Is Your Home Worth More or Less than it was Last Year?

With the massive onslaught of negative media, most of it warranted, and with people’s seemingly involuntary lack of resistance to fear-mongering and propensity to panic, I never would have guessed that Zillow’s latest report on public perceptions would have produced the results it did. Rismedia reported in a recent article that in fact, people’s perceptions are the opposite of what I would have guessed.

Even though 75% of homes in America have dropped in value, this recent poll has reported that 49% of homeowners believe their home to be immune to these market conditions. Evidently nearly half the homeowners in America report confidently that their homes’ values “increased or stayed the same over the past year.” This report is conducted quarterly. Evidently confidence is down from last quarter when a full 62% of homeowners reported that their home was still worth what it was last year or had actually increased in value.

This is very interesting to me. Is it denial, plain and simple, or are there other factors I’m not thinking about?

Will the New Fannie and Freddie Programs Help?

Experts seem to give these new efforts to help homeowners in danger of losing their homes a nod of approval, but no one is enthusiastic. Not from what I’ve seen. NPR yesterday stated some basics facts about the help being offered. Among other requirements, to restructure your loan you must be at least 90 days delinquent and have at least 10% equity in your home. How many homeowners in trouble is this going to help?

In my experience, which of course is limited to only a small number of markets, most homeowners calling me are in negative equity positions, not positive. Economist Alan Blinder calls this a “step in the right direction” but points out some important shortcomings. First of all, Fannie and Freddie have some of the best mortgages out there. Only a small percentage of their loans are going into default anyway. Just because they’re the biggest doesn’t mean these measures are going to address people in need. Mr. Blinder asserts that we need “serious public funds” to be committed to the aid of homeowners in danger of losing their homes to foreclosure. When prompted for specifics, he compared the idea to other bailouts currently in process. AIG, for example, is getting $150B, compared to ZERO being committed to helping homeowners. That’s right, zero.

7 Articles to Read This Week

Surely it doesn’t need to be explained the importance of reading to keep your mind sharp. When sales are slow, it’s a perfect time to focus on education, learning new ideas, attending conferences…anything you can do to improve your knowledge of the business of real estate. Here’s a list of articles I’ve read and shared with my team lately. We’ve had some great discussions over them, and I think you’ll find them all worth reading:

1.    10 Marketing Lessons from the Barack Obama Presidential Campaign
2.    4 Classic Cold Calling Mistakes
3.    7 Pitfalls of Using Email to Sell
4.    Want more twitter followers? Fuhgetaboutit
5.    7 Tips to Thrive in Today’s Market
6.    How to Sell Effectively by Letting Go
7.    Five Ideas to Fight off the Bear Market

Happy reading!

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Living with Mom and Dad is More Popular Lately

According to a report recently released by the U.S. Census, our clients and neighbors are with much increasing frequency, sharing living space with their extended families. American households are becoming more multi-generational. Many experts point out that this is a common response to the type of changes we’ve seen in our economy lately.

In the last seven years, the frequency of families sharing quarters with their grandmothers, grandfathers and more has increased 42 percent. The census reported a 75 percent increase in parents under the age of 65 who are now living with their adult children. This all translates to well over 3 million homes having made room for extended family in recent years.

By state, Alaska has shown the highest numbers of parents moving in with their adult children – a 167 percent increase, according to the report. South Dakota is on the opposite end of this scale…showing an increase of 7 percent. It’s interesting to me that even the state lowest on the list still shows and substantial increase. The change seems to be across the board.

Sharing a home represents an old-fashioned approach to economic challenge, experts point out. Donna Butts, executive director of Generations United, an advocacy organization.

“It is evolving in some ways back to how families used to live. That is, they’re living in multi-generational households, ” Butts said.

Source: ABC News, Barbara Pinto (09/23/08)

Changes to the Lending Industry, Changes to Our Economy

Mortgage companies have been working to help homeowners by “easing terms” on tens of thousands of home loans…reportedly about 79,000 of them in the past couple months.

To quote Reuters News, “Total workouts in August, which include new payment plans for existing contracts, slipped to 188,931 compared to July’s 192,220, according to Hope Now, the voluntary coalition of mortgage servicers and investors.

In all, the industry has performed some form of workout on 2.3 million loans since July 2007. About one-third of those were permanent modifications, Hope Now announced Thursday.

Paul Koches, general counsel of subprime mortgage servicer Ocwen Financial Corp., said a loan modification benefits both the borrower and the lender because losses on foreclosed homes are running at more than $100,000 per property. “It sure beats the alternative,” Koches said.

Nevertheless, the level of loan modifications varies dramatically in the industry, according to a Credit Suisse report released this week. Among 18 loan servicers, modification rates among subprime loans made since 2005 ranged from under 2 percent to nearly 18 percent as of August. Ocwen Financial had the third-highest level of loan modifications in the Credit Suisse report.”

My question this past week has been “Is this helping?” There’s the obvious effect of helping individual homeowners keep their homes, and on this level none of this should be scoffed at. I’m all for it. My concern, as many people these days, is for the economy as a whole. Being in the real estate business, what’s going on around us everyday touches a much bigger picture. It’s one of the things I love about the business, but when the bigger picture is a little scary and I’m in new territory, I get a little antsy is all. It’s of course going to be tough, if not impossible, to pin down the net effects of these mortgage and bailout measures.

Homeowners keeping their homes is good. A bailout to grease the wheels of our economy is good (wheel greasing is good right?). But when that stimulus dries up too, where will we be? Will we just do another one? Didn’t Japan do all this 10 years ago? Don’t quote me, but I think they did 10 or 11 stimulus packages like this. I’m no economist, but couldn’t we potentially learn a lesson here? Maybe the lesson is that bailouts make us feel better but don’t actually fix anything. Discussion please. In my best estimate, we’re in a dry spell now, and that’s not necessarily a bad thing. Economies go through recessions…they’re never fun actually, but we’ve done it before, yet we seem to be avoiding this slowdown like the plague. Does a continuation of foreclosures sound like fun? Does a credit freeze up sound like breath of fresh air to me? No, but since when has any economy been able to engineer themselves out of a downturn? Tell me, even one example, when it’s happened before that a society was so smart as to be able to steer it’s economy clear of any downturns, yes even depression from time to time. OR, tell me why or how we’re different, or smarter, or better. Just because we really, really don’t want a deep recession doesn’t weigh in as far as the market’s concerned. If we’ve created and depended upon false values in financials (we have) and real estate (we have), then those false values are going to have to work themselves out of our system at some point.

Some reading material for you

Every so often, Realtor.org publishes this list with the help of Amazon.com. It’s the top selling books on Amazon in the real estate category. It’s always good to know what your peers are reading. This is an time to concentrate on the essentials of our business. Surely education is on our list of priorities, right?

I find it interesting how old some of these top titles are. Some of them have been on the shelves for many years. I remember reading #10, What Every Real Estate Investor Needs to Know about Cash Flow… And 36 Other Key Financial Measures, several years ago. In the business of real estate, time is always of the essence, but some content never goes out of style. This is one of the classics in my opinion. I’m surprised sometimes how many of us are not privy to the real definition of NOI (Net Operating Income), for example. The very basics of real estate investing are here. It teaches you how to competently analyze properties on a cursory level. It also gives you all the tools necessary to go as deep as you want. What I like even more about this book is how it offers free downloads of some very simple but effective tools you can use to analyze different opportunities automatically.
 
Another on this list I can personally vouch for is The ABC’s of Real Estate Investing. I haven’t made up my mind quite yet how I feel about Kiyosaki himself, the creator of the Rich Dad franchise. But the content he and his team have produced has definitely been helpful and motivational to millions on a consistent basis. And I’ve found his team of advisors, who also write books for the Rich Dad library, are top notch. This book is no exception. What I found most interesting about this particular piece was that Ken McElroy, the author, takes the mysticism out of investing in property nationally and even globally. It’s a step I haven’t yet taken myself, but in reading the book, I learned that I do indeed have the tools to buy and manage property in other states and other countries. It’s a step that intimidates many investors, but McElroy drops the bomb on how simple it really is. There’s no magic, just math and step-by-step instructions.

The next on my list is SHIFT. It’s gotta be. As soon as I finish The Lexus and the Olive Tree (a great book on globalization by Thomas Friedman). I’ve loved Gary Keller and company’s Millionaire series. You know the red book and the blue book. We’ve all learned great principles from them so far. I have a copy of Flip, but I haven’t read it yet. I’m not really considering a flip anytime soon However, SHIFT couldn’t be more timely. I was invited to the launch thing they did in Chicago but I wasn’t able to attend. I heard the event went down really well.

It’s weird how impossible it is to calculate the actual return on investment when it comes to reading good books. How much money have I made from what I learned in The Millionaire Real Estate Investor? And how much will I continue to make for the whole of my career? It’s impossible to calculate. But when you compare it to any other investment, the ROI’s gotta be good! And what’s more, the return is always positive. Knowledge gained and applied through reading never results in a loss. If investing without risk exists, it exists in books. Anyway, here’s the list:

1. The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It , By Robert J. Shiller

2. The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It (Kindle Edition) , By Robert J. Shiller

3. Rich Dad’s Advisors®: The ABC’s of Real Estate Investing: The Secrets of Finding Hidden Profits Most Investors Miss (Rich Dad’s Advisors) , By Ken McElroy

4. The Pre-Foreclosure Property Investor’s Kit: How to Make Money Buying Distressed Real Estate — Before the Public Auction , By Thomas Lucier

5. Home Buying For Dummies, 3rd edition , By Eric Tyson and Ray Brown

6. Real Estate Investing for Dummies , By Eric Tyson and Robert S. Griswold

7. Real Estate Finance & Investments (Real Estate Finance and Investments) , By William B Brueggeman and Jeffrey Fisher

8. SHIFT: How Top Real Estate Agents Tackle Tough Times , By Gary Keller, Dave Jenks, and Jay Papasan

9. Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis , By Mark Zandi

10. What Every Real Estate Investor Needs to Know about Cash Flow… And 36 Other Key Financial Measures , By Frank Gallinelli

10 Safety Tips for Real Estate Agents

Today I’ve included some safety tips I picked up from my reading this week. Source: Maryland REALTOR. Safety is a significant concern today. Don’t neglect common sense, but sometimes it’s more than common sense that’s necessary. Be smart and educated. That means occasionally taking a few extra steps. It ALSO means on occasion saying no to a client you don’t know who wants to meet you at an REO with no electric, in the country, at night. Duh, you say?

You’d be surprised how often we skip the most basic common sense stuff. We tell ourselves how unlikely it is that the person is going to be a bad guy. My first two years in the business, I sold about 70 houses, and out of that sample of people, I worked with two child molesters, a rapist and a murderer. These are the ones I found out about. There may have been more of course. Who knows? I found out in each instance AFTER the fact. I was lucky enough to have had no compromises to my safety, but the experience taught me a lesson. The lesson is this: the bad guys ARE out there, and you ARE working with them. They ARE calling your office. It’s an inextricable part of the business. Therefore, getting educated and following through on personal safety is a job requirement.

1. Watch your advertising. To keep yourself safe from criminals posing as prospective home buyers, real estate practitioners should never advertise a property as vacant. You also should never print your home telephone number on a business card.

2. Meet at a public place. When meeting clients for the first time, have the introduction at an office environment and at a public place.

3. Find out about the customer. During that initial meeting, request identification, citing company policy as the reason. Find out as much information as possible about the would-be buyer — such as place of employment — before taking him/her on a showing.

4. Let others know where you’re going. Provide a colleague with your itinerary.

5. Take your own car. Insist on driving your own vehicle to the property.

6. Follow, don’t lead. Once at the listing, the prospect should be allowed to take the lead in exploring the home, as you maintain a safe distance behind. However, it is best not to follow prospective buyers into basements or other confined areas.

7. Keep your cell phone close and ready. Real estate agents also can improve their safety in the field by keeping a charged cell phone, with 911 on speed dial, on their person at all times.

8. Check in. Someone in the office should check in periodically with you. Have a code word that you and your office know, which when used, signals that you are feeling uncomfortable or threatened.

9. Don’t go solo. It is good practice to avoid working solo at public open houses.

10. Trust your instincts. If you’re picking up a bad “vibe,” simply walk away from a listing or showing.

Fed May Lower Rate to Zero

San Francisco Federal Reserve President Janet Yellen said the Fed could lower rates below 1%, and that they could reach as low as zero amid a weak economy. The Fed has been keeping interest rates very low, but most people aren’t talking about the fact that this is artificial. If YOU were to loan money at zero percent interest, how much money would you be making? The answer is not “nothing”…the answer is that you would be LOSING money on every dollar you lend at that rate. Truth be told, they’re losing money at CURRENT rates. This is just my opinion of course, but it’s bad financial policy.

There seems to be consensus on the fact that band-aid solutions are going to be of some lasting value. Why is that? How is losing money our genius plan? No one wants to see interest rates go up, but we’re pumping trillions into our economy to “stimulate” activity. There are going to be significant long-term inflationary consequences to all these endeavors. We cannot AFFORD to have artificially low rates. We look to consumption as a cure all. It represents the majority of our GDP. But maybe stimulating more and more borrowing is not the fix we think it is. Maybe a dollar borrowed, as it turns out, is NOT a dollar earned. Does anyone disagree with this?

Bring on the Downturn
 
We’ve been talking a lot about housing crisis, credit crunch, blah blah blah. Well at least I’ve been talking a lot about it lately. What I haven’t heard a lot of real estate professionals talking about lately is doing deals. Turn that frown upside down. It’s easy to get wrapped up in negative things, especially when so much has changed negatively over the last year. But let’s keep our eye on the ball, shall we? Why are we in this business? Hopefully our heads are in this for the right reasons. If you’re here for the easy money, you’ve already quit, and you’re probably not going to be reading this. You know a lot of people have left the business lately. To me, that’s fine. I don’t like to hear about anyone having a hard time, but I’ve not come across anyone with a significant real estate operation who’s ready to pack it up. It’s the peripheral agents who are getting out of the business these days. When you see the numbers of agents go down, and when you see sales get soft, don’t let it make you think your head’s on the chopping block and that you may be next. In my experience, the real professionals don’t blame the market. We know that success can be had no matter what’s going on out there. Can we ignore what’s happening out there? Of course not. Don’t take me to mean that you can just go out and do whatever you want and you’ll make tons of money. That’s never been the case, even when the market was hot. You have to be creative and adjust. Let’s be realistic, the market has slowed down, and it’s a good thing. Cooled off prices are going to bring a lot more buyers back into the fold once credit starts moving again, and the deals we’re able to do now are going to be for real…real homeownership, to homeowners who can and should be buying, into a home they can actually afford. I like that kind of thing. And those are the kind of deals I’ll be happy to be a part of for years to come. Bring on the downturn. Real estate is not an easy business. But it’s now more than ever that buyers and sellers need a real professional in their corner, helping them make sure they get it right. Our business (my business) doesn’t have the same volume it did last year. We’re focusing on quality, education, systems…the basics. This season is making us the strongest team we’ve ever been.

Conforming 30 yr. fixed - 6.125% (assuming credit score of 740…rates may be higher for lower credit scores)

Conforming 15 yr. fixed - 5.875%

FHA/VA 30 yr. fixed - 6.50%

Non-Conforming Jumbo 30 yr. Fixed - 7.375% (6.875% with 1 pt.)**

**certain level of banking relationship with Wells Fargo required – requires a minimum credit score of 700

As always if I may help you or your clients in any way please feel free to call on me at your convenience.  I look forward to the opportunity!

The Knowledge, Experience, and Expertise to get the job done “Wright”!

Andrew L. Wright
Home Mortgage Consultant
Wells Fargo Home Mortgage
S3901-028
4167 N. Scottsdale Rd.
2nd Floor
Scottsdale, AZ 85251
602.692.0344 Tel
866.584.4541 Fax
Andrew.wright@wellsfargo.com
http://www.homeloans.com/wfhm/andrew-wright