Just LEASED: Furnished 1bd at Cristalla (1104), $2000 PM

NEW Listing: Fully Furnished 1 bd at Seattle Heights, $1695 www.seattlerentals.com/8674; Apps Pending: Madison Tower 1604 & Cristalla 1104

“What happens in Washington doesn’t stay in Washington.” And that was especially true last week, as the effect of Congress’ actions regarding the U.S. automakers rippled out into the markets.

Bonds and home loan rates spent last week testing their previous best levels of 2008, and finally rallied on Friday to reach their best levels not just of 2008 but of the last five years. Stocks, meanwhile, were under pressure throughout the week waiting to see whether Congress would approve emergency loans for GM and Chrysler. While the House of Representatives approved the measure Wednesday evening, the Senate rejected the $14 billion bailout for the US automakers on Thursday evening, citing a lack of wage concessions by the United Auto Workers (UAW). Friday, the White House announced that the government may be willing to use Troubled Assets Relief Program (TARP) funds to prevent an immediate collapse of the auto industry. One thing we can be sure of in this matter is that the volatility for both Stocks and Bonds will continue while this issue remains unresolved.

There were other important happenings in Washington to note last week. Five members of the House Financial Services Committee are sponsoring a bill that would force the SEC to reinstate the uptick rule. The uptick rule is a former rule established by the SEC that requires every short sale transaction to be entered at a price that is higher than the price of the previous trade. So what would the reinstatement of the uptick rule mean for Bonds and home loan rates? The reinstatement of the uptick rule would do a lot to quiet the excessive volatility in both Stocks and Bonds.

In other important news to note last week, the Retail Sales report for November showed that retail sales fell for a fifth straight month. Meanwhile, Initial Jobless Claims reached their highest level in 26 years. Both of these reports are indicative of the current economic climate, and given the events of the week in Washington, they had minimal impact on Bonds and home loan rates.

As mentioned above, Bonds and home loan rates rallied Friday afternoon to reach their best levels of the year. As a result, they ended the week .25 percent better than where they began.

Tuesday will be a big day this week as more news from Washington may rock the markets. First, the Fed will be holding another regularly scheduled meeting of the Federal Open Market Committee (FOMC). Look for the Fed to cut the Fed Funds rate (the rate for overnight loans between banks) by a half point, to 0.50 percent. While a cut by the Fed often causes home loan rates to rise (because a Fed cut can lead to inflation, which is the arch enemy of Bonds and home loan rates), the deflationary environment we are currently in may prevent home loan rates from worsening.

Another event to note on Tuesday is the release of November’s Consumer Price Index (CPI) Report. This widely watched inflation indicator tells us how much more expensive goods and services are this month over last month, and with recent concerns on deflation - this will be an important report to watch.

As you can see in the chart, Bonds and home loan rates ended the week at their best levels of this year and in over five years. Let me know if you want some more information about how you can take advantage of the current situation.

Patrick Dunn, Westwood Mortgage Inc. & MMG Weekly
patrick@westwoodmortgage.com / http://www.certifiedplanning.com

Last week I was interviewed by Angela King at Q13 about current rental market conditions and it looks like it surfaced this morning- click here for the entire clip!

I am glad the interview came up when it did because our rental market has been severely impacted by the decrease in sales activity and financial crisis.  Hundreds upon hundreds of owners in the Seattle area have recently taken their condos and homes off the sales market and placed them into the rental pool in hopes of benefiting from our “stellar” rental market…but only to find out they are about 4-5 months too late.

Every Monday morning, SRG agents get together to discuss market trends/experiences and for the past 3 months, we have all been feeling the pressure of an oversupply, decrease in demand, and the dreaded reduction in rental rates.  I personally started to feel this crunch in August when there were a couple properties that just wouldn’t move- properties that would have leased for $2500 months prior (and in mere weeks) were below $2000 and still sitting.

Here are a couple issues that come up during our discussions, please feel free to comment or contact me with questions.

Tightened Pocketbooks: Due to the financial strain and economic state, renters have definitely been paying more attention to their bottomline and planning for the worst.  The most common scenario is that people are trying to consolidate and downsize in order to rent a 1 bedroom + den instead of needing a 2 bedroom or a townhouse instead of a home.  Renters are more price sensitive than ever and in some cases lower rental rates are the motivating factor rather than quality of building or home finishes- could come down to a difference of $50!

Apartments vs Condos/Homes: We have two rental markets- the private market with individually owned condos and homes, and the apartment rental market.

One of the challenges the private market has in competing with the larger apartment buildings is the ability to offer specials like “1-2 Months FREE” or “waived security deposits.”  Private landlords have the flexibility to reduce the rental rates to compensate tenants for such specials but in no way should reduce standard security deposits as they take on more liability when renting their property.

Some advantages the private market has is that the monthly rental amount often includes utilities, parking and additional storage.  These items are covered in HOA dues and therefore passed down to the tenant in a lump sum or included in the monthly rental amount.  This is easily missed by renters when searching so be sure to clarify what is included!

Note: Over 6600 apartment units are supposed to come on the market in 2009 and even more in 2010- just one of the many items discussed at the IREM Forecast Breakfast last Friday.  One of the better Forecast Breakfasts I have attended!

Where Are All the Renters? What we could be experiencing right now is an extreme case of the cyclical blues in combination with all the above.  We are approaching the dead of winter and typically Spring and Summer are the most common months for moving- so lets just hope that activity bursts in March!  We are seeing signs of this and have been getting a lot of inquiries for Feb/March move-ins…just hoping that the properties available NOW, don’t have to wait that long.

So in short, we are advising all of our clients to be market sensitive and price aggressive.  Renters have been starting their searches a lot earlier than in the past (1-3 month prior to their desired move-in) and rental rate negotiations are occurring left and right.

I hate to be a total pessimist so I will depart on this note… although this all may sound grim, relative to other markets, Seattle is still amongst the top in the nation!

JUST LEASED: 2424 Magnolia Blvd, $3900 per month PENDING APPLICATION: Cristalla #1200, $2500 per month

I just received this Press Release from buyers of the “A” flooorplan at 1521:

“Opus NWR Development LLC, the developer of the Fifteen-Twenty One Second Avenue condominiums, marketed the building as housing the premier condominiums in all of Seattle.  However, despite Opus’ representations about the grand scale and spaciousness of the condos, a number of buyers for “A” unit at  the building — which was represented to be the best unit carried a matching pricetag — have discovered on their initial walk-throughs that they were hood-winked into reserving the “ugly stepsister” unit of the entire project.  Instead of the 8′ foot entry door, open floorplan, and high ceilings they were promised, the buyers of unit A have discovered that the long, narrow entry to the unit is more befitting of an underground bunker than the “spacious living” they were promised (and paid for).  As a consequence, several buyers of unit A have retained Dan Donlan of the law firm of Lane Powell to represent them against the developer.  In addition to the design problems with unit A that have been admitted by on-site Opus agents,  the owners have discovered shoddy workmanship and a laundry list of defects.   However, instead of trying to resolve these issues with the tenants, Opus has thus far tried to blame the complaints on current market conditions suggesting the buyers are only complaining because their units are not worth as much as they once were. Despite the suggestion that the buyers are only looking to back out of their deals, none of the buyers has asked for a refund and have only asked to have the defects fixed.”

The “A” floorplan is located on the NW corner of the building and is approximately 1833 SF.  More information to come!

On another note, I did tour 1521 a couple weeks back and have to say that I was really impressed with the building appointments, amenities and finishes.  I toured #1602 (which is soon to be on the market for lease) and concluded that the 02 stack (also known as “C”) might be among the best…the SE corner has front row views of Elliott Bay, Pike Place Market, corridor views of 2nd Ave ending at the beautiful Smith Tower, easterly views of Lake Union and gorgeous city lights at night!  It just started to get dark when we were doing the walk-through- one of the best “in-city” city views I have seen!

With over 1740 SF, there are two bedrooms and two full bathrooms, a very large living area with an additional sitting space/office, a gigantic laundry room/pantry and the “glass room.”  I am sure most have heard about this unique 1521 feature but for those of you who haven’t, the rooms are located off of the living/kitchen spaces and serve as a indoor/outdoor terrace.  There are bi-fold windows along the exterior window wall that open above a glass guard panel allowing screen-free, fresh/open air into the room.  Most “glass rooms” have fireplaces in them (which is a little awkward for indoor use but nice for the outdoor space) and have Italian porcelain tile flooring.  I will have more pictures and details on this unit after it closes mid-month!

Another feature worth mentioning…raw studio spaces/hobby rooms.  These rooms (which often look like large storage spaces) have been offered in several condominiums downtown but are often not publicly marketed.  Typically these units surface in buildings where there is above ground parking and therefore “dead space” within the garage.  The developer builds the shell, in most cases with plumbing and electrical, and sells them to homeowners who then either use the space as glorified storage rooms, art studios, office spaces, etc.  It is up to the homeowner’s to build the space out so the possibilities are endless.  1521 has several of these units with 14′ ceilings and city/water views- #1602 has the option of leasing one of these spaces, so please ask for details.

Click here to reference the 1521 website.

Last Week in Review
“I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN.” Yogi Berra. And while last week’s Jobs Report wasn’t the worst record breaker of all time, it showed a loss of 533,000 jobs during the month of November, which represented the most job losses the US has seen in 35 years. And adding more pain to the Report were heavy downward revisions for September and October, which erased an additional 199,000 jobs. In addition, last month was only the fourth time in 58 years that our economy lost over 500,000 jobs.

So what does this mean for Bonds and home loan rates? We first have to acknowledge that we are not in a typical trading environment, where weak or negative economic reports always lead to improved pricing for home loans and vice versa. The dynamics of hedge funds de-levering - where fund managers are selling all types of securities with whatever timing they need to, in order to raise capital - have caused unprecedented volatility of late, and it is not quite clear when that will end.

The Fed has indicated that they would like to be a buyer of Mortgage Bonds, which has resulted in attractive, lower rates right now. But as stated above, the trading environment is extremely volatile, and opportunities to capitalize on lower rates that make sense should be taken advantage of. There have been recent rumors of interest rates being brought down towards 4.5% by the Treasury. This irresponsible release included no definitive plan, no indication of who might qualify, or what the restrictions would be. Like many other recent legislative “solutions”, the restrictions might be very tight, with income limits set very low, and as a result, helping very few people. Remember, it may make sense for you to act now, and take advantage of current historically low rates…with the possibility of refinancing should rates decline further.

In other news to note from last week, the Bank of England and the European Central Bank both cut their key benchmark interest rates in an effort to revive their sagging economies. The reduction in rates was expected as part of a global coordinated effort, and our Fed is widely expected to cut its benchmark rate during its meeting on December 16. While a cut by the Fed often causes home loan rates to rise - because a Fed rate cut can lead to inflation, which is the arch enemy of Bonds and home loan rates - the deflationary environment we are currently in may prevent home loan rates from worsening significantly after the Fed cut.

Bonds and home loan rates tested their best levels of 2008 throughout last week, but could not improve beyond them. As a result, Bonds and home loan rates ended the week slightly worse than where they began…even in the midst of rumors of rates declining as mentioned above.

GAS PRICES SURE HIT A RECORD EARLIER THIS YEAR, BUT NOW THAT THEY HAVE IMPROVED, THE IRS HAS ISSUED NEW MILEAGE RATES FOR 2009. SEE THIS WEEK’S MORTGAGE MARKET VIEW FOR ALL THE DETAILS!

Forecast for the Week
We will likely see another volatile Friday this week, with the release of several important reports at 8:30am ET. First we have the Producer Price Index, which measures inflation at the wholesale level. Given the recent whispers of deflation, this will be an important report to watch. Consumer Sentiment will also be released?but given the state of the economy, the results likely won?t be much of a surprise.

In addition, we?ll get a read on consumer spending patterns with November?s Retail Sales Report. This Report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. Black Friday kicked off the holiday shopping season last week and the National Retail Federation amazingly estimated that shoppers spent 7.2% more than last year?but this is likely a result of the deep discounting seen by retailers, and it could well be that many shoppers who normally wait until December to get started on holiday purchases went out early to take advantage of the sales. Don?t be surprised if this is a horrible report, as not only have the holiday shopping lists become shorter, but the amount spent for each individual has likely been reduced. In any event, it will be important to see what the report reveals, as a lousy report should be friendly towards home loan rates.

Remember, as Bond prices move higher, home loan rates move lower. And as you can see in the chart, Bonds have stalled out in their improving direction for the time being, after making some great gains over the last month. Home loan rates currently stand at historic lows.

Patrick Dunn, Westwood Mortgage Inc. & MMG Weekly
patrick@westwoodmortgage.com / http://www.certifiedplanning.com

Exclusively FOR LEASE- Four Seasons 2bd+den/2.5ba Private Residence http://www.seattlerentals.com/10671, $15,000 pm. Photos coming soon!