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Economic update for the week ending September 19, 2015

Stocks drop after Fed leaves rates unchanged – Stocks were up this week until the Federal Reserve left rates unchanged. Many investors feared a rate increase because higher rates increase borrowing costs which cut into profits. It has been widely felt that the Federal Reserve would have begun rising rates because the economy was on solid footing. Stocks had dropped over the past couple of months partially on fears on a rate increase; however, stocks dropped further when the Fed announced they were not going to increase rates! The Fed’s statement made investors feel the economy was weaker than the data indicates, fearing that future growth may not materialize as expected. The Dow Jones Industrial Average closed the week at 16,384.79, down from last week’s close of 16,433.09  The S&P 500 closed the week at  1,958.03, almost unchanged from last Friday’s close of 1,961.05. The NASDAQ closed the week at 4,827.23, also just about the same as last week’s close of 4,822.34.

Federal Reserve leaves rates unchanged – The Fed chose to leave rates unchanged. In one sense this was good news for investors that had expected the first rate increase since 2006. However, this decision, and their statement spooked investors. The Fed’s statement included that The U.S. was currently the worlds strongest economy, but the risk to future growth in the economy is very high due to weakness throughout the world. It further ran through a bunch of data that showed why they are concerned. Some included: a drop in exports, inflation well below the 2% target range, a stabilizing housing market, and stagnant wages. Strong employment growth was cited as a positive. They left room to raise rates as soon as the next meeting, but added that with inflation so low that even if they did begin to raise rates they would keep rates lower than “normal levels” for a prolonged period of time due to low inflation which they said could persist for as long as a decade. Many experts took these statements to mean that the economy was not as strong as they thought. Stocks sold off on Thursday and Friday after the report was digested on fears that The Fed fears the economy may weaken.  This would affect sales which would affect future corporate profits. All in all, the one thing that investors agreed upon is that the Fed’s decision not to raise rates, which have been at near zero since 2008 to stimulate the economy, creates an environment of uncertainty. Markets fear uncertainty.

Mortgage just under 4%  –  The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, and around 3.375% for loans over $417,000. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%. 

Treasury Bond yields slightly lower this week – The 10 year Treasury bond yield closed week at 2.13%, down from 2.20% last Friday.  The 30 year treasury bond yield closed Friday at 2.93%, almost unchanged from last week’s close of 2.95%. Mortgage rates follow bond yields so these are closely watched.

California employers add 36,200 non-farm jobs – The state’s unemployment rate dropped to 6.1% in August from 6.2% in July. Unemployment is at its lowest level since January 2008 in California according to the Bureau of Labor Statistics. Since August of 2014 the state has gained 470,000 jobs. That represents an annual growth rate of 3% which has outpaced the national average of 2.1% for the 50 states. 

California existing home sales and prices beginning to level The California Association of Realtors reported that the number of homes sold in August dropped 3.8% on an annualized level from the number of homes sold in July. Sales were still up 9.3% from the annualized number of homes sold last August. This year the number of sales have been much higher than last year which was the lowest number of sales in decades, but those increases did moderate in August. Prices are beginning to level as well, according to The California Association of Realtors. The statewide median price in August was up 1% from July, and up only 2.5% from August 2014. That marks the lowest year over year price increase in 3 1/2 years. Unsold inventory ticked up to a 3.6 month supply from a 3.3 month supply in July. This is still a very low number. A normal market has a 6-7 month supply. It’s unusual to see prices stabilize with such a low number of homes on the market. The assumption is that prices have risen to a level that buyers have pulled back on their home purchases. Either inventory can rise quickly or prices can begin to rise more quickly in this environment. Unfortunately, we won’t know for sure until one or the other happens!


It’s Easier to Get Financing! Here’s Why

Finance_LawYou may have heard that it is extremely difficult to get approved for a home loan to buy or refinance a condominium. That was the case for several years after the housing market crashed, but lenders finally have loosened the rules on condo financing.

Borrowers seeking to get a condo loan these days will find more lenders to choose from and more condominiums that are eligible for financing. Mortgage giants Fannie Mae and Freddie Mac have eased some of the requirements on loans for condos, and a growing number of lenders offer loans that go outside the box of the condo rules in conventional financing, says industry experts.

You’ll still need good credit and stable income to qualify for a condo loan — just as you would with a loan to buy a house. But you are less likely to face restrictions relating to the property itself. When approving a condo loan, the lender wants to make sure the building is financially stable. Because the financial stability of a condo project depends on the owners paying their bills, lenders tend to view condo loans as a riskier investment than a house. Lenders are more flexible when analyzing condominiums’ financial stability.

Late in 2014, Fannie issued new guidelines to lenders allowing them to issue loans in developments where up to 15 percent of the owners were 60 days past due on monthly payments. The threshold had been 30 days. Another change made it easier to finance condos in new developments. Still, many condo buildings don’t meet Fannie and Freddie’s requirements; however, there are several options that have now become available for portfolio lending, as well.

Economic update for the week ending May 23, 2015

Stocks mostly unchanged this week –  The Dow Jones Industrial Average closed the week at 18,232.02, almost unchanged from 18,272.56 last week. The Nasdaq closed at 5,089.39,  up slightly from 5,048.29 last Friday. The S&P 500 closed at 2,126.06, also about the same as last Friday’s close of 2,122.73.

Bond yields were volatile  again this week   –  The 10 year U.S. Treasury Bond closed the week at a 2.21% yield, up from 2.14%  last week.  The 30 year U.S. Treasury Bond closed Friday yielding 2.99%, slightly up from 2.93%  last Friday. Yields dropped Thursday after minutes from the last meeting of The Federal Reserve were released which ruled out a rate hike at the June Fed meeting. On Wednesday the 10 year closed at 2.26% and the 30 year closed at 3.06%. Fortunately they dropped on Thursday. Mortgage rates usually follow treasury bond rate trends.

Mortgage Rates  –  The 30 year fixed rate ended the week around 4.00% for loans up to $417,000, and around 4.25% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, and around 3.50% for loans over $417,000. The 5 Year-ARM rates are around 3.00%.  1 Year-ARM mortgages are around 2.50%.  Last week’s Freddie Mac Primary Mortgage Survey showed rates as follows: 30 year fixed rates at 3.84%. 15 year fixed at 3.05%. 5/1 YR ARM at 2.88% and 1 YR ARM at 2.51%.

Inflation report shows prices rising – The labor Department said on Friday that its Consumer Price Index (CPI) rose 0.1% last month. The core inflation figure which discounts food and energy costs were up 0.3%, its largest gain since January 2013. Experts still feel that this is really not a number that would show a strong economy.

Housing Starts rise 20% in April – The Commerce Department reported Tuesday that privately owned housing starts increased in April 20.2% from March. The level was the highest since November 2007. Building permits which is a good gage of future construction also increased 10.1% from March to the highest level since June 2008.

So Cal home prices continue to rise  Home inventory level droppingCoreLogic / DataQuick released its Sothern California Home Resale Activity Report for April which showed that the median price in their six county Los Angeles metropolitan area climbed 6.2% from last April. The report also showed that the number of sales in the six county area increased 8.5% from last April. One cause for concern in the report was that there is only a 3.6 month supply of homes. This could cause the number of sales to drop in coming months, and lead to higher prices.

Nationwide home prices up – The National Association of Realtors reported that the median price paid for a home in the U.S. in April rose 8.9% compared to one year ago. April marked the 38th consecutive month of year over year home price gains. On the negative side the number of sales dropped 3.3%. This is a sign that tighter home inventory levels are resulting in fewer sales.

California’s housing market shows strong resultsThe California Association of Realtors reported that sales of existing homes in California rose in April. The number of homes sold in California rose 9.2% from March. Year over year the number of sales were 9.3% higher than last April. It was the largest year over year sales gain since May 2012. The median price paid for a home in California was up 2.8% from March and 7.4% from last April. Home inventory levels continued to drop. There was only a 3.5 month supply of homes for sale in April, compared a 3.8 month supply in March.

California’s Jobless rate falls to 6.3% –  The California Employment Development Department reported that California employers added 28,500 non-farm payroll jobs in April. Although this was lower than the 40,500 jobs added in March unemployment reached its lowest level in April since 2008.

It’s more affordable to buy a home today than 15 years ago!

It’s more affordable to buy a home now in most U.S. metros than it was 15 years ago, even for millennials putting down less money on a home, according to a Zillow analysis of third-quarter income and home value data.

Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat.

On average, homebuyers making the nation’s median income and purchasing the typical U.S. home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999. In contrast, renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically. Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments – 17.4%.

Homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive homes. Continuously rising rents across the country could drive more people into the home-buying market, but they also make it more difficult for first-time buyers to save for a down payment.

“Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment – even if that down payment is relatively modest – find a home to buy and secure financing,” said Zillow Chief Economist Stan Humphries. “But what keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days. It’s very difficult to come up with a down payment when so much of your monthly paycheck – especially on an entry-level salary – is going to your landlord instead of into your savings. Buying conditions are getting better every day, and in time the allure of fixed housing payments and building wealth through home equity will draw more buyers out of rentals and into homeownership.”

Source: HousingWire

March 13 Real Estate Report

The Jobs Report Surprises Again

Daylight Savings Time is the official start of the spring real estate selling season. With the weather we have had during February, we are sure this early rite of spring caught many by surprise. But in our experience we know that things can heat up quickly. The markets will be monitoring how busy traffic is at open houses, builder sites and more when people are able to go out and drive again in certain areas of the country. 

Of course, the markets are also monitoring the jobs data closely as well. The jobs data has been so strong lately that analysts now seem to be expecting around 250,000 jobs to be added each month. In February, the numbers did not disappoint these prognosticators, as the economy added just under 300,000 jobs for the month. The unemployment rate slipped to 5.5% from 5.7%, which was also better news than forecasted.

There were some aspects of the report which were considered not as strong. For one, the rise in hourly earnings was disappointing. This is good news with a meeting of the Federal Reserve Board coming up next week. The Fed will be considering the issue of raising rates and the lack of wage inflation takes some pressure off. Of course, this is bad news for workers. Also on the weaker side was the drop in the labor force participation rate. Some are theorizing that the bad weather in February may have discouraged some from coming back into the labor force. Bottom line, the economy continues to improve. Now about that weather…

Interest Rate Overview

The Markets.  Fixed rates fell for the first time in nearly a month in the past week. These numbers were released one day before the jobs report came out and pushed rates higher. Freddie Mac announced that for the week ending March 5, 30-year fixed rates decreased to 3.75% from 3.80% the week before. The average for 15-year loans fell to 3.03%. Adjustables were mixed, with the average for one-year adjustables unchanged at 2.44% and five-year adjustables decreasing to 2.96%. A year ago, 30-year fixed rates were at 4.28%, which continues to be approximately 0.50% higher than today’s levels. Attributed to Len Kiefer, deputy chief economist, Freddie Mac — “Rates on home loans fell across the board, with the 30-year fixed rate reading 3.75 percent this week. Real GDP growth for the fourth quarter was revised down to 2.2 percent. Consumer prices fell more than expected in January, tumbling 0.7 percent.”  Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.  


Current Indices For Adjustable Rate Mortgages
Updated March 6, 2015 


Daily Value

Monthly Value


March 5


6-month Treasury Security



1-year Treasury Security



3-year Treasury Security



5-year Treasury Security



10-year Treasury Security



12-month LIBOR


 0.660% (Feb)

12-month MTA


 0.136% (Feb)

11th District Cost of Funds


 0.698% (Jan)

Prime Rate



Real Estate News

America’s fragile housing recovery is getting a boost from military buyers using VA loans as the U.S. draws down troops after more than a decade of combat in Iraq and Afghanistan. About 4.7 million full-time troops and reservists served during the wars and many are now able to take advantage of one of the easiest and cheapest paths to homeownership. The program’s share of new home loans, at a 20-year high, is also increasing as other types of government-backed loans have grown more costly. “The reduction in uncertainty for the returning vets allows them the freedom to spend more, including buying housing,” said Sam Khater, deputy chief economist at CoreLogic Inc., an Irvine, California-based property-data firm. “VA buyers are coming into the market in higher and higher proportions and tend to be first-time buyers, one of the missing drivers in the recovery in housing demand.” VA loans accounted for approximately 8.0 percent of home loans made in 2014, up from 6.9 percent in 2013 and less than 2 percent a decade ago, according to preliminary industry statistics. There are more than 2 million VA loans, with balances in excess of $370 billion, after six years of increasing volumes. Unlike the Federal Housing Administration (FHA), which allows down payments as little as 3.5 percent, the VA doesn’t charge monthly insurance premiums, and the relatively moderate upfront cost can be rolled into loan balances. About 90 percent of VA loans don’t have down payments at all. Source: Bloomberg

Pending home sales in January surged to the highest level since August 2013 after a steep drop last month, according to the National Association of Realtors. All major regions, except for the Midwest, saw gains in activity in January thanks to improved buyer demand at the beginning of 2015. The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 1.7% to 104.2 in January, from an upwardly revised 102.5 in December, and is now 8.4% above January 2014 (96.1). This marks the fifth consecutive month of year-over-year gains with each month accelerating the previous month’s gain. Lawrence Yun, NAR chief economist, says that for the most part buyers in January were able to overcome tight supply to sign contracts at a pace that highlights the underlying demand that exists in today’s market. “Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” he said. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.” Yun also points to more favorable conditions for traditional buyers entering the market. All-cash sales and sales to investors are both down from a year ago, creating less competition and some relief for buyers who still face the challenge of limited homes available for sale. Source: The National Association of Realtors

Home owners are remodeling their homes at levels that haven’t been seen in decades. In fact, the home improvement business could reach record levels this year, according to a new report from the Joint Center for Housing Studies of Harvard University. What’s behind the increase? Potential trade-up home buyers are fixing up their existing homes for sale, federal and state subsidies are increasing the desire for energy-efficient upgrades, and landlords are sprucing up their properties to justify raising rents, the report notes. A strengthening job market is also helping to lead more home owners to take on home remodeling projects, following years of delaying projects. Spending on discretionary home improvement projects jumped by nearly $6 billion between 2011 and 2013 — the first rise since 2007, according to the report. The top remodeling projects continue to target the kitchen and adding a new bathroom, but baby boomers also are increasingly retrofitting their homes for better accessibility and with age-in-place features. Also, more home owners are tackling home projects centered on energy efficient upgrades, such as for windows and heating and cooling systems. Source: CNBC 

Investment properties – Let’s do the math

MoneyHouseHave a few thousand dollars, and want to make an investment in real estate? Wondering how the numbers work, and why real estate is such a great investment?  Let’s take a look at the numbers.**

Here’s what we’ll start with (2015):

  • We’ll buy a 3-bedroom home in Palmdale, where you can actually buy a property like this for $125,000
  • 20% down (your total investment) = $25,000
  • Your monthly payments, including mortgage, taxes and insurance will be roughly $800
  • You’ll rent your property for $1,100/mo

In the above scenario, you made a $25,000 investment and will be repaid at a rate of roughly $300/mo.  Assuming there will be unexpected maintenance costs, let’s assume you pocket $2,000 a year.  So, you own a $125,000 with a loan balance of $100,000. You have $25,000 in equity.

5 years later (2020)…

  • By making your mortgage payments, you’ve paid off $10,000! Mazal Tov!  Your loan balance is now $90,000
  • Since rental rates increase at roughly 5% per year, you’re now charging $1,200/mo, and pocketing roughly $3,000 a year.
  • Over the past 5 years, after all the expenses and mortgage payments, you have pocketed roughly $10,000, reducing your original investment to $15,000 out of pocket.
  • During these 5 years, the market performed as we expected, and your home is now worth $140,000.

To recap, your home is worth $140,000 and your loan balance is only $90,000. You have $50,000 in equity!  Plus, you’re almost half way to repaying your original investment.

At this point you have 3 choices…

Option 1: Cash Out

So far, you’ve taken a $25,000 investment and turned it into $60,000.   Don’t believe me?

  • You put in $25,000
  • You’ve repaid $10,000 of that loan through monthly rental income (+$10,000)
  • You’ve repaid the bank $10,000 (+$10,000)
  • Your property went up in value by $15,000 (+$15,000)
  • So… $25k + ($10k + $10k + $15k) = $60,000!
  • If you sell your home right now for $140,000 and pay the remaining loans back the bank ($90k) and yourself ($15k), that leaves you with $35,000 of pure profit!  Not bad.

Option 2: Stay the Course

You have a great, low payment because you locked in your interest rate back in 2015.  You have good income and don’t want to increase your debt.  You can continue down the same path, repaying yourself a few hundred dollars a month, paying off your mortgage over the next 20 years, increasing rents at a modest rate, and watching your investment get more and more valuable.  In 20 years, your monthly income will increase by $700/mo, since you will have paid off the bank and will own your property free and clear.

Option 3: Leverage your debt

This is what the wealthiest real estate investors do – use someone else’s money to make even more money.  Here’s how:

  • You have $50,000 in equity on your first property (above) – refinance the property, taking out $20,000.  Combine that with the $10,000 from your original investment that you’ve already paid back, and you have $30,000 to work with.
  • Buy a second property for $150,000, which brings in a few hundred dollars per month of income, after all of your monthly expenses are paid.
  • You now own 2 properties, worth a total of $290,000, collecting $500+ per month in income… all thanks to a $25,000 investment 5 years ago.

Imagine what the future might hold…

What if you were to follow the same process every 5-10 years? How many millions of dollars of investment property would you own by the time you retire – all thanks to that one small investment back in 2015?  How many thousands of dollars of income will you pocket every month (and hand down to your children some day)? 

Compare that scenario to putting $25,000 into your retirement fund this year.  Which is going to provide more for you 40 years from now?

Call me! Let’s invest in your future!  (310)926-2386. Or send me a message through this website.

** Of course, before making any investment, it’s always a good idea to do your research and speak with accountants, financial advisers, seasoned investors, mortgage brokers and Tweet the Today Show for advice.


Tips for Home Buying under Obama’s New FHA Policy

FHA-300x188President Obama announced last week a new policy that will reduce annual mortgage insurance premiums (MIP) on FHA loans. The National Association of REALTORS® estimates that a reduction in the annual MIP of .50 to .85 percent will enable many first-time borrowers and other borrowers who are typically undeserved by the lending community to obtain home loans and help them into the buying market (and out of renting!)

Ray Brousseau of Carrington Mortgage Services, which specializes in FHA loans for first-time borrowers and those with a FICO score below 640, offers the following tips for consumers who wish to buy a home with an FHA loan with this new lower MIP:

  1. Buying a house with an FHA loan is now more affordable in many cases, so check back with your preferred lender about how much home you may now qualify for with this reduction. 50 bps off the premium could amount to either meaningful savings on a monthly basisor an opportunity to purchase more home. Remember you will still have to demonstrate your qualifying income; FHA loans are government backed and require full documentation from borrowers.
  2. Always consider what you can comfortably afford. While you may be able to “buy more home” with this reduction—getting you more for your money—be aware of your monthly cash flow so you don’t bite off more than you can chew long term.
  3. Take action now. More people may now start to look for a home, which means competition could spike in your preferred area. When competition increases, home prices rise as well. This could also mean a rush of new loan applications for lenders, which could mean extended loan closing times (like what occurred in 2013 when the average loan closing time topped 50 days for an FHA home purchase loan).
  4. If you already own, consider refinancing. With mortgage rates at 20-month lows and a reduction in the premium, borrowers may be able to achieve monthly savings by refinancing. Borrowers with an FHA loan have a potential opportunity to reduce their monthly payment with a user friendly refinance option called an FHA Streamline loan, which is typically faster to close than a regular refinance because no appraisal is required, and there are no out-of-pocket costs.Cash-out refinancing may also be an option, but be responsible. This shift in the market will allow some individuals to take cash out of their loans to pay for things like college tuition, weddings, etc. but don’t take out more than you can afford to repay.
  5. Discuss the opportunity of a reduced term loan (25, 20, 15 or 10 year loan) with your lender. This could not only result in interest savings through the reduced term, but may also lower your rate and offer an opportunity to take advantage of the annual MIP savings.
  6. Don’t let anxiety about financing a home paralyze you. Certain lenders offer educational tools to help keep you knowledgeable and informed throughout the loan process.

This article was originally posted here.

Here’s Your January 6 2015 Real Estate Report

Next week we will spend some time sharing predictions for 2015. But first we want to take a look back and see what happened in 2014. We started the year with a severe winter and a slowdown within the economic sector. We ended the year on an upswing best exemplified by the recently revised estimate for economic growth in the third quarter. The five percent growth rate was the strongest in over a decade. Though we are not expecting that the number for the last quarter of the year will come in at that level, there is also no evidence of a sharp slowdown in the rate of growth for the last quarter of the year.

Employment growth picked up nicely in 2014. Well over two million jobs were created last year and the unemployment rate dropped almost one percent to below six percent with December’s numbers still to be released. Inflation stayed tame this year and wage growth did not pick up significantly — thus all was not a bed of roses with regard to the employment sector. On the other hand, the low inflation rate enabled mortgage rates to stay low throughout 2014 and oil prices dropped significantly, especially in the second half of the year.

Meanwhile, the growth in the real estate market slowed somewhat in 2014. The pace of real estate sales leveled off and price gains were more moderate that the previous two years. As we have emphasized, the adjustments in the real estate sector are mainly related to the drop in distressed sales, which is actually a sign of normalization. Finally, the stock market was volatile but marched upward for most of the year as the bull market continued. This year’s gains of over ten percent for the S&P Index has contributed to a gain of well over seventy percent during the past five years — completing the stock recovery from the financial crisis lows of March of 2009. To illustrate, the Dow closed at a low of 6,547 in March of 2009 and finished 2014 close to 18,000, which now represents the fourth longest bull market in history.

The Markets.

 Fixed rates on home loans trended upward for the second week in a row, but remained close to their lowest levels of the year in the past week. Freddie Mac announced that for the week ending December 31, 30-year fixed rates rose to 3.87% from 3.83% the week before. The average for 15-year loans increased to 3.15%. Adjustables were stable, with the average for one-year adjustables increasing one tick to 2.40% and five-year adjustables remaining at 3.01%. A year ago, 30-year fixed rates were at 4.53%, which continues to be over 0.5% higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “While rates on home loans edged up this week, they remain near 2014 lows. Looking at full year data, the 30-year fixed-rate average for 2014 was 4.17 percent, the highest annual average since 2011. Also, the Conference Board reported that confidence among consumers rose in December and the S&P/Case-Shiller® Seasonally-Adjusted National House Price Index rose 4.6 percent over the 12-months ending in October 2014.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated January 2, 2014


Daily Value

Monthly Value


Dec 31


6-month Treasury Security



1-year Treasury Security



3-year Treasury Security



5-year Treasury Security



10-year Treasury Security



12-month LIBOR


 0.562% (Nov)

12-month MTA


 0.114% (Nov)

11th District Cost of Funds


 0.686% (Nov)

Prime Rate




Real Estate News

  Landlords are quickly raising their rents as the national vacancy rate dips to the lowest level in two decades. Rents are rising at the fastest pace in six years, according to newly released data from the Bureau of Labor Statistics. The annual rent inflation reached 3.5 percent in November, the highest growth since November 2008, and up from 3.3 percent in October, according to the government’s report. “Rental vacancy rates have fallen to 20-year lows,” notes Ted Wiesman, an economist at Morgan Stanley. The vacancy rate plunged to 7.4 percent in the third quarter, the slimmest margin since early 1995, according to a U.S. Census Bureau report. Builders are increasing construction of apartments, but are still playing catch-up with regard to rising demand. The National Association of Realtors® recently forecast that 2015 will continue to be a “landlord’s market” as rent growth continues to run higher than overall inflation. However, NAR does project that rent growth will start to cool — though only slightly — next year: Rent growth is expected to reach 3.9 percent in 2015 compared with 4 percent this year. “Low housing inventory and the sizable demand for rentals will continue to spur multifamily construction as well as keep rents rising above inflation through next year,” Lawrence Yun, NAR’s chief economist, said in a recent statement. Vacancy rates for rental apartments are expected to remain low for at least two more years, NAR says. The vacancy rate for rental apartments in the fourth quarter is expected to be at 4 percent, and inch up to 4.1 percent in 2015 and 4.2 percent in 2016. Vacancy rates under 5 percent often are considered by housing analysts to be a “landlord’s market” and ripe conditions for landlords to continue upping rents. Source: MarketWatch

The influence of Chinese investment in U.S. residential real estate could witness a dramatic expansion thanks to a little-publicized change in U.S. visa issuance rules. Under a visa deal signed recently during President Obama’s visit to the APEC conference in Beijing, student and exchange visas for Chinese nationals coming across the Pacific were extended from one year to five years, while short-term business and tourist visas were extended from one year to 10 years. Simon Henry, CEO of Juwai, a Shanghai-based company that facilitates Chinese inquiries into global real estate opportunities, predicted that the change in the visa rules would encourage Chinese purchases of U.S. housing. “The second biggest driver for Chinese investing in the U.S. is for property that the children can live in while studying in the U.S.,” said Henry in an interview with Forbes. “We forecast a rapid increase in the number of not just Chinese university students studying in the U.S., but also secondary and even primary school students. The new visa program will help propel this trend, which is already under way. One outcome will be increasing real estate investment by the parents involved.” According to data released in July by the National Association of Realtors (NAR), China is the largest source of foreign real estate transactions in the U.S., based on a dollar basis. Source: NMP Daily

Annual effective apartment rent growth reached 4.7 percent in November, the strongest of 2014 to date and the highest since August 2011, reported Axiometrics, Dallas. The figure represents the seventh-highest rent growth since Axiometrics started reporting monthly in April 2008. “The rate of increase bucks usual fourth-quarter trends, when rent growth either decreases or increases only slightly, confirming the strength of the apartment market in 2014,” said Axiometrics Senior Vice President Jay Denton. Denton said annual effective rent growth between October and November decreased from 3.0 percent to 2.7 percent in 2013. November’s year-to-date effective rent growth of 5.0 percent keeps 2014 as the apartment market’s strongest post-Great Recession year. Though the national occupancy rate continued its typical seasonal decline in November, it remained nearly 95 percent–the highest recorded in any November since Axiometrics began reporting monthly in 2008. Occupancy has now exceeded 94.0 percent for 31 straight months. Source: Mortgage Bankers Association 

January 2, 2015 Economic and Housing Market Update

Stock markets down from last week, but post 6th consecutive year of gains! Longest streak since the mid 1990’s – The Dow Jones Industrial Average closed the week at 17,832.99, down from 18,053.71 last week, but up from 16441.35 on January 2, 2014! The DOW Jones Industrial Average was up 7.5% for the year in 2014! The S&P 500 closed the week at 2058.20, down from last week’s close of 2088.77, but up from last January 2, 2014’s close of 1831.98. The S&P 500 was up 11.4% for the year for 2014. The NASDAQ closed at  4726.81, below last week’s close of 2088.77, and above last January 2, 2014’s close of 4,143.07. The Nasdaq gained 13.4% in 2014!

Treasury Bond yields drop in 2014! – The 10 year Treasury bond closed the week at 2.12% down from last week’s close of  2.25%. The 10 year treasury yield was 3% on January 2, 2014! The 30 year treasury yield was 2.69% down from last week’s close of 2.81%. The 30 year treasury yield was 3.92% last January 2, 2014! Mortgage rates follow bond rates. 

Mortgage Rates – The Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average for the week was 3.87% almost unchanged from last week’s 3.83%. The 30 year fixed survey average was 4.53% on January 2, 2014! This represents a drop of almost 3/4%! The 15 year fixed was 3.15%, slightly up from last week’s 3.10%. It was 3.55% last January 2! That’s a drop of almost 1/2%. The 5 year ARM was  3.01%, it was 3.05 last January 2. The 1 year ARM was 2.40%, and 2.56% last January 2. Rates dropped later in the week so next week’s survey should show slightly lower 30 and 15 year rates.

Gas prices end year down over $1.00 per gallon. – Oil closed at $52.81per barrel on January 2 2015 down from $95.76 January 2, 2014. Many parts of the country have gas prices under $2.00 per gallon. We are about $2.60 per gallon, due mostly to higher taxes, and also more expensive cleaner burning blends.

Low inflation causes other commodities to drop – The last consumer price index reading showed inflation in check at an annual increase of 1.2%. That has caused commodities which are used as a hedge against inflation to drop. For example gold closed Friday at $1189 an ounce down from January 2, 2014 when it was $1226, down about 4%. Silver closed Friday at $15.78 an ounce, also down sharply from $20.02 on January 2, 2014. A drop of over 20% for the year!

I will be doing a more complete year end report when final numbers are in for December. Employment reports for the U.S. will be out at the end of next week. The California jobs report will be available around the middle of the month. DataQuick will report home price and sale statistics in the second week of January, and the California Association of Realtors will release their market data the third week. Retail sales will be out in about 10 days. Inflation data will be out by the third week of January, as well consumer confidence readings. We will get a good year over year comparison when we have all the data.

9 Steps to Repair, Improve, and Protect Your Credit

The following steps will help anyone recover from past financial mistakes. These steps will help you rebuild, protect your credit, and obtain the credit scores needed to qualify for credit cards, loans, and/or mortgages (subject to income or other qualifications). If you have credit issues you must not only clean up derogatory obligations on your credit report but also establish new credit. Your scores determine your ability to qualify for that new car, credit card(s), vacation, mortgage, or even a job. Credit impacts almost every aspect of our lives. Many employers now require a credit check and past credit issues such as: bankruptcies, foreclosures, or judgments may disqualify you for a better or new job.

The following are steps to rebuild your credit:

Step One – Request a free copy of your credit report from all of the 3 main credit agencies (Transunion, Experian, or Equifax). Your reports can be requested online from any of the above mentioned credit agencies or through You are legally entitled to one free credit report yearly from each credit agency.

Step Two – Thoroughly review the report(s) for any errors or discrepancies. You can request the credit bureau correct any errors or dispute any derogatory accounts. You can dispute any inaccurate accounts. If the creditor who put the derogatory credit on your credit report cannot provide evidence that you owe the debt, it should be removed from your report.

Step Three – Bring all accounts current. If you have past due accounts focus on bringing them current first. Usually you can bring delinquent student loans current by negotiating a payment arrangement with the creditor. Then after 6 months of on time payments the creditor will likely report the account as current. If the creditor allows, change the payments to an automatic deduction. That will ensure your future payments are paid on time.

Step Four – Rebuilding your credit. Secure credit cards are offered by large banks online, local banks, and /or credit unions. A secure credit card usually requires a $300 to $500 deposit to open an account. This type of credit card will report payment activity to the credit bureaus just like a standard credit card. A secure credit card is a great way to obtain new credit. The last thing you want to do is apply at numerous lending institutions and pile up inquiries (which will lower your credit scores). You may need a co-signer if your credit scores are below 500.

Step Five – When rebuilding your credit, time will be your best friend. After 6 months of on time payments with a secure card, ask the lender to upgrade your credit card to a standard card. Also ask for the limit to be increased. This will give you more room to keep your balance under 30% of the available limit. Department store cards are a good place to start because they’re usually easier to qualify for. Remember to keep your card balances under 30% of the available limit to maximize your scores.

Step Six – Limit your inquiries. When shopping for a new credit card, installment, or auto loan, research the requirements first. If you do not qualify for the loan, go to another lending institution. The last thing you want to do is lose points from excessive inquiries.

Step Seven – Avoid closing credit cards. Usually the credit bureau does not differentiate between a card closed by the consumer or the creditor. Closing accounts can affect your score by lessening the amount of long-term established credit.

Step Eight – If you are unable to open a secure card, look into becoming an authorized user with a relative. They may qualify for the loan or credit card and add your name as an authorized user. You can use the card, make the payments, and have the payments recorded on your credit report.

Step Nine – Contact the credit bureaus to put a freeze on your accounts. This will prevent new accounts from being opened unless you contact the bureaus first. Identity theft protection services can be purchased which will monitor your credit activity and alert you of any potential fraud. Identity theft services can usually be purchased for less than $25 per month.


Recover from past financial mistakes. This article is a step by step guide to help you rebuild, protect your credit, and obtain the credit scores needed to qualify for credit cards, loans, and/or mortgages

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