Long Beach California Real Estate Loans

Long Beach, Ca.   With all the news about the recent layoffs, there is no holding back by home buyers in the local Long Beach real estate markets if the price on a listing is reasonable.   Inventories for certain areas of REOs on the market have diminished.  The current trend is Short Sale listings.  Remember that there are approximately 50 million mortgages outstanding and a full 10% of them are in default.  That means that one out of every 10 neighbors is probably feeling the stress of the new economy.  There are lots of short sale properties avialable at more affordable prices; but, not not as many agents that understand how the process of getting the property accepted by the lenders. 

Yesterday we had some interesting economic news. The Conference Board's Leading Economic Index rose .3%, which is the first gain in six months. Four of the 10 indicators the report were positive, unfortunately led by a 0.99 percent increase in the money supply adjusted for inflation, which is due to increased lending and purchases of securities by the Federal Reserve to unclog credit markets and ease borrowing costs. We also had Existing Home Sales unexpectedly rise 6.5% in December, mostly attributed to prices being down and a brisk market in foreclosures.

What is weighing our mortgage prices down, and keeping rates relatively high given the current state of the economy, is the supply coming on to the market. On top of the $2-3 billion or so of daily mortgage origination, we have a record $40 billion 2-yr note auction today and a record 5-yr note auction Thursday. There are always worries about who will soak up the supply, and the holiday in Asia tends to add to this consternation. The Fed's meeting today and tomorrow is expected to result in no change to their 0-.25% overnight rates, but analysts will be watching for any change to their language in the post-meeting wrap up. They are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield in order to reduce long-term borrowing costs at a time when the Fed can't lower short-term interest rates any further because they are effectively at zero. Currently, the Ten Year yield is at 2.62% (2.64% yesterday).  30 year fixed rate mortgages are holding flat to rates that closed yesterday.

First Federal of California is the latest lender to close their wholesale channel to brokers. I imagine the following announcement prompted yet another round of rumors and calls to the remaining wholesalers who offer their loans to brokers.

Mortgage giant Fannie Mae is looking to tap government rescue money. Fannie said Monday that it expects to request up to $16 billion from the Treasury Department, marking the first time the federally run mortgage giant will hit the government's taxpayer piggybank. Rival Freddie Mac has already received $13.8 billion from the government and said Friday that it expected to request up to $35 billion more when it reports earnings next month. If Fannie Mae and Freddie Mac both ask for the maximum they've indicated, the price tag for the government takeover of the companies in its first five months would be $64.8 billion. That money is separate from the $700 billion that the government is using to bail out the financial and auto sectors.  How high will this go?

Finally, on the interest rate forecast for the foreseeable future, interest rates are not likely to rise materially any time soon. Recessions are almost by definition deflationary. We had two massive bubbles bursting: the very visible housing bubble, and the less visible but even more powerful bursting of the credit bubble. It would be a strange, strange world indeed if inflation could get any real traction in such an environment. So deflation is our immediate problem; inflation will dominate headlines once the excess supply of everything from autos to durables to housing is wrung out of the global economy. And with GDP falling like a rock, excess supply is growing larger.

Kirk Mulhearn, a professional mortgage planner and real estate broker, can be contacted at: 

562-989-4608  ext. 110