Saving for a Down Payment
Lenders are shying away from offering riskier "subprime" mortgages amid worries about rising defaults.
As a result some would-be home buyers with little savings are being turned away.
WHAT TO DO: If you don't qualify for a loan because you have no down payment, stop shopping for homes and start getting your house in order. To save more, spend as if you've already bought a home. If your mortgage payment would be $2,500 and your rent is $1,500, deposit the $1,000 difference automatically into a high-yielding savings account each month. (You can find yields of 5% or more on savings accounts. Sock away sudden windfalls, such as tax refunds, bonuses and reimbursements from flexible-spending accounts.
Another way to save more is to earn more -- here are some tips to boost your pay. For more ways to save, click here. --Terri Cullen, 2/26/07
Monday, March 12, 2007
Thinking Conservatively About Your #1 Asset
HOME SWEETER HOME
Here are five things you can do to better manage your number one asset
• THINK DIFFERENTLY
It's a house, not a retirement fund. Stop thinking of your house as an investment, and recognize it for what it really is: an expensive installment-plan purchase that promises you a hefty rebate down the line. The best way to make a true profit on a home is to pay as little for it as you can. That means buy cheaper, buy quicker, buy smarter.
• PAY EARLY, PAY OFTEN
Speed up your mortgage payments. A typical home today will end up costing its buyer $1 million over the next 30 years. The first way to significantly cut that cost is to reduce interest costs. Add $100 a month to a 6.25%, $300,000 loan payment, and you will shave almost four years of loan payments and save $57,000 of interest. Add an extra $500, and you will pay off the house in just 17 years and save $170,000. Caution: Don't defer retirement savings in favor of rapid mortgage payments. Do both.
• SHARE THE BURDEN
Buy a two-family house or a house with a rental unit as your first home. [I wish we had these kinds of properties in our local market area. ~~ RK] Pay it off quickly, bulking up your monthly payments with your tenants' rent and paying off your mortgage early. Then use that house to buy your dream home. You will get out of debt more quickly, have more money to pay for your new home, save more in your retirement fund and use less of your regular income for future housing costs.
• WATCH THE RENOVATING
Build a new kitchen -- or bath or bedroom -- because you want it or need it, not because it will make you a profit or enhance the value of your home. According to Remodeling magazine's annual report on the costs and value of home renovations, a top-of-the-line kitchen remodel like you see on TV or in shelter magazines will cost you $108,000 and return just $82,000 -- a loss of $26,000. Borrow the money, and your loss will be worse.
• DON'T MOVE SO OFTEN
It's the best way to build equity and enjoy the benefits of rising values. According to a study by Harvard's Joint Center for Housing Studies, 15% of homeowners move every year -- or the equivalent of every U.S. homeowner buying and selling a home every seven years. Few homeowners have paid off more than 10% of their loan principal by that point. But they will have paid four times as much in interest. When they buy their new house, they start the mortgage clock all over again.
--David Crook
Here are five things you can do to better manage your number one asset
• THINK DIFFERENTLY
It's a house, not a retirement fund. Stop thinking of your house as an investment, and recognize it for what it really is: an expensive installment-plan purchase that promises you a hefty rebate down the line. The best way to make a true profit on a home is to pay as little for it as you can. That means buy cheaper, buy quicker, buy smarter.
• PAY EARLY, PAY OFTEN
Speed up your mortgage payments. A typical home today will end up costing its buyer $1 million over the next 30 years. The first way to significantly cut that cost is to reduce interest costs. Add $100 a month to a 6.25%, $300,000 loan payment, and you will shave almost four years of loan payments and save $57,000 of interest. Add an extra $500, and you will pay off the house in just 17 years and save $170,000. Caution: Don't defer retirement savings in favor of rapid mortgage payments. Do both.
• SHARE THE BURDEN
Buy a two-family house or a house with a rental unit as your first home. [I wish we had these kinds of properties in our local market area. ~~ RK] Pay it off quickly, bulking up your monthly payments with your tenants' rent and paying off your mortgage early. Then use that house to buy your dream home. You will get out of debt more quickly, have more money to pay for your new home, save more in your retirement fund and use less of your regular income for future housing costs.
• WATCH THE RENOVATING
Build a new kitchen -- or bath or bedroom -- because you want it or need it, not because it will make you a profit or enhance the value of your home. According to Remodeling magazine's annual report on the costs and value of home renovations, a top-of-the-line kitchen remodel like you see on TV or in shelter magazines will cost you $108,000 and return just $82,000 -- a loss of $26,000. Borrow the money, and your loss will be worse.
• DON'T MOVE SO OFTEN
It's the best way to build equity and enjoy the benefits of rising values. According to a study by Harvard's Joint Center for Housing Studies, 15% of homeowners move every year -- or the equivalent of every U.S. homeowner buying and selling a home every seven years. Few homeowners have paid off more than 10% of their loan principal by that point. But they will have paid four times as much in interest. When they buy their new house, they start the mortgage clock all over again.
--David Crook
Your Home as an Investment
Nest Egg
Why Your Home Isn't the Investment You Think It Is
Too many people rely on their home as their primary savings strategy.
That's a mistake.
By David Crook
Wall Street Journal
March 12, 2007;
Page R1
Planning your retirement? Don't bet the house on it.
Your home means a lot of things to you, most of them good. Your home gives comfort and protection to you and your family, and it could well embody all your material hopes and dreams.
But houses have become much more than just places to live. Your home is probably your biggest asset, and the price you could ask for it today is almost certainly much higher than what you paid for it back whenever.
As a result, houses have become substitute credit cards, as profligate owners borrow their equity to finance everything from cars to vacations. Among thriftier owners, the equity they have built up in the family home has become a vital part of retirement planning -- a "fourth leg" of the now-unstable "company pension/personal savings/Social Security" stool that was long the model for a financially secure old age.
More
Why Your Home Isn't the Investment You Think It Is
Too many people rely on their home as their primary savings strategy.
That's a mistake.
By David Crook
Wall Street Journal
March 12, 2007;
Page R1
Planning your retirement? Don't bet the house on it.
Your home means a lot of things to you, most of them good. Your home gives comfort and protection to you and your family, and it could well embody all your material hopes and dreams.
But houses have become much more than just places to live. Your home is probably your biggest asset, and the price you could ask for it today is almost certainly much higher than what you paid for it back whenever.
As a result, houses have become substitute credit cards, as profligate owners borrow their equity to finance everything from cars to vacations. Among thriftier owners, the equity they have built up in the family home has become a vital part of retirement planning -- a "fourth leg" of the now-unstable "company pension/personal savings/Social Security" stool that was long the model for a financially secure old age.
More
Saturday, March 10, 2007
Cockroach Principle and the Subprime Mortgage Market
from John Mauldin's e-letter...
The Cockroach Principle says there is never just one cockroach. If you see one running across the room, that means there are many more in the walls and behind the counters. I have been highlighting the problems in the subprime space for a long time. As I wrote months ago, this is going to be a major scandal. It is the main (and almost only) reason that I think we are going to have a recession in the US.
Last week www.lenderimplode.com listed 28 subprime mortgage firms that were shut down or taken over. The count is now 34. Yesterday the third largest lender of subprime mortgages, New Century, stopped accepting new loan applications. The shares were once at $50. Now they are under $4 and falling. The Financial Times reports that they cannot meet their margin calls from their lenders.
Essentially, New Century has been shut out of the capital markets. They are being hit with a wave of lenders who are demanding they take back the mortgages they sold, and my guess is that they do not have the capital they need. Maybe they can sell assets and get them. Who would take their paper or their mortgages today, knowing the problems? The money available to subprime lenders is rapidly evaporating, and until the lending standards are tightened considerably, it will remain that way. Many of the buyers of the Mortgage Backed Securities are going to lose some money.
Option One is an Irvine, California-based subprime lender. Yesterday they stopped doing 100% loans on the value of a home. CEO Steve Nadon pointed to an increase in loan submissions as a result of many of the company's competitors running into funding problems. "We are getting a lot of 80/20s and 100% CLTV deals that used to go to our competitors," the letter said. "While there is nothing inherently wrong with those types of loans from a pure credit standpoint, right now they have a fundamental flaw that we simply cannot overcome. That is the almost complete lack of appetite for the product by the bond market... To originate a loan product that no investor, in today's market, wants to buy is irresponsible."
Consider even a lender like Countrywide which only had about 10% of its portfolio in subprime. They can probably weather the storm, as their main business is prime mortgages. But the founder and CEO, Angelo Mozilla, has sold $140 million of his personal holdings, and almost $600 million of insider stock at Countrywide has been sold in the past two years.
I have highlighted this problem before, so will not go into it in detail again. Subprime mortgages are pooled and divided into different risk tranches, with the most risky being the "equity" portion of the pools, typically about 4%, and these equity portions are again put into pools with 80% of these equity portions now getting investment-grade ratings. These latter pools are going to lose money, if not go bust outright. The rating agencies are going to have major heartburn over this failure to adequately see the risks. Cue the lawyers, stage right.
If you would like to reproduce any of John Mauldin's E-Letters you must include the source of your quote and an email address (John@FrontLineThoughts.com)
The Cockroach Principle says there is never just one cockroach. If you see one running across the room, that means there are many more in the walls and behind the counters. I have been highlighting the problems in the subprime space for a long time. As I wrote months ago, this is going to be a major scandal. It is the main (and almost only) reason that I think we are going to have a recession in the US.
Last week www.lenderimplode.com listed 28 subprime mortgage firms that were shut down or taken over. The count is now 34. Yesterday the third largest lender of subprime mortgages, New Century, stopped accepting new loan applications. The shares were once at $50. Now they are under $4 and falling. The Financial Times reports that they cannot meet their margin calls from their lenders.
Essentially, New Century has been shut out of the capital markets. They are being hit with a wave of lenders who are demanding they take back the mortgages they sold, and my guess is that they do not have the capital they need. Maybe they can sell assets and get them. Who would take their paper or their mortgages today, knowing the problems? The money available to subprime lenders is rapidly evaporating, and until the lending standards are tightened considerably, it will remain that way. Many of the buyers of the Mortgage Backed Securities are going to lose some money.
Option One is an Irvine, California-based subprime lender. Yesterday they stopped doing 100% loans on the value of a home. CEO Steve Nadon pointed to an increase in loan submissions as a result of many of the company's competitors running into funding problems. "We are getting a lot of 80/20s and 100% CLTV deals that used to go to our competitors," the letter said. "While there is nothing inherently wrong with those types of loans from a pure credit standpoint, right now they have a fundamental flaw that we simply cannot overcome. That is the almost complete lack of appetite for the product by the bond market... To originate a loan product that no investor, in today's market, wants to buy is irresponsible."
Consider even a lender like Countrywide which only had about 10% of its portfolio in subprime. They can probably weather the storm, as their main business is prime mortgages. But the founder and CEO, Angelo Mozilla, has sold $140 million of his personal holdings, and almost $600 million of insider stock at Countrywide has been sold in the past two years.
I have highlighted this problem before, so will not go into it in detail again. Subprime mortgages are pooled and divided into different risk tranches, with the most risky being the "equity" portion of the pools, typically about 4%, and these equity portions are again put into pools with 80% of these equity portions now getting investment-grade ratings. These latter pools are going to lose money, if not go bust outright. The rating agencies are going to have major heartburn over this failure to adequately see the risks. Cue the lawyers, stage right.
If you would like to reproduce any of John Mauldin's E-Letters you must include the source of your quote and an email address (John@FrontLineThoughts.com)
Thursday, March 08, 2007
Sub-Prime Lender Woes Continue
CNBC is reporting that New Century Financial may be filing for bankruptcy later today, and their stock price has taken a 25% interday hit this afternoon. This follows on the heels of problems with Fremont General, another large sub-prime lender, who a couple of days ago told its staff in Anaheim to clean out their desks and take an extended leave of absence.
An increasing level of late payments and defaults in the sub-prime loan industry is spreading, and while foreclosures are not as yet much of a factor in our local market, it has become a factor dragging down home prices in other parts of the nation.
In response, the lending industry including Fannie Mae and the Federal Reserve are urging stricter lending guidelines, with verifications of employment and income, increased levels of down payment and reserves required of borrowers, and in general, a retrenchment to historical standards for making loans. As a result, marginal borrowers and potential home buyers, especially in the starter home market, may be eliminated from the housing market, particularly in the higher priced areas. It is conventional wisdom that without a healthy starter home market, the move-up home seller is unable to sell, thus affecting higher and higher home price levels. Locally, with the starter home being a $250-300,000 condo, we can see some of the effects of restrictions on the entry level home buyers.
Credit availability and loan ability moves the housing market. With the tightening of lending standards, the only other way to stimulate our housing market is in building more affordable housing. A healthy starter home market will ripple up through all home pricing levels.
An increasing level of late payments and defaults in the sub-prime loan industry is spreading, and while foreclosures are not as yet much of a factor in our local market, it has become a factor dragging down home prices in other parts of the nation.
In response, the lending industry including Fannie Mae and the Federal Reserve are urging stricter lending guidelines, with verifications of employment and income, increased levels of down payment and reserves required of borrowers, and in general, a retrenchment to historical standards for making loans. As a result, marginal borrowers and potential home buyers, especially in the starter home market, may be eliminated from the housing market, particularly in the higher priced areas. It is conventional wisdom that without a healthy starter home market, the move-up home seller is unable to sell, thus affecting higher and higher home price levels. Locally, with the starter home being a $250-300,000 condo, we can see some of the effects of restrictions on the entry level home buyers.
Credit availability and loan ability moves the housing market. With the tightening of lending standards, the only other way to stimulate our housing market is in building more affordable housing. A healthy starter home market will ripple up through all home pricing levels.
Wednesday, March 07, 2007
The Buyer's Agent: Why It Makes Sense to Hire One
Top 7 Reasons to Use a Buyer's Agent When Purchasing Your Home
by Eric Bramlett
Purchasing a home is a big step, and a big decision. The average person spends around 1/3 of their income on their home. The home that you choose has a big impact on your life, and can have a big impact on your finances, as well. It always surprises me when Buyers attempt to "go at it alone" because of the possibility of mistakes. A good Buyer's Agent is invaluable to a Buyer, and can be the difference between a wonderful transaction, and a nightmare.
1) Full Access to the MLS
The Multiple Listing Service (MLS) is a powerful tool that only Realtors have access to. When listing agents market a home for sale, they typically allow any Realtor to present the home to potential buyers, and to present contracts for purchase. The MLS is a database of all homes listed by Realtors, and represents roughly 99% of the homes for sale in any given market. As technology advances, so does the MLS. It has evolved into an extremely powerful search engine that allows your buyer's agent to enter in search criteria, and returns only homes that match those specific parameters. Buyers can find a lot of this information online through IDX feeds available on many websites, but this information is a "watered down" version of the MLS because the IDX search engines aren't quite as powerful, and don't return as detailed profiles as the MLS.
2) Maximize Your Time
While driving neighborhoods is an excellent idea to help you decide which locations you prefer, it's not a very efficient way to find your new home. [Plus, not all homes on the market will have a for sale sign on the front lawn.] Gas is expensive, and your time is valuable. Your Buyer's Agent will listen to your needs, make fantastic suggestions based on your likes & dislikes, and provide you with a list of homes that ALL match your wants & needs. Your Buyer's Agent has helped MANY new homebuyers through MANY purchases, and will help you better organize your search & decision making process – saving you valuable time.
3) Representation
Listing Agents enter into legally binding agreements that require them to ALWAYS act in the best interest of the seller. They are the seller's "coach" and will make sure that their clients' best interests are looked after. Luckily, your Buyer's Agent is there to make sure YOUR best interests are accounted for. With your expert Buyer's Agent in your corner, you can rest assured that you're on, at least, even ground with the home seller. A football team would be at a pretty significant disadvantage without a coach – just as you would be without a Buyer's Agent.
4) Negotiating Power
The MLS maintains a record of, not only all homes listed by Realtors in a given market, but also the sales price of those homes. Your Buyer's Agent will run a Comparative Market Analysis (CMA) to determine a prospective home's Fair Market Value (FMV). In simpler terms, your Realtor will look at similar homes in the same neighborhood that have sold recently. This way, you will know whether or not the seller has their home priced fairly. If the home is priced over Fair Market Value, your Buyer's Agent can present your "under asking price" offer with plenty of firepower – and a greater chance that the offer will be accepted.
5) Experience
The average person buys 3-5 homes in their lifetime. A good Buyer's Agent is working full-time in the real estate business. What might seem complicated and intimidating to you is fairly common and familiar to your Realtor. Your Buyer's Agent will know what to expect, and will know when to alert you if anything out of the ordinary occurs.
6) Industry Contacts and the Team approach
It takes a lot of people to close a real estate transaction – Buyer's Agent, Listing Agent, Loan Officer, Escrow Officer, Inspector(s), Appraiser, Insurance Agent, General Contractors, and sometimes more! A good agent will come with a strong closing team that has performed in the past, and will continue to perform. A transaction is only as strong as its weakest link – with your strong Buyer's Agent & their closing team [the SCV Home Team], you can rest assured that you will have plenty of support.
7) Peace of Mind
If you are like most people, your home is the largest purchase you will ever make. The average person spends around 1/3 of their total monthly income on their home. This is a big decision and you don't want to go at it alone. When you use a trusted Buyer's Agent, you know that your best interests are accounted for, and that you can feel confident in your purchase.
Purchasing a home can be a fun and exciting process. However, the home buying process can be intimidating, and mistakes are possible. A Realtor who concentrates on working with Buyers can help alleviate the fears & possibilities for mistakes. Make sure and use a Buyer's Agent on any real estate transaction, and you will help ensure that you are making the right decisions.
Ray Kutylo and the SCV Home Team are ready to go to work for you!
by Eric Bramlett
Purchasing a home is a big step, and a big decision. The average person spends around 1/3 of their income on their home. The home that you choose has a big impact on your life, and can have a big impact on your finances, as well. It always surprises me when Buyers attempt to "go at it alone" because of the possibility of mistakes. A good Buyer's Agent is invaluable to a Buyer, and can be the difference between a wonderful transaction, and a nightmare.
1) Full Access to the MLS
The Multiple Listing Service (MLS) is a powerful tool that only Realtors have access to. When listing agents market a home for sale, they typically allow any Realtor to present the home to potential buyers, and to present contracts for purchase. The MLS is a database of all homes listed by Realtors, and represents roughly 99% of the homes for sale in any given market. As technology advances, so does the MLS. It has evolved into an extremely powerful search engine that allows your buyer's agent to enter in search criteria, and returns only homes that match those specific parameters. Buyers can find a lot of this information online through IDX feeds available on many websites, but this information is a "watered down" version of the MLS because the IDX search engines aren't quite as powerful, and don't return as detailed profiles as the MLS.
2) Maximize Your Time
While driving neighborhoods is an excellent idea to help you decide which locations you prefer, it's not a very efficient way to find your new home. [Plus, not all homes on the market will have a for sale sign on the front lawn.] Gas is expensive, and your time is valuable. Your Buyer's Agent will listen to your needs, make fantastic suggestions based on your likes & dislikes, and provide you with a list of homes that ALL match your wants & needs. Your Buyer's Agent has helped MANY new homebuyers through MANY purchases, and will help you better organize your search & decision making process – saving you valuable time.
3) Representation
Listing Agents enter into legally binding agreements that require them to ALWAYS act in the best interest of the seller. They are the seller's "coach" and will make sure that their clients' best interests are looked after. Luckily, your Buyer's Agent is there to make sure YOUR best interests are accounted for. With your expert Buyer's Agent in your corner, you can rest assured that you're on, at least, even ground with the home seller. A football team would be at a pretty significant disadvantage without a coach – just as you would be without a Buyer's Agent.
4) Negotiating Power
The MLS maintains a record of, not only all homes listed by Realtors in a given market, but also the sales price of those homes. Your Buyer's Agent will run a Comparative Market Analysis (CMA) to determine a prospective home's Fair Market Value (FMV). In simpler terms, your Realtor will look at similar homes in the same neighborhood that have sold recently. This way, you will know whether or not the seller has their home priced fairly. If the home is priced over Fair Market Value, your Buyer's Agent can present your "under asking price" offer with plenty of firepower – and a greater chance that the offer will be accepted.
5) Experience
The average person buys 3-5 homes in their lifetime. A good Buyer's Agent is working full-time in the real estate business. What might seem complicated and intimidating to you is fairly common and familiar to your Realtor. Your Buyer's Agent will know what to expect, and will know when to alert you if anything out of the ordinary occurs.
6) Industry Contacts and the Team approach
It takes a lot of people to close a real estate transaction – Buyer's Agent, Listing Agent, Loan Officer, Escrow Officer, Inspector(s), Appraiser, Insurance Agent, General Contractors, and sometimes more! A good agent will come with a strong closing team that has performed in the past, and will continue to perform. A transaction is only as strong as its weakest link – with your strong Buyer's Agent & their closing team [the SCV Home Team], you can rest assured that you will have plenty of support.
7) Peace of Mind
If you are like most people, your home is the largest purchase you will ever make. The average person spends around 1/3 of their total monthly income on their home. This is a big decision and you don't want to go at it alone. When you use a trusted Buyer's Agent, you know that your best interests are accounted for, and that you can feel confident in your purchase.
Purchasing a home can be a fun and exciting process. However, the home buying process can be intimidating, and mistakes are possible. A Realtor who concentrates on working with Buyers can help alleviate the fears & possibilities for mistakes. Make sure and use a Buyer's Agent on any real estate transaction, and you will help ensure that you are making the right decisions.
Ray Kutylo and the SCV Home Team are ready to go to work for you!
Tuesday, March 06, 2007
Tax Tips, Tax Changes, Retirement Accounts
Tuesday, March 06, 2007
2006 TAX TIPS
The April IRS tax filing deadline is looming. Here are some tax tips from the Senior Advantage Real Estate Council to use as you prepare your own returns.
-Early mortgage and property tax payments-
If you made your January, 2007 mortgage payment before the end of 2006, be sure to deduct the mortgage interest for that January payment on your 2006 taxes. The same goes for pre-paid property taxes.
-Retirement Contributions-
If you're self-employed and have a Simplified Employee Pension (SEP), you have until April 16, 2007 to make contributions for tax year 2006. If you file an extension on your tax returns, you can extend that date to October 15, 2007.
-Home office deductions-
If you're self-employed and qualify for a home office deduction, don't forget to write off a portion of heating and lighting costs and home insurance premiums.
-Energy-efficient renovations-
If you've modified your home with energy efficient products, such as solar panels, energy-efficient windows, and so forth, see whether you're eligible for a tax credit.
-Investment Properties-
Add up receipts associated with investment properties. Repairs to keep the property in good working condition are deductible during the year you pay them. Significant investments, like a major kitchen renovation, get depreciated over 27.5 years for residential real estate.
top
2007 TAX CHANGES
There are a number of changes in the laws affecting estate, gift, and capital gains taxes. Here's some brief information on the changes.
Federal estate tax law amounts-
-For many over age 50, their home is the largest asset in their estate. The amount in an estate that is excluded from Federal Estate Tax is $2 million for 2007 and 2008. The exclusion rises to $3.5 million for 2009.
Gift tax-
-An individual can make a gift of up to $12,000 to any other individual without paying a gift tax or reporting the gift. Just a reminder: The tax on gifts over $12,000 is paid by the donor--the person giving the gift.
Capital Gains Tax-
In 2007 and 2008, the maximum tax percentage is 15% on long-term (over a year) capital gains (sales price minus basis, which varies based on the circumstances). On December 31, 2008, that maximum rises to 20%.
The minimum tax percentage fluctuates. It is 5% in 2007, dips to a zero minimum (0%) in 2008 and then goes up to 10% on December 31, 2008.
In 2007, the capital gains tax exemption amounts remain the same: $250,000 is not subject to tax for an individual, and for couples, the figure is $500,000.
top
NEW LIMITS: RETIREMENT ACCOUNTS
(Most Baby Boomers are still contributing to retirement accounts. For those who are no longer working, the distributions may be their primary source of money to live. The source of money impacts their housing and lifestyle goals.)
Contribution limits: Roth IRAs and traditional IRAs
2007: $ 4,000
2008: $ 5,000
Roth IRA Basics:
-Contributions are made with after-tax dollars
-Contributions are not deductible
-Can contribute even after the age of 70 -1/2
-Money can stay in a Roth IRA for your lifetime
-No tax penalty if you withdraw early
-Qualified distributions are tax free
-No income restrictions
-No income tax on withdrawals during retirement
Roth IRA income limits increase in 2007:
-Single people: A full contribution is allowed if income is $99,000 or less. A partial contribution is allowed if income is up to $114,000.
-Married couples: Contribution limits range from $156,000 to $166,000.
-To convert from a traditional to a Roth IRA, income cannot exceed $100,000, regardless of marital status.
Catch-up contributions: Individuals age 50 and older can make "catch-up" contributions to their retirement plans.
-Regular IRAs: Limits for 2007: $5,000; Limits for 2008: $6,000
-SEP IRAs, 401K, 403(b) and 457 plans: Limits for 2007: $5,000
-SIMPLE plans: Catch-up contributions equal 50% of whatever the current limit is for 401k, SEP, and 457 plans.
Qualified retirement plans: The current contribution limit allowed to be considered when determining contribution amounts and benefits is $250,000.
Defined benefit plans:
-2007 cap on annual benefits is the lesser of $180,000 or 100% of the average compensation for the last three years.
-Annual additions are limited to the lesser of $45,000 or 100% of compensation.
401K, SEP, 403 B, Elective Deferrals: The 2007 limit is $15,500 for elective deferrals for 401k plans, tax sheltered annuities, and salary deduction simplified employee pension plans.
Annual elective deferrals to a SIMPLE plan: The 2007 limit is $10,500.
Annual deferrals under section 457 plans (such as deferred compensation plans or state or local governments or tax-exempt organizations): The 2007 limit is $15,500.
As always, consult with your tax advisor.
2006 TAX TIPS
The April IRS tax filing deadline is looming. Here are some tax tips from the Senior Advantage Real Estate Council to use as you prepare your own returns.
-Early mortgage and property tax payments-
If you made your January, 2007 mortgage payment before the end of 2006, be sure to deduct the mortgage interest for that January payment on your 2006 taxes. The same goes for pre-paid property taxes.
-Retirement Contributions-
If you're self-employed and have a Simplified Employee Pension (SEP), you have until April 16, 2007 to make contributions for tax year 2006. If you file an extension on your tax returns, you can extend that date to October 15, 2007.
-Home office deductions-
If you're self-employed and qualify for a home office deduction, don't forget to write off a portion of heating and lighting costs and home insurance premiums.
-Energy-efficient renovations-
If you've modified your home with energy efficient products, such as solar panels, energy-efficient windows, and so forth, see whether you're eligible for a tax credit.
-Investment Properties-
Add up receipts associated with investment properties. Repairs to keep the property in good working condition are deductible during the year you pay them. Significant investments, like a major kitchen renovation, get depreciated over 27.5 years for residential real estate.
top
2007 TAX CHANGES
There are a number of changes in the laws affecting estate, gift, and capital gains taxes. Here's some brief information on the changes.
Federal estate tax law amounts-
-For many over age 50, their home is the largest asset in their estate. The amount in an estate that is excluded from Federal Estate Tax is $2 million for 2007 and 2008. The exclusion rises to $3.5 million for 2009.
Gift tax-
-An individual can make a gift of up to $12,000 to any other individual without paying a gift tax or reporting the gift. Just a reminder: The tax on gifts over $12,000 is paid by the donor--the person giving the gift.
Capital Gains Tax-
In 2007 and 2008, the maximum tax percentage is 15% on long-term (over a year) capital gains (sales price minus basis, which varies based on the circumstances). On December 31, 2008, that maximum rises to 20%.
The minimum tax percentage fluctuates. It is 5% in 2007, dips to a zero minimum (0%) in 2008 and then goes up to 10% on December 31, 2008.
In 2007, the capital gains tax exemption amounts remain the same: $250,000 is not subject to tax for an individual, and for couples, the figure is $500,000.
top
NEW LIMITS: RETIREMENT ACCOUNTS
(Most Baby Boomers are still contributing to retirement accounts. For those who are no longer working, the distributions may be their primary source of money to live. The source of money impacts their housing and lifestyle goals.)
Contribution limits: Roth IRAs and traditional IRAs
2007: $ 4,000
2008: $ 5,000
Roth IRA Basics:
-Contributions are made with after-tax dollars
-Contributions are not deductible
-Can contribute even after the age of 70 -1/2
-Money can stay in a Roth IRA for your lifetime
-No tax penalty if you withdraw early
-Qualified distributions are tax free
-No income restrictions
-No income tax on withdrawals during retirement
Roth IRA income limits increase in 2007:
-Single people: A full contribution is allowed if income is $99,000 or less. A partial contribution is allowed if income is up to $114,000.
-Married couples: Contribution limits range from $156,000 to $166,000.
-To convert from a traditional to a Roth IRA, income cannot exceed $100,000, regardless of marital status.
Catch-up contributions: Individuals age 50 and older can make "catch-up" contributions to their retirement plans.
-Regular IRAs: Limits for 2007: $5,000; Limits for 2008: $6,000
-SEP IRAs, 401K, 403(b) and 457 plans: Limits for 2007: $5,000
-SIMPLE plans: Catch-up contributions equal 50% of whatever the current limit is for 401k, SEP, and 457 plans.
Qualified retirement plans: The current contribution limit allowed to be considered when determining contribution amounts and benefits is $250,000.
Defined benefit plans:
-2007 cap on annual benefits is the lesser of $180,000 or 100% of the average compensation for the last three years.
-Annual additions are limited to the lesser of $45,000 or 100% of compensation.
401K, SEP, 403 B, Elective Deferrals: The 2007 limit is $15,500 for elective deferrals for 401k plans, tax sheltered annuities, and salary deduction simplified employee pension plans.
Annual elective deferrals to a SIMPLE plan: The 2007 limit is $10,500.
Annual deferrals under section 457 plans (such as deferred compensation plans or state or local governments or tax-exempt organizations): The 2007 limit is $15,500.
As always, consult with your tax advisor.
U.S. Foreclosures Top 1.2 Million in 2006
RealtyTrac Staff
U.S. Foreclosure Filings Up 42 Percent From 2005
More than 1.2 million foreclosure filings were reported nationwide during 2006, up 42 percent from 2005 and a foreclosure rate of one foreclosure filing for every 92 U.S. households, according to RealtyTrac's year-end U.S. Foreclosure Market Report.
“While foreclosures are not at historically high levels, a 42 percent year-over-year increase is certainly noteworthy,” said James J. Saccacio, chief executive officer of RealtyTrac. “The increase in the number of properties in foreclosure was driven partly by the general slowing of overall housing sales, and partly by the impact of monthly mortgage payments increasing dramatically for homeowners who held some of the riskier types of adjustable rate and sub-prime mortgages. As more and more of these loans re-set, we saw a surge to finish the year, with the fourth quarter producing more foreclosure filings than any of the three previous quarters.”
The number of total foreclosure filings rose from about 885,000 in 2005 to 1,259,118 in 2006. While that is a substantial increase, it is still within the scope of normal historical averages, according to Saccacio.
“It’s true that foreclosures could have a negative impact on the housing market if they continue to increase at this rate. And in some of the more problematic local markets they already may be contributing to slowing home price appreciation and a glut of homes for sale,” he said. “However, most local markets have been able to re-absorb foreclosure homes without seeing any major damage to the local economy.”
U.S. Foreclosure Filings Up 42 Percent From 2005
More than 1.2 million foreclosure filings were reported nationwide during 2006, up 42 percent from 2005 and a foreclosure rate of one foreclosure filing for every 92 U.S. households, according to RealtyTrac's year-end U.S. Foreclosure Market Report.
“While foreclosures are not at historically high levels, a 42 percent year-over-year increase is certainly noteworthy,” said James J. Saccacio, chief executive officer of RealtyTrac. “The increase in the number of properties in foreclosure was driven partly by the general slowing of overall housing sales, and partly by the impact of monthly mortgage payments increasing dramatically for homeowners who held some of the riskier types of adjustable rate and sub-prime mortgages. As more and more of these loans re-set, we saw a surge to finish the year, with the fourth quarter producing more foreclosure filings than any of the three previous quarters.”
The number of total foreclosure filings rose from about 885,000 in 2005 to 1,259,118 in 2006. While that is a substantial increase, it is still within the scope of normal historical averages, according to Saccacio.
“It’s true that foreclosures could have a negative impact on the housing market if they continue to increase at this rate. And in some of the more problematic local markets they already may be contributing to slowing home price appreciation and a glut of homes for sale,” he said. “However, most local markets have been able to re-absorb foreclosure homes without seeing any major damage to the local economy.”
US Foreclosures Up 19 Percent in January
RealtyTrac Staff
Foreclosure Filings Higher Than in Any Month in 2006,
Up 25 Percent From January 2006
A total of 130,511 new foreclosure filings were reported in January, an increase of 19 percent from the previous month and an increase of 25 percent from January 2006. The report also shows a national foreclosure rate of one new foreclosure filing for every 886 U.S. households.
“January’s foreclosure number represented the highest monthly number we’ve seen since we began issuing this report two years ago,” said James J. Saccacio, chief executive officer of RealtyTrac. “The month-over-month increase is similar to what we saw last January, when foreclosures shot up 27 percent from the previous month; however, the year-over-year increase of 25 percent is well below the 45 percent annual increase we saw in January last year.”
Nevada, Michigan, Georgia post top foreclosure rates
Nevada replaced Colorado as the state with the highest foreclosure rate thanks to an 8 percent increase in foreclosure filings from the previous month and a slight decrease in Colorado foreclosure filings. The state reported 2,397 new foreclosure filings during the month, a foreclosure rate of one new foreclosure filing for every 362 households — 2.4 times the national average.
A 70 percent increase in foreclosure activity propelled Michigan’s foreclosure rate to second highest among the states. The state reported 11,554 new foreclosure filings, a foreclosure rate of one new foreclosure filing for every 366 households. The state’s foreclosure total was the fourth highest reported by any state and more than twice the number reported in January 2006.
Georgia’s foreclosure rate — one new foreclosure filing for every 372 households — ranked third highest among the states for the fourth month in a row. The state reported 8,328 new foreclosure filings during the month, up 29 percent from the previous month and up 13 percent from January 2006.
Colorado’s foreclosure rate dropped to fourth highest for the month after claiming the top spot in nine out of 12 months in 2006. Other states with foreclosure rates among the nation’s 10 highest included Arizona, Texas, Ohio, Florida, Illinois and New Jersey.
Texas, California, Florida post most new foreclosure filings
Texas documented the highest foreclosure total of any state for the second month in a row, with 14,728 new foreclosure filings in January — a 4 percent increase from the previous month but an increase of less than 1 percent from January 2006. The state’s foreclosure rate of one new foreclosure filing for every 547 households was sixth highest among the states and 1.6 times the national average.
California’s foreclosure total of 14,430 was the nation’s second highest and represented a 14 percent increase from the previous month. The state’s foreclosure rate of one new foreclosure filing for every 846 households registered slightly above the national average and 14th highest among the states. [Note: local rates are miniscule compared to state average.]
Florida reported 11,709 new foreclosure filings during the month, third highest among the states and a 40 percent increase from the previous month. The state’s foreclosure total was up 13 percent from January 2006, and its foreclosure rate of one new foreclosure filing for every 624 households was the nation’s sixth highest.
Other states with foreclosure totals among the nation’s 10 highest included Michigan, Ohio, Georgia, Illinois, New York, New Jersey and Colorado.
Detroit, Greeley, Atlanta document highest metro foreclosure ratesDetroit documented the nation’s highest metro foreclosure rate, replacing Greeley, Colo., which had claimed the top spot for the five previous months. The Detroit metro area (Wayne County) reported 6,653 new foreclosure filings during the month, more than twice the number reported in the previous month and a foreclosure rate of one new foreclosure filing for every 124 households — more than seven times the national average.
Greeley, Colo., (Weld County) reported a 2 percent decrease in foreclosure activity in January, but the metro area’s foreclosure rate of one new foreclosure filing for every 173 households still ranked second highest among the nation’s metro areas.
The 28-county Atlanta metropolitan area documented a foreclosure rate of one new foreclosure filing for every 214 households — the nation’s third highest metro foreclosure rate. The metro area reported 6,791 new foreclosure filings during the month, up 25 percent from the previous month.
Foreclosure Filings Higher Than in Any Month in 2006,
Up 25 Percent From January 2006
A total of 130,511 new foreclosure filings were reported in January, an increase of 19 percent from the previous month and an increase of 25 percent from January 2006. The report also shows a national foreclosure rate of one new foreclosure filing for every 886 U.S. households.
“January’s foreclosure number represented the highest monthly number we’ve seen since we began issuing this report two years ago,” said James J. Saccacio, chief executive officer of RealtyTrac. “The month-over-month increase is similar to what we saw last January, when foreclosures shot up 27 percent from the previous month; however, the year-over-year increase of 25 percent is well below the 45 percent annual increase we saw in January last year.”
Nevada, Michigan, Georgia post top foreclosure rates
Nevada replaced Colorado as the state with the highest foreclosure rate thanks to an 8 percent increase in foreclosure filings from the previous month and a slight decrease in Colorado foreclosure filings. The state reported 2,397 new foreclosure filings during the month, a foreclosure rate of one new foreclosure filing for every 362 households — 2.4 times the national average.
A 70 percent increase in foreclosure activity propelled Michigan’s foreclosure rate to second highest among the states. The state reported 11,554 new foreclosure filings, a foreclosure rate of one new foreclosure filing for every 366 households. The state’s foreclosure total was the fourth highest reported by any state and more than twice the number reported in January 2006.
Georgia’s foreclosure rate — one new foreclosure filing for every 372 households — ranked third highest among the states for the fourth month in a row. The state reported 8,328 new foreclosure filings during the month, up 29 percent from the previous month and up 13 percent from January 2006.
Colorado’s foreclosure rate dropped to fourth highest for the month after claiming the top spot in nine out of 12 months in 2006. Other states with foreclosure rates among the nation’s 10 highest included Arizona, Texas, Ohio, Florida, Illinois and New Jersey.
Texas, California, Florida post most new foreclosure filings
Texas documented the highest foreclosure total of any state for the second month in a row, with 14,728 new foreclosure filings in January — a 4 percent increase from the previous month but an increase of less than 1 percent from January 2006. The state’s foreclosure rate of one new foreclosure filing for every 547 households was sixth highest among the states and 1.6 times the national average.
California’s foreclosure total of 14,430 was the nation’s second highest and represented a 14 percent increase from the previous month. The state’s foreclosure rate of one new foreclosure filing for every 846 households registered slightly above the national average and 14th highest among the states. [Note: local rates are miniscule compared to state average.]
Florida reported 11,709 new foreclosure filings during the month, third highest among the states and a 40 percent increase from the previous month. The state’s foreclosure total was up 13 percent from January 2006, and its foreclosure rate of one new foreclosure filing for every 624 households was the nation’s sixth highest.
Other states with foreclosure totals among the nation’s 10 highest included Michigan, Ohio, Georgia, Illinois, New York, New Jersey and Colorado.
Detroit, Greeley, Atlanta document highest metro foreclosure ratesDetroit documented the nation’s highest metro foreclosure rate, replacing Greeley, Colo., which had claimed the top spot for the five previous months. The Detroit metro area (Wayne County) reported 6,653 new foreclosure filings during the month, more than twice the number reported in the previous month and a foreclosure rate of one new foreclosure filing for every 124 households — more than seven times the national average.
Greeley, Colo., (Weld County) reported a 2 percent decrease in foreclosure activity in January, but the metro area’s foreclosure rate of one new foreclosure filing for every 173 households still ranked second highest among the nation’s metro areas.
The 28-county Atlanta metropolitan area documented a foreclosure rate of one new foreclosure filing for every 214 households — the nation’s third highest metro foreclosure rate. The metro area reported 6,791 new foreclosure filings during the month, up 25 percent from the previous month.
Is the Housing Market Stabilizing?
Best time to buy or sell depends on key factors
Monday, March 05, 2007
By Dian Hymer Inman News
According to the National Association of Realtors (NAR), the housing market could be stabilizing after months of rising inventories, meager home sale activity and soft prices.
The Pending Home Sale Index, which is a leading indicator for the housing market, rose 4.9 percent in December compared to November. This is the largest monthly increase since March 2004 when the index rose 6.9 percent compared to the previous month.
The December pending sale level was still 4.4 percent lower than it was a year ago. However, inventories of homes for sale -- which peaked at an all time high in July of 2006 -- have been shrinking.
The Pending Home Sale Index is based on new sales that have not yet closed. A listing is pending when a purchase contract has been signed by all parties. Closing takes typically 30 to 60 days.
According to NAR, the improvement in the pending sale index was broad based. It increased 8.1 percent in the Northeast, 5.3 percent in the West, 4.3 percent in the South and 3.2 percent in the Midwest.
It's too soon to tell if the recent increase in pending home sale activity is a trend toward stabilization or merely a fluctuation. A lot depends on interest rates and on the health of the overall economy. Another key variable is the unsold housing inventory; that is, the number of unsold listings.
It's typical for the housing inventory to diminish at the end of the year. It often doesn't build significantly again until March or April. The true test of the health of the market won't be clear until later in the year. The next Pending Home Sale Index will be available on March 6 and will be available online at http://www.realtor.org/research/index.html.
NAR reports are useful, but you need to focus on the local scene if you are thinking of buying or selling this year. For example, even though now is not the typical home-buying season, buyers in the San Francisco Bay Area aren't waiting until spring to start house hunting.
Due to the time of year, the inventory of homes for sale in some East Bay neighborhoods is so low that buyers have to compete to buy a home. A common complaint from real estate agents in the area is that there aren't enough listings coming on the market to satisfy the demand.
HOUSE HUNTING TIP: To find out what's happening to the housing market in an area where you want to buy or sell, talk with local real estate agents. Find out how many listings are on the market in the area? How does this compare with the inventory level of last month, six months ago and a year ago? How long is it typically taking listings to sell? Is the time lengthening or shortening?
Are homes selling with multiple offers? If so, this usually indicates that there are more buyers than sellers in the market. In such a market, listings tend to sell quickly. If prices have been slipping, an inventory shortfall can cause the market to firm up and prices to stabilize.
Another way to find out what's going on in an area is to subscribe to a local newspaper. How fat is the real estate ad section? Are the same home-sale ads running week after week? Or, are listings selling quickly? Are price reductions common or rare?
Other news of interest concerns the local economy. Are new businesses moving into or out of the area? Are employers hiring? Or are they laying people off? A hot job market usually translates into strong home-sale activity due to increased demand.
THE CLOSING: Supply and demand ultimately governs whether the housing market is strong or soft.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Monday, March 05, 2007
By Dian Hymer Inman News
According to the National Association of Realtors (NAR), the housing market could be stabilizing after months of rising inventories, meager home sale activity and soft prices.
The Pending Home Sale Index, which is a leading indicator for the housing market, rose 4.9 percent in December compared to November. This is the largest monthly increase since March 2004 when the index rose 6.9 percent compared to the previous month.
The December pending sale level was still 4.4 percent lower than it was a year ago. However, inventories of homes for sale -- which peaked at an all time high in July of 2006 -- have been shrinking.
The Pending Home Sale Index is based on new sales that have not yet closed. A listing is pending when a purchase contract has been signed by all parties. Closing takes typically 30 to 60 days.
According to NAR, the improvement in the pending sale index was broad based. It increased 8.1 percent in the Northeast, 5.3 percent in the West, 4.3 percent in the South and 3.2 percent in the Midwest.
It's too soon to tell if the recent increase in pending home sale activity is a trend toward stabilization or merely a fluctuation. A lot depends on interest rates and on the health of the overall economy. Another key variable is the unsold housing inventory; that is, the number of unsold listings.
It's typical for the housing inventory to diminish at the end of the year. It often doesn't build significantly again until March or April. The true test of the health of the market won't be clear until later in the year. The next Pending Home Sale Index will be available on March 6 and will be available online at http://www.realtor.org/research/index.html.
NAR reports are useful, but you need to focus on the local scene if you are thinking of buying or selling this year. For example, even though now is not the typical home-buying season, buyers in the San Francisco Bay Area aren't waiting until spring to start house hunting.
Due to the time of year, the inventory of homes for sale in some East Bay neighborhoods is so low that buyers have to compete to buy a home. A common complaint from real estate agents in the area is that there aren't enough listings coming on the market to satisfy the demand.
HOUSE HUNTING TIP: To find out what's happening to the housing market in an area where you want to buy or sell, talk with local real estate agents. Find out how many listings are on the market in the area? How does this compare with the inventory level of last month, six months ago and a year ago? How long is it typically taking listings to sell? Is the time lengthening or shortening?
Are homes selling with multiple offers? If so, this usually indicates that there are more buyers than sellers in the market. In such a market, listings tend to sell quickly. If prices have been slipping, an inventory shortfall can cause the market to firm up and prices to stabilize.
Another way to find out what's going on in an area is to subscribe to a local newspaper. How fat is the real estate ad section? Are the same home-sale ads running week after week? Or, are listings selling quickly? Are price reductions common or rare?
Other news of interest concerns the local economy. Are new businesses moving into or out of the area? Are employers hiring? Or are they laying people off? A hot job market usually translates into strong home-sale activity due to increased demand.
THE CLOSING: Supply and demand ultimately governs whether the housing market is strong or soft.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
Monday, March 05, 2007
Sub-Prime Lenders Going Under
Breaking News: Fremont Closes Doors
Sub-prime lender Fremont Financial in Anaheim told its employees to clean out their desks and go home this afternoon, in a report seen locally on Channel 4 news. One of the larger lenders in the sub-prime market, which last year comprised 20% of the home mortgage market, Fremont Financial was widely seen as one of the more stable lenders in this now-volatile lending sector. Early defaults leading to foreclosures have negatively impacted this section which provides home loans to marginally qualified buyers. This development portends a continued decline in housing.
While many in my industry continue to sing a happy tune, the gathering storm in the lending buisiness is the natural result of years of a Federal Reserve that was out of control with the printers churning out liquidity, lax lending standards issuing what came to be known as 'liar's loans', and option ARMs and other loan programs that absent strong appreciation, will tend to increase the default and foreclosure rate as those loans adjust to interest rates in the 10 or 12 percent range.
~~R Kutylo
New Century Stock Plunges;Lender Is at Mercy of Banks
By LINGLING WEIMarch 5, 2007 7:31 p.m.
NEW YORK -- Just last summer, New Century Financial Corp. Chief Executive Brad Morrice said his company was poised to "capitalize on" the U.S. mortgage industry's shakeout. Now, it is one of those being shaken out.
New Century, one of the largest lenders to high-risk borrowers, disclosed late Friday that it is the subject of a criminal inquiry into its accounting and trading in its stock. It also said it is at the mercy of the banks that provide it with essential credit lines -- Wall Street firms including Goldman Sachs Group Inc. and Morgan Stanley that also buy loans from the company and repackage them into tradable securities.
But its prospects for finding mercy are anything but promising. Should it fail, New Century would become one of the biggest casualties of the cratering of the mortgage market so far.
The company is "more likely to enter the death spiral than we had feared," Merrill Lynch analyst Kenneth Bruce wrote in a research note to clients Monday. Likely restricted liquidity -- as well as its delay in filing financial statements, the deterioration of its financial conditions and regulatory investigations -- could "conspire to limit its options outside of bankruptcy," Mr. Bruce said.
A New Century spokeswoman declined to comment beyond the company's regulatory filings. Shares in the Irvine, Calif., lender, tumbled $10.09, or 69%, to $4.56. The stock has dropped about 90% since last July -- when New Century traded around $46 and had just racked up a record of raising its dividend six times since its conversion to a tax-beneficial real-estate investment trust in 2004. Standard & Poor's removed New Century from its Standard & Poor's 600 index of small-capitalization shares.
Big shareholders including Greenlight Capital Inc., a New York hedge fund, stand to lose the most in the event of a bankruptcy filing. Earlier last year, Greenlight forged a deal with New Century that placed its president, David Einhorn, on the board, exempted Greenlight from a 9.8% shareholding limit and permitted ownership of up to 19.6%. Greenlight's regulatory filings show the fund owned 6.3% of New Century's outstanding shares as of Dec. 31, a position valued at about $110 million at the time. Today, the stake would be valued at less than $14 million.
The fund's current holdings or economic interest in the company couldn't be determined. A spokesman for Greenlight declined to comment for this report, citing Mr. Einhorn's position as a board member. At the same time, some investors have bet heavily on New Century's downfall, as evidenced by a 30% jump in short interest in the stock to 16.7 million shares last month from January. That represents 37% of the public float of the company's shares.
New Century was founded in 1995 by three mortgage-industry veterans, including Mr. Morrice, Bob Cole and Ed Gotschall. It went public two years later and was named to Fortune magazine's list of the 100 fastest-growing companies in 2003 and 2004. But now, New Century's rapid descent offers a cautionary tale.
The lender is plagued with problems including a surge of bad loans, costly obligations to buy back bad loans already sold to investment banks and inadequate reserves. On top of the financial stress, it faces regulatory probes and shareholder allegations that its officers and directors sold shares at inflated prices. The lender acknowledged Friday that a failure to convince its banks to ease their financing terms could prompt its auditors to warn of "substantial doubt" over its ability to remain in business.
A disruption in liquidity has already forced more than 20 independent mortgage lenders to shutter operations over the past two months. In the late 1990s, when the financial markets were rocked by Russian defaults, New Century and other mortgage lenders encountered a similar liquidity crisis but managed to get through it after U.S. Bancorp extended a lifeline.
Some analysts question the lender's ability to avoid bankruptcy or an outright liquidation this time around. Weakening loan demand and rising delinquencies have forced bigger financial services firms to become more cautious about the risks they take on, as a string of subprime lenders seek to sell out as a last-ditch alternative to closing shop.
New Century said it has $17.4 billion in short-term credit lines and had more than $350 million in cash and immediate liquidity as of Dec. 31. It also said 11 of its 16 financing pacts require it to report at least $1 of net income for two consecutive quarters. But it doesn't expect to meet this requirement for the period ended Dec. 31 and is seeking waivers from its banks, the company said.
Ed Groshans, an analyst at Fox-Pitt, Kelton, like many other analysts, is worried about the ability of the company to get all the waivers it needs.
Late last month, New Century disclosed that it had extended a $250 million uncommitted line of credit with Goldman Sachs for three months -- to May 14 -- as opposed to the more customary one-year extension. The other agreement it has with Goldman, with $1 billion in committed credit, expires in November. Many analysts have viewed the short duration of the extension as a lack of confidence on the part of Goldman about New Century's financial stability. A Goldman spokesman declined to comment.
As of Sept. 30, according to New Century's filings with the Securities and Exchange Commission, the company had a $3 billion credit line with Morgan Stanley and an outstanding balance under that agreement of $1.5 billion. The pact was supposed to expire last month. The New Century spokeswoman declined to comment on the status of the company's renegotiations with Morgan Stanley. The bank also declined to comment.
Other big providers of short-term funding to New Century include UBS AG, Bank of America Corp., Barclays PLC and Deutsche Bank AG.
--James R. Hagerty of The Wall Street Journal contributed to this report
Sub-prime lender Fremont Financial in Anaheim told its employees to clean out their desks and go home this afternoon, in a report seen locally on Channel 4 news. One of the larger lenders in the sub-prime market, which last year comprised 20% of the home mortgage market, Fremont Financial was widely seen as one of the more stable lenders in this now-volatile lending sector. Early defaults leading to foreclosures have negatively impacted this section which provides home loans to marginally qualified buyers. This development portends a continued decline in housing.
While many in my industry continue to sing a happy tune, the gathering storm in the lending buisiness is the natural result of years of a Federal Reserve that was out of control with the printers churning out liquidity, lax lending standards issuing what came to be known as 'liar's loans', and option ARMs and other loan programs that absent strong appreciation, will tend to increase the default and foreclosure rate as those loans adjust to interest rates in the 10 or 12 percent range.
~~R Kutylo
New Century Stock Plunges;Lender Is at Mercy of Banks
By LINGLING WEIMarch 5, 2007 7:31 p.m.
NEW YORK -- Just last summer, New Century Financial Corp. Chief Executive Brad Morrice said his company was poised to "capitalize on" the U.S. mortgage industry's shakeout. Now, it is one of those being shaken out.
New Century, one of the largest lenders to high-risk borrowers, disclosed late Friday that it is the subject of a criminal inquiry into its accounting and trading in its stock. It also said it is at the mercy of the banks that provide it with essential credit lines -- Wall Street firms including Goldman Sachs Group Inc. and Morgan Stanley that also buy loans from the company and repackage them into tradable securities.
But its prospects for finding mercy are anything but promising. Should it fail, New Century would become one of the biggest casualties of the cratering of the mortgage market so far.
The company is "more likely to enter the death spiral than we had feared," Merrill Lynch analyst Kenneth Bruce wrote in a research note to clients Monday. Likely restricted liquidity -- as well as its delay in filing financial statements, the deterioration of its financial conditions and regulatory investigations -- could "conspire to limit its options outside of bankruptcy," Mr. Bruce said.
A New Century spokeswoman declined to comment beyond the company's regulatory filings. Shares in the Irvine, Calif., lender, tumbled $10.09, or 69%, to $4.56. The stock has dropped about 90% since last July -- when New Century traded around $46 and had just racked up a record of raising its dividend six times since its conversion to a tax-beneficial real-estate investment trust in 2004. Standard & Poor's removed New Century from its Standard & Poor's 600 index of small-capitalization shares.
Big shareholders including Greenlight Capital Inc., a New York hedge fund, stand to lose the most in the event of a bankruptcy filing. Earlier last year, Greenlight forged a deal with New Century that placed its president, David Einhorn, on the board, exempted Greenlight from a 9.8% shareholding limit and permitted ownership of up to 19.6%. Greenlight's regulatory filings show the fund owned 6.3% of New Century's outstanding shares as of Dec. 31, a position valued at about $110 million at the time. Today, the stake would be valued at less than $14 million.
The fund's current holdings or economic interest in the company couldn't be determined. A spokesman for Greenlight declined to comment for this report, citing Mr. Einhorn's position as a board member. At the same time, some investors have bet heavily on New Century's downfall, as evidenced by a 30% jump in short interest in the stock to 16.7 million shares last month from January. That represents 37% of the public float of the company's shares.
New Century was founded in 1995 by three mortgage-industry veterans, including Mr. Morrice, Bob Cole and Ed Gotschall. It went public two years later and was named to Fortune magazine's list of the 100 fastest-growing companies in 2003 and 2004. But now, New Century's rapid descent offers a cautionary tale.
The lender is plagued with problems including a surge of bad loans, costly obligations to buy back bad loans already sold to investment banks and inadequate reserves. On top of the financial stress, it faces regulatory probes and shareholder allegations that its officers and directors sold shares at inflated prices. The lender acknowledged Friday that a failure to convince its banks to ease their financing terms could prompt its auditors to warn of "substantial doubt" over its ability to remain in business.
A disruption in liquidity has already forced more than 20 independent mortgage lenders to shutter operations over the past two months. In the late 1990s, when the financial markets were rocked by Russian defaults, New Century and other mortgage lenders encountered a similar liquidity crisis but managed to get through it after U.S. Bancorp extended a lifeline.
Some analysts question the lender's ability to avoid bankruptcy or an outright liquidation this time around. Weakening loan demand and rising delinquencies have forced bigger financial services firms to become more cautious about the risks they take on, as a string of subprime lenders seek to sell out as a last-ditch alternative to closing shop.
New Century said it has $17.4 billion in short-term credit lines and had more than $350 million in cash and immediate liquidity as of Dec. 31. It also said 11 of its 16 financing pacts require it to report at least $1 of net income for two consecutive quarters. But it doesn't expect to meet this requirement for the period ended Dec. 31 and is seeking waivers from its banks, the company said.
Ed Groshans, an analyst at Fox-Pitt, Kelton, like many other analysts, is worried about the ability of the company to get all the waivers it needs.
Late last month, New Century disclosed that it had extended a $250 million uncommitted line of credit with Goldman Sachs for three months -- to May 14 -- as opposed to the more customary one-year extension. The other agreement it has with Goldman, with $1 billion in committed credit, expires in November. Many analysts have viewed the short duration of the extension as a lack of confidence on the part of Goldman about New Century's financial stability. A Goldman spokesman declined to comment.
As of Sept. 30, according to New Century's filings with the Securities and Exchange Commission, the company had a $3 billion credit line with Morgan Stanley and an outstanding balance under that agreement of $1.5 billion. The pact was supposed to expire last month. The New Century spokeswoman declined to comment on the status of the company's renegotiations with Morgan Stanley. The bank also declined to comment.
Other big providers of short-term funding to New Century include UBS AG, Bank of America Corp., Barclays PLC and Deutsche Bank AG.
--James R. Hagerty of The Wall Street Journal contributed to this report
MLS Data Continues Mixed; May Not Be Valid
As reported in an earlier post, the local market data source has changed from Crisnet to SoCalMLS, and that changeover in mid-February has thrown into question the data that I am able to get.
For example, the February data indicates that local closed sales for the Santa Clarita and San Fernando Valley areas had closed prices at and above the current list price. Sorry, but that is not happening in reality. If it were so, sellers would not be worried and buyers would be scrambling to buy anything right now, before prices 'go up'.
You can appreciate the situation, I'm sure. So rather than publish a bunch of data that does not reflect reality, I'm going to hold off until the data provider gets some steadier legs. The new service does not provide as complete or as digestable set of data points as Crisnet did. I may have to make some adjustment in how my data is gathered and presented so that real and meaningful data can be provided to you, my valued clients.
As always, a neighborhood analysis of the current market is best, as that will most accurately provide the information you as a seller need to establish a list price that will be attractive to potential buyers. Conversely, if you are a buyer of property, you also want the real numbers for a neighborhood to ensure that you are not paying too much for a property.
Yes, yes, I know. As a seller, you want the best price (and frankly, so do I) but let's be realistic and maybe a simple analogy will illustrate: when you go out car shopping, are you anxious to pay a Ferrari price for a Saturn? No. probably not. And the buyer for your home doesn't want to pay more than market price for your home, either.
And buyers... while I do want you to get the absolute best home for your hard-earned money, the seller has market information and isn't going to give you a home for nothing just because you want it.
Reality is, both parties will settle for fair pricing in the vast majority of home sales. Coming to that point is as Trump so rightly pointed out, 'The Art of the Deal'.
For example, the February data indicates that local closed sales for the Santa Clarita and San Fernando Valley areas had closed prices at and above the current list price. Sorry, but that is not happening in reality. If it were so, sellers would not be worried and buyers would be scrambling to buy anything right now, before prices 'go up'.
You can appreciate the situation, I'm sure. So rather than publish a bunch of data that does not reflect reality, I'm going to hold off until the data provider gets some steadier legs. The new service does not provide as complete or as digestable set of data points as Crisnet did. I may have to make some adjustment in how my data is gathered and presented so that real and meaningful data can be provided to you, my valued clients.
As always, a neighborhood analysis of the current market is best, as that will most accurately provide the information you as a seller need to establish a list price that will be attractive to potential buyers. Conversely, if you are a buyer of property, you also want the real numbers for a neighborhood to ensure that you are not paying too much for a property.
Yes, yes, I know. As a seller, you want the best price (and frankly, so do I) but let's be realistic and maybe a simple analogy will illustrate: when you go out car shopping, are you anxious to pay a Ferrari price for a Saturn? No. probably not. And the buyer for your home doesn't want to pay more than market price for your home, either.
And buyers... while I do want you to get the absolute best home for your hard-earned money, the seller has market information and isn't going to give you a home for nothing just because you want it.
Reality is, both parties will settle for fair pricing in the vast majority of home sales. Coming to that point is as Trump so rightly pointed out, 'The Art of the Deal'.
Saturday, March 03, 2007
Sub-Prime Lenders Under Pressure
New Century Financial is the target of a federal criminal inquiry into its accounting and trading in its securities, and said its auditors could warn of "substantial doubt" over the home lender's ability to remain in business. Fremont General, another big lender, said it plans to stop making subprime residential loans and is in talks to sell that business.
The news came the same day federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages.
http://online.wsj.com/article/SB117286729439625151.html?mod=djemalert
The news came the same day federal bank regulators announced a crackdown on loose lending standards on subprime home mortgages.
http://online.wsj.com/article/SB117286729439625151.html?mod=djemalert
Thursday, March 01, 2007
Renting vs. Owning: Building Equity and Tax Advantages
Homeowners who have already secured their dream home know what a great investment they’ve made. However, millions of renters continue to have misconceptions about the home buying process, often delaying a home purchase by saying “it’s too complicated” or “interest rates are too high.” What renters don’t realize is that in the long term they can’t afford not to buy a home.
For many Americans, owning a home is the cornerstone of their financial wealth. Building equity in a home, combined with tax advantages offered by both federal and state governments, has driven home ownership to record levels. Currently, according to the U.S. Census Bureau, 68.7 percent of American households have chosen home ownership over renting for these, as well as other reasons. Buying a home is not as complicated as it may seem. As with any large investment, it’s important to thoroughly understand the purchasing process and the obligations associated with taking out a mortgage.
Over the years, reputable mortgage institutions have made the home buying process simple and easy to manage for potential homebuyers, especially first-time buyers.
One of the key steps in determining whether you should become a homeowner versus a home renter, is understanding how the amount you dedicate each month to paying for shelter could better serve you through the building of equity. For example, let’s look at a renter with a monthly rent payment of $600. Over five years, that person will have spent $36,000 on rent. In 10 years, that number rises to $72,000. That’s a large amount paid with no equity in return. Now, if this same amount were applied to paying a mortgage, a portion of each month’s payment would go toward paying down the principle (the price at which you purchased the home less a down payment), which would allow you to build ownership in the property. In addition, the interest that you pay each month, as well as any property taxes, may be deductible on your federal income taxes -- a tax advantage not available to renters (check with a local tax advisor or your local Internal Revenue Service office).
On the flip side, probably the most important advantage of renting is the flexibility it offers in terms of moving. The mortgage industry understands this concern and has created numerous financing products that allow a homeowner to better manage his or her cash flow as it relates to anticipated changes, such as moving to a larger home, relocation, or other financial pressures. A mortgage professional can help you understand the types of financing options that would best suit your individual circumstances.
Historically speaking, interest rates remain at their lowest levels in years. If you’ve ever thought about owning a piece of the American Dream, contact a mortgage professional to learn more about mortgages and to better understand the advantages of owning versus renting.
Courtesy of ARA Content
For many Americans, owning a home is the cornerstone of their financial wealth. Building equity in a home, combined with tax advantages offered by both federal and state governments, has driven home ownership to record levels. Currently, according to the U.S. Census Bureau, 68.7 percent of American households have chosen home ownership over renting for these, as well as other reasons. Buying a home is not as complicated as it may seem. As with any large investment, it’s important to thoroughly understand the purchasing process and the obligations associated with taking out a mortgage.
Over the years, reputable mortgage institutions have made the home buying process simple and easy to manage for potential homebuyers, especially first-time buyers.
One of the key steps in determining whether you should become a homeowner versus a home renter, is understanding how the amount you dedicate each month to paying for shelter could better serve you through the building of equity. For example, let’s look at a renter with a monthly rent payment of $600. Over five years, that person will have spent $36,000 on rent. In 10 years, that number rises to $72,000. That’s a large amount paid with no equity in return. Now, if this same amount were applied to paying a mortgage, a portion of each month’s payment would go toward paying down the principle (the price at which you purchased the home less a down payment), which would allow you to build ownership in the property. In addition, the interest that you pay each month, as well as any property taxes, may be deductible on your federal income taxes -- a tax advantage not available to renters (check with a local tax advisor or your local Internal Revenue Service office).
On the flip side, probably the most important advantage of renting is the flexibility it offers in terms of moving. The mortgage industry understands this concern and has created numerous financing products that allow a homeowner to better manage his or her cash flow as it relates to anticipated changes, such as moving to a larger home, relocation, or other financial pressures. A mortgage professional can help you understand the types of financing options that would best suit your individual circumstances.
Historically speaking, interest rates remain at their lowest levels in years. If you’ve ever thought about owning a piece of the American Dream, contact a mortgage professional to learn more about mortgages and to better understand the advantages of owning versus renting.
Courtesy of ARA Content
Wednesday, February 28, 2007
New-home sales plummet in the West
Nationwide median price falls 2.1% in January
Wednesday, February 28, 2007
Inman News
The rate of new single-family home sales in January was an estimated 20.1 percent below the rate for the same month last year, the U.S. Census Bureau and U.S. Department of Housing and Urban Development announced today.
Sales fell to a seasonally adjusted annual rate of 937,000 in January, which was about 16.6 percent below the revised December 2006 rate. This rate is a projection of a monthly sales total over a 12-month period, adjusted for seasonal fluctuations in sales activity.
Regionally, sales dropped an estimated 50.4 percent in the West, 11.2 percent in the South, 1.6 percent in the Northeast and rose 0.6 percent in the Midwest in January compared to January 2006.
The median sales price of new houses sold in January was $239,800, down 2.1 percent compared to January 2006, and the average sales price was $313,000, up 4 percent compared to January 2006.
The seasonally adjusted estimate of new houses for sale at the end of January was 536,000, which represents a supply of 6.8 months at the January sales rate. A supply of six months is generally considered to indicate a market that is in rough equilibrium while a supply greater than six months can indicate market that favors buyers.
An estimated 25 percent of home sales in January were priced from $150,000 to $199,999, compared with 21 percent in January 2006. And an estimated 11 percent of home sales were priced from $300,000 to $399,999 in January, compared with 17 percent in January 2006.
Statistics are estimated from sample surveys, the agencies noted, and are subject to sampling variability as well as nonsampling error. Changes in seasonally adjusted statistics can show irregular movement, according to the report, and it takes six months to establish a trend for new houses sold.
Preliminary new-home sales figures are subject to revision. The survey is primarily based on a sample of houses selected from building permits. A "sale" is defined as a deposit taken or sales agreement signed. On average, the preliminary seasonally adjusted estimate of total sales is revised about 3 percent.
Changes in sales price data reflect changes in the distribution of houses by region, size, and other factors, as well as changes in the prices of houses with identical characteristics, the agencies reported.
Wednesday, February 28, 2007
Inman News
The rate of new single-family home sales in January was an estimated 20.1 percent below the rate for the same month last year, the U.S. Census Bureau and U.S. Department of Housing and Urban Development announced today.
Sales fell to a seasonally adjusted annual rate of 937,000 in January, which was about 16.6 percent below the revised December 2006 rate. This rate is a projection of a monthly sales total over a 12-month period, adjusted for seasonal fluctuations in sales activity.
Regionally, sales dropped an estimated 50.4 percent in the West, 11.2 percent in the South, 1.6 percent in the Northeast and rose 0.6 percent in the Midwest in January compared to January 2006.
The median sales price of new houses sold in January was $239,800, down 2.1 percent compared to January 2006, and the average sales price was $313,000, up 4 percent compared to January 2006.
The seasonally adjusted estimate of new houses for sale at the end of January was 536,000, which represents a supply of 6.8 months at the January sales rate. A supply of six months is generally considered to indicate a market that is in rough equilibrium while a supply greater than six months can indicate market that favors buyers.
An estimated 25 percent of home sales in January were priced from $150,000 to $199,999, compared with 21 percent in January 2006. And an estimated 11 percent of home sales were priced from $300,000 to $399,999 in January, compared with 17 percent in January 2006.
Statistics are estimated from sample surveys, the agencies noted, and are subject to sampling variability as well as nonsampling error. Changes in seasonally adjusted statistics can show irregular movement, according to the report, and it takes six months to establish a trend for new houses sold.
Preliminary new-home sales figures are subject to revision. The survey is primarily based on a sample of houses selected from building permits. A "sale" is defined as a deposit taken or sales agreement signed. On average, the preliminary seasonally adjusted estimate of total sales is revised about 3 percent.
Changes in sales price data reflect changes in the distribution of houses by region, size, and other factors, as well as changes in the prices of houses with identical characteristics, the agencies reported.
Tuesday, February 27, 2007
Freddie Mac to Tighten Loan Standards
Government-sponsored mortgage marketer Freddie Mac is the latest company to weigh in on the growing concern over lending to unqualified homebuyers, saying this week it's tightening its standards for buying mortgages held by such borrowers. The McLean (VA)-based company said it would start enforcing the new standards after Sept. 1, 2007.
For its part, Freddie Mac said that it would stop buying those mortgages that have "a high likelihood of excessive payment shock and possible foreclosure." Instead, the company plans to buy only subprime adjustable-rate mortgages, and securities backed by such loans, that have been qualified at the fully indexed and fully amortizing rate.
Freddie Mac also said it would limit the use of loans that don't require income verification or other documentation, and will recommend that lenders collect adequate escrow for taxes and insurance payments. Moreover, the company said it's developing new fixed-rate and hybrid adjustable-rate mortgages with the aim of giving lenders "more choices to offer subprime borrowers."
The firm said its new requirements cover mortgages known as 2/28 and 3/27 hybrid ARMs, which currently make up about three-quarters of the subprime market. Specifically, Freddie Mac said it will require that borrowers applying for these products be underwritten at the fully indexed and amortizing rate, as opposed to the initial "teaser" rate -- often several percentage points below the actual rate for most of the life of the loan.
The company also will limit use of low-documentation loans, so-called "no income verification" products in combination with the 2/28 and 3/27 hybrid ARMs. In addition, the company won't purchase "no income, no asset" documentation loans and will limit so-called "stated income, stated assets" products to borrowers whose incomes derive from hard-to-verify sources, such as self-employed persons and those who participate in the cash economy, the firm said in a press release.
For its part, Freddie Mac said that it would stop buying those mortgages that have "a high likelihood of excessive payment shock and possible foreclosure." Instead, the company plans to buy only subprime adjustable-rate mortgages, and securities backed by such loans, that have been qualified at the fully indexed and fully amortizing rate.
Freddie Mac also said it would limit the use of loans that don't require income verification or other documentation, and will recommend that lenders collect adequate escrow for taxes and insurance payments. Moreover, the company said it's developing new fixed-rate and hybrid adjustable-rate mortgages with the aim of giving lenders "more choices to offer subprime borrowers."
The firm said its new requirements cover mortgages known as 2/28 and 3/27 hybrid ARMs, which currently make up about three-quarters of the subprime market. Specifically, Freddie Mac said it will require that borrowers applying for these products be underwritten at the fully indexed and amortizing rate, as opposed to the initial "teaser" rate -- often several percentage points below the actual rate for most of the life of the loan.
The company also will limit use of low-documentation loans, so-called "no income verification" products in combination with the 2/28 and 3/27 hybrid ARMs. In addition, the company won't purchase "no income, no asset" documentation loans and will limit so-called "stated income, stated assets" products to borrowers whose incomes derive from hard-to-verify sources, such as self-employed persons and those who participate in the cash economy, the firm said in a press release.
Exceptional People - Built By Design or Accident?
Consider for a moment what it is that makes people exceptional.
Is it certain character traits such as strength, confidence, integrity, respect, charisma, a sense of humor or intelligence?
The ancient Greek philosopher Aristotle offered the following as exceptional qualities in man: courage, temperance, pride, good temper, friendliness, truthfulness and justice.
An how do people become exceptional?
Are these qualities genetically acquired? Do they depend upon a person's parents and the values taught through experiences at home? Or, were they acquired though other means?
We believe that we can develop the positive characteristics of exceptional people through sports.
Everyone is born with tremendous potential, and participation in sports is one of many ways that the young people of America can develop into contributing citizens. High school sports are an American tradition that can teach people fundamental life skills such as teamwork, respect, responsibility, good sportsmanship and integrity, among other positive values and attributes.
At times, it seems that our society often overlooks these positive attributes because of the media attention given to the negative actions of certain athletes, coaches and fans. We are all familiar with altercations between athletes and fans, other athletes' outlandish antics and attitudes exhibited time and time again, and some team rosters that resemble police blotters.
High school sports are an American tradition that is entrusted to us. They possess tremendous potential to influence the values of young people and through them, our society.
Buth hese things do not happen automatically. In fact, they have probably been taken for granted, lost in the growing list of expectations for education in this country. Some things should not be taken for granted about sports and their ability to mold exceptional people.
First, we are convinced that sports can educate, ant that they can educate in the virtues identified by Aristotle.
Because of this, sports can become a major contributor to the development of the total individual -- the mind, the body and the spirit of the person. But, it doesn't happen by itself anymore.
Every day, another child learns to dribble a basketball, another high school student learns a new playing rule, and another coach teaches his or her team patience or integrity. Through lessons learned on the court or on the field, students lean and grow into more well-rounded individuals.
Second, we believe that we are in a tremendous struggle to see that sport is used in this educational framework. If we lose that battle, we may actually become a detriment to the education of athletes, and our society as a whole.
Third, we believe that we possess the means to change the direction we are in, and reposition these experiences for the betterment of our society and this nation.
But it's not going to happen by itself anymore.
In order for sports to remain an educational tool, we must guide our young people with patience and passion so that they may grow into individuals of character who we can entrust with the future of this country. We are the educational leaders of this nation and we must take advantage of the positive impact we can have on America's youth.
Learning and common sense mean absolutely nothing without character development. Think about any intelligent person you know who has dealt with problems with alcohol or other addictions. It doesn't take brains to stay out of trouble; it takes values -- values that can be developed through sports participation. Consider the following statement made by Theodore Roosevelt:
"To educate a person in mind and not morals is to educate a menace to society," he said.
As a testament to Roosevelt's statement, witness the myriad people in our prison system who are very intelligent individuals -- a prime example of acquired intelligence being worthless without character development. Any development of ability in a person is counterproductive to our society without the development of character.
As athletic leaders, we set the standards and place that education-based athletics will occupy for the generations to follow. We are the guardians of high school sports and it is our responsibility to serve in that capacity to the best of our ability. In doing so, we must be certain that our coaches and advisors teach honesty, effor, fairness, sportsmanship, racial harmony, proper work ethic and dedication to purpose.
Contained within each of you is the ability to inspire, influence and enlighten the youth of America. Each of you knows someone who has had a mentor and has been positively impacted by someone possessing a patient attitude and a genuinely caring spirit. With perseverance, you can be that person who makes a tremendous difference in the lives of young people. If we all keep this goal in mind, we will indeed succeed.
Will you have the courage and determination to assume this great responsibility? The success or failure of this challenge will be determined by all of us, and our willingness to put forth the effort to do so. It will require the efforts of exceptional people. It's up to each of you -- because that is who you are.
[From NFHS Officials Quarterly, Spring 2007. Ray Kutylo has been a NFHS/SCAF certified sports official for ten years, and starts and referees swim meets for Southern California high schools and the Special Olympics]
Is it certain character traits such as strength, confidence, integrity, respect, charisma, a sense of humor or intelligence?
The ancient Greek philosopher Aristotle offered the following as exceptional qualities in man: courage, temperance, pride, good temper, friendliness, truthfulness and justice.
An how do people become exceptional?
Are these qualities genetically acquired? Do they depend upon a person's parents and the values taught through experiences at home? Or, were they acquired though other means?
We believe that we can develop the positive characteristics of exceptional people through sports.
Everyone is born with tremendous potential, and participation in sports is one of many ways that the young people of America can develop into contributing citizens. High school sports are an American tradition that can teach people fundamental life skills such as teamwork, respect, responsibility, good sportsmanship and integrity, among other positive values and attributes.
At times, it seems that our society often overlooks these positive attributes because of the media attention given to the negative actions of certain athletes, coaches and fans. We are all familiar with altercations between athletes and fans, other athletes' outlandish antics and attitudes exhibited time and time again, and some team rosters that resemble police blotters.
High school sports are an American tradition that is entrusted to us. They possess tremendous potential to influence the values of young people and through them, our society.
Buth hese things do not happen automatically. In fact, they have probably been taken for granted, lost in the growing list of expectations for education in this country. Some things should not be taken for granted about sports and their ability to mold exceptional people.
First, we are convinced that sports can educate, ant that they can educate in the virtues identified by Aristotle.
Because of this, sports can become a major contributor to the development of the total individual -- the mind, the body and the spirit of the person. But, it doesn't happen by itself anymore.
Every day, another child learns to dribble a basketball, another high school student learns a new playing rule, and another coach teaches his or her team patience or integrity. Through lessons learned on the court or on the field, students lean and grow into more well-rounded individuals.
Second, we believe that we are in a tremendous struggle to see that sport is used in this educational framework. If we lose that battle, we may actually become a detriment to the education of athletes, and our society as a whole.
Third, we believe that we possess the means to change the direction we are in, and reposition these experiences for the betterment of our society and this nation.
But it's not going to happen by itself anymore.
In order for sports to remain an educational tool, we must guide our young people with patience and passion so that they may grow into individuals of character who we can entrust with the future of this country. We are the educational leaders of this nation and we must take advantage of the positive impact we can have on America's youth.
Learning and common sense mean absolutely nothing without character development. Think about any intelligent person you know who has dealt with problems with alcohol or other addictions. It doesn't take brains to stay out of trouble; it takes values -- values that can be developed through sports participation. Consider the following statement made by Theodore Roosevelt:
"To educate a person in mind and not morals is to educate a menace to society," he said.
As a testament to Roosevelt's statement, witness the myriad people in our prison system who are very intelligent individuals -- a prime example of acquired intelligence being worthless without character development. Any development of ability in a person is counterproductive to our society without the development of character.
As athletic leaders, we set the standards and place that education-based athletics will occupy for the generations to follow. We are the guardians of high school sports and it is our responsibility to serve in that capacity to the best of our ability. In doing so, we must be certain that our coaches and advisors teach honesty, effor, fairness, sportsmanship, racial harmony, proper work ethic and dedication to purpose.
Contained within each of you is the ability to inspire, influence and enlighten the youth of America. Each of you knows someone who has had a mentor and has been positively impacted by someone possessing a patient attitude and a genuinely caring spirit. With perseverance, you can be that person who makes a tremendous difference in the lives of young people. If we all keep this goal in mind, we will indeed succeed.
Will you have the courage and determination to assume this great responsibility? The success or failure of this challenge will be determined by all of us, and our willingness to put forth the effort to do so. It will require the efforts of exceptional people. It's up to each of you -- because that is who you are.
[From NFHS Officials Quarterly, Spring 2007. Ray Kutylo has been a NFHS/SCAF certified sports official for ten years, and starts and referees swim meets for Southern California high schools and the Special Olympics]
Monday, February 26, 2007
Mortgage Prepayments v. Tax-Deferred Retirement Savings
Commentary by Douglas R. Andrew on
The Tradeoff between Mortgage Prepayments
and Tax-Deferred Retirement Savings
From the Working Papers of the Federal Reserve Bank of Chicago
By Gene Amromin, Jennifer Huang, and Clemens Sialm
(forwarded to me by Adam Ford of the Mortgage Advisors' Group)
One of our own federal banks—Chicago's Federal Reserve Bank—has determined that by accelerating mortgage payments instead of stashing money in tax-deferred accounts, more than one in three Americans are making the "wrong choice ," and are giving up potentially important arbitrage gains.
The mortgage overpayments, the Fed's recent report says, is a "mis-allocation" of funds that costs people $1.5-billion a year. If consumers changed their allocation by not sending excess payments to their mortgage company, and instead put that money in some form of tax-advantaged savings, they would reap a median gain of between 11 and 17 cents per dollar.
This is the very first time the Fed has compared these two kinds of "savings," write the authors. They conclude that "many households have significant amount of money" in both tax-favored and taxable accounts, but that a "large proportion" of American taxpayers apparently are not taking the smarter route to asset allocation, which would put substantially more money in their retirement savings.
I am delighted to see that the Fed's own experts now believe deductible mortgage interest can be an excellent choice for many taxpayers to use in structuring their retirement funding strategy, even though I do not agree with the report's narrow focus on only qualified plans such as IRAs and 401(k)s.
What's more, the paper says arbitrage is a "rather conservative" way of optimizing retirement wealth. Taxpayers gain when interest rates go up, since the newly invested amount earns higher rates than the mortgage debt costs. Should interest rates go down, taxpayers still come out ahead, because they are "likely to exercise their option to refinance," thus "reducing the downside risk of the arbitrage strategy."
The Fed report ends by saying that despite the risks (and remember—there are risks associated with all investment strategies), saving retirement money in a tax-deferred plan "has the additional benefit of providing a good hedge against the combination of housing price risk and liquidity risk."
Finally, the Fed says that taxpayers with incomes over $100,000 a year who use mortgage-deductible interest as part of an arbitrage strategy in retirement accounts would appear to have the most to gain, and the authors find it "puzzling" that more people who are in "better financial shape" than the average taxpayer don't take advantage of this kind of strategy.
I have no idea if the authors of this Federal Reserve paper have read my Missed Fortune books or have heard of me. But it is gratifying to see government experts themselves validate and support a key element of my wealth optimization program. If you would like to read the entire study, it is available at www.MissedFortune.com/ChicagoFedStudy as found in the "working papers" section of the Federal Reserve Bank of Chicago's Web site.
The study also points out that:
“46.1 percent of households are prepaying their mortgage by an average of $3,140 per year”
“only 49 percent of households relied on advice from professionals”
“having access to better financial information (financial advisor or personal education) substantially increases the likelihood of making the right choice”
The key reasons Americans make these mistakes are:
“not having resources to make decisions”
“greater emphasis on savings habits they ‘perceive’ as more liquid”
“limited information on the cost-benefit analysis”
“rational response to ‘institutional’ factors”
The actual quote from the abstract at the beginning of the report reads as follows:
“We show that a significant number of households can perform a tax arbitrage by cutting back on their additional mortgage payments and increasing their contributions to tax-deferred accounts. Using data from the Survey of Consumer Finances, we show that about 38% of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice. For these households, reallocating their savings can yield a mean benefit of 11 to 17 cents per dollar, depending on the choice of investment assets in the tax deferred accounts. In the aggregate, these misallocated savings are costing U.S. households as much as 1.5 billion dollars per year…”
Download the Chicago Federal Reserve Study here
The Tradeoff between Mortgage Prepayments
and Tax-Deferred Retirement Savings
From the Working Papers of the Federal Reserve Bank of Chicago
By Gene Amromin, Jennifer Huang, and Clemens Sialm
(forwarded to me by Adam Ford of the Mortgage Advisors' Group)
One of our own federal banks—Chicago's Federal Reserve Bank—has determined that by accelerating mortgage payments instead of stashing money in tax-deferred accounts, more than one in three Americans are making the "wrong choice ," and are giving up potentially important arbitrage gains.
The mortgage overpayments, the Fed's recent report says, is a "mis-allocation" of funds that costs people $1.5-billion a year. If consumers changed their allocation by not sending excess payments to their mortgage company, and instead put that money in some form of tax-advantaged savings, they would reap a median gain of between 11 and 17 cents per dollar.
This is the very first time the Fed has compared these two kinds of "savings," write the authors. They conclude that "many households have significant amount of money" in both tax-favored and taxable accounts, but that a "large proportion" of American taxpayers apparently are not taking the smarter route to asset allocation, which would put substantially more money in their retirement savings.
I am delighted to see that the Fed's own experts now believe deductible mortgage interest can be an excellent choice for many taxpayers to use in structuring their retirement funding strategy, even though I do not agree with the report's narrow focus on only qualified plans such as IRAs and 401(k)s.
What's more, the paper says arbitrage is a "rather conservative" way of optimizing retirement wealth. Taxpayers gain when interest rates go up, since the newly invested amount earns higher rates than the mortgage debt costs. Should interest rates go down, taxpayers still come out ahead, because they are "likely to exercise their option to refinance," thus "reducing the downside risk of the arbitrage strategy."
The Fed report ends by saying that despite the risks (and remember—there are risks associated with all investment strategies), saving retirement money in a tax-deferred plan "has the additional benefit of providing a good hedge against the combination of housing price risk and liquidity risk."
Finally, the Fed says that taxpayers with incomes over $100,000 a year who use mortgage-deductible interest as part of an arbitrage strategy in retirement accounts would appear to have the most to gain, and the authors find it "puzzling" that more people who are in "better financial shape" than the average taxpayer don't take advantage of this kind of strategy.
I have no idea if the authors of this Federal Reserve paper have read my Missed Fortune books or have heard of me. But it is gratifying to see government experts themselves validate and support a key element of my wealth optimization program. If you would like to read the entire study, it is available at www.MissedFortune.com/ChicagoFedStudy as found in the "working papers" section of the Federal Reserve Bank of Chicago's Web site.
The study also points out that:
“46.1 percent of households are prepaying their mortgage by an average of $3,140 per year”
“only 49 percent of households relied on advice from professionals”
“having access to better financial information (financial advisor or personal education) substantially increases the likelihood of making the right choice”
The key reasons Americans make these mistakes are:
“not having resources to make decisions”
“greater emphasis on savings habits they ‘perceive’ as more liquid”
“limited information on the cost-benefit analysis”
“rational response to ‘institutional’ factors”
The actual quote from the abstract at the beginning of the report reads as follows:
“We show that a significant number of households can perform a tax arbitrage by cutting back on their additional mortgage payments and increasing their contributions to tax-deferred accounts. Using data from the Survey of Consumer Finances, we show that about 38% of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice. For these households, reallocating their savings can yield a mean benefit of 11 to 17 cents per dollar, depending on the choice of investment assets in the tax deferred accounts. In the aggregate, these misallocated savings are costing U.S. households as much as 1.5 billion dollars per year…”
Download the Chicago Federal Reserve Study here
Friday, February 23, 2007
Are Open Houses Effective?
"Now the Open House serves as a showcase for the home, and highlights differences to the buyers who have many more options."
Are Open Houses Still Worth It?
Industry watchers evaluate the practicality of holding open houses in today's market
By John Voket
RISMEDIA, Jan. 16, 2007
In this age of "virtual tours," "talking houses," and
practically every real estate client using the Internet during some segment of their new home search, is the practice of hosting open houses becoming impractical? While precise figures on the exact number of home sales directly resulting from open house visits remain elusive, it is clear that real estate professionals and industry watchers from across the nation believe the "open house" still plays a vital role in the overall strategy of marketing homes for sale.
Sharon Luther, a Realtor, mediator, and member of the Professional Standards
Council, Bay East Association in Castro Valley, CA, bemoaned the lack of hard data to substantiate whether or not open houses serve any relevant purpose.
She suggested in the current market situations where time on the market is
increasing markedly and buyers are driving hard bargains, sellers want to see their Realtor "working."
"I think this may be one of the primary reasons why many agents are forced to hold homes open," Luther said. "But in this day and age, most people are hooked in (to considering certain homes) by the Internet, and almost everybody seriously looking to buy a home is pre-qualified, so many of the reasons why we used to hold open houses are no longer applicable."
Delores A. Conway, Director of the Casden Real Estate Economics Forecast at USC's Lusk Center believes that in a hot market a seller has a lot of power because houses don't stay available for long. "But in a slowing market, houses are staying on longer," she said. "Now the Open House serves as a showcase for the home, and highlights differences to the buyers who have many more options."
Conway believes if Realtors don't hold open houses, their clients will be at a
disadvantage. While she concedes that buyers are doing a lot more homework on the Internet, she said open houses still provide a lot more information than the Internet listing.
"Open houses are typically used in normal times, and the cost to hold them is
justified because of the competition in the market," Conway said. "While percentages of sales from open houses vary widely, some areas attribute a significantly higher number of sales (to the pratice)."
John Ansbach of RECON Intelligence Services agrees that in recent years, agents have been shying away from open houses as a networking and referral tool. "None of our clients are stopping it, but it is no longer the consumers' exclusive experience. While in the future, it might be challenging to prove their value in the larger scope of the overall transaction, I think today open houses still earn their keep," Ansbach said. "For a vast majority of professionals it is still a viable experience, and an exhibit of value to both the seller and the buyer."
According to a 2004 survey by the National Association of Realtors, 87 percent of home buyers found open houses very or somewhat useful in their home search. A 2003 NAR survey showed 72 percent of 3,000 buyers, "…drove by or viewed a house for sale as a result of an Internet search. While 46 percent walked through a house visited online.
Ann Garti, CEO of the Orange County Assoc. of Realtors said judging from the open house announcements in weekend papers in her region, she believes the practice still has purpose. "However, I have no way of knowing the amount of traffic generated," Garti said. She pointed out that Prudential Douglas Elliman do full page ads in the NY Times, and Weichert Realtors also use the full-page print advertisement to showcase open house opportunities extensively.
Ann Guiberson, President/CEO of Pinellas Realtor® Organization in Clearwater, Florida agrees with Garti. "There has been a huge up-tick in open houses; however for years my members have said they are not really effective in helping to sell the home" Guiberson said. "They do it because it makes the seller feel good, and sometimes the Realtor who sits on the open house gets some leads."
Guiberson observed that overall, the real estate industry seems to be returning a era where they are trying to, "go back to the basics. But at the same time, (the industry is) resurrecting tactics that were not especially effective in the last transitioning or buyers' market," she added.
As far as Sharon Luther is concerned, open houses in a world providing a wealth of other electronic options potential buyers can access from the comfort of their own home or desk heavily weigh against this "old school" marketing practice.
Ray's Opinion~~
Open houses can sometimes be effective. It depends on the house and its condition, location, market demand for the home, and price. Of course all of these factors are intertwined, and at the end it is really a judgement call.
While the primary consideration is getting the home sold for the most money in the quickest and most convenient timeframe for the seller, there are other important considerations. An open house will put the seller out of the house for an afternoon. If a trip to the movies or a sports event is planned, terrific. But often sellers are imposed upon when there is an open house scheduled, and if traffic through the open house is light or even non-existent, that is an irritant for the seller. It must also be acknowledged that sellers often spend a lot of time in preparation for an open house, with cleaning and straightening up so that the home shows its best.
If the home is vacant, these considerations are not in play, and subject to location, my team and I may opt to have many open houses.
I generally have at least one open house for each listing. For that open house I invite all of the neighbors to see the home either through door hangers or by direct mail. Neighbors are naturally curious, and many like to know what is going on with home sales in their area, but my reason for inviting the neighbors is to create some buzz about the house. Neighbors like the neighborhood, and they may have friends who are looking to buy a home in the neighborhood. I want them to be thinking about my sellers' home when they hear of someone who wants to buy a home.
I also may have a Sunday Home Tour that starts and ends with my sellers' home. Information on the Sunday Home Tour can be found at www.sundayhometour.net . Basically, I show six comparable homes on a Sunday afternoon. After all, nearly all buyers will want to see not just my seller's home, but some other homes also before they make the decision to buy. It is the rare buyer who sees only one home and says "This is it!" The Sunday Home Tour starts and ends with my listed home, and we spend ten minutes only in each home. One big benefit to the seller is that the family is not out of the house for the entire afternoon. Many times they can just take a walk around the neighborhood, then resume their day.
What most Realtors will not tell their clients is that the primary use of open houses is to get buyer clients, and statistically, it is fairly rare for a buyer to walk into an open house and actually end up buying that house. I try to up that statistic as much as possible, but the fact remains that the great majority of people who walk into an open house will not buy that house.
Open houses are just one part of the marketing effort that I plan for my listings. If you want your home sold, give me a call at 661-287-9164.
Are Open Houses Still Worth It?
Industry watchers evaluate the practicality of holding open houses in today's market
By John Voket
RISMEDIA, Jan. 16, 2007
In this age of "virtual tours," "talking houses," and
practically every real estate client using the Internet during some segment of their new home search, is the practice of hosting open houses becoming impractical? While precise figures on the exact number of home sales directly resulting from open house visits remain elusive, it is clear that real estate professionals and industry watchers from across the nation believe the "open house" still plays a vital role in the overall strategy of marketing homes for sale.
Sharon Luther, a Realtor, mediator, and member of the Professional Standards
Council, Bay East Association in Castro Valley, CA, bemoaned the lack of hard data to substantiate whether or not open houses serve any relevant purpose.
She suggested in the current market situations where time on the market is
increasing markedly and buyers are driving hard bargains, sellers want to see their Realtor "working."
"I think this may be one of the primary reasons why many agents are forced to hold homes open," Luther said. "But in this day and age, most people are hooked in (to considering certain homes) by the Internet, and almost everybody seriously looking to buy a home is pre-qualified, so many of the reasons why we used to hold open houses are no longer applicable."
Delores A. Conway, Director of the Casden Real Estate Economics Forecast at USC's Lusk Center believes that in a hot market a seller has a lot of power because houses don't stay available for long. "But in a slowing market, houses are staying on longer," she said. "Now the Open House serves as a showcase for the home, and highlights differences to the buyers who have many more options."
Conway believes if Realtors don't hold open houses, their clients will be at a
disadvantage. While she concedes that buyers are doing a lot more homework on the Internet, she said open houses still provide a lot more information than the Internet listing.
"Open houses are typically used in normal times, and the cost to hold them is
justified because of the competition in the market," Conway said. "While percentages of sales from open houses vary widely, some areas attribute a significantly higher number of sales (to the pratice)."
John Ansbach of RECON Intelligence Services agrees that in recent years, agents have been shying away from open houses as a networking and referral tool. "None of our clients are stopping it, but it is no longer the consumers' exclusive experience. While in the future, it might be challenging to prove their value in the larger scope of the overall transaction, I think today open houses still earn their keep," Ansbach said. "For a vast majority of professionals it is still a viable experience, and an exhibit of value to both the seller and the buyer."
According to a 2004 survey by the National Association of Realtors, 87 percent of home buyers found open houses very or somewhat useful in their home search. A 2003 NAR survey showed 72 percent of 3,000 buyers, "…drove by or viewed a house for sale as a result of an Internet search. While 46 percent walked through a house visited online.
Ann Garti, CEO of the Orange County Assoc. of Realtors said judging from the open house announcements in weekend papers in her region, she believes the practice still has purpose. "However, I have no way of knowing the amount of traffic generated," Garti said. She pointed out that Prudential Douglas Elliman do full page ads in the NY Times, and Weichert Realtors also use the full-page print advertisement to showcase open house opportunities extensively.
Ann Guiberson, President/CEO of Pinellas Realtor® Organization in Clearwater, Florida agrees with Garti. "There has been a huge up-tick in open houses; however for years my members have said they are not really effective in helping to sell the home" Guiberson said. "They do it because it makes the seller feel good, and sometimes the Realtor who sits on the open house gets some leads."
Guiberson observed that overall, the real estate industry seems to be returning a era where they are trying to, "go back to the basics. But at the same time, (the industry is) resurrecting tactics that were not especially effective in the last transitioning or buyers' market," she added.
As far as Sharon Luther is concerned, open houses in a world providing a wealth of other electronic options potential buyers can access from the comfort of their own home or desk heavily weigh against this "old school" marketing practice.
Ray's Opinion~~
Open houses can sometimes be effective. It depends on the house and its condition, location, market demand for the home, and price. Of course all of these factors are intertwined, and at the end it is really a judgement call.
While the primary consideration is getting the home sold for the most money in the quickest and most convenient timeframe for the seller, there are other important considerations. An open house will put the seller out of the house for an afternoon. If a trip to the movies or a sports event is planned, terrific. But often sellers are imposed upon when there is an open house scheduled, and if traffic through the open house is light or even non-existent, that is an irritant for the seller. It must also be acknowledged that sellers often spend a lot of time in preparation for an open house, with cleaning and straightening up so that the home shows its best.
If the home is vacant, these considerations are not in play, and subject to location, my team and I may opt to have many open houses.
I generally have at least one open house for each listing. For that open house I invite all of the neighbors to see the home either through door hangers or by direct mail. Neighbors are naturally curious, and many like to know what is going on with home sales in their area, but my reason for inviting the neighbors is to create some buzz about the house. Neighbors like the neighborhood, and they may have friends who are looking to buy a home in the neighborhood. I want them to be thinking about my sellers' home when they hear of someone who wants to buy a home.
I also may have a Sunday Home Tour that starts and ends with my sellers' home. Information on the Sunday Home Tour can be found at www.sundayhometour.net . Basically, I show six comparable homes on a Sunday afternoon. After all, nearly all buyers will want to see not just my seller's home, but some other homes also before they make the decision to buy. It is the rare buyer who sees only one home and says "This is it!" The Sunday Home Tour starts and ends with my listed home, and we spend ten minutes only in each home. One big benefit to the seller is that the family is not out of the house for the entire afternoon. Many times they can just take a walk around the neighborhood, then resume their day.
What most Realtors will not tell their clients is that the primary use of open houses is to get buyer clients, and statistically, it is fairly rare for a buyer to walk into an open house and actually end up buying that house. I try to up that statistic as much as possible, but the fact remains that the great majority of people who walk into an open house will not buy that house.
Open houses are just one part of the marketing effort that I plan for my listings. If you want your home sold, give me a call at 661-287-9164.
Thursday, February 22, 2007
Changes in MLS and The Real Blog
For my loyal readers, I apologize for not posting on the Blog lately. We have had some upgrades to the systems, and you know how that goes sometimes. The 'new and improved' systems have to go out for a shakedown cruise before taking passengers.
Specifically, our main database resource, CrisNet MLS is no more, and has been replaced by the SoCalMLS. The new functionality is similar to AV's Rapatonni system, and includes an extended area including all of the area south of Santa Clarita including the greater Los Angeles area plus Orange County. At this point, both Simi and Conejo Valley Assns. of Realtors have opted out of this extended MLS system, preferring to retain their small local MLS areas. Antelope Valley continues as before, with its own MLS system. I will remain a member of the Greater Antelope Valley Assn. of Realtors (GAVAR) in addition to my membership in the massive SoCalMLS system.
This Blog has some increased functionality, with the purchase of Blogger by Google. I have had some problems getting in here to post lately with the upgrade, but that problem seems to have been resolved.
I have initiated some new marketing efforts which some of you may notice, and have some exciting new listings coming along that are great homes! And the people that I am working with are terrific... and it is indeed an honor to be working with them!
More later...
Specifically, our main database resource, CrisNet MLS is no more, and has been replaced by the SoCalMLS. The new functionality is similar to AV's Rapatonni system, and includes an extended area including all of the area south of Santa Clarita including the greater Los Angeles area plus Orange County. At this point, both Simi and Conejo Valley Assns. of Realtors have opted out of this extended MLS system, preferring to retain their small local MLS areas. Antelope Valley continues as before, with its own MLS system. I will remain a member of the Greater Antelope Valley Assn. of Realtors (GAVAR) in addition to my membership in the massive SoCalMLS system.
This Blog has some increased functionality, with the purchase of Blogger by Google. I have had some problems getting in here to post lately with the upgrade, but that problem seems to have been resolved.
I have initiated some new marketing efforts which some of you may notice, and have some exciting new listings coming along that are great homes! And the people that I am working with are terrific... and it is indeed an honor to be working with them!
More later...
Thursday, February 08, 2007
Realtor Economist Has Rosy Outlook
The NAR usually looks at the housing market through rose-colored glasses, and this year's market forecast is pretty rosy. Despite local conditions that has shown better than a 30% drop in sales, record numbers of listings on the market leading up to the Christmas slowdown, a rise in foreclosure activity, and a (slight) drop in prices when measured within the individual neighborhoods; the national association continues to maintain that the so-called bottom has been reached and the future looks pretty good.
To be fair and balanced... there is an uptick in activity since the first of the year, but this may be a little pent-up demand from the normal holiday slowdown. The numbers of listings coming on the market has risen, but this also may be the result of normal post-holiday activity. Some buyers, groundhog-like, have poked their heads out of the hole but they saw their shadow in my opinion, and a longer winter in housing is indicated than the Realtor economist shows by his comments in the following article.
I am cautious by nature. That's what my clients like about me. There are buyer opportunities for serious buyers, and as always sellers should price in the land of reality and not in fantasyland.
~~ Ray
Realtor forecast calls for home-price growth below 2%
Wednesday, February 07, 2007
Inman News
Existing-home sales are expected to drop slightly this year compared to 2006, according to the latest National Association of Realtors housing market forecast, and to rise in 2008.
There were 6.48 million existing-home sales in 2006, which is the third-highest sales total on record. This year the association projects 6.48 million existing-home sales, followed by 6.64 million sales in 2008.
New-home sales, after reaching the fourth-highest level on record at 1.06 million in 2006, are projected to fall to 961,000 this year and then rise to 971,000 in 2008.
David Lereah, chief economist for the Realtor group, said in a statement, "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008. New-home sales should continue to slide, but we look for that sector to turn around later in the year."
While home sales "may appear weak in comparison with the record surge in 2005," Lereah said that sales "will be sustained at historically high levels."
Housing starts are expected to total 1.52 million in 2007, down from 1.8 million units in 2006, and then increase to 1.56 million next year, according to the forecast. "When new-home demand begins to catch up with supply, builders will slowly increase construction -- probably in the second half of this year," Lereah stated.
The 30-year fixed-rate mortgage is forecast to rise to 6.7 percent by the second half of the year. Freddie Mac reported the 30-year fixed rate at 6.14 percent in December, and it has been trending up since. "Mortgage interest rates remain favorable, and a gradual rise means potential buyers have some time to weigh purchase decisions," Lereah said. "When existing-home supplies become more balanced between buyers and sellers this spring, we'll see some modest price gains."
The national median existing-home price is expected to rise 1.9 percent to $226,200 in 2007, after rising 1.1 percent in 2006. The median new-home price is expected to increase 1.8 percent to $249,800 in 2007, and in 2008 existing-home prices are forecast to rise 3.2 percent while new-home prices are forecast to rise 3.4 percent.
The unemployment rate is expected to average 4.7 percent in 2007, compared with 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is projected at 2 percent this year, down from 3.2 percent in 2006, while growth in the U.S. gross domestic product is expected to be 2.8 percent in 2007, down from 3.4 percent in 2006. Inflation-adjusted disposable personal income will probably rise 3.7 percent in 2007, up from a gain of 2.7 percent in 2006.
To be fair and balanced... there is an uptick in activity since the first of the year, but this may be a little pent-up demand from the normal holiday slowdown. The numbers of listings coming on the market has risen, but this also may be the result of normal post-holiday activity. Some buyers, groundhog-like, have poked their heads out of the hole but they saw their shadow in my opinion, and a longer winter in housing is indicated than the Realtor economist shows by his comments in the following article.
I am cautious by nature. That's what my clients like about me. There are buyer opportunities for serious buyers, and as always sellers should price in the land of reality and not in fantasyland.
~~ Ray
Realtor forecast calls for home-price growth below 2%
Wednesday, February 07, 2007
Inman News
Existing-home sales are expected to drop slightly this year compared to 2006, according to the latest National Association of Realtors housing market forecast, and to rise in 2008.
There were 6.48 million existing-home sales in 2006, which is the third-highest sales total on record. This year the association projects 6.48 million existing-home sales, followed by 6.64 million sales in 2008.
New-home sales, after reaching the fourth-highest level on record at 1.06 million in 2006, are projected to fall to 961,000 this year and then rise to 971,000 in 2008.
David Lereah, chief economist for the Realtor group, said in a statement, "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008. New-home sales should continue to slide, but we look for that sector to turn around later in the year."
While home sales "may appear weak in comparison with the record surge in 2005," Lereah said that sales "will be sustained at historically high levels."
Housing starts are expected to total 1.52 million in 2007, down from 1.8 million units in 2006, and then increase to 1.56 million next year, according to the forecast. "When new-home demand begins to catch up with supply, builders will slowly increase construction -- probably in the second half of this year," Lereah stated.
The 30-year fixed-rate mortgage is forecast to rise to 6.7 percent by the second half of the year. Freddie Mac reported the 30-year fixed rate at 6.14 percent in December, and it has been trending up since. "Mortgage interest rates remain favorable, and a gradual rise means potential buyers have some time to weigh purchase decisions," Lereah said. "When existing-home supplies become more balanced between buyers and sellers this spring, we'll see some modest price gains."
The national median existing-home price is expected to rise 1.9 percent to $226,200 in 2007, after rising 1.1 percent in 2006. The median new-home price is expected to increase 1.8 percent to $249,800 in 2007, and in 2008 existing-home prices are forecast to rise 3.2 percent while new-home prices are forecast to rise 3.4 percent.
The unemployment rate is expected to average 4.7 percent in 2007, compared with 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is projected at 2 percent this year, down from 3.2 percent in 2006, while growth in the U.S. gross domestic product is expected to be 2.8 percent in 2007, down from 3.4 percent in 2006. Inflation-adjusted disposable personal income will probably rise 3.7 percent in 2007, up from a gain of 2.7 percent in 2006.
Tuesday, February 06, 2007
How Big Is The Foreclosure Discount?
How Big Is The Foreclosure Discount?
by Peter Miller
Here's a puzzle: If a lender sells a foreclosed home what kind of discount will be available to buyers? Is it possible that there will be no discount, some discount or a huge discount?
These are tough questions because if local markets are strong enough, there's no discount at all according to Christopher Cagan, Ph.D., director of research and analytics at First American Real Estate Solutions.
"In the booming years of 2004 and 2005, foreclosure rates reached historical lows," says Cagan in a new report, A Ripple, Not a Tidal Wave: Foreclosure Prevalence and Foreclosure Discount.
"Homeowners who found themselves in difficulties could almost always sell their residences quickly and at a good price, thus avoiding damage to one's credit rating and receiving the benefit of remaining equity after paying mortgage balances and commissions. In cases where a lender did have to foreclose on a property, it could usually be sold readily at market price, without having to offer a substantial discount to encourage the sale of the foreclosed property."
But the good times of 2004 and 2005 largely disappeared in 2006. Cagan, an economist, looked at 815,000 home sales in the first half of 2006 -- including almost 25,000 foreclosures -- and found evidence of significant foreclosure discounts.
In California, for example, Cagan found that the typical home sold for $494,000 while the median foreclosure price was $435,000 -- that's a difference of $59,000 or 13.5 percent.
There's no doubt that $59,000 is a lot of money but there's a catch: Cagan found that the big price differential between homes sold at market value and those sold through foreclosure was not the result of an apples-to-apples comparison. In practice Cagan found that lower-priced homes were foreclosed more frequently, so foreclosure sale prices appear lower than a comparison of like homes might show.
"On the whole," says Cagan, "the foreclosure properties sold for less than they had been valued for -- less than their value would have been had they been offered on the market as non-foreclosed properties. This is what he calls foreclosure discount. For instance, discounts had been almost absent in California in 2004 and 2005 when properties (foreclosed or not) could be sold almost immediately at excellent prices. In the first half of 2006 -- when homes could take several months to sell and price reductions were often required -- foreclosing lenders had an incentive to offer at least a small discount to move their properties quickly."
In other words, the foreclosure discount in California was not $59,000. It was something lower. How much lower? When Cagan compared foreclosed homes with properties of similar size, location and condition, he found a $25,000 price differential -- a property with a fair market value of $460,000 typically sold for just $435,000 through the foreclosure process -- a difference of 5.4 percent.
Nationwide, because the market was not generally as strong in the first half of 2006 as the California market, Cagan found a much steeper foreclosure discount.
"For the first half of 2006, the foreclosure discount evaluated on a national basis was 14.2 percent. On that very general level, this is the discount that lenders accepted (beyond the background rises and declines of the general market) in order to sell their foreclosure properties."
The national figure, however, may not apply to individual states and communities. Such factors as local economic trends and population growth impact foreclosure rates -- the lower the foreclosure rate the lower the foreclosure discount.
For instance, Cagan found that in the first six months of 2006 the foreclosure discount was 1.9 percent in Arizona but a whopping 27.8 percent in Missouri. In local areas, the foreclosure discount was just .5 percent in Brevard County on the east coast of Florida but 46.6 percent in the city of St. Louis. Sometimes the discounts differed enormously in nearby jurisdictions: The foreclosure discount was 20 percent in the city of Baltimore -- and just 10.7 percent in surrounding Baltimore County.
What does it all mean?
How a home is sold -- whether in the open market or by foreclosure -- can make a substantial difference in terms of the sale price.
A home sold by foreclosure is likely to be sold at a discount, but not always.
The size of the foreclosure discount varies by location. Generally, the better the local economy the smaller the foreclosure discount.
There may not be any foreclosure discount in communities that have a growing population, an expanding job base and strong real estate sales.
Owners facing foreclosure are better served selling homes directly rather than waiting for their properties to be auctioned off.
Lenders have a stake in avoiding foreclosure. Even with private mortgage insurance (MI), they can still face substantial losses, especially in slow markets. For this reason lenders would greatly prefer that owners sell in the open market and fully repay loans rather than having a property go to foreclosure.
The more homes on the marketplace through foreclosure, the greater the foreclosure discount. In particular, Cagan found that "in markets where foreclosures constitute 8 percent or more of total market sales, foreclosure discounts are likely to be particularly large -- often 20 percent or deeper."
"What the First American study demonstrates is that foreclosure discounts are real in many markets," says Jim Saccacio, Chairman and CEO at RealtyTrac.com, the leading online marketplace for foreclosure properties. "At the same time, it's plain that lenders, mortgage insurers and borrowers have a mutual interest in avoiding foreclosures and the losses they typically represent, especially in markets where foreclosures are common and discounts are deep."
~~ from RealtyTrac.com
by Peter Miller
Here's a puzzle: If a lender sells a foreclosed home what kind of discount will be available to buyers? Is it possible that there will be no discount, some discount or a huge discount?
These are tough questions because if local markets are strong enough, there's no discount at all according to Christopher Cagan, Ph.D., director of research and analytics at First American Real Estate Solutions.
"In the booming years of 2004 and 2005, foreclosure rates reached historical lows," says Cagan in a new report, A Ripple, Not a Tidal Wave: Foreclosure Prevalence and Foreclosure Discount.
"Homeowners who found themselves in difficulties could almost always sell their residences quickly and at a good price, thus avoiding damage to one's credit rating and receiving the benefit of remaining equity after paying mortgage balances and commissions. In cases where a lender did have to foreclose on a property, it could usually be sold readily at market price, without having to offer a substantial discount to encourage the sale of the foreclosed property."
But the good times of 2004 and 2005 largely disappeared in 2006. Cagan, an economist, looked at 815,000 home sales in the first half of 2006 -- including almost 25,000 foreclosures -- and found evidence of significant foreclosure discounts.
In California, for example, Cagan found that the typical home sold for $494,000 while the median foreclosure price was $435,000 -- that's a difference of $59,000 or 13.5 percent.
There's no doubt that $59,000 is a lot of money but there's a catch: Cagan found that the big price differential between homes sold at market value and those sold through foreclosure was not the result of an apples-to-apples comparison. In practice Cagan found that lower-priced homes were foreclosed more frequently, so foreclosure sale prices appear lower than a comparison of like homes might show.
"On the whole," says Cagan, "the foreclosure properties sold for less than they had been valued for -- less than their value would have been had they been offered on the market as non-foreclosed properties. This is what he calls foreclosure discount. For instance, discounts had been almost absent in California in 2004 and 2005 when properties (foreclosed or not) could be sold almost immediately at excellent prices. In the first half of 2006 -- when homes could take several months to sell and price reductions were often required -- foreclosing lenders had an incentive to offer at least a small discount to move their properties quickly."
In other words, the foreclosure discount in California was not $59,000. It was something lower. How much lower? When Cagan compared foreclosed homes with properties of similar size, location and condition, he found a $25,000 price differential -- a property with a fair market value of $460,000 typically sold for just $435,000 through the foreclosure process -- a difference of 5.4 percent.
Nationwide, because the market was not generally as strong in the first half of 2006 as the California market, Cagan found a much steeper foreclosure discount.
"For the first half of 2006, the foreclosure discount evaluated on a national basis was 14.2 percent. On that very general level, this is the discount that lenders accepted (beyond the background rises and declines of the general market) in order to sell their foreclosure properties."
The national figure, however, may not apply to individual states and communities. Such factors as local economic trends and population growth impact foreclosure rates -- the lower the foreclosure rate the lower the foreclosure discount.
For instance, Cagan found that in the first six months of 2006 the foreclosure discount was 1.9 percent in Arizona but a whopping 27.8 percent in Missouri. In local areas, the foreclosure discount was just .5 percent in Brevard County on the east coast of Florida but 46.6 percent in the city of St. Louis. Sometimes the discounts differed enormously in nearby jurisdictions: The foreclosure discount was 20 percent in the city of Baltimore -- and just 10.7 percent in surrounding Baltimore County.
What does it all mean?
How a home is sold -- whether in the open market or by foreclosure -- can make a substantial difference in terms of the sale price.
A home sold by foreclosure is likely to be sold at a discount, but not always.
The size of the foreclosure discount varies by location. Generally, the better the local economy the smaller the foreclosure discount.
There may not be any foreclosure discount in communities that have a growing population, an expanding job base and strong real estate sales.
Owners facing foreclosure are better served selling homes directly rather than waiting for their properties to be auctioned off.
Lenders have a stake in avoiding foreclosure. Even with private mortgage insurance (MI), they can still face substantial losses, especially in slow markets. For this reason lenders would greatly prefer that owners sell in the open market and fully repay loans rather than having a property go to foreclosure.
The more homes on the marketplace through foreclosure, the greater the foreclosure discount. In particular, Cagan found that "in markets where foreclosures constitute 8 percent or more of total market sales, foreclosure discounts are likely to be particularly large -- often 20 percent or deeper."
"What the First American study demonstrates is that foreclosure discounts are real in many markets," says Jim Saccacio, Chairman and CEO at RealtyTrac.com, the leading online marketplace for foreclosure properties. "At the same time, it's plain that lenders, mortgage insurers and borrowers have a mutual interest in avoiding foreclosures and the losses they typically represent, especially in markets where foreclosures are common and discounts are deep."
~~ from RealtyTrac.com
California Foreclosure Data Mixed
After claiming the top spot for the three previous months, California’s monthly foreclosure total fell to second place thanks to a sharp month-over-month drop in foreclosure activity. The state reported 12,623 properties entering some stage of foreclosure, a 34 percent decrease from the previous month but still up nearly 65 percent from December 2005.
Locally, distressed properties appear up, with more NODs and Trustee's Sales filed. While many sellers are able to cure the default or negotiate an agreement with the lender, the rate of distressed properties coming on the market appears to be on the upswing. One indication of this is the higher numbers of 'short sale' properties making their appearance on the MLS.
While we appreciate the stress that sellers undergo in the pre-foreclosure process, and always treat them with the respect they deserve, the fact of the matter is that when buyers appear for purchasing these pre-foreclosure properties, sellers who are unrepresented often get screwed by these sharks.
If you are a seller who has a notice of default your first call should be to me. Immediately. The more time there is before the home is actually forced to sale, the more options you have. Definitely don't be like the lady I talked with last week, who had waited until the Notice of Trustee's Sale was stapled to her front door. When I asked her if she had been in contact with the lender, she said no. Three weeks (and less, in this case!) from sale is not the point to be getting a Realtor experienced in foreclosures involved. Her only hope at that point was to listen to my advice, price the home way low for fast sale, and try to get the bank to delay the sale and let an escrow close with a short sale.
So you are wondering what happened with the lady? She listened to a novice Realtor who listed the property well over market value, since the lady thought that some fool would come down the street ready to bail her out of her bad financial decisions, and give her some walking away money.
Yes, my friends, there are idiots in the world. The bank will take this property back. We'll see it on the market later on as an REO.
As a buyer, you've got to be doing some work to make it to the 'A' list. Everyone is 'interested in buying a foreclosure for nothing.' If you are serious about it, give me a call. We will get going, but you won't be getting a treasure-trove of leads and information unless you and I are meeting and agreeing, and you talk seriously with a lender and get pre-approved (yes, pre-approved subject to identification of the property and the appraisal coming in -- with no other conditions). There's no fooling around, and don't be big-talking me. You will have to be ready to take action when the opportunity arrives. Think you can make the cut? Give me a call and let's get started.
Buying foreclosures aren't for everyone. To many people talk a good game but fold up and blow away in the end. And if that sentence offends you, foreclosures aren't for you. But for serious people, there is opportunity.
As for the sellers who are in foreclosure... We are really sorry that you got to this point. We really are. But buyers buy foreclosures and pre-foreclosures expecting a discount off market. And in this, a gently falling market, you may very well be upside-down between the note, the late payments, penalties and fees, and sales costs, including sales commission. Yes, commission. This is not a subsidized public service, this is the market. A fair commission is charged.
If you are a seller in foreclosure, give us a call (immediately... right? Nod your head!). We will do our very best for you and get you on your way to your future, where you will hopefully be a little more conservative on your risk-taking, or that you will have better fortune than what life has thown at you lately.
Let's make is a win, win and win.
Locally, distressed properties appear up, with more NODs and Trustee's Sales filed. While many sellers are able to cure the default or negotiate an agreement with the lender, the rate of distressed properties coming on the market appears to be on the upswing. One indication of this is the higher numbers of 'short sale' properties making their appearance on the MLS.
While we appreciate the stress that sellers undergo in the pre-foreclosure process, and always treat them with the respect they deserve, the fact of the matter is that when buyers appear for purchasing these pre-foreclosure properties, sellers who are unrepresented often get screwed by these sharks.
If you are a seller who has a notice of default your first call should be to me. Immediately. The more time there is before the home is actually forced to sale, the more options you have. Definitely don't be like the lady I talked with last week, who had waited until the Notice of Trustee's Sale was stapled to her front door. When I asked her if she had been in contact with the lender, she said no. Three weeks (and less, in this case!) from sale is not the point to be getting a Realtor experienced in foreclosures involved. Her only hope at that point was to listen to my advice, price the home way low for fast sale, and try to get the bank to delay the sale and let an escrow close with a short sale.
So you are wondering what happened with the lady? She listened to a novice Realtor who listed the property well over market value, since the lady thought that some fool would come down the street ready to bail her out of her bad financial decisions, and give her some walking away money.
Yes, my friends, there are idiots in the world. The bank will take this property back. We'll see it on the market later on as an REO.
As a buyer, you've got to be doing some work to make it to the 'A' list. Everyone is 'interested in buying a foreclosure for nothing.' If you are serious about it, give me a call. We will get going, but you won't be getting a treasure-trove of leads and information unless you and I are meeting and agreeing, and you talk seriously with a lender and get pre-approved (yes, pre-approved subject to identification of the property and the appraisal coming in -- with no other conditions). There's no fooling around, and don't be big-talking me. You will have to be ready to take action when the opportunity arrives. Think you can make the cut? Give me a call and let's get started.
Buying foreclosures aren't for everyone. To many people talk a good game but fold up and blow away in the end. And if that sentence offends you, foreclosures aren't for you. But for serious people, there is opportunity.
As for the sellers who are in foreclosure... We are really sorry that you got to this point. We really are. But buyers buy foreclosures and pre-foreclosures expecting a discount off market. And in this, a gently falling market, you may very well be upside-down between the note, the late payments, penalties and fees, and sales costs, including sales commission. Yes, commission. This is not a subsidized public service, this is the market. A fair commission is charged.
If you are a seller in foreclosure, give us a call (immediately... right? Nod your head!). We will do our very best for you and get you on your way to your future, where you will hopefully be a little more conservative on your risk-taking, or that you will have better fortune than what life has thown at you lately.
Let's make is a win, win and win.
Monday, February 05, 2007
10 Features That Can Help Sell a Home
Daily Real Estate News January 31, 2007
In this tough market even small things can help a home sell faster. Denver home inspector Alan Gould lists these 10 items that home buyers often want and, therefore, are worth marketing when you sell your home.
1. Outside electrical outlets — especially those installed high up for holiday lights.
2. Permanent grill with gas service.
3. Electrical service for a future hot tub or fountain.
4. Security lights.
5. Speaker wires that are installed throughout the house, especially if a diagram is available.
6. Exterior speakers — if they stay with the home.
7. Lawn sprinkler system (note whether it has been winterized).
8. Availability of drawings and permits for substantial renovation work.
9. Storage that is both obvious and hidden, including a crawl space with lights and any oversized closets.
10. Swing-out drawers in the kitchen pantry.
In this tough market even small things can help a home sell faster. Denver home inspector Alan Gould lists these 10 items that home buyers often want and, therefore, are worth marketing when you sell your home.
1. Outside electrical outlets — especially those installed high up for holiday lights.
2. Permanent grill with gas service.
3. Electrical service for a future hot tub or fountain.
4. Security lights.
5. Speaker wires that are installed throughout the house, especially if a diagram is available.
6. Exterior speakers — if they stay with the home.
7. Lawn sprinkler system (note whether it has been winterized).
8. Availability of drawings and permits for substantial renovation work.
9. Storage that is both obvious and hidden, including a crawl space with lights and any oversized closets.
10. Swing-out drawers in the kitchen pantry.
Friday, February 02, 2007
Local Realtor Assn. Whistles a Happy Tune
This week's Realtor Report from the Southland Regional Assn. of Realtors has a couple of articles about this past year's sales activity in the San Fernando and Santa Clarita Valleys that contained some interesting quotes from association officers.
San Fernando Valley
Members of the SRAR negotiated the sale of 9,832 single family homes and 3,658 condominiums during 2006, the Association reported. The SFR sales represented a 24.7% decline in sales from the 2005 figure. Likewise, condo sales were off 23.5% 2005 figures.
Despite the decrease in unit sales, the median price of a single family residence rose 6.4% to a record high of $605,917, and the median price of a condo rose 8.5% to a record $394,917.
According to Realtor Report, "The fact that prices not only held firm, but showed modest gains during a period of slowing sales refutes claims that the residential resale market is in recession. That, Realtors said, is good news for buyers, sellers, and the local economy."
Winnie Davis, the 2007 president of SRAR went on to say, "The price of homes in the San Fernando Valley during 2006 hit a point where buyers finally said, 'Enough. No More.' and that's a good thing. Buyers simply refused to continue engaging in bidding wars with multiple contenders who were scratching over an extremely limited inventory. Now the market is working its way through a readjustment period."
Davis continued, "Sellers must post realistic asking prices and buyers finally have a wider selection and more options, but savvy buyers know not to expect deep discounts. Realtors must really educate buyers and sellers about the realities of this new, balanced market."
The Realtor Report opined "In fact, unlike some parts of the country where prices also rose too high too fast, no one is predicting a major downturn in the local market or a collapse in prices."
In fact, the SRAR website contains a poll of local Realtors on their view of the next year in housing. Nearly a clear majority at 45% predict that 2007 will be worse than 2006, while 37% predict that it will be better. The balance think it will be about the same.
Santa Clarita Valley
Realtors sold a total of 3,746 homes in Santa Clarita in 2006, according to Realtor Report, with 2,531 single family residences with the difference in condominiums. This was 32.1% off the SFR pace in 2005 and 29.6% off the condo number of 2005. Like the San Fernando Valley statistics, the median prices rose nearly 7% over the year for both SFRs and condos.
According to Larry Gasinski, the 2007 president of the Santa Clarita division of SRAR, "Sales are slowing down not for a lack of demand, but because prices increased too high too fast. More buyers are coming out now as they realize that the feeding frenzy is over, the selection is wider, interest rates are still near historical lows and that sellers are setting realistic prices and are open to negotiation."
Jim Link, the Association's executive vice president, believes the market readjustment is nearly over and that activity will increase in coming weeks and months, according to the article. "Only a few sellers still cling to the false expectation of a 25% return and only a few buyers incorrectly think they can get steep discounts," Link said. "Everyone else understands that while the sellers market is over, what we have today is a balanced market that, even with a larger ino way suddenly puts buyers in control."
There was a total of 1,919 active listing in the SCV at the end of December, up 81.2% from a year ago, but off 12.1% from the November tally. At the current pace of sales, that represents a 6.9 month inventory, only slightly above the 5 or 6 month range regarded as a balanced market, but not large enough to sway negotiating leverage to buyers. At the peak of the sellers' market the inventory often was near zero or less than a one month supply.
"Properly priced homes are selling," Gasinski said. "Frankly, getting back to a normal market is a wonderful thing for everyone."
San Fernando Valley
Members of the SRAR negotiated the sale of 9,832 single family homes and 3,658 condominiums during 2006, the Association reported. The SFR sales represented a 24.7% decline in sales from the 2005 figure. Likewise, condo sales were off 23.5% 2005 figures.
Despite the decrease in unit sales, the median price of a single family residence rose 6.4% to a record high of $605,917, and the median price of a condo rose 8.5% to a record $394,917.
According to Realtor Report, "The fact that prices not only held firm, but showed modest gains during a period of slowing sales refutes claims that the residential resale market is in recession. That, Realtors said, is good news for buyers, sellers, and the local economy."
Winnie Davis, the 2007 president of SRAR went on to say, "The price of homes in the San Fernando Valley during 2006 hit a point where buyers finally said, 'Enough. No More.' and that's a good thing. Buyers simply refused to continue engaging in bidding wars with multiple contenders who were scratching over an extremely limited inventory. Now the market is working its way through a readjustment period."
Davis continued, "Sellers must post realistic asking prices and buyers finally have a wider selection and more options, but savvy buyers know not to expect deep discounts. Realtors must really educate buyers and sellers about the realities of this new, balanced market."
The Realtor Report opined "In fact, unlike some parts of the country where prices also rose too high too fast, no one is predicting a major downturn in the local market or a collapse in prices."
In fact, the SRAR website contains a poll of local Realtors on their view of the next year in housing. Nearly a clear majority at 45% predict that 2007 will be worse than 2006, while 37% predict that it will be better. The balance think it will be about the same.
Santa Clarita Valley
Realtors sold a total of 3,746 homes in Santa Clarita in 2006, according to Realtor Report, with 2,531 single family residences with the difference in condominiums. This was 32.1% off the SFR pace in 2005 and 29.6% off the condo number of 2005. Like the San Fernando Valley statistics, the median prices rose nearly 7% over the year for both SFRs and condos.
According to Larry Gasinski, the 2007 president of the Santa Clarita division of SRAR, "Sales are slowing down not for a lack of demand, but because prices increased too high too fast. More buyers are coming out now as they realize that the feeding frenzy is over, the selection is wider, interest rates are still near historical lows and that sellers are setting realistic prices and are open to negotiation."
Jim Link, the Association's executive vice president, believes the market readjustment is nearly over and that activity will increase in coming weeks and months, according to the article. "Only a few sellers still cling to the false expectation of a 25% return and only a few buyers incorrectly think they can get steep discounts," Link said. "Everyone else understands that while the sellers market is over, what we have today is a balanced market that, even with a larger ino way suddenly puts buyers in control."
There was a total of 1,919 active listing in the SCV at the end of December, up 81.2% from a year ago, but off 12.1% from the November tally. At the current pace of sales, that represents a 6.9 month inventory, only slightly above the 5 or 6 month range regarded as a balanced market, but not large enough to sway negotiating leverage to buyers. At the peak of the sellers' market the inventory often was near zero or less than a one month supply.
"Properly priced homes are selling," Gasinski said. "Frankly, getting back to a normal market is a wonderful thing for everyone."
Banks move earlier to curb foreclosures
As the number of borrowers falling behind on their mortgage payments climbs to the highest level in five years, the mortgage industry is trying new strategies to help bail them out. Much of the attention is on homeowners who in recent years took out adjustable-rate mortgages, a popular way to finance a home when interest rates were low. Now, with rates having moved up, many of these borrowers have recently sen, or soon will see, their mortgage rates adjust higher for the first time.
To head off problems, mortgage companies are reaching out to borrowers earlier. Bank of America Corp. is allowing some borrowers with ARMs to refinance into a different loan at no cost. Citigroup Inc.'s CitiMortgage unit is focusing extra attention on parts of California, Florida and New York where home prices have moved up sharply. It is also contacting delinquent borrowers within days after a missed payment, if it doesn't fit their normal bill-paying habits.
The rise in bad loans also is leading to a pick up in so-called short sales, in which a lender allows the property to be sold for less than the total amount due and often forgives the remaining debt. For the lender, the process can be shorter and less costly than foreclosing, especially in a declining market. For borrowers, it is a way to avoid having a foreclosure on their credit report.
from realtrends.com
To head off problems, mortgage companies are reaching out to borrowers earlier. Bank of America Corp. is allowing some borrowers with ARMs to refinance into a different loan at no cost. Citigroup Inc.'s CitiMortgage unit is focusing extra attention on parts of California, Florida and New York where home prices have moved up sharply. It is also contacting delinquent borrowers within days after a missed payment, if it doesn't fit their normal bill-paying habits.
The rise in bad loans also is leading to a pick up in so-called short sales, in which a lender allows the property to be sold for less than the total amount due and often forgives the remaining debt. For the lender, the process can be shorter and less costly than foreclosing, especially in a declining market. For borrowers, it is a way to avoid having a foreclosure on their credit report.
from realtrends.com
Wednesday, January 31, 2007
How to Re-Design a House
by Roselind Hejl
"Two story brick traditional with 4 bedrooms, 2.5 baths, island kitchen, and large deck!" Sound familiar? We often talk about houses in terms of room count, along with a list of finishes, such as tile floors, granite counters, or faux paint. While this vocabulary conveys certain facts, it does not provide the tools to think about how to re-design a house in a fabulous way.
It is valuable to be able to make the decisions that transform a poor design into a house that is memorable, enduring, and widely appealing. To do this we need to go deeper than simply updating finishes or increasing square footage. We must think about how the structure shapes the feelings and experience of its inhabitants. In the words of Winston Churchill, "We shape our buildings, and afterwards our buildings shape us." When a house has design flaws, we know intuitively that it does not feel right. On the other hand, a well designed house can make us feel inspired, enriched, and touched by a sense of order.
We often see houses that have some elements in the structure and site that appeal to us, but cannot be lived in without remodeling. Often our clients say that they want to find a house with good bones (meaning good basic design), that they can update. The truth is that most houses have some good design and some bad design. Painting walls and updating fixtures will not cover bad design. You will need to think about the house in a deeper way. Use these design processes to help you make the difficult decisions that will result in a house that many people would love to live in.
1. Relate the house to the site.
Think about how the house integrates and interacts with the land around it. This awareness is a basic, but often ignored, beginning. The connection and interplay between interior and exterior spaces enhances both in a powerful way.
Manage the views from each window. Is there an undesirable view into a neighbor's home or yard? Is there a nice view that is blocked by a wall or fireplace?
Notice how the walkway leads to the street, where privacy is needed, where noise buffering is needed, how drainage will work.
A side area could be a private garden, accessible from the main bedroom. A front porch overlooking the street could bring the house into a relationship with the neighborhood.
2. Bring in natural light.
Houses can be transformed by adding windows and other light sources. Generous light feels safe and uplifting, and attracts people toward it.
Natural light raises the level of importance and the beauty of rooms. Light all main rooms from two sides, if possible, to reduce glare and balance the light. Use glass doors, windows, skylights, transoms, or light tunnels.
Keep passive solar techniques in mind as you add windows and shading devices. The control of solar energy for light and heat is fundamental for an efficient and comfortable home.
3. Break down hard barriers between indoor and outdoor spaces.
Glass doors, screens, and walls that slide open can create semi-transparent walls, forming indoor/outdoor spaces that have enormous appeal.
Breezeways, garden rooms, bay windows, and screened porches are spaces that people love. These bring people into contact with the outdoors, yet may be furnished in a comfortable way.
4. Think of outdoor spaces as large rooms.
When all areas of the site are thought of as living spaces, new ideas open up. These outdoor spaces expand the house by creating a sense of semi-enclosure in various ways.
Their edges can be defined by trees, fences, wings of the house or other buildings. For example, an outdoor room may be a shady natural space on the site enclosed by a line of trees and shrubs.
Outdoor living spaces can be courtyards, walled gardens, trellis covered breezeways, stone patios, or outdoor showers. Think about their use and connectedness to the house.
Often, we see an exterior space that is built as an isolated destination place - a second floor deck, for example. If you have to make an effort to go there, the space will not be used. Outdoor spaces are most used when they are on paths used by people coming and going. This is why a front porch is a very appealing design element. People naturally meet here, and the porch connects with neighbors walking by.
A popular outdoor living area is the backyard deck. This is often seems to be an afterthought, tacked onto the house. Can it be covered and screened?
5. Consider widening roof overhangs or adding propped shutters over windows.
This is a green building technique in warm climates, blocking solar penetration.
The view of the outside roof structure seen from inside the house evokes a sense of shelter and protection.
If possible, extend the roof in some areas to create covered porches or breezeways. Rooms that are simultaneously open and protected are very appealing.
Inside the house, exposed rafters, rustic beams, or wood surfaces on the ceiling create feelings of strength and character in the home.
6. Review traffic flow - a crucial, but often ignored, design element.
Walk down the paths that bring you inside the front door, then lead you to various rooms through the house, and again to the outdoors. Do they cut through the middle of living areas? When this happens the living area will never feel complete and comfortable.
Circulation paths should lead along the edges of main rooms, and efficiently to private rooms. A maze like floorplan creates a sense of wasted energy and confusion. Few exterior doors may result in a subtle feeling of being trapped.
Bring multiple uses to hallways and connecting spaces with bookshelves, windows or window seats.
Set apart the main entrance with details such as a covered place to stand, special doors, benches, or potted plants.
7. Compare the sizes of rooms in proportion to each other.
People have an intuitive sense of the correct hierarchy of spaces. Small living spaces will seem wrong when combined with large bedrooms.
Homes with awkward design can often be improved by removing walls to make one large space from several smaller ones.
Consider the use and function of each room. Is the room to be used privately, such as a bedroom, study, or library? Or, will the family gather here to cook and eat informally? Some houses include formal areas, others do not. Some have many rooms, others are very open. There is no right or wrong decision here. Houses that have a true and intuitive appeal have a clarity as to the function of each room.
8. Choose materials as an integral part of the design - not as decorator selections made at the end.
For example, structural materials can be exposed, or flooring can be used to connect and unify spaces.
Bring in the beauty and texture of natural materials. Use materials that offset each other - warm and cool colors, rough and smooth textures, solid and delicate walls.
Use materials to connect the house to the site - for example, a wood clad house surrounded by woods, or a stone house next to outcroppings of stone. Or, connect the house to the neighborhood with historic colors and siding. Repeat materials and colors to unify the interior and exterior.
"Two story brick traditional with 4 bedrooms, 2.5 baths, island kitchen, and large deck!" Sound familiar? We often talk about houses in terms of room count, along with a list of finishes, such as tile floors, granite counters, or faux paint. While this vocabulary conveys certain facts, it does not provide the tools to think about how to re-design a house in a fabulous way.
It is valuable to be able to make the decisions that transform a poor design into a house that is memorable, enduring, and widely appealing. To do this we need to go deeper than simply updating finishes or increasing square footage. We must think about how the structure shapes the feelings and experience of its inhabitants. In the words of Winston Churchill, "We shape our buildings, and afterwards our buildings shape us." When a house has design flaws, we know intuitively that it does not feel right. On the other hand, a well designed house can make us feel inspired, enriched, and touched by a sense of order.
We often see houses that have some elements in the structure and site that appeal to us, but cannot be lived in without remodeling. Often our clients say that they want to find a house with good bones (meaning good basic design), that they can update. The truth is that most houses have some good design and some bad design. Painting walls and updating fixtures will not cover bad design. You will need to think about the house in a deeper way. Use these design processes to help you make the difficult decisions that will result in a house that many people would love to live in.
1. Relate the house to the site.
Think about how the house integrates and interacts with the land around it. This awareness is a basic, but often ignored, beginning. The connection and interplay between interior and exterior spaces enhances both in a powerful way.
Manage the views from each window. Is there an undesirable view into a neighbor's home or yard? Is there a nice view that is blocked by a wall or fireplace?
Notice how the walkway leads to the street, where privacy is needed, where noise buffering is needed, how drainage will work.
A side area could be a private garden, accessible from the main bedroom. A front porch overlooking the street could bring the house into a relationship with the neighborhood.
2. Bring in natural light.
Houses can be transformed by adding windows and other light sources. Generous light feels safe and uplifting, and attracts people toward it.
Natural light raises the level of importance and the beauty of rooms. Light all main rooms from two sides, if possible, to reduce glare and balance the light. Use glass doors, windows, skylights, transoms, or light tunnels.
Keep passive solar techniques in mind as you add windows and shading devices. The control of solar energy for light and heat is fundamental for an efficient and comfortable home.
3. Break down hard barriers between indoor and outdoor spaces.
Glass doors, screens, and walls that slide open can create semi-transparent walls, forming indoor/outdoor spaces that have enormous appeal.
Breezeways, garden rooms, bay windows, and screened porches are spaces that people love. These bring people into contact with the outdoors, yet may be furnished in a comfortable way.
4. Think of outdoor spaces as large rooms.
When all areas of the site are thought of as living spaces, new ideas open up. These outdoor spaces expand the house by creating a sense of semi-enclosure in various ways.
Their edges can be defined by trees, fences, wings of the house or other buildings. For example, an outdoor room may be a shady natural space on the site enclosed by a line of trees and shrubs.
Outdoor living spaces can be courtyards, walled gardens, trellis covered breezeways, stone patios, or outdoor showers. Think about their use and connectedness to the house.
Often, we see an exterior space that is built as an isolated destination place - a second floor deck, for example. If you have to make an effort to go there, the space will not be used. Outdoor spaces are most used when they are on paths used by people coming and going. This is why a front porch is a very appealing design element. People naturally meet here, and the porch connects with neighbors walking by.
A popular outdoor living area is the backyard deck. This is often seems to be an afterthought, tacked onto the house. Can it be covered and screened?
5. Consider widening roof overhangs or adding propped shutters over windows.
This is a green building technique in warm climates, blocking solar penetration.
The view of the outside roof structure seen from inside the house evokes a sense of shelter and protection.
If possible, extend the roof in some areas to create covered porches or breezeways. Rooms that are simultaneously open and protected are very appealing.
Inside the house, exposed rafters, rustic beams, or wood surfaces on the ceiling create feelings of strength and character in the home.
6. Review traffic flow - a crucial, but often ignored, design element.
Walk down the paths that bring you inside the front door, then lead you to various rooms through the house, and again to the outdoors. Do they cut through the middle of living areas? When this happens the living area will never feel complete and comfortable.
Circulation paths should lead along the edges of main rooms, and efficiently to private rooms. A maze like floorplan creates a sense of wasted energy and confusion. Few exterior doors may result in a subtle feeling of being trapped.
Bring multiple uses to hallways and connecting spaces with bookshelves, windows or window seats.
Set apart the main entrance with details such as a covered place to stand, special doors, benches, or potted plants.
7. Compare the sizes of rooms in proportion to each other.
People have an intuitive sense of the correct hierarchy of spaces. Small living spaces will seem wrong when combined with large bedrooms.
Homes with awkward design can often be improved by removing walls to make one large space from several smaller ones.
Consider the use and function of each room. Is the room to be used privately, such as a bedroom, study, or library? Or, will the family gather here to cook and eat informally? Some houses include formal areas, others do not. Some have many rooms, others are very open. There is no right or wrong decision here. Houses that have a true and intuitive appeal have a clarity as to the function of each room.
8. Choose materials as an integral part of the design - not as decorator selections made at the end.
For example, structural materials can be exposed, or flooring can be used to connect and unify spaces.
Bring in the beauty and texture of natural materials. Use materials that offset each other - warm and cool colors, rough and smooth textures, solid and delicate walls.
Use materials to connect the house to the site - for example, a wood clad house surrounded by woods, or a stone house next to outcroppings of stone. Or, connect the house to the neighborhood with historic colors and siding. Repeat materials and colors to unify the interior and exterior.
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