Snoqualmie Pass Real Estate - A Fading Middle Class Perk - www.snoqualmiepassliving.com

A fading middle-class perk: lower mortgage rates

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Posted on April 25, 2014 at 11:00 AM

For all available Real Estate properties in the Snoqualmie Pass area, click: www.snoqualmiepassliving.com

WASHINGTON (AP) — For three decades, the U.S. middle class enjoyed a rare financial advantage over the wealthy: lower mortgage rates.

Now, even that perk is fading away.

Most ordinary home buyers are paying the same or higher rates than the fortunate few who can afford much more.

Rates for a conventional 30-year fixed mortgage are averaging 4.48 percent, according to Bankrate. For "jumbo" mortgages — those above $417,000 in much of the country — the average is 4.47 percent.

This trend reflects the widening wealth gap between the richest Americans and everyone else. Bankers now view jumbo borrowers as safer and shrewder bets even though conventional borrowers put less capital at risk.

Even as the overall U.S. housing recovery has slowed, sales of homes above $1 million have surged in the past year. Price gains have been so great in some areas that middle-class buyers are straining to afford even modest homes. They're also facing tighter lending rules, larger down-payment requirements and a shortage of houses for sale.

Used to be, rates for conventional mortgages would be 0.2 to 0.3 of a point below rates on jumbo mortgages. A decade ago, a conventional rate averaged 5.68 percent, a jumbo 5.97 percent. The advantage for middle-class borrowers was possible in part because government-chartered firms guarantee that lenders will be paid on a conventional mortgage even if a borrower defaults. No such guarantee exists for jumbos.

Two factors have caused the spread between conventional and jumbo rates to vanish:

— The government in 2012 began raising the fees it charges lenders for guaranteeing payments on conventional mortgages. Lenders passed along that increase to borrowers in the form of higher rates. The fees are meant to stop home buyers from once again borrowing more than they can afford — a trend that fueled the 2007 housing bust.

— Bankers say they've begun using mortgage rates to woo high-net-worth clients: Attractive rates on jumbos have become a way to secure additional business from those clients — from managing their investments to supplying a broad suite of financial services. What's more, those borrowers tend to be clustered in neighborhoods that lenders consider more stable.

"Jumbo borrowers represent the holy grail of what financial institutions are pursuing: that much-desired, mass affluent consumer," said Greg McBride, a senior analyst at Bankrate.

In the first three months of 2014, 37 percent of the money Bank of America lent for mortgages went to jumbos, compared with 22 percent at the same point last year.

The lower rates are geared for affluent borrowers living in "sweet spots" with strong employment and stable home prices — areas like metro New York City, Boston and sections of California, said Matt Vernon, who leads consumer mortgage lending at Bank of America.

"We're lending where we believe home ownership is sustainable," Vernon said.

Wells Fargo offers jumbos starting at 4.25 percent, about 0.25 point lower than for conventional mortgages. This month, Wells trumpeted the spillover benefits of increased jumbo lending: A 14 percent year-over-year increase in loans from its separate "wealth, brokerage and retirement" division.

"Hopefully, it'll continue to go up," Wells' CFO, Timothy Sloan, said of prospects for continued jumbo lending.

Sales of homes exceeding $1 million leapt 7.8 percent over the past 12 months. That contrasted with a 7.5 percent drop in overall home-buying in that period, according to the National Association of Realtors.

Prices have appreciated in areas such as San Francisco, New York and Washington, which have higher thresholds for jumbo mortgages than the national average. Jumbos in these cities are for loans above $625,500, about $200,000 more than the national average.

The median price of a two-bedroom home in San Francisco is $1.02 million, according to the real estate site Trulia. The median for New York City homes: $1.2 million.

Nationwide, just 2 percent of homes fetch prices that large.

Jumbos are a necessity for nearly everyone in communities such as La Jolla, Calif. That's where Aniqa Jaswal and her husband in February bought a four-bedroom house about 10 minutes from the beach.

"There are no homes below jumbo mortgage prices here," Jaswal said.

The trend coincides with the lopsided nature of the U.S. economy's nearly 5-year-old recovery. Almost all the U.S. incomes gains from 2009 to 2012 flowed to the top 1 percent of earners, according to tax data analyzed by economist Emmanuel Saez at the University of California, Berkeley.

By contrast, median household income was $51,017 in 2012, $4,600 below its peak in 2007, according to the Census Bureau. Squeezed by scant pay raises, the middle class has struggled or hesitated to take on mortgage debt. Many recall the high-risk loans that ignited the housing meltdown and led to the financial crisis and recession.

Not even jumbo borrowers feel completely safe. Some are borrowing in anticipation of setbacks in an economy where bills can multiply even when incomes barely budge.

One is Stephanie Kellen, who in December refinanced her home in Marin County, Calif., with a jumbo. The lower-than-usual jumbo rate helped replace a line of credit for her husband's auto repair business.

"The best way to have security was to have low interest rate loans for as long as possible," Kellen said.

Nearly one in five homeowners still owe more on their mortgage than their homes are worth. Without home equity, they have little or no wealth even as richer Americans have benefited from rising prices for stocks and upper-end real estate.

At the same time, the government has reduced its support for middle class homeownership after having rescued two companies, Fannie Mae and Freddie Mac, that enabled lower rates. The housing bust devastated Fannie and Freddie, which guarantee conventional mortgage payments. Both were forced into federal control at taxpayer cost.

To limit taxpayer exposure, Fannie's and Freddie's regulator required them to raise fees for guaranteeing mortgages. Those fee increases have boosted conventional mortgage rates and likely blunted the effectiveness of the Federal Reserve's efforts to keep rates low to invigorate the housing market and the economy.

"We're cutting off the avenue that has the most proven success in wealth building," said David Min, a professor at the University of California, Irvine, who specializes in mortgage finance.

The higher fees have left the industry concerned that more people won't be able to afford to buy, said Bob Walters, chief economist at Quicken Loans, though the fees might help protect some people from assuming unaffordable debt.

Walters doubts that rates for traditional mortgages will ever again fall meaningfully below jumbo rates.

"I don't see the days of those microscopic guarantee fees coming back," he said

Snoqualmie Pass Real Estate, Mortgage, and the Economy

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Snoqualmie Pass Real Estate - Can Spray Foam Rot Your Roof?

Snoqualmie Pass Real Estate, Mortgage, and Economy

Murmurs and hearsay about open-cell spray foam insulation have been gaining traction for a while. It rots roofs, people have told me. Not long ago, someone even told me that in Florida, roofing companies won't let their workers go up on roofs with open-cell spray foam because the roofs are so spongy, the guys fall right through. Open-cell spray foam is getting a bad reputation among some people in the construction industry. But is it deserved?

The Energy Nerd stirs up a hornets' nest

Martin Holladay, the Energy Nerd who muses at Green Building Advisor, stirred up a hornets' nest at the beginning of this year by writing an article titled Open-Cell Spray Foam and Damp Roof Sheathing. In it, he reported on two papers presented at the Conference on Thermal Performance of the Exterior Envelopes of Whole Buildings XII last December. Both papers basically came to the same conclusion: "Open-cell spray foam insulation is risky in all climate zones."

We already know open-cell spray foam is risky in cold climates. Moisture from indoors can diffuse through the foam and find the cold roof sheathing, where it accumulates and eventually rots the roof. As a result, in IECC climate zones 5 and higher, building codes require the use of a vapor retarder if you install open-cell spray foam. Many builders in cold climates use closed-cell spray foam instead because of its lower water vapor permeability, which means it doesn't need the extra step of installing a vapor retarder. But open-cell spray foam with a vapor retarder can work, too.

Open-cell spray foam has become popular in warmer climates, and this is where the two papers that Holladay reported on could cast the most doubt. In fact, the way Holladay reported the remarks of William Miller, the author who presented one of the papers, it sounds like he has no doubt: "The roof sheathing is humid when open-cell spray foam is used," is how Holladay quoted him.

The simplified version

The two papers were based on computer simulations. In the first paper, Roof and Attic Design Guidelines for New and Retrofit Construction of Homes in Hot and Cold Climates, the authors used HERS BESTEST and AtticSim. In the second paper, A Hygrothermal Risk Analysis Applied to Residential Unvented Attics, the authors used MATLAB and WUFI.

And that's as far down that path as I'm going. As promised in the title of this section, I'm going to condense this issue, so to speak, down to its essence. If you've read Holladay''s article and looked at the 77 comments, you may end up hopelessly confused. It's really not that difficult, though. (OK, it is really, but my plan is to make it sound like it's not by giving you just what you need to know.) Let's dive in.

Some houses with open-cell spray foam installed on the underside of the OSB roof sheathing have had moisture problems. The OSB got wet and rotted. But where does the moisture come from?

Moisture from above

The authors of the first paper cited a study in South Carolina where the relative humidity in the attic was way too high in summer - 80 to 100%. They didn't know where the moisture was coming from so they speculated that some was coming from above the roof and some from below.

The moisture from above, they thought, comes from rain and dew on the shingles migrating inward and then being forced farther inward during the day by solar vapor drive. It hits the OSB roof sheathing and keeps going through the foam into the attic air. At night it goes back through the foam to the OSB. The next day, even more moisture is driven inward.

There are two problems with this hypothesis. The first was stated eloquently by John Semmelhack in his comment (#9) to Holladay's article: "IF this were the main driving force, wouldn't closed cell foam be even worse, since the moisture would be driven into the OSB, but stopped (more or less) from drying to the inside?" Yes, it certainly would.

The second problem is that it doesn't fit with what we know now. Joe Lstiburek, principal of Building Science Corporation, previously thought moisture from above could be a problem with spray foam. Then they did a study in Houston showing otherwise. The photo above shows the house where they did the year-long study. As you can see, they used several different roofing underlayment materials, some vapor impermeable and some vapor permeable. "Turned out that there was no measurable effect of roofing underlayment permeability on inward moisture drive through the roofing assembly," he wrote in his latest ASHRAE Journal article, Cool Hand Luke Meets Attics.

So, it makes sense that moisture from above wouldn't be the culprit. We have some evidence from the field that that's not it, and if it were the problem, closed-cell spray foam would rot out the OSB even faster.

Moisture from the attic

Another possiblity is that the moisture is infiltrating into the attic from outdoors. Ah! That's an easy one. If that's the case, and William Miller proposes that as one possibility, then the spray foam installers didn't do their job. The biggest benefit of spray foam insulation is its air-sealing quality, so if air is infiltrating into a spray-foam attic, then the installers missed some spots and need to go back and make it right.

Moisture from the house

Picture this: You take a shower but forget to turn the bath fan on. Or you turn it on but, as is commonly the case, it removes only about half the air it's rated for. The bathroom fills with steam.

Water—surprise, surpise—is lighter than dry air. About 78% of the air is made of nitrogen, N2, with a molecular weight of 28. Another 21% is oxygen, O2, with a molecular weight of 32. When you add in the other 1% of gases, the average molecular weight of a volume of dry air is about 29.

Water, H2O, has a molecular weight of 18. When that steam comes out of the shower, it's going to reduce the average molecular weight of the volume of air containing it to less than 29. Watch the steam. Where does it go? Up! It's more buoyant than the surrounding air, so it rises. (Yeah, yeah, it's pushed up by the more dense air below, just like in the stack effect. But it still rises.) In a normal household where the occupants take a few showers and do some cooking, some of the water vapor may well find its way into the attic.

Moisture generated indoors or that infiltrates into the home is responsible for the bulk of the moisture in an attic insulated with spray foam on the underside of the roof sheathing. It's not coming from above the roof and it's not some new moisture source resulting from the spray foam.

Lstiburek takes blame for bad language

So what do you do to make sure your roof insulated with open-cell spray foam won't rot? You deal with the air in the attic; that's what. If you haven't read it yet, I recommend Lstiburek's latest article, Cool Hand Luke Meets Attics. He opens:

In what is turning out to be an unfortunate turn of phrase, the terms “unvented
attics” and “unvented roofs” have entered the lexicon. A lot of the blame for that goes
to me, and for that I am sorry. The “right” terms should have been “conditioned attics”
and “conditioned roofs.”

He then explains in the article some of the problems I've described above but also gives the solution. The easiest solution, he says, is "just add a supply and return to the attic space and be done with it."

The problem with that solution, though, is that it violates the building code for an attic with exposed spray foam insulation. It's OK to leave the foam exposed in an attic if you cover it with an ignition barrier. If you directly condition the attic, however, now you need a thermal barrier, and no builder's gonna do that.

Lstiburek is working to fix the codes, but unfortunately, it won't happen till the 2018 cycle at the earliest. He gives a couple of other suggestions, though, to help you work with the current messy situation, and I'll refer you to his article for those.

The conclusion to draw from all this is that it's best to be skeptical of modeling studies not backed up by field studies, especially when they seem to contradict experience. Yes, some homes with open-cell spray foam have had moisture problems. Many more have performed perfectly well.

Recommendations

Open-cell spray foam is not the enemy. It has its strengths and weaknesses, just as any building material. You don't have to be worried about using it. You just need to know how to do it right.

§  Don't use open-cell spray foam in cold climates (IECC climate zones 5 and higher) without a vapor retarder.

§  Make sure the installers get the attic sealed airtight. Test with a blower door to commission it.

§  Monitor the attic's relative humidity and temperature. Low-cost thermo-hygrometers with remote sensors are widely available. You could also put an alarm on it, as Skye Dunning describes in the comments below.

§  Condition the air in the attic. Lstiburek says to do it for every spray-foam attic. Others, like David Butler (see his comment below) say you need to do it only if a moisture problem develops.

There you have it. Open-cell spray foam is a perfectly acceptable insulation product to use in attics. Do it right, and your roof will NOT rot.

Snoqualmie Pass Real Estate, Mortgage, and Economy

Snoqualmie Pass Real Estate - The Vacation Home is Back in Business!

The Vacation Home Market is Back in Business

By Sara Goldman,

Sara Goldman On

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4/2/2014 6:19:47 PM

The vacation home market is once again buzzing with buyers and it hasn't been like this since more than seven years ago. Comprising 13 percent of overall home sales activity in 2013, vacation home sales obtained their largest market share since 2006.

In a recent National Association of Realtors Investment and Vacation Home Buyers Survey, vacation home sales rose 29.7 per cent from 553,000 in 2012 to 717,000 in 2013.

Lawrence Yun, Chief Economist at NAR, said that high networth households benefited from growth in the equity markets. This provided the springboard for empowerment and sufficient audacity to acquire recreational property. Vacation home sales are still one-third beneath 2006 peak levels.

2013 may have seen a rise in the percentage of vacation home purchases, but the same year also saw the downfall of investment home rate of investment homes dropped to around 1.1 million from 1.21 million the previous year. Overall decline of investment homes purchased was at 8.5 per cent.

The slowdown of investment activity is by no means difficult to comprehend, according to Yun. Because of quick-rising prices and a decrease in discounted foreclosures activity throughout the year, investor purchasing started to drop in 2013.

Yun added that in 2011 and 2012, home prices were defined by over correction when the downturn struck several points and generated bargains that could be converted to rentals and profits. Investors have to be more careful about their purchases and conduct a thorough market research once market conditions return to normal.

Representing a 13 percent surge, the median price of investment home increased from $115,000 in 2012 to $130,000 in 2013.

Buyers were far from discouraged even when median vacation home price shoot up from $150,000 in 2012 to $168,700 in 2013, an increase of 12.5 percent.

Cash purchases likewise took a turn for the better with 38 percent of vacation homebuyers and 46 per cent of investment buyers paying cash in 2013.

2013 was also a year for buyers who made large down payments but utilized mortgage to fund their purchase. Median down payment for investment buyers was at 26 per cent and 30 per cent for vacation home buyers.

Vacation homebuyers were typically in their 40s with a median household income of $85,600. Their preferred property location had a median distance of 180 miles from their main residence. 46 percent of vacation homes were within a hundred mile radius with 34 percent situated 500 miles away. Ownership plans for recreational properties were around 6 years. In 2012, buyers were more optimistic about owning recreational property for 10 years.

Last year, typical investment homebuyers had a median age of 42 with an income of $111,400 and purchased homes at a median distance of 20 miles from their primary residence.

The southern U.S. territory was a real estate hot spot for both investment and vacation homebuyers. Vacation homes purchased in 2013 were South-bound (41 per cent). The West (28 percent), Northeast (18 percent) and Midwest (14 percent) followed suit.

Investment properties were mostly purchased in the South, accounting for 38 percent. 25 percent of investment buyers preferred the West while the rest would rather invest in the Northeast or the Midwest.

Snoqualmie Pass Real Estate, Mortgage, and Economy

Snoqualmie Pass Real Estate, Mortgage, and Economy 4/19/14 De-Cluttering

Snoqualmie Pass Real Estate, Mortgage and Economy - Decluttering benefits our homes and ourselves

Because decluttering is so difficult for many of us, personal organization has become a thriving industry, with professional coaches and countless books and websites. But here are some things that you can do now.

By Tom Watson

Special to NWhomes

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Organizing and decluttering our home rewards us with a storage locker full of mental and environmental benefits.

Because it’s so difficult for many of us, however, personal organization has become a thriving industry, replete with professional coaches and countless books and websites.

Without hiring someone to do it, what would it take for us to really go for it this spring — to get rid of what we don’t need and organize what we want to keep?

First, we need to find our motivation. Then we need to start somewhere, anywhere.

Reasons to purge

Overconsumption greatly contributes to climate change. Our collective carbon footprint, which includes those unneeded items in our homes, has an impact on extreme weather, drought, rising seas and ocean acidification.

While it may seem daunting, taking individual action to organize and reduce is one of the easiest first steps we can take to help the environment. The personal benefits go hand in hand.

In her inspiring 2013 book, “Living Simple, Free & Happy,” waste-reduction expert Cristin Frank describes how simplifying your life directly correlates to greater personal fulfillment and self-confidence.

“Clutter is evidence of excess,” Frank writes. “By reducing clutter in our homes, we eliminate drains on our time, health and emotions.”

If money gets your attention, consider this: The average home contains “$5,000 worth of unused and unwanted stuff,” according to Frank’s estimate, based on her own experience and research. That’s your household’s potential revenue from selling what you don’t need.

Picking your battles

Your quest for organization will go more smoothly if you get early buy-in and support from everyone in your home. Convincing your partner, children or housemates works best if you set an example yourself.

Start with the easiest chore that satisfies your main reason for action. For example, if you’ve wanted to get rid of those countless boxes of old paper files, find a community shredding event near you.

The state Attorney General’s Office lists more than 30 free upcoming shredding events in Western Washington at atg.wa.gov/shredathon.aspx. Put a nearby event on your calendar, and start purging your files today.

If quick money is a goal, gather up large items you haven’t used in more than a year, such as bicycles and exercise equipment. Do you really need a backup sewing machine when you barely use your primary one? Drag it out of the basement and let someone else use it.

As a money-saving strategy, choose a decluttering project that doesn’t require spending money. For some projects, you may need to invest in new storage containers, but can avoid that by simply reusing existing containers that are now empty from your purging.

Moving it out

To get the most money for excess stuff of value, Frank suggests using Craigslist, eBay or specialized websites. For selling a wedding dress, for example, try oncewed.com or woreitonce.com.

Reach an additional audience with free online newspaper classified ads at The Seattle Times and elsewhere.

When selling books, CDs, DVDs and video games, Frank recommends using Half.com andAmazon.com. Check out the many consignment stores in the Seattle area if you’re not comfortable selling online, or for larger items such as furniture.

Donating to nonprofits that operate or partner with thrift stores is a convenient, rewarding way to support organizations that you care about.

Paper, metal and most types of plastic and glass containers should be recycled in your home recycling cart. Check your recycling program’s online or printed information for details. Some recyclables such as large plastic bottles and containers can be creatively reused as storage containers.

Organizing will never be our No. 1 priority, and it shouldn’t be. But we can’t just ignore it, either. If you can start an organizational project this week and then develop a plan to make decluttering a regular part of your life, you won’t regret it.

Snoqualmie Pass Real Estate, Mortgage, and Economy 

Snoqualmie Pass Real Estate - Tiny Home Ideas

Snoqualmie Pass Real Estate, Mortgage, and Economy

There are a few truisms about tiny homes: They are ecologically friendly. They are generally inexpensive. They can help avoid house debt. They have a reduced carbon footprint. They offer the possibility for a freer, simpler life.

Tiny homes may have another selling point: the coolness factor.

Architectural innovation has become part of the tiny home movement, with some of today's top designers testing the boundaries of imagination and possibility, transforming ultrasmall spaces into marvels of eco-sustainable, microminimalist design.

Just look at what a tiny home can be: A "free-spirit" tree sphere, hanging above the forest floor. A steel hut constructed of salvaged car parts. Aplastic "loft cube" that can be airlifted by helicopter. A Space Age microhouse with round, rotating rooms. A diamond-shaped glass house suspended on a pole.

"There are a lot of architects today who are pushing the envelope," said California architect Cate Leger.

"It's hard to tell people you have to live small. But building ecologically responsible housing is essential to our survival as a species."

Leger and husband Karl Wanaselja, founders of Leger Wanaselja Architecture, are "green builders" who recently designed a residence in Berkeley, Calif., the McGee House, that utilized car windows and 100 salvaged car roofs. Needing a storage shed during construction, the team quickly slapped together a metal hut-like structure using some of the leftover car parts, and the result was unexpectedly appealing.

"In the next five years or so, you'll see us turn that idea into tiny house architecture," Leger said. "I believe tiny homes are the future. Or they should be. It's hard to tell people you have to live small. But building ecologically responsible housing is essential to our survival as a species."

Many architects agree. Tiny homes are being retrofitted with ecologically conscious features like solar panels, rainwater collection systems and compost waste management systems. Some even have state-of-the-art internal heating and cooling systems that can be digitally controlled by smartphone.

Some of the most cutting-edge design is happening outside the U.S., such as in Tokyo, the world's most populated city and one of the most expensive. There, living tiny can be a necessity. Radical tiny homes abound there, such as the microcompact Paco House cube or the bullet-shaped Lucky Drop House, which is 30 inches wide at its narrowest point.

Most extreme of all may be Japan's so-called coffin apartments—mausoleum-like lockers that rent for $600-$1,000 a month and are barely big enough for a narrow mattress and a few belongings.

Denmark is also at the forefront of the tiny home movement. A futuristic structure called Primeval Symbiosis, designed by Konrad Wojcik , is an ultra-high-tech glass dwelling suspended on a pole above the forest floor..

"Wojcik's tree house is a good example of architecture students who have cast off the rule book," said Michael Janzen, 46, a corporate Web designer in Fair Oaks, Calif., and the founder of tinyhousedesign.com. "It's extremely expensive to put in photovoltaics and all those high-demand appliances. I don't think going the high-tech route is sustainable.”

Architect Jordan Parnass agrees that the super-wired mini-house might not make sense. He said that there are simpler means to an eco-friendly lifestyle.

"It's extremely expensive to put in photovoltaics and all those high-demand appliances. I don't think going the high-tech route is sustainable.”

"You see a lot of tiny homes that consciously avoid making a great impact on the environment, that aim to be off the grid," said Parnass, principal atJordan Parnass Digital Architecture in Brooklyn, N.Y.

Because a tiny home can be constructed from practically anything—a refurbished shipping container, a yurt, an "earthbag dome"—its cost is hard to quantify. Some businesses, like the Tumbleweed Tiny House Co., offer basic, ready-made starter homes starting at $57,000 ($433 a month) as well as do-it-yourself workshops.

Cheaper options are available, however. The "OTIS" house (optimal traveling independent space) for example, designed by students at Green Mountain College in Vermont, has features like a rainwater catchment system, composting toilet and a solar-powered electrical system, and still only costs $8,000-$10,000.

For aficionados of tiny homes, a houseboat or a treehouse may be the ultimate fantasy. Both minimize the home's environmental impact (because the earth is undisturbed by the home's construction) and allow the inhabitants to live harmoniously with nature.

Among the world's most ingeniously designed, unique tree homes are the Chudleigh family's Free Spirit Spheres on Vancouver Island, British Columbia. Inspired by Jacques Cousteau's round, steel deep-sea diving submarine, "Bathysphere," Tom Chudleigh, 62, custom builds uni-room, round dwellings that hang from trees.

An artist with a background in biology, boat making and engineering, Chudleigh handcrafts the beds, chairs, tables and circular windows so they fit precisely into the curved space.

All the spheres are unique, measuring between 8 feet and 10 feet in diameter, and have names like Eryn, Eve, Melody and Gwynn. They are currently being rented out as vacation homes, though Chudleigh and wifeenvision a future "populated with spheres, connected by rope suspension bridges."

It may be hard to imagine a future where "free spirit spheres" are a standard housing option, but Chudleigh said he's open to the possibility.

After all, the sky's the limit in the future of tiny home design.

Snoqualmie Pass Real Estate, Mortgage, and Economy

Snoqualmie Pass Real Estate, Mortgage, and Economy Blog 4/13/14

Snoqualmie Pass Real Estate, Mortgage, and Economy Blog 4/13/14

Interest Rates Make A Big Move Better: Interest rates have been trending higher over the last 2 months after hitting 2014 lows back on February 10^th. This week there were large loses in the stock markets accompanied by the typical improvement in interest rates. It is not clear to many analysts what caused this change in direction. There were some, less than encouraging, comments from the head of the IMF regarding slow growth in Europe along with returned concerns over deflation. Initial jobless claims fell this week which is usually a positive indicator for the economy but slowing growth in China and growing sentiment that the stock markets are due for a correction overshadowed jobs numbers. We are close to the low interest rates for the year which will be a strong impediment for further improvements. To hit new lows will require more news that economies are not recovering and inflation remains low.

Industry News "The one function that TV news performs very well is that when there is no news, we give it to you with the same emphasis as if there were." David Brinkley. While last week's economic calendar may have started off on the quiet side, the news picked up steam in the second half of the week. Read on for the highlights. There was good news in the labor markets, as weekly Initial Jobless Claims fell by 32,000 in the latest week to 300,000. This was near a seven-year low and a signal that the labor markets may be coming out of hibernation as spring starts to bloom. In addition the 4-week moving average of claims, which irons out seasonal abnormalities, also fell. Meanwhile, the Consumer Sentiment Index for April came in above expectations, showing that consumers are feeling positive about the economy as we head into warmer months.  The housing sector also had good news to report, as foreclosure activity across the nation continues to decline. RealtyTrac reported that foreclosure filings fell to the lowest level since the second quarter of 2007. In addition, March was the forty-second consecutive month where foreclosure activity decreased from the previous year, with foreclosure filings declining by 23 percent from March 2013 to March 2014. What does this mean for home loan rates? Typically good news helps Stocks improve at the expense of Bonds, including Mortgage Bonds (the type of Bonds on which home loan rates are based). However, Bonds and home loan rates were able to improve last week as the Stock market seemed to begin a correction from recent gains. In addition, the minutes from the Fed's March meeting of the Federal Open Market Committee imply that the Fed will continue tapering its Bond and Treasury purchases this year. Remember that the Fed is now purchasing $30 billion in Treasuries and $25 billion in Mortgage Bonds to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. Additional tapering of these purchases will continue to impact our economy and home loan rates as we move ahead this year, and this is an important story to monitor. The bottom line is that home loan rates remain attractive compared to historical levels, and now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients. Federal Reserve Update: Fed Chairman Yellen corrects misunderstanding.   Janet Yellen has continued the policy of her predecessor to have an open and transparent Fed. Some suggest this is dangerous territory and creates more volatility in markets. This may be true as we have seen relatively high volatility in markets during a relatively tame economic period. Others point to the remaining QE activity as the source of uncertainty and volatility. This week Chairman Yellen corrected an interpretation that a hike in Federal Funds rates were set in stone for 2015. She corrected that notion with comments that any Fed activity will be data dependent. The Fed still seems interested in supporting a healthy stock market while also stimulating real estate markets and an increase in inflation. This has caused a tempering of expectations of rate hikes.

 Real Estate Miscellaneous Stats

Foreclosure Rates In US Markets Down 34% From One Year Ago:  Foreclosure rates are at the lowest levels since July 2007. This represents 42 months of consecutive drops in foreclosure numbers. The first quarter of 2014 had just under 372000 foreclosure notices. This is still a large number. March foreclosures were actually up 6% from February. Even though overall numbers are down foreclosures are actually up in 29 states. Utah was up 226% and Oregon up 176%. Some of the foreclosure hotbeds are still up with Nevada and Florida up 21% from the prior year. California foreclosure notices were actually up 10%. This is the first increase since early 2012. According to Realty Trac executives, banks are now turning their attention to properties that were eligible for foreclosure but action has not been taken. This is especially true in judicial foreclosure states where impediments to foreclosing are higher. Even non-judicial have seen jumps such as in California. They also estimate there are 500000 properties that are still occupied by former owners and renters that have not been up for sale. These are expected to hit the market soon. They also have data that indicates over half of all foreclosed properties are still occupied by former owners or tenants. Distressed properties are still taking significant amounts of time to foreclose and then sell in many markets but much less so in others such as California. Realtors there say banks are moving through their inventory much more quickly. Other areas of the country still have a persistent lack of recovery such as Florida. Florida’s foreclosure rate has decreased over the last 3 quarters but is still 1 in 129 housholds for the first quarter 2014. Florida still has 8 of the top 10 markets for foreclosure rates. 

January  Case/Shiller Housing Market Index was released last week. National median values were up 13.2% year over year. The trend seems to be continuing up with month to month gains at 0.7%. This is not current data so it can only give an ideas of trends and momentum.  Price appreciation on a year-over-year basis in most markets,  has eased in recent months. This is a typical time of year for a slow down with unusually severe winter weather slowed demand for properties in some markets.  Most analysts still expect a robust spring. King County experienced the same slow down as many parts of the country but most are pointing to the Seahawks Super Bowl run as the reason. Median values in King County actually dropped in February by $5000.00 to $405,000.00. Pending sales were also down 13% from one year ago at the same time. Some of this is due to a persistent shortage of available homes for sale. People are reacting differently to current conditions. Some are motivated by higher rates and higher prices to buy or sell sooner than later. Others are holding on to homes with the idea that appreciation will work in their favor. Many buyers are reluctant to enter a competitive market and overpay for a home; especially if it is not something that is ideal. Zillow reports that 40% of Seattle area homeowners are still underwater on their homes. Most seem to be holding out instead of trying for a short sale. The hottest markets still seem to be causing a desperate frenzy which is causing some to overpay. This is causing problems with appraisals which look backward at values. If sales are scarce in the subject area the data can be months old. This is something to be aware of for buyers who are on the edge for down payments. With appreciation rates as high as they are it will be hard to convince sellers that they should lower their prices based on an appraisal. Snohomish County values were actually up from $295k to $315k from just the previous month.

February Pending Home Sales was reported by National Association of Realtors to be down 0.8% from January. These sales numbers were the lowest level since Octber 2011. Year over year numbers were down 10.5% which is  the 8^th straight decline in pending home sales in a row.

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Snoqualmie Pass Real Estate, Mortgage, and Economy Blog 4/13/14