Event Round-Up: Aug. 10

We’re going to go a slightly different direction here today, as I usually pull from a larger list of events and compile them for you. Instead, I’d like to focus on the Broadway Plaza Concert Series which has started this month. First, a few thoughts on the series itself:

Since they re-did the mall and have moved these concerts into the event plaza by Macy’s, I don’t really enjoy these shows as much as I used to. It is too crowded and it is fenced off, so people can still walk through.

I really liked the casual area that was once next to Stanford’s and behind the parking structure. It never felt too crowded there. I was thinking it might be better to move it to the top of the parking structure by Macy’s in the future.

With all that said, this is a good opportunity to get downtown on a warm summer night and enjoy some music with family and friends. Even if the layout isn’t as good as it used to be, the music is still there! So, here is the schedule for this summer – go check it out and let me know how you like it!

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(We’ve already had two of the shows go by, but there are still three more! You can bring blankets or chairs to the venue. Music always starts at 7 p.m.)

Aug. 15: The Cheeseballs

Aug. 22: The Unauthorized Rolling Stones

Aug. 29: Queen Nation

Home Sales Fall Despite Falling Rates?

Another great blog from Jay Vorhees at JVM Lending! He asks, with home sales falling despite the rates also falling, whether the end is finally here? “We can only hope,” he quips. Read on for more from Jay, and a bit of insight from yours truly at the end!

Tulip Mania

In the 1630s, the Dutch experienced one of the world’s first major financial bubbles – Tulip Mania. They were all convinced that the price of the exotic (at the time) tulip bulbs would increase forever, not taking into account how easy it was to reproduce them and how the ridiculously high prices were clearly not sustainable.

Everyone (even common laborers) was borrowing money to buy as many tulips as they could, trying to get in on the action. At one point, a single bulb cost as much as some of Amsterdam’s most expensive mansions at the time. Then, it all collapsed. There have been many bubbles since, including the 1929 stock market crash, the dotcom crash of the late 1990s, and most recently – the mortgage meltdown of 2008. All those bubbles were partially driven by easy credit, so every time the Fed lowers rates, I am terrified that it is fostering a new bubble.

Home sales fall in June – despite lower rates, higher wages, and lower unemployment

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So, that is why I was actually marginally encouraged to see this recent headline and article in the WSJ: U.S. Home Sales Stumble (in June). “Home sales slumped in June as home prices for major West Coast cities decline for the first time since 2012, ending the spring selling season with a thud.”

This is amazing to me because rates were about 1% lower than where they were the previous June, and everyone thinks rates drive housing prices. But, they clearly don’t. Home sales fell in the face of rising wages and decreasing unemployment too, leaving economists perplexed, as those factors are also supposed to drive prices higher.

Sales are probably falling because borrowers are hitting their affordability limit, and because buyers are acting prudently (unlike prior to 2008). While fewer sales overall are never a good thing, it is a good thing to see a potential bubble start to deflate instead of popping – so YAY! (sort of)

I might add that a huge brokerage we work with in Texas is currently projecting a downturn in the near future, telling agents that they need to trim expenses by 20%. So, it is not just the West Coast experiencing a slowdown. And finally, despite the apparent slowdown, numerous agents we work with are still experiencing record years simply because of their relentless marketing. We too have almost tripled our purchase volume year over year by improving our value props and increasing our marketing efforts.

Takeaways from this blog: This slowdown might be averting another bubble-pop! The Fed can’t stimulate everything with low rates. They might call Japan and ask how their low-rate experiment has gone, as 20 years of near-zero rates have not revived Japan’s economy at all. No matter how soft markets get, the overall market remains huge and business can always be found with stellar value props and very aggressive marketing.

Kristin’s insight: Some houses still have multiple offers, usually ones that are updated, and are priced slightly below market or in a highly desired neighborhood. The rest are sitting longer on the market and may see a price reduction or two as buyers become much more discriminant.

Go check out the Ed Hardy exhibit in SF!

According to the deYoung Museum’s website, California native and renowned tattoo artist Ed Hardy had a goal of elevating the tattoo from its “subculture” status to an important visual art form. I’d say he succeeded!

Ed Hardy is a household name now because he got into mass branding on shirts, skateboards and surfboards. My kids and even I had an Ed Hardy shirt. He says in the exhibit that business decisions allowed him to retire. The deYoung Museum is currently holding a really interesting exhibit on his work that I’d highly recommend visiting.

From now until early October, you can go see the Hardy exhibit for less than $30 (or FREE if you’re a member!). The exhibit surveys Hardy’s life in art that has its inspiration in both traditional American tattooing and Japan’s ukiyo-e era culture.

He actually started his tattoo career at age 10 with eyeliner and ink pens, when a friends father came back from the war and his tattoos intrigued the young artist who had been drawing from a very young age. I find him interesting because he has studied fine art and is truly an artist. When we handed in our tickets to enter, the staff said he often visits the exhibit with his dog. He is there most days. Unfortunately not the time I was there, but maybe you will get lucky!

Art Town: Painted Frog!

I recently came across this in sculpture on my way to Physical Therapy. I hurt my shoulder back in March while skiing at Jackson Hole and kept thinking it would heal. In June, I finally went to my doctor to see if the PT would help. Muir Orthopedics recently moved to 2625 Shadelands Dr. in Walnut Creek. On the corner of Shadelands and N. Wiget, there is a community garden. On the Wiget side, I drive past this artwork and every time I laugh. This may not be the typical type of Walnut Creek art that I have shared in the past, but it is so funny and cute, I couldn’t pass it up!

The structure is made of rock, and shaped into a large frog with its tongue out, which is like a mosaic. The rocks have been painted to create a cute sculpture by the garden. I don’t know who created it, but I love it!

It’s refreshing to have a nice mix of goofy and eclectic art in our little town. We have a beautiful city to wander through, and this just adds another level of charm!

Who funds Mortgage Loans?

For buyers, this JVM Lending blog from Jay Vorhees is a great “101” on the differences, pros, and cons of the three institutions you can go to for your loan. I often recommend JVM for their efficiency and getting the loan done in a short time frame, not because I get something in return. Having said that, I do get a big benefit by having a smooth escrow, closing on time with short contingencies, and happy clients. A buyer who has never been through a nightmare purchase will never fully appreciate a smooth buying process, but at least I know I have done a good job representing them.

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We host “Homebuyer Seminars” for buyers and “Mortgage 101 Seminars” for agents, and one of the slides that always derive a surprising amount of interest is the one that sets out the different mortgage origination channels.

This is because there are so many companies and individuals offering mortgages that it can be both very confusing and overwhelming for consumers and agents alike. Because of this, I am revisiting the topic in today’s blog.

Three Primary Channels for Mortgages: Commercial Banks and Credit Unions

These big institutions dominated the mortgage industry after the 2008 meltdown, but their overall market share has been dropping quickly in recent years, as Mortgage Banks and Brokers (see below) reclaim market share. The “big banks” include Wells Fargo, Citi, Chase, B of A, and U.S. Bank, among others. Major Credit Unions include Navy Federal and USAA, but there are hundreds of others.

Advantages: Bank and credit union advantages include a low cost of funds; they can loan out customer deposits and sometimes offer low rates. They also can “portfolio” (or retain) tough loans that otherwise could not be sold on the secondary market.

Disadvantages: The big banks are very slow and bureaucratic largely because they are so heavily regulated. They also rely on national appraisal management companies that do not employ the best, local appraisers – so appraisal issues are common.

Private Banking: Commercial banks have an offshoot for “high net worth” customers called “private banking.” These channels often offer exceptionally low rates that other entities usually can’t compete with.

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Mortgage Banks: Mortgage Banks include Quicken, Guaranteed Rate, and Fairway at the national level, and RPM and SWBC at the regional level. JVM Lending is also part of a mortgage bank. Mortgage banks do not hold deposits; the ONLY thing they do is underwrite and fund mortgages. Mortgage Banks use lines of credit to fund mortgage loans and then quickly sell the loans to investors or third parties to make money.

Advantages: Mortgage Banks can typically move much faster than commercial banks because they are less regulated, smaller and more nimble. They can also set up their own appraisal management companies, ensuring access to local appraisers and better appraisal quality.

Brokers: Brokers do no underwrite or fund loans. They only “originate” loans and then send them to outside “wholesale” lenders for underwriting and funding.

Advantages: Brokers can access dozens of different wholesale lenders and submit loans to whichever lender is offering the lowest rates or best terms at any given time.

Disadvantages: Wholesale lenders force brokers to use national appraisal management companies (like the big banks use) and there are frequent appraisal issues as a result. In addition, brokers have no control over underwriting (because it’s not “in house”) and turn-times. Brokers also have very few competitive options for jumbo financing. JVM was in the broker channel for years, but left it in 2014 because we had too many appraisal and service issues.

Road Trips: Marlette Lake

Over the 4th, I spent the long weekend in Reno and Tahoe. We decided to take do a hike to Marlette Lake. As you can see in the featured image on this post, Marlette Lake is a beautiful little lake in the Sierra’s, just above Tahoe and was used for the water, via flumes in Virginia City during the silver mining boom. It was a perfect day for this 9-mile round-trip hike.

I wanted to continue on the Flume trail which takes you to the old Ponderosa Ranch location and makes the trip a total of 13 miles with breathtaking views of the lake as a reward. However, you need to figure out how to get back to your car at Spooner Lake. There is a shuttle for $18 per person or you take two cars and park one at the new parking lot at the base and one at Spooner summit.

I was out-voted to do the longer hike and my my feet were very happy we didn’t. You just can’t beat day hiking around in the beautiful mountains around Tahoe. Note: There are two trails – one larger path for mountain bikes, and a narrower foot path for hikers going up to Marlette from Spooner. Going down or up the Flume Trail, all share the same path!

Higher Fees vs. Lower Commission: Friction Avoidance

Jay Vorhees at JVM Lending had a good blog recently about iBuyers, which are large firms that buy homes from sellers to get around the listing and showing process. Read on:

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The National Real Estate Post recently posted this interesting comparison of iBuyers and real estate agents. What is an iBuyer you ask … iBuyers are large firms that buy homes from sellers outright so sellers don’t have to go to the trouble of listing and showing their homes. The iBuyers then resell the properties as quickly as possible and usually for a profit. Some of the major iBuyers include Opendoor, Offerpad, and Zillow.

iBuyer fees are higher than realtor commissions

The video’s host points out that the iBuyers charge large “fees” that are really no different than commissions. What is surprising though is that the iBuyers’ fees add up to more than the average commission rate charged by real estate agents.

Opendoor and Offerpad charge fees that total 7.5% of the purchase price, while Zillow charges fees that total 7%. The fees for Opendoor, for example, include such line items as an “Experience Charge” and Repairs, and even a “Market Risk” fee.

The average real estate commission paid by sellers is now just over 5% according to the host, so sellers are paying substantially higher fees to the iBuyers. In addition, the iBuyers are unlikely to offer top dollar, given their desire to resell the homes at a profit.

The hosts also cite this WSJ article that discusses iBuyers at length as “The Future of Housing.” The WSJ article points how much traction iBuyers are getting in cities like Phoenix where there are large tracts of similar houses (something iBuyer algorithms require). The article also mentions a couple in AZ who sold their home for $215,000 only to watch Opendoor quickly resell the home for $240,000 after painting and slapping in some new floor coverings (something any agent would have recommended from the get-go). So, the sellers effectively left $30,000+ or more on the table by going the iBuyer route.

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In any case, there is a lot of data that agents can readily use to convince sellers not to sell to an iBuyer. And I suspect the iBuyer model will become much less viable if and when real estate takes a downturn and homes end up sitting on the market.

But, the biggest takeaway from all of this is that sellers are obviously willing to leave a lot of money on the table simply to avoid friction. Friction avoidance is something all agents will need to focus on to win and keep clients.

These days, my job is often project managing and coordinating the service providers to get the house market-ready. Doing that work the iBuyer companies do so it can be sold at a higher price. Often the seller is in another city or already moved out, so I manage the process with the objective of keeping it less stressful for the seller. Our area is much harder for the iBuyer companies because we tend not to have cookie cutter subdivisions in our area. The value of a good real estate agent is often undervalued because if they do their job well, the seller will often think they didn’t do anything because it all went so smoothly.

Beach Festivals around the world!

Last week, I listed a few good Northern California music festivals for you to check out this summer! I’m sticking with that theme today, but expanding our horizons and focusing on SUMMER! Here are the best Beach Festivals around the world – if you’re headed to one of these regions for vacation, try to pair your trip with an awesome music festival.

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Revere Beach National Sand Sculpting Festival

From July 26-28, you can watch artists build massive sand sculptures on America’s first public beach in Revere, MA. There will be food trucks, vendors, and other amusements, plus a huge fireworks display! More info.

Boardmasters Festival

This one takes you across the pond to Newquay, Cornwall, UK from August 7-11. It’s called one of the most popular beach festivals in the world because it combines professional surfing and skateboarding with music! Florence and the Machine, Wu-Tang Clan, and Franz Ferdinand are among the musicians performing. Check it out!

The Washington State International Kite Festival

Scurry on up to Long Beach, WA from August 19-25 for the kite festival, which fills the summer sky with kites! This is a super unique spectacle, and, honestly, when else would you go to the beach in Washington? More info.

Curacao North Sea Jazz Festival

Squeeze in one tropical vacation before the kids have to go back to school! (Well, not if your kids are in the Acalanes School District, as this year school starts on August 13th so that finals can happen before Christmas break). From August 29-31, one of the largest Caribbean beach music festivals takes place and offers all sorts of genres to its attendees. Catch The Black Eyed Peas, Earth Wind & Fire, Mariah Carey, or Maroon 5 here. Seriously!

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The Hawaii Food & Wine Festival

As if you need an excuse to go to Honolulu, there’s a full weekend (October 5-7) of wine tasting, local cuisine, and beach-bumming available to you. It’s a culinary festival, and proceeds benefit Hawaiian non-profits. See here.

The Airlie Beach Festival of Music

Okay, this is asking a lot. Flying to Airlie Beach in Australia is quite a trip, but if you happen to be there November 8-10, you’ll take part in a huge music experience at the heart of the Great Barrier Reef, right when our friends down under start their beautiful summer! If you haven’t been to Australia, this is a good excuse. Check out more details here.

For next year, you or your college kids may want to consider Barcelona Beach Festival (BFF). My son Jackson went to this when he was studying in San Sebastian and it sounds like they never went to bed, just party’d on the beach all night. BFF is a huge electronic music festival, featuring some of the mainstream’s biggest stars. As the name suggests, BBF takes place on the sands of the world-famous coastal city, transforming the Platja del Fòrum into one of Europe’s wildest party spots for over 12 hours. Mid July is the time frame. Here is the link to join the waiting list for 2020 date and line up