Real Estate News for Sunday, December 18th, 2005

Rates Heading Toward Big Test. If short-term yields top long-term, history says recession looms. But is this time different? The question of why long-term interest rates are where they are — and not substantially higher — has mystified many investors, economists and Federal Reserve governors for the last 18 months. The housing market, by contrast, has been less befuddled than simply thrilled with relatively cheap long-term money in the face of the sustained credit-tightening campaign by the Fed. But if long-term rates have been surprisingly low so far, the real test of their mettle lies just ahead. Although the Fed signaled at its meeting last Tuesday that it might be nearly done raising short-term rates, the central bank also said in its post-meeting statement that "some further measured policy firming is likely to be needed." Many on Wall Street figure that means the Fed's benchmark rate, now 4.25%, will rise to at least 4.75% by spring. That might be no big deal, except for this: In the Treasury bond market, even the longest of long-term rates — the annualized yield on 25-year T-bonds — currently is below 4.75%. So if the Fed lifts its rate to 4.75%, and bond yields stay subdued, investors face the prospect of earning less on longer-term securities than they would by keeping their money in very short-term, no-risk cash accounts, such as six-month T-bills. Click here to read more.

Yoo-hoo, looky-loos. For the birds? No, fans say open houses are for buyers, future sellers, do-it-yourself decorators, snoops, sleuths, the lonely, the blasé and anyone who might tell a pal. Curiosity may be real estate's greatest marketing tool. Anything that gets people into a house for sale — open houses, virtual tours, handout CDs — is a good thing from an agent's standpoint. It matters not whether lookers are qualified buyers or even, if they are buyers at all because they may know someone. Following this line of reasoning, some realty agents hold open houses targeted at just the neighbors. A neighbor may have a friend or a relative who they've been trying to get to move to the area. This is a great way of letting them know to get the word out. Click here to read more.

Backup offers' value debated. Realty agents, homebuyers are divided on standby bids if a primary deal falls through. No one likes to play second fiddle. But in the current housing market, there is increasing pressure on buyers to make backup offers - securing themselves the No. 2 position in case the original deal falls apart. For their part, sellers like the bargaining leverage of having other buyers waiting in the wings and the safety net they provide should the house fall out of escrow. Because escrows are confidential and not recorded until a sale closes, there are no numbers on how many deals fall through. Anecdotally, however, Los Angeles-area real estate agents report that fallouts are on the rise - all the more reason to have someone else ready to step in. Click here to read more.

SoCal Home Sales Flat, Though Prices Rise. Southern California's housing boom continued to run in cruise control in November, with the median home price up 15.4% over the year-ago level and 1.3% over the previous month, according to data released today. Strong buyer demand and the anticipation of higher mortgage rates sparked a rise in the median price to a new record of $479,000 for the six-county region. The percentage gain matched the 15.4% year-over-year rise in October, when the median price stood at $473,000. Sales of new and resale homes totaled 27,637, down 3% from October, but up 0.6% from the year-ago month. A sales decline from October to November is normal for the season. The latest data provides more evidence that the area's 5-year-old housing boom, while no longer white-hot like a year or two ago, has settled into a more moderate pace. While homes are staying on the market longer — with sellers in some cases cutting asking prices — there is enough pent-up demand in the market to keep prices from rolling over, analysts said. Click here to read more.

What do they have that the 30-year fixed doesn't? The new 40/30 loan performs like a 40-year loan for the first 10 years, then re-amortizes itself over the next 20 years. As a result, the entire balance is paid off in 30 years. Of course, most people don't pay their loans for 30 years. They either sell the house, pay off the loan and move on to another place with a new mortgage, or they turn in their mortgage somewhere along the line and start over with new financing, perhaps at a better rate, perhaps for a shorter term or perhaps even for a greater amount. Human nature has made pay-option loans and interest-only mortgages popular. Both come with extremely low start rates and permit borrowers to make minimal payments. Click here to read more.

Average Mortgage Rates and Indexes


Ask the Inspector: It may be past time to unplug old system. More questions and answers with Barry Stone. Click here to read more.

Robert Bruss: Mediation may solve dispute over leaky roof. This week's questions and answers with California lawyer and licensed real estate broker, Bob Bruss. Click here to read more.

~Tina Jan~
Coldwell Banker Kivett-Teeters
1655 E. Sixth St.
Beaumont, CA 92223
Work: 951-845-5520 Ext. 105
Fax: 951-845-4916
Cell: 909-446-2666
Toll-Free: 1-877-TINAJAN
tina.jan@coldwellbanker.com
www.tinajan.com