Burbank Real Estate Agent Ana Connell

• The Federal Reserve left rates unchanged today, at 2% for the key benchmark, a surprise to some, but while they noted that the financial markets are under more strain with the credit crisis,they cited labor worries and inflation as their top concerns.  Providing liquidity for the markets is high on their list as well.
  

• Mortgage rates are averaging 5.93% for a 30 year loan.

•  Despite the talk that the government would not intervene  AIG was offered an $85 billion loan from the US government in return for an 80% stake in the company.

What does all this mean for real estate in the San Fernando Valley and Burbank?

For now we have lower mortgage rates but very tight lending standards which means that buyers will have to work harder in order to qualify for a loan and put more money down.

In the long run we need for the financial markets to finish the clean up process in order to help stabilize our housing markets.  Look for more foreclosures to come online over the next year and hopefully a return to a more normal housing market after next year.

Here are some numbers to consider:

In August of 2005 there were a total of 80 homes/condos sold with an average of 24 days on market for an average price of $636,630.

In August of 2008 there were a total of 60 homes/condos sold with an average of 60 days on market for an average price os $555,118. 

There are several things reflected in these numbers:

• Longer days on market
• More homes are selling in the lower price ranges
• Overall prices are down, but not as much as the average would seem to suggest

• Former Federal Reserve Chairman Alan Greenspan, who served as Fed Chairman for 18 years, said this financial crisis will probably lead to the failure of more firms. He went on to say, in his interview with George Stephanopoulos, that this is the worst financial crisis he’s ever seen.

• Treasury and Federal Reserve officials are working on brokering a sale of Lehman Brothers Holdings Inc., the 158-year-old investment bank that reported a third-quarter loss of $3.9 billion.

Given that the Fed acquired a $29 billion portfolio of mortgage-backed debt from Bear Stearns Cos. earlier this year, they are now trying to avoid using any government funds to rescue Lehman.

• Crude oil fell to a six-month low in New York, crude oil for October delivery fell $2.10, or 2.1 percent, to $99.08 a barrel oil has fallen 33 percent from a record $147.27 a barrel in July.

Thanks to falling oil prices and the resulting impact on consumer prices, Bernanke may not have to raise rates just yet, an interest rate hike had been rumored before oil started to come down and Fannie and Freddie were taken over.

As far as the Burbank and San Fernando Valley real estate market, we’re not out of the woods yet. The good news is that lower mortgage rates will continue to help buyers get into homes. We have yet to see the impact of the housing legislation passed in May, which is estimated will help about 500,000 homeowners facing foreclosure. Prices have edged up in some areas and days on market have stabilized or gone down, from last month, which in part, indicates that homes are being priced more reasonably. Some areas continue to be hard hit from the number of foreclosed properties coming up for sale.

Economic releases to keep your eye on for next week:

• Industrial Production
• Housing Starts
• Consumer Price Index

Search for Burbank real estate here!

Every few years the State of California mandates that cities provide a policy document that outlines programs that both promote the development of affordable housing and reduce any constraints to the development of added housing. Individual cities that do not comply and complete this document risk losing funding for many future projects.

The draft of the General Plan Housing Element Update Project No. 07-0005885 GPA became available in February and City of Burbank has been holding public meetings to discuss the various elements of this plan and any mitigations that may be required.

On Monday, September 22, 2008 at 6pm the City of Burbank Planning Board will be holding a public hearing on the General Plan Housing Update and the proposed Negative Declaration. The meeting will be held at the City Council Chambers, Burbank City Hall, 275 East Olive Avenue.

In case you are wondering....a negative declaration is a document that basically says that after the completion of a proposed project there will not be any significant negative effects on the environment.

I highly encourage interested Burbank residents to attend this meeting as this will be your opportunity to explore positive changes as well as voice any concerns and ask questions as to how this plan might affect Burbank real estate and/or quality of life.

Month to month average sale price is up $30,186, year over year, average sale prices are down by $104,851 or 15.8%.

Average days on market, year over year are down 3 days.

Number of sales is up almost 10%.

These numbers are reflecting several factors……

• Year over year, you have more short sales and REO or bank owned properties on the market.

• For comparable properties the bank owned properties tend to be priced lower than the short sales or regular sales reflecting the fact that the bank owned properties need more repairs.

• Sales are up because prices are becoming more affordable and buyers are seeing good deals.

Mortgage applications have been up this week due to lower mortgage rates resulting from the Fannie Mae and Freddie Mac takeover.

Yesterday I wrote a post outlining some details of the Federal Housing Finance Agency's takeover of Fannie Mae and Freddie Mac.

Today I want to expand on that post and bring up some other discussion points.

First, let's be clear that the failure of these two entities represents the #1 and #2 largest financial institution failures in history. As such we should be aware that the impact will not be minimal, in fact I think we'll be feeling the pain for years. While the markets reacted favorably to the takeover, the exuberance will be short lived as the reality of the state of the mortgage industry sets in.

Let's start with the portfolio limits that will be imposed on these companies. They shall not exceed $850 billion as of Dec. 31, 2009, and shall decline by 10 percent per year until the portfolio reaches $250 billion.......given that Fannie's portfolio was $758 billion at the end of July, and Freddie's was $798 billion, that's a HUGE reduction.

Additionally it was announced that lending standards will remain tight and remember that the new FHA loan limits that went into effect on March 6, 2008 will expire on 12-31-08.

Former Federal Reserve Bank of St. Louis President William Poole stated that the government is aiming ``to prevent the mortgage market from falling apart,''. It is believed that the Treasury's funds will be needed for a long time, in order to clean up this debacle.

What this says to me is that by 2010 obtaining a conventional loan may become more difficult and that the overall housing market will feel the pain as loans may not only get harder to obtain, but down payment requirements will probably increase.

While interest rates are expected to drop in the short term, some are expecting the Federal Reserve to start raising interest rates in the not too distant future in order to support the dollar.

For those home buyers sitting on the sidelines, loan and interest rate considerations should be right up there with the pricing of the house. For all tax payers, we should be paying attention to both national and local politicians and their voting records on issues that directly impact how these companies operated both in the past and how they will operate in the future.