Just a bit angry today!

This morning I read an article in the Sacramento Bee about the former executives of Countrywide that got rich on bonuses and golden parachutes after they made tons of questionable loans which we are all now paying for. Believe it or not they have taken their wealth and created a company that buys up bad loans from failed banks. They are paying pennies on dollar for these loans and making a killing on collecting. The economy is in the tank, the everyday guy is suffering and these guys are making millions again!

Why do I feel that when this is all said and done the people that will have prospered are the ones who helped create the problem and the borrowers who made risky and poor financial decisions to buy homes they couldn’t afford? Those of us that bought homes we could afford and are making our monthly payments, even when our income has declined and other costs have skyrocketed, will maybe just be lucky get through this recession.

Today, another Washington scheme was announced called the “Making Homes Affordable” initiative. I am not saying the housing market and homeowners shouldn’t get help but there are now so many plans and programs it is confusing and most of my clients, who we help avoid foreclosure, say when they call their lenders and ask about these Government sponsored plans the answer is generally something about we don’t care what you read, send us money or we will foreclose.

There seems to be a breakdown in the communication between Washington and the lenders. Why when we are giving banks billions don’t we get commitments to follow the program? You don’t need to be a rocket scientist to understand “make loans and help borrowers.”

If you want a bit more detail on the latest plan to help you keep your house, check out my column, “Dizzy in Sacramento” over at Rocklin & Roseville Today.

Nothing new in Sacramento or Roseville

I started to blog about some of the November results for our local Sacramento real estate market and quickly became bored. For anyone who reads a newspaper or listens to the news there is nothing new to report. Generally sales are up, median prices and average price per square foot are down. About the only thing of much interest is the number of default filings have dropped, but may be the result of a new state law requiring lenders to contact homeowners who are delinquent on the payments, then wait 30 days before filing a default notice.

As we move into 2009 the inventory of homes for sale has continued the slow decline from the highs we experienced in the summer of 2007 when it was reported by HousingTracker that there were over 18,000 homes for sale in what they define as the Sacramento area. Even with the increased number of foreclosures the inventory of homes has continued to decline and as of mid-December stood at 12,628 down almost 23 percent from a year ago and down 5.9 percent in the past month.

As we move into the spring selling season I would expect to see the decline in homes on the market slow or even increase. There are still way too many houses on the market for the number of buyers but the good news is we are headed in the right direction to achieve a balanced market and some price stability.

If you are interested in more specific numbers about the Sacramento, Roseville or other local communities send me an email to juliej@jalone.com and I would be happy to answer.

Can housing lead the way toward recovery?

If it was housing that led the economy to where it is today, “the tank,” then it only stands to reason, housing can be the way to recovery. Sure there are other elements of the National economy that need tending but until we have some stability in housing the economy is not going to improve dramatically. Check out my column, “Next Steps Toward Recovery,” over at Rocklin & Roseville Today.

Update on my last column, Sacramento Short Sale Tales: Although we have not closed this transaction, we did escalate our request and rational to the executive offices at Bank of America and this morning we got what we hope will be the approval that will allow our clients to complete their short sale and avoid foreclosure and bankruptcy.

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.

Sacramento's real estate market is not frozen!

Is the only way to get anything done in politically partisan Washington to declare an emergency, tell the world the sky is falling and create a three day “bipartisan period” to pass back room brokered deal that may cost the American taxpayer a trillion or more dollars? We thought getting a budget passed in Sacramento for California was ugly!

I clearly have my opinions about the bailout and you can read more about that in my Rocklin & Roseville Today column, “Bailout will be felt in Sacramento” but my main message today is to motivate you to let your Senators know how you feel about the bailout. Here is a link to their contact pages.

The local Sacramento real estate market continues to be busy. We are getting and making offers on homes regularly. The lower priced homes are being sold faster today than they have in the past few years but the market for homes over $600,000 remains pretty slow. I recently been looking for homes for sale in Old Roseville and the inventory is low. Some of the houses for sale in Old Roseville that my buyer is interested in have multiple offers. Guess these folks have not been watching Fox News.

Is there a bail out?

I have read a fair number of blogs complaining about the governments “bail out” of people who over borrowed and companies who were responsible for much of the credit crunch. I don’t think the Housing Recovery Act is a mistake because it would not be prudent to push the economy into a long recession or even depreciation which I believe is a real possibility.

Only time will tell if the Housing Recovery Act will be successful but in my opinion when the financial system is faced with collapse there was no choice but to act.

In other news from Washington, earlier this week, the Federal Reserve did not make any changes in discount rate, leaving it at 2 percent. In their press release the Fed stated, "Although downside risks to growth remain, the upside risks to inflation are also of significant concern,"

The talking heads all seem to think we will see any interest rate changes from the Fed for the balance of the year as they watch and assess the risk to the economy.

Real Estate Statistics

If you have been a long time reader of my blog you may well remember I used to spend a fair amount of print writing about the monthly statistical reports. I can’t remember when was the last time I posted something to my blog or wrote an article on the monthly results. I suspect there are several reasons, including the media spotlight on real estate and the “downturn,” “crisis” or “meltdown” stories in the Sac Bee and other outlets almost daily. Other blogs, especially the bubble blogs like Sacramento Land(ing) focus almost every post on the market and do a good job keeping readers informed of the latest reports about the Sacramento area real estate market.

But today I would like to call your attention to the continued decline in the median prices in our area. As reported on various sites the median price of a home in Sacramento is down almost 28 percent in the past year. More importantly, in the past few months the decline has shown no signs of slowing down. According to HousingTracker, the change in the median asking price has dropped over 35 percent since our market high in August 2005.

Overall, prices and sales are significantly lower than they were a year ago and inventory is higher. Word on the street right now is strongly indicating an increase in activity but at this time, “good feelings” have not had any impact on stopping or slowing down the slide.
There is no single solution to our real estate problems. We need more Government and lender programs to help borrowers avoid foreclosure. The big lenders must come up with an innovative loan program to help borrowers buy homes with payments they can afford and budget for. Homeowners who do not “need” to sell should stay off the market for the time being and, and and….

Sacramento home prices are still dropping

Although the available inventory of Sacramento real estate homes on the market has remained steady for the past month and is down from where we were six months ago the median price for a home has continued to decline.

The median price for a home, according to HousingTracker was $319,000 as of February 11 and is down 1.8 percent from a month ago. Looking back further the median price has dropped 16.1 percent in the past month and over 20 percent in the last 12 months.

As we move into the traditional spring selling season we can expect to see more homes coming on the market which will continue to put pressure on sellers to lower their asking prices.
What we are seeing at MagnumOne Realty is no showing activity for overpriced homes. I would estimate a good 80 percent of the houses on the market are overpriced. We brought a new listing on the market last week, 316 Roseville Street, at what we felt was a competitive price but the lack of showings has demonstrated we may have missed the mark and we will be working on getting it reduced this week because it doesn’t do anyone any good to have it sit vacant and not shown.

Will Lower Rates Spark a Market Rebound?

From Realtor.org: Susanne Cannon, the director of the Real Estate Center at DePaul University, says that at a conference this month with other academics who specialize in housing, the consensus was that many buyers have been waiting on the sidelines until the market hits bottom and then plan to make their move.

Now that lower rates are a factor, Cannon says, the question becomes: At what point will buyers be compelled to act, thinking they are getting a price they can live with and a rate they do not want to miss out on?

Otha Greer, an associate with Coldwell Banker in Jackson, Miss., says the drop in rates ''has lit the fire in my business. I actually had an investor that called yesterday and she's interested in buying five homes.''

Not everybody is persuaded the turnaround has come. A Merrill Lynch report this week said housing prices were ''likely to remain in free fall.'' The report predicted a drop of 15 percent this year, 10 percent next year, and ''more depreciation likely beyond the forecast period'' — despite an expected series of rate cuts.

But Jim Klinge, an associate in San Diego, was closing his fifth deal this month, a decided improvement from the 16 houses he sold in all of 2007. ''It's very hard to find the right house at the right price,'' he says, ''but there's a strong undercurrent of very healthy demand.''

One of caveats to the above story is that many markets across the US did not experience the correction we have felt in the Sacramento area and may already be showing signs of recovery. In the Sacramento real estate market the consensus still appears to be another year, if not more, of depreciating values. Having lower interest rates will help but we still need to work through a huge amount of inventory before any sort of recovery can begin.

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.

A look at Placer County and New Listing

Looking a bit closer at the recent SacBee story, “Home sales seek bottom” we see that Placer County real estate may be looking harder for the bottom than some of the other local areas that make up the greater Sacramento real estate market. The median sales price for existing homes sold in May dropped $10,750 from April to $437,750. This is off 9.6 percent from a year ago. This is the largest one year price decline in the four major counties, Placer, Sacramento, El Dorado and Yolo. The good news in Placer County is sales volume. Including condos there were 512 closed escrows in May. This is up sharply from 378 in April and is on par with May 2006 when there was 516 closed escrows.

Hopefully we will continue to see buyers out looking, especially in Rocklin where I have a new listing. Check out this great 4 bedroom, 3 bath home off of 3^rd Street on Willard Way. It is a great home, with loads of extras and ready for a new family. With almost 1,900 square feet of living area you won’t find anything this nice priced below $200 per square foot.

Not a great May

The Sacramento Bee had their monthly synopsis of the local real estate market in the business section this morning. Jim Wasserman’s article, “Home sales seek bottom” was not one of his most succinct efforts. I had to go back a read it a couple of time to make much sense. I think he was trying to cover too much in too large an area.

Overall the May results we generally not very positive unless you live in Yolo County where the median price was up 2.1 percent from last year. In the other seven counties reported on, including Sacramento and Placer the median prices continued their year over year decline. The most positive news for May that sales of existing homes was up, as expected, from April in all except El Dorado County.

One of the more brilliant quotes in the article included, Anthony Graham, from my own brokerage, Lyon Real Estate, who said, “I think we’re really starting to see a little more hesitance on the part of the seller to put their home on the market.” Really, Anthony, do you think so?

What are other agents saying?

I thought it would be interesting to check on a few other local agents as see what they are saying about our local Sacramento real estate market. Here is what they are saying:

• In the short term expect to see a level of stabilization within the overall real estate market in California for the next three/four months. Ed Fitch
• With summer, optomisum(sic), growth and renewal are in the air. Buyers are out looking and buying all the great properties that are on the market right now. Tammy Gallentine
• Know this, things will get better. Land is scarce, the prices of raw commodities are high, permits are difficult to come by, and environmental hurdles will continue to restrict building. Your home will be an excellent investment over the long term. Hang in there! Jimmy Castro
• It is still an awesome market for buyers and homes are still selling if priced right! What an awesome summer it is going to be. Randy Hawley
• Real Estate market is good in Sacramento area. As looking at the increasing inventory of houses for sale and the average time a house stays on the market before selling, it seems like the housing market is buyer's market. Jack Dhaliwal
• The month of May saw the real estate market continue to mprove(sic). Michelle Dinh and Julie Dinh Cooper

Okay, real estate agents are not the best spellers and tend to be optimistic when writing advertisements. I found all of the above quotes at Realty Times.

By the way, looking for a new home or a place to have some horses, check out our Current Listings.

Getting Ready to Head Home

Well, our quick trip to Anchorage is almost over. We have a busy day with some last minute tasks over at the Lamplighter property, some errands to do and a final dinner with friends and family. Been a great trip but we are starting to get anxious to be at home and get on with the final few weeks of school and then summer.



I have some new clients I will be meeting with on Monday and Tuesday and I am looking forward to that as well as wrapping up a few things that I have been working on from here. Today’s technology makes it possible to do a great deal but being in your own environment is the most effective.



Not much news in the real estate business these past few days, rates are edging up, there is talk the Fed could or should lower rates and the number of stories about the industry continues to grow. Some reflect growing confidence in a recovery and others saying it may be 2009 before we see any positive changes. In our area I continue to see downward pressure on prices as more homes come on the market and buyers not afraid to make offers significantly below asking prices.

The Worst is Over....err, well maybe!

At least on a national basis there are some analysts who are pointing to what is happening and claiming the current housing slump has bottomed out and starting to recover. Check out my article and review of what Joe Kalish, from Ned Davis Research, has to say in a recent USAA article on the real estate market. You can see my article, The Worst May be Over?, on the Real Estate News page or here in my column over at Rocklin & Roseville Today.

Reader Response

My column, “No March flowers for Sacramento real estate,” at Rocklin & Roseville Today, got a bit of play, when part of it was posted over at Sacramento Land(ing). One comment posted there said, “If RE agents only took listings that fairly reflected current prices, and managed those prices throughout the listing period, I would bet their personal sales would increase 50%.”



I don’t know of any Realtors who actively practice setting prices significantly above the market value because when you do that, you are setting yourself up for failure in the eyes of your client, spending time and money on listings that have a low probability of selling and creating negative advertising with your name on a stale for sale sign.



My personal philosophy on pricing is to tell the seller what I think the home will sell for and provide information to support my recommendation. I believe, seller’s who set a realistic asking price when they come on the market will generally get a higher sales price than those that come on with an above market price and then, over time, lower the asking price (see my article on pricing). You get the most interest during the first week to 10-days the house is on the market so you want price to attract buyers, not chase them away.



Although I support and encourage selling homes at realistic prices, I work for my clients. It is their home and setting the price is their decision. For the reasons above, I will NOT list a home with a price that is significantly over what I believe the current value is. But I will list it at a price above what I recommend as long as we have a plan to reduce the price in a relatively short period of time.

I hope that gives the above reader some insight on the Realtor’s role in pricing homes on the market.

Blah March for Sacramento Real Estate

There is nothing positive to report about the Sacramento real estate market in March. Sales volumes are down, prices are not showing any strength, and inventory of available homes continues to grow. Slice it and dice it anyway you want and I’m not sure who you are to find anything to feel good about. Well, I suppose there are a few “bubblers” out there who seem to take delight in seeing the Sacramento real estate market in trouble. Read the full story: “No March flowers for Sacramento real estate” on my Real Estate News page or in my column at Rocklin & Roseville Today.

Are we headed to a new record?

Foreclosure activity in California during the first quarter took a large step towards the record high activity back in 1996 when during the second quarter of that year 15,418 foreclosure sales occurred. During the first quarter this year we had 11,033 sales and almost 47,000 Notices of Default filed. Take a look at my article “More Californian’s faced with sting of foreclosure” posted on the Sacramento Real Estate News page at Jalone.com or in my Rocklin & Roseville Today column.

By the way, if the weather doesn’t get any worse, the Placer County Strawberry Festival is this weekend. The hours are 10 to 7 PM today and 10 to 4 Pm on Sunday at the Placer County Fairgrounds (800 All America City Blvd., Roseville). Adult entrance it $9 and parking is $5. It is very good event and worth the time and money.

Happy Birthday Joe

The past week has been very hectic and busy with getting our son back in the school routine after spring break, a closing and more feng shui house hunting. I am pleased to report I think we have found a house for my clients and, most likely, we will be making an offer tomorrow or Monday. Today, I have an interview with a potential new member of our real estate group and later this afternoon Michael and I are hosting a small birthday celebration for our friend Joe Weber. He was disappointed we didn’t list his birthday in my April Newsletter so I thought he should, at least get a blog mention. Happy Birthday Joe! We hope you have many more and we are around to help celebrate!

Lots of news about our real estate market taking another turn for the worse with March not turning out to be as good as many of us hoped. I will be taking a closer look at the numbers next week and should have my normal monthly analysis done by the end of the week. I do think our market, like most, has been impacted by the tightening credit requirements being imposed by lenders. Clearly, having to prove you have a job and sufficient income to service debt has taken some buyers out of the market.