Chris Schell - San Diego Real Estate

Five Great Things about Homeownership

Stronger Lure for Prospective Home Buyers Owning Continues to Become More Affordable Relative to Renting, but Several Obstacles Prevent Many From Biting.

By NICK TIMIRAOS

Home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.

Where Housing Is Headed

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The Wall Street Journal's third-quarter survey of housing-market conditions in 28 of the nation's largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc. Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4%, are the lowest in six decades.

As a result, monthly mortgage payments on the median priced home—including taxes and insurance—are lower than the average rent levels in 12 metro areas, according to data compiled for The Wall Street Journal by Marcus & Millichap, a real-estate brokerage that tracked 27 metro areas. It remains less expensive to rent than to buy in 15 cities. But affordability hasn't done much to lift the sagging housing sector because many would-be buyers are unwilling to purchase a home or unable to qualify for a mortgage.

"It's one of the most striking developments of the housing downturn," said Paul Dales, an economist at Capital Economics. "The initial building blocks for a recovery are in place, but the legacy of the recession is really preventing households from taking advantage."

In Atlanta, which had the most favorable values for owning versus renting, the monthly payment on the average home was $539 assuming a 20% down payment during the third quarter. By contrast, the average asking rent stood at $840, according to the Marcus & Millichap data.

But real estate agents and economists say the trend hasn't boosted demand. That is because affordability alone hasn't been enough to overcome the obstacles in the way of a housing recovery. Some homeowners who would like to move up to larger properties are stuck because they can't sell their homes.

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Also, while the monthly carrying costs on a mortgage are lower than average rents in some cities, home ownership carries other costs—including taxes, insurance, homeowner association dues and maintenance—which may dissuade some potential owners.

Other would-be buyers can't qualify for mortgages because lending conditions are tight or because they don't have enough equity in their current homes to use as a down payments. "The reality of coming up with the down payment and the loan-qualification standards makes things much different than the raw numbers suggest," says Hessam Nadji, managing director of Marcus & Millichap. And even those who may qualify remain skittish about buying property in a market where prices could fall amid foreclosures and weak job growth.

Ryan Young illustrates the point. He is under contract to buy a three-bedroom home in Washington Grove, Md., that will have monthly mortgage, tax, and insurance costs for around $150 less than the $1,900 he is paying to rent a slightly smaller house in Bethesda, Md. He qualified for a 30-year mortgage with a 3.95% fixed rate. Still, Mr. Young says he is cautious about owning his first home with the prospect of future price declines. "Buying a house is not a good financial decision, per se, but we needed a bigger place," said the 35-year-old scientist, "and we don't want to move every couple of years into a new rental."

Other cities where owning is now cheaper than renting include Detroit, Minneapolis, Orlando, Las Vegas, Miami, St. Louis, Chicago and Phoenix.

Monthly Costs: Rent vs. Own

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Home ownership is also looking more affordable because after several years of declines, apartment rents will rise by around 4% this year, says Mr. Nadji. He says rents are poised "to pick up even more momentum across the country next year."

Even cities where it is still cheaper to rent than own have seen big boosts in affordability. In San Diego, the monthly cost of owning a home has averaged around 83% more than renting over the past two decades. During the third quarter, owning was 22% more expensive than renting, according to John Burns Real Estate Consulting.

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Associated Press

A new development in Canonsburg, Pa. The inventory of homes on the market has fallen from levels seen a year ago, as prices and mortgage rates continued to decline.

Mortgage rates are a big reason why affordability continues to improve. In 1991, a $1,700 mortgage payment allowed a borrower to take out a $200,000 mortgage. Today, it gets that homeowner a $350,000 loan, a 77% increase in borrowing power, says Dan Green, a loan officer with Waterstone Mortgage, in Cincinnati. At the same time, low mortgage rates aren't spurring sales because few analysts expect rates to rise anytime soon. The Federal Reserve in August said it would keep rates at ultralow levels for two years. In a normal interest rate cycle, "when they go low, they don't stay for very long, and people jump in," said Mr. Dales. "This time, there is no urgency."

Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of "distressed" sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools. Banks are often much quicker to cut prices to unload properties quickly, which means that the greater the share of "distressed" sales, the more prices tend to fall.

One hopeful sign is that inventories have fallen from their bloated levels of one year ago. All 28 cities in The Wall Street Journal's latest survey saw homes listed for sale fall from one year ago, when markets were reeling with a substantial overhang of properties amid a big drop in demand. Visible inventory was down sharply in several markets, including by almost half in Miami and 40% in Phoenix.

Low inventories have spurred more bidding wars at the low end of the market as investors compete for homes that they can convert into rentals. In Sacramento, it would take just 2.5 months to sell the listed inventory at the current sales pace. Las Vegas has a 4.3 month supply of inventory, according to John Burns Real Estate Consulting. But the potential supply of homes is much bigger because banks have yet to process hundreds of thousands of potential foreclosures.

Should I Take My Home Off The Market During The Holidays?

Behind the Numbers: Pending Home Sales Rise

By Alan Zibel

Luxury Home Values Rise in Third Quarter of 2011

SAN FRANCISCO, Nov 28, 2011 (BUSINESS WIRE) -- Luxury home values rose in Los Angeles, San Diego and San Francisco in the third quarter of 2011 compared to the second quarter, according to the First Republic Prestige Home Index(TM) by First Republic Bank, a leading private bank and wealth management company.

In the quarter ended Sept. 30, 2011, the Index indicated the following:

-- Los Angeles area values rose 0.7% from the second quarter of 2011 and increased 2.5% from the third quarter a year ago. The average luxury home in Los Angeles is now $2.01 million.

-- San Diego area values increased 1.1% from the second quarter and fell 3.9% year-over-year. The average luxury home in San Diego is now $1.63 million.

-- San Francisco Bay Area values climbed 1% from the second quarter and declined 1.4% from a year ago. The average luxury home in San Francisco is now $2.53 million.

"Luxury home prices in many California communities increased due to low inventories, low interest rates, and home prices that have declined over the past few years. This has improved the economics of investing in residential real estate," said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. "All three major metropolitan areas in California experienced gains in home prices in the third quarter, which is the first time that has occurred since the fourth quarter of 2010."

First Republic Bank produces the Prestige Home Index each quarter with Fiserv CSW Inc., a leading provider of automated property valuation services and home price metrics to U.S. financial institutions. Historical results of the Index, which has tracked luxury homes since 1985, are accessible at www.firstrepublic.com . First Republic Bank is an active lender in the luxury home market for primary residences and vacation homes.

Los Angeles Area Values

In Los Angeles, values have increased in three of the past four quarters. The highest end of the luxury market appeared to be the most robust, agents said.

"For homes priced at $5 million and up, the market remains active," said Jane Brill Graven of Coldwell Banker Beverly Hills East. "There are well-qualified buyers who are looking for properties at the very top end and they have the upper hand. Owners are having to reduce prices to where the market is."

Along the beach communities, the market was largely unchanged from a year ago. "If we had more and better product, we would have had more transactions in the past 12 months," said Barry Host of South Bay Brokers in Manhattan Beach. "Buyers with money are out there, but there is also a lot of uncertainty. Unless the news starts to settle, the market will continue to bump along."

San Diego Area Values

San Diego prices turned positive again after declining in the first half of 2011.

Despite the modest quarterly increase, luxury home prices remain soft, and many buyers remain uncertain. "We are very busy, but every single deal is a major struggle," said Lucy Kelts of Prudential California Realty in Rancho Santa Fe. "You have to talk realistically with sellers up front. We're not going to get out of this mess until the jobless rate goes down by half."

Greg Noonan of Prudential California Realty in La Jolla said the lower end of the luxury market was picking up. "I'm seeing a bit of pent up demand in the $1.5 million to $3 million range. At $4 million and above, it is a fairly soft market. Buyers are being extremely aggressive in their thinking about price. If a property is on the market for $4 million, buyers want to pay $3.5 million to build in some downside protection."

San Francisco Bay Area Values

In San Francisco and Silicon Valley, the luxury market is strong due to technology-driven wealth creation, lower interest rates and lower home prices. The market also benefitted from higher rents, which further enhances the attractiveness of residential real estate as an investment.

"The higher end market has been pretty strong," said Hugh Cornish of Coldwell Banker in Menlo Park. "There has been less inventory in the higher end and more from $2.5 million to $5 million. Palo Alto has been the strongest market, followed by Menlo Park and Atherton. We are seeing multiple offers, but not for every property."

In San Francisco, the higher end of the luxury market was active. "Above $5 million, the market is healthy," said Mary Lou Castellanos of Sotheby's International Realty. "Smart money is buying now and is taking advantage of lower prices and lower interest rates. At the same time, a growing number of sellers are getting more realistic about price."

In the Wine Country, a number of high-dollar sales have taken place over the past few months. "We're seeing a real surge in the upper end of the market," said Jim Perry of Pacific Union in St. Helena. "People have been waiting on the sidelines. With interest rates so low and prices down, that's hard to pass up."

About The First Republic Prestige Home Index

The First Republic Prestige Home Index(TM) is the first statistical model of its kind customized to measure changes in homes valued at more than $1 million in key California urban markets. Some common features of luxury homes in the Index: 3,000 to 6,000 square feet, three to six bedrooms, and three to six bathrooms. San Francisco Bay Area properties include a cross-section of luxury homes in Alamo, Atherton, Belvedere, Danville, Healdsburg, Hillsborough, Lafayette, Los Altos, Los Gatos, Mill Valley, Moraga, Orinda, Palo Alto, Piedmont, Portola Valley, Ross, St. Helena, San Francisco, Saratoga, Sonoma, Tiburon and Woodside. Properties in Los Angeles represent a cross-section of luxury homes in Arcadia, Beverly Hills, Calabasas, La Canada Flintridge, Encino, Los Angeles, Malibu, Marina del Rey, North Hollywood, Pacific Palisades, Pasadena, Playa del Rey, Santa Monica, Studio City and the West Los Angeles enclaves of Bel Air, Brentwood and Westwood. San Diego properties represent a cross-section of luxury homes in Carlsbad, Coronado, Del Mar, Encinitas, La Jolla, La Mesa, Poway, Rancho Santa Fe, San Diego and Solana Beach. In producing the Index, Fiserv CSW Inc. draws upon its economic database and years of experience in tracking single-family home values; collects and cross-checks data from multiple sources; achieves a weighted balance of validation elements such as repeat sales, comparable sales, and physical home characteristics; and combines this with First Republic's extensive local market knowledge.

About First Republic Bank

First Republic Bank /quotes/zigman/2803861/quotes/nls/frc FRC -2.27% and its subsidiaries provide private banking, private business banking and private wealth management. Founded in 1985, First Republic specializes in exceptional, relationship-based service offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Greenwich and New York City. First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans. First Republic is a component of the S&P Total Market Index, the Wilshire 5000 Total Market Index(SM), the Russell 1000(R), Russell 3000(R) and Russell Global indices and six Dow Jones indices.

About First Republic Private Wealth Management

First Republic Private Wealth Management is the investment management, trust and brokerage group of First Republic Bank. First Republic Private Wealth Management offers objective advice and fully customized solutions with the same level of exceptional client service that has been the hallmark of First Republic Bank for more than 25 years. First Republic has the flexibility to provide individuals, families, businesses, endowments, schools and non-profit organizations with appropriate choices that responsibly meet a client's specific investment objectives. Securities Products and Services are offered by First Republic Securities Company, LLC - Member FINRA/SIPC. First Republic Securities Company and First Republic Investment Management are wholly owned subsidiaries of First Republic Bank. Unless otherwise disclosed, investments through First Republic Investment Management and First Republic Securities Company, LLC are not FDIC-insured, not bank guaranteed and may lose value.

SOURCE: First Republic Bank

Realtors® Applaud Congress for Reinstating FHA Loan Limits

Washington, DC, November 18, 2011

WASHINGTON (November 17, 2011) – The National Association of Realtors® commends Congress for reinstating the loan limit formula and maximum cap for Federal Housing Administration-insured loans for two years.

“As the nation’s leading advocate for homeownership, we applaud members of Congress for restoring FHA’s previous loan limits, which will help reduce consumer cost burdens, stabilize local housing markets and allow qualified, creditworthy borrowers to access affordable mortgage financing,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “The reinstated loan limits will help provide much needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners and the housing market recovery remains fragile.”

The provision reinstates the FHA loan limits through 2013 at 125 percent of local area median home prices, up to a maximum of $729,750 in the highest cost markets. The floor will remain at $271,050.The loan limits for Fannie Mae- and Freddie Mac-backed mortgages will remain at 115 percent of local area median home prices, up to $625,500.

NAR believes the reinstated loan limit formula and cap change will help make mortgages more affordable and accessible for hard-working, middle-class families throughout the country, not just wealthy individuals or those in costly markets. Nearly two-thirds of buyers who will be helped by the loan limits provision have incomes below $100,000.

“It’s a misconception that only wealthy borrowers benefit from the maximum cost loan limits; middle-class homebuyers living in all areas of the country deserve the same access to affordable mortgage financing and the same opportunity to achieve homeownership that homebuyers enjoy in the most affordable regions of the country,” said Veissi.The legislative action will have an impact even in communities with loan limits well below the maximum cap;the reset last month impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000.

The bill also provides for a short-term extension of the National Flood Insurance Program through December 16, 2011. NAR strongly urges Congress to use the additional time to complete work on a five-year reauthorization of the program, which ensures access to affordable flood insurance for millions of home and business owners across the country.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Housing to gradually improve in 2012, NAR economist says

Gradual improvement in the housing market is expected next year, with existing-home sales edging up 4% to 5% and new home sales getting an even bigger boost off this year's record lows, the chief economist of the nation's largest real estate group said Friday.

"Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently," Lawrence Yun, chief economist of the National Association of Realtors, said. "Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely."

Yun, who made his comments during the annual NAR conference for real estate agents under way in Anaheim, Calif., projected gross domestic product growth of 1.8% for 2011, rising to 2.2% in 2012 with the unemployment rate declining to 8.7% by the second half of 2012.

Mortgage interest rates, he predicted, would gradually rise from record 2011 lows to 4.5% by the middle of 2012.

"Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities."

Existing-home sales are forecast to edge up about 1% this year. Based on NAR’s current projection model, existing-home sales would total 4.96 million in 2011. NAR is revising downward existing-home sales totals in recent years although it expects little change to previously reported comparisons based on percentage change.

New-home sales for 2011 are projected at 302,000 this year, a record low, with expectations that they will rise about 23% to 372,000 in 2012.

Housing starts are forecast to rise about 8% to 630,000 from 583,000 in 2011.

With falling inventory, the median home price should rise in 2012, he said.  "Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012," Yun said.

Richard Peach, senior vice president at the Federal Reserve Board of New York, said the economy continues to disappoint. "Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level."

He promoted moving foreclosures by giving incentives to military servicemembers.

"My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a down payment on a foreclosed home in the Fannie or Freddie portfolio," he said.  This would help to absorb the inventory and stabilize the housing market.

10 Value Added Realtor® Benefits ~ Are You Listening?

Good listening skills take practice, concentration and work.  We all know the difference between u-huh, u-huh…and actually being “heard” and understood. A good Realtor® has honed their active listening skills in order to become a Great Realtor® by knowing the right questions to ask and by listening to the answers. Interested in improving your business and personal listening skills? Try a free online listening test. Check out any book store for good titles or try, Listening The Forgotten Skill by Madelyn Burley-Allen.

10 Value Added Real Estate Benefits to Active Listening:

1. identify your goals,
2. help prioritize and meet needs,
3. find the right, special home for your family,
4. explore the best financing options,
5. avoid location or condition buying mistakes,
6. educate about the process to make good choices,
7. present ALL the choices
8. make you money,
9. save you money, time and aggravation
10. avoid costly legal entanglements

The Best Realtors® Listen For Understanding:

I listen to understand you needs whether you’re a Buyer or a Seller. Only after understanding can I help you find the best home, make a good investment, or help you sell your home for the best price, to a well qualified buyer.  I’ll ask you lots of questions like these, follow-up, and really listen to your answers:

• what are your needs; home, schools, commute?
• how much do you want to spend?
• when do you need to move?
• have you spoken to a lender,
• how’s your credit?
• why do you want to buy/sell?
• where are you going? being relocated?
• what will you do if you don’t /buy/sell?
• do you have a wish list? a must have list?
• where is your family located?

When I first started in Real Estate, a client said to me, “You don’t seem like a real estate agent”.  Uh-oh I’m thinking,  maybe I’m not meeting the buyer’s expectations!

But I summoned my courage and asked,

“really, why is that?”.  To my relief, she said, “You really listen!”

We both chuckled about the stereotype (sort of) -  Seems that I was their second Realtor®. We were in the process of clarifying their needs. They wanted “new construction” but close to town; not quite their price range, but close to town turned out to be a higher priority than new construction. I later sold or “listened” my way to the sale of a perfect home they would later happily renovate to be like “new“.

Selling real estate can be a “telling” business when it should be more of a listening  business.

The best Realtor’s® know and practice their active listening skills in consulting, identifying needs, negotiating and resolving issues.

Tips for the First Time Home Buyers

It is not uncommon to find a San Diego first time home buyer saying “But the house was available last week. What happened to it now?”

One of the most mutual mistakes that San Diego first time home buyers do is that they move too recollective to finalize on a home. Most San Diego first time home buyers are so wrapped up in this idea of buying a “perfect national” that they often miss some really well deals.

While shopping around for a home is a good idea, taking too long is not. There are several San Diego first time home buyers out there. So, if you do not make a move fast then some one else will.

Real estate agents who are experienced in the market propose that San Diego first time home buyers should first determine for themselves how much they plan to put in a home. San Diego first time home buyers demand to measure for themselves the benefits of owning a home as compared to living in a rented one. Then they ask to determine how much they can put in purchasing a home.

The next step that San Diego first time home buyers need to take is setting the parameters for their home. Almost all home searches begin on the Internet. With just a few clicks, San Diego first time home buyers can get a pretty good idea of the type of home and neighborhood that they want to live in.

After the Internet search is done, San Diego first time home buyers need to get down the looking at homes and short listing them. The time that it takes to find a home depends on whether it is a sellers or a buyers market. However, what ever the market, San Diego first time buyers should decide after the first two weeks of the search whether they are really into it.

A good real estate agent can help San Diego first time home buyers with finding a home. Real estate agents can organize for individuals to see homes.

Most San Diego first time home buyers will set aside a weekend for house hunting. However, they need to limit the number of homes that they should see. More than a dozen homes a day and the prospective home owner is really not going to be able to tell the difference from home to another.

San Diego first time home buyers should take a camera with them when they go house hunting. They should take pictures and compare the looks of different homes before settling down to one home.

San Diego first clock home owners need to pay attention to the home’s surroundings. After all, the price of the home is influenced by this.

15 IMPORTANT QUESTIONS TO ASK WHEN PURCHASING A HOME

The process of purchasing real estate is a complicated one.  Each transaction is different and requires full investigation during your inspection time to make sure you know what you are buying.  More questions will always follow, but here are 15 questions I think you should always ask when you first start the process and during the transaction.

1. Why are the owners selling?
The broker doesn’t have to tell you (they're getting divorced, they’re moving to Dallas, etc.), but when you uncover the reason they’re selling, it tips their cards and is the best indicator of how anxious the seller might be. This in turn lets you know how willing they might be to negotiate.

2. How long has the house been on the market? Can you give me its pricing history?
A house that’s been on the market for two months with three price reductions gives a whole different message than a house that’s been on for two months with no price reductions. The owner of the first house is far more negotiable.

3. Can you provide me with close comparable sales, and do those sales support their price or lower?
Bank appraisers use brokers to find similar home sales in the neighborhood. If the broker can provide comparables, you won’t be disappointed when it comes time to get your financing. 

4. What’s the price per square foot in the neighborhood?
This brings the house price down to a common denominator. Every house is assessed and square footage is listed in the tax assessor’s office, along with the land area and whatever improvements have been made.

5. How long has the home been on the market, and have their been price adjustments durring this time? This gives us an idea of whether the seller is motivated to sell their home, or just testing the market.

6. How does the price of this home rate in comparison to others on the market in the area?
You don’t want to be buying the most expensive house on the block. The middle-priced homes always sell at the best prices.

7. Have them pull the public history on the property and find out: Are the owners behind on their taxes?
If the owners are behind in their real estate taxes, it’s often the earliest sign of a potential foreclosure. You might wait or negotiate hard.

8. Have they had a Notice of Default filed on the home? Are they at risk of having to short sale, or foreclosure? Check the total loans owed vs. their current list price? If the home is at risk of foreclosure or short sale, you may be taking on far more then you were planning on. Short sales can be lengthy uncertain transactions, and may not be worth the headache.

9. What is the make up of distressed (foreclosed) properties in the area? Rates vary wildly and you shouldn’t be buying in an area drenched in foreclosures.

10. How are the houses reassessed in the town?
Some towns reassess when title passes, some when capital improvements are made, and some towns only every five years. Knowing how your taxes will increase in advance avoids surprises.

11. Are there any “unknowns” in the neighborhood I should know about?
These include things like garbage routes, car repair shops, empty lots, landfills, wetlands and pending zoning changes. You rely on your realtor for local knowledge, so be sure to ask about items like this. Some buyer's go so far as to talk to neighbors or business owners in the are they are considering. Carefully review Seller Disclosures for any hint of an issue that may present a problem to you.

12. What is the demographic makeup of the community? The US census bureau reports can provide some informative data about average salaries, percentage of men to wemon, age variations, etc. This should be only for information purposes, but can provide information helpful about making a final decision on a home. 

13. What are the crime statistics in the neighborhood? The local sheriff's department typically publish information regarding the number and types of crimes committed in a particular neighborhood in a given year. Again, this is helpful to understanding the makeup of the community.

14. What are the monthly utility bills for the house?
This is good to know before you sign a contract. Has the home been upgraded to include more energy effecient appliances or heating/cooling equipment.

15. What is the current condition of all the systems of the home? This is an essential buyer expenses of ANY real estate transaction. A thorough inspection of the home with a professional, licensed, contractor/inspector can be the most important thing you ever did in buying your home. An inspection can reveal all sorts of unseen issues, which had you not done the inspection, would now be yours to deal with as the new homeowner.

Buying a house raises many questions, and your broker is there to answer them for you. If my questions are not relevant to your situation, ask some of your own. I constantly ask questions of everyone I meet; knowledge is a very powerful thing, and when you are buying a home it could prove invaluable.