A rollercoaster closing on 2600 Jones Rd.

I recently represented buyers and helped navigate them through a difficult process to land a great home at 2600 Jones Rd. in Walnut Creek. What started as an ordinary home-buying process for John, ended up being a bit of a nightmare as the loan kicked out of underwriting without telling us and loan contingency removal was due on Monday. We got a conference call with them on Saturday and Monday, had a “solutions consultant” calling my client. Nobody mentioned this would happen. We got the details worked out, but when I asked how long before we know if it is approved, he said 6 days and I had no confidence that Quicken would still be able to make it work as their communication and getting all the documentation they needed upfront was not optimal.

We got a notice to perform, I recommended John get approved with JVM, the listing agent had spoke to this lender and they confirmed what I was telling her, so they gave us until Friday. JVM was able to fully approve him, so we removed the last remaining contingency “the loan” and asked for an extension to close. The sellers agreed. John is a newspaper guy from Minnesota and retired from the Chronicle, who was looking for a home where his 11-year-old son and mom, would be in a better school district. The one he would have been going into was ranked a 1. John Jr. will now be going into 6th grade at WCI albeit virtually for now.

John’s son is the joy of his life, a smart kid who now gets to attend a great school in Walnut Creek! We had our own troubles getting a loan and getting everything finalized (especially with the pandemic throwing things off), but eventually, we closed thanks to the help of JVM Lending.

Now, John has got his son into a get a 2-bedroom home in Walnut Creek with a pool. I also gave a bike that I wasn’t using, so now John’s son can walk to school, ride his bike, and swim in his new home. JVM was able to underwrite them quickly during this process, and that allowed us to get everything closed on the deadline day. So many crazy things went on during this process, but I’m happy to say that John landed his son and mother a great home!

Think this is a housing crisis? Think again!

Economists are predicting an interesting forecast for the second half of this year. I have spoken to some people who have tenants who aren’t paying, and they believe in the next couple of months we will have a setback. July will bring corporate reporting for the second quarter and they now say we are officially in a recession that actually began in February before COVID. All of this is creating an interesting and volatile market. As the states continue to open up, there will be fewer people on unemployment. It will probably take a year or more to get it back to normal levels, but in the East Bay, the market is on an upturn.

File:Sign of the Times-Foreclosure.jpg - Wikimedia Commons

As my manager, Elias, wrote us in an email recently: “Educating our consumers on the local market, listing inventory, buyer activity, year-over-year statistics, and truly being [customers’] trusted advocates” are important in this time.

Here are some other reasons why we most likely will NOT have a housing meltdown:

  • According to the latest Wall Street Journal Economic Forecasting Survey (which polls more than 60 economists monthly), 85.3% believe a recovery will begin in the second half of 2020
  • Five of the major financial institutions are also forecasting positive GDP in the second half of the year
  • Four of the five expect a recovery to begin in the third quarter of 2020
  • All five agree a recovery should start by the fourth quarter
  • Overall, the vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020
  • According to Kristin we had a housing shortage before Covid and we still have a housing shortage and that isn’t changing anytime soon.

A side effect is all the new restrictions on showing a property and how it affects the consumer. We now have to send a form stating everyone is aware of the COVID environment, make an appointment for a specific time, not touch anything, wear masks, and only have two people (plus an agent) in the house at one time.

A recent experience with a client on a new construction purchase really highlights the inconveniences. They are not allowed to meet in person, and to view the new construction, you also need an appointment. They send the document via electronic signature, however, my client was moving from out of state where they are not wearing masks and have a more open policy. He was having a hard time reading it on his phone, he was in the middle of moving to the Bay Area, and thought, “when I get there, I will just sign at the office.”

That was his expectation, but the office staff was not expecting him to sign in person because they sent it electronically. They had to give him a mask, and it became a reality of unmet expectations on both sides. The take away for me is that nothing goes a planned. We have to be more fluid. And communication is key. Expectations have to be voiced, as nothing is done how it used to be.

How low can rates go?

Jay Vorhees at JVM Lending recently shared a great blog, which I have posted in its entirety below. As usual, I’ve added my two cents to the topic at the end. Hope you enjoy!

One of the most interesting aspects of the COVID-19 crisis is its effect on interest rates. In “normal” times, mortgage rates correlate closely with the 10 Year Treasury Bond. In other words, when the 10 Year moves higher, so do mortgage rates and vice versa.

Also, “the spread,” or the difference between the 10 Year Yield and mortgage rates in normal times averages about 1.5%, meaning the average mortgage rate is usually about 1.5% higher than the 10 Year Yield. Since the COVID-19 crisis started, however, the “normal” correlation and spread have disappeared.

10 Year Treasury Yields have plummeted much farther and faster than mortgage rates. In addition, mortgage rates don’t always move in conjunction with the 10 Year, and the “spread” between the 10 Year and the average 30-year mortgage rate has jumped to over 2.6%!

Mortgage rates remain higher than expected for a few reasons that I have illuminated many times. One reason is that lenders could not handle the onslaught of refi volume if they lowered rates any more. But the important reason has to do with risk. Mortgages are much riskier now because of unemployment, forbearance, and liquidity concerns; higher mortgage rates simply reflect that risk.

HOW LOW WILL RATES GO?

If the market returns to “normal;” if the 10 Year remains as low as it is now (around 0.6%+); and if the “spread” between the 10 Year and mortgage rates drops back to the 1.5% range, we could see 30-year mortgage rates drop another 1%!

Yes, that means 30-year mortgage rates as low as 2%!

SHOULD BORROWERS WAIT TO REFINANCE?

Absolutely not, and this is why.

First and foremost, the above scenario requires a lot of major “ifs.” And in this extremely volatile economy, anything could happen to derail the downward rate spiral, including inflation, new regulations or government actions, less competition in the market, renewed liquidity crises, and/or a faster than expected economic rebound.

Additional reasons to refinance now rather than waiting include: (1) most refinances are “no cost” so borrowers can simply refinance again if rates fall further; (2) borrowers can save hundreds of dollars per month by refinancing now at no cost, so why defer the savings? And (3) refinancing is relatively painless now with all of the new technology in place, so refinancing again should not be a concern.

This has been our mantra for years and it bears repeating – borrowers who wait for pristine market conditions (with respect to both housing prices and interest rates) often get burned. And that is because in this world of extreme volatility, nobody really has a clue what will happen.

Kristin’s take: I have had many conversations with buyers who are wanting to “wait and see,” and many keep asking if prices have come down. Prices have not come down (with the exception of the luxury market) and we are currently seeing multiple offers or properties pending in 5 days, especially in the entry-level market. Of course, it depends on the home: is it updated? Is it priced at fair market value or lower? And so on. I believe the window to negotiate or get a great deal was within the first 6 weeks of our shelter-in-place because there was so much unknown. For those who had a higher level of risk tolerance or just needed to buy a home, I believe hindsight will show they got a deal (comparatively).

Qualifying for a loan after returning to work

Jay Vorhees at JVM Lending has shared another great blog, which I will share below. I did not include the last section, which is not applicable to my clientele, but you can read the entire thing in the link above. Look for my input at the bottom. As always, I welcome your feedback on this topic!

Many people are wondering how soon laid off and furloughed borrowers will qualify for mortgage financing once they return to work.

Loan Agreement Signature - Free image on Pixabay

Employment Gap Under Six Months

If the layoff or furlough lasts less than six months, lenders will be able to fund most loans as soon as borrowers return to work (for conforming, FHA, and VA loans). Some jumbo lenders, however, may require 30 days of job-seasoning before they will fund.

Employment Gap Over Six Months – Returning to Same Job/Industry

If a layoff lasts more than six months, things get more complicated. If borrowers return to the same job or a similar job in the same industry, they will be able to qualify for conforming (Fannie Mae/Freddie Mac) financing 30 days after they return to work, in most cases, with 30 days’ worth of paystubs. FHA and jumbo borrowers may require six months of job-seasoning, however.

New Job/New Industry

If laid off borrowers find new jobs in new industries, they will have to “season” their new jobs for six months in most cases (and up to two years in some cases) before they will qualify for any type of loan. The exception to this rule is for borrowers who recently graduated from college or any type of professional, training, or graduate program that relates to the borrower’s field in some way. Recent grads can usually qualify for financing as soon as 30 days after starting a new job.

Kristin’s Two Cents: Another topic that has come up is forbearance -a creditor’s temporary forgiveness of debt (i.e. to postpone your payment). Many think, “Hey, why not take advantage of not having to pay my mortgage for a few months?” even if they can, because there is no harm. Well, it will impair your credit (most will report it, you will be required to pay it back once the period is over – and with rates dropping, you won’t be able to refinance for one year after you have fully paid back the forbearance. Do you want to miss that opportunity? Click for more information about forbearance.

Another successful Love You A Latte event!

Last month (before the lockdown, seems like a year ago!), I held my annual Love You A Latte event at the Capital One Cafe in downtown Walnut Creek. I appreciate everyone who came out to support the cause and made donations to Tony La Russa’s Animal Rescue Foundation (ARF)!

It was great to see so many friends and clients come through and share a coffee or a quick chat. We ended up collecting and donating $265 plus some items to ARF!

I love connecting with everyone and have a moment to catch up over coffee along with providing for a great cause. If you didn’t make it this year due to other plans or vacations (lots of people were on vacation), I truly hope to see you next year. We may all be wanting more interactive personal connections by then. Thanks again to all those who participated either in person or by way of a donation.

Fed Rate Cuts Don’t Mean Mortgage Rate Cuts!

NOTE: We will be moving to one post a week (on Wednesday’s) until further notice since we are under lockdown here in Contra Costa County and I can’t go out and explore!

My friend Jay Vorhees at JVM Lending has an interesting take on the latest interest rate cuts by the Fed. Even since he’s written this, the Fed has made yet another cut (because of the government’s response to coronavirus killing the stock market in addition to the Saudi’s dropping the barrel prices), so I’ll try my best to tie the two together at the bottom and make sense of all this:

We were asked a variance of this question over and over yesterday: “I heard that the Fed cut the rate by 1/2 percent; can I lower my mortgage rate by 1/2 percent?” We would respond by explaining that the “Fed Funds Rate” often does not correlate to mortgage rates for a variety of reasons. I touch on this often because the confusion surfaces every time the Fed cuts rates.

When the Fed makes a rate cut, it is to the short-term “Fed Funds Rate,” which does not always impact long-term mortgage rates in the way that most consumers might expect. I blogged about this as recently as August, but here is a brief summary of why mortgage rates not only don’t always correlate to Fed rate cuts, but often go up after the Fed cuts rates:

The “markets” anticipated the rate cut and already adjusted for it. Traders and investors analyze polls, data, and Fed comments to very effectively anticipate changes and the Fed Funds Rate and the markets often adjust long before the rate cuts take place. As a result, very little happens when the Fed Funds Rate is actually cut (or increased).

Short-term rates don’t always affect long-term rates. The Fed is only reducing the Fed Funds Rate, or the rate banks charge each other for overnight loans. This is a very short-term rate and short-term rates don’t always affect long-term (mortgage) rates.

Many factors influence long-term rates besides the Fed, and below are just a few. These factors include economic data; inflation signals; geopolitical crises; and the demand for mortgage bonds. SO WHAT DID RATES DO AFTER THE FED CUT RATES? Rates were about the same after the rate cut as they were the day before.


One day later – in a shocking and surprise weekend move, the Fed cut the Fed Funds Rate to 0% on Monday. See above as to why it might not move mortgage rates. But, the Fed also committed to $500 billion of treasury bond purchases and $200 billion of mortgage-backed security purchases.

This renewed “Quantitative Easing” did push rates down slightly but that didn’t last, as the market is all over the place yesterday and probably today and extremely volatile.

MORTGAGE RATES BARELY MOVE; CAPACITY ISSUES

Despite the massive Fed intervention, mortgage rates barely moved. The reason is capacity.

There are $11 trillion in outstanding mortgages – give or take. The industry is capable of funding about $2 to $3 trillion per year – at most.

When borrowers with $5 trillion worth of mortgages want to refinance over the course of a few months, the industry simply can’t handle the volume.

And – as a result, rates remain on the higher side and are still over 1/2 a percent higher than where they were 10 days ago. The Feds’ rate cut is actually getting a lot of criticism because it will do so little to stimulate economic activity (travel, major events, supply chain issues) offset by the coronavirus concerns. It also leaves the Fed nowhere to go if things get worse. We are in uncharted waters; welcome to the new normal. At the end of the day when this settles, rates will still be low and we may see a listing and buying spree due to the sheltering in place.

Stay safe and healthy my friends!

House for lease in Emeryville!

I have a new listing (for lease) on a home in Emeryville! If you haven’t visited Emeryville in a while, it’s one of the next up-and-coming parts of the Bay Area. Close to a lot of hip, new places and with a fantastic walk score to boot!

The home I’m leasing is at 38 Glashaus Loop. It includes a 2-car tandem garage and is a 2 bed/2.5 bath unit. It is close to a lot of public transportation options and will go for about $3490 per month.

For those who are working in San Francisco and want to live closer than the East Bay or don’t want to pay SF rents , this is a good halfway point! You’d be near Berkeley and Oakland, and cut your commute by at least 30 minutes per day, each direction. Plus, as mentioned, the neighborhood is great with lots of restaurants, coffee shops etc. !

Give me a call if you’re interested in seeing it.

Come join me for my annual Love You A Latte event this weekend!

This Saturday, I’m holding my annual Love You A Latte event from 8:30-10:00 a.m. at the Capital One Cafe in downtown Walnut Creek! My team and I will be upstairs at the cafe enjoying a morning cup of coffee and making connections. Will I see you there?

As in previous years, we are hoping to bring people together and spread some love! This is one of my favorite events because, well, I love you a latte! It’s my modern version of the neighbor coming over for coffee to chat. The coffee and treats are on me – all I ask you to bring is a friend, loved one, and/or your kids! Here is the evite link – just RSVP “yes!”

I will buy their coffee, cocoa, or hot chocolate, too! As usual, we like to do some charity with Love You A Latte. This year, we are partnering with ARF, Tony La Russa’s Animal Rescue Foundation. If you would like to give to the cause, please bring a donation to the event and I will pass along, here is the link to the list of things they need: this link, which is ARF’s wish list. Otherwise there is a link to donate on the evite. I hope to see you there!

Did you know…?

Here’s a question for you: Did you know if you sell your home, you are required by law to have both smoke and carbon monoxide detectors?

Image result for house fire

California has state requirements that have been in place since 2010. Not having the detectors in place can be costly by requiring the appraiser to go back out to confirm the detectors have been installed. They charge $175 and then who is going to pay for that charge? The homeowner who didn’t have them in the first place, or does the buyer have to eat it? A good buyer’s agent will write it in the contract that if smoke and carbon monoxide detectors are not installed at the time the appraiser comes out, the seller will pay for the re-inspection. A good listing agent will make sure they are in the house before it goes on the market. In California specifically, every home must have one CO detector on every level and there should be a smoke detector in every bedroom, in the hall outside the room, and at least one total detector on each level.

Smoke detectors and CO detectors are super affordable and really useful to have in your home anyway. You don’t want to risk a fire, leak, or explosion just because you didn’t want to take the time or pay the money to install proper safety equipment.

Image result for CO detector

These days there are long-lasting (10 years) combined smoke and CO detectors, so you don’t have to change those beeping ones when the battery dies.

I had a personal experience, my ex-husband got so frustrated by the beeping, he finally removed the batteries because he got tired of replacing them. When he moved out, I put batteries back in all of them. One night, I had lit a candle in the bathroom and forgot about it and it had some decorative leaves around the holder and it started to burn. I had fallen asleep on the couch and the smoke detector went off. I rushed in to see the candle holder on fire, quickly put it out, and had only a slight burn mark on the counter. It could have been much worse if I had not put back the batteries!

GTK when selling or buying a home!

JVM Lending always gives me great ideas to comment on for real estate. One of their recent blogs featured two reminders. These struck me as very important to write about if you are thinking about selling or buying a home. Here they are, verbatim:

Seller Rent Backs: Sellers can rent back a property for 59 days after purchase. Rent Backs are limited to 59 days because the owner-occupant-buyers are required to take possession within 60 days of close, or the property will not be considered “owner occupied” (and thus subject to inferior investment property financing rules).

In our current housing market with a shortage of homes for sale, this helps a seller put their house on the market, get an offer, and then find a place to buy. Most sellers need to sell and have the money in hand before they can buy the next home

Max Number of Financed Properties: Some jumbo lenders allow borrowers to have no more than FOUR financed properties. Fannie Mae limits the number to TEN if a buyer is purchasing a second home or an investment property. Fannie and some jumbo lenders allow for an unlimited number of financed properties if a buyer is purchasing an owner-occupied primary residence.

This is really a reminder for investors. It is always best to leverage a home with a loan versus paying cash, even if you plan on flipping it. Many investors pay cash for homes they will flip within a few months with hard money loans, which have a very high interest rate because of the above rule. And oftentimes the houses they are purchasing would not qualify for a regular loan. However, if you just own a lot of homes, this is good to know -or, as the title indicates, GTK!