All about Life & Real Estate in Silicon Valley – Broker Michael Koo's Blog.

The source of frustration is the sheer number of mainland visitors, which is expected to reach 45 million this year, and 70 million by 2017. Any city might struggle to accommodate these numbers, never mind a congested territory of 7 million.

Furthermore, it’s pretty clear the majority of these visitors are not here to see Hong Kong’s undersized Disneyland but are really traders seeking bargains, courtesy of an outdated exchange-rate regime.

To get a sense of the situation Hong Kong finds itself in, imagine if New York were to have a separate currency and tax regime from the rest of the United States. To replicate the Hong Kong situation, New York would have both significantly lower taxes and a currency pegged at a discount of 25% to the U.S. dollar.

In these circumstances, you might expect half of America to descend on the Big Apple for a shopping bonanza. New York residents would likely be none-too-pleased if they felt they were subsidizing those bargains to non-tax-paying day-trippers.

This is effectively what has happened in Hong Kong as it has accelerated the integration of people and infrastructure with its giant neighbor, while retaining a three decades-old currency peg to the greenback.

While China has re-pegged the yuan higher against the U.S. dollar as its economy has grown, Hong Kong has kept its peg unchanged. In the past six years or so, the rate has gone from 110 yuan for 100 Hong Kong dollars, down to about 78 yuan currently.

This situation means every day seems like a fire sale to mainland visitors who can arbitrage the currency divergence. Now, they are not just buying duty-free luxury goods, but also everyday essentials such as toiletries, which are also cheaper.

The gripe from Hong Kong is that this outsized demand creates shortages, pushes up prices and leads to transport congestion. Among the mainland visitors, about 60% are believed to be same-day visitors, according to Tourism Board estimates.

Craig Stephens @ Market Watch

U.S. mortgage rates fell, decreasing borrowing costs for homebuyers as investors weighed whether the economy is strong enough for the Federal Reserve to make more cuts to its stimulus.

The average rate for a 30-year fixed mortgage was 4.39 percent this week, down from 4.41 percent and the lowest since November, Freddie Mac (FMCC) said today. The average 15-year rate slipped to 3.44 percent from 3.45 percent, the McLean, Virginia-based mortgage-finance company said.

The Fed’s bond purchases have kept borrowing costs at historic lows, bolstering a housing recovery that has also benefited from job growth and a tight supply of properties for sale. While the unemployment rate fell to 6.7 percent in December, the U.S. gained the fewest jobs in two years, Labor Department figures showed on Jan. 10.

“The recent bits of economic news suggest that the economy is not accelerating,” Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage-data firm, said in a telephone interview yesterday. “That does add doubt as to whether the Fed will be removing stimulus as quickly as expected just a few weeks ago.”

Fed policy makers have said they will gradually reduce the pace of bond buying as the economy strengthens. The committee meets next week after deciding in December to cut purchases by $10 billion a month.

Demand for home loans rose for a third week as the drop in rates spurred a pickup in refinancing. The Mortgage Bankers Association’s index of applications to reduce monthly payments advanced 9.9 percent last week, the Washington-based group said yesterday. The purchase gauge declined 3.6 percent from a seven-week high.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Average rates for fixed-rate mortgages have seen ups and down this year, and are closing out 2013 on the rise, according to data released Thursday.

The average rate for a 30-year fixed-rate mortgage hit 4.48% in the week that ended Dec. 26, up more than one percentage point from 3.34% at the beginning of the year, federally controlled mortgage buyer Freddie Mac FMCC reported. Meanwhile, the average rate for a 15-year fixed-rate mortgage rose to 3.52% from 2.64%.

Higher rates are behind some slowing in the housing market’s recovery, economists say, pointing to trends such as pending home sales falling in October for a fifth monthly slump. Such a decline makes sense given that rising rates lower affordability, cutting some demand.

However, fresh data signal that buyers may be adjusting to the pricier home-sales environment. And as long as jobs growth keeps up, home sales are expected to rise next year, even in the face of more expensive properties, new rules for loans and an evolving housing-finance environment.

Follow Ruth on Twitter @RuthMantell
Follow the Capitol Report blog on Twitter @CapitolReport

The Bay Area gained 13,100 jobs in October, state officials announced Friday, extending a pattern of strong growth throughout the year and keeping the region in the forefront of employment expansion in California.

Employment gains in the nine-county Bay Area last month accounted for one-third of the 38,900 jobs created statewide, this newspaper’s analysis of the numbers released by the state’s Employment Development Department show.

“The Bay Area is carrying the California recovery,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “Without the Bay Area, California would be lagging the nation’s job recovery.”

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.

Bay Area apartment rents slowed their march upward in the third quarter in a sign that the worst may be over in a region that has been slammed by two years of increases, according to a report Tuesday.

The average $2,006 a month asking price for all types of units was up 2.6 percent from the second quarter, considerably lower than the 5.2 percent jump earlier this year. The annual growth was 9.2 percent, according to RealFacts, which tracks apartment complexes of 50 units or more.

With occupancy rates dipping, RealFacts said, rent increase may continue to slow as landlords face more competition, particularly as more apartments are built.

Pete Carey at Mercury News.

Five Silicon Valley schools are among 15 in California that have been recognized as 2013 National Blue Ribbon Schools.

The winners and their school districts include Simonds Elementary in San Jose Unified, Faria Elementary in the Cupertino Union district, Chadbourne Elementary in Fremont Unified, Jensen Ranch Elementary in Castro Valley Unified and the private Valley Christian Junior High in San Jose.

The schools were honored for either high achievement or for making significant academic improvement. They were among 236 public and 50 private schools identified by U.S. Secretary of Education Arne Duncan.

The winners will be honored at a national awards ceremony Nov. 18 and 19 in Washington, D.C.

For information on the National Blue Ribbon Schools program, and for a list of the winners across the country, go to http://www2.ed.gov/programs/nclbbrs/2013/index.html.

— Sharon Noguchi, staff of Mercury News.

The city of Gary, Ind., is selling a dozen homes for $1 each as part of a neighborhood stabilization effort. Potential homebuyers must have lived in Gary for at least six months; have $1,000 in savings; earn at least 80 percent of the median annual income of $35,250 in the area; and demonstrate that they have the financial ability to rehabilitate the home, CNN Money reported.

Only those who do not currently own a home are eligible, and they must live in the house for five years before they assume full ownership. If they leave before that time has elapsed, they forfeit everything, the news outlet said.

Source: CNN Money

How should investors and potential home buyers and sellers view the housing market when the news recently has been so mixed? The National Association of Realtors reported Monday that existing home sales for June fell 1.2% but were more than 15% higher than a year ago. And the national median home price was 13.5% above the level of last June, at $214,000.
Last week the organization for homebuilders reported growing confidence in the market while the government said housing starts fell.
David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, tells The Daily Ticker that the month-to-month decline in existing home sales is a “respite” from recent gains due to a “full percentage point jump in mortgage rates in June.”
Related: Home Flippers Come Roaring Back
“It’s a very rare event to have mortgage rates jump that far that fast” says Rosenberg, and he expects the jump will be temporary.
“The trend is still up but you can’t ignore the fact that mortgage rates shot up very quickly,” says Rosenberg who also writes a daily newsletter. “The good news is that rates have come back down about 40 basis points from a few weeks ago.”
(Click here to check mortgage rates in your area).
Job creation may be even more important for housing than interest rates, according to Rosenberg. He says, “An improving employment and income picture will act as a very strong antidote to any increase in interest rates.”
Related: Big Drop in Housing Starts Suggests a More Shaky Recovery: BNP Economist
Rosenberg expects the housing recovery will continue but at a slower pace so long as we “don’t see continuation of the rapid increase in interest rates as we’ve seen in the past 4-6 weeks.”
Whether you’re a potential buyer or seller in the housing market, watch the video above to see what this veteran economist and strategist has to say about the market.

Bernice Napach at Daily Ticker

Rates on 30-year, fixed-rate home loans spiked 0.53 percentage points to an average of 4.46% this week — the largest weekly increase in more than 26 years, mortgage giant Freddie Mac said Thursday.The 30-year loan, which stood at 3.35% as recently as early May, is at its highest level since July 2011.
Rates for 15-year loans, popular with homeowners refinancing their mortgages, jumped 0.46 percentage points to 3.5%.
An extra percentage point will cost homebuyers with 30-year, fixed-rate mortgages $56 more a month for every $100,000 they borrow.
Related: Best advice now for homebuyers and sellers
“If sustained, the rate increase will take some of the steam out of the housing market,” said Mark Zandi, chief economist at Moody’s Analytics.
The sudden jump in rates is driven by uncertainty over whether the Federal Reserve’s economic stimulus program, called quantitative easing, will continue, according to Keith Gumbinger of HSH.com, a mortgage information provider.
“The aftermath of the Fed meeting and Mr. Bernanke’s remarks … about the future of QE continue to roil markets,” Gumbinger said.

By Les Christie @CNNMoney

Los Gatos High School and Saratoga High School have been named California Distinguished Schools, making them two of 218 distinguished middle and high schools in the state. The awards are based on the schools’ API scores, plus programs that are designed to improve student achievement.

LGHS had a 2012 API score of 886, while Saratoga’s score was 933. The average high school API score statewide is 752.

Los Gatos High School was recognized for its Freshman Transition Plan and for the CASSY counseling and support program, while Saratoga High School’s Media Arts and CrossFit Physical Education programs were used in the distinguished schools analysis. All the programs are designed to link student academic achievement with diverse learning opportunities and a culture that supports students’ emotional and physical wellbeing.

A Distinguished School Celebration and Recognition event will be held on May 17th at the Marriott Hotel in Santa Clara.

By Judy Peterson at Mercury News