FHA

WHAT WERE THE EXACT NUMBERS AND WHAT SHOULD YOU DO?... There were 1,471 sales in February ‘08, the latest statistics available. That is 14.4% up from December ’07. That breaks down to 975 single-family resale, 345 condos, and 151 new homes. The sales were evenly divided by price range which reflects the lowering prices because people could buy more house with less money. There were 1,739 Notice of Default filed but far fewer actual foreclosures at 732. WHAT SHOULD YOU DO? If we haven’t had an opportunity to visit with you about your real estate aspirations, now might be a good time. The Wall Street Journal had an awesome article in its Personal Finance section entitled, “PLAYING THE HOUSING SLUMP: IS IT TIME TO MAKE YOUR MOVE?” Although we won’t recapitulate the whole article here, it makes some excellent points about trading up, doubling down, and helping hand. The latter is a reference to helping your kids buy a home. RIGHT NOW WITH THE NEW FHA LOAN LIMITS, it is again an exciting time in real estate. FHA has a 3% down program. Although it is a fully documented loan, it does allow that 3% to be a gift. Fannie Mae also has raised loan limits based on median price for your area. To find out more about the limits you can visit http://www.efanniemae.com/. With the median prices coming down, you can get a lot of house for the money right now. It is something to seriously consider for your kids or yourself. THESE LOAN LIMITS MAY ONLY BE WITH US FOR A YEAR! Don’t miss out! Please call us and let’s talk about short sales, foreclosures, or many other opportunities.

Surge in Foreclosures

WHAT’S CAUSING THE SURGE AND WHAT ABOUT ALL THOSE FORECLOSURES?... The surge is caused plain and simple by buyer demand. Right now, if a home is properly priced for its condition, it will sell. Because of incredibly bad publicity, buyers have sat and sat and sat on the sidelines. Many of them can wait no longer to buy. AND THEY SHOULDN’T WAIT ANY LONGER. RIGHT NOW IS A GREAT TIME TO BUY PROPERTY! That’s not to say it couldn’t get even better in terms of prices declining, but the unknown quotient there is interest rates. Right now, we know that interest rates are great. We know the Fed has been very proactive in trying to guard the market from a true crash and all indications are it will continue to do so.

Right now is the best inventory. As this buyer cycle peaks, less desirable property will be available and in less quantity. According to Dataquick Information Services we so far have seen a 12.9% median price drop in LA county, 16.1% drop in Orange county (bringing it back to 2004 levels), and 21% down in the Inland Empire. Some buyers are targeting foreclosures, looking for that great deal. There are some deals out there, but you may also find yourself in a multiple offer situation because if it’s a deal, others will sniff it out as well. The big difference to this market, compared to the blow out of the 90’s is that this time around, people have jobs. We lost almost 1,000,000 jobs in the 90’s. This market is nothing like that. This time we have people waiting for the affordability index to rise so they can buy a home. BIG DIFFERENCE! When the housing market peaked, the affordability index was 11%. Today it is 32%. BIG DIFFERENCE!

OC News

FIRST THE GOOD NEWS! ORANGE COUNTY HOME SUPPLY AT 11 MONTH LOW… As of the end of March, the most recent numbers available, the county was left with 7.5 months worth of inventory. The term “market time,” defines the inventory line by how long it would take to sell all the homes listed at the current pace of sales. This is the lowest inventory in a year. But even more of a silver lining is the fact that a true down market, by definition, must have 15 months inventory according to the National Association of Realtors. Then why is our market so sluggish? There are several reasons. First of all, there is a lack of money. Lenders are running skittish and are hesitant to buy mortgage backed securities. Secondly, people are afraid. It is always nerve wracking to buy when everyone is selling, even though that is exactly when you should buy. People that buy their homes now, with the guarantee of low interest rates, will be the ones bragging in 10 years about what a great deal they got on their home all the while sitting on a pile of equity. The key reason for the improvement in inventory is of course sales. According to the OC Register the latest count for deals in escrow was 2.083, (March 25th), up 109% from January 19th’s wintertime low. Read on to find out what’s causing the surge.

Positive News in So. Cal Real Estate

FINALLY SOME REALISTIC (AND YES POSITIVE) HEADLINES ABOUT SO CAL REAL ESTATE… The news varied from a positive “negative headline” such as “O.C. homebuilder’s woes may reach bottom in ‘08” (OC Register, Lansner), to a downright positive headline such as “Ignore the Headlines! Except this one. Sure housing’s in a hole. But there’s a potent case for buying now, whether it’s real estate or stocks.” (Time Magazine, Keadlec). What is the reason for the sudden optimism within the broader pessimism? The answer to that question is a multitude of factors that this newsletter has been drumming into you for the past few months; factors such as low interest rates, selection, seller concessions, lack of competition and ultimately, more bang for your buck. Both of the articles mentioned above really hinge on mortgage rates as key. Jeff Meyers, the founder of the Meyers Builder Advisors consultancy in Corona Del Mar notes the loan limit changes as bringing liquidity to the market. He states, “…2008 will be the bottom year for builders in Orange County.” The time magazine article says if you are, “emotionally ready to be a homeowner, you have good credit, plan to stay put for five years and have been waiting for the perfect entry point… It’s time to get serious--- before an inevitable rise in interest rates wipes out your advantage.” There may be some plausible arguments to waiting for prices to finish falling in other parts of the country where appreciation isn’t the foregone conclusion to this story. But it’s tough to sit out in California. Housing prices have not fallen as fast as the doomsayers predicted. It has been a correction, just as this newsletter stated over a year ago. Will prices continue to come down? Yes, there is probably some air left in the balloon. But if you’re not careful rising interest rates will be buoying up that balloon that you want to see fall. Prices aren’t everything. Leverage is. (For copies of these articles, give me a call)

Navigate in Today's Market

PLEASE RELY ON ME TO HELP YOU NAVIGATE IN TODAY’S MARKET… I always have lots of information for you that I can’t get in this newsletter. For example, there are 6 major lenders that are all offering breaks to borrowers through either a loan modification or payment plans for distressed borrowers. The banks are; B of A, Citigroup, JPMorgan Chase & Co, Wells Fargo, Washington Mutual and Countrywide. Also, there was an excellent article in the Wall Street Journal about the pitfalls of buying a home at a foreclosure auction. It is not my intent to steer anyone in any given direction about how or when to buy property. Ultimately, that’s a personal decision. However, there are problems with foreclosures. You must make sure that all the liens have been wiped out, and that none were missed by the trustee or title companies, which are “senior” to the foreclosing lender. Also, many investors who know far more about the property and the area may be there to take over a sale. Other bidders can bid up a property to beyond its bargain value and you may not know that price threshold. Many of these properties are sold “as is” and people think they can fix them up and don’t realize how deteriorated they can be. If you are looking to buy or sell, please call me first. Let’s tailor a plan just for you that meets your objectives and keeps you safe. I always love your referrals as well. Have a great month!

Home Affordability

HOME AFFORDABILITY NUDGES UP IN ORANGE COUNTY… This was the OC Register headline on February 24th. Hopefully by the time you read this it will have nudged up even more. What makes for a real estate market recovery is pent up demand, and that is reliant on several factors aligning; incomes rising (3.5% the last 2 years and projected about the same for this year), prices coming down (check), and interest rates (stimulus package anyone?) The California Association of Realtors reported that 28% of Orange County residents can afford a started home as of fourth quarter 2007. That’s up from the all time low of 13% we saw in 2006.

Remodeling Projects That Pay Back

If you’re remodeling your home, you probably justified the costs by considering the increased resale value of your home. However, not all improvements are created equal. Some remodeling
projects return almost 90% of the original cost, while others return less than 50%. Work your way in The most profitable improvement projects are almost all exterior
projects. Projects such as additional decks, wood window replacements,
and siding replacements all return more than 80% of
the original cost. If you are remodeling for an increased home
value, start with the exterior, and move to interior projects only
after you have completed all of your exterior projects.
Common rooms take priority

In general, the more people use a room, the more likely it is to
hold its value. For instance, a kitchen is used by everyone in the
house, and, as you would expect, minor kitchen remodels return
81% of their original value. On the other hand, a master bedroom
is only used by one or two people, and, therefore, bedroom remodels
typically return less than 60% of their original value.
Novelty upgrades are risky

Less traditional upgrades, such as backup generators, are a dicey
proposition. There is always the chance that when it comes time
to sell, you will find the two buyers who absolutely must have a
backup generator, and promptly incite a bidding war. More likely,
buyers will shrug off the upgrade and refuse to pay extra for it. If
you really want a backup generator or a putting green, go for it,
but don’t expect to recover the value at resale.