Renters See Prices Skyrocket

As home prices have fallen to levels not seen in nearly a decade, rent prices have been on the rise due to rising demand for rental housing and the lack of new unit construction. According to, national home rental rates are up 6.7% from just a year ago. What does this mean for a real estate investor? It means you can buy homes at low prices and rent them for good money. Click here to read full article from SmartMoney Blogs.

Real Estate Investors to dominate the market

Buying rental properties is still an emerging trend in the current real estate market, but according to a recent article in the LA Times it will become rather commonplace.  A recent survey estimates investor buyers will outnumber traditional buyers 3-to-1 in the next two years!  If you want to get ahead of the masses to invest in real estate before everyone else catches on, you need to educate yourself now.  Click here to read full LA Times article

Do You Need a (Real Estate) Savior or Sherpa?

Buying, selling, or financing a home today can be quite an intimidating process to many.  From short-sales to appraisals to volatile home prices, more and more elements are beyond predictability.  I have watched some real estate professionals market themselves as real estate saviors, promising the world in order to falsely take the fear out of the process for consumers.  In my opinion, however, nothing is scarier in real estate than an over-promising sales person guaranteeing things they simply have no control over.

As a real estate agent and mortgage broker, I cannot be a savior.  Rather, I see myself as your real estate “Sherpa.”  Sherpas, as you may know, are an ethnic group in Nepal who are famous as highly skilled and capable mountaineering guides in the Himalayas.  Unable to make the trek alone, summit-seeking climbers hire Sherpas to manage and navigate the dangerous trek up Mount Everest.  And while Sherpas make most Everest ascents possible, the chance of reaching the summit is ultimately out of their hands.


Buying, selling, or financing a home can seem like climbing a mountain.  It seems scary, danger exists if you make a wrong turn, and there are plenty of nay-sayers claiming you can’t do it.  To overcome the obstacles, you need a partner who is experienced, resilient, and calm under pressure.  But, be wary of the guide who guarantees you a trip to the summit; who are they to control the weather in such extreme conditions? 

I cannot guarantee you the perfect house at the lowest price with the fastest close.  I cannot guarantee you an underwriter will approve your loan.  And I cannot guarantee your home will sell in 2 weeks for full asking price.  There are too many variables to a transaction to pretend like I wield the real estate cosmos in my hands.  Again, I am not a savior.  I am, however, your real estate Sherpa, determined to use my experience, skills, and knowledge to help you make the best decisions possible during your next unpredictable real estate expedition.

Read Beyond the Headlines

On May 11th, 2011, The Sacramento Bee published a front-page article titled “Sacramento-area home prices continue their long decline.”  Timely?  Yup.  Dramatic?  Certainly.  Accurate?  No way!!!

As a real estate professional who closely studies current market trends and statistics, I found the headline way off-base.  I read further to see how they were making this claim.  What I found was fairly ironic.

On the back-page of the continued article, a graph (provided by the Sacramento Association of REALTORS) illustrates the historical median home price inSacramentocounty over the last decade.  Take a peek:


This graph clearly shows how, for the past two-and-a-half years, the median home price trend has largely flattened out and stabilized.  The “long-decline” happened from 2005-2008, so within the writer’s own article he disproved the misleading claim of his headline.

In my opinion, the headline is another example of news providers creating sensational stories rather than factual news.

It was a good reminder that even in our information over-load lives, it is best to slow down and read beyond the headlines.

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!

’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.

’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 :-).

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.

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!

Matt’s 2010 Market Forecast

My annual forecast has always been the most popular post every year, so I hope you continue to find this year’s insightful and valuable.  2010 has been blazing by, and I’m just getting around to writing my annual real estate market projections and reviewing my previous year’s forecast.  I’ve been somewhat tardy in writing as I’m very busy in tending to my client’s buying, selling, and financing needs.  My full plate is one of many indicators that tell me 2010 will be an active year for the Sacramento real estate market.

With so many variables to the housing market, I focus my predictions on three broad categories: supply, demand, and interest rates.

‘09 Projection: Supply will remain low until April because many banks opted to not foreclose on properties during December and January…The number of homes for sale will roller-coaster up and down throughout the year, and end up close to it’s current level.
‘09 Result: The low supply of homes was the biggest real estate surprise in 2009.  Instead of the up and down roller-coaster trend I had predicted, the number of homes for sale continued to drop throughout the year (see graph). 


Currently, the Sacramento area has nearly ½ the number of homes for sale compared to a year ago.  Let me repeat…50% less homes for sale!  In my opinion, the reduced inventory of homes was the single, largest factor in stabilizing home values; more influential than tax incentives or low interest rates.  The surprising low number of homes for sale was likely due to “phantom inventory,” homes banks have foreclosed on but have not put back on the market for resale.  This decision by the banks has reduced the ratio of bank owned homes for sale on the market from 1 in 3 in December 2008 to nearly 1 in 6 currently.
’10 Projection: Inventory will be higher than 2009 levels.  Banks will begin to release more of their shadow inventory, and more short-sale listings will be successfully sold as improved processes are implemented.  Most major mortgage servicing companies are preparing to adopt streamlined, universal short-sale policies proposed by the Home Affordable Foreclosure Alternatives (HAFA) program.  If this program proves effective, more “upside-down” home owners will be inclined to sell and more home buyers will pursue short-sale properties. 

’09 Projection: While the global economic crisis has raised fears as to whether home prices will continue to fall, I believe low prices, low interest rates, and tax incentives will keep entry-level buyers extremely active in 2009.
‘09 Result: Gobs of 1st-timers purchased homes in 2009.  Since May of ‘09, Sacramento county homes priced under $200,000 have, on average, sold for more than asking price; a clear sign of strong buyer demand as buyers compete with each other.  For the first time in 4 years, the county’s median home price increased.

’10 Projection: Tax incentives will no longer be necessary to entice people to buy homes, and so the current tax credits will expire on April 30th, 2010 and not renews.  Sacramento saw a 4.8% INCREASE in the median home price over 2009 (see above), and this small yet steady rise will continue into 2010.  Demand will still be high in 2010 as buyers confidently (and rightfully) believe the bottom of the cycle is here.

Interest Rates
’09 Projection: With continued government intervention, mortgage rates will remain well below 6% for the year.  Lending guidelines will remain tight, but those able to qualify will have unbelievable refinance and home buying opportunities.
‘09 Result: In 2009 the Federal Reserve Bank bought 1.25 TRILLION DOLLARS in mortgage-backed-securities to keep mortgage rates low.  They did so because traditional investors refused to buy mortgages…they had lost faith in the system.  When the government swept in, interest rates immediately dropped more than a full percent, and fixed rates remained near 5% for most of 2009.
’10 Projection: Many predict mortgage rates to skyrocket above 6.0% in the coming months and stop any type of real estate market recovery.  The Fed has announced they will pull out of the mortgage-backed-securities market in March 2010.  The simple line of thinking is that rates were above 6% before the Fed got involved, so they’ll go back above 6% when they get out.  I don’t agree with this argument.  When the government intervened back in November 2008, the financial world seemed to be crumbling.  Investors were running scared from everything, including mortgages.  Fast-forward to February 2010 and things are immensely better.  They’re not great, but they are better.  Investors are now looking to buy assets again, but they want safety.  Mortgages have become a much safer investment as lending standards have tightened and home values in many areas have stopped falling.  If investors are ready again to buy mortgages (which I think they are), then that means they’ll be willing to do so at lower interest rates.  So, while I do expect mortgage rates to rise this year compared to 2009 levels, 30-yr fixed rates will stay below 6%.

Add it all up, and 2010 will be a year of recovery for Sacramento real estate.  Systemic challenges still abound, but overall this year will continue to be a wonderful time for home buyers, with now through April being the ideal time with low rates, low prices, and big tax incentives.  Tax credits to 1st-time and “move-up” buyers expire on April 30th.  If you’ve been considering buying a home for either personal or investment purposes, give me a call to discuss your options and see if you can take advantage of these ideal factors.

Thanks for reading.