Housing Reform Bill Ramifications

Housing reform and what it could mean for you. In our three part series on the housing reform bill we discuss three major changes that could impact your decision to buy, sell or refinance your home. Congress

Part 1

Listen to this short introduction in the player or subscribe to the full Podcast Download housing_reform.mp3

If you can imagine a ball of Silly Putty rolling down the aisles of the senate floor and how much unwanted stuff would stick to it, you can imagine what happened to the housing reform bill as it made its way through congress. Some of what was tacked onto the bill had nothing to do with the current lending issues at all.

At over 700 pages long, it will take awhile to discern what the ramifications will be in the housing or financial markets, but suffice to say we’ve found some interesting changes in existing laws that will have an unexpected, and in most cases, unwanted result. We figure the government wanted to find a way to fund some of these reforms so hang-on…

Most important to remember is the deadline—December 31, 2008. That date is important in two scenarios—buying or refinancing or purchasing a rental property. The first scenario we’ll deal with is purchasing a new home or refinancing your current residence. As it stands, the conforming loan cap which was $417,000 has been raised in high cost areas to $729,750 (125% of median home value for a particular area) will drop back down to $625,500 for the foreseeable future after December 31, 2008. Why is it nice to have a conforming loan? Rates are cheaper since these loans fall under Fannie Mae and Freddie Mac guidelines and are easily sold as securities in the secondary market. What if I’m buying a home for more than $729,750? It doesn’t actually work that way. The maximum loan amount for a conforming loan is $729,750. If one were to put down 20% the home value could not exceed $912,187 in order to stay under the cap—that’s hard to do in the Bay Area. But if you’re buying a home that costs over that amount you can still get a first loan (conforming) for $729,750 and a second for the difference—at a higher rate of course, or elect to make up the difference in cash. Another ramification is there may be some impact to the value of homes near the $912,187 threshold. For instance, a seller may choose to lower their price to $910,000 instead of $920,000 to attract more buyers. In this case the seemingly small differential in price is exacerbated when interest is calculated over 30 years at the higher non-conforming rate.

Here’s an example between buying a home that qualifies for a conforming rate vs. one which is just slightly over the limit.

Sale Price             $912,187              $920,000

Loan                      $729,750              $736,000

Rate                       6.625%                  8.250% (30 year fixed rate as of August 14, 2008)

Monthly               $4,672.67             $5,529.32             diff $856.65

Total interest     $952,410.93        $1,254,555.99     diff $302,145

Notice that the seller asking just slightly over the price threshold of $912,187 will cost the buyer $856.65 per month for a grand total over 30 years of $302,000! Which house would you buy? Based on this example, it’s clear to see why sellers may choose to lower the price of their home to get under this price point if they are even remotely close to the $912,187 threshold. Of course buyers are free to make up the difference in cash to keep their loan at conforming levels.

After December 31, 2008, when the conforming cap reverts to the $625,500, the choice becomes to buy a home worth less in order to qualify for a conforming loan–$819,375, or get a second loan at a much higher rate for the difference. Here’s what that would look like assuming rates remain unchanged and the buyer is purchasing the same home for $912,187. As compared to the above example, the monthly payment would go to $4788.35, or $115.68 more per month, and for a total of $41,641.65 more in interest over 30 years.

Clearly, buying before the year runs out has its distinct advantages—all other factors remaining equal.

Check back to read about the second reason December 31st deadline is importnat and read the second of our three part series on Housing Reform Bill HR3221.

MorganHomes.com

The end of the MLS as we know it

Search_bar_3

Launching the latest and greatest real estate search engine seems to be the new dot com venture. It feels like every time I turn around Inman News is sending me a list of newly launched search engines targeted at the eyes of would-be home shoppers. The latest email alert on August 8th was an article titled, “20 Online Real Estate Sites You Don’t Know About… But Should”.

That’s great I thought. Add that to the 1000+ other real estate search engines and you realize that all this information is a giant step backward—not forward.

Consumers want to be able to do their own legwork—like when I’m looking for a car. I peruse all of the available models on-line, run a compare search, limit it to a few possibilities then go visit the showroom. People looking for a home want the same information and once their interest is piqued, they want to see some homes in person.

One good search engine could do that just fine; one that has all of the available homes for sale in the area they’re searching, offers interactive mapping (with aerial views), and while we’re at it a comparison page, a place to save your viewed properties, and just to add more value a list of homes that recently sold nearby.

Our local Multiple Listing Service offers only a few of these features. It does provide for the most current and accurate information on listings listed by local cooperating brokers. And albeit a small fraction of the inventory, what it lacks is for-sale by owner properties. It also lacks many of the trick features these mashed-up web pages offer like property comparisons and a personal profile to store past searches.

What the MLS’s need to do is step-up to the plate and provide more information to the consumer. No consumer wants to search ten different web pages to get the entire inventory and most consumers don’t need a national database of homes for sale. Typically, buyers have narrowed down their search radius to a few miles and boasting of a national database of homes for sale seems more about bragging rights than valuable information.

Will any of these search engines put Joe real estate agent out of business? They had better hope they don’t. Because what they are offering is essentially a data feed and interface—and without real estate agents actually in-putting data into the MLS—which is in turn fed into the secondary web search market—there would be little inventory to view.

Imagine every seller uploading their own data. First, they’d have to make sure they hit all 1000+ search engines since there would be no centralized database to draw from. Second, who would police this data for accuracy, timeliness and authenticity? What about confidential information—how would that be handled? When a home is vacant should the seller input “we’re going on vacation so show our home anytime” on the internet? What type of lock boxes would a seller use and if so would they put the combination on the internet along with their home phone number for showings?

Don’t get me wrong. I love web sites like Zillow who offer fun interactive tools that make home buying more interesting. Let’s face it they have cool maps and fun algorithms and I enjoy looking at them to see the values they come up with. But they aren’t a substitute for people in the trenches gathering data at street level and reporting back to the Mother ship.

I’d like to see a web site that had all the features the consumer wants—then sell it to the local real estate boards since they can’t seem to think of these ideas on their own.

Real Estate Fees REVEALED!

Be sure and get our Podcast where we discuss how to negotiate the best listing fee with your agent and how our variable rate fee structure works. Download Fees.mp3


This chart illustrates the correlation between the price a seller receives of their asking price and the days their home is on the market. Note that the optimum time to sell a home is in the first 14 days. Listen to our complete Podcast for a detailed explanation on how pricing your home right can net you more for your home and reduce the fees we charge!



Belmont Real Estate–Values are holding steady.

Anyone trying to understand the wild fluctuations in Belmont’s median home price need look no further than this chart.

We’ve tracked the median home price in Belmont over the last year—ever since the mortgage crises. What we were looking for was the impact it would have on home values. We sure were stunned to see a $200,000 median price increase last December, which lead us to go back and track the median size home selling too; this way, we could adjust for larger or smaller homes selling in a particular month.

Now that we’ve plotted the data, it’s easy to see that the dramatic swings in median value correspond directly to the large fluctuations in the size of the homes sold during a particular month.

Belmont only has 20 or so sales a month—sometimes far less—so just a few larger than average homes selling can really skew the true median price.

(click on the graph for a larger view)

Data retreived from the Multiple Listing Service–ProListing of San Mateo County

Belmont’s Month’s Supply of Homes

The month’s supply of homes is a great indicator of whether it’s a seller’s or buyer’s market, and how bullish the market is in general. This barometer is calculated by dividing the number of homes available for sale by the number of sales per month.

We’ve tried to smooth out monthly anomalies by taking a three month moving average. Still, it’s clear that the beginning of the year was eventful. What made it so was not an unusual number of new listings but an abnormally low number of sales. So long as sales keep pace with the inventory of homes this line should be straight.

Anytime the month’s supply of homes is greater than two (months), it tends to indicate a buyer’s market. Note that for Belmont it’s currently at 3.25—clearly into Buyers market territory. To help put this number into perspective, for San Mateo County as a whole this number stands at 5.3 months and the national rate is over 10 months of inventory.

Belmont’s Weekly Housing Update-8.01.2008

Altura 

The Belmont Housing inventory is down to only 40 active single family residences for sale. That’s low for this time of year.

There are currently 24 homes pending sale which has helped drive the number of available homes down—last week added another seven to the list.

These are the six new listings that hit the market last week.

â–º2105 CIPRIANI BL
Detached Single Family (Class

4 bed(s) /3 1/2 bath(s)

5,580 sq ft 

Belmont (Belmont) 

$1,199,000

MLS: 80824979

Nice home. Busy street.

â–º2602 CARLMONT DR
Attached Single Family

Carlmont

These are nice (technically attached) homes in one of Belmont’s premiere canyons. Large lots but sometimes small usable yards.

4 bed(s) /2 1/2 bath(s)

17,380 sq ft 

Belmont (Belmont) 

$1,049,000

MLS: 80824689

â–º905 AVON ST
Detached Single Family

Sorry, there appears to be no uploaded pictures for this home. Hmm.

4 bed(s) /2 1/2 bath(s)

8,580 sq ft 

Belmont (Belmont) 

$999,000

MLS: 80825395

â–º80 EDGEWOOD PL
Attached Single Family

This townhome appears fairly priced for the complex.

3 bed(s) /2 1/2 bath(s)

1,932 sq ft 

Belmont (Belmont) 

$998,000

MLS: 80825408

â–º1907 OAK KNOLL DR
Detached Single Family

Oak_knoll

This was our “Best Deal for Belmont” this week. It’s got a nice feel, nice backyard, and it’s located atop one of Belmont’s best locations with a micro-climate protected southern exposure.

3 bed(s) /2 bath(s)

8,250 sq ft 

Belmont (Belmont) 

$988,000

MLS: 80824402

â–º101 FARALLON DR
Townhouse (Class 2)

3 bed(s) /2 1/2 bath(s)

2,389 sq ft 

Belmont (Belmont) 

$839,000

MLS: 80825321

Last week only five homes closed escrow. That’s very strange in that typically buyers try and close escrow at the end of the month to save on pre-paid mortgage interest. These are the five homes which closed escrow this week:

 

â–º140 VIRGINIA AV
Detached Single Family (Class

3 bed(s) /3 bath(s)

5,850 sq ft 

Belmont (Belmont) 

$1,089,000

MLS: 80810712

It’s nice to have this home off of the books. It was listed for $1,089,000 and finally sold 105 days later for $1,025,000–$64K less.

â–º1505 ALTURA WY
Detached Single Family

Someone got a good deal on this home we believe—even though they had to pay $53,000 OVER asking to do so. It sold for $849,000 in 9 days.

3 bed(s) /2 bath(s)

7,800 sq ft 

Belmont (Belmont) 

$799,000

MLS: 80810640

â–º2424 CORONET BL
Detached Single Family

This home had nice southern peninsula views but was TINY. Still, a good buy for the nice neighborhood. This home closed $30K under the seller’s asking price at $769,000.

2 bed(s) /2 bath(s)

5,700 sq ft 

Belmont (Belmont) 

$769,000

MLS: 80817167

â–º1121 GRANADA ST
Detached Single Family

This starter home on the east side sold for $715,000–$10K under the seller’s asking price and in only 14 days.

3 bed(s) /1 bath(s)

4,968 sq ft 

Belmont (Belmont) 

$725,000

MLS: 80812144

â–º817 COVINGTON RD
Detached Single Family

Talk about good value. To be in the Belmont Hills for under $600,000! That’s a nice price point.

2 bed(s) /2 bath(s)

5,150 sq ft 

Belmont (Belmont) 

$589,900

MLS: 80816502

Best Belmont Home Deals- July 29th 2008

This home, located atop one of Belmont’s mountains, is the best deal of the week for several reasons. Price is obvisoulsy a major factor and this home could easily have been priced at $1,050,000 in our estimation.

It has a great location, a warm micro-climate in the Belmont hills, and a fun floorplan that exudes charm and personality. The rear yard looks great for entertaining and it’s on a huge lot too.

BTW–last week’s best deal already sold in multiple offers.

View All Photos   
OAK KNOLL DR, Belmont 94002 (Belmont)
$988,000 Beds: 3 bed(s) Baths: 2 bath(s)
DOM: 2  CDOM: 2   MLS: 80824402 
Property Overview
Detached Single Family (Class 1)
Bed/Bath: 3 / 2 SqFt: 1,965
Yr Built / Age: 1956 / 52 years Assoc Fee:
Lot: 8,250 sq ft
Pricing/Dates
List Price: $988,000
Sale Price:
Sale Date:
COE Date:
OffMktDate:
WOW!Beautiful Belmont Home w/Mountain Views. 3 Lovely Bdrms,2 Remodeled Bthrms,Master w/Lots of Closet Space,LivRm w/FP & Access to Expansive Deck w/Views,Spacious DinRm,FamilyRm w/Built-In Desk,Updated Kitchen w/Lots of Cabinet Space,Hardwood Floors Thru-Out,Sunroom,Terraced Back Yard w/Mature Landscaping, 2 Car Carport w/ Garage Door and Extra Storage. Property Sold "As-Is". Pls Come See!!!
Listed By Leila Sisneros, RE/MAX Today

Belmont’s Best Deal for July 18th 2008

Best_deal_soldThis home wasn’t some fantastic steal of a deal but it was a really nice home. I say was because it was on tour Tuesday and has already sold. Who said the days of fast sales are over!

1612 Clee Street, Belmont

$848,500 2/1 1300 Sq. Ft.

Clee Street is a little known side street off of Chevy, another obscure street. Not many homes trade hands on either street. The neighborhood is part of the old golf course. The area was developed in the 1940’s for returning veterans after the golf course went bankrupt. It’s one of the few neighborhoods in Belmont with sidewalks and level streets making it ideal for the stroller set crowd or elderly.  And of course it’s always nice to walk on over to Vivace for dinner.

Best_deal_7182008 So our best value vote goes to East Laurel Creek. What this home lacks in traditional architecture it makes up for in its bucolic setting. It’s situated across from Sugarloaf Mountain preserve and is more reminiscent of a Tahoe cabin than a traditional home. In fact, inside when you look out upon nothing but trees you might think you are in Tahoe.

3324 E Lauel Creek, Belmont

3/2 1700 Sq. Ft. $768,500

So there’s no garage. At $768,500 we think there’s some real value there and real quality of life living for someone lucky enough to snag this home.

Foreclosures have pitfalls for buyers

Ever since we launched our foreclosure portal on our web site we’ve been inundated with inquires requesting information on how to purchase one of the many homes going to auction.

What we did not anticipate was the general misunderstanding of the process.

First, the opening bid is inappropriately referred to as the "sale price" when in fact it is more accurately the opening bid price. This sale price is what seems to attract the throngs of interested parties since it sounds too good to be true, and in fact, it is.

Buyers are asking us, "How can I purchase that home?" Of course the answer is you attend the Sherriff’s auction and be the winning bidder.

Then they ask when can they see the home? Unfortunately, the answer is not until after you buy it. House_and_lock The Sherriff’s department does not conduct home tours, nor do they perform inspections and provide buyers with illuminative reports on the condition of the home. Bidders show up with 10% of the price they wish to bid and must provide the remainder within 10 days of the auction or forfeit their deposit.

If you are lucky enough to be the winning bidder and manage to get a home for less than what surrounding properties of like kind are selling for-good. Now all you have to do is hope that when you get the keys and open the door the walls are intact, the kitchen is still there and the floors are not ruined.

Unless you are a savvy investor with deep pockets we suggest that buyers stick with more traditional methods with safeguards for purchasing a home.

Best Bay Area Home Deals-May 30, 2008

This home in Daly City is the best deal we saw this week. It’s a short sale and the bank is willing to let it go for $500,000. It worth more than that, though it does need some fixing up. Last I heard there were four offers being submitted.

MIDWAY AV, Daly City 94015 (Daly City)
$500,000 Beds: 3 bed(s) Baths: 2 bath(s)
DOM: 66  CDOM: 66   MLS: 786833 
Property Overview
519 MIDWAY AV
Daly City (Daly City) 94015
Detached Single Family (Class 1)
Bed/Bath: 3 / 2
SqFt: 1,170
Lot: 5,304 sq ft
Age: 61 years
Assoc Fee:
List Price: $500,000
Sale Price:
Sale Date:
COE Date:
Remarks
Subject to lender approval! Short sale!
Schools/Districts
Elem: —/ Jefferson Elementary
Middle: —
High: —/ Jefferson Elementary
Property Features
Familyroom
Separate Family Room

Informal Dining Area
Eat in Kitchen

Other Rooms
    —

Bedroom Descriptions
Ground Floor Bedroom

Shower And Tub
1 Shower over Tub

Shower
No Stall Shower

Other Areas
    —

 Amenities
220 Volts in Kitchen
Ceiling Fan(s)

Fireplace Location
Fireplace in Living Room

Floor Covering(S)
Hardwood

Energy Features
    —

 Listing Includes
1 Dishwasher
1 Refrigerator
Free Standing Range/Oven

Garage/Parking
1 Car Garage

Lot Description
Level Lot

View
Neighborhood View

 Yards/Grounds
    —

Has Pool
No Pool

Pool Description
    —

Pool Options
    —

Style
Cottage/Bungalow
Listed By Jen C Jacinto, Out of Area Office
Presented by Christine Morgan, Carlmont Associates, 650-508-1441, cmorgan@morganhomes.com
** Information contained on this report is designed for accuracy but is not guaranteed **