Category: Tahoe Real Estate News

Just Listed: 1635 Cedar Crest Avenue

Posted on by Liza Muhl

JUST LISTED

1635 Cedar Crest Avenue, Tahoe City, California

4 BR | 4 BA | 2218 SF

Listing  Price $1,680,000

CLASSIC A-FRAME ON THE WEST SHORE

Located just a few blocks from Lake Tahoe Park, the private HOA beach and recreation area, this home is your idyllic West Shore retreat. The attached living space/kitchenette/bathroom has a separate entrance, and can be closed off from the main home. This extensively remodeled home has four bedrooms, four bathrooms, a separate living area, and ample space for you and all of your visitors. The fully fenced backyard and large deck allow maximum optimization for your outdoor time, no matter what the season.

For showing appointment, contact Amie Quirarte.

PRICE REDUCTION: 160 Cherry Street

Posted on by Liza Muhl

SUPREME PRIVACY IN NATURE

Beyond the A-symmetrical front gate lies 160 Cherry Street. Situated on 2.38 acres and backing to Forest Service land, this property encapsulates privacy and seclusion without compromising your proximity to the lake.

Completed in 2020, this home features endless unique components, such as a hanging staircase made out of forged steel, and the use of reclaimed wood from the original Tahoe Tavern Pier that was reworked for multiple pieces throughout this spectacular home. The 20-foot stone, floor-to-ceiling, double-sided fireplace centered in the great room is the heart for family gatherings and celebrations.

PRICE REDUCTION

160 Cherry Street, Homewood, California

6 BR | 5.5 BA | 5670 SF

Listing Price $9,800,000

The main home has five bedrooms, four and a half bathrooms, and a 1,400-square-foot deck with a covered patio and wood-burning fireplace. The guest house is a fully detached one-bedroom, one-bathroom unit with four additional built-in bunk beds to accommodate both friends and family.

Nestled between the guest and main homes is an outdoor patio with a gas fireplace and a 30′ outdoor water feature. There are two separate garages that can comfortably house five cars and a boat. The radiant heat, air conditioning units, air purifying system, elevator, and heated stairs and driveway are the finishing touches to ensure life at Cherry Street is as effortless as it gets.

As a member of Tahoe Swiss Village’s homeowner’s association, you can enjoy the use of two buoys, two piers, and a private beach located just across the street. This custom home was initially envisioned as a mountain lodge with an industrial feel, and the dedicated group of minds behind it brought this vision to life. It was designed, engineered, and built by local teams who have a deep affinity for this area and worked together to seamlessly integrate the intimate characteristics of the home with the nature that surrounds it.

For showing appointment, contact Amie Quirarte.

 

JUST SOLD: 1058 TILLER DRIVE

Posted on by Liza Muhl

JUST SOLD | Represented Buyer

1058 Tiller Drive, Incline Village, Nevada

5 BR | 4 BA | 3212 SF

Sale Price $4,250,000

Located in Millcreek on a private parcel surrounded by matures pines, this fully renovated custom home is steps from Lakeshore Boulevard and a short stroll to the private beaches and amazing amenities. The new homeowners will enjoy full IVGID privileges and Nevada’s tax friendly residency. Nevada is one of only nine states that has no state income tax.

For more information on Incline Village real estate, contact Amie Quirarte.

Photo courtesy: Coldwell Banker Select

FED HIKES RATES FOR 10TH TIME

Posted on by Liza Muhl
BY EPHRAIM SCHWARTZ
Partner, Mortgage Consultant CMPS
O’Dette Mortgage Group
May 8, 2023

This past week the Federal Reserve raised rates for the 10th time in a little over a year. Let’s discuss what happened as we await yet another Fed rate hike next Wednesday.

“Was it something I said or something I did? Did the words not come out right?” Every Rose Has Its Thorn by Poison.

The Last Hike?

As we expected, the Federal Reserve raised the Fed Funds Rate to a range of 5.00% – 5.25%. Remember, this interest rate affects short-term loans like credit cards, autos, and home equity lines of credit.

The big question is whether this will be the last hike. When the Fed statement was released, the markets believed the Fed was signaling a pause by omitting the following line from the previous statement: “The Committee anticipates that some additional policy firming may be appropriate.”

However, shortly after the statement was released, Fed Chair Powell hosted a press conference and right at the top said the Fed Members have not discussed a “pause” in rates. Bottom line? Expect more uncertainty and volatility as it relates to rates.

Sound And Resilient

This is the term Fed Chair Powell used to describe the banking sector. Unfortunately, we are seeing more banks have issues. This week it was First Republic taken over by JP Morgan Chase and as of this writing PacWest was said to be “exploring strategic options.” The fear of banking contagion has elevated uncertainty in the financial markets. It’s not clear if and how many more banks will continue to have issues. Bottom line? The fear of this story has created a “safe haven” to trade into bonds where prices move higher, and rates move lower.

European Central Bank Hikes By Less

The European Central Bank (ECB) hiked their benchmark rate by .25%, the smallest since the start of their hiking cycle. Like our Fed, they too signaled they would be “data-dependent” going forward, leading markets to speculate a pause on future rate hikes.

Bottom line: The Federal Reserve is sending mixed messages on the future direction of rates. Meanwhile, long-term rates, which the Fed doesn’t control, are near their best levels in months and sense all the uncertainty in our economy will prompt the Fed to pause and potentially cut rates later this year. The incoming data and issues in the banking system will determine what happens next.

Looking Ahead

Expect market volatility to continue next week. The Consumer Price Index (inflation) will be reported. If this number comes in higher than expected, rates could rise. The opposite is true. Despite this being a backward-looking number, we will have Fed officials continue to speak and comment on the release and how they feel it impacts future Fed policy and interest rate decisions.

 

Changes to LLPA’s on May 1st

Posted on by Liza Muhl
BY EPHRAIM SCHWARTZ
Partner, Mortgage Consultant CMPS
O’Dette Mortgage Group
April 27, 2023

We’ve been getting a lot of questions about the new LLPA (loan level price adjustment) for Conforming loans and if people with worse credit will really get better rates than borrowers with excellent credit.  The short answer is NO, and your clients should never intentionally damage their credit.  Surprise, surprise, there’s some entirely incorrect information circulating that your clients may be exposed to.  Below is an explanation and FAQ’s:

What is changing?

Fannie May & Freddie Mac base pricing adjustments for credit scores & down payment are changing.  Borrowers with a lower credit score & lower down payment will not be as heavily penalized.  And, borrowers with best case scenario credit scores & down payment will receive less of a benefit than before.  So, the difference in rates between best case credit profile vs. lower credit score will be less significant.  These changes apply to every conforming loan funded by each & every mortgage company.

Does this mean borrowers with lower credit scores get better terms than those with higher credit score?

No.  People will still be in better position with a better credit & more down payment.   The difference between excellent & lower credit tiers will be less significant.

When does this go into effect?:

It’s been priced into rates for over a month now.  The May 1st date is when these adjustments go into effect for the mortgages purchased on the secondary market by Fannie/Freddie.   Banks knew this was coming, so these changes have already priced in and borrowers will not see any changes to rates over the next week, outside of the normal day to day bond/rate fluctuations.

What is the FHFA trying to achieve with these pricing adjustment? 

We all know Fannie/Freddie’s mission to increase access to affordable housing.  It’s always been their mission and it’s been a priority for the director of FHFA.   The new director of the FHFA has been vocal in disapproval of the solutions provided by Franny and Freddie and she thinks more is required of them to increase access to affordable housing, and she thinks this will help increase access to affordable housing.

Is this a good idea and will it work?:   We don’t like it but the whole world has to deal with it, so it is what it is at this point.  We do not see these pricing changes moving the needle in making homeownership more attainable for more Americans because even after these changes a borrower with low 600’s credit score is still better off going with an FHA loan, and those who have done a great job managing credit are stuck a hair worse pricing.  A better idea would be a campaign to educate people on how to manager credit; it’s not complicated and the information could be shared on something as simple as this one page I put together and have been sharing with clients for over a decade (see attached).   WE (all of us on the real estate community) continue to be the front lines in educating the public on all things related to buying, investing, & enjoying real estate.

Credit Health Tips

If you want to dig into the details, here are some example of scenarios that will be most affected: Attached is a matrix showing which scenarios have pricing improvements (green) vs. hits (red), relative to the old standard LLPA’s.

  • LTV’s in the 80% – 85% range are most significantly affected, so more borrowers in the ~19.99% – ~15% down might consider just doing 10%.
  • Cash-out refinances hits are mostly greater, unless you have top tier (>780) credit, or extremely low LTV (<30%).   So, cash-out refi is actually a scenario where if credit is >780, pricing adjustments have improved.
  • Price improvements for 2 & 3 unit properties.
  • Price improvements for low LTV investment properties.
  • Vacation Homes & Investment Properties essentially priced the same now.

LLPA Changes 2023

SVB FAILURE AND RATES

Posted on by Liza Muhl
BY TERESA O’DETTE & EPHRAIM SCHWARTZ
Mortgage Consultants
O’Dette Mortgage Group
March 21, 2023

Quite an exciting week and a half and I have some additional commentary to share in addition to this week’s MMG update (below).   Silicon Valley Bank failed for several reasons, and while it is of course the bank’s responsibility to manage risk, it was the Fed being late to the game in hiking the Fed Funds rate and then hiking so much in such a short period of time that pushed SVB’s bond holdings so significantly underwater.   SVB held a large position in government bonds, which are generally considered the world’s safest parking for money, and those bond yields were as close to zero as they’ve ever been.   A bond’s value on the market can be determine primarily by; it’s yield the maturity.   So, when the Fed hikes rates rather drastically in a such a short period of time, new bonds become available with a dramatically higher yield, in comparison to those bonds SVB & others were buying just a handful of months earlier – with a relatively small difference in maturity.   This put the value of those bonds underwater, but that’s not what caused the problem.    If SVB had been able to simply hold those bonds to maturity, there would have been no loss.  However, after some prominent VC’s yelled fire in the theatre & sparked a run on the bank with depositors to pulling money out, SVB quickly tried to raise capital to cover those withdrawals, and when they couldn’t raise money, they were forced to sell those underwater bonds to cover the withdrawals.   Yes, there are some things SVB should have done differently, like fill that Risk Management Officer role that sat vacant tail end of last year, and hold less in such low yield bonds, but it was the Fed’s concentrated rate hikes that pushed those low yield young in maturity bonds underwater.   The bank failure was backstopped by the Federal government working with FDIC to use funds from the FDIC insurance pool to guarantee all depositors would be made whole.   No tax payers dollars were used for this bail out, bank executives are being held accountable for poor risk management, and many who are often most critical of government intervention in markets agree, the administration & FDIC did an excellent job solving this potential crisis.

With respect to how all this this impacts mortgage rates, US bonds & treasuries are still the world’s safest parking for money, so SVB inspired concern surrounding regional banks has created a flight to safety with investment capital going into bonds, that demand pushes bonds prices up & yields/rates down.  As a result, the past week has seen the most significant improvement to mortgage rates since the November & December CPI (inflation) reports came in lower than expected.   Last week’s (3/14) CPI report came in exactly at market expectations of 6.0%, which allowed mortgage rates to hold on to gains.  This week’s Fed meeting is another potentially high impact event.  Wild week, but with respect to mortgage rates, they improved a bit last week and we expect inflation to continue gradually decrease and we still expect mortgage rates to be a little lower by end of this year – best guess would be mid/low 5%’.s

This past week, home loan rates improved to their lowest levels in a month in response to the closures of Silicon Valley Bank (SVB) and Signature Bank. Let’s walk through what happened as we approach the Fed Meeting next week.

“Bringin’ on the heartache, Can’t you see?, Can’t you see?” Bringin’ on the Heartbreak? Def Leppard.

SVB Failure and Rates

It’s important to remember that bonds enjoy bad news, so when word broke earlier this week that SVB was shuttered by the FDIC, home loan rates improved to their best level in six weeks. At the same time, the 2-year Note yield, which tracks Fed rate hike activity, plummeted from over 5.00% to under 4.00% in just a couple of days. This was an epic decline in rates not seen even after 9/11 or the Great Recession.

The good news (in the case of SVB and even Signature) is that bad management, failure to manage interest rate risk and a widespread desire for depositors to gain access to their funds (bank run) is what caused these banks to shutter.

In response, the Federal Reserve immediately created a line of credit and an implicit backstop to protect any depositors from any losses. This was good news and will hopefully limit any further fallout in the banking sector.

So, what does the Fed do with rates now that we have high uncertainty and contagion risk in the banking sector?

Stability > Inflation

Seeing that one reason SVB failed was in response to a rapid rise in interest rates, there is increased pressure for the Fed to limit rate hikes going forward and regain stability in the financial sector.

Just last week there was a high probability the Fed would raise rates by .50. Now just days later, there is a 75% chance of a .25% and a 25% chance the Fed doesn’t hike rates at all.

Next week’s Fed Meeting and press conference will hopefully have the markets feeling that the Fed is going to take every measure possible to ensure stability while they closely watch the pace of inflation decline.

Housing Numbers OK

It wasn’t all bad news this week. Housing numbers for February highlighted the little rate relief we saw in January and brought some optimism into February. Both Housing Starts (which is putting the shovel in the ground), and Permits (a leading indicator of future building), came in better than expectations.

This bodes well for housing in the months ahead, especially combined with the rate relief we are experiencing.

Bottom line: This week’s news in banking has changed everything as it relates to the Fed and rate hikes. The markets are suggesting the Fed will be cutting rates in the second half of the year which is a big change from the rate outlook just days ago.

Looking Ahead

Next week brings the Fed Meeting and monetary policy decision. As we shared, it appears the Fed is only going to raise rates by .25%, rather than .50% to foster stability in the financial markets and avoid contagion in the banking sector. What the Fed says will be important in bringing calm to the markets during this uncertain moment.

Good Economic News is Good News

Posted on by Liza Muhl

Interest rates hover near the best levels since September, despite several good economic readings reported. Let’s discuss what happened and see what is coming next week.

“Hey, alright now And don’t it feel good” – Walking on Sunshine by Katrina and the Waves

BY TERESA O’DETTE & EPHRAIM SCHWARTZ
O’Dette Mortgage Group
January 30, 2023

Economy Grew to Finish 2022

Gross Domestic Product, a measure of economic growth, for the Fourth Quarter 2022 showed the economy expanded at a 2.9% annual rate, down slightly from the 3.2% rate in the Third Quarter 2022. Seeing the economy grow in the back half of 2022 after negative growth in the first half of 2022 is good news.

This positive reading elevates the chance of a “soft landing” by the Fed, where they hike rates to slow inflation but do not slip us into a recession.

Unemployment Line is Historically Short

Initial Jobless Claims for December came in at 186,000…the lowest reading in 9 months. This is also good news as it tells us the length of the unemployment line. If the amount of people signing up for first time unemployment benefits remains near historical lows, it further lowers the chance of a recession. Moreover, it highlights the continued strength in the labor market, and this is paramount as jobs buy homes. Yes, we want interest rates to move lower but if someone doesn’t have a job or is in fear of losing their job, they can’t commit to a home purchase. Let’s hope the labor market remains strong as the Fed continues to hike rates to slow demand and lower inflation.

New Home Construction Costs Coming Down

The National Association of Homebuilders reported that building materials costs, less energy, are up 8.3% which is a big increase annually. However, the price growth is down a staggering 60% as input costs increased over 16% in 2021.

We should expect input cost growth to slow further in response to slower demand and further reopening of supply chains. This is another positive theme as we move through 2023.

Smaller Fed Rate Hike Still Priced In

One of the headwinds to the economy is the threat of higher short-term rates by the Federal Reserve. The good news there? After four consecutive .75% rate hikes, followed by a .50% hike in December, the financial markets are fully pricing in a smaller .25% hike at next week’s Fed Meeting.

The markets also believe the Fed will raise rates by another .25% in March and then pause to allow all the hikes that date back to last summer to seep into the economy.

This means the Terminal Rate, or the fancy way of saying the peak in the Fed Funds Rate, is going to be in a range of 4.75- 5.00%. From there we will have to continue to watch the standoff between the Fed who says they want to keep rates higher for longer. Additionally, with no rate cuts this year versus the financial markets, which are starting to “price in” as many as two rate cuts later this year.

Bottom line: The economy is showing mixed signals, but the labor market remains strong, and we are nearing the end of Fed rate hikes. So, the plan to land the U.S. economy softly and avoid a deep recession remains very much in play. That is good news for housing and the economy.

Looking Ahead

Next week is Fed week. As of this moment, the markets fully expect the Fed to raise rates by .25%. Anything other than that would be a surprise and generate a lot of market volatility. The Fed generally looks to avoid sending the market mixed signals but the markets will be on edge.

Have you experienced property damage due to the 2022/2023 Winter Storms?

Posted on by Liza Muhl

A federal emergency declaration has been proclaimed by President Biden and financial assistance may be forthcoming. While the federal government has not yet declared a disaster (a different designation that provides different resources) for California that could authorize direct financial assistance to affected residents.

Placer County requests those who have suffered damage to report it HERE.

If the issue is life threatening please dial 911. The intention of the survey is to allow the reporting of non-emergency issues during periods when the Emergency Operation Center is active. Your answers to the brief survey will help better document the extent of damage these storms have caused, so Placer County can continue to advocate for all available support for impacted residents.

With more weather still in the forecast, please use the Ready Placer Dashboard for the latest on road and weather hazards and to access resources to help protect your family and property.

Placer County Non-Emergency Reporting

Breaking News: CPI Report at 6.5%

Posted on by Liza Muhl

The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The U.S. Bureau of Labor Statistics (BLS) calculates the CPIas a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending.

BY EPHRAIM SCHWARTZ
O’Dette Mortgage Group of Synergy 1 Lending
January 12, 2023

January’s CPI (consumer price index) inflation data was released this morning and came in right at expectations of 6.5%.   This is good news as it’s notably lower than December’s reading of 7.1%, and CPI inflation has now moved lower for 6 consecutive months, with the last 3 CPI reports being the real catalyst in mortgage rates lower.   While this 6.5% CPI figure remains notably higher than the Fed’s target of 2% inflation, today’s report was still good news in the context of how inflation/mortgage rate are recovering from the distortion created by the Fed’s red line full throttle bond purchase program during Covid, and all supply chain related Covid issues which are mostly in the rear view mirror.  Here’s some context to share with clients and what it all means for mortgage rates.

We’re currently in this interesting window of time where it’s valuable for real estate investors to understand that increases to the Fed Funds rate does NOT mean mortgage rates increase.   Sometimes reiterating the mechanics of what determines mortgage rates (bond prices, which have move significant been determine by 2 things in the past few years:  the Fed’s bond purchase program and inflation) can instigate the question of; “why does it matter if the Fed hiking the Fed Funds rate isn’t what drives mortgage rates higher, it seem they’re usually moving in the same direction?”, in other words – does it really matter if it’s correlation or causation?

Answer:  yes – very much so, and the current market is precisely why it’s so important to clearly communicate the differences & mechanics for clients.  As of November, we are now in a phase where the Fed will continue to hike the Fed Funds rate, while mortgage rates are moving lower.    This is key for those looking to capitalize on a real estate opportunity before mass market sentiment pendulums back.

Here’s what’s going on with inflation mortgage rates:   CPI, a primary measure of inflation, had peaked at 9.1% this past summer.   The Fed hikes the Fed Funds rates (short term consumer debts) to fight this inflation.   The November & December CPI reports both came in notably lower/better than the market expectation, this benefited bond prices, and therefore mortgage rates.    Since mid-November we’ve been talking about how; unless we got surprisingly bad news on inflation in the months ahead, it looks like mortgage rates peaked that first week in November.   Today’s CPI data coming in right at expectations further reinforces this trend.   To put into perspective, the 10 yr Treasury, which is what Jumbo mortgage rates follow, hit ~4.35% that last week of October, then had it’s best day of the year the same day the November CPI report came in lower than expectations, then again moved another leg lower after the December CPI data, and is settled in today at ~3.4%.    This is significant good news as we all know higher mortgage rates are part of the downward pressure on real estate prices, and vice versa.

We’re still seeing Jumbo rates today a bit lower than conforming, and the larger loan amounts actually pricing the best.   For example today, a ~$2.0M purchase with 20% down, can get a 30 yr fix in the 5%’s with no points, and as low as ~5.25% with a little over a point.   This is a historically healthy place for mortgage rates to be.

In sum, the headlines will soon again talk about rates moving higher when the Fed increases the Fed Funds rate again, which is coming, and meanwhile mortgage rates have already come down to a healthy level.