The rates are still staying low this week. We hit our lowest rates in over 37 years on Wednesday with a slight uptick in rates this morning. The 10 year treasury bill is trading at 2.10 this morning. Investors are still in dismay as they wonder how the banks continue to lend at the largest spreads ever on mortgages.

If we look at the spreads between the 10 year treasury and 30 year mortgages, I believe you can historically expect about a 180 basis point spread. So basically, you would add 1.8% to the 10 year treasury yield. Today the 10 year treasure is 2.1, hence our rates should be at 3.9% or so. The banks are currently at a spread of 275 or so over the 10 year treasury with rates trading around 4.875.

The investors for mortgage backed securities are demanding higher returns due to the risk of mortgages and the default ratios. The banks are also working on retrieving their losses by adding their spread to the treasury to rebuild their coffers. Make no doubt about it, the banks never lose!! The public will always pay for it in the long run. But, if they did just “absorb” the losses, they would become insolvent and then our money would be worth nothing. Banks are a for profit business and have to pay dividends to their investors. Therefore, the spreads will remain high until their balance sheets rebuilt.

Having said that, the rates are still fantastic and buyers are now coming out of the woodwork. Finally.

                                        Source for statistics: California Association of Realtors

Gary Watts has long been recognized as a forecasting expert by the real estate industry. His long-term analysis has also drawn the attention of the media due to his consistent accuracy. His Economic Outlook has been spotlighted in regional newspapers, including the Orange County Register and the Los Angeles Times. He has been seen on the PBS TV program Real Orange, and he has been a featured advisor on real estate forecasting roundtables. He holds a degree in economics with advanced studies in psychology from California State University at Sacramento. 

The housing market below $250,000 has most likely reached the bottom
Prices now in the $350,000 range are close to the bottom.
The rest of the housing market still suffers a restructuring of prices. 
Expect foreclosures and short sales to dominate the market through 2010.
Listing inventory should rise due to the large number of foreclosures set to enter the market.
The credit conditions should greatly improve, bringing more buyers into the market place.
Demand for properties will continue to be higher than the past three years.

         Are you “On The Fence” About Buying a Home?

• It helps transform the mortgaged-back securities.
  This keeps access to capital for borrowers high and
  interest rates low.

• Conforming/jumbo conforming rates should drop in
  the coming weeks by as much as a percentage point.

• It improves confidence in the stock market allowing
  investors to once again realize profits, which they in
  turn can re-invest in mortgages.

• Credit will flow again bringing new, qualified buyers
  into the market to take advantage of the investment
  opportunities currently available.

• Modified mortgages will allow some homeowners to
  restructure their mortgages and avoid foreclosure.

If you’re on the fence, now is an excellent opportunity to realize
dramatic savings on a home purchase before the market shifts,
and we begin the next ‘UP’ stage of the cycle.

  3 Via Onza, Rancho Santa Margarita - Listed for $735,000 

Sold with mulitple offers in less than one month

 5 suggestions to ensure a successful real estate sale in Rancho Santa Margarita

On CNBC’s Parting Shot on June 27, 2008 Dennis Kneale’s commentary tried to put some perspective on the reality of the housing crisis compared to the way the news media likes to glamorize doom and gloom. He provides a refreshing approach, rather than the gloom and doom that the media has provided. CLICK HERE to watch video.

Here is an outline of his talk.

1/3 of all homes are owned outright, no loans
1/2 of all homes were purchased prior to 2000 and have equity.
95% of homeowners are paying on time.
which leaves 5% or 4,000,000 of homeownes at risk.

I asked my loan broker, Dean Rathbun this week how important is it that Fannie Mae and Freddie Mac stay in existence. And her is what he had to say. Fannie Mae and Freddie Mac, the two government-supported mortgage giants at the centre of America’s housing market, pose a particularly acute problem for the government. Not only are they too big to fail, they are almost too big to rescue.
They hold or guarantee some $5.2 trillion of the nation’s $12 trillion of mortgages, backed by the thinnest wafer of capital, meaning their collapse would imperil the already paralyzed American housing market. Yet, an analyst at Graham Fisher, a research firm, points out, nationalizing them, a stark choice for the government since their shares tumbled last week, would “result in a doubling of the federal deficit, a further collapse of the dollar and unthinkable implications for the Treasury’s cost of funding in the debt markets.” (more̷

Teledyne is a local high tech company here in Orange County. Owning their stock has made quite few of their employees and other local people Millionaires. I figured that everybody could understand making money this way. You simply bought Teledyne stock in the beginning and sold it after the price went up (way up).

Last Friday it closed at $65.17 per share. Back in March of ‘03 you could have bought some Teledyne stock for around $15.00. Now my question to you is, “Would it really have mattered to you if you had paid $14.50 or even $15.50? Sure, you want to make as much as you can, but if you had tried to “time the market” to buy it at $14.50 you might have missed it completely and had to pay upwards of $20.00 per share if you wanted in.

My advice to you is to buy when you can. Don’t worry about picking up every nickel off the table. Just get what you can. You would have gotten over 400% growth in the share price. Why be greedy? (more̷

The dynamics of short sales and REO transactions present distinct challenges to REALTORS® and Buyers. 

Short Sales

Short pay transactions or “short sales” are transactions where the seller owes more on his or her home than the home is worth.  The distinct nature of these listings enable a third-party  the lender to intervene in the terms of sale and the lender will dictate after a buyer may have had his offer on that home that the lender will want the seller to counter and
sell the home for more than was originally agreed to by the buyer and the seller.
This is possible, because the lender will have to discount the note, so although the seller has signed a legally binding
contract subject to lender approval of the short sale.

(more̷