Continued from Stockton Real Estate Recap, Pt 1  

In his November 2009 Update, Dr. Yun shares the following:  Rising home values will prevent home prices from overcorrecting even further. Home prices have, indeed, been overcorrecting and have led to sizable destruction in middle-class housing-related wealth. By contrast, stock market and financial wealth have experienced spectacular gains in the past nine months. Despite those gains, however, consumer confidence still continues to tread near historic lows.

But stirring a pot of voodoo finances has produced a brew that is showing some strong medicinal benefit.  Per Dr Yun: Earlier this month, the U.S. Congress overwhelmingly passed and the President signed into law new measures to maintain the momentum for a housing market recovery. The home buyer tax credit, originally scheduled to expire at the end of November will now be available through the middle of next year and more potential buyers will be able to take advantage of it. The income limit was also increased and many move-up buyers - not just first-timer purchasers - also will qualify. Furthermore, loan limits will not shrink as was planned for next year; in high-cost areas, the loan limit will remain at near $730,000 in 2010, thereby permitting more consumers to tap into the historically low mortgage rates.

In the Stockton market we have seen the benefit of this ‘brew’ first hand.  As the accompanying graphs are showing, the overall inventory has diminished greatly since the Tax Credit hit the scene.  In recent years a graph showing a decline of inventory would have been due to Sellers “giving up” and deciding to ride out the storm; not sell for a loss.  Who knew the tsunami that would be known as 2006!  But this decline of assets is real, representing Sold inventory leaving the market at near historic levels. 

Another interesting side note has been the rise of Short Sales, which continue to clog the market.  The effect is a market that is clearly made up of 3 parts.  1- Sellers with equity; 2- REO (foreclosures); 3- Short Sale assets.  As the graphs show, the moratoriums have delayed the REO assets from hitting the marketplace.  More on that subject later.  Short Sales are on the rise and slated to increase even more for the next 3-5 years per Alex Charfin, president of Certified Distressed Properties Experts (CDPE   www.cdpe.com).  Due to their increase as a market presence, they are impacting Days on Market (DOM) averages and more important there appears to be a growing sum of evidence showing they are selling

-10% less than REO or Retail.  The reasons are many, but 2 quick observations are: First, the primary buyer has been 1^st timers who qualified for the $8k Tax Credit.  These buyers did not want to take the chance and lose these funds by going to escrow with a home that may never close.  2ndly, as the DOM are long, the end result unknown, in a market that is still declining on average of 1.4% P/M (Metrolist) the buyers want to ensure they are not overpaying for the home once it finally closes. 

The end result has been buyers have turned their attention first to the Retail and REO seller.  We experienced a window of opportunity where pricing was able to be ‘pushed’.  Multiple offers were the norm throughout 3^rd quarter and into 4^th quarter leading to final values in excess of original list pricing.  Internally, we saw Sellers with borderline equity rush to the market to escape their losses, and eliminate the threat of foreclosure or the stress of short sale. While the extension of the tax credit has acted like a pressure relief valve, it is clearly going to play a part in 2010 as the Phantom Inventory makes itself visible.

As is evident, a safe conclusion of the above ‘facts’ is that we are in the MIDDLE of this market.  We have seen hints of what can happen if the market has sufficient Salable Inventory coupled with Tax Credits and historic low interest rates.  The data clearly show the Buyers are “there” if the market is.  However, we also see the effect of not having a clear Short Sale program equal in clarity to the REO system.  If someone can finally persuade the lenders to create some rules the housing market and real estate agents can interpret and depend on, we will see the END of this market.

Ever the ‘eternal optimist’ I believe we are seeing this.  Several lenders I serve are aggressively pushing the ‘Pre-Approved’ Short Sale.  Various reports show that the Lender will lose 70% of value through foreclosure while the losses are 15% in Short Sale.  Sounds like a simple decision then, right?  Not so.

The financial market is not the simple structure of years past, but more closely associated with “it’s not your father’s Oldsmobile” thinking.  With STORING loans being rare, selling the loan off the norm, selling fractured interest common and commonsense rationale being absent altogether, the task of persuasion becomes formidable.  Yet, any movement towards standardization will have a multilayered effect: cleansing the market, stabilizing pricing, and even driving prices to the point that borderline Short Sale candidates will not need to go down that path but instead sell and re-buy without a stigma attached to their credit.

And after all, it will be Housing that leads the way…

SUCCESS!

Darrell

Good Morning!

Last Thursday while attending an early morning meeting, I had the opportunity to hear my friend Zenet Negron, from First Priority Financial speak about how changes in appraisal policies and a declining market have impacted those ‘borderline’ borrower’s ability to refinance into a superior loan product.  So I asked Zenet if we could chat about this in today’s blog

DRI: Zenet, thank you for the time to chat and inform the public by means of my blog.  There are recent changes in appraisal law that were designed to give the public more protection through the loan process.  Have you already seen impact due to these changes?

Zenet: The appraisal process is pivotal to closing your loan.  As of Feb. 15, 2010, FHA loans are required to use an Appraisal Management Company (AMC) when ordering appraisals. Conventional loans adopted this practice in the latter part of 2009.

The process is now taking longer, which can cost the consumer more to complete a loan.  We have seen appraisals “come in” both under and over the current market values. In most cases out of area appraisers are being assigned by the AMC; hence, they are not entirely familiar with certain areas.

With every appraisal, the underwriter will review the appraisal report and establish a recommendation of value. It is not unusual for them to request a second appraisal. This long process is prohibiting some transactions from a timely closing.

DRI: Have you had someone actually impacted by this new policy?

Zenet: This past week, my refi-client had three comparable properties close escrow as their appraisal was being done. They were the ‘freshest’ and the rules require newer rather than older data be used.  Each comparable property had lower values which effectively reduced their home’s value and they were unable to refinance. So, the delay in process allowed closings occurring in a declining market to drive the new value out of range

DRI: This does not seem likely to be a ‘one time’ event.  What are you telling your clients?

Zenet: Timing is essential. If you're considering refinancing your home, it may be best to not postpone your decision and move forward. If you're purchasing, make sure to contact a reputable real estate professional that can properly negotiate your purchase price and that they are capable to renegotiate the purchase price in case the appraised value is lowered.

DRI: I know we have tossed out a significant coveration and lightly touched it.  I hope you will feel like taking this a bit deeper in a future blog.  Any interest?

Zenet: Absolutely.  I know we both work from a core value that our clients should be the most educated and well prepared in the marketplace to ensure their chance of success.  I would be glad to help.

DRI: Zenet, again, thanks for taking the time.  We all look forward to that day.

SUCCESS!

Darrell

On Tuesday, February 9^th, STAR POWER’s Alex Charfen and his team will in town, in fact, they will be at our office.  All for the express purpose of interviewing me and the Team and making it our official induction as a STAR. 

This is quite an honor, one I privately wished for but just didn’t see it in the cards.  However, Howard Brinton made that all change by selecting me for this honor just prior to his turning the reigns over to Alex. 

I have had a blast attending more than 12 STAR POWER conventions where I was free to grab, borrow and tweak ideas, from thousands presented, that allowed me to drive our business to record levels.  Those and other strategic ideas, clarified by our commitment to the Team motto:  Integrity… Knowledge… Success, coupled with applied energy and focus to succeed for our clients, has allowed our sales to soar to figures that at times are hard to conceive.  A statement backed by the NAR.

Per the National Association of Realtors data the average agent sold 3.98 homes in the year 2008.  We were blessed to assist 576 families in getting into their new home during that same time period.  In fact, since 2006 we have successfully closed over 1600 home sales.  Something I could never do without the support of a great Team, and that I have!

So, allow me this brief moment to sit in the sunshine, and I will be back to work on Monday morning.  After all, it will be a new day.  And if you’re an agent looking to take your business to the next level, you cannot do better than joining the STAR POWER team.

SUCCESS!

Darrell

In reviewing the abundance of information describing our nation’s current fiscal condition, more specifically as relating to the Real Estate Market, all sources shared varied opinions, yet did find agreement in some areas.

The first of these appears to be the agreement that the recession is losing steam and in the words of one source: “the pluses outweigh their minuses”.  To quote The Kiplinger Letter: The economic pluses outweigh the minuses.  Consumers are now showing a willingness to spend, despite their high debt levels and rising foreclosure rates.  Their long-term history suggest they‘ll keep it up.  Confidence, rebounding smartly, will keep improving.”

And, there is agreement in another area, that being 90% of the economists predicted the recession to be over by year end 2009, with 74% of the forecasters declaring the end by 3^rd quarter, and 19% estimating the turning point to be in 4^th quarter.  (Per NABE).  NABE further stated the economy will have grown at a 0.7% pace in 3^rd quarter followed by a 1.8% pace in the 4^th quarter.  “While that growth may appear to be minute, compare that to shrinkage at a 6.1% annualized pace in the 1^st three months of 2009.”

But housing may be stating a different opinion.  Housing has a long history of leading the economy into and out of recessionary times.  Why be any different this time?  So, is there good news?  Per Lawrence Yun, Chief Economist, NAR Research: “Happier days are ahead.”  But with it’s heals digging into the sand. (watch for Pt 2)

Ok, so you may not have recognized my "Laugh In" imitation, but, I did discover some news that was truly interesting!  In review of the local MLS data, I was excited to see that out of the more than 1100+ different real estate companies who sold a home in Stockton in 2009, my small band of loyal merry makers was the 5^th most productive office in units closed! When you consider that the Top 4 have a combined number of Agents in excess of 350+ and my Team is made up of 6, well let’s just say… I am very proud of the Team.  Go Genesis!!!  And if you are still wondering about what "Laugh In" is, well... you just had to be there.

Today marks the passing of a legend. Jim Rohn, said to be America's Foremost Business Philospher, was more than that, affecting everyone he touched on a personal level. It is said "when the student is ready, the teacher appears". I was the student, he the mentor.

http://tribute.jimrohn.com/

Jim closed his programs with the following: “I go with you in all the experience that we’ve had. But I promise you this as we leave here: I will not leave you behind. I’ll take you with me in my thoughts and in my heart.” And you are in mine.

D.

I love coming to the cabin.  Sitting here today, having just completed a lunch of the Thanksgiving Day leftovers-on-purpose, and watching the wind blow through the towering Douglas Fir and Pine trees, it has become very apparent… There is no place to store anything anymore!  The closets are full, the storage room is maxed out, and very soon important ‘things’ will just have to stay ‘out’.  Or not!

I have just been forwarded a link to Ladies Home Journal’s website with an excellent article on what to do when you just can’t store it anymore. 

“Don't Dump It, Donate It!  Give your old stuff new life by contributing it to worthy organizations”

“…Confession time: How much of the stuff that's crammed into your closets, attic, and basement do you actually need or use? We're talking about the bridesmaid dress the bride swore you'd wear again, the books your kid never read, and the inline skates you bought on a whim. But before you haul your random clutter to the dump, find out if there's a greener way to get rid of it. These organizations will take all that junk off your hands and recycle it or give it to those in need…”

Have linens that are ready for the rag bin?  “Animal shelters are often desperate for donations of soft blankets, thick towels, and linens to use in the animal cages, visit pets911.com”.

“Contribute your used furniture, such as beds, couches, and dining room tables, to your local chapter of the National Furniture Bank Association (nationalfurniturebank.org). The organization provides furniture to victims of hurricanes, floods, and earthquakes. It also helps families living below the poverty level and women and children who are starting over after fleeing violent homes”.

A whole host of suggestions for everything you rediscover that just needs a new home.  And, a tax deduction might be in order too.  I have always strived to create ‘win-win-win’ results in every opportunity I could.  This is a terrific example of how we all can create that ‘perfect’ solution.   A worthy organization gets goods to meet the needs of those in need;  you finally get some space in your home; and you might get a tax deduction to boot!  What can be better than that?  Oh…Santa IS on his way!

Take a moment and see if you might benefit with this information.  And, Merry Christmas!

SUCCESS!

Darrell

http://www.lhj.com/volunteering/dont-dump-it-donate-it/

Today at NAR meetings, FHA Commissioner Dave Stevens made an announcement that will save homebuyers hundreds of dollars, days maybe weeks in the transaction, and certain frustration...

The following is an exerpt from SRCAR...

"It's amazing the difference it makes when you have somebody in a position of authority who actually knows what they’re doing as opposed to putting a bunch of bureaucrats and political hacks in charge. Commissioner and Under-Secretary of Housing Dave Stevens is one of us. Just like in the state of California we finally got Jeff Davi in place to help straighten out the Dept. of Real Estate.

After hearing the apologists and sycophants discuss HVCC yesterday, it was gratifying to have a discussion with somebody who listens and who, as Pres. McMillan said, ‘Gets It.’ According to Charlie Mac, the FHA & Stevens has been a ’solid partner’. "

Speaking before a packed house...

"He credited discussion with Charles McMillan with swaying FHA policy regarding HVCC implementation saying they realize the importance of the independent appraiser and are concerned about the proliferation of AMC’s, especially those owned by major lenders. He said they intend to apply the principles of HVCC as it was intended, not as it has actually been implemented. Along those lines he also announced that effective Monday there will be NO MORE 2nd appraisal requirements for FHA."

Welcome news, indeed!

Obama Signs Homebuyer Tax Credit Expansion Into Law

President Obama today signed legislation to extend and expand the $8,000 first-time homebuyer tax credit that had been set to expire at the end of the month. These tax credit changes are included in the Worker, Homeownership and Business Assistance Act of 2009, which also extends unemployment benefits to people who have been jobless for more than one year.

The new legislation extends the deadline for the first-time homebuyer tax credit to include home purchase contracts entered into by April 30, 2010 and closed by June 30, 2010. The tax credit was also expanded to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence — if they have lived in their current residence for at least five consecutive years of the past eight years.

Homebuyers looking to take advantage of either tax credit are subject to income eligibility limits of $125,000 for individuals and $225,000 for married couples, up from the limits of $75,000 and $150,000 included in the previous law. The home purchased must cost less than $800,000 to qualify the homebuyer for the tax credit. And to help guard against fraud, buyers are required to attach documentation of the home purchase to their tax return.

NAR economists estimate that the current tax credit has contributed approximately $22 billion to the general economy, and that approximately 2 million people will take advantage of the tax credit this year.

“The substantial rise in home sales we’ve seen over the past few months proves that the tax credit is working and is being used by buyers who were waiting for the right opportunity to get into the market,” says NAR President Charles McMillan. “This important incentive is helping to stabilize the housing market, stimulate the economy and create new jobs in communities all across our great nation. Extending and expanding the home buyer tax credit will enable even more families to take advantage of current low interest rates and affordable prices to invest in their future through homeownership.”

Tax Credit Resources from NAR:

Details on Homebuyer Tax Credit Changes

Frequently Asked Questions on the Expanded Homebuyer Tax Credit
Fri, Nov 6, 2009

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.