Category: Professional

2011 Real Estate Market Forecast

Happy Valentine’s Day!  Now, I know today is a day devoted to love, but I figure it can’t hurt to sprinkle in some real estate chat too.  The two topics just might have more in common than you think.

Like love, our housing market can be impossible to understand, but that doesn’t stop us from trying to figure it out.  I think the mystic of the market (& love) captivates us to know what others think about it.  That’s probably why my annual market forecasts are the most widely read posts on this blog (read last year’s here).

So here it goes…my attempt to figure it out…Matt’s 2011 Market Forecast.  No love talk here, though; just economics.  As usual, my forecast focuses on three categories in the Sacramento real estate market: housing supply, housing demand, and mortgage interest rates.  I will recap 2010 and give you my best guess for what lies ahead in 2011!

Supply
’10 Projection: Inventory will be higher in 2010 (than 2009) as banks release more homes for sale and more short-sale listings are successfully sold.

’10 Result: Nearly 60% more homes are currently for sale compared to the end of 2009 (see chart above).  These increases were largely due to more homeowners looking to short-sale their properties and more banks releasing homes for sale.  Unfortunately, this increase in supply was not met by an increase in demand (more on that in a minute), and the amount of homes sitting on the market (known as inventory) is currently at an uncomfortably high 3.6 months.
’11 Projection: Short-sales and bank-owned properties will remain the primary sale types in Sacramento.  Additionally, an emerging sale type, the government-owned home, will become more prevalent this year.  The Department of Housing and Urban Development (HUD) has been forced to foreclose on an increasing number of FHA-held loans originated in recent years.  While the Making Home Affordable Foreclosure Alternative (HAFA) program was mostly unsuccessful in 2010, I am optimistic that improvements will be made this year that enable more short-sale listings to successfully close.

Demand
’10 Projection: Demand will still be high as buyers confidently (and rightfully) believe the bottom of the cycle is here.
’10 Result:  The bottom certainly seems to be here with respect to Sacramento county’s median home price.  In fact, it has increased 1.6% over the last two years.  First-time home buyers and real estate investors continue to make up the majority of current home buyers.  The overall pace of sales last year declined remarkably after the federal 1st-time home buyer tax credit expired in June 2010, indicating the market was propped up with artificial measures more than originally thought.
’11 Projection: Total home sales will be lower this year compared to 2010.  Although the bottom has arrived, it may be here to stay for some time.  Some potential home buyers may be reluctant to commit to a home purchase with looming job and other economic concerns and the absence of alluring tax credits.  Real estate investors, however, will be looking to purchase in abundance as rental rates are on the rise…11.6% nationally! (read this article for more details about these rising rental prices).

Interest Rates
’10 Projection: Despite wide-spread concern of drastically rising rates, I believe rates will stay well below 6%.
’10 Result: What a wild ride for mortgage rates in 2010!  While many worried of rates rising in April after The Fed stopped purchasing mortgages, rates actually plummeted for the first six months after the Feds exit from the market.  Towards end of the year, rates steadily climbed out of record-low territory.  In September I coined the 4th quarter as “Crunch Time” (read September’s blog post here) and encouraged clients and readers to consider refinancing before rates rose.  Thankfully, many heard that message as I helped more folks refinance in the 4th quarter of 2010 compared to any other 3-month period in my career.  30-year fixed rates rounded out the year hovering just below 5%, which was close to where they started the year.
’11 Projection: Mortgage rates will continue to be influened by politics more than economics, but in a very different way.  While I predict the Feds will stop trying to manipulate the mortgage and bond rate markets at some point this year, legislation from Congress will drastically impact mortgage rates.  MASSIVE financial reform regulations are scheduled to start in April 2011 that change how borrower’s closing costs are disclosed and paid for.  While unintended, these reform changes will increase the cost of obtaining a loan.  Furthermore, Congress is currently considering largely downsizing Fannie Mae and Freddie Mac’s participation in the mortgage market.  If this is done, mortgage rates will likely increase as banks must shoulder the risk of holding more mortgage loans rather than selling them to Fannie or Freddie.

In summary, 2011 will not be a rebound year from recent market challenges, but rather a continuation on our road to recovery.  American job creation & stability, mortgage financing availability & affordabiliity, and unpredictable legislative action will direct the market this year.  A healthy real estate market is within our sights, but we likely have another 18 months before we see a balance between home supply and buyer demand.  Until then, it will remain a buyers market largely comprised of 1st-time home buyers and real estate investors.

Do you have different thoughts and forecasts for 2011 housing?  I’d love for you to share them here.  Please leave a comment with your opinions, and let the chatter begin.

Want to Play Monopoly?

Ever since I have been old enough to count, I have loved the board game Monopoly™.  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!

To this day I still adore the game.  I’m currently biding my time for my girls to be old enough to play (recent attempts just led to slobbery battleship pieces, crumpled bills, and unfinished games).

In the meantime, I am enjoying working with more folks than ever before playing real-life Monopoly buying and financing investment properties.  Due to low prices, low interest rates, rising rental demand, and favorable tax benefits, “playing” Monopoly has become a very wise financial move.

Those with means and foresight should be running to buy homes right now

Consider these recent examples of clients I’ve helped:
1.) Mr & Mrs K. purchased a rental property for $158,000 in Fair Oaks.  They are renting it to their daughter who is covering the mortgage payment, which is actually lower than the rent she was paying at her previous apartment.  Talk about a win-win!

2.) Mr. G is purchasing a $200,000 4-bedroom home that already has tenants.  After making a 25% down payment, his TOTAL monthly payment is $1028.  The tenants want to remain in the home, and continue to pay their $1475/month rent…positive cash-flow of $5400/year (annual rate of return of 10.8%).

Examples like these are fairly common in today’s market.  It’s not about finding the “diamond-in-the-rough”; it’s about simple supply and demand.  The supply of houses at decade-low prices is up.  At the same time, the demand of renters is up as every homeowner that has lost their home to foreclosure or short-sale is now looking for a home to rent.  Tremendous investment opportunities are readily available for folks with great credit, document-able income, and at least a 25% down payment.

Ironically, the Monopoly™ board game became a popular game in the mid 1930s, in the midst of The Great Depression.  I can’t help but guess folks of the time became fascinated with a game aimed at buying property when their real life finances were so dire.  This time around, in what many are calling The Great Recession, I hope that instead of playing a board game you consider your real-life opportunities to attain financial health through real estate investing.  My experience can help you find the right loan and best property for your investment preferences.  As I said earlier, I’ve been practicing for this my whole life :-).

Pick Up The Pace (On Your Mortgage)

All of us dream of the day our home will be paid off.  For many, now is the ideal time to speed up your pay-off pace.  15 year rates are near record lows, meaning you may be able to refinance, keep your monthly payment nearly the same, and shave YEARS off the life of your mortgage.  Consider this example:

Mr. B. obtained a $300,000 mortgage at 6% in 2001.  His payment is $1798/month, and now his mortgage balance is $257,000 with 21 years left.  By refinancing to a 15 year fixed at 3.75%, his payment will be $70/higher and he will pay his mortgage off 6 years faster…avoiding $130,000 in monthly payments!!!  In short, Mr. B. will pay $70/month and save $130,000…talk about a wise investment!

Numbers don’t lie.  Give us a call so we can discuss your options of becoming mortgage-free faster than ever before.

4th Quarter is “Crunch Time”

I can’t believe we’re already heading into the final quarter of 2010.  It seems that Avery, my youngest daughter, was born just a few weeks ago, but now she’s walking around and Mary is sending out invites for her 1st birthday party next month!  What happened?   

Looking forward…the coming months typically are the slowest ones of the year for my business.  After all, it’s more enjoyable for a homeowner to plan a holiday party than to take time to sell, buy, or refinance their home! This year’s 4th quarter, however, homeowners have much more at stake with their finances. 

Mortgage rates have hit ROCK BOTTOM, enabling homeowners to save money, consolidate debt, or reposition home equity to other investments during these difficult economic times.  Unfortunately, many have not even inquired or pursued their refinance options.  Some hesitate upon hearing horror stories about other’s experiences; many wrongly assume they don’t qualify. 

If you have not yet assessed your refinance options, I urge you to look at the upcoming 4th quarter as “crunch time” and act now before rates go back up.  Crunch-time players don’t hesitate; they know what’s at stake and they take action.  Do you need to take action and save  money in this economy?  In other words…will you be a crunch-time player with your mortgage? 

To encourage you to step up your game, I am going to offer a FREE GIFT to those who contact me to review their refinance options.  There’s no pressure here; just an honest professional looking to honestly serve you before time runs out. 

Be Like Mike…step up and take the shot at refinancing before time runs out.

 In sports, the 4th quarter is the last chance to make a difference as the clock winds down and the pressure rises up.  The same is true for your mortgage as we enter the year’s 4th quarter.  Rates will likely be heading higher as we approach the November mid-term elections (politics play a bigger role in the mortgage market than ever before)…so time is running out. 

As a special offer only for only my blog readers, I will give a $10 iTunes gift card* for calling me in crunch-time and simply discussing your refinance options.  If we discover options, we’ll celebrate the wise play you made and the money I’ll help you save.  If not, you at least get to download some music & get to know me so you have a mortgage broker and REALTOR to trust down the road when you need to buy, sell, or finance real estate.

I look forward to hearing from you.

*To qualify for the $10 iTunes gift card, just give me a call and complete a loan application within the next 30 days.  That’s it!

No-Cost (FREE) Refinances are Back!

One of my (and my clients’!) favorite refinance options is back…the no-cost refinance.   They were missing from the market for the last 18 months for a number of reasons, but now they’ve returned and I already have many clients taking advantage of them.  These refinance programs allow a homeowner to refinance to a lower rate and not pay a penny in closing costs.  Like everything, there are pros and cons to these creative options.  Let me explain further.

When a borrower considers the cost of a loan, they must factor two things: the rate and the closing costs.  Many focus on getting the lowest rate possible, but borrowers must realize that lower rates always have higher fees.  Conversely, higher rates have lower fees…sometimes no fees at all.  That’s where the no-cost option comes into play.

A no-cost refinance allows the borrower to pay a slightly higher rate than the standard rate offered by the bank and in return the bank pays the closing costs for them.  There truly are no closing costs paid or financed by the borrower.  These options come in handy for the following homeowners who want to reduce their monthly payment but:

1.) plan to sell their home in the near future, thus shouldn’t incur significant closing costs for short-term monthly savings
2.) can’t afford to pay or finance closing costs
3.) recently paid closing costs on a loan (either to buy their home or to do a previous refinance) and can’t stomach coughing up thousands more again to refinance
4.) prefer to “hedge their bets,” meaning they’d like to refinance for free now yet want to save their closing cost money for later as they believe interest rates may fall further in the near future.

Most of the no-cost refinances I’m quoting on 30-year fixed loans are currently at 5% (for loans over $250,000).  Would you like a 5% rate for free?  That’s not a bad deal.  If you’re interested, call me to discuss your options further.  Don’t assume you don’t qualify.  Also, if you are a reader and client who has taken advantage of a no-cost refinance in the past, please post a comment sharing your experience with and motivation for a no-cost refinance.

Being Professional Means Being Personal

 A colleague recently mentioned he wanted to improve his biography page on his web site to come across more professional to clients.  After making his “improvements” I noticed he polished up his professional accomplishments and completely removed the paragraph about his personal interests, hobbies, and passions.

This struck me. In my opinion, conducting yourself in a professional manner includes revealing yourself personally to create TRUST with others.  In fact, that’s what this blog is all about!  The slogan “Part Professional, Part Personal, Always Insightful” means I want to provide both professional and personal insight so you may better know and trust me and my services.  WHO you are often means more to others than simply WHAT you do. 

Maybe I feel this way because of my chosen field and the way I run my business.  When helping clients, I often ask them personal questions about their life goals and dreams so I can best serve them and make the transaction’s outcome signify more than just dollars and cents.  In requesting such personal information, it is only fair I reciprocate and divulge myself through the process.  While driving around looking at homes or while giving advice about paying off a mortgage early, clients learn about my family, my boating obsessions, my ideals…they learn about me as I’m learning about them.  As a result, many clients become friends.  To me, professionalism is more than respectful demeanor, appropriate dress and market expertise; it also includes a personal panache that allows you, the client,  to get to know, like, and trust me, the professional, as a person.

I consider this the “new-school” way of being professional.  Simply doing your job well is not enough.  You must do it passionately while exuding your values and your interests; your personal side.

If you are new to my blog yet appreciate this “new-school” professionalism, then read on and stay tuned.  My ultimate goal is to develop a genuine, trusted relationship with you.  At some point you’ll need real estate services, and I have faith you’ll confide in a REALTOR and mortgage broker that has been professional, personal, and always insightful.

Good Advice can become Bad Advice

 

Avery, our little smile factory, recently turned six months old.  It’s such a wonderful phase of baby-hood; every little detail of this world fascinates her.  She has become most curious and interested in food, as six months now marks the beginning of eating solids.  It’s amazing how fast medical advice changes, because only four years ago we were advised to begin solids with Maddison at four months.  Studies now show early introductions to food may lead to food allergies.

At first I was reluctant to buy into this allergy “theory.”  To be honest, Avery hasn’t been the best sleeper and I knew that eating solids would help her (as well as Mary & me!) sleep longer at night.  And besides, Maddison doesn’t have any food allergies despite starting solids at four months so what’s the big deal, right?  Ultimately, I decided to follow the medical advice of the professional rather than pretend I was a doctor myself.

Why am I writing about baby food (don’t worry, I’m getting to the point here)?  Because I’ve realized that doctors have the same difficult task as I do when it comes to advising clients with new information in an ever-changing world, and patients and clients alike must value the expertise their professionals possess.

Doctors say they “practice medicine” for a reason; their field is always changing.  Medical advice from years past often becomes outdated due to new research, emerging technologies, and evolving diseases.  And yet, many of us are slow to follow the new advice.  As I almost did, we dismiss the professional’s advice and assume we know better.

Similarly, the real estate market is always changing too.  Homeowners today are experiencing unprecedented dynamics when buying, selling, and financing their homes.  Unfortunately, many folks are relying on their personal experiences from years past or on antiquated advice from friends, parents and neighbors to guide their decisions in today’s tumultuous and complex marketplace.  Doing so can cost them a tremendous amount of headache, heartache, and money.

The simple truth is this: yesterday’s good advice can become today’s bad advice when you don’t keep up with the times.  Our world changes quickly, so seek professional counsel in areas outside of your comfort zone.  Like a doctor, I devote a large portion of my mortgage and real estate “practice” to staying current on the trends of the markets so I can best help you make informed decisions in a fast-paced industry.  I am committed to provide up-to-date expertise to you and to those you refer.  As always, thank you for reading.

Cheap Mortgages May Last as Investors Replace Fed

In February I posted in my 2010 Market Forecast that I thought mortgage rates would remain low this year in spite of the phase-out of the Fed’s massive involvement in the mortgage-backed-securities market.  That phase-out was completed earlier this week, and just today I read an article  that supports my theory.  Yes, the Fed is out, but private investors are back buying mortgages, and willing to do so at lower yields meaning lower interest rates for borrowers.

The article has a fair amount of financial jargon, but the crux of it is investors are back buying mortgages because of 1.) more capital due to improving financial markets; 2.) lower risk due to tighter lending requirements and stabilizing real estate markets; & 3.) continued subdued inflation.  Read the whole Bllomberg article written by  Kathleen M. Howley by clicking this link.

MORE Tax Credits Available for California Home Buyers, but You Better Act FAST

While the biggest political news of last week was surely the controversial Health Care Reform Bill, California also passed a housing bill that is sure to aid the state’s housing market.  A few months ago I shared that Governor Schwarzenegger, in his January State of the State address, said he wanted to create state tax credits for California home buyers. Today, I’m happy to report that last Thursday he signed a bill that gives both first-time home buyers and buyers of new homes state tax credits up to $10,000.

As I understand it, this tax credit is IN ADDITION to the current $8,000 Federal tax credit that is available until April 30th, 2010.  This means that if you are a first-time home buyer in California and get into contract to purchase a primary residence in the next 30 days, you could be eligible for $18,000 in tax credits!!!  Quite incredible.

But as lucrative as this new California bill sounds, it is as equally illusive.  Let me explain.

California passed a similar $100 million bill in 2009 that gave credits to buyers of new homes only, and funding ran out in 4 short months, even in a year that saw record-low California new home sales.  This latest bill provides the same $100 million for new home buyers and an additional $100 million for 1st time home buyers. through December 2010 OR until funding is exhausted.  With housing affordability at reasonable levels in many parts of the state, expect the funding for both of these credits to also dry up quickly; possibly within weeks after the May 1st commencement date!!!  Consider these numbers:

So, what’s the moral of the story?  Incentives (especially illusive ones) should not drive the decision to purchase a home.  Yes, another amazing incentive has been thrown at 1st-time home buyers, but it is simply the cherry on top of an already delicious ice cream sundae.  If you are considering home ownership, good for you!  Homes in most areas are more affordable now than a decade ago.  But, be sure you’re buying to enjoy the whole sundae (home), not just the maraschino cherries (tax credits & low interest rates). 

*Please consult a tax professional before assuming you may qualify for any of the aforementioned state or federal tax credits.

Only 22% of California consumers were happy with their real estate agent in 2009? WOW!

Check out these excerpts of a surprising article I read this morning about California homeowner’s dissatisfaction with their real estate agents:

RIS Media – It doesn’t take a genius to know that events of the past few years have greatly affected the public’s view of real estate agents. Now that image is below that of used car salesmen (except, perhaps, Toyota used car salesmen!) and many are publicly stating that the agent’s time is over, that maybe it’s time to take corrective action. What do you think?

The study reported on consumer responses to one simple proposition: “Yes, I would use the same agent” over the six-year period from 2004 to 2009. It reports that 79% of respondents said “Yes” in 2004 but only 22% said “Yes” in 2009.

The article suggests that these statistics could be due to negative experiences with the difficult real estate market, and that home owners are turning their frustrations towards their agents.

Nevertheless, this article makes me feel very fortunate that during this same time frame, 94% of my surveyed clients said they would “absolutely” return to me for their mortgage and real estate needs.  My loyal clients have valued my services and enabled me to run a referral-based business in spite of a difficult real estate market.  Thank you!  Thank you!  Thank you!