Dawn Rivera’s Fremont & East Bay Real Estate Blog

A spurt in home sales in 2009, aided by low interest rates and the first-time home-buyer tax credit, has led some economists to forecast a turnaround in the housing market this year.

Among those who see improvement in the 2010 market is Lawrence Yun, chief economist for the NATIONAL ASSOCIATION OF REALTORS® (NAR). Yun hopes that the extension of the first-time home-buyer tax credit will provide a new pool of buyers to absorb the additional foreclosures that will hit the market this year.

He expects existing-home sales to rise 13.6 percent in 2010; home prices should go up 3 to 5 percent, with wide geographic differences. The average rate on 30-year fixed mortgages will range from 5.3 percent in the first quarter to 5.8 percent by year end. This forecast assumes there will be no major economic surprises. The weak job market remains a concern.

The Mortgage Bankers Association (MBA) has a slightly different take on the 2010 housing market. MBA predicts existing-home sales will increase approximately 11.2 percent. Interest rates should be about 5.6 percent by the end of 2010. The unemployment rate is expected to peak at 10.2 percent and gradually decline in 2011. National average home prices should stop sliding during the first part of the year and stabilize, depending on area and price range. 

In my office we have seen a marked improvement in the number of first time buyers calling for help buying a home.  I have been doing floor time (answering calls) and in the last five days I have acquired 5 new clients, one a day.

The FHA has come up with some new rules when it comes to their loans. 

Beginning April 2010, the up front mortgage insurance will increase from 1.75% to 2.25%

There will be no more spot appraisals.  So it will be harder to get an approval on a condo. 

This is a big one.  Effective for all case numbers issued on or after February 1 of this year, all previous FHA condo approvals will be eliminated and condominium projects must be recertified by HUD.

You can pretty much forget about buying a condo until the project has been blessed by HUD or one of HUD’s approved lenders.

Going forward there will be two approval methods for FHA Case numbers ordered after February 1, 2010; 

Hud Review and Approval Process (H-RAP)

DE Lender-Approval and Review Process (DEL-RAP)

On another note>>> 
For all purchase contracts dated after February 1st, 2010, FHA has waived the flipping rule.
Private Sellers & Investors can now sell their properties to FHA buyers without having to wait 90 days.

I have a listing in San Jose. The seller hired a handyman to remodel the home for her. He is a non-licensed contractor, who after 4 months of working on the home, talked the seller into letting him stay at the house (for free) while he worked on it. She agreed. BIG MISTAKE! We received a accepted offer on the property and he decided he did not want to leave. After giving him verbal and written 60, 30, and 3 day notices we were forced to do a unlawful detainer. I was able to help her with the unlawful detainer saving her the expense of an attorney, she had spent all her cash on the remodel. If the property you are listing has a tenant I recommend that you start the removal process as soon as the contract is signed. I was lucky and the buyer wanted the house enough to wait out the eviction, but we had to remove him before she would agree to close.

When I first heard about the new housing bill, that would force banks to modify loans to keep people in their homes, or face stiff fines. I was excited. A housing bill that would help keep people in their homes, and slow or stop the dreaded foreclosures. Woo Hoo! How wonderful for the many people faced with losing their homes.

Then I viewed my Active Rain site and read a blog by JP Lowry of Preferred Financial Funding, titled What are We Doing America? in which he VERY ADAMANTLY stated why the bill was Disgusting, Ridiculous & Entitled. I have to say after reading it there were some very good points. Now I am not sure where I stand and was wondering what other opinions were.

I am very happy for the families that will be able to keep their homes, but at what cost? I agree that some people bought homes that they knew they could not afford, but… the lenders let them. Also as tax payers have already bailed out the banks shouldn’t the money be used for what it was intended?

Okay, I’m going to do something I normally avoid; I’m going out on a limb and publicize my housing predictions for 2010. While I occasionally discuss general trends and opinions about the market, I think it’s important for all of us to have as much information as possible in order to properly plan our futures. And while this is only my opinion, after all, it’s the only one I can offer; it’s based on 4 decades of experience combined with careful observations of current trends and conditions. Here is what I see the future of housing:

I think the Fed will throw everything in it’s arsenal towards keeping interest rates low throughout 2010. To do otherwise would be to sabotage an economy that has been both erratic and unstable, and would prove fatal in an election year. Though the government will prefer to fight looming inflation, doing so would simply cause the economy to nosedive; and I doubt they’ll be willing to take that risk.

While it may appear that home prices have stabilized, my guess is, they have not. I predict we’ll continue to see overall prices remain at their current levels and, in some areas, to decline well into next year. Foreclosures and short-sales will keep pressure on home prices for another 2 – 4 years. I cannot foresee how we can possibly have a significant resurgence in prices for at least 5 years, with prices not returning to 2005/2006 levels for a decade or more.

Foreclosures and short-sales will make up as much as 40% of total sales for the next 30 – 36 months. And the percentage could possibly be greater, depending upon how eager banks will be to put their inventory on the market. Their preference will be to pace their release to keep prices from plummeting, but the sheer numbers may make that impossible for some banks. Even after the supply begins to dwindle, the effect upon home prices will continue for at least another year.

Unless the government passes a major and all-inclusive tax credit, sales must remain sluggish. I don’t expect another housing incentive. There is little public support for throwing more billions at the problem, knowing that whatever increase might be realized, the benefit would be limited, temporary, and far too expensive.

By spring of 2012 interest rates will rise sufficiently to negatively impact home sales. While this is not the path that politicians would prefer, approaching a presidential election, it will be necessary to keep us from unbridled inflation. This potential scenario supports the premise for a continuing housing slump, extending into the following year and beyond.

Finally, the mid-term election will be both chaotic and unsettling. Both political parties will pull out the stops as never before, one attempting to hold on to past gains, and the other to regain past losses; and they will spend more money, make more promises, and sling more mud than ever before. Political maneuvering in the coming year will certainly impact both the housing market and the economy, but it’s impossible to know what politicians are willing to do in order to maintain or gain power. While they would like for us to believe that their plans can restore the economy, there’s little remaining in their arsenal that can have a significant impact.

While many will view these predictions as meaningless negative claptrap, my intention is to share what I both see and believe to be true. If I am able to help one person make a more prudent choice, then my efforts will have been worthwhile. Take this with the proverbial “grain of salt,” but if it proves beneficial, we’ve both gained in the process.

Written by the Housing Gruru.

Buying a home

Homebuyers can make the most of several tax breaks that help lower their tax bill based on the purchase of an existing or new home. For instance:
-First-time homebuyers: The Recovery Act provides a credit of up to $8,000 if a taxpayer buys a home between Jan. 1, 2009 and Nov. 30, 2009. The homebuyer also must not have owned a home in the previous three years and the home must be the primary residence.
-Points: The points paid on a mortgage are generally deductible as interest if taxpayers paid enough of a down payment or earnest money at closing to cover the points. Homebuyers can deduct the points even if the seller paid them.
-PMI premiums: Buyers who make a down payment of less than 20% of the home’s cost usually pay private mortgage insurance (PMI). But the PMI premiums generally can be included in your home mortgage interest deduction.
-Job relocation: Taxpayers who moved due to a job change can deduct the cost of moving. In order to take the deduction, they must move within one year of starting the new job, work full-time at least 39 weeks during the first 12 months at the new location, and the new job must be at least 50 miles further than the old residence was from the old job. Qualified moving expenses include your out-of-pocket cost of moving yourself, your family, and belongings to the new location.

Owning a home

If a taxpayer typically has claimed the standard deduction, owning a home will likely mean itemizing for extra deductions. Some tax breaks for homeowners include:
-Mortgage interest: For most taxpayers, the biggest tax break comes from deducting mortgage interest. Taxpayers can deduct interest on up to $1 million of the loan used to buy, build, or make substantial improvements to a main or second home. Interest on a home equity loan up to $100,000 secured by the main or second home is deductible too.
-Real estate taxes: Taxpayers can deduct real property taxes they pay on real estate to their municipalities, whether made directly or through their lending company.
-Home improvements and energy credits: The Recovery Act gives incentives to homeowners making improvements and energy-efficient upgrades to their homes. Taxpayers can get credits for 30% of the cost of qualifying doors, windows, HVAC, water heaters, roofing and insulation, up to a maximum credit of $1,500. Solar energy and wind energy systems are each 30% of cost with no maximum.

Selling a home
Sellers won’t have to pay taxes on a profit up to $250,000 for single filers and $500,000 for joint filers. Taxpayers must have lived in the home for at least two of the past five years to claim this exclusion. In some cases, taxpayers can claim a partial exclusion if they are selling due to a change in employment status, health reasons, divorce or other unforeseen circumstances.

Taxpayers whose homes were foreclosed may be able to exclude the mortgage debt that was forgiven in connection with the foreclosure. This provision applies to debt forgiven in calendar years 2007 through 2012, of up to $2 million is eligible for this exclusion ($1 million if married filing separately).

The U.S. housing market continues to show signs of stabilization with a drop in the number of Multiple Listing Service (MLS)-listed homes for the twelfth consecutive month. The number of single family homes and condos listed for sale according to MLS data decreased in June 2009 from May by 2.1%, bringing the total number of active listings in 28 major U.S. markets to 696,858.

Other highlights from ZipRealty’s Housing Inventory Index, compiled from local Multiple Listing Service (MLS) data, for June 2009 include:

-Las Vegas, Los Angeles and Phoenix all recorded a decline in inventory which may have contributed to some homes receiving multiple bids.
-Median list prices have flattened or increased in Las Vegas, Phoenix, San Francisco Bay Area and Los Angeles, pointing toward stabilization in those areas.
-While South Florida has substantially fewer homes for sale than last summer, housing inventory there is plentiful. For example, Miami has 27.1% more homes listed for sale compared to Los Angeles even though Miami has a significantly smaller population than Los Angeles.
-California is seeing the most dramatic inventory declines with massive year-over-year inventory reductions: Los Angeles saw a 53.9% decrease year-over-year while Bakersfield/Fresno tracked a 56.2% decrease.
-Several major metros that have been hit hardest by foreclosures had limited inventory in June 2009, which is at levels not seen or experienced in years.

“‘Affordability’ has been the buzz word in real estate this summer, and with a significant number of listed homes bank-owned, we’re seeing instances in some areas of banks dropping prices to generate more offers from buyers,” said Zip RealtyZip Realty President and CEO Patrick Lashinsky. “If the number of home listings continue declining and buyer interest and activity remains strong, we should see sales prices and home values increase as we head into the fall.”

In challenging markets…like the one we currently face…it’s difficult to find new clients.

Why would you even consider firing a client?

Purely and simply, even the best client relationships can turn bad…and when they do, it’s time to end them by firing the client.

Most of us are too busy to allow deteriorating client relationships to drain time and energy from attracting new clients and serving existing clients. With that in mind, here are 5 reasons for firing a client.

1. Perfection Obsession

These are the buyers who are obsessed with finding a perfect home, in a perfect location and at a perfect purchase price.

Or they are sellers who insist on selling their homes terms and conditions that they consider perfect.

Perfection rarely exists in our world, and besides, your responsibility is to give clients the best possible service, helping them find the best possible deal…not the perfect one.

2. Lack of Trust

This can cut both ways.

For whatever reason, you no longer trust your client or vice versa.

Since trust is a key element of all client relationships, once the trust is gone for either party, the relationship is essentially over.

3. Miscommunication

Sometimes miscommunication is inadvertent or accidental.

Others times it is deliberate.

In either case, when miscommunication becomes a common element it represents a problem to be addressed.

If the problem of miscommunication itself cannot be resolved, it’s time to end the relationship.

4. Conflicting Advice

We all have advisor’s who offer opinions and suggestions on our decisions.

Some of these people are professionally trained, qualified and well informed. Others are well intentioned but otherwise poorly informed and mis-directed friends relatives and acquaintances.

It is the second group of advice-givers that have the most potential for causing problems in client relationships.

When clients start to be guided more by this group than by your professional advice, it’s best to reserve your time, energy and expertise for clients who value it.

If clients do not value what you offer them…fire them.

5. Indecision

Certainly changed circumstances result in changes in clients needs and wants.

However, when clients continually change their minds for no obvious reason, it’s hard to be sure of what they really want.

If they don’t know what they really want…how can you help them?

Is it not better to devote your resources to helping clients achieve what they know they want?

What other reasons might there be for firing clients?

What stories do you have about firing clients?

Federal Reserve governors, unanimously proposed tough new consumer-friendly disclosure rules for mortgages and home equity loans last month, tackling one of the less-appreciated causes of the nation’s deep financial crisis.

After 18 months of study and consumer testing, the Fed’s division of consumer affairs proposed, and governors accepted, a change to how finance charges and the annual percentage rate would be calculated. They also proposed restricting some bonus compensation from lenders to those who originate loans.

The action by the Fed’s Board of Governors, which requires a four-month comment period before becoming final, came as Congress is weighing an Obama administration proposal to strip the central bank of some of its regulatory authority over consumer credit products such as mortgages and credit cards. The administration favors giving those powers to a new Consumer Financial Protection Agency, which would have the sole mandate of protecting consumers from abusive practices such as the weakened lending standards that triggered a collapse of the housing sector. This crisis in mortgage lending quickly morphed into a global financial crisis.

Last month’s Fed vote also came hours after the National Association of Realtors reported that sales of existing homes rose 3.6% in June, the third consecutive month of increasing sales. All regions of the country posted growth, and the percentage of distress sales fell to 31% from 33% in May.

This report provides further evidence that activity in the housing market is stabilizing and that price declines are slowing. The increase in home sales over the last three months was the fastest since May 2004 (in percentage terms) and the NAR reports that the share of distressed sales is declining. This report, along with recent data on housing starts, building permits suggests that we may have seen the bottom in home sales and housing construction.

Wall Street cheered the housing news.

The Dow Jones Industrial Average closed up 188.03 points to 9069.29, crossing the psychological threshold of 9,000. The S&P 500 finished up 22.22 points to 976.29, and the Nasdaq wrapped up the day with a gain of 47.22 points to 1973.60.

Under the Fed proposal, lenders or other originators of mortgages-such as mortgage brokers-would have to provide borrowers with clear one-page explanations of how adjustable-rate mortgages, like those that triggered the housing crisis, differ from fixed-rate products. They’d have to provide clearer examples of what borrowers’ true costs would be, using the loans themselves rather than generic examples.

Lenders also would have to notify borrowers of payment changes 60 days beforehand, rather than the current 25 days. Similarly, for home-equity lines of credit, the notification period would be 45 days instead of 15.

Those moves are decidedly more consumer-friendly, giving borrowers more notice to adjust to pending changes and perhaps seek refinancing in the case of adjustable-rate loans.

The most controversial proposed change is restricting special compensation from lenders when mortgage brokers get borrowers into higher-priced loans when they qualified for lower rates. This bonus, called a yield-spread premium, was a factor in the explosion of sub-prime lending, which involved high-cost loans given to the weakest borrowers.

The National Association of Mortgage Brokers has defended these special commissions but it declined immediate comment on the proposed rule change, which expressly would prohibit steering consumers to higher-priced products in pursuit of personal gain.

During the comment period, the Fed will work to create similar disclosures at the Department of Housing and Urban Development, which has jurisdiction over the settlement documents involved in home purchases.

“It is a complex and comprehensive proposal, so I think an extended comment period is appropriate,” Fed Chairman Ben Bernanke said.

More information on this will be available approx. November 2009

Been out looking for an entry-level single family home in Hayward, CA? If your answer is yes, then you’ll have experienced first hand the craziness that’s become reality in the current Hayward, CA market. No matter which property you choose to visit, chances are there are folks there already, and, as you leave, odds are very good that others are pulling up behind you.

The entry-level market for detached single family homes in Hayward, CA has gone plain nuts.

Nuts might be good for squirrels but last time I checked, those cute, furry-tailed rodents don’t qualify as first-time home buyers. What’s all the fuss? I’ll explain the issues and implications at the end of this post, however, let me first set the stage.

Single family homes 1,200 square feet and smaller are flying off the market like pancakes off the grill during a lumberjack festival. Inventory is WAY down and sales are WAY up. In fact, in an unprecedented market maneuver, pending sales numbers are actually out pacing the supply of existing homes for sale. It doesn’t take a rocket scientist to realize that something is up and to agree that things can’t continue this way for long.

So where are we headed? Does this mean we’re at the bottom of this particular market? You tell me. It would appear that prices have stabilized and have been on a plateau for quite a while. There is a mere difference of $4,000.00 between the average sold price from November, 2008 until April, 2009. However, list prices are headed back up – a sure indicator that at least one group believes the market has turned – sellers.

As I’ve stated in other posts, the bottom of the market cannot be officially called until both Average Sales Prices AND Average Square Foot Prices are either flat or climbing.

While not yet perfectly level, the numbers are looking very, very good. We may not be at the absolute bottom, but we’re so close that if I was in a submarine, I’d be sounding the collision alarm and looking for something secure to hang on to.

Lastly we have Months of Inventory. A quick search on Google reveals many pundits stating that approximately 6 months of inventory indicates a level market. More inventory reveals a Buyer’s Market, less precludes a Seller’s Market. Anyone thinking we are still in Buyer’s Market in this category is simply in denial. True, we’ve not seen prices pounding back upward, but, from personal experience, I can tell you that almost every home in this group is ending up with multiple offers and is selling for over asking price. And here is a part of the rub – most of these homes go on the market with artificially low prices for the specific purpose of securing multiple offers and driving the prices back up again.

Here are 3 Critical Facts you need to know about this market:

1. We are running out of inventory at the bottom of the market.

There are a few reasons for this:

There was a hold on foreclosures from late 2008 until April 01, 2009. Although foreclosures are back on track, new properties have not yet hit the market in any kind of significant volume. That may change any moment.
Unprecedented numbers of buyers are hitting the market because of record low mortgage rates, rock bottom prices and good, old fashioned “spring fever.”
The $8,000.00 tax credit and its impending deadline are pushing buyers to cash in before it is too late. Even the confusion about whether or not the credit can be used for the down payment is fueling frenzies in some quarters.

2. Many homes are going pending that ARE NOT actually closing.

Because of the shrinking inventory, many buyers are starting to write on short sales – buyers that would’ve historically avoided them a brief 3-4 months ago. Once in contract, short sales show up as pendings, but take so long to close they actually mess up the pending numbers (that is the only way more homes can go pending than are actually on the market!). The success rate of short sales is somewhere between 10-20%, and they can take up to 9 months to close. To add to the confusion, many buyers submit an offer on a short sale, it gets marked pending, then those very same buyers go get offers accepted on OTHER short sales as well. While those escrows are slowly stewing in their short-sale crock pots, those same buyers actually go out and manage to get an REO into escrow! One buyer – three escrows? You betcha! You gotta know two of those escrows are NOT going to close, thus adding to the overall confusion in the current market.

3. Current list prices are artificially low.

Banks and their listing agents have figured out the “list low – sell high” strategy and are whipping it into an art form. Low ball offers on REOs are WAY gone unless it’s a dog of a property and has been sitting on the market an awfully long time. If you see something out there priced way too low to be real, guess what …

Lastly, remember that short sale listing agents are also pricing way below market value just to get you through the front door. Problem is, there is absolutely NO guarantee that the bank will actually sign off on the “list price” or your subsequent lower offer.

I believe this situation will be temporary.

We cannot continue to have more homes go pending than are actually coming on the market – this is supply and demand economics 101. Something has to give. I believe it will be supply: in my opinion, we are going to see a resurgence of foreclosed homes into the market in the near future that will level the playing field. Many of these will be existing short sales that have been sitting out there a long time. And in some cases, short sale homes, once foreclosed, will go back on the market at a higher price than their list prices as short sales. This is simply because they were priced far too low to begin so as to attract visitors and offers.

Bottom line: I personally do not believe homes at the bottom will go down much more in value, if at all. I believe homes in the upper end will be the ones taking the hit. And I also am going to predict that by mid-summer, we should be back to at least 3 months of inventory.

So how to respond to all of this?

Be a wise buyer. Cooler heads always prevail and make the money in markets like this while those who respond with panic end up losers every time. Set a limit and stick to it – it may be a while before you land a house, but with careful work and due diligence, you will find one that you can finally call “home.”