Time Will Tell

Sales are down, inventory is up, prices are falling and more households are able to afford an entry-level home. All of this is and a prediction is included in my Rocklin & Roseville Today column today, “Only Time Will Tell.” I have also posted it on my new page at jalone.com. Let me know what you think, send me an email; I enjoy reading your comments.

Home Inventories at 16-year high

According to a report by the National Association of Realtors, inventory of available homes across the nation rose to a 16-year high in July and now stands at 3.85 million. During the same month sales fell to a 5-year low. Inventories of single-family unsold homes represented a 9.2-month supply at the July sales pace, the highest since October 1991. By region, sales fell by 2.2% in the Midwest, were unchanged in the South, rose 1% in the Northeast and fell 1.8% in the West. To read the full story, see “Home inventories rise to 16-year high” at Market Watch.

Is this an unprecedented period of time or just another cycle in the real estate market? Check out my latest article, “Perspectives in a Turbulent Market” which is part of my ongoing reality real estate series, MyForSaleSign.

Home Affordability

The conservative guideline used by the mortgage industry is that housing expense should not be more than 28 percent of income. This is called the housing-to-income ratio and compares the sum of monthly housing expenses to monthly gross income.

Monthly housing expense include payments such as principal, interest, property taxes and hazard insurance and is often referred to as PITI (principal, interest, taxes and insurance). It also can include private mortgage insurance, condo and homeowner fees.

If other factors are thought to compensate for higher risks, lenders may use a housing-to-income ratio above 28 percent. For example if a borrower makes a large down payment a lender might use higher ratios.

There is a good home affordability calculator at CNN that shows a conservative and aggressive loan amount based on 28 and 33 percent of gross income.

By the way, check out our Open Houses for this Sunday.

Looking Back

It has been two, maybe not so short, years since the hot Sacramento real estate freight train jumped the track of double digit growth and multiple “over asking” sales prices and “stated income” loans. Our market peaked in the summer of 2005 and the ride has been downhill ever since. Take a look at the peak and compare it to where we are today in my most recent real estate news article, “Looking Back.”

Today was very exciting around our house as school started for our son, Mikie. He is very proud to be a second grader with his very own desk and a new teacher who calls him Michael.

Getting a loan is not easy now!

Borrowers with good credit but without 5 or 10 percent to put down are likely to be shocked at the rate they're offered, if they're offered a mortgage at all. Lenders are eliminating certain products altogether as well as requiring higher credit scores and down payments, more extensive appraisals, larger savings accounts, and additional income verification.

"We thought the dust was going to settle, but instead, it just blew up," says Mitchell Reiner, president of Mortgage Associates, a Los Angeles-based lender that does business in 48 states. "Everyone is being affected."

Source: The Wall Street Journal, Jonathan Karp (08/14/2007)

More on Lending: There are many borrowers struggling with their current loans and since most of these loans were sold in the secondary market the lender no longer has control or workout options. Now they are in a credit market where they can’t qualify for a refinance. In yesterday’s SacBee article about the subprime loan crisis there was a wonderful quote from a lender who said, “"Loans are like cooking chicken," Everybody knows how, but there's a few of us like the colonel who have secret recipes." I am fortunate to be working with a lender who has a few recipes herself so if you are looking for a loan or need to refinance, let me know and I will be glad to put you in contact with her.

Getting Away

I love helping my clients buy and sell homes. This summer I have heard myself, on more than one occasion saying, “It shouldn’t be this hard.” Part of why I have been saying this is the changing market place. Not only in real estate with the move from a seller’s to buyer’s market being so dramatic but also the significant changes in the home mortgage industry and the current subprime loan crisis.

Traditionally, the last two weeks in August are slow in my business as families get ready for the new school year and squeeze in a last minute vacation. I thought this was a perfect time to get away myself for a few days to clear my mind. What better place to leave “real estate” behind than one of the natural wonders of the world, Yosemite National Park.

Being born and raised in Alaska where we have such spectacular scenery still didn’t prepare me for my first visit to Yosemite. Wow, the towering granite walls, El Capitan, Half Dome and hundreds of other sites were breathtaking and I loved every minute. Well, except the time I peered over the railing at Glacier Point and looked straight down over 4,000 feet to the valley floor below. I am not into thrill rides!

Yosemite was a great place to refresh your mind but not so good if you are looking for a nice meal. Too many mediocre buffets and service from staff who have become bored with tourists is my complaint but we did get a book on hiking in the park and intend to go back many more times.

Arriving home and reading the SacBee this morning brought me back to reality and real estate a bit abruptly. See my latest article and Rocklin & Roseville Today column, “Sacramento real estate: Different this summer?”

MyForSaleSign

If you have been following my reality real estate series, MyForSaleSign, take a look at the latest article, “New Times, Loans and Lenders.” The transaction we have been tracking, Randi and Tony selling their condo and buying a new home is moving into the final few episodes and they are now working on securing their financing during a difficult time in the mortgage loan industry.

Have we set a new record?

It seems to have happened sooner than I anticipated! I thought we would see two more weeks of growing inventory or available homes and condos on the market before the record numbers started their seasonal decline. According to HousingTracker, as of the week ending August 6th the number of homes on the market declined from the previous week. From the July 30 record high of 18,454 homes on the market we saw a decline of 162 to 18,292. Compared to a year ago at this time, current inventory is 2.7 percent higher. As you can see from the attached chart, the build-up last year was more rapid and the decline happened almost as quickly. This year, although the market exceeded the maximum number of homes on the market in August 2005, the build-up was a bit more gradual. It will be interesting to see if we plateau for a few weeks before starting to see the number of homes on the market decline.

During the past week, according to HousingTracker, we saw a slight decline in the median asking price for available homes, from $385,000 to $384,900. Over the past month the median asking price has declined 1.3 percent and over the past year it has dropped 10.5 percent.
So far this summer our Jalone Real Estate Group has remained very busy but I anticipate a few weeks of quiet as families get ready to start a new school year. Our son, Mikie, started soccer practice yesterday and I can tell you the soccer equipment store we go to, Extreme Soccer, was full of parents getting their kids ready for the new season. I doubt many of them were thinking about buying or selling real estate! Our schools start two weeks from today. It will be after

Labor Day before we should start seeing some new activity. Then, believe it or not, it is the rush into the holiday season.

Hey, I still want a few lazy days of summer!

A Jewel in a Gloomy Market

I just finished some web surfing of a few blogs and other real estate related sites I read. I can’t find much out there that indicates the Sacramento real estate market is anything other than gloomy. Sales continue to be in the dumps. Sales are way down. In June of this year we had just over half of the sales we had in June 2006 and July will not be any better. Inventory of available homes continues to grow in almost every area around Sacramento and we are already at record highs.

There is little doubt we are in a “buyer’s market.” The best homes go first and anything left over that is less than perfect is expected to go for a big discount. Sellers who do not want to price aggressively (price below the last sale) can expect to be on the market for long time.

It is a difficult time for homeowners who have to sell. My advice continues to be, do everything you can to make your home shine and price it aggressively. These are the homes that get sold while others linger.

Happier news: I held a successful Open House yesterday at my Tanus Circle listing in Rocklin. This house does shine and is in a great neighborhood. We had some interested buyers through at I think at least one of them may be back this week for a second look.

Two Years of Change

It just dawned on me that just about this time two years ago, everything in the real estate market started to change from how it had been for five years before that. Not all of it has been easy and a good deal of people have been hurt, more are facing foreclosure but maybe, just maybe, where the market is today is leading towards building a better foundation for the future of the industry. Take a look at my latest column, “Two Years of Change” at Rocklin & Roseville Today, or on my website and see if you agree.

We just published and mailed the latest “Julie’s Newsletter” and it is one of my favorites. There are no obligations when you sign-up and the Newsletter is free so find out why they call a poker hand with a pair of aces and eights “Dead Man’s Hand.” The answer and more is in my August Newsletter along with a great offer from Liquid Landscape Services