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November 01, 2010

November 2010 Summit County Real Estate.Net Notices

"DOUBLE, DOUBLE TOIL AND TROUBLE; FIRE BURN AND CAULDRON BUBBLE..." No, the witches from Shakespeare’s "Macbeth" weren’t talking about the economy or the labor market – but economic reports of late are indeed swirling about as if in a cauldron, with a potent mix of both tricks and treats. One report will show improvement for the economy, while another tells a more negative tale. So what news came about this week, and what impact did it have on home loan rates?

Last week, there was reasonably good news on the housing front, as Housing Starts for September were up 0.3%, to a seasonally adjusted 610,000 unit pace, which was higher than expectations of 579,000. The good news is that this represents the third consecutive month of expansion and actually the highest level of Housing Starts since April.

Yet, while this is an encouraging sign and does suggest some stabilization in housing, we can't break out the party hats just yet. The improvement in Housing Starts is coming off of very depressed levels... and additionally, Building Permits, which are a sign of future construction, came in at 539,000, which was below expectations and also the lowest level we’ve seen in more than a year. The bottom line for housing is that people need to gain back real confidence and security about their job and economic prospects before we'll see a marked turn around.

Speaking of that important job market, last week’s Initial Jobless Claims were 452,000 – and Jobless Claims have been stuck near that 450,000 mark for a long time - and there will be no meaningful decrease in the Unemployment Rate until Initial Jobless Claims reach and start moving below the 400,000 level. Overall, we still have 8.5 million people collecting some sort of unemployment benefits, so we’ve still got a ways to go before we’re out of the woods.

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More housing news is in store this week, with both Monday’s Existing Home Sales Report and Wednesday’s New Home Sales Report. But whether these reports will show a move forward or backwards in the housing arena remains to be seen. Again, a marked improvement in the labor market will be necessary in order to see a marked improvement in housing nationwide.

Also, we'll get a read on the health of the economy with Wednesday’s Durable Goods Report, which gives us an update on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time, like furniture, televisions, appliances, sporting equipment, vehicles, copy machines... all manner of things. It’s an interesting report, as people tend to hold back on these types of purchases when they are feeling a need to be extra conservative with their finances, or feel insecure about their employment. Meanwhile, Friday will bring another read on the economy with the Gross Domestic Product Report, which is the broadest measure of economic activity.

And not to be missed is the Initial and Continuing Jobless Claims Report on Thursday, as well as earnings reports from Proctor & Gamble, 3M, Exxon Mobile and more.

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Avon Development Code Update Moving Into Final Stages

The Avon Town Council will have its first vote on the updated development code on Tuesday night. The Town has taken significant input from the public on the new code, particularly from the Vail Board of REALTORS® and local builders and planners. One of VBRs biggest concerns has been that the Land Use Code has made the town?s Comprehensive Plan a mandatory, binding document with no flexibility. At the last meeting, the Council discussed potential changes to the language that will make the Comprehensive Plans goals and policies non-binding, but the sub-plans will remain binding. If approved on Tuesday night, this will be a considerable victory for the Vail Board of REALTORS®, who has argued for the plan to be non-binding since the first draft was released. Most municipalities have non-binding comprehensive plans that serve as guiding documents. VBR believes that flexibility is needed in the Comp plan to allow Council members the flexibility to approve development projects differently as economic and environmental situations change.

New Castle Sign Code Getting a Facelift; Open House Wednesday October 13th

The town of New Castle is in the process of updating its sign code. Excitingly, New Castle has never allowed directional open house signs in the town but the new policy will allow directional signs. The proposed policy requires express consent from a property owner to be placed on private property. The signs will not be allowed to be placed on town right of ways. The town is holding an open house on the sign code update on Wednesday, October 13th at 3:30 pm and also at 5:30 pm at the New Castle Community Center at 423 Main Street. GSAR is concerned the directional open house sign language only applies to new developments. GSAR will be working with the town to modify the language to include directional open house signs for all types of real estate sales. REALTORS® who do business in New Castle are encouraged to attend one of the meetings on Wednesday.

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Condo Financing Issues To Be Discussed With Fannie Mae & Freddie Mac Later This Week

The National Association of REALTORS? has arranged for a discussion on the difficulties of condo financing with REALTORS? in resort areas and representatives from Fannie and Freddie. The FHA has admitted in recent weeks that condo financing issues need to be addressed. This call will begin the process of how to resolve these lending issues. There will be several representatives from the mountain resort boards to provide feedback on the difficulties, including REALTORS from Summit, Vail, and Steamboat.

NAR Addresses Bank Foreclosure Halts (from NAR?s Washington Report 10.11.10)

In September and October 2010, several lenders suspended foreclosures in two dozen states due to questions about whether foreclosures were being processed consistent with applicable state law requirements. Concerns are being raised by state and federal elected officials, as well as consumer and fair housing groups, about the validity of ownership of mortgages that have been securitized and resold. At the center of the controversy is Mortgage Electronic Registration Systems (MERS). This firm is responsible for electronically tracking the transfer of assignment of mortgages. Class-action suits are being brought against MERS alleging that the use of the system circumvents state laws.

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On October 1, 2010, Fannie Mae and Freddie Mac released statements regarding servicer compliance with foreclosure processing of Fannie and Freddie loans. In the releases, both organizations reiterated that servicers must comply with applicable state laws governing foreclosures. Although nearly all of the foreclosures in question are expected to be fixed eventually, the current situation is creating difficulties and a new hurdle to the recovery of the housing and mortgage markets. NAR members are reporting that upcoming sales have been delayed indefinitely or cancelled, to the detriment of all involved. Additionally, homes on the market without clear title will make sales much more difficult. While banking executives focus their attention on this problem, it is possible that servicers may be somewhat more receptive to approving loan modifications and short sales, since they avoid the foreclosure procedural problems altogether.

Key Points:

Theres no way of knowing what percentage of foreclosures that were improperly processed were, in fact, inappropriate or wrongly taken. The assumption is that for most of them, this may be only a technicality and that the property ultimately would have been repossessed. For owners who believe their home was wrongly foreclosed, they may wish to contact a real estate attorney to investigate the possibility of a property claim. However, that could prove costly and time consuming regulations vary by state. For banks, it may make sense to modify loans or agree to short sales to expedite disposal of inventory. For buyers, the assumption is that listed foreclosures come with clear property title but they should discuss any necessary contract contingency with their attorney. Foreclosures in limbo are likely to be withdrawn from the market. It's too early to tell if there?s an impact on the market butbe monitoring the situation.

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It may be a short week in the Bond Market, with the market closed Monday for the Columbus Day holiday (the Stock Market will be opened), but there will still be plenty of news to work through. On Tuesday, we’ll get a look at the Minutes from the Fed’s September 21st Meeting, and these may give us even more information about which way the Fed is leaning in the QE department.

A double dose of inflation news ends the week, with the Producer Price Index on Thursday (which measures inflation at the wholesale level) and the Consumer Price Index on Friday. Remember, inflation is the archenemy of Bonds and home loan rates, so any hint that inflation is increasing could cause home loan rates to worsen.

Two other reports to note include Thursday’s Initial and Continuing Jobless Claims (last week’s report, while not great, was slightly better than expected) and Friday’s Retail Sales Report. In addition, third quarter earnings season kicks into full gear this week. Some reports to look for include JP Morgan Chase and General Electric, reporting respectively Wednesday and Friday before the markets open.

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"EVERYTHING’S COMING OUR WAY..." Those words from Carlos Santana’s song come to mind following last week’s release of the Fed’s September Meeting Minutes, as well as a speech from Fed Chairman Ben Bernanke. The message was pretty clear - another round of Quantitative Easing (QE2) is coming our way! Remember that QE is the concept of the Fed becoming a buyer of Treasuries and Bonds, in a bid to keep interest rates low and therefore stimulate the economy. And while all the talk had Bonds behaving in a volatile fashion - ultimately causing home loan rates to worsen for the week overall - what was said specifically... and what does it mean?

First, let’s take a look at a few notes from the Fed Meeting Minutes: "Although participants considered it unlikely that the economy would re-enter a recession, many expressed concern that output growth, and the associated progress in reducing the level of unemployment, could be slow for some time." Stating that "many" Fed members expressed concern likely means that more voting Fed members are onboard with the concept of more QE.

Then there was this comment, which didn’t require much reading between the lines: "Many participants noted that if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate, or if inflation continued to come in below levels consistent with the FOMC's dual mandate, it would be appropriate to provide additional monetary policy accommodation." This is clearly telling the markets that the Fed will be stepping in with the money printing presses if the economy doesn't pick up. And with just a few weeks remaining before the next Fed Meeting, and recent economic reports being weak at best... rest assured, more QE is coming.

And this was underscored as Fed Chairman Ben Bernanke delivered a highly anticipated speech on Friday, also making a strong case in support of more Quantitative Easing. He stated "there would appear - all else being equal - to be a case for further action" and additionally, that the "FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate."

OK - so it seems clear - more QE is coming. But is this a good thing?

In Bernanke’s comments on Friday, he noted that the Fed has much less experience in judging the economic effects of more QE versus their more traditional monetary policy actions - and said that this "makes it challenging to determine the appropriate quantity and pace of purchases and to communicate this policy response to the public." True - this amount of money-printing is unprecedented... and begs the question of if more QE really makes sense. The idea is to strengthen the economy by helping make interest rates lower... but the questions remain - will it work, and what consequences may result?

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QE2 is Coming, But Questions of Its Effectiveness Still Remain

Interestingly enough - one result that is likely is that the US Dollar would weaken... and is already weakening following all the talk of QE. And remember, a weaker Dollar helps make our exports more attractive to foreign buyers, due to the weakened US currency making our products less expensive to purchase by foreigners. And while the government will never say it - as the US has been accusing China of very similar tactics - this Dollar devaluation may be exactly what the government has in mind.

Think about it... the "cover story" is all on how QE will help interest rates improve - but realistically, are slightly lower rates even what is truly needed to boost consumer demand and create jobs? Rates are pretty low as they stand right now...so why do more QE? Hmm... might just be to devalue the Dollar, and boost our economy through making our exports relatively cheaper for foreign buyers. And this is not a bad thing - but we have to be aware that while QE2 might provide an initial decline for interest rates - the devaluation of the Dollar will ultimately drive rates higher.

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This week’s economic calendar brings us new insight into the health of the manufacturing and housing sectors of the economy. We’ll start off with reports on Capacity Utilization and Industrial Production on Monday. The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate climbs too high it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and decides how to set interest rates on the basis of whether production constraints are threatening to cause inflation.

Tuesday brings us more housing news with the latest reports on Housing Starts and Building Permits for September. That news will be followed by the release of the Fed’s Beige Book on Wednesday. The Beige Book - which is officially known as the Survey on Current Economic Conditions - contains anecdotal information on the current economic and business conditions.

Thursday we’ll see another round of Initial Jobless Claims. In last week’s report, Initial Jobless Claims rose to 462,000, which was above the 450,000 that was expected. That was a disappointment, as it seems that the economy is unable to string together a couple of solid weeks with Jobless Claims below 450,000. Finally, the week wraps up on Friday with the Philadelphia Fed Index, which is one of the most important regional manufacturing indices.

Mortgage Bonds experienced volatility last week, due in large part to the ongoing comments about Quantitative Easing.

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The Fed and Chairman Bernanke Face a Tough Decision with QE2

But what would another round of Quantitative Easing mean to Bonds and home loan rates?

Let’s break it down into four important aspects: (1) When would it happen? (2) How much money would it involve? (3) Why is this being contemplated? (4) And what does it mean to home loan rates?

First, as stated above, whether QE2 happens will be dependent upon the upcoming data releases. Many experts agree that if the Fed does make a move, it will most likely happen at the next Fed meeting, which is scheduled for November 3rd.

Second, the question of "how much" is still up in the air. As stated above, New York Fed President William Dudley gave an example of a $500 Billion purchase - but estimates are all over the board at this point, from $200 Billion to $2 Trillion. Yet the big question is whether QE2 will even do any good. Recently, former Fed Governor Larry Meyer felt that even $2 Trillion would hardly move the needle on GDP growth or reduce unemployment rates. In fact, he likens it to pushing on a string. Mr. Meyer's sentiments were also echoed last week by former Fed official Joe Gagnon, who estimated that the Fed is indeed likely to do at least $1 Trillion in additional QE, but that it would have little impact.

That brings us to the third question: Why even contemplate QE2? Think about this: a large round of QE2 would almost assuredly hurt the US Dollar. And by hurting the US Dollar, our exports become more affordable abroad, as well as making imports appear relatively more expensive. This helps large multi-national companies, which have a large influence on the economy, as well as the major Stock market indices. This could be the goal of the Fed. Ahh...but you can't outright say you are trying to weaken your currency. After all - haven't many members of Congress and the Administration been bashing China for currency manipulation? The US may be trying to do exactly what it has both denigrated and admonished other nations of doing.

In other words, even if QE2 didn’t have a direct impact on the economy, the drop in currency value - which, if you've been paying attention to the Dollar-Euro relationship, has already been happening - would be very beneficial. But at what cost? While Stocks should benefit, Bonds may have a different reaction.

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What you need to know:

What would QE2 mean to Bonds and home loan rates?

If the Fed does go through with another round of Quantitative Easing, Bond prices should - initially - improve for two reasons. First, Bonds would likely improve due to the soft economic data causing QE2. Second, Bonds would improve simply because the announcement of QE2 would include large Bond purchases. The key word is "initially." That’s because, even though Bonds would initially improve, the eventual softening of the Dollar, rising commodity prices, and rise in Stock prices could become a drag on Bonds, which would negatively impact home loan rates.

Forecast for the Week

This week’s economic calendar may be light in terms of the number of reports, but don’t let that fool you for one second. The reports that are due out may have a huge impact not only on the economy this week, but also on decisions that will shape the economy for months to come.

We’ll start off with an update on the health of the housing industry, with the Pending Home Sales report on Monday morning. After that, things start to heat up with the ADP National Employment Index on Wednesday and Initial Jobless Claims on Thursday. But the big enchilada comes on Friday, when the all-important Jobs Report will be released. This report includes official labor statistics on non-farm payrolls and the unemployment rate, as well as average hourly earnings and changes in the average work week.

These reports on employment are always important, but they take on even more significance in the current climate. That’s because the question of whether the Fed will move forward with another round of Quantitative Easing as we’ve been discussing, depends heavily on the employment data that is released before the Fed’s upcoming meeting on November 3rd. And since the release of the November Jobs Report on October data is due out November 5th - two days after the Fed meeting - this coming Friday’s report is the last chance for the Fed members to see the official labor statistics before they meet to discuss QE2 and other financial policies.

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Bonds saw a nice rally earlier last week, due to speculation about the Fed making additional purchases of Bonds in the future. Last week, Goldman Sachs said the Fed may announce another $1 Trillion asset purchase at the November meeting. And while this is just speculation, many Bond traders bid prices higher on the chatter. Adding fuel to this story was an article in the Wall Street Journal, suggesting the same thing. On the other side of the debate, however, is Richmond Fed President Jeffrey Lacker, who stated that the US is far from needing more Bond purchasing by the Fed.

In other economic news, the Labor Department reported the inflation measuring Consumer Price Index (CPI) for August at 0.3%. That reading was just slightly above the 0.2% that was expected, but it was still a relatively tame reading. When stripping out volatile food and fuel, Core CPI was flat at 0.0%. This rather benign read on inflation allowed traders to breathe a sigh of relief and push Bonds higher. Prior to receiving the news, many traders were worried the CPI reading would be higher than expected. That’s because the Producer Price Index (PPI) was reported the day before and showed wholesale inflation rose by 0.4% in August. That was above the 0.3% expected and the biggest gain in 5 months! Remember, inflation is the archenemy of Bonds and home loan rates, so any indication that inflation is increasing could cause home loan rates to worsen.

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Forecast for the week of September 20th

  

September 22 - which is the day of the Autumnal Equinox - has often marked an apex and turning point lower for market prices and events. Keep this in mind as we approach this date this Wednesday, especially with Stocks trading near tough technical resistance. If this trend holds, Stocks may head lower and help Bonds and home loan rates improve. But since traders are aware of this potential problem period for Stocks, an avoidance of the trend would likely have Stocks’ players move into the Stock market with more gusto towards the end of next week, prompting a Bond sell off.

The Fed will hold their Federal Open Market Committee (FOMC) meeting next Tuesday - and always, the markets will be listening closely when the Fed’s Monetary Policy and Rate Decision are announced.

Also on tap for next week are new reports on the health of the housing industry, beginning with Housing Starts and Building Permits for August on Tuesday. We’ll also see reports on Existing Home Sales on Thursday and New Home Sales on Friday.

Thursday brings another round of Initial Jobless Claims. Last week, the Labor Department reported Initial Jobless Claims fell to 450,000, below estimates of 460,000 and the lowest reading in two months. While 450,000 claims are still a pretty high number, it is improved from recent readings.

Finally, we’ll get a look at manufacturing on Friday with a new report on Durable Goods Orders for August. Durable Goods Orders are considered a leading indicator of manufacturing activity, and the market often moves on this report despite the volatility and large revisions that make it a less than perfect indicator.

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It’s been said there’s a pot of gold at the end of every rainbow. Yet, after last week’s regularly scheduled meeting of the Federal Open Market Committee, the Fed helped gold seem more "charmed" than ever. What happened, and what does this mean for home loan rates? Read on for details.

As expected, last week the Fed decided to keep the Fed Funds Rate (which is the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on) at 0.25%. The Fed also reiterated that economic conditions warrant keeping the Fed Funds Rate low for an "extended period".

But the Fed’s Policy Statement was clearly more downbeat on the economy and showed greater deflationary concerns than the previous Fed Statement. It also gave the feeling that the Fed will jump in with more Quantitative Easing (QE) if necessary. QE means the Fed is prepared to create Dollars through Treasury purchases, which in turn causes the Dollar to weaken. And last week, in response to the Fed’s statement, we saw precious metals like Gold and Silver move higher as a hedge against a weaker US Dollar.

But, the Fed’s Statement is also significant because another round of QE by the Fed could mean continued good news for Bonds and home loan rates. What’s more, last Friday, respected hedge fund manager, David Tepper, noted that the shift in the Fed’s statement also puts Stocks in an almost "no lose" position.

Why is this? Should the economy improve, Stocks go up. But should the economy weaken, and the Fed jumps in with more QE, Stocks could also benefit because more QE alongside a weaker economy brings the Dollar index down, making our exports more attractive. This will greatly help large US multi-national corporations, which have a high influence on the major US Stock indices. The Fed clearly has some big decisions to make in the coming weeks and months to help ensure our continued recovery, and I’ll be watching closely to see how Bonds and home rates are affected. Last week, for instance, Bonds and home loan rates ended the week about .125 percent better than where they began.

Another thing to note - there was a mix of housing news last week. Housing Starts rose 10.5% in August from July, which was above expectations and was the highest level in 4 months. Building Permits, a sign of future construction, gained 1.8% and were also better than anticipated. In addition, New Home Sales came in near expectations, while Existing Home Sales were slightly above expectations - but still 19% below the sales pace of a year ago. Also, the inventory of unsold homes was reported at an 11.6 month supply for existing homes and an 8.6 month supply for new homes. Remember: The level of improvement in housing is a big indication of the strength of our economic recovery.

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What should you do outside your home?

If you live in an area with high moisture, you'll want to apply an additional coat of sealant to wooden decks. Chances are the summer sun has caused deterioration to the deck's protective layer, and re-sealing it will ensure that the wood won't absorb an excessive amount of water. If your area experiences extremely low temperatures, sealing any cracks in your driveway or sidewalk is also a good idea. If you have outdoor furniture or a barbecue, you'll want to cover them up or store them in the garage.

In terms of the shrubbery around the outside of your home, two precautionary steps will greatly improve the way it will look once winter has lifted. First, prune away any weeds or dead foliage from the base of each shrub. Next, add a layer of mulch to the surrounding ground, especially to any perennial flower beds.

Once you've tended to the greenery, you may want to winterize your power equipment. Fall is the perfect time for draining gas from lawn mowers and oiling any power tools. You'll also want to drain garden hoses, roll them up, and store them in the garage. If you want to take extra precautions, drain your outdoor faucets and cut off the water. This will keep pipes from freezing and eventually bursting. If you live in an area where it snows, do yourself a favor and make sure your snow removal equipment is in proper working order.

In terms of a home's exterior, the key word to keep in mind is "leaks." Leaks not only allow cold air to enter your home but water as well. Start by inspecting the home's foundation and exterior walls. Minor cracks can usually be sealed by using a caulk that's appropriate for the temperature of your region. Special attention should be paid to the wall area around windows and outdoor faucets. Also, if you have storm windows, now is the time to install them.

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The Great Indoors

It's time to make our way inside the home, and take another look at the topic of leaks. Preventing air leaks will not only ensure a cozier home, it will also help you save on your energy bill. Start by weather-stripping all windows and doors. It sounds like a big job, but in most homes this can be accomplished in one day. Also, look for leaks around wall outlets. Once again, the appropriate caulk will do the trick when it comes to creating a proper seal. Don't forget to check the attic or cellar for leaks as well.

Regardless of the type of heating system you have, it's a good idea to have it checked and maintained by a professional. Clean ducts and filter replacements can go a long way when it comes to improving efficiency. Also, be sure to clean and vacuum any heating vents, and keep the flue or damper closed when your fireplace is not in use.

As far as plumbing is concerned, every homeowner should periodically check their hot water heater for leaks, no matter where they live. This is the last thing you'll want to repair during the cold months. You may also want to consider purchasing a hot water heater blanket. It's a $15 investment that will increase the heater's efficiency. If you live in an area known for very cold weather, you may have a problem with pipes freezing. This can be alleviated by wrapping the pipes that are most prone to freezing with heat tape, which can be purchased at any hardware store.

Lastly, if you've experienced serious weather issues in past years, you may want to prepare a comprehensive emergency kit for your home. It never hurts to be prepared.

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Garfield County Planning & Zoning Extends Review of Proposed Comp Plan

After an outcry from REALTORS® and the general public, the Garfield County Planning and Zoning Commission agreed to extend the review period of the proposed Comprehensive Plan until September 22nd. Written comment is due to the County planning staff by September 8th. The P & Z will hold two more public hearings on September 22nd and 23rd. The P & Z could have a final vote on the proposed plan on September 23rd, if the P & Z is ready. If not, they have reserved an additional meeting date for October 7th. GSAR has been very concerned that the proposed Comp Plan as draft is a mandatory, binding document that leaves little flexibility for development. GSAR believes that a majority of P & Z members agree that the Comp Plan should be advisory. However, after significant research it appears that in order to make the Comp Plan non-binding, an amendment to the land use code must be made by the County Commissioners. Commissioners John Martin and Mike Samson have expressed interest in doing such an amendment. Once the P & Z has completed action on the Comp Plan, it will begin action in January to make the Land Use Code consistent with the Comp Plan.

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Workforce Housing/ Condo Financing Bill Introduced in U.S. House

Just before the August recess, Congressman Jared Polis(D-Boulder) introduced federal legislation to ease financing for affordable “workforce” housing in Summit, Eagle and Grand Counties. The bill is intended to serve as a testing of the waters to ease restrictive Fannie and Freddie condo financing rules. Polis believes there is no stomach in Washington to “loosen” financing for “rich second homeowners” at a time when Congress is working to ensure rules are tightened to prevent another mortgage industry collapse. The bill, HR 6079, does include relaxation of restrictions on mixed use developments, owner occupancy requirements, front desk requirements, and several other provisions. The bill comes out of several months of work between Congressman Polis and the Glenwood Springs Association of REALTORS®, the Steamboat Springs Board of REALTORS®, the Summit Association of REALTORS®, along with a coalition of other mountain REALTOR® associations, title companies, and mortgage companies. When Congress returns in September, Polis will amend the bill to include all resort areas nationwide. The bill is far from where REALTORS® would like to see the bill, and don’t expect action on the bill this fall, but it is a step in the right direction.

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Around The Mountains

Garfield County Comp Plan Discussions Continue At Slow Pace

Last week, the Garfield County Planning and Zoning Commission held what was supposed to be 2 final hearings and a final vote this week. Written public comment was extensive and the commission went through each comment and addressed those concerns individually. The most contentious discussion has revolved around cluster developments and whether changing the density in areas of the county truly achieves the goal of maintaining rural character in the County. The affects of changing density on property values was discussed extensively. The Commission will hold another session on October 7th at the Garfield County Administration Building in Glenwood at 6:30 pm.

In Washington, D.C.

FHA Higher Loan Limits In Limbo As Congress Prepares to Head Home

The future of higher loan limits in high cost areas remains uncertain as the House and Senate meet to consider a Continuing Resolution on a number of unfinished items before sine die, when Congress goes out of session. There could be a huge market interruption if the higher loan limits are allowed to expire and return to their original levels. NAR is monitoring this closely and has been in active contact with leaders in both the House and Senate to express serious concern over the matter.

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Speaking of unemployment, awful is the only way to describe last week’s Initial Jobless Claims report. According to the report, 500,000 people filed to receive unemployment benefits for the first time, which was well higher than the lofty 475,000 expected and the highest reading since November 2009. In addition, between Continuing Claims and people receiving Emergency Unemployment Compensation or EUC, the combined total of people receiving unemployment benefits now equals 9.25 Million people.

The bottom line is this: The labor market is the foundation of our economy. Job growth and confidence is the best and most sustainable way for our economy to recover. The present anti-business regulatory environment is pushing Initial Claims, a leading indicator on the health of the labor market, in the wrong direction.

But home loan rates, meanwhile, continue to remain at historic low levels. Though keep in mind, inflation is the arch enemy of Bonds and home loan rates, which means it can cause both to worsen. Both the Producer Price Index (which measures inflation at the wholesale level) and the Consumer Price Index were recently reported hotter than expected. If rates do start to rise, they will likely do so quickly.