June 2011


Anyone who knows me would probably say that I’m a fairly optimistic person, but lately it seems as though the real estate market is developing into a vicious cycle with no way to correct itself.   In a report released on Monday, the researchers at Capital Economics said that we could expect nationwide home prices to fall an additional 3% this year, bringing the year’s total decline to about 5%.  So, despite the fact that some markets inSan DiegoCountyhave seen modest gains in home prices over last year, overall, the picture is less than rosy.

So what are the driving forces behind this downward spiral?  Well, the obvious answer is that there are many complicated factors at play, but the cycle we’re seeing is really pretty simple:   Housing prices are falling due to low demand and too much inventory. Normally after a recession, home sales start to pick-up, but that’s not what we’re seeing.  Instead, demand is being strangled by increasingly stringent lending requirements which restrict buying power.  So instead of more buyers coming into the market to take advantage of the low interest rates, we’re seeing fewer that are able to qualify because of high credit score and/or high down payment requirements.   Even existing homeowners looking to sell and buy up or down are caught in a stalemate as most have limited or no equity to leverage against a new property. 

The cycle picks up momentum every time prices drop.  Lower prices, mean less equity for existing homeowners and for those with a mortgage, an increasing number of borrowers are choosing strategic default.  These voluntary defaults are adding to the foreclosure inventory already on the market and the estimated 5 million foreclosed homes lurking in the shadows.  And so the cycle continues; more foreclosures create a bloated inventory.  With an insufficient number of buyers able to buy, sales drop and prices fall, which breeds more foreclosures, and on, and on.

As I’ve noted before, I’m no economist and certainly don’t have all the answers, but there are clearly two actions that could put the brakes on falling prices and encourage increased sales:

  1. Congress should oppose the Quality Residential Mortgage (QRM) requirements being proposed.   The QRM would require an unnecessarily high down payment of 20% and impose a very stringent debt-to-income ratio for conventional loans.  The result would be that more borrowers would seek FHA loans, which in turn would likely raise qualification standards and insurance requirements.  The bottom line result will be fewer qualified buyers and fewer sales.
  2. Banks need to address the issue of negative equity by offering programs that provide principal reductions.  When a borrower feels that he/she is paying on lost equity that they will never recoup they are more likely to choose to default, adding to the inventory glut.

Do you have any ideas about breaking the cycle of falling prices?  I’d love to hear from you!

 

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A recent study by analytics company CoreLogic reported that nearly 25% of all mortgage borrowers owe more than their home is worth.  The aggregate amount of negative equity in the U.S. was a whopping $750 billion at the end of last year.   This lost equity prevents homeowners from refinancing or moving, and according to the report, is the “dominant factor” driving the real estate market.

If you’re among the millions who are paying each month for negative equity, you probably have some questions about your options.  To help address this issue, I’m offering a FREE workshop here in San Diego covering the following:

  • Should I wait for home values to increase?  What is the future of San Diego real estate?
  • What about a loan modification?  What programs are available, how do I qualify, and how many loan modifications are actually approved?
  • If I can’t afford my payments, what are my options?
  • What is involved in the foreclosure process?  How long can I stay in my home? How will it affect my credit?
  • Will filing Bankruptcy save my home?
  • What is a strategic default?  What are the risks?
  • What is a Deed in Lieu of Foreclosure?
  • Is a short sale better than foreclosure?  What is the process? What is a HAFA short sale?
  • What about deficiency judgments and 1099s?  When can I qualify to buy again?

Saturday, June 25th  10:00 – 11:30 a.m. 

San Diego County Library, 4S Ranch

10433 Reserve Dr, San Diego, CA 92127

There is no fee or obligation for attendance, but space is limited.  Advance registration is required.  Homeowners will receive comprehensive workshop materials.

Call 1-888-464-1820 x104 to Register Today

As mentioned previously, I’m not an accountant or lawyer and you should always consult the appropriate professional before making any major decision about your home.

 

Everyday I wake up, turn on my computer and read all the real estate news.  But pretty soon I’m scratching my head, wondering whether or not anyone really has a clue about what’s going on.  One story says values have double-dipped at a new low, another says they’re on the rise.  Some “experts” insist that reducing unemployment will drive the real estate recovery, while others have the statistics to “prove” that a stronger real estate market will be what heals the national economy.  No wonder the real estate market is stagnant – everyone is paralyzed by uncertainty!

As noted previously, I have no crystal ball.  Nor do I have a doctorate in economics.  However, I do know one thing that will help heal both the real estate market and the overall economy:   Would-be buyers and defaulting owners – take action now!  

If you are thinking about buying a property, quit thinking and start doing!  This is a fabulous buyer’s market and both prices and interest rates are at incredible lows.  If you’re worried that you won’t get the absolute lowest price because values might continue to drop, you’re probably wrong.  Most experts believe that we’ll see some slight ups and downs in value over the next 2 years, but it will be more of a bumpy road versus a roller coaster dive.   If you wait another year to buy, you’ll lose 12 months of mortgage interest deduction, and the enjoyment of owning your own home or investment property.

On the other hand, if you’re unable to continue to make your mortgage payments it’s definitely time to take action.  You probably won’t win the lottery, so call your bank and try to get a loan modification.  If that doesn’t work, consider a short sale.  Avoiding a foreclosure through short sale is generally not only better for the seller, but it will help the real estate market and economy.  Banks are choking on foreclosure inventory, and as those homes are released into the sales system they are often neglected and tend to lower home values.  Reducing the number of new foreclosures is key to recovery for everyone.

So if you’re still unsure and have questions about buying or selling, just give me a call.  I’m ready when you are to help turn this market around!

One of my daughter’s very good friends recently wrote a compelling blog post about how we as Americans are often much too attached to material things.  It was very well written and got me thinking about my relationship with stuff, and after some thought, I decided that an emotional attachment wasn’t all bad.

With the recent tornado and flood devastation we have once again been reminded just how precious life is.  As long as your family, friends and pets make it through alive, nothing else really matters…..and yet it does.  Following every disaster, as soon as people are accounted for, families return to what’s left of their homes to search for things.  Not just anything, but items that hold a special meaning and are often irreplaceable; a wedding photo, a child’s first doll, or granddad’s journal from the war.  They may not be things of monetary value, but the things that we sift through debris to locate are treasured because of our emotional attachment.  In some way, we lose a bit of who are when we lose our special things.

Things can evoke a connection with a special moment in time…they add richness and color to the memory and allow us to recapture and relive some of the emotions of an experience or event otherwise lost or buried.  It might not have even been a moment we lived, but a love note to an ancestor or a bracelet handed down from generation to generation, can connect us with our past and allow us to dream and wonder about the lives that preceded ours.

For me, it’s the Christmas ornaments.  Not shiny perfect balls bought at Target, but the decorations that all have a story, gathered with love for over 70 years.  There’s the pale blue peacock made from the thinnest of glass that used to grace my grandmother’s tree, mom’s funky ‘50s baubles, and all the hand-crafted ornaments my family and I have carefully brought back from every corner of the world.  Each year when I fold back the tissue paper and unwrap each ornament I reconnect with people, places and memories that are a part of who I am.

There is of course no question that the people I love and who love me are what make life worth living.  I’ll never be a hoarder, or even a serious collector, and as anyone who knows me will attest, I don’t need to have the latest electronic gadget or designer handbag.  But amidst all of the stuff that I could easily live without, I do cherish and enjoy the special things in my life.