Way to go Big Brother!

Riverton City Council just approved to raise city property taxes by 200%! That is awesome. Next week's agenda is voting for a one child only policy... developing...

Rates going up, values going down?

30-Year Fixed Rates Rise Slightly Mortgage rates rose slightly in the latest week, with the average conforming 30-year fixed mortgage rate increasing to 6.74 percent. According to Bankrate.com's weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.38 discount and origination points. The average 15-year fixed rate mortgage popular for refinancing rose to 6.27 percent, while the average jumbo 30-year fixed rate is now 7.68 percent. Adjustable mortgage rates were lower, with the average 1-year ARM dipping to 6.24 percent and the average 5/1 ARM down to 6.32 percent. Here’s another look at the latest figures:

30-year fixed: 6.74%, up from 6.70% last week (avg. points: 0.38)
15-year fixed: 6.27%, up from 6.22% last week (avg. points: 0.47)
5/1 ARM: 6.32%, down from 6.35% last week (avg. points: 0.45)


Values in SL County have been holding steady since the mighty decrease that we've seen in the last year. I would estimate that the average home value in Salt Lake County decreased by over 10% in the last year. Some areas took a hard shot to the you know where.

Our month supply is still over 10 months, meaning values won't go up until we get back down to that safe 6-8 month supply range.

Meanwhile, the Utes prepare to smash Michigan...

For your next home...

Daily Real Estate News July 8, 2008

Top 10 Best Counties to Raise a Family

Low cost of living, reasonably priced homes and short commute times added to excellent schools is what landed 10 communities at the top of Forbes magazine’s best places to raise a family.To be considered, the communities had to have populations greater than 65,000 and most of the school funding had to come from property taxes. Average SAT and ACT scores must top 1,050 or 22, respectively. These factors reduced the number of counties under consideration to 51.After that, the magazine considered cost of living, graduation rate, home prices, property tax rates as a percentage of median home prices, percentage of homes occupied by owners, per-capita income, air quality, crime rate and commute times.

Here are the results:

Hamilton County, Ind. (near Indianapolis)
Ozaukee County, Wis. (near Milwaukee)
Johnson County, Kan. (near Kansas City)
Geauga County, Ohio (near Cleveland)
Delaware County, Ohio (near Columbus)
Morris County, N.J. (northern N.J.)
Hunterdon County, N.J. (central N.J.)
Waukesha County, Wis. (near Milwaukee)
Montgomery County, Pa. (near Philadelphia)
Chester County, Pa. (near Wilmington, DE)

Source: Forbes, Zack O’Malley Greenburg (06/30/2008)

I should have gone to Harvard

Check out this study that these yahoos did at Harvard:

Tighter Lending Stalls Housing Recovery

Rising foreclosures and tightening credit standards are making it more difficult for the housing market to recover from the current downturn than it has been for the market to rebound from previous slowdowns, according to a Harvard University study."Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability," Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard, said in a statement.

I think a 4 year old could piece together that the CAUSE of the market crash was loose credit standards and as rates rose homes started foreclosing left and right. So for the market to recover, one could assume we needed the foreclosures to end... right?

This is almost as good as the Princeton study (tax payer funded) that found that parents who talk to their babies typically help them start speaking earlier. Amazing. I'm glad I could help fund that.

2008 mid year reports will be available in one week. Don't be caught not knowing what the market is doing (what would you do!). To request a free copy email me at me@dougnielsen.com.

In better news, I am told Harry Potter will be coming out in November. I am planning on renting out the theater for ya'll. Stay tuned...

Hey, Doug! How's the Market?

Here are some stats you can spit off at your next family get together:

*1st quarter 08 home sales in SL county are DOWN 67% from 1st quarter 07. Sales are lower than 2003 numbers.

*Homes have seen a 36% increase in value since 2003.

*28% of homes on the market are selling. Or, for the pessimist, 72% of homes are not selling. Contrary to popular belief, this is actually normal. THE MARKET HAS GONE BACK TO NORMAL. NOT COLLAPSE.

*During the boom, about 70% of homes were selling.

*The average home price fell to $267K. Down 7% from last quarter. I thought is was a law that real estate values always went up?

*Congress is full of idiots.

*There are currently more than 8200 homes for sale. About 2000 too many.

*SL county has a 8.7 month supply of homes. Buyer's market, baby. Buyer's market. Draper has a 13.1 month supply. Mega buyer's market.

*Did I mention congress is full of idiots?

Recession Proof?

What the heck is that supposed to mean? It's kinda like watching a basketball game and the announcer says, "This yahoo has made 25 free throws in a row!" Then on the next shot... CLANK!

Fortune or Forbes, whoever, has some nut who just wants to jinx us. Here is an section of the article.

So... in other news. Why does the media hate the Jazz? I can't figure that out. Hubie Brown can't stand us.

Now this is really interesting. This is the top 10 states in % change of their population and growth. In other words, these are the states whose economies are either booming or dooming. It is good to see we are at the top. This is one reason why the recession shouldn't effect us too much.

Everyone wants to know how the market is. Have we been affected? Infected (yes, this year's Nile Virus will be replaced with the Amazon Virus)?

Higher priced homes have COME DOWN IN PRICE by about 10%. In the last 3 years your 300K home went up in value to 370. That baby has probably come down to about 349, maybe more (Still a 50K gain). We are seeing this all across the board. In the last 6 months, sales are strong and increasing, but prices have come down. Anyone who tells you different is a liar. For alot of sellers there is still a bunch of equity gain in their homes (for example if you bought 5 years ago). Many sellers who purchased in 2007 and are trying to sell are finding it very difficult (do I use parenthesis too much?).

I expect to see prices stabilize. We should see mild appreciation in most areas, some areas still need to come down, i.e. new construction, Herriman. Existing homes sales have picked up over the last couple months.

In other news... with the looming energy crisis on the verge of crippling the US, congress met and voted overwhelmingly to put the polar bears on the endangered species list even though pb numbers have gone from 5,000 to 30,000 in the last 25 years. Way to go congress, I'm glad you are hard at work. Meanwhile, gas approaches 8 dollars a gallon... stay tuned.

So... how's the market? Depends on who writes the article!

The Housing Crisis Is Over
By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now. How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982. Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability. The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much. Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do. In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months. The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually. Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons. Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%.

Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading. This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure. A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.