Here is the Snoqualmie Pass Real Estate Report for May 13, 2012:

Mortgage Rates Test Historic Lows : The continuing concerns coming from Europe are causing shock waves through the world economy. People in Europe are insisting on hanging on to a fiscal illusion with expectations set by living for years under Social Democratic governments. Being unwilling to accept that they cannot borrower their way to prosperity and over spend in the process, they are rejecting plans to secure their countries solvency. This is taking the world financial system in to uncharted territory. In the entire history of the 10 yr treasury note there have been three days when the yield was below where it is this week; on Sept 22nd and 23rd and Oct 4th 2011. How much lower US interest rates will decline is hard to handicap; we are like fish out of water when it comes to forecasting markets in the face of the uncertainty and unprecedented crisis in Europe and the implications for the EU and Europe’s banks as well as economic concerns. See European commentary below.

Survey says? Last week’s economic report calendar may have been light, but some important surveys revealed key data to note. Read on for the details…and how home loan rates fared.
As you can see in the chart, the National Association of Realtors (NAR) said that of the 146 Metro cities surveyed, home prices rose in 74 of them in Q1 2012. This is up from 29 cities that saw an increase in home prices in Q4 2011. In addition, the NAR also said that inventories for existing homes fell 22% since this time last year and are down 41% since the peak in mid-2007. While the housing market has a long way to go, this report was a nice step in the right direction.
There was also news from the National Federation of Independent Business, which said that its small business optimism index gained 2% in April as the survey revealed that companies have increased plans for hiring and investing in the future. While companies added new employees at a slower pace in April than in March, the index rose to 94.5 — the highest level since February of 2011. Overall, though, the report showed that our economy is improving but is still fragile. The state of our economy is part of the reason for the improvement in Bonds (and home loan rates, which are tied to Mortgage Bonds) of late.
Another big reason that Bonds and home loan rates have been improving is the fresh round of uncertainty out of Europe. France elected a new president, and this change of the guard represents the ninth EuroZone leader swap since the financial crisis began. Greece is also back in the news and their citizens are not taking to the austerity measures either. The New Democracy government, a pro-bailout party, is having trouble gathering the support to rule the government. This has sparked some safe haven trading into our Bonds, as investors see our Bonds as a safe place for their money.
The events in Europe and potential softening of our economy have resulted in home loan rates remaining near historic lows. That means now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

Europe Has Failed to Produce a Successful Plan: Over this last week elections in Europe show the populations of many countries besides Greece are bucking against austerity plans proposed to bring debt loads in to line. Greek voters roundly rejected the austerity plan placed on them by the ECB while in France voters rejected the idea of severe spending cuts at the expense of jobs and being aligned with Germany’s insistence for increased austerity. In short, no matter that spending cuts are vital to preserve sovereign solvency, people are rejecting the painful reality and choosing the illusion. Europe is now in complete disarray with no plan in the face of the rejections by voters over the weekend. Many experts say Greece is cooked and will default soon. Europe’s economies will continue to decline and there will be defaults of sovereign debts in a number of other countries. It will be years before Europe can right itself, in the meantime the global economic outlook must be lowered in the minds of investors. Money from around the world continues to flood US treasury markets as fears of defaults and uncertainties drive US rates to new historical lows.

Everything looks positive for the US interest rate markets at the moment but most economists surveyed are forecasting the 10 yr note yield will be at 2.25% by the end of June; if they are correct, which can be debated, the mortgage market is at or close to its best levels for months to follow. Regardless of the forecasts, the present level of interest rates remains the best in 60 years. We hear a lot of talk that potential buyers of homes or those wanting to re-finance are waiting for rates to fall more. While anything in this climate is possible, the likelihood of substantially lower mortgage rates is remote. Mainly because at some point at these levels investors will realize that investing in very low interest rates is difficult to justify. The support in bonds now is two-fold; safety as Europe could blow up at any time and what looks like a decline in stocks is increasingly likely. UK GDP declined in the last two quarters. The increasingly serious question for Europe is whether the massive austerity cuts demanded have failed to gain support and are for a number of countries unachievable, leading to further deterioration of economies and dragging other global economies down with it. In the US economists predict Labor Department data this week will indicate U.S. hiring increased in April, though not enough to reduce the jobless rate. Consumer spending climbed in March, but a little weaker than estimates. The concern we have for the 10 yr is that it still has not shown the ability to hold under 1.90% on rallies going back to October.

Real Estate Miscellaneous Stats:

King County Home Prices On The Rise: Lack of supply is making it slim pickings for home buyers in many areas of King County. Median value for April was up 3% from one year ago at $360,000.00. Historic low interest rates and improving employment in our area are causing the researchers at the UW Runstad Center for Real Estate Research says we could see a strong prime real estate season coming this year. Listings are down 38% from last year. Distressed property experts continue to predict a large increase in foreclosed properties coming on the market over the next year but some suggest banks are being more sensitive to keeping a slower supply coming to market in the interest in keeping up values. A tight rental market is causing more people to consider buying. A 3 year low in vacancy rates at 4.6% is causing renters to have less choice and higher prices. Prices remain location dependent as Southwest King county continue to see price declines while Seattle city prices are up 10.4% from one year ago with a median value of $425,000.00. Snohomish County prices are also up about 10% from last year.
Interest Rates Set New Historic Lows: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.

February New Home Sales Revised Higher in February; A revision of new home sales for the month showed a sharp increase in the number of new homes sole in February. Many analysts are suggesting the numbers indicate the market is turning as 328K new homes were sold in March and February was revised to 358K.

March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. This is a positive sign for residential housing.

March existing home sales expected up 0.7% were down 2.6% to 4.48 million annualized; year over year sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% from March 2011. The tighter inventory is making some predict further price increases in many markets.

March National Association of Realtors pending home sales were expected up +0.5% but jumped 4.1%, abd year over year up +12.8%. This is a very good report. Pending sales are contracts signed but not closed. Contract cancellations have been running high as credit issues continue to drag on mortgage markets.

Not Like The Good Old Days: In 2006 45% or all first time homebuyers used $00.00 down loan options to purchase their homes.

Loan Program Of The Month. Guild Direct To Fannie Program: Guild Mortgage is unusual in that they originate loans and sell the directly to Fannie Mae. Most mortgage banking companies have to sell their loans to another larger banking institution which add their own rules and overlays to the underwriting parameters. This option gives Guild much more underwriting flexibility than almost all other lenders in our area. A recent example of this was a story relayed to me by a realtor who’s client was being denied a loan because he could not find a 2011 W-2 for $48.00. This would not cause a problem for loan approval at Guild. Another example is allowance of gift funds. Standard guidelines have required a borrower to have at least 5% of their own funds for down payment when using gift funds and putting less than 20% down. A Fannie program called My Community allowed for all gift funds with only 3% down. A recent change allows all gift funds with Fannie’s standard 5% down program. Guild can allow this because we sell directly to Fannie. The standard Fannie Mae program has a .5% lower interest rate than My Community which is a large benefit to the borrower.

Snoqualmie Pass Real Estate Report

The Bellevue Real Estate Report

Housing affordability is still at a record high, according to the National Association of Realtors (NAR). It is at the highest level since record keeping began in 1970. This is based on the relationship between median home price, median family income and average mortgage interest rate.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said this latest data underscores buyer opportunities in today’s market. “This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” he said. “For buyers who can qualify for a mortgage, now is a very good time to become a homeowner.”

Projections for the remainder of 2012 indicate that this affordability high will continue and rates will remain low. “Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”

Despite these incredible buyer opportunities, builder confidence is down. The National Association of Home Builders (NAHB) reports that builder confidence for newly built, single-family homes declined for the first time in seven months.

“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”

This has been an ongoing concern for many market activists. While housing affordability is at an all-time high, gaining access to credit is a tough road for many would-be buyers. Additionally, some would-be buyers are still wary of the market and are waiting on the sidelines for the economy to improve or market conditions to stabilize.

Regionally, results varied. The Northeast was the only region to see a gain in builder confidence, posting a 4 point gain on the HMI scale. The West remained unchanged, but both the West and South posted declines. Single-family home production held steady for the month. The multi-family sector saw a double digit decline, according to the U.S. Commerce Department.

Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, FL, reported, “While more consumers appear to be seriously considering a new-home purchase, builders remain very cautious about starting new projects until they see more actual sales materializing.

The Bellevue Real Estate Report

Here is the Snoqualmie Pass Real Estate Report for May 5, 2012:

Mortgage Rates Bounce Around Historic Lows : Mortgage Bond pricing, which determines interest rates, have moved solidly back in to historic territory and appear to be staying there for some time. US Treasury Rates are also back to historic low levels we have seen before. Treasuries are going for their biggest monthly gain since September as slowing U.S. economic growth and concern Europe’s debt crisis is worsening, increased demand for the relative safety of US treasuries. Mortgage bond pricing has benefited by the same factors. Spain going into its second recession since 2009 and economists said U.S. reports this week will show growth in manufacturing and services slowed. Not only Spain, the UK is in a double-dip recession since the 1970s as its longest peacetime slump for a century persists. While the grim prospects of investors finding returns in world stock markets is keeping rates low, there is concern that current low returns in bond markets will drive investors to move out of these assets and take risks elsewhere. This would cause rates to rise. I survey of economists shows most believe interest rates will rise soon due to this factor. With rates at 60 year lows the odds are against them staying here or moving lower. A systemic meltdown in Europe would trump all normal motivations.

Take this job and love it. And the Labor Department’s Jobs Report for April showed that fewer than expected people are able to do this, as fewer than expected jobs were created. Read on for details and what they mean for home loan rates.
The Jobs Report showed that 115,000 jobs were created in April, with 130,000 private sector jobs offsetting government job losses. This number was a disappointment and below expectations. The only silver lining in the report were upward revisions to the previous month’s readings which added 53,000 more jobs than what was previously reported.
The unemployment rate dropped a tick to 8.1% — the lowest since January 2009. However, the decline was mainly due to the labor force shrinking by 300,000, rather than by robust job growth. And as expected, we are starting to hear more and more about the Labor Force Participation Rate (LFPR). The LFPR dropped to 63.6, the lowest ratio since December 1981. Why is this important? The LFPR gives us a clear read of who is working and who is not. And if someone is not participating, then they are probably receiving some sort of social security or unemployment insurance. The bottom line is that it is tough to pay down debt when there are not enough people participating in the labor force.
Overall the Jobs Report was underwhelming and, unfortunately, further accommodative monetary policy or even more Bond buying (known as Quantitative Easing or QE3) will have a very limited effect on job growth. What’s more, the debt drama in Europe continues to escalate, as both Italy and Germany reported higher than expected unemployment rates, while Spain has slipped into its second recession since the financial crisis.
The events in Europe and potential softening of our economy have resulted in home loan rates remaining near historic lows. That means now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.
Europe Seems Headed For Protracted Tough Times ; the slow downs in Europe are causing concerns for a slowing world economy. The austerity plans, though necessary, have been forced on these countries with sovereign debt problems to help their economies prevent the suffering of high costs of borrowering but is back-firing in terms of economic health. Before it is over we are likely to see huge push-backs from citizens as wages and jobs are fall. Germany continues to control the situation as they have to sign off on any bail out plans. They are protecting their wealth and not willing to allow itself to be dragged into the problem to deeply. Germany is the key to re-structuring European debt and cold nix a plan that has been set in place for months. If the plan does not work, as currently indicated, the EU, ECB and IMF will have to re-think the debt issues. If they do not, Europe could be headed headed to depression and likely riots in the streets across the region.

Everything looks positive for the US interest rate markets at the moment but most economists surveyed are forecasting the 10 yr note yield will be at 2.25% by the end of June; if they are correct, which can be debated, the mortgage market is at or close to its best levels for months to follow. Regardless of the forecasts, the present level of interest rates remains the best in 60 years. We hear a lot of talk that potential buyers of homes or those wanting to re-finance are waiting for rates to fall more. While anything in this climate is possible, the likelihood of substantially lower mortgage rates is remote. Mainly because at some point at these levels investors will realize that investing in very low interest rates is difficult to justify. The support in bonds now is two-fold; safety as Europe could blow up at any time and what looks like a decline in stocks is increasingly likely. UK GDP declined in the last two quarters. The increasingly serious question for Europe is whether the massive austerity cuts demanded have failed to gain support and are for a number of countries unachievable, leading to further deterioration of economies and dragging other global economies down with it. In the US economists predict Labor Department data this week will indicate U.S. hiring increased in April, though not enough to reduce the jobless rate. Consumer spending climbed in March, but a little weaker than estimates. The concern we have for the 10 yr is that it still has not shown the ability to hold under 1.90% on rallies going back to October.

Real Estate Miscellaneous Stats:

King County Home Prices On The Rise: Lack of supply is making it slim pickings for home buyers in many areas of King County. Median value for April was up 3% from one year ago at $360,000.00. Historic low interest rates and improving employment in our area are causing the researchers at the UW Runstad Center for Real Estate Research says we could see a strong prime real estate season coming this year. Listings are down 38% from last year. Distressed property experts continue to predict a large increase in foreclosed properties coming on the market over the next year but some suggest banks are being more sensitive to keeping a slower supply coming to market in the interest in keeping up values. A tight rental market is causing more people to consider buying. A 3 year low in vacancy rates at 4.6% is causing renters to have less choice and higher prices. Prices remain location dependent as Southwest King county continue to see price declines while Seattle city prices are up 10.4% from one year ago with a median value of $425,000.00. Snohomish County prices are also up about 10% from last year.
Interest Rates Set New Historic Lows: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.

February New Home Sales Revised Higher in February; A revision of new home sales for the month showed a sharp increase in the number of new homes sole in February. Many analysts are suggesting the numbers indicate the market is turning as 328K new homes were sold in March and February was revised to 358K.

March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. This is a positive sign for residential housing.

March existing home sales expected up 0.7% were down 2.6% to 4.48 million annualized; year over year sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% from March 2011. The tighter inventory is making some predict further price increases in many markets.

March National Association of Realtors pending home sales were expected up +0.5% but jumped 4.1%, abd year over year up +12.8%. This is a very good report. Pending sales are contracts signed but not closed. Contract cancellations have been running high as credit issues continue to drag on mortgage markets.

Not Like The Good Old Days: In 2006 45% or all first time homebuyers used $00.00 down loan options to purchase their homes.

Loan Program Of The Month. Guild Direct To Fannie Program: Guild Mortgage is unusual in that they originate loans and sell the directly to Fannie Mae. Most mortgage banking companies have to sell their loans to another larger banking institution which add their own rules and overlays to the underwriting parameters. This option gives Guild much more underwriting flexibility than almost all other lenders in our area. A recent example of this was a story relayed to me by a realtor who’s client was being denied a loan because he could not find a 2011 W-2 for $48.00. This would not cause a problem for loan approval at Guild. Another example is allowance of gift funds. Standard guidelines have required a borrower to have at least 5% of their own funds for down payment when using gift funds and putting less than 20% down. A Fannie program called My Community allowed for all gift funds with only 3% down. A recent change allows all gift funds with Fannie’s standard 5% down program. Guild can allow this because we sell directly to Fannie. The standard Fannie Mae program has a .5% lower interest rate than My Community which is a large benefit to the borrower.

Snoqualmie Pass Real Estate Report

Here is the Snoqualmie Pass Real Estate Report for April 28, 2012:

Mortgage Rates Continue In Historic Territory and Set New Historic Lows: The news out of Europe continues to be a concern for the world economy. See details below. More bad news from Spain, Ireland, Greece and now worries about France are doing what most thought and keeping rates low. The austerity measures to reign in debt are slowing those nations economies which contributes to bad employment numbers and questions as to where growth will come from to pay off the bail out measures. This is causing slowing in China and other exporting Asian counties. The US economy continues to be the bright spot but is anything but robust. These circumstances are creating a consensus that the world economy will be sluggish at best over the foreseeable future. This sentiment is causing investors to seek returns in the US Bond markets which is keeping rates low. The US stock market has been giving reasonable return so rates have not changed significantly. The bond market pricing has not returned to historic low levels but survey interest rates set new records. Lenders may be giving up some profitability to attract business as it has speculated for some time that rates should be lower in the past based on bond pricing. See details below.

“I’m still standing – yeah, yeah, yeah.” Elton John. And after last week’s Fed meeting, Bonds and home loan rates are still standing near record best levels. Read on for details.
After last week’s regularly scheduled meeting of the Federal Open Market Committee (FOMC), Fed Chairman Ben Bernanke acknowledged that conditions in our economy are improving modestly, but he noted that the housing market remains depressed. One example of this is New Home Sales, which fell 7.1% in March to 328K units on an annual rate.
Bernanke also noted that inflation is higher in the short-run due to higher energy costs, but that the Fed expects prices to moderate and remain in check longer-term. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so inflation staying in check is crucial when it comes to home loan rates remaining near record best levels.
One important subject the Fed didn’t mention in their Policy Statement was another round of Bond buying to stimulate our economy (known as Quantitative Easing or QE3). This wasn’t much of a surprise because — after several moves to prop up the economy — the Fed must see where upcoming economic reports go before venturing to underwrite the economy further. If the housing market remains depressed and the economy doesn’t pick up steam, QE3 could be a very real possibility.
And there was a bit of a sluggish read on our economy last Friday, after the Fed’s mid-week meeting. The advanced (first of three readings) of Gross Domestic Product (GDP) for the 1st Quarter of 2012 came in at 2.2%, well below expectations. This was also well below the 3% final 4th Quarter 2011 GDP reading. Within the report it showed that the personal consumption expenditure inflation reading rose at the fastest pace since the 2nd Quarter of 2011. This is definitely something the Fed is watching closely.
As 2012 continues to unfold, inflation, the housing market, our sluggish economy, and our ever-growing debt are important issues that the Fed and our government need to address. Seeing the debt crisis in Europe escalate must put a sense of urgency on our government to reign in our annual budget deficit and overall debt. This mix of factors will continue to impact the direction in which Bonds and home loan rates move in the weeks ahead.
The good news is that now continues to be a great time to purchase or refinance a home, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.
Europe is in economic chaos as the debts of many countries are dragging its economy down; The Euro nations owe 386 billion euros ($508 billion) in bailouts for Greece, Ireland and Portugal after those nations were forced to seek rescues when their borrowing costs became unsustainable. Concern that Spain and Italy may follow has led their bonds to decline for six weeks, pushing their cost to borrow toward the 7% level. This is considered unsustainable and is the factor that triggered the aid programs to other nations. The EU’s plan for countries in the region to drastically cut spending in massive austerity moves may be back-firing. The demanded cuts put on Greece, now Spain and Italy; not to forget Ireland and Portugal, have caused the economic outlook to worsen sending Europe back into recession and adding concern that the cuts in spending may not be achieved increasing the possibility of sovereign defaults. The deterioration in Europe is further stressed with the French elections where Sarkozy was unable to get enough votes the first time around against his opponent that is against many of the plans agreed on between France and Germany.

Real Estate Miscellaneous Stats:

Case Schiller Index Shows February Home prices down 0.8% on the month: The 20 city composite index continues to show weakness in the national housing sector of the economy. Of these cities 16 had price declines while only 3 had price increases compared with January numbers. The annual decline now measures 3.5% and overall prices have hit a 10 year low point. Some are taking solace in the fact that the seasonally adjusted numbers show the first price increase since April 2011 but S&P says the unadjusted number is more reliable. These macro numbers do not give a complete picture of what is happening in local markets where many areas of these cities are seeing price increases and tight inventory while the outlying area price declines skew the values down for the whole area. Home values in Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa all were the worst since the housing bubble burst. Phoenix by contrast has seen prices rise 3.3% on an annual basis, which is the second month of positive 12-month returns and the fifth straight monthly gain. San Francisco: Prices down 0.7% monthly and 4.1% annually. Seattle: Prices down 0.8% monthly and 2.9% annually. Distressed inventory continues to drag the markets down even though there have been limited numbers of homes available in many cities. Banks are said to be stepping up placing foreclosed homes on the market for sale as recent settlements of law suits with many states have removed some restraint that has been in place for many months. Some market analysts predict that foreclosures will be up to 1 million for 2012 from 800000 in 2011.
Interest Rates Set New Historic Lows: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.

February New Home Sales Revised Higher in February; A revision of new home sales for the month showed a sharp increase in the number of new homes sole in February. Many analysts are suggesting the numbers indicate the market is turning as 328K new homes were sold in March and February was revised to 358K.

March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%. This is a positive sign for residential housing.

March existing home sales expected up 0.7% were down 2.6% to 4.48 million annualized; year over year sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% from March 2011. The tighter inventory is making some predict further price increases in many markets.

March National Association of Realtors pending home sales were expected up +0.5% but jumped 4.1%, abd year over year up +12.8%. This is a very good report. Pending sales are contracts signed but not closed. Contract cancellations have been running high as credit issues continue to drag on mortgage markets.

Not Like The Good Old Days: In 2006 45% or all first time homebuyers used $00.00 down loan options to purchase their homes.

Loan Program Of The Month. Guild Direct To Fannie Program: Guild Mortgage is unusual in that they originate loans and sell the directly to Fannie Mae. Most mortgage banking companies have to sell their loans to another larger banking institution which add their own rules and overlays to the underwriting parameters. This option gives Guild much more underwriting flexibility than almost all other lenders in our area. A recent example of this was a story relayed to me by a realtor who’s client was being denied a loan because he could not find a 2011 W-2 for $48.00. This would not cause a problem for loan approval at Guild. Another example is allowance of gift funds. Standard guidelines have required a borrower to have at least 5% of their own funds for down payment when using gift funds and putting less than 20% down. A Fannie program called My Community allowed for all gift funds with only 3% down. A recent change allows all gift funds with Fannie’s standard 5% down program. Guild can allow this because we sell directly to Fannie. The standard Fannie Mae program has a .5% lower interest rate than My Community which is a large benefit to the borrower.

Snoqualmie Pass Real Estate

Here is the Snoqualmie Pass Real Estate Report for April 22, 2012:

Mortgage Rates Hover : Mortgage rates moved in a tight range this last week the continuing theme of Euro drama versus decent US economic news continues. The sentiment remains that the US economy is improving albeit slower than needed for a recovery in employment. There were some disappointing data points this week in this regard. The main US manufacturing index came in at a very disappointing level yet at the same time retail sales were respectable. Another business indicator was soft and employment numbers were disappointing yet some economic leading indicators show improvement in the near future. Some of what is driving this mixed bag are the slowing economies in Europe driven by government austerity programs. This is seen as slowing growth in China which impacts the world economy. The European problems will not go away as Spain’s bond rates continue to move higher and further threats of a downgrade in France’s credit rating keeps concerns high. One key reason for the decline in rates has been predicated on the Fed possibly doing another QE, as well as the renewed fears over Europe’s debt mess. The US economic outlook, although better, has been dampened a little with employment figures suggesting new hiring is slowing; another easing move from the Fed will not have any direct impact on employment or continued declines in US interest rates. All of these factors are likely to keep interest rates down for some time yet not likely to move them much lower. We are currently 10 basis points from all time lows. If we are to see lower rates it will have to be on increasing fears on Europe’s ability to stem defaults

Last Week in Review:

“Bad news goes about in clogs, good news in stockinged feet.” Welsh Proverb. And we certainly saw both good and bad news in the economic reports released last week. Here are the details…and what they mean for home loan rates.
On the good side, Retail Sales in March rose by a nice 0.8%, as consumers bought all kinds of products across the board. And when stripping out autos, sales still grew. This adds to the increasing trend seen in January and February and is a good sign for our economy, as consumers don’t spend when they aren’t feeling optimistic about their financial situation.
But over in the manufacturing sector it was not as pretty a picture, as both the Empire State Manufacturing Index and the Philly Fed Index came in below expectations. This is largely being attributed to a global slowdown, and experts say that the outlook for our manufacturing remains positive…but just not accelerating at the present time. Things weren’t as pretty in the housing sector either, as both Existing Home Sales and Housing Starts fell in March.
And things in the labor market were verging on ugly, as Initial Jobless Claims spiked sharply higher. The Labor Department reported 386,000 fresh Claims in the latest week, above the 375,000 that was expected…and well above the 350,000 range seen in recent weeks.
Also verging on ugly was news out of Europe. There is growing and very justified concern about Spain’s ability to pay down debt, meet new budget deficit targets, and avoid a bailout or debt restructuring. The Spanish situation has prompted the G-20 (Finance Ministers and Central Bankers of the 20 largest economies) to urge the European Central Bank to do more to contain their debt crisis as it threatens global growth. And let’s not forget that besides Spain, we still have France, Portugal, Ireland and Greece to deal with in future months and years.
So what does all of this mean for Bonds and home loan rates? There will likely be more safe haven trading into the relative safety of the US Dollar and US Bonds (which will benefit Mortgage Bonds, to which home loan rates are tied) as the uncertainty out of Europe escalates. And more bad economic reports here in the United States could add to this safe haven trading into our Bonds, just as more good economic news here would likely benefit Stocks at the expense of our Bonds and home loan rates.
This mix of factors will continue to impact the direction in which Bonds and home loan rates move in the weeks ahead. The takeaway is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

Europe’s debt issues remain, and there is a little relaxation about the possibility of default as EU ministers are calling for the ECB to step up and buy Spain’s bonds to keep their interest rates from increasing more. So far nothing from the ECB but words implying it is “prepared� to act if necessary. The US bond market remains the safe port for investors and has been one of the reasons we have seen US rates fall over the last two weeks. US stock market is rallying this morning on the March retail sales increase, US interest rates are not seeing any selling on the better stock indexes; as long as the debt problems in Europe continue it should keep a bid in US treasuries, thus supporting the mortgage markets.

The world economy will expand 3.5% this year and 4.1% in 2013, the IMF said today in its World Economic Outlook, raising forecasts made in January from 3.3% for 2012 and 4.0% for next year. The U.S. will grow 2.1% this year and 2.4% in 2013, up from 1.8% and 2.2% in the lender’s January projections. The euro area economy is projected to decline by 0.3% in 2012, an improvement from the 0.5% in the IMF’s previous forecast. China is projected to grow 8.2% and Japan 2.0% this year. “The most immediate concern is still that further escalation of the euro-area crisis will trigger a much more generalized flight from risk,� the IMF said. “Geopolitical uncertainty could trigger a sharp increase in oil prices.� A 50% increase in the cost of oil would reduce global output by 1.25%, according to the report.
Real Estate Miscellaneous Stats:

Many Real Estate Markets Are Heating Up: In many local markets across the country, homes are being snatched up as soon as they hit the MLS. These markets tend to be close in to major employment centers where economies are in decent shape or they are very attractive to investors. Some cities are experiencing bidding wars on homes in affordable prices ranges just like the good old days pre-boom. While prices remain flat nationally, these high demand areas are seeing prices start to rise as inventory is down. In Seattle inventory has recently dropped 36%. This is due to a slow down in foreclosures and the inability for many who have lost equity to sell their homes. Competition is raging between first time buyers, investors and foreign buyers; especially in the lower price ranges. These cities are considered the 10 tightest based on change in inventory from Feb 2011 to Feb 2012

1. Denver CO. Inventory down 42%.
2. Portland OR: Inventory down 38%
3. Seattle WA: Inventory down 36%
4. San Jose CA: Inventory down 34%
5. Salt Lake City UT: Inventory down 31%
6. Sacramento CA: Inventory down 30%
7. San Francisco CA: Inventory down 29%
8. Birmingham AL: Inventory down 29%
9. Memphis TN: Inventory down 29%
10. Richmond VA: Inventory down 29%

These numbers are based on a study done by Move Inc for Realtor.com. It is a comparison of the 50 most populated markets in the US.
In the Bay Area a recovery in housing is more advanced than most others.

March housing starts and building permits; starts were expected to be up 0.3%, they fell 5.8% the lowest level since Oct 2011, permits were thought to be -0.9%, they increased 4.5% to 747K the highest level of permits since Sept 2008. The starts headline didn’t impress; however multi-family starts were down 16.9% while single family starts were down just 0.2%.

March existing home sales expected up 0.7% were down 2.6% to 4.48 million annualized; year over year sales of existing home sales are up 5.2%. Inventory levels declined 1.3% to 2.37 mil homes for sale, a 6.3 month supply. Listed inventory is 21.8% lower than in march 2011. The median price of sales $163,800.00 up 2.5% from March 2011.

Not Like The Good Old Days: In 2006 45% or all first time homebuyers used $00.00 down loan options to purchase their homes.

Recent Changes in FHA Guidelines Making Things More Difficult for Homebuyers: FHA has been the loan option so choice for many first time homebuyers ever since the mortgage market melt down. Low down payment, good rates and accommodating credit requirements make it very attractive. Officials at FHA have been attempting to manage the increasing strain on the FHA reserve fund and have had to increase the MI premiums again to accommodate losses experienced by the program. As of April 9th, any FHA case numbers will have an initial up front premium of 1.75% compared with 1% prior to the change. The annual component that gives the monthly payment has increased as well. For loan amounts above 95% LTV the premium goes from 115 basis points to 125. For those loans below 95% LTV it goes to 120 basis points. FHA loans with terms of 15 years or less remain exempt from the annual premium. In another announcement FHA informs of a change in policy regarding collection accounts, FHA previously did not require the payoff of collection accounts up to $1000.00. That has not been changed. Now borrowers will have to make arrangements to pay them off over several months or before closing. Exclusions include victims of identity theft, unauthorized use of accounts or when the accounts are over 2 years old.

Loan Program Of The Month. Guild Direct To Fannie Program: Guild Mortgage is unusual in that they originate loans and sell the directly to Fannie Mae. Most mortgage banking companies have to sell their loans to another larger banking institution which add their own rules and overlays to the underwriting parameters. This option gives Guild much more underwriting flexibility than almost all other lenders in our area. A recent example of this was a story relayed to me by a realtor who’s client was being denied a loan because he could not find a 2011 W-2 for $48.00. This would not cause a problem for loan approval at Guild. Another example is allowance of gift funds. Standard guidelines have required a borrower to have at least 5% of their own funds for down payment when using gift funds and putting less than 20% down. A Fannie program called My Community allowed for all gift funds with only 3% down. A recent change allows all gift funds with Fannie’s standard 5% down program. Guild can allow this because we sell directly to Fannie. The standard Fannie Mae program has a .5% lower interest rate than My Community which is a large benefit to the borrower.

Snoqualmie Pass Real Estate Report

Here is the Snoqualmie Pass Real Estate Report for April 16, 2012:

Mortgage Rates Recover : In keeping with the most recent theme of reacting to a balance of European news and developments in the US economy; interest rates had a nice recovery this week. Just as most predicted, the drama out of Europe continues to cause concern. Spain is the country of interest right now with it’s high level of sovereign debt and no growth in their economy. Most analysts have expressed great concerns that austerity programs in most European contries will cause stagnation in their economies which will not allow them to grow their way out of large annual deficits. At the same time the US jobs report was a big disappointment with the creation of new jobs much lower than anticipated. Many analysts continue to predict that any softening in the growth of the economy will cause the Fed to initiate another round of stimulus called QE3 ( Quantitative Easing 3 ). Many suggest that, like many movie sequels, this is a bad idea. Still the markets are responding to the rumor with lower rates.

“Wild thing! You make my heart sing!” The Troggs. And that song lyric is certainly an apt description for the volatility in the markets these days, as the ups and downs have given people things to both sing and scream about. Here’s what happened last week…and how home loan rates were impacted.
Inflation news hit the wires, with reports on both the wholesale and consumer levels. The wholesale-measuring Producer Price Index (PPI) showed that prices remained mostly unchanged during March. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so the lack of inflation on the wholesale side was good news for Bonds and home loan rates.
Also helping Bonds and home loan rates last week was the tame inflation data from the Consumer Price Index (CPI). The headline reading for March was right in line with estimates. When stripping out volatile food and energy, the Core CPI was also inline with estimates…but the year-over-year number was 2.3%, just slightly higher than the previous reading of 2.2%. While this raises eyebrows a bit, the Fed is still reiterating that inflation remains subdued. That being said, if the Core CPI continues to rise…which is indicative of inflation and as you can see in the chart…Bonds and home loan rates will have a tough time improving much further, regardless of other factors.
One key factor to keep an eye on is the labor market, as Initial Jobless Claims increased 13,000 to 380,000 for the week ending April 7. This marks the highest level since January, and the second highest reading for 2012. The Fed has acknowledged that job creations are short of their goals. In fact, last week Federal Reserve Vice Chairman Janet Yellen said that weakness in housing, the European debt crisis, and government spending cuts are likely to slow the pace of recovery and expansion. She did state that the Fed has plenty of stimulus tools to use, if economic conditions warrant another round of quantitative easing.
The bottom line is that many factors will impact the direction in which Bonds and home loan rates move in the weeks ahead. The good news is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

Just when Europe’s debt crisis was moving off the front page, it has jumped back in to the spot light. More bad news out of Spain is causing an increase in their bond market rates and roiling markets again. Recent bond sales in Spain had been meeting with better than expected demand and at slightly lower rates than analysts were thinking. This was helping to keep the rate at which the country borrows at a lower point. Now Spain is seeing rates increase as investors decline to buy at the levels seen a week ago; the debt crisis is once again being brought into question. The European Union debt problems won’t go away, it will likely continue to surface and fade then resurface for a long time, each time it will impair equity markets and add support to the bond markets.
The focus on US Inflation Continues: While the market keeps an eye on the improvement in the economy, those nervous about the level of US debt have a close eye on inflation. There were developing trends that was providing a concensus, although since Easter holiday week may have distorted the data somewhat .Inflation is higher than is comfortable for many. The jump in the core PPI has been dismissed due to the increase in light truck prices. Inflation isn’t much of an immediate issue now. Janet Yellen, Vice Chair at the Fed commented; “I consider a highly accommodative policy stance to be appropriate in present circumstances,� Yellen said yesterday in a speech in New York. She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening. She agrees with Bernanke by saying unemployment will decline “only gradually.� “Over the next several years, I anticipate that we will fall far short in achieving our maximum employment objective, �Yellen said. Still, “considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information.�

Real Estate Miscellaneous Stats:

Many Real Estate Markets Are Heating Up: In many local markets across the country, homes are being snatched up as soon as they hit the MLS. These markets tend to be close in to major employment centers where economies are in decent shape or they are very attractive to investors. Some cities are experiencing bidding wars on homes in affordable prices ranges just like the good old days pre-boom. While prices remain flat nationally, these high demand areas are seeing prices start to rise as inventory is down. In Seattle inventory has recently dropped 36%. This is due to a slow down in foreclosures and the inability for many who have lost equity to sell their homes. Competition is raging between first time buyers, investors and foreign buyers; especially in the lower price ranges. These cities are considered the 10 tightest based on change in inventory from Feb 2011 to Feb 2012

1. Denver CO. Inventory down 42%.
2. Portland OR: Inventory down 38%
3. Seattle WA: Inventory down 36%
4. San Jose CA: Inventory down 34%
5. Salt Lake City UT: Inventory down 31%
6. Sacramento CA: Inventory down 30%
7. San Francisco CA: Inventory down 29%
8. Birmingham AL: Inventory down 29%
9. Memphis TN: Inventory down 29%
10. Richmond VA: Inventory down 29%

These numbers are based on a study done by Move Inc for Realtor.com. It is a comparison of the 50 most populated markets in the US.

Fannie Mae and Freddy Mac Continue to Resist Principle Reduction Modifications: While there is an increasing trend toward principle reductions by private mortgage holders for mondifications, Fannie and Freddy continue to refuse this option. Of all the loan modifications granted in the private market; 16% received debt reduction by private holders and 25% by bank portfolio managers. Lenders continue to struggle as 12.1% of all mortgages were delinquent as of the end of last year. Debt reduction is said to be one of the best tools to help reduce those at risk but the government GSE’s say they cannot use this option as it would cost the US tax payer $100 billion at a time when deficits are at history highs. Foreclosures will be with us for a while as the rate increased in the 4th quarter by 22%.

Recent Changes in FHA Guidelines Making Things More Difficult for Homebuyers: FHA has been the loan option so choice for many first time homebuyers ever since the mortgage market melt down. Low down payment, good rates and accommodating credit requirements make it very attractive. Officials at FHA have been attempting to manage the increasing strain on the FHA reserve fund and have had to increase the MI premiums again to accommodate losses experienced by the program. As of April 9th, any FHA case numbers will have an initial up front premium of 1.75% compared with 1% prior to the change. The annual component that gives the monthly payment has increased as well. For loan amounts above 95% LTV the premium goes from 115 basis points to 125. For those loans below 95% LTV it goes to 120 basis points. FHA loans with terms of 15 years or less remain exempt from the annual premium. In another announcement FHA informs of a change in policy regarding collection accounts, FHA previously did not require the payoff of collection accounts up to $1000.00. That has not been changed. Now borrowers will have to make arrangements to pay them off over several months or before closing. Exclusions include victims of identity theft, unauthorized use of accounts or when the accounts are over 2 years old.

Good Article On Short Sale Advice: http://realestate.msn.com/short-sell-your-home-to-avoid-foreclosure .

Loan Program Of The Month. Home Affordable Refinance Program ( HARP ): Fannie Mae and Freddy Mac have rolled out their new revised version of the popular refinance program that allows borrowers who have lost equity to refinance without the requirement of obtaining mortgage insurance. In some cases refinancing is possible with negative equity with no limit on loan to value ratios due to 2nd mortgages. Eligible loans must be Fannie or Freddy loans and have been originated before May of 2009. Expanded appraisal waivers, transfer of existing mortgage insurance policies by non-originating institutions and expanded underwriting guidelines are also a part of the new version of the program. These changes are expected the help a large number home owners.

Snoqualmie Pass Real Estate Report

Here is an update to the Snoqualmie Pass Real Estate Report:

Mortgages Rates improved again today , though some lenders’ rates were little changed. This marks the second day of moderate improvement and consolidation after a strong move lower by most lenders on Friday. There’s a greater-than-normal variability between lender offerings, but in general, mortgage rates are near their best levels of the month. The Best-Execution Conventional 30yr Fixed Rate is probably best viewed as 3.875% now for flawless scenarios, and 4.0% for many others.

Snoqualmie Pass Real Estate

Here is the Snoqualmie Pass Real Estate Reportfor April 4, 2012:

Mortgage Rates Make Small Improvements: Interest rates had some success in overcoming technical levels of resistance which made for some optimism for more improvements. More troubling news is coming out of Europe but finance officials say they have identified a ceiling of the amount needed to cure any further sovereign debt issues at $1 trillion Euros. We will see if that plays out to be true…I am skeptical. Supposedly the existing Euro bank facilities have most of those funds available when needed. Mortgage bond markets have been helped by comments from Fed Chairman Bernanke that the US economy, while improving, is still questionable therefore he will continue to keep short term rates low for a considerably long period. As long as he remains concerned about the underlying strength of the recovery, it somewhat removes the bond market fear that rates will increase as the Fed would otherwise consider tightening to end off the inflation fears that will not go away.

Industry News
State of the Economy:
Last Week in Review

To “QE” or not to “QE” – that is the question. And that pun on Shakespeare’s famous quote is likely one that the Fed is weighing carefully these days, as they work to determine the best decisions for our economy. Read on to learn why…and what the impact could be on home loan rates.
Last week, Personal Income and Spending came in close to expectations. While that is good news, one negative within this report that is something to consider is the inflation-adjusted income. As you can see in the chart, Personal Income rose by 0.2%. But after factoring in the 0.3% rise in headline Personal Consumption Expenditures (which includes energy and food), income actually declined by 0.1%. We have seen incomes actually decline on an inflation adjusted basis three of the past four months. The rise in fuel prices is a big culprit for this negative trend and it highlights how high oil prices can be a detriment to the economy.
In addition, the final reading of 4th Quarter Gross Domestic Product (GDP) for 2011 remained at 3.0%, a decent number. However, for 2011 overall, GDP was an anemic 1.625%, well below the number needed for a normal functioning economy.
These factors — combined with recent weak data from the housing sector and a discouraging bounce higher in last week’s Initial Jobless Claims Report — are all reasons that could make the Fed consider doing another round of Bond buying (Quantitative Easing or QE3).
Remember: Home loan rates are tied to Mortgage Bonds…so as Bonds improve, home loan rates improve…and helping the housing market by keeping home loan rates low would be a big reason that the Fed would do another round of QE. Another key factor to keep in mind when it comes to whether Bonds and home loan rates will improve is the safe haven trade. The Eurodrama resurfaced front and center last week with the news from credit rating agency Standard and Poor’s that Greece may have to restructure their debt again. Plus, there was news that Spain’s GDP is already contracting, and the country is grappling with a 23% unemployment rate.
The bottom line is that even though Bonds and home loan rates worsened last week, rates still remain near historic lows and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

European leaders seeing rising confidence that their region’s crisis is near an end. The euro area’s woes are “almost over� after a slow initial response by policy makers, Italian Prime Minister Mario Monti said in Tokyo today. German Chancellor Angela Merkel said yesterday that the crisis is ebbing and her country’s borrowing costs will probably rise as its status as a haven wanes. Make what we want on the “almost over� quote. Conclusions to Europe’s turmoil have been called prematurely before. In March 2010 the EU Pres. said the worst of Greece’s financial crisis was over and other European nations wouldn’t follow in its path. Since then, Portugal and Ireland needed bailouts.

Fourth Quarter final GDP was +3.0% the same as the preliminary report last month. The data also showed corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool. To some degree the declining profits may justify the stance Bernanke and the Fed maintain that the economy isn’t on firm footing. To add more confusion to the economic outlook; the Business Roundtable’s economic outlook index increased to 96.9 in the first quarter from 77.9 in the previous three months, the Washington-based trade group reported. Readings greater than 50 are consistent with economic expansion, and this quarter’s measure is the highest since April-June 2011. 42% said they will increase payrolls, compared with 35% in the prior quarter, while 43% plan to hold their staffing levels steady.

Real Estate Miscellaneous Stats:

January Case/Shiller home price index Shows Continuing Improvement in Trends. U.S. single-family home prices were unchanged in January, suggesting the battered housing market declines may be near the end. The composite index of 20 metropolitan areas was flat in January on a seasonally adjusted basis. But on a non-seasonally adjust basis, prices tumbled 0.8 percent. On a yearly basis, prices fared a little better with January prices down 3.8 percent compared to the year before. This was an improvement from December’s 4.0 percent drop. Home prices in the Seattle area fell .7% for the month but was an improvement over the 1.3% rate in December. These are non-seasonally adjusted numbers. Regional prices for the year are down 4%.The Case/Shiller index measures prices against the levels in January 2000. The current index is at 130.03 which means values are 30% higher than that time. Prices are down about 30% from the peak in 2007. Market experts attribute the value losses to an increase in bank owned and short sale properties. They suggest these falling value numbers are not a reflection of the overall health of the market but of the continue liquidation of distressed inventory. This inventory will not last forever and when it starts to dry up pricing should change significantly. As employment improves and rental rates continue to go up it will help turn the market around. Graph below from the Seattle Times via Standard and Poors.

Loan Program Of The Month. Home Affordable Refinance Program ( HARP ): Fannie Mae and Freddy Mac have rolled out their new revised version of the popular refinance program that allows borrowers who have lost equity to refinance without the requirement of obtaining mortgage insurance. In some cases refinancing is possible with negative equity with no limit on loan to value ratios due to 2nd mortgages. Eligible loans must be Fannie or Freddy loans and have been originated before May of 2009. Expanded appraisal waivers, transfer of existing mortgage insurance policies by non-originating institutions and expanded underwriting guidelines are also a part of the new version of the program. These changes are expected the help a large number home owners.

Snoqualmie Pass Real Estate Report

Here is the Snoqualmie Pass Real Estate Report for March 24, 2012:

Mortgage Rebound Lower After Big Spike Last Week: Interest Rates have moved up about .375% compared with low points a couple weeks ago. Last week’s spike higher in rates caused by the disappointment in the Federal Reserve Open Market Committee policy statement that the Fed was not seriously considering another round of Quantitative Easing at the moment and that the US economy was improving at a pace that the Fed didn’t expect at its January FOMC meeting. This week interest rates have rebounded on weakness in China’s economic outlook; still growth of 8.0% but down from 11%+; Europe’s economic outlook has softened and the US stock market had become technically very overbought based on trader’s metrics. Even the most bullish had been warning of a potential pullback in equity prices. This week the bond market has been supported by news that global economies may be slowing a little. This makes US Bonds more attractive and rates move down. The market is also being supported by weaker than expected housing reports this week. Technically the short term continues to improve but the trends in bonds have officially switched to a bias higher. Any new significant bad news out of Europe could change the current trend.

The song remains the same. The title of that Led Zeppelin song is a great description for some of the things we’re seeing lately in the Bond market. Read on for details, and what they mean for home loan rates.
First, several housing-related reports were released last week – and they show that the housing market continues to remain weak. Both Housing Starts and Building Permits came in meeting expectations. Existing Home Sales fell 0.9% in February to 4.59 million units (though that was nearly inline with expectations), while New Home Sales fell 1.6% in February, which was below expectations.
Perhaps the biggest takeaway from these reports is that they could cause the Fed to do another round of Bond buying (Quantitative Easing or QE3) under the guise of helping housing. The housing market remains fragile, and it can’t absorb an uptick in rates just yet. It will be important to see if there are any rumors of QE3 in the coming days and weeks. Rest assured that the Fed has noticed the uptick in home loan rates and subsequent fall off in loan origination activity. This could certainly lead to another round of Bond buying, and as home loan rates are tied to Mortgage Bonds, as Bonds improve so will home loan rates.
Another thing that could help Bonds and home loan rates is renewed emphasis on safe haven trading. While global economic news has taken on a bit of a brighter tone lately, causing investors to move some of their money out of the safety of our Bonds, it’s important to keep in mind that the debt crisis in Europe is far from over. Just last week, it was reported that Portugal’s economy is set to contract by 3.3%, and it seems that it will be nearly impossible for Portugal to meet the tighter fiscal union rules and annual budget deficit targets. Also, Europe’s Services and Manufacturing numbers contracted more than forecast…confirming that the region is moving into a recession.
It is important to note that while Stocks saw some declines last week, Bonds were unable to build any positive momentum. This is eye-opening and doesn’t bode well for further price appreciation in Bonds. Whether the potential for QE3 or future safe haven trading helps Bonds and home loan rates in the future remains to be seen.
The bottom line is that even though Bonds and home loan rates worsened last week, rates still remain near historic lows and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

The last month or so Europe had faded to the background after Greece got its bailout funds to avoid default. Now however, Europe is back in the minds of traders. Interest rates in Spain and other EU countries are increasing as renewed concerns of debt concerns are reviving. Europe’s economy is weakening based on recent data, if its economy continues to soften it brings into question whether the debt ridden countries will be able to meet the austerity plans required to gain assistance from the ECB and IMF. Some of the current improvement in US rates can be attributed to renewed safety trades.

Federal Reserve Bank of New York President William C. Dudley said signs the economy is improving don’t dispel “meaningful� risks to growth, including higher gasoline prices, fiscal cutbacks and a weak housing market. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,� Dudley said today in a speech in Melville, New York. “But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.� A recent survey of a number of economists and analysts showed 90% of those surveyed do not believe the Fed will keep the Federal Funds rate at zero to +0.25% through 2014 as the Fed continues to chant. The economy is improving, the biggest voice against the strength is the Fed as it tries to temper optimism in attempts to avoid having to raise rates. They believe higher rates now will hinder and slow growth in the economy.

Real Estate Miscellaneous Stats:

February new home sales were expected to be up 0.7% from January with some looking for even more improvement. As reported sales fell 1.6% to 313K units, estimates were for 325K annually. January sales originally reported -0.9% were revised to -5.4%. Based on Feb sales there is a 5.8 month supply compared to 5.7 months in January. The median sales prices $233,700.00, up 6.2% from Feb. 2011

February existing home sales were expected to be up 0.7% from January. As reported sales declined 0.9% to 4.59 mil (annualized) from 4.63 mil in Jan; January sales were revised higher, from +4.3% to +5.7%. Based on sales pace there is a 6.4 month supply, the median sales price was $156,000 +0.3% yr/yr. 34% of sales were distressed sales.

Mortgage applications decreased 7.4% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012. The Refinance Index decreased 9.3% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The unadjusted Purchase Index was 1.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.79%. The four week moving average is up 3.25% for the Purchase Index, while this average is down 4.31% for the Refinance Index. The refinance share of mortgage activity decreased to 73.4% of total applications, the lowest since July 2011, from 75.1% the previous week.

FHA Mortgage Insurance Fees Increasing Again: On April 9th any files with case numbers assigned after that date, fees will increase for both the upfront and monthly component. The upfront premium is rising from 1% of the loan amount to 1.75%. The annual premium that determines the monthly payment is going from 1.15% to 1.25% for loan amounts above 95%.

Bay Area Home Sales Jump in February: Sales numbers in the 6 counties of Southern California were up 10.7% compared with the same time last year. That is the also the highest level in 5 years as it was in Southern Cal. Low prices, low rates and a gradually improving Bay Area economy are credited with for the jump in sales. Over all Bay Area prices were down 1.4% as compared with last year with every county experiencing a decrease except San Mateo where values were up 1.8%. Investors made up 26% of all sales which is up from 23% last year. The rental market continues to attract land lords. Market experts see a turn in the market. Supply remains low as most private owners are not listing their homes at the current depressed values. Distressed sales made up about 50% of all sales. Homes foreclosed on in the last 12 months made up 27% of all sales which is down from 32% last year. Short sales made up 23% of all sales. ( Source: Data Quick)

Loan Program Of The Month. Home Affordable Refinance Program ( HARP ): Fannie Mae and Freddy Mac have rolled out their new revised version of the popular refinance program that allows borrowers who have lost equity to refinance without the requirement of obtaining mortgage insurance. In some cases refinancing is possible with negative equity with no limit on loan to value ratios due to 2nd mortgages. Eligible loans must be Fannie or Freddy loans and have been originated before May of 2009. Expanded appraisal waivers, transfer of existing mortgage insurance policies by non-originating institutions and expanded underwriting guidelines are also a part of the new version of the program. These changes are expected the help a large number home owners.

Snoqualmie Pass Real Estate Report

Here is the Snoqualmie Pass Real Estate Report for March 19, 2012:

Mortgage Interest Rates Jump Higher: This week saw interest rates increase the most in eight months. The economy is growing more quickly than was expected a month or two ago and stronger than what the Fed has been thinking. The Fed Open Market Committee statement Tuesday was more optimistic than at the meeting in January. The outlook for the economy has been increasing recently, driving stock indexes to the best levels since the sub-prime economic meltdown in 2008. Whether or not one believes it based on personal observations is not important, it is based on how the stock market is performing recently. Economic data is reflecting improvement at a faster rate than expected six months ago; as the outlook improves the fear of inflation also has increased. Fear of inflation causes interest rates to rise because it erodes the value of the securities that determine interest rates. Core inflation levels remain very low but rates that include energy are higher than Federal Reserve targets. One major factor that had kept US rates low in the last five months was the safety moves in US treasuries on the debt crisis in Europe; that is no longer a force after Greece got its bailout funds and will avoid default this month. Europe’s crisis however if far from over, but for now it is no longer a factor in the bond market that determines interest rates. Another factor that held rates artificially low is the Fed’s constant reaffirmation that it will keep the Federal Funds rate at 0 to 0.25% through the end of 2014; the Fed still is saying it but not many are buying it anymore.

Don’t fight the Fed. The markets certainly felt the truth of that sentiment last week, after the Fed released its Policy Statement from their regularly scheduled meeting of the Federal Open Market Committee. Read on to learn how this and all the news of the week impacted Bonds and home loan rates.
Last week’s Fed Statement was not a glowing endorsement of the economy, but they did admit that things are improving in most areas except housing, which remains “depressed.” While improvement in our economy is good, should this trend continue home loan rates could edge higher. Why? Because Stocks often benefit in strong economic times at the expense of Bonds (including Mortgage Bonds, which home loan rates are based on).
The Fed did acknowledge that inflation could increase in the near-term due to higher energy prices – and higher inflation is never good news for Bonds as inflation hurts the return of a fixed investment. And we did see a hint of this last week as the Consumer Price Index rose a bit in February (though the wholesale-measuring Producer Price Index was tame). If hints of inflation pick up in the weeks or months ahead, this could hurt Bonds and home loan rates.
But there was more salt in the wound from the Fed’s Statement for Bonds and home loan rates. Not only did the Fed fail to mention anything about another round of Bond buying (called Quantitative Easing or QE3), but there was word that out of 19 banks, all but four passed an important stress test. While that’s good news for the financial system and the economy, it did help Stocks at the expense of Bonds.
Another important point to note: Things have been quiet in Europe and this has lifted the safe haven trade, thereby further applying selling pressure on Bonds. That’s not to say that Bonds and home loan rates won’t be seen as a safe haven for trading in the future, as the uncertainty in Europe is far from over. In addition, the issues with Israel and Iran aren’t going to just disappear, and those issues may lead investors back into the safety of Bonds in the near future.
The bottom line is that even though Bonds and home loan rates worsened last week, rates still remain near historic lows and now continues to be a great time to purchase or refinance a home. Let me know if I can answer any questions at all for you or your clients.

Greece appears to have gotten the necessary participation from bond holders to allow for the bailout and keep the country from defaulting. That said, it never seems it is actually over; after one hurdle another is set up. The country didn’t get the 90% participation they wanted so Greece will force holdouts to step using what is called collective action clauses to force holders of Greek-law bonds into the swap. Attention now shifts to euro-region finance ministers, they must decide whether the swap warrants proceeding with a 130 billion-euro second bailout package designed to prevent a collapse of the Greek economy. Germany is calling the debt swap a success.

Pressure in Europe and US stock markets this were triggered on a report that showed that China’s exports grew at a slower pace than forecast. China’s exports are at lows that go back 12 years. China’s various economic reports recently have been weaker than thought, worrying investors that the global economy is slowing. Europe of course is falling back into recession and China’s explosive growth is slowing a little. The stock market however, opened better and continued to improve this week with the Dow closing convincingly above 13000 for a few days.

Real Estate Miscellaneous Stats:

January pending home sales from National Association of Realtors, expected up 1.5%, as reported up 2.0%, the highest index since April 2010; December sales revised to -1.9% from -3.5% originally reported. Yr/yr pending sales +8.0%. Pending home sales are contracts signed but not closed. Many economists are saying the housing market is showing signs of life as a result of higher sales numbers. Sales have risin 13% over the last 6 months and there is currently a smaller supply of homes than we have had in 7 years. Sales are still below the total number needed for a health market which is considered to be 6 million. A disproportionate number of sales continue to be on homes at risk or in foreclosure at 35% of all sales. Homebuilders are also slightly more positive as markets improve. Analysts continue to warn that a full recovery is years away as the damage done when the bubble burst is deep. One third of realtors surveyed say they have had at least on deal scuttled in the last 4 months due to appraisals and mortgage turn downs. First time buyers are making up a large percentage of total sales.

The volume of purchase applications for home mortgages rose 4.4% in the March 9 week with the four-week average up 2.9%. These gains hint at underlying monthly strength for home sales though the report warns that purchase activity remains subdued and is holding in a narrow range.

Increase In Rent Rates May Spur Buying Activity: With the huge foreclosure numbers and many more people coming in to adult age categories, there has been increased pressure on rental markets. As a result, very large investment funds are snatching up large inventory of single family home across the nation as rentals. Many people who could purchase have waited for the market to bottom but the increase in rental rates and lack of rental inventory appear to be changing their minds. First time home buyer activity is up in many markets. As the job market recovers there will be more pressure added to rental markets. As those who went through foreclosure at the beginning of the crisis get 3 years removed from that event they can again consider using FHA financing to purchase a home. ( Office of Federal Housing Enterprise Oversight)

King County Reduced Inventory is Affecting Prices: While overall county prices are still moving down, a significant reduction in inventory is helping soften the blow and even reversing the slip down in some areas. In Seattle the median home value rose 3% compared with last year. Inventory usually goes up this time of year so many experts see this as a good sign for values. More stories of bidding wars on homes in centrally located areas continue to be heard. Sales also improved to the best levels since 2007 at 1230 units for February with South King County accounting for most of the increase. ( Source: Eric Pyrne @ Seattle Times)

Loan Program Of The Month. Home Affordable Refinance Program ( HARP ): Fannie Mae and Freddy Mac have rolled out their new revised version of the popular refinance program that allows borrowers who have lost equity to refinance without the requirement of obtaining mortgage insurance. In some cases refinancing is possible with negative equity with no limit on loan to value ratios due to 2nd mortgages. Eligible loans must be Fannie or Freddy loans and have been originated before May of 2009. Expanded appraisal waivers, transfer of existing mortgage insurance policies by non-originating institutions and expanded underwriting guidelines are also a part of the new version of the program. These changes are expected the help a large number home owners.

Snoqualmie Pass Real Estate Report