26. October 2007 by Burbank Real Estate.

Stocks rallied today with Microsoft’s blowout earnings announcement, their fiscal first quarter earnings beat expectations by more than $1 billion and Countrywide’s upbeat profit forecast for the future.

Overall, it was another turbulent week with rumors swinging the market every which way. Rumors that the Fed will lower interest rates again when they meet next week, that AIG will have a very large write down etc.

Items of note for the week:

Merrill Lynch wrote down a whopping $7.9 billion of subprime and collateralized debt obligations, this was $3.4 billion dollars ABOVE their October 5th estimate! They reported a $2.24 billion dollar loss as compared to last year’s $3.05 billion dollar profit. Needless to say, the subprime debacle continues to spread.

New Homes Sales, which were expected to come in at 770k(representing a 3.1% decline from August)came in at this number but the headline read it as a 4.8% increase as the August number, which was originally reported as 795k was revised to 735k. Confusing? A little but the revision made the September number look great, even though it came in as expected…….assuming no revisions.

Existing Homes Sales fell 8% to an annualized 5.04M. This is the slowest pace since the National Association of Realtors started reporting on this figure in 1999! The year to year decline is at 19.1%.

Housing Inventories for September were at a 10.5 month supply, the highest level since 1999.

Median price of a home fell to $211,700The number was not much of a surprise, but keep in mind that this number only accounts for closings, not sales so you can probably expect next month’s number to look even worse.

Countrywide posted a third quarter net loss, as expected, at $1.2 billion or $2.85 per share and maintained it’s dividend.

Jobless Claims came in at 331k representing a second straight week of higher claim numbers.

Oil closed the week at a record high of $91.86

On the mortgage side, the 2-year note is 3.81%, the 5-year at 4.04%, and the 10-year ended at 4.45%. The fact that treasury yields are staying low tells us that investor dollars are still going towards quality.

Anticipation of a Fed rate cut next week will dominate next week’s trading. Although with the dollar getting pounded, oil at record highs and more liquidity in the markets, the case for a rate hike is becoming less viable. Some were anticipating a 50 basis point cut, but I think either a Fed on the sidelines or a 25 basis point cut are more likely.

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26. October 2007 by Burbank Real Estate.

Existing Home Sales (September) 5.05M -8%, compared to the 5.48M revised number for August, sales are 19.1% below the 6.23M pace in September 2006

Pending Homes Sales Index (August) 85.5 -6.5%

New Home Sales Index (August) The September numbers, which were expected to come in at 770k(representing a 3.1% decline from August)came in at this number. The headlines reported it as a 4.8% increase oly because the August number, which was originally reported as 795k was revised to 735k. Yes, just a bit confusing!

Basically the number came in as expected but because the August numbers were revised downward, the September number looked better than it actually was.

Housing Starts (September) 1191m -10.2%, year to year they are down 30.8%

Housing Affordability (August) 106.1 up 2.4%

Housing Supplies Inventory is at 10.5 month supply which is the largest since 1999.

Nationally existing home prices dropped 4.2%, the median price is at $211,700.

Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed.

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26. October 2007 by Burbank Real Estate.

This is the first post in a series that looks at the current and past real estate market cycles.

The current cycle is starting to look somewhat like a 12 step program:

Step 1-Awareness of the subprime problem in late 2006

Step 2-Credit markets froze in July of 2007, which forced the Federal Reserve to step in.

Step 3-Losses start to hit at Citibank, Bank of America, Merrill Lynch and many others.

Step 4-Yet to come, but could be worst of it, accentuated by job losses, lower retail sales and housing foreclosures.

Step 5-12 Recovery?

Steps 4 and 5-12 are based on some speculation, but I think these might be close to the mark, at least at a national level. Keep in mind that local real estate markets will always behave somewhat differently depending on their demographics, local economies, availability and affordability of homes, just to name a few important factors.

In looking back at this last cycle it’s apparent that “easy” money, questionable loan practices, a friendly interest rate environment, little oversight and finally greed were the main culprits. This set of ingredients helped fuel the feeding frenzy for housing, not just by folks who should not have been buying from an affordability perspective, but also the many investors who took advantage of these circumstances in order to “flip” properties.

What we need to remember is that real estate is a cyclical industry and in hindsight I think we should have viewed the “flipping” craze that came at warp speed as a sign of the market top. The amount of zero down, no doc loans might have been a sign as well! Before my entry into real estate I had a 15 year career in the stock market arena, and I learned that you never try to time the market and that many businesses and industries are cyclical. Because real estate is not a liquid asset you won’t see the day to day gyrations of the stock market, but you will experience the cyclic nature if you own your home long enough.

So if you are in it for the long haul and are looking to buy your family’s “home” this could turn out to be the optimum time to buy in the coming months. We only see the recovery as we look back in hindsight, but keep in mind that, as a buyer, you have the following factors in your court:

• Historically low interest rates.

• Discounted housing prices, steep discounts in some areas.

• Inventories are at a 10.5 month supply level, which is the highest since 1999!

• Sellers are more open to negotiation if you are the only one at the table with them.

Remember that when things pick up there will be a whole lot of buyers jumping in with you. At the very least, make sure your financial house is in order and that you are talking to both a mortgage and real estate professional to help you make the right decision for your circumstances.

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