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California Association of Realtors
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PRESIDENT SIGNS $168 BILLION ECONOMIC STIMULUS BILL
President Bush today signed off on the $168 billion stimulus package approved by Congress last week, which, in addition to tax rebates for millions of working Americans and business owners, includes a vital, but temporary increase in the conforming loan limit. The economic stimulus package will allow the Federal Housing Administration, as well as Fannie Mae and Freddie Mac to offer mortgages above the current conforming loan limit of $417,000 to as much as $729,750 in high-cost areas for loans originated between July 1, 2007 and Dec. 31, 2008.
"The actions of Congress and our president represent a significant victory for homeowners across the state and nationwide," said C.A.R. President William E. Brown. "C.A.R. has long fought for increases to the conforming loan limit in order to close the gap for would-be home buyers in high-cost areas, such as California, and, with the spotlight now fully shining on this important issue, will continue those efforts and push for permanent changes beyond Dec. 31."
CASH-OUT REFINANCE VOLUME DECLINES IN FOURTH QUARTER
The dollar volume of home equity cash-out refinance transactions declined to $38 billion in the fourth quarter of 2007, the lowest level in nearly four years, according to Freddie Mac's quarterly refinance review.
"Home-value declines coupled with tougher underwriting standards at many lenders contributed to a decline in the amount of home equity cashed-out as part of a conventional loan refinance during the fourth quarter," said Frank Nothaft, Freddie Mac vice president and chief economist. "At the same time, rates on jumbo mortgages for prime borrowers became relatively much more expensive compared to conforming rates, averaging 7.1 percent for 30-year fixed-rate loans in December, about a full percentage point above rates on a comparable conforming product."
CONSUMER CONFIDENCE DECLINES IN JANUARY
The Consumer Confidence Index fell nearly three points in January to 87.9, down from 90.6 in December, according to new data from The Conference Board. The Index now stands at 87.9, down from 90.6 in December. While consumers were more positive about job prospects in January, the sampling from the January household survey of those who view business conditions as "bad" rose to 20 percent from 18.8 percent in December.
"The modest improvement in consumer confidence last month was short-lived," said Lynn Franco, director of The Conference Board Consumer Research Center. "Consumers' appraisal of current business conditions is becoming more negative and their assessment of the job market, while slightly less negative than in December, is more negative than a year ago."
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| Calif. median home price - December 07: $475,460(Source: C.A.R.) |
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| Calif. highest median home price by C.A.R. region December 07: Santa Barbara So. Coast $925,000 (Source: C.A.R.) |
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| Calif. lowest median home price by C.A.R. region December 07: High Desert $244,330 (Source: C.A.R.) |
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| Calif. First-time Buyer Affordability Index - Third Quarter 07: 24 percent (Source: C.A.R.) |
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| Mortgage rates - week ending 02/07: 30-yr. fixed: 5.67%; Fees/points: 0.4% 15-yr. fixed: 5.15%; Fees/points: 0.4% 1-yr. adjustable: 5.03%; Fees/points: 0.5% (Source: Freddie Mac) |
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C.A.R. Newsline, February 13, 2008
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California Association of Realtors
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C.A.R.'S 2008 CALIFORNIA HOUSING MARKET FORECAST
Home prices throughout most of California will post modest declines next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to C.A.R.'s "2008 California Housing Market Forecast" released today.
The forecast was presented this afternoon during the CALIFORNIA REALTOR® EXPO 2007, running from Oct. 9-11 at the Anaheim Convention Center in Anaheim, Calif. The trade show attracts nearly 12,000 attendees and is the largest state real estate trade show in the nation.
The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.
"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," said C.A.R. President Colleen Badagliacco. "Now is not the time for homeowners to test the waters, only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."
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Calif. median home price - August 07: $588.970(Source: C.A.R.) |
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Calif. highest median home price by C.A.R. region August 07: Santa Barbara So. Coast $1,262,500(Source: C.A.R.) |
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Calif. lowest median home price by C.A.R. region August 07: High Desert $287.39(Source: C.A.R.) |
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Calif. First-time Buyer Affordability Index - Second Quarter 07: 24 percent (Source: C.A.R.) |
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Mortgage rates - week ending 10/04: 30-yr. fixed: 6.37%; Fees/points: 0.5% 15-yr. fixed: 6.03%; Fees/points: 0.5% 1-yr. adjustable: 5.58%; Fees/points: 0.7% (Source: Freddie Mac) |
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C.A.R. Newsline, October 10, 2007
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Run the Numbers Before Buying an Investment Property
by Kimbrough Gray
People talk about running the numbers before buying an investment property, but what are the numbers and how do you get accurate numbers? Running the wrong numbers can make the difference of making $500 or losing $1000 per month. In this article, we will go through the costs and factors to consider making your investments successful.
RENTAL INCOME
Rental income is not as straightforward as it seems. Sometimes properties are under-rented and sometimes properties are over-rented, so be sure to find out the market rents when you consider a property. When we bought our first fourplex, we looked at comparable leases and realized our rents were too high, so instead of assuming we would continue to receive $3600 of rental income, we had to be realistic and assume it was more like $3200.
MORTGAGE INTEREST
A huge cost is mortgage interest. You should definitely sort out the details of your loan options and get an idea of current rates before running the numbers. It could make or break a deal. If you are getting a duplex or a house, the loans are generally similar to other home loan programs. Triplexes and fourplexes tend to have higher rates, and commercial is a whole other ballgame. One thing to consider is to put more down because the more you put down, the less your loan will be, which means less monthly interest to pay. Another consideration is the type of loan. We usually recommend people to get a fixed rate mortgage these days because the current ARM (adjustable rate mortgage) rates are not all that much lower than fixed rates.
Just get educated about the loan options and run the numbers with them. Oh, and do not just take advice from one mortgage person. The best way to get educated is to talk to a variety of mortgage brokers and banks to find your best solution; not all loan places have the same programs.
TAXES
People frequently use the taxes from the year when they purchased the property, assuming the taxes will stay the same. Taxes change every year. Taxes can go up drastically after a purchase. For example, an owner occupied property usually has tax breaks, so unless you intend to owner occupy too, your taxes will go up.
In addition, the county appraisal that your taxes are based on could go up after your purchase. For example, if you buy a property for 100,000 but the tax appraisal last year was for 50,000, don't count on it remaining at 50,000. In fact, I have seen cases where a year after a property was purchased the tax assessor increased the appraisal value to the purchase price. The safest approach is to look at the tax rate and the purchase price to determine your future taxes.
VACANCY COST
For some reason people tend to forget to take into account vacancy rate. Even when looking to invest in a desirable rental area, it's best to always take into account at least an 8-10% vacancy rate. Do some investigation, look at your market and find statistics on the average vacancy rate.
TENANT TURNOVER COST
We have personally found the biggest surprise to be the expense of tenant turnover. This includes advertising for a new tenant, cleaning, repainting, replacing carpet, etc. If you expect to have high tenant turnover, like next to a college campus, anticipate this to be a significant cost.
INSURANCE COST
Insurance on investment properties are typically higher than owner occupied, single family properties. So get an insurance quote on the property instead of basing your expected insurance off of the insurance bill for your house. You also should purchase liability insurance, which can be expensive.
MAINTENANCE COSTS
This is by far the most difficult number to estimate. It depends on the property, whether you fix some of the problems yourself or hire outside help, and random luck. So we can't give you a hard and fast number but we can look into different factors to take into account.
**Property Type - When you evaluate different properties remember to take into account the type of property. If it's brick you won't have to paint or worry about wood root. Decks need constant maintenance. A property with wood or concrete floors will be easier to clean and will not have to be replaced when a tenant moves out. Just think about the aspects of the property and their maintenance costs.
**Property Size - A smaller property is easier to maintain than a larger property. For instance, say there are two properties for sale for 200,000 and each have a combined rent of 2000. A property with 2 units and a total of 1000 square feet will be cheaper to maintain than a property with 6 units and 3000 square feet. The larger property will be more expensive to maintain when you are replacing the larger roof, painting the interior walls etc. More units mean more money spent on advertising, make-readies, and more appliances to repair.
**Property Location - Consider your proximity to the property. If you buy a property 30 miles away, over the course of a year you can spend a decent amount of gas money driving back and forth.
**Your personal management style - How often will you do maintenance work yourself vs. hiring help? For instance, when a unit needs painting will you paint the rooms or hire a painter? Hiring professionals is definitely more expensive, but you have to be realistic about how much you will personally do, especially if you are looking at many units.
UTILITY COSTS
Be sure to check what the tenants pay for and what the owner pays for. This includes all the utilities and lawn maintenance. In addition, there may be owner expenses like parking lot lights and trash bin service.
PROPERTY MANAGEMENT COSTS
If you are going to hire a property management company, definitely get their rates. We personally choose properties that we can manage ourselves.
SUMMING THE NUMBERS
We wrote a investment property calculator which is located here Investment real estate calculator. Once you add all the numbers up, you often find the property has 0 cash flow or even negative cash flow. This doesn't necessarily mean you should not purchase the property. There are positive tax benefits to rental properties and depending on your situation, a property with technically 0 cash flow could still put more money in your pocket due to tax benefits. If you think the property is going to appreciate in the future, a zero or negative cash flow property could still be appealing.
The point here is that if you are buying a property with zero or negative cash flow, it's best to know beforehand instead of after the property has been purchased.
Broker Agent News, October 2, 2007
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California Association of Realtors
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C.A.R. URGES SWIFT PASSAGE OF GSE AND CONFORMING LOAN LIMIT REFORM BILL
C.A.R. is pushing for swift passage of a bill in the Senate calling for increases in loan limits to match median home prices in California and other high-cost areas and the creation of a new regulator to oversee Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac.
Vigorous support helped push the measure, HR 1427, through the House in May, but it has since stalled in the Senate. The bill would raise the current maximum size of a conforming mortgage loan from $417,000 to a capped amount at 150 percent of the national limit or $625,500, allowing low- and moderate-income home buyers in high-cost areas better access to low-cost, low-rate fixed mortgages.
C.A.R. President Colleen Badagliacco was recently quoted in a "San Jose Mercury News" story on the issue, saying that a loan of $417,000 "may buy a mansion in Des Moines but it doesn't buy anything in San Jose."
CONSTRUCTION SPENDING FALLS 0.4 PERCENT IN JULY
U.S. construction spending fell 0.4 percent in July compared with June, the sharpest decline since January, the Commerce Department said Tuesday. Spending dropped to a seasonally adjusted annual rate of $1,169.1 billion, not the flat showing analysts had predicted for the month.
Total residential construction spending in July was down 1.4 percent at $541.9 billion compared with June at $549.7 billion, and $642.2 billion in July 2006. Residential construction figures account for the building industry's worst slump in 16 years and reflect a continued slowdown of construction plans as builders focus on moving stagnant inventories.
PENDING HOME SALES INDEX DOWN 12.2 PERCENT IN JULY
Tighter lending practices in the mortgage sector resulted in a 12.2 percent decline in July compared with June in the number of pending home sales contracts, according to the NATIONAL ASSOCIATION OF REALTORS® Pending Home Sales Index. NAR's index, a leading indicator of future existing home sales, shows a reading of 89.9 in July compared with 102.4 in June. The July index is down 16.1 percent from July 2006 when the reading stood at 107.1. "These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers," said Lawrence Yun, NAR's senior economist.
| Fast Facts |
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| Calif. median home price - June 07: $594,260(Source: C.A.R.) |
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| Calif. highest median home price by C.A.R. region June 07: Santa Barbara So. Coast $1,375,000 (Source: C.A.R.) |
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| Calif. lowest median home price by C.A.R. region June 07: High Desert $306,310 (Source: C.A.R.) |
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| Calif. First-time Buyer Affordability Index - Second Quarter 07: 24 percent (Source: C.A.R.) |
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| Mortgage rates - week ending 8/31: 30-yr. fixed: 6.45%; Fees/points: 0.5% 15-yr. fixed: 6.12%; Fees/points: 0.5% 1-yr. adjustable: 5.84%; Fees/points: 0.8% (Source: Freddie Mac) |
C.A.R. Newsline, September 5, 2007
Wondering what your home is worth? C lick the "Contact Me" or "Home Evaluation" for more information!
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Loan Fraud Awareness by Edward Sabalvaro
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January 29, 2007
In the past few years, the real estate market was seen to be in a bull market and property owners enjoyed the robust appreciation of prices seen in the real estate market. At times, the bidding on properties became so aggressive that buyers would start overbidding the properties on the market from $50,000 to $100,000 above the listed price. Part of this rapid escalation in home prices was due to the fundamental business principles of “Supply and Demand”. If the supply is low and the demand is high, the effect of this scenario would be to cause the price of an item to increase; which is also known as “A Seller’s Market”. If the supply is high and the demand is low, the effect of this scenario would be to cause the price of an item to decrease; which is also known as “A Buyer’s Market”. Another contribution to the rapid escalation of real estate prices can be attributed to “Loan Fraud”.
With the low single digit interest rates, something which has not been seen in over 40 years, buyers are able to borrow more money to leverage their purchase. Mortgage brokers are able to package a variety of loan programs for buyers and sellers to obtain purchase loans and equity loans; respectively. This economic setting created a frenzy of purchase loans and refinances. Beneath this frenzy of purchase loans and refinances, the activities of loan fraud were growing.
What is loan fraud and how is loan fraud created?
Loan fraud is defined to be the deliberate action to deceive the lender. The value of the property, which is assessed by an appraiser, is artificially over inflated to get the lender to release a certain amount of funds.
A basic scenario for loan fraud would be as follows: A buyer and/or buyer’s real estate agent would present an offer to the seller’s listing agent to purchase the seller’s property for a certain amount over the seller’s asking price; which is an amount significantly over the market value. In the purchase contract, the seller is directed to give the buyer a credit for a certain amount; usually the amount over the seller’s asking price. In the end, the lender funds the loan, the seller gets their asking price, and the buyer gets the property and extra cash. Typically, a lender will allow a buyer to wrap the non-recurring closing costs into the purchase loan. Non-recurring closing costs are expenses which are paid only once (i.e. Loan/lender associated fees and escrow fees). Typically, credit to the buyer should not exceed three percent (3%) of the purchase price to cover the non-recurring closing costs of the purchase transaction.
Some loan fraud schemes are very sophisticated. As a specific example, an outside brokerage office presented an offer for one of our office listings where they presented an offer price $110,000 over the listed price. In the purchase contract, the buyer specified the property is to be purchased “AS IS” and a $110,000 credit was to be paid to a 3rd party corporation who would be responsible for the needed repairs to the property. The attorneys representing our office investigated the background of this corporation and discovered the owner of the corporation was the buyer. By using this scheme, the buyer was able to hide many details of this transaction which would normally be disclosed under the consumer protection laws. Our office decided not to participate in this loan fraud transaction and is considering reporting this incident to the California Department of Real Estate (DRE).
During slow markets, sellers get frustrated and temptation increases to turn a blind eye to fraud. To recognize if your situation is a candidate for loan fraud, here are some basic questions you should consider:
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Are the representations in the transaction true?
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Are efforts being made to hide information from the lender (i.e. placing selected contract terms on a separate addendum or doing it outside of escrow)?
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Is money flowing directly or indirectly to the purchaser of the property without disclosure to the real lender (not an intermediary)?
Recently, the California Department of Real Estate (DRE), the Department of Justice (DOJ), the FBI, and the Department of Housing and Urban Development (HUD) are stepping up their efforts to prosecute participants of mortgage loan fraud. According to the California Department of Real Estate, loan fraud is punishable by up to 30 years in jail and a $1,000,000 fine for those who participate in loan fraud activities.
This article was written to bring awareness to the general public regarding mortgage loan fraud and is not intended as a substitute for legal counsel. Please consult an attorney or legal advisor regarding any legal concerns or issues.
Edward Sabalvaro is a licensed real estate broker with the California Department of Real Estate (DRE), a member of the California Association of Realtors (CAR), and a member of the San Mateo County Association of Realtors (SAMCAR).
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Six Signs That You're Ready To Buy
 Figuring out whether you're ready to buy a house -- whether you're a renter or are aiming to move up or size down -- can be a daunting task. But there are signs that will indicate whether you're ready to take the buying plunge.
If you are thinking about buying, you're not alone.
David Lereah, NAR's chief economist, said the housing market has reached a new plateau. "Over the last few years, it's become apparent that the level of home sales will generally remain at higher levels than what was common in the mid-1990s," he said. "The fundamental change is a growing population with a rising number of households entering the age in which people typically buy their first home. In short, we have the need, desire and ability for people to buy homes."
So are you ready to make the move? You might be if you:
Are familiar with the market. If you've been paying attention to how much houses are listed for in the neighborhoods you're eyeing and have a realistic view of how much a house will cost you, you're in good shape. But if you're dreaming about that big corner house with no clue about it's asking price, you may want to spend some more time becoming familiar with the market and how much houses are going for.
Have the money for a down payment and closing costs. The down payment is a percentage of the value of the property. Freddie Mac says the percentage will be determined by the type of mortgage you select. Down payments usually range from 3 to 20 percent of the property value. Also, you may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20 percent. Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. Generally, buyers will receive an estimate of these costs from your lender after you apply for a mortgage.
Know how much you can afford. Freddie Mac says that as a general guide, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. Also, your income, debt and credit history go into determining how much you can borrow. As a general rule, your debt -credit card bills, car loans, housing expenses, alimony and child support -- should not be more than about 30 to 40 percent of your gross income.
Know what additional expenses will come with owning a home. This includes homeowners insurance, utility bills, maintenance costs -- roofing, plumbing, heating and cooling.
Have your credit in good shape and make sure your credit report is accurate. Potential lenders will view your credit history -- how much debt you've accrued, how many accounts you have open, whether your payments are made on time, etc. -- to determine whether they'll give you a loan. You should get a report from each of the three credit reporting companies: Equifax, Experian, and Trans Union.
You haven't made any recent major purchases, particularly a vehicle. If you do, you may have a harder time getting a loan -- or it could potentially lower the amount you'll be approved for.
Once you decide you're ready, you'll need to be prepared to move quickly if you're aiming to buy in a sellers' market.
The next steps involve hiring a real estate professional and getting preapproved for a mortgage loan. This way you'll know if you can get approved and how much you can spend on a house. It also puts you in a stronger position when you ultimately make an offer on a house.
Written by Michele Dawson
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What is a "Buyer's Market"?
 Most real estate practitioners consider a typical market to be one in which homes take an average of six months to sell. Realtors keep track of this number by keeping up with the days on the market (DOM) of every home listed and sold.
If the number rises above six months inventory on hand, then the market is swinging into a buyer's market. If it falls below, it is becoming a seller's market.
A buyer's market is one in which there are too many homes on the market for the number of buyers. Homes take longer to sell and prices fall.
Sometimes buyers believe that winter time is a buyers' market. Homes offered for sale during slower times of the year are generally aggressively marketed, and may not sell for a significantly lower price than they would if they were marketed in a busier period.
In the spring, a seasonal adjustment occurs, and more homes come on the market. Buyer activity picks up as families with children (still the single largest buyer demographic) buy homes so they can move during summer vacation.
A buyer's market can easily exist in the spring, if conditions dictate that there are more homes than buyers, falling prices, and longer DOMs.
Sometimes a buyers' market can be created that lasts for a long time. The exit of one or more major employers from a community, a natural disaster such as a flood or earthquake, or some other catastrophic event can affect home values in an area for years.
As homes become more competitive, buyers realize that their interest is at a premium and they will increase their demands to sellers. Those nice chandeliers that normally would not be included in the purchase price of the home, now become a bargaining chip for the buyer.
The buyer may ask the seller to provide a home warranty at the seller's expense, or for the seller to pay more of the closing costs than usual out of the settlement proceeds, or any number of other contingencies.
The one certainty that can always be counted upon is that one side of the market will never stay on top forever. In fact, it can turn on a dime. The same area that remains depressed for a period of time can make a comeback as lower prices stimulate reinvestment. Contact your REALTOR® for more information about market conditions in your area.
Written by Realty Times Staff
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