“Fear comes from uncertainty,” wrote the poet William Congreve. Last week, however, the markets were moved by fear and by uncertainty that were unrelated. On the one hand, unrest in the Middle East drove up Oil prices and pushed investors into the safety of Bonds – while on the other hand, fear of inflation limited the gains that Bonds experienced. To see how those elements impacted home loan rates, let’s take a deeper look at each.

First, the global unrest in the Middle East continues to impact the markets. The protests that started a few weeks ago in Tunisia and Egypt have now spread to Bahrain, Yemen and Libya. Libya is of particular concern to the markets, since it is the largest holder of oil reserves in Africa.

With the thought of Oil fields at risk and with no foreseeable resolution in the near term, Oil spiked as much as $12 a barrel higher last week – climbing over the mark of $100 per barrel. Remember, high oil prices aren’t good for anything; they’re tough on the economic recovery, and they’re inflationary. And in terms of your wallet, the recent spike in oil has only just begun to translate to pumps across the country, so you can expect to see higher prices in the coming weeks.

In addition to higher Oil prices, the unrest is creating fear and doubt in Traders’ minds about what might happen. And when Traders are uncertain, they tend to move money into the relative safety of Bonds, which offer lower returns but also lower risks. This flood of money into Bonds – including Mortgage Bonds – helps prices and home loan rates improve. And sure enough, last week Mortgage Bonds traded higher, as protests and uncertainty permeated throughout the Middle East.

On the other hand, those gains in Bonds have been limited by fears of inflation down the road. That’s because investors demand a higher yield now to offset their concerns that future inflation will eat into their returns. That was evidenced by the tepid buying demand in last week’s Treasury auctions. And as the economy continues to slowly expand and inflation fears grow, rates will gradually move higher over time.

The bottom line is that global unrest has been a driving force behind improvement in the Bond market… and that it may continue to do so in the coming weeks. But at the same time, it’s important to remember that those gains are fleeting and have even been limited by inflation fears – so the positive picture for Mortgage Bonds and home loan rates won’t last long.

Now’s the time to look at your unique situation and take action. It only takes a few moments to sit down and see how the national and international news may help you benefit from a refinance or the purchase of a new home. Call or email today to get started. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.

Read the entire article and see the graphs here.

- Foster Weeks

SAN FRANCISCO — Luxury home values increased in Los Angeles, San Diego and San Francisco in the fourth quarter of 2010 compared to the third quarter, according to the First Republic Prestige Home Index™ by First Republic Bank, a leading provider of private banking and wealth management services.

In the quarter ended December 31, 2010, the Index indicated the following:

• Los Angeles area values rose 0.6% from the third quarter of 2010 and declined 2.2% from a year ago. The average luxury home in Los Angeles is now $1.97 million.
• San Diego area values gained 0.8% from the third quarter of 2010 and increased 0.6% year-over-year. The average luxury home in San Diego is now $1.71 million.
• San Francisco Bay Area values climbed 1.5% from the third quarter and were up 3.6% from a year ago. The average luxury home in San Francisco is now $2.6 million.

“The fourth quarter of 2010 marked the first time since the second quarter of 2007 that luxury values rose in all three of California’s major metropolitan centers,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “The modest increase in the fourth quarter of 2010 was due to low interest rates, a rising stock market and improving consumer confidence.”

First Republic Bank produces the Prestige Home Index each quarter with Fiserv CSW Inc., a leading provider of automated property valuation services and home price metrics to U.S. financial institutions. Historical results of the Index, which has tracked luxury homes since 1985, are accessible at www.firstrepublic.com. First Republic Bank is an active lender in the luxury home market for both primary residences and vacation homes.

Values in the San Francisco Bay Area posted their third increase in the past four consecutive quarters, although the gains were very modest.

“We’re off to a good start in 2011,” said David Shepardson of Coldwell Banker in San Francisco. “It is shaping up to be a pretty strong year because of low inventory and the fact there are quite a few buyers out there. It’s also apparent very quickly that if the property is overpriced, it will sit there.”

On the Peninsula south of San Francisco, the fourth quarter was unexpectedly strong. “In the past two years, we only had two sales over $6 million in Woodside and Portola Valley,” said Wendy McPherson of Coldwell Banker in Woodside. “In the fourth quarter of last year, we had six sales over $6 million all the way up to $15 million. All of sudden people have their confidence back.”

In the Marin County, the market was also brightening. “This is the year we’re going to see a very good recovery,” said Olivia Decker of Decker Bullock Sotheby’s International Realty in Mill Valley. “We had three months of good sales from December through February. This is encouraging because it is winter, and we’re not even in the spring buying season yet. The market is definitely much better.”

Contact:
Greg Berardi
Blue Marlin Partners
(415) 239-7826
Email Greg Berardi

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have the most elite agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

February looks promising. If the housing sector is any indication as to the way the economy is going, then things should certainly be looking up. Let’s hope so as this recession has gone on far too long. Regardless, San Francisco has been somewhat sheltered by the bad economy thanks to people who have the money have been spending it on houses!

Here are the numbers for the week of 2/23/11:

• 3 new listings ($575,000, $649,000 and $3,200,000)
• 15 ratified sales (pending) (average price $1,228,200, low $595,000, high $2,200,000)
• 7 closed sales (average price $1,775,437, low $719,000, high $2,200,000)

- Janis Stone
DRE #00517072

“You sound like a broken record…” or so the cliché goes. And lately that saying certainly applies to the phrase the media has been repeating recently: Don’t fight the Fed.

So what does “Don’t fight the Fed” mean exactly, especially when it comes to home loan rates? Let’s answer that by going back a few months. In early November, when home loan rates were at all time lows, the Fed announced their plan to purchase $600 Billion in Treasuries through mid-2011. Dubbed Quantitative Easing 2 or QE2, the Fed had three goals:

1. Boost Stock Prices
2. Lower unemployment
3. Create inflation

After just two and a half months, an argument could be made that the Fed has been somewhat successful so far. Stocks are higher, the unemployment rate has improved (though more improvement is certainly needed), and as we saw last week inflation has ticked higher.

Both the Consumer Price Index (CPI) and Producer Price Index for January were hotter than expected and, as the chart shows, the more closely watched Core CPI, which strips out food and energy, came in at the highest level since March 2010. And we’re not just seeing hotter inflation here. Reports last week showed inflation is heating up in China and England, too.

So what does all of this mean for home loan rates? Inflation is the arch enemy of Bonds and home loan rates, and usually any hints of inflation cause both to worsen. Yet, you may be wondering why Bonds and home loan rates improved slightly last week. There are two things to note: First, while last week’s inflation data was a touch hotter than expected, overall, it’s still on the tame side. Second, last week’s Initial Jobless Claims was a disappointment, suggesting that the labor market continues to improve but at a very choppy and sluggish snail’s pace.

The bottom line to remember is the phrase we started out with: Don’t fight the Fed. If the Fed wants to create inflation as one of its three-fold goals for QE2, it will likely succeed…and Bonds and home loan rates will likely worsen over time as a result. That’s why if you have been thinking about purchasing or refinancing a home, this is a great time to get started! Call or email me if you have any questions at all – I’m always happy to talk to you! Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.

Forecast for the Week

It’s a holiday shortened week, with both the Stock and Bond Markets closed Monday in observance of Presidents’ Day. But there will be lots of news the rest of the week:

• We’ll get a double read on how the consumer is feeling, first on Tuesday with the Consumer Confidence Report and then on Friday with the Consumer Sentiment Index.
• We’ll also get a double read on the housing market, with Wednesday’s Existing Home Sales Report and Thursday’s New Home Sales Report.
• Thursday will also bring another weekly Initial and Continuing Jobless Claims Report – will this week’s report disappoint like last week’s?
• And there’s one more double read, this one on the health of the economy. Thursday’s Durable Goods Report will update us on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time (i.e. appliances, furniture, etc). Then on Friday there’s the Gross Domestic Product Report, which is the broadest measure of economic activity.

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, Bonds and rates have made some improvements since February 9. But keeping in mind the saying about the Fed…and the signs of inflation…I’ll be watching closely to see what happens next.

Read the entire article and see the graphs here.

- Foster Weeks

WALL STREET JOURNAL – Many economists and housing analysts blame lax lending standards – including no-down payment, no-document loans – for contributing to the challenges in the current real estate cycle.  As a result, most lending institutions have increased minimum down payment requirements.  Now, a new proposal by the Obama administration calls for gradually raising down payments to a minimum of 10 percent on conventional loans – those that can be bought or guaranteed by Fannie Mae and Freddie Mac.

MAKING SENSE OF THE STORY

• Banks have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices.  According to a study by the Federal Reserve Bank of St. Louis, buyers who made smaller down payments were more likely to default during “unfavorable economic circumstances, such as a housing market slowdown or job loss.”
• A recent analysis showed the median down payment in nine major U.S. cities rose to 22 percent last year on properties purchased with conventional mortgages.  That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.
• Higher borrowing costs and larger down payments could cause housing prices to decline further, analysts say.  For now, borrowers who can’t afford such amounts are turning to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration.  Some industry experts say this has created a nonconventional mortgage market for riskier borrowers and those who don’t qualify for conventional loans.

SFAR asked us to post this to let our clients know about this amazing resource:

The Association’s web site for homeowners, www.SFBayWindow.com, contains more than 130 articles on subjects important to owners. From “Adding a Room” to “Zoning Districts,” it’s all there, making the site the most robust resource guide for San Francisco homeowners on the web.

Want to know more about sidewalk repair? What to do about barking dogs? Confused about who’s responsible for repairing the fence between your backyard and your neighbor’s? Aren’t sure if you need a permit to remodel your bathroom? The answers to all these questions and many more can be found on the Association’s very informative and unique site.

Topics are separated into three easy-to-navigate sub-headings: Your House, Your Neighborhood and Your City.

In addition, the site contains a fourth, separate category—Your Government—which provides descriptions of legislative proposals and ballot measures affecting the interests of property owners at the local, State and federal levels. Sometimes accompanying these descriptions are letters supporting or opposing legislative proposals (as the case might be) that site visitors can send to selected legislators, with their name attached to the letters with a single mouse click. To view the political content, however, the visitor must click on the separate Your Government link. The site was set up this way so that REALTORS® would not feel uncomfortable about referring their clients to the site because the “political point-of-view” expressed may be different than that of site visitors and client alienation would occur.

REALTORS® are encouraged to bookmark the site at www.SFBayWindow.com and to add a link to it on their web sites. Consider bringing the site to the attention of clients in mailings and suggest that clients visit the site regularly for information on how to make homeownership and living in San Francisco even more rewarding. It is hoped that every time they do, they will be appreciative of the public service the REALTOR® community is providing by maintaining the site.

The White House recently released recommendations to phase out Fannie Mae and Freddie Mac.  C.A.R. says the elimination of government involvement would raise borrowing costs for home buyers and severely restrict a safe and affordable flow of financing, further impeding the still-fragile housing market recovery.

C.A.R., along with NAR, believes that Fannie Mae and Freddie Mac government-sponsored enterprises (GSEs) should be converted into government-chartered, non-profit corporations.  Such an entity would ensure government’s role in a stable real estate finance system, while eliminating the conflict created by the GSE’s current charter allowing for a private profit and public loss structure.  With a clear explicit guarantee by the government, these entities would continue to be able to offer low interest rate loans onto home buyers and assure investor confidence.

The White House’s proposal also recommends allowing the maximum loan limit to drop back to $625,500 in high cost areas, further hampering California’s housing recovery.  Analysis by C.A.R. shows that a reduction in the conforming loan limit to $625,500 would render a percentage of home sales ineligible. To see the analysis, and C.A.R.’s recommendations on the GSE reform and loan limits, visit CAR’s website.

Note: Here is where I disagree with CAR. Once again, the real estate industry is looking at this from purely a self-serving point of view. If Fannie and Freddie are made government non-profit entities (which essentially they already are as much red ink as they have produced!) it means you and I as taxpayers are on the hook for the difference between losing money and breaking even. What’s the solution? – Mick Orton, Marketing Manager

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have the most elite agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

Even though things don’t really start heating up until Spring, February has been a pretty decent month for sales. This week alone was extremely productive.

Here are the numbers for the week of 2/16/11:

• 11 new listings (average price $2,099,727, low $695,000, high $9,500,000)
• 24 ratified sales (pending) (average price $1,517,476, low $349,995, high $7,000,000, 3 confidential)
• 6 closed sales (average price $1,231,000, low $572,000, high $2,375,000)
• 1 reduced ($2,595,000)

- Janis Stone
DRE #00517072

SFResidence is part of the TRI Coldwell Banker office at 1699 Van Ness in San Francisco which is one of the premier offices in the City and has the market share numbers to prove it. We have the most elite agents selling real estate in the San Francisco Bay Area. As a result, our office posts some impressive numbers.

Here are the numbers for the week of 2/9/11:

• 1 new listing (confidential)
• 13 ratified sales (pending) (average price $800,433, low $699,000, high $1,800,000, 1 confidential)
• 6 closed sales (average price $1,928,720, low $210,000, high $2,900,000)

- Janis Stone
DRE #00517072