by CRESTICO | Nov 10, 2011 | CRESTICO
Yesterday there was a passing thought that Italy’s debt problems would deal a serious blow to the country with its Interest Rates at record highs since the EU began. Yesterday another passing thought that the EU would eventually be restructured based on comments from French Pres Sarkozy that a two tier EU may be the best thing eventually. Yesterday the stock market dropped 389 points, the 10-Year Note yield fell 12 basis points to close under 2.00% at 1.96%. That was yesterday; like it has been the last few weeks, one day its doom and gloom, the next not as bad. No one actually knows what will happen tomorrow; therein lies the difficulty in attempting to assess the situation on a day to day basis.
Yesterday there were comments from supposed knowledgeable people that the ECB was precluded from buying bonds from individual EU countries; obviously that isn’t the case. We reported it as fact and one reason that the debt problems in the region were unlikely to be resolved for years and that there would be defaults in a number of countries. Overnight reports from the wires saying the ECB was in buying Italian bonds, so far no confirmation from the central bank. Italy did sell bills today, the demand was strong and for the moment markets are less concerned that Italy can not fund itself. The country sold 5 billion euros ($6.8B) of one-year bills at an average yield of 6.087% after yields yesterday on 10-Year Notes surged past the 7 percent level.
In Greece there is apparently a new leader that will form an interim government; former vice- president of the European Central Bank Lucas Papademos will head a national unity government for Greece, according to the country’s presidency.
At 8:30 this morning weekly jobless claims along with the every other day optimism about Europe driving stock indexes higher and interest rate prices lower. Weekly claims fell 10K to 390K the lowest claims in 7 months, expectations were for unchanged at 400K; continuing claims also fell, from 3.707 million to 3.615 million.
September U.S. trade balance declined to -$43.11B, if here is any consensus in the markets these days the forecast was for the balance to -$46.3B. October import prices fell 0.6% against estimates of -0.2%; export prices fell 2.1%.
At 1:00 this afternoon Treasury will complete borrowing $72B this week with $16B of 30-Year Bonds. The 10-Year Note auction yesterday was weaker than traders were expecting, sending rates higher on the reaction before regaining strength into the close with the 10-Year Note at 1.96%. This morning the 10-Year Note is hovering at 2.05%.
At 9:30 the DJIA opened +126, NASDAQ +30, and the S&P +13; the 10-Year Note 2.05% +9 bp and mortgage prices down 8/32 (.25 bp).
Attempting to trade on fundamentals these days is almost impossible with the constant changes happening in Europe. Looking solely at the technicals, the 10-Year Note presently is sitting right on its 40 day average at 2.05% with its 20 day average at 2.09%. 30-Year FNMA MBS today is trading below its 40 day and at the moment holding at its 20 day, similar to the 10-Year Note. The relative strength in both markets is hanging at neutral. The overall technical picture slightly positive but not by much. That the 10-Year Note this morning is back over 2.00% somewhat negates its close yesterday below 2.00%. With U.S. markets being completely dominated by what happens in Europe the outlook for U.S. interest rates in the end is impossible to anticipate. Bottom line; markets are adrift in a sea of uncertainty over Europe and the impact on the U.S. economy.
by CRESTICO | Nov 9, 2011 | CRESTICO
Yesterday in Italy, Prime Minister Berlusconi’s offer to resign boosted optimism Italy would appoint a new leader who can tame the debt crisis. Europe and U.S. stock markets rallied and interest rates increased on the idea that progress was being made. That all lasted about 20 hours; this morning Europe’s equity markets are lower and in the U.S. the DJIA (Dow Jones Industrial Average) opened down 200 points, the 10-Year Note at 9.30, +32/32 at 1.97%, -11 bps and mortgage prices +11/32 (.34 bps).
French banks taking huge hits this morning on deposit factor for Italian bonds due in 7-to-10 years will be raised to 11.65%, the French unit of LCH Clearnet said. That compares with a charge of 6.65% announced last month. Clearing houses guarantee that investors’ trades are completed by standing in the middle of two counterparties and raise margin requirements to protect themselves against losses should one side of the trade fail. French banks face collateral damage from the political turmoil that sent Italy’s bond yields to euro-ear records. Austerity measures to balance Italy’s budget are also threatening growth in an economy that has lagged behind the European average for more that a decade and may hurt the French banks’ consumer businesses.
Italy’s $2.6 trillion of debt is the world’s forth largest, behind the U.S., Japan and Germany and more that that of Greece, Spain, Portugal and Ireland combined. Relative to gross domestic product, it is the highest in Europe after Greece, standing at about 120%.
Events in Europe continue to drive U.S. markets, everyday analysts try to assess each event that occurs. Yesterday markets were motivated by Berlusconi’s offer to resign after he failed to get necessary votes of confidence; U.S. stocks rallied, U.S. interest rates increased. This morning the U.S. 10-Year Note yield is trading once again just below 2.00% and U.S. stock indexes are being hit hard in early trading. Yesterday markets believed the Italian crisis was on the path of being dealt with, today with margins increasing and Italy’s 10-Year Note at the highest ever since the EU was formed in 1999 another round of panic. Focus now will likely be on the ECB, whether it will step up and buy Italy’s debt and take the pressure off…for the moment.
Investors moving out of equities ths morning and into treasuries on worsening outlook in Italy and the inability of all of Europe’s various entities cannot agree on what to do. Over 2 years and the problems continue to worsen. G-20 leaders last week balked on having the IMF taking a larger roll; politicians running for cover and everyone looking out for number one. Europe is going to fall back into recession, as it does U.S. equities will be drawn down; safely into treasuries is the likely outcome with possibly much lower rates. Talk is cheap as it is said, the 10-Year Note, pacesetter for mortgage rates, while under 2.00% this morning has yet to sustain a close below 2.00% since late September when Operation Twist was announced and then it didn’t hold long. Since then though the debt crisis in Europe has increased; improving the view that U.S. rates could decline.
In the “it doesn’t matter” column this morning September wholesale inventories expected up 0.6%, were down 0.1% with inventory/sales ratio unchanged from August at 1. 15 months
At 0100pm this afternoon the Treasury will auction $24 billion of 10-Year Notes; yesterday the 3-Year Note auction went well. Today with rates lower the demand for the 10-Year Note will be interesting’ a solid auction would add to the increasing bullishness.
The day is just getting underway; all focus will be on what if anything comes from the ECB and what the central bank will do to curb the explosion in Italian interest rates. Greece is still not making any quick headway in forming a new government but the attention is all on Italy at the moment.
by CRESTICO | Nov 23, 2010 | CRESTICO
That Short Sale May Not Be A Good Deal
Lately – I have had many of my clients interested in short sales. I have tried to explain to them that not to be deceived by the name “short sale” because it’s quite deceiving. Neither word, “short” or “sale” has any truth to it in this instance. The time a short sale takes is not “short” and it’s definitely almost always never a “sale” in the sense of the word that includes a discount or “deal” of some sort.
Short sales take place when values drop and homeowners do not receive enough cash from a buyer to pay off their existing mortgages and think ONLY happens when lenders (the true “owners”) agree to accept less than the amount owed to them in exchange for releasing the current homeowner from his/her obligations to the bank.
On the surface, it seems a short-sale buyer is getting a bargain. But, most of the time a buyer would be better off buying a home that is not in default and not a short sale.
Why?
First let me tell you that because agents get paid no matter what kind of sale, they’re not going to tell you not to consider a short sale. But in the interest of bringing integrity and honesty back to the Real Estate industry (where, I feel it is severely needed) I will tell you the truth.
First, the Seller probably paid too much to begin with. If a home sold for $700,000 in 2005 and is now for sale at $500,000, that doesn’t mean the buyer is picking up $200,000 of equity for free. It means the seller paid too much in a rising market and now the market has fallen. It means the seller has no equity in the house and each of his mortgage payments has basically been trashed.
Next, the Seller probably borrowed too much against the house. Remember when HELOCs were ALL the rage and people were cashing out to go on trips? Remember those mortgage bankers that told you to refinance and cash out your equity and then you will be able to do it again in six months? What they were NOT counting on was the market crash and as well all know – it crashed. Hard. Years ago, the banks that were eager to lend money in upwardly moving markets – and they even let borrowers to over-encumber (that means owe more than it’s worth) the home, meaning the borrower’s loan balance exceeded the value of the property. Appraisals are subjective, and not all appraisers will place the same value on a home. Although against the law, some appraisers are pressured by banks to appraise at the amount the home owner wants to borrow.
Next, remember, short sales have strict requirements. Inexperienced or unethical real estate agents might influence a seller into a short sale when the seller doesn’t necessarily qualify. The banks require lots of things when determining whether or not to approve a short sale.
Another thing to remember is that, as a rule, homes sell at Fair Market Value. The bank that owns the short sale you are looking at is a highly sophisticated institution and knows exactly how much that home it worth. They will always get a comparative market analysis (something I provide all of my clients when they are considering making offers) to determine the value of a property. If the bank thinks it can make more money by foreclosing, it will not approve a short sale until it sees a profitable transaction for itself. Banks are here to make money – for themselves, not you. The bank will wait until it gets an offer at a price that it is willing to accept, and that price is going to be close to fair market value. If you are lucky enough to be dealing with an approved short sale. That is the minimum price that the bank will accept. Remember, this price has taken months to arrive at along with a lot of research and analysis. You can’t haggle the bank into a lower price and you definitely won’t get one below market value.
The condition of the home is another factor in considering a short sale. In regular transactions, closing costs, repairs and inspections can be negotiated and often shared between buyer and seller. But in a short sale, because the Bank is paying the closing costs more often than not, they are not going to pay for anything else. These other costs include things like: Suggested repairs disclosed on a home inspection, Pest inspections or work necessary to issue a clear pest report, Roof certifications or roof repairs, Home protection plans for the buyer, and Deferred maintenance. Because lenders rarely will pay for any extras, like a seller would be willing to do, if you want any of those extras, you will pay for them yourself. Sometimes lenders will refuse to pay for standard seller closing costs such as transfer taxes, too. If you want specific inspections, you will probably pay for them out-of-pocket.
When do you want to move? If you are looking at a short sale, you’re not looking at a 30-day transaction. Depending on when the Notice of Default was filed, the lender’s back-log of foreclosures and how much paperwork the seller has already submitted, it could take anywhere from two weeks to six months to get a response on a purchase offer from a lender. In addition, if two lenders are involved because there are two loans secured to the property, it could take longer to satisfy the demands of the second lender. If you need to close escrow by a specific date, lots of luck with that. A short sale home closing process takes an indefinite amount of time. The seller’s lender calls the shots, not the buyer nor the buyer’s lender. If you are trying to close escrow concurrently with the sale of your home, it might not happen.
The Bank is in charge. Some lenders reserve the right to renegotiate the terms of the short sale at the last minute. If the market changes, new laws pass or new information crosses the lender’s desk, the lender can attempt to change the terms of the contract. Lenders generally have lawyers at their disposal, and ordinary buyers do not.
These are all things to consider before and when buying a short sale. I’m sure you’re thinking it doesn’t as good as it seems. Great rule to live by: if it sounds too good to be true, it probably is.
As always, we at Crestico Realty are here to help answer all your questions about real estate. Please visit our website at http://www.crestico.com for more information regarding this and any other real estate topic.
by CRESTICO | Oct 5, 2009 | CRESTICO
The National Association of Realtors has a message it would like to get across and that message is that "America needs Fannie and Freddie." Who are these people that we have been hearing a lot about in the news lately? They are Fannie Mae and Freddie Mac.
According to Realtor Frances Martinez who was the speaker representative at a House Financial Services Subcommittee hearing on June 3, 2009, "Fannie Mae and Freddie Mac serve an important role in expanding homeownership and providing a solid foundation for our nation's housing financial system…Unlike private secondary market investors, Fannie and Freddie remain active in housing markets during downturns, using their federal ties to facilitate mortgage finance and support homeownership opportunities for all qualified borrowers."
Fannie and Freddie are government sponsored organizations that basically insure the success of our nation's housing system, the cornerstone of our economy. Fannie and Freddie work to make sure that all Americans have and will continue to have access to the fair and affordable mortgages. Just think, without Fannie and Freddie, when the market crashed, there would have been no alternative and all housing sales would have essentially come to a dead stop and this would have thrown our country into a deeper economic crisis.
All in all, Fannie and Freddie basically guarantee that there will be a secondary mortgage markets where people can safely and securely buy their homes and achieve the American dream. Getting a mortgage can be a scary thing. Thankfully, we have a country, a government and a system in place to make sure that the days of predatory lending and fraudulent behaviors in the lending industry are behind us.
by CRESTICO | Jun 9, 2009 | CRESTICO
The National Association of Realtors has a message it would like to get across and that message is that "America needs Fannie and Freddie." Who are these people that we have been hearing a lot about in the news lately? They are Fannie Mae and Freddie Mac.
According to Realtor Frances Martinez who was the speaker representative at a House Financial Services Subcommittee hearing on June 3, 2009, "Fannie Mae and Freddie Mac serve an important role in expanding homeownership and providing a solid foundation for our nation's housing financial system…Unlike private secondary market investors, Fannie and Freddie remain active in housing markets during downturns, using their federal ties to facilitate mortgage finance and support homeownership opportunities for all qualified borrowers."
Fannie and Freddie are government sponsored organizations that basically insure the success of our nation's housing system, the cornerstone of our economy. Fannie and Freddie work to make sure that all Americans have and will continue to have access to the fair and affordable mortgages. Just think, without Fannie and Freddie, when the market crashed, there would have been no alternative and all housing sales would have essentially come to a dead stop and this would have thrown our country into a deeper economic crisis.
All in all, Fannie and Freddie basically guarantee that there will be a secondary mortgage markets where people can safely and securely buy their homes and achieve the American dream. Getting a mortgage can be a scary thing. Thankfully, we have a country, a government and a system in place to make sure that the days of predatory lending and fraudulent behaviors in the lending industry are behind us.
