Bay Area Real Estate Finance - mortgage blog

How Often Do Mortgage Rates Change? July 2011 Update

How often do mortgage rates change these days?
About every 3.1 hours.

I’ll admit, July seemed to be a lot more volatile than a review of the tape is indicating. Perhaps that’s because most of the turbulence was in the last week of the month. We had an abysmal GDP report last week, and then of course the craziness over the debt ceiling and budget debates. On the final day of July, mortgage bonds – the instruments that loan originators monitor to keep a pulse on rate movement – wound up at their best levels of the month. In fact, it was their best level of the year.

Mortgage rates still have some catching up to do, as Friday’s move was so sudden and far, that the lenders seemed to have trouble keeping pace with the momentum. That’s typical when rates should be improving – not when they’re going up. “Up like a rocket, down like a feather” (I have no idea who said that first, but that’s how it plays out).

In July, on average, rates changed 2.25 times per day.

Mortgage rates volatility index — Frequency of lenders' mortgage rate changes per day in July

Technically, volatility was down slightly from June. But the number of rate changes does not tell you the whole story. Some of the rate changes were bigger than others, and in July, we had some big overnight moves. To conclude that July was less volatile than June would be misguided.

Rates Changed 45 Times During the 20 Trading Days in July

If you had a 30 day escrow during the month of July, that means there were potentially 45 different pricing results that you could have obtained based just on the timing of your rate lock. The average duration of a rate sheet issued by lenders was about 3.1 hours. That is up from 3.0 hours hours in June.

What About this Debt Ceiling Issue?

There are some rules of thumb in the markets that are relevant here:

Mortgage rates improve when bond investments are in favor.
Mortgage bonds often follow the direction of Treasury notes.
Bonds are often in favor when stocks are out of favor.
Both markets hate uncertainty.

None of these is universal (well, maybe the last one). In the lead up to Sunday’s debt ceiling agreement, uncertainty had become ‘priced in’ to the market values of investment securities. This includes stocks and bonds. In many regards, we are in such uncharted territory with the economy, there’s no way to predict what will come next.

For example, economists in and out of the mortgage industry thought mortgage rates would jump in March of 2010 after the Federal Reserve ended Quantitative Easing. Instead, rates fell off the ledge and hit all-time lows within 3 months. The experts are all over the map, and more are wrong than right with this stuff.

As I write this on Sunday evening, the markets appear poised for a stock market rally (a fairly significant one) and a more mild bond market sell-off. This would be consistent with the last two bullet points above. It addresses the typical relationship between stocks and bonds. And with near-term uncertainty removed from the markets they are set to react.

Could this be a good thing for mortgage rates?

There are a few reasons why mortgage rates may not really care all that much about this right now. For one, at the core of the debate is the essence of our economy – it’s kind of the pits right now. That reality is going to keep rates low across the board for a while.

Two, I’m not sure anybody really thought this debate was anything more than a game of political chicken. Everyone knew what was on the line; nobody was going to let it break down fatally. If this stock market rally doesn’t gain traction over the next few days/weeks, that’s a sign that the ‘uncertainty factor’ wasn’t really all that real.

On the flip side of this, if there was true market anxiety over the debt ceiling issue, the traditional bond/stock lever wasn’t fully intact here. Nervous money moves from stocks to bonds, but panic money moves to the sidelines, away from both. To cash, hard assets, gold, etc. We may see some relief buying in both stocks and bonds, and that will also serve as a force helping keep rates down low.

One more facet of the “good for mortgage rates” argument is that the whole ordeal with the debt ceiling, and the threat of credit downgrades for the US has direct implications for Treasury securities. Mortgage bonds are a step removed from these instruments, and while they often move in a similar fashion, the markets were getting a nervous twitch about Treasury debt, not mortgage debt.

I am sure that I’m overlooking some key variables here. Perhaps guilty of wishful thinking. I guess we’re about to find out…

How to Make the Most of it

If you speak to someone who suggests they can get you the perfect lock, that’s probably a bad sign. Market prediction on that level is impossible. Especially in the face of a market in as unique a place as ours is right now.

Similarly, you shouldn’t expect to catch the market at it’s absolute low – it’s not a realistic expectation. But a professional who can explain the market context you’re transacting in, and show you which calendared events have potential to introduce risk or opportunity to your strategy, is probably more valuable as a resource than anything else when trying to maximize your rate lock.

Make sure you get your rate quotes in the same vintage. This means that any lender who isn’t quick to reply to your inquiry isn’t really helping out. Then, make sure your lender is tuned in to the economic calendar, so that you can be aware of what days are more or less likely to be volatile ones. The market gets little economic data points or events to digest just about every day. It’s important to know which ones carry greater risk at any given time, as their significance can change with the greater context of the marketplace. The last thing you want to do is leave your rate lock open when the risk is greater than the potential reward.

Working with your lender to create a lock and pricing strategy suitable for your transaction will probably shed some light on who you’re working with, and serve you far better in the long run than comparing apples and gooseberries.

Need help with a rate lock strategy? Contact me below and tell me how I can help.

How To Build Green – Inspiring Approach and Solutions

If you’re interested in the Green Movement, a hot topic in and around Bay Area real estate circles, I think you’ll find this video (~6 minutes) fascinating. I really like the economic approach behind the planning; there are all kinds of cost/benefit evaluations. From this angle, costs are viewed, at least in part, in terms of energy and resource consumption; the basis for “Green” thinking and planning.

If you have a story about green style home improvements, construction, or planning in general, we’d love to hear about it below.

When Do Conforming Loan Limits Change?

Fewer homes in San Francisco and other Bay Area counties will transact under conforming loan guidelines effective 10/1/2011

photo © 2006 Franco Folini | more info (via: Wylio)After several months of speculation that conforming loan limits would be reduced in 2012, FHFA released the official numbers last night. A similar announcement was already made about FHA loans. This another significant step in the declared effort to limit future US Government involvement in the mortgage industry.

Economists and regulators have so far speculated that the broader market impact will be insignificant. However, in a case study below, we will see that at the individual level, property transactions in the affected price ranges will assuredly notice a difference.

Quick Background

At the beginning of 2008, we found the market throat-deep in the mortgage meltdown, and in the early stages of the housing crisis. Conforming loan limits were set nationally at $417,000. Congress passed the Housing and Economic Recovery Act (HERA) of 2008, bumping the conforming loan limit celiling to $625,500 for select ‘high cost’ areas, as defined by median house value in 2007. Some counties hit the max, others landed somewhere between the old limit and the new one.

But a few months later the Economic Stimulus Act (ESA) of 2008 took over with a more liberal approach, and the new ceiling was raised to $729,750. ESA is set to expire on before October 1, 2011. The HERA limits will still be in place.

San Francisco Bay Area mortgages – What’s the Impact?

For most parts of the country, the conforming loan limit is, and has been $417k since 2005. That is not going to change.

Seven Bay Area counties currently have ‘high cost’ conforming loan limits at the national maximum of $729,750. These are:

Alameda County
Contra Costa County
Marin County
Napa County
San Francisco County
Santa Clara County
San Mateo County

Effective October 1, 2011, all of these counties except Napa will revert to the new max of $625,500. Napa County will fall all the way to $592,250.

Impact to the Market and to Buyers and Sellers

For the last year’s worth of mortgage data, approximately 50k loans would have fallen in this ‘used-to-be-conforming-now-jumbo’ range. Roughly 30k of those are California transactions, and though the data didn’t get more specific than this, it’s safe to assume that a significant number of those were from Bay Area real estate transactions. Market-wise, economists say this will not have a significant impact.

But for an individual transacting in the affected sector, the impact will be substantial.

Taking a single price point as a case study:

Purchase price $787,500, 20% down
Loan amount $630,000 (just over the new conforming limit)
Assuming a 0.500% rate increase for jumbo rates relative to conforming
Assuming a .04% qualifying ratio limit decrease for jumbo relative to conforming

As a conforming loan, assuming 4.750%, normal tax and insurance figures, the monthly housing payment in this scenario would be about $4106. Conforming loans allow for up to 45% of gross monthly earnings to be used to service recurring obligations, so the minimum income needed to qualify in today’s environment would be $9125

As a jumbo loan, assuming 5.250%, the same tax and insurance figures, the monthly housing payment in this scenario would be about $4299. Jumbo loans allow for up to 41% of gross monthly earnings to be used to service recurring obligations, so the minimum income needed to qualify after October 1 would be $10,485.

There’s a squeeze play at work here. It will take 14.9% more income to qualify for the same sized loan, because the costs are higher, and so are the benchmarks for qualification. Just like that. Overnight.

In this case, a borrower would likely find another $4,500 to put down on the house and keep the loan under conforming limits. A keen understanding of the marginal costs of borrowing would provide that incentive. But what if the loan amount would have been $640k? $650k? $675k?…. $700k or $725k?

Simply put, there’s a bandwidth of market activity that will be disrupted by these changes. Along with the changes to FHA loan limits, any property selling for between $650k and $912k will have a buyer pool who has seen their borrowing options change. Faced with a different set of options:

Some will put more money down, keep the loan conforming. But not all will have the capital to do so.
Some will digest the higher jumbo loan costs. But others will reduce their top price to keep the payment from increasing.
Some will simply not be able to qualify for financing the home they wanted.

If you’re a seller in this range, this is one more reason to get your home on the market today. If you’re a buyer in this range, this is one more reason to ramp up your home search today. And if you’re a refinance candidate with a balance between $625,500 and $729,750, this is one more reason to evaluate your options today.

Do not Assume the Effective Date is a Safe Deadline

FHFA has announced the change to be effective October 1, 2011. However, even before the announcement was made, last Friday we learned that a major national lender was ceasing all applications above $625,500 for conforming loans. For whatever reason, they’ve decided that the don’t want to participate in this sector for the final three months. Other lenders could follow suit. Maybe today, maybe tomorrow. Maybe not until September. But you certainly don’t want to be too patient here. Rates are presently low as it is, so the risk of waiting is only increasing, and seems to exceed any potential benefits.

Don’t wait. If you’d like to see how these changes would impact your loan payment and long term cost of financing, or if you’re a real estate agent who would like to show a buyer or seller client how these changes might impact their transaction, send me a note in the form below, and let me know the details.

How Often Do Mortgage Rates Change? June 2011 update

How often do mortgage rates change?
About every three hours.

Mortgage rate volatility jumped in June, after a few relatively calm months. That isn’t helping people shop for loans, since it makes it very difficult to compare options. If you survey a few different lenders, and it takes all day to get quotes, you may be looking at indications from different rate ‘vintages’.

In June, on average, rates changed almost two and a half times per day.

Mortgage rate volatility rate sheets per day increases — Frequency of lenders' rate changes surges in June

Rates changed 52 times during the 22 bond trading days in June.

If you had a 30 day escrow during the month of June, that means there were 52 different pricing results that you could have obtained based just on the timing of your rate lock. The average duration of a rate sheet issued by lenders was about 3.0 hours. That is down from 3.8 hours hours in May.

Volatility Came From Events Not On The Economic Calendar

During the months of April and May, when mortgage rate volatility calmed a bit, there was also a growing sense of optimism in much of the economic data that was trickling in. The signals were not exactly what you’d expect with a booming economy, but after the slow recovery crawl we’ve been enduring for the last 2 years (The Great Recession was officially declared over July 2009), ‘less bad’ news begins to sound great. And that’s what April and May brought. Less bad news. Something to grasp onto for the optimists.

But the slow motion train wreck in the Euro Zone came to the surface again in June, with the uncertainty about Greek debt default, associated debates and protests about austerity measures, and concerns about a potential spillover into other European nations, not to mention a scramble to quantify direct US exposure. These issues are not on the official economic calendar. Even though there is an awareness of the issue, the outlook has been highly uncertain, and the markets have reacted swiftly to each and every signal. Some good, some bad. Rates up, rates down. Volatility defined.

How to Make the Most of it

If you speak to someone who suggests they can get you the perfect lock, that’s probably a bad sign. Market prediction on that level is impossible. Similarly, you shouldn’t expect to catch the market at it’s absolute low – it’s not a realistic expectation. But a professional who can explain the market context you’re transacting in, and show you which calendared events have potential to introduce risk or opportunity to your strategy, is probably more valuable as a resource than anything else when trying to maximize your rate lock.

Need help with a rate lock strategy? Contact me below and tell me how I can help.

How To Compete With Cash Investors In The Bay Area Real Estate Market

Money Hand Holding Bankroll Girls February 08, 20117 — 'Come on, come on. Listen to the money talk.'

This is particularly common at the lower end of the price spectrum, as seasoned real estate investors are active in the market for investment real estate. They have been since the crash, and with every notch lower in the housing value indexes, more buyers step in to the market.

Any seller in this market has to be careful about qualifying any offer, given the challenges associated with borrowing mortgage money in the current climate. If financing is involved, the odds of that offer following through are lower than if there is no financing from a bank. An all cash offer conveys capability, intent, and speed – all variables that the seller will value, sometimes more so than price.

Investors use this to their advantage by offering quick closing time frames and all-cash offers, and often get the property at a discount.

Compete with price. Period.

Everything has its price, they say. If you need financing, but want to buy real estate in a market sector that is swimming with cash-laden investors, you have one real variable you can manipulate: price. You can offer more money than the cash investors – enough to compensate for the risk you bring: risk of financing following through, risk of financing taking too long, risk associated with you being a first-time buyer – a little less confident about buying in general and maybe hesitant to make it past your contingency removal dates.

You can mitigate these risks by dangling more money in front of the seller. Most sellers in this market are not selling because they think it’s a great time to do so. They’re selling because they need to. So they’re anxious. An offer to close quickly is relatively appealing. But money buys time, and offering a higher price than the all-cash investors will get the attention of that seller. You just need to find out how much it’s going to take to get that attention.

Wait just a second…

I am not suggesting recklessness in the bidding process. I am suggesting that money will compensate for the advantages the all-cash investors bring – at some point. I don’t encourage anyone to allow for budget creep – where the anxiousness about getting an offer accepted leads to overspending and operating beyond the intended price range. I just think that you can’t expect to compete with a cash offer and expect the same discount to the acquisition price.

This would be a good time to remind you that your own individual circumstances require unique planning, especially with respect to financing.

Built-in reality check

Your financing relies upon a valid appraisal. If you really shoot the moon, and pay too much for the property, the appraiser is going to have a tough time justifying the price. You’ll have a chance to think about it if you receive such an indication. The financing may still work, but would likely require you to increase your down payment dollar-for-dollar above the value indicated by the appraisal, and when making an aggressive offer, you should be prepared to encounter this.

At the end of the day, you can pay any amount you want to as long as the seller agrees. You can finance it if the lender agrees. Believe it or not, there are still some free market dimensions to this marketplace. But to continually make financed offers that are on par with all-cash offers is a process that is likely to lead to exhaustion, frustration, and disillusion. And also prolonged renting.

The other card you can use to your advantage is to appeal to the seller on a personal level. Sometimes that happens, but that’s about as common as finding a diamond in a haystack. So don’t count on it.

If you do compete with investors, and pay a higher price, you’re going to have to shake off the feeling that you overpaid for your home. Fair market value is a subjective concept, and the all-cash investor looking only for discounted acquisitions likely places a lower value on the property than a first time buyer would. If it is about buying your home, and competing with someone who wants to buy a house, fix it up, and sell it for a profit, the cost is just going to be different. Period.

Are you encountering this?

I’d love to hear about frustrations in the bidding process – have you been outbid by all-cash buyers? How many offers have you made or did you make before getting one accepted? Please share your story in the comments below!

Jumbo Rates Have Fallen Harder In The Recent Mortgage Rate Decline

photo © 2010 Lizzie Erwood | more info (via: Wylio)I remember watching the rate for jumbo mortgages change from around 5.750% to about 8.250% over the course of something like three days. It was in August of 2007, when subprime’s “well-contained” meltdown jumped the firebreak into the broader mortgage market, and eventually grew into the wildfire that set global financial markets ablaze and brought the US economy to it’s knees in 2008.

As we draw nearer to the 4th anniversary of that event – a memorable one for this writer – jumbo rates have become more readily available and become relatively competitive again. Buyers planning a move up into jumbo territory, and borrowers who have been locked out for the past few years because of the jumbo market dysfunction should consider now a good time to revisit their situation.

By the time the greater economy was into it’s full-blown panic in 2008, the mortgage industry had already been in the doldrums for a year. A tremendous backpedaling of lending guidelines was well-underway, and the marketplace for jumbo money – then any loan above 417k, no matter what the location – was essentially shut down.

Jumbo rates shot up based on the seizure of liquidity in that marketplace. Banks were not willing to lend without a serious premium because the private, wall-street fueled mortgage marketplace was defunct. The demand went to zero, very few lenders wanted to supply the product, and those that did charged a shelving premium knowing that they would need to sit on the investment indefinitely. This was not the business model preceding the meltdown.

First Steps Toward Jumbo Relief

The Economic Stimulus Act (Feb 2008) and then the Housing and Economic Recovery Act (July 2008) were a couple of economic ‘smokejumpers‘ that helped push the conforming/jumbo breakpoint up from 417k to as high as 729,750, depending on the median home prices by area. For the San Francisco Bay Area, all counties were temporarily bumped up to the max of 729,750. This opened up quite a bit of the formerly-jumbo marketplace, but left anything from 730k and up locked out in the frigid jumbo market.

Eventually, more jumbo product started to appear, and at mildly more competitive prices. Traditional 30 year fixed rate loans were essentially non-existent however, since the banks making jumbo loans did not want to commit money over such long time frames. Instead, they offered more competitive pricing with shorter term scenarios, like 3 and 5 year fixed rates.

Over the past year or so, we’ve seen some 30 year money show up, but with so few suppliers, the terms often just weren’t quite competitive enough. Either the rate was at too big of a premium over non-jumbo (“conforming”) loan rates, or the reach was restricted to low percentages of the home’s value, or the guidelines were too cumbersome to qualify for.

New Life In Jumbos

But in the last few months, jumbo product has begun to show up in the marketplace. As the private secondary market begins to show signs of life, originating lenders are showing an appetite to get back out to the consumer to deploy some capital. With increased supply, we are seeing increased competition on terms.

While a recent bond market rally has brought conforming mortgage rates to their 2011 lows, the jumbo rates have fallen farther as this same bond market activity has been coupled with increased competition.

Jumbo rates today are better than where they were when the market seized up in 2007. You can reach above 1MM in borrowed money with just 20% equity.

Quite a few would-be jumbo borrowers have been stuck on the sidelines waiting out the return of this market. While being held back, they’ve also watched their values decline. But for the many jumbo borrowers who were deep in equity to begin with, this represents as good a time to look at jumbo financing. And for move-up buyers looking to trade-up while prices are down, this is the environment to transact in.

If you’d like to explore this market in greater detail, drop me a note in the form below.

FHA Borrowers In The SF Bay Area To Face Restricted Access

FHA loan limits reduction, impact by area — California awash in red as the most severe adjustments will hit the highest cost areas

There is structural change pending for FHA mortgages that will soon trim down the maximum size of an FHA loan by 14%.

Due to change on or before October 1, 2011, this change will impact the San Francisco Bay Area more than any other part of the country.

The following counties in the Bay Area are presently at the loan limit ceiling of $729,750, and will be reduced to $625,500 ceilings in a matter of months:

Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, and Santa Clara

Already on Borrowed Time

The limit of $729,750 is a temporary extension afforded by stimulus act legislation that put a temporary lift on the conforming loan limits. This was intended as a way of opening mortgage refugee camps to provide borrowing access to just-barely-jumbo borrowers when the jumbo market went into seizure in August of 2007 – the beginning of the financial crisis.

The limits have been extended by Congress each year since. But for the first time since the crisis and associated meltdown in financial markets, the political sentiment has flopped the other way. Movements are afoot to trim down the exposure and involvement of government-sponsored, government conservatorized, and government run bodies in the mortgage marketplace.

That means that despite the growing realization that the economy is not on a clear recovery path, the usual assumption that Congress will extend these loan limits is currently questionable.

HUD Releases Impact Study Findings

HUD recently issued a study to measure the impact. Their findings suggest that for California FHA-endorsed loans since January 1, 2010, 5% of the cases representing 12% of the outstanding balances in dollar total would be ineligible under the new ceilings.

Reaction

12% of the dollar volume of the FHA marketplace is not insignificant by any stretch. Right now, you can use a maxed-out FHA loan to buy a home worth $756,000 with the minimum 3.5% down payment. Once these limits expire, the reach is reduced to $648,000

That is a key price range in the high cost Bay Area. The 650k to 750k range is an active price bandwidth that will undoubtedly feel this impact. If this is to be a step backward in order to take two steps forward toward a privatized mortgage marketplace, it certainly will not have a positive initial impact; the housing economy is on wobbly knees as it is. Trimming access, as this will do undermines demand, period.

We already have demand issues. And we certainly have credit access issues. This will not help.

The Current Opportunity

If you’re a buyer in this range, or a refinance candidate looking for the right opportunity to transact, you should give serious consideration here. Rates are at 2011 lows, and lenders have been known to cut off access prior to formal effective dates of changes like this. Meaning, an October 1 change date does not guarantee you that lenders will still participate in originations in September, or even August.

If this is your range, the clock is ticking. Contact me below if you’d like to explore how this applies to your individual circumstances.

How Often Do Mortgage Rates Change? May 2011 update

One of the reasons it can be ~~difficult~~ annoying to shop for mortgage is because the undulating marketplace for interest rates can lead you to conflicting feedback from different providers. Banks issue loan rate pricing each morning, but often adjust mid-day when the bond market is moving one way or the other. And just as can happen in the bond markets, interest rates can get on a run up, a run down, or a choppy sideways pattern that looks like your neighbor’s kid on a pogo stick passing by the kitchen window.

Mortgage Rate Volatility Index 2011 May — Mortgage Volatility Index - updated for May 2011. I'll admit, this chart has become a complete psychedelic mess. Over the 5 months since I began tracking this information, the display has become a bad 70's moment. Apologies. I'll need to find a new format. If you are having 'flashbacks' DO NOT click on the chart.

Rates changed 39 times during the 21 bond trading days in May.

That can really make it a pain in the neck to figure out what the best rate is going to be when you’re in the middle of buying or refinancing a home. You call one lender first thing in the morning, email two others at lunch, one of whom doesn’t reply until the end of the day, and by the time you have all your research, you’re looking at three different ‘vintages’ of rate quote. Can a fair comparison be made?

Maybe.

But you’ll need to know first if rates have changed over the course of the day. And based on recent history, odds are you’ll be comparing apples and gooseberries. Besides, even if you can get three quotes in the same window, how do you know if today is better than tomorrow?

When it comes to mortgage quotes, the little differences can be meaningful. If you want to maximize your shopping results, you need to make sure you are comparing quotes from the same vintage, and you need to know what vintage is produced in the best climate.

Rates changed every 3.76 hours in May

In Maythere were 21 bond trading days. We received 39 rate sheets over those 21 days, or an average 1.86 rate sheets per day.

Most lenders have open lock desks for 8 hours a day. Some are open for 9, and the most aggressive lenders, often the most sensitive to bond market fluctuation, accept rate locks for about 6 or 6 1/2 hours a day. On turbulent bond market days, they often delay the first rate sheet release.

Assuming an average of 7 hours for an open lock desk, and 1.86 rate sheets per day, that means rates changed every 3.76 hours. Compared to January’s average expiration of 2.29 hours, the volatility has fallen significantly in recent months.

Intra-day Mortgage Rate Volatility Doesn’t Tell You Everything

While volatility was pretty steady month over month from April to May, the direction of rates in general was lower. Other than one brief increase, rates trended downward, steadily, all month. The conviction of the move likely had much to do with lower volatility.

Even still, with rates lasting less than 4 hours on average, it still makes it difficult to do your comparison shopping.

How to Make the Most of it

Last month, rates changed 39 times on 21 bond trading days. If a typical escrow period when you’re buying a new home is 30 days, that means you had a 1 in 39 chance to nail it on your rate lock. If you’re qualified to be applying for a mortgage, it’s a virtual certainty that you already have a full time job, so you really should rely on a professional with the time and insight to be able to monitor this for you.

Need help with a rate lock strategy? Contact me below and tell me how I can help.

Is George Costanza A Case-Shiller Analyst? And Why Does The Mercury News Think Declining Foreclosures Are Bad?

silicon_valley_jobs — Somewhere out there ... there's a job

photo © 2009 Revol Web | more info (via: Wylio)Real estate values are off 33% from their 2006 value peak, nationally speaking. According to the Case-Shiller home price index, we’ve just crested the hump of a small bounce, and are in the early stage of ‘double-dipping‘.

But national trends don’t tell you everything you need to know about your local Bay Area real estate market. Real estate value trends depend on the broader national picture, but also on a scale of region, city, even neighborhood. Local forces are at work in local markets.

As an example, a San Francisco client of mine who bought a condo for 1.2MM in November 2009 just had it appraised at 1.6MM in April 2011. 33% gain in 1.5 years – you’re not getting a read on that micro-market when you look at the Case-Shiller index, or even the San Francisco-specific data for Case-Shiller, which suggests a decline over the same period.

Watch Jobs Data To Predict Real Estate Values

With a title like “Foreclosures In Silicon Valley Remain Stubbornly Low“, you might think the San Jose Mercury News would follow with a story about the relatively strong employment market in the area. Unemployment is still high, like everywhere, but it’s lower than the general California rate. And, there’s that whole booming dotcom round two going on with Facebook growing like a weed, LinkedIn set for IPO tomorrow, and of course bellwethers like ‘the’ Google.

Unemployment correlates to real estate values. It’s pretty tough to pay the mortgage when you don’t have income. Tech firms are in growth mode, and with that sector abuzz, jobs are available. It stands to reason that fewer properties in the area would be falling into foreclosure, because the people who live there, more so than greater California, are still drawing income.

So why does the Mercury News draw a different interpretation? They suggest that the decline in foreclosures represents a concern because it must imply there is a building back-up of soon-to-be foreclosures. Maybe, but jeepers, talk about a glass half-empty attitude!

Maybe the news media has to paint the situation with a black brush to stir up drama. Maybe they just don’t get it. Or maybe they are on to something… But even if there is a mechanical problem with the foreclosures being purged from the marketplace, and you have improving employment trends, some of those would-be foreclosures are going to be cured, prevented, avoided, etc. So in the end, I don’t share the sentiment expressed in this article.

The robo-signing issue cited in this piece is a national phenomenon. To make local extrapolations like this is awkward – it would affect other areas in the same way, and I believe this robo-signing is a state-by-state issue if not just a national one.

This isn’t the first time the newspapers misrepresented the story of the mortgage marketplace. But I’d rather they applauded the local industry and somewhat stronger jobs marketplace.

How To Chagrin A News Reporter 101

I love Martin Andelman. I read his column Mandelman Matters periodically – not religiously, because his posts can be long. But they are so tempting – he’s a skilled wordsmith.

Biggest Consumer Advocate In Mortgage Modifications?

I admire his hard-core protectiveness of the consumers’ interests. At times, a bit brash, I get the idea that every once in a while, he’s in the midst of over-selling his point just for the sake of good writing. That said, I do believe he has unbridled passion for the consumer.

He is devoutly defensive on their behalf when it comes to the core area of his focus (as far as I am aware) which is banks screwing people in the mortgage space. But often when he lets loose, there are many notes of sarcasm that serve to underscore the absurdity of the situation he’s riled up about. That’s the part I really enjoy… he is a talented writer.

Many of his articles are about loan modification absurdities. Oh there are absurdities. But “Mandelman” doesn’t take this marketplace sitting down. He’s a crusader, persistently vocal, demanding better human-to-human interaction than what typically gets reported in the nastiest corners of this housing market turmoil. I admire that.

“Oppression Can Only Survive Through Silence” (Monteflores)

He recently took Carolyn Said of the San Francisco Chronicle to task for an article about homeowners who have overcome foreclosure challenges. I’ve said it before, and I’ll repeat it here – there is no shortage of tragedy in this marketplace.

His basic gripe is that Said is far too casual in her portrayal of the bank each case. But you have to read his words. There were portions that made me feel that the reporter was getting more of a beating than she deserved. But, I’ll go back to what I said before – If Andelman wants to over-sell the point to ensure that it is clearly laid on the table, I’m fine with that.

Got my attention.

Follow the money, they say. It’s always good to remember who’s doing the talking and what might be in their agenda. I’m not so sure it’s as cut and dry as he makes it out to be, but he certainly got me thinking about it.

I’ll be interested to know if there’s a follow-up.