The two year long election is finally over.  We can now turn off the TV, and let go of all the drama that ensues from presidential campaigns.  I was diagnosed with electionitis, and that is why I have not been able to write for a week.  I had election fever.  It has been a historic election, indeed, no matter who you were rooting for.

Now that we’re back to day to day life, the question lies…”How is the outcome of the election going to affect real estate?”  We heard about the economy, energy, the war, and a bit about foreclosures and the $700 billion bail-out bill from the candidates, but I was curious to find out how the housing market will be affected by all of this.  According to the CEO of the Illinois Association of Realtors,

“Obama advocated tax credits for property owners and fought to end predatory lending.  As a U.S. Senator, he’s advocated for a stronger FHA and voted for the National Association of Realtor-backed economic stimulus bill, which increased loan-limits in high cost areas.”

The outlook of the housing market based on current data is an issue that was brought up to Chief Economist Lawrence Yun by the National Association of Realtors 2009 President Charles McMillan.  Yun gave his perspective on the housing market in the following statement:

“We are in a recession.  In the next six months, we may lose up to 1 million jobs.  But the good news is, historically housing moves independently from the economy.  We are seeing a 20 percent improvement in home sales in states like California, Florida, and Virginia.  The economy will not improve without a housing recovery.”

San Francisco has not seen as much of a drop in real estate prices as other parts of the Greater Bay Area.  However, the state of the economy and the housing market is affecting the nation as a whole.  2009 is going to be a defining point for the current situation.  Our President Elect Obama has a big job ahead of him, and we all know that the president does not hold all of the cards.  All of our elected officials are going to have to come together with solutions that are better for the economy.  If housing is a top priority for President Obama as it has clearly been in the past, we may see better times ahead.  I have to say that I think the bottom is already here for Bay Area Real Estate.  I say I think because we have seen multiple offers in the Northern Peninsula where the housing prices have taken a huge hit.  Stay tuned for my research.  I know I have to base my opinion on statistics, so more to follow….

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Do you live in the San Francisco Bay Area, are planning to sell your home in the near future, and are wondering what some of the costs are that you may be responsible for when selling your property?
Are you planning on buying a home in the San Francisco Bay Area, and are wondering who pays what when it comes to your title and escrow costs and city and county transfer tax amounts?  Well, wonder no more.  The following is a quick guide to closing costs for title and escrow and city and county transfer taxes.  You can estimate the amount that you are going to pay if you have a ballpark figure of what the property you are buying or selling is worth.

Find Your San Francisco Home’s Value

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Have you ever thought about getting out of your current home and upgrading?  I don’t mean heading out to the lonely, desolate, outskirts of the Bay Area where you can get a great, great deal…tempting, I know, but for us San Francisco residents who will absolutely never leave the city unless we get dragged out of here, this is for you.

The Current San Francisco Real Estate Market

Right now, the San Francisco real estate market is pretty stable, so to speak.  This past week, 16 single family homes sold for over asking price, 7 sold for below asking price, and zero sold for the asking price.  Also, this past week, 6 condominiums sold for over asking price, 12 sold for below asking price, and 4 sold for the asking price.

So why would you want to sell your home right now if you don’t have a good chance of getting 30 offers or so like people were getting in the height of the market a few years ago.  Well, for starters, don’t you want to be the buyer who is putting the only offer on the house of your dreams?  I am sure that it would be the ideal situation for you to not be competing with several other buyers and having to offer around 100-200k over asking price, right.  Well, now is a great time to sell your home only if you are upgrading, and obviously, if you have to sell for some other reason.  I would not suggest selling your home if you are going to downsize or move into something less expensive than what your current home can sell for right now.

Why Sell My San Francisco Property Now?

Let’s say properties are down 10%, hypothetically speaking, from last year.  You can sell your property for $720,000, and it was worth $800,000 last year.  Why would I sell my property now if it is down 10%, you ask.  Well, let’s say you have been wanting to upgrade to a property that was $1,000,000 last year, has now gone down 10%, and is now worth $900,000.  Well, if you sell your property today for $720,000, and upgrade to a better property that you buy at $1,000,000, you’ve won the game.  The $100,000 savings that you receive from buying your dream home today versus last year exceeds the $80,000 loss that you take on selling your home today versus last year.  This only applies if you are upgrading.  The question is:  Why would you wait for the market to go up to sell your home, and move up?  The other homes out there are going to get more expensive if your home does, too.  You will be spending more and your property taxes will only be higher.  Not to mention, where oh where will the interest rates be when the market turns?

What is my San Francisco Home Worth Today?

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By Guest Author - Greg Anthony CMPS

How long will the turmoil last, and is this still a good time to buy a home?

How long will the turmoil in the housing markets last?

This is the first time in our country’s history where home values have declined nationally without a corresponding large rise in unemployment. During the Great Depression, the unemployment rate was around 25% compared to approximately 5.5% today! Therefore, the challenges being faced today are different than the challenges that were faced in the 1930s.  Today, states like Michigan and Ohio have high rates of unemployment, and this is causing many people in those markets to default on their loans and go into foreclosure. Those markets will not likely rebound until the employment situation improves. On the other hand, states like Florida, Arizona and California have stronger employment. Home prices in those states have declined largely due to unsustainable speculation on the part of investors who over-extended themselves by betting that housing prices would always rise. Those markets have a large glut of investor-owned properties that are going through foreclosure. The downward pressure on housing values due to foreclosures will likely last in most markets across the country throughout 2009, and in some markets, perhaps even through 2010. This does not necessarily mean that home prices will decline for another 12-24 months. This simply means that home values are not likely to recover very quickly due to the downward pressure on home prices.

The sub-prime market has virtually evaporated and lending guidelines have tightened significantly. Interest rates on jumbo mortgages and loans for borrowers with unique situations are considerably higher than loans for borrowers who have smaller mortgage balances, high credit scores, large down payments, and long, steady job histories. There are two factors necessary for lending guidelines to loosen back up: Housing market recovery - lending guidelines are likely to remain very tight until housing prices at least find a bottom. This is because lenders, mortgage insurance companies and Wall Street investors don’t want to assume the risk that homeowners will walk away from their mortgage if the home declines in value.  Clear rules and regulations - lenders and Wall Street investors today are very hesitant to be flexible in their guidelines as long as the rules of the game are still undefined. There is a very large fear in the marketplace among lenders that they will be faced with large legal liability if they extend loans to people who may not be able to afford the payments at some point in the future. On July 14, 2008, the Federal Reserve issued new guidelines that clarify the rules that lenders must follow when evaluating a borrower’s ability to repay. This was the first time since the credit crisis began in July 2007 that lenders have clear guidance on the rules of the game. This should give lenders a larger comfort level in creating new loan programs and becoming more flexible in their guidelines. Obviously, “flexible”guidelines in the coming months will be defined differently than the reckless “flexible” of the past. Regulators are also considering new rules for Wall Street financial institutions and investors, and these rules should also help in jumpstarting the mortgage lending industry once again. Therefore, lending guidelines will likely become more flexible sometime in 2009. As a participant in the CMPS Institute, I have been very active in helping to shape some of the new rules by commenting on various government proposals and participating in dialogue with Congress, the Fed, HUD and other government agencies.

Please ask me about other articles in this series:

What exactly is the problem today with banks, financial institutions, and the financial markets?
What are the options if I owe more on my mortgage than the value of my home?
Is this a good time to buy a home?

This is definitely a buyer’s market! Your negotiating power in this market is greater than at any point in the last several years. If you are interested in buying a home for the long-term, this is a great time to do so. However, if you are a novice looking to speculate in the real estate markets, now is the worst time to do so because this market is more dangerous than ever. Only the truly savvy investors will be able to navigate the market today, but they need to act quickly. There is so much panic selling in the marketplace right now that the deals that are available today will not likely be around in the future. Of course, there will always be deals available, but the types of deals available today are not going to last forever. Everyone talks about buying low and selling high, but hardly anyone actually does it! Once the market stabilizes, everyone will want to jump in again and the best deals will have disappeared.  As long as your timeframe is greater than two years, now is probably the best real estate buying opportunity in over two decades. 

The best thing for you to do is work with a team of professionals to help you structure your home purchase transaction in ways where you could save the most money. Strategies for you to consider include seller-paid closing costs, maximizing acquisition indebtedness to create tax benefits, structuring the down payment in the proper way and other useful strategies.

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Today, Congress passes the historic bailout bill which will provide the Treasury Department $700 Billion to purchase bad mortgage-related securities from institutions that are suffering from holding bad securities on their books.  This has been a controversial bill from the start that has sparked a lot of tension from both sides of the political spectrum.  The final vote was 263-171 in the House.  Today’s approved bill was a revised version of the Emergency Economic Stabilization Act of 2008 that was voted down this past Monday.

Since this is a real estate blog, I will outline how the bill relates to those who own property and those who are going to buy property.  If you are interested more in the bill, the White House has a fact sheet showing the key provisions and benefits of the bill.  If you are curious as to why there has been so much controversy regarding HR 1424, or why a lot of votes that were a “no” turned into a “yes”, take a look at what else was included in the bill that taxpayers are paying for.  It’s pork barrel politics at its finest.

The Emergency Economic Stabilization Act of 2008 and Real Estate Consumer: (more…)

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Going through the loan approval process can be tedious, overwhelming, and mostly boring.  It is definitely one of the most time consuming and frustrating tasks that you may ever have to do.  However, it is the most important thing that you should be doing right now if you are even remotely considering buying a home in the near future.

The worst thing that can happen is that you find the perfect home, only to realize that everything regarding your financing is not in place, and the house is gone before you can put everything together.  Believe it or not, contrary to the media hype, there are homes out there receiving multiple offers and getting sold quickly.  You do not want to be in the position of not getting the home you want because you are not pre-approved yet.  Talk to your lender and make sure that you have given him or her everything that has been requested from you.  The following is a very brief list of documents that you should be starting to gather for your lender in the beginning stage of the pre-approval process:

• Paycheck stubs or printouts for the last three months
• Tax return information for the past two years
• 401k and/or any other retirement account information
• Any other income from other sources besides your job

This brief list is meant to start getting you prepared if you are planning on purchasing a home.  You should speak to a qualified mortgage professional to get more information on preparing yourself to obtain a home loan.

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Rent control is hot topic and sometimes touchy subject for landlords and tenants in San Francisco.  There are many rules that are included under the rent control umbrella.  The San Francisco Rent Board has a website stock full of information on rent control.  (more…)

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By Guest Author - Greg Anthony CMPS

Wow… another historic week. Rather than rehash the week’s events that you’ve undoubtedly heard enough about already; I thought I would remind everyone of the silver lining. Here’s an excerpt from a CMPS press release I found very reassuring: (more…)

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Sunday we learned “Director James Lockhart of the Federal Housing Finance Agency (FHFA) has appointed FHFA as conservator of Fannie Mae. FHFA also appointed a new president and chief executive officer for the company, Herbert M. Allison, Jr. In addition, the U.S. Department of the Treasury has agreed to provide capital as needed to ensure the company continues to provide liquidity to the housing and mortgage markets.”

Ok… so what does that mean? Well, FHFA defines conservatorship as a “legal process in which a person or entity is appointed to establish control and oversight of a Company to put it in a sound and solvent condition. In a conservatorship, the powers of the Company’s directors, officers, and shareholders are transferred to the designated Conservator.”

Was this necessary? JAMES B. LOCKHART of FHFA stated Sunday that “Fannie Mae and Freddie Mac share the critical mission of providing stability and liquidity to the housing market.” “During the turmoil last year, they played a very important role in providing liquidity to the conforming mortgage market. That has required a very careful and delicate balance of mission and safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Given recent market conditions, the balance has been lost. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt. Today’s action addresses safety and soundness concerns.”

You see, Bonds are technically loans. Investors give the issuers of bonds money in return for interest over a set time; for instance 30 years (30 year fixed). When the bonds mature the principle investment (aka loan) has to be repaid. The way bond issuers raise the money to do this is by issuing new bonds. This happens every month. In order for the system to work investors have to keep buying new bonds.

If this system were to collapse, it would cripple the mortgage and housing markets. The treasury has stepped in and guaranteed payment of these bonds to keep the system functioning… and it’s working. So far the take over has sent investors running to mortgage bonds. Of course this is great news for 30 year Mortgage rates. We enjoyed an improvement of .5% on Monday! Let’s hope it keeps working.

As always, please feel free to contact me for further explanation or to see how these events effect your mortgage management or home ownership goals.

(logos from www.freddiemac.com and fanniemae.com)

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There had been talk for several months about the federal government taking over Fannie Mae and Freddie Mac. The time has now come, and the takeover is now official as of today. Both Fannie Mae and Freddie Mac have been placed in a government conservatorship that is being regulated by the Federal Housing Finance Agency. The CEOs of both companies have also been kicked out. The new CEO for Fannie Mae is Herb Allison who is the former vice chairman of Merril Lynch. The new CEO for Freddie Mac is David Moffett, former vice chairman of US Bancorp.

The government has stepped in to try and save these two mortgage giants from going under due to the immense amount of loans that are not being paid. US Treasure Secretary Paulson talks about the severity of the situation and the reason for the takeover,

“A failure would affect the ability of Americans to get home loans, auto loans, and other consumer credit and business finance.”

The big question is how much of an effect is the takeover going to have on the mortgage market?  Greg McBride, Senior Financial Analyst at bankrate.com states the takeover will

“keep the lanes in the mortgage freeway open.”

Fannie Mae and Freddie Mac together own or guarantee about 5 trillion in home loans, which is about half of the nation’s total.  With the number of loans that have gone into default, the bailout is going to guarantee that the both of the companies’ debt is safe.  Getting more buyers into the market is key for stimulating the housing market.  The other big question…”What are the ramifications for the taxpayers?”  There has been no concrete answer given.  However, the estimate is tens of billions of dollars.  Only time will tell if the benefits outweigh the costs or vice versa.

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