ARE WE THERE YET?

With many regions in California still in a downward tailspin, many are wondering - where’s the bottom?

Just a few years ago those in the real estate, banking and the lending profession were proud of the fact that 70 percent of all families in this country own their homes. However, in order to get there, lenders, real estate agents and consumers dipped into a "too easy" bucket where the value of ownership sunk to the same level of the cost of getting in the door - zero down, and in some cases, almost zero out of pocket...

We are now paying the price of too much credit being offered to poor or borderline borrowers, overeager investors betting on dreams of continued double-digit appreciation, and impassioned move-ups wanting more housing than they could realistically afford.

Now we are seeing a new phenomena, homeowners who can afford to make their payments yet choose to walk away from their homes. Their argument usually sounds like this - "It’s cheaper to rent than make my mortgage payment and the I owe more on my home than it’s worth. In fact, it may take years before it appreciates to the same value as when I purchased it."

A decade of cheap money and incredibly flexible loan programs offered by many lenders, sparked overbuilding by lenders, a flip-and-run mindset for speculators, and unrealistic expectations for first-time home buyers blinded by the low payments of a short-term loan. While the equity gained by rising home prices can cover many ill-conceived loan mistakes, a flat or sinking market only compounds problems for lenders and owners. Thus the rationale to "walk away" from a perceived bad deal...

Now, let me point out, values are not in the tank everywhere. But, in most cases, homes certainly are not rising quickly in value and they are taking longer to sell. Multiple listing service figures that show a drop in new listings must be filtered with the number of would-be sellers not wanting to compete in a slow or flat market. A few bright spots in the Bay Area are San Francisco, and Hillsborough, on the peninsula.

All real estate is regional. Blips and dips in one neighborhood can resemble a flat line just a few blocks away. But a return to a national "feel good" housing atmosphere likely is years away, not months. So, where is the bottom? My crystal ball is a little murky, but I do see signs of a recovery. Price decline has meant more affordability and great values.

We are seeing this in the number of sales we have experienced since February of this year. We have more than doubled the number of closed units, year-to-date, and our inventory is holding steady. So, though I believe we are a few years away from the illusive "normal market," we are in what I would call an "active" buyer’s market.

If you are a first time buyer, or are in a position to purchase a "second or vacation home," this is a great time to find that bargain. Just call on one of our real estate professionals. They are there to listen first, then help you with your real estate needs.

Was I Right. Or, Was I Wrong? Read On...

If any of you noticed (you probably didn’t), I haven’t blogged in awhile. Why, you ask? Because I had a lot going on, what with an anniversary celebration in Yosemite with my sweetheart, Pat, and a family vacation to Twain Harte.

The second reason is that I was waiting for the market to settle out - to see if I could get a handle on the direction we are heading. My crystal ball, like many others, doesn’t always work like I would hope it would. My prediction at the end of last year was that we would see the market start bottoming out by July 2008. What did I mean by this prediction? I meant that the foreclosure mess would start diminishing (less properties being foreclosed), prices starting to hold steady, and some regular sale activity in the market (not just bank owned properties and short sales).

Well, I was wrong! Actually, there will be a steady batch of new bank owned properties coming on the market - for at least the next 6 to 7 months (and some predict even longer). Prices are continuing their downward trend, though not as dramatically. Short sales are happening, but they are still a pain, with lots of lenders still not being that helpful and last minutes disappointments still occurring as sales fall apart because of lack of lender participation.
The only bit of good news is that we are selling about twice as many properties (each month) than we did a year ago. The inventory is holding steady, and there are good deals to be had for those who are taking advantage of lower price and good interest rates.

My latest prediction (take it for what it’s worth), is that we won’t see a market with home appreciation and regular sellers not under duress marketing and selling their homes until mid or late 2009. So again, if you are not a "serious seller" who needs to sell, it is not a good time to "test" the market.

I wish all of you the very best summer, and if you have real estate needs, our company has the very best to offer because in my opinion, we have the most well trained, caring sales associates. Call on one of them, you’ll be glad you did.

Last, but not least, congratulations to our Benicia Sales office and sales associates, under the leadership of the manager, Vita Mangosing, which has been the number one real estate sales office in Solano County for the last three years in terms of number of units sold and dollar volume closed. Great job - Keep it up!

HAS THE HOUSING MARKET BOTTOMED OUT?

According to MSN Money, the Foreclosure "crisis" is overblown
MSN Money states, "Although the national foreclosure rate rose 79 percent between December 2006 and December 2007, the rate was still only 1.033 percent of all homes. This is a regional problem, not reflective of the overall real estate market."

MAKING SENSE OF THE STORY FOR CONSUMERS
• Foreclosure statistics are rarely presented in context. Because about 30 percent of homes are owned free and clear, only seven-tenths of 1 percent of all homes were in foreclosure last year. • If you rank the top 100 foreclosure areas identified by RealtyTrac as reported by MSN Money, only 34 areas had foreclosure rates above the group average. • Fifty-one areas had foreclosure rates of 1 percent or less. • Foreclosure rates actually fell in 14 of the top 100 foreclosure areas.

The main source of foreclosure information comes for a company called RealtyTrac. But when RealtyTrac reports the latest information regarding defaults on loans, or foreclosures, it is not always a straightforward, easy to understand report. In fact, RealtyTrac reports defaults on loans, not on individual properties, so one household that defaults on a primary loan and an equity line will be counted as two defaults, driving up RealtyTrac’s foreclosure statistics. Because of this one home may be associated with a default notice, auction sale notice and bank repossession, each of which is counted as a foreclosure filing. This also skews RealtyTrac’s foreclosure statistics.

Now for good news! We are starting to see a rebound. In February, the hardest hit market in the Bay Area, my county, Solano, saw transactions under contract rise 63.5% over February 2007 (from 255 to 417). Over half the counties were on the plus side for transactions under contract. Joining Solano were Sonoma (+.52%), Napa (+29%) and Contra Costa (+12%). Yes, prices have been hit hard, but buyers are starting to show up and not just look, but make offers.

We see this in other ways, too. Our agents report that their Open House activity has really picked up. It’s not just a few buyers showing up, but in many cases dozens of prospects viewing a home held open. It is a buyer’s market and buyer’s are starting to take advantage of it.

The question then is - have we hit bottom? My guess is probably not, but we are getting close. The inventory of homes for sale in many areas is decreasing, even with the foreclosure problems many face. The bank owned properties are very attractive as they are really priced to sell. Let’s hope this keeps up. My prediction is that by Spring or early Summer we will have hit bottom and start actually see a stop in the price decline and a slight upswing in home values

THE STIMULUS PACKAGE - BITS AND PIECES

As most of you know, the Congressional Stimulus Package was just passed and signed by the President. It has many features, including some accounting breaks for businesses and mortgage relief. What does it really mean to those who either want to refinance an existing loan, or purchase property?

Well, the choir is still out. Since this is February, my guess is that it will take until at least mid-March until it is all sorted out. But here are some of the things that are possible (and likely).

The stimulus package will raise the FHA and Conforming Loan limits (Fannie Mae and Freddie Mac’s - GSEs) to as high as $729,750 in high-cost areas. By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably. But still to be determined is "what is considered a high priced area - is it by county, city, etc.?

Yes, increasing the FHA loan limits is critical to bolstering California’s housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The new provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.

The National Association of Realtors has estimated that raising the conforming loan limit to $625,000 ($729,750 in high priced areas) would prevent 140,000 to 210,000 foreclosures and prop up home prices by 2 to 3 percentage points. But critics say increasing the limit could hurt Fannie and Freddie’s mission of helping low and moderate income families by putting them at greater financial risk.

What does this mean for you? It looks like with an increased loan limit your buyers will have an easier time qualifing for what once was considered a Jumbo Loan, and people who have good credit and equity in their home will be able to refinance to more favorable interest rates from a current jumbo loan they have on their home. This is all good....now, again, we just have to wait for the powers to be to tell us what will work in our area.

Also of note, Countrywide Mortgage has agreed to work with ACORN, a debt relief agency, to adjust the so-called sub-prime mortgages to a low fixed interest rate, no matter whether the loan is current or in default. There are many who would argue that this is just helping out those who should have known better from the beginning. But, if it helps slow that slew of foreclosures, it not only helps those in financial distress, but it helps all of us who are homeowners and want to see some stabilization in the home market and maintain the equity we have in our homes.

In addition, the Treasury Department and the White House are working with five other major lenders to do something along the same lines. It will be interesting to see how this works out.

More good news? Interest rates are nearing a 30 year low and the home inventory is up, and affordable. My guess is that we will bottom out sometime at the end of May, and see a relative stabilization in the real estate market. We will see how accurate my predictions are...stayed tuned.

What does it take to sell a home in a Buyer's Market?

I am often asked - What does it take to sell a home in a buyers’ market – a fresh coat of paint or a kitchen overhaul? Lowering your asking price or offering incentives? From cosmetic to strategic, smart sellers can take advantage of a few simple tips to get the most out of their properties. Here are six simple strategies to help secure a "SOLD" sign:

1. Boost your curb appeal. Though they may be obvious, cosmetic upgrades like painting and planting can truly go a long way to forming a fantastic first impression of your home. Make sure the yard is picked up, and how about a new front door matt? And be sure to clean, clean, clean!

2. Make big fixes where you can. If your budget allows, invest in bigger improvements. Focus on "make or break" rooms like bathrooms and kitchens, because nothing says "uninviting" like an unattractive cooking space. If your budget is limited think about smaller home improvements in these areas which could help close the deal (new light fixtures, bathroom faucets, etc.).

3. Let the Internet work for you. Free online tools like the Coldwell Banker® Home Tracker (www.coldwellbanker.com) or Home Value Estimator can assist you in gauging your property value including home improvements you have made to your home. Using online resources allows you to engage in a dialogue with your real estate broker and can assist you in setting the right price for your home. In addition, www.solanopacific.com, has many buyer friendly tools that shows off your property and give the prospective purchaser a reason to contact us and find out more.

4. Transparency is golden. Getting a preliminary professional home inspection and sharing it with potential buyers may help them understand your home’s condition and reinforce your position as a trustworthy and responsible seller. You should also be clear about recent improvements you have made, and provide estimates on other optional upgrades – especially any for which you would be willing to foot the bill.

5. Go the extra mile. You can have your home pre-inspected and follow up by making necessary repairs. Allow potential buyers to see the report and receipts for the work. Offering a home warranty could also sway a buyer to purchase your home over another. Buying down mortgage rates or pay points on behalf of the buyer is another suggestion

6. Be realistic. Selling in a buyer’s market takes skill and strategy. In most markets, increased inventory has given buyers the opportunity to be selective in the home they want and the price they are willing to pay. Properly priced homes are selling and your sales associate will work with you to determine what that price should be. Also understand that it normally takes a bit longer to sell a home in buyer’s market than in a seller’s market.

For those of you who want to know more, please contact one of our top flight sales associate. They will be happy to share a DVD entitled DRESS YOUR HOME FOR SUCCESS which will go into more detail about preparing your home for sale. They will also give you a realistic assessment of value - what is and is not selling in and around your area. Happy New Year for 2008, and please call on us for any help you may need in the real estate finance or sales area.

I AM STILL ALIVE. THANK YOU!

Excuse me, if I feel a little like a wounded animal. Why, you say? Because everyone who knows me knows I’m in real estate and wants to know if I am doing okay. Or, as they put it, "Are you surviving!"

I am happy to report, I am alive and well, thank you. In fact, some would say we are beginning to see a little light at the end of the tunnel. Though some economistd are still talking about a possible upcoming recession, some are saying, "Hold on, not so fast." The UCLA Anderson Forecast (which tends to be quite conservative) came out with a report stating recession is unlikely. According to Edward Leamer, director and co-author of the forecast, "We still think an official recession is not in the immediate future." This, with the strong report we just had on employment being up, and the fact we are holding steady on the unemployment number at 4.7%, are all positive signs. This, and the fact that the President, Congress and financial institutions are taking our mortgage lending problems seriously, all indicate that we may be out of the woods in the next twelve months or sooner.

The other bit of positive news is that we are seeing a number of sellers taking their listings off the market and renting them or deciding to remarket them in the first part of 2008, or later. This is beginning to have the effect of reducing listing inventories. As I have mentioned in the past, if you don’t really need to sell, or aren’t serious about selling, don’t put your home on the market - it will just sit there!

Price reductions continue to drive more sales. As sellers continue to become more realistic about the current environment and reduce their list prices, buyers are eager to seize the opportunity. In my own family, my daughter and son-in-law listened to their real estate agent (no, it wasn’t me listing their home as they live out of area), and reduced the price of their home to the point they were the most competitive home in their subdivision. This helped them put together a sale within weeks. Good advice, good results.

My last point, there are still serious buyers out there as we enter the holiday season. People who need to buy, who want to be in their new home to start 2008 will still be looking during the Christmas holidays. Serious agents will still be working, and as we close the year, I am confident that there are better times ahead. I am entering my 29th year in this business and it is still just as rewarding as it was when I started. Happy Holidays...

Great Opportunities - Don’t Pay Attention to Doomsayers!

Does the name Chris Thornberg ring a bell?

If not, Mr. Thornberg currently works for Beacon Economics in Los Angeles. He was one of the first economists to warn of a housing bubble starting in 2004. Mr. Thornberg was formerly with the UCLA Anderson Forecast. His latest predication is that there is a 75% chance of a recession and that housing prices will continue to fall. Ouch, big time.But how accurate is this info?

This information came from an article Mr. Thornberg recently wrote that was featured in a wide spectrum of newspapers around the country and had a headline that stated "Grim forecast for Economy, Housing." It seems Mr. Thornberg loves to spread bad news about housing and real estate in general (the glass half empty syndrome?).

It is interesting that further on in the same article it mentions that, "Best in 5 months - Payroll adds 166,000 jobs in October." Wait, I thought the sky was falling. And further on Mr. Thornberg indicates that the Bay Area might not be hit as hard as other regions. In fact, he says, the Bay Area economy is diverse and strong in the technology sector which will likely be a bright spot. He further states that trends in the Bay Area are some of the best in the nation. Now you’re talking!

I could go on, but I think I’ve made my point - the local, state and national press love to post headlines that are negative, jolting and not always balanced. I am not saying that all is wonderful in real estate at this moment, but it’s not all dire news either. But give the press half a chance and they will jump on a piece of bad news and ignore a parcel of good news.

Speaking of which, on the good news front, there has been a slight decline in both interest rates and number of homes listed. I predicted that November and December will show an overall drop in the listing inventory and mortgage interest rates - an even better reason for real buyers to start making offers to purchase. Sellers are beginning to understand that we have moved away from the hot market days of 2003 through 2005. You need to be a serious seller. If you don’t have a good reason to sell - don’t.

As for buyers, if you are concerned about further erosion of prices, then write offers at price levels that you feel comfortable offering. You never know, many sellers are now becoming more realistic about pricing and the values of their homes. This is a market where buyers for the first time in many years have negotiating power. Use it!

I am so proud of our team of real estate professionals. We continue to grow market share and have a wonderful camaraderie in our offices. Everyone is working hard, and seeing the great opportunities that come from a Buyer’s Market. Gang, keep up the outstanding effort. It is appreciated.