Mortgage – Page 10 – Matt Sundermier's Memos on Real Estate & on Life

Timing The Market is Like Timing The Weather

I just returned from a trip to Switzerland with my wife and oldest daughter. The weather was incredible, despite the fact January is typically the coldest and wettest month for the Swiss. Our good fortune was quite remarkable and I can’t help but compare our timing with the weather to how many folks feel about timing the real estate market.

The majestic Matterhorn is rarely seen this clearly during winter. We were very lucky!

More and more clients seem to be asking for my prediction on what the upcoming year holds for real estate. The truth is I can’t time the market any more than I can time the weather!

Instead of basing decisions on good fortune from things beyond our control, I’m an advocate for planning and acting based on things we can control. This is true in most walks of life, including real estate. Below are the 3 things I encourage every client to consider before making an important real estate decision.

Plan Ahead

Most people don’t wake up and decide they’re going off to the airport to go on vacation because the weather looks good in a faraway city. Rather, a long trip requires planning. How are you going to get there? What will you do when you get there?

Planning for this trip began in October. We figured out which cities we would visit, how we were going to get to each one, and where we would stay. Furthermore, we have a “team” of people that we need to consult with prior to traveling (colleagues, grandparents, teachers, etc.), and each one’s input is important in figuring out if and how the trip will come together.

The same is true in real estate. You should not wake up one morning and decide to buy or sell a home on a whim or, even worse, because of what some market “expert” is predicting. It takes planning, and a team of people to help you sort it out. Many people take this time of year to do real estate planning so they are ready to act in the spring when market activity picks up.

Focus on Factors You Can Control

Mary and I knew January was a sketchy month to travel to Switzerland. February or March would have been better as the temperatures are generally warmer and there likely is a bigger snow pack to enjoy for skiing. In the end, January was the month where we could pull it off due to our schedule. In the end, it worked out great because we had Spring-time conditions in the dead of winter!

With real estate, I see many people attempt to decide to buy, sell or refinance based on the right timing in the market. I believe this is a recipe for disappointment. The market is unpredictable and there is no way to guarantee the market is going to behave in your favor. Rather, an important real estate decision should be based on questions you can answer: does your family need a larger home? Are you stable in your career? Can you afford a home? Is your health making it difficult to maintain your home? Do current rates make your monthly payment affordable?

Making a move based on these factors means you are doing what’s best for your timing, not the market’s.

Don’t Let The Outcome Be Determined By Factors You CANNOT Control

As much as we enjoyed our fortunate weather, our enjoyment was not going to be impacted by Mother Nature. We packed for cold weather, and had alternative itineraries for gloomy days should they have arisen. Also, this was a rare opportunity for Mary and I to travel with just our oldest daughter (we have two younger children as well). This factor alone meant we were going to have a memorable and unique trip to spend quality time with her, regardless of the weather.

When it comes to buying and selling real estate, it is a dangerous proposition to say that your decision will only be a smart one if the market ends up working in your favor. For example, if you are considering selling your home this spring because you are confident home prices are going to fall later this year, then how will you feel if prices keep going up? Conversely, if you are thinking of buying this year because you’re convinced you’ll be priced out of the market if you keep waiting, then how deflated will you become if prices and/or interest rates fall instead?

The bottom line is this: you and I can’t time the real estate market any better than we can predict the weather. I encourage all of my clients to put less emphasis on what’s going on in the market, and a greater emphasis on what’s going on in YOUR life. In other words, is buying or selling a right time for YOU?

As I said previously, now is a wise time to begin discussing and making plans for a real estate decision later this year. These types of life-changing events don’t formulate over-night. My team and I are here to help you sort out the important and complex decisions ahead. As always, we value your trust in us to navigate you in your real estate affairs.

Mortgage Broker vs. Banker – Should You Care If There Is A Difference?

Over the last 5 years, there has been a growing trend of mortgage professionals electing to work for mortgage companies who operate as banks rather than brokers. In fact, to my knowledge, my firm is one of the only new brokerages to emerge in our community since the mortgage meltdown in 2008. Did my decision to start a business on the minority model doom me from the start? Or is our against-the-tide approach in the lending industry exactly what clients want amongst a crowded selection of impersonal, mega-corporate banks?

All sensationalism aside, the difference between a banker and a broker is simple: bankers lend their own money and brokers do not. However, a growing number of “direct mortgage lenders” actually don’t have their own money either, but rather a line of credit from a larger funding source who ultimately buys the loan from them only days after the loan closes. So they’re essentially still more a broker, like myself, than an actual bank. A common misconception is if you go straight to the company who has the cash to lend then you can get a better deal. This is simply not true.

So who offers better rates? Brokers, like myself, tend to work with “wholesale” banks that don’t sell directly to the consumer. As a result, their only marketing expenses are compensating the brokers that deliver them business. “Retail” banks, on the other hand, spend gobs of money advertising and having access to the consumer directly. While they don’t pay brokers in order to acquire business, they have tremendous other overhead expenses for which to account. I often wonder how much it costs the country’s 4 largest banks to operate their 20,000 retail branch offices! The rates we offer at Blue Waters are very competitive, and most cases lower, when you compare them to other mortgage outfits. Case in point, I recently received a referral from a VP of a large bank to help his brother refinance. I asked him why he would refer it to me instead of the company who signs his paycheck. He said, “your rates are way better than ours. I’m looking out for my little bro.”

And who offers better loan program options? One often assumes that if a bank lends their own money, they get to make their own underwriting rules. While this is true in very few instances with jumbo and sub-prime loans, the more common reality is banks and brokers alike are ultimately originating loans that are sold to investors (ie-Fannie Mae, Freddie Mac, FHA, etc.). As such, we are all following the same guideline rules when working to get your loan approved. Furthermore, a bank has their single menu of loan rates and options. A broker has a multitude of different banks they do business with, so my array of options is unparalleled when comparing to a traditional bank.

The rates and programs of brokers and bankers are certainly characteristics a consumer should consider, but in the end it’s the service level that matters most in your mortgage professional. I can’t universally say brokers have better service than banks, but I can say this: I am completely dependent on my client’s satisfaction of and trust in my company in order to stay in business. I’m not so sure a multi-national, diversified, conglomerate, too-big-to-fail bank has the same mentality. To me, service is more than simply doing what the client asks; it’s about educating and empowering clients to help them make sound financial decisions for themselves.

Trust Diagram — In our firm, building trust is not done with a formulated diagram. It simply comes down to just doing the right thing for our clients. Every. Single. Time

In many regards, my work is similar to that of a teacher. It is no coincidence that I recently had the opportunity to spend a Spring Semester as an adjunct professor at Folsom Lake College teaching Real Estate Principles. Doing so was a fantastic opportunity to give back to my small community, and also a reinforcement of my desire to teach students and clients alike.

So when choosing your financial professionals I hope that you will keep Dave Ramsey’s (America’s most well-recognized and respected finance commentator) advice in mind, “when getting help with money, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Is What I Do Legal?

This is a blog post I’ve wanted to write for years, but haven’t had the audacity to do so…until now! Thanks in advance for reading it all the way through and please share your thoughts if you’d like.

Working simultaneously as a mortgage professional and REALTOR over the last 12 years, I’ve often been asked by folks unfamiliar with my business model,
“Can you really be both a mortgage broker and real estate agent?”
“Is that legal?”
“Isn’t that a conflict of interest?”

To be frank, most of us are uncomfortable with what is unfamiliar, and my business model of offering both mortgage and real estate services certainly is unconventional in the industry. As a result, some naysayers assume it is uncommon because it’s unlawful. While this may be true for certain federally regulated bank employees, nothing could be farther from the truth for California mortgage brokers. In fact, I firmly believe our holistic approach to real estate services is a better way to serve a client’s needs than if their mortgage and real estate services were being handled by separate companies. Let me try to explain with an analogy…

My wife and I have considered putting a pool in our backyard. We love being outdoors, so its critical we have a pool that complements the rest of our backyard’s landscape design features. As a result, we want to find a pool contractor who knows not only how to build a beautiful pool, but who also is very familiar with landscape architecture and design. It just makes sense (right?) to have a single, capable, trustworthy consultant who is a master of both aspects to create the perfect outdoor living area. Wouldn’t that be awesome?!

To us, a pool should be a complementary feature to the rest of its surroundings, similar to the mortgage services received when buying a home — To us, a pool should be a complementary feature to the rest of its surroundings, similar to mortgage services given to a client when buying a home

Well, guess how many contractors we’ve found that fit that description? Zip. Zilch. Nada. If you know of one please let me know! Much like mortgage and real estate companies, pool contractors will often partner with landscape architects, but not one I’ve investigated is a master at both crafts.

Why?

There’s certainly nothing illegal about it. I just think certain folks are inclined to work with concrete and pools, and others with dirt and plants. They are two very different disciplines, yet so incredibly complementary to the final product.

This same paradox is true of offering services to find a home and obtain a mortgage; they require very different skills and inclinations, yet the service of one is interdependent on the other. And yet, very few real estate practitioners recognize the synergistic relationship, and even fewer have what it takes to deliver this type of bold, comprehensive service. Its not a matter of legality; just willingness and competence.

My incredible teammates and I are some of these few who are willing and able to be both your mortgage broker and REALTOR, and I can confidently say it is the best thing we can do for our clients. Perhaps that’s the reason 94% of my home buying clients also utilized us for their financing needs as well. And of those clients who completed a survey, 89% of them were “completely satisfied” with our services (the other 11% were “mostly satisfied”), and 100% of them indicated our one-stop-shop model is a strength of our services. Bottom line, clients take advantage of our multi-faceted services and are extremely happy. Just like Mary’s and my vision for a beautiful backyard, our client’s transactions are well planned, executed, and cognizant of the many needs of a successful home purchase.

In short, what The Blue Waters Group does is perfectly legal. More importantly, our services are in the best interest of our clients to assure they have the best possible experiences and outcomes in their real estate transactions. Its not easy working a weekday mortgage operation that requires a high degree of analytic skill and a nights & weekends real estate outfit that requires interpersonal and negotiating skills. Ultimately, our model isn’t about doing what’s easy; its about doing what’s right, both in the eyes of the law and our valued clients.

2015 Real Estate Market Forecast

As usual, I’m a little tardy in posting my annual market forecast. I assume everyone else’s Januarys are as hectic as mine, so its likely you wouldn’t even read it if I were to send this out at the turn of the New Year. By more happenstance than design, my annual forecast release in early February has worked out over the years, as more readers view it over any other MattsMemos.com post during the year. I’m honored you find entertainment, and perhaps a little insight, from this annual tradition.

2014 Year In Review

Before I get ahead of myself, let us review 2014’s forecast and see how my predictions stacked up to what truly transpired. In short, I forecasted we would see stabling home prices due to a healthy balance of supply and demand of traditional buyers & sellers. I can’t help but brag for a moment that this was the exact script for last year’s market. Sacramento homes appreciated less than 5% (Folsom was less than 2%), and the market maintained between 1.8-2.7 months of inventory (this is a balanced level). Short sales and REO sales accounted for less than 15% of Sacramento area sales. All of these signs clearly indicate a return to normalcy for our real estate market.

My accurate aim stops abruptly, however, when you peek at last year’s interest rate forecast. With The Fed easing and ultimately exiting their campaign of buying mortgages (known as “quantitative easing”), I anticipated 30-year fixed rates would steadily climb through the year and end up around 5%. In actuality, rates somehow defied logic and plummeted back down well below 4% towards the end of 2014. There are a number of factors that led to this, but the main cause was the falling price of oil. When oil costs less, so does everything else as it costs less to produce and transport goods. With little to no threat of rising costs of goods, interest rates on mortgages tend to slip lower as investors are not worried about inflation.

2015 Market Forecast

There is much “writing on the wall” that makes me very excited for 2015’s real estate market. Compared to the meager demand of buyers seen in 2014, I anticipate many more first-time & “boomerang” (folks who lost a home to short sale or foreclosure who are now looking to purchase again) home buyers entering the market. Why? Rent prices are skyrocketing everywhere, thus making it less financially attractive to rent versus own. Also, lending guidelines are becoming more favorable for folks with small down payments. For example, FHA financing (which allows down payments of as little as 3.5%) slashed monthly mortgage insurance rates by more than 35% last month. When combining this drop with the overall decline in interest rates, homes have instantly become more affordable for most buyers.

With more first-time & boomerang buyers on the scene, entry level home prices will appreciate more rapidly than other segments of the market, but the tepid pace of entry level home sales will have a positive ripple-effect on larger homes as more folks look to move-up. I boldly predict we will see more homes sold this year in the Sacramento area than we have in over 5 years.

As always, interest rates will be a big wild card. It always seems an unpredictable global, political, or financial event causes rates to swing in the opposite direction conventional wisdom suggests. Will 2015 play out the same way? Perhaps, but given the low cost of oil (which keeps rates low) and the sputtering pace of the stock market (if stock market does poorly then rates tend to fall) I would be incredibly surprised to see rates increase more than ½% from their current marks. 30-year rates are below 4% presently and 15-year rates are inching towards 3%.

All in all, the real estate market looks rosy. Perhaps that’s due to the shade of my glasses, but the combination of hungry buyers, willing & able traditional sellers, and accommodative interest rates and lending guidelines make it hard to believe 2015 will be a poor year for the market. As always, I’m thrilled to have a front row seat while it plays out, and I’m honored to have your trust to help navigate your real estate affairs.

Hear That Sound? Its a Refi BOOM!

We are only 5% into the New Year, and I have already locked 25% of the total number of loans I did in all of 2014. We are officially in a REFINANCE BOOM due to SUPER-LOW INTEREST RATES! Last month I posted a short video titled “Will Mortgage Rates Go Even Lower?” They indeed have done so, as 30-year fixed rates have plummeted well below 4% and 15-year fixed rates are nearing 3%. Rates are re-approaching levels seen in Spring 2013, when mortgage rates hit their all-time lows.

The Refi Boom has spread like wildfire. In one instance, I had one client refer a friend, who referred another friend, who referred another friend, who referred another friend…all in a single week! Thank you Ben for spreading the word about The Blue Waters Group and helping your friends save money.

If you’d like to discuss your refinance options, reach out to me ASAP. No one knows how long these low rates will hang around so let’s collectively seize them while they’re here.

Rates are Low! Will They Go LOWER?

In the last few days mortgage rates have dropped suddenly. I’ve called many clients to advise of refinance opportunities, but I thought it would be more effective to do a quick video and ASK YOU TO CALL ME if you’d like to discuss your refinance options.

In short, many economic triggers have fired off in recent days, and today may be the biggest factor of all…The Fed’s last meeting of 2014. Again, give me a call to chat in greater detail and how the current market may be able to help you lower your monthly payment, take cash out, or BOTH!

Are Most of Your Friends in Real Estate Too?

Last month I received one of the highest compliments I can receive from a dear client; I felt I had to share the story with you. Ironically, I’m not sure if he even meant it as a direct compliment, but I took it as such and it made my day. Here’s how it transpired:

On the Fourth of July, I was working with some long-time clients who wanted to purchase a home they saw earlier in the week. They have been living in a 2-story and it is simply time for them to downsize. With that said, however, they haven’t moved in nearly twenty years and a lot of anxiety and complexity began to set in. Should we sell first? Buy first? What furniture are we going to get rid of? In talking about the logistics of selling their current home, I advised him to tell all of his friends that they were selling to help market the property. His casual response was, “you know Matt, most of my friends are in real estate.” He meant it as a good idea to effectively spread the word, but I heard a much more significant statement, one that meant the world to me.

You see, Brian is a wonderful man. He is well-known and well-liked in the community. It comes as no surprise to me that he has an abundance of friends, many of whom are in real estate. The fact he has chosen me and The Blue Waters Group to help him navigate a very delicate transition in his family’s life speakes volumes to the amount of trust and respect he has in our team. As a business where we feel earning one’s trust is more important than simply getting their business, this indirect compliment is one of the highest we can receive.

As I reflected more on this, I realized we receive this compliment every single time someone chooses to do business with us. You, too, undoubtedly have other friends, family, and acquaintances who are real estate professionals. Recent estimates figure there are more than 500,000 licensed real estate agents in California. Some know more than others, but the simple fact is you probably didn’t choose to do business with us due to a lack of alternative options. It takes more than being your friend or acquaintance to earn your business and trust in real estate. Buying or selling a home is one of the biggest, scariest, most important financial decisions most of us make in our lives. You don’t want just anyone helping you through that.

A big thanks to Brian and all of our clients who choose to do business with The Blue Waters Group. We know you choose to do so not simply because you know us, but because you trust us. Please know we will steward your trust reverently and cherish it always.

2014 Real Estate Market Forecast

Its that time again…time for my annual market forecast. I like to consider March as the turn of the Real Estate year, as many folks begin to think about their real estate affairs this time of year.

Forecasting, to be honest, is just as much about reviewing the past as it is about predicting the future. How can you know where you’re going if you don’t know where you’ve been? With that said, its always a scary (albeit entertaining!) exercise for me to review last year’s forecast with what actually took place.

In short, 2013 was a two-faced trip around the sun for the Sacramento real estate market. From January to June, I couldn’t have been more accurate with my projection of “steady price increases for sellers and challenging times for buyers”. The market was ON FIRE with average home prices rising 21%, interest rates hitting rock bottom lows, and the number of homes for sale at the lowest point in over a decade. However, after The Fed meeting on May 22^nd that quickly raised interest rates, the real estate market hit the brakes and my forecast accuracy fell off the tracks. In the second half of the year, Sacramento home prices only increased 4%, and the number of homes for sale (known as “inventory”) nearly doubled.

2013 Home Prices Rallied Fast, then plateaued in July

The number of homes for sale rose sharply as the year progressed.

In hindsight, this second-half slow-down was healthy for the real estate market. Things had become out of balance and the rally unsustainable. Now looking forward to 2014, the big question will be are we going to see a resurgence in home prices as Spring nears or will it continue on its plodding pace?

My prediction is we’ll see stable 2014 home prices as both inventory and sold homes increase to remain mostly in balance with one another. Despite the sharp increase in inventory in recent months, its still low at a level not seen since 2005 (see below). More sellers will look to sell in 2014 as life events dictate homeowners to move. Similarly, more buyers will look to buy in 2014 as folks re-enter the market after a prior short-sale or foreclosure.

Even though inventory has risen sharply, it is still about as low as we've seen in the last decade. — Even though inventory has risen sharply, it is still about as low as we’ve seen in the last decade.

In short, we should see a traditional market with a healthy balance between traditional buyers and sellers. Short-sales and REOs will account for fewer than 15% of the market, real estate speculators will gravitate away from California, 30-year fixed rates will hover around 5%, and transactions will be dominated by repeat buyers. In fact, I couldn’t agree more with Trulia’s Chief Economist who coined 2014 as “The Year of the Repeat Home Buyer.” The Blue Waters Group is uniquely equipped to help clients buy, sell, and finance all at the same time. Moving up or down can be an anxious experience, but our clients find having a single, trusted team handling all facets of their multiple transactions makes for a smoother, confident, and successful transaction.

Even a “normal” market requires just as much know-how, expertise, and calm nerves as any other market we’ve seen over the years. If you or someone you know is considering a real estate transaction this year, I look forward to the opportunity to share my knowledge and experience.

Three Years In A Row Is No Fluke

For the 3rd year in a row, Sacramento Magazine (on newsstands now) has featured me as a Five-Star Real Estate Professional, a distinction given to less than 4% of our region’s agents. Even fewer agents have won the award three years running! These awards are primarily determined from survey responses of Sacramento homeowners and self-nominations are not allowed, so I owe this repeat honor to YOU! Thank you for always supporting and referring my business. I’ve always said your endorsements fuel our business; now I can say they put hardware on the Blue Waters mantle as well!

As many of you know, I did not begin my career as a combined mortgage broker and real estate agent. Since adding real estate sales to my services in 2004, I have had to constantly remind folks I was more than just a mortgage broker. This streak of Five-Star recognition in Sacramento’s most widespread regional magazine feels like I’ve triumphed in not just simply being an all-in-one professional, but becoming one of the region’s best at helping you buy, sell, and refinance!

I can’t emphasize enough the impact you’ve had in elevating my real estate career from a side-show to one of the main attractions in my services. Thank you again for always spreading the word about The Blue Waters Group. Please keep it up :-)!

Everything Is Cooling Off

I recently went up to Donner Lake for a beautiful fall weekend. When I came back it felt like I brought the cool air back with me. The autumn air here in Sacramento feels crisp, healthy, refreshing.

Similarly, the real estate and mortgage markets are cooling off too. THIS IS GREAT NEWS! Much like the changing weather, the current market changes are healthy and refreshing too. After months of sizzling home price increases, we’re beginning to level off. Interest rates, too, have cooled off and have fallen from their summer highs. All of this means home buyers, particularly MOVE-UP buyers, have more opportunities to find their next home at a reasonable price.

This past summer we saw an unbelievable real estate rally. Much like a caged animal, the market sprung from hibernation and jumped with reckless abandon Sacramento area average home prices spiked 13.8% from April to August!!! This rally was exciting and, thankfully, unsustainable. Had we kept on that pace, we simply would have created a market bubble that surely would have popped in the near future.

The number of homes for sale in Sacramento is on the rise

Instead, we’re seeing prices level off, homes sit longer for sale, and more homes available to purchase. This is incredibly good news for home buyers. I had several clients who looked to buy a home earlier this year who opted to sit on the sidelines and wait for the market to calm down. These clients now look very savvy & patient (you know who you are :-), as the coming months should present them a more reasonable marketplace in which to buy.

Furthermore, the interest rate spike we saw this summer is beginning to reverse. In May & June, the markets were largely expecting The Fed’s influence on mortgage rates to “taper.,” thus sending rates higher. Now, the expectation is beginning to change. With sluggish economic indicators and a political stalemate threatening to bring our country to a halt, uncertainty is high. As a result, fixed mortgage rates have fallen nearly ½% in the last month.

Again, all of this means home buyers are in a much better position to find the right home without the worry of insane, multiple-offer situations. If you are a first-time home buyer, there’s no need to panic about being “priced-out” of the market in the near-term. If you are a move-up buyer, this balanced market between buyers and sellers is the perfect environment to buy your new home and sell your old home.

As most clients know, our firm is perfectly suited to help you with all of your home buying, financing AND selling needs. Many clients find this one-stop-shop form of real estate service incredibly valuable and convenient. For the rest of the year, if you enlist us to help with all three services (buying & financing a new home as well as selling your old home), we will reduce our listing commission by ½%. On a $400,000 home that’s a $2000 discount!

Thanks as always for reading Matt’s Memos and your continued support by returning to and referring The Blue Waters Group.

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