The Gory Details...of Real Estate

The Return of the Gory Details Podcast -- Carole Rodoni Speaks!

Yes, it’s FINALLY back – the first and longest running real estate podcast in the SF Bay Area – the Gory Details, is back again for its first monthly installment of 2010.

In this episode, I interview the always entertaining, highly regarded speaker Carole Rodoni, to discuss the current state of affairs in today's real estate market.

Shadow inventory… 3/5/7 year cycles … the budget crisis' effect on real estate... Carole covers it all.

For those of you who don't know her, Carole Rodoni is a highly regarded speaker, author and advisor in Bay Area real estate. Formerly president of Fox and Carskadon Realtors, COO of Cornish & Carey Real Estate, President & COO of Alain Pinel Realtors, she is now president of her own consulting firm, Bamboo Consulting

Click away below, because the March 2010 edition of "The Gory Details Podcast" is now available!

(1) iTunes users, get it right here

(2) Or get it at http://edgory.podshow.com

(3) And, always available at http://www.edgory.com

Happy listening!

The Party Might Just Be Ending for Low Interest Rates

It’s safe to say that mortgage interest rates have been at historic lows since the summer of ’09, mostly around and sometimes even under 5%.  Currently, they’ve been floating around the 5 & 1/8% range.

Part of the reason for these low rates has been because the Fed has been on a buying binge of Mortgage Backed Securities (MBS).  The Fed has been buying $1.25 trillion in mortgage-backed securities in its effort to prop up the economy but has said it will end those purchases March 31.

 

As I speak fairly regularly with seasoned, well-informed, and intelligent mortgage lenders and brokers, one thing they all seem to agree on is that the expectation is that, after March 31^st,  rates will head upwards, and will likely be in the 6% range.

 

Still pretty low, historically – but, a significant impact to the buying power of home buyers out there. 

 

Just think about it, if you’re looking at a loan amount of say $700,000, this means that a 1% increase in interest rate translates to paying $450 MORE per month on the same loan.  Or looked at another way, a 1% increase in rate just reduced the sale price you can afford by about $80,000.

 

Quoting some highlights from a recent WSJ article:

 

What happens when it (the Fed) stops buying hundreds of billions of dollars in financial assets?

In its monetary-policy statement, the Fed said it would "gradually slow the pace of these purchases in order to promote a smooth transition in markets." Suddenly cutting to zero, presumably, could prove too much of a jolt.

But even a gradual pullback could have big repercussions. Zero interest rates and Fed purchases -- financed by printing money -- have played a massive role in reviving stocks and bonds and rekindling the economy.

Mortgage rates will likely move up, as private-market buyers will charge more than the Fed for bearing the risks of holding government-backed mortgage securities.   Now, the Federal Reserve has said they would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness

 

In its best corporate-speak, the Fed said they will "evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets."  That is, if markets play along. Investors are already balking at the heavy use of printing presses. Just look at the sliding dollar.

Nostradamus Predicts Real Estate Market Trends for 2010?

 

Ok, so obviously there’s nothing in Les Propheties that I can think of that predicts any real estate market.  But if I was Nostradamus, here’s what I’d predict:

 

“ Your local housing market will be one of the following; up, down or the same.”

 

Whoah, Ed….prolific yet prescient. How can you be so sure? 

 

Ok, so obviously I cast a little doubt on “experts” predicting the market. But I think primarily it’s because the information the general public receives on a daily basis seems to manifest more personalities than Sybil.

I mean, one look at the articles in today’s media, and surely (bolding for sarcasm) one can get a great sense of what’s going on.

 

Example numero uno. Here’s two recent articles…tell me which one you believe:

 

“Pending Home Sales Down 16%”  

vs.

“Home Resales at Highest Level in Nearly 3 Years”

 

Headlines aside, let’s look at the two main themes of these articles:

 

“The number of people preparing to buy a home in November fell sharply in the latest sign that the housing market, which had been rebounding strongly, may be headed for a "double-dip" downturn over the winter.”

vs.

“Sales of previously occupied homes surged in November to the highest level in nearly three years, spurred by federal subsidies for starter homes and a massive Federal Reserve push to drive down mortgage rates.”

 

Example numero dos.

Construction of New Homes rebounds in November

vs. 

Construction Spending falls more than expected

Huh? What? And both of these articles came from the same news outlet (MSNBC, whose coverage I humbly admit I usually tend to like).

 

And though while the title of this final article is quite vague:

 

“Home prices rise for 5^th straight month”

..one of its key points was this: “Prices have climbed for at least six months in a row in Denver, Washington, Minneapolis and San Francisco. But in Chicago and Tampa, Florida, prices are down by more than a percent from September.”

 

Its premise points to one clear truism: all real estate is local. 

Thus, NostraGoryus was right...Your local housing market will be one of the following; up, down or the same.

 

 

 

Urban Legend Hits the Real Estate World

Be forewarned -- no, this is not about kidney harvesting, Nigerian Lottery winnings, or Bill Gates giving everyone lots of money for forwarding an email -- there is an email making the rounds titled "HR 2454: CAP AND TRADE ENERGY BILL", which purports that new legislation will require all homes to retroactively pass new energy standards before they are sold.

Some even say that all homes will now be required to get a "label" for your house every year, proving that your home meets new energy standards.

This is all patently and unequivocally FALSE. (and you can even check Snopes.com here to doublecheck)

Firstly, whoever started this email has a serious conspiracy theory complex. They also probably fall into the category of "birther", "teabagger party member", or "Glenn Beck-lover".

Bottom line, our gub'mint is not going to do anything - ANYTHING - that will adversely affect the real estate market, which is absolutely one of the key elements in our ongoing, slow economic recovery. Why do you think they recently overwhelmingly voted to extend the first time buyer $8K tax credit bill, as well as extend the $729K conforming loan limit? They want to encourage people to have more confidence in home ownership.

Anyway, I also consulted our National Association of Realtors (NAR) position on this, and below is what it said. The most revealing statement, which contradicts this email is that this bill  "Does not create a federal energy audit requirement for real property"

"The U.S. House of Representatives approved H.R. 2454, the American Clean Energy and Security Act by Reps. Waxman (D‐CA) and Markey (D‐MA). Following NAR’s long‐standing policy to only take a position on legislation, or provisions within legislation that have a direct affect on real estate, NAR worked with our Congressional allies to strip the Energy Bill of provisions that would have adversely affected our industry.

After multiple consultations with the NAR Climate Presidential Advisory Group, the NAR Land Use, Property Rights and Environment Committee, and state associations who had dealt with energy audit legislation at the state level, the Land Use, Property Rights and Environment Committee directed NAR staff to concentrate on the real estate provisions in the bill.  As a result, NAR issued calls for action and made this a talking point for Capitol Hill visits during its recent Midyear meeting.

Overall, REALTORS® succeeded in making a number of positive changes affecting the real estate provisions of the bill. The House‐approved bill:

·    Does not create a federal energy audit requirement for real property;

·    Exempts existing homes and buildings from any federal guidelines for new construction energy efficiency information labels.

·    Prohibits the implementation of any labeling during a sales transaction.

·    Leaves the decision to states as to whether to require energy audits, disclosures, etc.

·    Provides property owners with significant financial incentives, matching grants and tools to make property improvements and reduce their energy bills;

·    Prohibits the Environmental Protection Agency from regulating residential and commercial buildings under the Clean Air Act;

·    Eliminated an early proposal to allow citizens to sue over minor climate risks under the Clean Air Act; and Establishes green building incentives for HUD housing, including a loan program for renewable energy, block grants and credit for upgrades in mortgage underwriting."

Federal Tax Credit For Home Buyers Gets Extended - Well, Happy Early Christmas!

  An early Christmas present for many home buyers came in the form of the extension of the federal tax credit for home buyers, and was signed into law by President Obama Friday, Nov. 6.  The tax credit, which was set to expire Nov. 30, has been extended through April 30, 2010 with a 60-day extension if a binding contract is in place prior to deadline.  It also was expanded to include existing homeowners who have lived in their primary residences for five consecutive years out of the last eight years.

For all kinds of FAQs (aka, "Everything You Wanted to Know About the Tax Credit....But Were Afraid to Ask), see the official website here.

First-time home buyers still may be eligible for a tax credit of up to $8,000, while existing homeowners may receive a credit of up to $6,500.  The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers, to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The bill maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order. 

What is WRONG with Short Sales Agents, Anyway?

One thing for sure about this difficult market for us agents -- in pure Darwinian fashion, the cream has risen to the top and the strongest are surviving.

It's also unfortunately elevated many agents that in previous years were at the "bottom of the barrel"...to high levels of production that they'd never been accustomed to.

I guess I write this based on my experience this past year so far in seeing how these bottom-dwellers are managing to survive -- these "short sales experts" were experts at nothing 3 years ago, but somehow got an "in" at lender, and many are now the go-to agents for all the short sales coming out of any particular lender.

So it is with a wee bit of vitriol that I rail against these "short sales experts". Granted, there ARE some good ones out there.  But the 'good ones' are unfortunately hugely overshadowed by the lack of professionalism, ethics, common sense, attention to detail, and common business courtesy that is so commonly present in these "wastes of space".

Rather than mention the numerous tales from the trenches, all I'll recommend to anyone out there who is considering selling their home via a short sale: make sure you talk to a "real" professional.  

Be initially wary of anyone who says they are a "short sale specialist", or even CDPE-certified (CDPE is Certifed Distressed Property Expert).  Do your homework as if you're doing a normal sale -- talk to their references; see how many homes they sold not THIS year, but 4 or 5 years ago (HINT: if they've sold 12 homes this year, but ZERO homes in 2004....run away FAST!).

Sandbags Available for Redwood City Residents

With the first significant storm coming in on Tuesday, I have heard that sandbags are available for pickup for Redwood City residents starting at this past weekend. If you are in a flood-prone area of Redwood City, you can get sandbags in the parking lot of Redwood City’s Public Works Services building, 1400 Broadway (between Chestnut and Woodside). These are for Redwood City residents only, and there is a limit of 24 bags per household.

For residents of unincorporated areas of San Mateo County, the County provides other sandbag pickup locations:

Grant Corporation Yard, 752 Chestnut, Redwood City – (650) 363-4103

Princeton Corporation Yard, 203 Cornell Avenue – (650) 728-7993

Pescadero Corporation Yard, 1000 Pescadero Road – (650) 879-0202

Pescadero High School, 350 Butano Cutoff Road

La Honda Corporation Yard, 59 Entrada Way – (650) 747-0341

Tales of Buffoonery, aka What the Heck is Bank of America Smoking?

Ok, I only republish these two stories below because the last two transactions I've had where B of A was the buyer's lender have me totally convinced that BofA's left hand does not even KNOW there is a right hand. Ok, ok, I know that mortgage regulations did need to be more restrictive compared to the free-wheeling days of 2003-2006 -- but boy, the pendulum has just swung so far to the other end of the spectrum, it can just make a buyer pull their hair out while continually uttering "WTF?"

Read on:

BofA requires armless man to provide fingerprints to access his cash:

http://www.huffingtonpost.com/2009/09/02/bank-of-america-asks-arml_n_275882.html

BofA forces homeowner to buy flood insurance (when she lives on the crest of a big hill)

http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=6996278

Tales of Short Sale insanity in dealing with BofA

http://agentgenius.com/g-rants-insanity-more/realtors/bank-of-america-retard-division-for-short-sales/

(quick note: I'm just republishing this one, I'm not condoning his metaphor....but do note this, the thesaurus usage of "retard":  “the process is retarded by bureaucratic red tape delay, slow down, slow up, hold back, hold up, set back, postpone, put back, detain, decelerate; hinder, hamper, obstruct, inhibit, impede, check, restrain, restrict, trammel.”

Don't Buy That Furniture (If you want the $8000 tax credit, that is)

Good article in the WSJ about how lenders might actually be checking your credit on closing day, hence advising would-be benefactors of the $8000 first time homebuyer tax credit to NOT buy stuff until after you close.

Here's some more of the good snippets from the article:  

With the deadline on the first-time home buyer tax credit looming, plenty of buyers are under contract and looking to close before Nov. 30.  Excited to move into a new home, some of these first-timers start hitting the stores shopping for new furniture, appliances or curtains.

Big mistake. 

Real estate agents are reminding buyers to wait until the close to start buying stuff.  The reason: Lenders are occasionally running credit reports on closing day, and they might not like to see an increase in credit card debt or indications that debt could soon increase.

While such measures have been used over the years, lenders, still dealing with the fallout from the boom’s lax lending standards, are being especially particular these days. Even buyers with great credit scores face scrutiny.

Agents also advise not moving money between accounts, so don’t join two savings accounts, transfer large sums out of savings or add more funding to checking. Emptying out an account could look like money’s being spent, and lenders might request a paper trail for the money flow.  That could delay the closing or, in rare cases, terminate the loan. That wouldn’t necessarily free the buyer from the obligation to buy the home.

Dan Rider, a broker with Dickson Realty in Reno, Nev., says one of his recent closings was delayed by five days when lenders spotted a $500 deposit in a buyer’s checking account. It wasn’t a gift – it was a repaid loan from her mother – but it sparked concerns that the buyer needed help to close the deal. Though the buyer had a healthy checking balance, the lender wanted canceled checks and bank statements and both parties had to write an explanatory letter.

BOTTOM LINE: Stay out of the stores. Don't move money around more than necessary.

Interesting Market Share Data -- Who Sold What Mortgages So Far

Ever want to know how many mortgages your lender does, in your area, and what kinds?

Well, with much kudos to my preferred B of A mortage loan officer Shaveta Sareen (who can also be reached at 650-358-4874), take a look at this market share data for San Mateo County, from January to June of this year (H1 '09).

I'll paste the quick snapshot below, but for an even more detailed chart, including # of fixed vs. # of ARM mortgages, and more, see the full PDF here: Download San Mateo - Purchase Mid 2009.