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Bellevue Real Estate, Mortgage, and Economy 12/26/11

Posted on 26 December 2011

Here is the Bellevue Real Estate Report for Dec. 26th 2011:

Interest Rates Lose Some Ground This Week: More risky assets took some momentum away from mortgage backed securities this week as fear over Europe subsided a small amount and the US economy continued to show improvements. In the US the economy is improving, about every data point over the last month has been better than thought. The only reason US rates are at these low levels is because money from around the world is moving to the safest place—the US bond markets. The US stock markets had a large rally this week on news out of Germany and the UK that their economies are holding up relatively well during the Euro crisis. While there still are no ‘solutions’ this small amount of good news lowered the level of panic. This caused bond rates to increase. Mortgage bonds held up much better than treasuries as the Fed is buying mortgage backed securities. I continue to believe the bond and mortgage markets will trade in narrow ranges through the remainder of the year.

Fitch lowered France’s credit outlook and put other euro-area nations on review Dec. 16, saying an overall crisis solution may be “technically and politically beyond reach.” Italy’s benchmark 10-year bond yield returned yesterday above 7%, the level that led Greece, Portugal and Ireland to seek bailouts, before falling below the threshold.

Europe’s equity markets better on data from Germany and the UK were better than expectations. German business confidence climbed in December, suggesting Europe’s largest economy is weathering the euro area’s debt crisis. The gauge of business confidence, based on a survey of 7,000 executives, rose to 107.2 from 106.6 in November, the Munich-based Ifo institute said today. Consumer confidence in the UK rose in November from a record low as consumer expectations for the economy improved in the run-up to Christmas. Momentary reports that are not likely to be sustainable but today they are pushing equity markets higher in the region.

Real Estate Miscellaneous Stats:
December National Association of Home Builder’s housing market index, expected at 20, increased to 21 from 19 in November. Single family index came in at 22 from 20 in November; next six months outlook index increased to 26 from 25. (50 is the pivot for the indexes, above expansion, below contraction).

November Housing Starts and permits were reported. Both starts and permits were expected to be weaker (-0.8% or starts and -2.8% on permits) as reported starts increased 9.3% and permits up 5.7%, the highest in a year, multifamily starts at a three year high. New construction of single-family houses rose 2.3% from the prior month to a 447,000 annual rate, the most since June. Work on multifamily homes surged 25% to an annual rate of 238,000, the highest level since September 2008.

November Existing Home Sales were expected up 2.2%, increased 4.0% to 4.4 million. The median sales price at $164,200 was a decline of 3.5% yr/yr. Based on sales there is a 7 month supply which continues to show some improvement. A bomb was dropped by the NAR when they revised sales between 2007 and 2010 down another 14% based on double listings; the revised sales show sales were even lower than what had been reported.

Loan Program Of The Week. New Portfolio Jumbo Loan: Guild Mortgage has just entered in to an agreement with a Jumbo Loan provider that offers some of the most flexible underwriting and creative provisions for loan approval. Here are a few bullet points:
• Loan Amounts Up to $5,000,000.00 and $10,000,000.00 on a case by case basis.
• True portfolio product with flexible underwriting policy. We just approved a loan that was declined with other portfolio lenders because of income problems.
• Asset Depletion can be used to supplement income. This can be done even if a client does not have a history of depleting assets on their tax returns. Income calculations from this source are based on age of the borrower. 4001K funds can only be used if the borrower is of retirement age.
• Pledged Assets can be used to reduce down payment. This allows the borrower to keep their assets invested. This can allow down payments as low as 10%. Pledge cannot come from a 401K, IRA or annuities.
This loan can be very helpful for high net worth borrowers that may not show a lot of income on their tax returns.
Some Interesting Information:
Doubling Down—That can be a good move if you are in Vegas but what about government debt? The United States has creates as much debt in the last 7 years as was created in it’s entire history up until 7 years ago. As of 4/30/2004 total US debt was $7.13 trillion. Current total Federal Debt is $14.29 trillion. ( Source: Treasury Department )
Medicare Time bomb—Medicare Trustees released a report on 05/13/2011 regarding the financial condition of the trust fund. The new report says the trust fund will run out of money 5 years earlier than their report issued just one year ago. Medicare Part A (hospitalization coverage) is projected to be depleted by 2024 in the latest report and will be in the red for all future years. The trustees give a long term projection that goes out 75 years. They say the shortfall could be cured by an immediate increase in the Medicare payroll tax of .79%. This would raise the tax from 2.9% to 3.69%. ( Source: Medicare Trustees )
Unemployment Outpaces Jobless Rate —The number of people out of work in the last 4 years has doubled from 7 million to just over 14 million. At the same time unemployment benefits have increased 5 times in the last 4 years from $31 billion in 2006 to $159 billion in 2010. ( Source: Labor Department )
Skin In The Game —As of 1979 only 30% of all taxpayers paid no Federal Income Tax. By 2009 that number had increased to 42%. This is the last year we have data available. Many suggest that number is over 50% now. What happens when a majority of people voting to raise taxes are not impacted by that change? This is a matter of concern to many. ( Source: Internal Revenue Service ).

Bellevue Real Estate Report