Category: Professional

ALERT! Equifax Data Breach & What You Can Do

Last week Equifax, one of three U.S. credit reporting agencies, reported hackers stole data files that potentially compromised 143 million consumers.  Let me restate that figure, 143,000,000!!!  That means there is a 57% chance your information was involved in this hack (US Census estimates we have ~250 million adults).

Equifax reports credit activity; they are more than merely a credit card company.  They are involved in nearly every major consumer financial transaction and account in the United States, so if you have any type of credit history (mortgages, credit cards, student loans, etc.) you owe it to your digital identity to take this very seriously.  We are providing some tips and info to our clients so they can take measures to mitigate this potential threat to their identity.

The first step is to determine if you were affected.  Go to Equifax’s ID Protection partner’s (Trusted ID Premier) web site, enter your last name and last 6 digits of your SSN.  It will then conclude if your data was possibly compromised.  I’ve read reports that this look-up tool may not be 100% reliable, so you may want to cautiously assume that your data was a part of the hack.

Next, you can sign up for 12 months of ID Protection that Equifax is offering for free.  It includes credit monitoring, social security number monitoring, identity theft insurance and more.

You can take things one step further and sign up for free credit “freeze” and fraud alert with the 3 credit bureaus.  This makes it harder for new credit accounts to be opened in your name without your authorization. Read CNet.com’s write up for more details on how to set these up.

Lastly, set a reminder in your calendar to file your taxes early in 2018.  Often data hackers who obtain social security numbers will attempt to file phony-baloney tax returns and attempt to cash refund checks.  Filing early will make subsequent filings from fraudsters submitted to the IRS flagged for suspicious activity.

The Blue Waters Group will help clients in the near future closely review credit reports pulled for transactions to identify any suspicious activity.  We hope this unprecedented industry data breach will not materially impact you, but taking the measures mentioned here will help mitigate the complications that come with identity theft.

Its Time to Talk Monopoly, Again!

I’ve previously written about my love for the game of Monopoly.  Ever since I have been old enough to count, its been one of my favorite games.  Whenever my buddies and I played I wanted to be both the banker and the property card-keeper; an ironic foreshadowing of my career as a combined mortgage broker and REALTOR.  As it turns out, I’ve been playing banker and property card-keeper my entire life!

Ollie picLove for Monopoly is hereditary

Property Ladder (2)I was playing Monopoly Jr. with my son this week, and it reminded me of this 2011 blog post.  Back then, I was helping a few brave clients purchase investment properties despite the bleak economic outlook.  Things worked out quite well for that group of investors, as their investments have doubled in value over the last 5 years.

This summer, half of my team’s home buying clients were investors as expectations of Sacramento home prices are high.  Combined with low levels of new home building, a flood of Bay Area money (check this article out) and some of the country’s fastest rising rental rates, Sacramento is an area many investors have honed in on. 

Concept conceptual 3D illustration young man businessman silhouette jump happyClients with the courage to own rental properties over the long-term amass great wealth as home prices rise, particularly in hot spot markets like Sacramento.  My team has become experienced in helping clients make the leap to real estate investor.  From hosting info seminars (remember this one!!??) to illustrating cash-flow analysis to having trustworthy connections with property managers and licensed contractors, we are a valuable resource to those looking to play real-life Monopoly.

As I said earlier, I’ve been doing this my entire life! 

It’s May. Bring on…EVERYTHING!

May seems to always be the most hectic month of the year.  Weddings, picnics, school parties, swim team, 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 spoken to several clients in the first few days of this month. 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.

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

May GraphThis is an incredibly low amount, considering we are a town of over 70,000 people and 26,000 housing units (according to the US Census in 2010).  Over the last few years, beginning in May, we start to see this figure increase through the summer months, but since 2014 we have seen the number of homes for sale in the summertime decrease each year.

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.  This means there won’t be enough homes to meet demand, which will push prices up further.  For current homeowners, this is great news.  For those looking to buy their first home, this is truly discouraging.  Perhaps they’ll be too busy with a hectic May schedule to notice right now, but by the end of summer I predict home values in most areas will increase 2% per month through August.  If that pace holds, we may see Folsom home prices eclipse their previous all-time high levels before summer is over.

May Graph 2

Much like May’s relentless calendar, higher home prices are on their way. Some of the cause is inevitable, like wedding invites in May, and some of our own doing, like over-scheduling boating picnics. Either way…Bring. It. On.

2017 Real Estate Market Forecast

c0501a39-6615-4dce-9c0f-3703cc5aa964March marks the beginning of Real Estate season.  As snow melts and flowers bud, current and aspiring home buyers alike are coming out of financial hibernation to assess their real estate affairs.  That’s why I hope this annual market forecast is a timely message to many of my clients and readers.

 

I’ve always said forecasting is a fancy word for guessing.  No one knows for certain what lies ahead in our local real estate market.  Nevertheless, as someone who witnesses the front-lines action in the market, I have the chance to share observed indicators with you.

These “markers” signify much of the same patterns we’ve seen in the market for the last three years: high demand, low supply, and rising prices.  Frankly, I don’t see these altering course in 2017.  Here’s why:

Without further ado, here are three significant real estate predictors to watch for in 2017.

Welcome to the Party, Millennials!

Millennials are discussed for many reasons, and for good reason!  They are the largest generation by population in our country, so their actions will have profound impact on many industries, including real estate.  Research from Zillow indicates Millennials were the largest generational buying group in 2016, and they are predominantly buying in the suburbs.  This is a big deal, as Millennials have deferred home buying longer than their predecessors.  The conceived factors vary from their high levels of student debt to their emotional scars of witnessing others before them lose homes and wealth during the Great Recession, but the simple fact is Millennials have not been buying homes at typical rates…until now.

Last year, the United States’ Home-ownership rate dipped below 63% for the first time since 1965 a symptom not necessarily of affordability (after all, home-ownership rate hit an all-time high when prices were at all-time highs in 2005) but rather due to a lack of appetite.   With Millennials poised to remain hungry for homes of their own, the demand for housing will persist into 2017 and beyond.

Where are all of the new homes?

In last year’s forecast post, I shared some shocking statistics regarding the relatively low level of new home construction in Sacramento.  Without enough homes to go around for everyone, prices are forced to go up.  New home permits are increasing (up 20% from a year ago), but not at a rate fast enough to meet current buyer demand.  2016 had over 6,000 single-family home permits filed in the Sacramento area, the most seen since the Great Recession but far fewer than the peak of 18,523 in 2004.

Furthermore, there are fewer and fewer homes available to rent.  In the 4th quarter of 2016, the Western region of the United States had a rental vacancy rate of 4.2%, the lowest reading since the Census department began collecting this statistic in the mid-1950s!!!

Until new home construction picks up considerably, there will be upward pressure on the prices (& rents) of the limited number of homes for sale (& rent).

Never Say Never (to new housing highs)

When the real estate market crashed ten years ago, many people said home prices became so inflated that they’d never reach those levels again.  In 2011, the “never again” prophecy seemed accurate.  Sacramento home prices had lost over 50% of their values from the peak seen in 2005.  Beginning in 2012, however, the market rebounded with a vengeance and now has clawed back to price levels seen in 2007, before the Great Recession.  This 5-year rally has market observers wondering if we will break through to new price highs soon.

Some pockets of town have already earned this accolade.  East Sacramento, for example, is experiencing higher home prices now than ever before.  I believe other neighborhoods will follow suit, but not prolifically in 2017.  We may need to wait one more year before breaking new records, but sooner or later the “never say never” prophecy will ring true.

In 95819, the median home price hit a peak of $500k in 2005.
Presently, it’s $525k!
 

Is This a Bubble Waiting To Pop?

Some view these hot market factors and predict a market bubble forming.  After all, how much longer can a 5-year rally last?  While I agree that a rally can’t last forever, the rare combination of scarce housing options, home-ownership rates at 50-yr lows, and an emerging generation of home buyers leads me to believe the Sacramento housing market is well-insulated from another bubble.  Even with the looming possibility of rising interest rates impinging housing affordability, our real estate market should see steady gains (5-10%) yet again this year.

If you are thinking of buying or selling a home, I’d love the opportunity to serve.  With 15 years of local market experience, I am able to provide honest insight on how to best navigate the current market dynamics to help make your real estate transaction a success.

As always, thank you for reading Matt’s Memos!

 

I Hate To Talk Politics, BUT…

We have all been warned of the three taboo conversation topics: sex, religion, and politics. Touching on such subjects with others often leads to conflict or misunderstanding. Wikipedia even admits on their web site that “its nearly impossible to provide a neutral point of view” on these matters.   And yet, NOT discussing politics in our current climate is nearly impossible as well, even for a guy like me who wants to focus on economics rather than politics.

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All of these “us” vs. “them” antics are exhausting, and dangerous.

 

So here it goes; my bold attempt to lace politics into my Part-Professional, Part-Personal, Rarely-Ever-Political blog.

Political news is everywhere!  Its even prevalent on financial (see below), fashion (peek at GQ’s polarizing Facebook video page) and sports (Google “Ass or Asset”) news sources .

moneycnn-screenshot

Check out this screen shot I took last night when visiting www.Money.CNN.com, my preferred source of financial and market news. Every single one of the top 10 headline stories covers some element of President Trump’s administration; they even have a page titled “Trumponomics.”  The unavoidable reality is that our politics are shaping our economics, including mortgage rates.

As I’ve been preparing my Annual Market Forecast post (coming soon!), I’ve realized I must understand our political affairs in order to best counsel my clients about the recent and potential future changes in interest rates. For example, mortgage rates and other financial markets have been incredibly volatile since Election Day due to the foreshadowing of how our world may be different under a Trump Administration. In fact, the term “Trump Effect” has been coined as a reference to the markets being indirectly influenced by President Trump. For example, on good stock market days, you’ll read headlines such as “Dow closes above 20,000 for first time as Trump actions spark rally” and “Trump tax talk lifts Wall Street to record high.” And on down days you’ll see “Will Trump kill the Trump rally?” and “Is Wall Street starting to show Trump regret?”

Like it or not, our economics are closely tied to our politics, and it seems that in the near term market movements will be directly correlated to President Trump’s every move, meeting, tweet, and executive order.

So here is the economic takeaway from this tip-toed political blog post: the more volatility, uncertainty, and controversy surrounding President Trump’s first 100 days in office, then the more likely we will see mortgage rates drop.  Markets disfavor uncertainty, and when it comes money flows to safer investments such as bonds and mortgages. On the other end, the more focused he becomes on pushing his domestic promises to cut taxes, deregulate industry, and increase infrastructure spending, then the more likely we will see mortgage rates rise. If you are in the market to purchase or refinance a home in the coming months, then the inescapable political headlines you encounter every day have more impact for you, as the Trump Effect on mortgage rates will surely be at play in the weeks to come.

Do The Big Brokerages Have Big Advantages?

Last month I posted about how RE/MAX, one of the world’s largest real estate franchises, is beginning to mimic our business model of offering one-stop-shop services with mortgage brokers and real estate agents all under the Re/Max umbrella. Imagine that!?! The little guys like me who offer combined, efficient, and effective services must be doing something right if the big guys are catching on.

How about other features of our services? Do the big brokerages still have other advantages due to volume and brand recognition? For example, some homeowners believe they’ll have a better shot at selling their home faster and for top dollar if they list with a big brokerage since they have huge advertising campaigns and a broader marketing reach. Is that true?

david-v-goliath

Do little guys like me even have a fighting chance in providing superior service and results compared to the Goliaths of our industry?

Let’s look at the stats, shall we! Since 2014, the median days on market for my listings was 9 days and the median sales price to list price percentage was 100%. This means that, on average, I sell your home in a little over a week and for the price for which you list. Additionally, I didn’t have a single canceled or withdrawn home listing. In other words, no one backed out of listing their home with me.

How do these figures compare to the big brokerages? By my account, Folsom’s three largest brokerages are Re/Max Gold, Keller Williams, and Coldwell Banker, accounting for a combined 240+ active agents and 2000+ listings over the last 3 years. Here’s how their figures compare to mine on  closed listings from 1/1/2014 thru 11/4/2016 (from Metrolist):

Brokerage Days on Market Sales Price to List Price Percentage Expired or Withdrawn Listings (as %)
Matt Sundermier 9 100% 0%
Re/Max Gold – Folsom 13 99.49% 24.9%
Keller Williams -Folsom 13 100% 22.9%
Coldwell Banker – Folsom 16 99.73% 20.5%

As you can see, there is not much difference on how fast and for how much we are selling our listings. Big brokers are not performing any better than me in these regards. And check out the far-right column, which represents the percentage of listings that expire or are withdrawn from MLS. At the big brokerages, 20-25% of listings don’t even end up closing escrow. Say what?!? Imagine meeting with an agent in preparations to sell your home and they say, “I have a 75-80% chance to sell your home.” Doesn’t exactly instill confidence, right?!

As a reminder, these numbers represent the total population of agents within these offices, so surely there are agents who have a better track record than that. Frankly, the individual agent makes a bigger impact on your listing and selling experience than the broker and brand they represent. But the big take home lesson is this: the big-brokerage advantage is a myth.

In order to effectively sell your home, you don’t need a brokerage with nation-wide TV commercials and a household brand name. You need an agent that has three primary traits: market knowledge, industry experience, and the ability to articulate both of those to you throughout the home selling process.

The next time you’re in the market to sell your home, don’t limit yourself to just the big-brokerages. As these stats and my track record suggest, there is no distinct advantage to you for going big. In fact, I’d make a VERY strong case it’s probably better you go small!

What other features of mortgage and real estate services that vary from big to small operations may be of interest to you? Let me know and I’d be happy to consider discussing your topic on an upcoming blog post. Until then, thanks as always for reading Matts Memos!

RE/MAX is copying me, and I’m flattered!

I am very excited to pass along a big announcement from a competitor. Why?!? Let me explain.

Earlier this week, RE/MAX, the world’s biggest real estate franchise, stated they are opening mortgage brokerage operations within their existing real estate offices for a “one-stop-shop” experience. Known as Motto Mortgage, these outfits will perform as mortgage brokers offering multiple finance options from a number of lending sources (just like we do!).

Some may say this is bad for my business. The world’s largest brand name is copying my one-stop-shop business model. Should I be concerned about my market share?

Perhaps, but the overwhelming feeling I have is one of flattery. I’m absolutely flattered that RE/MAX, a 43-year old company that has over 100,000 real estate agents doing business in over 100 countries, is trying to emulate us! And I’m flattered that a company with that much financial backing chose to set up their mortgage operations as a traditional brokerage rather than a bank, citing that mortgage brokers “bring choice and service to the consumer.”

The Blue Waters Group has believed from our very beginnings that the customer benefits from competent and compassionate advisors who can offer both mortgage and real estate services. With RE/MAX acknowledging the consumer demand for one-stop-shopping, no longer is our business model the obscure alternative; it is the one that leading industry players are striving for. No longer is our platform one that I need to defend with blog posts titled Is What I Do Legal; it is the one that’s copied by others.

We are still unique from RE/MAX’s aspirations in that our associates are able to offer both mortgage and real estate services (all of us are licensed both as mortgage loan originators and real estate agents) while RE/MAX simply hopes to pair mortgage and real estate services more efficiently by providing them under the same corporate umbrella. Nevertheless, this week’s move by RE/MAX further validates the craft I’ve been honing for nearly my entire career. Working as both a mortgage broker and REALTOR is not an easy task, but with a 15-year head start on RE/MAX and others who are sure to follow suit, I’m confident The Blue Waters Group will continue to be imitated but never duplicated!

REFI ALERT! Rates in a free fall after UK Vote to leave EU

The United Kingdom voted yesterday to separate itself from the European Union, an unprecedented action that has financial markets panicking all over the world.

Here at home, stock markets and mortgage rates are both falling.  I’m seeing 30-year fixed rates in the mid 3s, and 15-year rates well below 3%. 

Many are stating the UK’s vote is the single biggest step against a united Europe since World War II.  While I think that’s a bit of an exaggeration, the markets are uncertain on how this change will impact our financial markets now and in the future.  This uncertainty and volatility will push rates down, but how far and for how long?  No one knows.

If refinancing has been on your mind, don’t delay in reaching out to me so I can provide you some options.  Something worth considering is a cash-out refinance.  Many of my clients have been doing cash-out refinances to consolidate high-interest debt or pay for home improvements.

Should You Finance Energy Efficient Upgrades?

Energy efficient upgrades to a home can add value, lower your utility bills, and make you a “greener” citizen of the Earth. There are now a number of finance alternatives that have made these updates more accessible than ever before.

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For example, you can lease solar systems and offset the monthly lease payment with the energy savings produced. You can also borrow money to install energy saving appliances, and have the loan payments added to your property tax bill. With all of these new finance alternatives, it has helped many homeowners who otherwise wouldn’t have been able to install these updates with their own savings.

But are these new finance options truly helping homeowners? We have spoken to a number of clients who weren’t aware of some of the fine print of these finance schemes, specifically how these lease and loan options create a lien on their property that make it difficult or even impossible to refinance their homes.

A trusted colleague told me early in my career that there is no free lunch in lending. In other words, you don’t get to borrow money without strings attached. Typically, that means you are paying interest, and in the case of real estate it also means you put your property up for security against the loan. Mortgages, for example, are recorded against the property and this loan must be paid off prior to selling or allowing another mortgage to be taken out.

Most folks recognize that they are going to pay interest if they borrow money from a solar or utility company, but what does not appear to be commonly understood is that these loans and leases are recorded against the property.

Several times in the last year, we have worked to help a client refinance to a lower interest rate and save money on their mortgage payment. During the underwriting process, we discover an additional lien resulting from a solar, window, HVAC, or other energy efficiency update. This secondary lien must either be paid off or give permission for the mortgage to be refinanced. Many times, the client either doesn’t want to or can’t pay off the loan, and the energy efficiency loan won’t allow the refinance to proceed. The refinance attempt ultimately fails. Ironically, the act to save money through energy efficient updates ends up handcuffing the client to a higher mortgage interest rate loan, thus losing more money to interest than what is being saved in lower utility costs.

Not all loan and lease terms are the same amongst the various options and vendors. And in some cases it probably makes sense to obtain one of these loans and live with the potential down sides.   Simply be sure you know the fine print. Solar and other outfits are pushing these available financing options hard on homeowners, but there are more traditional finance options available that you may want to consider as well. A cash-out refinance, home equity line of credit, home improvement loan, or other form of traditional mortgage financing may make sense as well. As always, we are happy to discuss what options you may have and objectively point out the pros and cons of each.

Myriad of Mortgage Options

When I began this blog in 2009, I vowed to not devote it to monologues about underwriting rules or my latest listings for sale. BORING!!!  Consequently, when I take the time to write one such as this, one with a topic that goes against the grain of the very spirit of MattsMemos.com, then I must be doing it for a darn good reason.

Indeed, the reason and timing of this post are quite significant. For the first time in a decade, the mortgage industry is expanding its options to consumers, and with it will come a healthier real estate market. This pendulum swing is long overdue, and it makes working with a mortgage broker like us an even smarter decision than ever before. How? Let me explain.

Myriad of Mortgages

Back in 2007, nearly 75% of mortgages were originated by mortgage banks (think Wells Fargo, Bank of America, etc.). For many years, the mortgage market was very homogenous; varied loan options just simply didn’t exist. Last year, the banker’s market share was less than 50%; industry analysts have been calling it an exodus of large banks. Why? The reasons are many, but a significant one is banks don’t have the wide array of options that the mortgage marketplace now offers, so consumers find brokers a better option.

There are more options to offer consumers nowadays, and brokers like us are simply better at providing the options of today’s market. Let me give you a brief overview of some of the more significant finance options that we can offer our clients that you may not find at your traditional bank.

Reverse Mortgages – These are gaining tremendous popularity for homeowners over 62 years old, and we offer them! In short, you no longer make a mortgage payment ever again by using the equity in your home to cover the payments. While these loans were traditionally designed for seniors on a low, fixed- income and high equity trapped in their home, they are being utilized by high net-worth baby boomers who are approaching retirement. They can be used as a diversified financial tool by giving retirees the option to withdraw equity from their home (which is not taxed) rather than assets from their retirement accounts (which typically is a taxable event), or as a way to continue their lifestyle while simultaneously living mortgage-payment free.

Home Remodeling Loans – FHA and Fannie Mae have fixed rate loans that allow homeowners to significantly remodel their homes, using the post-renovation value of their home to access borrowed money. These are being used to build an addition, put in a pool, or redo a kitchen. In prior years, the only way to get a mortgage for a remodel was to already have the equity in the home prior to the improvements. These programs allow you to leverage the future value of the home, thus making it easier to borrow for that needed home makeover.

“Piggyback” Loans – They went by many names in the 2000s; “80/10/10,” “Simo Seconds” & “Piggyback Financing.” It was a method used to split up the total amount borrowed into two mortgages, possibly to avoid paying PMI or to borrow more than the maximum allowed on a single loan. We have a bank who is offering these up to 90% loan-to-value; I don’t know of any traditional banks offering such a program.

Jumbo Loans – These are big loans; amounts over $475,000 in the Sacramento area. We have a number of lenders offering competitive fixed rates nearly as low as regular sized loans!

Alternative Documentation Loans – Many people have been squeezed out of getting a new mortgage because it is difficult to fully document their income (think business owners). New lenders are allowing these types of borrowers to submit bank statements or profit & loss statements to document their income; a very sound alternative that went away after the Mortgage Meltdown.

The bottom line is this: creative financing alternatives are back and no one is better at offering and executing these options than a mortgage broker. While we will continue to be a price leader for the more “vanilla” loans, these other options simply expand our loan “tool box” in order to help as many of our clients in the community as possible.