Real Estate and Mortgage Market Insight for the Bay Area

Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video by

Remember back in mid 2007, just before the housing bubble burst?  At that time most buyers and borrowers opted of ARM loans with a fixed rate period, typically 3, 5 or 7 years.  Conforming fixed rates were in the high 6’s at that time and 1 year fixed ARM loans were in the mid 5’s without a “teaser” rate.   The rate and payment difference made a lot of sense for many buyers and homeowners in the high priced bay area.  Gone are teaser rates, option ARM loans with negative amortization and the entire sub prime mortgage industry.

Over the past two years the fed has done everything possible to bring mortgage rates down and now conforming fixed rate loans hover in the 5% range.  Bringing fixed rates down also brought about what is called an “inverted yield curve”.  That’s when long term rates are lower than short term rates.  As you can see here, the yield curve inverted in late 2008 and mid 2009.  At other times during the past two years ARM loans didn’t make sense relative low cost fixed loans.

 But all that’s soon to change.  The period between 2005 and 2007 reflects a more traditional spread between fixed rates and various ARM loans.  You can see here the spread between fixed rates and ARM’s has been increasing since 12/08 and we may be entering a time where it may be worth your while to consider an ARM loan. When the rates were comparable a fixed rate loan makes the most sense, but with rates beginning to creep up ARM rates can have a healthy edge.

The first thing to ask yourself is what your future plans are.  Do you plan to expand your family any time soon? Or, do you only plan to live in the area a few years or maybe you work for a company that relocates you often.  If you answer yes to any of these questions an ARM with a fixed period may make smart financial sense.   For example, today, a 5 year fixed ARM is a full percentage point below a fixed rate. At today’s rates, the difference in interest paid over five years on a $400,000 loan would nearly $15,000.

Rates are still low and a fixed rate loan is very appealing, however, as the low rate market shifts, other loan products may be worth considering.

I am always available to discuss your concerns or answer your questions about real estate or mortgage loans, just text, call (650 325 7877) or email me for a prompt response.

Now, more than ever buyers and sellers will benefit from the advice and guidance that an experienced REALTOR® can provide. If you are in the San Francisco Bay Area, I invite you to take a look at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loan information,  market activity reports, home seller strategies, staging and decorating, a suite of 19 calculators, plus my book, “Let’s Make a Deal, The Insiders Guide to Buying and Selling Real Estate” and more. Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.

Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video by

We often hear the question, “is this a good time to buy”.  It occurs to me that what is really being asked is, “are prices going to go down further?”  We know that buyers have been blessed with low mortgage interest rates and the first time homebuyer tax credit, which was recently expanded to include “move up” buyers.  We have heard so many times in the last 12 months that now is a great time to buy. But is this true?  So when is the right time to buy?

In my opinion, the right answer is that the best time to buy a home is when you are ready, willing and able to buy.

Let’s examine those three points:

1.     To determine if you are “ready”, ask yourself why are you considering buying a home?  Is it reasonable to think you will be able to live in your home at least five years?  Have you explored the pros and cons?  Homeownership is a huge responsibility that fortunately has many rewards, not the least is that you will be building equity for your future.

2.      Are you “willing” to take on the responsibility of homeownership?  Like all things worth having, homes require maintence and attention.  A side benefit is that you can bring your own “sense of style” to your home.   You can own the experience.

3.      A prime consideration is your ability to buy.  Are you planning to move on or are you willing to stay put?  How is your job and income stability? What about down payment, credit and ability to make the payments?  All this and more makes up your ability to buy.

If you decided that you are ready, willing and able, what about market conditions?

Let’s start with interest rates; during the past two years, buyers have been very fortunate with low interest rates in the high 4's to mid 5's and the first time home buyers tax credit, which expires at the end of April. 

The Federal Reserve implemented a plan to help keep mortgage interest rates low. It was a way to keep fears out of the market and stimulate the economy.  That was the original plan. What is the plan now?  If we are to believe what we hear from Washington, this plan will come to a halt by the end of March.

Another market condition is housing inventory.  Available inventory has been shrinking over the past year as investors and first time buyers purchased low priced bank owned and short sale homes.  So what does it all mean?  It means you have to be ready, willing and able. In other words, committed to the process.

 So is time running out? Of course not, whther the market is contracting or expending, whether rates are up or down, people  buy homes. Whether to buy or not should come with careful consideration and planning.  And part of this planning should include real estate and mortgage professionals. You should not just buy because you could get a tax credit or because mortgage rates are low, you should buy a home because it makes sense as an investment, it provides the kind of shelter you want for you and your family and it brings enjoyment to your life.

If you are waiting for rates or prices to drop further or are hoping for another extension of the tax credit, let’s face it, you may be “able” but are you really “ready and “willing”?

Buying or selling a home is serious business.  In these complex times, I am always available to answer your questions or discuss you concerns.  Simply call, text or email me for a prompt response.

Now, more than ever buyers and sellers will benefit from the advice and guidance that an experienced REALTOR® can provide. If you are in the San Francisco Bay Area, I invite you to take a look at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loan information,  market activity reports, home seller strategies, staging and decorating, a suite of 19 calculators, plus my book, “Let’s Make a Deal, The Insiders Guide to Buying and Selling Real Estate” and more. Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video by

Every year, Remodeling Magazine publishes the Remodeling Cost vs Value Report. You can now view the 2009-2010 Bay Area Remodeling Cost vs Value Report available under Quick Links on our website, www.aboutbayareahomes.com. You can also access the report by clicking on the Cost vs Value widget below Quick Links.

2009 was a year of transition for the remodeling and real estate. One would have thought that the costs for remodeling projects would have fallen, but that turns out to not be the case, although the rise was smaller than in previous years. On the other side of the coin, even though costs increased slightly, the value added of the projects dropped slightly. Of courses some of the difference could be the result of consumers sticking to projects that are “back to the basics”.

Exterior improvements were more common, primarily because exterior improvements contribute to the overall look and feel of a building. In other words, in a market where there are more buyers than sellers “Curb appeal is king.”

For the San Francisco Bay Area, improvements that increase a home’s value above the project’s cost included, adding a bedroom in the attic, a new deck, new entry doors, kitchen and bath remodels and window replacement. You can view the entire San Francisco Bay Area Report at under Quick Links at www.aboutbayareahomes.com.

For now, it looks like “Bling is not the thing.” The four-year Cost vs. Value trend toward smaller, low-maintenance projects and an emphasis on essentials over extras will likely continue to influence homeowners remodeling plans.

In these complex times, I am always available to answer your questions or discuss you concerns.  Simply call, text or email me for a prompt response.

Now, more than ever buyers and sellers will benefit from the advice and guidance that an experienced REALTOR® can provide. If you are in the San Francisco Bay Area, I invite you to take a look at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loan information, market activity reports, home seller strategies, staging and decorating, a suite of 19 calculators, plus my book, “Let’s Make a Deal, The Insiders Guide to Buying and Selling Real Estate” and more. Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.

Real Estate and Mortgage Market Updates and Commentary Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video by

As we begin the New Year there are several pieces to the real estate and mortgage market puzzle that I think will be helpful to home buyers, sellers and home homeowners. Let's start with the $8000 Federal Tax Credit. The credit is limited to 10% of purchase price not to exceed $8000 and the purchase price cannot exceed $800,000. In other words, if you pay $810,000 for a home, no tax credit, buy it for $800,000 and you may qualify for an $8,000 federal tax credit. As amended and expanded, the Tax Credit can be used by first time homebuyers and, with some restrictions, by move up buyers as well. To qualify, the sale must be in escrow by April 30 and close by June 30. The tax credit can be used for the tax year 2009 or 2010 and does not need to be repaid as long as you meet the requirements. Your REALTOR® or Tax Advisor can give you all the details.

 And speaking of tax credits, the Governor has proposed an extension and expansion of the 2009 state tax credit for California that was limited to new construction purchases only. The $100 million allotted in the 2009 program was gone within five months. The proposal put forth in the Governors state of the state address would be for all homes, not just new construction and $2billion would be allotted for the tax credit by the state. Remember, it just a proposal and must be approved by the somewhat contentious California Legislature. 

 

Rates continue in an historic low range, so really there is nowhere to go but up. Rates jumped up at year end, however have drifted back down this past week. The long term consensus is that conforming rates will rise to 6% by the end of 2010, which is still low by historical standards. There are three primary categories of conventional loans today. For conforming loans up to $417,000, rates are very near 5% on single family homes. The second category is high balance conforming loans up to $729,500. This segment runs .375% to .50% higher in rate than conforming. Today, that would be the mid 5%'s or slightly less. And then we have Jumbos. Lenders offering competitive jumbo financing are few in number. At best add .375% to .50% to the high balance conforming rate or somewhere between 5.75% and 6% for a 30 year fixed rate. The best rate in any category is with at least 20% down on a single family with credit scores above 720. FHA Loans are available up to $729,500 with as little as 5% down and scores in the mid 600's. You may have heard that pending home sales have increased for 9 months in a row until November. As expected the number of pending contracts fell as buyers waited for the federal tax credit to be renewed. This chart shows the history of pending home sales going back to 2003. Red reflects contractions and green, expansions. While it is expected that the pending home sales will continue to expand, the expansion may be negligible in December and January due to the holidays. This chart reflects further indicationthat the bottom of the market was a little over one year ago.

 

A question that comes up, especially with first time home buyers, is "how should I take title"? To shed some light on that subject I've put together helpful tips in the Quick Links Section of our Resource Center Home Page. Quick Links are located in the right sidebar at the top of the page.

 

 In these complex times, I am always available to answer your questions or discuss you concerns. Simply call, text or email me for a prompt response. Now, more than ever buyers and sellers will benefit from the advice and guidance that an experienced REALTOR® can provide. If you are in the San Francisco Bay Area, I invite you to start at our Resource Center, www.AboutBayAreaHomes.com. There you will find links for active home listings, including bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating, a suite of 19 calculators, plus my book, "Let's Make a Deal, The insiders Guide to Buying and Selling Real Estate" and more. Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

 

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.

 

All home buyers have one thing in common: Everyone wants a great deal. The buying public seems to think that "great deal" equals foreclosure, short sale or bank-owned property. The truth is that these properties may appear to be bargains, but in many cases you could be buying someone else's problems. So the real issue is whether the foreclosure, bank owned or short-sale property you're considering is a bargain or problem. If you're looking for a bargain property, here are some key issues to consider:

1. What is your time line for purchasing?
You may find the perfect short-sale property, and the seller may accept your offer. The challenge is that you don't have a deal until the bank approves the short sale. At many large lenders a single short sale processor may have hundreds of files to handle at one time.  I’ve experience delays of up six to get an offer approved. The wait can be extremely frustrating and it can also be costly.

For example, months from now the offer made today you may be too high or to low. Also, interest rates are more likely to go up rather than down during the coming year. And, just because the seller has accepted your price, it doesn’t mean the bank will.  You will have a better shot at buying a short sale where the bank has preapproved the sales price. It still may take a long time to close, but not as long as it would if the price was not preapproved.

2. Are you prepared to be in a multiple-offer situation?
You’re not the only one looking for a “bargain”.  Many buyers are searching for distressed properties and the approval process takes so long, multiple offers are common. The sellers agent or lender will not tell you about the details of other offers.

If another offer comes in at a higher price and at better terms, the bank is obligated to take the best offer. If the property is a short sale, the seller's signature on the document merely opens the negotiation - it does not finalize it. Furthermore, the seller/lender may continue to market the property even after they have signed a contract with you.

3. Ask the agent if the seller participated in the "Cash for Keys" program
The best candidates for good bargains are those properties where the sellers are still occupying them.  Many banks have a program called "Cash for Keys." This program pays the owners of foreclosure and short-sale properties money to keep the owner from trashing the property when they move out. It’s not uncommon for disgruntled owners or tenants to remove or damage appliances, plumbing and electrical systems.  Cash for Keys is designed to minimize these behaviors.

4. Beware of tenant occupied and vacant properties
It’s never a good practice to purchase a property without doing a physical inspection. Also, be sure you have stipulated the right to make a final inspection prior to closing.  This is especially important with distress sales.  Also, if the property is tenant occupied be sure the contract states the property must be delivered to you vacant.  Trust me, you don’t want to be responsible for evicting a tenant.   Also, the longer a house stays vacant, the more likely it is that problems will develop.  Not only vandalism, but rats and mice are more likely to move into vacant properties. Rodents can chew through the wiring and generally wreak havoc with the home's electrical systems.

5. Is the deal more important than your lifestyle?
A property can be a great deal in terms of the price, but is it worth it if it's in a poorly rated school district or if you end up with an extended the commute?  A “bargain price” won’t make up for a poor floor plan, airplane, train or traffic noise or the occasionally whiff of the sewage treatment plant? When you purchase, it's important that you take all of these issues into consideration rather than focusing exclusively on the price. A property with any of these types of problems will be harder to sell in the future.

As you can see, it's important to consider the price in conjunction with the quality and the convenience of your lifestyle once you move in.

Of course there are good distressed property deals out there. Nevertheless, don't limit your search. Keep in mind that, depending on the neighborhood and price range, anywhere for 10 to 50 percent of the sales may be distress sales.  This means that 50 to 90 percent of the available homes are likely occupied by owners that are maintaining their homes and in better neighborhoods.  In the long run, they may be a much better bargain. 

A true bargain is when you find a home in the neighborhood and price ranges that fits your lifestyle.  A house you will be proud to call home.

If you are in the San Francisco Bay Area, I invite you to start at our Resource Center, www.AboutBayAreaHomes.com.  There you will find links for active home listings, including bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating,  a suite of 19 calculators, plus my book, “Let’s Make a Deal, The insiders Guide to Buying and Selling Real Estate” and more.  Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Real Estate and Mortgage Market Updates and Commentary Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video by

You already know that what the Federal Reserve does with interest rates has a huge impact on the housing market.   I’m Russ Boyd and what you might not know is that the Fed influences housing prices in another significant way—through its purchasing of mortgage-backed securities (MBS)—and now the question is that when the Fed stops buying those securities in the near future, how will it affect the housing market?

Some background will help explain what is going on. Let's start with a definition. An MBS is a group of mortgage loans that are pooled together and sold as a bond.

Part of a Pool

It is easy to understand how MBS come about and how they work. When you go to a bank or mortgage broker to borrow money to purchase a home, the home is collateral, and your mortgage—the promise you'll pay principal and interest each month—is the anticipated cash flow the lender receives from you.

That bank or broker then sells your loan to an entity that aggregates your loan with a bunch of other loans into a big "pool" of various types of loans with various maturity dates (fixed, adjustable rate, one-year, 30-year, good credit, bad credit, etc.) The aggregator then issues these pooled mortgages as bonds, the MBS, which promise investors an attractive stream of interest payments.

Who are these aggregators?

They are government sponsored entities (GSEs). One large group is the Federal Home Loan Banks (FHLB), a private corporation made up of 8,100 member banks. All of the member banks must own stock in FHLB in order to participate in its loan program.  Other GSEs, which have become household names are Fannie Mae, Freddie Mac, and Ginnie Mae

To recap,  an MBS is a pool of home loans sold as a bond. And we know who issues them: government sponsored enterprises such as Freddie and Fannie, etc. So, how does this help us understand where real estate prices are going?

Easier to Get a Home Loan

Well, most banks have neither enough money, nor any desire, to hold a large number of home loans for an extended period of time. Absent a place for the banks to sell them, as many of us found out over the last year, it then becomes difficult for us to get a new loan. Thus, the MBS market is currently providing us all with an important means of loan supply, albeit indirectly via our bankers and mortgage brokers. The easier it is for banks to sell our loans to MBS aggregators, the easier it is for us to get a home loan. The more difficult it is, the harder (and more costly) it is for us to get a mortgage.

When the entire financial system found itself on shaky ground the housing market was affected big time. Anticipating a big increase in homeowners defaulting on their mortgages, investors no longer wanted to own their existing MBS, let alone buy newly issued MBS.

With no buyers for those securities, the GSEs couldn't sell them or issue more. As a result, the supply of mortgage loans all but came to a screaming halt.

To the rescue came the Fed. Last November, as part of its efforts to get the economy moving again, the Fed announced it would buy $500 billion in mortgage-backed securities. In March of this year it raised its target to $1.25 trillion, and it has followed through on its pledge.  These purchases have undoubtedly provided much needed liquidity to the MBS market and helped keep the long-term mortgage rates at historic lows.

Behind the Higher Rates

O.K., let's get back to the original question: What's next? Well, just as it has been with interest rates, the Fed has been transparent about its intentions toward MBS. It has said it will stop buying MBS once it fulfills its commitment of buying those $1.25 trillion worth of bonds. It will complete that purchase sometime during the first quarter of next year.

That means that, sometime within the next five months, the Fed will be withdrawing a prop under the housing market.

What remains to be seen is how other investors react as the Fed slows—and then eliminates—its purchase program.

My expectation: As the Fed pulls out, private investors will demand a higher interest rate for such securities—to compensate for their concern people will continue to default on their mortgages—and thus long-term mortgage rates will rise. The real question is how fast and how high.

The real estate and mortgage markets are more complex than ever.  I encourage all interested buyers, sellers and homeowners to work with an agent that they can trust, an agent that values their business and an agent that has the skills and experience to provide counsel and guidance in this complex market. 

If you are in the San Francisco Bay Area, I invite you to start at our Resource Center, www.AboutBayAreaHomes.com.  There you will find links for active home listings, including bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating,  a suite of 19 calculators, plus my book, “Let’s Make a Deal, The insiders Guide to Buying and Selling Real Estate” and more.  Of course I am always available to discuss your real estate or mortgage related questions or concerns, just call, text or email me for a prompt response.

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They serve clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.

Real Estate and Mortgage Market Updates and Commentary Videos by Russ Boyd are uploaded to Youtube, MetaCafe, Veoh, Vimeo and Yahoo Video byTube Mogul.

Watch Video here

While sometimes it feels natural to focus on life’s challenges and difficulties, I’m grateful that the Thanksgiving Holiday is upon us. For me, Thanksgiving is a true reminder about all that I have to be thankful for. From my family to yours I wish you all a Happy Thanksgiving.

As it turns out, I’m thankful for all the first time home buyers who, according to a report released by the National Association of Realtors®, have represented 47% of buyers this year. This surpasses the previous high record of first time purchasers set back in 1991. This can best be illustrated in data show in these graphs just released by Zillow.com.

The first graph is the San Francisco Metro Area and includes San Mateo, San Francisco, Alameda and Contra Costa Counties.

The second graph is Santa Clara Metro Area comprising Santa Clara and San Benito Counties.

It’s clear that the housing recovery for the bay area began at the beginning of 2009 and continues to progress. It’s also clear that first time buyers are critical to housing and a general economic recovery.

Why? Because they absorb excess inventory created by the high number of financially stressed homeowners and resulting foreclosures. The research confirms that the current high level of first time buyers compares to the recession in 1991, where the same dynamic played out as first time home buyers started the chain reaction that led the nation out of recession. The combination of tax incentives, record high affordability, low interest rates and pent up buyer demand has led to a high level of sales which began earlier this year. Economists would also credit the FED with suppressing any immediate rise in interest rates affecting home mortgages while the economy is still so fragile.

The survey reflected that the median age of a first time home buyer is 30. First time buyers are being realistic about the long term nature of their investment by planning to live in their homes for at least ten years. Nationwide, 78% of the homes purchased were single family homes.

Of all the first time buyers, 96% choose a fixed rate mortgage. 61% of first time buyers used their savings as a down payment while 22% received down payment assistance as a gift from family. This tells us that saving for a down payment is back in vogue.

And no surprise here, a staggering 84% of first time home buyers are using the Internet to find their new home.

Reflecting the complexities of the market, 85% of successful home sellers used a Real Estate Professional to sell their home. The actual number of homes sold without buyer or seller representation was a record low according the most recent survey only 6%.

If you have an interest in Bay Area homes you will find what you are looking for at our website, www.AboutBayAreaHomes.com.

There you will find links for home search, listings for bank owned and short sales, home loans, market activity reports, home seller strategies, staging and decorating, my book "Let's Make a Deal, The Insiders Guide to Buying and Selling Real Estate" and more. Of course I am always available to discuss your real estate or mortgage questions or concerns, just call, text or email me for a prompt response.