Wednesday, June 27, 2007
Hi everyone, I have been away for a little while, so I have been unable to post. Now I'm back with some notes.
It used to be, when I first started Real Estate, that the hottest part of the market was always the price range that encompassed first time home buyers. In the Berkeley area, that is the $550K to $650K range. Those were the people who had to buy. They were starting families, begining to settle down, and trying to get that whole living as an adult thing down.
In these troubeld times, the hottest part of the market in Berkeley is the $750k to just under $1m market. These are second or third time home buyers. These homes in some of the better parts of Berkeley like Thousand Oaks, the Gourmet Ghetto and the Hills, still seem to fly off the market with multiple offers.
Above $1m things are a little quieter. I can understand this. Those looking for homes above $1m don't have to move. They have homes, and they can wait.
But what about those first time home buyer's market. Why is that so sluggish? Part of the reason maybe because of the tightening of loan requirements. All those 100% financing loans based on stated incomes have dried up as the banks have tightened their requirements.
That has certainly taken a lot of people out of the market.
So what looks like a reletively healthy Berkeley Real Estate market, may just be skewed because of a segment that is leading all the others.
Thursday, June 14, 2007
As I left the office this afternoon, I ran into one of the loan brokers I regularly use. He was shaking his head, and I asked him what was happening. He said that interest rates got crushed this week.
Interest rates have been edging up for the last few months, but by very small increments. This week they increased by 3/8ths, and are starting to close in on 7%.
Part of the problem is that the Fed has indicated that they are not going to raise rates. While this has fed a growing stock market, it reduced the yields in the bond market. Traders have been getting rid of their bonds. but there has been no rush to buy them, and that has helped to push interest rates up this week.
In effect, even with lists prices for homes in this area holding steady, for the buyer, home prices just took a large step upwards, because the costs to borrow money went up sharply this week.
As I have stated before, even if you are in an area where home prices are falling, at some point, rising interest rates will cancel out that drop in price.
If the only reason you are waiting to buy in a down market is because you think home prices will drop further, take a careful look at what your mortgage payments will be with the rising interst rates, and make the smart move for you.
Sunday, June 10, 2007
In talking to my clients this week, I am reminded of some of the things all buyers should think about when buying a home;
- Don't Think That There is Only One Perfect House For You.New Homes come onto the market every week. Selecting the right home is a process of elimination, not selection. This is especially true in our area where you are looking at mostly existing homes, not new homes. Be open to all the possibilities.
- Consider Your Long Term Needs. Don't just think about what you need now. Consider your future. What will you want 5 years from now?
- Follow Through on All Inspections. I have mentioned this before. Inspections include not only the home, and the home systems such as heating and plumbing, but also the neighborhood, and your proximity to schools, transportation, friends and family.
- Know the Total Costs in Buying a Home. You must plan for all closing costs, lender fees, escrow fees, on going property taxes and all the costs involved in owning property. Your Realtor can help you with all these things.
- When You Choose Your Real Estate Agent, Be Sure He Is Commited To Forming a Strong Business Relationship With You. Make sure that agent is listening to your wants and needs, and is available to give you reasoned advice. Your Agent is your Advocate.
Tuesday, June 5, 2007
Every now and then I will watch the program on the A&E channel called "Flip This House". It is one of the most popular programs on that channel.
It showed people buying homes in need of repair, doing renovations with the advise of a Real Estate Agent, and, in a matter of months, putting the homes back on the market and making a tidy profit.
I could never really figure out how they were doing it. In the area in which I work it is very difficult to do a flip like this and in such a short amount of time, make any kind of profit once you include commissions, taxes, labor and materials.
It takes careful planning, and a thorough knowledge of the market and construction costs to even squeeze out a thin margin of profit, especially these days with what the Real Estate Market is doing. I would watch the show, and the participants seemed to be flying by the seat of their pants, and yet they would sell their flippers, and make a profit. How did they do it?
Well, it turns out, at least in one case, the whole thing was a sham. The homes were never truly renovated, and they were never truly sold.
In a Yahoo News Article you can read here, an Atlanta Businessman, Sam Leccima, who appeared on several episodes of "Flip This House" never did the work on the houses he said he was flipping, and in some cases, never even owned the homes he said he sold.
So the lesson is, don't rely on Reality TV to do your financial planning. Who would have thought?
I would love to say that it is simple as pie to find a home in need of just cosmetic fixing, a new bathroom, refinishing the floors, etc. and all it will take is a little sweat equity and in a month and a half, before the second mortgage payment is due, put that little jewel back on the market and watch the offers roll in.
That is the myth that "Flip This House" is trying to perpetuate.
You have to have a plan. You must be aware of the tax ramifications of owning a home and selling it in such a short time. You have to know the area in which the property is in. What is the inventory like? How long are homes on the market? What kind of prices are they bringing in? What are your costs going to be, and what if something goes wrong, because something always goes wrong.