Bellevue Real Estate, Mortgage, and Economy 11/5/11
November 5th, 2011Here is the Bellevue Real Estate Report for November 5, 2011:
Interest
Rates Move Higher 1 Week Ago and Then Improve This Week: And it is all about Europe. If you listen to financial analysts and stock
experts you will hear moaning and groaning because, in spite of the fact that
US businesses are doing relatively well, our stock markets are not improving
due to continued concerns that Europe will not be able to orchestrate an
orderly rescue plan. Extreme measures are being considered to save their
banking and financial systems but individual autonomy in the nation states
continues to prevent consensus and responsible action. The wheels started
coming off yesterday on what was lauded as a big step forward in Europe to get
a grip on Greece and other EU countries that are similarly facing potential
defaults on their sovereign debt; Wednesday morning the wheels fell off
completely—–at least at that moment. What is happening today is no
assurance the same will be the case tomorrow based on the last two years out of
the region. A huge shocker to financial markets in Europe and here in the US;
in a surprising move no one saw coming, Greek Prime Minister announced he would
not continue to fight the issues in the country and let citizens decide whether
or not to go along with the austerity programs set out by EU officials. He is
calling for a voter referendum and let citizens decide whether they want
austerity or default that will eventually end Greece’s membership in the EU.
Greece’s
proposed referendum poses a threat to the region’s financial stability, Fitch
Ratings said. No one saw this coming; letting voters decide, but the voting
isn’t likely until early next year. Now this morning the Greek PM is
backtracking from a referendum but confidence and certainty is waning.
Industry News
State of the Economy:
Trick or treat? Last week, there was big news out
of Europe, as an agreement was reached to help keep Greece from going into default. But
will this deal mean a frightful time is ahead for Bonds and home loan rates?
Read on for more details.
On Thursday, the world was
cheering on the news that a deal in Europe was
reached, with private banks and other holders of Greek debt accepting a 50%
haircut on their principal investment. Once the write down takes place, Banks
who are holding Greek debt will have to recapitalize themselves by year-end,
and government support will be available to fill voids that private money won’t
fill. In addition, the Economic Financial Stability Facility (EFSF) rescue
fund, which currently has $443 Billion in holdings, will be expanded and
leveraged to $1 Trillion Euros or $1.4 Trillion US Dollars.
So the agreement is together…but like any effective plan, it now
has to be put into action. And as this rolls out, the financial markets will be
watching every step. When the sentiment is positive, like it was the day the
plan was announced, Stock markets could benefit as investors would seek to take
advantage of gains.
In fact, the Stock markets were set to have their biggest monthly
gains on record as October came to an end. The closely watched S&P 500
Index is up 13.5% for the largest increase since October of 1974, while the Dow
Jones advance of 12% is the biggest gain since January of 1987. Optimism
surrounding the European crisis, positive economic data and better than
expected earnings reports had fueled the rally. Then came the announcements
from Greece
mentioned above and the stock markets lost big. Most analysts still believe the
European crisis will be around for a while and our interest rates will stay low
as a result.
MF
Global filed for bankruptcy yesterday: Ex New Jersey Governor Corzine ran MF Global
after leaving office. It is said that he made highly leveraged bets with
European government securities. Those bets went bad and a 200 year old company
is now no more. There are also accounting irregularities, according to some
sources, that show the firm was mingling client funds with the companies
trading accounts. The NY Fed revoked its primary dealer status, overnight there
has been talk that custodial funds (money in accounts of customers) possibly
$100 mil that is not accounted for.
Sept Consumer Price Index increased 0.3%
overall and when food and energy are removed up 0.1%; yr/yr CPI +3.9%, the core
yr/yr up 2.0%. Yesterday’s PPI was stronger than expected increasing concerns that
inflation may be increasing, today the CPI takes a little worry away but not totally.
Real Estate Miscellaneous Stats:
Obama Administration Proposes Changes to
HARP: The original Home Affordable Refinance Program was designed to
help millions of homeowners lower their interest rates and help lower
foreclosures. The program helped far fewer people than was originally hoped
because of the degree of equity loss in many markets. There will be no caps on
how far underwater a homeowner is to be eligible under the new guidelines where
there was a 125% limit before. The Federal Housing Finance Agency is
coordinating the changes with Fannie Mae and Freddy Mac. Only loans sold to
those agencies by March 31,2009 are eligible. This leaves many jumbo borrowers
without options except committing large amounts of cash to a refinance. The new
guidelines are expected to be released by November 15th and should
help homeowners in the hardest hit areas of the country such as Florida, California, Nevada and Arizona.
Here are a few highlights:
·
Appraisals can be waived in some cases
·
Fees are being reduced for higher loan to value loans
·
No fees for borrowers going in to shorter term loans such as 20
and 15 year fixed.
·
Relaxed ‘reps and warrants’ for lenders will make them more
willing to offer these loans
·
Some limitations apply so check with us regarding your specific
situation
King County Home Values Take Surprising Drop: The
Seattle Times is reporting a 15% year over year in Median Home Values last
month. This is a new post-boom low at $320,000.00. Analysts are looking for
explanations for this as the trends were not indicating this would happen. Glenn Crellin,
director of the Washington Center for Real Estate Research at Washington State
University, said he
expects prices will continue to slip for another year. “There’s little
pressure on buyers to be active, especially with interest rates not expected to
rise for some time,” he said. Mortgage rates have been at historic lows —
even dipping below 4 percent for a 30-year term — for much of this year. Sales
Volumes are up 14% from the same time last year and it could just be that most
of those sales are on the lower end of the price spectrum. Many analysts do not
see much significance in the low values. Short sales and bank owned sales made
up 31% of all sales in the county and that continues to put pressure on values.
Brokers point out that many Eastside sales were distressed properties. Others
point out that mixing King
County regional numbers
gives a skewed view. Sales last month in South King County were much higher than the more
central areas. That area has had the biggest price drops. If you look at the
numbers for Bellevue/ Seattle the price drops are not as
significant. See full article here: http://seattletimes.nwsource.com/html/businesstechnology/2016682452_homesales04.html
Loan Program Of The Week. Government Loan
Programs: The most flexible loan programs available concerning
qualifications are FHA and VA loans. These loan programs allow for much lower
credit scores and more negative history. There are limitations on many credit
issues such as foreclosure and bankruptcy that can be explained with a
consultation. There are many situations where borrower circumstances can be
explained and compensated for with these loans where a conventional loan will
not accommodate them. One of the most common is working around bankruptcy when
the circumstances that caused the issue were beyond the borrower’s control,
were temporary in nature, and no longer exist. This is subject to underwriter
review and approval. Guild is unique in that they will allow a credit score
down to 600 for these programs. Particular credit items on a report can be a
problem so complete credit history is subject to review. Down payment is also
favorable with FHA requiring 3.5% down up to certain loan amounts and VA can be
$0.00 down based on eligibility. Call with questions about these programs.
