Northwest Living | Bellingham Real Estate Market

The US Government announced Wednesday that it is freeing up billions of dollars at Fannie Mae and Freddie Mac, so that the two companies can help homeowners refinance mortgages on the brink of default. This will have a huge impact over the next year to help homeowners get out from under these tough loans of the past.

The Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored companies, unveiled a plan to ease mandatory capital requirements now in place. It said the plan is expected to result in an immediate infusion of up to $200 billion into the market for mortgage-backed securities.

Now nearly $20 billion for the two - will be reduced by a third under the new deal. The freed-up money will go toward buying mortgages of struggling homeowners to enable them to refinance into more affordable loans.

The announcement is part of a large number of government actions revealed lately aimed helping the financial markets and protecting the economy from recession. The capacity of Fannie and Freddie will permit them to do more in the jumbo temporary conforming market, subprime refinancing and loan modifications areas.

These type of announcements don’t get much headlines with the general public, but are usually the type of decisions that make the most impact. If your a homeowner in our Northwest corner and have been thinking of refinancing or buying a home…there is good news on the horizon. Now we just need a little bit of a trickle down effect from the three quarters percent drop in rates, to home loans.

Once the housing market can get some footing under neath it by stopping the deflation of housing values, is really when we will see a recovery. This news today with the freeing up of capital from Fannie Mae and Freddie Mac was the kind of stimulus that might get the housing market going again.

Jerry Campbell - Muljat Group - Bellingham, WA - Bellingham WA Real Estate

The Fed’s action lowers the funds rate to 2.25 percent, the lowest since February 2005, and comes two days after the central bank announced the latest in a series of emergency measures to stem a fast-spreading global financial crisis. The Fed has now cut rates by 3 percentage points since mid-September, including 2 points since the start of the year. 

In recent days, the central bank has also offered to help financial institutions as well by providing access to liquid funds. The central bank is pulling out all the stops to provide liquidity to financial markets and put a floor under an economy many analysts believe is in recession. 

The Fed, fearing financial markets would freeze up and send the economy into an sharp downward spiral, has offered cash auctions and direct loans to financial institutions, opening those liquidity avenues beyond the banks that normally deal with the Fed to include other Wall Street firms. 

The good thing is that the global economy is doing pretty good and especially in China where they are experiencing a boom. Our nations steel industry is actually on a rebound and looks to do pretty good. 

Jerry Campbell - Muljat Group - Bellingham WA - Bellingham Real Estate

The Federal Reserve dropped the federal funds rate to 4.25 percent today. The street however was hoping the Fed might instead lower rates by a half point but chose not to. This key rate is what governs overnight lending between the nations banks.

In another move the Fed also lowered the discount rate it charges for direct loans to banks by matching a quarter point here as well to 4.75 percent. Since September the Fed has now lowered the overnight rates by a full percentage point in an attempt help the nations economy and lower the risk of falling into a recession. 

Most of todays decision was based on the nations condition with the housing sector.  With so many banks exposed to subprime loans, especially in the southern part of the country from California to Florida, that the banks are reluctant to extend credit.  The Northwest is not spared from the subprime mess, but were at least fortunate to have a much lower rate of subprime loans outstanding per loans on the market. One look at the national map of subprime loans shows that the Northwest should at least be feeling like we will get through this. 

But because the nation as a whole has several areas of concern with housing and subprime loans, it affects us all, and so the fed had no choice but to step in and react.

Outside of the housing and financial services sectors, the U.S. economy has exhibited resilience. In addition to a steady labor market, many retailers reported stronger than expected November sales and a slumping dollar helped boost demand for U.S. exports.

Also, the risk of a inflation, which the central bank had cited as a reason for monetary restraint even as financial markets clamored for rate cuts, appears to have
eased slightly. Productivity has been strong and core inflation gauges, which exclude volatile energy and food costs, have remained tame.

However, after a period of relative calm, credit markets are showing a level of strain not evident since August, when mounting defaults on U.S. subprime mortgages first led to a
worldwide pullback in money markets.

Does this mean that interest will drop in lock step, not necessarily, because interest rates are connected to long term bond rates.  Subprime borrowers will not gain from this cut, because those type of loans are keyed with LIBOR rates which actually have been trending up in recent weeks. Because of the liquidity issues in global financial markets, LIBOR rates have actually increased at the same time that treasury and other benchmark yields have been declining. The rate cuts today will however benefit those that are looking for lower rates on home equity loans, because those are tied in with the prime rate that borrowers pay on such loans.

Jerry Campbell - Muljat Group - Bellingham, WA - Bellingham WA Real Estate

 I normally don’t like to post to many interest rate articles, but wow interest rates are down under 6% again and the trend is looking good for the foreseeable future.  That’s got to help our local Bellingham WA real estate market.  Here’s some stats I want to pass on. 

Long-term mortgage interest rates were down Monday, and the benchmark 10-year Treasury bond yield dropped to 3.83 percent.

The 30-year fixed-rate average sank to 5.82 percent, and the 15-year fixed rate fell to 5.4 percent. The 1-year adjustable held at 5.53 percent. The 30-year Treasury bond yield was down at 4.29 percent.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.  But one still needs to check with one of our local banks or mortgage company’s here in Northwest Washington.

Anyone that might be looking to lock in some decent rates and buy a home in this buyers market might have just gotten an early Christmas present with the new interest rate news.

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It seems like more and more these days I’m getting questions about buyers wanting to purchase foreclosure homes. So I did some research the other day and found a few web sites and blogs that had some very useful information on the subject of foreclosures.  One of the best sources I found was on the Austin real estate blog which had a lot of useful information.  Ki Gray is the owner of the site and he’s using a map that he found on the New York Times showing county by county where the highest percentage of the subprime loans were taken out.

click the map below to open a new window with the full interactive version and our Northwest viewers can checkout the areas in the Northwest with the highest subprime loans.  That will give one an idea where you could pretty much predict where one would expect to find loans going into foreclosure.

subprime mortgage map

The interactive map showed that for the Northwest corner of Washington State, Skagit County showed that 27% of all mortgages are in subprime lending, 19% in Whatcom County, 18% in Island County, and only 10% in San Juan County. As high as those numbers might seem at first glance, those numbers are not to bad when compared to many of the other counties in the State of Washington.  Most of the other counties range from 25% to 35% overall.

This map is a good indication why the Northwest has done so well versus the rest of the country.  The light shade areas are the areas in the US that have the lowest subprime loans per county, and the darker areas are the worse hit by these tough loans. Looking at that map it appears that many areas in the midwest and especially the south and southwest have really been the hardest hit.

Click that link above the map and you can really zoom in and get a good idea of whats going on across the united states.  I really think if buyers and sellers in the Northwest could see this scenario, it would give a much more positive attitude towards are market here.  Especially when one factors the low interest rates under 6%, low unemployment rates (down to 3.8% in Whatcom County), and pretty good retail numbers.  In Whatcom County we also have the benefit of having almost three million citizens of British Columbia just over our border and with the parity of the Dollar and the Looney, Canadians are shopping here more. 

Next week I’m going to post the sales numbers for the Whatcom County housing market and it will show that the Bellingham WA housing numbers for the first ten months of 2007 vs 2006 are actually up year over year. I have the total sales numbers for the last eight years on a monthly basis and I’m going to start sharing them here on my Northwest real estate blog.  Look for the stats next week. I tend to look at the number of sales instead of prices, because I feel its one part of statistics that can not be easily manipulated. Price increases only tell you about what properties are selling for, but what about the homes that tested the market and didn’t sell.  That’s why I look at sales numbers comparisons instead. Tells a more true story.

Jerry Campbell - Muljat Group - 510 Lakeway Dr - Bellingham, WA 98225 - Northwest Living

Northwest Home buyers should take notice of where interest rates are currently, there looking pretty good at the moment.  Combine that with the fact that home buyers usually fair better with negotiations in a buyers market, now might be the perfect time to buy. 

Long-term mortgage interest rates dropped to 6.06%, and the benchmark 10-year Treasury bond yield inched up to 4.58 percent. The 15-year fixed rate sank to 5.69 percent. The 1-year adjustable dipped to 5.7 percent. The 30-year Treasury bond yield held at 4.83 percent.Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks covering the United States. Points on these mortgage loans range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average went over 14,000 for the first time and finished the day at 14,087.55, gaining  191.92 points on the day. The Nasdaq was up 39.49 points for the day to finish at 2741.

Home buyers in the Northwest here might want to lock in a long term rate and consider this a buying oportunity in the market place.  I know in fact there are a lot of home buyers sitting on the fence for some kind of good news.  I really think this is a perfect time to purchase a home with home prices dipping and lock in a great rate to boot.     For all your Bellingham real estate needs visit Bellingham WA Homes.

Frontier Financial Corp. has acquired Whidbey Island Bank in a move to improve its position in the Northwest area of Washington State.  The deal to purchase Whidbey Island Bank will cost Frontier about $191.1 million.

“We are absolutely thrilled to have Washington Banking join our organization,” stated John Dickson, Frontier Financial’s President and Chief Executive, in a prepared statement. ”Whidbey Island Bank is a high-quality organization that operates with a philosophy very similar to our own.”  He went on to say, “We believe this will be an outstanding combination of highly talented employees who bring with them a solid customer base, and we look forward to welcoming the Washington Banking team into the Frontier family.”

The holding company for Frontier Bank, Frontier Financial is headquartered in Western Washington. The terms of the agreement call for Frontier to pay approximately $21.40 per share to Washington Banking Co., the holding company of Whidbey Island Bank.

Frontier already owns 782,506 shares of Washington Banking common stock at a cost basis of $3.1 million. The transaction is expected to close in the first quarter of 2008.

Frontier operates 47 offices in Washington and plans to open its 48th location in October in Gig Harbor. Whidbey Island Bank has 20 branches in San Juan, Skagit, Island, Whatcom and Snohomish counties.

“The professionals on the Frontier team are amongst the finest bankers in the region, and I am confident that our organizations will both benefit from this combination,” said Michal Cann, chief executive of Washington Banking Co. “As we considered all of our strategic growth options, it became obvious that choosing to partner with Frontier would provide the greatest benefits and opportunities for our shareholders, employees, customers and the communities we serve.”

Following the merger, Cann will continue as senior vice president and regional manager. Additionally, one member of the Washington Banking board will be selected by Frontier to join the boards of Frontier.

Frontier previously announced a merger with the Bank of Salem that it is expected to close in the fourth quarter of 2007. Following the mergers with Bank of Salem and Washington Banking, Frontier’s total assets will be approximately $4.6 billion.

For all your Whatcom County real estate needs visit Bellingham WA Homes.

The subprime fallout has made the once slam-dunk home loans more difficult to obtain. While some Puget Sound neighborhoods continue to be very active, exemplified by one Bainbridge Island home drawing nine offers in one day, other areas have slowed considerably.

In addition, the first notion of back to school already has hit many second-home owners who are beginning to schedule the winterization of the family cabin. Instead of going through another off-season with little use and significant maintenance, some owners will use the last few weeks of the summer season to show and hopefully sell the family getaway, raising for-sale real estate inventory levels in popular areas.

If your house or cabin already has been sitting for sale long enough to bite into your comfort and affordability zones, you might want to consider a lease option.

A lease with an option to buy often can solve a two-mortgage problem for a seller, and provide a cash-poor buyer with an opportunity to “try out” a house while getting a portion on the monthly rent credited toward an eventual down payment.

Many sellers make a commitment to purchase another house contingent on selling the one they’re already in. But when it comes time to purchase the second house, or lose it, the prospective buyer can be faced with making payments on two homes if the first one has not sold.

A 12- to 18-month lease agreement, with an option to buy within the lease period, can solve problems. Here’s how a typical lease-option works:

The buyer and seller agree on a purchase price, usually a figure somewhere between today’s market value and the anticipated market value 12 months down the road.

The seller gives up tomorrow’s presumably higher value for money in hand today. The buyer pays a bit more than today’s value in exchange for very little cash down. Let’s say buyer and seller agree the price will be $335,000.

The seller charges the buyer a nonrefundable fee for agreeing to this option. The amount can vary depending on factors such as how eager the seller is to move and the size and quality of the house. Typically, the higher the fee, the better the buyer maintains the property.

Let’s use $3,000 for the fee in our hypothetical transaction. The fee is in addition to the monthly lease payments. And we’ll have the seller give the buyer the right to purchase the property for $335,000 at any time within the 12-month lease period. If the option is exercised, the fee could be considered part of the down payment.

The lessee has made no down payment, hence the monthly option fee is typically higher than rental market rates. The two parties agree on what portion of the rent will be applied to the down payment. Any amount can be credited. For example, if the monthly fee is $2,000, $800 could be credited to the down payment. (If the seller really is not eager to sell, he may not agree to a higher rent credit.)

Buyer and seller must be sure to specify both lease and sale terms in the agreement. For example, when the time comes for the buyer to exercise the option, if the interest rates are at 8 percent, the buyer may not be able to qualify for a loan. It’s a good idea to set an interest-rate ceiling in the agreement, or ask the seller to finance the home when conventional rates hit a certain level.

Sellers should read their mortgage agreements carefully before entering a lease-option agreement. Some lenders may activate a “due-on-sale” clause if the seller enters into a lease-option with another party. Many times, lenders will permit a specific lease-option period if notified in advance. And lenders usually are more willing to participate when they are assured of future business — like the seller’s or buyer’s new mortgage loan.

Some realty agents have been reluctant to seek lease options for clients because they have been unwilling to gamble their commissions on whether the option would be exercised. Others are skittish about deferring their commission until a deal is solidified. However, when open-minded agents understand a lease-option could keep a deal together and result in future business, the concept is readily accepted.

What’s the once-popular saying … a small piece of something is better than a large piece of nothing? Via HeraldNet and Tom Kelly

While the disruption roiling the mortgage-financing industry may seem like panic, some market veterans say it is actually a return to normal after a period of excess.Without trillions of dollars in easy money pouring into bonds backed by mortgages in the last few years, many of the lenders going bankrupt this year would never have thrived. And the U.S. consumer never would have grown accustomed to a market where someone with a spotty credit history and no verifiable income could borrow lavishly with little or no down payment.

“There is a little bit of rationality returning to the markets,” said Richard Bookstaber, a former risk manager at a number of Wall Street investment banks.

Bookstaber, author of “A Demon of Our Own Design,” which argues crises like this are inevitable because of the way markets are structured, said this newfound aversion to risk — though painful — is ultimately good for the economy.

That can be hard to explain, though, to the tens of thousands of people who have lost their jobs at bankrupt lenders like New Century Financial and American Home Mortgage.

Anyone who owned mortgage-lending stocks has lost a lot of money in the past six months, and the shakeout in the industry prevents some people from buying a home.

People and lenders had borrowed “to the hilt,” Bookstaber said. It is better for this industry to return to earth before it grows even bigger on borrowed money, he said.

“It is better to fall off the ladder when you are just four rungs up than when you are 20 rungs up,” he said. “Every month that nothing goes wrong, people think the market is all the less risky so they borrow more.”

Flight to safety

Most of the credit problems that ignited this flight to safety sprouted from “exotic” mortgages, including loans with cheap teaser rates that reset higher in two years, loans that are not backed by enough collateral, and loans where borrowers do not have to document their income.

These loans are becoming more difficult or sometimes impossible to obtain as lenders become pickier about the risks they are willing to take. If this shakeout seems drastic, consider that some of these loans were practically nonexistent at the turn of the century.

The worst may be yet to come, though. Many adjustable-rate loans still being paid at a teaser rate are scheduled to reset higher within the next year.

Decaying credit

And Countrywide Financial, the nation’s biggest home lender, has reported decaying credit quality even among borrowers with prime credit quality. In the meantime, standards are tightening.

“The industry has returned to what it was doing 10 years ago,” said Frank Bowersox, president of the Pennsylvania Association of Mortgage Brokers.

The permissive underwriting standards and exotic products of the past few years “were directed at people who normally would not have been able to buy a home,” he said.

That means people with good credit who can verify their incomes still have mortgage loans readily available to them, Bowersox said. In fact, interest rates for prime home loans are at some of the most attractive levels in 20 years, he said. Via Seattle Times

Pending home sales index shows surprising gain in June, suggesting more deals to buy houses are in pipeline to close. 

Home sales could see an increase in the coming months, as the latest reading on the state of the battered U.S. real estate market from an industry trade group showed surprising strength.

The National Association of Realtors’ pending home sales index jumped 5 percent to 102.4 in June, the group announced Wednesday. Economists surveyed by Briefing.com had forecast the index would slip 0.6 percent after a revised 3.7 percent drop in the May report.

It was the biggest increase in the index in three years. But that is up from a May reading that matches the second lowest on record. Only September 2001, the month of the terrorist attack, had a weaker pending home sales reading than May.

And even with the increase, the June reading is 8.6 percent below the June 2006 level, showing that there is still weakness in the market.

The index was created in 2001 to be a more forward-looking reading on home sales than the group’s existing home sales report, which charts sales at the time of closing. The pending home sales index tracks when a sales agreement is signed, generally a month or two ahead of closing.

Even the Realtors weren’t willing to state that the housing market has turned around, although it did say the pickup in the index is good news.

“It is too early to say if home sales have already passed bottom,” said Lawrence Yun, the senior economist for the group in the report. “Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand.”

The report is a rare island of good news in a sea of other reports showing weakness in the housing market. Tuesday, Standard & Poor’s/Case-Shiller Home Price Index showed further declines in home prices and values, and Wednesday, the Mortgage Bankers Association reported that applications for new mortgages fell to a five-month low. Other recent reports have shown declines in both existing and new home sales.

Still, the report was good news for worried U.S. financial markets, which have been tumbling for much of the past week on worries about housing and rising mortgage delinquencies and defaults. U.S. stocks, which had been lower before the pending home sales report, turned higher immediately after its release, but then quickly gave up those gains.  Via CNNMoney.com