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Tuesday, January 30, 2007
Wednesday, January 17, 2007
Mortgage industry pegs 30-year rate at 6.5% by year-end
The Mortgage Bankers Association expects the interest rate on a 30-year fixed-rate mortgage to jump from 6.2 percent to 6.5 percent by the end of the third quarter, as investors lose hope that the Federal Reserve will slash short-term rates any time soon.
In a long-term forecast released this week, MBA Chief Economist Doug Duncan predicted existing-home sales will decline by about 7 percent this year compared to 2006, and that sales of new homes will decline by about 8 percent. Sales in both categories are projected to rebound in 2008 by about 3 percent and 1 percent, respectively, in 2009.
Duncan expects existing-home price appreciation to slow "significantly" over the next three years, and that median prices should remain relatively flat for new and existing homes. Price gains for both types of housing are expected to be limited to about 2 percent in 2008 and 2009.
With interest rates up and home sales down, total residential mortgage production in 2007 is projected to be $2.39 trillion, a 5 percent decline from an estimated $2.51 trillion in 2006. The Mortgage Bankers Association projects total mortgage originations will decline an additional 4 percent to $2.29 trillion in 2008 and drop another 6 percent to $2.15 trillion in 2009.
Residential mortgage originations for purchase loans could reach $1.33 trillion in 2007 and remain flat in 2008 before edging up slightly in 2009. Residential refinance loans are projected to total $1.06 trillion in 2007 before declining to $957 billion in 2008 and hitting $800 billion in 2009.
Duncan sees the unemployment rate increasing from 4.5 percent to 4.9 percent by the end of the year, but envisions real GDP growth will pick up to an average of 3 percent in 2007, 3.3 percent in 2008 and 3.4 percent in 2009.
The MBA's top economist expects the Fed to hold the short-term federal funds interest rate at 5.25 percent. With financial markets lowering their expectations of an easing in the federal funds rate in the first half of this year, long-term interest rates are on the rise, he said.
Duncan warned that the housing sector could deteriorate more than projected, with sharper declines in single-family housing starts and home sales. If the core inflation remains high, the Fed might be reluctant to bring the federal funds rate down, increasing the risk of recession.
Continued deterioration of the housing sector "could lead to a marked slowdown in consumer spending growth and threaten an economic expansion," Duncan said in a prepared statement. "If so, the Fed could start easing to prevent a recession. However, if core inflation remains elevated or even edges higher, the Fed would likely remain on the sideline, increasing recession risks. We believe the probability for this scenario to be small."
In a long-term forecast released this week, MBA Chief Economist Doug Duncan predicted existing-home sales will decline by about 7 percent this year compared to 2006, and that sales of new homes will decline by about 8 percent. Sales in both categories are projected to rebound in 2008 by about 3 percent and 1 percent, respectively, in 2009.
Duncan expects existing-home price appreciation to slow "significantly" over the next three years, and that median prices should remain relatively flat for new and existing homes. Price gains for both types of housing are expected to be limited to about 2 percent in 2008 and 2009.
With interest rates up and home sales down, total residential mortgage production in 2007 is projected to be $2.39 trillion, a 5 percent decline from an estimated $2.51 trillion in 2006. The Mortgage Bankers Association projects total mortgage originations will decline an additional 4 percent to $2.29 trillion in 2008 and drop another 6 percent to $2.15 trillion in 2009.
Residential mortgage originations for purchase loans could reach $1.33 trillion in 2007 and remain flat in 2008 before edging up slightly in 2009. Residential refinance loans are projected to total $1.06 trillion in 2007 before declining to $957 billion in 2008 and hitting $800 billion in 2009.
Duncan sees the unemployment rate increasing from 4.5 percent to 4.9 percent by the end of the year, but envisions real GDP growth will pick up to an average of 3 percent in 2007, 3.3 percent in 2008 and 3.4 percent in 2009.
The MBA's top economist expects the Fed to hold the short-term federal funds interest rate at 5.25 percent. With financial markets lowering their expectations of an easing in the federal funds rate in the first half of this year, long-term interest rates are on the rise, he said.
Duncan warned that the housing sector could deteriorate more than projected, with sharper declines in single-family housing starts and home sales. If the core inflation remains high, the Fed might be reluctant to bring the federal funds rate down, increasing the risk of recession.
Continued deterioration of the housing sector "could lead to a marked slowdown in consumer spending growth and threaten an economic expansion," Duncan said in a prepared statement. "If so, the Fed could start easing to prevent a recession. However, if core inflation remains elevated or even edges higher, the Fed would likely remain on the sideline, increasing recession risks. We believe the probability for this scenario to be small."
Friday, January 12, 2007
How not to run out of hot water
By Paul Bianchina
Inman News
Running out of hot water before you finish your morning shower is one of life's little irritants. If you have an electric water heater, the answer may be as simple as adjusting a thermostat or replacing a heating element.
Your first task is to check the settings on the thermostats, of which there are two on most water heaters. First, check your electrical panel and locate and shut the circuit breaker that controls the water heater – you're dealing with 240 volts as soon as you open up the water heater, so DON'T TRY AND DO THIS WITH THE POWER ON. There is, however, no need to shut off the water for this first step.
Remove the two access panel covers on the front of the water heater, which are held in place by one or two screws each. Set the panel covers and screws aside and, if present, remove the small insulation blankets inside the access areas. This will expose the thermostats, which are simply two small dials marked in degrees Fahrenheit, with a small adjustable pointer.
First, check to see what number the pointers indicate, and that both pointers are set the same. For the typical residential water heater supplying hot water for bathing, laundry and a dishwasher, the thermostats should be set between 130 and 150 degrees, depending on how much hot water you use and what your personal preferences are. At settings much below 130, you'll have a hard time maintaining a large flow of hot water, and this may be below the minimum temperature recommended by your dishwasher manufacturer. On the other hand, settings above 150 will waste electricity and increase the risk of scalding, especially for small children.
To set the thermostats, simply use a screwdriver to move the pointers until they point directly at the desired temperature. Be sure that both thermostats are set to the same temperature.
To change a water heater element, you first need to drain the water out of the tank. After shutting the power, close the water inlet valve, which is typically located above the water heater on the cold water side (the lines are marked with C and H where they enter the tank). Connect a garden hose to the drain valve on the bottom of the water heater, and route the hose to a convenient location before opening the valve. To help the flow of water coming out of the hose, open a hot water faucet near the water heater, or loosen one of the flexible water lines where it enters the water heater.
When the tank is drained, close the drain valve and remove the access panel covers as described above. Near each thermostat, you will see a fitting that resembles a large bolt head with wires attached to it. Make a note of how the wires are attached, then disconnect them. Using a special water heater element wrench, which looks somewhat like a socket wrench, unscrew the fitting and remove the element. Element wrenches are available wherever the elements are sold.
Water heater elements are rated by their wattage, and are sized to specific tanks. Your best bet is to take the old element to a home center or plumbing supply retailer and have them match you up with a new one. For best results and longest life, it's best to replace both elements at the same time.
To replace the elements, simply reverse the above procedure. Be sure that any gaskets or washers are in place, then screw the element into the tank and tighten it securely. Reconnect the wires in the same configuration as before, then replace the access covers. Make sure the drain valve is shut and that you've retightened any pipes you loosened, then open the inlet valve to refill the tank. Leave a hot water faucet open near the water heater to allow air to purge out of the tank as it fills. Once the tank is full and water is coming out of the faucet, turn the power back on. NEVER turn the power on when the tank is empty or only partially full – that's a sure way to burn out the elements.
Remember, if you're uncomfortable with any of the plumbing or electrical connections, contact a qualified, licensed plumber or electrician.
Inman News
Running out of hot water before you finish your morning shower is one of life's little irritants. If you have an electric water heater, the answer may be as simple as adjusting a thermostat or replacing a heating element.
Your first task is to check the settings on the thermostats, of which there are two on most water heaters. First, check your electrical panel and locate and shut the circuit breaker that controls the water heater – you're dealing with 240 volts as soon as you open up the water heater, so DON'T TRY AND DO THIS WITH THE POWER ON. There is, however, no need to shut off the water for this first step.
Remove the two access panel covers on the front of the water heater, which are held in place by one or two screws each. Set the panel covers and screws aside and, if present, remove the small insulation blankets inside the access areas. This will expose the thermostats, which are simply two small dials marked in degrees Fahrenheit, with a small adjustable pointer.
First, check to see what number the pointers indicate, and that both pointers are set the same. For the typical residential water heater supplying hot water for bathing, laundry and a dishwasher, the thermostats should be set between 130 and 150 degrees, depending on how much hot water you use and what your personal preferences are. At settings much below 130, you'll have a hard time maintaining a large flow of hot water, and this may be below the minimum temperature recommended by your dishwasher manufacturer. On the other hand, settings above 150 will waste electricity and increase the risk of scalding, especially for small children.
To set the thermostats, simply use a screwdriver to move the pointers until they point directly at the desired temperature. Be sure that both thermostats are set to the same temperature.
To change a water heater element, you first need to drain the water out of the tank. After shutting the power, close the water inlet valve, which is typically located above the water heater on the cold water side (the lines are marked with C and H where they enter the tank). Connect a garden hose to the drain valve on the bottom of the water heater, and route the hose to a convenient location before opening the valve. To help the flow of water coming out of the hose, open a hot water faucet near the water heater, or loosen one of the flexible water lines where it enters the water heater.
When the tank is drained, close the drain valve and remove the access panel covers as described above. Near each thermostat, you will see a fitting that resembles a large bolt head with wires attached to it. Make a note of how the wires are attached, then disconnect them. Using a special water heater element wrench, which looks somewhat like a socket wrench, unscrew the fitting and remove the element. Element wrenches are available wherever the elements are sold.
Water heater elements are rated by their wattage, and are sized to specific tanks. Your best bet is to take the old element to a home center or plumbing supply retailer and have them match you up with a new one. For best results and longest life, it's best to replace both elements at the same time.
To replace the elements, simply reverse the above procedure. Be sure that any gaskets or washers are in place, then screw the element into the tank and tighten it securely. Reconnect the wires in the same configuration as before, then replace the access covers. Make sure the drain valve is shut and that you've retightened any pipes you loosened, then open the inlet valve to refill the tank. Leave a hot water faucet open near the water heater to allow air to purge out of the tank as it fills. Once the tank is full and water is coming out of the faucet, turn the power back on. NEVER turn the power on when the tank is empty or only partially full – that's a sure way to burn out the elements.
Remember, if you're uncomfortable with any of the plumbing or electrical connections, contact a qualified, licensed plumber or electrician.
Thursday, January 11, 2007
January Market Flash
LOOKS LIKE UP TO ME
Intro: If you compare the market realities of today with what they were last fall and last summer, you will see that what matters is motion, fluidity, interaction and inter-reaction. What the numbers are saying and what the trends are implying may be very different. Read on.
Statistics:
Statewide: The median resale price of a single-family detached home in California for November was $555,290, an increase of 0.7% from October and 1.4% over November 2005. Unsold resale inventory in November was sufficient for 7.4 months, up from 3.6 months (says CAR) a year earlier; median number of days till sale was 70, an increase from last year’s 39.
Bay Area: November median price, at $738,900, is up half a percent for the month and 2.2% from the November 2005 figure; a decline in activity of 11% for the month and 18% for the year – but remember those figures are relative to the unusually strong November of last year. The Santa Clara County median price of $775,000 is flat for the month and up 4% for the year. Santa Cruz County at $719,000 is down almost 5% for the month and about 9% for the year. San Benito County, with a $555,000 median, has declined 7% for the year. Monterey County and region’s medians have declined 3% for the year, which is within the scope of seasonal correction.
Sales activity is a story with some bright spots. Santa Cruz County is up 18% for the month and 9% for the year, so improved affordability has certainly counted for something. Monterey region year-over-year is down 12% in November, but it was down 24% in October and 48% in September, so do not let the general fact of a decline obscure a relative improvement in the situation. Monterey County year-over-year is down 26%, but that is only half the decline of September’s 52%. Northern California as a whole is down 9% in November compared to 14% in October, 26% in September, 31% in August. Most other Northern California regions are holding roughly steady. The numbers and the trends are telling...not opposite stories, but an equivocal story.
Sacramento/Capitol Region: Warming perceptibly. The market in resale properties, which seemed impaired last summer, is mending slowly. Looking at the list of communities and neighborhoods in the region, we find more than 25 whose medians have improved over last year. This market will take some time to bounce back, but we are betting it will not take long. Sacramento has lots of reasons to grow.
Interest Rates*: Last year we wrote “Core rates have been managed in masterly fashion for the last year and a half to two years…Most rates will probably bounce between high fives and low sixes for a while, but adjustable rates are now almost identical to the lower fixed rates – which speaks to a lack of elasticity in the system.” Situation today is much the same, except that rates are paddling around in the high fives, with only non-conforming 30-year fixed barely poking above six. 5/1 ARM is at 5.55% compared to conforming 30-year fixed at 5.72%. So far as rates are concerned, the bedrock conforming 30-year fixed can still be called “substantially under 6%” and that is cause for applause. Conforming 15-year fixed at 5.48% is an increasing favorite with baby boomers who want to pay off their houses while they have earned income to do it. Overall, rates are edging up slowly – we are sensing the complex interaction of a whole bunch of contradictory pressures – but they remain broadly attractive. If the Fed cuts rates in January or February, as many experts foresee, mortgage rates could stop inching up and start inching down.
Inventory: Mean time till sale is at 70 days and what more do you really need to know? You will have an incredible selection of compelling properties. We cannot imagine worrying about inventory at all.
News Media: Overall, reporting seems to be fair and highlighting reasons for optimism, such as normal seasonal adjustments, increasing sales and plentiful inventory for home buyers. The consensus seems to be that after the tremendous surge of increased home prices and sales a few years back, the market is now balancing out. For 2006 as a whole, the news media was surprisingly evenhanded in their take on real estate and seemed to avoid their once typical “gloom and doom” and the “bubble is about to burst” stories of recent years. The news media are grasping the fact that perceptive reporting on the market can even help to direct it.
Overall Assessment: A prospect’s attitude toward this market will depend on circumstance, but for many people, this might be the best time to buy in a decade. Long inventory means generous selection. Almost any mortgage you might want is still under 6%. Affordability is recovering as sellers price to sell. As buyers discover the interlocking advantages of this market, and if – that is, when – more buyers with more dollars chase fewer properties, the balance will tip slowly toward the seller. The message: The sooner you buy, the more chance you will give this market to work in your favor.
Intro: If you compare the market realities of today with what they were last fall and last summer, you will see that what matters is motion, fluidity, interaction and inter-reaction. What the numbers are saying and what the trends are implying may be very different. Read on.
Statistics:
Statewide: The median resale price of a single-family detached home in California for November was $555,290, an increase of 0.7% from October and 1.4% over November 2005. Unsold resale inventory in November was sufficient for 7.4 months, up from 3.6 months (says CAR) a year earlier; median number of days till sale was 70, an increase from last year’s 39.
Bay Area: November median price, at $738,900, is up half a percent for the month and 2.2% from the November 2005 figure; a decline in activity of 11% for the month and 18% for the year – but remember those figures are relative to the unusually strong November of last year. The Santa Clara County median price of $775,000 is flat for the month and up 4% for the year. Santa Cruz County at $719,000 is down almost 5% for the month and about 9% for the year. San Benito County, with a $555,000 median, has declined 7% for the year. Monterey County and region’s medians have declined 3% for the year, which is within the scope of seasonal correction.
Sales activity is a story with some bright spots. Santa Cruz County is up 18% for the month and 9% for the year, so improved affordability has certainly counted for something. Monterey region year-over-year is down 12% in November, but it was down 24% in October and 48% in September, so do not let the general fact of a decline obscure a relative improvement in the situation. Monterey County year-over-year is down 26%, but that is only half the decline of September’s 52%. Northern California as a whole is down 9% in November compared to 14% in October, 26% in September, 31% in August. Most other Northern California regions are holding roughly steady. The numbers and the trends are telling...not opposite stories, but an equivocal story.
Sacramento/Capitol Region: Warming perceptibly. The market in resale properties, which seemed impaired last summer, is mending slowly. Looking at the list of communities and neighborhoods in the region, we find more than 25 whose medians have improved over last year. This market will take some time to bounce back, but we are betting it will not take long. Sacramento has lots of reasons to grow.
Interest Rates*: Last year we wrote “Core rates have been managed in masterly fashion for the last year and a half to two years…Most rates will probably bounce between high fives and low sixes for a while, but adjustable rates are now almost identical to the lower fixed rates – which speaks to a lack of elasticity in the system.” Situation today is much the same, except that rates are paddling around in the high fives, with only non-conforming 30-year fixed barely poking above six. 5/1 ARM is at 5.55% compared to conforming 30-year fixed at 5.72%. So far as rates are concerned, the bedrock conforming 30-year fixed can still be called “substantially under 6%” and that is cause for applause. Conforming 15-year fixed at 5.48% is an increasing favorite with baby boomers who want to pay off their houses while they have earned income to do it. Overall, rates are edging up slowly – we are sensing the complex interaction of a whole bunch of contradictory pressures – but they remain broadly attractive. If the Fed cuts rates in January or February, as many experts foresee, mortgage rates could stop inching up and start inching down.
Inventory: Mean time till sale is at 70 days and what more do you really need to know? You will have an incredible selection of compelling properties. We cannot imagine worrying about inventory at all.
News Media: Overall, reporting seems to be fair and highlighting reasons for optimism, such as normal seasonal adjustments, increasing sales and plentiful inventory for home buyers. The consensus seems to be that after the tremendous surge of increased home prices and sales a few years back, the market is now balancing out. For 2006 as a whole, the news media was surprisingly evenhanded in their take on real estate and seemed to avoid their once typical “gloom and doom” and the “bubble is about to burst” stories of recent years. The news media are grasping the fact that perceptive reporting on the market can even help to direct it.
Overall Assessment: A prospect’s attitude toward this market will depend on circumstance, but for many people, this might be the best time to buy in a decade. Long inventory means generous selection. Almost any mortgage you might want is still under 6%. Affordability is recovering as sellers price to sell. As buyers discover the interlocking advantages of this market, and if – that is, when – more buyers with more dollars chase fewer properties, the balance will tip slowly toward the seller. The message: The sooner you buy, the more chance you will give this market to work in your favor.
Wednesday, January 10, 2007
Home Sales To Rise Gradually Into 2008
After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turn around by summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Annual totals for existing-home sales in 2007 will be comparable to 2006, says David Lereah, NAR’s chief economist.
“Keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,” Lereah said. “We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals.”
The good news, he says, is that a steady improvement in sales will support price appreciation moving forward.
2006 Sales Third-Highest on Record
Existing-home sales for 2006 are expected to come in at 6.50 million, the third highest on record, with a total of 6.42 million seen in 2007. New-home sales in 2006 should tally 1.06 million, the fourth highest on record, with 957,000 projected this year.
Total housing starts for 2006 are likely to be 1.81 million units, with 1.51 million forecast in 2007, which would be the lowest level in a decade. Builders are pulling back on new construction to support prices of remaining inventory.
The 30-year fixed-rate mortgage will probably rise to 6.7 percent by the fourth quarter of 2007. Last week, Freddie Mac reported the 30-year fixed rate at 6.18 percent, far below earlier consensus forecasts.
“The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers,” Lereah says.
The national median existing-home price for all of 2006 is expected to rise 1.1 percent to $222,100, and then gain 1.5 percent this year to $225,300. The median new-home price, after rising only 0.3 percent to $241,600 in 2006, is projected to grow 3.0 percent in 2007 to $248,900.
Soft Landing for Housing
“With all the wild projections by academics, Wall Street analysts, and others in the media, it appears that much of the housing sector is experiencing a soft landing,” Lereah says. “Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you’re in it for the long haul, housing is a sound investment.”
The unemployment rate is likely to average 4.8 percent in 2007, following a rate of 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.2 percent 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is seen at 2.5 percent in 2007, compared with 3.3 percent last year.
Inflation-adjusted disposable personal income should grow 3.4 percent this year, following a rise of 2.7 percent in 2006.
Annual totals for existing-home sales in 2007 will be comparable to 2006, says David Lereah, NAR’s chief economist.
“Keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,” Lereah said. “We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals.”
The good news, he says, is that a steady improvement in sales will support price appreciation moving forward.
2006 Sales Third-Highest on Record
Existing-home sales for 2006 are expected to come in at 6.50 million, the third highest on record, with a total of 6.42 million seen in 2007. New-home sales in 2006 should tally 1.06 million, the fourth highest on record, with 957,000 projected this year.
Total housing starts for 2006 are likely to be 1.81 million units, with 1.51 million forecast in 2007, which would be the lowest level in a decade. Builders are pulling back on new construction to support prices of remaining inventory.
The 30-year fixed-rate mortgage will probably rise to 6.7 percent by the fourth quarter of 2007. Last week, Freddie Mac reported the 30-year fixed rate at 6.18 percent, far below earlier consensus forecasts.
“The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers,” Lereah says.
The national median existing-home price for all of 2006 is expected to rise 1.1 percent to $222,100, and then gain 1.5 percent this year to $225,300. The median new-home price, after rising only 0.3 percent to $241,600 in 2006, is projected to grow 3.0 percent in 2007 to $248,900.
Soft Landing for Housing
“With all the wild projections by academics, Wall Street analysts, and others in the media, it appears that much of the housing sector is experiencing a soft landing,” Lereah says. “Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you’re in it for the long haul, housing is a sound investment.”
The unemployment rate is likely to average 4.8 percent in 2007, following a rate of 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.2 percent 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is seen at 2.5 percent in 2007, compared with 3.3 percent last year.
Inflation-adjusted disposable personal income should grow 3.4 percent this year, following a rise of 2.7 percent in 2006.
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