All posts by jd

Real estate broker, civil engineer and general contractor.
Real Estate

Have We Hit the Bottom of the Housing Market?

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Another indicator that we may be nearing the bottom of the housing market is builder confidence in April made its most dramatic increase in nearly seven years, according to an industry report.

According to  CNN Money

“The Housing Market Index, a survey-based measurement of sales, as well as sales expectations, rose by more than 50% in April, according to the National Association of Home Builders, which compiles the index with Wells Fargo.

The index rose to 14 from its prior level of 9, which was the biggest increase since May 2003

“After a very long period of extreme distress, it’s given the builders some sense of reaching a bottom,” said David Crowe, chief economist for the association”

This is just one of several indicators that we may be bottoming out. Sales in Nevada County have been increasing in April to a point where we have 199 pending sales on the Nevada County Multiple Listing Service (MLS) as of yesterday.

There are large home price changes occurring, some as much as minus $600,000 or more. These large price reductions are in all probability, based on sellers setting their own price based either because of emotional reasons or basing their price on what houses sold for a few years ago. In a declining market, it is very important to list your home a little below the market.

You should have a good market analysis of your home made by your real estate agent and base your listing price based on facts, not emotional reasons, how much money you need to get out of your home, or what you think your house is worth. (I know, sometimes that is hard to do) It’s an un-fortunate fact of life that the market sets what a house sells for and not what we want to sell our house for, No?

Oh, to answer if we have hit the bottom of the housing market, I don’t know and I doubt if anyone else does either. But it sure looks close to the bottom.

Real Estate

Vandals Strip Vacant Homes in California

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This foreclose home has been stripped of the oven, microwave and range vent, together with 29 missing door knobs, 28 light fixtures, 10 floor registers, eight faucets or shower heads and one air conditioner
This foreclose home has been stripped of the oven, microwave and range vent, together with 29 missing door knobs, 28 light fixtures, 10 floor registers, eight faucets or shower heads and one air conditioner

In real estate It wasn’t too long ago that the biggest game in town for vandals was to strip vacant homes of copper wire and copper plumbing. With copper prices down and so many vacant homes being sold by banks in expensive neighborhoods, the newest game is to strip a house of anything of value as shown in the above picture.

A home in Encinitas – costing $13 million to build and furnish was foreclosed by the bank. It failed to sell at a bank foreclosure auction with a starting bid of $2.3 million. The home left unguarded by the bank, is missing an estimated $1 million worth of fixtures, from antique doors to top of the line toilets.

The 16,000 square foot Spanish hacienda style house is on 1.24 acres in rural east Encinitas. Suzy Brown, an electrical engineer who built the house, surrendered title after not making payments for more than a year and moved out March 22.

“It’s like a car up on blocks,” sheriff’s Detective Steven Ashkar said. “It’s been stripped.”

There are a string of burglaries targeting unoccupied homes in the East Bay Area according to police reports. The thieves are going after “staged” homes, full of expensive furniture, bedding and decorations. .They could be possibly driving, looking for homes for sale, looking for for-sale signs in the yard. Another ploy is to go to an open house that is unoccupied, unlock one window or door for easy access so they can come back to clean out the house.

They could also be going online and looking at homes for sale in particular areas, and doing the virtual tours with the Internet,” explained Orinda Police Sergeant Andre Charles. They could also be going online and looking at homes for sale in particular areas, and doing the virtual tours with the Internet,” explained Orinda Police Sergeant Andre Charles.

Continuing on:

Police in Indio, in Southern California, arrested three people accused of breaking into a dozen houses for sale in nearby communities. They recovered more than $250,000 worth of stolen goods, including artwork.

A home stager in Emeryville, Calif., says thieves took about $11,000 worth of furniture and accessories she had brought to spruce up the homes, “Its devastating,” she says.

So if you are going to sell a home that you don’t live in, be sure and have an alarm system and set it. Tell your real estate agent to inform everyone that nothing is to be removed from your home. Depending on the value of your home, you might want to contract with a security company to guard your home. That’s what the bank did in Encinitas, after they lost a million dollars worth of property.

Real Estate

Derivative Markets….an explanation

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 Warren Buffet in his letter to the shareholders in 2003 described derivatives as “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” His vision of derivatives being destructive is so true, as we live in 2009, in the ruins of financial institutions. 

I received this e-mail from a friend of mine and thought it was a great explanation of what derivative markets are and decided to put this on the website. Enjoy.

Heidi is the proprietor of a bar in Detroit.

In order to increase sales, she decides to allow her loyal custormers-most of whom are unemployed alcoholics-to drink now but pay later.  She keeps track of the drinks cosumed on a ledger, thereby granting the customers loans.

 Word gets around about Heidi’s drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi’s bar and soon she has the largest sale volume for any bar in Detroit. By providing her customers’ freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit. 

He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank’s corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then traded on security markets worldwide. Naive investors don’t really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. 

Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nation’s leading brokerage houses who collect enormous fees on their sales, pay extravagant bonuses to their sales force, and who in turn purchase exotic sports cars and multimillion dollar condominiums.

One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due to his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts.

Therefore, Heidi cannot fulfill her loan obligations and claims bankruptcy. DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND performs better, stabilizing in price after dropping by 80%. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.

The suppliers of Heidi’s bar, having granted her generous payment extensions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers. The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.

Finally an explanation I understand……

Hiking, History, Lakes in nevada county, Recreation

Lake Englebright in Nevada-Yuba County

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Englebright Lake offers a great deal of recreation including boating, camping and fishing. It’s located in Nevada-Yuba Counties, California. The lake was named after Harry Lane Englebright (January 2, 1884-May 13, 1943) who was a politician that served in the United States House of Representatives. He was a House minority whip between 1933 and 1943.  He was a mining engineer prior to entering politics in 1926 and was reelected every two years for the rest of his life.

Englebright Dam is a concrete arch structure and was constructed for the storage of hydraulic gold mining debris. The dam spans 1,142 feet across and is 260 feet high. The dam is in the steep Yuba River gorge known as the Narrows, holding back a 9 mile long lake with a surface area of 815 acres. It has 24 miles of shoreline and is at an elevation of 527 feet.

The shoreline is rocky and steep, with some areas of sandy beaches with pines and oaks.

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Operating Hours:

Office hours are Monday – Friday 8:00 a.m. – 4:00 p.m. The park is open all year.

Camping:

Camping at Englebright Lake is unique as all campsites are boat-in only and located along the lake’s 24 miles of shoreline. Each campsite consists of a table, fire grill, lantern hanger and level spot for tents. Portable restrooms are centrally located in all campgrounds. Drinking water is available near each launch ramp.

Group Camping: (reservations required)

Point Defiance Recreation Area features a group campground that is available by reservation only. To help protect our natural resources, groups are limited to 50 people. Call the park office for reservations.

Boating:

The lake provides plenty of space for the boating enthusiast, water skier or angler. Boats can be launched from one of two boat ramps located near the park’s entrance. Due to narrow canyons and sharp bends, the upper 4 miles of the lake are not suitable for waterskiing and/or towing any type of inflatable device. Therefore, these activities are restricted to the lower five miles of the lake. A counter-clockwise direction of travel is strictly enforced for the safety of park visitors. Types of boating allowed, power, row, Jet Ski, windsurf, canoe, sail, water ski, house, and inflatable’s are allowed. There is a full service marina with launch ramps. Rentals: fishing, canoe, water ski boats, houseboats & patio boats. There are also docks, berths, moorings and gas.

Fishing:

To the expert or beginning angler, Englebright means fish. Game fish such as rainbow and brown trout, large and smallmouth bass and Kokanee salmon abound in the lake’s clear, cool water. Catfish and sunfish can also be caught. Fish may be taken from the shore or boat by bottom fishing or trolling with bright, flashy lures.

Day Use:

Picnic facilities are available at the Narrows Recreation Area. Each site has a picnic table, barbeque grill and lawn area. Enjoy a short scenic hike to the dam overlook area or along the less strenuous fishing access trail.

Ranger Programs:Group tours and ranger programs can be scheduled by calling 530-432-6427.
Boat-in Camping: (first-come first-served basis)

 

Contacts:
U.S. Army Corps of Engineers
P.O. Box 6
Smartville, CA 95977-0006
(530) 432-6427 or fax (530) 432-6418
Email: englebright-info@usace.army.mil

Skippers Cove Marina  (530) 432-6302 offers boat  rentals, mooring, gas, sewage pumping and store facilities.

Additional information on the amount of settlement from the gold mining days and run off are available by a recent study made by the USGS at
Bathymetric and geophysical surveys of Englebright Lake

Real Estate

Should I Walk Away from My House?

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    So your house is worth less then you paid for it. Maybe the value has dropped thirty percent or more. Are you thinking of just walking away from it because you feel you are just wasting money?If that seems like a silly question to you, it’s surprising to me how many people are actually saying that to me. When they pose that question, I ask them why they bought a home. Did they buy the home to live in or to make a fast buck?  I can’t seem to get a straight answer other then the value of their home has depreciated.  So here’s what I think:
    History has shown that real estate goes up and down. We are in a down cycle right now. In the 1980’s people were saying the same thing to me. I’m going to bail out of my house, it’s worth less then I paid for it.  Well, houses are worth more now than they were in the 80’s. Prices will increase in the near future. So here are some reasons to stay in your home.

    Pride of Ownership

    This means you can paint the walls any color you like, attach permanent fixtures and decorate according to your taste. Home ownership gives you and your family a sense of stability and security.

    Appreciation

    While this may sound silly with the real estate market decreasing in value at the present in  real   estate has its cycles. Long term it will increase in value, that’s a given. Why do you think so many investors are buying homes now? They realize this is a buying opportunity of a life time. They are there to make money.  Holding on to your house will make you money in the long run in my opinion. If you walk away from your home now, you wouldn’t be able to buy another one for three to five years.  Back to renting and your credit score drops like a rock.

     Mortgage Interest Deductions

    Yes you can deduct the interest on your mortgage.  Home ownership is a superb tax shelter and our tax rates favor homeowners. Interest is the largest component of your mortgage payment. Check with your accountant on this deduction.

    Property Tax Deductions

    IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.

    So my advice to you is, even if your house is worth less then you paid for it, so what, you have a place of your own to live in. Values of real estate will go up and it’s far better to have a place to call your own then it is to rent.

Real Estate

Banks Banking Their Foreclosures?

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Are the banks holding off putting some of their foreclosures on the market? It looks like they might be to keep the prices of the real estate market from plunging further. Another reason could be that it helps them appear more solvent then they really are.

According to the San Francisco Chronicle

“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.”

“There is a real danger that there is much more (foreclosure) inventory than we are measuring,” said Celia Chen, director of housing economics at Moody’s Economy.com in Pennsylvania. “Eventually those homes will have to be dealt with. If they’re all put on the market, that will add more inventory to an already bloated market and drive down home prices even more.”

In November of last year, Fannie Mae and Freddie Mac ordered their loan servicers and attorneys not to evict about 16,000 troubled borrowers or sell their homes until they implement a streamlined loan modification program. This might prevent some foreclosures, but the numbers of homeowners facing foreclosures have increased since then.

Where’s the bottom? As I posted yesterday, there are some signs of increased sales and improvement in the economy, so maybe we’re there and maybe not.

Real Estate

Signs of Life in the Real Estate Market

signsoflife

I keep track of the number of pending real estate sales in Nevada County daily and have noticed a healthy increase in pending sales lately. Although many of the sales are short sales and foreclosures, other properties are moving as well. With real estate market values depressed to its present level, buyers are coming back to the market. This includes first time home buyers and investors sensing a buying opportunity of a life time.

According to Rismeida:

“A run of encouraging economic reports that have recently been released may mean the worst, panic-inducing stage of the economic downturn is over. Emphasis on the word may. “I think there are signs of economic life,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, PA, said. “The downturn is no longer intensifying, and the clearest evidence of this can be found in the retail sector as retail sales have turned since the beginning of the year,” Zandi said.

New-home sales in February jumped 4.7% to an annual pace of 337,000 from a record low in January. February marked the first increase in sales since the summer, and the report added to a string of “better-than-expected” housing data, according to Wachovia Bank economist Adam G. York.”

I believe foreclosures will continue into the next year, as the Alt-A loans come due for readjustment. Some figures indicate that there may be as much as $600 billion in foreclosures still to come from the Alt-A mortgage loans made in the 2006-2007 years. Alt-A loans were the love child of lending institutions and Wall Street when subprime loans were getting a bad name. The subprime loans were repackaged as Alt-A mortgage, bundled and sold to investors. A majority of these bundled loans are now toxic and due to fail.

Real Estate

Mortgage Brokers Can Cost You More Money

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Using a reputable mortgage broker can save you time and remove some of the hassle in obtaining a loan.  However according to a study by the Department of Housing and Urban Development published last year, you may wind up paying more for your loan.

According to the study, borrowers paid about $300 to $425 more in fees when they worked with a broker as opposed to working directly with a lender.

If you are a home buyer, you may want to investigate mortgage options as opposed to using a broker by comparison shopping. This can be tricky, but be sure to include at least one credit union, a community bank and multiple national banks. You may have to spend several days doing this before you find just the right loan.

You should compare one type of loan at a time–for instance, a 30-year, fixed rate with no points. Their research should include a request for a guarantee that both the rate and the good-faith estimate will be exactly as initially presented. This standard could be difficult for a buyer to find, but it’s worth trying to find it, experts say.

If you get too confused, you can always go to a mortgage broker, they have access to multiple lenders and can lead you through the lending process rapidly.

 

Real Estate

The Sad Face of a Foreclosure

I was recently asked by an Eastern Bank to do a brokers professional opinion (BPO) as to the listing value of a property. This is not an appraisal, but a value based on six properties that are similar, three recently sold and three that are active that would compete for the property for which the bank wants a listing value.

 We had done an earlier BPO on this property several years ago when the home owners were in the process of building their home.  The bank had given them a loan to build their home and the homeowners wanted additional money to finish their home.

The market at that time was red hot and the value for additional financing was there, based on the value of similar properties in the area.  What a change, going back there now, the owners had left, leaving behind their dreams, broken like the thousands of pieces of garbage they had left behind. Yes, they had left behind a home unfinished, garbage strewn all over the property, vehicles left behind that had been cannibalized. To further complicate matters, it is off the power grid, and the home was provided power by a generator and solar panels, all of that gone, leaving behind only one battery in the living room.

The kitchen was unusable, with the stove inoperable, and in a big mess. I would estimate that before the bank can even put this house on the market, it is going to cost $15,000 to clean up the garbage, haul away the vehicles, (including a trashed RV).  Due to the poor workmanship on the home, the home being off the grid, the cleanup necessary, the bank is going to lose a tremendous amount of money. Of course, this foreclosure will further depress the market in the area, as all foreclosures are doing to all of our property values.