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October 24, 2010

October 2010 Summit County Real Estate.Net Notices

Steamboat Candidate Forum to Be Held Thursday

The Steamboat Springs Board of REALTORS & the Steamboat Pilot, along with the Routt County GOP and Democrats are hosting their annual candidate forum on Thursday night at the Community Center in Steamboat. The event is open to the public. There will be a Meet and Greet from 5-6pm with food provided by Rex's and the candidate forum will be from 6-8pm. REALTORS are encouraged to attend and bring family and friends to learn about the candidates and the issues!

Summit Candidate Forum Tonight

The Summit Association of REALTORS® and the Summit County Building Association are holding their traditional candidate forum tonight at Beaver Run in Breckenridge. The event will be moderated by newly appointed 5th Judicial Circuit Judge Mark Thompson. REALTORS® are encouraged to attend the event and learn about the candidates and the issues. You are welcome to bring friends and colleagues, too.

The schedule for the evening is as follows:


"EVERYBODY’S WORKING FOR THE WEEKEND...." (Loverboy, 1981) Or... are they? Unfortunately, many folks out there these days sure wish they were working at all... and the Labor Department reported last Friday that the US lost 95,000 jobs in September. What else did the Jobs Report say and what could the news mean for home loan rates? Read on for details.

A closer look at the Jobs Report for September shows that 159,000 of the jobs lost were government workers, many of which are the unwinding of the temporary census hires. The more important private sector added 64,000 jobs - but still not great, and also below the 74,000 expected. But this number confirms the thought that the economy, or the Job market, is stabilizing and perhaps even improving, albeit it at a very gradual pace. More on why this is so important in a minute.

The Jobs Report also showed that the Unemployment Rate remained at 9.6%, just below the 9.7% anticipated. However, it’s likely the actual rate of unemployment is higher. Why? Because if an unemployed individual does not seek employment for four weeks, they are removed from the count of the "officially unemployed." And with unemployment benefits available for about 2 years, it increases an unemployed individual's chances of becoming less motivated to look for a job, until the benefits are close to running out.

This can skew the headline Unemployment Rate, and is evidenced by the sharp rise in the overall unemployment rate or "U6" measurement of unemployment, which stands at 17.1%. The U6 rate accounts for these discouraged workers who have not sought employment for the past four weeks, as well as those who have accepted part-time employment but would prefer to be working full-time.


This week, we’ll get a read on the consumer perspective of the economy, with reports on Personal Income and Personal Spending Monday as well as the Personal Consumption Expenditure (PCE) Index, which is the Fed's favorite gauge of inflation. Those reports will be followed by a report on Consumer Confidence on Tuesday.

Manufacturing will also be in the news Tuesday with the Chicago PMI, which surveys more than 200 Chicago purchasing managers about the manufacturing industry and is a good indicator of overall economic activity. The ISM Index is due out the day after that. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.

We’ll also see the first employment report of the week on Wednesday morning with the ADP National Employment Report, which comes just a day before the Initial Jobless Claims report on Thursday. Initial Jobless Claims fell 31,000 in the latest week to 473,000, below the expected 485,000. And while that is still bad, at least for one week it broke a bad trend of consecutively higher readings.

But the big news of the week is expected on Friday, when the Labor Department releases the official Jobs Report for August. With so much of the economy in a holding pattern because of unemployment concerns, the markets will definitely be paying attention to this report.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see from the chart below, Mortgage Bonds weren’t able to close above resistance last week.

Overall, Bonds and home loan rates ended the week near where they began, which is at historically great levels for homebuyers or homeowners looking to refinance. If you’re curious how you or someone you know can benefit from these levels, please contact me today to discuss your unique situation.


Wall Street Reform and Consumer Protection Act--Provisions Relevant to REALTORS®:

Earlier this year, Treasury Secretary Timothy Geithner indicated that the Obama Administration would seek public input on the reform of the U.S. Housing Finance System. In order to facilitate a focused conversation, the Administration published seven questions and established a July 21st deadline to help drive the conversation. NAR, along with over 500 other interested parties, responded to the government's solicitation for comments.

NAR's comments reiterated the recommendations of the GSE PAG that: (1) some level of government involvement is required in the secondary mortgage market, and (2) the restructure of Fannie Mae and Freddie Mac should occur in a manner that ensures the flow of capital continues to enter the mortgage market regardless of the state of the housing or mortgage market or overall economy.

The Administration will use the submitted comments to help complete a study of the housing finance system and report its findings to Congress by January 31st, 2011, as required by the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act.


Consumer Financial Protection Bureau (CFPB):

NAR secured an exemption for real estate professionals performing traditional real estate activities from the jurisdiction of the CFPB except to the extent they are governed by existing laws such as the Real Estate Settlement Procedures Act (RESPA) that will now come under the bureau's purview.

Risk Retention – Qualified Mortgage Exemption:

At NAR's request, Congress included a qualified mortgage exemption from potentially costly (for both lenders and consumers) risk retention requirements. Congress gave the regulator flexibility in determining what a qualified mortgage is, but it must be no less than the standards laid out in the predatory lending portion of the bill which includes such concepts as underwriting based upon full documentation, ability to repay, and limitations on fees among other things. NAR will work with the regulators to ensure that the regulatory framework maximizes access to affordable mortgages for consumers.

Qualified Mortgage Safe Harbor:

A safe harbor from the "ability to repay" requirement which limits the total points and fees collected by lenders and their affiliates to 3 points -- was included over NAR's strenuous and repeated objection. However, NAR believes there is some regulatory flexibility in this provision including flexibility for smaller loan amounts with "smaller" left undefined.


Be cautious of solicitations by mail or email that require you to pay a fee to obtain information about unclaimed property. You may end up paying a fee and receiving no information about unclaimed property, just the contact information for the state. Any unclaimed property information can be obtained free of charge by visiting the above listed website.

What about money in Canada, or Federal money such as IRS returns, Savings Bonds, or Federally insured Credit Union accounts? While you're on, just hit "links" at the top of the page to search these resources as well.

By taking a minute to do a quick search, you may find out you're a bit richer than you think. Pass this article on to your friends, family members, or colleagues...but be sure to remind them to include you in their celebration if they find their missing stash of cash!

Q&A: Rate versus Price Reduction?


QUESTION: Should you focus more on your rate or getting a price reduction?

ANSWER: Since the Fed's Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could well cost you more money in the long run.

Let's look at an example to see why. Say a homebuyer wants to buy a home that costs $300,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $10,000. If, in the meantime however, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and locking in the 5.25% interest rate. In other words, the buyer would save $10,000 only to end up paying $35,000 more.

Now these prices and rates are just for the sake of example. But the point is that home prices are already very affordable...and rates are still at historic lows for now. So in the end, waiting for a home price to reduce may end up costing you much more than you expect if rates rise.


Garfield County Planning & Zoning Commission To Hold Public Hearings on Draft Comp Plan

Next week the Garfield County Planning and Zoning Commission will hold three public hearings around Garfield County to receive input from the public on the final draft of the Garfield County Comprehensive Plan 2030. If public input is favorable, the P & Z could have a final vote on August 18th. If public input suggests the draft needs more work, the P & Z will not take a final vote on the 18th, and go to back to the drawing board. GSAR members are encouraged to attend any of the work sessions next week because the draft Comp Plan will affect private property rights, and possibly values. The meetings are:

Monday, August 16th at the BOCC Hearing Room at the County Building in Glenwood at 6:30 pm

Tuesday, August 17th, at the Training Room at the Sheriffs Annex in Rifle at 6:30 pm

Wednesday August 18th at the BOCC Hearing Room at the County Building in Glenwood at 6:30 pm.


State Rep Kathleen Curry Files Lawsuit on Campaign Contributions

State Rep Kathleen Curry is planning to file a lawsuit to overturn the language in the Colorado Constitution that limits monetary campaign contributions to unaffiliated candidates and minor party candidates. Current law only allows unaffiliated or minor party candidates to accept half of what major party candidates can receive, the argument being that major party candidates have primaries and general elections, thus 2 races, while minor party candidates have only the general election. Curry, who is running as an independent after changing parties earlier this year, is also running a write-in campaign. Curry knows this lawsuit is late in the game, but argues that her opponents do not have contested primary races, and can receive twice as much money as her. She feels the law is discriminatory and should the playing field should be leveled.

Steamboat City Council Picks Kounovsky of Colorado Group Realty To Fill Engelken's Seat

Last week, the Steamboat Springs City Council unanimously picked Bart Kounovsky, Chief Operating Officer of Colorado Group Realty, to fill Jim Engelken's seat. Kounovsky was chosen for his financial acumen at a time when the City's budget couldn't be tighter. When asked if his role in the real estate industry would conflict with his role as a Council member, Kounovsky said that he doesn't not sell real estate, so it would not have a direct conflict. Kounovsky will be sworn in and seated on the Council September 7th.


"It all depends on how we look at things." Those words by Carl Jung describe the importance of perspective... which is exactly what last week’s economic reports on home sales require! Existing Home Sales were reported well below expectations and a significant 27% decline from last month. As you can see in the chart below, New Home Sales were also ugly - coming in well below expectations and at the lowest reading on record. But as Carl Jung said, let's take a step back and gain a wider perspective about how we look at those reports... and what they mean!

With all due respect, the actions from the Washington academics are invariably filled with unintended negative consequences. The First Time Homebuyer Tax Credit is a good example. It's now clear that the tax credit has done more harm than good...all at an enormous cost to those who pay taxes. Here’s why: The tax credit simply rewarded those who were already going to purchase homes, as well as those who moved up the timing of an inevitable purchase. But now... the "sugar rush" is over, and the void remains. Worse yet, potential buyers are feeling reticent to make a move after "missing out" on the free money. The obvious problem that remains within our faltering economy is the job market. Yet the focus from Washington has been elsewhere. And it can be argued that each landmark passage of reforms - from aviation to healthcare to financial - has made job creations more challenging.

But eventually we expect some better decisions to come out of Washington. This, along with time, will help the housing market and overall economy recover - making for a good long-term buying opportunity in today's market. Remember, the best investors buy during the most pessimistic times.

To highlight this - as well as give us better perspective and some hope towards the future - here’s something that was recently pointed out by Dennis Gartman, a well-respected market analyst. Back in 1992, an article in Time Magazine included this passage:

"The US economy remains almost comatose. The slump already ranks as the longest period of sustained weakness since the Depression. The economy is staggering under many ‘structural’ burdens, as opposed to familiar ‘cyclical’ problems. The structural faults represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the banking collapse, the real estate depression, the health care cost explosion and the runaway federal deficit."

It's amazing how eerily similar the picture from 1992 compares to today. We all know that the period following 1992 included terrific growth and opportunities in the economy, stock market and housing. If history repeats itself, which it often does, this could point to much better days in the future with opportunities in the present.


"The great thing in the world is not so much where we stand as in what direction we are moving." Last week, the financial markets appeared to agree with Oliver Wendell Holmes' words by looking for some more direction from the Fed after its FOMC Meeting.

While the Fed didn't say much, they did state that Mortgage Bond holding income and proceeds would be reinvested into Treasuries. This helps the Treasury continue to pump out debt at low rates. But this relationship is a concern to the Stock market, as there is no doubt that this will lead to further problems down the road. In addition to "kicking the can," the Fed did not provide a game plan on how it could handle deflation, a Japanese type economy, or longer-term inflation. This uncertainty is something that the Stock market hates. As a result, investors pushed Stock prices significantly lower in early trading Thursday - and the cash sale proceeds from Stocks found their way into Bonds.

Markets Wanted More Direction from the Fed

In other news last week, the Labor Department reported that preliminary Productivity for the 2nd Quarter came in at -0.9%, which was below the 0.1% rise expected...and quite a bit lower from the 3.9% reading for the 1st Quarter. The decline in Productivity was actually the first negative reading since the 4th quarter of 2008. The slowdown in productivity is interesting, as higher productivity does many things. It keeps operating costs lower, lessens the need for hiring, and works to keep prices down. So this unexpectedly weak number, should it become a trend, may work to ease some of the deflation fears and, ironically, could help the labor markets.

Speaking of labor, last week’s Initial Jobless Claims report showed 484,000 people signing up for first-time unemployment benefits. That number was worse than expectations of 465,000 and the highest reading since February's 498,000. No matter how you slice it, this is a horrible number... and it highlights that the most important element of any real-life economic recovery is still struggling.

According to the report, Continuing Jobless Claims did fall, but that number can be deceiving since the decrease has nothing to do with an improvement in the labor market. In actuality, the decrease in Continuing Claims, which lasts for the first 26 weeks of unemployment, is due to the benefit expiring - and those individuals rolling into the Emergency Unemployment Compensation benefit category. And in that category, due to the recently passed unemployment benefits extension, those collecting Emergency Unemployment Compensation, spiked a whopping, almost incomprehensible, staggering, shocking, (fill in your own favorite descriptor here) 1.2 Million from the prior week to 4.5 Million... and yet the majority of the media overlooked the real facts or were unwilling to report them.


This week, we’ll see a number of reports that have the potential to move the markets. We’ll start off with a dose of manufacturing news right away Monday morning with the Empire State Index, which looks at New York State’s manufacturing sector, including how busy it is and where things are headed. On Thursday, we’ll also see the Philadelphia Fed Index, which is one of the most important regional manufacturing indices. These two reports will provide an early look at the manufacturing sector for the month of August.

Things kick into full swing on Tuesday with a number of important reports, including the Producer Price Index (PPI), which measures inflation at the wholesale level. Remember, inflation is the archenemy of Bonds and home loan rates, so it will be important to see what this report reveals. The PPI report comes just after the Consumer Price Index was released last week showing the highest headline reading in a year, so the markets will definitely be paying attention to this report. We’ll also see reports on Industrial Production and on Capacity Utilization, which is considered a telling inflation indicator.

Tuesday also brings another dose of news on the health of the housing industry with reports on the number of Housing Starts and Building Permits in July. Housing Starts for June came in below expectations and at the lowest level in 8 months. And even though Building Permits showed an uptick, it was primarily in the multi-family area rather than in the more important and widely watched single-family area, which showed the lowest permits since April 2009. I’ll be watching to see if those numbers improve for July.

Finally, the week of reports caps off on Thursday with the weekly Initial Jobless Claims report. As discussed above, last week’s report was disappointing to say the least.

In addition to those reports, the Treasury Department and White House will be hosting a "Conference on the Future of Housing Finance" next Tuesday where the future of Fannie Mae and Freddie Mac will be discussed. You may recall a couple weeks ago, rumors were swirling of a major bailout to help millions of homeowners who are upside down on their mortgages - and some pointed to this conference as the venue to release such a big announcement. So I’ll be keeping a close eye on this conference and how it impacts homeowners.

Rate Review

In Freddie Mac Primary Mortgage Mkt Survey (for the week ending September 17th) in which the 30-yr fixed-rate mortgage (FRM) avg. 4.37%. Last year at this time, the 30-yr FRM avg 5.04%.


The 15-year FRM this week avg 3.82%. A year ago at this time, the 15-year FRM avg 4.47%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) avg 3.55%. A year ago, the 5-year ARM avg 4.51%.

The one-year Treasury-indexed ARM avg 3.40%. At this time last year, the 1-year ARM avg 4.58%.


New Home Sales Hit a Record Low in July 2010

Speaking of revisiting the past... back in 1985, the Kansas City Royals faced the St. Louis Cardinals in the World Series. This was known as the "I-70 Showdown" World Series, as I-70 is the route that connects both cities, and the road along which fans traveled between both stadiums. Lately, there's been another I-70 Showdown, between Kansas City Fed President Thomas Hoenig and St. Louis Fed President James Bullard. And interestingly enough, both Fed Presidents spoke at the ongoing Jackson Hole Symposium, which was hosted last week by the Kansas City Fed. Hoenig kicked off things with his opening speech Thursday night. While he has clearly been the most vocal Fed inflation hawk - calling for an increase in the Fed Funds Rate to at least 1% ASAP to prevent future inflation - his opening remarks were mellow.

The next morning, it was St. Louis Fed President Bullard's turn at the plate. While Bullard has been quite the inflation dove of late - calling for the Fed to do more to prevent deflation - his remarks were rather surprising. He stated that he doesn't see a double dip recession, despite the economy being a bit softer. He further commented that he expects reasonable growth during the second half of this year and for the economy to be back on track during 2011. Those are pretty positive comments from a man who actually went right from stage to an appearance on CNBC, where he went on to state his most surprising comment, which was that the Fed has done as much as they will do for the Mortgage Backed Securities (MBS) market.

The main event came when Fed Chair Ben Bernanke was up. In his comments Friday morning, he appeared to dismiss the deflation scenario, stating it wasn't much of a risk as the Fed has the tools to combat deflation. Those tools include more purchases of longer-term securities - and when you take this comment along with what Bullard said previously about MBS, it looks like the Fed may lean their purchases towards longer term Treasuries. This incestuous relationship between the Fed and the Treasury gives the US a license to print money at low rates, which will almost certainly end with an inflation problem down the road.

Another tool would be lowering the interest paid on excess reserves, which may influence banks to lend out that money; however, much like pushing on a string, this has been difficult to do.

A final tool would be signaling that the Fed will keep short-term interest rates close to zero for longer than what the market currently expects, or for an "extended period." Some are looking for the Fed to give clarity as to when they'll look to raise rates, such as an unemployment rate that dips to "x" level. But the Fed does not appear to want to be handcuffed to such a trigger, as economic circumstances contain so many moving parts.


Congress Restores Funding for Rural Housing

Congress finally passed legislation to restore funding to the 502 single-family rural housing program. NAR had been pushing this bill, and thousands of REALTORS® had responded to Calls-for-Action to get this done. Senator Michael Bennet (CO) and Reps. Kanjorski (PA) and Capito (WV) championed this issue, which has been working its way through Congress since March. The legislation will increase the guarantee fee for borrowers (but still allow it to be financed), which will make the program self-sufficient. The legislation also increases the commitment authority so Rural Housing Service can formally guarantee loans (they had been providing conditional commitments). We anticipate a notice from Rural Housing shortly after the President signs the bill.

Seller Financing :

NAR was successful in getting the legislation amended to allow an individual to conduct three seller financed transactions in a 12 month period without being subject to the complicated mortgage rules in the new Act. NAR has asked HUD to adopt a similar approach to exempt seller financing, up to three transactions in a 12-month period, from loan originator licensing requirements under the S.A.F.E. Act.






Tomorrow is Primary Day; Plan To Vote In Pivotal Elections

If you haven't already mailed in your ballot for tomorrow's primary elections, plan to head to the polls tomorrow if you are registered as a Democrat, Libertarian, or Republican! Tomorrow's primary elections are some of the most watched primaries nationwide this year. The important races to watch: the US Senate Seat currently held by Michael Bennet (D). Bennet is being challenged by popular former House Speaker Andrew Romanoff (D). Romanoff has been behind in the polls, but pulled even with Bennet last week. Most political commentators are still picking Bennet by a hair, but even an article last week in the Wall Street Journal suggested Romanoff could pull an upset. Even so, many are preparing for Romanoff to run for Mayor of Denver. On the republican side, tea partier Ken Buck's recent gaffes have caused him a down slide in recent polling, and opponent Jane Norton is pulling out all the stops to take advantage. Senator John McCain was in the state over the weekend campaigning for Norton. This race, too, is too close to call. The republicans also have an important primary race in the run for Governor. Republicans Scott McInnis and Dan Maes are battling it out for the nomination. McInnis had been widely expected to get the nod to run against Democrat John Hickenlooper, but McInnis' campaign can't shake the recent "plagiarism and pay" scandal. Businessman Dan Maes had been speeding up the charts in polling, but recent polls show McInnis may be whittling away Maes lead. In Congressional House District 3, currently held by John Salazar, the republicans there are fight it out in a primary battle. Scott Tipton, and Bob McConnell are duking it out. McConnell recently received an endorsement from Sarah Palin, and it could help McConnell pull an upset over Tipton, who ran in 2006.


Despite the markets being closed last Monday for Labor Day, there was plenty of market action... and plenty of words from the Fed. So what happened, and what was said? Read on for details.

After the recent 4-month rally in the Bond markets, which has led to some of the best home loan rates in history, money has started shifting over to the Stock market. Why has this happened? Some economic reports have been better than expected in the past few weeks... such as the Jobs Report for August and Consumer Confidence. While that’s great news, it’s important to remember that good economic news - or as has happened recently, better than expected news - often causes investors to move their money out of the safe haven of Bonds to Stocks in the hopes of taking advantage of any gains.

So why does this behavior impact home loan rates? When the economy appears strong or starts to improve, and investors move their money from the safe haven of Bonds to Stocks, a decreased demand for Bonds means that Bond prices move lower. And when Bond prices move lower, it means that Bond yields - and consequently home loan rates - move higher.

In fact, given the recent better than expected economic news, St. Louis Federal Reserve Bank President James Bullard last week shifted away from previous comments he had made about deflation and said that while he sees a slowdown in the economy for the second half of this year, he predicts a pick up in 2011. He also said that the Unemployment Rate will likely fall next year, and business spending should start to rebound.

While continued improvements to our economy are good news, one big impact is that home loan rates will start to increase. And when home loan rates start to increase, they tend to increase quickly. That being said, while home loan rates ended the week about .125-.25 percent worse than where they began, they are still near some of the best levels we have ever seen!

If you or anyone you know would like to learn more about taking advantage of historically low home loan rates while they remain so, please don’t hesitate to call or email us as soon as possible. Or forward this newsletter on to anyone you think may benefit and we would be happy to talk to them free of charge.


Last week's Jobs Report was worse than expected, showing more and more people aren't working nine to five or any other kind of full time job. So what does this mean for our economy and home loan rates? Read on to find out.

Last Friday's Jobs Report showed that 131,000 jobs were lost for the private and government sectors, versus the 87,000 job losses expected. To add insult to injury, the revisions for June showed nearly 100,000 more jobs lost than had been previously reported. While some of the losses were due to the government laying off temporary census workers, the private sector was also disappointing, showing 71,000 job creations for July, worse than expectations of 83,000... and well short of the market's hope of 100,000. Rounding out the report, the Unemployment Rate remained steady at 9.5%, just below the 9.6% anticipated.

In addition, something to keep in mind is that the State governments are now under major pressure because of growing budget deficits. With tax revenues declining and budget cuts needed, States are finally having to make cuts like the private sector already has. As they start to catch up in making cut-backs to headcount, this could cause the unemployment rate to worsen. Not very good news, as an improvement in the labor market is needed to fuel the economic recovery... and especially disappointing, considering the money that has been injected to try and remedy this situation.


Also in the news, the Commerce Department reported last week that Personal Spending and Incomes were unchanged in June, due to a slowing of the economic recovery in the spring. In addition, the Savings Rate increased as consumers cut back on spending.

Why is all this significant... and what does it have to do with interest rates? It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent, and passes from one hand to another, or one business to another. The speed at which this money passes between parties is called the velocity of money. With the job market still very sluggish, consumers aren't spending much money these days... and businesses are still reluctant to spend money making investments in their business. With present velocity at low levels, inflation remains subdued... however, once velocity increases, the excess money in the system will cause inflation.

And remember, inflation is the arch enemy of Bonds and home loan rates... which means that even the scent of inflation can cause home loan rates to worsen.

While we certainly want to see better Jobs Report numbers in the future, Bonds and home loan rates were able to benefit from the poor report. Remember, weak economic news often causes money to flow from Stocks to Bonds as traders seek to protect their investments in the safer haven of Bonds. As a result, Bonds and home loan rates ended the week slightly better than where they began.