Bellevue Real Estate, Mortgage, and Economy 12/6/10
Posted on 06 December 2010
Here is the Bellevue Real Estate Report for December 6, 2010.
When you expect the expected and it occurs, is it really news? We tend to think not, which is why the news on home prices really doesn’t seem like news. We knew prices would post a decline, and, sure enough, they did: The S&P/Case-Shiller Home Price Index posted a 0.8 percent monthly drop from August to September. The index also showed that 15 of the 20 cities surveyed showed year-over-year declines, led by a 5.6 percent slump in Chicago .
The latest news on home prices has many analysts ringing their hands, anticipating that a double-price dip will be confirmed by next spring. We won’t rule anything out, but we will note that the Case-Shiller numbers are over two months old, and much has occurred (much of it positive) over the past two months. We still think the worst is over and that home prices are more stable than they were a year ago, mostly because they reflect economic reality today sans the crutch of an artificial tax-credit stimulus. Karl Case, the co-creator of the eponymous index, appears to agree, stating that home prices are “unlikely to fall much further in the next year even after a discouraging report on values in September.”
Of course, distressed properties remain the elephant in the room, but it’s a well-vetted elephant. What is already known rarely rocks markets; it is what isn’t known that rocks them. For the past quarter or so, we’ve seen encouraging trends on the delinquency front. Even though delinquency rates remain high, we think that the trend will continue to improve thanks to improving economic conditions, which should lower delinquency rates over the coming year and further mitigate the downward pressure on home prices.
In the meantime, RealtyTrac reports that 188,748 homes in some stage of the foreclosure process sold in the third quarter of 2010, which was a 31 percent decrease from the same year-ago quarter and a 25 percent decrease from the previous quarter. Of course, we know the reason for the improvement: many lenders froze REO sales in October in order to give mortgage servicers time to review faulty documentation. There will be a pick up in foreclosure activity as the servicing and foreclosure situation continues to clear in coming months.
Clearing on mortgage rates is another matter. We thought rates would rise sooner than they have and not dip quite as low as they did. Over the past few weeks, though, we’ve definitely seen a reversal in rate trends, with rates rising perceptibly over the past week. Depending on when a rate quote was rendered and what product it was rendered for, a quote could have been as much as 15 basis points higher this past week compared to the previous week’s quote.
We can’t say that rates won’t ease over coming weeks (they very well could), but we think the Fed’s monetary policy, coupled with continued strength in stock and commodity prices and the likelihood of sustained economic growth, means the longer-term trend in rates is almost certainly higher. Therefore, we will council anyone considering a loan not to wait; the likelihood of smacking one’s forehead down the road for not taking advantage of today’s still-historically low rate environment is rising.
Bellevue Real Estate Report
No responses yet. You could be the first!