How I read the market

This market is very interesting. What I am seeing is an active market for properly priced properties that are well located with good floor plans that  show well, but that properties that have some problems, such as a strange lay-out, deferred maintenance, poorly designed remodel, or that are significantly over-priced are sitting on the market. My last 2 listings sold within 3 days of being placed on the market, and both were in the mid $400,000 to $600,000 range. The most important factor which led to their quick sales was that the sellers agreed to let me help them “stage” their property. Because of this, both properties showed like a model home.

Most of the problem in the real estate markets are occuring in this price range where first time buyers got into financial problems when they financed their purchases with 100% variable rate financing and were unable to afford the increase in the monthly payments when short term interest rates bumped up. Interest in this price range by buyers is still strong, and many properties that are well located and show well are receiving multiple offers. I have one client who has recently placed full price offers on 2 properties in the mid $400,000 range in San Pedro and still lost out to other buyers.

Homes in the $1 million and over price range have faired fairly well in this market, particularly on the Palos Verdes Peninsula. There have been some recent decreases in the list prices of homes, but most of this has been a result of overly aggressive initial pricing by the listing agents. Homes prices generally are still above year ago levels. One property was recently listed for sale in lower Lunada Bay in Palos Verdes Estates, and they received several offers in excess of the list price. This home was in a very desireable area and demonstrates that demand for well located propeties is still strong.

Interest Rates Hold Firm

Excerpts from HSH Associates newsletter for the week ending June 29, 2007:

Economic crosscurrents continue to provide a less-than-clear direction for the road ahead, and mortgage rates remain at elevated levels, according to the nation’s widest sampling of mortgage prices. The average 30-year fixed-rate mortgage (FRM) edged one basis point lower, landing at 6.80%, while 5/1 Hybrid ARMs dumped four basis points to close the week at an average 6.47%.

The housing market is dragging growth downward, but perhaps the rate of decline is slowing, if nothing else. Existing Home sales for May rang in at a 5.99 million (annualized) rate of sale, down just 0.3% for the month. However, that lumbering sales pace leaves an inventory overhang of nearly nine months of unsold homes available, which may produce downward pressure on home prices. May’s median home price of $221,600 was unchanged from April.

The Fed isn’t likely to lower interest rates anytime soon even if measures of core inflation start to fall into their comfort zone, believed to be about an annualized 2% mark for “core” measures of inflation.

Mortgage rates meandered this week, closing on a slight downward note. Next week brings an Independence Day holiday right in the middle, but there are potential market-moving reports . . .  so traders can’t easily skip out before or after the holiday. If we’re right . . . , mortgage rates could back off by a few more basis points, perhaps as much as four or five. At worst, we’d expect no change.

                                                         Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.45%	6.80%	6.63%	6.07%	6.39%
CA/Statewide	6.53%	6.84%	6.70%	6.39%	6.45%

Interest Rates Surge

The following are excerpts from HSH Associates newsletter for the week ending June 8, 2007:

Home mortgage rates continued their weeks-long rise this week; the average 30-year fixed-rate mortgage (FRM) surged by 14 basis points (0.14%) to close the nation’s leading poll of mortgage prices at 6.65% (up almost 30 basis points (.3%) in the last month). Hybrid 5/1 ARMs followed suit, rising to 6.46%, a spurt of 15 basis points. These increases were largely due to a surprise hike in foreign interest rates.

A light economic calendar, a stock market which seems to have topped out for the moment, and a late-week selloff in the Treasury market — which pushed 10-year Treasury yields to five-year highs before falling back by week’s end — all contributed to the increase in mortgage rates, particularly this week. As has been the case over the last couple of weeks, economic news has been mixed, but flashes of stronger growth have become clearly evident.  Inflation concerns are evident around the world; the European Central Bank raised rates a quarter percentage point this week, setting their key interest rate at 4%. Opportunities in other bond markets are drawing off investor dollars, adding more firmness to U.S. interest rates.

Mortgage rates took quite a hit this week, but this was due largely to the Treasury selloff caused by a surprise rate hike by New Zealand’s Reserve Bank; this spurred fears that other countries’ central banks might follow suit. Even without this scare, the general runup in rates over the past few weeks isn’t wholly unexpected given the reports of stronger economic data and a revival of economic growth from a truly anemic 0.6% in the first quarter of this year. Investors have given up on a rate cut by the Fed this year.

                                                            Fixed Rate                   Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	6.36%	6.65%	6.51%	6.01%	6.37%
CA/Statewide	6.46%	6.72%	6.60%	6.19%	6.45%