Have we HIT the bottom of our BAD market?

April 8th, 2009
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As part of our commitment to help our clients make good real estate investment decisions, David Harts Realty has developed a number of graphs showing trends in today’s market. These graphs represent Single-family home transactions in Sonoma County over the last four years.   Residential Listing and Sales Activity by Month This first chart (See Below) shows a dramatic change occurring in today’s market. Look at the green line “Contingent/Pending” which represents homes that have been placed in the market and currently have a written agreement between the buyer and seller. These houses are in escrow right now and as they close, they will become “Sold” homes. We have never had this many homes in escrow in Sonoma County before, this is significant. Notice how in the past three years, this green line stayed fairly close to the red line which represents “Sold” homes, but early in 2008 these two lines started to separate. This is because the length of time the average home sits in the escrow process waiting to become a “Sold” home has gotten longer.  Escrow times are longer today for many reasons including more stringent lending policies and in the “Buyers market” that we have now, buyers are asking for more time to make their inspections and work through the escrow process. More significantly, however, are the large number of “Short Sales” occurring in today’s market. The escrow process for Short Sales is typically four to six times longer than a normal sale.  This longer escrow causes a disconnect between the two graph lines. In addition to longer escrows, Short Sales have a much lower success rate than a typical sale primarily due to the banking industry’s failure to develop workable processes to accommodate this type of transaction. This low success rate means that although we are seeing a much higher number of homes going into escrow, many of these escrows will fail and go back on the market, typically as bank owned properties. Still, even with an anticipated higher rate of escrow failures, I think this huge increase in the number of “Contingent/Pending” almost certainly predicts a marked increase in the “Sold” home statistic over the next few months. This increase in “Sold” homes reduces the glut of home inventory in the market today and helps us return to a more normal “Balanced” market. Stay Tuned !!!        Residential Total Listings/Sold and Months of Inventory This second chart shows the volume of “Total” listings (blue line). These are all listings in the market at any point in time and include New, Contingent, Pending listings. The red line at the bottom of the chart shows the volume of homes “Sold” over time, which by it’s very nature would be lower than the number of total listings in the market. What is important in this graph, is the RATIO between the number of homes in the market and how many of these homes sell each month. This ratio is often referred to as the “Months of Inventory” in a market. The green line in this graph represents the Months of Inventory for our market and many market analysts suggest that a “Balanced” market for Sonoma County is 5 or 6 months of inventory. Look at the level of this inventory in 2005 which was part of our “boom” market. At that time the inventory level was running very low at around 2-months of inventory. This represents a strong sellers market which tends to boost prices higher than normal and we certainly saw much of that in 2004 and 2005. Over the next few years, this line trended higher and higher as the market cooled. But look at what happened in early 2008; the inventory peaked and has been trending downward since then. While (as of 3-31-09) we were still above the “Balanced” range (we have roughly 7.5 months of inventory), look at the TREND and how much better we are today than we were at the peak of the market in 2008 with almost 16 months of inventory in the market. Over the last four months we have been hovering at around 7-months of inventory which is not too far from a return to a normal market. We will keep an eye to these trends and provide market updates on our website the Santa Rosa Real Estate Blog http://davidhartsrealty.com/wordpress/

First Time Buyers, Lending, Market Statistics, Uncategorized

Are lenders making it impossible to buy a home?

March 27th, 2009
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Money is CHEAP today with mortgage rates this week running around 5.2% for a 30-year fixed mortgage. Still, people are hesitating to buy a home because the word on the street is that loans are hard to get.

There is some truth to this urban message; According to the Mortgage Bankers Association, 40% of all loan applications are currently denied.  The minimum FICO score required to qualify for a mortgage has been rising steadily over the last year. Larger down payments are now required for a typical mortgage compared to a year ago.

So why bother? Why waste your time thinking about buying a home?

Here is why; Everything is on sale. This is the biggest sale many buyers have ever seen. Prices for real estate are lower today than they have been for over 10 years.  There is PLENTY to choose from. With the number of homes for sale at record levels, you CAN find the perfect home and get it for a great price. Sellers are WAY more willing to work with buyers and are very accommodating for qualified buyers. Asking the seller to leave their closet full of Armani suits may be a bit much, but most reasonable requests will at least be considered.

As I said above, interest rates are INCREDIBLY low. Rates are floating around the lowest rates in history, rates we have not seen since the end of World War II.

You have to live somewhere and right now in many areas, buying a home is LESS money than renting. Many renters would actually SAVE money on their housing costs buying in today’s market.

So what do you do? Do your homework. Find a good local lender and sit down with them for 20 min. and they can tell you what you will qualify for in the way of a loan. If you don’t know any great lenders call me I have many I can suggest.

Once you know what you can qualify for, find a great real estate agent. A great agent can help you identify the best deal in the best neighborhoods and walk you through all the paperwork with very little stress.

Call me TODAY at 707-327-9407 and I can answer any question you have about buying a home!!!

First Time Buyers, Lending

One-half percent down payment?

March 14th, 2009
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Lately it seems like all the real estate news is focused on the changes in the financing of a home. Perhaps that is as it should be considering how fast things are changing in this area. The Obama Administration is making changes left and right with the hope of getting some of the excess housing inventory SOLD!!!

Some of the new programs include a new one-half-percent down payment program called the “First House Program” that allows for 95.5% financing. There are quite a few restrictions to this program, so talking to a good lender is where you would want to start. If you don’t know any, I know a few and would be happy to provide contact information. One of the restrictions is the purchase must close escrow by June 5th2009, so you have to get going!!

Many of the new incentive programs have very short durations and as of today, the best ones expire at the end of 2009. The Press Democrat has been reporting increases in the number of homes sold each month, which is required for a turn around in the market. All this points to 2009 being a good year to buy a home for many people. That said, the ability to get financing for that home purchase is one of the big wild cards, which brings me full-circle to my opening statement. I expect we will be hearing a lot about new financing programs, rules and restrictions. I will try and write more as these things change.

First Time Buyers, Lending, New Laws

The 2009 Economic Stimulus Bill may help first-time buyers get a home

February 17th, 2009
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Uncle Sam wants YOU to buy a home.

In fact, they want you to buy one so badly they have added yet ANOTHER incentive for you to do so. The $790 billion stimulus package approved by the House and Senate includes benefits for any one buying a home, but is especially beneficial to first-time homebuyers. Among other things, the bill has created a true tax credit for first-time buyers that give them an $8,000 credit if they purchase a home in 2009. This credit does NOT have to be paid back as long as the buyer stays in the home for at least three years. A first-time buyer is anyone that has not owned a home in the last three years.

What this means is that for a first-time buyer, the Government will pay for a significant portion of your down payment. For example, according to BAREIS, the Median price for a home in Sonoma County in January 2009 was $290,000. If you buy a home at this price and use the FHA loan program with its low 3.5% down payment, your down payment would only be $10,150. At the end of 2009, the Government would give you back $8,000 of this money. Your effective down-payment would only be $2,150, or equivalent to less than two months rent. In addition to this, the entire down payment could be a gift from a relative.

When you combine this new incentive with the INCREDIBLE features of an FHA loan, it really makes sense for anyone that is considering the purchase of a home to take a serious look at what is available in the market today. Contact me at 707-327-9407 or by email at: davidharts@sbcglobal.net and I can help you get started in understanding today’s market and help you find a good lender that will treat you fairly and honestly.

For more information about the great benefits of an FHA loan today, read my post: The Advantages of the FHA Loan

First Time Buyers, Lending, New Laws, Tax Advantages , ,

Advantages of an FHA loan

February 12th, 2009
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Have you heard about the new FHA loan programs?

The FHA loan has quickly become the “loan of choice” for many buyers in today’s crazy market. The FHA loan pretty much disappeared in California about 15 years ago because the FHA loan limits had not kept up with the price of homes.

Well  MUCH  has changed recently. As the newspapers are quick to point-out, the price of homes have dropped significantly in the last three years, and this combined with higher loan limits for an FHA loan make this a very useful loan today. Today’s loan limits for an FHA loan are $520,950, AND the Obama administration may change this to even higher limits later this month. This means that even with a minimal 3.5% down payment, today you could have a purchase price of $539,844. That will buy plenty of home in today’s Sonoma County real estate market.

Here are some other benefits available from an FHA loan;

FHA loans are assumable!!! This means that when you go to sell your home, you can offer a qualifying Buyer the same great interest rate that you got, regardless of what the current interest rates are the day you sell your home. Today’s incredible low rates will probably not be around in a few years, so YOUR home will be very attractive to potential buyers.

 The Buyer’s FICO scores can be lower for an FHA loan than those for a conventional loan. This means more buyers will qualify.

The allowable debt ratios are higher for an FHA loan than the debt-ratio limits imposed for conventional loans.

The FHA loan requires a smaller down payment: FHA-insured loans have a low 3.5% down payment and the money can come from a family member, employer or charitable organization as a gift. Most conventional loan programs don’t allow this.

FHA has eliminated unnecessary requirements to make minor repairs on homes and the current requirements are quite easy to follow.

 The seller can contribute up to six percent of the home’s price toward the Buyer’s closing costs.

 Mortgage insurance is funded into the loan, meaning a premium of 1.5% is added to the loan balance instead of being paid out-of-pocket. In addition, a small portion for the mortgage insurance premium is added to the monthly payment, but it is far less than private mortgage insurance monthly premiums.

I hope this helps with your questions about the FHA loan. I do know several lenders that are quite good with FHA loans and offer very competitive rates. Call me at 707-327-9407 or email me at davidharts@sbcglobal.net if you want to learn more about the incredible opportunities in today’s market.

First Time Buyers, Lending , , ,

Is it time to reduce your property taxes?

February 9th, 2009
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What’s up with my Assessed Value and Taxes?

Each year the Sonoma County Assessor’s office will re-evaluate the “Assessed Value” of your property for the purposes of calculating your property taxes. Historically the Assessor has worked under the philosophy that property values increase each year which generally has been true. In the last few years, however, this has NOT been the case for many homes in Sonoma County. Yet despite the fact that the median price for homes has steadily declined for several years, the Assessor’s opinion of the value of YOUR home may NOT have dropped, or may even have increased. If you feel that the Assessor  SHOULD have decreased the assessed value of your property (and therefore lowered your taxes) you can request that the Assessor take another look. This is called an “Informal Request for Decline”. 


How do you request a review of your property valuation?

There tends to be a quite a bit of confusion about this process and which comparable sales are allowed, so I have created a quick review of the process and links to the required documents.

 The purpose of the Informal Request, is to show the property value of your home, as of January 1st of 2009, is lower than the current assessed value. This is done by filing a Prop 8, “Informal Request for Decline” document with the Sonoma County Assessor’s office. This is a fairly simple form which you can use to show the sales prices of three comparable properties which have sold in your area between April 1st of 2008 and March 31st of 2009. This is a one-year time frame from which to select your comparable sales. These three sales should support your request to the Assessor that the tax valuation of your property should be lower.

 The Assessor will review the information that you provide and will calculate an opinion of the current value of your property for the purpose of assessing taxes. In doing so, even though any sale that occurs within the one-year window CAN be used, the Assessor will place the highest relevance on those sales that occurred CLOSEST to January 1st 2009, but no later than March 31st 2009. This means that a comparable sale that occurred in December of 2008 will have higher relevance than a sale that occurred in March of 2009 because the December sale is closer to the valuation date of January 1st 2009. A sale that occurs in September 2008 can be used because it did occur within the 12-month window, but a sale that occurs on April 1st 2009 cannot be used because it is past the March 31st cut-off.

 Here is a link to the Prop 8, “Informal Request for Decline” on the Assessor’s website.

 The deadline for filing this form is October 31, 2009. 


What if you disagree with the Assessor’s opinion of value?

The results of the Assessor’s “Informal Request” are completely up to the Assessor’s discretion.

If you disagree with the Assessor’s evaluation you can call them (707-565-1888) and discuss this, but more importantly, you may file a formal appeal with the State Board of Equalization Assessments Appeals Board. The Assessment Appeal Filing period is from July 2 through November 30, 2009

Here is a link to the “Application for Changed Assessment” as well as directions for filing the form.

 It is important to note that you have until October 31st 2009 to file the “Informal Request” and that if you disagree with this valuation, in Sonoma County you must file a “Formal Appeal” by November 30, 2009 (one month later). It is entirely possible (VERY PROBABLE) that the Assessor’s office will not have responded to your “Informal Request” before the deadline to appeal their decision has already passed.

For this reason, you may want to file the “Formal Appeal” at the same time you file the “Informal Request”, or at least no later than November 30, 2009, even if you have not received a result from the Assessor’s office. Once you do receive the result, if you agree with the Assessor’s valuation you may simply cancel the “Formal Appeal”, or leave it in place if you disagree.

 The State Board of Equalization has some good information about the appeal process, including several videos and publications.

 The Sonoma County Assessor’s office has posted a pamphlet “Residential Property Assessment Appeals“.

 If you need help with finding comparable sales for your neighborhood, you may contact me at 707-327-9407 or at davidharts@sbcglobal.net and I will be glad to assist you. You may also want to check-out my website (davidhartsrealty.com) where you can find tons of information about real estate in Sonoma County as well as the ability to search the local MLS.

 Please feel free to pass this along to anyone you know who may want to lower their property taxes.

 David Harts
David Harts Realty

Uncategorized , ,

The Difference of a Drop in the Median Home Price and Actual Home Prices

January 29th, 2009
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I am often asked by my clients to explain the connection between the “Median” home price for our area and actual sales prices. Often a client will say “I have seen the HUGE drops in the median price for homes in Santa Rosa, but prices in my neighborhood don’t seem to have dropped quite as much, why is this?

The reason is that the Median Home Price is used to talk about the market because it is an easy market-wide statistic.  This statistic works ok in a normal market when the percentage of homes selling in each price range are relatively stable from month to month. However, in our current real estate market, this stability has gone haywire.

I’ll illustrate with an example:
Let’s create a make-believe real estate market. In this simplified market there are only two kinds of homes; Affordable homes which sell for $400,000 and expensive homes that sell for $800,000. Normally, in this make-believe market, there are 10 homes that sell each month, and five of these sell in the $400K range and five sell in the $800K range. This means the median sales price for homes in this market is $600,000.

Suddenly, the sub-prime mortgage crisis hits this market and as a result, nobody buys any of the $800,000 homes, but ten of the $400,000 homes do sell. As a result of this, the median price for the homes sold is now $400,000. The median price for homes in this make-believe market has statistically dropped by 66%, even though the homes that did sell, sold for the same price as they had the month before.

This is an example of how the statistics being reported for a market like Sonoma County can make things seem worse than they really are. This is not to say that home values in Sonoma County have not dropped, they certainly have, but the drop in value for a particular home may not be as dramatic as the reported drop in the median home price for the market.

Distressed Properties Drag the Market Statistics Down

A large part of what has fueled the recent drops in median home prices for our area are the large number of distressed properties (Short Sales and Foreclosures) selling in the market today. The quantity of these distressed properties are not spread evenly throughout the price range of homes in our market, but are much heavier in the lower end of the market. The resulting sale of these distressed properties hurts the prices of other homes in the same price range. Also because a much larger number of these lower-priced homes are selling and fewer of the higher-priced homes are selling, the median price for Sonoma County has dropped significantly.

For this reason, if you are considering the sale of your home, it is critically important not to rely on statistics about median home prices, or other “market-wide” indicators, but rather to have a professional Comparative Market Analysis done for your home and determine the best price for YOUR home in YOUR neighborhood.

Uncategorized , ,

Lenders Get a Little Wacky Lately

January 20th, 2009
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As the current economic situation unfolds in Santa Rosa and Sonoma County, lenders are constantly changing the way they do business. This constant change is caused by many things such as new legislation, bank failures, lending requirements, market conditions, risk aversion, etc. The list goes on and on.

The result of these changes is that potential buyers are finding it hard to predict the qualifying requirements for a loan, the amount of time required for an escrow, or the final cost of the loan.

A recent change which I have seen in Santa Rosa and Windsor, is new auditing requirements which many lenders are putting into play. A lender “file audit” is simply the lender having a second person or department look through a buyer’s loan file prior to loan approval. In this audit, the lender checks that everything in the file looks correct and in some cases, the lender may require that certain information in the file be “verified” through a separate process.

A good example of this verification is when the lender will request a copy of the buyer’s tax returns DIRECTLY from the IRS and then compare the IRS document to the document the buyer provided directly to the lender. In this way, the lender is verifying that what the buyer provided is accurate and nothing has been left out. As one might expect, a small percentage of these IRS verifications show that the buyer “creatively modified” their tax returns or omitted pages. When this happens, it usually results in a loan denial.

Historically, a lender would only request IRS verification of tax returns for something like 2%-4% of their loan applications prior to approval. Just in the last two months this number has jumped to around 40% and for certain types of loans it could go as high as 60%. The problem, of course, is that with this new flood of tax return requests, the IRS is swamped and cannot get these documents produced in the same time frame they did when only 2% of the loans required them. Add to this the fact that most lenders don’t really have the manpower to quickly process this huge change in paperwork either. This is causing new delays in closing escrows.

As a result of these extended delays, I have recently seen loans that are not ready to close within the time allowed in the Purchase Agreement. This creates the possibility of the Buyer being in default of the agreement and putting their earnest deposit at risk. The remedy to this is to get your loan approval EARLY and be sure that the contingencies written into your Purchase Agreement are structured to protect you in the case of a lender issue. A good real estate agent can help you identify problems like this and help write a strong purchase agreement to protect you.

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