A Conversation About the Current Real Estate Market

In my last article, concerning the mortgage market and rates, I indicated that we might see the yield on the 10 year Treasury note trade between 4.6% and 4.9%. Remember, the direction of the 10 year Note yield is often a reflection of where 30 year fixed rate mortgages are heading. At this writing, the yield has fallen below 4.6%. The rate on a 30 year fixed rate mortgage (conforming……more on this later) is currently around 6.25%. Prior to the debacle in the sub prime market and capital markets, such a downward move in the 10 year Treasury note yield, would have translated into a rate that would be lower than what we are currently seeing. So, with the perceived risks in the mortgage market, rates are just not falling like they would have in the past. Investors still perceive more risk in the mortgage market and they want higher returns on their money.The sub prime woes are starting to impact other sectors of mortgage lending. When we talk about conforming loans that means that we are looking to Fannie Mae or Freddie Mac. Their current guidelines, on conforming loans, limits mortgage loans at $417,000. So, if you buy a home for $521,500 and put down 20% your loan amount is $417,000 and your loan is conforming. Anything above a $417,000 loan is non-conforming and you have to look beyond Fannie Mae and Freddie Mac for a loan.The problem is that investors in the capital market that buy mortgage backed securities are gun shy right now for mortgages other than conforming, that are backed by housing agencies such as Fannie Mae, Freddie Mac or Ginnie Mae.Given the troubles in the sub prime sector, investor appetite for all types of mortgage loans not guaranteed by the above agencies, has dropped off significantly. Lenders had been able to move the risk of jumbo loans by selling them to investors. However, these investors have been burned by the sub prime market and they have become very picky and as a result they are demanding higher returns.Countrywide Financial has said that they are now focusing on making loans that can be guaranteed by Fannie Mae or Freddie Mac. Other lenders have tightened their borrowing guidelines. They may want the borrower to fully document their incomes and assets even though they have great credit and they are making a large down payment. With the lack of investor demand, banks that are still making jumbo loans (over $417,000) are charging higher rates as dictated by the capital markets.There is a psychological impact going on here and it is affecting certain high-priced real estate markets. Times of uncertainty tend to push people into delaying purchase decisions. Some people may be waiting to see if conforming limits will be increased. They are just waiting to see what will happen and how it might affect their home buying decision. All of this is going to start to put more downwards pressure on the real estate market should the lending environment remain tight. In California, the median home price is well above $500,000 and jumbo mortgages make up over 40% of all mortgages issued. In San Francisco, the median priced home is $1.1 million.Here is a look at the 10 Year Treasury Note yield. The trend is still down (the red line) and we are testing the lows of March:

Road Trip to Hoover Dam and Milepost 28 Arizona

Last Friday, I decided to take a day trip to Hoover Dam. While I didn’t go through the visitors center, I did take some pictures that I though you might enjoy. It was actually a fun trip. We ended up driving into Arizona and at milepost 28 we came across Rosie’s Den. My friend, Colleen McGrath, said it reminded her of an old roadhouse in Alaska. Rosie’s is a very quaint cafe, restaurant, bar and tourist attraction of sorts. They had a camera crew from one of the news channels taking video of the people hoping to win the Powerball, which was over $300 million. I guess this is the place people come to, from Nevada, to buy their Powerball tickets. Another friend told me it was a popular site for recreational bikers venturing into Arizona. Rosie’s is known for their large pancakes, their friendly staff and they sell a lot of lottery tickets. Who knows what will happen when the Hoover Dam bypass bridge project is completed. I understand that land values have been moving up. Sorry, I don’t have any pictures of Rosie’s Den. Maybe, someone will read this post and send us one.

Grape Expectations – Winemaking in Las Vegas

Winemaking in Las Vegas? Yes, I met with Charlie Peters this morning and we talked about his new ambition. Charlie is the founder of Grape Expectations Nevada School of Winemaking. He is a longtime resident of Las Vegas and has spent many years in the Food and Beverage Industry here in the city. On a trip to the Jersey Shores with his friend Louis Sodano the idea of starting his own school of Winemaking emerged. There are many Italian-Americans in the Jersey Shores area and you’ll find that winemaking is wide spread, even if you may have to go back a couple of generations.

What you will find at Grape Expectations is quite extraordinary. The facilities are spotless and the many oak barrels of wine conjure up the thought that your own wine could be aging and ready for consumption in a few months. Charlie’s friend, Master Winemaker Louis Soldano, has taken a hand in finely tuning the production  facilities.

Each oak barrel will hold 53 gallons of wine. This is roughly 240 bottles of wine. Charlie wants this to be a hands on experience that can create long lasting memories shared with family, friends and business associates. The idea of partnering up will allow expenses to be shared along with the wine that you produce.

You start the process by selecting a grape varietal. Perhaps a Merlot or a Chardonnay, there are over 20 varietals to select from. The grapes are then crushed, de-stemed and fermentation is begun. We all remember the grape crushing scene from “I Love Lucy”, in this instance a hydraulic wine press is used. The juice is then pumped into the barrel. After a few months the sediment is washed from the barrel and the wine is reintroduce into a fresh barrel where the final aging process continues. Your final session is bottling and you can design your own label or choose from their selection. Go ahead and  “uncork” a new family tradition. Not a bad idea for creative team building or providing distinctive gifts for valued customers. It truly looks like a fun experience no matter what the reason.

To find out more about Grape Expectations you can visit their website at www.grapeexpecttionslasvegas.com (you can find their link on this site under local merchants) or you can call Charlie at 702-806-3383.

A Trip to Real Estate Connect in San Francisco

Larry and Kathleen just returned from the Real Estate Connect in San Francisco.  It was two and one half days  jammed packed with information and ideas. At times conflicting ideas. Real Estate Connect is a place where the real world of traditional real estate meets head on with new ideas, new technology, new marketing, innovations and discussion of where real estate is going from the here and now into the future. Currant trends and troubles are addressed, such as the decline in the housing market, the subprime mortgage crisis and of course what all these things mean to agents and to our clients.

Just a few of  the companies represented at the conference by their top excutives were, HomeGain, Chase International, Prudential, Coldwell Banker, John L.Scott, Homes.com, Imprev, Oodle, Trulia, Zillow, House Values, Active Rain, epraisal.com, Point 2 Technologies, Google, National Assoc. of Realtors, IAC, Zip Realty, OpenMLS, Move,Inc, Mapquest, Bank of America, Microsoft, craigslist.org, Yahoo, Redfin, etc.etc.

One thing is clear, things are changing. More and more the driving force in many things is the consumer or I should say YOU, the home buyers. The ease with which the real estate world is at your fingertips is paramount. Agents who know their community, how to embrace new technology to help you and understand what is happening in the real world of real estate will be best at serving their clients. At the conference there was an entire day of sessions devoted to real estate bloggers.  This makes our heart go pitter patter, as you may have noticed we are bloggers!  We have been  developing a network of blogs about towns and cities across the nation all connected to each other and to the consumer in each area. Each town will have its own sponser and voice. We blog with the purpose that was espoused at Inman New’s Real Estate Connect, to educate our readers and clients about real estate and mortgage ins and outs. providing them with a better experience when they are shopping for a home.  Info about the community they are thinking about living in is a major theme.  All of our blogs are 2.0, allowing you to comment or ask questions, which we will answer. Please Ask!  Blogs were often touted as the best method of marketing in the future.

Click on this link for the full article by Larry Cragun on IssaquahUndressed.com

Centennial Hills Community Center and Park

Posted by mark clawson

You now have a new Centennial Hills Community Center and Park. The Community Center is operated by the YMCA of Southern Nevada. The monthly and annual fees are reasonable given the amenities that are found at the center. At the YMCA, no one is turned away because of an inablity to pay. Program and membership assistance are available to those that complete the application and qualify. The Community Center is lots of fun with tremendous facilities. You’ll find full court basketball, indoor pools, aerobics studios, a weight room, computer lounges and many other activities. They have a number of programs for “Itty Bitty” three to five year olds. Swimming Lesson are available for all ages starting at three months.This is not just for the kids, the YMCA offers FREE childcare. So work out to your hearts content. You can even book a private party at the water park which has flume slides and aqua play zones.

Mini-Panic in Stocks – Good for Mortgage Rates?

The stock market came slightly unglued today, dropping 387 points to 13,270, as an announcement by BNP Paribas raised concerns about a widening problem in the U.S. Credit markets. The European Central Bank and the Federal Reserve added a combined $154 billion into temporary banking reserves. There is a concern about credit availablity and bad sub-prime mortgages. It seems as though there is growing evidence that the sub prime lending problems are starting to work there way into the general economy both here and abroard. The $130 billion injected by the ECB is the largest ever. “This is a mini-panic,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., “All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer.” There is some talk that the Fed may cut rates at their next meeting. I would suggest that the Dow Jones Industrial average could easily find itself back to 11,000 if this “mini-panic” continues. On the technical side, a point and figure chart could confirm that zone, however, the Dow would need to fall below 13,100 and stay below that number.

On the Mortgage front this news is good for mortgage rates since there is flight to quality issue when the stock markets are in turmoil. The 10-Year Treasury note yield has an influence on where mortgage rates are heading. The chart below indicates (by the red trend line) that the yield is still in an uptrend. However, the recent failure to get above 4.9% would indicate that  we may see a trading range between 4.6% and 4.9%.

Remember that even if the Fed were to cut rates, it will have the greatest impact on short term rates. When the Fed started and continued to raise rates, 30 year fixed rate mortgages were pretty much unchanged. A rate cut could start to bring short term mortgage rates down and this can make home ownership more affordable.