Ed's Blog

Most people would probably be shocked to know just how much time I spend reading, studying, and analyzing market trends and predictions, with the sole goal being to decipher just what is the “state of the market.”

While that unfortunately makes me sound a little dull (Yes, I admit to being a real estate geek!), I’ve got to tell you that my findings are anything but dull. This is undoubtedly one of the most exciting times in the real estate market, I’ve ever experienced. And by exciting I mean it feels like I’m riding a rollercoaster 24/7. Wwwhhheeeeeeeee!!!!! Yeeeeooooowwww!!!!! Every day it’s Mortgage Crisis, Credit Crunch, Record Foreclosures, Lenders Going Out of Business, Real Sales Falling, and you name it! Whew.

In recent weeks, I’ve focused my research on deciphering the state of the market for residential investors. Here’s the scoop:

· There are some CRAZY (read: incredible) deals available right now in the residential market. In some areas -hint: Sacramento- home values are down a whopping 20-30%. Talk about a steal!

· There is a huge surplus of homes for sale, and sellers eager to entertain any offer.

However, even with great deals you’ll still need to do some serious homework, or what appears to be a great deal may not live up to your expectations.

Here’s how to be a smart investor in today’s market:

· Conduct extensive research on the area where you’re considering buying.

· Don’t listen to just anyone. Talk to a trusted professional real estate broker and lender. Seek out those who are currently investing themselves, and ask questions!

· Beware of areas in economic decline, as home values may drop even further.

· Don’t buy anything without seeing it with your own two eyes.

· Contact my team for the best pricing and advice on smart mortgage loans! (Oops! Did I say that out loud?)

Next week I’ll relay a new week’s worth of findings on investing commercial properties in this market!

The Million Dollar Question of the Week: What is the State Of The Market For Sellers?

Well, it’s great in some areas which haven’t seen significant home value declines. It’s not so great in other areas. But regardless of whether you’re selling in a stable area, or an area suffering value declines, you need to beware that you’re going to have to be patient. Though there’s plenty of blame to go around for the fact that lending guidelines have tightened so much over the last several months, you can bet your bottom dollar that your patience is likely to be tested at least once during the sales transaction.

But, in effort to minimize aggravation, there are some things you can do to help expedite your sale process, or at least prevent delays.

*Hire an Experienced and Seasoned REALTOR®

I’m not advocating age discrimination! But an agent who has experience in a slow market could prove an invaluable ally. They’ll know how to make your home stand out among the masses and generate the most interest.

*Price Aggressively

The difference between selling your home in 45 days and selling your home in 120 days or more (or not at all, ugh!) will most likely boil down to how aggressively you and your REALTOR® price your home. Again an experienced agent will know what price range will generate the most interest, in the quickest amount of time.

*Don’t Put All of Your Eggs In One Basket

You need to confirm that your buyer is qualified. Even pre-approved buyers are now subject to changes at their lenders’ discretion (often at the 11^th hour.) Insist that your REALTOR® confirm, double check and triple check on the loan status of buyers. Many loans have fallen out of escrow lately, which can cause you a real headache.

*Get Creative

If your buyer runs into some obstacles with their loan, you might consider offering to pay the points on their mortgage to lower their rate. This may allow them to qualify for a bigger loan amount, thereby allowing them to write you the BIG check that you’re coveting.

Whatever you do as a seller, remember that patience is a virtue, and try to keep a positive attitude even when faced with hurdles. Stay optimistic, commit to being flexible, and the house will be sold before you know it.

WOW! Is all I have to say about the Commercial Lending Conference that Smith Craine Finance held last week in South San Francisco.

With more than 500 attendees from all corners of the country packing the conference rooms at the South San Francisco Convention Center, one theme resonated louder than any other:

The Real Estate Industry is unquestionably, alive and kicking!

The sheer volume of professionals, who chose to come and listen to some of the most innovative speakers in the commercial lending industry, is in itself, impressive. But what it even more extraordinary than the turnout, is the message that it conveys...

Despite dismal housing reports updated in the media daily, and the beating that the housing and lending industries have endured of late; people still recognize the value in investing in Real Estate.

While it’s no shock that so many people find real estate investing appealing, (as historically speaking, long term real estate investments have always been a smart financial decision) it was certainly validating to know that not even the gloom and doom reports can suppress the entrepreneurial spirit of real estate investors. We are still thinking of the future!

I’ve said it before, but it bears repeating now. The key to investing successfully- whether in commercial properties, mixed use, or residential properties- is a commitment to a long term investment plan.

It was incredible to see that more than 500 of my colleagues agree.

If you’re in the Phoenix area on November 1^st, 2007, be sure to attend our next Commercial Lending Conference. Regardless of whether you’re new to commercial, or a seasoned commercial pro, you’ll certainly catch the commercial investment fever, just as we all did in San Francisco.

Looking forward to seeing you there!

Finally! The Federal Reserve did what it needed to do and cut its Fed Funds Rate. As the CNN Headline put it:

'Hallelujah' the Fed swoops in

Although it remains to be seen how today’s action plays out long term, the markets loved it. Stocks had their biggest gains in 5 years, while the bond market didn’t have a cow over inflation fears and held relatively steady.

Let’s hope these trends continue. And let’s hope that this, along with some current legislation making its way thru Congress, will help revive the housing market.

So what does this mean for you as borrowers?

1. For those of you with a Home Equity Line of Credit (HELOC) or credit cards tied to the Prime Rate, the Fed’s cut just helped you lower your monthly bills! Thanks Big Ben!

2. Fixed rate mortgages are once again near historic lows. If you’re looking to refinance at a low rate or buy a home, this could be a great opportunity to do so, especially if your loan falls into the conforming loan category ($417,000 or less for a single family home).

3. If you have an Adjustable Rate Mortgage, you might want to consider refinancing into a fixed rate. But in the meantime, this rate cut will most likely improve your situation by lowering your rate and payments. (There are a few exceptions, such as those with loans tied to LIBOR.)

If you want to check out your personal situation, give us a call or send an email. We’ll be glad to review your personal circumstances and make some recommendations.

I have to commend President Bush for taking the initiative to address the ongoing mortgage mess in his recent press conference. The fact that he not only recognizes the need for reform, but that he’s pushing for Congress to act on legislation (which could potentially prevent thousands of homeowners from losing their homes via foreclosures,) is to be applauded.

His initial outlined proposals, which could include naming California a “high cost state,” are sound. This would allow for the federally backed mortgage powerhouses, Fannie Mae and Freddie Mac to raise their conforming loan limits to $625,500 I California. Anyone living near the coast or the city centers can attest that this still won’t be enough for all properties, but the current limit of 417K doesn’t cover much at all. In this sense, it’s better than nothing, and a very good start.

His second proposal, which outlined a plan for the modernization of FHA, also makes a great deal of sense. The reason that so many homeowners are in subprime adjustable mortgages that they can’t afford when they reset is largely due to the fact that in recent years FHA loans weren’t viable for hundreds of thousands of homeowners. The disappearance of FHA loans is more than likely the catalyst that sparked the emergence of so many exotic subprime loans. Had FHA loans been able to be secured for homeowners with less than stellar credit, or with income documentation obstacles, they likely wouldn’t have been lured into a subprime loan, which boasts a much higher interest rate, and is subject to regular increases.

Alas, hindsight is always 20/20.

While Bush offers no plan to bail out Wall Street or the lenders who made these loans, his support is clearly behind the American homeowners who are facing trouble. For that, his efforts should be praised.

What remains to be seen now, is whether or not Congress will follow his lead, and push these plans into play. Stay tuned, and cross your fingers that those who we elected to look out for our best interests, will do right by us, and get the mortgage reform ball rolling…

In recent weeks, one question has been posed to me repeatedly, and I mean repeatedly! And I totally understand why given the rocky road that the mortgage and housing industries have found themselves traveling lately.

The question is: “What is the state of the market?”

There is no simple answer to this question because currently the market is in such a state of flux. There is a lot of anxiety, volatility, and uncertainty on the part of lenders and Wall Street investors who buy loans. This has led to the credit crunch you've been reading and hearing about. In general, lenders have tightened up their underwriting guidelines and taken many creative loan programs off the table. Gone for now are the days of loans with no money down, no income documentation, and less than stellar credit.

But not all is doom and gloom out there. We have several buyers closing loans as I'm witting this. So, let me give you the 411 on what's happening. I'm going to break this down into a few entries so I can address one market segment at a time.

Today we'll talk about effects on buyers, especially first time home buyers.

Here's a snap shot of the market:

1. Things have changed.

Buyers, and especially first time home buyers must understand that mortgage guidelines have changed dramatically in recent weeks and that they continue to change daily. So, if you're in the market to buy a home, you may find yourself facing obstacles that your friends who bought their first home even a few months ago did not face.

2. Lenders are still making loans!

Just because it’s harder to get a loan, that doesn't mean that first time home buyers (or any home buyers) need to give up on dreams of home ownership. There are still many great loans available at near historic low interest rates.

3. There are some great deals to be had!

There are more houses for sale now than there have been for the past 10 years. First time home buyers have a vast selection of homes to choose from. Combined with declining prices in many areas, this makes for a great buyers market- as long as you're prepared to act fast. So, what does a first time home buyer need to do to get prepared?

Here are some things you can do:

1. Make sure your credit is good.

Really good would be even better! Check with one of us for a thorough credit analysis. For example, credit dings can often be removed from your report when you're working with a broker who's been thoroughly trained on the ins and outs of credit reporting. We can recommend steps you can take to improve your credit, thereby improving your chances of being approved for a loan.

2. Be prepared with a down payment.

Expect to pony up at least 5% of the home sale price for a down payment. More likely though, you'll need to have 10% down. And if you want a stated income loan, plan on making at least a 20% down payment.

3. Be realistic.

If you know your credit is not good, don't get your hopes set on a home priced where you’ll need a loan of more than $417,000. Anything over that amount falls into the category of “jumbo loan”. Most lenders are shying away from offering jumbo loans to any buyer with less than stellar credit.

4. Be informed.

Remember that the only thing reliable pertaining to the state of the market today is that it’s constantly changing. So if you’re contemplating a home purchase, be sure to keep up to date on the market. Feel free to contact us by email or by telephone at 415-406-2330 for updates.

In the meantime, stand by for our next installment, where we'll talk about home sellers.