Greetings!
Hope
you are doing well. I wanted to give you a quick update on what's been
happening in the real estate market so far this year. Please read on!
|
|
|
The Market
 We
have seen relatively brisk sales of homes below the $500K price level, especially
in the REO (foreclosure) market. The
market above $750K has been somewhat less active, due to the current
constraints on jumbo loans. In the
Berkeley-Oakland area below $750K, prices hit a bottom in January of this year,
and have been rising since February, when more aggressive pricing by sellers met
with an influx of new buyers, and those buyers began making offers at or above
list prices. Prices and sales continued
to rise throughout the spring. |
|
Mortgages
What
have been hot this year are FHA loans, for which the down payment can be as
little as 3.5% for a single family home (sorry, no more 0% down, except for VA
loans!). These loans require owner
occupancy for an initial time period, and can go up to the conforming loan
limit of $729,500, allowing for a purchase price of about $756K. They can also be used for investment
property, with the down payment depending on the income produced relative to
the price, as well as the buyer's financials.
Conventional loans below $417K require 5% down and a 720 FICO score, and
10% down in the $417K-$729K range. Any
loan with less than 20% down requires mortgage insurance (PMI), which increases
the overall loan rate.
Jumbo
loans, those greater than the $729K loan limit, require a greater amount down. Up to a loan amount of about $1M, these loans
require 20% down, and it helps if you can show reserve assets (cash or liquid
funds, stocks and bonds, IRA/401(k)/403(b)) equal to or greater than 3 months'
worth of mortgage payments. For loans of
$1.5M or greater, up to 25% or 30% down can be required, as well as a year or
more of assets in reserve. (As always,
all cash still works, too!)
Rates are in the low 5% range up to the $729K
limit at par (i.e. not buying down the rate with points). Above this limit, jumbo rates are in the lower-
to upper- 5% range, depending on the fixed term of the loan. Fixed terms of 3, 5, 7, 10, and 30 years are
available for 30-year amortized loans.
Those fixed for less than 30 years become variable at the end of the stated
term, and can be refinanced at that point if desired. Interest rates on all loan types tend to be
higher for investment property than for those which will be owner-occupied.
|
|
Sellers- Get Out There!
Sellers,
don't be shy! There are many, many
qualified buyers out there looking for a nice home, in all price ranges! It has been frustrating working with buyers
in the price bracket above $750K because of the limited inventory at these
price levels. When a nice home does come
on the market, all the buyers out there jump on it, creating a bidding
war. So if you are considering selling,
the market is ready for you!
It is very
important right now that your home is in the best possible condition; that you
properly prepare it for sale, stage it, and price it according to the market. I've got a great team of contractors, inspectors,
stagers, and photographers who can help do the job without breaking the bank!
|
|
Upside-Down?
There
are cases where a seller may be upside-down on his or her mortgage, but still
needs to sell. Typically, this can mean
a short sale, which is a daunting prospect for many, but which can be done with
diligence, patience, and a positive attitude.
In many cases, however, even though the sale of a home at current market
prices will not generate enough proceeds to pay off the loans (i.e. it is short),
the home can still be sold without resorting to the standard short-sale
process.
Let
me explain. If the sale is short only by
a small amount, one may proceed with a normal sale, pricing the home aggressively
to attract buyers. If the highest offer
obtained will result in insufficient proceeds to pay off the loans, then there
are two options. One is for the seller
to put the requisite cash into escrow to close it. This money can be borrowed from friends or
family, or even a credit card. The
second is to carry a note back with the second lender, which can be paid back
over time.
One advantage to this approach is that the sale
process is much easier, and the seller's credit rating will not be damaged, as
it would be with a standard short sale, in which the lenders must agree to a
reduced payoff amount. It may even
improve the seller's credit with the payoff of most of the debt. Another advantage of this approach is that the
main source of the debt the seller is facing is quickly and effectively removed,
allowing him or her a fresh start without the continued burden of a mortgage,
property taxes, and insurance.
|
Buyers- Why is Concord Hot? Is Berkeley
Next?
Concord is hot, with
many sales of bank-owned (REO) single family homes, which are great for
owner-occupants or as an income-producing investment. Why Concord? Concord
is a confluence of two favorable conditions.
One, there is large inventory of inexpensive 3- or 4-bedroom, 2-bath
single-family homes in decent condition, built mainly in the 1950's and 60's (with
some more recent construction). Two, Concord is the first
community heading away from the Bay Area that is relatively inexpensive, but
that is still close enough to be commutable to jobs that support good
rents. The neighborhoods are a bit patchy,
but you can find great properties in the $225-$400K price range if you shop
around! Fortunately, I know all the
neighborhoods, housing stock, and prices well, so contact me if you are
interested in learning more.
Even
those houses in the best condition typically need $20K-$35K of renovation,
although an occasional "paint and carpets only" type does show up, albeit at a
higher price. Importantly, rents have held up well so far in Concord, compared to other areas further
out. It is important when buying a
property for its income-generating ability to continue monitoring rents going
forward to make sure they hold up as they have so far. Easy commuting access to jobs for renters
plays a critical role in this calculus.
The good news is that with careful choice of property and renovations, good
positive cash flow is easily achievable, with properties priced in the low- to
upper- $300K range providing a good balance between income and the superior asset
appreciation achieved in the better neighborhoods. Contact me if you'd like me to run
through some numbers with you.
I believe the Berkeley market for income properties will heat
up over the coming months, with more foreclosure properties coming onto the
market, and prices softening somewhat. Buyers
increasingly are unwilling to pay a price higher than that supported by the income
from the property. And by income, I mean
the existing monthly rent roll, not some imaginary "projected" rent roll that magically
erases the effects of Berkeley
rent control! No longer are buyers
willing to pay as much of a premium for potential price appreciation, but instead
are strictly looking for positive cash flow with 3.5% to 25% down, and are
taking all the costs of repairs and maintenance into account in their offer
prices.
|
|
First-Time Buyers
Remember
that the $8000 Obama tax credit ends November 30th! You can qualify as a first-time home buyer if
you have not owned property for more than 3 years. Also, my mortgage broker informs me that if
you amend your 2008 taxes, you can receive the credit as a refund
immediately. Check with your tax
professional to confirm the details.
More information about the tax credit can be found here and here.
|
|
I'm Never Too Busy for Your Referrals!
And
always remember, if you know anyone who might be thinking about buying or
selling a home or income property, please put them in touch with me, and I will
take great care of them.
I work with an
excellent team of mortgage brokers, contractors, inspectors, stagers, photographers,
and escrow professionals to help my clients get the job done!
|
|
Next month:
"Green"
building, debunked and explained!
|
Thanks for
reading! And feel free to forward this
newsletter to a friend-- use the link below.
Dan
Contact:
Dan Suich
RealtorŪ, DRE
#01826113
PBG
Real Estate
2907
Claremont Avenue
Berkeley, CA 94705
(510)
910-7265 cell
dan.suich@gmail.com
www.dansuich.com
www.pbgrealestate.com
Disclaimer: The foregoing
information is my personal opinion, based upon recent experience, and is not
intended as investment, tax, or financial advice.
|
|
|
|
|
Contact:
Dan Suich
RealtorŪ, DRE
#01826113
PBG
Real Estate
2907
Claremont Avenue
Berkeley, CA 94705
(510)
910-7265 cell
dan.suich@gmail.com
www.dansuich.com
www.pbgrealestate.com
|
|
