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Last Updated:
December 13, 2010

December 2010 Summit County Real Estate.Net Notices

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CAR Opposes Amendments 60 & 61; Proposition 101

The Colorado Association of REALTORS? recently voted to oppose three harmful ballot measures that will be considered by Colorado voters in November. Amendments 60, 61 and Proposition 101 would severely reduce the ability to support infrastructure needs for our schools, transportation, and other critical investments made by our state and local communities. Due to the significance of their potential impact, CAR has launched a statewide campaign to assist in defeating the measures. Your statewide leadership has committed an initial $150,000 to Coloradoans for Responsible Reform (CFRR), the campaign formed in opposition to Amendments 60, 61 and Proposition 101. Our local association needs to be part of the effort to raise public awareness of these issues and the importance of defeating all three ballot measures.

A recap of what these measures could do to our economic vitality includes:

Amendment 60

Schools would lose more than a billion dollars in funding each year. The school districts would be required to cut property taxes by 50 percent. This would be on top of cuts that have already occurred. Inevitably, there will be more school closings and even fewer teachers. In addition, Amendment 60 would overturn hundreds of local elections ? commonly called de-Brucings ? that have occurred since 1992. Colorado voters have chosen to give greater flexibility to their local school districts, library districts, fire departments, police departments and other services to meet local needs. If Amendment 60 passes, local control would be usurped by the state, resulting in financial chaos for local communities and especially for our schools.

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Through the week, Stocks danced higher as strong earnings reports continued, with more than three-quarters of the S&P 500 companies who've reported second quarter earning beating expectations. In addition, conditions in Europe look to be improving... and this is quite the turnaround from just a few weeks ago when things looked to be horrible. The bank stress tests - whether they are to be believed or not - appear to have helped conditions overall, and brought some strength to the Euro and also to our Stocks, which improved on the news.

This is important to note, as part of the big rally we have seen in the Bond market and the big improvement in home loan rates came from the rush of funds from Europe to the US, and in particular to our Bond market, as protection from a precipitously declining Euro. If conditions in Europe continue to improve, money might just flow back over to Europe, and Bonds and therefore home loan rates could worsen.

However, not all of our economic news has been positive lately, and some of this weaker economic date helped Bonds and home loan rates maintain their historic levels last week. Durable Goods Orders, manufactured goods lasting at least three years, fell 1.0% for June. This was the biggest decline in nearly a year, signaling that economic growth was stagnant in the second quarter. In addition, the Advanced or first reading for 2nd Quarter GDP showed the US economy slowed to a 2.4% annual growth rate, which represents the lowest number in a year. These readings show that consumers and businesses remain cautious and reluctant to spend money. And that's understandable... concerns remain about the labor market, the housing market, and the economy overall. All in all, the news from last week helped Bonds and home loan rates improve, and they ended the week slightly improved from where they began.

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Will any of this week’s reports be good luck charms for home loan rates? Wednesday’s Gross Domestic Product (GDP) Report is an important one to watch, since GDP is the broadest measure of economic activity.

Information about the Labor Market is also important these days, which is why the Labor Department has decided to delay the Jobs Report for September one week, until Friday, October 8. However, this Thursday does bring another Initial and Continuing Jobless Claims Report. Last week’s report was disappointing, as Initial Jobless Claims were above expectations and represented the first rise in 5 weeks.

Friday we’ll get a read on the consumer perspective of the economy with reports on Personal Income and Personal Spending as well as the Personal Consumption Expenditure (PCE) Index, which is the Fed's favorite gauge of inflation. Given the deflationary concerns in the Fed’s Policy Statement last week that we discussed above, the Fed will certainly be watching this report closely.

Winter’s Just Around the Corner. Are You Ready?

We’ve past the point of no return. The Autumnal Equinox occurred last week, and we’re now headed into the shorter, colder days of fall and eventually winter. Whether you live in a cold northern climate or a moderate southern climate, there are a number of steps you need to take to make sure your house and yard are ready for the impending winter season. By following the advice below, you can make sure your home is ready... inside and out!

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Fed Chair Bernanke compared the Fed’s handling of the next round of QE2 to being like a golfer with a new putter, stating that the golfer has to tap lightly at first and try to figure out how to use it properly. Wow - not exactly words that inspire confidence in the Fed’s ability to get QE2 right... particularly when you consider that the weekend golfer has a less than 50% chance of sinking a putt 3 feet in length.

And one of the Fed members themselves, Kansas City Fed President Thomas Hoenig, actually said that attempting to stoke change for the economy via monetary policy like QE2 is making a "bargain with the devil". Strong words.

Bill Gross, manager of the world's largest Bond fund, PIMCO, took the criticism of QE2 a step further. He recently stated that "Checkwriting in the Trillions is not a Bondholder’s friend... it is in fact inflationary, and, if truth be told, somewhat of a Ponzi Scheme. It raises Bond prices to create the illusion of high annual returns, but ultimately it reaches a dead end where those prices can no longer go up." Definitely colorful language, likening what is happening to a "Ponzi Scheme!"

While Bill Gross doesn’t always get it right... he sure has it right here. Printing more money will ultimately be a negative to Bond investors, and could pose serious negative consequences to the economy down the road.

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Vail REALTORS® Making Positive Input Into Avon Development Code; REALTORS® Won’t Be Held Liable For Violations of New Code

The Vail Board of REALTORS® has been able to provide significant input into the direction of the proposed Avon Development Code. VBR submitted a 9 page letter to the Town outlining numerous concerns and suggestions for the proposal. VBR’s suggestions came from a land use memo prepared for VBR from Land Use Attorneys contracted by NAR to review the Avon Development Code. Eric Heil, Avon Town Attorney, submitted a memo to the Town Council addressing many of VBR’s concerned and agreed with those concerns on most points. In some areas he suggested making changes as suggested by VBR, and in other areas he suggested Council discussion. One of the most concerning points in the proposed code was language that would have held REALTORS® responsible for client/property owner violations. This language was removed at the suggestion of VBR and now will only hold property owners liable for violations. Positively, the Town Council is concerned how the proposed code will affect private property rights, and property values. While VBR is encouraged with the progress and direction of the code, VBR will not be fully comfortable until the new draft is introduced with our changes included. The Town intends to hold work session/ public hearings on Tuesday, August 24th; Tuesday, August 31st; and Tuesday September 7th. REALTORS® are encourage to attend the meetings.

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"TEN PEOPLE WHO SPEAK MAKE MORE NOISE THAN TEN THOUSAND WHO ARE SILENT." - Napoleon Bonaparte. And there have certainly been more than ten who are speaking out - and using some pretty strong words - as experts and analysts are looking forward to some major events this week, including the midterm elections this Tuesday, the Fed Statement on Wednesday, and the Jobs Report on Friday. To say the least, that’s a very influential trifecta of events - so let’s take a look at some of the strong and colorful lingo being used - and why.

One of the biggest news items up for debate is the Fed’s expected announcement of another round of Quantitative Easing (QE2) when it releases its statement this week. Remember, QE is the concept of the Fed becoming a heavy buyer of Treasuries and Bonds. This is done to artificially cause those security prices to move higher under the increased demand, which in turn will cause interest rates to move lower in the hopes of stimulating the economy - but it also continues to load the US with debt and may have numerous other negative unintended consequences. Although this move by the Fed is likely, it’s been under some criticism - and after hearing some colorful commentary about QE2 last week from Fed Chair Ben Bernanke, the skepticism heightened.

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Last week was one of the busiest economic calendars seen in years. Friday’s Jobs Report capped off a week filled with election results and a big announcement from the Fed regarding the next round of Quantitative Easing (QE2). So what impact did all of this news have on Bonds and home loan rates? Let’s break it down.

On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market.

Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed.

And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that’s exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates.

Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won’t last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation.

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