It’s May. Bring on…EVERYTHING!

May seems to always be the most hectic month of the year.  Graduations, picnics, school parties, sports, boating…commitments and fun keep us busy all month long, and I’m sure the same is true for you.

The real estate market has a way of hitting its full stride in May as well.  For the last few years, May has signaled the time when many homeowners decide to put their homes on the market.  This year appears to be similar as I’ve already listed two homes for sale in recent days. This is a good sign for the market at large since the single greatest issue we have in our market is too few homes for sale. Yes, that’s a bigger issue than high mortgage rates (although one could argue these issues are linked together)!

At the time of this writing, there are fewer than 100 single-family homes for sale in Folsom. 

May is often when new listings hit their annual peak

This is an incredibly low amount, considering we are a town of over 80,000 people and 28,000 housing units. Over the last few years, beginning in May, we start to see this figure increase through the summer months, but since interest rates began rising two years ago we have seen the number of homes for sale in the summertime decrease dramatically.

What will this summer bring?  Unfortunately, much of the same.  Unless I get more calls from clients interested in selling their homes this summer, I expect the number of homes for sale to be similar to last summer.  For current homeowners not looking to move, this is great news.  For those looking to buy their first home, this is truly discouraging, at least for now. 

I am anticipating mortgage rates to improve in the second half of the year, which will likely do two things: #1) more buyers will re-enter the market due to improved affordability; and #2) more “move-up” and relocating sellers will choose to put their home on the market as they feel less committed to remaining in their current home to hold on to an ultra-low mortgage rate. This increase in both demand and supply should keep prices level while increasing options for buyers.

Much like May’s relentless calendar, the real estate market keeps chugging right along despite challenging conditions. Either way…Bring. It. On.

LATEST LISTING – 4346 Prodperine Lane

This listing won’t last long! It’s literally the only home in the entire Sacramento region priced under $600,000 that provides over 2000 sq ft of single-story living space in a gated community built in the last 20 years.

Visit www.AspenVillageHomeForSale.com for full details.

GET REAL – Buyer Always Pays

Let’s Get Real about Buyers Paying Real Estate Commissions. Much of the recent news coverage of the real estate industry has focused on the shift that buyers now may be the one paying their REALTOR commission. Well, this shouldn’t be a newsflash, but the truth is the buyer ALWAYS pays.

Let me break this down for you. Say a homeowner sells their home for $500,000. Before the seller sees a dime of that $500,000, the transaction costs, including real estate commissions, are paid out through closing using the funds the buyer brought to the closing table. So who’s money actually paid those commissions? Oh yeah, the buyer’s money! It doesn’t matter if that money was from the buyer’s down payment or from the buyer’s loan…it was the buyer’s side of the transaction that made paying those commissions possible.

The actual thing that’s changing is a seller can no longer advertise a pre-determined commission amount to the buyer’s agent as a part of the MLS marketing. But rest assured a buyer’s REALTOR commission will still be negotiable and paid at closing. Maybe from time to time its paid by the buyer directly or, more likely, worked into the price of the home as it more commonly is now.

But make no mistake about it, either way the buyers always pay.

GET REAL – The Buyer Always Pays

Aloha!!! Get Real episode from Hawai’i! Many think that the rule changes coming to real estate commissions mean it’s going to cost buyers more to purchase a home.

The reality is buyers always pay transaction costs. From supply chain costs on islands to higher minimum wages in CA to real estate commissions when purchasing a home, buyers always pay. Just because it shows up on the seller’s ledger, don’t think that the old way of doing business meant buyers weren’t paying commissions all along.

The upcoming rule changes are not as disruptive as some fear mongers are proclaiming.

GET REAL – CA Dream “For All”

Let’s Get Real about California’s new loan program coined Dream For All. The Blue Waters Group has this shared appreciation 2nd mortgage available to eligible applicants when it comes back on April 3rd, but is it really a Dream “For All?”

It truly is a great loan program for those who qualify, as it will allow folks to buy with no money down, avoid PMI, and keep their monthly payment at a reasonable level.

The program is, unfortunately, underfunded. The state legislature recently allocated $220,000,000 in funding for CalHFA’s Dream For All loans, which will likely only reach approximately 2,000 California applicants. To put that in perspective…our state had over 250,000 transactions in January alone. So Dream For All loans will impact less than 1% of transactions.

This program is getting a lot of hype and I am happy to help you apply for it before the application window closes at the end of April. Keep in mind, however, it will not end up being a Dream For All, but rather For a Very Lucky Few.

With that said, it’s a great program if you qualify and are fortunate to have your name pulled in the lottery system. Reach out to me and I can help you navigate the application process and give you more details about CalHFA’s Dream For All loan program.

GET REAL – Price Fixing

Let’s Get Real about Price Fixing in Real Estate. There is this misguided myth that our industry price fixes commissions, and nothing could be farther from the truth. In my 22 years in this business, I have never, ever had anyone tell me how I should structure a real estate commission. 

You’ll find a ton of click-bait headlines out there today proclaiming that a recent REALTOR class-action lawsuit settlement aims to drastically cut commissions in the real estate industry, but if the market really demanded lower commissions it doesn’t need a class-action lawsuit to enable that. The American real estate agent marketplace is one of the most competitive and creative industries in the world, and no one is out here telling practitioners or consumers that commissions are fixed.

In fact, on every California listing contract it’s put in bold lettering to advise sellers that commissions are not fixed. And if a market disrupter wanted to come in and offer lower commissions to consumers, which they do constantly, they are certainly at liberty to do so.

No one is going to convince me that 2 million realtors are acting as a unified cartel who is fixing commissions, and you shouldn’t let anyone convince you too. Home buyers and sellers have been able to and will continue to be able to negotiate commissions with their selected REALTORs at will.

GET REAL – Commissions

Let’s Get Real about Commissions. There have been a ton of sensational headlines in recent days about a settlement the National Association of REALTORs proposed last week, and I’m here to set the record straight.

There are some who think this settlement will revolutionize how real estate transactions work. Well, that may be true in Missouri where the class-action lawsuit was initially filed, but out here in California we already operate very similarly to the proposed settlement terms.

For example, the biggest change will decouple commissions, meaning the seller pays their realtor and the buyer pays their realtor. Now, there are some significant downsides to mandating decoupled commissions that we don’t have time to get into on this post, but again in California there are already buyer contracts that state a buyer is ultimately responsible for paying their own realtor. While not required, I’ve been using these buyer-agreements for years and require all of my team to use it too so I don’t anticipate significant changes to my practice and interactions with clients.

In most transactions today the seller ends up compensating the buyer’s agent, and I think that will remain the norm. Informed and intelligent sellers will continue to see the value a buyer’s agent brings to the successful marketing and sale of their home, and will continue to offer compensation at similar levels as they do today.

The procedural changes proposed in the settlement agreement are not finalized and even if they do they won’t take effect until the second half of this year, so it’s a bit too soon to know exactly how things may play out, but rest assured REALTORs will continue to be a valuable part of clients home buying and selling experiences.

California Dream For All Loan Example

Our team has become well-versed with the new California Dream For All Loan program and is ready to offer it to first-generation home buyer clients when the program is released next month.  Let’s unpack a common example and see how this program functions.

Assume someone buys a home for $500,000.  They would obtain a traditional 30-year fixed loan at a fair market interest rate for 80% of the purchase price, making the loan $400,000.  Now instead of making a $100,000 down payment, something most first-generation home buyers don’t have, they obtain a 2nd mortgage from the state of California for the needed $100,000.  No monthly payments are required and no interest accrues on this $100,000 2nd mortgage.  But it is not a grant; it is not free money.  This 2nd mortgage is a Shared Appreciation Loan, meaning that when the home buyer goes to sell the property they have to pay back the loan in full AND share in the gained equity with the state of California.

Lets see how those numbers work.  Lets assume this $500,000 home appreciates over the next few years and is now worth $600,000; it has appreciated by $100,000.  Most folks utilizing this program will need to pay back 20% of that appreciation to the state, in this case $20,000 dollars.  So when they sell the home, they will pay $120K to the Dream For All mortgage, the outstanding balance of the 1st mortgage that started at $400,000, leaving them with $110,000 in equity before selling costs.

So, in a nutshell, a borrower who put in nothing for a down payment ends up earning nearly $110,000 in realized equity.  And to do so, they had to pay $20,000 in shared appreciation to borrow a $100,000 loan. 

Here’s another example created by CalHFA worth taking in:

Like any loan program, there are qualifying restrictions and there are limited funds available so a lottery system is being implemented by the CA Housing Finance Agency to award approximately 2,000 folks to utilize the program. Contact my team and I for the full details on how first-GENERATION home buyers can take advantage of this new loan!

GET REAL – Education

Let’s Get Real about Education in Real Estate. It’s not a field that requires a ton of it. To get your license you have to have a high school diploma; that’s it! To keep your license, you need to complete a few courses every four years, and I just completed mine last month.

There are a ton of classes to take once you become a REALTOR, but most of them are offered by sales companies who teach you how to get folks attention. Every day I get emails offering classes on social media mastery, You Tube proficiency, scripts for cold calling, and so on.

I try to focus on education that helps me give value to my clients. Here is a list of some of the educational classes I took last year. Again, they were aimed at learning something new so I could provide value rather than learn a new gimmick just to get your attention.

The real estate industry is constantly evolving, so even though you can get into the business with very little education, it takes a learn-for-life mentality to stay sharp, relevant, and helpful.

Spring Market Comes Before Spring Season

For those of us who miss the sunshine during these cold wintery months, springtime is a welcomed season. With daylight savings and the spring equinox both later this month, it feels like Spring is right around the corner.

But for the real estate market, spring is already here! The months of April-June (known as the Spring Market) are generally when we record the highest number of sales in the Sacramento region. A sale doesn’t typically close until 30 days after the listing goes into escrow, which means the market activity today gets reflected in those Spring month counts.

As this current crazy storm passes through Northern California and the weather eventually heats up, more folks will consider their options to buy or sell. If you’ve been thinking about a real estate transaction this year, don’t wait until Spring Break to do these essential “Spring Cleaning” steps!

  • Buyers need to get pre-approved for financing, check their credit report for any errors, and become laser-focused in the areas or amenities that are most important to them
  • Sellers need to spruce up the exterior of their homes, clear out the clutter, and do market research to identify how their home compares to other recent nearby sales

The Blue Waters Group is uniquely abled to help both buyers and sellers in this Spring Market. As experienced REALTORS and Mortgage Brokers in our region, we are well-versed in the changing dynamics of our market and can best counsel you through your next transaction. We look forward to hearing from you.