Existing home sales increased .5% to an adjusted annual rate of 6.24 million last month. The National Association of Realtors reported on Tuesday that it was the first increase after seven consecutive monthly declines. 

David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers, accustomed to the booming market conditions of previous years, reluctantly cut their prices. 

“Many buyers remain on the sidelines,” Lereah said. “After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007.” 

As we look forward to what we hope to be a strong 2007. One thing will be certain to either pick the market up or keep it slowing, and that is interest rates. Interest rates have been seeing slight decreases and mortgage applications rise every time the fed cuts rates. One thing is certain, if the fed raises rates, the market will continue to force sellers to cut prices as more buyers wait on the sidelines for interest rates to drop. 

 

Home-loan volume, buoyed by the lowest interest rates seen since January of this year, surged 4.3 percent last week. The Mortgage Bankers Association reported a 6.5-percent jump in refinancing demand, which reached its highest level in more than 12 months.

Meanwhile, purchase-loan applications, which two weeks ago were at a three-year low, rebounded 2.7 percent for their best performance in four months.

What does this mean in the coming months and year? One thought is that buyers are now ready to capitalize on lower housing prices which in the long run will decrease the supply of homes and increase pricing.

Interest rates were down slightly and mortgage applications were up almost even with last year, despite a week shortened by the Veteran’s Day holiday, according to the Mortgage Bankers Association.

The Market Composite Index, a measure of mortgage loan application volume, was 647.5, an increase of 4.3 percent on a seasonally adjusted basis from 620.9 one week earlier. On an unadjusted basis, the index was down 0.1 percent compared with the same week one year earlier.

The refinance share of mortgage activity increased to 48 percent of total applications from 46.3 percent the previous week. The refinance share is at its highest level since February 2005.

The average interest rate for 30-year fixed-rate mortgages decreased to 6.15 percent from 6.24 percent. The average rate for 15-year fixed-rate mortgages decreased to 5.85 percent from 5.96 percent. And the interest rate for one-year ARMs decreased to 5.87 percent from 5.89.

Values of homes are not jumping off the paper any longer, borrowers who expected to see fast appreciation may see their selves on the wrong side of the market. Many sellers are in serious trouble and need someone to bail them out, in this case a buyer. Just as fast appreciation cannot last forever, neither will a softening market. Hold on to your home if you can and avoid default at all costs.  Earning potential is there in real estate based on past sale prices so avoid delinquency and foreclosure at all costs. Values will return to previous levels and exceed those too. 

In a receint report, delinquency of borrowers is increasing as values decline.

Residential loans to the riskiest borrowers are sinking into delinquency 50 percent faster in 2006 than last year, according to UBS Securities.
UBS, one of the top 10 underwriters of mortgage bonds, says 2006 subprime loans that are delinquent more than 60 days rose to 2.4 percent after six months, compared with 1.6 percent for loans originated last year.

Subprime mortgage bonds, sold on Wall Street as “home-equity asset-backed securities,” have nearly doubled since 2002 to $565 billion outstanding.

Second-lien loans and mortgages with a high loan-to-value level also are deteriorating faster this year than they did last year, according to the analysts.

As we look at the numbers for October and head into the holiday season, sold home numbers are off from the recent highs of the past few months. October ‘05 saw 52 homes sell compared to 48 last month. In comparison to the past few months there is a decline in both sold and available homes, but these numbers are usual for this time of the year.

Advice as we move forward? Value, buyers want it and sellers need to provide it. Inventory is high and if you home is not the best when it comes to Price, Location and Condition, you will be passed up. There is still activity in the market and sellers need to adjust to market conditions to have a successful sale.

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Below is the weekly update on Days on the Market for East Bay communities.

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Do you think the real estate market has no where to go except down? You are not the first one. History proves that even the ‘Experts have had it all wrong, time and time again.’

 

“The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline.”- Money Magazine 1947

 

“Houses cost too much for the mass market. Today’s average price is out of reach for two-thirds of all buyers.” – Science Digest 1948 (average price at that time: $8,000)

 

“The goal of owning a home seems to be getting beyond the reach of more and more Americans.” Business Week 1969 (average price at that time: $28,000)

 

“The era of easy profits in real estate may be drawing to a close.”- Money Magazine 1981

 

“If you are looking to buy, be careful. Rising home values are not a sure thing anymore.” – Miami Herald 1985

 

“Most economists agree…a home will become little more than a roof and a tax deduction, certainly not a lucrative investment it was…” – Money Magazine 1986

 

“We’re starting to go back to the time when you bought a home not for its potential money-making abilities, but rather as a nesting spot.”-Los Angeles Times 1993 (Note that 1993 was the absolute low-point for real estate values in Los Angeles. Prices have sky-rocketed since.)

 

“Financial planners agree that houses will continue to be a poor investment.” – Kiplinger’s Personal Financial Magazine 1993

 

“A home is where the bad investment is.” San Francisco Examiner 1996