Burbank Real Estate Agent Ana Connell

Economic Recap:

• Pending home sales for September dropped 4.6%, worse than expected.
• Showing extremely weak numbers, total domestic light vehicle sales came in at 7.7 million annual unit sales. This the lowest since the recessionary times in the early 80s. The car rate of 3.9 million is the lowest yet in data going back to 1967.
• The October jobs report fell for a tenth-straight month, showing larger-than-expected job losses and the highest unemployment rate since 1994. Nonfarm payroll employment in October plummeted another 240,000, following a revised drop of 284,000 in September and a revised decrease of 127,000 in August. The For the year-to-date, the economy has lost 1.2 million jobs net.

• Federal Reserve lowered interest rates this week by ½% to 1% for the federal funds rate and 1.25% for the discount rate.
• Consumer Confidence is at it’s lowest level, ever! Or at least since they began tracking this number 40 years ago.
• So far this year we have had 17 bank failures.
• Chicago Purchasing Manager’s Index came in with a steep drop, from 56.7 in September to 37.8 in October. Readings below 50 point to slowing output, reduced orders, which point to reduced consumer spending and demand.
• Both the 3 month and overnight LIBOR rates have dropped. There is a great article….Uncovering the mysteries of the LIBOR, for those interested in further reading.

Be on the look out for the advance retail sales report due out end of next week.

As I’ve said before, I think many things need to happen for both the economy and the real estate market to turn around, but key elements include shoring up the unemployment situation as well as our credit markets. How quickly this will happen as well as cleaning up our mortgage situation will determine how fast we come out of the current quagmire.

As far as the Burbank and San Fernando Valley real estate market, we'll have to see how the local economy fares. We’re still not out of the woods with respect to unemployment and the recessionary back drop. How bank lending reacts to the current financial upheaval will prove to be a pivotal factor in our recovery as well as foreclosure bailout proposals being discussed by congressional leaders.

Burbank Real Estate Monthly Activity Report: 10-2008

Property Type: Residential

The columns for New, Under Contract, and Sold represent the number of listings that went into those statuses during the month. These are updated on the 1st and 15th of each month for the preceding month.

Month to month average sale price from September to October 2008 is up $, year over year, average sale prices are down by $ or %.

Average days on market, year over year are days.

Average square footage is % year over year.

Most notably number of sold properties is down 34% from September 2008 and down 22% from October 2007.

• According to the San Fernando Valley Economic Research Center, foreclosures soared 203 percent from July through September compared to a year earlier. 2,589 local families lost their homes in the market collapse.

• There were 854 foreclosures in the comparable period in 2007.

• The glut of homes on the market pushed down the median price, to $400,000 in September from $620,000 a year ago, down 35.5%. The price fell $21,000 from August levels.

• The median price of an existing, single-family detached home in California during September 2008 was $316,480, a 40.9 percent decrease from the revised $535,760 median for September 2007.

• Statewide, days on market and inventory on hand is down. We are currently at a 6.5 month inventory for California.

• The new home sales report for September points to the possibility that the sector has bottomed. New home sales came in at a better-than-expected annual rate of 464,000, up 2.7 percent on the month. The 464,000 rate is the first back-to-back below 500 rate since the '91 recession. Supplies are coming down and are at 10.4 months, down from 11.4 months in August. The median price, of $218,400, is the lowest in four years.

• Impressive reductions this last month in the foreclosure arena! For the San Fernando Valley, in the $200k-$400k segment (yes, there is plenty of housing out there in the neighborhood of $200k), I saw reductions ranging from several thousand to one hundred thousand dollars! This points to the fact that the banks are wanting to clear out some inventory, maybe some year end house cleaning? At any rate many homes have gone into multiple offer situations as buyers are out in full force.

• A couple of things are clear, many people have lost confidence in the financial system and this is not just a U.S. problem as the aftermath of this financial crisis is being felt around the world.

• Federal Reserve Chairman Ben Bernanke brokered the broadest coordinated interest rate cut in history, among all of the central banks. Yesterday, the Fed, the European Central Bank, the Bank of England, Bank of Canada and Sweden's Riksbank reduced their benchmark rates by half a percentage point. The Bank of Japan and Switzerland also supported the action and China's central bank cut it's key rate by .27 percentage point.

• The stock market has reacted sharply to economic and credit data this week and ended today at 8579, down 679 points on the day. We have not seen these levels since 2003.

• The giant safety net that the Fed and Treasury have initiated has helped to keep the financial system afloat, but it has not restored confidence nor has it enabled US banks to start lending to each other again. Banks in Europe, as evidenced by the extremely high Libor rate, remain on the defensive and continue to hold on to cash. The Libor rate is at it's highest level this year.

Why should you care about the Libor rate?

Some business loans and many adjustable rate mortgages in the US are tied to the Libor rate, the rise will probably put added stresses on consumers and could offset some of the easing by the Fed over the past year if the rate stays high. Questions to ponder:

• Currently the nominal value of all delinquent US mortgages, as of the 2nd quarter, was put at $680 billion by High Frequency Economics. If this number is accurate, will the $700 billion bailout or rescue plan do enough to alleviate this problem. Additionally there is enough anecdotal evidence to suggest that this number will be rising over the next year. If you look at the reaction of the stock market this week, the answer to that question may be negative.

• It's clear we're in a recession, the big question is how long will we stay there and how long will it take the credit markets to unfreeze?

I think many things need to happen for the economy to turn around, but key elements include shoring up the unemployment situation as well as our credit markets. How quickly this will happen as well as cleaning up our mortgage situation will determine how fast we come out of the current quagmire.

As far as the local real estate market, we'll have to see how the local economy is impacted by unemployment and the current credit squeeze as well as the number of foreclosures coming online over the next few months.

Burbank Closed Sales for September 2008

Month to month average sale price from August to September 2008 is down $14,258, year over year, average sale prices are down by $127,253 or 19%.

Average days on market, year over year are up 23 days.

Average square footage is down by 8% year over year.

Most notably number of sold properties is down 34% from August 2008 and down 22% from September 2007.

These numbers are reflecting several factors……

• More foreclosures have been coming online, loans are hard to come by in the current credit environment.

• Mortgage applications have been down, despite lower rates, but mainly due the seizing up of the credit markets.

It's clear that the optimism from last Friday has quickly given way to a no confidence vote for Treasury Secretary Paulson's plan.

Today's highlights:

• The Dow was down by 372.75 points but the big story is gold rising by $40 and oil rising by $15 per barrel to close at $120.
• Morgan Stanley has received approval to become a bank holding company and talks between them and Wachovia are on hold.
• Goldman Sachs received approval to become a bank holding company.

Giving Goldman and Morgan bank status basically allows them access to money through deposits, which would help manitain their liquidity needs.

Secretary Paulson and Fed Chairman Bernanke will be testifying before the Senate Banking Committee tomorrow. Here are some details of the plan for the plan, as I know it:

• Secretary Paulson is asking for $700 billion
  
• Original plan was to purchase non performing mortgage securities, but that appears to have changed to any type of non performing asset. It's unclear how they would determine if the price that they are paying for these assets is fair. In theory the banks would submit the assets with a price, but this approach leads to many more questions.
• Foreign banks can also participate, if they have U.S. operations......ummmmm.
• Increases the debt ceiling to $11.3 trillion dollars since we'll have to issue debt to pay for all of this.
• The infrastructure for this plan has not been outlined.
• No real plan to help main street, just wall street.

It's clear the markets are not happy with this plan and there are worries about the impacts to our financial system. More details will have to surface and hopefully Congress will not approve a hastily conceived plan without thought to the longer term impacts. More to come as details unfold.

Existing home sales and new home sales are due out later this week.

Living in Southern California for over 35 years has made me somewhat complacent about earthquakes, but I know first hand how devastating they can be and at the very least I keep a good supply of bottled water in the house, just in case. But I know I need to do more.

Just as most people, I get busy with other projects, work, family and at the end of the day, feel unprepared for a catastrophic event.

On November 13th, 10am, the the Great Southern California ShakeOut will take place. This drill, quite possibly the largest earthquake preparedness exercise in U.S. history, includes businesses, hospitals,schools, non-profits, neighborhood councils, basically anyone who would like to participate.

The main purpose is to create awareness and to see how our resources would fare in responding to a magnitude 7.8 quake. If you remember the Northridge quake you saw the devastation and the damage a magnitude 6.7 earthquake can inflict.

They say there is a 67% chance that the Los Angeles area will have a magnitude 6.7 quake, or larger, in the next 30 years. Those percentages should be a wake up call for the many who are unprepared.

If you would like to stock up on emergency supplies, check out SOS Survival Products.