Fannie, Freddie and Interest Rates

The federal take over of Fannie Mae and Freddie Mac have sent shock waves through the financial market and concerns not to be taken lightly by each of us taxpayers but what about the effect on the real estate market?

One nearly instant effect has been the 4 tenths of a percent drop in the interest rate on a 30 year fixed rate mortgage. Two weeks ago the 30 year fixed rate was hovering near 6.5% today a person can get the same loan at less than 6%.

Keep you eye on other developments that should be coming soon. Some other fees such as the up front delivery fee and "G-Fees" charged by Fannie and Freddie are likely to be eliminated or substantially reduced by the new management in the coming months.

This is good news for buyers in a market of lower home prices and should also be good for sellers with competitively priced homes.

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• Mortgage rates drop sharply

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Home Value Web Sites

Web sites such as Zillow.com, Housevalues.com and Cyberhomes.com are use full for getting an overall view of a neighborhood and general pricing but be careful of utilizing these sites to zero in on a specific homes value.

Web sites such as these rely on computer generated, automated models to to estimate value. The problem is that these automated models can not account for a specific home's condition or improvements. Many times these websites do not even accurately reflect property descriptions.

"The percentage of error on these estimates is still very large," says Delores Conway, director of the Casden Forecast at the University of Southern California Lusk Center for Real Estate. If there are not many comparable sales in one area, for example, she says, "the estimates will have huge errors in them."

Even Marty Frame, general manager of Cyberhomes.com, admitted that the data on there site is best used as a way to form an overall impression of a neighborhood when speaking with the Associated Press this month.

"Our goal is to provide you all this information and let you cherry-pick the things that are most interesting to you," Frame says. "You're going to look at an estimate and say, "that makes sense' or 'that doesn't make any sense."'

While these web sites have their place and some useful information you are best off to consult a real live professional when it comes down to pricing real estate you are about to sell or when determining a fair amount to pay for that new home.

Interest Rates & Real Estate

Being active in both the Whatcom & Skagit County real estate markets we often get asked "where are interest rates today?"

This question means different things to different people. For some they want to know if they got a good deal when they locked their rate, others want to know if they should lock their loans now. "Should I buy now or wait for conditions to get better?" seems to be the perpetual question.

Here is a short article from Reuters News quoting Allen Greenspan concerning the current state of interest rates and the ecconomy:


Daily Real Estate News June 16, 2008
Greenspan Predicts Rise in Interest Rates

The credit crisis is under control, but with inflation now the top concern, higher interest rates can be expected, said former Federal Reserve Chief Alan Greenspan said last week.

Greenspan said he thought the credit crisis had peaked in March. "I think the worst is over (for the U.S. economy) if the financial crisis is over," Greenspan said via video link to an event in Mexico.

But to keep inflation under control, Greenspan said the fed will have to tighten monetary policy and that will drive up interest rates.

Source: Reuters News (06/13/2008)

So, if you are in a position that a change in interest rates may affect you, wheter you are buying, selling, refinancing...it may be time to make some decisions.

If you have questions or would like more information just give one of us a call, we would love to talk with you.

Current Statistics

With all the talk about how bad the real estate market is you might ask "how bad is it, really?"

Well, here are some of the most current Whatcom County statistics on real estate.

In Bellingham alone we had 103 used, single family homes sell in the month of May. Compare that to last May when we had 157 used homes sold and you will see that we are off last year by 54 sales.

New homes sales in Bellingham performed slightly better with 24 sold this May and 27 sold last May.

Looking at the Whatcom County real estate market as a whole compared to last year and using year to date numbers rather than individual months we are down 23.1% from last year. This number includes all types of real estate (residential, condos, multifamily, land...) and covers all of Whatcom County.

So what about pricing?

In Bellingham the average price for a used, sigle family home this year in May was $357,351. Last May the average for the same category was $342,309.

That is a 4.4% increase over last year in Bellingham.

In northern Whatcom County including Ferndale, Lynden & Blaine our average price for a used single family home this May was $317,354 compared with last May's average of $332,700 gives us a decline of 4.6%

As we head to the east county including Deming and Sumas we saw an average sales price of $202,423 this May and and average of $196,837 last May. This gives us an increase of 2.8%.

So while sales are still slowly pluging along for most of us our average sales prices have continued to increase slightly and those for those who did see some decrease in average sales price it could have been worse.

The good news is that most of the ecconomists I have been reading are predicting a recovery of the real estate market for the second half of 2008.

Real Estate Outlook: Some Encouraging News

We have all heard that real estate is local and it certainly is. But we would be foolish to think that the Whatcom County real estate market is not also affected by events on a national level.

So let’s step out of Whatcom County and take a look at how national trends affect us locally.

Despite all the grim news about gas prices and recession, there are more than a few encouraging signs popping up in the national economy that are not getting much attention.

Worker productivity in the U.S., for example jumped by 2.2 percent in the latest quarter -- and that was on top of a 1.8 percent gain in the prior quarter.

Why is that significant for housing and real estate? Because rising productivity generally points to lower inflation … and lower inflation fears help keep interest rates low. Just ask the Federal Reserve, which keeps an eagle eye on productivity.

In fact we continue to see mortgage rates hovering near record lows. Thirty year fixed rate loans dropped again last week -- the second week in a row -- and went under the six percent mark to 5.9 percent, according to the Mortgage Bankers Association of America. Fifteen year rates slid to 5.5 percent.

Equally important, the number of consumers applying for mortgages to purchase homes took a healthy jump last week -- up 12.1 percent, according to the Mortgage Bankers. Applications for FHA mortgages -- the hottest product in the home purchase space right now -- were up by 13.2 percent.

The surge in loan applications is important because it points to potentially higher home sales in the months ahead. Lower home prices in major markets, plus the arrival of the long-awaited "jumbo" loans in high cost areas, are definitely pushing applications.

But despite these positive signs for the housing economy, there are some troubling developments as well. Last week's Senior Loan Officer Opinion Survey -- a poll of bankers across the country conducted by the Federal Reserve Board -- found that "tightened lending standards" are major impediments keeping home buyers on the sidelines.

Toughened underwriting restrictions that began a year ago with sub-prime loans have now "spilled over into the overall mortgage market including prime," according to the Fed survey. 62 percent of all banks reported imposing more restrictive loan standards during the first quarter of this year compared with last year.

What the Fed report documents, in effect, is that large numbers of home sales that might otherwise be occurring -- helping to pull us out of the real estate slump -- are being prevented by lenders' narrowing or closing of their mortgage windows.

Even though here in Whatcom County and the Pacific Northwest we have thus far escaped the full weight of the real estate down turn, until lenders start loosening up, it will be tough to move to a full real estate recovery both nation wide and localy.

WSU's Real Estate Report

What is going on with the Whatcom County real estate market? Have we reached the bottom? How low will prices go? Is this a good time to buy or should I wait?

These are just a few of the questions that we frequently hear around Bellingham and Whatcom County these days.

Of course no one really knows the answer but most will give you their opinion. If you listen to the popular media outlets you might believe the sky is falling. If you listen to some in the industry you might hear “what housing slump?”

While we certainly are not in a booming market, real estate in Whatcom and Skagit Counties is also not at a standstill.

Matthew Gardner of the Central Puget Sound Real Estate Research Committee with Washington State University states it this way in the executive summary of their Real Estate Research Report.

“It is without question that we are in a state of change as it pertains to our own marketplace. After several years of stellar growth in the residential market, although not record-breaking by more macro standards, we are seeing the effects of the sub-prime debacle hit our area. It would be extremely short-sighted for anyone to believe that we are immune to this national event; however, I would contest that we are currently faring better than the country as a whole, and that we will come out the other side somewhat scarred but not totally beaten. The market continues to move to a substantively more moderated pace of activity as media influenced buyers expect large discounts or fence sit waiting to see where 2008 will take us.”

In this report he goes on to conclude that the report shows a market that is growing and actually benefiting from some of the turbulence that surrounds us. He also states that we tend to lag the U.S. into negative growth and come out of recession at a quicker rate.

One of the final statements that Matthew Gardner makes is a sentiment that we have had for some time now;

“There are numerous consumers imposing a substantive level of self-imposed cautionary posture that can be attributed to the national media’s “doom and gloom” predictions.”

Whether you listen to hyperbole that appears so frequently in the general media or take a more optimistic view one thing is true, Whatcom County’s real estate has taken a slight hit in value and a slowdown in sales activity. The question now is; are we at or near the bottom? As the overused cliche goes “buy low, sell high”.

Here is What the Nations Realtors Think

These are the ongoing results of a nation wide poll of realtors and consumers conducted by the National Association of Realtors. This poll will stay active through May so check back to get updated results. As always, feel free to leave your comments.

View Poll View Results

Online Poll PoweredBy MicroPoll

Something New

As you can see we have decided to jump into the blog revolution. We plan on posting information on the Bellingham / Whatcom County real estate market, real estate statistics and trends, as well as some fun and interesting things that Northwest Washington has to offer.

We hope that this will be both informative and entertaining.

Please join us by commenting on our blog, we want to hear from you.

On the right side of this page we have placed a link to our web site as well as some of our featured listings, an easy to use MLS real estate search, and one for new listings. We hope these links will be helpful.

Check back soon; we will have our first commentary up shortly. Until then enjoy the spring!

Eric & Debbie