Why I Refer JVM Lending

When a buyer client doesn’t have a lender, I refer to JVM Lending. I can give multiple lenders and a buyer can choose whoever they want. Oftentimes, there are reasons for that choice. For example, if a buyer has only been in the country for less than two years, most lenders can’t finance them and big banks will only allow a certain amount of money, provided they have a chunk of change in their bank.

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However, for most situations, I know JVM will perform if they give an approval. They are so diligent, have amazing systems in place, and are not dependent on just one loan officer responding. They don’t even have loan officer titles – the initial contact is with a Client Advisor.

There is nothing worse than having the loan blow up during the escrow process, especially in this market where buyers are removing all contingencies. I have been one of those agents who has called JVM to save the day, and they have saved it every time.

This recent blog by JVM shows how important it is to know if the lender is focused on refi’s, or primarily does purchase loans. It can make a world of difference. The only motive I have to refer JVM is that I know I will look good to my clients because everything will go so smoothly for them. Most buyers never recognize how smooth the process truly is, but they would appreciate it if they have ever experienced a bad lending experience and would never want to go through it again!

Why The Market Continues To Grow

According to a recent CNN article, the housing market is on a tear, after a slowdown at the beginning of the pandemic. You can read the entire story about one Washington, D.C.-area realtor who listed a property that received 76 all-cash offers in the first 72 hours. Incredible!

The article specifically mentions that home sales bounced back a few months after the pandemic began, but inventory did not. That increased demand, coupled with a lack of supply, has driven home prices up at a crazy pace. According to the National Association of Realtors, the median price of a home has risen 16% from last year.

brown and white concrete house under blue sky during daytime

It seems to be the competition that is driving home prices up so much, and causing this market to take off, however, buyers ultimately determine what they are willing to pay for a home. A long-standing slowdown in homebuilding, plus the pandemic, plus the low interest rates, a desire for more space due to working from home, and a recent exodus out of the cities (since people don’t need to be so close to work) have all contributed to this buying frenzy and a perfect storm for the housing market right now. It isn’t just happening in California, it is across the United States.

If you’re buying, buckle up, because it might be a bumpy ride. Many offers that are being accepted see the buyers removing all of their contingencies. Do I think that is smart? No, but if you have to get into a home and have written and lost 10-plus offers, then a buyer may just do that! If you’re interested in knowing more about the market, the process, or are ready to sell, now might be the best time to do it. In either case, if you want to buy or sell, especially in the East Bay, please give me a call. I’d be happy to help you out!

[JVM Lending Blog] 4% Rates by June?

The following blog is from my friend Jay Vorhees at JVM Lending. I’ve contributed some of my own insight at the very bottom. Enjoy!

I am always hesitant to predict rate-increases because they so often do not come about. But, because rates have increased over 1/2% over the last few months and because Barry Habib of MBS Highway predicted that increase with amazing accuracy, I listen when Habib predicts additional increases. And that is what he did in his recent commentary and in an interview with economist, David Rosenberg.

BAD NEWS = INFLATION

How Interest Rates Affect Property Value - The Paratto Team

Credit: The Paratto Team

Both Habib and Rosenberg believe inflation numbers will spike up over the next few months. They focus on Consumer Price Index (CPI) numbers, and point out that the CPI is a moving average of the last twelve months of inflation reports.

Hence, we won’t see inflation spike until April, May and June when the price increases we have seen in recent months start to get factored into the average. CPI numbers were in fact released today, showing a 1.7% increase over the last 12 months.

Habib and Rosenberg believe, however, that CPI numbers will be 1% to 2% higher by June, and that will no doubt spook the bond markets and push rates significantly higher. This is because no bond investor wants to be stuck with a 1.6% yield if inflation rates are at 3%.

GOOD NEWS = INFLATION IS SHORT-LIVED

Habib and Rosenberg also both believe that the inflation we will see will be short-lived. This is because they both think the price increases we are seeing now are primarily a result of supply chains being broken because of COVID.

They remind that the same vaccines and potential herd immunity that are freeing up spending and potentially spurring inflation are also the same vaccines that are also opening up supply chains.

They think the benefits of opened supply chains will outweigh upward pressures on prices brought on by increased spending, and we will see tamer inflation numbers later in the year. Rosenberg also points out that all of the government borrowing taking place now is also deflationary.

NO MELTDOWN; PRAGMATIC; ANYTHING COULD HAPPEN

30-year mortgage rates hit highest since July, refis cool | Fox Business

Credit: Fox Business

What I most enjoy about old salts like Mr. Rosenberg is how pragmatic and relaxed they are. The blogosphere is filled with “doom and gloomers” who insist “the end is near” because of our government’s unprecedented and massive monetary and fiscal intervention.

Rosenberg, however, believes those fears are overstated, pointing out how the Japanese central bank and government have been far more activist over the last twenty years without suffering any major consequences.

Rosenberg is finally quick to point out that there is still no certainty with any prediction in today’s volatile world, and he is particularly adamant about not trying to time predictions.

CONCLUSION

Rates will very likely continue to rise over the next few months b/c of inflation concerns. They could also fall again, but there is no guarantee.

Kristin’s two cents:

I also listened to a Barry Habib Zoom call in early February. One of the other things he noted is as debt increases, interest rates decline. What stood out is the current U.S. debt is around $28 trillion. If you decreased it by $1 million a day, it would take about 2,700 years to fully pay it off. The current administration is currently looking a more debt with their infrastructure bill. The good news is if rates go back down and you are just getting into a loan, you can always refinance down the road.

One last thought: The Wall Street Journal just reported that there are more real estate agents in the United States than houses on the market, but that will be a blog for another day!

Thank you for your support!

I’m proud to announce that I’ve received a Better Homes and Gardens Real Estate Platinum Award for 2020! It was certainly a crazy year for everyone in every industry, but it was a real estate year like none we’ve ever faced before.

So, I just want to thank everyone who has supported me, worked with me, bought or sold a house with me, and everything in between! I work hard for all of my clients and partners, and it’s nice to get acknowledged.

As you can see in the image above, the Platinum Award is given to Better Homes and Gardens realtors who close between 46-57 units and a total volume of $8-12 million. It was a rollercoaster year, where we had to learn different ways to work, not being able to work for a couple of months and 2021 is proving to also be a challenge for buyers and agents with limited inventory!

I have been doing this for 18 years and know the market will change, people are always on the move and rates will go up and down, thus the future looks bright (especially once the COVID market ends!), and I look forward to representing clients in the Bay Area for many more years.

A continuation of the great COVID migration

You may remember what I wrote about a few weeks back: the belief that people are fleeing big cities during COVID and moving elsewhere. While we determined that specific claim was a little bit exaggerated, the pandemic still definitely has an impact on real estate.

One interesting thing I read was that there are actually way more people in the U.S. looking to BUY a new home than there are owners looking to SELL right now. That has led to low inventories across many cities and suburbs. Overall, the tight market is more being driven by low mortgage rates and that COVID migration.

The Wall Street Journal says all of this, plus that Americans are holding on to their homes longer than usual, which is costing would-be homebuyers. This all contributes to the low inventories and record-low sales (which, in turn, helps contribute to high prices). According to Redfin, the typical homeowner had remained in place for 13 years, up from 12.8 years in 2019, and way ahead of 2010’s 8.7 years.

One factor to consider, too, is that with so many people now working remotely, many home buyers are in the market for more space. If their home is going to double as a workspace now, it makes sense to look for a larger home. With that though, potential sellers are being scared off by the day-to-day of having strangers enter their homes during a pandemic. All of this adds up to a crazy COVID market!

I recently put an offer in for a client listed at $1,075,000 in San Ramon. There were 19 offers, the seller gravitated to offers that removed all their contingencies. The home (4 beds, 2 baths, 1447 sq. ft.) had been renovated prior to going on the market is pending at $1,310,000 and it appraised! Hopefully we start to see more equilibrium between a sellers and buyers market, but for now, hold on, it is a wild ride for buyers, but great for sellers.

The great COVID migration

You may have read conflicting articles about the mass “COVID migration,” in which big cities are seeing people flee to more affordable areas in the midst of the pandemic. As far as I can tell, those claims are a little bit exaggerated, even if the Bay Area as a whole is still seeing people leave.

man in blue shirt and gray pants standing beside man in blue shirt

For example, this Bloomberg article tells us that fewer people are leaving big cities overall since the beginning of stay-at-home orders, even if interest in moving is rising again. That said, some big cities (namely New York City and San Francisco) are getting more out-migration than most…and many of those people are migrating towards other large cities like Seattle and Los Angeles!

This does seem to mean that some suburbs and more affordable large cities will likely see home values rise soon. Even if young adults are leaving certain cities, they typically are not doing it because of that city itself, but because they want to try another big city out!

And though it may be true that large corporations, including some based in Silicon Valley, are leaving California for cheaper pastures like Texas, there’s very little indication that it has anything to do with desirability in our state as a whole. While cost is definitely a factor, the rise in remote working during COVID has definitely prompted people to leave the Bay Area at a higher rate.

person using laptop attach to vehicle near green leaf plant during daytime

So what does this all mean for you? If you live in a San Francisco condo, it means prices have dropped about 10% per sq. ft. Rents have also dropped, but the younger folks still gravitate to the city, so if you don’t have to sell right now, maybe wait. If you have been renting at the cities high rent rates and shelter in place means you are about to strangle your family as you need more space, then people are looking to the east bay where prices less that is a relative term – they are less then buying in the city and you get more space. The people who are moving out of the city to Walnut Creek or Sacramento, are driving prices up willing to pay in cash over the appraised value, because it seems relatively cheap or cheaper for them. If you currently have a condo in the east bay, they are sitting much longer. This is because rates are so low, and with no HOAs to pay, people qualify for a house, maybe not in the city they originally wanted i.e. Walnut Creek, but can get on in Concord or Brentwood. This is happening all over the United States. Austin TX, for a second year in a row has the hottest housing market in the country. I have seen friends that are retiring move out of California to TN, ID and Nevada. Having said all that the Bay Area remains a very attractive area to home buyers, and even with a slight uptick in move-out traffic, I don’t expect that to change anytime soon! As a side note, I do think California will need to get friendlier towards attracting and keeping business’s in the bay area and address the rising homeless population especially in San Francisco.

Clarifying the Rate Quote

My friends at JVM Lending put together a list of misleading rate quote tricks that I think you should be aware of. Here, I offer my clarification based on their blog. You can see more from them on their website. Read on…

From JVM: We recently had a borrower come to us with a ridiculously low rate quote for a “no cost” loan from one of America’s largest mortgage banks. The borrower insisted it was legitimate and asked us to match it, so we asked to see the other lender’s Loan Estimate, or “LE.” And, sure enough, there were $9,000 of points buried in the loan.

The loan officer was offering a loan with “no out of pocket” costs, meaning that he had merely increased the borrower’s loan amount by enough to absorb ALL of the points and nonrecurring closing costs. The confused borrower, however, thought she was getting a “no cost” loan.

Yesterday, we had another borrower come to us with a ridiculously low rate quote for a 75% LTV cash out investment property loan; the loan officer had simply misquoted because he missed all of the “hits,” or rate-increases that are associated with such a loan. In any case, the above instances prompted me to write another blog about the tricks and/or mistakes lenders make when quoting rates. Here are a few rate quote tricks and mistakes:

“No Cost” vs. “No Out of Pocket”

This is a classic ploy and it is what happened in the above instance. A true “no cost” loan means that the lender covers or pays all of the nonrecurring closing costs or one-time fees (title, escrow, appraisal, under writing, etc.) on behalf of the borrower. With a “no out of pocket closing cost” loan, the lender still charges the borrower ALL of the standard closing costs (and points in many cases); the lender, however, increased the loan amount by enough to cover all of those costs so the borrower does not have to pay them “out of pocket” at close.

“No Cost” vs. “No Points/No Fees”

Many lenders quote “no points and no fees” loans, when it really only means no lender fees (“big banks” are notorious for this). Borrowers still have to pay for their appraisal fee, escrow fees, title insurance fees, notary fees, etc. These fees can easily add up to several thousand dollars, making “no fees” quotes very misleading.

Quoting Non-Existent Rates

Some lenders quote rates associated with very short-term lock periods (under 7 days for example) that WILL only be available once a loan is fully approved. So, if rates increase between the date the loan is submitted and the date the loan is approved, the borrower is out of luck. Similarly, many lenders also underquote rates during a borrower’s pre-approval stage, knowing they will not be held accountable to that rate because the borrower is usually weeks or even months away from going into contract – when the actual rate lock will be necessary and the loan officer can then say: “oooh – sorry dude, rates have gone way up…”

Quoting Without A Full Scenario (credit score, LTV, property type)

This is a painfully common trick, too. There are as many as 12 factors that affect every borrower’s individual interest rate, as set out in this blog. Some loan officers purposely misquote before knowing all of these factors in an effort to reel in borrowers, knowing that the actual interest will likely be higher once all of the factors are known. The loan officers simply hope they can convince the borrowers that the mistake was innocent and that the borrowers will not want to endure the time or cost (especially if they pay for an appraisal) that going to another lender might entail.

Manipulating Annual  Percentage Rates (APRs) and Closing Costs

In this blog called 5 Misleading Closing Cost Tricks Big Banks Play, I illuminate a lot of closing cost tricks lenders play.. These tricks include understating prepaid interest (which makes APRs artificially low), property taxes, and hazard insurance. Lenders also sometimes understate 3rd party fees and eliminate “owner’s title insurance” altogether.

What should borrowers do to avoid these tricks?

They should only use lenders with stellar online reputations and reviews; make sure they are getting quoted rates that can actually be locked, and go over their Loan Estimates with a fine-toothed comb.

 From Kristin: Give me a call, and I’ll refer you to a reputable lender…like JVM! It is also hard to compare lenders because of everything noted above. If you have a bad lender the whole transaction can go south, so what I look for in lenders are ones that provide a fully underwritten approval or a DU (desktop underwritten) and ones that I don’t have hiccups with, they consistently perform and finally ones that I know are honest about the rates they are quoting.

A little bit about Prop 19

This year, voters in California passed Prop 19, which potentially can changes the financials in a positive way of your next home sale or purchase. The proposition will go into effect in mid-February of 2021, so below is a summary of details. Some things the legislature will still have to interpret some of the language.

Inherited Properties

All reassessment exemptions for inherited properties only apply if the property is used as a primary residence by the child (or sometimes grandchild) or used as a family farm. In cases in which the current market value of an inherited property exceeds the parent’s taxable value by more than $1M, the child’s taxable value will be assessed at the current market value and reduced by $1M. The State Board of Equalization will adjust the $1M amount of inflation beginning February 16, 2023, and every two years thereafter. 

Transfers

As of April 1, 2021, previous restrictions based on location will be removed, allowing eligible (meaning people over age 55, victims of wildfires or other natural disasters (and the severely disabled) homeowners to do a few things. First, they can utilize the transfer multiple times; they can transfer the taxable value of a property up to three times in their lifetime. Natural disaster/wildfire victims will be allowed to transfer once. The language around what constitutes a natural disaster still needs to be defined.

This group can also purchase a property of higher value, meaning the tax bill will go up but by a lower amount than for other buyers. And, finally, they can also move anywhere in California by transferring the taxable value of a primary residence anywhere in the state within two years of the sale of the original primary residence.

If you’re interested in the details of Prop 19, here’s a great resource from the California Association of Realtors that might answer all of your questions!

GUEST BLOG – From Finances to Moving: How to Upsize in Retirement

By Bob Shannon

A lot of seniors think they have to downsize in order to live comfortably in retirement. But this isn’t always the case. If you plan on having your kids and grandkids visit or take up homesteading, a smaller home simply won’t do, and you’re going to need wide-open spaces to make those golden-year dreams come true. These upsizing tips can walk you through the process from start to finish with less stress and hassle.

Budgeting for a Bigger Home in Retirement

As with any major purchase, you need to think about your budget and finances first before you decide to buy a bigger home. If you have a sizable amount of debt, you will want to start by coming up with a feasible plan to pay it down or completely off. In many states, consumers can turn to debt relief agencies for help coming up with this plan. You’ll need to factor in your amount of debt, employment situation, and ability to make payments to figure out which solution is right.

Once you have your debts paid down, you should have an easier time qualifying for home loans. You’ll also want to determine how much home you can afford before you begin submitting those applications. While this may seem like a daunting task, there are plenty of tools available online that make it simple, including calculators and worksheets.

Finally, you will want to figure out how much you will get from the sale of your current home. You can reach out to an experienced local real estate agent for a CMA (Comparative Market Analysis), but you also need to factor in any needed repairs into your estimated profit. For example, if your windows are cracked, repairing them could cost you anywhere from $170 to
$375. However, repaired windows can add curb appeal to your home, making it a worthwhile expense.

Finding Enough Room for Retirement

Now that you’re done with your finances, you can start looking for a home. You can check out local real estate sites or blogs like Walnut Creek Lifestyle for tips on searching and buying, but you may also want to start by hiring the right real estate agent.

A real estate agent can also narrow down home choices to ones that include the features you want most in retirement. For instance, if you plan on homesteading and hosting family members, a larger yard or land may be necessary. Then you will have plenty of space to play with the grandkids or grow your own vegetable garden and raise livestock.

Depending on the sort of hobbies you plan on taking up, you may also want to look for a home that includes a shed or workshop. You can always add one later, so long as you have the extra acreage. Also, make sure the features inside your home will keep you and your loved ones comfortable for years to come. This could mean making sure there’s an extra room that can be turned into a playroom or smart home features that can be used for aging in place.

Planning a Safe and Stress-Free Move

Once the deals are done, you’ll need to plan for a safe and problem-free move. For seniors, this may mean hiring professionals to help you pack and move your belongings. Otherwise, you could end up overdoing it and injuring yourself trying to do it on your own.

You can use an online move planner to figure out when to start hiring pros and when to take care of other essential moving tasks. That way, you won’t forget anything crucial, like changing your address with the post office or using up the food in your fridge.

When you have bigger dreams for retirement, a smaller home simply won’t do. If you do plan on upsizing your home, do make sure you know which steps to take to avoid added stress. Most of all, make sure you find a home that fits you and your plans to help you make the most out of your golden years!

If you want more information on upsizing, downsizing, or Prop 19, contact Kristin Lanham at (925) 899-7123 or kristin@lanham.com.

Prop 19: Vote YES!

I tend to avoid posting anything remotely political on here, but today I have to urge all California voters to consider voting YES on Prop 19! The biggest reason,  allow eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment. This means you don’t have to buy a house less than the one you sell. This could also help our housing shortage, because many seniors may now decide to sell their bigger homes and down size. I realize many may have already voted, for those who have not yet done so, this one is a no brainer.