5 Reasons Why This Market is a Good Thing

August 28, 2008

I know, I know, how can the current real estate market in the Sacramento region be a good thing.  Families losing their homes and the effect on the economy point to just the opposite being true. But for every negative there is a positive.

I talk to Realtors everyday.  So many of them are pushing away the current market because of the negative press and missing the opportunity of a lifetime.  Someone losing their home is never a good thing for anyone.  Let’s focus on the positives.

1) Home price declines

Home prices have now declined to pre 2002 or 2001 levels.  In some areas, even lower than that.  Our market began booming from that level and will do so again.  Hopefully not like last time.  A steady and moderate pace to appreciation is healthy.  Sacramento housing is now, comparably, affordable.

2) The Mortgage Industry

I was in a sales meeting at the Placer County Board of Realtors sometime in 2005.  One of the hosts of the meeting was a mortgage broker who said “I don’t know why anyone would get anything other than an interest only loan.  With the pace of appreciation in California, you’re just throwing your money away paying down the principal.”  :)

I think a little regulation was in order in the mortgage sector. Ya think?!  What kind of advice was that!? Fogging a mirror should never have been the only prerequisite to obtaining a home loan. Now we have stiffer requirements, albeit a little knee jerking is going on at the moment, and you’ve got to prove that you can pay back your loan.  Now there is a novel concept!

Stat: Roughly 269 lending institutions are now out of business since mid 2007.  There’s a little dose of regulation!

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On the Surface, It Looks Really Bad!

August 21, 2008

The Sacramento real estate market looks really bad, I mean bad.  There are estimated to be about 10,000 more, or so, foreclosed properties coming on the market between now and the beginning of 2009.  But with every downside there has to be an upside.  It’s tough to see though.  I speak to people everyday who are postponing making a decision on selling their homes and buying another because they want to wait until the value of their home comes back to purchase…:)

Wait until the interest rates are higher, wait till the value of the home they are intending on purchasing comes back so that it offsets any gain you had on your home while you were waiting.

This just doesn’t make sense.  If you have equity, buy now.  That’s my advice.  While everyone has different situations and concerns, it just doesn’t make sense to wait for interest rates to go up, which is essentially what they are saying, to purchase when now is potentially the cheapest it will be in our area or any area for that matter.  Trust me folks, interest rates are going to go back up.  You don’t need me to tell you that.  It is as if to say, “no thanks, I’d rather wait for the price to go up before I buy.” (that sounds so bitter when I re-read that!)

The Upside

The sharp decline in housing prices nationwide is a plus for those people who, for the last few years, were priced completely out of the market.  In the Sacramento area, first time home buyers have returned back to the market with the prospect of being able to buy.  This is a very good sign.  You can’t kick a rock without hitting a Realtor who says that there are 20 offers on this or that foreclosure listing.  A good portion of those people looking are first time home buyers.  The Sacramento region has become affordable once again.

Continuing increases in the amount of homes for sale will dictate that prices will remain low for sometime.  However, WHEN interest rates go up, these lower prices won’t matter much as it will get more expensive to own a home in the region.

HUD 203K Rehab Program

August 10, 2008

Where has this been hiding?  I have a very close friend who sent me this today and I thought it perfect for our market considering the damage some of the foreclosed homes endure as the owners vacate the home with virtually everything in it. (including the kitchen sink!) I’ve heard of this program but haven’t seen it in a very long time.

The loan allows you to purchase a home at the future appraised value once repairs or modernization are completed.  That’s pretty handy!

From the HUD.gov website:

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How to Buy a Foreclosed Home In Sacramento

August 10, 2008

In CNNMoney\realestate today, there is a great article on how to buy a foreclosure property.  Click here to see the full article.

While the pre-foreclosure and auctions sales are good opportunities, they carry inherent risks that could cost you thousands of dollars.  Not to mention the difficulty if you have no experience in the process.  Having said that, it can be learned.

Why Make It Hard

In the last section of the article, Christie cites Steve Dexter as saying,  “You might not think that’s too great for buyers,” [buying foreclosures in the REO stage] said Dexter, “but the listing prices are lower [than market value],” usually by 10% or more. The total discounts often exceed 15%.”

He says earlier, “Get a young, hungry real estate agent who’s screening REOs all the time and put them to work for you.”  Good advice.  It costs you nothing and it saves you time and money.

If you’re looking for REO’s in this market, find someone who you gel with and get buying.  The timing is perfect!

The Boy Scout Motto – “Be Prepared!”

August 7, 2008

I was speaking to a friend of mine today who purchased an investment home through me in 2004 in Folsom and he was curious about how the value of his home had been affected by the this downturn.  I was more than happy, as I always am, to look up the comparable sales in the area and run the numbers for him.  What I emailed him didn’t make me happy and I’m assuming he wasn’t too thrilled either.

While the investment was producing a return, the net affect was a loss of approximately $50K.  This will improve, folks, it always has.

Pending Sales Increase Nationwide

If you live in the Sacramento market, you’re used to hearing, ad nauseum, about the loss of value across the board in community after community.  Today, CNNMoney\realestate.com ran an article citing the NAR (National Association of Realtors) reported that pending sale numbers (homes with ratified agreements but not closed) for June had ticked up nationwide.  This is good news.  The west came in with a 4.6% increase in pending sale numbers for June.

The article then went on to say that the signs of a rebound, however slight, are appearing in across the state.  We’re seeing this locally with multiple offers on many of the foreclosed homes and slightly reduced inventory levels during a time of year when inventory levels generally increase.  My aforementioned friend said his experience with the foreclosure market is something akin to a feeding frenzy with as many as 20 to 30 offers per property.

With activity like this, it’s even more important to have your ducks in a row when setting your sights on a foreclosure in the Sacramento region foreclosure market.  The Boy Scout Motto – Be Prepared is especially important now.  Click here for a partial list of what you’ll need to make it happen. As always, call if you need ANY assistance what so ever.

15,000 More Foreclosures In The Sacramento Real Estate Market

August 6, 2008

According to a CNNMoney article, 1 in every 171 homes in the U.S. received a notice of default in the second quarter of this year.  That’s triple the filings from the same period in 2007.  220,000 homes total received a notice of default. Wow…

The Sacramento real estate market is one of the foreclosure hot spots in the U.S.  Private mortgage insurers rate most of the metro counties in the state of California at high risk for further price declines.  Could it get any better…I mean worse out there? :)

People losing their homes is not good for anyone and effects all of us. Fact is, this market was inevitable. I know that’s easy to say looking back on it but going forward, I think the signs will be more visable that we’re headed for trouble.

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