East Bay Blog

How many people saw a buying opportunity in the stock market on October 20, 1987? The day before, on Oct. 19^th the Dow Jones fell 22.6%, it was considered one of the worst stock market crashes in history. The drop in the Dow during that crash was 508 points, and the Dow was at a little over 2,000 points back then. Now we are at almost 13,000 on the Dow, and I can guarantee that it was a huge buying opportunity. Yet people stayed out of the market during that time due to FEAR and PANIC, and I’m starting to see those same emotions enter the housing market.

Everyday the news is filled with horrible housing news, and the psychology is spreading. You hear about lenders going bankrupt, and then how foreclosure are up, and today how even the largest mortgage lender, Countrywide Financial is starting to have credit problems, and on, and on…. It’s funny but the pendulum has completely swung the other way in regards to housing. A couple of years ago, it was ridiculous how hot real estate was, multiple offers everywhere, houses going up 10% per month, etc… We are now at the opposite of that, and just like all of those investors who wished they had sold at the top, we are entering a time when people will look back and wish they’d bought at the bottom. I am now seeing even well qualified borrowers with good credit and sizable down payments having difficulty securing a loan. Loans are still there, you just have to work a little harder to get them. The lenders are scared and when emotions enter business decisions, it spells opportunity.

So how does this affect you, the East Bay Real Estate Blog reader? Well for one, buyers, start looking for those deals. If you are planning on buying Real Estate in the near future, now is the time to start looking for the opportunities. In certain areas I am starting to see a glut of bank owned properties and short sales. These are areas where aggressive negotiating can land you some cheap real estate. Every situation is a little bit different, depending on what you plan to do with the property, there are different tactics to how you put deals together. Work with someone with knowledge and experience to help you find those deals now, while we are near or at the bottom.  Sellers, don't panic be patient and smart about your property.  Use a good REALTOR to help you sell your home.  There are buyers out there, you need to market your home extensivley, make sure you highlight what sets your home apart, and price your home right the first time.  Read my previous blog about doing it right the first time, this is important.  Don't hesitate to give us a call if you need help.  As usual your comments are always welcome, until next time…

For the last several months I have been talking to some people who are in trouble with their mortgage payments. These people tend to have purchased in the last two years, and have an adjustable rate mortgage that recently reset. Most of these people also took advantage of 100% financing at the time of their purchase. The majority of the people I am seeing in this kind of predicament tend to be people that used sub-prime financing, and were first-time homebuyers. These people were told by lenders that they could easily refinance once their rate changed. The problem is that lenders have become difficult when it comes to approving loans, and with the recent adjustment in property values, some people now owe more than their home is worth.

So, what are the options for these folks? If they can’t refinance and can’t pay, they have three options, renegotiate your existing loan, sell your home, or lose your home through foreclosure or forfeiture. Let’s start with the best option.

1. Renegotiate your existing loan. This is probably your best option. As banks are seeing their inventory of homes grow, the last thing they want to do is take your property. Give your lender a call and ask for a renegotiation. What’s the worst that can happen? They say “no”. Most lenders will not be too accommodating, so it may be a long shot but it’s worth a try. Also, some lenders may not even talk to you about this until you’ve missed several payments, at which time your credit will start to suffer, so be prepared for that.
2. Sell your home. If your property is still worth more than you paid for it, you are in good shape. Just sell your home and move into something more affordable. If your home is not worth enough to cover the loans on it, you’re in a short sale situation. Contact your real estate professional to get an accurate assessment of the current value of your home. If you are going to proceed with a short sale I recommend you speak with a lawyer and tax professional in addition to your Realtor. There will be tax implications for selling your home in a short sale. You may have a large tax bill ahead of you for debt forgiveness from the lender… Be sure to get legal and tax advice. If you are in this situation and need help, give us a call, we can help.
3. Lose your home through foreclosure or forfeiture. If you find that your lender is not going to approve your short sale and will not renegotiation your existing loan you may have no choice to but face foreclosure. If you are in this situation, try to give you property back to the bank before the foreclosure sale. This may avoid a foreclosure hit on your credit. Give you lender a call and let them know your situation, see if they would be willing to take the house back prior to a foreclosure sale.

All of these situations are difficult, but it is the reality that some people find themselves in currently. The best advice I can give is FIRST talk to professionals i.e. a lawyer, a CPA, and a Realtor. Also, don’t wait till the last minute. If you wait until you have received a Notice of Default, it may be too late to do anything. If you need help, give us a call, until next time…

If you’ve been keeping up with the news lately, you’ve heard about all of the doom and gloom in the Financial Markets especially in regards to Real Estate. The last couple of weeks have been especially harsh with the big stock market drops of last week, the cloudy comments regarding the credit markets by Bear Sterns executives last Friday, and then this week with the bankruptcy of American Home Mortgage. We also saw Wells Fargo raise their Jumbo Mortgage Loan rates from 6.75% to 8% overnight. Although this might not affect a lot of the country, we know that in the East Bay, most homes are a lot more expensive then the conforming loan limit of $417,000 which means most of our mortgages are Jumbo Loans. Wells Fargo is basically telling the market they want no more Jumbo Loans for now, read more about this at: http://money.cnn.com/2007/08/07/real_estate/jumbo_jam/?postversion=2007080710 With all of this bad news we see there are a lot of people who had plans to buy/sell but have put those plans on hold. Their hope is that if they wait for the Real Estate Market to change they can get a “better deal”.

What people have missed are the signs of stabilization in the market. When you click on the news tonight I’ll bet 90% of what you see will be bad news. Why is that? It’s because it gets your attention. People tend to be more interested in bad news then good. It’s the same with financial news. For Real Estate in particular we have had some good news lately that has not been publicized very well. First was the news early last week that pending home sales jumped 5% in June. Economists had forecast a drop. This was the biggest increase in 3 years. I’m sure many of you did not hear about that. This is good news for the real estate market because pending home sales are a leading indicator. If more homes go “sale pending” you’re sure to see more homes sold and that will show as an increase in activity when the home sales report comes out next month. Today we also saw that mortgage demand jumped for the first time in 3 weeks. That jump puts mortgage demand at the highest level since early June. Another report today showed that although U.S. homes sales will fall further this year than expected, prices will drop less sharply than previously thought. I did see the headline about homes sale falling, but I had to dig into the article on CNN before I read about the price drop being less than expected. Once again, the headline shows bad news to get our attention. Any other news gets buried deep within the news article, or left out completely.

You don’t have to take my word for it. Go online and see how easy it is to find bad news about any topic, then look for some good news. I’m certain the bad news is a lot easier to find. So my take away for today is this, if you are one of those buyers waiting on the sidelines for prices to drop in order to get a “better deal”, when will you know that time has come? No one can time the market. If all you see if bad news, you will feel comfortable in your decision to sit out the Real Estate Market for now, however a better strategy would be to start looking for signs of stabilization. Those signs are starting to appear. If you are waiting to see good news in the headlines, you may be waiting an awful long time. Until next time…