How is the housing market changing?

According to a Zillow Senior Economist, the housing market is changing: “The number of homes on the market is hesitantly inching higher — now approaching the highest level in a year and a half. The first quarter of 2019 is shaping up to be more competitive than the lull we saw as 2018 come to a close.”

I have some thoughts about this! We are seeing the market pick up locally, but I am still seeing price reductions and then some that surprise me. Overall, homes priced right and in turn-key condition will always fare well over the competition.

The number of homes for sale has increased in four of the last five months after years of decreases, but that doesn’t mean there’s suddenly a huge amount of houses available. Don’t get fooled into thinking there is a hot, new market while you’re buying.

Further, mortgage rates are trending downward over the last year, according to Freddie Mac’s Primary Mortgage Market Survey (Feb. 14 week). They cite a “combination of cooling inflation and slower global economic growth” for this drop.

My take on this is that we are truly operating in a global economy and the softening of Europe with their various issues has had an impact. The Fed has stated they now have the least amount of control over mortgage rates than in their entire history. I have no crystal ball on rates, so enjoy them while they stay low. That may be why we are having an uptick since the winter of 2018.

Down Payment Assistance: a video with Robert Ring from Cross Country Mortgage.

Another closing at Tampico!

I recently closed a townhome on Tampico, and I’m so happy to have helped Tyler and Yana. They relocated about a year ago and decided to rent in San Francisco for a year and get a feel for the area. Tyler works down in Pleasanton and their San Francisco rent recently went up. They were very motivated to move back into home ownership.

We met one day over coffee and talked about the market, what they were looking for, timing, and the area they were most interested in. They loved Walnut Creek with Broadway Plaza, all the restaurants and overall vib. Since I had a previous appointment, we looked over some open houses in Walnut Creek and they decided to go look at a few. He called me later that day and said they really like a home on Tampico and wanted more information.

This home had been bought in July by an investor who flipped it. Timing is everything and the seller had the unfortunate experience of a soft second half of 2018. There had been a handful of price reductions until January where it was listed at $699,000, down from $775,000 – an opportunity for a buyer! It took a few days to get the financing and all the details, so about three days later we submitted an offer less than asking. In the beginning of January, the market again began to shift, this time upwards, and another offer was submitted and countered to $715,000. Their offer was accepted and then we started the inspections. They ended up with a $5,000 credit and some things that HOA needs to fix. Overall, it was a very smooth process and they are excited to be living in Walnut Creek with a yard for their dog and a nicely updated home! Congratulations!!!!

Congrats on the closing!

I met Lisa and Grant in the middle of November and by the middle of January, we closed on their new home. They lived in Daly City, work in San Francisco and just had a baby and decided it was time to buy a house – the East Bay is more affordable than the city or the Oakland area.

They were initially not in a hurry, but were very active right out of the gate; then I found out that it made sense for them to purchase before Lisa’s maternity leave was over in February, thus a couple of weeks later we were in contract! There was one other offer, we got a Seller Multiple Counter and in the end their offer was accepted.

After all the inspections were completed, they received a credit and a slight price reduction because of a couple of unfinished portions of a recent remodel job. I have to give a big shout-out to Tobi, the Escrow Officer at Fidelity, on this transaction. She went above and beyond to work through a title issue. Overall, the process was smooth, JVM (the lender) was on point, and they got the house before Lisa goes back to work.

They now are in the process of doing some repairs prior to moving in and putting their personal touches on the home. They were so excited! I wish them many wonderful memories and happiness.

Why I only refer clients to lenders I trust!

I won’t be pasting the entirety of Jay Vorhees of JVM Lending’s blog about this here. I’ll just hit the major points. But this is a perfect example of why I only refer clients to lenders I trust. Read on:

Last week, a borrower came to us to discuss her refinancing because she had lost trust with the lender she was working with (America’s largest non-bank lender). She was trying to refinance the house she lived in but it was owned by her Dad and she was not on the title, so a refinancing was impossible.

In any case, she was trying to refinance the house she lived in but it was owned by her Dad and she was not on title. So a refi was impossible – something the other loan officer failed to comprehend – and it had to be structured as a purchase.

Further complicating things was a “gift of equity” down payment, the need for “cash out” for improvements, and the need to avoid capital gains taxes for the seller – all issues that the other loan officer had zero understanding of.

In any case, one of our Mortgage Analysts quickly figured out how to structure the loan and then re-locked the same borrower with the same lender via our correspondent relationship but at a 1/2 percent lower rate.

I share this story not to make JVM the hero but to once again warn buyers away from the big call center mortgage companies. The call centers stuff bodies into cubicles to do nothing but sell.

Those “bodies” often do not have the skill to close transactions when there is even a small amount of complexity, and…their rates are way higher to boot.

That’s Jay’s horror story about call centers. It does a great job of explaining why I prefer to refer specific lenders I know who will always get the job done. It creates a smoother process for everyone that way. Most banks or Quickens of the world don’t fully underwrite upfront; it requires a lot of paperwork initially, but it creates a very smooth process to closing. This way the buyers are aware of any potential issues before you ever write an offer. They also don’t tell you that once you are in contract, you are handed off to loan processor who you have never spoken with and many loan agents are on to the next approval and are no longer in the immediate loop. Communication often falls apart at this point. Your loan officer may be local, but the processor could be in a different state.

I currently have a new home buyer who is shopping three different lenders looking for the best rate. With two of them, I expect possible delays and a questionable overall experience for my buyers. One is fantastic, but a first-time home-buyer doesn’t understand those nuances far outweigh an eighth of a point difference in an interest rate. Hopefully whoever they choose will do right by them and it will be smooth sailing.

I just closed on a house (blog to come on Thursday). When we first met, they were talking to one of the largest non-bank lenders. I recommended they speak to JVM and just compare the experience and decide who they would like to work with. They closed with JVM and when I handed them the keys, they remarked at how smooth the overall process was for them and when compared to their friends who recently purchased and had a loan with one of the big banks, they said their lending experience was horrible.

The Fed lost control over interest rates – so now what?

My friend Jay Vorhees of JVM Lending had a great blog recently about The Fed and interest rates. Here is the article below, with my two cents included:

Rates are at an eight-month low right now – about 1/2 percent lower than they were at their peak in October. I should add though that they still remain about 1/2 percent higher than they were last year at this time. So, did the Fed finally achieve its stated goal of pushing up rates?

Not in the way anybody expected.

According to former Senate Banking Committee Chairman Phil Gramm, the Fed now has less control over interest rates than at any other time in its 105-year history. I won’t go into all the details, but it has to do with its massive bond holdings (almost $4 trillion) and the excess reserves in the banking system. You can read more about it here.

The Fed can influence rates in the short term with its actual policies and statements, but the markets now seem to have much more say in the matter than the Fed. We are watching this currently, as the Fed’s short-term rate increases are not resulting in long-term rate increases like we have seen in the past.

What this means is a repeat of what I have been saying repeatedly over the last several years – nobody really has any idea of what will happen with rates (or anything else for that matter – remember Mr. Trump’s election?). A slowing world economy could continue to bring rates down, or a resurgence in bank lending (according to the article referenced above) could spark an inflationary spiral that will send rates through the roof.

Suffice it to say that we will see a lot more volatility in both the stock and bond markets for a long time to come. What is really scary though is what will happen when everyone figures out that there is no way that the world can ever pay back the $250 trillion in worldwide debt that has built up over the last ten years. When that happens, today’s environment will seem like very calm sailing.

Lastly – despite the uncertainty, many pundits are now predicting low (and even declining) rates throughout 2019.

Great stuff from Jay, right? So, here are my thoughts: The Fed came up with four rate hikes last year, and now the mortgage rates are lower than expected as stock market sways are leading people to bonds. What that means for the real estate market, especially locally is that more buyers maybe taking advantage of getting in now. I am starting to see the market pick back up, but this year it didn’t happen on January 3rd, didn’t really see it until the weekend after January 7th when the kids returned to school from their holiday break. January has been interesting the last few years, as buyers have been out, but sellers want to wait until March and they often loose that burst of lots of buyers and no inventory. At any rate, nobody has a crystal ball and I believe we will be on a wild ride as the stock market will have more volatility (as it is suppose to).

Reasons to buy in the off-season!

Lizzie Weakley of RIS Media’s Housecall wrote a blog recently about why it’s okay to buy in the off-season. I want to piggy-back off of that here. First of all, yes, there is an “off-season” in real estate. For the most part, winter is the time of year that the industry slows down in markets around the country.

However, there are a few good reasons why the off-season might actually be a great time to buy a home, especially in the Bay Area! As Weakley lists, there are fewer buyers crowding the markets. This decrease in competition is an excellent advantage for any prospective home-buyer. On that note, sellers seem to accept lower bids in the winter because of the low competition. In our area, we also don’t have to worry about trudging through snow storms to see a listing (one of the major reason for a slow-down), in addition to the holidays when most people are entertaining or having family visit.

Everything can move a little bit faster in winter. Home inspections can get done quicker, and mortgage companies tend to finish paperwork faster, too, because – again – they don’t have as much traffic. I should mention that in the Bay Area, with our warmer climate in Spring, the winter “off-season” tends to be much shorter than in other places, but still usually extends for a couple months at the end of the year and wraps around into January (we are nearing the end of the off-season now). Often buyers are out in January, but the sellers have not yet readied their home for sale, so we often find a switch back to a seller’s market this time of year. We will see what 2019 holds.

One more perk to buying homes in the winter? Us real estate agents have more time to dedicate to you! Sure, we love to give as much personalized attention as possible to each and every client, but the truth of the matter is that we get busy in peak seasons too. When I can focus all of my energy on one listing, it’s almost always smooth-sailing and everything gets finished at the speed of light!

Next time you are thinking of buying a home, and read that you should wait until the weather warms up again, give it a second thought. There are some big-time perks to buying in the off-season!

Home affordability at lowest point in a decade

I recently read a blog from my friend Bob Schwab, a certified mortgage consultant with Finance of America, that had me thinking. It’s about how the median home price in the fourth quarter of 2018 was the least affordable level since the third quarter of 2008, according to statistics from ATTOM Data Solutions.

But, it’s not all doom-and-gloom on that front. Nationally, 58 percent of counties analyzed by the data report recorded an improved home affordability ranking on a quarter-over-quarter basis. According to Daren Blomquist, SVP at ATTOM and quoted in Bob’s blog, “home price appreciation falls more in line with wage growth,” and “high-priced areas such as San Diego, Brooklyn, and Seattle saw annual wage growth outpace annual home price appreciation.”

Here are my two cents on this, and about what it means in the local real estate market: You can’t time the market. Buying over renting is always a better long-term strategy. I have had buyers looking this December and were able to quickly get into a home that had some healthy price reductions (really it finally just got priced right) and we have been able to negotiate on repairs. They also found a home that was about $70k below their top end budget. They were motivated, they just had a baby, wanted a house, and were very methodical. They will simply build equity just by paying their mortgage every month and doing some improvements.

Needing more space?

Homeowners: Cash in on all-time high equity

I came across a CNBC story recently about homeowners and the $14.4 trillion in equity they’re about to be able to dig into. New research, according to the article, suggests that home equity is about $1 trillion higher than its peak in 2005 before the Great Recession.

With interest rates rising on consumer debt, the article states, home equity loans or lines of credit could be an appealing option for consumers looking to borrow money at a lower cost. Homeowners no longer need to refinance just to take out equity. This is the aspect of the story I really want to focus on. First, a graph from the story:

Why consumers tap their home equity

Use	Description	Percent using*
Major expense	Take cash out, often for a large expense like home remodeling	91 percent
Debt consolidation	Consolidate balances from other accounts	41 percent
Refinance	Refinance to get a better rate or term	23 percent
Piggyback	Concurrent with a mortgage origination, often used for down payment	4 percent
Undrawn	Not used immediately (i.e., a rainy day fund)	2 percent

[Source: TransUnion, CNBC story]

(*Based on 2.4 million home equity loans originated between July 2016 and June 2017)

During the meltdown, people were using their homes like they were ATMs; as interest rates dropped they kept refinancing and taking out money to buy a boat, a big trip, etc., but when equity dropped, or they lost their job, they were in trouble. Use a HELOC (Home Equity Line of Credit) wisely. If it helps you get into a home or remodel a home to add value, it will be a smart decision. And always remember as rates go up, so does the interest on a line of credit.