By Linda Stern | May 5, 2010

Housing indicators all are pointing to a recovery in the housing market, but buyers shouldn’t have to worry about massive bidding wars breaking out anytime soon. The combination of relatively low mortgage rates, still sticky real estate prices, and a hidden inventory of homes not yet on the market could make the rest of this year an opportune time to buy a home. On Tuesday, the National Association of Realtors reported higher than expected sales in March, but simultaneously revised their sales predictions down for the rest of the year. The group now expects that bigger boost in home sales to wait until 2011.

Home sales rose 5.3 percent in March, beating analysts expectations significantly.  Earlier, the Commerce Department had reported that new home sales, which make up a small percentage of the entire housing market, had surged 27 percent from February to March, and were up 23 percent from a year ago. And in March, the median existing single family home cost $170,700, up from February’s $163,900. But prices are still well below last summer’s levels, when the median home cost $181,900.

Of course, that $8,000 homebuyers tax credit, which expired last week, propelled those March sales, particularly after a bad-weather February. (Buyers who signed contracts by April 30 have until June 30 to close on their deal to qualify for the credit.) “In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” said Lawrence Yun, chief economist of the National Association of Realtors. His group now expects existing home sales to be up 4.3 percent in 2010 and 5.1 percent in 2011. A month ago, they had expected 2010 sales to be up 6.5 percent and 2011 sales to be up 3.7 percent.

This year, the early signs of recovery can be expected to bring many more homes to market, keeping prices from leaping. At the same time, the continued weakness in the economy is keeping mortgage interest rates near all-time lows.

The bottom line for buyers? More choices, cheap mortgages, and the rest of the year to take your time shopping for the just-right house. And here’s a bonus: That federal homebuyer’s credit might have expired, but some places — Washington, D.C. and the whole state of California, for starters — offer their own credits for homebuyers. Shop carefully and strategically, and you can still get paid to buy that home.

Photo courtesy of thetruthaboutmortgage.com

Another classic Yogi Berra-ism is, “I never said most of the things I said.” Luckily, the Fed can’t make the same claim. This coming Tuesday, the “Meeting Minutes” or open commentary of the Fed’s last monetary policy meeting will be released to the public. If there are inflammatory comments, the market could respond quickly.

Remember, when Bond prices move higher, home loan rates move lower. And as you can see in the chart below, Bonds have rebounded higher off of their key 50-day moving average support level, and are moving back toward the upper portion of their current trading range. This means if Bond prices continue to move toward the upper boundary of the range, we could see home loan rates improve slightly.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Apr 04, 2008)

Here we go again…another action packed week in store, with the main event being Friday’s monthly official Jobs Report. This report is always of high interest, as it gives a good read on the health of the economy. Boiled down simply — if businesses are hiring, it means their outlook is good for the future growth of their business and the economy overall. Additionally, the more employed workers there are, the more dollars being earned that can be used to buy goods and services - also good for keeping the economy thriving.But the headline number often comes with “revisions” of past numbers — which is often the wildcard within the report. Some past revisions have actually added more jobs to the count than the current month’s number in total. And for added excitement, in advance of Friday’s official Jobs Report, gigantic payroll company ADP will release their own count on job growth on Wednesday. And while the numbers are not “official” and are sometimes seen as unreliable — the markets won’t be able to help but take notice of their findings, and may react to their release.Bottom line — volatility remains in vogue. The chart below shows how Bonds improved significantly over the past week, helping home loan rates improve as well. But remember — another Fed Cut is likely in the cards, just a few short weeks away. As we’ve discussed in the past, a Fed Rate Cut can often result in a move higher for home loan rates, as a Fed Rate Cut often spurs on spending and therefore inflation, the arch-enemy of Bonds and home loan rates. So while Bonds and home loan rates have seen nice improvement of late, they are heading towards both a technical “ceiling of resistance”, as well as a March 18th Fed meeting that could cause rates to worsen. If you - or one of your friends, family members, neighbors or coworkers - have been considering a refinance or purchase, feel free to reach out to me to discuss taking advantage of current low rates.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Feb 29, 2008)

 Max Jarman

The Arizona Republic

Feb. 9, 2008 10:24 PM

For Zonies with serious San Diego addictions, there could be an upside to falling real-estate prices.

 

A condo-market meltdown has put the dream of owning a piece of downtown San Diego within the reach of more Valley residents.

 

Tightening credit and pain caused by rising payments on subprime loans have put the brakes on new-condo sales, sending prices plummeting and strapped buyers running for the exits. 

 

While still lofty, prices for some units are now more than 30 percent below previous highs and still falling.

 

A new 725-square-foot “bank-owned” studio, two blocks from the San Diego Padres’ ballpark, is listed at $189,900, down from $289,900 at the end of September.

 

“Prices are at least starting to make sense,” said Stanley Paul Cook, a former Phoenix resident who is now a San Diego real-estate consultant.

 

He noted that real-estate speculation over the past few years pushed average San Diego home prices near $700,000, making it one of the nation’s most expensive housing markets.

 

 

 

But the deals probably won’t last. Construction of new condos has dramatically slowed, and when the existing units are sold, prices are expected to creep up. After all, it is San Diego, still one of the country’s most desirable places to live.

 

Falling mortgage rates and a possible increase in the size of loans that can be sold to government-backed agencies also could help jump-start the stalled market. And there is increasing interest from foreign buyers who get an additional discount due to the weak dollar.

 

But for now, terms like “short sale” and “lender-owned” have become the bywords of the real-estate market downtown, along with “desperate” and “make offer.”

 

Lockboxes for real-estate agents cover railings outside buildings. Inside, residents come home to find foreclosure notices on their neighbors’ doors.

 

Tiny ‘treasures’

 

The building boom, spurred by an aggressive downtown redevelopment effort and the construction of the Padres’ Petco Park, brought thousands of new condominium units to downtown San Diego in the past few years.

 

Real-estate speculators fueled the frenzy, flipping (selling, often before taking occupancy) properties from building to building while creating an artificial demand that sent prices through the roof. “The market was so good and prices were going up so fast that we were oblivious to any kind of a peak,” said Ken Baer, an agent with Willis Allen Real Estate in San Diego. “We knew things were high but thought they would keep going up.”

 

Unit 211 in Discovery at Cortez Hill, for example, sold in 2002 for $409,000 and in 2004 for $699,000. The unit sold to a Phoenix couple in December for $470,000.

 

Downtown, there are more than 1,000 condominiums on the market in a roughly 125-block area. That is up from 700 last year and 500 in 2005.

 

Of the 1,000 units, about 400 are in new buildings that are just being completed.

 

Most of the others have been built within the past few years, and many, bought by speculators, have never been lived in.

 

They are generally small. One-bedroom and studio units, some under 500 square feet, make up the largest category of unsold condos on the market.

 

“An entry-level condo that sold for $400,000 a year ago is practically impossible to sell at that price in this market,” said San Diego real- estate agent Mark Mills. As a result, prices are dropping fast for the small condos, and many are landing in foreclosure.

 

Some frustrated owners, now struggling to sell their properties, blame the developers for building so many small units.

 

But with the high cost of land and construction, Mills noted the tiny condos were the only way some developers could make their projects make economic sense.

 

The Centre City Development Corp., a non-profit agency that is spearheading the redevelopment of downtown San Diego, reported that the agency has assisted in the development of 7,200 condominium units in more than 50 projects downtown since 2001.

 

That has helped push the downtown population to 30,000 from about 10,000 at the start of 2000. Another 60,000 are forecast to move downtown, bringing the population to 90,000 by 2030.

 

“You can’t beat it. Everything is close by,” said Gary Smith, a longtime downtown resident and president of the Downtown San Diego Residents Group. “You drive to the golf course on weekends but walk to everything else.”

 

Although new construction has fallen off dramatically, more than 1,300 units are expected to be completed in the next two years. Thousands more have been approved and are waiting to be built.

 

Arizonans’ views

 

Susan and Michael Markowitz of Scottsdale spent three years studying the downtown San Diego market before buying a bay-view condo in April.

 

“Our timing wasn’t the greatest, but we weren’t looking to make money and couldn’t be happier,” Michael Markowitz said.

 

On his last visit, he walked to his condo from the airport.

 

“It took about 40 minutes, and it was a beautiful walk,” he said. “I never imagined it was even possible to walk home from an airport.”

 

Scottsdale real-estate agent Bob Sutton has owned a second home in San Diego since 1997.

 

“It was a great way to experience the whole Southern California lifestyle thing without having to pick up and move,” he said.

 

Sutton started out with a $73,000 condominium in Pacific Beach and moved up to a downtown high-rise four years ago. He bought another unit as an investment at the peak of the market and has been trying to sell the one-bedroom, 800-square-foot unit since. He’s hoping to break even or take a small loss on the property.

 

“It hasn’t turned out to be such a great investment,” he said.

 

Converted to hotels

 

While some condo projects are being abandoned or put on hold, others are being reinvented as hotels, apartment houses and office buildings.

 

“Before, they were all condominiums,” said Sherm Harmer, chairman of the Downtown Residential Marketing Alliance, which promotes downtown housing. “Now, it’s a mix.”

 

The Centre City Development Corp. plans to use the lull in condo construction to catch up on infrastructure improvements. That includes the development of 10 new parks, a new public library and waterfront improvements, among other projects.

 

Upside down

 

The downtown condo market peaked in late 2006 when sales slowed and prices started to fall.

 

“Everything went into the crapper the same time I bought this place,” Vern Scholl said of his 1,550-square-foot penthouse in the Park Place complex downtown. Scholl paid $1.9 million for the unit in 2006 and had been trying to sell it ever since. He originally asked $2.3 million but was trying to negotiate a short sale for $1.65 million prior to its sale for $1.5 million at a January foreclosure sale.

 

“What do you do when you owe more than it’s worth?” he said.

 

Lew Breeze, a number cruncher and real-estate agent, estimates that there were 20 foreclosure properties on the market a year ago and now there are more than 100. There are even more short-sale deals.

 

A short sale occurs when a lender agrees to take a loss on the sale of a property in order to avoid the foreclosure process and the possibility of a greater loss.

 

Short sales also allow owners to get out from under properties they can’t afford without incurring the stigma of foreclosure.

 

An Aqua Vista penthouse that sold for $2.1 million in 2004 is now on the market as a short sale for $1.2 million.

 

Turnaround ahead

 

A slowdown in new construction eventually is expected to lead to a short supply, particularly if a ramp-up in new construction lags behind the falling supply of units.

 

Baer added that foreign investors, particularly from Canada, are beginning to snap up the units, gaining deeper discounts with the declining value of the dollar.

 

He believes there is also considerable pent-up demand out there from people who have always wanted to live in San Diego but were put off by the high prices.

 

 

 

While sellers scramble, civic officials remain pragmatic about the situation.

 

Barbara Kaiser, vice president of real-estate operations for San Diego’s Centre City Development Corp., said the city is still processing design review and zoning changes for new residential projects.

 

“People are positioning themselves for the next boom,” Kaiser said.

 

 

 

Reach the reporter at max.jarman@arizonarepublic.com or (602) 444-7351. 

After a closed market on Monday, all of the coming week’s economic reports will be delivered on Wednesday and Thursday - but don’t expect that any volatility will be limited to those days.The most recent read on inflation will come via the Consumer Price Index, being reported on Wednesday alongside the latest Housing Starts and Permits data. And of particular interest - the “Meeting Minutes” from the last Federal Reserve meeting will be released as well. These Minutes give the inside commentary between members - and remember, Dallas Fed President Richard “Loose Lips” Fisher was not in agreement with the most recent cut to the Fed Funds Rate. His seemingly uncontrollable remarks regarding his concerns over inflation have rocked the markets of late, with Mortgage Bonds losing 187 basis points since his tirade on February 7th - that translates into about .375% higher for home loan rates. Bottom line - the inflation data and Fed Meeting Minutes could be real market movers. Since inflation erodes the value of the fixed return provided by a Bond, if the news of the week continues to reek of inflation - this could spell more bad news for Bonds and home loan rates.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Feb 15, 2008)

 

“CUTS LIKE A KNIFE, BUT IT FEELS SO RIGHT” Bryan Adams And financial pros will tell you it’s wise to never try and catch a falling knife. Seems like decent advice in general - but in the financial world, it means that when the price of a Stock or Bond is in the midst of a severe decline, be very cautious about stepping in to buy…even if it feels so right because the price starts to look cheap. That’s because when prices declines sharply, it often gets even worse, making it hard to call the bottom. That’s why many investors, who attempt to buy on the way down, say the feeling cuts like a knife. And over the past week - Bonds have been dropping much like a knife, and home loan rates have risen by about .25% across the board.And speaking of sharp objects, Cupid’s arrows might have been flying around everywhere last week - but little love came calling for the Bond market. First, Retail Sales for January were far better than expected - which was good news for Stocks, but as money flowed into Stocks, pulled money out of Bonds and caused Bond prices to move lower. Next, Fed Chairman Ben Bernanke gave it to us straight from the heart, as he testified that the Fed would keep the door open to more rate cuts, which worried Bond Traders about the risk of more inflation ahead. And unlike the media seems to believe, cuts to the Fed Funds Rate generally cause home loan rates to rise, not decline. Why? Because Fed Rate Cuts can spur on more inflation, as it becomes less expensive to finance business and personal purchases. And as a result, inflation erodes the value of the fixed return provided by a Bond - so in the face of inflation, Bond prices fall, and home loan rates rise.Finally, Moody’s credit rating agency downgraded FGIC - one of the very largest Bond insurers in the world. This is another concern for Bonds, as the downgrades of Bond insurers in turn threaten the ratings of the Bonds they insure. If the added safety from insurance on Bonds is in doubt, the yield or rate on those underlying Bonds must increase to compensate investors for the additional risk. All in all - a tough week for Bonds and home loan rates - read on to find what’s in store for the week ahead.AND DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW - ALERTING YOU TO IRS SCAMS, TO WHICH EVEN THE SAVVIEST HAVE FALLEN PREY.

This week’s economic calendar holds mostly mid-level reports, but the Retail Sales report on Wednesday will definitely draw some attention, as we get a chance to see how consumers have been spending money out there. Additionally, Thursday’s Initial Jobless Claims and Balance of Trade reports and Friday’s Industrial Production report will also be of interest.

Bond prices had been hanging from a ceiling of resistance, shown in blue on the chart below…almost reminiscent of a Salami hanging in a butcher shop or meat store - and last week saw prices fall off that ceiling, straight down through a floor of support at the 25-day Moving Average. And now - what was a floor becomes a ceiling, and Bonds have not yet been able to recover and climb back above this level.

The economic news and headlines in the coming week will determine if Bonds are able to drive back higher, through the 25-day Moving Average and help home loan rates improve. Weak, negative economic news would be bad news for Stocks, but help money flow over into Bonds and find improvement for home loan rates. Positive, strong economic news will have just the opposite effect though, and cause Bonds and home loan rates to worsen.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday Feb 08, 2008)