Real Estate Guru

Difference between a Short Sale and a Bank Owned Home

I recorded a very short video clip on the difference between short sales and REO properties or bank owned homes, since I get asked this question almost daily.

www.cineplextours.com/sh001a 

Let me know if you have any further questions, and happy house hunting!

Market Recap for October 20th, 2008

Keeping you updated
on the market!
For the week of
October 20, 2008

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MARKET RECAP No one would blame you if you complained of dyspepsia these days. After all, one day the Dow Jones Industrial Average is up 400 points, the next day it's down 700 points. That's been the modus operandi in the stock market for the past two weeks, as investors react half-cocked and full-bore to the day's financial headlines. Mortgage rates joined the act last week, moving about like an inebriated butterfly in search of a flower. But unlike the stock market, mortgage rates moved higher – much higher. According to Bankrate's latest national survey, the prime 30-year fixed-rated mortgage averaged 6.74%, the prime 15-year fixed-rate mortgage averaged 6.41%, and the prime 5/1 adjustable-rate mortgage averaged 6.61%. It was the biggest all-around weekly rise in more than 21 years. What gives? Some pundits are blaming higher mortgage rates on the government's $700 billion bank bailout. Banks remain hesitant to loosen the purse strings because they are uncertain about what to sell or to whom to lend. The Treasury Department responded by stating it would take a $250 billion equity stake in potentially thousands of banks. In fact, it's already taken a $100 billion preferred-stock stake in nine of the country's largest banks. This latest move could be the preferred strategy; the direct investment approach immediately improves banks' capital position, which should, in theory, enable them to increase lending activity immediately. We'll see in coming weeks if this new strategy proves effective. Mortgage rates approaching 7% might seem a little ominous, but it's not, if you put today's rates in historical perspective. Back in the early 1990s, when the fallout from the savings and loan crisis was gaining traction, the 30-year fixed-rate mortgage moved between 8% and 10%. If you go back even further, to the early 1980s, when the economy was in a deep recession, 15% 30-year fixed-rate mortgages weren't uncommon. The real villain in today's mortgage market isn’t rates, it’s lack of liquidity caused by overly stringent underwriting criteria. The continued slowdown in housing starts isn't particularly ominous either. Last week, the Commerce Department reported that housing starts fell 6.3% in September to a seasonally adjusted annual rate of 817,000, the lowest since January 1991, sending some professional worrywarts into a conniption. Builders cutting back on production is simply good economics. When a market suffers from an inventory glut, the last thing you want to do is add to that glut.

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Leading Indicators (September)	Mon. Oct 20, 10:00 am, et	0.3% (Decrease)	Moderately Important. The indicators offer more proof that the economy is moving toward a recession.
State Street Investor Confidence Indicator (October)	Tues. Oct 21, 10:00 am, et	65 Index	Moderately Important. Confidence is expected to crater with the stock market's recent performance.
Mortgage Applications	Wed. Oct 22, 7:00 am, et	None	Important. The pop in rates last week is expected to slow application activity.
Existing Home Sales (September)	Fri. Oct 24, 10:00 am, et	4.88 Million (Annualized)	Important. Sales are expected to show a slight decline, but lower prices are slowing the downward trend.

I'M BUYING That's basically what legendary investor Warren Buffett said this past Friday. After global equities suffered another bruising week, Buffett revealed that he is now buying U.S. stocks with his own money. He predicted that shares would "substantially" outperform cash over the next decade. Writing in the New York Times, Buffett echoed his famous motto – to be fearful when others are greedy, and be greedy when others are fearful. The word “greedy” is a misnomer. The word “opportunistic” better describes the sentiment. The premise of the message, buying at bargain prices, is worth heeding. What's more, it not only applies to stocks but other forms of investment as well, including real estate, which is something more people will become attuned to in the next 12 months. The only obstacle blocking some opportunistic buyers from applying Buffett's motto to today's real estate market is a sclerotic lending environment. But that could be changing. Buffett's recent stock purchases include Wells Fargo, Goldman Sachs, US Bank and SunTrust. Banks don't make money unless they lend. Perhaps Buffett sees a freer lending environment in the near future. And of course if you need local real estate information on Southern California homes for sale or mortgage financing options, go to www.TeamHomeSales.com If you have questions about the difference between a short sale and a bank owned property you can also watch this short video clip www.cineplextours.com/sh001a  .

Market Update for October 6th, 2008

Keeping you updated
on the market!
For the week of
October 6, 2008

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MARKET RECAP What should have been a sure thing last week turned out to be a sure thing this week. We are referring to the $700 billion financial-market rescue package, which the House of Representatives unexpectedly nixed last week on a 229 to 205 vote, sending equity and credit markets into a tailspin. The Senate then stepped in, larded the package with porcine inducements, and then sent it back to the House for another vote. Fortunately, the House gave the amended package a collective thumbs up and sent it to the President for his signature. The good news is the core of the package remains intact – the Treasury Department will have $700 billion at its disposal to purchase bad mortgage-related securities that are weighing down the balance sheets of the institutions that hold them. The purchases should help improve the flow of credit, which is freezing fast, threatening not only consumers’ ability to make purchases but businesses’ ability to conduct routine operations. And the last thing we need is a new threat to business operations; employers cut the most jobs in five years in September, eliminating 159,000 jobs and sending the unemployment rate up to 6.1%. Unemployment rates weren't the only thing rising last week. Mortgage rates continued their push higher too, erasing half the improvements realized after the feds put Fannie Mae and Freddie Mac in conservatorship. The higher rates reflect an increasing unwillingness among lenders to lend money, and that's not good. And as always, go to www.TeamHomeSales.com to search for homes for sale and rent in Southern California~

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Federal Reserve FOMC Minutes	Tues. Oct 7, 2:00 pm, et	None	Important. Markets are expecting the Federal Reserve's bias to shift toward additional rate cuts.
Consumer Credit (August)	Tues. Oct 7, 3:00 pm, et	$5 Billion (Increase)	Moderately Important. The slowdown in credit growth reflects current credit-market conditions.
Mortgage Applications	Wed. Oct 8, 7:00 am, et	None	Important. Applications plunge on increased credit-market turmoil.
Pending Home Sales Index (August)	Wed. Oct 8, 10:00 am, et	85.6 Index	Important. The index suggests falling home prices are stabilizing sales activity.
Wholesale Trade (August)	Thurs. Oct 9, 8:30 am, et	0.2% (Increase)	Important. The increase in sales suggests the economy continues to avoid a recession.
Import Prices (September)	Fri. Oct 10, 8:30 am, et	1.5% (Decrease)	Important. Prices continue to drop on falling energy prices, further mitigating inflation concerns.
International Trade (August)	Fri. Oct 10, 8:30 am, et	$59.5 Billion (Deficit)	Moderately Important. The expected deficit is in line with recent postings and will have little impact on financial markets.

Thawing the Credit Markets No one can overstate the need to unfreeze the credit markets. Home prices dropped in 24 of 25 U.S. metropolitan areas in July, led by declines in Las Vegas and the coastal cities of California , as foreclosures depressed prices and accounted for a fifth of all sales. Foreclosed houses tend to sell at a discount of about 20% to owner-maintained houses; these discounts are weighing on prices throughout the country. Meanwhile, the market for commercial paper, short-term borrowing by businesses, has nearly frozen to a standstill. Even giants like General Electric are suffering. The industrial giant had to sell $3 billion worth of preferred stock to investing legend Warren Buffet and had to place an additional $12 billion of stock in the equity markets to maintain its triple-A bond rating. To get credit flowing again, banks have to start lending to each other at lower rates. When banks charge each other a higher premium to borrow, the cost trickles down to the consumer. One indicator of how willing banks are to lend to each other is the "TED Spread," which measures the difference between the three-month LIBOR (London Inter-bank rate) and the three-month Treasury rate. The higher the spread, the greater the aversion to risk. Last Tuesday, the spread surged to 3.5%, its highest level in more than 25 years. The fact is the $700 billion rescue package is the icebreaker for our frozen credit markets. Sure, the prospect of re-floating a few free-wheeling fat cats and funding a few pork-barrel projects appeals to no one, but the prospect of cutting off our nose to spite our face isn't very appealing either. We might not like it, but Congress did the right thing.