House OKs Lift on Fannie, Freddie Loan Limits
The economic stimulus package hammered out between the White House and Congress on Thursday lifts the size of home loans that may be bought or insured by Fannie Mae and Freddie Mac.The Fannie/Freddie cap would rise to $729,750 for one year. Currently Fannie and Freddie are capped at $417,000.

The measure also would permit the Federal Housing Administration to indefinitely insure loans up to that same level. Currently, FHA loans may not exceed $367,000.“The stimulus package announced today is a positive step toward strengthening the housing market and our economy," NAR President Dick Gaylord said in a public statement. "The increase in loan limits should provide liquidity to the mortgage market in all parts of the country allowing qualified home buyers who may have been on the sidelines to enter the market."

The measure is also expected to make jumbo loans more affordable because it will make them more attractive to investors, who since summer have shunned home loans that don’t pass through Freddie or Fannie.“In high-cost states, many home buyers with good credit could save $3,000 to $5,000 per year by not being forced into the current jumbo mortgage market," Gaylord said. "Currently, only families in lower cost areas are able to qualify for these types of affordable loans.

Such a move would stimulate home sales and help stem the rise in foreclosures, reducing the number of foreclosures by as much as 210,000."In particular, prospective home buyers in costly regions like California, Northern Virginia, and New York have faced higher mortgage rates and tougher loan terms, and those areas would get relief under the plan, says Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.

"This is meaningful because the mortgage crisis and meltdown is geographically concentrated," she says. "This response will assist the stressed areas."

Source: Reuters, Patrick Rucker (01/24/08) and REALTOR Magazine Online

Real estate rates fall overnight

30-year fixed rate at 5.31%; 10-year Treasury yield at 3.44%

Wednesday, January 23, 2008 source: Inman News

Long-term mortgage interest rates dropped Tuesday, and the benchmark 10-year Treasury bond yield tumbled to 3.44 percent.

The 30-year fixed-rate average sank to 5.31 percent, and the 15-year fixed rate fell to 4.82 percent. The 1-year adjustable rate dipped to 5.25 percent.

The 30-year Treasury bond yield was down to 4.2 percent.

Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

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Mt. Pleasant Market Update – January, 2008

Has the single family home market hit bottom yet?

This is the most common question in everyone’s minds right now. Sellers are anxious to see their home sold, buyers are anxious to buy, but don’t want to lose equity by buying in a declining market, and investors are waiting for the cycle to turn around to start re-investing in property.

Although picking the bottom of the housing market is as difficult as predicting the stock market, there are some encouraging signs that point to a recovery during 2008. The following charts show statistics for single family homes in Mt. Pleasant (MLS Areas 41 and 42), taken from the MLS.

As the above chart shows, inventory is still very high, although, for the PAST FIVE MONTHS inventory has been slowly declining. I believe this encouraging sign is due to several factors:

1. Sellers have finally realized they are not going to get the price they were expecting (based on the 2005 market), and they are withdrawing their home from the market;
2. There is very little new speculative construction going on; and
3. Re-sales are continuing to happen (at the 2003/04 level).

We Were Spoiled!

In Mt. Pleasant we had such a good market during the last 4 to 5 years before this downturn, that everyone expected to place their home on the market and sell it in two weeks! While this was true at the peak of the market in the Summer of 2005 (see the following chart), today the average time to sell a home in Mt Pleasant has risen to almost 160 days. This is also due, in my opinion, to several factors:

1. Much higher inventory levels mean that, on average, any single home will take longer to “get its turn” to sell if the demand stays the same.

   

   Notable exceptions to this rule are homes that are priced aggressively from the onset. Those homes are still selling quickly.
2. Buyers are more cautious and are generally looking around for a much longer time before making a decision.

Another factor that has changed is the “negotiability” of list prices (see next chart). While in 2004 the average Sale Price/List Price ratio was above 99%, today it is around 95%, which means that buyers are negotiating harder and getting better deals than before.

And the current ratio is probably underestimated, given that it is calculated based on the LAST list price before the home goes under contract. If this ratio was based on the original asking price (like in 2004) it would be much lower. The chart also shows how sellers become more negotiable in the slow winter season, and

less negotiable in the busy summer season (demand-driven).

The “Months of Inventory” indicator shows that Mt. Pleasant is still in a “buyers’ market”. This number is calculated by dividing the total number of available listings by the number of listings sold every month. It is used as a measure of the average time that it would take to sell all the available inventory.

From May 2003 until January 2006, the market had just 2-3 months of inventory (a sellers’ market). From that time it started to climb steadily, until reaching a peak of 18 months in October, 2007.

Although it is encouraging that this number has come down during the “slow” winter season, we’ll have to wait another 2 to 3 months to be able to tell if the market has indeed turned for the better.

Future Outlook

My prognosis for this year is positive, for the following reasons:

1. Interest rates have come down to the lowest level in 5 years – this will encourage “hesitant” buyers to jump in.
2. Prices have come down and sellers are a lot more realistic than a year ago. Sellers who are motivated to sell will price their homes strategically and those homes will sell first. Real estate is cyclical, prices will come back up, following the basic supply and demand theory (more people, same amount of land available)
3. There are virtually no new homes being built at the moment in Mt Pleasant, so the existing home inventory will begin to decrease.
4. We are still receiving many out-of-town and out-of-state buyers who are interested in living in Mt Pleasant.

Potential risks that can affect the recovery of our real estate market:

1. The sub-prime debacle is far from over. I believe we’ll see more foreclosures and tightening of lending standards this year. I believe the numbers are not significant enough to affect the market, but negative media attention does affect the public’s perception.
2. Consumer spending/credit crisis – Many consumers have been funding their credit purchases with their home equity. As real estate markets decline and this equity disappears, this may cause economic hardship which may lead to a national recession.
3. The presidential election – Markets are always unsettled in an election year.
4. The hurricane season – Although the past season was a non-event for Charleston, a major hurricane will affect the property market.

Source: Charleston Trident MLS – information deemed reliable but not guaranteed.

Disclaimer: This analysis constitutes a market opinion and should not be construed as investment advice. Prospective buyers, sellers and investors must rely on their own research and interpretation of facts to base their decisions.