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Last Updated:
April 05, 2011

April 2011 Summit County Real Estate.Net Notices


Garfield County Commissioners Send Comp Plan Back To P & Z To Consider Making Plan Advisory In Nature

While the Garfield County Planning and Zoning Commission voted 5-3 in favor of the new 2030 Comprehensive Plan- and making it mandatory, rather than advisory- last November, the Garfield County Commissioners weighed in last week and unanimously agreed that the Plan should be advisory in nature, so that County Commissioners can have a final say in new projects that come before the County. By doing so, the Commissioners feel they can best represent their contituency, while at the same time, provide them flexibilty to make projects work even if they do not comply with all aspects of the Comprehensive Plan. The Planning & Zoning Commission will hold a public hearing during March, and then the text amendment language will go back to the Commissioners in April for final approval. GSAR fought hard with the Planning and Zoning Commission to make the Comp Plan advisory in nature to allow the County flexibility in allowing and encouraging new developments to come to Garfield County. GSAR is very pleased with the direction the County Commissioners have chosen to go with the Comp Plan.


Breckenridge To Review Open House Sign Policy March 8th

The Town of Breckenridge's Open House Sign Ordinance, which allows open house signs, with restrictions, will sunset in early April. The Council will consider the ordinance again on Tuesday, March 8th, and Tuesday March 22nd. According to town planners, the planning staff will ask if the Council would like to make the policy permanent. The Council approved Open House Signs two years ago with strict guidelines that allows open house signs, but only in the towns burgundy color, and not in the historic district. Last year, the Summit Association of REALTORS asked for the policy to be made permanent, after REALTORS mostly complied with the policy. The town chose to extend the ordinance for one more year to put continued pressure on REALTORS to comply with the policy. SAR will again ask for the the Open House Sign Ordinance to be made permanent at the March meetings.



In addition to monitoring the unrest in the Middle East, we have a big week of economic reports on our hands - with the big news coming on Friday! Here’s a highlight of what to watch:

The week starts off Monday morning with reports on Personal Spending and Personal Income, as well as Pending Home Sales. The Pending Home Sales report comes after last week’s Existing Home Sales release, which came in better than anticipated... but the National Association of Realtors who reports all these numbers is under fire for possible overestimation in the past few years.

On Monday, we’ll also see the Personal Consumption Expenditures (PCE) Index, which is the Fed's favorite gauge of inflation. Remember, inflation fears have grown and have been limiting the gains that Bonds experience. In fact, the inflation reading in last week’s GDP release was hotter than previously reported - and that coincides with the recent Consumer Price Index trend, which saw a hot 0.4% month-over-month gain during each of the past two months. So the markets and the Fed will definitely be keeping a close eye out for the PCE report this week!

Manufacturing reports will also hit the newswires this week. On Monday, we’ll see the Chicago PMI, which reports on manufacturing in Chicago and is a good indicator of overall economic activity. Then on Tuesday, we’ll see the ISM Index, which is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.

The big topic of the week will be employment. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment, followed by another round of Initial Jobless Claims on Thursday. In last week’s report, Initial Jobless Claims were reported lower than the expectations. Normally, this would have applied pressure on the Bond market, but again the unrest in the Middle East is trumping this data.

Finally, the busy week culminates with the highly anticipated monthly Jobs Report on Friday. This report features new data regarding job growth and the unemployment rate - needless to say, this report can be a big market mover! 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.

The important thing to notice in the chart below is the direction on the right side of the chart. As you can see, Bond prices moved upward, which is good news for home loan rates. One of the major reasons for this movement was the ongoing unrest and uncertainty in the Middle East, which prompted Traders to move money into the relative safety of Bonds.

As a result, now is an ideal time to take advantage of the historically low home loan rates.


Local/County Economic Development Discussion at Vail Town Council Meeting Tuesday

One of Governor Hickenlooper's first acts in office was to start an economic development intitative in Colorado to help create jobs and get the economy rolling again.  Part of that initiative was for County's to have local dicussions on economic development with business associations, individual businesses, and county residents. Following these meetings, the Governor will travel around the state to regional economic development meetings (see article below). This week, Eagle County will have a local economic development discussion at the Vail Town Council meeting at 1:00 pm on Tuesday, March 1st. REALTORS are encouraged to attend the event to provide feeedback and help identify economic needs in Eagle County.

Governor's "Bottom's Up" Economic Development Initative Heading To Mountains- Join the Conversation!

As part of the Governor's economic development intitative, there will be 14 regional meeting discussions with 4-5 counties participating in each discussion. Governor Hickenlooper is expected to attend most of these meetings. There will be a regional meeting for Summit, Eagle, Grand, and Pitkin counties on March 10th, with the time and location still to be announced. For Routt and Garfield counties, along with Moffat, Delta, and Rio Blanco Counties, the meeting will take place on March 9th, from 3-5:30 p.m. in Craig, at the center of Craig, 601 Yampa Ave.  Because the real estate indutry makes up such a large portion of local economies, REALTORS are encouraged to attend the meeting to voice your desires for economic development in your areas and at the state level. 



"Should I stay or should I go now? If I go there will be trouble, and if I stay there will be double!" - The Clash. The unrest in Egypt has been boiling for the past few weeks, as protestors took to the streets and Egyptian President Hosni Mubarak contemplated whether to stay in power... or step down.

And any time there’s uncertainty, there is sure to be movement in the markets. For example, oil prices rose Thursday morning after rumors spread through the media that Mubarek would step down later that night. In the end, Mubarek didn’t officially step down until Friday morning, at which point the streets of Cairo erupted in celebration, oil moved lower again, and the Stock market ticked up in hopes that the uncertainty in Egypt would soon be a memory.

Of course, Cairo wasn’t the only place that has been reacting to uncertainty lately - and we don’t have to look any further than Mortgage Bonds and home loan rates as an example. To say that Bonds have had a rough time lately would be a bit of an understatement, as Bond pricing and home loan rates worsened very significantly over the past week and a half. By the end of last week, however, Bonds looked like they were beginning to stabilize... at least for now.

Impacting Bonds last week were a number of remarks by Fed members, including Fed Chairman Ben Bernanke who spoke on Capitol Hill, saying it will take several more years before the unemployment rate returns to a more normal level, and that lawmakers need to act to reduce the country’s deficit.

The recent tough times for Bonds and home loan rates underscores the current opportunity... rates are still relatively low, but gradually creeping higher. This makes now an ideal time for consumers to take advantage of the still historically low rates. If you or someone you know is in the market for a new home or to review your home loan, now’s the time to act.


After last week’s slow schedule of economic reports, we’ll see some influential reports this week... that have the potential to really move the markets.

We’ll start off Tuesday morning with the January report of Retail Sales, which is considered a timely indicator of broad consumer spending patterns.

We’ll also see manufacturing news this week with Tuesday’s Empire State Index, which looks at New York State’s manufacturing sector and is a good gauge of manufacturing overall. Then on Thursday, we’ll see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the U.S.

More news is headed our way on Wednesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. Then, the very next day on Thursday morning, we’ll see the Consumer Price Index (CPI) with a look at inflation at the consumer level. In light of last week’s news about inflation concerns around the globe - including in China and Brazil - it will be important to see what these reports reveal. Remember, inflation is important to keep an eye on because it is the archenemy of Bonds and home loan rates.

Wednesday will also bring more housing industry news with reports on the number of Housing Starts and Building Permits in January.

Finally, the busy week of reports caps off Thursday with the Initial Jobless Claims report. Last week’s report showed that Initial Jobless Claims hit the lowest weekly reading since July 2008. Overall, the labor market appears to be slowly gaining positive traction... and further improvement will lead to an improvement in the housing market, but also higher rates over time.


"Fear comes from uncertainty," wrote the poet William Congreve. Last week, however, the markets were moved by fear and by uncertainty that were unrelated. On the one hand, unrest in the Middle East drove up Oil prices and pushed investors into the safety of Bonds - while on the other hand, fear of inflation limited the gains that Bonds experienced. To see how those elements impacted home loan rates, let’s take a deeper look at each.

First, the global unrest in the Middle East continues to impact the markets. The protests that started a few weeks ago in Tunisia and Egypt have now spread to Bahrain, Yemen and Libya. Libya is of particular concern to the markets, since it is the largest holder of oil reserves in Africa.

With the thought of Oil fields at risk and with no foreseeable resolution in the near term, Oil spiked as much as $12 a barrel higher last week - climbing over the mark of $100 per barrel. Remember, high oil prices aren't good for anything; they’re tough on the economic recovery, and they’re inflationary. And in terms of your wallet, the recent spike in oil has only just begun to translate to pumps across the country, so you can expect to see higher prices in the coming weeks.

In addition to higher Oil prices, the unrest is creating fear and doubt in Traders’ minds about what might happen. And when Traders are uncertain, they tend to move money into the relative safety of Bonds, which offer lower returns but also lower risks. This flood of money into Bonds - including Mortgage Bonds - helps prices and home loan rates improve. And sure enough, last week Mortgage Bonds traded higher, as protests and uncertainty permeated throughout the Middle East.

On the other hand, those gains in Bonds have been limited by fears of inflation down the road. That’s because investors demand a higher yield now to offset their concerns that future inflation will eat into their returns. That was evidenced by the tepid buying demand in last week's Treasury auctions. And as the economy continues to slowly expand and inflation fears grow, rates will gradually move higher over time.

The bottom line is that global unrest has been a driving force behind improvement in the Bond market... and that it may continue to do so in the coming weeks. But at the same time, it’s important to remember that those gains are fleeting and have even been limited by inflation fears - so the positive picture for Mortgage Bonds and home loan rates won’t last long.

Now’s the time to look at your unique situation and take action. It only takes a few moments to sit down and see how the national and international news may help you benefit from a refinance or the purchase of a new home.


Garfield County P & Z Presents Completed 2030 Comp Plan To Commissioners

Nearly 3 months after approving a new Comprehensive Plan to guide the county in future development, the Garfield County Planning and Zoning Commission present the New Plan to the County Commissioners. At the meeting, P & Z members voiced their comments on the plan which varied widely from robust support for the plan to concern that the plan did not address more important issues. The hot button issue of whether the Comp Plan should be mandatory or advisory came up again. The plan was approved as a mandatory document, but some planning commissioners and members of the Citizens Advisory Commission told the County Commissioners that it must be an advisory document to give the county flexibility in approving developments within the county. The Board of County Commissioners will now review the Plan and provide feedback to the Planning and Zoning Commission on the document. It is widely expected the County Commissioners will provide several areas of concern with the document. New Commissioner Tom Jankovsky has said the Commissioners will work to make the document advisory, and make it more business-friendly.

Yampa Valley Housing Authority Plans Ballot Question to Ask For Property Tax Increase 

The Yampa Valley Housing Authority (YVHA) in Steamboat Springs has decided to recommend asking voters in November to approve a new property tax. A committee of the Authority has suggested a .55 mil of tax to help provide a dedicated source of funding for operations for YVHA. Those operations include advising individuals and families seeking affordable rentals and homes for sale, while also managing existing deed-restricted condos and a mobile home park.

The proposed mill levy would increase the taxes on a $500,000 home by $21.89 annually and  the taxes on a $1 million commercial property would increase by $145 a year. The tax would raise $395,000 for YVHA. According to members of the Authority, the tax would enable YVHA to wean itself off of the $190,000 it receives from Steamboat and the County each year. The authority would also like to use funds for land acquisition and build capital reserves.


Efforts To Cut Back, Eliminate Fannie Mae And Freddie Mac Underway in Washington

Texas Republican Jeb Hensarling is expected to introduce a bill this spring to completely eliminate Fannie Mae and Freddie Mac over a five-year period, according to Congressman Jared Polis (D-Boulder). Polis' staff told the SAR Government Affairs Director last week that the bill is expected to be approved by the House, but won't go anywhere in the Senate. Republicans in Congress feel strongly that the "federal government shouldn't be in the business of making home loans." On Saturday, the National Association of REALTORS® released an issue analysis of the Treasury Department and HUD's proposed GSE reform, which also includes significant cuts in the Fannie and Freddie programs.  In NAR's analysis, NAR suggests that cutting back on Fannie and Freddie's involvement in the mortgage market will reduce housing access and affordability, increase profits for big banks, create more big banks set up to fail, and hinder the economy.




"And now... the rest of the story" - Paul Harvey. With his famous line, Paul Harvey pointed out for years that there’s more to every story - and often those hidden details influence what happened. With that in mind, let’s look at the “rest of the story” behind last week’s news items, which had alternating impacts on Bond prices and home loan rates.

First, let us start by sending our thoughts and prayers to the families affected by last week’s earthquake and tsunami in Japan. The earthquake was a magnitude of 8.9 - the strongest in 140 years. The earthquake in Japan and its damage created some counterintuitive market reactions.

One would think that US Treasuries and Mortgage Bonds would have traded much higher, as often is the case with devastating natural events that drive money into "safe haven" trades. But that wasn't the case. Why? The answer is that buying of Treasuries and Mortgage Bonds as a safe haven trade was offset by the Japanese selling some of their own massive holdings of Treasuries and Mortgage Bonds, in order to repatriate money back to their country during the time of emergency. Considering that Japan is the second largest holder of U.S. debt at $877 Billion, selling just a tiny position of their holdings has an impact on Bond prices.

In addition, Bond prices traded in very volatile fashion last week after getting jockeyed around on news out of Saudi Arabia that police had opened fire on protesters with rubber bullets. Let’s look at how this influenced the markets in a different way than one might at first imagine.

Like other recent uprisings in the Middle East, Saudi protesters are looking for more democracy, the right to elect public officials, greater civil rights, freedom of expression, more women's rights and a higher minimum wage. Interestingly, however, oil fell last week, despite the news. Why? Shouldn't unrest in Saudi Arabia - the world's largest oil producer, push prices higher? Yes, but that news was offset by the earthquake in Japan. That’s because Japan is a huge importer of oil... and the market senses that the earthquake and subsequent tsunami may create an economic slowdown and diminish the demand for oil.

Seeing that Mortgage Bonds are lower - even in the face of weak Stocks and enormous uncertain global news - tells us that the gains in Bonds are not coming with a lot of conviction and Traders are selling into this strength. This is because a lot of headwinds remain for Bonds - like inflation abroad, rising government debt and continued QE2 purchases.

This is a good example of why it is important to work with a mortgage professional that understands not only what was reported in the news, but also how the many cross currents may have alternating effects on everything from Bonds, Stocks, Oil to the US Dollar.



It’s a holiday shortened week, with both the Stock and Bond Markets closed Monday in observance of Presidents’ Day. But there will be lots of news the rest of the week:

We’ll get a double read on how the consumer is feeling, first on Tuesday with the Consumer Confidence Report and then on Friday with the Consumer Sentiment Index.

We’ll also get a double read on the housing market, with Wednesday’s Existing Home Sales Report and Thursday’s New Home Sales Report.

Thursday will also bring another weekly Initial and Continuing Jobless Claims Report - will this week’s report disappoint like last week’s?

And there’s one more double read, this one on the health of the economy. Thursday’s Durable Goods Report will update us on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time (i.e. appliances, furniture, etc). Then on Friday there’s the Gross Domestic Product Report, which is the broadest measure of economic activity.

Bonds and rates have made some improvements since February 9. But keeping in mind the saying about the Fed...and the signs of inflation...We will be watching closely to see what happens next.

Don’t fight the Fed.

So what does "Don’t fight the Fed" mean exactly, especially when it comes to home loan rates? Let’s answer that by going back a few months. In early November, when home loan rates were at all time lows, the Fed announced their plan to purchase $600 Billion in Treasuries through mid-2011. Dubbed Quantitative Easing 2 or QE2, the Fed had three goals:

  1. Boost Stock Prices
  2. Lower unemployment
  3. Create inflation

After just two and a half months, an argument could be made that the Fed has been somewhat successful so far. Stocks are higher, the unemployment rate has improved (though more improvement is certainly needed), and as we saw last week inflation has ticked higher.

Both the Consumer Price Index (CPI) and Producer Price Index for January were hotter than expected and the more closely watched Core CPI, which strips out food and energy, came in at the highest level since March 2010. And we’re not just seeing hotter inflation here. Reports last week showed inflation is heating up in China and England, too.

So what does all of this mean for home loan rates? Inflation is the arch enemy of Bonds and home loan rates, and usually any hints of inflation cause both to worsen. Yet, you may be wondering why Bonds and home loan rates improved slightly last week.

There are two things to note: First, while last week’s inflation data was a touch hotter than expected, overall, it’s still on the tame side. Second, last week’s Initial Jobless Claims was a disappointment, suggesting that the labor market continues to improve but at a very choppy and sluggish snail's pace.

The bottom line to remember is the phrase we started out with: Don’t fight the Fed. If the Fed wants to create inflation as one of its three-fold goals for QE2, it will likely succeed...and Bonds and home loan rates will likely worsen over time as a result.



Garfield County Reorganizes To Address Economic Development

Garfield County Manager Ed Green announced last week that the county is reorganizing the county offices to focus on economic development. The move comes after a recent Board of County Commissioners retreat where the Commissioners determined the need for the County to determine ways to attract new businesses and jobs to the county.The immediate focus of the county will be on:

Use of the Garfield County Regional Airport as "the focal point" of the county's economic development efforts.

A look at various levels of land use review based on the county's land use code, including the possibility of "rezoning areas in the county to reflect the rural and regional employment centers, as well as commercial and industrial areas."

"Examination of regulatory barriers to existing businesses and their potential to expand."

"Reconsideration via work sessions and public hearings on whether the Comprehensive Plan should be advisory rather than mandatory."


Steamboat Continues Holding Economic Development Discussions with Public

After several months of public discussions, the Steamboat City Council recently held another work session on economic development in Steamboat Springs. Ideas thrown out at this meeting included a website detailing local assets and resources for small businesses, to help Steamboat Springs attract new business owners and entrepreneurs, and potential incentives for energy conservation for businesses that promote sustainability.  Others suggested significant changes to the city's codes and regulations on business that would loosen restrictions on businesses.

During that meeting, the City Council worked on three long-term goals: preserving existing assets, leveraging those assets to boost economic activity, and increasing the city's economic diversity. The Council placed potential action items beneath those assets such as improving broadband access and supporting the Local Marketing District's airline program and Bike Town USA initiatives. The City Finance Director suggested the creation of an economic development fund in the city's budget to better track and prioritize potential expenditures, and she's working on an estimate of funds that could be available for economic development.

After so many public meetings on economic development, the City is ready to solidify some of the economic development goals identified during the public meetings. They will hold one more public meeting this week before taking action.




REALTORS Vote to Support Additional funding for Foreclosure Prevention & Counseling

CAR has voted to support HB 1136, Fund Foreclosure Prevention Counseling, by Rep. Angela Williams (D-Denver), which authorizes the creation of a foreclosure counseling and outreach program within the Division of Housing in the Department of Local Affairs.  The program will primarily be financed through a $240 surcharge that will be assessed by the public trustee every time a notice of election and demand (NED) is filed.  The program may also accept public and private gifts, grants and donations.


CAR and CARHOF have been long time advocates and financial supporters of the Colorado Foreclosure Hotline.  The Hotline has been very successful in helping homeowners avoid foreclosure and CAR believes HB 1136 will supplement the efforts of the Hotline by helping distressed homeowners get the help they need through funding foreclosure prevention and counseling programs at the local level.  It will be heard in the House Local Government Committee on Monday.

Seller Financing Bill Heads to Senate

HB 1022, Seller Financing of Real Property, by Rep. Ray Scott (R-Grand Junction) and Sen. John Morse (D-Colorado Springs) has passed out of the House and has been assigned in the Senate.   The bill, proposed by CAR, seeks to allow a seller up to three transactions in any twelve month period before they're required to be licensed as a mortgage loan originator, per federal law.  Currently, state law permits seller financing only if the property being conveyed serves as the seller's residence.    HB 1022 has been assigned to the Senate Committee on Business, Labor & Technology.


Freshman Legislators

There are over 20 legislators new to the General Assembly this year. We will introduce you to them over the next several weeks. This week: Representatives Robert Ramirez, Don Beezley, Kathleen Conti, Rhonda Fields, Chris Holbert & Kieth Swerdfeger

Rep. Robert Ramirez, Republican:  HD 29 (Westminster) Ramirez defeated three-term incumbent Debbie Benefield in a close race.  Ramirez currently works in a management position with a locally family owned and operated uniform rental service.  Prior to moving to Colorado, he served for a number of years in the U.S. Navy.  Ramirez and his wife Suzanne live in Westminster; they have one daughter.  Committee Assignments:  Education, Transportation

Rep. Don Beezley, Republican:  HD 33 (Broomfield, Superior, Erie) Beezley defeated two-term incumbent Dianne Primavera.  Beezley grew up in Boulder County and has lived (and owned a business) in all four counties that make up HD 33.  He currently runs a franchise development business and is involved with a number of civic organizations.   He and his wife Pat have two boys and reside in Broomfield.  Committee Assignments:  Education, Finance

Rep. Kathleen Conti, Republican:  HD 38 (Littleton, Greenwood Village) Conti unseated two-term incumbent Joe Rice.  She is a small business owner and is actively involved in the community as a volunteer.  Conti and her husband have two sons and reside in Littleton.  Committee Assignments:  Finance, Local Government

Rep. Rhonda Fields, Democrat:  HD 42 (Aurora) Fields defeated Sally Mounier in an open race for the seat vacated by Karen Middleton.  Fields is a lifelong resident of Aurora, a 24 year employee of United Airlines and holds a Masters Degree from the University of Northern Colorado.   She is also the founder of the Fields Wolfe Memorial Fund, a nonprofit established in memory of her late son and his fiancé, and is a community leader in promoting public safety, victim advocacy and civic engagement.  Committee Assignments:  Health & Environment, Local Government

Rep. Chris Holbert, Republican: HD 44 (Parker, Lone Tree) Holbert takes the reins in the district previously held by House Minority Leader Mike May.  Holbert has been involved in federal and state legislative and regulatory matters pertaining to the real estate industry since 1992, and in the automobile industry the preceding seven years.  He also has also served as president and executive director of a statewide trade association.  Holbert and his wife Diane have two sons.  Committee Assignments:  Econ. & Business Development, Education

Rep. Kieth Swerdfeger, Republican:  HD 47 (Canon City, Pueblo West, Pueblo) Swerdfeger defeated Carole Partin in the district held by term-limited Democrat Buffie McFadyen.  Swerdfeger has deep roots in Southern Colorado, where over the last 40 years he has built a successful construction firm.  He married his high school sweetheart, Sharon.  They have four children.  Committee Assignments:  Finance, Econ. & Business Development, Local Gov't


Vail REALTORS Hold Economic Development Discussion With Mayors/Commissioners

Last Monday, the Vail Board of REALTORS hosted an economic development forum that included a panel of Mayors, Town Managers, and County Commissioners. Mayors Dick Cleveland from Vail, Rich Carroll from Avon, Ed Woodland from Eagle, Minturn Town Manager Jim White, and Eagle County Commissioner Sara Fisher all attended the event. The officials all gave updates on what the towns are focusing on this year, potential budget battles, and how they are dealing with decreased revenue from property taxes. The towns also talked about economic development. Not surprisingly, but Vail indicated it is past the recession and "moving ahead".  Mayor Dick Cleveland received a resounding applause when he announced that the town is almost debt-free. Vail is focusing guest services and how to ensure guests have the ultimate experience while they are in Vail. Mayor Ed Woodland said the town of Eagle is working hard to do anything it could to bring new businesses to Eagle. He said the town is ready to move towards build-out, which they are far from, at this point. Minturn Town Manager said Minturn has never had money so it wasn't as badly affected by the recession. Avon Mayor Rich Carroll talked about Avon's desire to support local businesses and provide incentives. Sara Fisher, County Commissioner, took most of the heat from the audience as she fielded questions about the failed Stratton Flats affordable housing project, and competition for local REALTORS® from the County-funded Valley Home Store which sells deed-restricted properties.





"Bad news goes about in clogs, good news in stockinged feet." Welsh Proverb. And there was certainly both good and bad news in last week’s Jobs Report. Here’s what we saw...and what this means for home loan rates.

The Labor Department reported that just 36,000 jobs were created in January, with only 50,000 jobs created in the Private sector, much lower than the numbers anticipated. However, there were upward revisions to both November and December, which added another 40,000 jobs than previously reported.

But that’s not the only bit of good news in the report. The Unemployment Rate fell to 9%, down from 9.4% last month, rather than increasing as had been expected. In addition, the U6 or "real" rate of unemployment, which includes discouraged workers and those who have accepted part-time employment for economic reasons, fell to 16.1%, from the previous month of 16.7%...and reflects the lowest level since April 2009!

So what does all of this mean when it comes to home loan rates?

It’s important to remember two things:

First, the Fed’s goals for their current Quantitative Easing policy (dubbed QE2) where $600 Billion is being injected into the economy are to (1) boost Stock prices, (2) create inflation, and (3) lower the unemployment rate.

Second, while these goals are designed to stimulate our economy and keep our recovery moving forward, they are also unfriendly to Bonds and home loan rates.

In recent weeks, we’ve seen evidence of all three goals: Stocks been improving, the unemployment rate has declined, and we've seen an increase in global unrest of late, not just in Egypt, but in other parts of the world as well... and much of this centers around runaway inflation in commodities and food.

This means that the old trading saying, "Don't Fight the Fed" is still ringing true. If the Fed wants to accomplish its three QE2 goals at the expense of Bonds and home loan rates, they probably will.


Most conversations I am having these days eventually migrate to a common theme, “where is this market heading?”. Admittedly, my crystal ball is no clearer than the next guy’s; however, there seems to be positive indicators globally, nationally and locally that will benefit our local real estate market.

I am often asked to provide positive information that can be shared with clients. Recently, I read the below article and thought it worthy of sharing. Enjoy!

Almost five full years into the housing downturn, it's still cool to be bearish on real estate. But cool isn't always right: Despite headwinds such as looming shadow inventory, a lackluster job market, and geopolitical instability, there are plenty of reasons why rose-colored glasses may be the real estate eyewear of choice.

Below are 10 reasons why it may finally be time to be bullish on housing ... but first, one huge caveat.

The local bottom that the broad housing market experienced in April 2009 may yet be surpassed to the downside. If it is, housing bears will pound their chests, stubborn pessimism vindicated. They will be mistaking the trees for the forest. This recovery, which in many areas remains in full force, has been, and will continue to be, highly local in nature. Fundamentally strong markets have thrived, while weak ones have languished. National, state, and even city-level indicators have been masking trends that are ongoing on a neighborhood level. This will continue, and those that ignore it will miss out on countless opportunities.

So without further ado, 10 reasons to be bullish on housing:

1. Jobs. Housing follows jobs. Period. And while the job market is still bunk in many areas, pockets of strength are emerging. After Google (GOOG) announced it would be hiring as many as 6,000 new employees, the Silicon Valley powerhouse received 75,000 applications in two weeks. The company is looking to retain talent in its fight against local rivals like Apple (AAPL), (CRM) and Yahoo (YHOO), along with social media upstarts like Facebook, Twitter, and Zynga. If housing really does follow jobs, the San Francisco Bay Area may prove to be a bright spot in 2011.

2. Jobs. At the risk of being redundant, housing follows jobs. Consumer confidence is close to reaching last spring's high point, the most optimistic the US has felt since 2008. And while hiring hasn't restarted in earnest, firing has slowed to a drip. If you haven't been fired yet, chances are your job is reasonably secure. Job security drives optimism, planning for the future and ... home buying.

3. Pent up demand among young adults. Consider this: 2006 college grads entered the labor market just as home prices began to collapse. Those who still have a job kicked and scratched their way through the Great Recession and are now 27, perhaps married or getting there and kids may be on the horizon. Some were even smart enough to save some money. According to a graph produced by economist Tam Lawler and posted on Calculated Risk, today's young adults are under-represented as homeowners compared to historical norms, and a disproportionately large chunk are living at home. As the job market crawls back to life, this trend is likely to reverse. And if the apartment market's snappy performance in 2010 is any indication, it already has.

4. Foreclosures. Frankly, I'm getting tired of people claiming that an impending flood of distressed real estate is going to torpedo home prices. If you're making that case, ask yourself if you really, truly have any idea what you're talking about. Banks are rational actors, and as much as Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and the rest are demonized, they rarely willfully destroy the value of their own assets. Which is exactly what flooding the market with bank-owned properties would do. Coupled with political pressure and an ever-increasing maze of foreclosure litigation gumming up the repossession process, foreclosed inventory will continue as its steady stream. It will take years (around four based on current estimates) to work through shadow inventory, but there will be no flood.

5. Inflation. While much is made of inflation in the media, few pundits actually understand it. Inflation expectations, not inflation, is what we should be worried about. Things get scary when consumers start believing that prices are rising, or about to rise. Rational economic actions take hold, and rather than filling their tanks when empty, drivers fill whenever they pass a gas station. The expectation of higher prices, not higher prices themselves, is what changes economic actions. Rising inflation expectations pull demand forward, pushing up prices in an inconvenient self-fulfilling prophesy. Historically, real estate has been a rather good hedge against inflation. As people start to get nervous about inflation, they buy real estate. For more on how good a hedge real estate has historically been against inflation, see my firm's analysis a few weeks ago: If You Fear Inflation, Should You Buy Real Estate?

6. Higher rents and low interest rates. Ask a prospective tenant in a major metropolitan area how the apartment search is going and the response will not be pleasant. Rents are rising, inventory is down, and landlords are back in the driver's seat. And despite a recent bounce, interest rates remain historically low. High rents and low interest rates push would-be renters towards buying, particularly in areas with job markets that are relatively less weak than the country at-large.

7. A booming apartment market. Investors are snatching up multifamily properties as positive demographic trends, low interest rates, and perceived values attract professional and amateur buyers alike. Homeownership is at a 10-year low, young adults are moving out of their parents' basements and into apartments, and leverage is fantastically cheap. What more could an apartment buyer want? The multifamily space typically recovers first, and if history is rhyming in even the smallest way, this is good news for housing. Also read Multi-Family Properties: Have We Come Too Far, Too Fast?

8. Investor appetite remains strong. From fedora-hat donning, Hawaiian-shirt wearing, clipboard-scribbling, earpiece-whispering professional investors at the courthouse steps to vulture funds armed with hundreds of millions of dollars, investor demand for real estate remains robust. Distressed opportunities -- across all types of real estate -- have come to market slower than expected, which means buyers have had more time to hit the pavement and raise money. With limited opportunities, competing buyers are driving up prices of distressed assets: For every well-priced foreclosure there are a dozen all-cash buyers looking for a deal. And don't forget the baby boomers, the first of which turn 65 this year. While many are eying a trade-down into a smaller, more retirement-friendly home, even more are looking for reliable fixed income to pay for rounds of golf and tennis lessons. More than a few gray-hairs view real estate as their path to comfort during the golden years.

9. The stock market. With the Dow Industrials above 12,000 and the S&P 500 topping 1,300 for the first time since mid-2008, IRAs, 401(k)s and trading accounts are feeling fuller than they have in years. The wealth effect is in full effect, as buyers look to sell stock for a down payment and the confidence to pull the trigger on a new home.

10. Confidence. If you've made it this far without either scrolling down to question my sanity on the Minyanville message boards or falling asleep, I salute you. And for the precious few readers who are still with me, consider this very important question: Do you feel better or worse about the US economy, and more importantly your own personal economy than you did two years ago? This is not a political statement: Challenges remain, to be sure, but we Americans are a stubbornly resilient, optimistic bunch. Confidence is relative, and for a country that has been through economic hell and back since 2008, we are in remarkably better shape. Confidence in the present builds confidence in the future, and confidence of all types increases risk-taking activities. Admittedly when you have seen the depths of despair, a single ray of dim light can feel like high noon, but it doesn't matter. Confidence is a trajectory, a transitory voyage through time that is more accurately measured against where you just were than looking at the last time you were here. The fact that most people believe that we're no longer headed for apocalyptic collapse is, as they say, a good thing.

Nothing contained in this article is intended as a solicitation for business of any kind or for investment in the firm.


CAR Opposes Mandatory Energy Rating for Commercial Properties

SB 130, Transparency Building Energy Performance, by Sen. Michael Johnston (D-Denver) and Rep. Andy Kerr (D-Lakewood) seeks to require commercial properties to obtain an energy rating before being sold or leased.  CAR Legislative Policy Committee voted this afternoon to oppose the bill. 

CAR supports improving energy efficiency through voluntary financial incentives, education and other commercially reasonable alternatives in lieu of government fiat. Creating laws which trigger such requirements at the time when real property is sold, or otherwise impose undue economic burden on property owners or property managers, will only slow energy retrofits.

A few weeks ago, we reported that Sen. Johnston had agreed to exclude residential properties from the legislation; CAR will continue to express concern with regard to commercial properties.  The bill has been assigned to the Senate Agriculture and Natural Resources Committee.