Some straight-forward tips for today’s buyers:

For those of you looking for a “perfect” home, there is no perfect home. I’ve had clients build from the ground up what they thought would be “perfect” only to discover when they moved in there are quite a few things they would change. Do you see how that would happen?

And if price is the issue, be careful not to be stuck on “principle” and wanting a “good deal” even in today’s market. My experience with many, many clients is that they don’t miss the money, but they do miss the house if they don’t end up buying it.

Today’s Rates

30 year fixed with 1 point 5.375%

30 year fixed with 0 points 5.875%

5/1 Jumbo with 1 point 6.00%

FHA 30 year fixed with 1 point 5.375%

FHA 30 year fixed with 0 points 5.875%

Mortgage rates plummet

The $800 billion infusion of federal funds into credit markets has an immediate impact on mortgage rates.

NEW YORK (CNNMoney.com) — Mortgage rates fell sharply yesterday after the administration announced that it will pump another $800 billion into credit markets to free up frozen consumer and mortgage lending.

That number dwarfed previous government actions aimed at bolstering the mortgage lending market.  

“The feds agreed to spend a half a trillion dollars to buy up mortgage backed securities and another $100 billion to fund lending for Fannie and Freddie; we’re not talking chump change anymore,” said Keith Gumbinger of HSH Associates, a publisher of mortgage information.

Rates averaged 5.77% for the day on a 30-year, fixed rate loan, down from 6.06% Monday, according to Gumbinger. They fell as far as 0.75 percentage points during the day, according to Orawin Velz, Associate Vice President for Economic Forecasting at the Mortgage Bankers Association.

That could save a typical homebuyer more than $90 a month on a $200,000 mortgage.

“The government action was geared to bringing mortgage rates down,” said Velz, “and it did.”

The drop was the largest since early September, when the administration announced that it was taking control of mortgage giants Fannie Mae and Freddie Mac , and stemmed from similar market sentiment.

Both actions sought to give confidence to the investment community. Most mortgages are sold to investors in so-called secondary markets but with foreclosure rates so high and expensive write downs of mortgage-backed securities so common over the past several months, investors had fled the mortgage market.

Instead of buying mortgage bonds, they’ve been snapping up Treasurys, a virtually risk-free investment. That showed up in the falling yields of Treasury bonds and the greater difference between Treasury yields and mortgage interest rates.

Normally, interest rates on 30-year fixed rate mortgages are only slightly higher than yields on 10-year Treasury bonds, about 1.5 percentage points. That difference compensates mortgage investors for taking on extra risk.

Lately, however, because investors have perceived, quite reasonably, that risks of mortgage-backed securities were far greater than previously supposed, they demanded greater reward for investing in them.

That sent the difference, or spread, between mortgage interest rates and Treasury yields to 2 percentage points or so over the past year. That had widened even more recently, to about 3 percentage points, before the government took action yesterday. Even after the big drop in rates, the spread is still more than 2.5 points.

Whether the government action will lead to lower mortgage rates over the long term remains to be seen. “In theory, it should stimulate investor demand but there are a lot of unforeseen things that can occur,” said Velz.

She initially thought the Fannie-Freddie takeover would have much the same long-term impact because it meant that the government was guaranteeing all the loans the two were backing.

“But the government started backstopping almost everything,” she said, “so demand for mortgages declined and the spread increased again.”

This time might be different, according to Mike Larson, a real estate analyst with Weiss Research, but he’s far from certain.

“There’s been some short-term bang for the buck,” he said. “We have to see if it sticks.”

Helping it stick could be the downward pressure from deflation concerns and the still unusually wide spread with Treasurys.

“Even if the spread just got a little tighter you’d get some added horsepower,” said Larson. “We could see rates in the low fives pretty soon.” 

After years of being concerned about inflation, the Fed is now concerned about deflation. So what exactly is deflation? Deflation is when prices drop, which generally is due to lack of demand, and therefore lack of pricing power. With the economy slowing down, we are hearing economists forecast that we may be in for a deflationary recession. In a deflationary environment, investors flee into fixed instruments like Bonds, because the fixed payment received would actually buy them more goods and services over time as prices decline.

So what does this mean for home loan rates? Remember, home loan rates improve as Bond pricing moves higher - and more demand for Bonds would mean higher prices for Bonds. In the spring of 2003, when Alan Greenspan uttered the “D” word, deflation, Bonds rallied 400bp in just a few weeks, bringing a significant drop in home loan rates. Of course, the economy is different right now, but as more money may be headed towards Bonds in a deflationary environment, we could again see a significant improvement in home loan rates down the road.

Polls show 83% of Americans feel the Country is on the wrong track. What is your opinion on Friday night’s debate and the future of our economy?

Active Residential Listings: 1097

Active Residental Listings in Arrowhead Woods: 479

Pending Residential Sales: 144

Sold Residential Properites month to date: 53

MLS wide Median Residential Sold Month-do-date: $215,000 (#59)

Arrowhead Woods & Lake Front Median Sold Month-do-date: $488,000 (#18)

Source: MLS, Rim of the World Association of Realtors

Active Residential Listings: 1100

Active Residental Listings in Arrowhead Woods: 475

Pending Residential Sales: 142

Sold Residential Properites month to date: 42

MLS wide Median Residential Sold Month-do-date: $212,500 (#50)

Arrowhead Woods & Lake Front Median Sold Month-do-date: $402,000 (#15)

Source: MLS, Rim of the World Association of Realtors

·                The chart below shows closed sales from June 1^st, 2008 through August 20^th 2008 for all cross-property listings from Crestline to Green Valley Lake: 

 The chart below shows sales for Out of Area, including Big Bear, Highland, San Bernardino, Pomona, Apple Valley, Hesperia, & Victorville: 

First-time home buyers accounted for nearly one-half of all new and existing home sales in many areas of the country during the first quarter of 2008, according to HouseHunt’s “Current Market Conditions” random survey of member-agents. Historically, first-time buyers represent about one-third of all buyers.

The latest national survey showed first-time buyers at 46%, an increase of seven percentage points over the fourth quarter of 2007 and 12 points higher than the third quarter of 2007.

Much of the first-time buyer activity in the first quarter was reported in the West (up 17%), Texas (up 26%), California (up 25%) and Florida (up 12%). A decrease of 22% was reported by member-agents in the Chicago metro area.

“Stepped up activity by first-time buyers around the country is not surprising, given widespread home price declines from foreclosures and other negative market pressures,” said Glenn Tinturin, Managing Broker of Windermere Fine Properties / Lake Arrowhead. “Our agents say they are receiving record numbers of Internet leads from people looking for homes, so the pent-up demand is there. Many of these leads are being converted into sales. The challenge is to convince sellers sitting on the sidelines that they have to reduce the price of their homes to be able to purchase another home — also at a reduced price — and at favorable financing rates.”

With prices falling in many parts of the country and the number of foreclosures rising, a small yet growing number of bargain-hunting buyers are seeing an upside to the real estate market. MAKING SENSE OF THE STORY FOR CONSUMERS First-time homebuyers priced out of the market during the frenzied 2001-2005 market are among those most attracted to real estate today. In November 2007, 39 percent of buyers were first-timers, up from 36 percent in 2006, according to NAR. The key impediment to buying? Meeting tighter bank qualifying criteria. International buyers increasingly are looking at opportunities in the U.S. real estate market. Declines in the value of the dollar against other currencies and lower prices translate into a discount of up to 30 percent for some foreign buyers. Investors from other states also are seeking bargains in those markets hardest hit by the real estate downturn. Some are even buying properties sight-unseen for conversion to rentals until the market heats up again – a risky proposition, according to some observers.

“My husband and I are in the market for our first home. We like our agent but she hasn’t been an agent for very long and she can’t give us a straight answer about how much below the list price we should offer. We don’t want to spend too much with the current real estate market. What do you think?”

Assuming you are here on the mountain, here’s what I recommend:

Only search and view homes that are within your price range. If you can afford a $300K house - don’t look at $350K houses in the hope that those sellers will come down.

When you find a home that meets your wants and needs, consider its relative value to other comparable homes that you have viewed. If this home compares favorably, then chances are it is priced properly. If it seems overpriced, it probably is.

Your agent should then do a market analysis of the recent sales of the closest comparable homes to get a feel for what kind of value an appraiser is going assess.

Your agent should then evaluate the current market for this home - taking the number of similar listings and absorption rate into consideration.

Finally, look for motivating factors. If the home is vacant, or if your agent can discover the seller’s motivation to sell… you can use that as the final tweak.

Some properties - recently listed at an aggressive price - will sell for their asking prices… even in today’s market. There are seasoned agents out there that that price properties based upon the goals of their clients. Some clients want top dollar, while others want a quick sale.

There is no magic percentage you can use to formulate a good offer. If the property has the amenities you are looking for, and is priced well in comparison to the competition, it is probably priced right.