Sacramento homes can still sell fast!

I have noticed a difference in the Sacramento real estate market. I understand it is late October and things normally slow down about now and homes for sale in Sacramento as well as homes for sale in Roseville and other communities start to stay on the market longer but since the economy crisis came to light the phone is not ringing as often, new leads are fewer and worst of all, the lenders have become much more difficult to deal with when negotiating short sales.

If you are a seller or in a position where you are going to have to sell your home during this uncertain Sacramento real estate market, take a look at my column, “Sacramento Homes: Eight Rules to Sell Fast in an Uncertain Market” over at Rocklin & Roseville Today. I have attempted to spell out some basic tenets about selling homes in all markets but which may be even more important in a slower market like we are currently seeing in the Sacramento area.

Bar Stool Economics

I couldn’t resist sharing this long but illuminating story this morning. It was one of those things that had been forwarded about a 100 times so I had to clean it up a bit but I think it is intact and worth the time to read.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers", he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share?"

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!""Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!" "That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.Professor of Economics,

University of Georgia

Not that Simple

I came across this brief article this morning and thought it was worth sharing:

Reworking Troubled Mortgages Isn't That Simple

In order to rework troubled mortgage, the government may have to do more
than persuade lenders and investors that workouts are ultimately more profitable
than foreclosure, analysts conclude.

Hundreds of investors hold an interest in trusts that invest in mortgages.
If loans are reworked, some of those investors will lose money. Mortgage
servicers are prohibited from modifying a pool of loans without getting the OK
from two-thirds of the investors. That nod can be difficult to get because some
investors stand to make more from foreclosure.

Many observers and government officials are pointing out that it will take
government action to nullify or supersede investor interests. If the government
stepped in and, perhaps, gave less-favorable tax status to an investor that
didn’t agree to accept a modification, there would certainly be lots of
litigation and the government might have to reimburse investors for value they
lost, analysts say.

Therefore, some analysts conclude that the best answer is to give
bankruptcy judges the right to cut the interest rate or reduce the principal
owed on a debtor’s troubled mortgage.

Source: www.realtor.org

It never ceases to amaze me how large and diverse our economy is. The fact that the government has allocated $750 billion to work on the credit crisis is not enough, we can’t just buy or way out of this mess. There has to be a well developed and thoughtful plan created by a broad cross section of business and political leaders and I only see a shoot from the hip approach.

There are fewer homes for sale in Sacramento

With September sales volume of up in all counties in the Sacramento region from last year and for most counties up even from August we are finally seeing a decline in homes for sale. Check out my weekly column, “Six Months of Increasing Homes Sales in Sacramento,” over at Rocklin & Roseville Today for the details and a prediction.

With this great “Indian Summer” weather even October continues to show some good levels of activity. Homes priced right are getting a fair number of showings and most of our short sales all have solid offers being reviewed by the seller’s lenders. Most of these even have backup offers. Most of the activity we are seeing is in the under $350,000 price point. We have seen some of our seller’s of more expensive homes ask to take their homes off the market as showings of homes priced above $600,000 has slowed down as buyers are waiting to see how the economy and credit markets respond to the Government rescue/bailout plan.

Potential Loan Woes in Sacramento

I received word this morning that some lenders are not providing pricing on FHA Plus which are loans in excess of $368,231 and conforming Plus which are conforming loans above $417,000. Remember these were temporary limits with an end date of December 31, 2008. Because these loans must be closed before the end date and since there is no extension yet moving these increased limits into 2009 lenders are starting to pull away from these products now.

I know, we just passed a $750 billion bailout; the government is buying bank stock and commercial paper but can’t extend these limits so banks are pulling back? This is just one more thing about this credit crunch to make you angry. Regardless if you are thinking about buying a home and using FHA, you may want to talk to your lender now and see if you need to move faster or if there are other products available to you.

If you need more information or have any questions please call me at MagnumOne Realty. My number here is 916 290-9339 or you can email me at juliej@jalone.com

New Listing near Sierra College

I just listed a great home in Rocklin’s Reflections at Sierra College which has 3 bedrooms, 2.5 baths and almost 1,600 square feet of living space. If you are looking for a home and not a lot of yard work this is the house for you. With a small front and back yard you have all the benefits of a single family home but without the headache of having to care for a large yard. The private fenced back yard has a patio, shade pavilion and room for a garden. It is a great place to entertain or relax on a warm summer evening. This is a short sale and won’t last long so if you or someone you know is interested in a great house within walking distance of Sierra College take a look here and get more information on my website.

Other News: Tina Farinas is hosting an open house tomorrow, Saturday, October 18 from 1 to 4 PM at her Alicia Way listing in Sacramento. This looks like a nice home and is being marketed as a Short Sale so if you are out and in the area, stop by 1536 Alicia Way in Sacramento and say hello to Tina.

Good News for Sacramento Real Estate

We have finally slipped below 14,000 homes for sale in Sacramento. According to HousingTracker there were 13,958 homes on the market as of October 13. This is the first time since March of 2007 since we have been this low. It is still higher than it should be and the uncertainties of foreclosures and the credit crisis loom but check out my column, Good News for Sacramento Real Estate, over at Rocklin & Roseville Today and see what I have to say about prices.

Staying Busy with Roseville Real Estate

It very nice to see a break in the warm weather and even to get a bit of rain but I am happy to see we will be getting some nice warm days this week as we move deeper into October.

Over at MagnumOne Realty we had a strong past week with some new listings and some nice escrow closings. One of the joys of this business is to complete a sale for my clients and this past week it was fun to see my customers from the southern part of the state move into their new home here in Roseville.

Even with bailout legislation we are still anticipating seeing the Sacramento area foreclosures continuing to be a significant part of our local real estate market. This means we will continue to help clients avoid foreclosure by representing them on short sales in Sacramento. I will be adding three new short sale listings during the next week.

Our team is getting very good at working with the lenders to get these short sales completed but there is nothing easy about the process. One of our short sales is being caused by the seller being transferred out of state to maintain employment. For some bizarre reason their lender, who has the completed short sale package we prepared, sent the loan to HOPE where they specialize in finding a way to keep the homeowner in their homes by restructuring the loan. When they have to move to keep a job, this is not exactly what they need and could cause a delay of up to two weeks in getting an answer to our short sale request. Even when you call the lenders as often as we do to keep the process on track, some still find ways to “drop the ball.”

Bailout and Sacramento Real Estate Market

After the failed vote on the financial rescue plan on Monday the Senate takes the spotlight today and is likely to pass a slightly revised plan to provide liquidity back to the credit markets. I predict an embarrassed House of Representatives will place their rubber stamp on the bill and we will have legislation by the end of the week.

How will this impact the Sacramento real estate market and the recovery that is taking place? Take a look at my column, “Bailout may slow Sacramento real estate recovery,” over at Rocklin & Roseville Today.