Vancouver Washington & Portland Oregon Real Estate Report November 4, 2008 From Ed Bisquera

Real Estate Report Newsletter -- A weekly news update from Ed Bisquera, Mortgage Planning Consultant

November 4, 2008

Happy Election Day

This has not been a good election season. It is not fun to watch candidates point fingers at each other claiming that their opponent and their party helped cause the mess we are in. It would have been better to have candidates claiming that they were the cause of how well things are going. It is hard to say we are on the right road with so many people hurting in this financial crisis. On the other hand, let’s not lose sight of the fact that the political process in this country, though not perfect, is a privilege for all of us to participate.

Right now the government is doing plenty to put us in better position. The Federal Reserve Board lowered short-term rates to their lowest level in history. The Treasury is buying banks, commercial paper and even is considering a plan that would modify mortgages for millions. But the markets are not reacting well. Long-term rates have moved up despite the Fed’s action. The stock market had one of its worst months in history. Economic growth was negative for the past quarter and this puts us in recession territory.

History has shown that significant fiscal stimulus will turn the ship around. And we have never had as much stimulus as we have right now. Elections can boost the economy as well. Not just through dollars spent, but because of confidence. Above all, this crisis is a crisis of confidence. No matter which candidate wins, there is a possibility that the markets will react positively. If people envision the end of the crisis–more will step up and be part of the recovery.

The Markets. Rates reversed their drop of the previous week . Freddie Mac announced that for the week ending October 30, 30-year fixed rates averaged 6.46%, up sharply from 6.04% the week before. The average for 15-year fixed rose significantly as well to 6.19%. Adjustables were also higher with the average for one-year adjustables increasing slightly to 5.38% and five-year adjustables rising to 6.36%. A year ago 30-year fixed rates were at 6.26%. "Long-term rates followed long-term Treasury bond yields higher this week, pushing fixed-rates up to levels of two weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist. "The Federal Reserve’s 0.50 percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low; consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels. In other news, house-price declines in many markets have improved housing affordability and stimulated home sales. In September, sales of existing homes rose 5.5 percent while sales of new homes were up 2.7 percent, at a seasonally-adjusted annual rate."

  Bargain hunters and home owners who pulled their properties off the market hoping for better days down the road helped shrink the inventory of available homes in September, according to a Wall Street Journal survey. The largest year-over-year declines in inventory were 32.1 percent in Sacramento, 27.1 percent in Orange County, Calif., 21.6 percent in Los Angeles, 21.5 percent in Boston, 21.1 percent in Denver, and 20.6 percent in San Diego. Demand for housing has slowed even as the population has increased, according to Census Bureau figures. Mortgage Bankers Association chief economist Jay Brinkmann blames lack of jobs, noting that young people don’t go out on their own nearly as frequently during tough times. Source: The Wall Street Journal

House and Senate leaders are considering enacting another economic stimulus package after the Nov. 4 election, and realtors and home builders say the measure should provide assistance for home buyers and the housing market. Realtors say first-time home buyers should not be required to repay the new $7,500 tax credit for purchasing a home, and they add that Congress should extend the break to all buyers of a primary residence. "Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving as quickly as possible," says Richard Gaylord, president of the National Association of Realtors. The building community, meanwhile, says municipalities should waive impact fees on new projects, streamline the development review process and allow higher density for affordable housing, among other measures. "By encouraging new development rather than penalizing it, local governments will be helping to create a new business environment that will generate jobs, stabilize property values and get the housing market back on track." Source: National Mortgage News

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