Another Rate Cut

Here's a quick take on how the latest cut to the Fed Funds Rates affects mortgage rates, coutesy of Union Trust Mortgage Services, a loan brokerage affiliated with Pacific Union:

"Jumbo rates decreased 0.125% yesterday (1/22/08) and conforming rates (loan amount under 417K) decreased 0.25%. A Fed cut was already priced into the bond market and that is why we have seen interest rates go down in the last month. Wall Street was counting on a 0.5% cut and now it was 0.75% so that is why we saw just a little drop. If the Fed would have cut just 0.5%, the bond market would not have reacted and we would have seen interest rates stay the same. Remember that mortgage markets are "open" every day whereas the Fed meets just eight times annually. This gives the markets a ton of time to interpret news, listen to Fed speakers, and generally prepare for the next Federal Reserve meeting.

"The big winners yesterday were people with home equity lines of credit, and those that carry credit card balances. Effective January 22, 2008, your borrowing rates just fell 0.750%.

"The Prime Rate is now 6.500%.

"FORECAST for Long-Term Interest Rates: We believe conforming interest rates (loan amounts under $417K) will probably continue to go down another 0.25-0.5% over the next 6-12 months. Jumbo loans are a different story though and we believe those rates will decrease only about 0.125-0.25% since there are still very few lenders that are willing to lend on large loan amounts."

Note that predicting mortgage rates 6-12 months down the road is a little like walking around with something green in your teeth; no matter how confident you are, eventually someone's going to notice and you are going to look foolish. Consider yourself warned...

2007 Round-Up

A belated welcome to 2008 from your favorite intergenerational real estate team. We are rested, nourished, and energized after some fun holiday travel, yummy eats, and a sudden respite from the rain clouds.

A special "thank you" goes out to those of you who bought or sold homes with us in 2007, as well as the many friends and former clients who helped us build our business last year. Your referrals are the the lifeblood of our business. We can't express our appreciation enough. One way we try, however, is to make donations to Ritter Center in Marin County and Glide Memorial Family Services in SF for every opportunity you send our way. We were thrilled to make many donations to both organizations throughout the year. And if the number of calls we've received during the first two weeks of 2008 is any indication, this year will be even better.

While 2007 was a busy year for Next Generation Real Estate, it was not so busy out there in the broader market. The fourth quarter in particular was not kind to sellers. Check out these end-of-year stats for a complete picture. The first number shows the percentage change in the total units sold in 2007 vs. 2006. The second number reflects the Q4 year-over-year change:

San Francisco -9.69% -19.11%
Marin -12.0% -29.0%
Sonoma -23.26% -39.04%
Napa -25.13% -42.02%
Solano -40.02% -48.43%
Alameda -27.53% -42.91%
Contra Costa -29.30% -42.89%

This next set of stats shows the percentage change in the median price in 2007 vs. 2006:

San Francisco +3.25% +4.3%
Marin +4.15% +4.4%
Sonoma -5.91% -13%
Napa +.84% +1%
Solano -8.13% -17.2%
Alameda +1.0% -3.36%
Contra Costa -1.0% -14.35%

As we've noted before, the upper end of the market out-performed the lower end in 2007. This accounts, in part, for why Marin and SF had an increase in median price despite a roughly 10% drop in total units sold.

We think there's good information in the above charts, as well as hints as to where the market may be headed in 2008. Please get in touch if you or someone you know is considering a real estate transaction this year. We'd love to talk about it!

All the best in 2008.