Real Estate Values – The government through The Community Reinvestment Act and other regulatory actions relaxed the real estate lending standards with the intention of allowing a greater number of people to have the opportunity to buy a home.  Loan programs were rolled out that allowed people with non-prime credit and little or no income to qualify for a home loan.  The sub-prime mortgage market was born which included the infamous “Liar Loans”, where people could get a home loan by just declaring their income, otherwise known as “Stating their income”.  In this situation the lender would just accept just about any monthly income claimed by borrowers to quality for a loan. In addition the age old requirement of having home buyers contribute a down payment was done away with and the opportunity for a home buyer to buy a house with no money down and no income qualifying requirements was made available. Real Estate Values.

Where we’re Going (Part 3)

Mortgage Industry – As is most common in life in order to know where we’re going it’s important to know where we’ve been and where we’re at. We have looked at both in our prior postings in this 3 part  series.

But it’s always helpful to update things, so here’s a short review of past events.

The California real estate market experienced a substantial run up in both market activity and increases in property values.  In and around 2003 the market started its run up that lasted until 2007 when the bottom started to drop under its own weight.  There are several age old statements that life has consequences and for every action there is an equal and opposite  reaction.  Then there is the theory of unforeseen consequences.  Each of these statements is appropriate to what happened to the California real estate market as logic was thrown to the  wind by so many smart people.

The government through The Community Reinvestment Act and other regulatory actions relaxed the real estate lending standards with the intention of allowing a greater number of people to have the opportunity to buy a home.  Loan programs were rolled out that allowed people with non-prime credit and little or no income to qualify for a home loan.  The sub-prime mortgage market was born which included the infamous “Liar Loans”, where people could get a home loan by just declaring their income, otherwise known as “Stating their income”.  In this situation the lender would just accept just about any monthly income claimed by borrowers to quality for a loan. In addition the age old requirement of having home buyers contribute a down payment was done away with and the opportunity for a home buyer to buy a house with no money down and no income qualifying requirements was made available. Mortgage Industry.

As time went on through the mid 2000’s homeowners who never had the ability and should have never been allowed to buy a home were falling behind in their monthly mortgage payments, many entered foreclosure and thus started the crash that began to drag the entire real estate market down.  It has been documented that the 3rd quarter of 2006 was the turning point, it started slow but going into 2007 and 2008 the market accelerated its decline and the house of cards that had been built up from 2003 to 2007 began to crash down and fast.  The down turn has now become known as the Great Recession.  The name is very appropriate since the entire economy of the country was almost taken down.  At best the economy was severely injured and is still in the process of recovering.

Well here we are in November 2013, heading into the winter months, a time when historically most real estate sales activity slows down from the summer sales activity.  So at this time let’s look into some of the available economic data that just might indicate where we are pointing heading into 2014.

It is clear that mortgage interest rates are up and real estate sales are down from earlier this year.  The common practice of every seller getting multiple offers for their homes has decreased dramatically.

The inventory of houses available have increased since the spring and summer buying season, which is putting some pressure on tempering prices due to the balancing of the supply/demand ratio.

Asking prices have decreased from the standard monthly increase which has been seen over the past year as has been compiled by and Dataquik.  Both these and other companies closely track the market and have determined that market activity has slowed down.

Home prices have remained flat since June, indicating that the real estate market has returned to a generally normal sales condition. The medium home price remained at $385,000 which is unchanged from June and July prices.  This is a 24% increase over August 2012 medium prices. This price run up was fueled by record low mortgage interest rates. This has given many would be home buyers the possibility of having the ability to purchase a home before being priced out.  The leveling out of prices will help offset any possibility of a drop in prices due a real estate bubble busting.

The available properties on the market are primarily coming from homeowners as opposed to banks reselling foreclosed properties that would have a negative impact on the market.  The percentage of foreclosed properties on the market has dropped to 7.1 % from a high of 56.7 % in February 2009.  The real estate market is returning to normalcy which is very good for homeowner and investors alike.

Currently today there is only a 3 month supply of houses on the market for sale, historically a very low number which should assure that prices will stay at current levels and not drop off from current market prices. Mortgage Industry.

The outlook for the California real estate market is neutral to slightly positive.  The market has returned to a more normal supply demand ratio that should assure current prices will remain intact.

The activity of investor involvement in the market has turned from Fix & Flip to a Fix & Hold mentality.  In addition Wall Street and hedge funds firms have entered the real estate market supplying additional support for long term appreciation. Mortgage Industry.

The lingering effects of the recession and the remaining employment problems will put a limit on available income from buyers who now must go through an extensive underwriting approval process in order to get approved for a real estate loan.

Since there remain many economic and governmental variables that could put negative pressure on the real estate market caution is the only watch word we can offer.  The market is unstable enough to allow for a sudden downturn in sales activity and market prices.  While there is no single economic variable that is looming on the horizon that can put potential negative effect on the market caution is still offered as the economic foundation is just not stable enough to allow anyone to let down their guard.

The possible negative effects that the extremely rocky roll out of the new government health insurance program is causing uncertainty along with the additional financial burden that most financial and business experts have suggested could add additional variables to the future of the real estate market.

The best advice that we can offer is just stay put.  If you currently own real estate now appears to be a good time to sell if you have been considering selling since there is no evidence that prices are going to continue their upward climb going into 2014.  If you are a buyer looking to possibly buying your first home then now is a good time to buy since values don’t appear to be headed downward so most likely buying now would not be a bad financial decision.  Under current tax laws interest and other costs are still deductible against annual income so even buying into a possible flat market will still prove financing beneficial after allowing for tax ramifications. Mortgage Industry.

US Home Buyers 2013: Competing Against Multiple Offers

Multiple Offers – What a difference a year makes. Just a little over a year ago property owners were hard pressed to find buyers to step up and purchase their properties when they made the decision to sell.

Like many other things in life, what is good on one side just might not be as good on the other. What we mean here is if people who currently own real estate make the decision to sell, it’s a good time since sellers will most likely receive multiple offers and should get a good price for the properties they’re selling.

But if the decision is not to leave town or become a renter then the lucky sellers who were so popular with all the buyers must now join the same group of buyers when a property is found that they want to purchase. The chances of having to compete against multiple offers is a real possibly.

Many buyers are aware of this multiple offer situation and often, in an attempt to be the winning bidder, will make an offer to purchase that just might be more than they really wanted to offer – the motivating factor being that they are so tired of walking away as a losing bidder.

Some of the people that work at our company have been involved in multiple bidding situations. Some were great decisions where they benefited from buying a property where the property continued to go up in value, but there are a couple of other people that paid too much when they purchased, since they were the last person to buy just before prices started coming down.

People who invest in the stock market have become very familiar with price fluctuations. Real estate is just like any other commodity on the stock market where the laws of supply and demand dictate prices. Many potential buyers often get caught up in the frenzy of the moment in an attempt to be the winning bidder and put a stop to the difficult task of searching for another property. Sometimes they end up paying too much.

More Buyers than Sellers

According Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), the number of available homes for sale has reached a low that has not been seen since 1999. The percentage of buyers in the market to purchase is up over 40% from year ago. Currently the supply/demand ratio is out of balance. The market now can only be described as a seller’s market.

Many sellers are purposely pricing their homes at prices low enough to prompt buyers to make multiple offers in an attempt to be the winning bidder. The sellers usually benefit from multiple offers from buyers. There are those that believe that low balling the asking price is a manipulative act by sellers and causes buyers to enter into a situation of one upping each other in an attempt to out-maneuver each other with no knowledge as to what actual prices the sellers really want for their homes.

It is so important to take into consideration comparative property sales when making an offer for a near identical property. In addition, the location and condition of the property to be purchased must be taken into consideration when making purchase offers. A bad location will, in most instances, not get better over time and properties that need repairs will cost buyers additional money following the close of escrow. This will actually add to the acquisition price of the properties.

The forces that are currently driving the recent rise in prices and the corresponding increase in buyer’s offers are due to several factors, including:

  • Ultra low interest rates on mortgages
  • Low available of real estate on the market
  • High rental rates
  • Increase in consumer confidence
  • Fear of missing the real estate boat


The following 2 charts were compiled by the federal governmental department known as the Federal Housing Finance Agency (FHFA). For some reason this agency has little name recognition but plays a very large role in governing the extension of credit in our country. The Federal Housing Finance Agency is the regulatory body that regulates both FNMA (Federal National Mortgage Association) and FHLMC (Federal Home Loan Mortgage Corporation). Combined, these two quasi-governmental sponsored entities (GSE) play a part in over 75% of all residential mortgages made in our country annually. The data provided in the past by FHFA has been reliable and as such we are happy to provide the information. We thank the FHFA for allowing us to re-publish the following data. Multiple Offers

National Home Price Recovery Strong; Regions Mixed

U.S. house prices rose 0.7 percent from January to February according to data released this morning by the Federal Housing Finance Agency (FHFA). FHFA said this was the fifth consecutive time its seasonally adjusted Home Price Index (HPI) had risen more than a half-point from one month to the next. Monthly prices have not declined since January 2012.

House prices have now increased 7.1 percent over the last 12 months to a level last seen in October 2004. The HPI is now 12.5 percent below the peak it reached in April 2007.

All divisions reported price increases for the previous 12 months but ranging from 1.9 percent in the Middle Atlantic to 14.0 percent in the Mountain division (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico) and 15.3 percent in the Pacific region (Hawaii, Alaska, Washington, Oregon, and California.)

FHFA uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index.

As can be seen from the 2 charts real estate prices are going back up. Multiple Offers

It has been a long time since the possibility existed where it could cost less to own rather than rent due to record low mortgage interest rates.

With the increase in home prices, sellers who might have not considered selling just might be swayed into putting their properties on the market which should lead to a balancing of the supply/demand ratio. There has been an increase in construction of residential properties and their arrival soon on the market should help further to level out the supply imbalance.

Buyers should consult their real estate brokers or agents to get complete information of all comparative properties when determining a sale price for their homes. Buyers need to make certain that the price offered is not at a price that can be considered “overpaying for the neighborhood.”

Buyers should never lose sight that just a number of years ago billions of dollars were lost by buyers paying too much and when prices fell they ended up owing more than their houses were worth. This situation can have devastating financial consequences.

If a property has been located and it’s apparent there will be or currently are multiple offers then buyers need to do their homework and decide on the highest price they are willing to offer. Make the offer and if it the price offered is not as high as others then stop and look elsewhere for a property to purchase.

Don’t get caught up in the frenzy of the moment and get carried away. Do your homework, take your time and be persistent. The right property awaits you. Multiple Offers


Good news to benefit California – Big Banks Settlement


Big Banks Settlement – Good news continues to flow in that benefit the California real estate market, Interest rates are at the lowest level in recorded history. The largest institutional banks settled for a staggering 25 Billion dollars with the Federal government for inappropriate foreclosure activity and now the California Homeowners Bill of Rights is completely implemented.  All have led to a resurgence in the California real estate market that will benefit homeowners as prices should continue to increase due to the positive economic factors.

But probably the best news is that foreclosure activity is down 65% from January 2012.  Couple this with the banks being much more active in “working things out” with delinquent homeowners and with the Homeowners Bill of Right instructing California lenders to stop the process of dual tracking will only lead to more future positive news for homeowners and real estate professionals throughout California.

The restrictions on “Dual Tracking” is the process of one department at the bank foreclosing on the property while the other department attempts to work things out with the homeowner.  This was tantamount to helping someone while at the same time stabbing them in the back.  It just wasn’t the right thing to do to people who were experiencing hardship due to many factors, this being possibly the largest factor being the downturn in both the national and California economy. It is now considered illegal for California banks and their foreclosure companies to employ such a process on homeowners.  The great news is that so many struggling homeowners are going to be able to keep their homes and this will prevent or minimize the vacant homes in neighborhoods all over California.

It is so nice to be able to report good news after so many years of month after month of reporting so much bad news. Big Banks Settlement!

California Real Estate Prices Rising 20.9% Year-Over-Year


California Real Estate Prices – Good news has finally come to the California real estate market.  With many of the foreclosures that occurred due to the irresponsible lending policies of state and federal chartered banks now behind us prices are now finally starting to rise.

As of March 1, 2013 California real estate prices have increased 20.9 over prices from a year ago.  In addition, sales activity is at a six year high and shows no indication of slowing down due to positive current economic factors.  First time buyers and investor confidence are significant factors in leading to the improvement in values.  It’s important to keep in mind that even after the current increase in values that the current medium sales price is still down 37% over the all-time high set in early 2007.

Most every market gauge indicates prices are up significantly over the past twelve months, even after adjusting for the type of properties sold, size, location and sales prices.

The current low inventory of available house or sale has also contributed to the increase in values.

I will have more positive news about real estate market in the days ahead.