January 26, 2011

Still Cheaper to Buy than Rent in San Diego

Posted by martikilby under Buying versus Renting, Home Ownership, Real Estate Values | Tags: , , , , |
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In a survey of the 50 largest U.S. cities, Trulia found that it is still more affordable to buy than rent, even in San Diego.  But does this survey tell the whole story?

According to the guidelines the company used, a price-to-rent ratio of 1-15 means that it is more affordable to buy than rent, a ratio of 16 – 20 indicates it is more expensive, but still might make financial sense, and a ratio of 21+ means that it is definitely much more expensive to buy than rent.  San Diego scored a 15, and only 4 cities were over 21, including San Francisco, Seattle, New York, and a surprise, Kansas City, MO.

That all sounds well and good, but it should be pointed out that the survey compared the cost of buying versus renting 2 bedroom apartments, condos and townhomes, not single family residences.  The company arrived at the numbers by comparing the median list price of homes offered on their website for 2 bedroom units to the median rent for a comparable home.  Also, I’m not sure that looking at list price is an accurate indicator as most homes do not sell at list price.

The other problem I have with the survey is that it doesn’t take into account the level of demand for apartments or townhomes versus single family homes.  In New York or San Francisco, there is a much higher demand for condo living than there is here in San Diego.  I believe a more accurate survey for our market would be the comparison of buying versus renting a 3 bedroom 2 bath single family home analyzing sales price and actual rent paid.

The survey results did however indicate an interesting shift in the demographics of who is buying and renting.  According to Tara-Nicholle Nelson, consumer educator for Trulia, “Lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of long-time homeowners are finding themselves tenants – some by choice and others by necessity.”

In the end, I don’t really believe that renting or buying a home is just about the numbers, and who is under the roof with you is much more important than the cost.

 

January 22, 2011

Social Media 101

Posted by martikilby under Business promotion, Business relationships, real estate, Realtor, Social Media | Tags: , , , , , |
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I attended a 90 minute webinar yesterday, designed to get me straightened out about the importance of social media and how to use it effectively in my business.  The presenters are somehow experts (though obviously they’ve only been doing this for a few years).   They spoke about LinkedIn, Twitter, Facebook, YouTube and blogging and how to position yourself on all of this media to gain massive lists of people who will magically consider you the go-to person for your specialty.

My mind is reeling.  First of all, I consider myself very good at what I do, and pride myself on the service I provide to all of my real estate clients.  But I don’t take myself so seriously as to think that there will be 30,000 people just waiting for my next tweet!  And even if I did, do I really want the responsibility of keeping-up this continual stream of content bits and pieces? 

The experts pointed out that the average user spends 55 minutes on Facebook every day, not to mention time spent updating LinkedIn, sending tweets, uploading a new video, or of course, composing a new blog post.  Besides feeling that I am totally failing Social Media 101, I came away from the webinar wondering when I’m supposed to actually do any of the real work I’m trying to promote!   Having thousands of people like me or what I do is useless if I don’t have the time to do it.  So I’ll keep you posted on my progress, but don’t expect a tweet any time soon.

 

January 18, 2011

Is the REO Sales System Really this Bad?

Posted by martikilby under foreclosure, REO, Selling REOs | Tags: , , , |
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If you’ve ever wondered why we’re drowning in REO properties, it could be that banks are stupid.  No, I shouldn’t say that.  Let’s rephrase that more politely to read, “People in banks who make decisions about liquidating foreclosed properties perhaps lack any trace of common sense.”   See if you agree.

Last night I received an email from the asset manager in charge of one of my foreclosure listings.  In case you aren’t familiar with the lingo, the asset manager is often an employee of a third party company that is assigned bulk REOs by a bank.  It is his/her job to hire a Realtor to market the individual properties, act as an intermediary between the Realtor with the listing and the bank, and get the properties sold as quickly as possible for the most money. It is a stressful, high-pressure job.

I like the asset manager on this deal, and so far we’ve worked well together.  I’ve been waiting though for her to open escrow on a sale they approved early last week….an all cash offer of over $300K on a home that needs more than $50K in repairs.  The buyer is ready to close, and I can’t understand the hold-up.  So my asset manager sends me the following email, “We have an issue on this one. The offer is $80 under what I can accept. And no I am not kidding. Is the buyer willing to come up $80?”

$80 dollars????  Are you kidding me?  On a $300K all cash deal?  Geez! I’ll write the check myself!  Let’s just get it done!  So this is what we’re dealing with….a system that is so screwed-up that the person in charge of unloading foreclosed homes doesn’t have the authority to waive $80 bucks!  Sigh.  It’s going to be a long road back to a ‘normal’ real estate market…..

 

January 14, 2011

Lipstick on a Pig?

Posted by martikilby under foreclosure, Real Estate Sales Statistics, REO | Tags: , , , , , , |
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In an underwhelming report issued this week by Field Asset Services, the company revealed that people would rather buy a foreclosure that has new paint, carpet and appliances than a foreclosed home that has not been spruced-up.  Really?

Field Asset Services is a Texas based company that provides cleaning and rehab services to banks and companies holding REO properties.  In an independent study during the first half of 2010, 17,252 properties were tracked across 13 states.  The homes that were not rehabilitated were on the market for an average of 222 days while those that were rehabbed sold in 69 days.

The benefits are obvious.  Not only do banks cut their expenses associated with holding a property but neighborhood values are also improved by reducing the number of vacant homes.  It is also more likely that the home will be sold for more and bought by someone who is going to live in it versus an investor looking for a flip.  Everyone wins.

So at a cost of only $4000 – $8000 for the average rehab, why aren’t more banks willing to put some lipstick on the pig?  I wish I knew the answer to that one!  I was assigned a foreclosure listing back in September.  In early December, the bank finally got around to asking me for quotes to rehab the place.  I supplied 2 quotes at roughly $4200 each…..and I’m still waiting.   They won’t let me list the condo in the MLS, and won’t let me sell it to an investor…..because they’re still trying to decide if fixing the place is worth it!  Crazy!  And people wonder why there is a glut of REOs on the market?  I say slap on the make-up and get ‘em movin’!

 

January 12, 2011

Struggling HAFA Gets Some Updates

Posted by martikilby under foreclosure, HAFA, Short Sale | Tags: , , , , , |
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It’s no secret that the government’s short sale program, HAFA, has had less than stellar results.  The Home Affordable Foreclosure Alternative program was started in April 2010 to provide alternatives to foreclosure when a loan modification wouldn’t work.  Through September, the program has processed only 342 short sales or deed-in-lieu transactions.  This number is ridiculously low considering that third-party technology provider Equator, who provides the platform for processing short sales for several banks, including B of A, reports that over 117,000 HAFA short sales were initiated in the period from April – October.   What happened to all of those transactions?

Mortgage servicers and Realtors have complained about the confusing rules and the stringent requirements for participation that have made it difficult to complete a transaction.  In December the California Association of Realtors sent a letter to government regulators complaining about the program and requesting specific changes to expedite approvals.  The government responded quickly and issed a directive on December 28 that made some significant changes to the program.  Here are a few of the highlights:

  • Servicers are no longer required to verify that an applicant’s mortgage payment exceeds 31% of their gross income, although a hardship must still be demonstrated.
  • Applicants do not need to be currently living in the home so long as it was their principal residence in the last 12 months.
  • Payments to subordinate lien holders are no longer capped at 6%, but have an aggregate cap of $6,000.
  • Servicers participating in the HAFA program will be required to either approve, disapprove or provide a counter to any complete short sale application and purchase offer within 30 days.
  • Servicers who pay contractors to assist in processing the short sale cannot charge those fees to the borrower or deduct it from the real estate commissions.

Will these changes improve the approval rate?  Probably, but the key will lie in how well the banks comply and the rules are enforced.

 

January 9, 2011

What If????

Posted by martikilby under Home Ownership | Tags: , , , , , , |
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We live on the edge of a canyon, and the homes across the street are on narrow lots, perched on a steep hill about 50 feet above our home.  Last night, I awoke in panic as the foundation on one of the homes began to crumble in the heavy rain and started sliding down the hill towards our home.

Luckily it was a dream, but I couldn’t get it out of my head.  Would we get out in time?  Would I have time to grab anything before our home was crushed?  What would I take?  When I got up this morning and reassured myself that both homes were very much intact up on the hill, I wondered if our insurance would cover our home if my nightmare had been a reality.  And the truth is, I have no idea.

We all heard the horror stories after the last two wildfires swept San Diego County…stories of those with no insurance, but even more frequently, those who were under-insured.  Disasters such as wild fires or flooding can happen to any of us, but how prepared are we to recover our losses and rebuild our homes and our lives?

My way-too-real dream reminded me that a call to my homeowner’s insurance agent for a New Year’s check-up might be a good idea.  Here are a few things to review: 

  • What is the deductible?
  • Are we covered for flooding?  Any limitations on fire coverage?
  • Are we sufficiently covered for loss of use?
  • Would our additional coverage pay for removal of debris if the house across the street did slide down the hill into ours?
  • Do we have an endorsement for guaranteed replacement cost of our home?
  • Is our personal property adequately covered?
  • And finally, are we getting all of the discounts that might be available to us?

This morning I’m very thankful that we didn’t have to make a midnight run for our lives, but I think I’ll sleep better once I know we’re covered, just in case……

 

January 4, 2011

Living in a Pig Pen?

Posted by martikilby under Realtor, Selling your home | Tags: , , , |
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If you think it’s OK to ignore the ketchup that dropped on the carpet, and that black fur growing in the bath tub is normal, do me a favor:   Don’t list your home for sale.  As a Realtor, I’ve seen more than my share of filthy, smelly houses, but yesterday’s showing put a surprising twist on what people consider acceptable. 

Entering the front door of the home I noted several rows of shoes in the foyer.  Normally, this is a sign that the occupants care about keeping their floors clean and don’t want to track dirt from the outside world into their home.  However, as I gingerly stepped onto the carpet, not only did I keep my shoes on, but I was wishing I had worn waders to protect me from whatever life forms were living in the carpet!  What were these homeowners thinking?  The carpet was stained to the point that it was difficult to determine the color and piles of dog and cat hair billowed around my feet at every step.  And they remove their shoes?  Really?

Most sellers of course don’t live in a pig pen, and if your standards of cleanliness are a bit relaxed, that’s your business.  However, most of us become so comfortable in our own environments that we may not be able to see things that will distract a buyer.  When it comes time to sell your home, listen to your Realtor!  Most buyers lack imagination and will not be able to see past dirt or clutter.  Hand prints on the walls and less than clean appliances are seen by the buyer as work they don’t want to do. 

Ready to sell your home?  Ask your Realtor for a candid evaluation of items that need to be cleaned and/or repaired before you worry about the list price.

 

December 29, 2010

Taking a Bet on Real Estate in 2011? Here’s My Predictions

Posted by martikilby under foreclosure, Home Ownership, Interest rates, loan modification, Real Estate Sales Statistics, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , , , , |
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Once again, Santa forgot to bring me a crystal ball.  So this look into the future of the housing market is based on trends from the past year, projections from those that crunch the numbers, and my gut feelings based on life in the real estate trenches.

Foreclosures continued to be the top story in 2010 with robo-signing and questionable practices making headlines.  In 2011 so-called shadow inventory will be making news as it grows and clogs the pipeline.  This includes borrowers that are 90 days or more delinquent, homes in foreclosure, and bank-owned properties not yet on the market.  S & P estimates that it will take 41 months to clear the backlog, continuing to slow the recovery.

Short sales will increase as the government and lenders try to stem the deluge of foreclosures that add to the shadow inventory.   Right now about 35% of defaults end in a cure or short sale.  I see that number growing as banks and the government iron out the problems with HAFA (Home Affordable Foreclosure Alternatives), and the processing of short sales is streamlined.

Loan modifications will continue to be largely unsuccessful.   There is some hope for small improvement in the numbers if the FHA principal reduction program can be expanded.

Mortgage interest rates jumped this last month, but are gradually heading down.   Frank Nothaft, chief economist for Freddie Mac foresees rates staying below 5.00% throughout the year.  Let’s hope he’s right.

Home sales will increase, especially for first-time buyers, provided interest rates remain low and the economy continues to improve.  If unemployment continues to decrease and incomes increase we should see an increase in home sales over 2010 by the 2nd half of the New Year.

Home values throughout most of the country will reach the bottom by mid-year and many areas, such as San Diego County will see modest gains of 2.00 – 4.00%.  The exception continues to be the luxury home market where home prices in locations such as La Jolla and Rancho Santa Fe will continue to decline.

My advice?  If you own a home and are not terribly upside-down, hang tight.  Looking to buy?  Do it now!  This is a great time to purchase your first home or pick-up an investment property.  Struggling with your payments?  Let’s explore your options, before it’s too late.  Overall, I’m cautiously optimistic.

Best wishes for a happy, healthy and prosperous New Year!

 

December 22, 2010

Fannie Mae Slaps Foreclosure Victims

Posted by martikilby under Fannie Mae, foreclosure, Loan qualification | Tags: , , , , , , , |
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Just in time for Christmas, Fannie Mae put new rules into effect on December 13th that will make it even more difficult for homeowners who have had a foreclosure to buy again.

Under the new lending guidelines that control qualification standards for Fannie Mae backed mortgages, a borrower who has had a foreclosure will now have to wait seven years before being approved for a new mortgage.  That is up from the current wait time of four years.  Another provision of the guideline revision tightens the acceptable debt-to-income ratio (DTI) to 45%, down from 55%, and includes stricter scrutiny of all installment debt.  Under the new guidelines, even one missed payment on a credit card could mean the difference between approval, and not qualifying.  Fannie Mae currently guarantees 28% of all residential loans.

While we all understand the need to move away from the “if you have a pulse, you qualify” standards of a few years ago, these new guidelines seem downright punitive!  On one hand the Fed is pumping money into banks urging them to make more loans to stimulate the economy, yet at the same time the new regulations make it more difficult for banks to lend.   And why the increase from four to seven years?  There is no rational reason for this extended wait time.  The only thing I can figure is that this is intended to scare homeowners considering strategic default into continuing to pay an inflated mortgage on a grossly devalued home.

Although there are several provisions of the new guidelines that may benefit some borrowers, overall this is not an effective way to get the housing market back on its feet.  Thanks Fannie:  You’ve just provided one more reason why I believe we’ll continue to see an increase in short sales over the coming year.

 

December 21, 2010

Hope for Homeowners Facing Foreclosure

Posted by martikilby under foreclosure, loan modification | Tags: , , , , , , , |
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Finally, it appears that something is working to help save homes and stop foreclosures.  In a report released on Monday, NeighborWorks America revealed that a homeowner who works with a housing counselor is nearly two times more likely to avoid foreclosure than those that receive no counseling.

NeighborWorks America is the administrator of the National Foreclosure Mitigation Counseling Program (NFMC) established by the federal government in 2008.  The first two years of the program were analyzed by the Urban Institute of Washington, D.C, and revealed the value of counseling intervention in not only reducing the number of foreclosures for homeowners who were counseled, but in mortgage modification.  Homeowners who worked with a counselor to get their mortgages modified ended up with reductions averaging $555 a month, compared to savings of $288 for those that did not work with a counselor. 

Another benefit of working with a counselor is that the re-default rate is lower.  After receiving a loan modification 49% of non-counseled borrowers re-default after 8 months, compared to 36% of those counseled.  This still seems high, but overall the report clearly demonstrated the value of counseling as 55% of those in foreclosure that sought counseling were able to cure the foreclosure and save their home within 12 months.

The report did not indicate if the lenders involved in the modifications reduced principal balances or simply modified rate and term.  And while counseling may be useful in many cases, I still believe that principal reductions are the only real tool to stop the foreclosure flood as counseling does not address the issue of strategic default.

 

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