Tuesday, April 29, 2008

Buyer Beware

In most cases, the following people are directly compensated when you purchase a home: real estate agents, mortgage broker/bank, appraisers, inspectors, surveyors, title companies, pest inspectors, and to a lesser degree county recorders. Don’t forget that the majority of the media outlets, like newspapers, Internet sites, and radio also make money by advertising their services.

For them, it is always a good time for you to buy. I doubt these real estate service providers will ever tell you it’s a bad time to buy. So please keep in mind who pays their bills when receiving advice on the housing market. Just about everyone a buyer deals with makes money when they purchase a home. To make matters worse, the more expensive a home you purchase, the more some of these folks make. In other words, no one is truly looking out for the buyer best interest. Everyone involved in the transaction wants you to spend money, and the more you spend the better for them. Of course this isn't that different than other big ticket items, such as cars, but even then a borrower can go to Consumer Reports to get an unbiased evaluation.

Buyer's have much more control of their destiny compared to previous years, however there are still a great many pitfalls that await the uninformed and/or unprepared. Forbes recently reported that Sacramento is #2 in the nation for projected home value decline in 2008, and #1 in homeowner debt.

Initially this blog, was my way of coping with the frustration of waiting out the bubble…..but it has also evolved into an independent voice that advocates issues from the buyer’s perspective. When my husband and I bought for the first time, we were incredibly reliant all the folks listed above. We searched the Internet, but had trouble finding unbiased advice on what to expect. There are a so many “ins and outs” to the process that there were times when we didn’t even know what questions to ask.

We learned a lot from that experience, and as a result, I do my best to provide relevant commentary and data to those who are hoping to purchase a home. My hope is that this forum can provide them the knowledge to make a more informed decision (often those who comment know way more about a topic than I do). Like Consumer Reports, I do not receive any compensation or endorsements from service providers. Although I must admit, I am quite partial and advocate on behalf of affordable housing for all (lower prices).

We are also in the middle of trying to navigate the purchasing process ourselves, so I’m not just pontificating without any skin in the game. Instead, I am actively trying to find a home in this very messed up housing market and reporting on my trials and tribulations. But also note that I am not a paid professional in this field.

A Marketing 101 refresher for bank REO sellers and their agents:

1. In a buyer’s market, you are in a competition for buyers and buyers’ cash. The banks and agents that make it easier for a buyer to buy, will get more buyers for their REO’s, than the banks and agents who make it harder.

2. Every telephone call and email is a potential new customer for you. The courtesy and promptness with which you respond to that telephone call or email may make the difference between whether you get a new customer or forever alienate a potential new customer.

3. If you think you don’t need to work to get new customers because you have the cheapest product, you should save every dollar that you make now, because these times will not last and buyers will remember.

4. Banks: The conduct of your agents reflects on you. Choose carefully.

5. Agents: You have a fiduciary duty to hold your client’s (bank’s) interest above your own. If you have accepted more listings than you have the time or resources to properly service for the sake of more commissions, you are (in my opinion), breaching your fiduciary duty.


Monday, April 28, 2008

Do Unto Others....

Let me preface this by saying, Mr. BT and I disagree on this subject.

I have largely stayed away from the “walking away” topic, because it pertains more to sellers than to buyers. Paul’s comment this weekend, about how bank’s are more concerned about their bottom line and their shareholders, than treating customers with respect and dignity, made me reconsider.

With the disappearance of local banks, a mortgage has basically become a pure business transaction (its more less a commodity product that is purchased from a somewhat anonymous seller). If there is a failure to live up to the terms of the contract, there are remedies the bank can pursue (i.e. foreclosure). In theory, the bank should not enter into a contract if the remedy is not sufficient to satisfy the breach of contract.

These national banks do not care about ethical or moral obligations, only legal obligations (to creditors and shareholders). Their dealings with customers are purely a cost benefit decision (with some PR considerations thrown in).

So why are a bank’s customers held to a different standard? How can the bank expect borrowers to pay on their contract, even if it is to the detriment of their shareholders (i.e. their family), if it would not do the same?

Of course I am not talking about loans taken out fraudulently, where the borrower knew at the time they would not perform on the contract. I am talking about families that stretched too far, or didn’t have a big down payment, who are now walking away from their house because it’s makes financial sense.

Those who object to this line of thinking, tend to cite the “a (wo)man is only as good as their word” argument. In some cases I agree. If people were dealing with an actual human that they borrowed money from, and not an institution, I believe there is a higher moral obligation to do everything they could to honor that commitment. As that person would likely extend the same courtesy should the situation be reversed.

For those who “walk,” the right thing to do is to offer the house to the lender in good condition, and without a fuss (don’t make them kick you out). In my mind this is still a form of honoring the contract because you are facilitating the contract remedy process.

Sunday, April 27, 2008

More on bank arrogance

I don't know if this is bank or agent arrogance, but here are selected "instructions" from Keller Williams website of bank owned properties about "offer instructions" to buyer agents:

1. Buyer to be pre-approved by lender acceptable to seller. Call .... Buyer is under no obligation to use this lender. SELLER WILL NOT ACCEPT OFFERS WITHOUT THIS PRE-APPROVAL. We will not be following up with this Lender for you . Please have pre-qualification with the offer at time of submitting.

2. In addition to item 1 above, if the buyer chooses to use their own lender, then buyer is to submit a conditional loan approval letter with their offer and prequalify as instructed above. If the buyer is using 100% LTV financing, the approval letter needs to stat e the type of loan product that is being used and discuss it’s current availability and future availability as many 100% loan products are currently being fazed out.

3. If you have questions about availability of property please check MLS as we pride
ourselves in keeping it current. These type of calls are not returned due to volume!!

4. If you're wanting to know if there are offers on a property, please be advised that we
cannot return those calls due to the volume of contracts!! Please write offers as if there
are offers in; write your best offer!

5. If the property is currently winterized, it is the buyer’s responsibility at their expense to have the property “De- Winterized” for their home inspection and then “Re-Winterized” immediately after their inspections. You must contact Doug McKay at (916) 792-7751 to complete the de-winter/re-winter process. The cost is approx. $50 to de-winterize and $100 to rewinterize
and is payable to the vendor at the time the service is rendered. Any freeze/water damage incurred to the property during the De-Winterized time period for buyer’s inspection will
be at the buyer’s and buyer’s agent’s expense to correct.


Saturday, April 26, 2008

Lack of Common Courtesy?

Well, I am going to assume that our offer to the bank (which hasn't responded yet), was not good enough. They are holding the house open again this weekend (and had it open last weekend).

My question....do they just lack the common courtesy to respond to us (after all, their agent never returned any calls), or are they holding it open one last time to shop the offer?

I guess we will find out on Monday (when my agent suggested we would get an answer).

Update: We stopped by both Saturday and Sunday when it was supposed to be open, according to www.Metrolistmls.com to give it another look and see what the agent had to say (she was not the listing agent). Both times the house was not open. Of course this leaves me wondering if they might be seriously considering our offer. At the gym today I was daydreaming about how I would decorate....sigh.

Friday, April 25, 2008

Sinking Sentiment

For some time now, I have suspected that we will enter a rather serious depression (not great depression, but certainly not short recession).....and lately, there seem to be daily announcements from the experts that are leaning this way as well. With consumer sentiment at a record low, I got to thinking about how our expectations have changed.

Last year around this time, Mr. BT and I were prepared to spend a considerable amount of money on a home. At the time, we figured we could get a piggy back loan to make up the difference for what our down payment didn't cover.

Come July or so, as the credit markets started to melt down, and as local home prices began dropping, we lowered our price range cap to reflect only our 20% down payment (which has grown a bit over the year).

As home prices have dropped further, we are now seriously looking at homes priced 20-30% below our 20% down payment cap. I am very nervous about things to come, so purchasing a house well below our current means, is very appealing to me.

In essence, our price range has dropped just as much as the local real estate market. As homes drop in price, our expectations are not growing (same price range, but nicer home)......they are instead moving down with the market (lower price range, same type house).

Of course this won't help out the local economy. Less money to a realtor, less money to a mortgage broker, less taxes to local governments etc. On the other hand, a looming recession/depression coupled with inflation prospects, is also driving me to purchase sooner than I probably would like to. I have a feeling the Fed will be raising interest rates come Fall, once they see that inflation is not subsiding with the slow down in the U.S. economy.

In 6 months time, I think home prices will not be dropping as dramatically, so it be the point of maximum value, in terms of the home price interest rate trade off.

Yes, this is all speculation on my part, but after all, I am an average buyer....It's likely I am not alone in my thinking =)

Closing the Loop and Breaking the Chain

The anecdotes keep piling up. Its seems many first time buyers are attempting to get back in the market now that homes are becoming reasonably affordable (under 300k). Unfortunately they are continually being beat out by investors.

It appears we have a game of musical chairs, investors buy foreclosed homes and rent them to folks who were foreclosed on. This is a closed loop, and does not set off the needed move up buyer chain reaction . I believe this is why homes over 500k are not selling very well.....there just aren't enough move up buyers out there!

As long as foreclosures dominate sales statistics, the chain will be broken. Homes have to be bought from real people, looking to move into another (larger) home for the chain to be repaired. One good to come of this: rent's don't go up, due to oversupply.

From what I understand, the government gives generous tax benefits to real estate investors, which makes rentals property an attractive investment even if rent doesn't cover all expenses.

Thursday, April 24, 2008

Cameron Park Trivia

I told BT I would do a post today, but I am not currently able to do my intended post due to "operator malfunction" on my part. So ...

The Commerce Dept. reported a few minutes ago that new home sales (contracts signed, not closed, and subject to reduction before closing due to cancellations that are not counted by the Commerce Dept.) dropped 8.5% to 1991 levels, with price declines of 13.3% year-over-year. I doubt that any of the regular readers would call this "news."

Cameron Park has no new home developments (that I am aware of), so the only measure is existing home sales. CP has long been known as the "poor man's El Dorado Hills," but it is nonetheless home to many. It is the only Zip Code that I watch with regularity. I know my stats don't compare on any level with those of BT and others, but here is what I observed this a.m.:
249 total listing (single family homes only, no condos)
29 listings +$1 million, with 3 pending
77 listings $500k-$1 million, with 4 pending
121 listings between $300k- $500k, with 24 pending
22 listings under $300k, with 7 pending

Observations: I have watched five specific homes in the $479k-$550k, go pending in the past, only to go back on the market. Of those five, two have gone pending one time and are back on the market, one has gone pending twice and is back on the market, another has gone pending three times and is pending again, and the last appears to have closed.

I have not seen any home +$1 million, go pending in the past 6 months and I'm frankly surprised to see it now. My guess is that this is a spring time phenomom.

The +$500k homes are simply languishing on the market with daily price decreases coming in my morning emails from the REO's and "near" REO's.


Wednesday, April 23, 2008

Updated Historical Charts: Folsom & El Dorado Hills

Not much time for commentary today....but notice how sharply the sales dropped off in the MelissaData when compared to the DataQuick. I believe the driver is new homes, whose values also tend to be higher.

Tuesday, April 22, 2008

March/April 2008 Month's Inventory

Total month's inventory is now at a low since I have been collecting data. The data is ranked by most month's inventory to least. 6 month's inventory is considered a balanced market by most in the industry. Sales are from DataQuick (thanks for the link DJ) and inventory is gathered for Single Family Homes from ZipRealty.

No shortage of head scratching going on here. Several expensive zips, Granite Bay, El Dorado Hills, Davis, Loomis are way at the top, and others, are way at the bottom like Arden, Downtown and East Sac, Folsom and Roseville.

Lower inventory will likely stop some of the price free fall some parts of Sacramento have been experiencing lately, but I imagine banks will still be pricing their properties rather aggressively to make sure that if anything sells, it will be their property. Speaking of sales, there seem to be a lot of cheers that sales are up from those in the industry, but the folks over at BMIT put the trend in perspective for us.

Monday, April 21, 2008

If at first you don't succeed.....

......try, try again. Looks like we will be giving it another go. We found an REO this weekend that fits all our criteria, and is modestly priced. I jumped on the chance, when my husband expressed an interest in this home....which brings me to today's subject, finding a place we both want to call home.

Mr. BT and I, like many couples, value the various aspects of a home differently. I tend to want a smaller home on a medium lot.....whereas, Mr. BT tends to think bigger is better in every respect. Lucky for me, he doesn't like HOA and Mello Roos, so that keeps him out of the new developments with monster homes.

I have heard that remodeling a home is one of the biggest causes of marital discontent (typically finances tend to be number one).

Neither of us tends to be very hard over on any particular item so finding something we both like isn't that hard. But finding something we can both get excited about, and a price that is well within our budget is much more rare.

Many of us talk of finding our dream home.......but is your idea of a dream home the same as your partners?

Friday, April 18, 2008

Stressed Out

When we made our offer on a home last February, I was incredibly nervous about market conditions, so I started to track active NODs (preforclosures) and Foreclosures via http://www.forclosure.com/ to get a feel for how much downward pressure there would be on prices.

Looking at the market stress data below, I am rather grateful our deal didn't go through. In the seven weeks I have been tracking the data, foreclosures have almost doubled in these two zip codes.
Anyone who argues we have hit bottom around here, is severely delusional.

Thursday, April 17, 2008

Why do we Wait?

Why do we wait out the housing bubble? Why do some hate giving money to the government (taxes)? Why do others regularly fret over their investments? Why do we clip coupons and shop around for the best deal?

In the end, I guess it boils down to having more money to do with as we please. But what exactly does that get us?

Most Americans seem to view money as an end in itself, a symbol of status and power. So I was delighted to see a column in the WSJ that addressed this issue a little differently. What’s more, most of the benefits outlined in his column do not require vast sums of wealth. It’s all about lifestyle choices and pursuing what makes us happy. Of course, this avenue of thought caused me to reflect on my personal situation.

Since we moved back to California I have been the happiest I can remember (which to some degree, I define as the absence of stress in my life). In fact, I keep waiting for the other shoe to drop because my life’s experiences have taught me to expect tough times. We have paid off our enormous student loans (around 100k), so the only debt we have is a small car payment. Now that we are back in California, we are just a short drive away from family and friends, whom we see on a regular basis. We have also met some really nice families and made some friends (I have come to realize that the snobby attitude in EDH comes more from the people who work here, as opposed to the people who actually live here). And last, but certainly not least, I have a family and a job I love. None of these things are directly tied to our income level. In fact we took a sizable pay cut, in Mr. BT’s salary to come back to California.

All this to say, I don’t think money necessarily buy's happiness, but it does allow you spend more time on the things you enjoy (assuming you choose to do so). All the $$ we are saving by waiting out the bubble won't necessarily make us happier, but it will relieve financial stress and will likely go toward our childeren's college education.

Wednesday, April 16, 2008

Collateral benefits of the housing downturn ...

This morning as I was driving down Hazel Avenue during commute traffic, I noticed the absence of contruction trucks which got me to thinking about the collateral benefits of the dramatic downturn in new construction.

First on my list was the dearth of gravel trucks and not having to deal with chipped and broken windshields from thrown rocks.

Then I got to thinking about how long it has been since I've heard a traffic report during the commute, reporting the daily "ladder in the rodeway."

Lastly, the total number of cars on the road appears to me (and others) to have declined. Presumably, this is at least partially due to the $4.00 gallon gasoline, but the missing contruction trucks is another factor.

What other "benefits" have you observed from the housing downturn?


Tuesday, April 15, 2008

Renters Bliss

While there are quite a few downsides to renting, I thought it would be nice to highlight some of the less obvious up sides (of course the obvious upside is that, at least in our area it is so much less expensive than buying).

--The thing that has been the best about renting, at least for us, is the ability to “test-drive” a neighborhood. If we were really ambitious we would move into the neighborhood I currently covet, to make sure it’s as great as I think it is.
--In times of economic turmoil, its beneficial to be relatively mobile. Not needing to sell your home in order to take a new job is a great benefit of renting in times of uncertainty and high unemployment.
--If personal circumstances change, you can easily downsize to a less expensive place.....if gas gets too expensive, you can move closer to work, and if you family size grows or shrinks you can easily "right size your home".
--Similar to item one above, if a neighborhood that you initially liked, with all its new homes etc. starts to crumble before your eyes, you can move with little to no cost (as opposed to those who bought and would have to sell for a loss in order to get out).
--While we treat our rental better than we would our own house, when our potty training kid accidentally pees on the stairs on the way up to the bathroom, I can take consolation in that at least its a rental!

In many respects, as some have pointed out in the past, Renting is very similar to an option on the housing market and you life circumstances.

Monday, April 14, 2008

Survey Request

This week marks the one year anniversary of the Average Buyer blog. Over the year traffic has grown quite a bit. According to Google, there are many daily visitors.

As a favor, I would appreciate it, if everyone would take a moment to fill out the survey I have posted on the sidebar. It doesn't require a sign on. Please mark all categories that apply (i.e. we are both Renting 1-2 years, and move-up buyers).

I would like to get a better idea of who reads the blog and why. It will help me know what type of content is most appropriate going forward. Thanks in advance.

Tools of the Trade

One of the topics of discussion on Sunday was what tools we use to monitor our local market. I'm not talking statistics on overall market performance, but how to track local listings and sales, in order to identify specific properties and determine a reasonable offer price.

Below is a quick review of the the tools I know of and use. However additional input would really be appreciated. I will compile then post this on the sidebar for easy reference, like the glossary.

I don’t pay for any services, so all the sites are being reviewed in terms of their free content. If anyone pays for a service, please let us know what it is, and what value you think it provides (why its worth the $$).

Of course Lander, maintains links to many many good resources, so this is just a subset. They are grouped into categories.

Inventory Tracking
· http://www.metrolistmls.com/ Not as easy to navigate for just monitoring inventory, but gives the status of homes (like whether its pending or not) which I haven’t been able to find anywhere else.
· http://www.ziprealty.com/ My personal favorite. I love being able to save homes into a “favorites” section and get e-mail updates on them. I especially like the mapping feature. Its easy to use and presents great information for browsing quickly. It also hooks into Zillow and Cyberhomes to give you previous sales. Some have complained that their ZipAgent resets their criteria.

Foreclosure and Distressed Property Tracking
· Hotpads This is a new tool that has a really cool mapping feature for the foreclosure information. From the review I read, it gets foreclosure data from RealtyTrac. I haven’t tried the other features yet.
· http://www.foreclosure.com/ The free info is good for monitoring foreclosures and pre-foreclosures. As suggested earlier by someone on this the feature where for monitoring the name of the owner on the pre-foreclosure list is very helpful to see if your landlord is getting a NOD.
· RealtyTrac I haven’t used this site much, but it is often cited as a source of data, so I am assuming there are some redeeming qualities about it.

Individual Home Sale History:
· Sac Bee This is the only place I am able to find recent individual sales information in bulk, for free. Unfortunately, the information it doesn’t go back very far, and there tends to be a couple month lag in updating the data.
· Zillow This site is nice if you are looking at a specific home and want to see its sales history.
· Cyberhomes: Similar to Zillow. Others have said they think the values seem more accurate.

Friday, April 11, 2008

Too Good to Be True

I particularly like to browse listings on ZipRealty near downtown Folsom. I happened upon this one yesterday and immediately e-mailed my agent to get a little more info on it.

500 Sibley in Folsom, looks like a gem at first glance (older well cared for home near light rail and downtown Folsom). MLS 80023909. The lot size on the listing is really small, but the pictures show a large lot so I assumed it was a typographical error.

Well my agent called today give me the low down. Apparently they have split their lot into two parcels. And both must sell together. But it allowed the seller to drop their asking price on the home by 175k.

I guess desperate times call for desperate measures and dirty tricks. Sigh...and that home looked so lovely.

(From the mapping feature, it looks like the home is located next to a cemetery...too much bad juju in that case).

To Pool or Not to Pool

I grew up on the Central Coast of California, in a relatively small farming town. No one I know had a pool in their backyard. Back East, many middle class neighborhoods had a community pool. But here in Sacramento, seems private pools are very common in the suburbs. (or perhaps I’ve just developed a warped sense of perception from looking at houses in Folsom and El Dorado Hills).

Is it me, or does Sacramento actually have one of the nation’s highest number pools per capaita? I can’t tell if the recent proliferation of pools is a response to increasing wealth, germaphobia and anti-socialization or just a natural response to the hot summer days.

Around here, people seem to take their pools very seriously; there are waterfalls, slides, and even a pecking order. For instance, it seems above ground pools, get almost no respect. I have seen quite a few listings that feature the pool much more prominently than the house. (As if the house just happened to come with the pool you were purchasing.)

As for our preference, I have mixed emotions about the whole thing. Some pros and cons.

Pro: They provide endless hours of summer entertainment once kids are a bit older (and looking for something to do to while away the summer months).

Cons: First it seems like an awful lot of money to spend on something you don’t only use in the summer. Pools can be a serious liability (and with young kids, it will be a source of stress till they are old enough to swim well). They also require a lot of care and maintenance. The cost to heat the pool is rather prohibitive, which means you have to have some thick skin as well. Not to mention we also have a beautiful lake and river not too far away (and a nice looking aquatic center in Folsom…..having other kids to play always makes things much more fun).

Riddle Me This.....

How can sales be occurring at their normal seasonal levels, but pending (homes under contract) are way up?

My Theory:

Because escrow periods have gotten much longer (dealing with the bank, on both sides likely takes longer....buyers are finding it harder to get financing and the banks selling the homes take forever to make decisions).

Thursday, April 10, 2008

April 2008 Change in Inventory

To re-emphasize yesterday's statement about Sacramento metrics....."Lately when I look at the Sacramento housing market metrics, one word keeps coming to mind…..FUBAR. "

Below is the monthly inventory of SFH from ZipRealty for April and March. The "change in inventory" is from March to April. However, I also colored April if the inventory is less than it was in January. This is very odd behavior for a market that is normally highly seasonal. The list is sorted by Zip code this time.

Unfortunately, I am a bit short on time today, so not going to get into specifics or formulate hypotheses. So I will leave that to you all today.

P.S. Next month I will have a full year of data, so I can do year over year comparisons of inventory. Although at this rate, there may not be a need.

Wednesday, April 9, 2008

What Happened to the Spring Bounce?

The trees and flowers are blooming. However it appears that home inventory in Sacramento is immune to the trappings of spring this year.

I have come to believe that the industry has undergone such fundamental changes lately that the typical seasonal patterns are getting wiped out. First the evidence, and then a couple thoughts as to why.

According to housing tracker, we have been way above last year’s inventory level (by about 2000 listings) until this month. As seen from the monthly data, inventory appears to be flattening out and losing its “seasonality”. One look at the “inventory chart” and this trend becomes very obvious (the widening and flattening of inventory can also be seen in Max’s inventory charts over at Sac Real Stats).

Lately when I look at the Sacramento housing market metrics, one word keeps coming to mind…..FUBAR. We are in some serious uncharted territory. So all this talk about “inventory stabilizing”, and “bottom calling” on the local blogs is starting to make me chuckle. They always forget to mention that inventory has been way above normal levels for quite some time now. I find it especially amusing when commenter’s make broad predictions based on one or two data points. Personally I wouldn’t trust anyone who makes predictions which such self-assurance. We are all playing a guessing game at this point.

Yes, inventory may be stabilizing, but I believe it’s for a very different reason. It’s the loss of seasonality. Normally stabilization occurs because sales occur at an increased rate, thus keeping inventory down. (Although there is some evidence that increased sales are keeping inventory down at the lower price ranges).

The fundamental industry changes driving this trend have a lot to do with the overwhelming amount of distressed inventory, which, according to Agent Bubble’s latest data, now stands at 50% of the Sacramento market. A bank has nothing to gain by removing their listing from the MLS and waiting till spring (carrying costs make this a really stupid thing to do). I would imagine, distressed seller’s (short sales) feel the same way. I haven’t seen much to suggest that waiting till spring improves your chances of selling your home. If a home is priced right, it will sell, no matter what month it is.

Personally, I never understood the reason for the strong seasonal trend in residential real estate. Don’t people die and get divorced all year round? The only reason I can think of is related to the local school calendar. Some families want to sell their home in spring in order to be moved into a new home by the time school starts in fall. But that doesn’t really explain the increase in sales in spring (or why there is still a bump in spring inventory in counties with year-round school). Why is spring a better time to buy a house? Only reason I can think of (is self reinforcing) is that there is more inventory to choose from. In other states (think Midwest and East) the weather might come into play. But here in California, we have beautiful weather most of the year.

My industry (aviation) is rather seasonal, but there is a valid reason for that. Most families travel during school breaks (primarily the summer). There is also considerable travel to warm destinations in the winter (HI and FL come to mind). Business travel happens all year round, so it’s the additional the vacation travel that drives the seasonal demand.

Tuesday, April 8, 2008

Average Buyer Attempts

Now that prices have come down a bit, I'm not as embarrassed about submitting (what I consider) a reasonable offer. So I will create a new section to keep tabs on our attempts at purchasing a home., both offers and outings.

Offers so far in 2008:
1) January - We put in a verbal offer to a builder who built a custom spec home (the home sold for 16% below asking, but still 20% above our meager offer). For some reason, I'm not as embarrassed about submitting low offers to builders since they wouldn't take it as personally.
2) February - We submitted a written offer and negotiated with a seller on a short sale. Unfortunately, the bank would not approve the sale at our offer price (approximately 20% below asking). The seller did receive bank approval at 14% below their list price, and they immediately re listed the home (before we even responded that we wouldn't increase our offer price). We feel like we were played so that they could bring an offer to the bank and get a "bank approved" figure.
3) April - Written offer on an REO, approximately 15% below asking. After lengthy negations, and several unpleasant discoveries about the home and lender we bowed out at the last minute. Rather disgusted to learn that the home went for considerably less then what we had negotiated with the bank. How incredibly frustrating. They played uber-hardball with us, and we eventually walked....their loss.
4) June - Written offer on an REO. We saw this place at an open house, the same day as the offer #3 house. So far the bank is not budging on the price. They think its priced right now (apparently it took them 6 months and around 100k in price drops to get there). The home sold for 25K above our final offer.
5) August - We resubmit for the Short Sale that we tried for in February. In the hopes that the bank would be more willing to negotiate now that 6 months have passed. We even paid $300 for an appraisal. The bank would not negotiate. We believe the home is now going into foreclosure.
6) December - We made an offer to a builder at a development we have eyed for quite some time. We were surprised and delighted when they accepted. We closed on our home in Feb of 2009.

1) In mid February, saw 4 homes with our agent (one resulted in offer #2 above), and one additional home without our agent.
2) Mid April went to 5 open houses. Two were REOs. The other three were above our price range, but were not likely to sell at their current price, despite the agent's insistence. Wrote offer number 3 on one of the REOs.
3) Open house in June to re-examine the same REO we saw in April. The price has dropped substantially since then.
4) Early August - We saw 3 homes with our Realtor (one was having an open house). The one we liked the most is an REO (but we think it will get bid up way above our price range...and they are making you pre-qual through their people with lots of other paperwork...not sure if its worth the hassle to get outbid). Another was a short sale, but apparently about to go into contract. The third was an actual owner occupied sale, but the road noise was a pretty big turnoff.
5) Mid September - We attended 3 open houses. Really liked two of them. The third was beautiful, but not properly laid out for a family of 4. Was rather impressed at how much home we can get for our money these days. In both cases there was one other buyer there (so I wouldn't say tons of foot traffic, but better than nothing).
6) September - A bank owned home on a large parcel of land was up for auction. We visited on the "open house" day. Unfortunately, the very reasonable "reserve price" listed online was completely meaningless according to the Realtor, so we did not bother attend the auction, as the bank would not accept anything less than 3x the reserve. How annoying. Even more frustrated to learn that the home did not sell at auction, but then showed up on the MLS a couple weeks later as pending sale. It sold for less than we were willing to pay. Sounds like an inside job.
6) November - Went to some open houses one Sunday and saw a FSBO in one of our favorite neighborhoods (found it on Craigslist).

Meet-Up with Other Average Buyers this Sunday

Just a reminder, this Sunday is the Average Buyer meet-up on the patio at Dos Coyotes in Folsom. For more details see here. Based on comment responses and some additional e-mails it sounds like we should have a rather nice showing.

As for the results of the RSVP contest….it looks like I am buying a drink for Agent Bubble and Sacramentia for their price and inventory predictions. Who would have guessed that inventory would be lower in April compared to January (apparently Sactramentia!).

I am really looking forward to meeting all of you. I know I could certainly use use a pep talk, as we didn't pursue the short sale ….sigh.

P.S. I will be the lady wearing jeans with patches and will likely have a pile of old WSJs sitting nearby waiting to be read.

Monday, April 7, 2008

Trends in Auburn

MCB44 was kind enough to send an update on the Auburn area (which he tracks on a weekly basis). He put together a summary comparing sales in Q1 of 2007 to Q1 of 2008. The trend of more sales at lower price points is also similar to what we have been seeing in Folsom and El Dorado Hills.

Note that the high end of the graph is on the left, with the low end on the right.

Highlights: Median price decreased from 439,750 to 339,700. Sales volume decreased from 87 to 69.

I also totally agree with his conclusion regarding the data.....that we "will continue to see further downward pressure on prices and we will likely see more of the listings migrating down into the price bands where sales are occurring."

Friday, April 4, 2008

Agonizing over a Short Sale

Well the bank came back with a price that is not too far from ours (25k more….but a drop of around 75k from asking). Its still a pretty reasonable price, but with all the maintenance needed on the home, it would end up being around 25% above our monthly rental expense.

With the banks approval their agent immediately dropped the price on the MLS (unfortunately we paved the way for him…sigh). So I suspect the home will now generate some more serious traffic. One thing in our favor, it’s a very odd house, so I don’t think we would be competing with investors on it.

So the question is, do we wait, in hopes that no offers come in and the bank changes their mind or forecloses? Or do we jump on it despite the higher price and the fact that the second lien holder has not agreed?

I keep going back and forth. In some ways I am okay if someone else grabs it, because it then sets a great comp for the area. Local market stress indicators keep me hopeful that we are in store for more price drops. On the other hand, homes don’t come up in this neighborhood as often.

Here are some additional pros and cons of our situation as I see it.


  • Location. Walking distance to the elementary school, and a small park
  • Large enough lot to comfortably hold our old fishing boat and even older inoperable ‘68 Dodge Charger.
  • Established neighborhood
  • Nice looking swimming pool (but not sure how much we will use it)
  • I’m really ready to settle down. Another couple that moved into the area a month before we did who rented up the street from us, just bought an REO. I am very jealous.


  • Road noise. Bordered on both sides by major EDH roads (perhaps more as DOT will be doing some major road work on either side of the house in the next 5 years….luckily the home is not located in an asbestos region)
  • House layout (really odd, and with lots of oak cabinetry which I am not fond of). No room for my office if the kids refuse to continue sleeping in the same room. The layout will likely cause problems when it comes time to sell.
  • Lot needs major landscaping, and has not been cared for.
  • Swimming pool (needs looking after)
  • Home needs major updating (at least 7 types of flooring on the bottom floor alone)
  • With a recession in full bloom, I am anxious about purchasing a home near the top of our price range.

Thursday, April 3, 2008

Signs of the times ...

1. In the early 1990's as droves of folks moved out of CA, Uhaul charged a premium for one-way truck rentals to other states, to recoup the cost to Uhaul to try to get trucks back to CA for the next one-way move. Yesterday, I went to Uhaul's website and selected an arbitrary one-way truck rental from Sacramento to Charlotte, NC ($3,420) and compared it to a one-way rental from Charlotte to Sacramento. Same mileage, same truck, same number of days, but Charlotte to Sacramento was only $1,959, a premium of almost $1,500 to move out of California.

2. Four listings that I have been watching in the $500k range, recently went pending. In each instance, the "For Sale" sign vanished immediately with nothing in its place. In the past, agents would typically post "Sale Pending" or "Sold" signs on the posts and the signs/posts would not be removed until after escrow closed. Even though the MLS states the homes are "pending sale," there is no real estate sign on the property. The conspiracy theorists thinks the agents' strategy is to reduce the number of visible For Sale signs so that it appears to the casual observer, there are less-and-less homes for sale, thus falsely creating a sense of urgency among buyers. Someone else opined that it was more likely because the agents needed the signs somewhere else. What have you seen in this regard?

3. Lastly, of those same four listing, as of today, three are now back on the market with the "sales pending" lifted. I actually spoke to one of the homeowners last Saturday at her garage sale (while her home sale was still shown as pending), where she stated that she believed the escrow on her home was going to close this current week (presumably March 31 or April 1), however, my daily MLS email this morning has put her house back on the market for the third time. This suggests to me that her escrow cancelled literally at the eleventh hour and presumably not due to inspections, buyer qualifications, buyer downpayment, or the like.


Wednesday, April 2, 2008

April 2008 Good Buys & Offers to Builders

There was only one post for March and I know there are quite a few "good buys" out there these days. So don't be shy this month. FWIW - The "good buys" section of this blog generates the most daily hits.

Please post homes you think are a good buy or any offers you know of that were accepted, especially to builders. It will help give others negotiating leverage when they are ready to buy. Even just letting people know what type of builder incentives they can expect would be helpful since its hard to tell if they give everyone the same incentives.

Pieces of data to include: Zip Code, MLS or Development Name, List Price, Incentives, Offer (if any), house details (sq ft, garage size, lots size etc).Feel free to post info for homes anywhere in the Sacramento Metro area.

Just cause I tend to confine my search to the Gold River, Folsom, El Dorado Hills, Cameron Park areas doesn't mean others have to.

Tuesday, April 1, 2008

Update on Your Average Buyer

Things have been rather hectic for me lately. I have been playing single mom because Mr. BT has been traveling the great state of California with his new work assignment. As some of you may have noticed, Paul has stepped in to take up the slack.

As for the status of our short sale offer......it sounds like the 1st may be willing to at least consider it, they had an appraisal done recently. So its all about getting the second to sign on. Any suggestions are welcome.

I know many wouldn't consider putting in an offer on a short sale. However I don't really see it as that big of a hassle. Its not like we have to purchase a house in the next month, so waiting a little longer for an answer isn't really an issue for us. This home fits almost all of our criteria (except its a two story instead of a one story), otherwise we wouldn't be bothering to make an offer right now.

The "as is" sale would be the same if we bought from the bank, so that doesn't make a short sale any less desirable than an REO. We are rather handy so it doesn't intimidate us as much. (This home needs some serious TLC. )

The one true downside I have heard, is that sometimes banks cut the commission for the Realtors. So for some, it might be a challenge finding an agent willing to go the distance on a short sale.

If the short sale doesn't work out for us...I may start a scorecard to track all our failed offers and see at what price they finally sold.

Ten Reasons Why There Will be a Government Home Price Bailout

1. It is an election year. Conservative politicians must try to convince voters that they are not insensitive. Liberal politicians must try to convince voters that they are not insensitive.

2. Washington worries more about deflation than it worries about inflation. Deflation will erode overall tax income and politicians’ power, whereas inflation will increase overall tax income and politicians’ power.

3. As Boomers retire, social security is headed for a +$1 trillion deficit. Washington must continue to perpetuate the myth that American’s retirement assets are in their homes so that Washington can make social security a needs tested entitlement.

4. GDP is plummeting into a (likely) recession due to declining consumer spending. Only if Washington can fool the voters into thinking the voters have wealth by inflating real estate prices, can Washington successfully fool voters into returning to their buying and spending spree of the 2000-2006 time period.

5. The Federal Reserve has committed over 50% of its balance sheet to bailing out the financial markets in the past six months. It does not have enough left on its balance sheet to bailout the remaining (predicted) financial losses.

6. Voters are being hit in the wallet by rising gasoline prices. Gasoline prices are rising in substantial part, due to the plummeting dollar. The Federal Reserve cannot prop up the dollar by raising interest rates until the financial markets are stable. The financial markets will not be stable until home prices stop declining.

7. Local governments rely heavily on property tax revenue for funding. Declining real estate prices have and will continue to reduce funds available to local governments, thus reducing government employment and spending, prolonging and deepening the (likely) recession.

8. About 65% of America owns their own homes. Simply put, there are more voters who own homes and are watching the value of that asset decline, than there are voters who rent.

9. Wall Street financial institutions contribute far more to politicians than people who rent houses.

10. Only with inflation (including home prices), can Washington hope to minimize the appearance of the ballooning Federal debt burden as a percentage of GDP.