Lenders Roundtable

On Tuesday, May 8th, we held our Lenders Roundtable. Thanks to all who came. It was very informative.

Greg Matthews of American Home Mortgage, gave us the low down on conventional loans.

Melinda Rogers of Bof A told us about about the ACORN program.

Last but not least, Randi DeHollander of Vintage Lending gave us the low down on First Time Buyer assistance programs, and in particular the Cal HFA program.

It was a good opportunity for new buyers to ask questions and find out what is or is not possible in the world of lending.

We have the handouts from the event and if you want a copy just drop us an email at info@eastbaydigs.com and we can get that to you.

Long Time No Blog

Hi Real Estate Lovers

Its been a while since I've updated this Blog.

I did want to let you know that we will be hosting a LENDERS ROUNDTABLE on May 8th in Alameda. We have three great lending professionals who will present briefly and then take questions. Randi Dehollender from Vintage Mortgage is making the trek from Livermore and we are excited to have her join us. She is an expert on programs for first time buyers and can answer all your questions about jumping into home ownership.

You can get the details on our website at www.eastbaydigs.com. Just give me a call to register for the event so we can have enough food ready. Yup, we like to feed our East Bay Digs friends. 510.764.4921 is the number to call.

First Time Homebuyers Assistance Programs

There are loan programs available for first time homebuyers that can enable you to purchase a home for little to no money down. They offer fixed low interest rates and the loans range from a down payment credit for residing in a high cost of living area, to offering a percentage of the purchase price to use towards down payment or closing costs, to a below market interest rate for teachers in eligible school districts.

CalHFA interest only 'Plus' offers up to 100% financing and allows borrowers to pay only the interest on the first five years of a 35-year term. After that, borrowers pay principal and interest at the same low fixed interest rate for the next 30 years. CalHFA also offers 30 and 40 year fixed mortgages with up to 100% financing and below market fixed interest rates. These programs were developed in response to the ARM loans that populated the mortgage lending climate in the last several years.

These types of loans require a minimum 620 credit score plus 3 years of tax returns as well as pay stubs, in order to process and qualify for them. You can also "layer' many of these loans, meaning you don't necessarily have to use just one, you might be eligible for many different loan options. Your mortgage broker can help you determine which ones are right for you.

New Buyers

February saw a peak in new mortgage applications. So while we are reading about the bad state of the rela estate market there is a new group of buyers getting ready to jump in.

Mortgage applications surge as rates fall; Mortgage Bankers Association's weekly index shows that interest rates edged downward to lowest level since early December.

Alameda is seeming some crazy overbidding. A 3/1.5 listing on Gibbons Street brought multiple offers and a final sale price of $850,000. Other deals are in process so we can't publish prices, but multiple counter ooffers and selling prices way above asking are being seen again after a very quiet year. No one can tell if this is anectodal or the beginning of a very busy spring season. But then again Alameda is suffering from inventory shortage. In parts of Oakland and Berkeley things are at a standstill. Towns like San Leandro have plenty of properties on the market keeping prices at a standstill.

What Kind Of Market Are We In?

Sellers market, buyers market, normalizing market, stabilized market... where are we now? Well, it depends on who you ask, for there are many differing opinions rattling around out there, a true indication that things are definitely changing in the marketplace.

The real estate market is regarded as an "imperfect" market, because home prices vary astronomically at times according to many factors such as location, improvements, school districts, size, style and many others. The values of these homes are determined by both buyers and sellers... by what the buyer is willing to spend on a specific property as well as what a seller is willing to accept.

In Alameda, as well as other cities around the East Bay, we are seeing that, if a home is priced below market value, interest is increased, thus creating a buzz surrounding the property and ultimately culminating in multiple offers on the home. Quite reminiscent of the bidding wars of the last few years, however, different in that the bidding now is starting at a lower price. Inventory is low, which means that buyers are still having to compete for well-priced properties, therefore it can't really be referred to as a buyers market. And we aren't seeing the price point peaks that we were seeing a couple of years ago, when buyers were forced to forgo contingencies and inspections with their high priced offers. So, a sellers market it definitely isn't. So what is it? I think it is a normalizing market. Sellers are still on occasion getting top dollar for their property, but oftentimes buyers are holding the cards.

Inventory is not high enough for there to be a glut of homes where buyers can just take their pick, but if they play their hands right, buyers can walk away with exactly what they are wanting. And at a price that is, by the Bay Area benchmark - and the rest of the country notwithstanding - reasonable.

Investigate Your Potential Home Using All Five Senses

The title says it. You can use each of your sensory organs to scope out potential problems and identify things you like about each property that interests you in order to determine whether or not it will be the right fit.

• Sight –Look around the home fully. Notice any cracks in the ceiling, walls or foundation. See if there are any other defects that might lead to further problems down the road or if they might only need some cosmetic work. Take note of what you like about the quality of the floors, the size of the rooms and the details of the home such as crown molding, wainscoting, tile, paint color and floorplan.

• Hearing – Listen to the sounds of the home. If it is windy outside, do you hear the wind coming in through any of the windows? Is the home near a BART station where you can hear the train as it passes? Can you hear any traffic noise going by? What about loud neighbors or fast cars driving with their windows rolled down and music blaring? You might need to hang around for a while in order to fully investigate this, but it is something to think about if you are considering living there for several years.

• Smell – Use your nose to sniff out any potential problems such as stained carpet padding from pet urine or smoke soaked wallpaper from in-home smokers. If these are problems, you can likely negotiate with the seller to either make the necessary repairs or issue you a credit to have them done.

• Touch – Feel the materials throughout the home. The siding on the home may look like wood, but feel it to find out. It could be vinyl. Touch the countertops, do they have a nice smooth finish or are they cut and cracked? Take notice of the floors underneath you. Do they slope? If they do, you can feel it with your feet.

• Taste – Okay, this one is more elusive, but it can apply here using it in a different, more esoteric way. You know the expression “it left a bad taste in my mouth”? This is how you can utilize taste to investigate your future home, in the sense of instinct rather than literally tasting (I certainly don’t advise you to go around licking surfaces). How does the home feel to you? Does the energy strike a cord with you or do you feel turned off by it in general? Are there certain rooms that make you happy? Do others depress you? Pay attention to your intuition regarding the home. Your gut reaction to most things are almost always right.

Using all of your given faculties will help you to make an informed decision during the investigation process. If you happen to be lacking in any of these senses, no worries! As you know, the rest of your senses will take over for the one that’s missing. Happy hunting!

Sewer Lateral Inspections

Many cities have requirements for inspecting a home's sewer lateral at the time of a sale. The sewer lateral is the sewer line that runs from the house to the street. In some cases the sewer lateral runs from the back of the house or is connected to neighboring homes. The purpose of the sewer lateral inspection is to assure that raw sewage is not leaking into the ground under or around your home.

The city of Berkeley has a relatively new compliance policy. The policy is well defined and extremely important to understand if own or plan to own property in Berkeley. You can find out all the information about the policy at their website: http://www.ci.berkeley.ca.us/pw/sewers/pvtlat.html

Lead Safety

There are many things owners of older homes should know about their homes. One of them is the potential for lead in the home. Lead was an ingredient in paint used in homes, until is was removed in 1978. So homes built before 1978 (which is most of the homes in the East Bay) have the potential for lead exposure to occupants.

Lead is extremely dangerous for children and pregnant women. Lead poisoning is completely preventable and screening is available. We can test people AND homes. Yes, you can have your home tested for lead so you know where it is and how to deal with it.

The county of Alameda has a Lead Poisoning Prevention Program. They provide free in-home consultations and can provide free lead testing kits. Contact them at 510-567-8280 or check out their website at: http://www.aclppp.org

Jack London Square Tour Report

We had a wonderful day in Jack London Square for the guided home tour last Sunday. The rain held off and we were able to do most of the tour on foot. We saw 9 properties during our 2-hour tour. The properties ranged in size from a 1 bedroom condo with 889 square feet to a 3 bedroom condo with 2019 square feet. List prices ranged from $470K to $749K. We were very fortunate to find properties available in 4 different buildings ranging in size from 10 to 224 units. We visited The Sierra at Jack London Square, Pocket Lofts, Tower Lofts and New Market Lofts.

During our tour we talked about the important features of condominiums and how they are different from detached homes. We also talked about the Jack London Square neighborhood; who lives there, crime & security issues, living in a converted industrial building, train and highway noise, night life, restaurants, etc.

Please join us for future events and invite your friends. There is a lot to know about purchasing real estate and these events are designed to familiarize novice buyers with many aspects of the buying process.

What Do I Think of Zillow?

I was asked that question recently at a novice homebuyer's seminar. I gave a rather luke-warm answer, because I really only had my anecdotal experience to pull from. I know that they get their information from county records and that they use information about recently sold property to update that information. I know that Zestimates can sometimes be pretty accurate and sometimes pretty inaccurate.

Well today I came across an article by James R. Hagerty in the Wall Street Journal Online. The Wall Street Journal did an analysis of 1000 Zestimates for homes in 7 states and found out what I already knew from experience. But the interesting thing is that they have hard data. Granted they only sampled 1000 homes, but given their results are similar to my expectations confirms that my gut sense is correct. Zillow was pretty darn close for about 1/3 of the estimates. The rest of the estimates were pretty equally split between those that were too high and too low. 11% of the time it was off more than 25%. Zillow was off more than 50% for 34 of the 1000 transactions reviewed.

There are a number of reasons for this. First, the Zestimator never visits the property. Zillow does not know if the home has been extensively remodeled or recently burned to the ground. Zillow does best in neighborhoods where all the homes are substantially the same and there are a number of recent home sales to support their estimates. In neighborhoods were there is a great variation in the style or size of homes or in rural areas, Zillow is less likely to be accurate.

Zillow is the first to say that their Zestimates are a starting point. I like to use Zestimates to look at property in other states or communities where I am unfamiliar with neighborhoods or property values. It gives me a clue about whether I'm looking in the right place or barking up the wrong tree.

For any tool to perform well you have to know what it is good for and how to use it. It is the same with Zillow. Proceed with caution and have fun!

Decisions, decisions

If you are a first time homebuyer, you might be trying to decide between a house or a condo for your first big purchase. Before you decide, you should consider your lifestyle and weigh the pros and cons of each type of property very carefully.

In terms of lifestyle, are you single and looking to get into the real estate game and begin building equity? Or are you a couple just starting out and ready to make the jump from renting to owning? Or do you have a spouse, 3 kids, 2 hamsters and and a dog? What about the idea of having a pool that you don't have to personally maintain to lounge around on summer weekends? Or would you prefer a yard of your own where you can grow plants and veggies of your choosing and where you can host an intimate gathering of friends for a barbecue? The way you like to live is important when deciding where you want to live, so after you have answered questions such as these you can deliberate the pros and cons of condos and houses.

Condos- Pros
* Condos have easy upkeep, free of yard work and home maintenance responsibilities.
* They are usually centrally located, oftentimes in the heart of the city, so if you are an urban dweller, a condo could be a perfect location for you
* Condos often have amenities that single family homes don't always have, such as swimming pools, hot tubs, exercise facilities and gated communities

Cons-
* Condos have monthly fees, called HOA dues which can be costly when added onto the mortgage
* Within the Home Owners Association (HOA)is shared decision making which means you will have to go through the condo board to make any changes on the interior of your unit

Houses- Pros
* Houses are family friendly, with their own yards for the pets to roam and the kids to play, plus garages and basements for storage. And there are no shared walls or ceilings or floors, so it's okay if Jenny jumps rope on the hardwood floors in the living room at 10pm on a Tuesday.
* Houses generally have more living space than a condo. Kids and grownups alike need extra space. Determine how much you will need or if you will work from home or have a hobby that requires more space.

Cons-
* When you own your own home you are responsible for all of the maintenance. Any improvements you make, however, will probably pay off in the long run in the form of higher resale value.
* Higher costs are usually associated with a single family residence. These include unforeseen maintenance costs, higher heating/cooling costs, cost for furniture to fill the rooms, yard maintenance costs as well as the mortgage itself.

Whether you buy a house of a condo, you should think about the neighborhood and where it is currently as well as where it is heading. The investment you make could hinge on this one factor, so consider wisely.

On Being a First Time Buyer in 2007

If you're finding its hard to make that jump into the real estate market---you are not alone.

The share of first-time home buyers dropped from 30.5 percent in 2005 to 27.1 percent in 2006 in California, according to a real estate market report released today by the California Association of Realtors (CAR); The State of the California Housing Market.

Getting finances in order so first time buyers can jump in has become harder and the measures buyers must go to have grpwn. The report found that the share of buyers who used a second mortgage rose from 38 percent in 2005 to 43 percent in 2006, which is the highest percentage since 1982. And the share of home buyers with zero down payments increased from 4.5 percent in 2000 to 21.1 percent in 2006, the Realtor group reported.

Leslie Appleton-Young, vice president and chief economist for the C.A.R, said in a statement that two out of five first-time buyers made a zero down payment on their home purchase, while one in 10 repeat buyers purchased their home with no down payment.

The C.A.R survey also found that the share of buyers who used a second mortgage climbed from 38 percent in 2005 to 43 percent in 2006 -- more than triple the percentage since 2001, and the highest percentage since 1982.

Home sales in the San Francisco Bay Area fell at a slightly lower rate than for the state as a whole, the association reported. After peaking in 2004, Bay Area sales declined 10 percent in 2005 and declined another 19 percent in 2006.

The median price in the Bay Area -- the highest of any region in the state -- continued to increase by small single-digit increments throughout 2006, "in part because of inventories that were well below the statewide levels," according to the report.

Kindergarten Khaos

Sunday night was an interesting night in Alameda. More than 60 people lined up outside of Edison Elementary, a consistently high ranking school on the east end of the island, in order to get their children into kindergarten. The school sent out more than 100 packets to families of future kindergarteners even though they don't have enough space to accommodate all of them. There was a succession of phone calls on the east side Sunday evening, as parents got wind of the fact that their mere presence in the district wasn't enough to guarantee their kids a slot. By 9:00 pm, parents were converging in front of the Edison office with their sleeping bags, ready to camp out. Edison's principle, Marcheta Williams, told KTVU and Kron4, both of whom sent reporters to the school, that it wasn't "an audition for American Idol, this is kindergarten".

Parents were upset that the district hasn't made a plan to accommodate their children in the zones that they live. They also expressed irritation at the fact that there is no "sibling priority" at any of the schools in the district, meaning that it is likely that some siblings will be split between schools. At the "coffee with the superintendent", Ardella Dailey last week, it was a topic of discussion. When questioned about the lack of sibling priority, Dailey simply implied that there is no priority and there are no plans to implement it.

AUSD also held the second of three meetings last night to discuss cutting $2 million dollars from the school district's funding by closing Wood Middle school, increasing class sizes for 9th graders, eliminating some high school counselors and reducing support for athletic programs.

Our schools are already in crisis. The more cuts that are made, the more parents are going to pull their kids out of public school and put them in private, further decreasing funding. AUSD already receives much less per student than other Alameda county schools. What will it take to turn this around? It's time for us to rally for our kids and change this cycle. It really can't continue on like this.

Lender Fraud

I've been hearing a lot lately about lender fraud. The industry is really scrutinizing loans to assure there is no fraud. I've been looking into what constitutes fraud and wanted to share with you what I've found.

The most common way that fraud occurs in home purchases is when monies are held back from the sale and given to the buyer or some other party.

It is not uncommon for money to be set aside from the seller's proceeds for some cost associated with the purchase. This is often referred to as a seller credit for non-recurring closing costs. In this case, it is perfectly legal for the seller to pay for some of the buyer's closing costs . These would be costs such as title insurance, appraisal fees, notary fees, etc.

The majority of problems that have been occurring have had to do with a buyer offering to purchase a property at well over the actual value of the property, then asking the seller to credit back a large chunk of money to the buyer or some other person at or after closing. This arrangement is often made through an addendum to the contract and involves more than one person actively attempting to deceive the lender.

So what should you do??? The age old advice still holds true, if you think the deal smells funny it is because there is something rotten in there. First, make sure all agreements are in writing. Next, make sure the lender receives all the addendums to the contract. The lender must be informed of all the financial agreements related to the sale of the property. Next, ask your real estate agent for advice. If the agent is unsure how to proceed, speak with the agent's broker about your concern. If you are still concerned, consult a real estate attorney.

Alameda Point Redevelopment

Alameda City invited the four developers working on a master plan for the naval base to present to the community tonight. Three plans were pretty similar, and the fourth was an intriguing Green Alameda Village concept including a UC San Francisco research center for environmental issues and Global Warming, and an ultra light rail system. In any case all four plans are proposing hundreds of residential units on the old naval base.

The plans would take years to come to fruition as the planning would take two years from the time the city chose a developer with whom to work. No one knows how long after final planning building would start.

One of the developers, SunCal, is also the developer for Oak Knoll in Oakalnd. that project , also a reclimation from the navy, is further along. They don't know yet when that project will begin construction. probably a couple of years out, but it will have the required 25% of low and moderate income housing.

Home Buying Resources At Your Fingertips

There are many experiences that we embark upon for the very first time. First interview. First job. First car. First baby. First home. Inevitably, we come to realize that merely putting these ‘firsts’ in the hands of fate is not how we ultimately want to operate.

Either we do our research, formulate a plan and then execute it to the best of our knowledge and ability, or we rely on the expertise of a professional.
The same can be said about purchasing our first home. There is just too much risk involved in buying a home to not uncover every stone and investigate all avenues before beginning the process.

Fortunately in the undertaking of home buying, we can have it both ways. We can do as much individual research as we like on the Internet AND we can rely on the guidance of a professional Realtor. While the Internet is a veritable smorgasbord of information on buying a home, there is nothing that will match the pool of knowledge and information that your Realtor has access to The combination of these systems will serve to empower your confidence and develop your understanding of the home buying process.

Let’s start with the basics.
Get a copy of your credit report. Go over it well and make sure there are no mistakes. And if there are, you’ll need to rectify them before applying for any type of financing. For information on how to obtain a copy of your report go to www.equifax.com.

Go over your finances and set a budget. Pay off minor debts and do not incur any new ones while going through this period. Develop a household budget and determine the maximum dollar amount that you feel you can afford, and feel comfortable, to put towards a mortgage each month.

Get familiar with types of mortgages. Investigate the different loan types that are available. You can go to most bank websites to view a checklist of the mortgages available from them. They usually outline it in simple, easy to understand terms. www.wachovia.com. Don’t know what amortization means or if you will need an adjustable rate or a balloon mortgage? For definitions of all the elusive real estate financial terms, see www.realestatewords.com.

Become familiar with your local market. It’s important to have a handle on the market because knowing its activity will better prepare you for what to expect in pricing. Your local Realtor is the best source. A good section on local market conditions can also be seen at http://realtytimes.com/.

Search for homes in your area. Again, your Realtor is your best resource. Keep in mind that a Realtor has access to an excellent database, the MLS (Multiple Listing Service), which provides very detailed information not included on the realtor.com website. Also www.realtor.com is the premier source for public access online listings.

Take a seminar on home buying. This can be a vital step. A seminar can, in one fell swoop, identify all that has been outlined above in a matter of hours. They are conducted for consumers who are serious about educating themselves to the fullest extent possible on the process and are proactive in their enterprising. The benefit of a seminar is not just the information that is presented but also the fact that the professionals conducting the class can answer your questions. An invaluable service, since your computer can’t tailor its answers to the many questions that you will invariably have while moderating the home-buying process.

Find a Realtor. However you find an agent, it is a good idea to work with one. Realtors provide beneficial services for the consumer, including providing resources on finding available homes in your price range and area while giving objective and extensive information about each property. They help you negotiate contracts and provide advice on as-is purchases, contingencies, home inspections, deposits and a myriad of other components that come up during the contract phase. Your Realtor can also help you with finance options and identifying lenders for you to speak with. Do not underestimate the necessity of a Realtor. You wouldn’t navigate several hundreds of thousands of dollars’ stock market investment without the help of a broker. Don’t unnecessarily sabotage this big financial outlay by trying to wade through the home buying process on your own. For more information on what Realtors do see “Why Use a REALTOR?” at www.realtor.com.

Secure a lender. After all of these steps have been taken, it is time to become pre-approved. This means that based on your credit and finances, you are given a commitment for a loan from a lender. Pre-approval shows sellers that you are capable of receiving financing and informs them that you are serious about purchasing a home. This process also sets a top limit on the price of the home you can afford. Ask your Realtor or a friend for a referral to one or more reputable local mortgage brokers, loan officers or banks. For more information and for help deciding which lending institution is right for you, see “Should I Use a Mortgage Broker?” at www.realtestatejournal.com

So now you have at your fingertips all of the resources available to educate yourself on the home buying process. Using these tools will give you a sense of empowerment over this seemingly slippery subject. If you become overwhelmed, just take some time to digest all of the material, then return to your task with confidence. The goal is to make the most informed decision possible. Remember, “Education is to knowledge as knowledge is to power”. Own your power in this process and you will surely be successful.

Why Are Home Prices Declining

"Real estate normally appreciates one to two percentage points above inflation. Between 2001 and 2005, however, real estate values increased 50 percent, giving sellers an abnormally high return. That drastic increase leveled off in 2006 and prices and sales began to return to more normal rates — although still far above historical norms — resulting in the third best year for real estate sales ever.

Ironically, it was also the first year that national median home prices declined since the NATIONAL ASSOCIATION OF REALTORS® began keeping figures in 1968. "

The rest of the article is at http://realtytimes.com/rtapages/20061215_housedecline.htm

Realty Times had this article. I think its important for first time buyers to see that this is a very small window. Prices will go back to NORMAL increases which historically has been 2% above inflation. Timing the market is difficult but there are good deals out there right now.

Interest Rates Rise Again

Freddie Mac reports the following increases in rates:

15-year fixed mortgages rose to 5.98 percent from 5.96 percent during the week.
Five-year adjustable-rate mortgages nudged up to 6.04 percent from 6.03 percent.
One-year ARMs rose to 5.51 percent from 5.44 percent.

Source: Contra Costa Times (Calif.), Martin Crutsinger (01/19/07)

Benefits of Home Ownership

I find that a rent-buy analysis doesn’t capture the whole picture of why homeownership is so important to building wealth and to producing satisfaction in domains other than financial. I thought I would take a moment and recount a few of the many advantages of home ownership.

Pride of Ownership. A homeowner has a personal stake in the viability, safety and aesthetic of their home, neighborhood and larger community. No one washes a rental car and no one improves a home they are renting.

Personal Autonomy. Owning your home gives you the final say in what color to paint the living room, what additions you to make to your home, and provides you with a stability that is critical to building a family and a community. No one will tell you that you need to move out; you make that decision.

Tax Benefits and Wealth. A homeowner benefits in several ways through the tax code. Mortgage interest and property taxes are deductible on your taxes. Check with your CPA to confirm this for your situation. Also, if you own your primary home for two of the past five years, unmarried persons can realize up to $250,000 on the sale of the house and pay no federal income tax on that gain. Couples can exclude up to $500,000.

Leverage. Typically, when you purchase a home, you will put a down payment and borrow the balance. This allows you to take advantage of appreciation on an asset that is many times larger than your initial investment. It is not uncommon for homeowners to see 50%-100% annual returns on their money invested.

Financial Opportunity. If your home appreciates, there could be opportunities to refinance or use a home equity line to access cash for a number of opportunities including other investments, pay for children's college or to do home improvements to further increase the value of your home. Renters will never have this opportunity.

Interest Rates Projection

While interest rates are still really low we have been seeing the rates creep up.

The rates will effect the ability of first time buyers to jump into the real estate market.

With that in mind I wanted to update the blog to reflect the following from today's Inman News headlines:

"The Mortgage Bankers Association expects the interest rate on a 30-year fixed-rate mortgage to jump from 6.2 percent to 6.5 percent by the end of the third quarter, as investors lose hope that the Federal Reserve will slash short-term rates any time soon."

All in all still a pretty wonderful climate for getting a loan to buy your first property, but that rise in interst would translate into $50 a month on a $200,000 loan, or $10,000 of house bargaining money.

2006 Roundup

2006 was a real turning point in our local market. I pulled together some of the forecasts for 2007 and beyond that might interest first time buyers or owners thinking of buying up to bigger properties this next year.

There are many voices chiming in on what to expect from this step forward. The National Association of Realtors has predicted that things will be looking up from now on, as we have hit the bottom.

An article on the NAR web site says, "After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer, according to the latest NAR forecast. David Lereah, NAR's chief economist, said annual totals for existing-home sales will be comparable between 2006 and 2007. 'Steady improvement in sales will support price appreciation moving forward,' he said."

Inman news reported similar projections. "We're going to hit the trough in the first half of 2007," said Frank Nothaft, chief economist for Freddie Mac and a panelist for the "Housing Outlook: 2007" session. Other panelists included representatives from the California Association of Realtors, Rutgers University and the University of Pennsylvania.

Forcasts need to be localized and for California Inman News reported, "existing-home sales fell about 23 percent to 24 percent in 2006 compared to the prior year, and that is expected to be followed by another 7 percent decline this year, said Leslie Appleton-Young, chief economist for the California Association of Realtors. Overbuilding has left a large inventory of properties on the market in some areas, she said -- there is about a 10-month supply of properties for sale in one region of the state, she said, though she expects excess inventory to be absorbed within about a year."

In the East Bay that may be most relevant in the condo market.

The Wall Street Journal's latest semiannual economic forecasting survey offered an optimistic outlook for 2007. The service sector should keep humming along as the recent weakness in housing and manufacturing abates and the Federal Reserve begins to reduce interest rates. That would allow the economy to expand at a rate fast enough to keep investors happy, but slow enough to keep inflation at bay.

THE WSJ reported that its panel of 60 economists predicted that inflation-adjusted gross domestic product, a broad measure of economic activity, will grow at an annualized rate of 2.3% in the first half of 2007 and 2.8% in the second half. That's up from a sluggish 2% in the third quarter of 2006, but still far below the robust annual growth rates of 3.2% for 2005 and 4.1% for early 2006.

The economists surveyed expect year-to-year inflation to decline to 1.7% in May from 2.0% in November. As a result, they expect the Fed to shift its focus from fighting inflation to helping the economy grow, lowering short-term interest rates to 4.75% by the end of 2007 from the current 5.25%.

That's a big change from six months ago, when forecasters saw the Fed's battle with inflation as the greatest challenge facing the economy. "The Fed was hoping to slow the economy down enough to take the wind out of inflation without triggering a recession," says Nariman Behravesh, chief economist at consulting firm Global Insight in Waltham, Mass. "So far it looks like it has succeeded."

Stay tuned for some very local numbers about house costs in 2006. I'll post them by the end of the weekend.

Sharon

Happy New Year

Our first seminar is scheduled for Janaury 21st. We have eight people registered so far. Pretty exciting as we have barely started to advertise the event.

I've been looking for more information about special lending programs for first time buyers and will have materials at the seminar. As far as specific city programs I will bring Oakland, Berkeley, San Leandro and Alameda contacts for everyone.

Come back to the blog on Monday. I'll have a 2006 market roundup, and links to what some experts and economists are projecting for 2007.

Have a great weekend y'all.

Sharon