"Interest rates and old junk"

We are in the clouds this morning. There are lots of mornings during the winter that foothill communities spend in the clouds. Agents will frequently tell their buyers who are considering a move to El Dorado Hills or Auburn that “We are above the fog and below the snow-line. “ They probably don’t tell them that we have clouds up here obscuring commuter’s drive time. What is the difference between fog and clouds anyway? Maybe we need another disclosure for our foothill buyers called the “Cloud Disclosure”.
My wife Vicki is a saver. She saves everything. If anyone needs to borrow a 16mm movie projector we have one. We have an ice cream and a bread maker that we haven’t used in 5 years resting patiently on a pantry shelf. We have paper plates, cups and three hats from a New Year’s party seven years ago and we have 175 wine glasses from various wine and charity events that we have attended going back to 1989 when we decided to give up on the boxed ripple red.
The problem is nobody wants our old junk. So, it goes into permanent retirement in a closet, our storage shed or MY garage. Garage Sales don’t work in remote locations. Few can find our place hidden in the clouds. My neighbors are a suspicious looking lot and scrutinize strangers carefully. Once I put a Ben Franklin wood stove and an old microwave on the corner with a “Free Take Me” sign. Someone did.
I gave myself a new 17 inch monitor for Christmas and now can’t find a home for my old 15 inch one. I must have been the last person in the world to trade their 15 inch monitor for a larger one. Maybe I will take it down the street and put another “Free” sign on it but will I be guilty of littering or dumping illegally? I can see the headlines in our local paper “Local Broker does hard time for trashing community” Maybe I will just store it along with our 16mm movie projector.
Freddie Mac today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 6.15 percent, with an average 0.6 point, for the week ending January 12, 2006, down from last week's average of 6.21 percent. Last year at this time, the 30-year FRM averaged 5.74 percent.
Adjustable rate mortgages are not much lower. Five-year adjustable-rate mortgages (ARMs) averaged 5.76 percent this week, with an average 0.5 point, down very slightly from last week when it averaged 5.78 percent. A year ago, the five-year ARM averaged 5.05 percent.
One-year Treasury-indexed ARMs averaged 5.15 percent this week, with an average 0.6 point, down very slightly from last week when it averaged 5.16 percent. At this time last year, the one-year ARM averaged 4.10 percent.
"Interest rates for long-term mortgages slipped lower this week due to some economic data releases that pointed towards more subdued inflation in the near term," said Frank Nothaft, Freddie Mac vice president and chief economist. "Rates for 30-year fixed-rate mortgages are about the same as they were in late October of 2005. However, shorter-term rates, such as those for adjustable-rate mortgages, were basically unchanged due to market expectations of another rate hike by the Federal Reserve Board at the end of January."
"Our January forecast calls for a gradual rise in long-term rates throughout 2006, ending the year at about 6.5 percent for the 30-year fixed-rate mortgage, while relative rate differences with adjustable-rate mortgages will narrow. This should induce some slowing in housing market activity, but we expect the housing market in 2006 to be strong, nonetheless."
Enjoy your weekend. Vicki and I are off to preview some acreage in the Russian River appellations of Dry Creek, Russian River Valley and Alexander Valley. I suspect that we will return with a few more glasses to add to our collection.

"Welcome to Wal Mart"

Finally, yesterday I received my first buyer client call of the New Year. I was beginning to think my phone was never going to ring again. Traditionally, buyer calls are slow during the holidays but this year it was completely quiet. It was beginning to concern me. I had to call myself several times between Thanksgiving and New Year just to make sure that my phone was still connected. Commission sales are feast or feathers but yesterday Susie called. She saved me a trip to Wall Mart where I was going to apply for a job as a “Greeter”……”Welcome to Wal Mart”.
I had only met Suzie once at an art and wine event a few years back in Placerville. She was there with a past client who introduced us. Suzie said that she wanted to buy a home in El Dorado County but needed to work through some issues first and would call me when she was ready. Yesterday and three years later I got the call.
Being single woman and self-employed isn’t the problem today as it was 5 years ago. Twenty years ago it would have been nearly impossible for a single woman to qualify for a loan. Today single women have become the fastest growing segment of the housing market, accounting for 18 percent of all homebuyers according to the National Association of Realtors Profile of Home Buyers and Sellers. This places women next to married couples as the largest demographic group of buyers. A single woman, in fact, is more likely to purchase a home than a single man (56% vs. 47%). Single women purchased approximately one out of every five homes in 2004 compared with more than one out of ten homes purchased by men. Current statistics show 15.5 million women in the US living alone, compared to only 11.8 million men. So what’s up with that?
More women today have sufficient incomes to enter the housing market. Continued high divorce rates, delayed marriages and longer life expectancies have contributed to the increased number of women headed households. According to the Fannie Mae organization, it's a trend that will continue. Fannie Mae predicts that by 2010, women headed households will increase to nearly 31 million—close to 28% of all households in the country. A nationwide survey conducted by Sears, Roebuck and Co. showed that married households are declining. In the 1950s, married couples occupied nearly 80 percent of all households. Today the number of married couple households has slipped to 50.7. Things change.
Now that I know that my phone works, if you know of someone single or married who would like to buy a home please forward this e-mail along to them.

Something suspicious

John Garamendi is running for Lt. Governor and is using his position as Insurance Commissioner to make headlines as a consumer advocate. He isn’t. The Insurance Commissioner is claiming that title and escrow fees are too high. He wants to reduce the profits that the title companies have been making on their title policies.
Based upon my past experience in real estate and as a former owner of an escrow company I agree that title insurance premiums are too high BUT the corresponding escrow fees are too low. Title companies subsidies the true cost of providing escrow services for the opportunity of getting the title premium. As a kid I worked in a grocery store. Each week the manager would advertise special sale items that we actually sold below our cost. The manger knew that customers attracted into the store to buy the specials would buy other high profit margin items also. It all balanced out.
Garamendi bases his publicity stunt on a report by a Texas economist, who never asked a title or escrow company representative a single question about their pricing philosophy. The report claims that there is no competition among only 15 title companies. Gregory Vistnes, a former deputy director for antitrust at the Federal Trade Commission’s Bureau of Economics (and who is not running for a political office) reviewed the Texan report and said, “The analyses contained in the report are superficial, misleading or simply wrong.”
But let us assume that title insurance which is a requirement for any loan by any lender is too high. Who do you suppose reviews every title insurance company filed insurance rates? The Department of Insurance and John G. Then why now, after 4 years in office and after one million loans have been refinanced, all requiring title insurance, is the commissioner taking on the 100 (not 15 as the report claimed) title companies?
Competition between title and escrow companies for business is fierce. Every title company is required to file their title insurance fees with the Department of Insurance. Their policy rates have actually decreased over the past two years according to the department’s own records.
Regulators should call attention to industry practices that they feel are unfair business practices. Garamendi has had ample time over the past four years to do so. I am very suspicious.

Outlook for 2006

Having a web conference with five of the most nationally recognized real estate and finance economist might not be high on your “to do” list but if your 2006 business plan is dependent on real estate and making mortgage loans it was a priority for me.

The Web conference call was hosted by The Homeownership Alliance, five of the industry's top economists discussed the outlook for the housing and mortgage finance markets for 2006. Participating on the panel were David W. Berson, chief economist for Fannie Mae, David Leareah, chief economist for NAR, Paul Merski, chief economist for the Independent Community Bankers of America, David Seiders, chief economist for NAHB, and Frank E. Nothaft, chief economist for Freddie Mac. For 2006, Leareah predicted that existing home sales would decline between four and five percent, probably more in some hot markets like California, new home sales would drop five to six percent, and housing starts would fall seven to eight percent.

Nothaft speculated that there would be a reduction in mortgage originations of about 14 to 16 percent and cash-out activity would be half the level of 2005. Both Seiders and Merski suggested that the 30-year fixed rate would end up around 6.7 percent for 2006. Nothaft said he expects the share of adjustable-rate mortgages to drop from the 30 percent level of 2005 to 25 percent in 2006.

Opinions differed on predictions of home price appreciation, ranging between three and six percent, down from the 13 percent for 2005. All agreed that though the boom was winding down, housing activity would still be at a healthy level and 2006 could be the third best year ever.

According to all of the members of the panel, investor activity could be one of the biggest risk and unknown for 2006. There is the possibility that investors will not only stop investing, but will move units back onto the market in large volume. The question is where they would put their money if they pulled it out of the real estate market.

The consensus was that the Feds will probably raise the federal funds rate at least once more in January and possibly a second time in March. They predicted the Fed. rate should level off to about 4.5 to 5 percent this year.

Having been reassured that 2006 was still going to be a good (not great but good) year I decided to continue to work on my business plan. How is yours coming along?