Fed Takes Break from Hikes

From RISMedia

The Federal Reserve Board yesterday left short-term interest rates unchanged at 5.25 percent.

The Fed says the lull after 17 consecutive increases was because of the softening housing market, high energy prices, and previous rates increases.

Home buyers "who are looking at longer-term fixed-rate products are going to get a pretty good deal," says Doug Duncan, chief economist of the Mortgage Bankers Association. Duncan believes rates on fixed-rate mortgages aren't likely to move much higher unless the Fed decides to boost rates again to stem inflationary pressures.

Yesterday, rates stood at 6.66 percent, nearly one-third of a percentage point below their recent peak of nearly 7 percent, according to financial publisher HSH Associates.

The pause also will slow the pace at which rate increases are being passed on to borrowers with adjustable-rate mortgages, though some borrowers could see their rates continue to rise if their payments are tied to an index such as the 12-month Moving Treasury Average, which reflects rate moves on a lagging basis.

Source: The Wall Street Journal, Jeff D. Opdyke, Jennifer Saranow and Ruth Simon (08/09/2006)

PENDING HOME SALES INDICATE TRANSITIONING MARKET

From CAR Newsline - Wednesday, August 02, 2006

For the second consecutive month, pending home sales have risen on a month-to-month basis, a sign the housing market is beginning to level out, according to a recent report from NAR. In June, the Pending Home Sales Index (PHSI), which gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed, increased 0.4 percent to 113.9 from the reading one month earlier and edged down 9.6 percent from June 2005. An index of 100 or more generally indicates a high level of home sales activity.

"Once again, we have various housing indicators moving in different directions, which itself is an indicator of a market in transition," said NAR Chief Economist David Lereah. "The housing market is striving for balance -- a process that will take several months. A quieting in the movement of indicators should restore confidence to home buyers who've been on the sidelines, waiting for the right time to get into the market, and now is the best time we've seen since the 1990s in terms of housing choices and flexible terms."

The PHSI declined across the nation in June compared with the readings a year ago. On a regional basis, the PHSI was highest in the South, where it edged down 4.8 percent to 130.7. In the West, the index fell 14.2 percent to 110.1. The PHSI also declined in the Midwest and Northeast regions, falling to 103.3 and 99.4, respectively.

And you thought the Sonoma Coast was expensive....

Here's a place for $135M - and it's not even close to the waterfront!

But I think the best part is that the quoted expert hyphenated her name - with the same name...

Click here to see Laurie Moore-Moore's comments on the luxury property.

The once-hyper market is experiencing a soft landing near historical norms

The media continues to buffer their harsh outlook on the housing market, as indicated by a few of the articles below and those to come.

Check out this article which states the NAR (National Association of Realtors) expects a slower years in terms of sales, minor fluctuations in prices, and stabilization near or below present levels.

Activity is certainly increasing here on the Coast and while we generally follow the trend, it appears that we may be recovering more quickly than those areas that continued to see sales growth well after we took a hit. Most of the sub-million dollar properties have already seen reductions and it seems to be a good opportunity for those who waited.

CALIFORNIA HOUSING STARTS REFLECT NORMALIZING MARKET

New home construction in California declined during May 2006, falling 21.2 percent when compared with the construction pace recorded one year earlier, the California Building Industry Association (CBIA) recently reported. Despite the decline, housing starts continue to edge up on a month-to-month basis, suggesting builders are on track to produce 170,000 to 180,000 new housing units in California during 2006, the fourth-highest number of starts in the past 17 years.

Based on the number of building permits issued, 15,263 new housing units were started throughout the state in May, with single-family units accounting for 75.8 percent of the starts. While single-family production is expected to remain strong in most of Southern California, starts are anticipated to trend downward in San Diego, the San Joaquin Valley, the Sacramento region, and the Bay Area, according to the report.

Click here for the complete story

10 years...

Over the past few months, I've been hearing more and more people mention Zillow.com when discussing current home prices and trends. I was on the website again today, and while most of the data for our area is incomplete or entirely inaccurate (DO NOT rely on Zillow.com for specific home values on the Coast), I did find some interesting historical data showing how well real estate has treated us here in California - and Bodega Bay in particular. I haven't confirmed the data but the general numbers add up.

Here's what was shown over the past 10 years (percent growth):
ZIP 94923: 306.0% (15.0% annualized)
Bodega Bay: 301.2% (14.9% annualized)
Sonoma County: 240.6% (13.0% annualized)
California: 269.8% (14.0% annualized)
United States: 108.5% (7.6% annualized)

What's going on here?!

You might notice that the articles listed below (and those to come) seem to be contradictory in many ways. While perhaps confusing, that is certainly the state of the market at this time. I suppose that this is common in transitional markets of any kind - we just don't know where it's headed most of the time. Comps are only somewhat relevant guides for listing a property so we're seeing some homes holding steady and while at least half are taking reductions in price. However, those reductions have averaged less than 10% and homes are still selling close to asking.

What I think all of this mess means is that we're headed into a more stable, predictable and realistic market here and throughout California. And that's good for everyone.