Pacita's Quick Bytes of Real Estate: November 2009

Somehow, it seems to go against the concept of being green by advertising in print. Traditional marketing takes a back-seat if you want to reach that unique buyer who appreciates the eco-friendly aspects of a green --- REALLY GREEN --- and brand-new home.

And it also seems inefficient to use print if the objective is to reach the biggest target audience when the internet can reach the entire world!

So....what do you do, and where should you go? Here are but a few ideas. Let's hear it from the rest of you!

ECO-WORDS

The EcoBroker website has very limited listings --- and how many buyers actually look there?

Besides the usual websites like REALTOR.com and electronic flyers such as Postlets and Vflyers,what would you propose as a unique way to market an environment-friendly home that will set it apart from the rest?

Filling the description with key words is a given.....yes, we should pepper the text with words like:

•  
  • environment-friendly
  • eco-friendly
  • energy-saving
  • green building
  • sustainability
  • solar energy
  • bamboo floor
  • cork floor
  • recycled building products
  • tankless water heater
  • photovoltaic system

A good source for eco-friendly terms is TreeHugger.com. Getting Google juice is paramount in reaching the widest audience.

GOOD PRESS

"Build it and they will come" per the movie "A Field of Dreams". Guess those folks never heard of advertising or marketing. Thanks goodness for word-of-mouth!

When it comes to unique products, getting good press is extremely important. Engaging reporters to write feature articles about the property is worth its weight in gold.

TELL 'EM WHAT YOU'RE GOING TO TELL 'EM THEN TELL 'EM AGAIN

Let's not forget that there is a story to tell.

Focus on the key ideas, and keep repeating them. If we don't reach them the first time, we may reach them a second time the story is told. Or those who missed it the first time may find it the next time.

Put the keywords in all you online ads. Blog about it!

Once is simply NOT enough

A PICTURE IS WORTH A THOUSAND WORDS

Words alone will NOT sell a product.

With the help of careful staging, visualizing the property through a well-conceived visual tour or video, it's the next best thing to being there.

Besides showing how nice the rooms look, focus on the what makes this property green? Do a close-up of the photo-voltaic system. Zoom in on what that insulation really is made of.

Wow! Recycled denim!

NETWORKING

Perhaps an under-utilized method is networking with other like-minded people who will likely know others with similar interests.

That's why we have ActiveRain!

Is it a good time to buy and sell real estate?

The perception is that REALTORs are always trying to convince their clients to buy or sell real estate each and any time. But the reality is that when the buyers or sellers are on the verge of making a decision, they are the people who make that decision based on the information they have, and how they process that information.

As such, it is always a good idea to stay abreast of the real estate market movement and factors that are affecting --- or  effecting --- that movement.

Affect versus Effect

There is a difference when used as a verb:

• Affect means: to have an influence on;  to act on the emotions of; to attack or infect
• Effect means: to bring about to produce an outcome to achieve a result

How to we apply this to real estate and to answer the question of whether or not it's a good time to buy or sell? The answer lies in how people process, interpret and take action on the information they know about the current situation.

Tax credits

• The National Association of REALTORS helped to effect(cause to happen) the extension and expansion of the tax credits by encouraging its membership to contact their legislators to pass the bill and encourage President Obama to sign it.
• Who are affected by the bill when it was signed? The first time home buyers and repeat buyers who have until April 30 2010 to get into contract, and have 60 days to close escrow to qualify for the tax credit.

Short sales and Foreclosures

• The four largest lenders are staffing up their short sale department to effect a simplification of the short sale process
• Homeowners who are suffering reduced incomes and drop in home market values are facing foreclosure, and are directly affected by the economic downturn.  Market observers like Steve Harney say that "if anything, future foreclosure inventor is underestimated, not overestimated."
• More short sales and foreclosures may adversely affect the market values of neighboring homes. So if property owners are contemplating selling their home, they should factor the projected increase in distressed properties. How can they compete? Price their homes aggressively so that they move fast and ahead of the market. Assume

Assume $500,000 home  in November 2009, and owner has an outstanding loan of $400,000 at 6% interest.

• Selling now for $500,000 with projected close of escrow by April 30, 2010:  $64,600 net at closing
• Waiting until June 2010 when more foreclosures and short sales are expected to come on the market, the value of his home may be affected by as much as 10% or down to $475,000. Projected close of escrow 90 days:  $61,873 net at closing

Interest rates and FHA down payment

Historically speaking, the current rates are still some of the lowest they've ever been in 40 years.  See FreddieMac for a peek at 30-year rates since 1971.

• Interest rates may rise by 1 - 2% by next year. A concern for increasing rates may effect renewed interest in buying property, coupled by a desire to meet the tax credit deadlines.
• When interest rates rise, this may affect the buyers' ability to qualify for a loan  if the monthly mortgage payments based on the higher interest rates  are higher than what their current income level can support. It is important to relate the cost of buying a home --- if prices decrease by 10%, but the interest rate increases by 1% --- how will that affect your monthly payment? Assume 30-year mortgage with 20% down payment , in Oakland CA
  • $500,000 purchase price at 5% interest rate: $2,814/month
  • Reduced purchase price by 10% or $475K, with increased interest rate to 6%: $2,912/month, or $98 higher

Now, about that FHA down payment....

Keep your eye on this bill H.R. 3706 that proposes increasing down payment for FHA insured mortgages from 3.5% to 5%.  Reactions are mixed regarding the pros and cons of this bill and what its effect will be (more bailout?) and how it will affect buyers (more difficult to qualify to buy).

According to Wall Street Journal, the agency opposes this bill. David Stevens, the commissioner of the FHA, warned that "the biggest mistake" the agency could make is to "overcorrect."

Can one say information overload? Political intervention and interference? Who do we believe?  What can we expect?

Is it ever a good idea to simply let go of an unhappy and dissatisfied seller?

I can't remember where I first saw it, or heard about it. But I know that since I've become a realtor, I  have always offered a no hassle, easy exit guarantee on my listing agreements. I figured that if someone is not satisfied with the service I provide, it is best to let go of the client and part on amicable terms.

If you google "easy exit guarantee" you will see a ton of realtors and agencies who subscribe to this principle.

But not everyone agrees.

UNHAPPY SELLER

An unhappy seller had posted her concerns about her agent who reduced on the MLS the list price on her property without her knowledge. Many realtors and brokers who responded said the same thing: that the agent shouldn't have made that change without her knowledge and written consent.

Thereupon she wrote to the broker that she wants to terminate the agreement. She included many other reasons for her dissatisfaction.

BROKER SCOLDS SELLER VIA EMAIL

The broker, instead of making a phone call or asking to meet with the seller, responded via email, starting off with....

"You personally have been extremely detrimental to your agent's efforts...."

The broker provided his own view of what has transpired as a rebuttal to the seller's complaints. He itemized examples of what he thought the owner had done or refused to do. 

Then he ends it by saying he will not release the seller from the contract. And that if the seller lists the property with another agent, they will file a claim for full commission on any sale of the property.

Is this the way to build a bridge to a client base?

EMAIL IS FOREVER

The Seller is incensed. She told the broker that his assertions are incorrect.

She may wait until the listing agreement period is expires. But the damage is done. She is on the warpath and is planning to file complaints against the broker and the agent. She is also spreading the word. She is bound and determined not to let this go, invoking the power of the internet and all that.....

Is it worth winning the battle but lose the war? How would you handle it?

Agree or disagree, this is an interesting outburst --- a voice echoing the cries of distressed homeowners and their advocates. "Homeowners: "Hey Congress.. Get off your a**!" 

Petition to the U.S. government from the Homeowners proposing "an immediate halt to all foreclosures until new, mandatory guidelines are established and that these guidelines be overseen by a new Consumer Protection Agency..."

EXCERPT:

We propose an immediate halt to all foreclosures until new, mandatory guidelines are established and that these guidelines be overseen by a new Consumer Protection Agency, which was recently recommended by President Obama and endorsed by Sheila Bair, chair of the FDIC.

We also demand that these guidelines include not only a simple 31% of the borrower's gross monthly income, but that the Net Present Value (NPV) test: 

• be created and administered by the government, not the banks,
• have its data, assumptions and formula published so that they may be verified by the public, and
• be made available at www.makinghomeaffordable.gov in a calculator form so that people can learn immediately, with the other eligibility questions available there now, whether they're eligible for HAMP.

We are also strongly advocating that additional guidelines be formulated that would open the door for modifications at an even a lower rate in significant hardship conditions and for writedowns of principal when homes are severely underwater."

Read more at: http://www.huffingtonpost.com/richard-zombeck/homeowners-hey-congress-g_b_342665.html&cp

Lenders make more money on foreclosures than from short sales or loan modifications. That's what Steve Harney conveyed in a seminar. He caused an earthquake in San Francisco

When loan modifications are turned down, the next thing we attempt is a short sale. And we know that lenders turn over the short sale accounts to loan servicing companies who make our lives hell getting short sales approved. As such, we should know that these loan servicing companies make MORE money by letting the properties foreclose than to approve the short sales OR the loan modification.

RUMBLE...GRUMBLE...CRIES OF DISMAY!

Did he just confirm what we were afraid of?

So I researched this topic and found a few articles worth reviewing. How did I miss these? Was I under a rock in a desert?

CONSUMERLAW.ORG REPORt ON "Why Servicers Foreclose when They Should Modify And Other Puzzles of Servicer Behavior"

DAILY PRESS headline. Oct, 30 2009. Do Mortgage Lenders Make More Money when a Loan Goes iInto Foreclosure?

HUFFINGTON POST. Oct. 21, 2009, Foreclosures Are More Profitable Than Loan Modifications, According To New Report

Washington Post. July 28, 2009.  Foreclosures Are Often In Lenders' Best Interest. Numbers Work Against Government Efforts to Help Homeowners.

ThinkGlink. October 21, 2009. Loan Modification Help: Why Lenders Are Slow To Provide Loan Modifications

Dayton Daily News. Oct. 17, 2009. Drop in foreclosures called "very scary". Lender's actions show they think properties are not worth pursuing.

Mortgage101.com. October 23, 2009. Mortgage Companies Make More on Foreclosures Than They Do Modifying Existing Loans. (This blog refers to the news article on Huffington Post)

FLASHBACK: Huffington Post, June 8, 2009. Short Sales: Banks Blocking Way Out of Foreclosure Crisis

FLASHBACK: Huffington Post, May 15, 2009. Short Sales Stories. Lenders tend to stick with more familiar foreclosure process, losing money for everybody. 

UPDATE: Huffington Post, November 2, 2009. Homeowners: "Hey Congress, Get Off Your A**"

KNOCKING OURSELVES OUT TRYING TO HELP

So are we engaging in self-flagellation helping our distressed clients with their short sales and loan modification?

Are lenders really more likely to foreclose?

Are the short sale servicing companies really trying to help?

Or are they stalling and withholding their help because they know their leaders would rather have the property burn into foreclosure?

Is there no resolution in signt?

There oughta be a law!

For the statisticians and other folks who prefer graphs to see what's going on a specific market, here's a snapshot of what it looks like in Walnut Creek CA, comparing the market activity the past two years, starting in October 2007 - October 2009.

MONTHS SUPPLY OF INVENTORY  When there are more buyers than there are sellers, it means that it's a seller's market. The higher the months inventory, the more it becomes a seller's market. Traditionally, if the the months inventory is more than six months, it's a buyer's market, and vice versa.

In Walnut Creek the months' inventory was 8.2 months in October 2007, and 2.2 in October 2009 ---  73% decrease.

UNDER CONTRACT

• October 2009 reports the highest peak, with 155 homes in contract compared to only 65 in October 20007 and 85 in October 2008.
• December 2007 reported the fewest contracts. The following year, December 2008 recorded 68 homes in contract.

MEDIAN PRICE  The median price was the lowest in February 2009 and bounced back in April. Nonetheless, the general trend seems to be downwards. October 2009's median price is the next lowest point.  Sellers may have to adjust their expectations depending on current market values.

SUPPLY AND DEMAND Here's a good way to correlate number of properties sold (demand) with number of properties for sale (supply). .

DAYS ON MARKET  So, how long do the Walnut Creek properties stay on the market before they have accepted offers?  With the exception of February 2008 where the average days on market peaked to nearly 100 days, the average days on market is steady at between 60-70 days.



So...what are these graphs telling you?

Berkeley real estate market is nearly unchanged when compared with the frenetic activity in the surrounding cities.

For the statisticians and other folks who prefer graphs to see what's going on a specific market, here's a snapshot of what it looks like in Berkeley CA, comparing the market the past two years, starting in October 2007 - October 2009.

People will see different things and interpret this information in different ways --- I guess it depends on what you want to see or what you hope will happen.

in the meantime, here's what the data is SHOWING us.

MONTHS SUPPLY OF INVENTORY I like starting with the months supply of inventory. When there are more buyers than there are sellers, it means that it's a seller's market. The higher the months inventory, the more it becomes a seller's market. Traditonally, if the the months inventory is more than six months, it's a buyer's market, and vice versa.

In Berkeley the months' inventory was 2.6 in October 2007, and 1.6 in October 2009. This difference is almost insignificant --- but it is an amazing picture to show the movement in the Berkeley market. The inventory levels mirrors the activity in other cities in the East Bay.

UNDER CONTRACT Homes under contract peaked in 

•  
  • June 2008 (68 in contract),
  • April 2009  (66)
  • October 2009 (65)

Fewest contracts were recorded in January 2008.That would have been a time when a buyer would have had more negotiating power.

MEDIAN PRICE  The median price was the lowest in March 2009 and bounced back in April. Prices increased again. Although not at the peak recorded in June 2008 when median price was a $640K, October 2009's median price is close enough at $696K
 

SUPPLY AND DEMAND Here's a good way to correlate number of properties sold (demand) with number of properties for sale (supply). This chart shows almost no change. Demand is nearly flat.

DAYS ON MARKET  So, how long do the Berkeley properties stay on the market before they have accepted offers?  With the exception of December 2008 where the average daays on market peaked to over 90 days, the average days on market is steady at between 30-40 days.

Good for the sellers and their agents! While buyers and their agents are on notice that they should be fleet of foot when searching for property and when strategizing on their offers.


So...what are these graphs telling you?

Received the text this afternoon.

Scrambled to find news articles. The best one I found was on Bloomberg. Headline: "Senate approves extended U.S. homebuyer tax credit"

Posted on Facebook.

Networked at a Chamber mixer. Shared news with other folks who haven't heard about it (yet).

Sent them link to Bloomberg news so that they, in turn, can spread the word.

Extension not passed yet...but with a Senate vote of 98-0 for it, it's almost a certainty that the House will follow suit. Then on for Obama's signature.

Scrambling to find details about this from other news sources.

• Barely mentioned in CNN.com under headline of  "Senate extends unemployment benefits by up to 20 weeks...."
• And in Fox News, it's "Senate votes to extend benefts to jobless, homebuyers"
• MSNBC says "Jobless, homebuer aid extensions advance"

Checked National Association of Realtors...not there yet?

In the meantime....this list is enough. Time to inform my buyers. There is hope!

How you see it is the same as how you look at a glass --- half-full, or half-empty?

No man is an island. Yes, we get it. And even in our slice of paradise known as the wondrous island of Alameda, CA, we have our share of distressed properties.This is actual data. Analysts have different ways of looking at the same figures and extrapolating different conclusions.

So let's take a look at what it's like for 2009, as of today, November 3, 2009.

COMPARING SOLD PROPERTIES

Sold since January 1, 2009 - 362 homes

• Of which 47 were bank-owned, or 13% of total
• Of which 26 were short sales or 7 % of total
• Together, 73 were "distressed properties or 20% of total

FORECLOSURES

Sold  - 47 homes

• Highest price is for a lagoon-facing property foreclosed at $738,000
• Lowest price is for a 1 bedroom/1 bath condo foreclosed at $150,000

Pending - 10 homes

• Highest price is for a large home at the newer Bayport development, currently listed at $739,900
• Lowest price is for a 2 bedrooms/1.5 bath condo listed at $262,900

Active - 7 homes

• Highest price is for a duplex (lower unit is totally gutted) on Park Street, listed at $709,900.
• Lowest price is for a 1 bedroom/1 bath condo listed at $175,000.

SHORT SALES --- if both buyers and sellers are willing to stick it out, there are some good deals to be found.

Sold - 26. Yes, folks. We do and have closed short sales.

• Highest price is for a Mediterranean style 3 BR/3 BA home that sold for $745,000
• Lowest price is for a 1 Bedroom/1 Bath 640 sq ft condo that sold for $180,000

Pending (pending, pending to subject lender approval) 25 homes.

• Highest price is for a large home in Harbor Bay, listed for $899.000
• Lowest price is for a 1 bedroom/1 bath 740 sq ft condo listed for $199,000

Active - 13 homes

• Highest price is for an overpriced then and still overpriced home on Westline Dr, listed for $918,000
• Lowest price is for a 1 bedroom/1 bath 701 sq ft condo listed for $210,000

WHERE IS ALAMEDA REAL ESTATE MARKET HEADED?

So....where is the Alameda market headed? Take a look at this post: Alameda CA; Where is the market headed to get a picture of what it was like for the last two years starting in October 2007-October 2009.

For the statisticians and other folks who prefer graphs to see what's going on a specific market, here's a snapshot of what it looks like in San Ramon, comparing the market the past two years, starting in October 2007 - October 2009.

People will see different things and interpret this information in different ways --- I guess it depends on what you want to see or what you hope will happen. Some market observers have said the bottom was four months ago. Some say the worst is yet to come (when?).

in the meantime, here's what the data is SHOWING us.

MONTHS SUPPLY OF INVENTORY I like starting with the months supply of inventory. When there are more buyers than there are sellers, it means that it's a seller's market. The higher the months inventory, the more it becomes a seller's market. Traditonally, if the the months inventory is more than six months, it's a buyer's market, and vice versa. This shows quite drop, and seems to be on a continuous downtrend.

UNDER CONTRACT Homes under contract peaked in September 2009 (height of selling season?) and dropped in October.

MEDIAN PRICE it appears the median price is recovering because the median price is only 8% below where it was two years ago. The lowest median prices were posted in January 2009, and made a comeback the next month!

SUPPLY AND DEMAND Here'sgood way to correlate number of properties sold (demand) with number of properties for sale (supply). Supply is on the downward trend, or 38% less than where it was this time in 2007. While demand increased by 55%.

So...what are these graphs telling you?

For the statisticians and other folks who prefer graphs to see what's going on a specific market, here's a snapshot of what it looks like in San Ramon, comparing the market the past two years, starting in October 2007 - October 2009.

People will see different things and interpret this information in different ways --- I guess it depends on what you want to see or what you hope will happen. Some market observers have said the bottom was four months ago. Some say the worst is yet to come (when?).

in the meantime, here's what the data is SHOWING us.

MONTHS SUPPLY OF INVENTORY I like starting with the months supply of inventory. When there are more buyers than there are sellers, it means that it's a seller's market. The higher the months inventory, the more it becomes a seller's market. Traditonally, if the the months inventory is more than six months, it's a buyer's market, and vice versa. This shows quite drop, and seems to be on a continuous downtrend.

UNDER CONTRACT Homes under contract peaked in April 2009 (height of selling season?) and seems to be on the rise again in October.

MEDIAN PRICE After a significant drop in number of units sold as well as media price, it appears the median price is showing a slight uptick although the median price is still 16% below where it was two years ago,

a

SUPPLY AND DEMAND Here'sgood way to correlate number of properties sold (demand) with number of properties for sale (supply). Supply is on the downward trend, or 52% less than where it was this time in 2007. While demand increased by 57%.

So...what are these graphs telling you?