Market News

Guess what…

I just sold two condos!

No surprise. Both homes sold in the first 4 hours. When you fix up homes to look like these and market them the way we do, there are people begging to buy it.

For the two-bedroom (photo above), I brought some purchase contracts, interviewed various buyers and wrote an offer up in the guest bedroom while hundreds of people were parading through the home. It sold for over $50K over asking price. We are due to close next week.

The one-bedroom (photo below) also sold well over asking and has already closed escrow. Very exciting. So…who do you know who could benefit by my over-the-top home-selling services? Just give me a call and give me their names.

And BTW, I desperately need a two-bedroom lower-level condo for a couple in Oceanside. Do you know anyone who might want to sell theirs?

Thanks so much.

Jenean
(949) 583-1331

Removing PMI Insurance from your monthly mortgage payment

If you or anyone you know has a loan that has Private Mortgage Insurance attached it can be removed.  This additional cost applies when a home is purchased with less than 20% down.  To remove PMI:

  1. Once you’ve made enough payments to boost your equity to 20% of the original purchase price, you can ask your lender to cancel PMI.  By law, the lender must cancel PMI at this point as long as you have a history of on-time payments.  You can establish that the property value has not declined and there is not a subordinate lien — such as a home equity loan — on the property.
  2. If you can’t get PMI removed at the 20% level, it gets easier once you reach 22% equity (based on the original purchase price).  At that point, the lender must automatically cancel PMI as long as you are current on your payments.  For certain loans defined as “high risk” by the lender, you must wait until you reach 23% equity.

Loans by FHA and VA don’t apply this rule.  Any problems with a lender contact the Federal Trade Commission or our State Attorney General.

Good News for Short Sale Sellers… and How the Fiscall Cliff provisions affect you, your home and your taxes

On January 1 both the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff.” The bill will be signed shortly by President Barack Obama. Below are a summary of real estate related provisions in the bill:

REAL ESTATE EXTENDERS:

  • Mortgage Cancellation Relief is extended for one year to January 1, 2014 (This is huge.  Many of you toward the end of the year did not consider “short sale”ing your home to reduce your financial burdons because you were concerned about income tax consequences.  Please talk to your tax advisor to have him firm that the coast is clear until the end of 2013.  With an abundance of buyers on the market, I can help you set up a quick and virtually seamless short sale transaction that retains privacy and peace of mind.)
  • Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
  • Leasehold Improvements: 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
  • Energy Efficiency Tax Credit: The 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

Permanent Repeal of Pease Limitations for 99% of Taxpayers
Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. These thresholds have been increased and are indexed for inflation and will rise over time. Under the formula, the amount of adjusted gross income above the threshold is multiplied by 3%. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80% of the filer’s itemized deductions.

These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012. Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.

Capital Gains

Capital Gains rate stays at 15% for those the top rate of $400,000 individual and $450,000 joint return. After that, any gains above those amounts will be taxed at 20%. The 250/500k exclusion for sale of principle residence remains in place.  (Chances are you fall into the 15% category, so if you need to sell an investment property this year, the extra 5% capital gains tax won’t affect you.)

Estate Tax
The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent. The exemption amounts are indexed for inflation.

A Spooky Market

 The following piece was written by my associate, Steven Thomas.  He is the Quantitative Economics and Decision Sciences specialist who writes for the O.C. Register and consults to the Orange County Association of Realtors.  His words precisely reflect the dynamics I see day in and day out in this current market.

The market is recovering, but there are aspects of Orange County housing that are simply spooky.

Spooky CharacteristicsAs the kids scurry from house to house in anticipation of a Halloween treat, it is appropriate to take a look at the housing market from a different perspective, the things that are spooky about real estate.

My kids have been planning a neighborhood, second annual Spooktacular Haunted House, my house of course.  They put together a detailed map and determined all of the “perfect” spots to jump out and scare those that dare enter.  I remember being a kid and slowly making my way through an unfamiliar maze of scares within a home.  With timid steps, my heart pounding, and eyes closed, I cautiously approached a corner, not knowing what lurked there ready to pounce on my nervous anticipation.  In prior years during the downturn, that described the mood of the housing market to a tee.  Not this year.  With homes appreciating again, inventories much lower, and demand much higher, there is nothing to worry about, right?  Wrong.

 The number one spooky feature of today’s market is the absurdly low inventory.  Everybody has heard that inventories are low, but the depth of those lows is only understood by active buyers and sellers today.  There are only 4,043 homes on the market after shedding an additional 4% in the past two weeks.  The most recent prior record low inventory was established in March 2005, with 4,912 homes.  That is 21% more than today.  It reminds me of the kids combining all of their Halloween candy, and then flash forward a couple of weeks down the road as they scrape the bottom of the bowl.  The candy that remains is nobody’s favorites.  Similarly, most homes that remain on the active inventory and not pending after many weeks on the market are your overpriced “black licorice,” or have some other underlying reason for not selling.

The concern is that there will not be a lot of fresh inventory for the remainder of the year.  We are continuing to test new lows and buyers that remain in the hunt are going to get no relief from the holiday slowdown.  There just are too few homes on the market and buyers have come to the realization that it is finally time to buy.  So, many buyers are going to feel like they have the appropriate strategy of pouncing on a property during the holiday lull.  Given the number of buyers who have been unsuccessful after writing multiple offers, expect many of them to attempt the same strategy.  As a result, they will encounter continued competition to purchase.

Another “spooky” concern are the number of homeowners that are entering the housing market way too overconfident.  Not too long ago, buyers were in control of the market.  Flash forward to today, just a half of a year into a healing housing market, and sellers are getting ahead of themselves and offering ridiculous asking prices.  Given supply and demand, buyers are willing to pay a little bit more than the last closed sale within hot ranges and hot areas, but, if you are a seller, hold your horses.  For most homes, a few thousand dollars more than the last comparable sale is agreeable to buyers in the midst of a lot of competition, but they will walk away, or will ignore altogether, a home that is listed at 10% above the last comparable sale. 

The median sales price in Orange County was up nearly 6% in a year.  That means it took 365 days to go up 6%, not a couple of months.  The problem with some sellers is that they price their homes 6% or more than the home that just closed last week or last month.  Homes do not appreciate that much in such a short period of time.  It takes much longer than that. 

For those sellers willing to keep their home ready to show day in and day out for a year, the market just might appreciate to their overzealous price in time, a very, very long time.  With so few homes on the market, even overpriced homes will be shown a lot; they simply will not sell.  Instead, they will waste everybody’s time, including their own, as tons of willing and able buyers tour their home without writing an offer.  Any offers generated will be “lowball” in the minds of sellers, but in the minds of buyers, they are strategizing on ways to get the seller off of their high horse and back down to reality.

Orange County Homes – 2 for the price of One!

It is not just the low interest rates that are bringing buyers to the market, it is that you can practically buy TWO homes for the price of ONE house payment compared to the hot market we had  a half a dozen years ago.  Let’s look back in time and do the math:

Below are two  3,000-ish  sq. ft. homes in the Lake Forest II/Sun and Sail Club community of  Parkwood Estates. 

SIX YEARS AGO: The house on the left sold in a market that was full of multiple offers at a sales price of $850,000 in an era of 6.60% interest rates.  A 20% down purchase would have required a $170,000 cash down payment.  Including property taxes of $708 per month, the monthly payment would have been $5,050 plus HOA and insurance.  (Actually it would have been higher because it was a non-conforming loan rate)

TODAY: The house on the right was offered at $575,000  and just entered escrow yesterday.  The market in this price range  is very hot as well.  If the buyer put 20% down that would only be $115,000 down.  With an  approximate interest rate of 3.47%, and property taxes of $479, the buyer’s (P,I&T) payment would be $2,536 per month.  The new buyer is paying HALF of what the 2006 buyer paid and they also have an extra $55,000 in their pocket.

You can see that right now we have a perfect storm.  Prices are great and interest rates are at an all time low – about half of what they were in the mid 2000’s.  Have you been longing to move out of your crowded surroundings and buy the home you dreamed of?  What if I told you you could select your new home first?  Through my “Select-then-Sell System”, First Team’s teamwork, and Sneak Preview system, I can help you identify your move up home prior to placing your home on the market….and then when we do put it on the market your Grand Opening Open House will look like this: http://youtu.be/39KFlc7Sz8Y

Alternatively if you love the home you’re in, but want to reduce your monthly payments, give me a call and I will help you determine your home’s value estimate and refer you to my mortgage partner to give you white glove service in lowering your interest rate and keeping more money in your pocket.  It’s a win/win! 🙂

Top 10 Signs You Are Being Scammed

Sitting on the Orange County District Attorney’s Real Estate Fraud Task Force, I have the opportunity to share what I see going on in the field.  At the same time the D.A.’s are able to share fraud schemes that they detect and prosecute.  Here are some things to watch out for.  If you find yourself in the middle of a transaction that just doesn’t seem right, please feel free to give me a call and share the details.

consumberfinance.gov

Home values rise for first time in 5 years


Here’s a great CNN article I just read that does a good job spelling out what is happening in the market. Home prices hit a bottom and are finally bouncing back, according to an industry report released Tuesday. Nationwide, home values rose 0.2% year-over-year to a median $149,300 during the second quarter…

Click here to read full article

Weekly Mortgage Watch

Significant amounts of very important economic data are due this week, along with a meeting of the Federal Reserve. Mortgage rates have the potential to fluctuate, in either direction, during the course of this week. Few are expecting the Federal Reserve to make any announcement regarding any new policy direction. Most analysts are expecting the Fed to take a wait-and-see position following the recent extension of Operation Twist. If the Fed does announce a new policy, mortgage rates could be driven downward. Economic data will also influence rates this week. A few experts are expecting a bit of an economic bounce. If the data shows a measurable improvement, then rates could climb…  To read the full story and see today’s interest rates, click the link below: http://ftemerson.wordpress.com/2012/07/16/weekly-mortgage-watch-85/wmw-7-15-12/

Falling Head Over Heels Too Fast!

Good Afternoon! Hearts are breaking as many buyers learn the hard way to not get emotionally attached to a home until it is theirs.

 Buyers’ Broken HeartsWith multiple offers, only one buyer wins.

Gone are the days where buyers scrutinize the market and slowly isolate the perfect home.  They can no longer wait a week before preparing an offer to purchase.  Buyers can no longer take their time and gingerly approach the market.  Those tactics only work during a buyer’s market.  For homes priced below $1 million, 71% of the active listing inventory and 92% of demand, it is a seller’s market with tremendous competition, multiple offers, and offer prices often at or even over the asking prices. And, the lower ranges are as hot as molten lava.  For homes priced between $250,001 and $500,000, the hottest range, the expected market time is an eye-popping 24 days.  With expected market times below one month, competition is so fierce that many homes generate over 10 offers.  Not only do homes sale for their full asking prices, often many are sold to buyers with “all cash offers.”  When 10 offers are generated, nine buyers have to be told the disappointing news, that they did not get the home.  By the time that new buyers to the market write their first offer to purchase, they have already spent countless hours researching available homes and local real estate conditions on the Internet.  They may have seen a half a dozen homes as well.  Typically, they bring in an offer to purchase after falling head over heels for a home.  They mentally place their furniture in the home.  They start making a list of everything that they would like to do to the home after the sale is closed: paint, carpet, tile flooring, new landscaping, wood molding, etcetera.   They can visualize living in the home, raising their families, barbecuing in the yard.  HOWEVER, the odds are stacked against each and every buyer that falls in love with the same property.  When 10 offers are written on the same home, there’s only a 10% chance of success.  In those terms, it is not very encouraging.  The end result is broken heart after broken heart.  Buyers learn the hard way that they should not put the cart before the horse.

So, how should a buyer approach the market with offers to purchase homes?  Although extremely hard to do, the best bet is for buyers to pull the emotion out of purchasing.  Buyers should create a wish list for their ideal home and then wait for the right property to be placed on the market.  When that does occur, buyers need to be ready to pounce.  They may have to do this over and over again until they finally achieve success.  The good news is that there are plenty of similar properties built throughout Orange County.  Buyers will not be hurt in the process of isolating their home when they are keeping their emotions in check.  As soon as a buyer achieves success and a seller accepts their offer, it is time to celebrate and flip on the emotional switch.  Then, it is okay for a buyer to become emotionally invested in their soon to be home, mentally placing their furniture and coming up with their “to do” lists.

The Active Listing: The listing inventory dropped to its lowest level since the beginning of May 2005.

I am nothing short of amazed at how far the active listing inventory has dropped and how it has shown absolutely no signs of letting up.  In the past two weeks, the inventory has shed an additional 164 homes and now totals 5,314.  That’s the largest two week drop since the end of April.  The lowest the inventory has been in the past decade dates back to March of 2005, when the active listing inventory bottomed at 4,912 homes.  That’s only 400 fewer than today!  I am both shocked and mystified by these numbers.  The downturn in housing had been marked by a number of surprises, twists and turns.  Why should a recovery be any different?  I do not know of a single analyst, economist, or expert that forecasted record low inventories.  For perspective, there were 6,006 additional homes on the market a year ago, more than double.  And, there were almost 3,000 more homes on the market at the beginning of 2012 compared to today.  From here, the active listing inventory’s descent will start to slow.  Demand will start to soften a little at the end of summer as kids start heading bag to the classroom.  In turn, the inventory should stop its drop.  I will be amazed if the record low inventory reached in 2005 will be matched in 2012, but that’s what this year has been all about, full of amazement.

FALL LEAVES BRING FALLING INTEREST RATES

The news in the papers, financial websites, and money blogs this month has us pondering interest rates and refinancing again. First, 30-year mortgage interest rates continue their historic drop, reaching an average low of 4.125 percent. It’s difficult to predict if those rates will continue to go down or start to creep up, but we know one thing for sure:  These rates could mean a lot of savings for homeowners. Then there’s the news about the Obama administration’s plans to help struggling homeowners refinance their mortgages. This program would help homeowners with government backed loans refinance to more favorable terms to keep their homes. Finally, home prices have seen a slight increase this spring – rising by as much as 3.5 percent. This good news means some homeowners may actually have equity in their homes again as the value of houses climbs. All this news about loans and refinancing got us thinking: Is now a good time to refinance your home?  Who Can Refinance?

These days, not everyone can refinance a home – nor does it make sense for everyone to refinance. The main reasons to apply for a refinance are to lower monthly payments, secure more favorable loan terms, or consolidate debt. If you already have a low interest rate, good loan terms, and a manageable monthly payment, you may be better off leaving your mortgage alone. Most people assume homes that are underwater, meaning you owe more than the home is worth, aren’t eligible for refinancing. However, many programs, both governmental and non-governmental, work specifically with homeowners in this situation so they can take advantage of today’s low rates. The standard rule of thumb for homeowners considering refinancing used to be  that, unless you can lower your interest rate by at least one percentage point, the refinance doesn’t pencil out financially. With “No-Cost” loans often available today, this is no longer the rule. If you’ve maintained good credit and would like to lower your monthly outlay, ditch some less-than-desirable loan terms or get out from being underwater, refinancing now might just make perfect sense. Interest rates are at historic lows, and banks are ready to work with refinancing applicants.

Refinancing Advantages

The main advantages of a home refinance don’t change much, no matter the state of the housing  market. There are really three main reasons to seek a refinance. 1. The top reason to refinance is to lower your monthly payment by securing a lower interest rate. Right now, 30-year mortgage interest rates are averaging about 4.125 percent. Rates can go lower if you refinance into a 15 or 20-year loan instead. We don’t know where rates will go in the future, but they can’t get much lower.

2. The second reason you might try to refinance your home is to secure better loan terms. During the housing boom, many homeowners got themselves into interest-only, adjustable rate mortgages.

At the time, this loan option made sense as home values kept rising. In today’s housing market, a fixed-term loan that locks in today’s low interest rates makes more financial sense for homeowners and allows you to pay off your principal balance, not just interest. Now could be an especially good time to refinance if you are in a 5, 7, or 10-year adjustable rate mortgage. You don’t want to get to the end of that loan and suddenly face skyrocketing interest rates. Also, if you’re underwater on your home, any refinancing option that lowers your payment or helps you gain equity in your home is better than your current mortgage.

3. Lastly, many homeowners use a refinance to consolidate debt, either from a home equity line of credit or credit cards. Rolling these debts into your mortgage secures a better interest rate and lowers the total amount you’ll end up paying for these debts in the long run. the refinance by the amount your monthly payment is reduced. The answer tells you how many months it takes to break even.

However, a better way to determine whether now is a good time to refinance is to figure out how much the refinance will save you in overall interest expenses. You want to capture enough savings in interest expenses to offset the closing costs. A lower interest rate can certainly lower total  interest expense, but so can refinancing into a loan with a shorter term – 15 to 20 years, for example. This move can save you tens of thousands of dollars over the life of your loan. A shorter loan term means your monthly payments will increase, but if you can afford the additional cost you can save yourself a bundle of money in the long run.

 Next Steps

Talk to my lending partner, Tom Testerman at (949) 422-4497 to learn about whether a refinance makes sense for you right now. You could save yourself a bit of money right before the holidays arrive – there are only so many shopping days left!