Here is a primer for home buyers ... and home sellers ...

Get a 'good deal' through curiosity, negotiation

Friday, March 31, 2006

By Robert J. Bruss
Inman News

Thanks to abnormally low mortgage interest rates, home sellers had an extremely favorable "seller's market" for the last few years. That means there were more qualified home buyers in the market than there were homes available for sale.

Homes often sold in just a few days or weeks. Typical home sale prices appreciated 10 percent or more annually for the last few years in many communities. Since 2000, the average U.S. home has doubled in market value, according to the National Association of Realtors.

But the 2006 home sales market pace has rapidly slowed down in most communities, mostly due to rising mortgage interest rates, according to home industry economists. The volume of home sales is down. But home sales prices are holding steady in most communities.

The result for this year's peak spring home sales season appears to be a "buyer's market." That means there are more houses and condominiums available for sale than there are qualified home buyers.

As a result, home buyers can be more selective and negotiate harder even though mortgage interest rates remain remarkably affordable in the 6 percent interest range. To help home buyers negotiate their best possible sales price and terms, here are the five key questions home sellers and their real estate agents hope buyers don't ask:

1. WHY ARE YOU SELLING THIS LOVELY HOME?

Having bought and sold dozens of houses and condominiums for both personal use and as investments, this is my favorite and most revealing question to ask of home sellers and their listing agents.

Even if the home is run-down and shabby, I always try to use that word "lovely" to see if the seller and/or the listing agent have a sense of humor.

The primary reasons the home buyer needs to know why the seller is selling are to (1) tailor a purchase offer that will meet the seller's needs, and (2) determine if the seller is highly motivated to sell.

To illustrate, if you learn the sellers are moving to a retirement residence, perhaps they will carry back a first or second mortgage, thus creating superb secured income earning around 6 percent for them and easy financing for you as the buyer. Or, maybe you learn the sellers are in foreclosure so the buyer needs to act fast to close the purchase before the foreclosure auction.
Unless the buyer asks, the listing agent is unlikely to volunteer the reason for selling. Occasionally, the buyer will be rebuffed.

For example, I recall I once asked this key question and the nasty listing agent said, "It's none of your business." Later, I learned the sellers were retiring to move to Palm Springs, Calif., and they would have been perfect candidates for a seller-financed mortgage.

2. HOW MUCH DID THE SELLER PAY FOR THIS HOME?

In most communities, this information is a public record, which the buyer's agent can easily obtain. The reason smart home buyers insist on knowing this vital information is it shows how much negotiation room the seller has.

A key follow-up question is, "What is the current mortgage balance and are there any other liens against the home, such as a second mortgage or home equity loan, judgment liens, and mechanics' liens?"

The answer from the seller or the listing agent shows how much cash the seller absolutely must receive. If you learn the home is free and clear with no encumbrances, you just struck gold because the seller can then be flexible as to price and terms.

As a seller, when a home buyer asks me what I paid for the property, I politely reply, "I got a bargain purchase price when this was a run-down shack before I renovated it so my purchase price is irrelevant to today's market value."

If a smart home buyer, and his or her buyer's agent, discover the seller paid a low purchase price many years ago, that means the seller has lots of room to negotiate. However, if you find out the seller bought the house in the last year or two with a large mortgage or two, the seller might not have much negotiation flexibility.

3. WHAT DEFECTS DOES THE HOME HAVE AND HAVE THERE BEEN ANY RECENT PROFESSIONAL HOME INSPECTIONS?

In most states, home sellers must now provide buyers with written home sale disclosures revealing any material facts that affect the home's market value or desirability.

Smart listing agents obtain the seller's written disclosures at the time of listing and have it easily available to prospective buyers. Then buyers won't be surprised later by discovering the home has major problems that were already disclosed by the seller.

Home sellers, at the suggestion of their listing agents, often have customary professional inspections completed before the home is put on the market. Then the seller can either have any defects repaired, or at least can make the buyer aware of them before the purchase offer is made.

Of course, after the seller accepts the buyer's purchase offer in writing, the buyer should always hire his or her own professional inspector just to double-check the seller's inspector. If the buyer's inspector discovers any undisclosed defects, then negotiations can be reopened if the buyer included a professional inspection contingency clause in the sales contract.

A good source of quality home inspectors is the American Society of Home Inspectors. To find local ASHI members, go to www.ashi.org or phone 1-800-743-2744.

4. WHAT PROBLEMS HAVE YOU HAD WITH THIS HOME?

An open-end question like this will remind the home seller of any problems that, hopefully, have been corrected.

For example, when I first moved to my current home I quickly discovered I couldn't have a decent garden because the deer would eat virtually everything. So I constructed fences to solve that problem. A few years later, the wood shingle roof began to leak but new leaks kept reappearing after a roofer made repairs. About 20 years ago, I had a new metal "lifetime" roof installed and I have had no further roof problems.

In most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected. But it is still important for buyers to know if those past problems might again become future problems.

5. WHAT IS THE QUALITY OF THE PUBLIC SCHOOLS?

If you don't have school-age children, it's easy to forget this important question. But top quality schools contribute to home values and future market value appreciation. Families prefer to buy in communities with superb public schools and are willing to pay extra for the privilege.

However, in many big cities where the public schools are poor quality, families who buy a house or condo there realize the low school quality contributes little or nothing toward residence values.

Because most home sellers do not have accurate information on public school quality, the buyer's agent should provide their home buyer with the latest school quality statistics, usually based on standard test scores and high school graduation rates.

Most real estate brokerages have access to the Internet resource www.schoolmatch.com, which tracks over 14,000 public school districts. Over 7 million parents accessed School Match services last year. A related Internet resource is www.houseappreciation.com, which rates the top 32 percent of communities based on their school quality and home value appreciation since 1994.

SUMMARY: Home buyers should always ask the five key questions sellers and their listing agents hope you don't ask. The answers help eliminate undesirable homes and maximize the home buyer's negotiation information. More details are in my special report, "The 10 Most Important Questions Home Sellers Hope Their Buyers Don't Ask," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

This study indicates increasing rents and population for Southern California ...

Forecast calls for up to 7% rent hikes this year in L.A.

Thursday, March 30, 2006

Inman News

Southern California apartment rents and occupancy rates rank among the highest in the country, and economic gains should push these levels higher, according to a forecast released today by the University of Southern California Lusk Center for Real Estate.

About 97 percent of apartments in Los Angeles, Orange, Riverside and San Bernardino counties are rented and those occupancy rates should remain steady this year, according to the Casden Real Estate Economics Forecast.

Rent increases of 6 percent to 7 percent are forecast in Los Angeles, where the average monthly rent at the end of last year was $1,416. Orange County renters also can expect a rent hike of 6 percent to 7 percent beyond the average monthly rent of $1,390. Inland Empire rents, which averaged $1,012 per month at the end of 2005, should rise about 5 percent this year.

"The recent run-up in home prices makes apartment living more desirable," said Delores Conway, director of the Casden forecast, in a statement. "And the tight supply of land coupled with more condo conversions means fewer available units. That translates into higher rents and occupancy rates for the next couple of years." She also stated that apartment demand will benefit from the region's increased growth in trade along with an infusion of higher-paying jobs associated with business and professional services.

The forecast analyzes apartment transactions, new building permits, leasing activity and employment data using information from MP/F YieldStar, Property & Portfolio Research and other sources.

In Los Angeles County, demand for apartments is expected to be bolstered by the addition of 45,000 to 60,000 new jobs. Los Angeles County leads the nation in multifamily development, with 10,900 new apartments under construction at the end of 2005. Constrained by available land, these projects average 57 units apiece, according to the report.

By comparison, apartment projects in Orange County average 270 units. With the urban lifestyle appealing to more households, downtown Los Angeles accounted for one-third of all apartments completed in the county in 2005. Occupancy rates downtown – now at 98.2 percent – are the highest in the county and will continue to be tight, the Lusk Center reported. In West Los Angeles, rents are rising in step with jobs recovery.

"The Hollywood submarket's makeover in Hancock Park, Los Feliz, Silver Lake and Park La Brea should keep apartment demand strong this year. The South Bay submarket is on a steady path to recovery, boosted by federal spending and accelerated growth in global trade. The Antelope Valley continues to be Los Angeles' most affordable submarket, with average monthly rents of $916 per month last year," according to the announcement today.

High home prices and few apartment completions in 2005 is expected to maintain a strong apartment market in Orange County, with demand in the most affordable (Anaheim) and most expensive (Newport Beach) communities. "Irvine remains a dominant submarket with the greatest number of new apartments completed," according to the announcement, and six new communities with a total of 1,400 apartments are scheduled to open this year.

The average rental rate in Newport Beach is $1,892 per month, or about 33 percent higher than the rest of the nation. There has been no new apartment construction in Newport Beach since 2002. New construction and urban revitalization is under way in Anaheim, with two high-end projects bringing about 500 new units to market this year, according to the announcement. In Buena Park, no new products are expected this year and "occupancy remains extremely tight so further rent increases are expected."

In the Inland Empire, cheap land has fueled the growth of affordable apartments for the rising labor force in the area, the Lusk Center reported.

"The Inland Empire's robust multifamily market will see steady, but moderate rent increases thanks to almost 6,000 new units opening in 2006. The trade-based submarkets near Ontario Airport continue to be strong, helping the entire region hold on to the title of California's fastest-growing urban area over the next 10 years."

The supply of apartments may exceed demand so that rent increases could become more tempered this year, with the rate of growth at approximately 5 percent, according to the announcement.

The Foothill Area, close to job centers in Los Angeles and Orange County, should continue to have the most expensive rents which averaged $1,172 per month at the end of 2005. This area is centered around Ontario Airport and includes Rancho Cucamonga.

Southwest Riverside County, including Temecula, Murrieta and Wildomar, is the market leader in new construction with 3,000 units under way."

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a column about preparing yourself mentally to become a homeowner ...

How to eliminate obstacles to financial goals

Wednesday, March 29, 2006

By Ilyce R. Glink
Inman News

When you're broke, and spend your free time dreaming the American Dream of home ownership, the idea of closing on a house seems about as real as an oasis in the desert.

So you continue to daydream about the future while wasting money decorating your rental, buying nice clothes and eating out several times a week. You feel better about where and how you're living today, because you've created a nice-looking home for yourself.

But if your real goal is to become part of the "ownership society," and buy a place of your own, your ship is turned in the wrong direction. You're actually moving further away from home ownership.

Feathering someone else's nest is often misplaced money management. And it happens so quickly, and so silently, that most wannabe home buyers aren't even aware that they're moving backward instead of forward.

How do you right the ship and turn yourself around? You have to bring the "future to the present."

Bringing the "future to the present" is a phrase my friend, Michael Alter, likes to use when working on closing a sale in business. Alter, who is president of a fast-growing online payroll company called SurePayroll (www.surepayroll.com), likes to lay out the path so he knows what steps have to be taken to get the deal done, which hurdles have to be overcome, and who the real decision maker is in any business deal.

The methodology involves asking a lot of pointed questions that begin with, "If this happens..." and end with "…then what?"

Buying a house requires home buyers to ask a lot of these kinds of "If...then what?" questions. For example, let's say you have a $15,000 car loan and $2,000 of credit card debt, and you apply to get pre-approved for a mortgage. The lender says that your debt-to-income ratios are a bit out-of-whack. In other words, the monthly debt service on what you want to buy is more than you can afford--a common obstacle for first-time home buyers.

If you're using "future to the present" logic, you might say to a mortgage lender, "If I can pay off the $2,000 of debt, then what will you need to approve me for the loan?"

The lender might say nothing more is needed, or he or she might suggest that you beef up your cash reserves. At which point you would say, "And if I bring up my cash reserves, then will you be ready to approve me for the loan?" And so on, until the lender says there's nothing left to do and the loan is approved.

Bringing the future to the present allows home buyers to eliminate potential obstacles to a deal and get it done. It allows pre-buyers, those who are still in the dreaming stage, to organize their thinking and figure out what kinds of steps they need to take to achieve their goal of home ownership.

Which is what Sandra, 26, needs to do. Sandra works full-time in Portland, Ore., and wants to buy her first house. Housing prices in the metro area are affordable, but she wasn't sure how to begin thinking about buying a house when even modest two-bedroom bungalows seemed out of her price range.

So instead of taking actual steps toward achieving her goal, Sandra started sending friends and family links to various homes for sale in different neighborhoods.

In bringing the future to the present, Sandra has to think about how she can translate her rent payment into a mortgage/taxes/insurance payment. She also has to work out how she is going to reduce her credit card debt enough so that she can take on as large a mortgage as possible.

She also has to think about maintenance and upkeep, which neighborhoods are going to provide good price appreciation but allow her to feel safe at night, and whether her next career move (either up the ladder or off to graduate school) will allow her to keep afloat financially.

Where should she, or any first-time buyer, start? If you have debts that you cannot pay off today, you should probably sit with a credit counselor for a free budgeting session. The counselor will go over your monthly expenses, and show you places you may be able to cut back. Then, you should start paying down your revolving debts with the savings.

Once your debt load is under control, find an honest mortgage lender who can work with you to maximize your earning power. Work with the lender step-by-step in order to resolve each issue before it becomes overwhelming.

The next step is finding the right house, resolving all of those issues that come up, building the best home-buying team and ultimately closing on the property.

Bringing the future to the present isn't a magic answer. You won't buy your dream house overnight. It may take weeks, months or even a year, depending on how complicated your life is today.

But focusing on the step you're standing on and what has to be done to get you to the next step will get you turned in the right direction.

And that's the first step toward achieving your dreams.

Contact Ilyce through her Web site, www.thinkglink.com.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's an interesting article about the changing expectations for sellers ...

Tuesday, March 28, 2006

Ruth Simon
Wall Street Journal

Rising mortgage rates, a surge in housing inventory, and slower home sales in some areas are changing the ways in which buyers and sellers approach the housing market.

Real estate practitioners are placing a great deal of emphasis on pricing, with buyers who use the Web to conduct home searches steering clear of properties that appear to be overpriced.

Westport, Conn.-based practitioner David D'Ausilio of Re/Max Heritage is encouraging sellers to price their homes in the bottom 25 percent of comparable dwellings and shave 3 percent to 5 percent off the asking price after three weeks if interest is tepid.

Sellers also are urged to undertake repairs to attract buyers at a time when they have plenty of homes to choose from and plenty of time to make purchase decisions.

Meanwhile, first-time buyers are encouraged to stay within their budgets because slower home-price appreciation means there will not be a great deal of equity to bail them out in the event of a financial crisis.

Move-up buyers, by the same token, are being told to avoid offers that are contingent on the sale of their current residence if they want to secure a better price; and investors who do not want to aggressively compete with other new units for sale are being advised to rent or turn to stagers to make their properties more attractive.

The housing slowdown also is impacting relocaters, as a growing number of employers require that homes be priced close to the appraised value to achieve a quick sale. Additionally, many companies are instituting "loss on sale" programs to compensate workers who get less than their asking prices.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's an article about consumer opinions and the economy ...

More jobs expected over next 6 months

Tuesday, March 28, 2006

Inman News

The Conference Board reported that its Consumer Confidence Index, which had declined in February, increased in March, as more Americans expect an improving job market in the coming months. The Index now stands at 107.2, up from 102.7 in January.

The present situation index rose to 133.3 from 130.3. The expectations index improved to 89.9 from 84.2 last month.

"This month's gain in consumer confidence has pushed the Index to a near four-year high (May 2002, 110.3)," said Lynn Franco, director of The Conference Board Consumer Research Center. "The improvement in consumers' assessment of present-day conditions is yet another sign that the economy gained steam in early 2006. Consumer expectations, while improved, remain subdued and still suggest a cooling in activity in the latter half of this year."

Consumers' overall assessment of current conditions remains favorable. Those claiming conditions are "good" rose to 28.3 percent from 26.4 percent. Those claiming conditions are "bad" declined to 14.7 percent from 15.4 percent. Current labor market conditions, however, remained mixed. Consumers saying jobs are "plentiful" increased to 28.4 percent from 27.4 percent, while those claiming jobs are "hard to get" moved up to 20.7 percent from 20.2 percent.

Consumers' outlook for the next six months improved moderately in March. Consumers expecting business conditions to worsen decreased to 9.9 percent from 10.9 percent, while consumers expecting business conditions to improve increased to 18 percent from 16.2 percent.

The outlook for the labor market was also more positive. Those expecting fewer jobs to become available in the coming months decreased to 16.6 percent from 19.9 percent in February, while those expecting more jobs edged up to 13.9 percent from 13.4 percent. The proportion of consumers anticipating their incomes to increase in the months ahead held steady at 18.8 percent.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a story about the changing trends in real estate financing ...

Caution weighs heavily on borrowers, lenders

Friday, March 24, 2006

Inman News

The use of adjustable-rate mortgages for home purchases has declined significantly in California during the past three months, the result of more caution among buyers and lenders in a market that is seeing slowing increases in home values, a real estate information service reported.

The use of ARMs, which are easier to get and are considered by many to be an indication that buyers are stretching their finances, fell to 51.9 percent in February. This was down from 63.7 percent in January, 68.7 percent in December and 70.9 percent in November, according to DataQuick Information Systems.

ARM usage peaked in May last year at 73.7 percent, up from the prior real estate cycle in September 1988 when ARMs accounted for 66.1 percent of all home purchase loans.

"Some of the financing issues at play here are fairly complex and would include this year's higher conforming loan limit, the spread between the cost of an ARM and a fixed-rate mortgage, use of equity lines, and federal regulators who have recently told lenders to lower risk levels," said Marshall Prentice, DataQuick president.

The median price paid for a California home was $547,000 in February, up 12.3 percent from $407,000 for the same month last year. The year-ago median was up 21.1 percent from $353,000 12 months earlier. The annual increase statewide peaked in May 2004 when the median of $382,000 was up 23.2 percent from $310,000 a year earlier.

"It's a lot easier to loan somebody money when the collateral is going up in value at more than 20 percent a year than when values are going up at half that rate. What we have here is a market cycle that has passed its frenzy phase and is moving into more balanced territory," Prentice said.

Other trends also indicate low levels of market volatility:

-- February buyers financed 78.8 percent of their purchase with a first mortgage, down from 79.1 percent a year ago and 80.5 percent two years ago.

-- Seller financing, which was very popular in the late 1980s, is at very low levels.

-- Flipping sales, where the seller owned the home six months or less, accounted for 3.3 percent of the market in February, down from 3.7 percent a year ago.

-- Absent-owner purchases accounted for 15.2 percent of February's sales, down from 15.8 percent a year ago, DataQuick reported.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here are the latest figures for February real estate sales in Southern California ...

Record median Southland home price, with declining appreciation overall

DQNews.com

Home prices in Southern California edged up to a new record in February, although they edged up to that record at the slowest pace in almost four years. The number of homes sold was the lowest in five years, a real estate information service reported.

The median price paid for a home in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties was $480,000 last month. That was up 2.3 percent from $469,000 in January and up 12.9 percent from $425,000 for February a year ago, according to DataQuick Information Systems.

The previous record of $479,000 was set in November (and December). Last month's year-over-year price increase of 12.9 percent was the lowest since March 2002 when prices rose 12.7 percent to $257,000 from $228,000 a year earlier.

"It's numbers like these that both bubble-theorists and market cheerleaders can pounce on to make their points. Reality is more mundane. The frenzy is behind us, we're in a new phase of the real estate cycle and what remains to be seen is how this cycle's end game will play out. We'll know much more when next month's figures are in," said Marshall Prentice, DataQuick president.

A total of 19,905 new and resale Southland homes were sold last month. That was down 0.9 percent from 20,085 in January, and down 7.0 percent from 21,394 for February last year.

In Riverside County, 4,282 homes were sold in February 2006, up 4.8 percent from 4,084 sold the previous year. Meanwhile, the median home price in the county hit $410,000 in February, up 10.2 percent from $372,000 a year ago.

A decline from January to February is normal for the season. Last month's sales count was the lowest for any February since 2001 when 18,040 homes were sold. The strongest February in DataQuick's statistics was in 2004 when 23,004 homes were sold, the weakest was in 1991 when 10,025 homes were sold.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,251 last month, up from $2,162 for the previous month, and up from $1,905 for February a year ago. Adjusted for inflation, current payments are about 2.7 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.

Indicators of market distress are still largely absent. Financing with adjustable-rate mortgages has dropped significantly during the last three months. Foreclosure activity is edging up from its bottom, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a story about the future of interest rates and the economy ...

Tuesday, March 21, 2006

Bloomberg News

The small difference between short- and long-term interest rates isn’t a sign of an economic slowdown, and the increasing consumer mortgage debt isn’t a serious problem, says Federal Reserve Chairman Ben S. Bernanke.

"Wealth has grown," Bernanke told the Economic Club of New York Monday. "Families have made a lot of progress in restructuring their liabilities."

If consumers continue to pay off credit card debt and house prices moderate, consumers could increase their saving, he says.

Low long-term rates complicate the Fed's job of managing the economy because they blunt the effects of increases in the Fed's benchmark short-term rate.

To the extent that the difference between short- and long-term rates is narrowing because investors are willing to accept less risk because of stable inflation, "the implications for future economic activity are positive rather than negative," Bernanke says.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a column about the different options for home sellers ...

2006 should be strong, but not as strong as previous years

Monday, March 20, 2006

By Dian Hymer
Inman News

The housing market has changed. There are fewer multiple offers. Negotiation is back in vogue. Listings, in general, are taking longer to sell. And some listings are not selling at all.

What are your options if your home is less desirable in the current marketplace than you'd hoped it would be?

One option is reduce your price. Another is to hold out for a while, hoping that the market improves to meet your price. In most cases, however, the latter option is unlikely to yield results.

The robust housing market of the last several years appears to be taking a break. No one knows how long it will be before we see double-digit price appreciation again. Many experts believe it will be years.

A third option, if there's no urgency to sell, is to rent the property for a time and sell at a later date. This might be worth considering. However, as with any scheme, there are pros and cons that should be evaluated carefully before making a decision.

On the positive side, a property that is, or will soon be, sitting empty will generate income. This income can help offset mortgage and property tax obligations and homeowner association dues for condo owners. Another plus is that you can buy time until the market improves.

On the other side, consider that the market in most places is still good. 2006 isn't expected to be as strong a year for homes sales as was 2005, which was the best year ever. However, David Lereah, chief economist for the National Association of Realtors, predicts that the 2006 home sales volume will be the third best ever.

A risk in renting now and selling in 2007 or later is that the home sale market might not be as good then as it is now. If interest rates rise considerably in the interim, it most certainly won't be better. A downturn in the general economy also wouldn't bode well for the housing market, particularly if accompanied by higher interest rates and oil prices.

HOME SELLER TIP: An important factor to consider is the tax implications of renting rather than selling. If you have owned and occupied the property as your primary residence for two of the last five years, you are entitled to a capital gain tax exemption. For a single individual, $250,000 of capital gain is tax-free. The exemption is $500,000 for a married couple who files jointly.

If you wait over three years to sell because of market conditions, you would lose this valuable exemption unless you move back in to the property, which might not be convenient or possible at that time.

You could forgo the exemption and turn the property into a permanent rental for tax purposes. At some later date, you might do a 1031 exchange and trade this investment property for another, thereby deferring tax on the gain.

However, deferring gain on an investment property may not be as advantageous as taking the tax-free gain you can realize when you sell a personal residence. Be sure to consult with a knowledgeable tax adviser about the consequences of turning your single-family residence into a temporary or permanent rental.

Even if you do sell in time to preserve your capital gain tax exemption, you're likely to face additional expenses preparing your home for sale. Tenants usually don't care for a property as an owner would, so you should anticipate that repairs and renovations will be necessary.

THE CLOSING: When you take into account the cost of future renovations and staging, and the uncertainty of a future market, you might be better off lowering your asking price and selling now.

Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers," and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a column about the limitations of new online real estate websites ...

Can Zillow accurately assess home values? Not by itself

Friday, March 17, 2006

By Bernice Ross
Inman News

It's probably safe to assume that the early surge in Zillow.com's traffic resulted in part from real estate agents and brokers who fear what Zillow may do to their business. Are "Zestimates" (Zillow's estimate of what your property is worth) something brokers should fear?

The billion-dollar question for the real estate industry is whether computers can do a better job of accurately pricing property than experienced agents can. Like many other brokers, I decided to put Zillow to the test by evaluating the properties that I have owned in the past.

When it came to selecting comparable sales on my home in Austin, Texas, Zillow did not select a single comparable sale from within the subdivision where I live. While the price was off by about 15 percent, the comparables were so far away that they were useless. Furthermore, every single comparable sale Zillow selected had square footage that was only 50 percent of the size of my home.

After testing Zillow for Texas, I decided to see if there were any more accurate estimates in Southern California. When I priced the properties that I used to own in Beverly Hills, Bel Air and Brentwood, the Zillow algorithms gave them a premium value because the lots were larger than 2 acres. What Zilllow didn't take into account was that each of these properties was not flat -- i.e., the large lot size resulted from the property being on a ridge with a downslope. It also didn't differentiate between those properties with views and those that lacked views.

These examples strike at the heart of trying to use an algorithm (mathematical formula) to establish value. The computer has no way to tell whether a house has a view, is on a downslope or flat lot, or is in good or poor condition. It can't tell if a property has airplane noise or strange smells emanating from a landfill. Ultimately, pricing a property is more of an art form rather than a process that can be reduced to pure mathematics.

I was curious to see if any of the other tools did a better job than Zillow. I have been tracking values on my house in Los Angeles and was curious what it would be worth once we expand one bedroom and add another bath. I used Zillow and Moveup.com to determine which approach would give me the most accurate value.

The Zillow algorithms allow me to program in a kitchen upgrade, increase the square footage, and add in a new bath. Zillow's Zestimate told me that without the addition, the property was worth $448,000. By adding a single bath and expanding one of the existing bedrooms, the value jumped to $660,000. A 50 percent price increase seemed way out of line given the nature of the improvements. I then went to Moveup.com. Each of the 15 comparable sales was appropriate to the area. Moveup.com provided the sale date, the square footage, the price per square foot, bedroom-bath count, lot size, and whether the property had a pool. Even with this data plus a deep familiarity with the area, I still couldn't nail down what the exact price should be.

The challenge was with the comparable sales that were available. Normally, I would do a price-per-square-foot calculation. The rule of thumb is that you should only use properties that are within 10 percent of the same size for both the improvements and the lot size. In California, where the improvements are worth little and the lot is worth a great deal, you can skew the results by using properties that have square footage that doesn't fall into the appropriate categories. Even with 15 comparable sales, none of them fell into the 10 percent rule that I would normally use. The price per square foot ranged from $243 per foot on the low side to $626 on the high side. The high prices per square foot were for very small homes with the high lot values. (Smaller houses in areas where the land is valuable always sell for a higher price per square foot -- larger houses always sell for less.)

The low price per square foot was for homes that were twice the square footage of the smaller homes. Since our home would be in the middle of this range, the best comparable sales put the property value at $450 to $518 per square foot. On a 1,300-square-foot property, that's the difference between $585,000 and $673,000. In truth, the only way to resolve where the property should be valued would be to personally visit the comparable sales or to hire an agent who works the area and knows property values.

The challenge with relying on computers to establish value is the difference between stagnant data that exists in a database and knowledge that relies on human experience and complex thought processes. In the book "Social Life of Information," John Seely Brown and Paul Duguid make exactly this point. A computer relies on information. When it comes to real estate, this means the property's features, including bedroom-bath count, lot size and floor plan. Even when two properties have identical floor plans, one may sell for more because of the beautiful landscaping, the privacy, or some other factor the computer cannot access. The value of these features is often more intuitive rather than quantitative. As such, computers may estimate values, but the estimates will continue to be flawed because there is no scientific way to value these other factors.

While Zillow has made a big splash, accuracy is still the name of the game when it comes to comparable sales. In those areas where the market is flattening or declining, overpricing can cost the seller thousands of dollars. Rather than bemoaning the fact that comparable sales are now available on the Web, agents and brokers must be proactive in helping sellers to understand that sites such as Zillow and Moveup.com are a starting place in determining what their properties are worth. They must also be prepared to educate sellers about the challenges of relying strictly on information rather than a human being's wisdom of experience.

Ross, co-owner of Realestatecoach.com, has written a new book, "Waging War on Real Estate's Discounters," available online. She can be reached at bernice@realestatecoach.com.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a story about the number of people moving to Riverside County ...

Warm climes, housing 'bargains' fuel explosive growth across desert

March 16, 2006

Doug Abrahms
The Desert Sun Washington Bureau

WASHINGTON - Like many who see a balmy bargain in the desert, Al Zappala moved to Indio, cashing in on the high value of his Los Angeles County house to buy something more affordable in the desert.

"I didn't have to put it all back into the house," said Zappala, who is retired from the insurance industry and made the move to the valley in February. "I like the casual desert clothing - it's shorts for most of the day."

Riverside County grew by 76,954 people to about 1.95 million between July 1, 2004, and July 1, 2005, Census Bureau data released today shows. That's the second-largest increase of the nation's 3,086 counties behind Maricopa County, which includes Phoenix.

But as the county nears the 2 million-person mark, challenges persist. More Coachella Valley residents increase the need for schools, roads, parks and jobs.

By 2014, Riverside County will have more students than any other California county except Los Angeles County.

"We're trying to keep a step ahead of it," Peggy Reyes said of the population increase.

The director of facilities for Desert Sands Unified School District said 500 to 800 children have joined the district annually.

The district opened a new middle school and an elementary school last year and is building a high school that should start in 2008, she said.

Meanwhile, the district has added four to six portable classrooms a year to each of its two high schools.

And a recently completed study of all of the Coachella Valley's roadways showed a $2.6 billion need, a dramatic increase from $630 million in 1999.

Where they come from

Unlike U.S. immigration flows to the West Coast during decades past, Americans are relocating east from the Los Angeles and San Diego areas, said William Frey, a demographer at the Brookings Institution, a Washington think tank. They are relocating to the Inland Empire, Central Valley and even Las Vegas and Phoenix, he said.

By contrast, Los Angeles continues to grow because of an increase in births and a continued influx of immigrants, but that growth is nearly offset by migration to nearby counties and states, Frey said.

"Central California is getting inflows to the coast and then losing people to other states," Frey said. "A lot of it is driven by housing costs.

"As long as California continues to get a lot of immigrants and Californians can keep cashing in their home prices, this will continue," he said.

The median price of a home in the Coachella Valley is about $400,000, compared with $490,000 in Los Angeles County and $617,000 in Orange County, according to research firm DataQuick Information Systems.

In fact, 10 percent of all new U.S. residents moved to three Southwestern counties - Riverside, Maricopa and Clark County, Nev., home to Las Vegas, the Census Bureau reported.

The population growth isn't likely to stop anytime soon.

Some projections show Riverside County could double in size to about 4 million people within the next 20 years.
Growth has added jobs

Riverside County's fast growth has created its own jobs boom, ranging from construction workers to hospital and retail positions, said Hans Johnson, a demographer at the San Francisco-based Public Policy Institute of California.

"It has been the case that for the last several decades, at least the Inland Empire has been the fastest-growing area in the U.S. or one of the fastest-growing areas in the U.S.," he said.

Jan Lewis moved from El Cajon to Indio in November after her husband took a job in the area. The couple was able to buy a 2,100-square-foot house that cost less than what they received for their 1,100-square-foot abode in San Diego County.

Despite a slowdown over the past few months, home sales will continue to grow, said Randy Gutierrez, a real estate agent in Desert Hot Springs. While housing prices have risen over the past two years, they remain lower than in many other parts of the state, said Gutierrez, who moved a few years ago from the Silicon Valley area, where houses were going for $800,000.

"I get a lot of buyers from L.A., Orange County, San Diego," he said. "(The Palm Springs region) is such a huge destination and it's still affordable from a California standpoint."

Christina Storm moved back to Palm Desert with her family in November after living for five years in San Diego, where her husband is stationed in the Navy. They couldn't afford a house in San Diego, but bought one here. Their mortgage is just $400 a month more than what they paid to rent a two-bedroom apartment in San Diego.

"Our little guy (toddler) has a back yard to play in instead of just a balcony," Storm said. "It's huge - all the new development and there's still so much building going on now."

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here is a Press-Enterprise article about a new state-backed program for first-time buyers ...

State move aims to aid first-time buyers as the region's prices reach new heights

Tuesday, March 14, 2006

By LESLIE BERKMAN
The Press-Enterprise

Even as Southern California continues to set record-high home prices, the California Housing Finance Agency unveiled a program to make those homes more affordable, but over 40 years instead of 30.

Housing prices rose last month at the slowest pace in four years, but still the region's median price hit a record of $480,000. San Bernardino County saw the biggest annual gain of almost 28 percent, with the median price reaching a new all-time high of $373,000.

Riverside County homes sold in February at a median price of $410,000, which was more than 10 percent higher than the median price a year earlier, according to statistics released by DataQuick Information Systems Tuesday.

"Californians face an incredibly difficult market to purchase a first home," Theresa Parker, executive director of CalHFA, said in announcing the new program for first-time buyers.

CalHFA's 40-year loan has a fixed interest rate of 5.75 percent, which is about a point below market-rate loans, and on average will lower mortgage payments by $150 a month compared to the agency's 30-year loans, said Evan Gerberding, the agency's assistant director of marketing.

John Marcell, president of the California Association of Mortgage Brokers, said since 40-year mortgages became available on the private market about a year ago, they have gained popularity in high-cost housing areas like California, New York and Florida. Marcell estimated that 40-year mortgages now represent about 15 percent of the market in California.

He said the association forecasts that if home prices continue to rise, this year 40-year mortgages will become a major part of its members' lending activity.

But Bunker Rayner, vice president of Corona Mortgage, said, "I don't think the 40-year mortgage alone will make as big of a difference as people are hoping for." He said the market-rate interest for a 40-year fixed rate loan is 6.25 percent and to buy a $400,000 home with 20 percent down, the monthly principal and interest payment would be $1,816, compared to $1,918 with a conventional 30-year fixed rate loan.

He said to make a bigger impact on reducing monthly payments, lenders also have to look to adjustable and interest-only loans. "You always combine as much of the programs as will allow you to have a lower payment," to meet a client's needs, Rayner said.

Still, DataQuick analyst John Karevoll said as mortgage interest rates rise, lenders and buyers have started to shy away from adjustable rates.

He said between November and February, the portion of home buyers financing their purchase with adjustable rate mortgages slipped from 71 percent to 53 percent in Riverside County and from nearly 70 percent to about 52 percent in San Bernardino County.

While a number of factors may be contributing to the change, Karevoll said, "probably both buyer and financial institutions are being a bit more cautious."

In the Inland Empire, Gerberding said, households of one or two people earning up to $66,840 a year and households of three or more with annual incomes of as much as $77,980 are eligible to apply for CalHFA's first-time home buyer loans. Under the program they may buy homes priced as high as $525,000.

Gerberding said although families earning $66,840 could not qualify to buy a $525,000 house without a large down payment, they could purchase a condo for around $300,000.

Currently there are 10 lenders who offer the 40-year, government financed loans, she said: American Home Mortgage, Bank of America, Clearinghouse, CU West Mortgage, Eagle Home Mortgage, First Mortgage Corporation, Guild Mortgage, Mountain West Financial, Pinnacle Financial and Visalia Community Bank.

CalHFA also offers first-time home buyers 100 percent financing and down payment assistance. Moreover, she said if the new homeowner loses a job, the agency will make the mortgage payments for up to six months until the borrower finds new employment.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's another column from Robert Bruss about preparing your home for the market ...

New book shows how to highlight property's best features

Tuesday, March 14, 2006

By Robert J. Bruss
Inman News

In their unique book, "Outside the Not So Big House; Creating the Landscape of Home," best-seller author Sarah Susanka and noted landscape designer Julie Moir Messervy team up to show landscape ideas for "completing" modest-sized homes. Along the way, they share the benefits of sound landscape techniques to create enjoyable outdoor spaces that are both attractive and practical.

A special feature is the authors explain how they created the landscaping, often to meet the special requests of the homeowners. In other homes, Susanka and Messervy share how they combine landscape methods to accomplish a goal.

My favorite is "blurring the boundary," where Susanka's home architecture is blended with Messervy's landscape design.

As usual with the beautiful Taunton Press books, the color photos make this "coffee table"-quality book come to life to illustrate the thoughts of the authors. Photographer Grey Crawford did a superb job of showing what is explained in the text.

Unfortunately, not much attention is paid to the unique, interestingly designed homes that could have been the topic of an accompanying book. Frankly, the homes shown only from the outside look as interesting as their landscaping.

Most of the homes, and their landscaping, appear to be several years old so the landscaping has "matured" and is virtually full-grown. What makes the narrative explanation so valuable is that the authors share what they tried to accomplish to blend landscaping with the house.

To give the reader a perspective, each house shown includes a landscape design plan that reveals the overall yard landscaping in relation to the house. Both old and new houses are shown, often with updated landscaping to bring out the strong points of the older houses.

Although emphasis is on homes located on larger parcels, many houses shown are on city sidewalks with attractive landscaping used to accomplish specific goals, such as privacy. However, usually the backyards are shown, where landscaping adds special benefits, like a joining of the house to the outdoors.

This is one of the very few home design books to emphasize the importance of landscaping to enhance a home's atmosphere both inside and outside. Most of the homes are not brand-new, showing what can be done with modest-sized older houses to make them more attractive with landscape techniques.

Chapter topics include: "Playing Up the Corners"; "The Attraction of Opposites"; "Variation on a Theme"; "The World Behind the Walls"; "A Landscape of Stone"; "Good Fences"; "Rooms Inside and Out"; "Garden of Earthly Delights"; "Three Cabins in a Forest"; "At Home on the Range"; and "A Cottage in the City." The Appendix includes a house-by-house list of the architects and landscape designers.

Just as every house is unique, the premise of this book is that home landscaping should also be special to bring out the residence's best features (or hide its drawbacks). The authors share what their goals were and in most cases they appear to have used effective landscaping to bring out the best features of each home. On my scale of one to 10, this outstanding new book rates a solid 10.

"Outside the Not So Big House; Creating the Landscape Architecture of Home," by Sarah Susanka and Julie Moir Messervy (The Taunton Press, Newtown, CT), 2006, $34.95, 209 pages; available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's a handy story about the importance of preparing your home for the market ...

By Keith Rockmael
Contributor to The Christian Science Monitor

SAN FRANCISCO – When it comes to staging a home, the beauty lies not only in the art but in the numbers. For those who haven't seen a home-staging TV show or sold a house recently, staging can transform a home from ugly duckling to swan.

Many people are under the misconception that staging is a pricey option for rich homeowners. Not true: Staging is about the creativity, not the money. What some people don't realize when they sell their house "as is" or don't stage is that it can actually cost them money.

Because the air seems to be seeping out of the real estate bubble, staging should be on the minds of more home sellers. In the real estate game, time is as important as money. Unstaged homes spent an average of 22 days on the market. Those staged by a professional spent an average of 11 days on the market, according to statistics compiled by Stagedhomes.com.

The industry makes impressive claims for staging: Unstaged home prices averaged $518,820, while a comparable staged home sold for $557,271, a 7.4 percent difference. Barb Schwartz, founder of Associated Staging Professionals and author of "Home Staging: The Winning Way to Sell Your House for More Money," makes an even loftier claim. According to her recent figures, staged homes priced under $1 million sell for 10 percent more than comparable unstaged homes. Staged homes listed for $1 million-plus sell for a 20 percent premium, she says.

Comparisons are difficult, since no home is sold both with the staging add-ons and without them. A more down-to-earth appraisal of staging's effect is offered by HomeGain, an online resource for homebuyers and sellers: Their 2003 poll of 2,000 real-estate agents found that staging typically costs from $212 to $1,089 and adds from $2,275 to $2,841 to a home's selling price - a "return" of from two to 13 times the cost of staging.

Ms. Schwartz points to some impressive successes: A Philadelphia house sat on the market for a year priced at $1.195 million. After Schwartz's stagers did some work, the home received a $1.395 million offer the next day.

But it's not just about million-dollar houses. The owners of an Oak Grove, Calif., home originally listed it at $369,000 prior to staging. The house eventually sold for $390,000, a tidy $21,000 over the original asking price.

San Francisco seller Nathaniel Robinson spent nearly $4,000 on staging. "I absolutely feel like it was worth it," he said after the sale. "The vendor transformed my place from my daily living place to a showcase for lofts in general." He was "thrilled." "The negative aspects are that it's not cheap," he says.

Staging is not necessarily pricey. In fact, a high price tag - say, $5,000 for staging an entire house - may indicate low creativity on the stager's part. Anyone can fill a house with costly furniture, artwork, and table settings. Top stagers may charge as little as $300 by swapping items from other rooms. "We make things out of nothing, like on 'Gilligan's Island,' " Schwartz says. "It cuts down on the cost." If a client does more, a stager can do less, and the cost goes down. "Sometimes the owners run and buy new dishes ... but there's nothing that I can't make work," says Peggy Selinger-Eaton. She has a new book and DVD titled, "Stage Your Home for Profit."

Deborah Chapman who recently sold her home in Kirkland, Wash., says she was a staging skeptic. But after the recent sale, "it totally changed my mind," she says. As someone who has sold her house a few times before, she notes, "The dealmaker or -breaker is 'How fast do you want to sell?' "

When Ms. Selinger-Eaton enters clients' homes, she hands them her wish list. "In this market, I'm pretty tough with my wish list. It's their 'profit list,' " she says.

Staging is designed to differentiate a house, to create emotion, which translates into more offers and more money. Selinger-Eaton says that she creates an illusion. "Even if there's a grungy couch, we can update it buy buying pillows and throws at Target." (Both Schwartz and Selinger-Eaton often use or recommend Target for what they consider its low prices and high style.)

Sellers shouldn't look at staging by seeing how much it will cost but how much it could make. Even sellers with limited financial resources can find ways to use a stager's expertise. Some stagers will do a consultation for about $250, which can include a written report that details what owners can do to stage a home themselves.

How to 'stage' a home

Staging expert Peggy Selinger-Eaton offers these tips to do-it-yourself stagers:

Less is more: Remove clutter and use a few wisely chosen accessories (candles, fresh flowers, crystal) to beautify your home.

Bedrooms should have beds: If you're a bed short, use an inflatable mattress and some boxes to create a faux bed.

Light and more light: Raise window blinds and remove screens from windows to let in as much natural light as possible.

Modernize fixtures: Brass and glass light fixtures are dull and should be hidden or replaced. Affordable new lampshades will minimize their appearance. Chrome, iron, or brushed-nickel fixtures give a modern look.

Disguise furniture: If your couch looks shabby, disguise it with decorative attention-grabbing pillows and throws.

Create life: Dining-room and kitchen tables should look as though you're ready for guests to arrive. Set out your favorite dishes and napkins to make it look inviting.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here is a column with tips on hiring the right Realtor ...

Tips to help earn top sales price

Friday, March 10, 2006

By Robert J. Bruss
Inman News

Spring is traditionally the peak home sales season. Home sellers know if they want to earn top sales price, they must have their house or condo in tip-top condition during this best home sale time of the year when the largest number of buyers are in the market.

But the 2006 home sales season started off much differently than usual in most communities. Perhaps it was the mild weather in many areas.

For some unexplained reason, the number of homes listed for sale grew abnormally large in January and February, traditionally slow home sales months.

The result for buyers is an especially enjoyable "buyer's market" in most areas.

That means there are more homes for sale than there are qualified buyers, which means that home buyers can be especially aggressive with their price and sales term negotiations.

HOW TO SELL YOUR HOME FOR TOP DOLLAR. However, if you are a 2006 home seller, you need to know how to get top dollar for your house or condo amid the competition from other residences listed for sale.

The first step is to get your home into its best physical condition. This includes cleaning, repairing, and painting so your residence shows its best.

The second step is to have customary local inspections made and necessary repairs completed before listing your home for sale. Such inspections might include termite (pest control), radon, building code compliance, and energy efficiency.

The third step is to have a professional home inspection. While not required, savvy home buyers insist on such inspections as a sales contingency. However, many buyers will accept the seller's professional inspection report.

When the report reveals an unexpected problem that you don't want or can't afford to have repaired, just sell the home "as is" but disclose the defect. An "as is" sale means the seller won't pay for any repairs but all known defects have been disclosed.

If you don't know a local qualified professional home inspector, the American Society of Home Inspectors (ASHI) has the toughest, most respected standards. To find local ASHI members, go to http://www.ashi.org/ or phone 1-800-743-2744.

The fourth step to a profitable home sale is to interview at least three successful local real estate agents. Even if you plan to sell your home alone "for sale by owner," it's smart to interview three agents to find out the market value of your home and all the details of today's home sales.

Don't worry. The agents you interview won't mind, even if you want to sell your home alone. They know most do-it-yourself home sellers fail and, within 30 to 60 days, list with one of the agents interviewed.

HOW TO LOCATE THREE REALTY AGENTS TO INTERVIEW. After your house or condo is ready to sell, and you had it professionally inspected so you know of its warts, if any, selecting listing agents to interview is your next step.

The reason it is critical to interview at least three successful local agents is to compare their evaluations of your home. Don't be misled by a charismatic agent who gushes with enthusiasm for your home. Also, watch out for the enthusiastic agent who says your home is worth far more than the other interviewed agents estimate.

To find agents to interview, consider agents who send you their monthly newsletters about local home sales prices (disregard those glossy four-color flyers with recipes but nothing of local interest).

In addition, look for agents whose "for sale" signs turned to "sold" signs within a reasonable time. Finally, ask nearby friends and business associates for names of realty agents who recently sold their homes.

If you still don't have the names of three successful local realty agents, a good Internet source is http://www.realtor.com/.

KEY QUESTIONS TO ASK OF AGENTS YOU INTERVIEW. Each agent you individually interview should, after inspecting your residence, prepare a personal CMA (comparative market analysis) and give you an opinion of your home's market value.

As a savvy home seller, discuss each CMA with the agent who prepared it. Watch out for agents who try to "buy the listing" by estimating an abnormally high sales price without justification based on sales prices within the last few months of comparable nearby homes.

Next, ask the 10 key questions each agent hopes you don't ask:

1. How long have you been selling homes in this area?
2. What are the names, addresses, and phone numbers of your five most recent home sellers?
3. What is your written marketing plan for my home?
4. Do you sell real estate full time (dismiss any part-time agent unless you want part-time service)?
5. How many listings do you currently have (watch out for agents who have too many listings and won't have personal time to devote to your home sale)?
6. Do you have any office assistants (if so, inquire if you will be dealing with them or the agent)?
7. What day of the week do you take off and which agent covers for you when you are gone?
8. Do you plan to take any vacation during my listing period?
9. Will you be able to sell my home within the 90-day listing period?
10. What is your sales commission fee schedule?

If you don't like an agent's answer to one or more questions, don't necessarily dismiss that agent (unless the agent is not a full-time agent). To illustrate, a new agent might have more time to devote to your listing than an "old pro" who has too many listings.

AVOID LONG-TERM LISTINGS. The biggest pitfall home sellers make is signing a long-term listing without an escape clause. Some of the best agents insist on a long 180-day listing. But, if you ask, they will usually agree to an unconditional cancellation clause after 90 days.

The reason to avoid long listings over 90 days is just in case you chose a lazy agent who doesn't aggressively market your home, and you don't want to be stuck with an unsold home.

Even when the agent says something like, "Well, according to local statistics, homes in this area take an average of 132 days to sell," your very polite reply should be, "I don't want to list with an average sales agent. If you won't either list and sell my home within 90 days, or list for 180 days with an unconditional written cancellation clause after 90 days, I don't think we should do business." The best agents have enough confidence in their ability to agree to such terms.

CONCLUSION: Home sellers who want to earn top dollar for their homes in today's extremely competitive home sales market must (a) carefully prepare their residence for sale, (b) interview at least three successful local real estate agents, (c) ask lots of questions, and (d) list with the best agent.

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Homeowners continue to benefit from price increases ...

Friday, March 10, 2006

As their homes increase in value, American homeowners’ total net worth also soars.

U.S. households' total net worth rose 2.3 percent to $52.11 trillion as consumers took on slightly less debt in the last three months of 2005, the Federal Reserve reported in its quarterly "flow of funds" data. Net worth measures household assets minus liabilities.

For all of 2005, household net worth grew about 8 percent. But the gains in wealth weren’t evenly distributed. Lower-income people carry more debt and that makes it more difficult for them and more vulnerable to a weaker housing market, says Diane Swonk, chief economist at Mesirow Financial in Chicago.

"We have a bifurcated consumer," she says.

Source: The Wall Street Journal, Rafael Gerena-Morales and James R. Hagerty

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here is an interesting survey done by L.A. Times-Bloomberg about consumer opinions on the housing market ...

Thursday, March 8, 2006

By Tom Petruno and Kathy M. Kristof
Times Staff Writers

Americans remain largely optimistic that home values will keep rising in the next few years, but some are concerned that they won't be able to keep up with their mortgage payments, according to a Los Angeles Times/Bloomberg poll.

More than one-quarter of those who have adjustable-rate mortgages say they aren't sure they'll be able to make their monthly payments if their interest rate goes up. These loans have been particularly popular in California and other states with high housing costs.

Homeowners' views in the new nationwide poll show widespread faith in the real estate market, despite signs that prices and sales are cooling. The median price of existing U.S. homes sold in January was $211,000, down from a record high of $220,000 in August.

In the Times/Bloomberg poll, nearly half of homeowners expected the price of their primary residence to rise 5% to 15% over the next three years. Twenty-five percent expected appreciation of 16% or more in that period.

Just 5% predicted no price increase."I think the 'bubble' talk is hyped," said Diane Harvey of Foster City, Calif., in a follow-up interview after the poll. She and her husband, David, have made a business out of buying and selling houses in the Sacramento and Phoenix areas for the last 2 1/2 years.Harvey, 66, said she believed that the market had entered a slowdown but that over time, the growth of households and the lure of Sun Belt living would shore up prices in the regions where she and her husband had invested in homes.

The Times/Bloomberg telephone poll surveyed 2,563 adults on their personal finances and their views of financial markets and investment opportunities.Asked about the short-term trend in house prices, 36% of all respondents — homeowners and renters — expected homes in their neighborhood to increase in the next six months, while 49% expected prices to stay the same.

A minority of 14% predicted a decline in prices in that period.In the West, 43% of respondents predicted rising prices in their neighborhood in the next six months, the highest percentage among the nation's four major regions. The figure was 29% in the Midwest.

The poll, which was conducted Feb. 25 through Sunday and has a margin of sampling error of plus or minus 3 percentage points, also revealed unease among some homeowners about their ability to hold on to their property.

About 1 in 7 homeowners said the mortgage on their home was an adjustable-rate rather than a fixed-rate loan. Adjustable-rate loans typically offer low initial interest rates, making homes affordable for many people who couldn't qualify for fixed-rate mortgages.

As market interest rates rise, however, homeowners with adjustable loans face the prospect of sharply higher payments.

Of those who have adjustable-rate loans, the poll found that 21% said they were "not too confident" about making their payments if they adjusted higher. Five percent said they were "not at all confident." The rest were "very confident" or "somewhat confident."

Lillie Oliver, 50, of Alvertville, Ala., said she got an adjustable-rate loan a few years ago when she refinanced her house to pay for improvements. But her loan rate recently jumped a full percentage point, and it could adjust again in six months, she said.

"I'm at the point right now where I can barely make the payments," Oliver said. "If everything keeps going higher, like groceries and everything, I don't know how I am going to make it."

Jackie Arnold, 41, and her husband used an adjustable-rate loan to buy a home in suburban Atlanta 18 months ago. Now, as interest rates rise, she's worried that the loan may have been a mistake."

Our dilemma is, do we sit on the [loan] that we have and wait … or do we refinance now and pay considerably more right away?" Arnold said. "We are caught between a rock and a hard place."

Some consumer advocates say home buyers haven't been fully aware of the risks involved with adjustable-rate mortgages.

Homeowners with "substantial income or assets could well weather the storm of higher payments on these loans," said Stephen Brobeck, head of the Consumer Federation of America. "But we know that a fairly high percentage of people who have taken out these exotic loans aren't in that situation."

In California, an estimated 25% of so-called prime mortgages issued in 2005 were adjustable-rate loans, compared with 13% nationally, according to data firm LoanPerformance. Prime borrowers generally have the best credit ratings, but over the last two years even these customers increasingly have taken out adjustable loans that allow them to pay artificially low interest rates for months or years. When these loans eventually adjust higher, many consumer advocates fear, some borrowers won't be able to make their payments.

Still, with most homeowners enjoying the relative safety of fixed-rate loans, and with home prices up significantly in nearly all regions in recent years, the allure of residential real estate as an investment remains strong, the poll indicated.

Asked how they would invest most of a $1 million windfall, 36% of respondents picked real estate. The next-most-popular investment was mutual funds, named by 13% of respondents.

T. Darren Gillespie, 34, figures his best retirement plan is the Orange County, N.C., house that he lives in.

He said he had been saving and investing in mutual funds for 14 years but felt that he had accumulated relatively little — $35,000 in all — in those accounts. "As hard as I've worked at it, that's all I've got," said the self-employed contractor. "That's not going to provide me with a whole lot for retirement."

By contrast, Gillespie estimated that the value of his home, recently appraised at $350,000, had risen $50,000 in just three years."Eighty percent of my net worth is tied up in this home," he said.

In the poll, 56% of property owners estimated that real estate accounted for 50% or more of their family's total net worth, or assets minus liabilities.

A report last month from the Federal Reserve pointed to the increasing importance of home equity in bolstering Americans' net worth in this decade. That, in turn, has helped support consumer spending.

Of homeowners in the poll, 16% said they had taken cash out of their home in the last two years through credit lines, second mortgages or other loans. The money primarily went to finance home improvements, pay off other debts and buy cars, poll responses showed.

Seven percent of homeowners said they were considering tapping their equity.One is Edward Ogden, a 52-year-old public relations executive in Canton, Ohio. With children ages 17 and 15, he said, he might have to turn to a home-equity loan to finance their college expenses.

Many Americans' reliance on real estate as a savings account, however, raises the risk that a decline in housing prices could drag down the economy because consumers would have less home equity to tap for spending.

A decline in housing prices also could hit Americans who lack substantial savings and were counting on their home equity to help fund their retirement.

For Carol Carlisle, 60, drawing down the equity in her Albany, Calif., home in retirement may be unavoidable, she said.

Carlisle and her husband have saved, but she's not certain they have enough to last. The value of their investment portfolio tanked after the 2001 terrorist attacks and left her with a nagging uncertainty.

"There is great anxiety," she said. "My parents got to age 62 and they were retiring and they had enough. My friends and I talk about it a lot. We don't know if we have enough."

The majority of homeowners in the Times/Bloomberg poll — 75% — said they weren't expecting to need their home equity to help pay for retirement. But some economists believe people routinely underestimate what retirement will cost."

This is something that no one thinks about until they get there," said Susan Sterne, head of Economic Analysis Associates in Greenwich, Conn.

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