Foot Traffic Down About 25% In August

Foot traffic is a strong leading indicator of future trends in contracts and closing for home sales. NAR Research monitors foot traffic patterns in roughly 170 markets. Traffic has been expanding in most markets since the spring of 2011. However, relative to August of 2012, foot traffic fell in the majority of markets in August of 2013, though the magnitude of the decline is not clear. This change likely reflects the recent increase in mortgage rates and tight inventories.

Every month SentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®. Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future. For the month of August, the diffusion index for foot traffic fell 24.9 points to 34.1.

Mortgage rates have risen roughly 1.2% since May and stood above 4.5% at the end of August. This trend coupled with strong price appreciation has eroded affordability. However, inventories have been on the decline as well, limiting the top end of the foot traffic index to band between 60 and 70 since the fall of 2012.

This month’s reading is the first decline in the index since March of this year. March of 2012 was a particularly strong month for traffic, so that decline reflects the strength of the market in 2012. The index fell below the important “50” mark in August, which indicates that more than half of the markets in this panel had stronger foot traffic in July of 2013 than the same month a year earlier. This reading does not suggest how much of an increase in decline there was, just that the majority of markets experienced more foot traffic in August of 2012 compared to last month.

On a metro level, the decline appears widespread from high priced coastal markets to the Midwest and Southwest. It is not clear though whether tight inventories, higher mortgage rates or a combination of factors was the driver of this trend. While the decline in traffic from 59 to 34.1 was large, it is important to remember that this decline was from a high level a year ago during an atypically strong end of summer. By comparison, the decline in traffic that followed the expiration of the home buyer tax credit was much larger falling from 64.8 to 19.3 in a single month.

Foot traffic fell sharply in August likely reflecting the strong increase in mortgage rates, tight inventories, and strength of last year’s market. Consumers are likely to take a pause and to reevaluate affordability conditions this fall, but rates remain well below levels during much of the market expansion in the early 2000s and prices have yet to reach those peaks. A reversion to historic price growth would benefit the long-term stability of the market.

Is Having Buyers Waiving the Appraisal Contingency the New Norm in Real Estate?

On three occasions in the last two weeks, we have had our buyers get beat out of contention for getting an offer accepted due to other buyers waiving the appraisal contingency.

What is waiving the appraisal contingency? Well, say a seller has a home listed for $450K which is market value based on the comps for the area. Onto the scene enters a buyer, who offers $475K for the home and waiving the the appraisal contingency.  When the home is appraised, it will come close to the asking price, however, the buyer is willing to pay the premium of $25K to ensure that he/she gets the home. The sellers are of course happy as this will give them a larger bottom line when selling the home to this type of buyer.

So, you probably wonder if this is a good or bad thing for SoCal real estate. Well, let’s weigh in on how this “new trend” will effect the real estate market. Mind you, that the inventory in San Fernando and Conejo Valleys is extremely low. We have about 2 months worth of inventory for 6 months worth of buyers. We simply do not have enough good homes to sell to our buyers and once a good home does come up, it is a bidding war. Sometimes there are 15+ offers on the property. The sellers see an opportunity as does buyers who have been outbid when writing offers on other homes. So here it goes:

• How does this new trend effect buyers?

1. Buyers are offering $20-50K more for exceptional homes than the comparable market value of the home should be and are waiving the appraisal contingency in order to get into escrow.
2. The  “premium” drive the home price up and once the house purchase closes, the new “price with a premium” become the new comp for the area.
3. Due to the increase in home prices, the comparable sales values are higher (in essence artificially inflated).
4. The cost of other homes  will increase as other home sellers see that a comps of their home is higher than “true” market.
5. The new artificially inflated home prices will make it difficult for buyers who have FHA or VA financing as they typically do not have extra money to throw in the deal.
6. Essentially, buyers who have the extra cash or perhaps a rich uncle who will pay for the difference of appraised market value and the “higher price” that other buyers are willing to pay are now in a great position to close the deal.
7. Inventory is still tight but since sellers may see an opportunity to make money vs loosing money selling their home, inventory levels will increase.
8. With inventory increasing and prices going up, the lower end buyer, the buyer who can afford up to $417K before it becoming a jumbo loan, will be squeezed out of the market.

• How will the trend effect sellers?

1. Price is higher than appraised market value as buyers will pay a “premium”.
2. Sellers can ask more money for their home since they know that the buyers are desperate to get an offer accepted.
3. Sellers will be more inclined to enter the market and sell their home as they may actually walk away with money.
4. It will bring more homes to the market and our desperate buyers will have inventory to choose from.

• Will the “waiving contingency” trend become a new norm?

Well, we certainly hope that it does not become a new norm. As mentioned in the beginning of this blog, we have seen it on 3 deals out of 10 in the last two weeks. We do not recommend our buyers waiving the appraisal contingency unless they are fully prepared to pay cash in excess of what the bank is willing to lend them.  We have buyers who have written offers on 3+ properties and they are really wanting to buy a home but their offers were not “strong enough”, whether price, down payment, or the lack of appraisal contingency waiver. We understand the frustration of buyers in this market and hope inventory will increase.

We see a huge demand for good homes and we encourage any of our clients, family or friends to consider selling their home to call us to discuss how we can sell your home for the highest price.

Richard can be reached at 805-404-1167 and Kirsten at 818-268-3236.

The real estate market is recovering but is your home selling?

We have seen a huge improvement in the real estate market over the last year or so and we believe the real estate market is on track for recovery…. The buzz is in the air… we feel it, we hear it and we see it…. BUT….

The improvement in the housing market is not treating all home sellers equally. We see many well priced homes in prime locations that are selling within weeks of coming on the market.  And then there are the other areas, where homes are still takes months to sell, and prices haven’t fully stabilized.

There are several factors that could be keeping your home from selling. One is the state of the local housing market. Residential real estate is a local business. National trends, while informative, don’t necessarily apply to the state of the market in your neighborhood.

Other factors include: the list price; the condition of your property; or lack of broad marketing exposure. Hint, this is where we come into the picture….

HOUSE HUNTER’S TIP: Today’s buyers don’t overpay. They need to be convinced that the price you’re asking for your home is a fair market value.

The housing market is pulling out of the worst recession since the Great Depression. This is fresh in buyers’ minds. There are plenty of buyers who think this is the right time to buy, but they’re not inclined to make offers on overpriced listings.

Sellers often wonder why buyers won’t make an offer at a lower price if they think the list price is high. Buyers don’t want to waste their time making an offer if the seller is unrealistic. Making an offer takes a lot of time and emotional energy. Most buyers who have the wherewithal to buy a home don’t have time to waste.

We come across many buyers who give sellers lowball offers well below market value hoping to get lucky. These buyers also won’t pay over the asking price. They want a bargain. As a seller, you can avoid this experience by having your home priced right for the market….hint: Again, this is where we come in.

So what are the clues that will tell you if your home is overpriced?

1. You don’t receive any showings, or you receive showings but no repeat showings.
2. Feedback from buyer’s agent to listing agent that the home is overpriced.
3. Other homes in the area are selling but your home is still on the market.

While you as a seller ultimately determine what price the home is listed at, we as listing agents will give you sound advice on how the home should be priced based on market conditions.  If there is a difference between the price we recommend and the price you want to put the house on the market at, we will know within a week of listing the home if the house is overpriced or not.

Some sellers have false expectations about the current picked-up market. In some areas, the improved market means that homes are taking less time to sell, not that prices have increased.

The condition of your home will influence the market value. You need to lower the price to account for deferred maintenance or a dated decor, or take care of these issues so that you can present your home in move-in condition. You’ll then attract more buyers and sell for more.

More than 88 percent of today’s home buyers use the Internet to find a home. As a result, we offer a comprehensive and professional online marketing package which will reach potential buyers and draw them to look at your home.

Call Richard and Kirsten Powell when you are ready to list your home. Richard can be reached at 805-404-1167 and Kirsten can be reached at 818-268-3236.

Avoiding Loan-Modification Hoaxes

Homeowners wary of being taken in by bogus “loan modification specialists” should not assume that a law office is the most reliable way to work with their lender.  Consumer advocates say a growing number of fraudulent modification services involve lawyers, or people who say they are lawyers.

Making sense of the story

• Increasingly, lawyers are lending “their names, their offices, their credentials” to fraudulent operations that vaunt superior skills in obtaining loan modifications, according to a senior counselor at the Lawyers’ Committee for Civil Rights Under Law in Washington.

• While Federal Trade Commission rules generally prohibit demanding upfront fees for mortgage relief services, there is a narrow exception for lawyers.

• Under the rules, a lawyer may charge clients in advance for assistance if the service is part of their general practice of law, and not outside of that practice.

• Certainly, many lawyers provide legitimate foreclosure-avoidance services, but borrowers should know that when going to a lawyer whose sole business is loan modifications, that is a red flag.

• As more homeowners become aware of these tactics, some operations are changing their practices.  Instead of selling loan modification services, they are advertising so-called loan workouts and forensic loan audits. Some are even posing as nonprofit groups.

• The Homeownership Preservation Foundation and the Lawyers’ Committee both belong to a coalition of public and private agencies that maintain a national database of loan-modification complaints.  Since March 2010, some 28,000 homeowners have reported potential fraud.  Their reported monetary losses total around $66 million.

Counseling services offered by the Dept. of Housing and Urban Development are free of charge.  Visit http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm to find a HUD-approved counselor.

If you are looking to sell your home and you currently owe more that it is worth, please call us so we can walk you through the short sale process and help you determine if that is the right option for you!

How the fiscal cliff negotiations affected California Real Estate

Happy New Year to you and your family!

2013 is well underway and changes have taken place in the real estate environment that we would like you, your family and friends to know about.

1. Congress reached an agreement in the “fiscal cliff” negotiations and the President signed the Taxpayers Relief Act into law. The bill includes a provision to extend the Mortgage Forgiveness Debt Relief Act for an additional year of exemption of the taxation on mortgage debt that is forgiven when a homeowner and their mortgage lender negotiate a short sale or loan modification (including any principal reduction). This applies to the federal level and the California exemption expired on December 2012 making the forgiven mortgage debt a taxable state income for now. 
2. The California Association of Realtors is sponsoring SB 30 which will conform state law to the federal law just passed last week. Upon passage of SB 30, the measure will be effective retroactive to January 1, 2013.
3. The “Pease Limitations” that reduced the value of itemized deductions, including the mortgage interest deduction, are permanently repealed for most taxpayers but will be reinstituted for high income filers.  This provision reduces a taxpayer’s itemized deductions by 3 percent of the amount of his or her adjusted gross income (AGI) that exceeds the threshold amount.  Under the new law, the Pease thresholds are $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000).  No matter how high a taxpayer’s AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year.
4. The restoration of a tax deduction for mortgage-insurance premiums, including premiums paid to the Federal Housing Administration and private mortgage insurers.  This provision expired at the end of 2011 but has now been retroactively extended for all of 2012 as well as 2013.
5. 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.
6. Capital gains rates will remain at 15 percent for those earning less than $400,000 (individual) and $450,000 (joint).   Gains above those income levels will be taxed at 20 percent.  Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 taxpayers filing jointly.

Call Richard and Kirsten Powell at 805-404-1167 if you are looking to sell or buy real estate the San Fernando and Conejo Valleys.

The Fall is Upon Us…. Is your home ready for Fall and Winter?

Fall means a lot of things, including going back to school, raking leaves, decorating pumpkins, and eating turkey, but it also usually means home maintenance, such as replacing the kitchen sink or refrigerator or replacing carpeting and repairing the roof. The fall home maintenance and repairs are on top of all the ongoing house maintenance for homeowners.

To keep your home in top condition, there are certain tasks you’ll need to do every year. Here is a list of suggested items to help keep it in top condition:

Clean your gutters

Most single-family homes should have their gutters cleaned out once a year, typically after the leaves have fallen. But if you live in a heavily wooded area or have trees that shed leaves or flowers in the spring, have your gutters cleaned twice annually.

The cost ranges from $50 on up, depending on the size of your home. If you don’t keep your gutters clean, they won’t do their job of diverting water to the storm sewer or away from your home. If you have a home without gutters, water can run down the side of your home and potentially leak into the basement.

You also want to go around your home and make sure that the soil around your home is properly sloped away from your home. If you have had some soil compression, you might want to add more soil or you can have a landscaper help you out to make sure that water drains away from your home.

Look for cracks and leaks

Walk around the base of your home, inspecting for cracks, failed caulk around the window joints, and the condition of your exterior siding. Failing to tuckpoint your brick exterior means your home could wind up with water damage. If you have synthetic stucco siding, hire a professional inspector who specializes in Exterior insulation and finishing system (EIFS) to look for damage, cracks or any holes that could allow water to get behind the EIFS. If you have exterior wood clapboards, keep them painted. Otherwise, they could rot, requiring an expensive fix.

Keep your home maintained

In your bathrooms, replace caulk that looks as though it isn’t sealing properly or looking old. Change smoke and carbon monoxide detector batteries (this should be done twice a year). Clean the fan hood and filters over your stove to eliminate grease buildup.

Fireplace

If you like using your fireplace, you might want to consider having the flue of your fireplace cleaned every couple of years.

Inspect your furnace and air conditioning units

Plan to have your furnace cleaned once every year to keep it running as efficiently as possible. You’ll probably need to change the filter at least once a year as well, or in some cases every couple of months. If you have air conditioning units, you need to make sure they are clean and allow air to flow freely around them to keep a high efficiency.

The bottom line is that home maintenance requires vigilance—and a wide-open checkbook. However, if you do regular, ongoing maintenance in your home, the costs will be relatively minor and you may be saved from an unwelcome home emergency.

For all your real estate needs, call Richard at 805-404-1167 or Kirsten at 818-268-3236!

8 Ways to Protect Yourself From Identity Theft

We come across identity theft on a daily basis and our clients have shared horror stories that they have experienced. So here is a quick reminder of 8 things that you can do to avoid becoming part of the identity theft statistics.

You turn on the TV and radio and hear the “Special Reports” or the advertisements on how these firms can help protect you.The companies can help you but you can also help yourself by following these 8 easy steps:

1. Don’t overshare your personal information on social media sites
2. Maintain anti-virus and anti-malware software
3. Create STRONG passwords
4. Be careful with unsecured Wi-Fi
5. Handle Financial documents with care
6. Monitor credit and bank accounts closely
7. Don’t be reeled in by phishing scams
8. Get a good shredder and shred sensitive information that you no longer need

Identity theft victims are spending more time on cleaning up the mess than in years past. Now it takes a victim about 33 hours of work to resolve identity theft issues compared to the 21 hours it took back in 2012. Do not become a statistic!

Call Richard and Kirsten Powell when you need to realize your real estate goals! Richard can be reached @ 805-404-1167 and Kirsten @  818-268-3236

New Reports Details Housing Recovery

It appears that the trend for declining house prices has finally hit bottom and is now on the way back up. At least that’s the indication, according to Fiserv-Case Shiller’s house index reading. According to this study, the housing market is finally in recovery, and both home prices and rentals are on the way up.

Buying a Home is Now More Expensive 

The report also showed that housing prices rose in 40 percent of the 384 metropolitan areas studied by the index. The analysts say that by 2014, housing prices will have risen 5 percent from where they are now.

Another indicator of an improving housing market is the decline in the number of homes available for sale. The number of houses on the market went below 2.5 million for the first time since 2004. It is now cheaper to buy a home than it is to rent, which is encouraging for first-time homebuyers.

The rising demand, along with the decrease in available properties for sale, will continue to raise the price of homes, helping to accelerate the recovery.

Can People Afford to Buy?

The one thing that can limit and even stall the housing market’s recovery is the state of the economy. People have to be able to afford houses and be willing to buy. Consumer confidence has taken a hit each spring, which keeps them from going out and spending money on a home. If the drop in consumer confidence also brings lower mortgage rates, people may still be willing to buy. This would allow the housing market to withstand drops in the economy. Some homeowners are holding on to their properties waiting for an increase in pricing before they put them on the market; others aren’t sure yet about the market itself. This means that there will be more houses available in the future as the market makes improvements.

Where Are the Improvements?

According to the housing index, Detroit and Miami saw the biggest improvement, while Atlanta and Las Vegas continued to have the biggest decline. The declines were due to the large number of foreclosures still being seen in those cities. According to a report from the National Association of Home Builders, the most affordable houses are located in towns in Ohio, Indianapolis, Indiana, and Buffalo, New York. The least affordable homes are in New York.

Other cities with lower affordability include Santa Cruz and Santa Barbara, California. Lower affordability is a good sign for the housing market since it indicates a rise in the price and value of a home.

The housing market may be in recovery, but it’s not going to change overnight. With an economy that’s still struggling, people are going to be hesitant to buy. Stagnant incomes will also be a factor, since many people will still not be able to afford to exchange renting for buying. But the indicators look good for an improved housing market, which in turn can help the economy to recover.

A Dozen Ways to make Your Home Show Better

We are getting ready for the busy selling season of the year so here are a dozen ways to get your home to show better to attract more buyers but most importantly, attract a higher price.

We have all had the experience of someone important coming over to the house, whether it is in-laws, old friends or business associates. You know the drill; Have the house in “show” condition.

Selling your home is much the same: First impressions count and while you may not be able to tell a book by its cover, you will likely pay more for a book if the cover is inviting, alluring and attractive.

If you are about to make the decision to list your home for sale with us, here are 12 steps you can take to get your home in show condition:

 

1. Start with the outside. Mow the lawn, prune bushes, remove dead branches, and get rid off outdoor furniture that you do not intend to take with you when you move.
2. Paint the front door and lintels, or at least clean them up.
3. Check for leaks. Though a drip may not seem that important, it does suggest poor maintenance in places which can’t be seen. Eliminate the buyer worries and fix the little items which may be seen as clues relating to the general condition of the home.
4. Clean out the garage and storage areas.
5. Hire a professional to clean your carpets. This is important when carpets are to stay.
6. Caulk around tubs and sinks. New caulk always looks better than old caulk and it can help prevent future leaks too.
7. Replace light bulbs that does not work and use as much wattage bulbs as is appropriate for each fixture. Bright lights always make a home seem light and airy.
8. Do you have a lot of books and magazines that you do not want? See if your local library, hospital, school or local charity can use them. You will gain more space getting them out of your home and you might get a write-off.
9. Is there anything in the house that will surprise visitors? For example, mirrors in a poorly lit basement can be dangerous. Look at the property from a first time visitors perspective. Things which are known to you may be uncomfortable to visitors.
10. Clean out your medicine cabinets. Remove all out of date items. If you have prescription medicines, consider removing them when buyers visit.
11. People have allergies and concerns when it comes to animals. If you have pets, make arrangements to have them elsewhere when the home is being shown.
12. Homes in any given location and price range battle for a common pool of buyers. We will examine your home prior to listing it to give you an idea of what you should do to prepare your home for show. We want you to be able to be competitive and also get as much as possible for your home.

We look forward to listing your home for sale! Please call Kirsten at 818-268-3236 or Richard at 805-404-1167 to schedule your listing consultation.

Why Warren Buffett is Doubling Down on Housing

Investment magnate Warren Buffett admitted a mistake and made predictions for the housing market in his annual shareholder letter. In the letter, Buffett announced he was wrong in his predictions that home prices would rebound last year. While he was premature in his hopes for the housing market, he maintains his stance that home prices will recover this year. 

 Who is Warren Buffett?

After graduating from Columbia University with a business degree, Buffett moved back to his hometown Omaha, Nebraska, and founded the partnership Berkshire Hathaway, when he was just 25. With his intuitive grasp on investing, his friends and family members had no qualms about giving him their money to manage. In less than ten years after founding the initial partnership, Buffett was a millionaire. By the late 1970s, Buffett was on the Forbes 400 list of richest Americans. As of today, Buffett is worth over $40 billion. 

Now famous for philanthropy, frugality, and annual letters, Buffett has become a market wise man, or the “Oracle of Omaha.” Though he was disappointed that the housing market did not improve according to his prediction, his hopes remain high for 2012. Buffett gives the following reasons for why he’s betting the housing market will improve.

Reason 1: Market Uncertainty

Buffet explains that the housing market’s current depression is a result of too many young people living with their parents. Many boomerang kids leave for college only to return to their parent’s house after their four-year degree is completed. Wary of the uncertain economic times, more young people would rather live with their parents than purchase their first home. For that very reason, Buffett believes those young people will become agitated living with relatives. According to Buffett, “people postpone hitching up during uncertain times, but eventually, hormones take over.” What Buffett calls “hormones” is really an urge for independence that may impel young adults to venture out on their own for the first time. 

Reason 2: Decline in Supply

According to Buffett, homebuilders, contractors, and construction workers are not creating enough new homes to support the rising demand. As excess inventory leftover from the financial crisis disappears, renters, young Americans, and first-time home buyers will be looking for homes. Indeed, data released by the National Realtor Association suggests that Buffett may be right on target, as pending home sales are the highest they’ve been since April 2010. 

 

In an appearance on CNBC, Buffett added that if it were possible, he’d buy up thousands of single-family homes. With low prices and rising demand, houses make for an attractive investment. When homes are held at low rates for a long period of time, they make for an even more attractive investment than stocks, Buffett says. Buffett advises those purchasing homes to take out 30-year mortgages and refinance if rates drop.