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Last Updated:
March 10, 2010

March 2010 Summit County Real Estate.Net Notices

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SAR To Host Council Candidate Forum March 15th At Beaver Run

On Monday, March 15th, the Summit Association of REALTORS® will host a town council candidate forum for the towns of Breckenridge, Dillon, Frisco and Silverthorne. The forum will be from 5-9 at Beaver Run Resort in Breckenridge. Appetizers will be provided, along with a cash bar. A cocktail/"meet the candidates" hour from 5-6 will precede the forum, which begins at 6 pm. The Silverthorne forum will begin at 6pm, Frisco at 6:45 pm, Dillon at 7 pm, and Breckenridge at 7:30pm. The event is cohosted with the Summit County Builders Association and will be moderated by Lee Zimmerman, Executive Director for The Summit Foundation.

VBR Hosting Eagle & Gypsum Candidate Forums April 1st

On Thursday, April 1st, the Vail Board of REALTORS® will host its 2nd Eagle & Gypsum candidate forum. The event will be from 8-10:30am at the Dusty Boot in Eagle. Breakfast will be provided. the event was very successful with many REALTORS® attending the event last election.

Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending March 12th) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.95%.  Last year at this time, the 30-yr FRM avg 5.03%.

The 15-year FRM this week avg 4.32%. A year ago at this time, the 15-year FRM avg 4.64%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.05%. A year ago, the 5-year ARM avg 4.99%. The one-year Treasury-indexed ARM avg 4.22%. At this time last year, the 1-year ARM avg 4.80%.

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Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending March 5th) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.97%.  Last year at this time, the 30-yr FRM avg 5.15%.

The 15-year FRM this week avg 4.33%. A year ago at this time, the 15-year FRM avg 4.72%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.11%. A year ago, the 5-year ARM avg 5.08%.

The one-year Treasury-indexed ARM avg 4.27%. At this time last year, the 1-year ARM avg 4.86%.

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An Ordinance Allowing the Use of Open House Signs In Steamboat Springs(pending).

SSBR and REALTORS® began talks with City staff last summer to include open house signs in the city’s effort to update the sign code. Current language would allow 2 directional open house signs and one on-site. The language will also allow a centralized location in multi-plexes for promoting real estate.  As of mid-December, the City Planning Commission is favorable to the REALTORS® requests. City Council consideration is currently scheduled for February and March 2010. REALTOR® Leadership on the issue: Mark Stine, MacArthur & Stine; Lori Thompson, Colorado Group Realty; Susan Ross, Coldwell Banker; Giles Howard, Coldwell Banker; Bobby Aldighieri, Prudential; Jody Gale, Prudential; Michelle Garner, Prudential; Suellyn Godino, Prudential; Erick Steinberg, Prudential; Polly Banks, Coldwell Banker; Sue Weber, Old Town Realty.

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FORECAST FOR THIS WEEK

The markets will enter holiday mode later this week, with both the Stock and Bond markets closing early on Thursday and remaining closed all day Friday in observance of the Christmas holiday, but not before several important reports are released.

First, we'll get a read on the housing market with Tuesday's Existing Home Sales Report and Wednesday's New Home Sales Report. Tuesday also brings a read on the economy with the broadest measure of economic activity via the Gross Domestic Product Report.

There is still more news on Wednesday with the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report. With last week's mixed inflation news, this will be an especially important report to watch.

And Thursday could bring some big news just before the markets close by way of the Durable Goods Report, which gives us an update on consumer and business buying behavior on big ticket items that last for an extended period of time. A look at the job market will come with the Initial Jobless Claims Report. Last week's Initial Jobless Claims and Continuing Claims numbers were higher than expected, showing that the labor market is still struggling.

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HUD has some changes that are now in effect and upcoming as well.

 
  1. Anti-flipping policy – Until this month, an investor had a timing issue if they purchased a home, remodeled it, and then sold it.  HUD would not allow a buyer to use an FHA loan unless the home had been owned by the seller/investor for at least 90 days from the date of seller’s purchase until the date of contract.  Essentially meaning the investor had to keep possession for at least 4 months (1 month for buyer process) when oftentimes the buy/fix/sell process could be accomplished in 2 months or less.  NOW, HUD has relaxed that 90-day rule and there is no time constraint on the seller/investor’s holding period.
  2. Effective with case numbers issued 4/5/10, the upfront MIP fee will go up from 1.75% to 2.25%. Currently the yearly MI renewal is .55% or .50%.  It is likely that these will be modified in the next wave of changes.  No info yet on what and when.
  3. Currently the downpayment requirement is 3.5% for a purchase.   Going forward, if a buyer has a credit score lower than 580, their downpayment will be 10%.  (note that MOST investors will not accept credit score less than 620) Currently the seller can pay up to 6% for closing points/costs/prepaids/etc.  Going forward, that will be limited to 3%
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All of these changes and upcoming ones are in reaction to increased foreclosures during the last 2 years, the perception that FHA is the alternative/A-/subprime loan these days yet still trying to keep the housing market moving forward instead of stagnating.

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The next Federal Reserve Policy Statement will be coming on January 27th, and they have gone out of their way to mention in the last several statements that the MBS buying program will not continue. Count on me to be listening closely when the Fed releases this next Statement, as this will help further gauge what home loan rates have in store.

In other news, Retail Sales for December came in well below expectations and were down from the 1.8% increase seen in November. While this suggests weakness in the Retail sector, it has to be taken with a grain of salt, as it is likely that frigid temperatures and snowy conditions throughout much of the country were contributing factors to the decline. Overall, 2009 was a very tough year for retail. Retail Sales for 2009 dropped 6.2% compared with 2008, which was the biggest decline on record, dating back to 1992.

There was some good news, however, on the manufacturing front, as the Empire State Manufacturing Index was reported above estimates, indicating manufacturing expansion in New York state and parts of New Jersey and Connecticut.

For the week overall Bonds were able to break above important technical levels, and home loan rates ended the week slightly better than where they began.

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This past week both Stocks and Bonds battled back and forth near key technical levels.

The markets were closed on Monday in honor of the Martin Luther King, Jr. holiday, but then the Bulls and the Bears in the Bond market spent the first part of the week pushing and pulling Bond prices above and below their 200-Day Moving Average. This level is important because it can often set the stage for price direction for an extended period of time. Bonds were finally able to break above this important level, which was good news for home loan rates.

And the war wasn't just being waged in Bonds...the Stock market was fighting some technical battles of its own. The Dow and the S&P both tumbled lower, falling beneath their own 50-day Moving Averages. This is very significant, as neither index has closed beneath their 50-day Moving Average since July of 2009. If Stocks are unable to regain their footing and move above this important Moving Average, we may see a continued slide lower in Stocks, which could benefit Bonds and home loan rates.

However, a possible uptick in inflation later this year and an end to the Fed's Mortgage Backed Security purchase program in March are two important factors that will likely cause home loan rates to worsen in the months ahead. While this week's Producer Price Index Report (which measures inflation at the wholesale level) was relatively tame, higher than expected inflation was reported in both the UK and India. Reports out of both countries say that they expect levels of inflation to continue higher, but not just in their own countries...they see it around the world as well. Remember, Bonds and inflation are mortal enemies. If Bonds were Superman...inflation would be Kryptonite. And when inflation does begin to tick higher here, it will send home loan rates higher as well.

It's also important to note that the Fed bought $12B in MBS in the latest week, bringing their purchase total to $1.149T, leaving $101B left to purchase before the end of March. If we have not talked yet about your own home loan situation, let's be sure to connect very soon as the current low home loan rate environment may soon be a thing of the past.

After all the tug of war this week among traders, home loan rates were able to end the week slightly better than where they began.

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An Ordinance Approving the Use of Open House Signs in Breckenridge.

Despite the town’s opposition to clutter and open house signs, the Town Council approved an ordinance to allow uniform open house signs in specific areas of Breckenridge for one year. The ordinance will expire in March 2010, and SAR will have to request that the ordinance be permanently extended. REALTOR® members who led the issue: Karen Contino, Exclusive Resorts; Bonnie Arnold Century 21; Todd Rankin, Cornerstone Real Estate; Dan Corwyn, Breckenridge Associates; Daniel Webster Johnson, Resort Brokers.

Support of An Ordinance That Promoted Community Character in Subdivisions  in Breckenridge.

While REALTORS® are typically opposed to any limitations on one’s ability to use their property as they see fit, SAR supported the Towns efforts to protect community character and neighborhoods. The goal was to ensure “McMansions” did not pop up next to small A-frames, and ultimately limit home sizes in Breckenridge. The “Neighborhood Preservation” ordinance addresses each subdivision individually with maximum home sizes. The largest home in Breckenridge can be 9,000 square feet, plus a 3-car garage. The maximum square footage does not include below ground basements. The ordinance was drafted with the help of several REALTORS® who served on a task force to achieve a compromise that would address the needs of all involved. REALTOR® members who led the issue: Paula Stanton, Prudential Timberhill; Michele Hart, Colorado West Real Estate; Turk Montepare, Coldwell Banker, Tim Casey, Mountain Marketing Associates.

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Real Estate Industry Reps Meet With Congressman Polis Staff on Condo Financing

Late last week REALTORS®, Title Companies, and Mortgage Brokers from Summit and Eagle Counties met with Congressman Jared Polis'(D-Boulder) staff in Frisco to discuss the difficulties of obtaining financing for condos in the mountain region. From condo-tel issues to loan limits, the industry representatives made it clear to congressional staff that the issue is far-reaching and must be dealt with. One solution discussed is that Fannie Mae made an exemption to its resort condo financing rules, and gave "special approval designation" for 52 condo projects in Miami Beach, Florida. Congressman Polis and his staff are very sympathetic to the concerns of the real estate community and are going to research how this exemption was given to the Florida resort community, and determine whether it is an option for the Colorado resort areas. Polis is also going to determine why the rules were implemented to begin with. SAR and VBR have also included NAR staff in the discussion. NAR's lobbyists and regulatory staff are going to follow up this week with Polis' DC office.

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Breckenridge Will Begin Review Of Open House Sign Sunset This Week

It's been almost a year since the Breckenridge Town Council approved a year long allowance of uniform directional open house signs in the town. The ordinance is set to expire in March, and this week the Council will have a preliminary discussion whether to extend the ordinance for another year, make it permanent, or again impose a ban on open house signs. SAR will be speaking to the Council on their efforts during the last year to educate REALTORS® on the policy, and the importance of self-policing. SAR will be asking the Council to make the ordinance permanent. The Council will have its first reading on an ordinance February 23.

Avon Extends Fee Reduction For Zoning & Building Permits

Against the wishes of town staff, the Avon Town Council recently approved a resolution that will provide an extension of a 100% fee reduction for zoning and building permit applications for an additional three months. Last year, the Council reduced building & zoning permit fees to zero for the period of August 1, 2009 to February 12, 2010. Planning staff recommended that the resolution be denied, citing that the fee reductions did not produce intended results, and that the construction industry was not jump started. According to planning staff, only $2100 in fees were waived during that period. In addition, the town manager felt that the fees should not be waived further because it will put further pressure on a very tight general fund. In the end, Council wanted to give the program more time to work, and make a gesture to the construction industry that they understand the difficult economic situation. The fee waiver program will now expire on May 12, 2010.

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FHA announced changes in the following areas:

The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP

Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.

FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium. Seller concessions will be reduced to 3 percent from 6 percent. FHA will make the following lender enforcement changes:

FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.

FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.

FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch. FHA is an integral part to the continued recovery of the real estate industry and the overall economy.

NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.

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2010 Session Begins

The 2010 General Assembly began on Wednesday, January 13, and over the next 120 days will consider a multitude of issues. Governor Ritter?s State of the State speech outlined several legislative priorities, beginning with keeping the state budget balanced, a difficult challenge as Colorado continues to struggle to climb out of the recession. Election year politics are sure to play a role in the session, with both parties steering debates in order to gather political ammunition for the November election. The coupling of the election with severe budget challenges will make for a contentious four months at the state capitol.

Legislative Policy Committee Meets for First Time Today

REALTORS? can be assured that the CAR Legislative Policy Committee (LPC) will work tirelessly to promote the protection of private property rights, the real estate transaction, and our state?s economic vitality. The committee, consisting of 37 REALTORS? across the state, reviews each bill of interest to the industry and takes a position on those that are most important to be lobbied at the state capitol.

Although the session is mere 10 days old, there have already been over 275 bills introduced; to-date, CAR is monitoring more than 25 of them and has taken a position on 9. More information will be forthcoming, but current positions can be viewed online.

Should you read an article in the paper or wonder what CAR is doing at the capitol on a specific bill, please be sure to contact your CAR Government Affairs Division staff.

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This will be a busy week for economic reports, starting off with the Personal Consumption Expenditures report on Monday. This report measures consumer price changes, and also gives us a look at inflation.

We'll also get a glimpse at Personal Income and Personal spending on Monday, as well as the Institute of Supply Managers Index, which is the king of all manufacturing indices, and is considered the single best snapshot of the factory sector.

By mid-week, the labor market will lead the big news. In addition to the latest Initial Jobless Claims numbers, ADP's Employment Report will also be delivered. These two data points will lead the way to Friday's official Jobs Report from the Labor Department. This report includes the latest information on job losses and the unemployment rate, as well as the average work week and hourly earnings. With all the recent talk about the job market, it will be important to get a current read on the situation.

As you can see in the chart below, Mortgage Bonds traded in a tight technical range last week between a ceiling of resistance at the 100-Day Moving Average and a floor of support at the 200-Day Moving Average - and as always, I'll be watching carefully to see which way Bonds and home loan rates are headed.

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Visit by NAR Chief Deputy Lobbyist Jamie Gregory.

The National Association of REALTOR® Chief Deputy Lobbyist Jamie Gregory, made a special visit to the 4 mountain boards to discuss legislative and regulatory action in Washington, DC pertaining to the mortgage industry, health care, and energy reform. It was also an opportunity for local REALTORS® to express their views on national issues as they relate to the mountain region.

An Ordinance to Allow Open House Signs in the Town of Vail.

Vail was the first of the Mountain REALTOR® Boards to pursue changes to sign codes to allow the use of open house signs. After 6 months of VBR working with the town, the Vail Town Council agreed that the sign code was outdated and needed to allow directional open house signs in all of Vail, but particularly for the long and windy roads in Vail. The ordinance allows three directional open house signs. REALTOR® members who led the issue: Sue Rychel, Slifer, Smith & Frampton; Cynthia Kruse, ReMax.

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Steamboat Planning Commission to Vote on Open House Signs This Week

The Steamboat Planning Commission will take a second look at the proposed sign code updates on Thursday night. The sign code updates include modificiations that will allow directional open house signs to an open house in Steamboat. It also includes allowance of a central location in multi-plexes for flyers of units for sale in the complex. The Planning Commission was happy with its inital look at the language in December. It will make its recommendation to the City Council on Thursday night. The City COuncil will review the sign code changes on February 16th and March 2nd. SSBR worked with City staff last year to draft language to include open house signs in the sign code update and is pleased with the current language.

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An Ordinance to Allow Short Term Rentals in Avon.

Because of the current economy, many locals and second homeowners desired the ability to short term rent their properties for income. The town of Avon agreed to consider an ordinance that would allow short term rentals in specific areas of the town core. With 40 letters from local REALTORS®, nearly half of all letters received by the town, and hearty debate by the council with comments from local REALTORS® and property owners and managers, the Town Council agreed to allow short term rentals in HOA’s, except PUD’s and area’s north of I-70. The areas not included in the ordinance may apply to the Planning Commission for approval to do short term rentals. REALTOR® members who led the issue:  Mark Weinrich, Prudential; Frank McKibben, Prudential.

Vail Town Council Candidate Forum.

With three town council seats up this election, and 9 candidates running for those spots, the VBR breakfast candidate forum was a very informative format for REALTORS® to learn about candidate positions important to the real estate industry. REALTORS® were also provided the opportunity to ask questions on any issue facing Vail.

Visit by NAR Chief Deputy Lobbyist Jamie Gregory, State Senator Al White, and State Representative Christine Scanlan.

The National Association of REALTOR® Chief Deputy Lobbyist Jamie Gregory, made a special visit to the 4 mountain boards to discuss legislative and regulatory action in Washington, DC pertaining to the mortgage industry, health care, and energy reform. It was also an opportunity for local REALTORS® to express their views on national issues as they relate to the mountain region. Eagle County’s state representatives, Senator Al White and Representative Christine Scanlan also provided a 2009 state legislative wrap-up.

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There are definitely some glimmers of hope for the job market - but any way you look at it, the bottom line is that continued and significant improvements need to be seen in the labor market before the economy can be considered out of the woods.

Another important note for the week - Pending Home Sales for December were up significantly from November's reading, and up a healthy 10.9% over December 2008, as homebuyers take advantage of today's low rates and tax incentives. And speaking of low home loan rates, the Federal Reserve purchased $12 billion in Mortgage Backed Securities last week, bringing the total to $1.173 trillion since the program began in January of 2009...which leaves just $77 billion in purchases to be made over the next eight weeks until the program ends on March 31st. While home loan rates improved very slightly during this volatile week - don't forget that when the Fed is done buying, home loan rates will be very susceptible to moving higher. Please reach out to us to discuss how you or someone you know might benefit from current low rates, or the Homebuyers Tax Credit. The clock is ticking on both these fronts - so why wait?

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REALTOR Day at the Capitol

Pre-register today for the 2010 REALTOR? Day at the Capitol on February 2, 2010! By attending you can learn about government issues affecting the way you do business and will have the opportunity to network with your fellow REALTORS? and legislators from around the state. The deadline to pre-register is Tuesday, January 26, 2010. Pre-register online.

Race to the Top Bill First Passed of 2010

Colorado is working hard to win Race to the Top dollars, a federal competition for states to advance reforms in education. Colorado?s application, which will be submitted on Tuesday, January 19, is expected to request approximately $400 million. Awards in Race to the Top will go to states that are leading the way with ambitious yet achievable plans for implementing coherent, compelling, and comprehensive education reform in four areas:

Adopting standards and assessments that prepare students to succeed in college and the workplace and to compete in the global economy; Building data systems that measure student growth and success, and inform teachers and principals about how they can improve instruction; Recruiting, developing, rewarding, and retaining effective teachers and principals, especially where they are needed most; and Turning around our lowest-achieving schools.

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Last week it was reported that the inflation measuring Consumer Price Index (CPI) for December came in lower than expected. Overall, CPI for all of 2009 was fairly tame. The closely watched Core CPI, which strips out volatile food and energy, rose to 1.8% year-over-year in December after hitting a multi-year low of 1.4% in August.

So what does this mean for Bonds and home loan rates?

Clearly, inflation is tame at the moment...but slowly trending higher. The Fed will be watching this data very carefully in the coming months, as they seek to time perfectly the exit from what is essentially a zero rate environment. The Fed will likely err on the side of keeping the Fed Funds Rate lower for longer than they perhaps should, in order to avoid a "double dip" recession...but that will likely lead to more inflation down the road. Remember, Bonds and home loan rates hate inflation - so home loan rates are likely to trend higher as more inflation creeps into the economy.

Speaking of the Fed, they stepped up their Mortgage Backed Security (MBS) buying in the latest week, purchasing $14B in MBS, whereas the most recent prior purchases were around $9.5B. The Fed now has $113B left of their $1.25T allotted commitment, with the buying program set to wrap up on March 31st. The Fed's purchases have helped home loan rates stay historically low - and although there has been some buzz about an extension of the program, it seems unlikely that will come to fruition. When the Fed purchases stop, home loan rates will be very susceptible to moving higher - so if we have not talked yet about your own home loan situation, or if you know of a friend, family member, neighbor or coworker who might like some advice, let's be sure to connect very soon...time is of the essence.

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SSBR Reaches Out To Morrisson Creek Water and Sanitation District

After stopping efforts by the Morrison Creek Water and Sanitation District(MCWD) last year to increase water tap fees significantly and limit the amount of sewer vault permits in the Stagecoach development, SSBR recently reached out to MCWD through a letter indicating the REALTORS interest in working with District to achieve mutual goals, and come up with a long term plan that will provide water and sewer to as many residents and lot owners of Stagecoach as possible. The County Commissioners were also copied on the letter to MCWD. Diane Mitsch Bush, County Commissioner responded to SSBR and said "As we saw at our Fall 2009 hearing on Morrison Creek Vault Agreement, we all need to communicate and work together to solve this problem in a way that is mutually beneficial for the District and the County, which include taxpayers, property owners, and residents. Thanks for being proactive and persistent and reaching out.". SSBR has yet to hear back from MCWD.

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Prevented the Morrison Creek Water and Sanitation District(MCWD) From Increasing Water Tap Fees From $8,000 to $30,000 in Stagecoach.

In an effort to raise funds to build a new wastewater treatment plant in Stagecoach, MCWD announced plans to increase water tap fees on lot owners from $8,000 to $30,000. SSBR opposed the measure over concerns that the proposal was not publically vetted, was not applied equally because some lot owners had already prepaid tap fees, and did not require existing users to contribute to the cost of a new plant. Ultimately, MCWD imposed a more reasonable fee increase of $12,000 plus $2,000 per year starting in 2011. REALTOR® members who led the issue: Crystal Staepel, Anchor Realty & Ren Martyn, Mountain Valley Properties.

Prevented MCWD From Limiting Sewer Vault Permits in Stagecoach.

In a huge effort by Steamboat REALTORS®, the Routt County Commissioners received nearly 70 letters from REALTORS® in opposition to the MCWD’s plan to limit sewer vault permits in Stagecoach. MCWD had proposed to limit the vaults over concerns of road traffic. The County Commissioners agreed with the lot owners and REALTORS® that there would be a significant drop in property values in approved, and denied MCWD their request to limit vault permits. REALTOR® Leadership on the issue: Crystal Staepel, Anchor Realty, Lori Thompson, Colorado Group Realty, Pam Lindahl, MacArthur & Stine.

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"THE NINE MOST TERRIFYING WORDS IN THE ENGLISH LANGUAGE ARE: `I'M FROM THE GOVERNMENT, AND I'M HERE TO HELP.`" Ronald Reagan.

And regardless of if those words do indeed terrify you or perhaps give you confidence, the government held center stage last week, with a pivotal Federal Reserve Board Policy Statement, President Obama's first State of the Union address, and Ben Bernanke's confirmation for another term as Fed Chairman.

First, let's start with the Federal Reserve Board, who on the heels of their most recent meeting reiterated their important line, "rates will remain low for an extended period" in their Policy Statement. This tells us that the "carry trade" which has pushed Stocks, Commodities and even Bonds higher may continue, as the driving force of this trade - low interest rates - will likely provide a tailwind. This piece of the Statement was good news for Bonds and home loan rates. However, this was offset by further confirmation that the Fed's Mortgage Backed Security purchase program will indeed end March 31st, 2010. This was bad news for Bonds and home loan rates, and overrode the "extended period" statement in terms of Bond market and home loan rate action.

Then on Wednesday evening, President Obama delivered his first official State of the Union address, and just like in his initial post-election speech, a big theme was job creation. He discussed a new jobs package, but no details on how much the package would cost or where the resources would be spent have been provided yet. With lots of money already spent with this goal in mind during 2009, and the jobs picture still worsening, hopes are high that future plans will be carefully crafted and targeted to achieve this important goal.

And finally - Ben Bernanke ultimately received a hard-won Senate confirmation for his second four-year term as Chairman of the Federal Reserve, but it was a bit of a bruising confirmation fight. Bernanke has been under some criticism as he led the Fed in taking a series of extraordinary measures to protect the economy during the financial crisis, including the decision to help home loan rates stay low during 2009 and early 2010 via the aforementioned $1.25T Mortgage Backed Security purchase plan.

In other economic report news - last week's Advanced read on 4th Quarter Gross Domestic Product (GDP) showed a climb of 5.7%, and as you can see from the chart below, that was the best reading since the 3rd Quarter of 2003.

Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending February 5th) in which the 30-yr fixed-rate mortgage (FRM) avg. 5.01%.  Last year at this time, the 30-yr FRM avg 5.25%.

The 15-year FRM this week avg 4.40%. A year ago at this time, the 15-year FRM avg 4.92%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 4.27%. A year ago, the 5-year ARM avg 5.26%.

The one-year Treasury-indexed ARM avg 4.22%. At this time last year, the 1-year ARM avg 4.92%.

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While it's nice to see positive gains on this broad read on the economy, we need to take the report with a grain of salt. Last Friday's report was only the first or the Advanced reading. So we still have two more reports - the Preliminary and the Final - due out regarding the 4th Quarter GDP. And in the past, we've seen some of the gains go away when the additional reports were released. In fact, just last quarter, the GDP reading dropped 2.2% from the Advanced reading to the Final report. It wouldn't be surprising to see a similar revision lower this time, as when the economy slowed, businesses reduced their inventory rather than keeping their shelves full...and in the 4th Quarter, many businesses began to restock their shelves, with restocking accounting for 3.4 of the 5.7 percentage points in GDP growth. The problem is that sales haven't increased along with the restocking. In fact, Consumer Spending actually declined when compared to the previous quarter. Th is means last week's GDP report probably overstated the level of growth and, as a result, will likely be revised lower in the future.

Overall - Bonds and home loan rates experienced quite a bit of mid-week volatility while absorbing all the news, but ultimately ended up very close to where they had started.

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New Lending Policies Announced by FHA

If you were listening to the housing news last week, you probably heard a number of reports about lending changes that were announced by the Federal Housing Administration (FHA). While many of the news reports were confusing, the truth is pretty clear, and isn't as bad as some people may have heard.

Overall the measures are intended to help the FHA better manage its risks and strengthen its capital reserves, while still providing home loans to the nation. The good news, as FHA Commissioner David Stevens stated recently, is that "by continuing to provide affordable, responsible mortgage products, FHA will support the housing market's recovery" and "remain the largest source of home purchase financing for underserved communities."

What's Changing?

If you or someone you know is considering an FHA loan, some of these changes may affect you. Here's a clear, concise rundown of the major changes and what they mean:

1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing.

2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility.

3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

In addition to these changes, the new policies contain a series of new measures aimed at increasing lender enforcement.

These changes will become effective on April 5, 2010. The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans. 

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The first major economic report of the New Year will come on Friday, with the Labor Department's official Jobs Report for December. Last month's Jobs Report showed that only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. This marked the least number of jobs lost in nearly two years, since December 2007. In addition, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level.

Remember, though, that we need to create an additional 125,000 jobs each month just to keep up with population growth...so there is still quite a ways to go before we're out of the woods on the employment front. And while last week's Initial Jobless Claims number showed that new Unemployment Claims were reported at the lowest weekly reading since July of 2008, the holidays and large snowfall in many parts of the country may have prevented people from getting out to the unemployment office to file their claims...so this may well have skewed the reading. The bottom line is that the labor market is a key component to our economy's recovery, so both Thursday's Initial Jobless Claims number and Friday's Jobs Report will be important to watch.

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Last week's Jobs Report had something for both optimists and pessimists, as the numbers were both good and bad...depending on which survey you looked at, and what numbers you focused on.

First, the headline numbers: The Labor Department reported that there were 20,000 jobs lost in January, which was worse than expectations of 15,000 jobs gained. However, the Unemployment Rate came in lower at 9.7%, down from last month's read of 10.0%. But what do these numbers actually tell us?

Remember that the numbers in the Jobs Report come from two separate surveys: First, the Business Survey - also called the Establishment Survey or Current Employment Statistics Survey - which surveys about 140,000 businesses and government agencies. It uses something called the "birth/death ratio" to provide an estimate of the number of jobs gained or lost each month. This survey is used to report the headline number of jobs gained or lost. Now there is also the Household Survey, also known as the Current Population Survey, which uses actual phone calls to 50 - 60,000 households to gather its data. This survey is used to report the headline Unemployment Rate.

The Business Survey is very susceptible to inaccuracy, particularly during times when the labor market is substantially worsening or improving...and you don't need to look much further than all the revisions to prior reports to see how inaccurate the report seems to be. December's report was revised to 150,000 jobs lost, nearly doubling the original report of 85,000 job losses. Although November showed 60,000 additional gains - wait a minute - October's revisions showed another 100,000 jobs lost. And if that weren't enough, the Business Survey threw in a "Benchmark Revision", which indicated that there were an additional 900,000 jobs lost from March 2008 - March 2009 from what was previously reported!

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Breckenridge Town Council Race Filling Out

Well before the March deadline, the Breckenridge Town Council race is quickly shaping up. Three seats are up this year, belonging to Rob Millisor, Jennifer McAtamney, & Dave Rossi. Both McAtamney & Rossi have announced their re-election bids, and Rob Millisor, has announced that he will not seek re-election, citing 6 years is enough. Long time locals Larry Crispell and Mike Dudick have announced they are running, and just recently, Mark Burke, owner of Burke & Riley's Pub announced he will run for a Council seat.

GSAR To Provide Candidate Questionnaires for Local Elections

Carbondale, Silt, New Castle and Parachute will all hold Council elections in April. The GSAR Board of Directors announced last week that they will submit questionnaires to candidates in all of the local elections this spring. The questionnaire will include questions important to the real estate industry. GSAR will provide the results of the questionnaires to GSAR members for voting purposes. The questionnaires will be sent to the members well before the mail-in ballots begin.

Looking for Local REALTORS? To Run For Open Seats This Year

With many City & Town Councils, & County Commissioners elections up this year, we are looking for REALTORS to run for seats in your local areas. If you are interested, or know of soemone who might be interested, please contact Sarah Thorsteinson, Mountain REALTOR? Government Affairs Director at sarah@coloradorealtors.com.

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The markets will be closed on Monday in observance of the Martin Luther King, Jr. holiday, but plenty of news will follow later in the week. Wednesday brings more news from the inflation front, with the Producer Price Index (PPI) Report, which measures inflation at the wholesale level. Wednesday will also bring a read on the housing market, with the Housing Starts and Building Permits Report.

There's also more manufacturing news ahead on Thursday with the Philadelphia Fed Report. Also in store for Thursday is another look at the weekly Initial Jobless Claims Report...so it's sure to be an interesting week, with a variety of data for the markets to absorb.

Bonds and home loan rates improved last week, largely due to tame inflation numbers and a decline in Stocks. In fact, Bonds were actually able to power through a tough technical "ceiling of resistance" at the 200-day Moving Average...but it remains to be seen if they will hold their gains. We will be watching closely to see if Bonds and home loan rates can build on their positive momentum in the coming week.

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FHA Changes Announced (from NAR)

In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level of 2 percent. The drop in capital reserves has led Congress and the Administration to call for changes to strengthen FHA.

On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund ? ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.

NAR has met with the Commissioner on several occasions to discuss the state of the housing market and to underscore FHA's invaluable role. By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.

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