This Week in Real Estate 12-25-2015

Merry Christmas.

Santa brought Lucy drums.  He brought us ear plugs.

Hope you and your family have a safe and wonderful holiday.

-Kris

This Week in Real Estate 12-18-2015 - Fed Reserve raised rates

The Fed raised rates.

For the first time in 9 years the Federal Reserve raised the short term borrowing rate. It went from 0.00% to 0.25%. This increase has been talked about for 2 years. The increase had been delayed many times as well. Initially the thought was that rates would increase in February 2015.

But it happened. And guess what? The financial markets reacted by going UP more than 200 points on Wednesday.

"I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households, and domestic spending," Fed chief Janet Yellen said during a press conference. "There are pressures on some sectors of the economy, particularly manufacturing, and the energy sector...but the underlying health of the U.S. economy I consider to be quite sound."

The Fed telegraphed it will be patient with future rate increases so as not to kill the economic recovery. The central bank's statement said the economy will only merit "gradual increases" in rates, which are likely to remain low "for some time." Yellen repeatedly said during the press conference that future rate hikes will be "gradual."

CNN wrote a great article talking about the impact of these moves.

http://money.cnn.com/2015/12/14/news/economy/what-a-fed-rate-hike-means-for-you/index.html?iid=surge-stack-dom

The Federal Reserve’s official press release

http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm

-Kris

This Week in Real Estate 12-11-2015 - Rental Market Crisis

Rental Market Crisis

The alarms of increasing rents have been ringing for nearly 3 years. Now a report from Harvard really is shocking. http://www.jchs.harvard.edu/americas-rental-housing

·         On average renters are spending 30% of their income on rent up from a historical average of 21%

o   50% are rent burdened spending more than 33% on rent

o   25% are severely rent burdened spending more than 50% rent

·         There are 9 Million more rental households today than 10 years ago

·         Homeownership is at the low for the past century (63%)

·         The household starts, mostly young people and millennials, are in a rental situation

·         Rental prices are way beyond the previous peak

It still might be the best bet to lock in your “rent” with a 30 year fixed mortgage on a home you own that will build equity with every monthly payment.

-Kris

This Week in Real Estate 12-4-2015 Negative Equity still a Problem

Property Tax bills

If you don’t want to pay a 10% penalty on your property tax bill make sure you have your payment to the county by December 10^th. PLEASE DO NOT MAIL it is not the post mark date. It needs to be received by the county by December 10, 2015.

Negative Equity still a problem.

I read this great article from CNBC regarding the negative equity effects still in our marketplace.

As a nation nearly two thirds of all homes have a mortgage. In California the figure is slightly higher with a little over 70%.

On average 10% of homes with mortgages (7% overall) in the bay area are underwater or have negative equity. The problem with the negative equity is that it creates a shortage of homes for sale. If you can’t sell at a profit, as a homeowner, you are stuck.

The recent study found that the majority of homes with negative equity are the less expensive homes that are below the median price for the area. Often these homes are the entry-level or starter homes.

Also the number of repeat buyers has dropped dramatically in the last decade, owing to negative equity, but when combined with tighter underwriting standards, the options for these buyers is even worse. Lenders today require higher levels of income compared to debt, and Americans in mid-tier FICO credit ranges have had increasing difficulty qualifying for loans.

While the market is much stronger and a key part of the growth of the overall economy, the prediction is that it may be 3-4 years before the “negative equity” effect is behind us.

-Kris

Toys for Tots Client appreciation party recap

I wanted to thank everyone who came out last night. We had a blast and were able to give over 200 toys to Toys for Tots.

THANK YOU.

This Week in Real Estate 11-27-2015 Happy Thanks Giving

Happy Thanksgiving.

I hope that you had a wonderful Thanksgiving. I know mine was filled with blessings again this year.

-Kris

This Week in Real Estate 11-20-2015 Rates heading higher

Rates likely to increase in December

Prior to the October’s Job report the percentage of financial analysts that thought a rate increase for the December Federal Reserve meeting was about 35%. After that report it went up to 70%. Now with unemployment near 5% and core inflation figures about to come out at 2% the increase is just about a lock.

We have seen the mortgage rate volatility increase in recent weeks as well. We are up and trending to stay that way. Up about 12-25 basis points from the beginning of October, and that is in direct proportion to the expected 0.25% increase in the FEDs short term lending rate.

This is a good sign for the health of the real estate market and overall economy as a whole.

-Kris

This Week in Real Estate 11-13-2015 2016 Forecast

Housing forecast for 2016

California’s housing market will continue to improve into 2016, but a shortage of homes on the market and a crimp in housing affordability also will persist, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2016 California Housing Market Forecast,”. 

The C.A.R. forecast sees an increase in existing home sales of 6.3 percent next year to reach 433,000 units, up from the projected 2015 sales figure of 407,500 homes sold.  Sales in 2015 also will be up 6.3 percent from the 383,300 existing, single-family homes sold in 2014.

“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said C.A.R. President Chris Kutzkey.  “However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability. On the other hand, demand in less expensive areas such as Solano County, the Central Valley, and Riverside/San Bernardino areas will remain strong thanks to solid job growth in warehousing, transportation, logistics, and manufacturing in these areas.”

C.A.R.’s forecast projects growth in the U.S. Gross Domestic Product of 2.7 percent in 2016, after a projected gain of 2.4 percent in 2015.  With nonfarm job growth of 2.3 percent in California, the state’s unemployment rate should decrease to 5.5 percent in 2016 from 6.3 percent in 2015 and 7.5 percent in 2014.

The average for 30-year, fixed mortgage interest rates will rise only slightly to 4.5 percent but will still remain at historically low levels.

The California median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015 to $476,300.  This is the slowest rate of price appreciation in five years.

“The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “However, the global economic slowdown, financial market volatility, and the anticipation of higher interest rates are some of the challenges that may have an adverse impact on the market’s momentum next year. Additionally, as we see more sales shift to inland regions of the state, the change in mix of sales will keep increases in the statewide median price tempered.”

2016 California Housing Market Forecast

	2010	2011	2012	2013	2014	2015p	2016f
SFH Resales (000s)	416.5	422.6	439.8	414.9	383.3	407.5	433.0
% Change	-12.30%	1.40%	4.10%	-5.90%	-7.60%	6.30%	6.30%
Median Price ($000s)	$305.0	$286.0	$319.3	$407.2	$447.0	$476.3	$491.3
% Change	10.9%	-6.2%	11.6%	27.5%	9.8%	6.5%	3.2%
Housing Affordability Index	48%	53%	51%	36%	30%	31%	27%
30-Yr FRM	4.70%	4.50%	3.70%	4.00%	4.20%	3.90%	4.50%

p = projected
f = forecast

For the full 131 slide presentation from Leslie Appleton Young please visit:

http://www.car.org/marketdata/marketforecast/

Great Information.

This Week in Real Estate 11-6-2015 Renting vs. Buying.

Rent vs. Buying

I know that home prices are up dramatically in the bay area, but those prices are being out paced by the increases in rent in our area as well. Recently this article from Zumper shows that 3 of the top 5 most expensive rental cities are #1 San Francisco, #4 San Jose and #5 Oakland.

https://www.zumper.com/blog/2015/11/zumper-national-rent-report-november-2015/

In Napa, our rental situation is just as bad, the vacancy rate has been about 3-4% all year. The rents have been going up steadily for the past 5 years and right now the “break even” point for buying vs. renting is about 7 years on a median 3 bedroom 2 bath home.(assuming $618,000 for the home purchase and $2,500 for the rental rate)

http://www.realtor.com/mortgage/tools/rent-or-buy-calculator/

If you are looking at putting down roots in the Valley, it might be a good time to look at purchasing while rates are still in the low 4% range.

-Kris

Home Tips for preparing for the holidays.

When I worked in advertising these are the make or break weeks for the year known as the Hard 8. There are 8 weeks between Halloween and Christmas. It is supposed to be the “happiest time of the year”, but the stress level goes up, the time seems to vanish, and work becomes crazy …

I really liked the following bloggers/websites take on how to make this time of year more about loving the holidays vs. getting through the holidays.

http://bemorewithless.com/a-guide-to-simple-holidays/

http://www.taskcomplete.com/organizing-and-clutter/insiders-guide-simplified-holiday-prep/

http://christmasplanner.com/make-christmas-planner

Celebrating Veterans Day.

If you have served, THANK YOU. and there are a tremendous amount of businesses that would like to thank you as well.

Free meals for veterans on Wednesday November 11, 2015.

http://themilitarywallet.com/veterans-day-free-meals-and-discounts/

You can support our veterans as well with support to the Pathway Home, or many of the other great organizations helping our soldiers.

 

This Week in Real Estate - 10/30/2015 - Housing Bubble ???

A housing bubble again ???

One of the most common questions I get is whether or not I believe we are in a housing bubble. I do not think that we are in a bubble, but it is always great when someone smarter than you tells why in an article.

This was published by Housing Wire yesterday from the economist Mike Fratantoni.

http://www.housingwire.com/blogs/1-rewired/post/35485-worries-about-the-housing-market-are-overblown

HousingWire

Worries about the housing market are overblown

There are limits, after all

Mike Fratantoni

October 29, 2015

Lynn Effinger recently wrote an opinion piece here on HousingWire in which he surmised that we are in a housing bubble. He suggests that Fannie Mae and Freddie Mac (the GSEs), the Federal Housing Administration and the Federal Reserve are once again “setting the stage” for another housing crisis.

If anything, the overcorrection by regulators and trepidation by lenders has created an environment where borrowers and private capital are both left sitting on the sidelines, and access to credit remains quite tight relative to historical norms.

There is no question that the government remains a larger force in the housing market and is focused on protecting consumers. However recent actions by the FHA, the Department of Justice and the Consumer Financial Protection Bureau are more likely to constrain rather than expand the availability of credit.

They have levied significant penalties to hold lenders accountable and ensure that the mistakes made in the run up to the crisis never happen again. And as such, they have overcompensated and created an environment where qualified, responsible buyers are being kept from the home purchase market. 

In fact, the homeownership rate remains near a 26-year low in this country, and credit still remains tight. The Mortgage Bankers Association's Mortgage Credit Availability Index  reinforces the notion that although credit has improved marginally over the last year, primarily for borrowers seeking jumbo loans, it is nowhere near where it was during the housing bubble (Chart here: MCAI Longview).

Furthermore, the CFPB’s Ability to Repay/Qualified Mortgage rules have effectively eliminated the unsustainable lending products and instruments that substantially contributed to the 2005-2007 boom, including no-doc loans, subprime, negative amortization, extended term loans, balloons, ARMs with deep teaser rates, among others.

Housing markets are driven by underlying changes in housing supply and demand.  While new construction has picked up, we remain just above the pace of single-family starts seen at the worst point in the 1990-1991 recession. And inventories of homes remain extremely tight in many markets.

Housing demand is driven by the job market and demographics.

With an unemployment rate of 5.1%, we are approaching full employment. In terms of demographics, the Millennial generation, the largest in history, is now moving out of their parents homes and into their own.

With the oldest millennials being in their early 30's, simple math dictates a tectonic sea change is afoot. More housing, both rentals and owner occupied, will be required to meet the needs of the approximate 1.4 million new households annually for the decade ahead.

Compared to the roughly 600k households formed annually during the recession, this huge increase will require new homes that will need mortgages. (Household Formation). And incidentally MBA's forecast calls for a slow but steady increase to meet this significant demand (Forecast).

It is not surprising that, given the depths of the last housing bubble, some are looking for an opportunity to predict the next one. A stopped clock is right twice a day.  However in this case, the current regulatory environment and household formation trends reveals a different reality.

I know it was a little long, but a great read.

-Kris

Home Tips for Halloween.

We all know the tips for kids and parents trick or treating, http://www.safekids.org/tip/halloween-safety-tips, but do you know the tips to keep kids safe while approaching your home?

http://www.safewise.com/blog/9-ways-prepare-house-safe-halloween/

1. Secure railings.

Young children, and the adults who often accompany them, will need the security and support of railings while climbing steps to get to your front door. If you’ve been putting off fixing that rickety railing, it’s time to get out the toolbox and make it secure.

2. Clear walkways.

Trick-or-treaters are too busy counting candy to pay close attention to where they’re walking, so it’s critical to survey your yard for potential trip and slip hazards. Be sure your yard is free of tripping hazards like hoses and sprinklers, clear walkways of loose gravel, and be sure to clean moss off steps. If your home has an irrigation system, turn the system off well in advance of the big night so your lawn and walkways have a chance to dry.

3. Avoid using candles.

A glowing jack-o’-lantern makes your home warm and welcoming to candy seekers, but using a candle to illuminate a pumpkin can be dangerous. Costumes, paper decorations and ornamental straw can easily catch on fire. Instead of a traditional candle, use one powered by batteries.

4. Consider candy choices.

No doubt buying Halloween candy is fun, but keep in mind that not all candy is appropriate for every child. Avoid candy that poses a choking hazard for toddlers, and keep in mind that a number of children have peanut allergies. Even if the candy doesn’t contain peanuts, it could be made in a facility that handles peanuts. Check the candy bag’s label for a peanut allergy warning.

5. Use lots of lights.

A dimly lit entryway helps set the spooky mood of Halloween, but it’s also increases the chance of an accident. Make sure the exterior lights of your home are working, and consider turning on flood lights to illuminate the darkest areas of your yard. Even if you’re not going to be home, leave on lights for safety reasons and to dissuade unsavory characters from vandalizing your home. And, if you won’t be there, make sure you set your security system, just to be safe.

6. Contain your pets.

Barking dogs not only scare trick-or-treaters of every age away, they also present a danger. A dog that breaks away from your home might not bite, but he could knock down a toddler or scare a teen right into the street, causing even more danger. Keep all pets securely confined inside your home until the hustle and bustle of the night has passed.

7. Don’t put out candy.

Maybe you won’t be home on Halloween or perhaps it’s difficult for you to answer the door, so you’ve put out a bowl of candy for kids to help themselves. While this seems like the right thing to do, someone could taint the candy. It’s probably unlikely, but it’s definitely not worth taking the chance.

8. Make room in the garage.

If you’re headed out on Halloween, clean out the garage and store your car securely in it. From teen antics to serious vehicle vandalism and theft, your car is best kept in the garage on Halloween.

9. Use discretion when opening the door.

While nearly all trick-or-treaters are innocent kids out to collect as much candy as they can possibly carry, you must still be cautious of whom you open the door for. If you have an uneasy feeling about the person approaching your door, don’t open it. And as the barrage of trick-or-treaters fades to just a few here and there, it’s a good idea to stop opening the door for the night.

This week in Real Estate - 10-23-20015 - Affordability is falling, but there is help

The affordability is dropping.

There are many factors that are included in the Housing Affordability Index (HAI), but Median Income, Median Price and Interest rates are the three that have the most impact on the index.

As you know, prices are increasing. Up nearly 80% since the low in 2012.

Interest rates are up as well. You may not believe it, but 4% interest rates are still incredibly low as compared to historical averages, but they are up from the 3.25-3.5% rates we had in the beginning of 2013.

And incomes are up, but not that much. The results, affordability has dropped significantly.

In Q2 2012, the Housing Affordability Index (HAI) for Napa County was 50% in Solano County it was 77%. The latest report for Q2 2015 has the HAI for Napa County at 23% and Solano County at 46%

-Kris

Helping with Affordability

The Cities of Napa, American Canyon, Calistoga and Yountville all have GREAT opportunities for down payment assistance programs for first time home buyers

In Napa, you can get up to $150,000 or 30% of you purchase price. In American Canyon you can get up to $100,000.

They have programs for people trying to purchase mobile homes as well!

The money is always in the form of a silent second (NO PAYMENTS) and some of the loans are forgiven/dismissed if you live in the property for the entire length of the loan!

In addition they have programs to help low income families repair the homes they are currently living in.

These programs are great, but there is an income restriction catch. For a household of 2 people you need to make less than $52,750 for a household of 4 people it is $65,900.

If those income qualifications take you out of the running there is a county program that just may work as well.

The County will lend you up to 10% of the purchase price.

You have to work in Napa County and the home you purchase must be within 20 mile radius (as the crow flies) of your work.

The good news the income for a household of 2 people less than $82,680 for a household of 4 people it is $102,320.

These are both great programs and the money will not be available for ever, so get shopping.

For more information regarding these programs please email me.

-Kris