Exerpted from the weekly Real Estate Report which I distribute to clients and referral sources every Tuesday morning . . .

What other explanation could there be for the sharp rally experienced at the start of last week?  The Dow was up over 200 points on Monday and oil prices headed over the $80 per barrel mark.  All the while the economic reports continued to show tepid growth and the Federal Reserve Board continued to make statements that can only be described as cautionary.  There was even mention of the dreaded “deflation” word. So why would the markets rally before the employment report was released?  Certainly corporate earnings were better than expected.  But if one takes a look at the bond market, the market rally was not accompanied by as sharp an increase in rates as would have been expected.

If the market was rallying because they saw big things coming, rates would have also risen as sharply.  Because they did not, we can at least surmise that this was a “relief” rally.  The markets were relieved that the economic reports and earnings are not pointing toward a double dip recession.  Everyone was expecting a slow recovery and it could be argued that the markets should not have sold off as sharply to begin with because of evidence of a slow recovery.  The markets were apparently scared that this pause could have been something worse.  Well, in the words of Ben Bernanke, the Chairman of the Federal Reserve, “The worst is behind us.”  This brings us back to the employment report.  Indeed, it appears the rally was not due to expectations of a strong report and we did not get one.  The “relief rally” concept holds more water when we consider the fact that the markets recovered after an initial sell-off right after the disappointing jobs report was released.  The task will be to recover about 8.5 million jobs lost and we can see that it will be a long and winding road.

The Markets.

Rates fell to historic lows for the sixth time in seven weeks.  Freddie Mac announced that for the week ending August 5, 30-year fixed rates averaged 4.49%, down from 4.54% the previous week.  These rates are averages and are quoted with 0.70% discount points.   The average for 15-year fixed fell to 3.95%.  Adjustables were also down with the average for one-year adjustables falling to 3.55% and five-year adjustables decreasing to 3.63%.  A year ago 30-year fixed rates were at 5.22%. Stated Frank Nothaft, vice president and chief economist, “And yet again, rates for fixed-rate loans and now the hybrid 5-year ARM fell to all-time record lows this week following the second quarter GDP release.   Annual revisions cut the cumulative GDP growth in half over the past three years ending in the first quarter of 2010 from 1.4 percent to 0.6 percent. This reduces inflationary pressures and allows longer-term rates room to ease. More recently, housing investment picked up in the second quarter of this year as the homebuyer tax credit spurred new and existing sales and low rates encouraged remodeling.  Fixed residential investment added 0.6 percentage points to second quarter real GDP growth following two quarters of decline.”  Rates indicated do not include fees and points and are provided for evidence of trends only.  They should not be used for comparison purposes.

Real Estate News

Home builders are vying actively to buy land to buy in anticipation of a market turnaround. “There’s been an absolute land rush,” says Gregor Watson, a partner with McKinley Partners, a California-based real-estate fund. Builders prefer land with improvements, including sewers and streets because it allows homes to be constructed quickly. Especially attractive are suburban lots in neighborhoods that are easy commutes. Nationally, the price of finished lots are up about 20 percent from early 2009. Prices for attractive lots in Phoenix and Southern California have risen 60 percent. Nationwide, the best-located lots are fetching twice as much as they would a year ago, said Greg Vogel, CEO of Land Advisors Organization, a land brokerage firm based in Scottsdale, Ariz. Source: The Wall Street Journal

The Federal Emergency Management Agency is offering two years of eligibility for the program’s Preferred Risk Policy, the cheapest option, to home owners and small businesses whose properties are in a newly-designated special flood hazard area. The deal will be available after the redrawn maps take effect, in most cases this fall or next winter. The preferred risk plan discounts the full rate by 75 percent to 80 percent. FEMA, which has been modernizing the maps for the last six years, has run into considerable resistance from both citizens and legislators who think its changes are wrong or unnecessary. Source: The Associated Press

Women are more stressed and less confident than men when buying a home, according to a new study by mortgage insurer Genworth Financial Canada. Here are some of the findings: 43 percent of the women surveyed, compared with 32 percent of men, find the home-shopping process stressful. 75 percent of women and 60 percent of men say it is important to have a simple and easy-to-understand mortgage structure. 65 percent of women want the security of low and level monthly mortgage payments, while only 50 percent of men say this is critically important. Source: The Globe and Mail

The restoration of the single-family rural housing program that would guarantee home loans for rural buyers was passed by the Senate and is on its way to President Obama. “This is going to be a great lift for thousands of rural home buyers who need to close on their home purchases before Sept. 30 to take advantage of the home buyer tax credit,” said NAR President Vicki Cox Golder. “Many rural families would have been left out in the cold without these guaranteed loans. Increasing the commitment authority will help rural families, support local housing markets, create jobs and generate new tax revenues.” The legislation increases the guarantee fee for borrowers, but allows the fee to be financed. “This change will make the program completely self-sufficient,” she said. The Rural Housing Service is expected to announce new guidelines shortly after the president signs the bill. Source: National Association of Realtors®