Archive for January, 2008
Fed bets we’ll never learn
January 31st, 2008 Categories: Real Estate News
I am not an economist, but I can follow a simple explanation and here is what I am following regarding the two recent interest rate cuts by Bernanke.
In order to combat a possible pending recession, the fed cut interest rates to help stimulate growth of the economy through consumer spending. Sounds simple enough
The Fed’s rate cuts aren’t as beneficial to homebuyers as they are to homeowners who have balances on their home equity lines of credit, Burford says, because HELOC rates will fall 1.25 percentage points in the next billing cycle. He believes that consumers will react the way the Fed wants them to: by borrowing and spending.- Mortgage Rates Rise a Bunch, Holden Lewis, Bankrate.com,1/30/2008
Now hold on here!!! Isn’t the ‘home as an ATM” philosophy one of the primary causes of our current housing mess?
“It’s a net plus for the American homeowner to have the opportunity for that credit,” Ms. Crews Cutts said, “but it can turn into a nightmare if they aren’t able to keep their finances under control.”-Amy Crews Cutts, deputy chief economist at Freddie Mac,4/22/2006
All of those Hummers, RV’s and toys you saw your neighbors, friends buying in the last several years were not purchased because of raises at work. They were tapping into their homes equity and now they too face the prospect of having an undervalued home even though they have owned for several years.
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New blog
January 16th, 2008 Categories: Real Estate News
Still under construction… stay tuned
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When real estate prices trump life and health
January 15th, 2008 Categories: Real Estate News
San Diego– The headline of today’s San Diego Union Tribune screamed, “ Median Home Price Plummets in County”. They supported this headline by early quoting Economist Mark Schniepp of the California Economic Forecast. What did he have to say?
First he said, “conditions are right for purchasing a home, if you’re making a long-term investment.” and continued with, “I think there is a window of opportunity that will exist between now and summer,” Schniepp said. “Interest rates are only going to fall. The credit crunch is going to get better. There is going to be plenty of inventory. We are not going to have a recession.” 
HUH? A more appropriate headline should be, “Where home prices have fallen, Economists see opportunity”
What inspired this post was reading a bit further down you see an article headlined, “Drug Zetia fails to slow fatty buildup in arteries.” What the real deal here is a story of MILLIONS of people paying for a drug to help save their lives that one, does not work, secondly, may actually make the situation worse, and lastly, the drug companies have made hundreds of millions possibly knowing all along they had a dog.
Here are some excerpts from the article about the usefulness of the drug and that it may actually be more damaging.
-“In a news release, Merck and Schering said that not only did Zetia fail to slow the accumulation of fatty plaque in the arteries, it actually seemed to contribute to plaque formation – though by such a small amount that the finding could have been a result of chance.” SD Union
Tribune-1/15/2008 (plaque is a significant contributor to heart attacks).
-“Steven Nissen, the chairman of cardiology at the Cleveland Clinic, said the results were shocking.
“This is as bad a result for the drug as anybody could have feared,” Nissen said.
Millions of patients may be taking a drug that does not benefit them, raising their risk of heart attacks and exposing them to potential side effects, Nissen said. Patients should not be given prescriptions for Zetia unless all other cholesterol drugs have failed, he said.” SD Union Tribune-1/15/2008
As for the two companies involved Schering Plough(SGP) and Meck(MRK) have seen there share rise significantly and released numerous dividends since the time they were suppose to release their data in April 2006. Schering Plough has seen their stock price rise from approximately $19 to a 
high of $32 while releasing 7 dividend payments. Merck almost doubled at one point seeing their shares go from approximately $34 to a high of $58 while also paying out 7 quarterly dividends.
What do they think about all this on Capitol Hill?
“The House Energy and Commerce Committee, which is investigating the delay, said in a statement yesterday that the fact that the results were negative added to suspicions that the companies deliberately sat on their findings from the study, which was known as Enhance.
“In light of today’s results, which were released nearly two years after the Enhance trial ended, it is easy to conclude that Merck and Schering-Plough intentionally sought to delay the release of this data,” Rep. Bart Stupak, D-Mich., chairman of the committee’s subcommittee on oversight and investigations, said in the statement.”SD Union Tribune-1/15/2008
Now maybe I am sensitive, but knowing that we are being taking for a financial ride, your taxes pay for this drug for anyone on Medicare and impacts your insurance carrier, and that these companies may have put profit ahead of lives shouldn’t life had trumped real estate for a headline?
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Countrywide, the Prince and Ben Bernanke
January 13th, 2008 Categories: Real Estate News, San Diego county Real Estate News
Wow, what a week!!! The pieces are coming together that could help get 
the real estate market steadied. Those pieces are cash back to the financial institution that do the lending and lower interest rates to help keep rates down which will help new buyers and those with adjustable loans.
It all started with the proposed purchase of Countrywide by Bank of America this week. Then there is plenty of talk of more buy outs of financial institutions and lastly, the FED made comments leading everyone to believe there are deep rate cuts coming. The FED needs to do this to limit the impact of the real estate downturn on the overall economy.
I wrote a blog article about other ways to make money from the real estate market and buying stock in some of these mortgage companies may be one way. I was watching Countrywide closely as I found it hard to believe that the nation’s largest mortgage lender was going to be allowed to go under. The company, in my opinion, to watch now is Citigroup(C) which is looking at getting an infusion of capital from Saudi Prince Alwaleed bin Talal. It is trading near it’s 52 week low at $28.56.
Now the fed. The current Fed rate sits at 4.75. The speculation of the market is that the fed will be lowering the rate .75%. Will this translate directly to mortgage rates, probably not. But it will help those that have adjustable rates directly tied to the fed rate, which should slow down the pending foreclosure storm so much written about.
As I write this, the current 30 year fix rate is 5.54% with no points. This is a great time to get into your first home. I have a client in escrow right now in the Westwood townhomes. It is a 2 bedroom 2 bath with a 2 car garage and a yard. It has had significant remodel work done, the kitchen is awesome, to it by the former owner. I can not at this point say what the purchase price becuase of 
confidentiality issues, but lets say that the payment, hoa fess and taxes wil add up to less than $1800/month. That’s a tax write of of abou $22,000 a year. Once these tax benefits are realized, you could not rent for this much.
Call me and let’s find your first home!!!!
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Does 1.04% REALLY matter
January 9th, 2008 Categories: Real Estate News, San Diego county Real Estate News
(CFC)Countrywide home loan delinquencies rise read one of many headlines this morning and their stock got hammered. Since Monday, it is down about 45% currently trading at $4.90 from an all time high of just under $40, with a 2 for 1 split in August 2004. OUCH!!!
As I read the article they stated that loan revenue was up for the fourth quarter which is good news, but that yes foreclosures were up just over a third. The natural first reaction is ‘this has got to be bad, just look at the hit the stock took’, however the number was a miniscule .65% to 1.04. Yes, 98.96% of there loans are still viable. That a darn big number
See Countrywide is the largest mortgage lender in the nation. How are they doing in the current slump? Well in December alone they funded $24 billion in loans in December bringing their fourth quarter total to $69 billion. That’s not a bad book of business considering all the upheaval in the market in particular the mortgage industry.
Additionally there is all the talk of a possible bankruptcy filing. This isn’t the first time the BK talk has swirled around Countrywide. As reported by the New York Times blog as early as August 26, 2007, “a move that came amid speculation that Countrywide’s survival was in question and that it had become a takeover target — notions that Countrywide publicly disputed.” Just what is that ‘move’ I have highlighted? That would be Bank of America buying 2 billion dollars of Countrywide preferred stock, non-voting, that 
could be converted to common shares at $18/share. This is the equivalent to a 16% stake at the time. Brilliant move or… YOU’RE FIRED!!?
The official line regarding these new rumors(?),
“There is no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company,” Countrywide said in a statement, according to Reuters.-January 8, 2008 5:35 PM ET
Lastly, Countrywide Banking still has assets of $113 billion and is offering great rates on CD’s and saving accounts. Currently they are offering 5.45% 
on a 6 month CD with a $10k balance while the national average is 4.2%.
Here is another example of how the media, and not digging deep enough, does not always paint the most accurate picture; Mortgage application volume skyrockets is the headline of another article written this morning. Why isn’t that front page news?
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$435,000 for your own park and 4 bedroom home!!!
January 9th, 2008 Categories: San Diego county Real Estate News
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When a stabilizing market is in crisis
January 1st, 2008 Categories: Real Estate News, San Diego county Real Estate News
I am often asked my opinion of the real estate market. Primarily people want to know when it will be changing for the better. I do my best to answer it honestly and accurately. If I think it is bad, I tell them. If I see a positive than I point that out. The biggest problem I see right now in the real estate market for potential clients is all the information. Here is a perfect example of too much information. Unfortunately it is from a professional group that is suppose to be a tool supporting the real estate professional.
Take a look at articles three and five. Do we have a stabilizing market or is the housing crisis, if there actually is one(see stabilizing market article), lasting through 2008? Hope this helps with your decision making process!!! (what a joke).
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