Palo Alto Real Estate

MARKET RECAP
Recoveries are often imperceptible in their earliest stages, which has us wondering about the status of the housing-market recovery. It seems to be one that's no longer imperceptible. In fact, the prices of residential properties listed for sale rose in 22 of 26 major markets during April, with prices in 18 markets posting three months of sequential listing price increases, according to a report published by Altos Research and Real IQ,
Meanwhile, pending home sales offer hope that the sales pace will continue to accelerate through the summer months. The National Association of Realtors’ pending home sales index, a forward-looking indicator based on contracts signed in March, increased 3.2% in March, posting its own three-month sequential increase.
The one notable piece of negative housing news is the number of borrowers who are underwater on their mortgages, which climbed to 20.4 million at the end of the first quarter of 2009, according to Zillow.com, an on-line real estate information company. Thomas Lawler, an independent housing economist, stated the obvious by noting that borrowers who owe 30% or more than their homes are worth are more likely to walk away than those who owe just 5% or 10% more. It's also worth noting that the borrowers who owe 30% or more are still a relatively small percent of mortgages outstanding, and most are concentrated in Las Vegas , sections of North California, sections of Florida, and Phoenix .
The employment situation could also be viewed as a potential negative. Payrolls fell by 539,000 in April, while the jobless rate jumped to 8.9 percent, the highest since September 1983. But the fact that employers cut fewer jobs in April compared to March is viewed as a sign that the worst of the recession has passed. Granted, many economists still expect the unemployment rate to rise to 9.5% by year's end, but that suggests the rate of increase is abating
Speaking of rate of increase, mortgage rates – relatively stable for the past month – are creeping higher, which should be expected given that yields on Treasury securities have been rising at an increasing rate over the past two weeks. In fact, the 10-year Treasury note – a benchmark for the 30-year fixed-rate mortgage – jumped over half a percentage point last week, posting one of its biggest increases in months. We've been beating the drum over the past month to lock in mortgage rates ASAP. Now we are beating that drum even harder.
Stressed, But Still A Success
It's official: Our financial system isn't going to collapse after all. I think we all knew that, but the Federal Reserve went out of its way to prove everything was okay by “stress testing” the banks. The Fed's test measured bank reserves based on what's known as common equity, the value of a company's common stock and profits. The test revealed that some of the banks have sufficient reserves by traditional measures, which include other credit-related assets, but fall short by this narrower standard. The bottom line is the nation's biggest banks are regaining their health, which should translate into a greater willingness to lend.
The stress test was a part of the Obama administration's plan to fortify the financial system. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding. The stress test has been criticized as a confidence-building exercise whose rosy outcome was inevitable. But the information, which leaked out all week, was enough to provide a much-needed dose of market confidence.
The stress test result is yet another sign that we are well on our way to an economic recovery. We begin this year saying we expect January 2010 to look a lot better than January 2009. Our prognostication appears to be headed in the right direction. It's also worth remembering that recoveries mean markets start tilting more toward the seller’s side, so this unprecedented buyers market in housing we've witnessed over the past 18 months is less likely to last much longer.