Come to the 59th Coconino County Fair to enjoy traditional county-fair fare from corn dogs to cotton candy, from carnival rides to fine art displays. Featuring livestock competitions and 4-H auctions. Music by local, regional, and national headliners. You’ll find politics in full-swing at the special-themed booth areas and vendors of all kinds.

The County fair kicks off Friday and runs through Monday at Ft. Tuthill County Park.  Exit 337, off I-17. Admission prices range from $4-8, with children under five free. For a full schedule of Coconino County Fair events, click here.

The Preliminary 2nd Quarter reading for Gross Domestic Product (GDP) was revised higher to 3.3%, far exceeding expectations of 2.7% and was much more than the 1.9% that was previously reported.  Next month we will see the Final reading for the 2nd Quarter GDP - but for now, this number is surprisingly strong and has boosted Stocks while pressuring Bonds lower.

Initial Jobless Claims were reported at 425,000, in line with expectations and the markets had little reaction.  Oil prices have climbed back above $120 a barrel as Hurricane Gustav continues to makes its way towards the Gulf of Mexico's oil and gas platforms. 

At 1pm ET, Bonds have another round of supply hitting the market by way of $22 Billion in 5-year Treasury Notes.  Yesterday's 2-year Note auction had so-so results, but today's Five-year may be more closely followed, so stay tuned.

Bonds have enjoyed a nice little rally after bouncing off of the 50-day Moving Average.  We can continue to carefully float, but don't stray too far from the lock trigger - prices are now testing a tough ceiling of resistance at the 100-day MA and are already off the best levels of the day.  Even if prices do break above this ceiling, the Bond will have it's work cut out to break above the 200-day Moving Average, just 49bp above current levels. 

Featured Home is MLS #132763

If you have never visited this street in northeast Flagstaff, you will be amazed by the wonderful location of this week’s featured listing. This gem of a home is located on a cul-de-sac across from a treed and inviting National Forest Service parcel. The City of Flagstaff has authorized purchase of this treasured open space when the NFS sells it. Although you are in the midst of paradise (the neighborhood is known in Flagstaff as Paradise Hills), you’re only a five minute drive from Flagstaff Medical Center and less than ten minutes from central downtown Flagstaff.

This Flagstaff home has been lovingly maintained by the same owner for decades and reflects the homeowner’s care. You’ll love the mature trees, the solidly established lawn, and the raised garden beds. You’ll find high-quality Berber carpet and ceramic tile throughout the home and duet blinds in the windows.

The living room and master suite have useful and attractive built-in shelving. The furnace and hot water heater both have been replaced in the last 5 years. The sale will include the washer, dryer and refrigerator – a great bonus for a first-time home-buyer.

The floor plan of this Flagstaff home includes two separate living areas. The front room has an attractive fireplace. The master bedroom is large, with a private exit to the backyard. Speaking of the backyard - it's as gorgeous as the front, is fully fenced, and also has a dog run.

The home is priced to sell in the Flagstaff market. For details and more pricing info, visit this Featured Flagstaff Home Listing by clicking here. The home is Northern Arizona MLS #132763. You can search the entire Flagstaff MLS from our website.

Come take a look - this is a rare opportunity you won't want to miss!

The National Association of Realtors^® released its existing home sales data for July on Monday. The numbers show that sales increased to the highest level in five months, accompanied by a drop in prices. Read the complete press release here: July Existing-Home Sales Show Gain.

According to the NAR data, the national median home sale price was down 7.1 percent from July 2007, proving again that lower prices bring more sales. In contrast, the Flagstaff data for July residential real estate sales show a significant drop in the number of sales from 2007, but an increase in the median home price.

Lawrence Yun, NAR chief economist, said home prices in some regions of the country could soon increase. “Sales have picked up significantly in several Florida and California markets. Home prices generally follow sales trends after a few months of lag time,” he said. “Still, inventory remains high in many parts of the country and will require time to fully absorb.”

Indeed, the number of homes for sale nationally rose 3.9% in July compared to June. However, the rise in supply results from a sharp increase in condo inventory; the single-family supply declined. The Flagstaff inventory very nearly matches the national supply – about eleven months’ worth of homes for sale (homes for sale/homes sold in the last month).

In Flagstaff, we need to keep a close eye on the Phoenix market. I believe that the Flagstaff market will not begin to recover until some months after the Phoenix market turns around. Right now, the Phoenix area has a lot of inventory to work through before that happens. Whether Flagstaff home prices will drop further, or whether they will just remain stagnant, is impossible to predict.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said: “We hope the new tools in the hands of home buyers from the recently enacted housing stimulus package will spark a sustained sales uptrend in the months ahead.” Those “tools” consist of a $7500 tax credit (available to Flagstaff home buyers) and a property tax credit for those who purchase in 2008.

Market Comment

Mortgage bond prices rose last week pushing mortgage interest rates lower.  Stronger than expected producer price index data was overlooked as oil prices remained lower the beginning of the week which eased inflation fears.  Unfortunately oil prices spiked higher towards the end of the week with a $6/barrel swing on Thursday alone.  Traders were concerned about international political tensions with Russia.

For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.

The preliminary gross domestic product data Thursday will be the most important event this week.  The bond market closes early Friday in advance of the Labor Day Holiday.  The shortened trading week may lead to market volatility.   

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Existing Home Sales	Monday, Aug. 25, 10:00 am, et	Up 0.8%	Low importance.  An indication of mortgage credit demand.  Significant weakness may lead to lower rates.
Consumer Confidence	Tuesday, Aug. 26, 10:00 am, et	53.0	Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
New Home Sales	Tuesday, Aug. 26, 10:00 am, et	Down 1.3%	Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Fed Minutes	Tuesday, Aug. 26, 2:00 pm, et	None	Important.  Details of the last Fed meeting will be thoroughly analyzed.
Durable Goods Orders	Wednesday, Aug. 27, 8:30 am, et	Up 0.1%	Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Preliminary Q2 GDP	Thursday, Aug. 28, 8:30 am, et	Up 2.7%	Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Personal Income and Outlays	Friday, Aug. 29, 8:30 am, et	Income down 0.1%, Outlays up 0.3%	Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
U of Michigan Consumer Sentiment	Friday, Aug. 29, 10:00 am, et	62.3	Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Fed Minutes

The Federal Open Market Committee decided in December of 2004 to reduce the lag time between the open market committee meeting and the release of the minutes from six to eight weeks to only three weeks.  The minutes from the meeting have the ability to cause mortgage interest rate volatility because they provide more policy details than the standard post meeting release.  Most importantly the minutes provide the Fed’s complete economic analysis and the various opinions of individual Fed members.  There is typically an overwhelming consensus among the members.  However, there can also be dissension, which often causes uneasiness in the financial markets.  The release often comes and goes without much uproar but keep in mind that if any of the text seems troubling to analysts you can see market volatility.

Remember that mortgage interest rates remaining historically favorable.  Capitalizing on current levels is wise amid the recent geopolitical instability across the globe.  Inflation fears could be stoked if Russia reduces the flow of oil in Eastern Europe.  Inflation, real or perceived, generally does not bode well for mortgage bonds and could cause rates to rise.

Flagstaff Unified School District schools are back in session, and Northern Arizona University’s academic year is about to begin. With these turns of the calendar, NAU athletic events come back to town. Meanwhile, the Arizona Cardinals completed their last pre-season practice in Flagstaff Thursday afternoon.

But the summer weather is not over, and neither are the open-air, weekend events at Heritage Square in downtown Flagstaff, where you’ll find an outdoor movie Friday night, after some entertaining music beginning at 6 p.m. The summer concert series continues Saturday afternoon with the Porchlights at 2 p.m. and on Sunday at 2 p.m., when Backroads, a local Flagstaff bluegrass group, will perform.

This weekend only, Flagstaff Light Opera Company will perform The Gondoliers at Sinagua High School. Click here for details of the performance times and ticket prices or call 928-779-0219. The classic Gilbert and Sullivan show is a musical farce featuring infant marriage, unknown identity, unintentional bigamy, “republican fallacies,” and the Spanish inquisition.

Saturday night, you can enjoy art and music at the Coconino Center for the Arts. Billed as Prelude to the annual late September Open Studios weekend, the Saturday evening celebration will feature artwork by local artists who will open their studios for tour. Enjoy live music, good food and conversation with the artists.

Six Degrees of Separation continues this weekend at the Doris Harper White Community Playhouse, home of Theatrikos Theatre Company. And, there are some great exhibits to visit at the Museum of Northern Arizona.

If you decide that this is the weekend to buy a Flagstaff home, give us a call: Team Heitland at RE/MAX Peak Properties!

Have a great weekend!

Rate cuts, and new loans

The Fed has slashed interest rates over the past year to 2% from 5.25%, but that's the least of what they've done. In addition to traditional rate cuts, the Fed has instituted several innovative emergency loan programs to provide liquidity to commercial and investment banks.

The Fed has now moved to the sidelines - unwilling to move rates lower due to the threat of inflation and having promised to keep lending cash to financial institutions until at least the New Year.

My guess is that the programs will need to be in place longer to prop up the skittish mortage market.  The recovery to the financial institutions will not happen in the next 4 months. 

Despite this frenzy of action, there is no end in sight for the financial market turmoil and the related housing market downturn, many experts say.

"I have a feeling that it is far from over," said Barry Eichengreen, an economic historian at the University of California at Berkeley. Eichengreen and other experts see mounting credit woes for banks from credit cards and other consumer loans.

I think this is a big issue in front of us.  If consumers do continue to grow their credit card debt and with the resets on interest rates in place with the credit card companies now surprises are ahead of us.  What I mean is if you miss even one payment date your interest can skyrocket on not just that account but all of your accounts.  Be aware of the interest rate resets!

"I think there will be another wave of mortgage-related problems, emanating not from the subprime part of the market anymore, but from people with slightly more normal credit and mortgages," he said. "It is entirely plausible that there will be some hedge fund failures and commercial bank problems."

"I think this is going to bubble along for a while now," he said.

Former IMF chief economist Ken Rogoff reportedly told an audience in Singapore earlier this week that a large U.S. bank was likely to collapse in the new few months.

Since the beginning of the year, financial markets have reeled from one crisis to the other and remain very fragile. "You don't have the resilience now to shake off bad news," said Phillips, now dean of the business school at George Washington University.

Fannie, Freddie

The current crisis surrounds the worsening conditions of Fannie Mae (FNM) and Freddie Mac (FRE) , with many expecting a government bailout of the two mortgage giants.

To be fair, the economy has navigated the top part of the mountain in pretty good shape.

"I don't mean to sound like Phil Gramm...but there has been a huge amount of financial market disruption and the actual impact on the real economy has been limited," said Adam Posen, deputy director of the Peterson Institute for International Economics.

Gramm, a former senator, quit as a top economic adviser to Republican presidential candidate John McCain, after he said Americans were "whining" about the economy.

So far this year, there hasn't been a negative gross domestic product number.

And it is very easy to overstate the problems of the financial system, warned Minneapolis Fed Gov. Gary Stern in a television interview earlier this week.

But other economists are simply unsettled.

"It is not as if there are not some positive signs, but to me they are not consistent enough for me to be positive," said Phillips.

The fact remains that the first necessary condition for repair of the markets - the bottoming of the housing market - is not in sight. Until the housing market bottoms, it will not be clear how many losses the banks need to realize.

This statement you need to take city-by-city and actually neighborhoods within each city.  Many areas have bottomed out and are seeing price stability.

"Looking ahead, there is still substantial uncertainty about the ultimate realized magnitude of loss on mortgages in 2006 and 2007, said Richmond Fed President Jeffrey Lacker this week. "That uncertainty is out there - and that means still the potential for other shoes to drop."

"We are going to continue to see some at least moderate level of stress," said Lacker.

Robert Eisenbeis, a former researcher at the Atlanta Fed, said he is not confident that financial institutions have taken all the losses that they will.

Fundamental questions remain about the business of investment banking and commercial banks. "I don't think anybody knows yet how big and how viable a particular business is going to be," Eisenbeis said.

It has been a wild trading day so far.  Mortgage Bonds opened the day 12bp higher than yesterday's close, which suggests a lot of buying pressure at the beginning of trading.  However, prices have since turned lower, giving up all the early gains and more, as Traders take some profits from recent rise in Bonds.  The Bond is already well off the best levels of the day.

Initial Jobless Claims were reported at 432,000, which was basically inline with expectations.  The more closely watched four-week average of new state filings rose to 445,750, the highest since the recession of 2001.  The report, while looking bad, is being somewhat discounted as a new federal program continues to skew the new claims in recent weeks.

Oil is taking off today, now up close to $120 per barrel, after trading near $111 a barrel just a few days ago.  This is adding some selling pressure to both Stocks and Bonds.

The Philadelphia Fed Index was reported at -12.7, which was very close to expectations, and Leading Economic Indicators was reported at -0.7%, which was worse than expectations of -0.3%.  These reports did little to move the markets.

Even though Bonds are trading lower today, we have benefited from either an improvement re-price yesterday or better pricing this morning, thanks to yesterday's big rally.  But, going forward we have to be very cautious.  The recent rise in Bonds has pushed them into "overbought" territory, which makes them ripe for a reversal lower.  After yesterday's powerful move higher, Mortgage Bonds separated themselves from the 50-day MA.  But, this morning's wild reversal lower after the stronger open may lead to further price deterioration and another visit down to the 50-day MA, still 33bp below current levels.   Since the pricing losses happened before rate sheets were delivered, we can carefully float for now, but keep a close eye on the pricing windows on the Bond Page as the market is very, very volatile.

Of course I will be watching closely and will alert you if you need to take action.

The Housing and Economic Recovery Act, which became law at the end of July, provides many changes for homeowners and would-be homeowners. One small item is that homeowners who do not itemize their deductions will be able to deduct $500 in addition to their standard deduction in acknowledgment of the state property taxes that they pay and which would be deductible if they itemized. The additional deduction is $1000 for married couples filing jointly.

Homeowners who can take advantage of this provision of the Housing Act are likely to be people who do not have mortgages – otherwise their mortgage interest payments would put them outside the category of the standard deduction. This provision would also give an additional bonus to people who purchase so late in the year that their mortgage interest payments do not reach the level where they exceed the standard deduction available. That is, in addition to the much-touted $7500 so-called tax credit, which is a major feature of the law. 

This provision applies only to 2008 tax returns (filed in 2009).

To purchase your Flagstaff home in 2008, and tax full advantage of these tax credit provisions, contact Team Heitland at RE/MAX Peak Properties!

MLS #132508 - 1929 Deer Crossing, Flagstaff, AZ

If you’re looking for a Flagstaff home in a great neighborhood at, or below, the median price for the Flagstaff home market, you’ll want to put this home on your list of “must-sees.”

The home comes with central air-conditioning. The real wood floor in the family room is a “knock-out” and you’ll love the light that the windows on three sides of that room bring into the house. The living area has a very open floor plan and features a classy gas stove to warm up with quickly on chilly winter evenings. Solar tubes lighten up the home in other parts of this three-bedroom, 1653 sq. foot home.

Outside, you’ll find mature landscaping with real grass, shade trees, and a horseshoe pit. The back and side yards have a perimeter fence and features both a covered and an open patio. In addition, there is a storage shed on one side of the home and RV parking available.

The home is located in the Sinagua and Knoles school area.  A hop, skip and jump to the Foxglenn Regional City Park. The home is also just down the hill and around the corner from the brand-new Flagstaff Aquatics Center!

For more details, pictures, pricing and a virtual tour for this great Flagstaff home, click here. This home is listed on the Northern Arizona Multiple-Listing-Service, so contact your Realtor^® today to arrange a live showing! The home is listed with Team Heitland at RE/MAX Peak Properties.