March 7, 2009

• Pending Homes Sales Index (PHSI) a new indicator of housing market activity.
• Mortgage Rates decline for the week
• Mortgage availability continues to expand
• Pending homes in our greater area continue to expand
• Unemployment in San Mateo County 7.4%, lowest in Greater Bay Area.

Pending Homes have become the new market indicator watched by home buyers trying to get an answer to,” Is this the bottom, should I buy now?” question. www.realtor.org/research will be able to help you here. The west has seen a 2.4% and a 13.5% increase from last month and last year in PHSI. Locally, in my covered area homes sales pending are:
• 0-$500,000 = 45
• $500,001 - $1,000,000 = 44
• $1,000,001 – 2,000,000 = 45
• $2,000,001 – 3,000,000 = 10
• $3,000,001 – 4,000,000 = 0
• +$4,000,000 = 3

After looking at these numbers I did something to check on my business career based upon past recessions. We hear and or read about the “worst recession in 26 years” and so on until we want to look for Looney Tunes on TV. Well forget about Buggs Bunny for now! In 1981 I took my wife on our first date, we were at the peak in unemployment nationally at +8%, my business was never greater. I had buyers coming out of the wood work. Prices were down and sellers were giving great offer. Interest rates were so high that sellers were taking back notes. When we married in 1984 unemployment was declining and we bought our first house in SF, a REO in Cow Hollow for $267,000. The recession was waning and employment numbers were getting better. Business was not as hot as it was in 1981. We did sell our home for $400,000 in October of 1984 13 months later and bought our first house in Woodside for $425,000, listed at $650,000. By 2000 we were in another recession and unemployment was +6%. We sold the Woodside house for $1.9 million and bought 5 acres in Woodside for $800,000. What that tells me is that Recessions and high unemployment numbers are “buying opportunities” If that is in your mind, do not hesitate. For the sellers, you have heard me tell you to wait. Refinance to end your monthly pains. I can help you with some great mortgage brokers.

As to Mortgage Brokers, below is something from Zack Hoffman of Pinnacle Bancorp:
Conforming
30 Year Fixed
4.750%, 1 Point Fee
15 Year Fixed
4.375%, 1 Point Fee

Conforming Plus
30 Year Fixed
5.375% 0.75 Point Fee

Jumbo to $5,000,000
7/1 ARM with Interest Only Payments
5.875% @ 0.50 Point Fee
10/1 ARM with Interest Only Payments
6.250% @ 0.50 Point Fee

Still available: 80% financing to $2,000,000 and 75% financing to $3,000,000 for qualified borrowers

This is not a commitment to lend nor should it be considered such. Rates quoted as best case scenarios on 3/6/09 and 30 day rate locks. Rates subject to change to due to market conditions. Please call for details on closing costs or qualifications. APRs in order of presentation: 4.88% and 4.60% based on $417,000 loan amount, 5.48% based on $650,000 loan amount, 4.62% and 5.15% on $5,000,000 loan amount

Zachary Hoffman
Pinnacle Bancorp
Mortgage Broker
Direct: 866 433 1719
Fax: 866 543 3050

Office Locations
11400 W Olympic Blvd, Suite 1700, Los Angeles CA, 90064
220 Montgomery Street, Suite 1950, San Francisco, CA 94104
136 Heber Avenue, Suite 208, Park City, UT, 84060
6400 S Eastern Avenue, Suite 15, Las Vegas, NV 89119

If you need another name use Eric Trailer, write or call me for more on Eric.

Eric notes in his letter to me that PSHI has historically peaked at +100 and this leads to strong demand and eventually constrains supply and pushes home prices higher. With no new homes being built, the inventory of available homes in your searched area will decline and prices will move up.

Eric recently is helping a client refinance their home in Menlo Park and saving them $2000 per month in payments.

The unemployment numbers continue to expand, but not as much as December and the outlook is for declining numbers as we see pick ups in Health Care, Government and Education. Manufacturing and auto have been in a bear market for years. The “rust belt” is just that and has been for over 20 years, so don’t focus on it! Focus on where we live. Focus on our businesses and on our industry. Why is Genetech sought after to a point billions more are added to the take out offer? Why would a company want to buy in a recession? The simple answer is it is cheaper to buy than to build. That goes for businesses and it goes for homes. Would you buy a home in Central Menlo Park for $2 million on a 10,000-12,000 square foot lot upgraded or a newly built home of the same square footage on a 6000 square foot lot in Menlo Park County area with the same interior square footage for over $2 million that was recently built? The answer is simple the county comes down and it sells. It is all about buying opportunities. The cost of carry for spec builders and contractors will sooner or later be dictated by their bankers and prices will cut and homes will sell! Just as the REO and Short Sales in Redwood City have created values and now inventories are down. President Obama will soon end all of that nonsense of below market sales that cost the Tax Payers money for the Banker’s stupid mistakes and yet maintain their high power bonuses!

So much for the week, for those who fret about your stock portfolios? We should see a meaningful rally soon as many of the point and figure charts have all hit their downside objectives. Do you sell, I can’t tell you that. Until next week, keep a positive attitude. I believe we are seeing the greatest opportunity of a life time.