Austin Real Estate Blog

What Did Interest Rates Do This Week?
** according to Freddie Mac **

30-yr Fixed – Higher
This Week:  5.72%
Last Week:  5.67%
1yr Ago:  6.30%

15-yr Fixed – Higher
This Week:  5.25%
Last Week:  5.15%
1yr Ago:  6.03%

5/1 ARM – Slightly Lower
This Week:  5.19%
Last Week:  5.21%
1yr Ago:  6.01%

Highlight of This Week’s Major Economic Reports

According to Freddie Mac, “This week was relatively light on the number of economic data releases, which painted a mixed picture regarding the current state of the economy.  On a positive note, labor productivity rose higher than market forecasts in the fourth quarter of 2007 while gains in labor costs slowed.  However, pending existing home sales fell for the second month in December, indicating further weakness in home sales for January and February.

“These historically low mortgage rates and declining house prices contributed to the highest housing affordability in December since March 2005, according to the National Association of Realtors®.  However, with banks continuing to tighten lending standards, fewer families will likely have an opportunity to take advantage of these factors.”

What to Look for Next Week

January’s Consumer Price Index will be the highlight of the holiday-shortened week.  If headline inflation is higher than expected, mortgage rates will likely trend even further upward.

Short-Term Rate Outlook

Stable to Slightly Higher

Tools to Help Your Buyers & Sellers

Rate Protection from Coldwell Banker Mortgage can provide that win-win situation for your clients!

Whether rates go up or down, with Pre-Purchase Rate Protection, it doesn’t matter!  Protect your buyers’ purchasing power by offering them the ability to cap their interest rate for up to 90 days at no cost while still offering a “float down” option to take advantage of possible rate improvements.

Call me to learn more!

Right now the real estate market in places across the country is pretty shaky. In places that experienced unsustainable appreciation, prices have tumbled and combined with the mortgage crisis, prices have been depressed. Understandably, many buyers are afraid to make a move due to the uncertainty being spread by the media and folks who sell stocks.

Consumers need to remember that commodity brokers want to sell you commodities, stock brokers want to sell you stocks and so on and so forth. That said, take an example such as Enron. When Enron collapsed, many people lost their entire retirement, pension, or and/or savings. The company was a sham.

Does this ever happen in real estate? I personally can’t imagine anyone buying a property and then having it evaporate overnight. I suppose if you bought a property with a nuclear waste dump on it, then it’s possible, but aside from that, real estate is a much safer investment.

Additionally, real estate needs to be managed. In that respect, if you buy a property in Austin or Las Vegas and are a good owner you might want to take a trip there to make sure your property is being managed properly. This is called a tax deduction. :) You get the picture. Of course, that is just one perk of owning real estate. You get additional benefits such as tax write-offs, depreciation, and leverage.

With prices down, rates cheap, and lots of inventory, it may be counter intuitive, but it could be the perfect time to buy.

Builders remain cautious although more buyers visit model homes

Paul Lopez
National Association of Home Builders

WASHINGTON, D.C. – - Builder confidence in the market for new single-family homes edged marginally higher in February as traffic of prospective buyers through model homes improved considerably, according to the latest National Association of Home Builders//Wells Fargo Housing Market Index , released Tuesday.

The index rose a single point to 20 this month, still close to its recent historic low reading of 18 (the series began in January of 1985).

“While builders remain very cautious about the outlook for new-home sales, given today’s economic environment, the fact that more consumers appear to be checking out their options is a good sign,” said Sandy Dunn, a home builder from Point Pleasant, W.Va. and the newly elected 2008 president of the National Association of Home Builders.

…

“Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase given improving affordability factors and the large selection of units on the market,” said the builders’ chief economist David Seiders. “That said, builders know there’s a difference between people looking and people buying, and their current outlook remains quite subdued. Additional stimulative measures on the legislative and policy side are definitely needed to bolster consumer confidence and help bring about a housing and economic recovery.”

…

In February, the index gaging current sales conditions for single-family homes rose one point to 20, while the index gaging sales expectations for the next six months declined one point to 27. Meanwhile, the index gaging traffic of prospective buyers rose five points to 19, its highest level since July of 2007.
…

Austin Area Market Summary – From Coldwell Banker Austin

December 2007:

Compared to 2006, the number of single-family homes sold dropped by 8%. During the same time, the average sales price increased 6% to $250,552.

The total number of single-family listings is up 10% compared to this time last year.

The months of inventory in the Austin market has increased to just over 5 months, which is beginning to favor buyers.

The average days n the market for single-family homes remains steady at 62.

The Austin real estate market has experienced a decline in transactions through the MLS for the first time in many years. That said, Austin’s average and median prices continue to increase. The Austin area continues to be rated in multiple categories among the nation’s top cities to live.

Georgetown: (average price is up 7% from a year ago to $224,353) Sales of single-family homes for 2007 are down 5.5% compared to 2006. There is 5.5 months of inventory and the number of active listings has increased very slightly to 484.

Round Rock: (average price is up 6% from a year ago to $211,146) Single-family home sales are down 5.6% compared to 2006. There is a balanced 4 months of inventory of homes available. Compared to last month the number of active listings has remained steady at 911. This area is among the top 20 most active Austin MLS market areas.

Cedar Park/Leander: (average price is up 10% from last year to $199,855) Single family home sales decreased 9% for the year and the active inventory is balanced at 3.6 months. The number of active listings is steady from last month to 670. This area is among the top 25 most active Austin MLS market areas.

North/Northwest: (average price for 2007 compared to 2006 is up 8% to $309,136); single family home sales in this area are off 17.6% compared to last year. The number of active listings is down 11% compared to last December, and steady from last month at 273 units. This represents a healthy 2.6 months of inventory, which favors Sellers. This area is in the top 20 most active Austin MLS markets.

Westlake: (compared to 2006, the average sales price rose in 2007 by 10% to $790,436) Single-family home sales in this area are down 12% compared to this time last year. Currently, there are 219 active listings; this is down 10.6% compared to last December. There are 5.6 months of inventory, which slightly favors buyers.

Southwest: (the average sales price for 2007 compared to 2006 is up 12.8% to $228,546) Single-family home sales are down 10.7% compared to this time last year. There is a 2.3 month supply of homes, which favors Sellers. The number of active listings is up 2% to 433. The Southwest area is among the top 10 Austin MLS markets.

South: (the average sales price compared to last December is up 11% to $150,081) Single-family home sales are identical to 2006, and there are 3.3 months of inventory, which reflects a balanced market. Active listing inventory is steady at 177.

Lake (South shore): (the average sales price for 2007 is up 7.7% over 2006 to $477,681) the number of homes sold this year is 18% less than last year. The months of inventory has dropped slightly to 9.9 months, which favors Buyers. There are 732 homes for sale, which is slightly less than last month, and 34% more than this time last year. With the average sales price continuing to increase and inventories at high levels, this is an indicator that buyers are finding greater value in higher priced properties.

“Texas Tenth in Mortgage Fraud” from Dallas Business Journal

Texas ranked tenth in the nation for mortgage fraud last year, according to Dallas-based MortgageDaily.com.

The state had $98.2 million in fraud, up from $96 million in 2006. California and Ohio topped the list, with California alone totaling $1.6 billion in fraud.

MortgageDaily.com identified over $4 billion in mortgage fraud nationwide.

For those considering refinancing their homes, Real Estate Center Chief Economist Dr. Mark Dotzour says there may not be a better time than the present for many years to come.
“Inflation is clearly rampant all over the world, including in the United States,” he said. “When inflation is a problem, mortgage rates go up. Rates probably should be much higher right now, but they aren’t.”
Why are rates so low when inflation is not a fear but a fact? Dotzour says the fear of a global collapse of the banking system is greater than the fear of inflation for the world’s bond investors.
“Wall Street has a name for the phenomenon, and it’s called the ‘flight to quality.’ When investors get concerned about global conditions, the United States is the haven of safety,” Dotzour said. “As investors moved money into U.S. Treasury bonds, the ten-year treasury rate dropped from 5.3 percent in August to 3.7 percent today.”
Dotzour said investors who are using U.S. treasuries as a safe haven are willing to accept a 3.7 percent interest rate even though the U.S. inflation rate is at 4.1 percent.

Once the banking system is repaired and the fear of global collapse of the banks is over, Dotzour predicts treasury rates and mortgage rates will move up, maybe substantially.
“If you believe that we are in for a global financial collapse, then don’t refinance yet because interest rates will continue to fall,” he said. “If you think the U.S. government and the central banks around the world won’t let this happen, then now is the time to get a fixed-rate mortgage at rates we haven’t seen in the past 40 years.”

What Did Interest Rates Do This Week?
** according to Freddie Mac **

30-yr Fixed – Down Slightly
This Week:  5.67%
Last Week:  5.68%
1yr Ago:  6.28%

15-yr Fixed – Down Slightly
This Week:  5.15%
Last Week:  5.17%
1yr Ago:  6.02%

5/1 ARM – Lower
This Week:  5.21%
Last Week:  5.32%
1yr Ago:  5.99%

Highlight of This Week’s Major Economic Reports

Congress passed its much-talked-about economic stimulus package, which is aimed at putting more money back in consumers’ hands.  More money in our pockets means more spending, which means more economic activity to thwart a recession.  At least we hope.

On the mortgage side, it allows for Fannie Mae and Freddie Mac to increase their loan limits up to $729,750.  But only for “high cost” areas.  For places like Austin, Texas, the “confirming limit” will stay put at $417,000, which means any loan above this amount will still be considered a jumbo loan and will therefore be subject to different (stricter) underwriting guidelines and higher interest rates.

Will this economic stimulus package actually help the national housing downturn?  We’ll just have to wait and see how the markets react to the changes.

One thing has been clear, though:  lenders are continuing to tighten their underwriting requirements, making it harder to obtain a new mortgage loan.  According to a recent Fed survey of Loan Officers, 53% tightened requirements for “prime” borrowers, 72% for “subprime” borrowers, and 85% for “non-traditional” borrowers (i.e., those seeking such products as interest-only loans).  While the tightening for subprime and non-traditional borrowers comes as no surprise, it’s amazing to see how much even those with good credit scores are being impacted.

What to Look for Next Week

January Retail Sales and an appearance by Fed Chairman Ben Bernanke will highlight the economic show next week, but neither is expected to significantly impact mortgage rates.

Short-Term Rate Outlook

Stable to Slightly Higher

The real estate industry has long been susceptible to price inflation, fraud, and other unsavory practices. Making it illegal to coerce an appraiser would be a good thing, but I hope that most appraisers wouldn’t see that as a way out of talking and reviewing agent recommendations when there is an issue with an appraisal.

I’ve not had any problems with an appraiser doing that, but I’ve heard stories about appraisers not taking input. Lenders seem to be the culprit in most cases of coercion that I’ve heard of.

You can read the summary of the Federal Reserve Proposal below in the first quoted area.

Additionally, in the news recently, is an appraiser that is suing WaMu for breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander. The bank is accused of pulling business from an appraiser who refused to make the appraisals favorably to the bank. Man, o, man. That’s bad news for the bank. What do you think about inflated appraisal? Send us a comment and let us know.

Federal Reserve Proposal Addresses Appraisal Coercion
Excerpt from Appraisal Institute’s Appraiser News Online Vol. 9, No. 1, January 15, 2008

The Federal Reserve Board recently proposed prohibiting creditors and mortgage brokers from coercing real estate appraisers to misstate a home’s value on all mortgages. The announcement was part of the Fed’s December 18 proposed changes to Regulation Z (Truth in Lending), which would restrict certain practices and require certain mortgage disclosures to be provided earlier in the transaction.

…

In addition to prohibiting creditors and mortgage brokers from coercing appraisers, the Board also proposes to prohibit creditors from extending credit when creditors know or have reason to know, at or before loan consummation, that an appraiser has misstated a dwelling’s value. The regulation would apply to all consumer credit transactions secured by a consumer’s principal dwelling.

In its discussion on the topic, the Board said, “Pressuring an appraiser to overstate, or understate, the value of a consumer’s dwelling distorts the lending process and harms consumers… Inflated appraisals of homes concentrated in a neighborhood may affect other appraisals, since appraisers factor the value of comparable properties into their property valuation. For the same reason, understated appraisals may affect appraisals of neighboring properties. Thus, inflated or understated appraisals can harm consumers other than those who are party to the transaction with the inflated appraisal. Moreover, these consumers are not in a position to know of the practice or avoid it.”

The proposed regulation defines the term “appraiser” as a person who engages in the business of providing – or offering to provide – assessments of the value of dwellings.

The commentary to the proposed regulation gives examples of acts that would violate the regulation: implying to an appraiser that retention of the appraiser depends on the amount at which the appraiser values a consumer’s principal dwelling; failing to compensate an appraiser or to retain the appraiser in the future because the appraiser does not value a consumer’s principal dwelling at or above a certain amount; and conditioning an appraiser’s compensation on loan consummation.

The commentary also lists examples of acts that would not violate the regulation: requesting that an appraiser consider additional information for, provide additional information about, or correct factual errors in a valuation; obtaining multiple appraisals of a dwelling (provided that the creditor or mortgage broker selects appraisals based on reliability rather than on the value stated); withholding compensation from an appraiser for breach of contract or substandard performance of services or terminating a relationship for violation of legal or ethical standards; and taking action permitted or required by applicable federal or state statute, regulation, or agency guidance.

…

The Nation’s Housing

Appraiser’s Lawsuit Puts Lenders on Notice

By Kenneth R. Harney
Saturday, January 26, 2008; Page F01

Real estate appraisers have complained for years about demands from loan officers that they fudge and inflate numbers to allow mortgage deals to close.

Now a California appraiser has sued the country’s largest thrift institution, Washington Mutual Bank, charging that she was blacklisted for refusing to provide favorable appraised values despite declining market conditions.

The lawsuit, by Jennifer Wertz, comes just two months after the state of New York sued an appraisal management company, First American eAppraiseIT, for allegedly giving in to pressure from Washington Mutual to inflate property values for loan applications — contributing to mortgage-market losses. EAppraiseIT and LSI, a unit of Fidelity National Information Services, were also cited in Wertz’s suit as contractors to Washington Mutual.

Wertz said in her complaint that she began performing appraisals for Washington Mutual in 2001 and earned “in excess of $100,000 a year” from her work for the bank. But last May, according to the suit, a Washington Mutual manager upbraided her for describing local property values in an appraisal as “declining.” The manager “insisted that [Wertz] change her report to indicate ’stable’ conditions so that the loan could be approved.”

All the relevant data suggested otherwise, however, and Wertz refused. The manager then allegedly told Wertz that she would be banned from all further assignments from Washington Mutual if she did not cooperate. Wertz declined to do so — citing federal, state and professional rules requiring her to provide objective and accurate reports free of outside influence. According to the lawsuit, Wertz was then cut off from Washington Mutual business through the appraisal management companies.

Wertz’s lawsuit, filed in California Superior Court in Sacramento, charges breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander, among other alleged violations.

…

As Texas is a non-disclosure state, I’ve never liked Zillow. People who think Realtors do nothing, but schmooze and collect paychecks love Zillow, because they feel it empowers them to do their own home sale. In reality, since non-disclosure states do not disclose all sales prices, Zillow often gives poor data because (1) it only has sparse data to give and (2) a computer program is never going to be able to select comparable sales as well as a human who can go and physically view the property and adjust subjectively. So basically, Zillow, while it may be fun, is completely unreliable here in Texas.

But what about Zilpy? It’s a terrible name, but I thought I’d check it out. I compared the data provided by Zilpy for three apartments and condos that I know the rental rate and occupancy for in Austin to gauge the usefulness and accuracy. It was remarkably accurate for all the places that I checked. Granted, the site doesn’t appear to delineate by class of dwelling, but the ranges it gives help make it seem more accurate.

If you have a rental, check it out and let me know what you think. I’d love to hear from you.

Excerpt from Inman News.

Zilpy, the new ‘Z’ site in online real estate

Web site offers rental price estimates

Thursday, February 07, 2008

Inman News

Zilpy is like Zillow for rental properties, with rental price estimates, demographic data and heat maps based on median rental rates.

The new Web site, which launched last week and lists Zillow as a partner company, offers competition to Rentometer.com, another site that allows users to gauge rental prices in a selected area.

Zilpy.com is not a rental listings site. It is a rental research site that allows users to grab automated rental price estimates by address, city or ZIP code, and to refine searches based on type of rental property, a desired rental range, number of bedrooms and a range of square feet. One of the founders referred to the site as “the Trulia for the rental market.”

The heat maps show areas with higher and lower rental prices — red zones feature the highest median rental prices, while dark green shading indicates the lowest rental pricing.

…

Screen shots from Zilpy.com

Even though 2007 was a record breaking year and the national economy appears to have taken a hit, Austin is going gangbusters. You’ve got to know things are going well when the mainstream media says the “Austin economy spanks the competition”. Here’s to a great 2008! If you’re thinking about moving to Austin, give us a call. It would be our pleasure to help!

bizjournals.com
Austin economy spanks the competition
Thursday January 31, 3:41 pm ET
High-tech, a booming film industry and the University of Texas all helped propel Austin to the top of Forbes’ 2008 list of America’s Fastest Growing Metros.The magazine ranked Austin No. 1 among the nation’s 100 largest metropolitan areas. The list sorted cities by their anticipated gross domestic product growth between 2007 and 2012. Austin’s GMP, or the value of goods and services produced in the area, is expected to climb 32 percent over the five-year period.
Forbes credits the local boom to high-tech employers like Dell Inc. (NASDAQ: DELL – News) and IBM (NYSE: IBM – News) as well as the University of Texas, which is producing ample engineering talent. …

Forbes used GMP forecasts provided by Moody’s Economy.com. …

Published January 31, 2008 by the Austin Business Journal

What Did Interest Rates Do This Week?
** according to Freddie Mac **

30-yr Fixed – Higher
This Week:  5.68%
Last Week:  5.48%
1yr Ago:  6.34%

15-yr Fixed – Higher
This Week:  5.17%
Last Week:  4.95%
1yr Ago:  6.06%

5/1 ARM – Higher
This Week:  5.32%
Last Week:  5.13%
1yr Ago:  6.04%

Highlight of This Week’s Major Economic Reports

According to Freddie Mac, “Mortgage rates ended their four-week descent this week, with average rates on 30-year and 15-year fixed rate mortgages coming up by about 0.2%.  This increase completely erased the previous week’s decline. The movement in fixed mortgage rates was broadly consistent with the movements of Treasury bonds over the week.”

Amid continued concern over the credit market putting a squeeze on the rest of the economy, the Federal Reserve cut short-term rates for the second time in eight days.  While this bodes well for rates on such things as credit cards, this move may actually cause mortgage rates to trend higher.

What will cause mortgage rates to remain at lower levels, however, is continued economic weakness.  Job growth, which is a good indicator of economic activity, was negative in January, much to the surprise of market analysts.  There was a net loss of 17,000 jobs last month as businesses trimmed their payrolls in light of these uncertain times.  The unemployment rate is now at 4.9%.

Meanwhile, New Home Sales dropped another 4.7% in December with prices being cut 12% from November.  Many are hoping that the recent drop in mortgage rates will help to spur sales.

For some good news:  GDP estimates showed a positive 0.6% for the 4^th quarter of 2007.  While this figure is still weaker than expected, the fact it was “positive” should help to stave off the recession talks for another month.

What to Look for Next Week

Not much noteworthy activity on slate for next week, so look for stock market activity to once again drive the direction of mortgage rates.

Short-Term Rate Outlook

Stable

Tools to Help Your Buyers & Sellers

Rate Protection from Coldwell Banker Mortgage can provide that win-win situation for your clients!

Whether rates go up or down, with Pre-Purchase Rate Protection, it doesn’t matter!  Protect your buyers’ purchasing power by offering them the ability to cap their interest rate for up to 90 days at no cost while still offering a “float down” option to take advantage of possible rate improvements.

Call me to learn more!

Stay Informed:  What’s in the News

“More Strength in Texas Labor Market” from the Texas A&M Real Estate Center

The Texas economy continues to produce more jobs than the national economy, according to the latest report from the Real Estate Center at Texas A&M University.

Texas nonfarm employment rose 2.2 percent from December 2006 to December 2007 compared with the 0.9 percent annual growth rate for the United States.

The state’s seasonally adjusted unemployment rate fell from 4.7 percent in December 2006 to 4.5 percent in December 2007.

The state’s mining industry ranked first in job creation, followed by professional and business services, the leisure and hospitality industry and the financial activities industry.

All Texas metro areas except Killeen-Temple-Fort Hood had positive employment growth rates from December 2006 to December 2007. McAllen-Edinburg-Mission ranked first in job creation followed by Tyler, Austin-Round Rock, and Brownsville-Harlingen. Midland had the lowest unemployment rate, followed by Amarillo, Lubbock, Odessa and College Station-Bryan.

Marie Funston
Mortgage Advisor
Coldwell Banker Mortgage
Tel.:  (512) 691-6757
Fax:  (512) 343-1224