This Weeks Market Commentary

This information is courtesy of our friends at Princeton Capital. As a reminder, I highly recommend you call upon a qualified loan professional before you even start to look at properties. By doing so, you can ensure your ability to act when you find the right one. If you have any questions about the financing process, you can contact my associate Tisha Shaffer with Princeton Capital.

This week brings us the release of three pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting and a speaking engagement with Fed Chairman Bernanke and a congressional committee. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but the others do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

 

Monday and Tuesday have nothing of importance scheduled, so look for stock movement to heavily influence bond trading and mortgage rates. Stock gains will probably pressure bonds and cause mortgage rates to move higher. If the major stock indexes show losses during the first couple days, we may see bonds thrive and mortgage rates remain unchanged or move slightly lower.

 

The National Association of Realtors will give us their Existing Home Sales report at 10:00 AM ET Wednesday. This data tracks resales of existing homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for an increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Wednesday morning since a strengthening housing sector raises optimism about broader economic growth.

 

Also late Wednesday morning will be testimony from Fed Chairman Bernanke to the Joint Economic Committee of Congress. He will be updating them on the status of the economy and the Fed’s outlook for future growth and monetary policy. This will be watched closely and is one of those speaking engagements that can cause considerable movement in the financial markets and mortgage rates.

 

Furthermore, the minutes of the last FOMC meeting will be released Wednesday afternoon. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about the Fed’s next move regarding interest rates and their current bond-buying program (QE3). Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading Wednesday.

 

April’s New Home Sales report is the sister report of the Existing Home Sales and will be released late Thursday morning. It gives us a similar measurement of housing sector strength and future mortgage credit demand, but tracks a much smaller portion of housing sales than Wednesday’s report does. Actually, it is the least important release of the week and probably will not have much of an impact on mortgage pricing unless it shows a sizable variance from forecasts. It is expected to show gains in sales from March’s level, meaning the new home portion of the housing sector also strengthened last month.

 

Friday has the week’s most important economic report with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years. It is currently expected to show an increase in new orders of approximately 1.6%, indicating the manufacturing sector remained strengthened a little last month. That would be relatively bad news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on Friday’s mortgage rates.

 

Overall, I believe Wednesday will be the most important day for rates, although Friday should be active also as it will be shortened due to the early close ahead of the Memorial Day holiday and has the most important report of the week. Still, Wednesday’s economic data and Chairman Bernanke’s testimony in the morning and FOMC minutes in the afternoon means we could see a couple changes to mortgage rates that day. I suspect that Tuesday will be the calmest day of the week. There is nothing to be concerned with Monday, but strong selling in bonds late Friday means there is a fairly large increase in mortgage rates waiting if your lender did not make an upward revision during afternoon trading. I don’t think we will see as much movement in rates that we saw last week, however, it is still recommended to maintain contact with your mortgage professional if you have not locked an interest rate yet.

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Timing is Everything!

MarchRealityCheck

They say timing is everything in life. And that’s particularly true when it comes to real estate. If you’ve been thinking about selling your home but are not sure if this is the right time, think again: There may not be a better time to sell than right now.

We are experiencing a severe shortage of homes for sale in our area. Our inventory of listings is at the lowest level it has been in many years. Buyers are out there each weekend scouring the neighborhoods for homes to buy; buyers are ready to make a move when they find a house to buy.

With so few homes available in this market, if you were to sell your home now you could potentially get the highest price since the downturn of the housing market. With buyers far outnumbering available homes for sale, sellers are often getting multiple offers – sometimes a dozen or more – often closing at a price that is significantly more than their asking price.

We’re not alone here in the Sacramento/Tahoe region. The low inventory of for-sale homes is creating a seller’s market throughout the country, according to an article by the National Association of Realtors®. NAR reported that “Buyers and Agents are literally waiting for the next house” to come on the market in many cities.

According to NAR, the supply of existing homes for sale reached nearly an eight-year low in January. Nationwide, there is a 4.2-month supply of existing homes for sale and it could take some time before we reach a more balanced market. There are a number of reasons for the shortage of listings. The number of distressed houses for sale is decreasing as the foreclosure crisis recedes. New home construction is improving but still at low levels in most areas of the country. And many homeowners still believe they are too underwater on their mortgage or may not have enough equity in their property to buy their next home.

But you may be surprised at how much the tide has turned in the last year.

Multiple offers and bids over the asking price are pushing up home values in many areas. Properties that looked like they would have to sell as a short sale have ended up pricing out as a traditional equity transaction with homeowners walking away with cash from the sale. We are experiencing this change in the market every day.

In a recent Money magazine article, reporter Beth Braverman said homeowners might be wise to sell now rather than hold off. “It’s tempting to postpone selling to hold out for a better price,” she said. “But if you want to move to a larger place, act sooner rather than later.”

While you might be able to sell your home for more if you wait, there’s no way to tell what the future will hold. When more homeowners eventually decide to come into the market, the balance of supply and demand could change in favor of buyers once again. And even if prices go up in the future, the appreciation on a trade-up home could be even greater.

As we travel through life, housing needs evolve. You may have outgrown your starter home and need more space now that you have children. Perhaps you want to move to a similar home on a quieter street. You’ve decided to downsize now that the kids are on their own and you are empty nesters. Or you’re just tired of maintaining that big yard in your current home.

Whether you’re moving up, across or downsizing, whatever the reason for your move, it’s important to work with a well-qualified professional Realtor® who can help make the transition a success.

In order to get the best possible price for a home, you must expose it to the largest number of potential buyers. Start by hiring an Agent from a reputable firm who specializes in your local area.

Your Agent must be able to showcase your home in a variety of traditional and online media including professional photography, direct mail, property flyers, listing syndication, social media, and electronic communication to area Agents.

Additionally, your Agent should also identify the key selling features of the home and actively promote the property to other Agents during the brokers’ tour and to potential buyers during an open house.

Your best choice is to start by hiring the Sacramento/Tahoe region’s leading real estate services company, Coldwell Banker Residential Brokerage. Our proven marketing plan will showcase your home to the widest possible audience of qualified buyers and net you the best price possible for your property.

Selling your home can be a complicated and stressful process. But it doesn’t have to be, especially when you are working with the best. As a full-service company, we are with you every step of the way, keeping you informed about the entire transaction.

As your professional Realtor®, I can help you navigate through the process of selling your home and even help you find your next home that fits your current situation. Contact me today for a private consultation and to learn more about my comprehensive marketing program.

As they say, timing is everything.

This Reality Check is brought to you by Coldwell Banker Residential Brokerage, the leading provider of real estate services in Northern California. Coldwell Banker Residential Brokerage is home to more than 3,600 Sales Associates of the region’s most successful real estate professionals.

Affordable Home Staging Strategies

These are some great suggestions. Additionally, remember to ensure your home is clean! Take the time to mop your hard surface floors and vacuum the carpets- buyers love vacuum lines! You should also pay attention to scent. It’s a good idea to place “plug-in” type air fresheners in each room. Consider alternating scents that compliment each other so that potential buyers notice a pleasant smell in each room as they enter it, instead of adjusting to the same consistent scent. Need more ideas? Give me a call- I can help! Good luck 🙂

stagingcover

Affordable Home Staging Strategies

An open house can be the selling point for potential buyers, and most sellers understand the importance of staging a home properly. However, few homeowners want to spend a great of money redecorating their homes. The good news is, there are several ways for sellers to stage their homes beautifully without reaching too deeply into their pockets.

Do some research

For homeowners who are unsure how they should stage their homes, speaking with a real estate professional is the first step. Real estate agents have most likely attended several open houses and have unique insight into what buyers may be looking for. In addition, homeowners themselves may benefit from venturing out to staged model homes or open houses in the area, and examining the techniques other sellers are using.

Sellers should first rely on what they have

Before going out and purchasing a new living room set, sellers should focus on decluttering their homes, cleaning it until it’s spotless and making any necessary repairs or alterations before purchasing new items. They may find that they already have all the items they need to stage their properties. If not, all the legwork will be done and sellers will have a better idea of what they are lacking before they seek out accent pieces, plants and other popular staging products.

In addition, rearranging a room to highlight certain areas or making the room feel more spacious can also have a great effect on a home staging. For example, framing a living room around bay windows and adding a bookcase or two to a home office can make a room look more appealing.

Focus on subtle changes

Homeowners who still feel their home needs sprucing up should explore small changes that may change the look of a room. For example, adding a fresh coat of paint (many suggest a neutral shade), purchasing updated kitchen appliances and putting in new lights, doors or window treatments can have a profound effect on a room. Purchasing small items, such as colorful picture frames, books and lamps may also make a staged home appear more warm and lived-in.

Lastly, homeowners who are staging on a budget may also consider borrowing small accent pieces from friends and family to cut the costs of purchasing new items.

 

They say timing is everything in life. And that’s particularly true when it comes to real estate. If you’ve been thinking about selling your home but are not sure if this is the right time, think again: There may not be a better time to sell than right now.

We are experiencing a severe shortage of homes for sale in our area. Our inventory of listings is at the lowest level it has been in many years. Buyers are out there each weekend scouring the neighborhoods for homes to buy; buyers are ready to make a move when they find a house to buy.

With so few homes available in this market, if you were to sell your home now you could potentially get the highest price since the downturn of the housing market. With buyers far outnumbering available homes for sale, sellers are often getting multiple offers – sometimes a dozen or more – often closing at a price that is significantly more than their asking price.

We’re not alone here in the Sacramento/Tahoe region. The low inventory of for-sale homes is creating a seller’s market throughout the country, according to an article by the National Association of Realtors®. NAR reported that “Buyers and Agents are literally waiting for the next house” to come on the market in many cities.

According to NAR, the supply of existing homes for sale reached nearly an eight-year low in January. Nationwide, there is a 4.2-month supply of existing homes for sale and it could take some time before we reach a more balanced market. There are a number of reasons for the shortage of listings. The number of distressed houses for sale is decreasing as the foreclosure crisis recedes. New home construction is improving but still at low levels in most areas of the country. And many homeowners still believe they are too underwater on their mortgage or may not have enough equity in their property to buy their next home.

But you may be surprised at how much the tide has turned in the last year.

Multiple offers and bids over the asking price are pushing up home values in many areas. Properties that looked like they would have to sell as a short sale have ended up pricing out as a traditional equity transaction with homeowners walking away with cash from the sale. We are experiencing this change in the market every day.

In a recent Money magazine article, reporter Beth Braverman said homeowners might be wise to sell now rather than hold off. “It’s tempting to postpone selling to hold out for a better price,” she said. “But if you want to move to a larger place, act sooner rather than later.”

While you might be able to sell your home for more if you wait, there’s no way to tell what the future will hold. When more homeowners eventually decide to come into the market, the balance of supply and demand could change in favor of buyers once again. And even if prices go up in the future, the appreciation on a trade-up home could be even greater.

As we travel through life, housing needs evolve. You may have outgrown your starter home and need more space now that you have children. Perhaps you want to move to a similar home on a quieter street. You’ve decided to downsize now that the kids are on their own and you are empty nesters. Or you’re just tired of maintaining that big yard in your current home.

Whether you’re moving up, across or downsizing, whatever the reason for your move, it’s important to work with a well-qualified professional Realtor® who can help make the transition a success.

In order to get the best possible price for a home, you must expose it to the largest number of potential buyers. Start by hiring an Agent from a reputable firm who specializes in your local area.

Your Agent must be able to showcase your home in a variety of traditional and online media including professional photography, direct mail, property flyers, listing syndication, social media, and electronic communication to area Agents.

Additionally, your Agent should also identify the key selling features of the home and actively promote the property to other Agents during the brokers’ tour and to potential buyers during an open house.

Your best choice is to start by hiring the Sacramento/Tahoe region’s leading real estate services company, Coldwell Banker Residential Brokerage. Our proven marketing plan will showcase your home to the widest possible audience of qualified buyers and net you the best price possible for your property.

Selling your home can be a complicated and stressful process. But it doesn’t have to be, especially when you are working with the best. As a full-service company, we are with you every step of the way, keeping you informed about the entire transaction.

As your professional Realtor®, I can help you navigate through the process of selling your home and even help you find your next home that fits your current situation. Contact me today for a private consultation and to learn more about my comprehensive marketing program.

As they say, timing is everything.

This Reality Check is brought to you by Coldwell Banker Residential Brokerage, the leading provider of real estate services in Northern California. Coldwell Banker Residential Brokerage is home to more than 3,600 Sales Associates of the region's most successful real estate professionals.


Jessica Hays
(916) 691-8086
(916) 208-4347
01878401
Jessica.Hays@cbnorcal.com

From the first time home buyer, to the savvy investor - from the seller with equity, the seller underwater and needing options - I am here for you. 

View My Website  CaliforniaMoves.com

 

©2013 Coldwell Banker Real Estate LLC. All Rights Reserved. Coldwell Banker® is a registered trademark licensed to Coldwell Banker Real Estate LLC. An Equal Opportunity Company. Equal Housing Opportunity. Each Coldwell Banker Residential Brokerage Office Is Owned by a Subsidiary of NRT LLC. If your property is listed with a real estate broker, please disregard. It is not our intention to solicit the offerings of other real estate brokers. We are happy to work with them and cooperate fully. DRE License #01908304

 

 

Good News for Underwater Sellers! And the Rest of Us Too!

Many sellers have anxiously counted down the days to the end of 2012 and the expiration of the Mortgage Debt Relief Act which prevented sellers from having to pay income tax on debt forgiven in a short sale. They watched in horror as the ball dropped on New Year’s Eve and panicked because their sale hadn’t yet recorded and no deal had yet been struck! Was it too late to cancel the contract? I mean it’s better to have a foreclosure than a $20,000 tax bill, right? Can you even file bankruptcy on tax debt?! Let the spiral continue.

Well, never fear because The American Taxpayer Relief Act of 2012 (affectionately referred to as the Fiscal Cliff Deal) which passed late last night has upheld the debt forgiveness law as suggested in this Housing Wire article excerpt:

“One of the more watched provisions of the fiscal cliff was the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on Dec. 31.

The fiscal cliff deal extends it for another year, meaning homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.”

Good news for sellers and great news for our economy!

See the full article here. The settlement will also extend a law that expired in the end of 2011 which allowed for the deductibility of mortgage insurance premiums. Additionally, capital gains rates are to rise from 15% to 20% for high-income earners. However, capital gains rates on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for married couples.

What You Need To Know About The 3.8% Tax!

Most importantly- Don’t freak out! It’s probably not going to affect you (or the sale of your home). Okay, now that we’ve gotten that out of the way you can check out the short video below and the National Association of Realtors’ “Top 10 Things You Need to Know About the 3.8% Tax” for more specific details.

 

 

See original article here

Learn the most important takeaways for REALTORS® when it comes to the 3.8% tax that’s part of health care reform:

  1. When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.
  2. The 3.8% tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.
  3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
  4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
  5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
  6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
  7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.
  8. The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would never be imposed on more than $1,000.
  9. It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
  10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. NAR strongly opposed the tax at the time, and remains hopeful that it will not go into effect. The tax will no doubt be debated during the upcoming tax reform debates in 2013.

March Reality Check

 SFSellingTodaysMarket
As the Sacramento area’s housing market continues to bounce back from the recession, more and more buyers have decided they can’t wait any longer – now is the time to get back into the market to find their next home.While the real estate market still has its challenges, things are very different today than they were in 2009, 2010 and even early last year. Buyers are generally more optimistic about the future, ready to purchase, much better qualified for a loan and, in many cases, are paying big down payments or even all cash for their next home.

Indeed, the scales of supply and demand are once again moving back in the direction of home sellers after being out of balance for several years. While countless buyers are out there pounding the pavement for a home, the problem now is that there just aren’t enough sellers to meet the demand in many communities.

As the economy continues to improve and with a shortage of attractive properties in good neighborhoods, buyers are once again paying good prices for properties rather than simply looking for distressed homes at bargain basement prices. And in some cases, properties are even getting multiple offers, driving up the sale price above the asking price.

So if you’ve been thinking about selling your home, now may be an ideal time to do so while buyers are eager, interest rates are still low and there isn’t as much competition from other sellers as there usually is this time of year. Here are several suggestions on how to get started and the best way to get top dollar for your home in today’s market.

  • Pick the best agent for the job. Selling a home is never easy, but in today’s complex real estate market it’s particularly challenging. So it’s more important than ever to find an experienced professional Realtor to help you get the job done. This is no time for amateurs. Start by interviewing several agents to see who has a proven track record of successfully marketing properties in your area. Ask them about their marketing plan, including print media, social media and online marketing via major real estate websites. Find out how well networked they and their brokerage are to other agents with potential buyers. Do they have offices beyond your city limits and even outside the state? Today’s buyers are just as likely to be relocating from across the country as they are from across town.
  • Go online and be visual. Remember the days of sticking a sign in the front lawn and taking out an ad in the local paper? Those days are long gone. Nearly 90 percent of buyers start their search for a home online, according to the National Association of Realtors. So you must be there in a big way to compete for the attention of buyers. Work with your agent to put up lots of high-resolution photos and as much information as possible. Make sure to show photos of all the major areas of your home and yard to give buyers as much of a sense of being there as possible. If not, buyers may wonder what you’re hiding. And strongly consider using video and virtual tours. Such marketing tools are no longer just for luxury homes.
  • Price your home competitively for today’s market. Just because a house comparable to yours sold for a certain price before the recession doesn’t mean you will be able to get the same price today. A lot has changed since then. And while prices are firming up, it’s still important to realize the new realities of today’s market. Talk with your Realtor to determine the appropriate, competitive listing price for your home based on current market conditions. You may even choose to have an appraisal done in advance of setting the price. Remember that in this market, homes that are priced aggressively attract the most buyers and – in some cases – multiple offers that push your final sale price even higher.
  • De-clutter and de-personalize. De-personalizing and de-cluttering a home before putting it on the market can help make it easier for buyers to imagine themselves living there – a crucial step in the selling process. Take down family portraits, personal collections and knickknacks. Homebuyers are looking for a home they can picture their family living in, not yours. Removing these items will also eliminate clutter and ensure that people are looking at the house itself, not at the photos from your last family vacation.
  • Update, freshen up. Keeping in mind that some buyers take move-in condition to be important, put your home in its best light. Possibilities include replacing outdated kitchen and bathroom fixtures, applying a fresh coat of paint and/or refinishing the kitchen cabinets. Replace worn carpet or fix broken tiles. Many cosmetic touches are surprisingly affordable but may yield much higher sale prices. The less work buyers have to do when they move in, the faster they may be willing to make an offer.
  • Conduct a full home inspection. If a professional home inspector determines that there are negative issues with the home, consider repairing the problems before buyers show up at your door. Potential buyers will cast an extremely critical eye over your home if it needs too many repairs – especially if they are trying to decide between your home and another one without problems. Be sure to have the home inspection report available for prospective buyers along with an itemizing all of the repairs that have been made and the associated cost for each to demonstrate the investment you’ve made in your home.
  • Make your home and yard picture perfect. As the old saying goes, you only get one chance to make a good first impression. When a buyer sees your house for the first time, a positive impression can make or break the sale. You can maximize curb appeal by trimming trees, planting flowers and even rolling out a new lawn if needed. A fresh exterior coat of paint might also prove valuable. And consider having a professional “stage” your home to make it even more attractive for buyers by rearranging what you have and/or bringing in other furnishings and accessories.
  • Be patient and flexible. You’ve done all the right things to put your home in the best position to sell. But there will undoubtedly be bumps along the way. A buyer may have difficultly securing financing. The appraisal may come in lower than expected. The escrow period could drag on longer than you thought before the deal closes. It’s not unusual to have occasional issues pop up. After all, buying a home is the single biggest financial transaction most of us will ever make in our lives. Through it all, remember that your Realtor is there by your side. He or she will be there with you every step along the way, managing the tough issues so you don’t have to and helping you achieve all of your home selling goals in today’s market.

Housing Crisis to End in 2012 as Banks Loosen Credit Standards (Maybe)

While I certainly don’t expect to see any major improvements in the local housing market this year (with respect to average sales prices or price/sqft), I also don’t anticipate any drastic declines. Elk Grove currently only has 238 Single Family Residence listings available on the market (this includes equity sales, short sales, and bank owned homes- one house on one lot).  Couple this with the fact that there are currently 855 Elk Grove Single Family Residence listings in contract (this includes homes listed as short-contingent, pending, and pending/bring backup), and you’ll realize that we are actually seeing the pendulum swing back in the direction of this being a seller’s market! This is NOT to say that prices will sky-rocket. However, the simple laws of supply and demand still apply. There are more buyers out there looking to purchase homes in Elk Grove than there are listings. We’re seeing a lot more bidding wars over competitively priced homes and the average “Days on Market” time before listings are going into contract has dropped substantially.  Dare I say it? Stabilization may be on the horizon.

01/24/2012BY: KRISTA FRANKS Printer Friendly View

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

 

See Actual Article Here.

2011 Real Estate Reality Check!

SACPoliticalHeadwinds
Leslie Appleton Young, the chief economist for the California Association of Realtors, recently noted that all that California’s real estate market really needs to right itself is six straight months with no surprises. All the ingredients for a turnaround are there — record low interest rates, outstanding affordability, and very attractive home prices. But economic and political headwinds at home and abroad kept the market from really gaining much momentum this year. To be sure, 2011 was anything but predictable. On top of the tepid economic recovery here in the U.S., there was one crisis after another around the world — the Japanese Earthquake and Tsunami, the “Arab Spring” uprising, a spike in oil prices, political standoffs on Capital Hill, the debt limit ceiling and downgrade of U.S. debt, and most recently the sovereign debt crisis in the eurozone and the subsequent stock market volatility here at home.While California’s real estate market did show some encouraging signs of improvement in certain price segments and communities, skittish consumer confidence, the sluggish economy, stubbornly high unemployment and volatile financial markets all combined to keep home prices and sales flat in most areas. Locally, The Sacramento Bee reported on November 17 that home sales in the Sacramento region in October — the most recent figures available — jumped 19.6 percent from a year ago, according to research by DataQuick, the La Jolla real estate information firm. But the median price edged lower as distressed home sales continued to be the lion’s share of the market. The median sale price in Sacramento County was down 8.2 percent to $157,000, according to The Bee. Placer County saw the median drop 12 percent to $252,000. In El Dorado County, the median was down 12.2 percent to $230,000. And in Yolo County it was off 14.6 percent to $194,750.The California Association of Realtors, in its annual forecast predicts that home sales in California will rise just 1 percent in the coming year. But as we know, real estate is really all about location. And in this challenging housing market, it’s also a matter of price segments. Locally, entry level homes and distressed properties continue to see robust sales in many areas as bargain hunters rush to take advantage of attractive prices and, of course, low interest rates. As a result, we actually have seen inventory drop sharply this year to the lowest level in about two years.Market wide, we are down to 4.2 months supply of homes on the market, according to MLS figures — a 31 percent decline year over year. At the same time, sales year over year market wide were up 16 percent. That trend, if it continues, could be very positive for the market and help it move back towards normalcy.Distressed vs. Luxury Markets
One trend we’ve noticed of late is a drop in the number of bank-owned properties that are listed for sale and an increase in short sales. The reason may be that government regulations and controversies over “robo-signing” have kept more foreclosures from coming on the market. As banks put the robo-signing debacle behind them, we may see more REO properties released in 2012.
While the release of additional distressed properties could keep prices of all homes down in 2012, we suspect that strong demand by investors for these homes will probably keep prices from falling much further. We’ve seen multiple offers for many bank-owned properties, sometimes all cash offers, as investors snap up what they believe to be great bargains.On the other end of the spectrum, the high-end market saw solid buying throughout much of 2011. But in recent weeks we have seen that interest decline, with sales dropping 8 percent in September and inventory levels rising 2 percent from the previous month. Non-distressed mid-market
Homes that are somewhere between distressed and luxury properties – the bulk of the market here in Northern California – probably were the most challenged in 2011. One big reason for the softness is that we didn’t see very many move-up buyers trading their entry-level homes for larger, more expensive properties as they have traditionally done in the past.
Equity homeowners stayed on the sidelines, perhaps due to a lack of confidence in the housing market and the economy in general. They may have been frightened away by doom and gloom news headlines about the housing market, or maybe fear over whether they might lose their job should the economy stumble again. This uncertainty and lack of confidence, I suspect, will continue to some degree into 2012 until there is more positive improvement in the economy.But as we approach the new year there are glimmers of hope that the housing recovery could finally gain some traction.Gradually we’re seeing fewer distressed sales and more “normal” transactions. Despite the recent downturn, the high-end market had a solid year in 2011, which is a good sign for the entire market.In the past, luxury homebuyers – the so-called “smart money” – are often the first to declare a market bottom and jump back in because they have the means to do so once they are convinced the time is right. The other segments eventually follow.Buyers are far more active right now and that, coupled with tight inventories, is helping to firm up pricing while getting serious buyers to be a little more realistic when making offers–especially in the entry-level arena. Properties priced correctly and that show well are getting a tremendous amount of traffic as well as multiple offers in some cases.Additionally, we are finally seeing many banks starting to process short sales in a more streamlined fashion, allowing us quicker short sale approvals. Finally, the news media are starting to join the chorus suggesting a turnaround is near and that now is the time to get back into the housing market. A recent Fortune magazine article declared, “Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.” And The Wall Street Journal followed with a headline declaring, “It’s Time to buy that House.”So will 2012 usher in a steady, predictable economic recovery at long last or another wild rollercoaster ride of economic and political surprises? Only time will tell how it all plays out. Fasten your seat belt

From the first time buyer to the savvy investor – From the seller with equity to the seller underwater and needing options. I am here for you.

ColdwellBanker3d3cweb1

 

What’s the DEAL with Short Sales?!

This is a question I hear on a daily basis.  It’s important to understand and accept that a short sale will take longer than a straight equity sale, and even a bank owned home in most cases.

Here’s a quick break down of the overall process, and why it seems to take so long.

  • Once an offer is made it has to first be accepted by the home owners.  This is usually not a difficult step, as the average home owner is not overly concerned with the net sheet because it’s ultimately not that person’s net loss.
  • After the homeowner accepts the offer, their agent then submits it to the bank(s).  In the best case scenario, the subject property will only have one mortgage, and in turn one bank to negotiate with.  We’ll assume that this the case for now, and then go over the possible differences at the end of my spiel.
  • Normally, the agent will put together a short sale package containing a myriad documents that are requested by the bank to go along with the offer.  Each bank has its own requirements, but almost all banks will ask for the following:
  1. Listing Agreement
  2. MLS history for the property
  3. Comparable Listings to justify the list price (usually 3 active, 3 sold, and 3 pending if possible)
  4. Executed Purchase Agreement
  5. Pre-Approval letter or Proof of Funds for the buyer making the offer
  6. A HUD-1 Statement for the purchase (this breaks down the banks expected net loss from the sale after all fees are accounted for)
  7. Financial Statements for homeowners applying for the short sale including but not limited to: bank statements, retirement accounts, investment portfolios, pay stubs, evidence of other income, a signed 4506-T granting the bank access to your tax returns, a completed budget worksheet which breaks down the homeowner’s end-of-month net after all necessary expenses are deducted from their gross income, etc.
  8. A well written, one page hardship letter explaining what event(s) have occurred that have left the homeowners less able to pay their monthly mortgage payment than they were on the day they were approved for their home loan.  It’s important to note that being upside down in itself is not generally accepted as being a true hardship for the purposes of a short sale.  There must be an extenuating circumstance that lessens your ability to afford your regular payment, i.e. loss of employment, death in the family, unexpected medical expenses, an adjustment in your ARM loan, reduction in income, or some other catastrophic event.
  • When your agent submits this well organized package to the bank, there will be an administrative person who receives it from the bank’s short sale department in most cases.  This person’s function is to ensure that the package is complete and ready to be reviewed for negotiation. If your package is not complete, it will not be sent to a negotiator’s desk, so make sure everything is done right the first time around.
  • Once your file has been reviewed and accepted as a complete package it will then be assigned to a negotiator.  This alone may take two to three weeks.  Keep in mind that yours is just one of many files on the negotiator’s desk, which will absolutely mean a delay between the time he/she receives your file and the time he/she actually begins reviewing it.
  • The negotiator’s job is to protect the bank financially.  He/she needs to examine the numbers and ensure that the net loss on the short sale will overall be less expensive than a foreclosure would potentially be.  He/she also needs to determine that foreclosure is eminent if a short sale is not approved (this is where all of those financial documents and hardship letter come in).  Keep in mind that in most cases the bank sells off mortgage debt to third party investors which means the bank must be able to justify any losses to those individuals.

IF the homeowner can be financially interpreted on paper as being able to afford the mortgage payment, then there is no real reason for the bank allow that person to do anything less than what was agreed upon in their contract- which is pay the full amount due, with interest, as promised .

IF though, that person’s financial situation has drastically changed and it’s clear through their financial records and hardship letter explanation of their circumstances, that there is just no possible way for them to continue paying the loan payments, regardless of whether or not a short sale is granted, and if it isn’t granted then the home will in all likelihood end up in foreclosure (an expensive process in itself), then the bank will be more likely to negotiate for an acceptable loss.

  • Usually the negotiator will calculate a “Magic Number” so to speak that the bank needs to be able to net in order for it to be financially sensible for them to accept a short sale, but of course they will not normally share this number with the agent until the very end of negotiations (if at all) in an effort to maximize their earnings from the sale.  They will then take the difference between that number, and the number at hand with the given offer on the table and attempt to trim costs as necessary.  They may do this any number of ways.  For example: it’s very rare that a bank will pay any non-essential fees, or costs that could potentially be passed on to the buyer (i.e. home warranty, closing costsexcessive commissions, etc.)
  • Once all of this back and forth has been handled you might be ready to close!  UNLESS THERE ARE SECONDARY LIEN HOLDERS OR MI COMPANIES (and there often times are).
  • IF the property has mortgage insurance, a 2nd mortgage and/or a HELOC you will need to negotiate a payoff with them as well.  All of the same rules that come with negotiating with the 1st bank will apply to the other bank(s) involved in the financing.  Other possible lien holders include Home Owner Associations, or government entities for unpaid tax liens.  Each secondary lien holder will have to be settled independently of each other.  Once the secondary lien holders have agreed upon their respective payoffs, your agent will then add their payoff amounts to the HUD-1 to be paid through escrow once the home is sold.  The bank that holds the 1st mortgage must agree to the payoff amounts for each secondary lien holder, and each secondary lien holder must be paid through escrow.  It is ILLEGAL for a buyer to pay a secondary lien holder outside of escrow!

If all the payoffs have been negotiated and approved by the 1st lender, AND if the remaining balance after those payoffs are made is still enough to satisfy the 1st mortgage’s previously mentioned “magic number” THEN you will have the makings of a successful short sale.  Of course all of this is dependent upon a very strict time table, because in many cases there may be a looming foreclosure on the horizon.

Bottom Line? Short Sales are complicated, and time consuming, and stressful.  That’s just part of the deal.  They are also a means of salvation for the struggling home owner under water who is looking to minimize the long term damage to their credit so that they can start rebuilding towards future home ownership.  AND they are often competitively priced because of the added frustration that comes along with the process, which means a golden opportunity for buyers on a budget!

Feel free to contact me if you have any questions or concerns specific to your situation that I may be able to address for you.  Before you consider a short sale, I highly recommend you speak with a real estate attorney to determine the possible consequences that may or may not apply to your unique situation.

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.