Saturday, September 29, 2007
Fed's rate reduction hasn't made a difference in real estate market
Sept. 2007
By Sue Thompson
"Have you seen any changes in the real estate market since the Feds lowered the rate?"
Everyone seems to be asking that question. I interviewed several people in the real estate industry from developers to escrow officers to get their answers to this question.
I also asked what their current challenges are in this market.
Sheryl Holben, Auburn's branch manager and escrow officer for Old Republic Title Corporation (ORTC), feels that buyers are waiting for the "great deal."
"We are in a market where very few sellers are willing to give that great deal. My biggest challenge today is receiving money from lenders. It is difficult getting loans to fund because lenders are constantly changing their lending criteria," she said.
"We have to do a better job of educating buyers. Buyers need to go back to the basics. Those basics include good credit, verifiable income and a 20 percent down payment, or be willing to pay for private mortgage insurance, PMI."
Holben said the ORTC analysts are predicting a significant change in market conditions by the end of 2008 and the beginning of 2009. The agents she works with think that it will be spring of 2008 before we start to see an upswing in transactions.
Another thing Holben has observed is that sellers are feeling very anxious about whether or not their existing escrows will really close while buyers are feeling very positive.
"It is a great time for buyers ... and me? I remain very optimistic," Holben said.
Ryan Rivera, a lender with Goldmine Mortgage, has seen the 30-year fixed rate drop to 6.25 percent with no points.
"It is phenomenal that prices and rates are down at the same time. It doesn't get any better than that," Rivera said.
"I see this time in the market as opportunity. It is especially good for the buyers. This is the time to get into low, long-term fixed rates on purchases as well as refinances.
"The more I think about it, this market offers more opportunity for everybody, even sellers. Sellers may be selling lower but they are buying lower as well. A lot of people tend to forget that. They don't like to say they sold low, but they sure are happy to say they bought low."
Steve Carpenter, developer and real estate broker, has several low-end properties on the market. He hasn't seen any changes at the entry level. He has however experienced great delight when the interest rates on his personal loans went down a half percent.
"The rate change has had an effect on my planning. It has changed the pro-formas on future projects," Carpenter said.
"I think the biggest challenge is the public's perception of the market and where it is at today. We have a great market. Interest rates are extremely low, inventory is high, so buyers have a lot to choose from, and employment is good."
Carpenter believes the prices will stay low until some of the inventory is absorbed and we get through some upcoming foreclosures.
"There is no reason buyers shouldn't be buying. I think we should see an upturn in spring of 2009. I don't see it going up as fast as it went down."
Carpenter has a lot of projects in the works right now.
"The long-range-thinking people are working around the clock to ramp up for the next peak in the market," Carpenter said.
Bud Richardson, senior consultant for ORTC, said Carpenter hit the nail right on the head.
"Carpenter is right about the market," Richardson said. "We may already be at the bottom of the market. I can't emphasize strongly enough that buyers need to get into the marketplace now. I truly believe that buyers will be paying more for properties in 2009."
Richardson thinks that the public doesn't know that 30 percent of all homes in the U.S. are owned free and clear. That's a lot of equity. The rest of the homes in the country have seven trillion dollars in mortgages on them. Only 11 percent are considered subprime. Only 10 percent of those mortgages are in trouble. The thing that makes it so scary is that though the number is relatively low, they are all in trouble at the same time!
Eric Whaley, a veteran Lyon Real Estate agent, said he received three phone calls yesterday from clients wanting to get their homes on the market. But he has seen no change in buyer activity.
"I have more people looking to sell and fewer people looking to buy," he said. "I think that the biggest market challenge is with sellers' unwillingness to price their homes competitively. Years ago the sellers would price high and wait for the market to catch up. Now we as agents need to get the message across to sellers that they need to price their homes beneath the market value and let the market meet them - not chase the market down. It is a very tough message to get across. We've seen some change, but not enough."
It sounds as though there haven't been any significant changes in the market since the Feds lowered the rate. Maybe we need more time or maybe nothing will change unless the rate goes even lower.
In any case we have no control over what the Federal Reserve Board does or doesn't do. We do however have control over how we price the homes on the market.
The market is defined by what buyers are willing to pay and what sellers are willing to take. If buyers aren't willing to pay what sellers are asking, sellers need to adjust by being more aggressive in their offering prices.
Taking advantage of today's opportunities with aggressive pricing and low interest rates is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com
By Sue Thompson
"Have you seen any changes in the real estate market since the Feds lowered the rate?"
Everyone seems to be asking that question. I interviewed several people in the real estate industry from developers to escrow officers to get their answers to this question.
I also asked what their current challenges are in this market.
Sheryl Holben, Auburn's branch manager and escrow officer for Old Republic Title Corporation (ORTC), feels that buyers are waiting for the "great deal."
"We are in a market where very few sellers are willing to give that great deal. My biggest challenge today is receiving money from lenders. It is difficult getting loans to fund because lenders are constantly changing their lending criteria," she said.
"We have to do a better job of educating buyers. Buyers need to go back to the basics. Those basics include good credit, verifiable income and a 20 percent down payment, or be willing to pay for private mortgage insurance, PMI."
Holben said the ORTC analysts are predicting a significant change in market conditions by the end of 2008 and the beginning of 2009. The agents she works with think that it will be spring of 2008 before we start to see an upswing in transactions.
Another thing Holben has observed is that sellers are feeling very anxious about whether or not their existing escrows will really close while buyers are feeling very positive.
"It is a great time for buyers ... and me? I remain very optimistic," Holben said.
Ryan Rivera, a lender with Goldmine Mortgage, has seen the 30-year fixed rate drop to 6.25 percent with no points.
"It is phenomenal that prices and rates are down at the same time. It doesn't get any better than that," Rivera said.
"I see this time in the market as opportunity. It is especially good for the buyers. This is the time to get into low, long-term fixed rates on purchases as well as refinances.
"The more I think about it, this market offers more opportunity for everybody, even sellers. Sellers may be selling lower but they are buying lower as well. A lot of people tend to forget that. They don't like to say they sold low, but they sure are happy to say they bought low."
Steve Carpenter, developer and real estate broker, has several low-end properties on the market. He hasn't seen any changes at the entry level. He has however experienced great delight when the interest rates on his personal loans went down a half percent.
"The rate change has had an effect on my planning. It has changed the pro-formas on future projects," Carpenter said.
"I think the biggest challenge is the public's perception of the market and where it is at today. We have a great market. Interest rates are extremely low, inventory is high, so buyers have a lot to choose from, and employment is good."
Carpenter believes the prices will stay low until some of the inventory is absorbed and we get through some upcoming foreclosures.
"There is no reason buyers shouldn't be buying. I think we should see an upturn in spring of 2009. I don't see it going up as fast as it went down."
Carpenter has a lot of projects in the works right now.
"The long-range-thinking people are working around the clock to ramp up for the next peak in the market," Carpenter said.
Bud Richardson, senior consultant for ORTC, said Carpenter hit the nail right on the head.
"Carpenter is right about the market," Richardson said. "We may already be at the bottom of the market. I can't emphasize strongly enough that buyers need to get into the marketplace now. I truly believe that buyers will be paying more for properties in 2009."
Richardson thinks that the public doesn't know that 30 percent of all homes in the U.S. are owned free and clear. That's a lot of equity. The rest of the homes in the country have seven trillion dollars in mortgages on them. Only 11 percent are considered subprime. Only 10 percent of those mortgages are in trouble. The thing that makes it so scary is that though the number is relatively low, they are all in trouble at the same time!
Eric Whaley, a veteran Lyon Real Estate agent, said he received three phone calls yesterday from clients wanting to get their homes on the market. But he has seen no change in buyer activity.
"I have more people looking to sell and fewer people looking to buy," he said. "I think that the biggest market challenge is with sellers' unwillingness to price their homes competitively. Years ago the sellers would price high and wait for the market to catch up. Now we as agents need to get the message across to sellers that they need to price their homes beneath the market value and let the market meet them - not chase the market down. It is a very tough message to get across. We've seen some change, but not enough."
It sounds as though there haven't been any significant changes in the market since the Feds lowered the rate. Maybe we need more time or maybe nothing will change unless the rate goes even lower.
In any case we have no control over what the Federal Reserve Board does or doesn't do. We do however have control over how we price the homes on the market.
The market is defined by what buyers are willing to pay and what sellers are willing to take. If buyers aren't willing to pay what sellers are asking, sellers need to adjust by being more aggressive in their offering prices.
Taking advantage of today's opportunities with aggressive pricing and low interest rates is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com
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HAVE PLACER COUNTY LAND PRICES HIT ROCK BOTTOM????
Home $$$ and Sense
Date Published: 2007
By Sue Thompson
Dear Sue,
I have always wanted to build my own home and I think it's time.
I have been looking around for property for quite some time now. For so long home prices were falling but land prices were still inflated, so I waited.
The land prices have finally come down to what I think is now a reasonable level.
I really have two questions here:
First, do you think that land prices have reached rock bottom?
Second, if they have, how do I start the building process?
- Ready Randy
Dear Randy,
You are a keen observer. Land prices held for the longest time. But now they have come down.
Premier building lots in South Auburn have lost as much as a third of their value since the peak in 2005. Premier building lots in North Auburn have lost value at the same rate. A lot that was purchased in 2004 for $250,000 and resold in 2005 for $350,000 to $400,000, is now valued between $250,000 to $350,000.
The high end and the low end of any market are impossible to predict. If I had been able to predict when the market was at its highest, I would have sold everything before July of 2005.
My feeling about the market is that one should buy or sell when they need to. In your case, since you are building your own home, just do it. The timing can't be better. Land is low, interest rates are low, hovering at just over 6 percent, builders aren't too busy now, and they are eager and very competitive.
Regardless of the price of land, most land buyers who intend to build their home should have a budget. It is very important that you establish your budget as early in the game as possible.
Example, let's say your total budget is $600,000, including your home and the land. You want to build a home that is 4,000 square feet and you find that the cost of construction is $200 per square foot. It will become obvious that there is no money left for land and you will be $200,000 short on construction.
With a $600,000 budget a more realistic home size would be in the 2,000 square foot range, leaving you with approximately $200,000 for the lot purchase. I would suggest a 15-20 percent buffer for when "stuff" happens.
When you are evaluating the lot you want to build on, you must make sure that the estimated $200,000 includes everything, such as access, excess grading, possible fill and utilities.
You also want to make sure that the county or city has accepted the lot as a legal building site. Don't take anyone's word for it. You personally need to go to the county or city to make certain. Most of the horror stories are about people who forgot to figure in details like, the real cost of construction and the cost of getting their lot read to build.
In today's market buying a lot, doing your research and building your own home is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com, or on the Web at www.homedollarsandsense.com.
Home $$$ and Sense
Date Published: 2007
By Sue Thompson
Dear Sue,
I have always wanted to build my own home and I think it's time.
I have been looking around for property for quite some time now. For so long home prices were falling but land prices were still inflated, so I waited.
The land prices have finally come down to what I think is now a reasonable level.
I really have two questions here:
First, do you think that land prices have reached rock bottom?
Second, if they have, how do I start the building process?
- Ready Randy
Dear Randy,
You are a keen observer. Land prices held for the longest time. But now they have come down.
Premier building lots in South Auburn have lost as much as a third of their value since the peak in 2005. Premier building lots in North Auburn have lost value at the same rate. A lot that was purchased in 2004 for $250,000 and resold in 2005 for $350,000 to $400,000, is now valued between $250,000 to $350,000.
The high end and the low end of any market are impossible to predict. If I had been able to predict when the market was at its highest, I would have sold everything before July of 2005.
My feeling about the market is that one should buy or sell when they need to. In your case, since you are building your own home, just do it. The timing can't be better. Land is low, interest rates are low, hovering at just over 6 percent, builders aren't too busy now, and they are eager and very competitive.
Regardless of the price of land, most land buyers who intend to build their home should have a budget. It is very important that you establish your budget as early in the game as possible.
Example, let's say your total budget is $600,000, including your home and the land. You want to build a home that is 4,000 square feet and you find that the cost of construction is $200 per square foot. It will become obvious that there is no money left for land and you will be $200,000 short on construction.
With a $600,000 budget a more realistic home size would be in the 2,000 square foot range, leaving you with approximately $200,000 for the lot purchase. I would suggest a 15-20 percent buffer for when "stuff" happens.
When you are evaluating the lot you want to build on, you must make sure that the estimated $200,000 includes everything, such as access, excess grading, possible fill and utilities.
You also want to make sure that the county or city has accepted the lot as a legal building site. Don't take anyone's word for it. You personally need to go to the county or city to make certain. Most of the horror stories are about people who forgot to figure in details like, the real cost of construction and the cost of getting their lot read to build.
In today's market buying a lot, doing your research and building your own home is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com, or on the Web at www.homedollarsandsense.com.
Sue, Thank you for your views on today's market. So frequently, the public is influenced by the media(the doom and gloom media).....and I would love for them to be influenced by your clear and unbiased views! Keep it up! Katy
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