Over the course of the last month the activity in the real estate market has followed its typical and of the year cycle. The numbers reported show a decrease in the number of showing during the holiday weeks, followed by an increase in the middle of January.

The numbers are actually encouraging showing that there is strong activity in the housing market, and that the end of December numbers are seasonal. As the spring approaches it will continue to be a buyers market as the Cincinnati real estate market rebounds.  As the foreclosures rate slows, the inventory in our area will diminish helping to maintain housing prices. Without the abundance of under-priced foreclosures on the market homeowners should see a stabilization of value over the next few years.

Smart Money.com reports on the National Association of REALTORS January 2009 monthly report. It projected existing-home sales at 4.90 million in 2008 and 5.22 million in 2009 compared to 5.65 million in 2007. Compared with the December 2008 report, the revised numbers are a mixed blessing.

There were 60,000 fewer houses sold in 2008 than projected, but the NAR Raised their 2009 forecast by 30,000 homes.  Along with the slightly higher volume, there is a slight decrease in the 2008 median real estate price, reflecting the continued absorption of foreclosures and short-sales.

The NAR’s pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

I have had the pleasure of working with a number of first time home buyers over the years and after reading the National Association of Realtors report on first time home buyers, I have to agree that the first time home buyers I am seeing these days are a bit different than in years past.

The NAR report states that the median age of these buyers is up to 31, from 30 in 2007 and they are putting twice as much money down (4% vs 2%) compared to 2007. Even more promising is that the first time buyers are making up more the buying population in 2008 (41%) compared to (39%) in 2007.

For the Cincinnati Real Estate market recovery that is a very good thing. Every first time home buyer helps absorb homes from the current inventory, without adding their house into the mix. This increase in first time buyers and the apparent slowing of the foreclosure crisis could be leading indicators that our local market may stabilizing in the year to come.

The FED cut their prime lending rate just 1%, and there was some impact in the mortgage market … for a few moments. I had conversations with real estate agents in a few different markets who all got the news and did not even have enough time to notify their clients.

Dan Green over at The Mortgage Reports has a reasonable good explanation about how the FED move impacted rates today. From a real estate agents point of view this is a mixed blessing. Yes it makes purchasing a home more affordable to those who are currently looking, however lenders are still being overly cautious about to whom they lend. I am suggestion that all my Cincinnati clients evaluate their position and speak with a mortgage professional about their rates and options.

New information from Marketwatch.com points to a slowing foreclosure rate in leading indicator states. Their conclusion is that the number of foreclosures is in decline due to some of the aggressive measures being taken by banks, and government agencies to keep families in their homes.

Their research shows a slight drop from 84,534 to 84,291 in the number of properties repossessed by lenders following foreclosure November over October. But that’s off nearly 21% from September’s 106,415 REO filings. In California Foreclosure Index numbers show REO filings in the state down to 15,978 in November. That is a decrease of 6.55% from October and off nearly 50% from September.

The hope is that as these foreclosure rates slow there will be fewer foreclosed homes on the market, which will help stabilize home values. The article however does not take into account the overarching economic slow down. Although the major real estate challenges of 207-2008 are being resolved, I’m not sure if there is an eminent rebound. The Cincinnati real estate market remains relatively steady, with prices across the board lower than a few years ago and activity levels down as well. Our real estate values did not balloon like Florida, Arizona and California so subsequently we did not experience, for the most part, the bubble bursting.

There is a new tool  being developed for the real estate market which allows home sellers and their agentsto create an electronic marketplace for openly and transparently accepting offers. N-Play allows potential home buyers to submit their offering price openly through the N-Play site. Other potential buys can see those offers and so can the home owner.

There are a few advantages, being that both the seller and buyer can see what current market is for their property. The open nature encourages interested buyers to make as attractive an offer as they can knowing other potential buyers are watching, and competing. 

At the same time the system is potentially suseptible to outside influences. Since the offers are non binding (written real estate offers are binding if accepted since they are contracts) there is a potential for outside influence in the form of multiple low or high offers altering the perception of genuine buyers.  As a marketing and exposure tool N-Play could generate property interest and help both buyers and seller better understand the current market price for property. I look forward to using this in my Cincinnati Real Estate business.

We will be hosting the Comey and Shepherd Price Me Now real estate pricing competition. Price 

Me Now compares your home value estimates with those of other players and the actual List and Sale price. You earn points depending on how closely your estimates are to the rest of the players. The closer you are to the community average the more points you earn and the higher your Real Estate IQ.

It is an one of a kind system that helps community members and Cincinnati area real estate agents better understand trends in the local markets and how home values change over time. Register for the competition today, as it will be running the entire month of October.  We will be giving away some very nice gift certificates to those who have the top three Real Estate IQ’s. 

If you are planning to sell your Cincinnati home in the near future, here is some information that might be of interest. National Association of Realtors has found that the top ten preferences that buyers are most interested in when searching for a home are:

• Central Air Conditioning
  
• Garage (2 or more spaces)
  
• Walk-in closet in master bedroom
  
• Backyard/play area
  
• Cable/Satellite TV-ready
  
• High-speed Internet Access
  
• Separate shower enclosure in master/main bath
  
• Patio
  
• Fencing
  
• Home less than 10 years old

If you were planning to apply for the seller funded downpayment assistance program through Ameridream, please be advised that this program will soon be coming to an end on October 1, 2008. There is speculation that this program is being eliminated by Congress because the foreclosure rate by those who participated in this program was higher than other groups.

Per the Ameridream website here is some background information on its Down Payment Assistance Program. Charitable down payment assistance funded in part with seller participation has allowed homeownership to grow without using taxpayer dollars. To date, more than one million families and individuals have utilized this down payment assistance, generating nearly $10 billion in home equity for those families. These working families qualify for FHA insured loans in every respect, but are unable to save the needed down payment. Please visit http://www.supporthomeownership.com to let your voice be heard to Congress to save this program.

The city of Cincinnati’s downpayment assistance programs are not affected by this change, so the Cincinnati real estate market may not be too adversely impacted.

Cincinnati real estate Investors who own multi-family properties or apartment buildings are consistently trying to ensure that their rental rates are consistent with the market. Where as an investor can you go to find the market rates for your area. You can look in the local newspaper such as the Cincinnati Enquirer or community newspaper such as Suburban Life Press for the real estate classified ads.

The Federal Hosing Bill that is working through the Senate and House right now are expected to have sizable impacts on local economies and real estate markets like Cincinnati. The Housing Bill provides financial incentives like mortgage negotiation perks, $7,500 interest free short term loans, and Jumbo loan borrowers.

For those currently in debt and in trouble with their mortgage here are the incentives the government has set out for you to renegotiate with lenders:
1. Your loan must be at least 31 percent of your monthly household income.
2. Lenders, however, are not required to give you a better deal under the new law.
3. If you manage to get a new loan, you cannot take out a home equity loan for at least five years. 4. 4. You will also have to pay a 1.5 percent fee each year on the remaining balance.
5. Finally, you have to hand over no less than 50 percent of any appreciation on the home to the government once you sell. Sell the house in less than five years, and you will have to turn over as much as all of the gain.

Now about those $7,500 interest free loans being handed out. Well they are for first time home buyers and come in the form of a tax credit. How ever if your income is over $75,000 ($150,000 married) the credit begins to phase out. You will pay the loan back in 15 equal payments over the next 15 years to the Internal Revenue Service. The tax credit is retroactive to home purchases on April 9, 2008, and expires on July 1, 2009. Ask your accountant about this benefit in your 2008 return.

The Bill will also allow Fannie Mae and Freddie Mac to purchase and securitize loans up to $625,000 where in previous years the cap was $400,000. This increase comes in line with the increase of home prices over the decades.

In a week in which stock markets moved 1 percent or more on four separate days, mortgage markets displayed a relative calmness that helped pull rates lower.

It was the second consecutive week that mortgage rates improved in Cincinnati. 

Last week’s biggest story came Monday when the housing bill was passed into law.  The new law provides lifelines to the housing market’s far-reaching corners including to homeowners, to lenders, and to mortgage-bond securitizers like Fannie Mae.

To the mortgage markets, the law adds stability to the system.  Because the severity of losses is likely to reduce, mortgage debt is suddenly more attractive to global investors which includes pension funds, hedge funds, and other nations. 

With fewer mortgage-related losses expected, demand for mortgage debt increased and that helped pressure mortgage rates lower.

There was other big news last week, too, and it came in the form of employment data. 

For the seventh straight month, the economy lost jobs and it has now shed close to a half-million jobs so far this year — a minuscule one-third-of-one-percent of the entire U.S. workforce.

Despite that smallness, though, unemployment among Americans is a trend worth watching. 

When fewer Americans are working, fewer Americans are spending and that can slow down the U.S. economy.  For now, this sort of mild slowdown appears to be leading mortgage rates lower but too many lost jobs could reverse the trend.

This week, there are two big events on the calendar — Monday’s Personal Spending and Personal Income figures, and Tuesday’s Federal Open Market Committee meeting.

The Fed is widely expected to hold the Federal Funds Rate at 2.000 percent but — as is always the case — it’s not what the Fed does, it’s what the Fed says.  If the Fed talks tough against inflation, expect mortgage rates to rise.

(Images courtesy: The Wall Street Journal Online)

Mortgage rates soared in Cincinnati last week as mortgage markets experienced a 4-day freefall. 

By the end of the trading week, conforming mortgage rates had jumped by as much as 0.500 percent.

The spike in rates can’t be pinned on any one factor, but 3 contributing factors include:

1. The lingering impact of high energy prices on inflation
2. The ongoing weakness of the U.S. dollar
3. A rally in the financial sector, marking a return to risk-taking

Inflation and a weak dollar both devalue mortgage repayments, a well-chronicled relationship on this Web site.  In short, when mortgage bond investors find that their repayments are worth less, they demand a higher return.  This causes mortgage rates to rise.

But, it wasn’t inflation or the dollar that caused the majority of the damage to mortgage rates last week — it was the rally in the financial sector.

Rates had edged higher Tuesday on the inflation data but it wasn’t until Wednesday’s morning stronger-than-expected announcement from banking leader Well Fargo that mortgage rates really started to spike. 

In its quarterly report, Wells Fargo said that its balance sheet was strong and that it planned to increase shareholder dividends.  The rosy announcement sparked a strong demand for all things financial and — by day’s end — the sector scored a 12.3 percent gain on Wall Street. 

It was the largest one-day gain in financial stocks ever.

Then, following Wednesday’s rally, financials picked up additional momentum and ended up closing out the week higher by 21 percent. 

Unfortunately for mortgage rate shoppers, a large chunk of the money that fueled the rally came out of from the mortgage bond market. 

As investors looked for cash to buy financial stocks, many chose to sell mortgage bond holdings, creating excess supply.  More supply leads prices lower and, in the mortgage world, when prices fall, rates go up. 

Because mortgage bond prices fell a lot last week, mortgage rates rose by a lot.

This week, expect momentum to be The Big Story.  There is little data beyond Thursday and Friday’s Existing Home Sales and New Home Sales, respectively, and Friday’s Consumer Sentiment Index.  And only a few members of the Fed will be speaking in public.

The one bright spot last week was falling oil prices. 

After an 11 percent decline, Americans are waking up this morning to lower gas prices.  This is anti-inflationary and could help tug mortgage rates lower.

Mortgage rates fell slightly in a week that included a bank failure, more oil price spikes, and questions about the health of the nations’ mortgage market. 

Rates would have fallen more for Cincinnati residents if not for a late-Friday sell-off that added 0.125 percent to most products.

As financial markets fell under stress, most people missed the strong points that emerged about the U.S. economy last week:

• Fewer Americans filed for unemployment benefits
• Wal-Mart reported stronger-than-expected sales
• Consumer confidence rose for the first time in 7 months

And, also worth noting: homes under contract slipped but remained above the lowest levels of the year, suggesting a potential housing floor.

But, the biggest story of last week was the stock-price collapse and subsequent pressure on Fannie Mae and Freddie Mac.  It should be the biggest story of this week, too. 

So far, Fannie and Freddie’s issues appear to be more psychological in nature than fundamental, but to an already roiled market, negative perception can quickly become reality.  This is one of the biggest reasons why both the Federal Reserve and the U.S. Treasury made public statements Sunday in support of Fannie and Freddie, and in advance of the Asian markets’ opening.

Other events that may move markets this week include Retail Sales data on Tuesday, consumer inflation data on Wednesday and Ben Bernanke’s two-day testimony to Congress which takes place over both Tuesday and Wednesday.

It’s unclear in which direction mortgage rates will go, but because the markets are on-edge, expect rate movements to be sharp and quick.  In other words, if you’re in the market for a mortgage this week and you see a rate and payment you like, don’t mess around with it — just get it locked.

(Image courtesy: Wall Street Journal Online)