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April 2 , 2006
February housing sales heat up
Mortgage rates edge up
Lake Tahoe Top 10
March Roundup
Real Estate Apocalypse
Mortgage Science Fiction
California 40-year rate
'February housing sales heat up
Economists were expecting sales of about 6.52 million, according to a survey conducted by MarketWatch.
Existing home sales were revised higher in January to 6.57 million from 6.56 million estimated earlier.
Sales are down 0.3% since February 2005. The boost in sales in February was likely due to warmer than usual weather in January, when sales that were closed in February were initiated, the realtors said.
It was the biggest percentage gain in two years. The supply of unsold homes also rose 5.2% in February to 3.03 million, close to the all-time record of 3.04 million in 1986. The inventory represents 5.3 months supply, unchanged from January.
Read more on this article at 
Mortgage Rates Edge up this Week in Response to Fed Actions
McLEAN, VA --
The average for the 15-year FRM this week is 6.00 percent, with an average 0.5 point, up from last week's average of 5.97 percent. A year ago, the 15-year FRM averaged 5.58 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.02 percent this week, with an average 0.6 point, up from last week when it averaged 5.96 percent. A year ago, the five-year ARM averaged 5.43 percent.
One-year Treasury-indexed ARMs averaged 5.51 percent this week, with an average 0.8 point, up from last week when it averaged 5.41 percent. At this time last year, the one-year ARM averaged 4.33 percent.
"The Fed raised rates this week, as was expected, but the market was a little surprised at the Committee's comments, which implied more tightening in the future," said Frank Nothaft, Freddie Mac vice president and chief economist. "That raised the expectation that inflation may be more of a threat than was previously thought, and that kind of thinking promotes upward pressure on mortgage rates like we saw across the board this week." Week of March 31, 2006.
Lake Tahoe Top 10
Looking for a vacation property while keeping an eye on investment potential? According to MSN Money "Lake Tahoe is among the Top Ten places to buy a second home".
As of March 11, 2006
SINGLE FAMILY HOMES
283 single-family homes currently available. Price range: $265,000 to $2,700,000. Rooms: studio, 1 bath to 7 bedrooms, 5 baths. Sizes range: 264 sq. ft. to 5370 sq. ft. of living space. Average Days on Market: 83. The median price of these active listings is $549,900.
59 listings are under contract. Price range: $309,900 to $1,599,000. Rooms: 1 bedroom, 1 bath to 6 bedrooms, 3 baths. Sizes range: 500 sq. ft. to 3,706 sq. ft. of living space. Average Days on Market: 114. The median price of these pending listings is $489,000.
SINGLE FAMILY HOMES SOLD
644 single-family homes were sold from March 1, 2005 to March 1, 2006. Price range: $185,000 to $4,250,000. Rooms: studio, 1 bath to 6 bedrooms, 6 baths. Sizes range: 431 sq. ft. to 5967 sq. ft. of living space. Average Days on Market: 74. The median price of these listings is $485,000.
44 single-family homes were sold over $1,000,000, from $1,000,000 to $4,250,000.
CONDOS/TOWNHOMES
31 condos/town homes are currently available. Price range: $182,000 to $2,876,000. Rooms: studio, 1 bath to 4 bedrooms, 4 baths. Sizes range: 480 sq. ft. to 3,200 sq. ft. of living space. Average Days on Market: 37. The median price of these active listings is $525,000.
There are 6 condo listings are under contract. Price range:$179,000 to $400,000 Rooms: studio, 1 bath to 2 bedrooms, 1.5 baths. Sizes range: 678 sq. ft. to 977 sq. ft. of living space. Average Days on Market: 68. The median price of these pending listings is $257,000.
CONDOS/TOWNHOMES SOLD
61 condos/townhomes were sold from March 1, 2005 to March 1, 2006. Price range: $157,500 to $910,000. Rooms: studio, 1 bath to 4 bedrooms, 3 baths. Sizes range: 480 sq. ft. to 1870 sq. ft. of living space. Average Days on Market: 78. The median price of these listings is $350,000.
MULTI-FAMILY
38 multi-family duplex to fourplex properties are currently available. Price range: $329,000 for 2 studio with 750 sq. ft. to $1,265,000 for four units with 5,040 sq. ft.
LAND
76 parcels are currently available. Price range: $115,000 to $3,500,000. Size range from: .115 acre to 62.5 acres. Average Days on Market: 119. The average price of these listings is $450,588.
SOLD MARKET COMPARISON 2002-2005
Residential - single family and condo/townhome sales
2005
Single Family
Average Price: $565,682
Median Price: $475,000.
26% increase over average price in 2004
25% increase over median price in 2004
Condos/Townhomes
Average Price: $374,800
Median Price: $350,000
11.6% increase over average price in 2004
25% increase over median price in 2004
2004
Single Family
Average Price: $447,872
Median Price: $380,000
18.3% increase over average price in 2003
17.4% increase over median price in 2003
Condos/Townhomes
Average Price: $335,806
Median Price: $280,000
39.4% increase over average price in 2003
40% increase over median price in 2003
2003
Single Family
Average Price: $377,154
Median Price: $323,500
9.3% increase in average price over 2002
17.6% increase over median price in 2002
Condos/Townhomes
Average Price:
Median Price:
6.6% increase over average price in 2002
10.7% increase over median price in 2002
2002
Single Family
Average Price: $345,148
Median Price: $275,000
Condos/Townhomes
Average Price: $223,563
Median Price: $179,500
A desirable location and quality of life contribute to high demand while low inventory and limited development due to environmental restrictions leads to a limited supply. It is likely over the next decade that home sales in Lake Tahoe will remain robust with probable continued price appreciation.
Location:
The key to any good real estate investment is location.
Close to San Francisco Bay Area and Sacramento (one of the fastest growing areas in California), Lake Tahoe makes an accessible choice for a vacation retreat, retirement home or investment property. Our proximity to the high tech industries of the Silicon Valley offer many vacation homeowners the opportunity to telecommute part time from their vacation homes. Easy drives from Sacramento and Reno make it a popular weekend spot.
Recreation:
The Tahoe basin enjoys status as one of the finest year-round recreation areas in the world. Visitors come to experience the best in year-round outdoor activities including world-class skiing and boarding, snowmobiling, boating, golf, hiking and mountain biking. Some come to try their hand at gaming and tempt "lady luck" or to enjoy the nightlife.
Lifestyle:
Match your destination to your lifestyle. Changing priorities have made quality of life increasingly important. Buyers are increasingly looking for a place to escape on the weekends while looking for a solitude and relaxation?
Spectacular scenery:
Lake Tahoe attracts millions of travelers a year because it offers the best of both winter and summer climates.
Visitors continue to be awestruck by the grandeur and beauty of one of the most spectacular mountain lakes in the world. Like travelers before them, present day vacationers flock to Lake Tahoe's shores, many vying to make a piece of this paradise their own. With awe-inspiring beauty and a multitude of selections for vacation homes and rentals, the South Lake Tahoe resort area is great for both vacation homes and investment opportunities. If you are looking for a vacation home in Tahoe you are not alone. Who wouldn't long to view sweeping mountain vistas from a mountain chalet sequestered among the Jeffrey pines?
Information Sources:
National Association of Realtors®, California Association of Realtors®, South Tahoe Association of Realtors®, Aspen Board of Realtors, Land Title Guarantee Company of Eagle County, Colorado.
(Information deemed accurate but not warranted)
ZIP Code: 96150
Approximate Location Boundaries: From Emerald Bay to Glenbrook in portions of El Dorado and Douglas Counties.
Location Characteristics: Lake Tahoe is regarded as one of the finest year-round recreation destinations in the world with opportunities for fun and adventure for the whole family. Enjoy crisp, clean air, and the undiminished grandeur of the Sierra Nevada amid fragrant pines. At an elevation of 6,229 feet this alpine lake ranks among the most spectacular mountain lakes on the planet.
March Roundup
March Roundup
See-saw. Yo-yo. Bouncing ball. All are good terms to describe the nature of the current mortgage market, with rates moving up and down, ever so slightly, week-in and week-out.
In the latest Freddie Mac survey of loan costs, the average for the standard fixed-rate, 30-year mortgage was 6.32 percent, a dip from 6.34 percent the week before. Last year at this time, the rate was 6.01 percent.
Which is to say (with apologies to Elvis) that over a 12-month period, there hasn't been a whole lot of shakin' goin' on.
It was the second week in a row that long-term rates drifted lower. At the same time, though, shorter-term rates rose in anticipation of further rate hikes by the Federal Reserve Board.
Here's a look at how other benchmark rates ended the month:
- The 15-year, fixed-rate loan averaged 5.97 percent, down just one peg from 5.98 percent. A year ago, the average was 6.01 percent.
- The five-year hybrid adjustable rate mortgage (fixed for five years, then adjusts annually thereafter) average 5.96 percent, up from 5.93 percent. The five-year ARM was 5.35 percent a year earlier.
- One-year ARM was 5.41 percent, up from 5.37 percent. A year ago: 4.24 percent.
Energy Tax Credits
Under the Energy Policy Act of 2005, home owners who make certain energy-conscious improvements during the 2006 and 2007 tax years can claim a credit on their tax returns. To qualify, the law states, the component must meet or exceed the criteria established by the 2000 International Energy Conservation Code, including supplements, and must be installed in the taxpayer's principal residence.
Now, IRS says taxpayers can rely on manufacturers claim's that their products will qualify for the credit as proof the items meet the law's requirements.
There are different levels of credit, depending on the type of improvement made. But the maximum amount of credit for all energy-related improvements combined and undertaken by an individual home owner cannot exceed $500 during the two-year period of the tax credit. Improvements eligible for the credit include the following:
- Added insulation to walls, ceilings or other part of the building envelope.
- Replacement windows.
- High-efficiency gas, oil and propane furnaces and boilers.
- High-efficiency central air conditioning units, including air-source and ground-source heat pumps.
- High-efficiency fans for heating and cooling systems.
- High-efficiency water heaters, including heat pump water heaters.
A good website for information concerning federal tax credits for energy-related home improvements is
Flood Insurance
Last year's devastating hurricanes showed home owners the importance of flood insurance. And now Congress has acted by increasing the borrowing authority of the National Flood Insurance Program from $18.5 billion to $20.775 billion. Without this additional borrowing authority, the program would run out of money next week and be unable to pay any future claims.
But lawmakers also are considering legislation that would, among other things, force owners of vacation homes, second homes and nonresidential properties to pay actuarial rates for coverage. Right now, the cost of insurance on these properties is subsidized, at least in part. If you don't think this is fair, write your legislators in Washington. And of course, if you think this is the way it should be, write in support of the change.
The legislation that has been cleared by the House Committee on Financial Services also would increase NFIP's borrowing authority to $25 billion, increase the coverage limits for residential flood insurance policies from $250,000 on the structure and $100,000 for its contents to $335,000 and $135,000, respectively, and require lenders to tell all borrowers, not just those whose houses are in a flood plain, that flood insurance is available, and that premiums can be escrowed just like those on standard homeowners policies.
Most home owners buy flood insurance only because it is required in areas considered most vulnerable to flooding, according to a recent study by the Rand Corp. Just 20 percent of those living in the most flood-prone areas purchase coverage when they are not required to do so, the study says.
"Substantial flood damage from Hurricane Katrina was suffered by homes located in flood zones whose owners were not required to purchase flood insurance," said Lloyd Dixon, lead author of the report.
Only about 1 percent of Americans living outside flood zones buy federal flood insurance, according to the study, even though they sometimes become flood victims as well.
Fifty to 60 percent of the 3.6 million single-family homes in the most flood-prone areas are required by law to buy federal flood insurance. But the owners of the remaining homes in the most flood-prone areas and the roughly 76 million single-family homes in the nation outside these areas are not required to buy flood insurance.
Identity Theft
Mrs. W., an 80-year-old California woman, became a victim of identity theft when she hired two young men to clean her apartment. But working with the Identity Theft Assistance Center, she was able to detect and close one fraudulent account, and identify 16 additional incidents of possible fraudulent activity.
The group is a cooperative initiative sponsored by the financial services industry, and is operated by the Identity Theft Assistance Corporation, a not-for-profit membership corporation.
"We joined ITAC because we want to give our customers the help they need during such a vulnerable time," said Brian McGinley of Wachovia Bank. "Every consumer who uses ITAC talks to a knowledgeable trained agent who walks them through their credit report and helps them through this difficult and overwhelming experience."
Over 60 percent of consumers who use the ITAC service find other suspicious activity on their credit report. ITAC notifies its members of the suspicious activity identified by the consumer. And member companies report that over half the alerts turn out to involve fraud.
"Reports from ITAC have enabled us to prevent fraud," said Wells Fargo's Diana Starcher. Recently, a notice from ITAC allowed Wells Fargo to close down several fraudulent checking and savings accounts established online using a New York City resident's social security number, but a Florida address and phony driver's license. ITAC member companies report that over 50 percent of the alerts they receive from ITAC turn out to involve fraud.
Real Estate Apocalypse?
NEW YORK - If California slid into the sea, would it take the U.S. housing market with it?
After a few years of real estate boom, which spread dramatically higher prices to many (though not all) parts of the U.S., the market has recently seemed to change course. On Thursday, the U.S. Census Bureau reported that housing starts were down 7.9 percent from January to February and had declined 4.8 percent from February 2005, indicating less demand for new construction. That came three days after the National Association of Realtors predicted that this year would bring "a more level playing field for buyers and sellers on the heels of a five-year sellers market."
This won't be a crash, but a soft landing for the real estate market, it appears. But that made us wonder: What would it take to make things really go off the rails?
War, pestilence and natural disaster have always been bad news for human civilization; that would seem to suggest that they are bad for home sales as well. While conflagrations like World War II and economic declines like the Depression are rare, they do happen — as do lesser versions of conflict and crisis.
We talked to a number of experts about hypothetical events that could send the U.S. real estate market into a skid, from highly unlikely scenarios such as a military confrontation with China, to the types of predicaments we have faced in recent years, like natural disasters and terrorist attacks.
Turns out, there are lots of ways to hit the housing market.
"Prices will certainly plummet if we have significant loss of house buying power," says James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
Higher interest rates that make mortgages more expensive, an employment decline that results in loss of income, or an increase in the costs of other goods (think oil) can all divert money from real estate.
"Anything that throws the economy into recession will throw the real estate market into recession," says Susan M. Wachter, professor of real estate, finance and city and regional planning at the Wharton School of the University of Pennsylvania.
A truly dramatic plunge in the real estate market could be precipitated by a crisis, whether economic, natural or, as in the case of war, man-made, that lasted.
"It's the long-term impact stuff we have to worry about," says Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California Lusk Center for Real Estate. An earthquake may be devastating, but if it only lasts a day the market can recover. A prolonged economic crisis can have a far more profound effect.
What about wars abroad, or concerns like bird flu, nuclear ambitions in Iran or conflict in Israel? In some cases, such as with Hurricane Katrina, what can be devastating to one region will have no impact — if not even a positive effect — on other areas.
"SARS in Asia is very negative for the Asian market and real estate in the markets where it occurs," she points out. "But it has no negative impact on the U.S. A beneficial impact is that it might, if anything, draw capital to the U.S. and lower interest rates." An increase in the threat of war could have the same result, as investors seek a safe harbor for their money.
On the other hand, a meaningful outbreak of avian flu in the U.S. would probably have a strongly adverse impact on the housing market, especially if it struck a major population center. Robert J. Shiller, an economist at Yale University and author of the book "Irrational Exuberance", which predicted the 2001 stock market bust and was recently updated to include real estate bubbles, notes that housing prices in the U.S. were on the decline in 1916. But a serious drop took place at the same time as the 1918 flu epidemic. "World War I and the flu were kind of coincided," he says. "It looks like that had a huge hit on housing prices — they were down 40 percent in real terms from 1912 to 1920."
By Sara Clemence 
Mortgage Science Fiction
Some mortgages are likely to outlive you. Think twice before signing up.
When most of us think of science fiction, we may imagine life on other planets or animals forming governments. When bankers engage the science fiction gears of their brains, though, they may be thinking of ... 50-year mortgages.
You read that right. Our friends at the Treasury Department are once again selling 30-year bonds, leading experts to expect more 40-year mortgages ahead. (This is because long-term loans are generally tied to some correspondingly long-term interest rate.) Some even imagine 50-year mortgages. If you suddenly find yourself intrigued, first consider the pros and cons of such an instrument.
On the minus side, longer mortgages mean you pay a heck of a lot more in interest over the term of the loan, and you build up equity very slowly. With a 50-year mortgage, if you buy your home when you're 40, it may well outlive you. Even if you're alive, trying to perform the traditional mortgage-burning ceremony upon your last payment may result in an explosion due to your oxygen tank.
So what should you do? Well, if there's no other way for you to afford a home, or the home that you simply must buy, then consider a long-term mortgage. There are already some 40-year loans in existence. But plan to refinance into a short-term loan as soon as you can so that you can build more equity.
Also, ask yourself whether there's any way you can swing a shorter-term loan, such as a 30-year one. Many times, the difference in monthly payments won't be so enormous. A 40-year $200,000 loan at 6.5% would offer payments of $1,180, just $50 less than the 30-year option described above. With some careful budgeting, you might be able to swing the shorter loan.
What will longer mortgages mean for the lending and home industries? Well, they're likel to attract more borrowers, for one thing. So revenues might rise. An Associated Press article pointed out that, "Chris Low, chief economist at FTN Financial, a financial services firm, said longer-dated home loans could prevent a dramatic drop in the housing market because their lengthy payback periods would lower monthly payments at a time when interest rates for other mortgages have risen from historic lows."
If you're interested in home-buying and home-owning issues, visit our Home Center, which features lots of money-saving tips and even some special mortgage rates.
And if you're in the market for mortgage insurance, another way to inform yourself about options is to spend some time at the websites of lenders. Here are some major lenders:
- Wells Fargo (NYSE: WFC)
- Capital One (NYSE: COF)
- Washington Mutual (NYSE: WM)
- Wachovia (NYSE: WB)
- Countrywide Financial (NYSE: CFC)
- National City (NYSE: NCC)
- Bank of New York (NYSE: BK)
A California 40-Year Rate Lower Than 30-Year Rate
A 40-year, fixed-rate mortgage with an interest rate lower than that of a 30-year mortgage?
Get out.
Ever-higher home prices in the past year have given a boost to 40-year mortgages. The longer term makes for lower monthly payments and that means more buyers can qualify for and afford more expensive homes -- at least on a month-to-month basis.
The problem is, the interest rate for a 40 year loan is typically a tad higher than the rate on the 30 year loan. Combine that higher rate with 10 more years to pile on interest and the financing costs over the life of the 40-year loan virtually wipes out the month-to-month savings.
While some borrowers ignore the long-term costs just to get into a home using a 40-year loan, that long term cost causes most borrowers to stick with loans with less long-term sticker shock.
In California -- a market ripe for mortgages with more leverage -- a new 40-year mortgage program is helping make the loan's long term costs more manageable, at least for first-time home buyers who can qualify.
The California Housing Finance Agency (CalHFA) which serves only low- and moderate-income, first-time home buyers who meet income and home price limits is offering a 40-year loan with a fixed rate of 5.75 percent.
"Compared to the 30-year fixed mortgage, the 40-year fixed mortgage offers monthly loan payments that would be less than a 30-year mortgage on the same house," said Theresa Parker, CalHFA's executive director.
"Each first-time home buyer comes to us with unique financial situations. The 40-year fixed mortgage gives them one more option to consider as they try to determine the best way to finance their first home," she added.
Let's compare a $300,000 mortgage.
As of March 17, Freddie Mac's Weekly Mortgage Survey of market rates put the average fixed-rate for 30-year conforming loans at 6.34 percent. Forty-year loans typically cost at least 0.25 percent more than 30-year loans -- on the conservative side -- putting the 40-year rate at about 6.590.
Using these fixed rates and Nolo.com's loan calculator, a $300,000 30-year loan costs about $1,864 in principal and interest each month and, over the life of the loan, $371,307 in total interest, for a combined principal and interest payback total cost of $671,307.
The typical fixed-rate 40-year, $300,000 mortgage costs about $1,775 each month, $552,308 in total interest and a total payback of $852,308 over the life of the loan.
The CalHFA 40-year mortgage costs $1,598 each month, $467,362 in total interest and $767,362 in total payback costs over the life of the loan.
The CalHFA 40 is only for income and credit qualified first-time home buyers purchasing a single-family home, condo, planned unit development (PUD) home or qualified manufactured home.
In Santa Clara County (Silicon Valley), for example, income limits range from $73,301 to $140,493 (based on number of people in the household) for resale homes and from $85,518 to $140,493 for new homes.
Home price limits for the same county range from $627,591 to $767,055 for resale homes and $630,435 to $770,531 for new homes -- in both cases, depending upon the home's location within the county.
Also the loans are available only through CalHFA-approved lenders, including Bank of America, American Home Mortgage, First Mortgage Corporation and more than a dozen more regional mortgage lenders throughout the state.
For those who qualify, among the agency's other loans, there's a interest-only, fixed-rate 35 year mortgage at 5.85 percent; special 30-year loans with rates as low as 3 percent and up to 5.625 percent; and a host of down payment assistance and other loan programs that can be coupled with the fixed-rate loans.
"While the 40-year mortgage may not be right for everyone, it does offer first-time home buyers another way to help achieve their goal of home ownership," Parker said.
Published: March 22, 2006
by Broderick Perkins
American Mortgage of Lake Tahoe
1111 Ski Run Blvd. Suite 2
South Lake Tahoe, CA 96150
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