefits and the First Time Home Buyers tax credit, which is also being expanded to include benefits for homebuyers who aren't on the first time around buying a home. If purchasing a home is in the cards for you or anyone you know, you can get all the details of the homebuyer's tax credit in this week's Mortgage Market Guide View article below. But first, here are a few additional highlights from last week...including important job market news.

Last week's official Jobs Report showed that there were 190,000 jobs lost in October, higher than the 175,000 job losses that were widely expected. In addition, as you can see in the chart below, the Unemployment Rate rose to 10.2%, quite a bit higher than the 9.9% expected, and the highest Unemployment level since 1983.

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Chart: Unemployment Rate

While this number is bad, what is even more concerning is the "real" unemployment rate being closer to 17.5%. This includes those who have not searched for a job for at least four weeks, known as "discouraged or detached" workers, as well as those desiring full time work but having to settle for part time, the "underemployed". The only ray of sunshine within this anemic report were the upward revisions for August and September, showing 91,000 fewer jobs lost than previously reported.

Let's remember, in order to just keep up with population growth - or to keep the ranks of the unemployed from rising - there must be 125,000 jobs created each month. So the latest report of 190,000 jobs lost, really means we have fallen behind by 315,000 jobs, just last month.

In other news, Pending Home Sales for October were reported up 6.1%, mostly attributable to First Time Home Buyers rushing to get into contract before the original November 30, 2009 expiration date for the $8,000 tax credit - again, see below for details on the tax credit extension and expansion. Also last week, the Fed issued its latest Policy Statement without any big changes or surprises.

"Don't believe the hype!"

The words from Public Enemy's hit song title rang true once again last week when the Commerce Department reported the Gross Domestic Product (GDP) for the 3rd Quarter. As you can see from the chart below, GDP rose by 3.5% for the first gain in a year and the strongest reading in two years.

While most media outlets were giddy about the news and started the hype that the recession is behind us, it's important to remember that there's more to the economic data than just the headlines.

The temporary "Cash for Clunkers" program has now expired, but was a big part of last quarter's GDP gain. If we remove it from the total, the reading would have been a more modest 1.9%. But there is even more to the rise in the latest GDP number that is just temporary...

Also bolstering the economy has been the $8,000 first-time homebuyer tax credit - which is set to expire at the end of this month. Many home buyers have been taking advantage of this program - and wisely so.

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Chart: US Gross Domestic Product (By Quarter)

New Home Sales were reported last week, showing a 7.5-month supply of inventory. While that number is slightly worse than last month's 7.3 reading, it's still a big improvement from where we were in January. Back in January, inventory levels reached a high of 12.4-month supply! The improvement in housing inventories has been due in large part to the $8,000 First Time Homebuyer Tax Credit, which is set to expire on November 30.

There is a real possibility of an extension of this program through a proposed Bill, but it is not yet a certainty. The extension Bill still must be reconciled between the House and Senate, and then voted on for final approval. Under the current extension proposal, sales with signed purchase agreements by April 30th that close before June 30^th, 2010 would qualify for the credit.

Another positive element would be the possible addition of $6,500 tax credit for other primary home purchasers, meaning the tax credit would no longer be limited only to first-time homebuyers. There is also a possibility that qualifying income limits could increase from $75,000 to $125,000 for singles, and from $150,000 to $250,000 for joint tax filers.

"THE DEVIL IS IN THE DETAILS..."

Or so the famous saying goes. And when it comes to really understanding the various reports and events unfolding in the economy, it's important to take a look at the details - not just the headlines. Here's what you need to know.

On the inflation front, the Producer Price Index, which measures wholesale inflation, unexpectedly fell due to a drop in energy prices. While that seems like good news on the surface, keep in mind that next month's number could climb higher again, as oil and natural gas have both been on a tear higher lately.

In housing news, Housing Starts and Building Permits both came in a bit below expectations, but this may be a sign that builders are exercising some caution - particularly in the face of the $8,000 tax credit for first time homebuyers that is presently set to expire on November 30th. Existing Home Sales came in better than expected - and a whopping 45% of those homes were sold to first time homebuyers - rushing to move in on that credit. Recent studies have shown that many who qualify for this tax credit aren't even aware of it...so please let me know if you or someone you know needs more information - the clock is ticking!

Additionally, the level of existing homes inventory shrunk to a 7.8 month supply, down from a recent high of 10.1 months in April.

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Chart: Existing Home Sales (Supply in Months)

In other news, 3rd quarter earnings season continues, where companies report their status as of the end of September. While many companies are beating expectations, it's important to realize that many of those companies achieved better earnings by cost cutting and layoffs, not from increased sales. This is a big disconnect between Wall Street and "Main Street". Stocks are rocketing higher based on these "positive" reports, but the cost cutting and job cutting measures can only go so far...you can't simultaneously grow the ranks of unemployment - and then grow your business, hoping for increased sales to those same people who are without jobs.

Last week's Jobless Claims numbers seem to confirm this as Initial Jobless Claims rose more than expected. In addition, the number of individuals continuing to receive unemployment benefits fell to the lowest level since March, but this is likely the result of people's unemployment benefits expiring, without them having been able to find jobs.

Also worth noting is the news that ratings agency Moody's lead analyst, Steven Hess, said that the US needs to cut its deficit or it could lose its "AAA" rating in the next 3 to 4 years, which we have maintained since 1917! Think of all we've been through - two World Wars, the Depression, three Wall Street collapses and major terrorist attacks...yet our credit quality has maintained that AAA rating, allowing us to issue debt at the most favorable rates. Hess went on to say that if the US doesn't "get the deficit down in the next 3-4 years to a sustainable level, then the rating will be in jeopardy." And just like on a mortgage when the credit rating gets reduced, interest rates move higher. This will definitely be something we'll keep an eye on in the months ahead.

"THE HEAT IS ON." Glenn Frey.

While cooler temperatures are beginning to descend on many parts of the country, Bonds and home loan rates are feeling the heat and pressure from several fronts. Here are some details...along with why it's important to act soon to take advantage of current home loan rates, as they may never be seen again.

Last week, the Core Consumer Price Index (CPI) was reported higher than expected, indicating that inflationary forces may already be underway. Remember, inflation erodes the value of the fixed return that a Bond provides - therefore, inflation is harmful to Bonds and home loan rates. Just the hint of inflation can cause home loan rates to worsen, which is what we saw last week.

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Chart: Core Consumer Price Index (CPI)

And here's a very interesting and important note - when looking at these CPI numbers, it is important to understand the effect that the "Cash for Clunkers" program had on this index. The Cash for Clunkers program was very "creatively" accounted for as a reduction in the sales price of automobiles, which had to have a dramatic effect on lowering the CPI that was reported. Imagine how much higher CPI would have been had this "creativity" not been used. As even more inflationary fears creep into the economy, home loan rates will continue to rise.

Also adding pressure to Bonds and home loan rates is the Fed's plan to ration out their remaining purchases of Mortgage Backed Securities. The Fed has purchased around $950B year-to-date out of the $1.25T allotted for the program, which is now set to expire March 31, 2010. This means the Fed will be averaging about $14B a week in purchases, a lot less than $25B or so they had been doing up until recently. And anytime demand for an item slows down...including Mortgage Backed Securities...the price goes down. And in this case, it means that home loan rates will move higher.

The bottom line is that the heat is on...and home loan rates are starting to rise already. While home loan rates are still incredibly low, it is clear this won't last much longer - and we may not see rates at these levels again in our lifetimes. Give me a call if you want to discuss your own situation, or if you have a friend, family member, neighbor or coworker who might benefit from some information.

In other news, Retail Sales for September fell by 1.5% - and while the numbers were better than expected, they are still dismal at best. In addition, the flood of pre-holiday sales and layaway options that are already hitting - remember, it's still mid-October - also suggests a lack of pricing power for retailers. Stock earnings season continued with some mixed news: There were reasonably strong earnings reports from Intel and JPMorgan Chase, while there were weaker than expected reports from Johnson & Johnson, General Electric and IBM. Bank of America also posted its first loss for the year.

"LISTEN TO WHAT THE MAN SAID."

And those aren't just the words from Paul McCartney's hit song of the same title...they're also words of advice for anyone who's considering buying a home or refinancing. Last week, Federal Reserve Chairman Ben Bernanke said that as the economy heals, the Fed will be very vigilant to protect against inflation. While inflation is not a problem at present...it will most certainly become a problem down the road. So why does this matter if you are considering purchasing or refinancing? Because inflation is the arch-enemy of Bonds and home loan rates, and just the knowledge of it coming has been causing both Bonds and home loan rates to worsen in recent days. Along with the fear of inflation, the Fed's purchasing program of Mortgage Backed Securities is already slowing down, with the end of their buying in sight - and the reduced demand for these Bonds is also driving home loan rates higher.

Bottom line: home loan rates are already on the rise, and we won't likely see these low historic levels again.

Interest rates are still very near historic lows - George Washington couldn't have gotten a better interest rate - and the opportunity these low rates present is huge for homebuyers or people looking to refinance. If we haven't talked recently about your own home loan situation - or if you have a friend, family member, neighbor or coworker who needs advice - please call or send me an email. There's no time to waste.

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On the topic of inflation - Gold has been on a tear higher of late, reaching a record high of $1048 an ounce. Remember that Gold is seen as a "safe harbor" or hedge against a falling Dollar and inflation - as Gold is not likely to lose much value in periods of rising prices. Again, fears of future inflation are pervasive, particularly in light of the massive economic stimulus that has been injected into the US economy...and inflation will drive home loan rates higher. The latest spike in Gold is more likely attributable to the Dollar's recent decline, but both factors are somewhat at play.

Also last week, the Initial Jobless Claims Report came in better than expected. According to the report, 521,000 new applications for unemployment benefits were received. That number was lower than the 540,000 that were expected, and marked the fewest number of new claims since the first week in January. However, that good news must be tempered by a look at the big picture...the reality is that despite a better-than-expected number, more than half a million people per week are still applying for new unemployment benefits. That's a sign that the labor market is still very weak. In fact, just last week former Fed Chairman Alan Greenspan also commented that he sees unemployment rising beyond 10%.

"WORK, WORK, WORK...IT'S A LABOR OF LOVE."

"WORK, WORK, WORK...IT'S A LABOR OF LOVE." The words to Sammy Kershaw's country song sound pretty good right now to a number of Americans...much better, in fact, than the recent employment numbers do.

Last week, the Labor Department's Jobs Report didn't show much love for US workers. As you can see in the chart below, the Labor Department reported 263,000 jobs lost in September, which was quite a bit worse than expectations. Compounding the bad news was an up-tick in the unemployment rate to 9.8% as well as downward revisions to prior Jobs Reports, showing an additional 13,000 jobs lost in July and August.

Also within the Jobs Report were declines in the Average Workweek and in Average Hourly Earnings, both of which came in below expectations. The shortening of the Average Workweek may be telling us that the amount of people forced to accept part time work is growing. The decline in the Average Hourly Earnings underscores the weakness in the labor market, as it indicates that companies have no pressure to raise wages...particularly with unemployment near 10%. An improvement in Hourly Earnings will likely give us the first sign of labor recovery, so this will be important to watch in upcoming Jobs Reports.

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Chart: Jobs Report for September

Personal Spending was also reported last week, indicating that spending rose in August at its fastest monthly pace in almost 8 years! And while the news appears to be good for the economy, we have to take it with a grain of salt, since a large part of that spending was the result of the "Cash for Clunkers" vehicle purchasing incentive program, which is no longer in effect.

Finally, the housing industry received some good news last week, as Pending Home Sales were up significantly at 6.4%, which was far above expectations. Some of the increase is likely due to folks working fast to take advantage of the $8,000 First-Time Homebuyer Tax Credit, which is currently set to expire on November 30th...and be sure to ask me about this, if you or any of your friends, family members, neighbors or coworkers could benefit from this great incentive. The Case-Shiller Home Price Index also came out last week with news that home prices fell less than expected. The report, which looks at the 20 largest cities, also showed that only 2 cities (Las Vegas and Seattle) experienced price declines when compared to the previous month. Overall, the numbers appear to indicate that the worst of the housing price declines may be behind us.

"BE WILLING TO MAKE DECISIONS." General George Patton.

And that's exactly what the Fed did last week at their regularly scheduled Federal Open Market Committee meeting. But just what did they decide...and what do their decisions mean for home loan rates?

The Fed said they are going to ration out the remaining commitment of Mortgage Backed Security purchases through the first quarter of 2010. There will be no additional buying, but instead, a longer weaning off of the program. There was some speculation about the Fed increasing the amount of buying above the $1.25T committed to, and last week's statement is the Fed's nice way of saying "no." They will not be buying more in quantity, but what they will do is attempt to provide a smoother transition to normal market conditions.

It is a given that once the Fed ceases its purchases, that interest rates will climb significantly higher...most likely back above the 6% area. So instead of a hard transition with a large bump in rates, the Fed is attempting to allow rates to gradually rise. This means that waiting to purchase or refinance will very likely mean a higher interest rate.

Their decision also means that the Fed's remaining purchases will all be lower in quantity, as the remaining allotment for purchases will be spread over a longer period of time - and additionally, will not necessarily be spread out as evenly as their past purchases - which could lead to more volatility for rates in the near term.

In other news, Existing Home Sales and New Home Sales were reported slightly less than expected, but both reports continue to show signs of an improving housing market. The inventory of unsold existing homes fell to its lowest inventory level since April 2007, while the inventory of unsold new homes dropped to its lowest level since January 2007. While some of the decline in new home inventory may be due to builders constructing fewer homes - these reports indicate that the housing market is indeed showing signs of life.

Why Now May Be a Good Time to Move up to a Larger Home

You’re beginning to feel a little cramped in that starter home that looked so perfect several years ago. There just aren’t enough bedrooms anymore, or adequate storage space, or a big enough back yard for the kids and the dog to play. Or maybe there is another one on the way – a baby, not a dog!

Many residents are facing a similar dilemma these days. While that tiny bungalow made perfect sense back when you bought it, you are quickly realizing that you have long since outgrown your home. The logical answer would be to move up to a larger property,
but many homeowners fear that the soft housing market would make buying that dream home difficult if not impossible.

Surprisingly this may actually be a great time to move up – precisely because of the housing slowdown. Yes, home sales and prices have been sluggish for the past couple of years. And chances are that your home isn’t worth what it was at the peak of the market two or three years ago. But savvy homeowners are beginning to discover that the math actually works in their favor when they move up to a more expensive property.

It’s true that you probably won’t get every dollar you would like when you sell your existing home. Depending on the price range and location there may be a larger than normal inventory of properties on the market and fewer qualified buyers. So, of course, prices need to be competitive in order to sell. Valuations have dipped in many communities, in some cases back to levels of six or seven years ago.

Now for the good news: That larger, more expensive home that you’ve had your eye on has probably dropped even more – in some cases, much more – than your current home. So the difference between your existing home and the next one is probably much less of a step up than you might have imagined. And if you’ve been in your home for more than just the past few years, there’s the possibility that you’ve built up equity that could be used to buy a larger home.

Plus those individuals who are in starter homes are finding that thanks to the $8,000 first time home buyer credit there is increasing demand for homes like yours. As such, homes at this price point are selling more quickly, sometimes with multiple offers.

Walter Maloney with the National Association of Realtors said it’s important for homeowners to do the math. “Obviously, if you’re selling for less than you could have gotten two years ago, you’re disappointed, but you really need to look at your bottom line,” he said. “If you’re trying to trade up, whatever you’re going to trade up to is going to sell at a discount, too. You need to look at your net.”

Let’s look at the example used in an April 23, 2009 MSNBC article entitled Math smiles on move-up buyers. The article reported, “Chris and Lori Kristen got $20,000 less than they might have in 2007 when they sold their Seattle condo earlier this year, but they purchased this suburban home for $425,000--$86,000 less than the home’s peak value.”

The article went on to report, “Their mood brightened when they began shopping in the spacious neighborhoods of this suburb northeast of Seattle and found a 3,000-square-foot, four-bedroom split-level on a half-acre of towering fir trees that they wound up buying for $425,000. That’s $86,000 less than the $511,000 peak value placed on the home by real estate Web site Zillow.com, $64,000 below the original asking price of $489,000 and even well below the final asking price of $438,000.”

Getting into a larger home isn’t the only reason consumers typically think about moving up. Others consider “trading spaces” because of job relocations or a desire to get into a certain neighborhood or simply because they’ve been pining after that dream home. While the savings on the purchase price of a larger home is a benefit, there are a number of other reasons why the soft housing market may work in your favor right now:

• Strong buyer’s market at upper-end. There just is not as much competition for more expensive homes as there is in the entry level market. Much of the home sales this year have been low-priced and distressed properties. “This year’s peak home buying season is suffering from the absence of move-up buyers,” said Jim Gillespie, chief executive officer of Coldwell Banker Real Estate Corporation. Less competition can mean lower prices and greater bargaining power for those individuals who can afford to make the jump.

• Mortgage rates are still near historic lows. Traditionally, low interest rates make homes more affordable. While it is easy to lament the recent decline in your existing home’s value, interest
rates may play an even greater role in how much home you may be able to afford when it comes time to moving up. According
to Brendon Riordan of Princeton Capital, a one-percent hike in interest rates can increase monthly mortgage payments just as much as a 10 percent increase in price. He went on to note: “With 30-year fixed rate mortgage hovering in the low 5 percent range, buyers may be able to stretch their housing dollars further than they think.”

• Record affordability. According to the National Association of Home Builders August 19, 2009 article entitled Housing Affordability
Continues to Hover Near Highest Level in 18 Years, “Bolstered by affordable interest rates and low prices, nationwide housing affordability during the second quarter of 2009 continued to hover near its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released today.” The article went on to report, “The HOI showed that 72.3 percent of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000, down only slightly from the record-high 72.5 percent during the previous quarter and up from 55.0 percent during the second quarter of 2009.”

• Entry level homes are in greater demand. The hottest segment of the housing market this year has been the low-end. In some cases, there are multiple offers for the best properties. Adding to the demand is the $8,000 federal tax credit for first-time buyers that’s due to expire before the end of the year. So while you may have outgrown that little bungalow, there are lots of potential buyers who would be interested in moving in when you’re ready to trade up.

• Housing market showing signs of improvement. While no one can say for sure whether we’ve bottomed out, there have been many encouraging signs in recent months that the housing market is stabilizing and perhaps turning the corner. In its August 21, 2009 report entitled Strong Gains in Existing-Home Sales Maintain Uptrend, the National Association of Realtors reported, “For the first time in five years, existing home-sales have increased for four months in a row, according to the National Association of Realtors®.” The article went on to report “Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004 and the last time sales were higher than a year earlier was November 2005.” It may be a good idea to think about trading up while it’s still a buyer’s market.

Making the decision to move up to a larger home is just the beginning, of course. There are a myriad of issues that go into selling your existing home and getting into that larger move-up property. That’s where a professional Realtor can help. Working with a seasoned agent who knows your market may be the best move you’ve ever made!

"I'M ON MY WAY...JUST SET ME FREE...HOME SWEET HOME."

The lyrics from Mötley Crüe's Home Sweet Home sound a lot like something the housing industry might have sang last week, after the Commerce Department reported that the number of Housing Starts in August came in better than expected. As you can see in the chart below, Housing Starts have fallen significantly since June 2008, but in last week's report, they broke free to come in at their highest level since last November. Building Permits were a bit lower than expectations, but the overall report suggests that while we're not entirely out of the woods yet, the worst in the housing market may have passed and that the industry may be on its way to stabilizing. ----------------------- Chart: Housing Starts in August Inflation was also in the news last week. On Tuesday, the Producer Price Index came in more than double expectations, prompting fears of wholesale inflation. However, since wholesale inflation isn't always passed on to consumers, the markets anxiously awaited the Consumer Price Index (CPI). CPI is an important measurement of inflation because it actually measures the average prices paid by consumers for goods and services, which is where the real inflation concerns come in. According to last week's report, CPI came in just slightly higher than expectations. Remember, inflation is the archenemy of Bonds and home loan rates, and it is said that "rates are the boat that floats on the sea of inflation", meaning when inflation rises, home loan rates will move higher as well. With the recession appearing to be bottoming out and with an unprecedented amount of government spending over the past year, there are fears that inflation - and therefore home loan rates - may be on the rise soon. If you are in the market to purchase or refinance, this is an important aspect to keep an eye on. Call me if you want to discuss presently low rates, and how they might fit into your plans. The $8,000 tax credit for First Time Home Buyers was also in the news again last week. White House Spokesman Robert Gibbs said that the administration is evaluating the program and the effect it has had on home sales and will soon make a recommendation to the President. Although there's been talk and speculation regarding the expansion of this program, as of now, potential buyers must complete their first-time home purchases before December 1 to qualify for the special credit. Overall, Bonds and home loan rates saw some nice gains early last week, but finished just slightly worse than they began, as Stocks closed at highs for 2009 and pulled some money away from Bonds. Whether Bonds can climb back up this week will depend not only on the economic reports due out, but also on how well the markets receive the incoming round of 2-year, 5-year, and 7-year Note auctions.

"BEFORE ANYTHING ELSE...PREPARATION IS THE KEY TO SUCCESS." Alexander Graham Bell

Very true words - and preparation is especially important these days, as several circumstances will make this fall a particularly successful time for prepared home buyers.
Rates for home loans remain low - but it won't last forever. The Fed continues on their purchasing plan of Mortgage Backed Securities, and the added demand has kept Bond prices high and home loan rates low. Last week, they purchased another $32.4B, bringing the total to $849B out of the $1.25T they committed to. While these Fed purchases have helped home loan rates stay near present low levels, remember that their buying program is set to be over near the end of the year. There is talk that the program will be extended - but there has also been talk that it will end early - so nothing is a guarantee, except for the fact that when the Fed purchasing program is over, home loan rates will assuredly rise.
In addition, given the current expiration date of November 30, 2009 for the $8,000 First Time Homebuyer credit, it's important for homebuyers to get prepared, and take action. In fact, many homebuyers are doing just that already. The Mortgage Bankers Association reported that home loan applications surged in the latest week to their highest level since late May, as more buyers are seeing the great opportunity that exists right now.

Let me know if I can answer any questions for you, or perhaps a friend, family member, neighbor or coworker that might be thinking about a home purchase. The combination of reduced home prices, motivated sellers, low home loan rates, and the potential of a juicy tax credit is too great an opportunity to miss.

The Stock market is doing well - the Index closed at its highest level of 2009 last Thursday. The S&P 500 is a basket of 500 Stocks that are considered to be widely held, and is considered by most market experts as one of the best benchmarks available to judge overall US Stock market performance.

In other economic news, Consumer Sentiment came in stronger than expected and Initial Jobless Claims were also reported better than expected, but still at a high level. Continuing Claims, which represent the number of people still receiving unemployment benefits, dropped a bit, but this realistically may be due to benefits expiring rather than people finding new jobs.

"Advertising is the tax you pay for being unremarkable."

"Advertising is the tax you pay for being unremarkable." -Robert Stephens, founder of Geek Squad, acquired by Best Buy in 2002

"I DON'T KNOW WHY I GO TO EXTREMES." Billy Joel.

Last week, Bonds went to the extremes of their trading range, battling tough layers of technical resistance as they attempted to improve. Let's take a closer look, and understand the news of the week.

There was good news on the inflation front as the Federal Reserve's preferred inflation gauge, the Core Personal Consumption Expenditure Index (PCE), indicated that inflation remained tame last month. Generally tame inflation is a good sign for Bonds - but there is still concern, as inflation is certainly coming...it's just a matter of when.

-----------------------
Chart: Core Personal Consumption Expenditure Index

As part of that same report, Personal Income and Spending were both reported inline with expectations. Interestingly enough, consumer spending has now risen three months in a row. However, this needs to be taken with a grain of salt, as this boost comes on the heels of the Government's "Cash for Clunkers" program, which likely boosted spending statistics. Until the labor market stabilizes, we won't likely see a meaningful pickup in consumer spending. Speaking of the consumer, the Consumer Sentiment Index was also reported in line with expectations.

There was also more good news on the housing front last week. The Case-Shiller Home Price Index showed home prices rose for the second straight month while New Home Sales surged 9.6% in July from June's reading, signaling that the housing market is stabilizing. Adding to the positive tone of the report was a drop in inventories, which now stands at a 7.5-month supply from last month's 8.8 month reading.

Keep in mind that some of the current buyers are adding a bit of what may be an artificial boost to the housing numbers, as they normally would have purchased in 2010 but have moved up their buying decisions to take advantage of tax credits and historically low rates. Let me know if you would like more information on these time-sensitive tax credits.

It's also important to note that the revised second Quarter Gross Domestic Product Report showed that the economy has now contracted for four consecutive quarters for the first time since the Great Depression. This is another area to watch in the coming months as we gauge the pace of recovery.

Remember, positive economic news typically causes money to flow from Bonds to Stocks, causing Bonds and home loan rates to worsen. However, even with the pressure of more supply from last week's Treasury auctions, Bonds and home loan rates were able to hold on to some improvements and end the week very slightly better than where they began.

"IF YOU BUILD IT...THEY WILL COME."

And while that line from the movie Field of Dreams may have referred to a baseball field, there are some small signs that it could perhaps refer to the housing market once again before too long.

The housing market continues to show signs of stabilization, and although home prices are not about to spike higher, the decline certainly seems to have subsided. Existing Home Sales came in better than expectations, reaching their highest level in two years, as you can see in the chart below.

-----------------------
Chart: Existing Home Sales in July

And while the inventory of unsold homes remains lofty, it was reported at its best level in a year. In addition, while Housing Starts and Building Permits both came in slightly below expectations, they did rise in July - another sign of stabilization in the housing market. New Home Sales data will come out this Wednesday, so indeed we will soon find out if home buyers are coming out to buy those new built homes. With home loan rates still at exceptionally low levels - it presents a great opportunity to buy. Do let me know if you or one of your friends, family, neighbors or coworkers would benefit from learning more about buying a home in today's market.

On the wholesale inflation front, the Labor Department reported that the Producer Price Index (PPI) fell more than expected. However, the Core PPI - which strips out volatile food and energy prices - was inline with expectations. In the past year the Overall PPI has dropped by a record -6.8%...this going back to 1947, when data was first collected on PPI. This decrease in wholesale prices is certainly reflective of the recession, but also points to the power of the cost reductions through technology and productivity gains.

Remember, inflation is the arch enemy of Bonds and home loan rates. While it's good news that inflation is not currently an issue, with an unprecedented amount of government spending, no one really knows what the full impact will be down the road. This will be something to watch for in the weeks and months ahead.

The job market also continues to be something to watch. Initial Jobless Claims were reported at 576,000, which was a bit higher than expected, particularly after a string of better-than-expected reports recently. Claims readings will need to be in the low 400K's before the Unemployment Rate can stabilize and start to improve.so we have a ways to go.

Although not all the news of the week was necessarily positive, Stocks found ways to take a ride higher, finishing last week on the plus side and at the highest levels so far this year. The Dow surged ahead by 155 points closing at 9,505, the S&P gained 18 points to 1,026 while the Nasdaq rose 31 points ending at 2,020. But Bonds and home loan rates were in turn under pressure, and found it hard to maintain any positive momentum. And with more Treasury auctions scheduled for next week - which have not been overly friendly for Bonds and home loan rates - the pressure could increase.

Surprise, your lifes changing!

Here we go again; I was able to put a house into escrow for the third time. Ugh. Appraisal killed the deal last time. Let's hope it comes together this time, as I've spent a record amount of time on this, for a deal that should be a no brainer. Because of the economy and the real estate disaster, new laws have made some simple things difficult for everyone. Oh well, it is what it is.

Interesting thing happened yesterday with Lili. After watching another season of So You Think You Can Dance and America's Best Dance Crew, all of which she goes crazy over, she let me know she no longer wants to do dance class but go back to competition cheer. Huh? I thought she'd be all fired up for dance to start up again, but no she got a bug in her and was all on fire for cheer.

She did all kinds of research online she found a bunch of places between Santa Rosa and Vacaville she wanted to check out. We went back and forth about it all day, me mostly trying to tell her how unlikely it will be that we could do something like this right now between time and expenses. It's difficult when you have five kids and no money to spread the opportunities around. However, Lili has been focused on competition cheer (or the like) for most of her life. None of the others have shown much desire for activities other than to do what someone else is doing for the sake of playing with others. This gives me reason to feel maybe this is the one thing she should get a shot at. I don't know where it could go, but I do want to teach the kids to follow their dreams and this appears to be her dream.

After half a day of negotiation and research, she talked me into checking out a place in Petaluma. We went and I have to admit I was impressed. This is no school cheer team. This is the stuff you see on ESPN. It still seemed unlikely she could get in as their training season starts in April and goes year round, according to their website. It turned out they only started actual rehearsals last week and felt like Lili could catch up. They sounded like they wanted her, and she certainly wants to join. This would be the beginning of many schedule and lifestyle changes for the family. Are we up for it? Where are we gonna find the money? Will the schedule work with all we have going on now? Not sure, but this is what Denise and I talked about after we finally got the kids to bed. Still not sure, but I think we're going to give it a shot.

This year will Cosette and Gracie will be in Girls On The Run, a cross country style running group at school. Cosette and Lili did it last year and it was great, and more than enough extra activity. Paris is still not interested in much of anything nor is Asher, so I think we have everyone covered for another year.

Band is going good. Music is getting...I don't know. I should be getting better as it seems I have the opportunity but I'm not spending enough time with it. Not as much as I'd like for sure. It'll be better once school starts. Real estate still feels like a crap shoot. I've been able to spend most of the summer with the kids but now that school is starting I'll be able to focus more on real estate and take on more business.

I'm thinking about going back to school. Thinking. I do think I'll speak with a school counselor and see what they have to say.

"ENERGY AND PERSISTENCE CONQUER ALL THINGS." Benjamin Franklin.

And indeed, Bonds and home loan rates definitely showed some serious energy and persistence this week, despite some serious headwinds, including additional supply flooding the market from this week's big Treasury auctions.

The Treasury unloaded an enormous supply of paper onto the markets this week...and remember, anytime there is more supply than demand, it means prices will naturally decline. And when Bonds are concerned, when prices decline, home loan rates go up. The heavy supply hitting the market caused some wild volatility for rates midweek, but overall home loan rates managed to find some improvement by the end of the week. However, it won't be long before another enormous supply of Treasuries comes on the market. In just two weeks, we'll be looking at a fresh round of auctions...and the size of those auctions will be announced on August 5th. This announcement date of August 5th, and the following week's auction dates of the 11th, 12th and 13th will probably have high volatility and provide a headwind for Bonds. It used to be that the dates of economic news would be circled on the calendar as the ones to watch for greater movement in Bond prices...but right now, the supply issue has become so important that it now may be the most dominant current factor in Bond pricing and home loan rates.

In other news, Advanced Gross Domestic Product (GDP) for the 2nd Quarter came in better than expected, while the 1st Quarter GDP was revised lower. GDP measures the total market value of all final goods and services produced in a country in a given year. Overall, GDP has fallen four quarters in a row for the first time since government records started in 1947. The report also showed consumer spending is down, as consumer savings increased to the highest level since 1998.

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Chart: Gross Domestic Product

However, there are continuing signs that the economy is stabilizing. First, the widely looked at Case/Shiller Home Price Index for May showed that home price declines in the 20 largest US cities appear to be moderating. This most recent report was the best reading in nearly twelve months, and the first month-over-month improvement in three years. Combining this report with the last few months improved Existing and New Home Sales Reports gives us reason to be more optimistic on housing, and a reason to feel that home prices are nearing a bottom for most of the country.

THIS MAY PRESENT A GREAT TIME TO PURCHASE A HOME, BUT BE AWARE THAT INFLATION WILL DEFINITELY PLAY A BIG ROLE IN THE DIRECTION OF HOME LOAN RATES...TO LEARN MORE, CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW.

Go Back to School...For Free!

Go Back to School...For Free!

As unemployment rises, many adults are heading back to the classroom to retool their skills or learn about new industries. Here are some great tips for getting that education for free.

Scholarships...

Many scholarships don't have age limits, which makes anyone eligible to apply. Check out www.Fastweb.com and www.SuperCollege.com to search for available scholarships.

Professional and Trade Organizations...

Local and national professional and trade organizations often offer grants and scholarships. For instance, The San Diego Foundation (http://www.sdfoundation.org/grant/) has several scholarships for adults. Begin by doing an Internet search for your particular locale and specialty. You can also contact your local Chamber of Commerce to see if they have any information on local grants and scholarships.

Colleges and Universities...

Many schools offer scholarships created especially for adults who are returning to school. Check a school's individual Web site or contact the admissions office for details.

The Government...

Individual states may also provide grants to help people attend re-training programs that they sponsor. Information and links can be found at www.careeronestop.org. In addition, the Obama administration has launched www.opportunity.gov to help unemployed adults return to college. The site includes information on a variety of federal student aid programs.

Employers...

A large number of employers still offer tuition assistance, especially if you can show how the educational program will help your job performance. For adults who want to return to school while they are still working, this is another avenue to consider.

The Bottom Line...

With a little research and a little effort, returning to school may be a whole lot easier...and a whole lot cheaper...than you think!

Look who's getting fancy with the graphs.....

IT'S THE THOUGHT THAT COUNTS...OR IS IT? As we look back at last week, think about this for starters - the housing industry received some welcome good news, as Existing Home Sales came in better than anticipated, and marking the third straight month that Existing Home Sales have increased. And perhaps even better, the supply of unsold homes on the market dropped from the prior reading of 9.8 months down to 9.4 months - which is the best level seen in over a year. With home loan rates still at low levels and homes priced to sell - this is a great time for potential homebuyers to stop thinking, and go ahead and take some action.

Despite that bright spot of news, last week's Consumer Sentiment report - which measures consumers' attitudes and expectations concerning both present and future economic conditions - showed that consumers still think the economy has a ways to go, as the report did come in a bit weaker than anticipated. According to the report last week, Consumer Sentiment came in at 66 for the month of July, down from June's reading of 70.8. Take a look at the chart below for an interesting historical perspective on this report.

-----------------------
Chart: Consumer Sentiment (University of Michigan)

And one of the major reasons for the decline in Consumer Sentiment was ongoing concern over unemployment - and last week, Initial Jobless Claims reportedly rose by 554,000. While this number was high, it was essentially in-line with expectations of 557,000.

The big news that many headlines featured was the number of Continuing Claims, which fell from 6.31 million the prior week to 6.22 million. And although this drop was reported as positive news, we need to remember that a large number of people are still unable to find jobs, but are no longer being counted in Continuing Claims because their unemployment benefits have expired. The bottom line is that it will be hard for the economy to really turn higher with momentum until the labor market starts to turn around.

Stocks had a good week, with the Dow closing above 9,000 on Thursday for the first time since January 6th, as well as finishing the week with its strongest two-week span for blue chips since 2000. Since Stocks moving higher can drain money away from Bonds, the rally in Stocks - combined with the announcement of next week's Treasury's auction of $115 Billion in Notes - put selling pressure on Bonds toward the end of the week. Despite some volatile mid-week action, home loan rates closed out the week near the level where they had begun the week.

After a heavy dose of corporate earnings reports for the past few weeks, the week ahead will hold quite a few economic reports for traders to chew on. This week starts off with a report on New Home Sales, which is expected to rise modestly from June's reading of 342,000 to 355,000. Particularly following last week's decent Existing Home Sales Report - this will be one to watch closely. Production and manufacturing will also be big headlines in the news this week. Durable Goods Orders, which is considered a leading indicator of manufacturing activity, could move the market mid-week - while Gross Domestic Product (GDP), which measures the total production and consumption of goods and services in the US, is due at the end of the week. The GDP read is expected to come in at -1.5% for the second quarter, which would mark an improvement over the previous quarter's reading of -5.5%. The Chicago Purchasing Managers Index is also due out at the end of the week, and although this report only surveys 200 purchasing managers in the Chicago area, it's used by traders to help predict the more important national Institute of Supply Managers Report, which is a leading indicator of economic health. The Employment Cost Index rounds out the week, which gives an indication of total labor costs - and it has the potential to move the markets if it doesn't come in close to last quarter's reading of 0.3%. What industry experts are really looking for in this report are wage trends that indicate wage inflation and price pressures...and given the continued weakness in the labor market combined with fears of future inflation, you can bet Traders will be keyed in on this report. Finally, the markets may be impacted by the Treasury Department's auction of $115 Billion in Notes this week. This auction was just announced last week and will be held in addition to the $90 Billion worth of T-Bills that are usually auctioned on a weekly basis. Just the announcement of the auction weighed on the entire Bond market last week, and could continue to be a factor this week depending on how well the additional supply hitting the market is received. 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, Mortgage Bonds traded higher early last week, but were pushed lower last Thursday after the Treasury announced a record $115 Billion in auctions. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jul 24, 2009)

INFLATION, ALL WE NEVER WANTED...!

Or so the Go-Go's song "Vacation - All I Ever Wanted" could have been re-written this week, as whispers and glimmers of future inflation as well as some positive economic news roiled the Bond market. Overall, home loan rates worsened by about .25% across the board.

Inflation at both the wholesale and consumer level came in hotter than expected via the Producer Price Index (PPI) and Consumer Price Index (CPI) reports, the latter shown in the chart below. The Consumer Price Index (CPI) rose by more than expected, and was the biggest increase in a year, mostly due to higher gasoline prices.

However, a look back over the past year shows a drop in overall CPI of 1.4%...why is this? It was a year ago that a barrel of oil was $147, and today that barrel stands at $60, up from the $30 range seen earlier this year. But even when stripping out food and energy, the most recent Core CPI rose 0.2%, higher than the 0.1% anticipated - and year-over-year, Core CPI prices were up 1.7% after rising 1.8% in the 12 months ended in May. On the wholesale side, even excluding volatile food and fuel prices, Core PPI rose quite a bit more than anticipated as well. And remember, inflation is bad for Bonds and home loan rates. If this trend continues, it could have a big impact on rates later this year.

Bay Area Home Sales Rise Again

The number of homes sold in the Bay Area in April was higher than a year ago for the eighth month in a row while the median price fell 41.3 percent to $304,000 as bargainpriced foreclosures continue to dominate the market.

While the median prices is down significantly from a year ago, it edged up slightly on a month-to-month basis for the first time in almost two years, said the report released Thursday by MDA DataQuick Information Systems.

In April, a total of 7,139 new and resale houses and condominiums closed escrow in the Bay Area, a 12.9 percent increase from March and a 13.1 percent gain from March 2008. The 13.1 percent year-to-year gain for home sales is significantly smaller than the 29.1 percent year-toyear gain reported for March home sales.

Last month's median price was 4.8 percent higher than in March, the first time there was a month-to-month gain since October 2007, when the median price increased 1
percent from September 2007.

From March to February and from March to April, the median sales price reflected a 1.7 percent drop, compared to an average month-to-month decline of almost 5 percent in the 12 months ending in January 2009.

"When you see units up and prices going up it points toward stabilization and it's very encouraging," said Rick Turley, president of Coldwell Banker Residential Brokerage in the Bay Area.

A lower concentration of discounted foreclosure resales helps explain why the median sales price has begun to stabilize, the DataQuick report said.

That said, Turley and other real estate observers expect more foreclosures to come onto the market in the coming months now that temporary foreclosure moratoriums have ended. More foreclosures could drag down median prices, which is the point at which half of homes sell for more and half sell for less.

In April, 47.4 percent of existing home sales in the Bay Area involved properties that had been foreclosed upon at some point in the last 12 months, compared to 50.2 percent in March and 52 percent in February.

Turley pointed out that the recent slowdown in foreclosure sales is likely the result of foreclosure moratoriums that were in place until the end of March. Now that the moratoriums have been lifted, expect to see more foreclosed properties to be put on the market, he said.

"We will see more. They are being released more. There was a buildup," he said.

As far as April home sales that closed, Turley said the low-end market is the strongest in the Bay Area.

"We are seeing that the lower-end market is really on fire," he said. "Multiple offers are being made on the low-end of the market due to lots of well-priced distressed properties and historically low interest rates."

As far as higher-priced properties go, Turley said he is seeing pending sales activity for homes in wealthy areas of the Peninsula such as Portola Valley, Atherton and Hillsborough. In the East Bay, Orinda, Danville and Montclair are also seeing pending sales activity for high end properties.

"For the past few months we've seen faint but growing signs that would normally suggest many markets are nearing price stabilization. But we'll need to see those vital signs continue to strengthen into the fall. Job losses and historically high foreclosures levels continue to pose serious threats to housing stability," DataQuick President John Walsh said in a statement.

Inventory levels are tightening up in markets such as Brentwood, Livermore, Walnut Creek and Pleasant Hill, where the median sales price is in the range of $400,000 to $500,000, said Jeff Sposito, president of J.Rockcliff Realtors, an East Bay real estate brokerage. Inventory levels are a measure of the time it would take for homes to be sold in a particular area.

Back in November, inventory levels in those cities ranged from 12 to 14 months whereas now they are in the four to five-month range, Sposito said.

Steve Dhillon, a Realtor with the Fremont office of RE Realty Experts, said inventory levels are down compared to few months ago. Lower inventory helps explains recent price stabilization, he said.

In January, there were 130 foreclosed homes for sale in the Tri-City area of Fremont, Union City, Newark. In April, that number was 85.

"Inventory is low and what I'm also finding is more buyers are entering the market" to take advantage of lower interest rates, low home prices and tax credits for buying homes, he said. "In a year or so, people will look back and think that was a great time to buy," Dhillon said.

By Eve Mitchell Staff Writer Bay Area News Group
Source: Contra Costa Times, May 21, 2009

Preparing For Your House Hunt: A Buyer's Checklist

Buying a home is one of life’s most important decision and exciting adventures, but there’s much more to it than picking out the perfect floor plan. Even experienced buyers can find the process a bit complex and overwhelming. That’s why the time you spend preparing yourself before you start your search can be the best investment you makein your new home. As a buyer, it’s important to know the potential pitfalls and stumbling blocks that may pop up during your path to homeownership success. A decision you make now could down the road cause difficulties, delays, or worse, the realization that you made the wrong choice. So here are some things to keep in mind before and during your search:

• Do the math and establish your purchasing power.
Before you start cruising the neighborhood for open houses, you need to know which driveways you can afford to pull into. Meet with a lender who will help you determine which type of financing (fixed rate, adjustable, interest only etc.) will work best for you and how much you qualify for with each type. Also, getting pre-approved can put you in a much stronger negotiating position because it shows the seller that you are a committed buyer.

• Make a timeline.
As the old proverb says, “he who fails to plan, plans to fail.” Sit down with a calendar and set up your goals for the months leading up to your potential move date. Plan on getting pre-approved for a loan and looking for an agent three to four months in advance. The next two or three months will be spent looking for a house and the details of your actual move will be made in the few weeks before moving day. By setting up a timeline for yourself, you are more likely to stay organized, on task and goal oriented.

• Start surfing.
One of the most important tools you’ll need for your house hunt can be found right in your own home or office—the Internet. The majority of homes on the market are listed somewhere on the Internet because real estate agents know the majority of people turn to the Web first when looking for a new home. And why not? With just a few clicks of a mouse, buyers can see pictures, take virtual tours and map out locations for homes that contain features they specifically search for. Start looking on websites like AgentLevy.com, CaliforniaMoves.com, Realtor.com, Trulia.com and Zillow.com for homes that fit your particular criteria. You can register for e-mail alerts to have homes sent to you and your agent so he/she can investigate further.

• Location, location, location.
One can make a list of pros and cons for nearly every home in every neighborhood. That’s why it’s important to narrow your search before you start touring every house in town. Decide what neighborhoods work best for you and your family. Check out school districts, shopping and dining,public transportation, recreational areas and crime statistics.

• List your priorities and prepare to compromise.
The dream home you have pictured in your mind might not exist in reality—or at least not in your neighborhood or price range. Unless you are building a home from the ground up, there are often compromises involved in deciding on a property. So, you may have to sacrifice that extra large bathtub or redwood deck in order to get the home located near your child’s school that has the four bedrooms you require. Make a list of the features you are looking for in a house and rate them on a scale of one to five, with five being a feature you can’t live without. Then, bring your list with you as you tour homes to keep score.

• Would you like French doors with that?
Once you’ve found a home you like, consider the costs of upgrades, repairs or remodels and factor those in to your short or long term budgets. Remember that upgrades may add value to your new home. So it may be worth the extra expense up front, if you are planning on selling your home in the foreseeable future. Given the current buyer’s market, there may be no time like the present to purchase a home. In many markets, home prices have stabilized and in some cases even increased. So the perfect time to buy has likely come and to wait much longer could put you at risk of missing out on great deals and excellent inventory. With this checklist and the right market conditions, you are well on the road to home happiness!

Clarifying the tax credit...up to $8000!
http://ping.fm/prSVI

Clarifying the tax credit - up to $8000!
bukkalevy.blogspot.com

Clarifying the tax credit - up to $8000!

Purchase a Home Now and Take Advantage of the New Tax Credit of up to $8,000
A benefit that makes your new home affordable

A tax credit is available for first-time homebuyers under the American Recovery and Reinvestment Act of 2009. If you buy a home between January 1, 2009 and November 30, 2009, you may be eligible to receive a tax credit for 10% of the purchase price of your home—up to $8,000. Program highlights include:

1. Any individual (and if married, their spouse) who has no ownership interest in a home during the last three years is eligible.
2. Full credit for single taxpayers with incomes up to $75,000 ($150,000 on a joint return); partial credit for incomes up to $95,000 ($170,000 joint return).
3. Available for the purchase of a single-family home that will be used as a principal residence. Moreover, if the new home you are purchasing is a mobile home or condo, and it is going to be your principal residence, you still qualify for the home buyer tax credit. Even building a home on a land (as opposed to purchasing a ready-made house) qualifies for the $8000 housing tax credit.
4. Homebuyers can reduce (or even eliminate) their income tax liability for the year of purchase by claiming the credit on their tax return.* (*Certain eligibility criteria must be met. homebuyers should consult their tax advisor for further details)
5. If the home is sold before three years, the first-time home buyer (who is now the seller) must pay the IRS the entire amount of the tax credit at closing.

believes a happy life consists not in the absence, but in the mastery of hardships.

Looking at real estate in Half Moon Bay. Overcast but beautiful!

A CONSUMER GUIDE TO THE FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT

A CONSUMER GUIDE TO THE FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT As Modified in the American Recovery and Reinvestment Act February 2009

FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT: EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit:

The amount of the homebuyer federal income tax credit is the lesser of 10% of the cost of the home bought or $8,000.

Eligible Property:

Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer’s principal residence.

Refundable:

This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.*

Income Limit:

In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.

First-time Homebuyer Only:

The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer’s spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.

Revenue Bond Financing:

A homebuyer who utilizes revenue bond financing may be eligible for the homebuyer income tax credit.

Repayment:

There is no repayment of the homebuyer income tax credit by the homebuyer.

Recapture:

However, if the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.

Effective Date:

The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.

A Look at 30-Year Fixed Rate Mortgages Since 1971

We’ve all seen the headlines. “Rates on 30-year mortgages drop back below 6%.” “Lower rates help sell houses, but market faces broader ills.” “Mortgage Applications Surge with Large Drop in Rates in Latest MBA Weekly Survey.” But what do changes in rates really do for your personal purchasing power and how low is “low” when it comes to today’s rates? To answer these questions, we turned to the experts.

An historical perspective to give you a better perspective as to how low mortgage rates currently are, we turned to Freddie Mac, a shareholder-owned corporation developed by the United States Congress in 1970. The mission of the organization is to provide homeowners and renters with lower housing costs and better access to home financing. I can provide you with a chart which includes the monthly average commitment rate and points on 30-year fixed rate mortgages since 1971.
A few of the key highlights:
• As of January, 2009, we are averaging a 5.05 percent commitment rate on 30-year fixed rate mortgages
• To put it in perspective, in October 1981, interest rates reached their highest point, averaging 18.45 percent; more than three times today’s current rate
• Though rates eventually came down, they did remain at double digit numbers for most of the 1980s and into 1990 (nearly a decade)
• At today’s rate of around 5.05 percent, rates are the lowest they’ve been in Freddie Mac’s record which dates back to 1971
• Historically speaking, rates have moved relatively slow and consistent through the years though there have been some notable peaks. Among them:
o Since 2000, mortgage rates have remained relatively low with a peak of 8.52 percent in May 2000 to the January 2009 low of 5.05 percent
o But to put it into perspective of how fast things can change, in January 1979, rates were at 10.39 percent. Just over two years later, rates reached their peak of 18.45 percent in October 1981. During this period, rates rose dramatically, and at one point jumped almost two percentage points in just 30 days.

The bottom line is that with interest rates remaining at historic lows, this increases an individual’s purchasing power and makes the mortgage payment more manageable. All of this is leading up to a very strong market for buyers.