Mortgage Rate Trends

Another dose from Sacramento Real Estate Gal's mortgage expert Huck Ferrill:

One would think from the news, that mortgage rates are falling like crazy. Not true!

While the Fed Funds rate has dropped rather precipitously, my clients have been surprised to hear that some mortgage rates have actually risen. For example, the range for a 30 year fixed rate loan is actually about 50 basis points higher now, than two weeks ago, ranging from about 6-6.25% depending on whether one pays points or not. The reason is mortgages are longer term instruments whose rates move roughly with US Treasury notes and bonds, as opposed to a short term rate like Fed Funds. A ten year Treasury is currently yielding about 3.8% currently, up from a recent low of 3.4% in late January.

These are still good rates, however.

My point is that it's a bad policy to delay purchasing or refinancing in hopes rates will drop. One might wait a long time. So essentially, if rates and the resulting payment look good now, go for it. Don't be greedy.

So far, only 15, 20,and 30 year fixed rates have gone up. Happily, hybrids that are fixed 3, 5, 7 and 10 years have held pretty steady. I just checked one of our investors to find they are buying 5 year fixed product at under 5% for one point. Similar 7 year product ihttp://www.blogger.com/img/gl.link.gifs out there at about 5.5. These hybrid products can be really attractive when the yield curve is steeping, as it is now.

Also read: My personal mortgage train miss; February Mortgage Update; market predictions for 2008.

Real Estate Quote of the Week

While technically not related to real estate, it is a good investing quote often forgotten.

The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.

- Warren Buffett.

Selling 101

While in search of good customer service, in the last year, I have come across three basic types: the ones that don't care, the ones that involve you in their drama and the ones that talk down to you. The third kind is by far the worst. I shudder as I think what would happen to my clientele if I started telling them that the house they were in love with is just too horrid to be inside.

See, I'm not even good at making this up.

But it seems to be the lead selling companies out there that do this most often. In my early days of Sacramento Real Estate Gal, someone from one of these House-or-Home-Something-Value-Something-dot-com called and asked me how I was generating internet leads. His big argument was that's the new frontier. I told him I wasn't interested in internet leads, which was true at the time.

"Not interested in internet leads?" he repeated and laughed.

Maybe it was the same guy that called today. Because this time he wanted to sell me an exclusive zip code and bragged that someone before me from Big Brokerage had bought some zips. I told him politely I wasn't interested right now.

"So you'd rather have _____ (insert name of Big Producer/other Realtor) get them all, huh?" He laughed.

I'm sorry. I don't get the joke.

You would think the the Salespeople of the Third Kind would have learned that as selling 101 - don't talk down to the prospect. Or is the idea to make the prospect who answers the phone feel so crappy about herself that she buys your product just to feel better?

Come on. I have better use for my phone minutes.

And I will never buy anything from any salesperson that devalues the profession. That would be terrible business.

You're a Realtor, so Show me a Home!

Lately, I seem to be wading through quite a few clients who come in wanting to see homes and who - unfortunately - I have to turn away. Equally unfortunate is that sometimes they don't understand why and end up getting upset. So this is a post trying to explain my position.

There are two sides to a real estate transaction - the listing (seller's) agent and the selling/co-operating (buyer's) agent. When most people call to see a home, unless they call the listing agent directly, the Realtor who receives the call hopes to become their agent, that is, the buyer's agent. This does not mean that he hopes to sell them just that particular home, but simply wishes to work with them until the right home is found. Hopefully, the client likes him enough to stick with him throughout the search.

Also, as Realtors, we are ethically required to ask if you are currently working with another agent. If you are not happy with your agent and are looking for a new one, feel free to tell us. But I seem to run into quite a few clients who have an agent and are still asking other agents to show them homes.

Why is this? Even in this competitive market, are there really Realtors who will turn their backs on buyers? Or have we turned so pessimistic that we don't believe our clients will ever buy homes?

Either way, please remember: I for one will never show you a home if you are currently committed to and working with another agent. It really is your agent's job. I would hate to take time away from clients who are committed to me - after all, I wouldn't want them to be shopping by themselves.

Real Estate's Unexpected Fortunes: A Perspective

It occurred to me this morning in the middle of a phone conversation that I may have changed. (Insert scary dramatic music here.) In a good way. I realized that selling real estate - and certainly buying it as well, may have contributed in a more positive way to my life than I ever thought possible. And before you write me off as another pollyanna, read for yourself and see if it isn't true for you as well, especially if you are a fellow Realtor or investor.

Selling real estate forced me to become more social - earlier article about not doing well in an office not withstanding. I was one of those perpetual student types - you know the kinds that don't really ever quit school because they don't know what to do next. I had a long and happy road to a Masters Degree in Writing but wasn't really the best communicator outside of writing well and getting a few stories published in various magazines and anthologies.

In my first few weeks of selling real estate though I was out around my neighborhood knocking on doors and introducing myself. Besides the unexpected rewards of homemade pies and tamales my neighbors bestowed on me, I quickly established myself as the neighborhood expert and still owe much of my business to those first few doorknocks. And I really know my neighbors by their first names. Even when I'm driving through Colonial Village today, houses don't just have numbers, they have names.

I handle rejection extremely well. This will come as no surprise to those of you who followed this blog through the bubblehead days. And no, the bubbleheads haven't left yet. Besides trying to be annoying, they are also incredibly angry and make claims of wanting to hurt not just me but my family as well. One of my fellow Realtors is considering filing a lawsuit against one of them. And more power to him, but I've developed thicker skin than that.

Selling real estate does that. You have to be able to hear a lot of "no, no, no" and still come home with your self esteem intact. Besides, some of the most successful people in the world have more critics than friends. It doesn't make them any less successful.

Selling real estate taught me to have difficult conversations. Most properties are not worth what the sellers want. Other homes will sell for more than what buyers want to pay. Somewhere in the middle of this is where Realtors come in as experts on market trends and numbers. Difficult conversations have gotten easier as a whole and I draw on my professional emotional fortitude consistently to remind myself that sometimes, even in difficult conversations, people still need to hear the truth of the matter, whether it is a seller in foreclosure or a tenant who is late on the rent.

This post promised to be a long one when I began it, but I can't possibly end without mentioning something about real estate teaching me to see opportunity when others didn't - a quality I greatly admire in my mentors, from whom I have learned so much and the fact that I wouldn't have met some of the most wonderful people and been able to contribute in such a meaningful way to their lives if I wasn't doing what I am.

What more could I want?

Pollock Pines - Home in the Hills

Crashing a party is always fun. Well, technically we didn't crash it, but it sounds better to say so. The HAZE club - the Hangtown Association of Zymurgy Enthusiasts - held a snow brew day yesterday in Pollock Pines. A handful of members got together with a handful others and brewed about 150 gallons of beer in the snow. From what I hear, the brewing actually began with shoveled snow, so it was a snow brew in more ways than one.

Since we live right in Pollock Pines and belong to the club, we thought it would fun to attend and meet some of our neighbors. We weren't disappointed. Even in the 32 degrees of the garage, we managed to find enough warmth and food while the brewing continued until 3 or 4 pm. We lost track of time.

Now if only I had brought a camera. Darn, being a reporter all the time is hard!

"Doesn't Play Well with Others"

The other day I received a call from a tele-marketer hoping to sell me real estate advertising on Google. Well, nothing came of that, but our initial interaction was interesting. He asked me if I had made it into the office yet. And I said, of course - my office is at my home. So essentially I'm here all the time - unless I'm out showing houses to prospective buyers.

Now I didn't always used to work from the house. Initially, when I worked at _______ (insert name of big brokerage) I used to go into the office every day at 9 a.m. and leave at 4 p.m. Interestingly enough, I sell more real estate when I work from home than when I go into the office. Now I understand everyone has different opinions about how they motivate themselves to work and for them it helps to have people around that, for the most part, look busy.

What bothered me about an office environment - let me correct that - what bothers me to this day about every office environment I've ever been in, is that very little really is ever being done. I contend that if every person in that office did only what they were supposed to do in a day and leave, they'd be out of there by lunchtime. A lot of what goes on in an office is unproductive.

So no, I guess I don't play well with others.

I got tired of the snarky remarks behind people's backs, the forming of cliques and clubs which - if you weren't part of - you were automatically treated differently. I got tired, essentially, of being forced to be like everyone else. So that if a client walked in wanting to sell his house, we all appeared the same. All they knew was that they listed their home with a _________ (insert name of big brokerage) agent. And perhaps that is what all offices want - an army of copies of one another that sound the same and say the same (nice) things about their brokerages. Hence, the need real estate agents feel for titles, distinctions, and letters of the alphabet after their names that make no sense to the customer.

So when I moved to _______ (insert name of another big brokerage), I was determined not to work at the office. I became an at-home agent, which besides making me sound lazy, ensured that I was always thrown in with the newbies at meetings. There was an underlying theme of "I haven't seen you before, so you must be new."

That's why I'm so glad to be at Elite Properties. I think we're true individualists here. Here I can work at my own pace, we have (almost) no meetings, all clients and transactions are handled electronically - really, is there anything we can't say by email? - and there is no attempt at making me just like everyone else. In fact, I recognize most people at the company by their personalities, not just by their faces, or names.

How refreshing. For both us and our clients.

Reads and Feeds

A few great articles came up on my radar in the past few weeks, so of course I want to share them! Enjoy!

This one has got to be my favorite by far. Someday, I will learn to great and brief and say so much by saying so little, just like Seth Godin.

Bankrate.com came up with this one today - one of the more balanced articles I've seem about the truth of the real estate market and if you should worry.

And finally, you may have more in common with Fred Flintstone than you think!

How I may have Missed the Mortgage Train...

Here's a riddle for you: What does the Sacramento Real Estate Gal have in common with those home buyer fence sitters out there?

Answer: I may have just missed an opportunity to save some money on my rentals (well, at least one of them) and have them cash flow. I was one of those people that got every excited when I saw mortgage rates drop. "How far down will they go?" was the question.

Sound familiar?

Unfortunately, this is what has happened. And I am still paying about $75 - $100 more on a rental than I would have been had I jumped up and called my mortgage lender.

And I may have missed the refinance train. For now.

Sacramento Realtors: Communication is Paramount

In this slow Sacramento real estate market with more short sales and foreclosures than ever, it surprises me how much resistance I seem to run into with just communicating with so many of my fellow Sacramento Realtors. I have heard the same frustration from some other Realtors as well and I wish it wasn't true.

The biggest issue we seem to face is that we love to talk to clients, but are not as good as talking to the co-operating Realtor who brings in the offer on our listings. I think I know where the frustration stems from - it comes from the fact that we have an offer, but can't do anything about it because it's not as simple as calling the seller and saying, "We have an offer. I'll come over tomorrow and decide if we can open escrow." It's the fact that then you have to submit the offer to a bank and deal with a long line of phone calls with unfriendly machines, bored loss mitigation officers, and - gasp! - other co-operating Realtors.

But it is precisely this market in which Realtors prove how professional they are. I haven't spoken to a single Realtor who survived the 1990s real estate crash who thought it was a waste of time talking to other Realtors and Brokers, who didn't think that good real estate customer service extends beyond just clients. Good Realtors on both sides of a transaction are the best assets clients can have. They can also be each others best business alliances in a market gone crazy.

And chances are, if they're both around, they might just work together again in better times!

It's Tax Time!

I actually like this time of year. We're one of those couples that get a refund (the rental homes and our own home help immensely!) every year - I know, I know, most financial advisors would say that is a way to give the IRS an interest-free loan for a whole year. But I feel like I'm more motivated around tax time if I have a refund coming... and no matter how crazy the year has been financially, we can look forward to a little relief at tax time.

That's my story and I'm sticking to it!

Does Median Income Have Anything to do with Median Home Values?

Okay, I'm really sick and tired of this argument. You know how it goes: "Median income has not kept up with median home values in Sacramento, this home prices must fall until everyone in Sacramento can afford to pay a third of their monthly budget toward their mortgage." It's a seemingly innocent calculation and very easy to remember; so simple in fact that it gets quoted again and again and unfortunately believed.

Here is a list of areas where median incomes do not - by a long shot - keep pace with median home values. Interesting, huh?

Here are a few reasons that calculation, pat and easy as it is to parrot, does not work:
1. Not everyone can afford a home. Some people rent. Sometimes all their lives.
2. Some people buy more than one house and rent it to others. They are called real estate investors and landlords.

On an individual level (and for budgeting and loan purposes) it helps to use the 30% rule. But as a large group and especially when relating to medians, that formula falls apart. To push every individual and situation into a formula is ridiculous.

The next time you come across pat formulas like these, question their basis and their source.

Home Buyers: 100% Financing Getting Harder

I had mentioned in early December that first time home buyers would have a harder time getting qualified for a loan and that there was still time to buy real estate with zero down before February. My clients at the time had excellent credit scores, great incomes and were buying a house so far below market that even when the lender asked for more comps, we were able to provide them.

That excellent purchase went through just fine, but today the Sacramento Bee reports that mortgage insurers may begin to stop issuing PMI for 0 down financing.

Unfortunately, thanks to the empty-headed bubbleheads out there, such warnings when issued by Realtors are ignored as "just a sales pitch" with the obvious remark, "Of course you're going to say that - you sell real estate!" That's like saying, borrowing a comment from John Lockwood, to a doctor, "Of course you're going to say it's a good time to get sick - you're a doctor!"

Happy Valentine's Day!

If you're wondering what I'm doing today it's getting a special dinner prepared for James. I'm going to be adventurous and try to make ravioli (his favorite) from scratch. In return, I've been promised red roses :)

Unless the ravioli looks like a perfect disaster (or maybe if it does!) I'll have pictures later today!

Sacramento Real Estate Moguls-To-Be: Where & How to Shop

Now that the real estate statistics are beginning to show slightly bigger numbers of people headed out in January to look at and make offers on both single family homes and condos, my hunch is that a lot of these people making offers are investors hoping to add to their portfolio before property values head up again.

It is important however that you as an investor know where to look and how to analyze a property before you buy it or even make an offer. There is an art to making an offer as well, but more on that some other time.

First of all though you should decide if what you want to buy is a single family or multifamily property. Single family houses are homes like we buy to live in, multi unit properties include duplexes, triplexes, apartment buildings and such. I recently learned that multi unit properties are usually better for income purposes, but I still prefer single family homes to some degree, especially if you are an investor just starting out. They give you a better idea about what's involved and are easier to sell if you want to get out.

Another very important factor that determines your success (or failure, but we won't talk about that) is the location or community you buy a rental in. Your best chance of making an income by having the place rented all year is to pick a 3 bedroom, 1 - 2 bath home in a neighborhood that is what we would call "middle of the road." Very expensive neighborhood tend to be cashflow negative and very inexpensive homes tend to have repairs. Try to strike a balance. My favorite neighborhoods are ones like Colonial Village, Colonial Heights, the older parts of Elk Grove, Foothill Farms,and for want of a better name the zip code of 95821. These are all older, established neighborhoods with good rental property that stay fairly stable in value.

When determining how to buy the home, realize you don't have to be a vulture. If a home is a good buy, go ahead and pay full price for it. If you don't, it means you don't trust yourself. If you do your homework and realize there's money to be made, you will not be afraid of paying the asking price. Also, don't write embarrassingly low-ball offers. If the market's bad, chances are property values are already depressed. You shouldn't need to rob anyone to make a good purchase.

Good luck!

Real Estate Customer Service Lessons - from a Propane Company

After living in Pollock Pines for more than six months now and learning we really don't like cooking on an electric cook top, we made the momentous decision to switch to propane. So I called the closest propane company. Our conversation, after the initial phone call (which was all about how "free" their service and extras were) went something like this:

"I called the other day and I was told that we would probably get a 250 gallon tank installed and that would last us probably 4 - 6 weeks for just a cook stove and maybe a water heater. Doesn't that seem like a lot?"

"Well, you said it was your only source of heat!"

"No, I said we were only going to use it for cooking."

(With exasperation and tone) "Then it could last you two months - maybe four. Depends on how much you use it."

"Okay, and you will get it installed?"

"YOU must talk to the county first."

"The county said you would pull the permits."

"No. We install it. We don't dig trenches for it. But it's free - with a two year service agreement."

My thought is, no wonder they need a two year service agreement! If at the first question the consumer asks you, you sport major attitude, you probably have to depend on tricks like service agreements and free goodies.

Why not just give information and be like the other company I called that took down my contact information and made an appointment to send a service technician over to survey the property? How about ask some questions to get an idea of what I want?

Guess which company I'm going to use? Here's a hint - it's not the one that sells free stuff. I don't mind paying a little more to be treated with respect.

Sacramento Foreclosures - Why the Numbers Need to be Taken with a Grain of Salt

The California Association of Realtors' Market Matter Advisory just hit my mailbox and I think this is important information in the light of all the bad news of foreclosures out there.

If you're reading numbers from Realty Trac, you should remember that the company reports defaults on loans and not properties - an important distinction that could artificially inflate foreclosure statistics since a first mortgage and a home equity line could count as two foreclosures, although they are both on one piece of property.

Another piece of information that I don't think most consumers are aware of is that a foreclosure filing includes default notices, auction sale notices and bank reposessions. One property can fall into each of these categories as it goes through the foreclosure process. RealtyTrac counts each of these as separate incidents and can skew the statistics.

Now be aware that I am not denying that there are a record number of foreclosures out there. In fact, that is how prices have fallen and many people that have not been able to buy in years are now first-time buyers. But I think it's important to remember to take the doom and gloom news with a grain of salt and remember that in the long term real estate is a great investment.

Real Estate Quote of the Week

Owning a home is a keystone of wealth.. both financial affluence and emotional security.

Suze Orman, financial expert.

Read other real estate quotes here: Real Estate Quote by Theodore Roosevelt; Real Estate Quote by John Stuart Mill; Real Estate quote by Anthony Trollope and my favorite one so far by Anderson Cooper.

Sacramento Real Estate Statistics: Condo Market

Yesterday, I posted Sacramento county's single family residence statistics. Here are the latest numbers for January 2008 for condos:

There seems to be a certain amount of agreement with the number of pending sales in both single family homes and condos - both have gone up. And it's not just personal experience any more that we're seeing more people wanting to buy homes for themselves and investment purposes now that prices have fallen so low. I hear this phrase again and again: "I don't want to miss out on this market!"

So, about the condos:

We have 733 on the market currently. Going by January's sold numbers, that's 18.7 months of inventory. But wait... a whopping 93 went pending sale in January 2008. Since condos are cheaper than single family residences, investors are looking toward them for purchase a lot more.

195 new listings for condos came on the Sacramento market in January 2008.

Median price has now fallen to $143,000.

Follow the trends: December's numbers for Sacramento county condos; November's numbers for Sacramento county condos; Sacramento real estate market statistics for October.

Want to know what your house is worth? Click here for a free market analysis!

Sacramento County Statistics January 2008

Here are the latest numbers on single family residences from the Metrolist MLS:

January was a slow month in terms of sales and disappointing as the median price dropped another 9.4% over December's median sale price to $255,000.

2523 units came on the market as new listings in January in Sacramento county now bringing single home inventory to 9042, about 11.9 months of unsold homes.

The silver lining? 1209 homes went pending in January 2008, 16.8% higher than December's numbers. Perhaps this fall in homes has inspired many to head out - first time buyers and investors alike.

Check the trends: December's numbers for Sacramento real estate; November's Sacramento real estate statistics; October's numbers.

Also read: Population Projections for Sacramento; Statistics and How to Read Them

Tomorrow, I'll have statistics for Sacramento condos. Be sure to check back!

Sacramento Mortgage Update

Sacramento Real Estate Gal's mortgage expert Huck Ferrill has the following mortgage updates for you today:

Much has been happening lately on the residential real estate front, some well publicized, like the huge number of foreclosures, and some not so well publicized. In the last month for example, I’ve been prequalifying about a half dozen prospective buyers per day!

Entry level houses ($100,000 - $300,000 in Sacramento area) seem to be enjoying the greatest interest by both first time homebuyers and investors looking for more rental property. One of my clients, a well recognized listing agent of bank repo property, reports that the nicer homes are seeing multiple offers not long after they’re listed. So far, prices haven’t risen but, I suspect that if that trend continues, for sale inventory will drop, and prices will start to rise. This is probably a great time to be buying if you or someone you know is looking for an investment or their first home.

Mortgage news - 2008 is the year that all the low rate 3 year and 5 year fixed loans made in 2003 and 2005 will reset to higher adjustable rates, typically in the 6-7% range. Pay option ARMs also remain at relatively high rates.

The great news is that 30 year fixed loans are enjoying pretty good rates, around 5.5-5.75% depending on whether or not points are paid, and as long as the loan amount is under $417,000. Stay tuned, though-Congress may authorize an increase in that loan limit, to as high as $730,000.

More mortgage news - FHA loans are coming back big! For years, FHA loans comprised about 65% of all financing in the Central Valley, but they went by the wayside with all the “subprime” lending (now gone) that became popular. The beauty of these loans is they are fixed, very attractive rates, they are tolerant of some past credit problems and only require a 3% down payment. In fact, it’s possible to finance all down payment and closing costs so that little or no upfront money is required to buy a home! I’m processing one of these right now for a single first time buyer. Price is $127,400 for a nice little North Highlands house, total payment will be $944.00 including all property taxes and insurance. Her only initial investment in the purchase is about $200.00 toward the cost of the appraisal!

More news later as various lending reform packages move through Congress and the Administration, but one thing is sure - the chance to buy bargain homes comes every 10 years or so, and we’re there!

Also read 2008 Sacramento real estate and mortgage Predictions and feel free to give Huck Ferrill a call at 916-788-9802.

To search for properties, just click the links to the right!

MLS Search is Live!

In the past, I've been sending you to the Elite Properties site to search for real estate in Sacramento, but now you can search for homes right here on Sacramento Real Estate Gal.

Just follow this link.

Bear with me while I add more links to automatic email updates of properties and the such, but for now the MLS is searchable right here!

Enjoy!

Sacramento Foreclosures Affect Pets

Here's a side to the Sacramento real estate market that has been largely ignored - the pets of foreclosed homes. According to a recent article in the Sacramento Bee, a large number of homeowners leave their pets behind either tied to a tree or just stuffed in closets when they leave a foreclosed home.

If you're facing foreclosure and cannot afford to take your pets with you, at least consider adopting them out. You can go to the Sacramento Society for Prevention of Cruelty to Animals on Florin-Perkins Road and surrender them for $30. Website is here.

If you know you won't be able to take your pets with you (and honestly foreclosures take months) advertise them as adoptable. Here are some tips on how to do so and here are some more.