Real Estate Information

In an unusual move, the Fed yesterday raised rates between official meetings.  The discount rate was raised to 0.75% from 0.5%, in what appears to be an effort to return lending facilities to more normalized levels. This move was anticipated to be discussed at the next meeting for possible future action, but with the inflation report coming in twice what was expected this morning, apparently they  felt the need to act.

The Fed indicated the move, along with other recent modifications to its credit programs, does not signal a change in its outlook for the economy or for monetary policy, and the more important fed funds rate remains in its range of 0% to 0.25%.  The Fed usually changes the discount rate at the same time it does the fed funds rate, but after the unprecedented steps taken to combat the financial crisis, the Fed appears eager to start bringing rates back to more traditional levels, and Thursday’s move was a start.

What does this mean for interest rates?  Right now the mortgage market is still off negative on yesterday’s inflation news.  Action by the Fed historically calms fixed rate investors nerves about inflation eating up the value of their mortgage investment. 

We often get quizzed about when should I sell and is it a good time to sell now? Generally the answer is less about real estate and more about personal motivation. In other words, why do you want to sell?  Is it; to downsize? upsize? Financial pressure? job related? commute?......There are many factors and most truly aren’t real estate questions.

If you do consider that selling your property is the right move, then your next question is likely, “In this challenging market, is it a good time to sell?” Here are the four factors we believe make now actually a strong time to sell.


1. Sell low and buy low. Because all property values are down, the loss on the property a home owner sells is really only a paper loss because the next property he buys also will be a bargain. If he buys smartly, when prices come back up in a few years, he’ll be in better shape.

2. Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region or give us a call.

3. Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.

4. Good help is available. Some really talented remodelers, contractors, landscapers and designers are slower than normal and are available and eager for new client.

5. You have super stars on your side. We are ready willing and able to work for you and put your interest first and foremost

Smaller homes, lower prices. That's the outlook for new home builders this year. In a recent poll by (NAHB) National Association of Home Builders 95 percent of those polled say they consider one or the other or both as their top buyer priorities.

At the recent 2010 NAHB International Builders' Show builders were given a list of 40 features and asked which ones they were likely to include in new homes this year. Here's what's hot and what's not.

Items most likely to be found in new homes for 2010:

1. Walk-in closet in master bedroom
2. Separate laundry room
3. Insulated front door
4. Great room
5. Low-E windows
6. Linen closet
7. Programmable thermostat
8. Energy-efficient appliances and lighting
9. Separate shower and tub in master bedroom
10. Nine-foot ceilings on first floor

The least likely items homebuyers will find in new homes this year include:

1. Outdoor kitchen
2. Outdoor fireplace
3. Sun room
4. Butler's pantry
5. Media room
6. Desk in kitchen
7. Two-story foyer
8. Eight-foot ceiling on first floor
9. Multiple shower heads in master bath
10. Smaller kitchen area than in recent years

We have notice that buyers are focusing their wants heavily on energy-saving. Things we thought were consumer necessities — such as granite countertops in the kitchen or home offices — are no longer on the list.

Also not as popular in 2009 were energy-guzzlers like the high-ceiling entryways. Builders are leaning more in 2010 to nine-foot ceilings hoping to give the buyer a feeling of more square footage, which has been reduced.

Buyers continue to look for products that save money. Did you know, water-saving toilets use an average of 39,000 fewer gallons of water annually for a family of four. That's enough for a lifetime of drinking water for three people according to Kohler a leading manufacturer of faucets and fixtures.

NAHB conducted a consumer survey to compare the wants of older buyers with others. They found that those age 55 and older have a slightly different "want" list in a new home:

1. Washer-dryer in the unit
2. Storage space
3. Windows that open easily
4. Garage door opener
5. Easy-to-use thermostat
6. Master bedroom on first floor
7. Private patio
8. Porch
9. Attached garage
10. Bigger bathrooms

Of course we all have hang-ups. But when going through the emotional ordeal of putting their home on the market, we have observed that sellers can develop sale-affecting hang-ups that can affect their ability to maximize their return. Below are seven common ones and their symptoms.

1. Price-aphobia:
The fear that a property will sell for less than a premium price. Price and greed combine to form a drug like addiction to unrealistic expectations. Only buyers determine true market value.  When selling sellers should use all resources and analysis to make the best attempt to list at a price that will receive the most favorable attention by buyers and then review and adjust their pricing every few weeks with the goal for reaching the buyer sweet spot for maximum seller return on investment in the shortest period of time.  For sellers often times the enemy of good…is better.

2. Shag-itis
Sellers must understand that certain home decorating trends are not coming back  Despite that they love that sea shell wallpaper in the master bath or that shag carpet in the game room has been barely walked on. These areas need to be evaluated and redone.

3. Pet Addictions:
Not everyone loves seller’s pets as much as they do. No matter how adorable “Precious” is, pets almost always have a negative affect on showings and value.  This can equate often to 3-5% of value.  Often times “Precious” becomes a $10-$15K+ kitten.

4. Photo-mania:
Dozens of family photos can distract a buyer’s attention from the property. While it is nice to show how “homey” a house can be, the buyer needs to imagine their life in this house, not the sellers. Sellers need to understand they are not “selling a home”, but now marketing a commodity to the broadest range of buyers.  Oftentimes buyers curiosity is draw to a small family photo with comments like, “Look how cute those little kids are!” While missing the Brazilian hardwoods and canyon views.

5. Pack Rat Plague
The Little Angel doll collections and shrine to World War II paraphernalia need to be packed away. While they may be sentimental to the seller, they are yet another distraction to the buyer. In addition, buyer and buyers children will often pick-up, handle and damage items.

6. “As-Is” ism
The seller thought process of “The Buyer can take it or leave it” in regards to stained carpet, defects or repairs is flawed.  90% of the times that is exactly what buyers do….”leave it”. Buyers often construe the smallest defects as heralds of huge problems, i.e. a broken door bell is a sign of giant electrical problems or worse a reflection on the sellers poor ongoing maintenance of the home.

7. Audio Selectivism:
Sometimes, the Seller just hears what they want to hear. “The buyer must be confused.” “The appraiser was in a bad mood, or he just didn’t like us.” “My neighbor said I wasn’t asking enough.” The most important data the seller has at their dispose is comparative market analysis of recently sold similar homes from a competent real estate professional.

With the arrival of a new year also came new ways to compare home loans.

On January 1, 2010 new rules went into effect, which mandate that all home loan applicants be given a new version of the Department of Housing and Urban Development’s “Good Faith Estimate” (GFE) form.

The new form is HUD's latest development in the Real Estate Settlement Procedures Act, RESPA, (12 U.S.C. 2601) which, regulates real estate transfers involving a "federally related mortgage loan" by requiring, among other things, certain disclosures to borrowers and is designed to clarify what home loans will actually cost, which should make it easier for borrowers to compare home loans. All lenders must disclose their fees and put them in the same places on the form.

In addition to interest rates, there are other costs associated with loans that should be compared. These are what are typically known as “origination costs,” which are the fees a lender charges, and there are “settlement fees” – such as appraisal fees, title insurance, etc. – that are part of the costs.

The new regulations require that lenders disclose these fees uniformly and then stick to them. For example, if you are quoted a $450 appraisal fee on a Good Faith Estimate form, you cannot be charged more than 10 percent of the price quoted.

According to HUD "The intent of the standardized GFE and HUD-1 is to provide borrowers an easier means of comparing loan offers, and to determine that they are getting the loan at settlement that they were offered in the GFE." Thus making it easier for consumers to do an apples-to-apples comparison of different loan products.

On the third page of the three-page form, there is a place to do a side-by-side comparison of up to four different loans and recognize what is the best deal. Sometimes, borrowers get so caught up in what the interest rate or monthly payment is that they lose track of other costs associated with a loan, and it becomes more expensive than they thought.

Proponents claim HUD’s new efforts will improve transparency and uniformity and in turn assist consumers with finding the best loan deal more easily.

Critics claim the new HUD mandated GFE makes it easier to hide the yield spread compensation because it actually misrepresents the yield spread as a credit back to the borrower. At the very least the new HUD GFE takes focus off of complete transparency - and does not squarely break numbers down for borrowers. The lack of line-items leaves mortgage brokers holding the bag when it comes to explaining fees without being able to direct them to the specific line item.

The view from this desk is that consumers should know upfront in plain simple language exactly how much fees are for originating loans. The new muddled GFE often provides the consumer with only one lump sum amount which is the summation of different fees going to different people.

I believe brokers should be compelled to provide an additional form with a simple line by line breakdown of all their costs on one easy to understand page.

In the late 80’s and early 90’s in Austin, job growth stopped, real estate values dropped and people left town. Probably because of the severity of that recession, Austin has faired much better this time. Home prices did not increase more than could be supported by median family incomes. Thanks to Texas’s home equity laws, consumers could not borrow against their home appreciation nearly as easily as homeowners in other states – which helped keep home prices stable and consumer debt manageable. If you don’t have a bubble then you don’t have a bust. While most other major real estate markets have seen home prices drop by as much as 50% and experienced high unemployment, Austin’s median home price has been stable or seen only a small drop. Job losses have been slight. 

Now, Forbes and Moody’s Economy.com projects Austin's economy will grow by 32% over the five year period from 2007 to 2012. Not only is Austin’s economy growing, but it's growth rate is nearly 50% higher than #2 ranked Fort Myers, Florida. Equally important to Austin’s economic growth is Austin's population growth which is expected to grow by an amazing 15%.

 “To compile our list, we looked at all of the country's 363 metropolitan areas, defined by the U.S. Census Bureau as a geographic region with a "core urban area" of at least 50,000 people. Because many small metro areas are high growth--and because we wanted to show growth in large cities as well--we split the group into two classes: the largest 100 metro areas (with at least 528,000 people) and everyone else. We use projections run for us by Moody's Economy.com to show growth in GMP between 2007-2012.

Of course, if one looks at economic growth in the country's largest 100 metros, the usual suspects jump to the top of the list. With an estimated 32% GMP growth from 2007-2012, Austin, Texas, is the winner for big metros. Atlanta, Seattle, Orlando, Houston and San Jose, Calif., also appear high on the list. What do they all have in common? They're tech hubs with proximity to universities and a healthy increase in population. Austin's population, for example, is expected to increase by nearly 15% by 2012, according to Moody's Economy.com forecasts.”

Go Austin. Go.

Full Article: http://www.forbes.com/2008/01/30/economy-cities-alabama-biz-cx_bw_0130econcities.html

We expect banks holding commercial real estate loans will feel more pain in 2010, with real estate values having plunged.

A majority of commercial loans due through 2014 appear to be underwater, meaning more banks will be forced to restructure loans to avoid costly foreclosures.

U.S. banks hold a historic $1.3 trillion of commercial mortgages outstanding as of Sept. 30, with about $60.5 billion of them delinquent. Approximately $650 billion in banks' boom-time commercial real estate loans are coming due over the next four years, with more than $150 billion maturing in 2010.

A significant number of commercial mortgage loans are underwater because real estate property values have dropped significantly. Even for loans that are performing on a cash-flow basis, when they hit maturity, it is going to be difficult to refinance them without additional equity.  In today’s market that additional equity is often difficult to find and fund.

A key factor affecting the commercial real estate market will be the depth of any credit meltdown over the next 4-5 years and how quickly does a recovery take place. When you have high levels of unemployment, you're probably also going to see higher vacancy rates. This is going to put pressure on rents. 

Unlike the residential mark that is beginning to dog paddle, the commercial markets have treacherous waters ahead.

The appeal of a luxury hotel room is undeniable. Often time our homeowners who are preparing to list or simply upgrade consult with us on how to incorporate this homey and cozy feel in their own master bedrooms. Below are some of our suggestions to creating the master retreat of your dreams...

Step #1: Start with your bedding. We recommend you start with bedding, is not only because the bed is the core focus of the master retreat, but also because the bedding will set the tone, style and color palette for the rest of the space. It is much easier to design a space around focal point as you can take all of your cues right from the bedding. Attractive fabrics which make up a lovely bedding set will provide a delightful source of color inspiration.

When choosing your bedding, it's important to consider functionality and style. Make sure the weight of your blankets, comforters or duvets are suitable for your body temperature and sleeping preferences. Ease of making the bed on a daily basis is another important factor to consider. An organized and restful space is key to creating a relaxing retreat. If you're running short on time in the mornings, but still want that hotel-like feel, consider choosing bedding that is easy and simple to toss and make while on your morning run out the door.

Step # 2:  Coloring your Cocoon. Paint is the least expensive way to change the look of a room. Hues for a bedroom escape should be natural, relaxing and sophisticated. We recommend avoiding overly stimulating or saturated colors in this space, for obvious reasons. When selecting color palette, take cues from your bedding. Don't forget to have fun painting the ceiling. Since the ceiling may be the first thing you see at the beginning of the day, and the last thing you see at night, pay special attention to your ceiling color. Forget any “rules” of design you may have heard in the past – the ceiling doesn’t have to be white, or even a lighter shade of the wall color. You can use a darker shade of the wall color or even a completely different hue.

Step #3 When furnishing the master retreat, remember that you can and should create a space within a space.  A bedroom doesn’t only have to be for sleep – which is why it’s called a master retreat. For example, do you need a writing desk?  A dressing table? A comfy reading nook?  A place to sit and enjoy your coffee and newspaper in the morning?  Examine - What’s YOUR form of escape?

Step #4  Lighting is an important feature in any room,  especially the bedroom, where the mood can so easily be set with proper illumination.  Wall lamps or nightstand lamps on each side of the bed are a must for bedtime reading. Creating a “lighting triangle” by adding a 3^rd lamp on a side table, dresser or desk in another area of the room and add dimmer switches for ambience and functional purposes.

Step #5 Window Treatments should complement the overall design of the room.  Think of your window treatments as the belt or earrings which pull together a fabulous clothing ensemble.  To create that sophisticated hotel suite look, avoid bold patterns and overly ornate and “fussy” designs.  Simple custom drapery panels, lined with a room darkening fabric over a layer of sheers will be sure to create the hotel-suite look . If you’d like more light control, try layering decorative panels over a hard window treatment (such as blinds, woven woods or shutters).

Step # 6  Flooring: If you’re the type who likes the feel of soft flooring  underfoot, think plush, soft and inviting. Use accent rugs over hard surfaces (and yes, you can even add rugs over carpet if you desire.) If allergies, ease of cleaning & pets are a factor, wood is a wonderful choice for a hard surface – it is warm in appearance and much warmer in temperature than tile. In this year's flooring trends we are seeing lots of texture - sculpted carpets in contemporary patterns and shaggy shags with multi color threads.

Step #7  When accessorizing a master retreat, keep it simple and not too cluttered.  Art and accessories in your bedroom escape should inspire you, instill feelings of relaxation and serenity, or serve as reminders of moments you don’t want to forget.  Keep in mind that less is more, and that clutter is far from restful!

Money Saving Nugget: If you don’t have money in the budget for a new bed frame or headboard, place a rug, upholstered boards or large pieces of art at the head of the bed. For more ideas on how to create your own headboards, visit HGTV.com.

HUD just changed its condominium rules again, and there's both good news and not so good news for investors and developers tucked away in the revisions.

On the one hand, HUD relaxed its previously controversial requirement that at least fifty percent of the units in a project be sold before FHA could insure loans for new buyers on individual units.

Under the amended rule, FHA financing will be available in projects where at least 30 percent of the existing units have been sold. This change is important to developers and investors because many newly-constructed projects have had trouble pre-selling units in the current tough real estate market.

A large number of new developments and conversion projects would have been knocked out of eligibility for FHA financing on their remaining units under the 50 percent presale rule.

HUD also relaxed its controversial policy that no more than 30 percent of the units in a condo project could be financed with FHA-insured mortgages. The new standard maximum will be 50 percent. Under certain circumstances, however, HUD said it would be willing to consider situations where the percentage of FHA financing on individual units is even higher, provided the project has been completed for at least a year, and the condo association's operating budget provides significant reserves for capital improvements and deferred maintenance.

In its revised regulations, HUD stuck with a number of previously announced requirements that have drawn criticism from investors and developers, including that fifty percent of the units be owner-occupied. However, HUD says it will not count vacant or tenant-occupied bank-owned REO as non-owner occupied units in the computation.

HUD will continue to require that no more than ten percent of the total units in a condo project be owned by a single investor - and that the 10 percent limit will include unsold units that developers are renting out.

That policy has sparked renewed controversy within the building and investment communities. Including unsold units rented out by developers or project investors will threaten the viability of many condo communities. Developers routinely rent unsold inventory to generate cash flow so they can keep paying their construction loans.

If HUD prevents them from selling units to buyers using FHA financing, builders may simply "hand the keys back to banks and walk away".

One footnote to all this: HUD labeled its latest condominium changes "temporary." They take effect December 7 and can only be counted on by investors and developers through December of 2010.