Thanks for all who have made inquiries and took the time to come and see this unique home in Hayward. We got a lot of interest and are now currently under contract. If all goes well with this one we should be closing escrow quickly. For those that didn’t have their offer selected, please keep in mind that often in this market unforeseen things happen during escrow and there may be an opportunity if something like that happens with this one.
Home Prices Likely to Hit Bottom in March
Home prices in 45 of the largest housing markets are expected to fall another 4.2 percent before they hit bottom in March, 2010, according to First American CoreLogic’s Home Price Index. By October 2010, prices are expected to be heading upward again by about 1 percent compared to 2009.
The report expects the strongest recoveries next year in California cities. These include:
1. San Francisco, up 5.7 percent
2. Los Angeles, 5 percent
3. San Diego, 4.7 percent
4. Sacramento, 4.6 percent
Another Big Gain in Existing-Home Sales
Existing-home sales rose again in November as first-time buyers rushed to close sales before the original Nov. 30 deadline for the recently extended and expanded tax credit, according to the NATIONAL ASSOCIATION OF REALTORS®.
Conditions Optimal for Buyers
Last month’s mortgage interest rate was the second lowest on record after bottoming at 4.81 percent in April 2009. NAR President Vicki Cox Golder said conditions are optimal for buyers in the current market. “Inventories have steadily declined and are closer to balanced levels, which indicate home prices in many areas are either stabilizing or could soon stabilize and return to normal appreciation patterns,” she said. “This means buyers still have good choices but are purchasing near the bottom of the price cycle with historically low mortgage interest rates.”
Total housing inventory at the end of November declined 1.3 percent to 3.52 million existing homes available for sale, which represents a 6.5-month supply at the current sales pace, down from an 7.0-month supply in October. “Nearly all markets experienced a solid sales gain from one year ago,” Yun said.
• Existing-home sales in the West increased 10.6 percent to an annual rate of 1.46 million in November and are 28.1 percent above November 2008. The median price in the West was $231,100, which is 4.1 percent below a year ago.
Source: Inman News (12/21/2009)
I pulled up the recent stats on what the market is doing in Contra Costa County and posted this PDF doc that has very detailed graphs of various factors. Particularly interesting is the overall trend of decreased inventory and rising sales. I find that when I am talking to people, the current mindset is that this is a buyers market and that there is plenty of time to wait before the market picks up, however when looking at the actual data what we are seeing is that the market has picked up overall and we are down to about 2 – 3 months or so of inventory overall in Contra Costa County (this is strickly looking at detached SFR) in March of 2009 compared to the 7 to 8 months of inventory we had in March of 2008. Purchases are up, less inventory on the market. I have been hearing from various lenders that it is also looking like the interest rates might be hiking up some in the next number of weeks as well. Bottomline is that no one has a crystal ball to be able to really say what is definitely going to happen, but I think we can tell a lot from looking at actual data. There is still apparently a lot of REO properties that the various banks are holding onto, and will at some point need to place into the market so who knows what inventory will look like down the road, but from my experience as of late… there is not as much to choose from and when the prime properties come onto MLS they are going fast and with multiple offers. Opportunity doesn’t always last as long as we might suspect, so if you are in a position to get out of being a renter and can qualify to own a home, or are looking to purchase an investment property… I encourage you to take advantage while you know there is an opportunity! Please contact me for more information, or perhaps to go and see some of the homes that are still on the market.
I thought I would post a link to the new homes that came on the market today, March 25th, for those that would like to have a browse of what types of properties are coming on the market on a daily basis. The latest stats from NAR shows that overall existing home prices are up by 5.1% in February (check out link to report here) and that there is a stronger than expected recovery happening in the West than expected.
Check out what’s new today on the market, and then contact me if you see anything you would like to know more about! Click Here!
I just received an e-mail from my friend Andy Scott who is on the front lines in the mortgage industry. He is unusually gifted when it comes to putting into words a clear picture of how the mechanics of our economic system functions in regards to lending and the current climate of our monetary system. His message which I post below should give you something to consider regarding why it is difficult still to get financing. I encourage you to e-mail Andy and request to receive his newsletter which is quite enlightening! (E-mail him at: email@example.com)
Well, after many weeks without seeing my newsletter, it’s finally back. During the course of the last couple of weeks, many things have changed in the market place….however, much of what we hear on the news is incorrectly reported. I will begin with last week’s economic data. Jobless claims were up and the stock market was down – both of which hit numbers that we haven’t seen in excess of a decade. Rates for home loans continue to hover near 40 year lows and FHA is making a push for the higher loan limits ($729,000), with the benchmark 30 year fixed conforming loan being around 5%.
President Obama has implemented the “Making Home Affordable” program which is intended to help up to 9 million homeowners who have been struggling to stay on top of their payments….there is so much information to wade through that it will take several days to decipher the information and a few weeks or months to see if this program will yield any positive results. I mention this because in 2007 and 2008, the push was for loan modifications that the government had authorized and it sounded like a wonderful lifeline for many struggling homeowners. In reality, it only helped a small fraction of homeowners who met the strict criteria that the non-profit organizations had to work with from the lenders. I wouldn’t hold my breath that this new program will save everyone and get things on track right away – but we can always hope that all this money that we’ve borrowed from ourselves will be utilized properly as well as truly help to mitigate our losses so that we can begin to rebuild our economy.
There is one thing that hasn’t made the headline news that will actually have more impact on our economy than nearly all of the stimulus packages (which are merely a band-aid), and that is the Mark to Market laws. At the end of this week and I’m sure into next week, the Senate Finance Committee and the House of Financial Services will be meeting with top policy makers to figure out how to repeal (temporarily) or at the least modify this law. Why is this important? At this time, the bank are sitting on more cash than they ever have in the history of the banking industry. Then why is it so difficult to get a loan? Because the banks are required to keep a certain amount of reserves and assets on their books in order to maintain their charters. When a bank can’t determine how to value a loan on their books, they have to supplement that asset with cash to cover the amount of the original terms. An easier way to look at it is like this: Imagine you are a bank and you’ve given someone a home loan for $500,000 back in 2004. As the bank, you see this as a good loan – the client hasn’t defaulted on the loan, they are still making payments for a $500K loan, and as far as you (the bank) are concerned….it’s a $500,000 asset that is performing well. Now, throw in the Mark to Market rule. The house that you loaned the $500K on has now devalued to $300,000 – well, according to the mark to market rule, you have to show that loan as only being worth $300K (even though it’s still performing like a $500K asset) and then you have to supplement the difference of $200K with cash. The problem is, the banks have to continuously keep re-evaluating their portfolio and can’t determine a fixed price to reflect a value to their assets, so they are hording the cash – as it has a set value. If we can get this rule repealed or modified so that the banks and investors can peg a value to their assets, we would see an influx of cash hit the streets and loosen up this credit freeze that we currently have in the market place. I’ve taken steps to write to both Sen. Barbara Boxer and House Rep. Nancy Pelosi about the Mark to Market rule and that it needs modification. If what I wrote here makes sense to you, please contact your representatives and ask them for their support in modifying or repealing this antiquated rule.
I will keep you posted with latest information about the “Making Home Affordable” program and how it will impact you.
One last thing, when will we see a bottom to this market? I always get a kick out of this question, because once the news reports a bottom, we’ve already hit it and now we are rising again. If you have thought about refinancing into a fix product (which is a great idea in light of the current economic climate), buying a new home, or of buying an investment property….now is a fantastic time to buy. I am getting a client a 30 year fixed rate on an investment property at 5.125%!!! He is paying a small fee to the bank for that rate, but it’s unheard of to get a rate on investment financing that is that low. Call me now or email me if you would like to explore your options.
Have a great week,
Here is a message from the NAR newsletter that I just received from the current NAR president Charles McMillan regarding the current legislation that will hopefully make a positive impact on our current housing situation here in the US:
Dear Fellow REALTOR®,
For nearly four months, NAR has been working to deliver to you and to our nation a comprehensive plan to stabilize the housing market.
This week, we saw countless hours of hard work pay off – in a MAJOR way – when the federal government implemented NAR’s recommendations to stimulate housing with the signing of the American Recovery and Reinvestment Act of 2009.
This bold and unprecedented move to help housing did not happen by chance. Just a few months ago, the auto industry had Congress’ ear. Yet, thanks to countless meetings, letters, phone calls, and public pressure that we – the REALTORS® of America – placed on lawmakers in Washington, D.C., housing emerged as the top priority in the new Administration and in Congress. While some of the items in the Act are controversial and are currently being debated, most of our top priorities were addressed.
Thanks to all of our hard work, America’s homebuyers and homeowners will soon have:
- Lower interest rates for home mortgages;
- A greater ability to get financing through FHA, Fannie Mae and Freddie Mac in high-cost areas;
- A true tax credit incentive to buy a home NOW; and
- Foreclosure mitigation and short-sale standards.
As a direct result of NAR’s advocacy, we hope REALTORS® will see an increase in home sales this year. NAR also continues to make significant progress on our efforts to unclog the pipeline for foreclosures and to address administrative problems with short sales.
Such significant movement on these critical issues is rare. I personally thank and congratulate each and every member of the National Association of REALTORS® for helping to make NAR’s Housing Stimulus Plan a reality. For more information and details on these new laws and programs, visit the Unlock America’s Economy Page on Realtor.org:
Make no mistake — we’re just getting started. NAR will continue to push for other important laws and policies that can help you in your business. From keeping banks out of real estate to providing you with affordable health coverage, you can count on the “Voice for Real Estate” to help you gain an advantage in every kind of market.
That’s the power of NAR, and it’s why I am proud to be a member and to serve as your 2009 President.
Once again, thank you all, and keep up the great work!
Charles McMillan, CIPS, GRI
2009 NAR President
This is a great little animated explanation of how we got into our present global economic situation that I discovered on YouTube… here is part 1:
Here is part 2:
Perhaps there is some hope on the horizon for the United States economy. It seems that when I talk to anyone about the state of their business affairs the story is always the same – things are slow or at a stand still. This has been the case for months now, and it has been hurting the greater majority of businesses which in turn tighten their belts and make the necessary cut backs like layoffs or salary reductions… bad news all the way down the line.
When it comes to the housing market, the individuals who have already lost their homes to foreclosure (for whatever reason, be it due to the subprime lending debacle, or simply due to any number of reasons that might or might not have been unwise decisions made by mortgage holders… I run into a lot of finger pointers which I think tends to cast unnecessary negativity out amongst our already suffering social atmosphere and solves nothing… stop with the hating and realize that anyone who lost a home has suffered tremendous emotional pain and were trying to follow the American dream of owning a home for themselves and their family and didn’t set out to bring down the US or global economy — OK… sorry for tangent… done ranting now) are in need of rentals, which keeps rental prices up. There are investors who are able to turn around a property very quickly into a positive cashflow situation and are definitely doing this in lower price point areas.
My concern is for the individuals who are not necessarily investors but are in a position to take advantage of the current economic climate and get into a new home, but are not moving forward with the process. I think it is understandable that people are unsure of the times that are ahead, however unless enough people move forward and start purchasing housing then the economy will remain stagnant and nothing good will happen to us… sky falls, oceans turn to blood, zombies rise to eat the living, etc.
If you are in a position to better your long term financial situation by purchasing a new home and get out of a rental, then now is the time… the incentives are there for you and now here is even more bright sunshine in the way of a status update from NAR that I thought I would share to show that all is not darkness:
Dear Fellow REALTOR®,
Here’s our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury’s package holistically, in compliment with each other – mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.
So here’s what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.
In addition, we preserved what we have – which some tend to forget is always on the table when these negotiations start up again – mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).
We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be. It’s pretty hard to complain when they give you what you ask for and you lose something you never had.While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.
Charles McMillan, CIPS, GRI
2009 NAR President
See… keep hope alive! Contact me if you’d like to get started with the super fun process of buying a home (or if you are thinking to yourself, gee whiz , I bet it really would be a good time to make use of the down turned economy to go and buy our next bigger home, but I have no idea how to do that… maybe this guy has a way we can do it which would make the most of the down market without us risking listing our current home first before we’ve located our new home since that is extremely scary to us.) 😀
Gosh… I haven’t written a post in a while and have been meaning to write about some of the topics that seem to be recurring themes in conversations that I’ve been having… such as “What are you seeing in the market?” – “Has the downturn really bottomed out?” – “Should I wait till the Summer before I buy?” – etcetera. Well… hmm – I don’t know how to answer some of these questions with any real solid answer because like most things real estate related, the real answer is “it depends.”
We kind of need to focus very close to home to try and get any real understanding about what is going on in the real estate market, because real estate is so regionally local. I specialize in the San Francisco Bay Area, and more regionally specific I tend to know what is going on very locally down to the neighborhoods in the East Bay where I live and spend a good deal of my time. I can tell you that if you take a step back and look at factors such as job stability and population concentration you will have a very clear understanding of why real estate hot spots like San Francisco and San Jose are much more stable than the areas that get further and further away from them… obvious factors such as commute times and proximity to industry etc are the things that directly influence housing demand. We need to always look at these types of factors when trying to figure out what is happening with the real estate market. What is going on in San Francisco and several miles away from San Francisco can be and most likely is quite different than what is going on with real estate 40 miles away from San Francisco (and San Jose respectively.) If this seems obvious, it should… however I am none the less asked about the real estate market as a whole on nearly a daily basis, so I think that breaking down the market into the obvious components is often really the only way to sober up someone who is trying to make a decision about real estate regardless of whether they are buying or selling.
When I talk to a prospective client and we first start out the process it is vital that we establish a basis of understanding that includes the realities of the market place we are going to compete in (and competition is exactly what it is since we are either going to be a property that is competing for buyers or a possible purchase competing against other buyers.) In a supply and demand world, if you aren’t realistic about the current factors that determine your success of selling a home then the inevitable result will be that the home will not sell (particularly when emotion or delusion has played a heavy hand in how the price was set.) If a buyer believes that in order to have a successful home purchase they need to get the property for 20% below the market value, then the chances of success will of course be greatly diminished.
The “gotta get a deal” mentality is a hard one to come up against since what constitutes a “deal” is very subjective. Investors who want to stick to a specific formula like: offer 20% below market value and see what sticks, and make offers on everything may end up with some properties that they purchase for 20% below market value… however they also are doing that as a business investment and have very different needs and concerns than someone who is looking to purchase a home that they will be living in. There are still a lot of buyers wants to try and purchase a home that they will be living in for 20% below market value which is understandable when we hear news stories on a constant basis that tell us how far real estate values have fallen/are falling. The question that needs to be considered is if you wait to get your home that you plan to live in will you be paying less for the same or less for better… not necessarily the hard to substantiate “20% below market value” that seems to be in some people’s minds. The one rule that seems to be forgotten on both sides of the fence is “you get what you pay for in this world – and sometimes you get lucky.” It seems that when the market value of homes in an area have come down by 20% -30% in the past year to two years, any home that is purchased could be considered a “deal” as long as it is done so with the idea that it was financed in such a way that monthly payments are comfortable for the purchaser and the new home owner can come home to eat dinner without thinking ‘gosh, I wonder how long it will take to get enough equity to move to a new home.’ All very subjective factors.
The real concerns about purchasing in a down market are what monthly payments are going to be locked in for the long term which is directly tied to interest rates and loan programs. With credit still very tight, the financing is what has a lot of buyers stuck in a holding pattern regarding being able to purchase (which is also of great concern to sellers since they rely on buyers having the ability to finance the property.) The fact that there are many businesses that have had to lay people off as well as force pay cuts up to 20% has a lot of folks late on payments for things like credit cards and their bills which lead to FICO score hits – which makes getting loans for purchasing in this favorable downmarket a challenge.
All these things may seem obvious but I notice that it is the obvious things that get lost in emotional confusion when real decision should be made. A confused mind says “NO” – so by stepping back and looking at ones situation in an ordered fashion and logically addressing concerns will overcome obstacles that prevent correct decision making in uncertain times like these. “Should I sell now?” or “Should I sell in the Summer (or sometime down the road?)” are questions that I can’t make for anyone other than myself… but I can help with the understanding of what factors a seller will be up against if they sell their home now in the current real estate market. I can present data that may help to determine if waiting will tend to indicate a more favorable market, but beyond that, future telling crystal balls don’t really exist. With buyers it is usually easy to help them determine whether they should buy or continue to rent — change your life by becoming a home owner and benefit yourself tax-wise with essentially a forced savings account that if held for a long enough period of time will have reliable returns (provided of course that you are in the right position financially and can afford the monthly payment) – or write a check for a space you inhabit with no real benefits tax-wise, credit-wise, etc.
Since I tend to be rather verbose when writing these posts, I will end with this… if you are thinking about what to do regarding purchasing or selling a home in the current real estate market, it is important to try and keep a clear head and look closely at the areas you will be transacting business in. The national media when talking real estate is in general very dramatic and sensational (not to say that there isn’t sensational stuff happening) but you may be up against very different factors even down to neighborhoods in a single city when it comes to how your particular experience may pan out… supply and demand… that is what it is ALL about!
With so much going on in the economy it is sometime very hard to keep from losing ones mind when the unexpected happens… like when a client experiences a life situation which throws a monkey wrench into the works of an otherwise smooth running real estate transaction. There are so many folks in these trying economic times that are either losing their jobs completely or having to take significant pay cuts, and when one of these folks happens to be involved in a transaction to purchase… that can and in my case recently did shut down an otherwise soothly running transaction to purchase a single family home in the Hayward area.
In the previous post I wrote a bit about short sales and a of the intricacies that are involved with those types of transactions… keeping those points in mind, this was a short sale transaction but the buyer was making a strong offer on a property where the listing agent had indicated that there was a third party short sale company that was to be involved as far as the negotiations with the one lender on the property that was going to have to approve the sale. This home is a single family detached three bedroom, two bath home that isn’t thrashed! Definitely worth the asking price of 200K which is a hot price point in that particular area in Hayward. In fact most of the comparable homes at that price point are bank owned and are in varying states of disrepair, and have the added challenge of getting multiple offers sometimes with as many as 15 to 20 offers within a day or two of the property being listed.
My client was getting a bit discouraged with the stiff competition that comprises a lot of investors at that 200K price point and when we found this short sale it made sense to give it a try. The offer was accepted by the seller and the short sale was moving forward quite nicely, with a negotiator being assigned in just less than one month, and then earlier this week my client sent me an e-mail notifying me that in order to keep from being laid off he had to accept a 20% cut in pay at his job, and needed to pull out of the transaction. The ironic thing is that six minutes later I got an e-mail from the listing agent containing THE key form from the seller’s lender that basically laid out the lender’s demands (which were very minimal considering what some are like) and then a few other “house keeping” items that would basically be needed and we could have quickly gotten approval to move forward with the sale.
So… shut down by the economic downturn. My client is bummed, but is just going to have to reevaluate his new income to expense ratio and will see what lending options he has before making another go at getting into a home. In the meantime… if you know anyone or have yourself considered owning an investment of real estate in the San Francisco bay area, there is an opportunity here to get into a three bedroom, two bath single family home that isn’t thrashed and although it is a short sale, already has a negotiator assigned and is steps away from getting lender approval to purchase at the 200K price point. Contact me and I will get you in to see this place!