Real Estate Information

We can't count the number of buyers we have observed either at an open house, with another agent, or our own buyers who peer around the corner and pretend to peer down the basement and see all that they can see.  If you really want to know what is going on in a home, before you fall deeply in love with all of the lovely things it has to offer upstairs, go into the guts of the home and give it a once over, and even two with your real estate agent to determine what issues may exist.   It is here that you will know if there are cracks in the foundation, or settling, if the stack needs replacing, whether or not the electric has too many wires for the number of circuits in the box.  Our first time home buyers start their boot camp training down in the depths of cellars and basements.  For more tips or our complimentary reports on buying a home visit our website at www.trails2openspaces.com or e-mail us with your questions at mikeandpat@trails2openspaces.com.

We've heard how bad the market it is but did you know that in St. Charles county we are holding our own as reported by the St. Charles County Association of Realtors.  Although appreciation slowed, home values continued to rise.  The Association reported an average home sales price of $214,483 for the year which was an increase of $2,150 in 2007 over 2006.  This means the homeowner that held a home for the past 5 years has incurred approximately an average increase in value of $54,000 which results in a 7% per year tax free increase on your investment.  Want to know what's going on in "your neck of the woods"?  E-mail us at MikeandPat@trails2openspaces.com for a complimentary monthly "Market Snapshot" in the area you want to buy or sell, or if you want to know the value of your home go to www.StCharlesMarketValues.com

Chris Simms, Certified Mortgage Planner, with Pulaski Bank in St. Louis has been providing us with valuable information on the Mortgage Industry.  We asked Chris to give us a quick update since we have seen quite a bit of activity in the market this week. 

"It is amazing how much History repeats itself.  On Tuesday of this week the Fed made a surprise move and cut rates by 75 basis points to show foreign markets and us investors that they are still in the game of helping to save us from a recession.  This was an emergency move because they are expected to meet next week and also make another cut to rates.  The last time the Fed did this was on September 18th.  They made an amergency cut then by 50 basis points.  That day mortgage bonds traded higher. 

On Tuesday of this week mortgage bonds did the same thing and traded 53 basis points higher.  This is huge, first of all as you have heard me talk before, when the fed cuts rates it hurts mortgage bonds.  This time it didn't.  This is the reason why.

The Fed told everybody that they were right and that we are heading near a recession so they needed to move, thus confirming all of the fears.  So investors pulled their money out of the stock market and threw it into bonds (yeah).  The next day following on September 19, the mortgage bonds started trading better and then all of a sudden fell and fell hard.  The same thing happened on Wednesday.  They opened an additional 39 basis points higher and then in a blink of an eye fell 94 basis points.  The stock market gained 600 points. 

Thursday the stock market continued to gain strength and investors pulled money out of bonds and poured them into the stock market hoping to find some bargain stocks cheap.  It was so dramatic that at 10:00 a.m. Wednesday rates were at 5.25%, by 1:00 p.m. they were at 5.625%.  Then by the end of the day they had hit 5.75%.  On Thursday rates finished at 5.875% on a thirty year rate.  That's insane to move 75 basis points higher in 24 hours.

So what do we expect for the next couple of weeks:  Well just as it happened in September, I expect the next several weeks to follow suit.  We will continue to have a lot of volatility.  But we do expect rates to continue to come back down.  How low, I don't know and if I did I would be in Tahiti enjoying a beer on the beach.  So hang in there and just be patient.  Besides since when was 5.875% on a 30 yr loan bad?

In other news, it appears that congress and the White House are agreeing on a stimulus package that could be interesting.  They are wanting to raise the conforming loan limits to $729,750.  This would save jumbo loans below $729, 1- 1 1/2% in interst rates.  This could be a big deal for real-estate in St. Louis.  Especially since St. Louis was rangked in the top 5 cities with appreciation last year and a great place to own real estate.  (something we knew all along)  By the way, if you haven't checked we still had positive appreciation in the metro area last year as opposed to the rest of the country dropping 1.8% in value last year.  This was the first nationwide decline in Real Estate since Realtors started tracking this 40 years ago.  Although that might sound bad, think of it this way.  Many parts of the country saw gains of over 100% in a five - six year period.  If the stock market rose 100% iin five years and then dropped 1.8% for the next two years, would anybody talk about it?  I don't think so.  Not like the doom and gloom we are hearing now about real estate.  I will say that every commentator I have heard from is saying that real estate is a great place to park your money!  So get on the stick, start saving and buy a home or two!"

Questions may be addressed to csimms@pulaskibankstl.com or by calling 314-229-4242.

We asked Chris Simms, Certified Mortgage Planner of Preferred Home Lending, powered by Pulaski Bank to give us a quick update on mortgage rates.  This is what he had to say:

"Home sales and building permits came out at a 16 year low.  Believe it or not this has helped the bond market a little bit.  In addition the first auction the Fed had yesterday went very well.  On the foreign side, the European Central Bank put 500 billion back into the market to help foreign investors deal with our mortgage crisis.  This helped LIBOR rates ease the gap a little so adjustables will be a little more attractive.  (Did you say adjustables, they still exist? Yes and they can be a good investment if used correctly?  That doesn't mean everybody should get one but they can be a part of any financial plan if used correctly).

All this helped rates drop to 6.125% for today"

You may comment on this blog or contact Chris directly with questions at 314-229-4242 or e-mail him at csimms@pulaskibankstl.com

We recently requested our team member and Certified Mortgage Planner, Chris Simms, to provide an update on what is going on in the market.  This is what he had to say "The last two days have been a wild ride.  The stock market has seen two major 10% corrections this year.  Once in August and now in November.  But yesterday and Tuesday it saw the largest two day gain in five years.  The bond market saw some strength yesterday.  So how is the bond market seeing gains and the stock market seeing gains?  This is because we have had some bad economic indicators showing that the economy is slowing.  Jobless claims came out with above expectations.  This is usually a huge deal but stock traders are attributing a lot of this number to the writer's strike and the short week last week.  But the bond market sees this number as some positive news in regards to the feds likelihood of cutting rates on December 11.  Again the fed will cut the prime lending rate (rate banks charge each other to borrow money on overnight basis) (also what we base our short term loans, i.e. credit cards, car loans, ad Home Equity loans off of) in December but it's a matter of how much.  The jobs report was the first indication.  The next will come in the personal consumer expenditure (PCE) that will be released tomorrow morning.  (PCE is the change in cost for goods and services over a period of time.  Compared to employment, growth, personal income, and jobs this number helps the fed determine where inflation stands.  As an example, if goods go up 3% and income goes up 3% then we are even and there is acceptable inflation.  If goods go down 3% and income goes up then we have deflation.) 

If the PCE for tomorrow comes in at 2% or lower then we will see the fed possibly drop the prime rate 50 basis points or 1/2%. 

Stocks:  Stocks will love this and will truly rally.  The prime rate drop will free up cash flow and businesses will have more money to spend.

Bonds:  Bonds will hate this because of the fear of inflation.  Again more cash in the market means that producers and servicers can raise the price of goods and services because of more money in the market.  Currently we are expecting at least a 1/4% decrease in the prime rate.

Mortgage Rates:  will not like it and we will see mortgage rates rise.  People will pull money from bonds and mortgage backed securities and invest in stocks.

If PCE comes in just a little higher than 2% but still modest we will see a smaller decrease of maybe 25 basis points or 1/4%. 

Stocks:  Stocks won't be thrilled but they will accept the rate drop.  Money will flow in stocks buth with modesty.  There will probably be a large gain in the beginning and then normal up and downs.  Stocks will be modest because there will still be indications that the market is not in safe water.

Bonds:  Have already factored in the fed cut.  There will be a decrease in the beginning as money tries to pick up on the gain in stocks.  But more market news will continue to show problems in the market and security in the market will help money flow to bonds.

Mortgage Rates:  will follow suite with bonds.

Overall I don't expect the current PCE to reflect the state of the economy as it stands today.  These numbers are always looking to the past.  That's why we usually don't know we are in a recession until six months later.  I expect the bond market to continue its trend and rates to continue to go down.  I don't expect them to get outrageous yet, that will depend on future events.  As for now hang in there and enjoy the lower rates today, and don't hesitate to call with any questions."

Chris can be reached at 314-229-4242 or you can e-mail him at csimms@pulaskibankstl.com