Forbes

America’s riskiest real estate markets

Using data from a variety of sources, Forbes has compiled a list of the nation’s “riskiest” real estate markets – which includes San Diego and Sacramento.  But, the magazine concludes, there are signs that improvement may be on the horizon for these two major California markets.

MAKING SENSE OF THE STORY FOR CONSUMERS:

• The riskiest markets are those with high foreclosure rates, slow or no job growth, and a glut of homes on the market.  Markets like Detroit, Cleveland, and Miami display all three characteristics.
• By contrast, transactions are rising in San Diego, and that’s a good sign assuming the increase is sustained.  Rising transaction numbers may mean credit is becoming easier to come by and buyers are looking somewhat more favorably on the market.  In fact, Forbes suggests prices also may begin to rise over the next six months.  That’s because there usually is a lag between increases in transaction numbers and price increases.
• The Forbes report also projects better times ahead for San Diego and Sacramento thanks to a 125 percent increase in Fannie Mae/Freddie Mac conforming loan limits.  In San Diego, the report notes, 18 percent of the market will see improved lending conditions.

To read the full story, click here.



  National Public Radio

Many homeowners insist on inflated prices

Behavioral finance professor Hersh Shefrin of Santa Clara University discusses why some homeowners decline to accept an offer from a buyer that is less than their inflated asking price.

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   Dallas Morning News

Report:  Housing slump hitting second homes

Vacation home sales declined by more than 30 percent in 2007 and home sales to investors fell more than 18 percent from the previous year, according to a report issued Friday by the NATIONAL ASSOCIATION OF REALTORS®.

MAKING SENSE OF THE STORY FOR CONSUMERS:

• Sales of primary residences dropped 10 percent nationally over the same period, so it is no surprise that second-home and investment purchases, which tend to be discretionary, would fall as well.
• Second home and investment property buyers also have faced the same disruption in the mortgage market that buyers of primary residences have faced.  Mortgage credit tightened across the board during the last six months of 2007, creating a significant barrier to the completion of second- and investment-home sales.
• Despite the decline in sales, the median price of investment properties remained unchanged at $150,000 and vacation home prices fell by only 2.5 percent from 2006 figures to a median price of $195,000.
• Even with a softening in second/investment home sales, buyers remain optimistic:  80 percent of those surveyed by NAR in 2007 said they considered it a good time to invest in real estate.

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     Bloomberg.com

Banks fail to lower mortgage rates as Bernanke cuts

Though they’ve received seven interest rate cuts and a program designed to kick-start borrowing, banks are rebuilding their balance sheets rather than passing on the cuts to consumers in the form of lower interest rates.

MAKING SENSE OF THE STORY FOR CONSUMERS

• With home sales continuing to fall, policy-makers have shaved 3 percentage points off of bank borrowing costs, but the average fixed rate has dropped only half a point.  Last week, the rate for a 30-year-fixed loan was 5.85.
• In 2000, the last time home sales fell year over year, interest rate cuts helped revive the market.  During 2001, the Federal Reserve acted 11 times to reduce rates by a whopping 4.75 percentage points.   Fixed rates fell to a record low of 5.21 percent in June 2003.
• Because they have been holding steady at just below 6 percent in recent years, interest rates would have to fall to 5.7 percent or less to stimulate a wave of home purchase or refinance activity, according to one mortgage broker.

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    Reuters

Wall Street reacts to Paulson plan

Here’s a thumbnail sketch of Treasury Secretary Henry M. Paulson Jr.’s proposal, unveiled Monday, to create a set of federal regulators with authority over the entire financial system.

To view the video, please click here.