Turnaround in the Real Estate Market?

California Leads the Way in Hot Markets

The real estate conditions are right in California -- falling prices, pent up demand, low interest rates -- to bring about a perfect storm of real estate sales, creating a hot market statewide. While some prognosticators tout the woes of price drops of up to 50 percent, buyers are seeing the devaluation as a signal to get off the fence. And they are doing just that with a vengeance.

Statewide, homebuyers purchased at an annual rate of nearly 490,000 homes in July -- up 43 percent from a year ago. July marked the third consecutive month for home sales to top the 400,000 mark, according to California Association of Realtors President William Brown.

"Year-to-year increases in the number of transactions ranged from a 6.7 percent increase in the San Francisco Bay Area to a 176.5 percent increase in the Riverside/San Bernardino region," he says on the trade group's web site. "In general, greater percentage gains occurred in lower-priced areas that had been most adversely affected by the market downturn since late 2005 and that are concurrently experiencing the biggest declines in prices."

The inventory of homes in California continues to drop from last year's levels as well. For the month of July, there is a 6.7 month's supply compared to last July's 10 month supply of homes.

30-year mortgages fall to six-week low

Freddie Mac, the mortgage company, reported that 30-year, fixed-rate mortgages dropped to 6.40 percent this week, down from 6.47 percent last week. The new rate was the lowest since the week of July 17 when 30-year mortgages stood at 6.26 percent. Rates on 15-year, fixed-rate mortgages fell to 5.93 percent, down from 6 percent last week. Rates on five-year, adjustable-rate mortgages averaged 6.03 percent this week, up slightly from 5.99 percent, and one-year, adjustable-rate mortgages edged up to 5.33 percent, from 5.29 percent.

WASHINGTON

U.S.-backed loans see fees rise

Borrowers who take out government-insured mortgages will have to pay higher fees under new rules announced this week. Effective Oct. 1, the Federal Housing Administration will raise its mortgage insurance fee to 1.75 percent for a new mortgages and many refinanced loans. That's up from 1.5 percent. For a borrower with a $200,000 loan, that means a fee of $3,500, up from $3,000 in the past.

NEW YORK

Struggling Lehman plans to lay off 1,500

Lehman Brothers, the ailing Wall Street bank, plans to lay off as many as 1,500 employees, or nearly 6 percent of its work force, before it announces third-quarter results on Sept. 15, a person briefed on the plans said. Lehman has already laid off 6,000 workers since June 2007, mostly in its mortgage origination and securitization businesses. It was not immediately clear what divisions would bear the brunt of the latest cuts but virtually every Wall Street business is struggling, and investment bankers and traders at Lehman were anticipating layoffs. A Lehman Brothers spokesman declined to comment.

WASHINGTON

Banks borrow from Fed

Banks borrowed more over the past week from the Federal Reserve's emergency lending program, while Wall Street firms passed for the fourth straight week. A Fed report said commercial banks averaged $18.47 billion in daily borrowing over the past week. That compared with a daily average of $17.51 billion in the previous week.