Susan's Blog

I haven't posted for awhile, but I'm back!  I have continued to write my monthly column for the Sacramento Union newspaper, trying to present the more positive facts about the real estate market, and here is the most recent column, in the February 22 issue:

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Are You Tired of Hearing Real Estate Doom and Gloom?

By Susan Neal, Real Estate Broker and Realtor

Sacramento Union Real Estate Writer

       You can't avoid it.  Every day the newspapers and television reporters relate bad news about the housing market, and there is no doubt that the national market over-all has felt different from how it looked in 2005, but those who are experienced in real estate and familiar with regular economic cycles are not as concerned as the media hysteria would suggest.  To a large extent, it is difficult to determine whether market conditions are driving the media or if the constant barrage of bad news selectively reported in the media is negatively impacting the market.  Many believe that the media has certainly affected perceptions.  It is time to consider some solid evidence that contradicts all the doom and gloom.

     According to Richard F. Gaylord, 2008 president of the National Association of Realtors (NAR), it is important to remember that real estate is a long-term investment.  That is how it has traditionally been considered, but "the boom created a misconception that real estate is a high yield, short term investment.  It's not."  Gaylord adds, "Regardless of where we are in a cycle, there are always plenty of people ready to buy and sell.  In fact 2007 existing home sales surpassed those of 2002 - then a record-breaking year."  Bad news should be put in perspective.

     Foreclosure is terrible, and a tragedy to someone going through it, but when the media talks about "foreclosure spikes," they should provide context.  According to NAR statistics, the foreclosure problem is predominantly with sub-prime loans, which are held by less than ten percent of homeowners.  And not all sub-prime loans are in trouble.  Only a percentage of troubled loans on which foreclosure is started are actually foreclosed on.  The true foreclosure rate on prime loans is just 0.6 percent, according to Gaylord.

     Great opportunities exist right now for investors as well as for people buying a family home, and lower prices enable more first time buyers to find affordable homes. Buyers and sellers need professionals who are committed and professional to advise them and assist them with taking advantage of today's market. 

     Donna Fox, Branch Manager of Eagle Home Mortgage in Gold River, says that now is the time for buyers to act.  "If people don't take advantage now, the market is liable to turn," says Fox.  But she also advises, "Don't let someone push you into a loan that you can't afford over the long haul. If you are considering buying a home, sit down with a reputable lender and find out what programs are available and what you can afford. Then you can feel confident that you will be able to make a solid offer on the home you choose without getting yourself into financial trouble."

     A recent issue of Forbes Magazine had a list of markets where home values were up at the end of 2007, including nine metro areas with percentage increases in double digits.  While Sacramento County was not on their top ten list, agents throughout the county are experiencing increased activity at open houses and buyer excitement and enthusiasm is multiplying.  More Realtors are reporting that they are receiving multiple offers on properly priced properties.  The boom of a few years ago was an anomaly and for the last year, prices have been correcting, but those who bought more than three years ago are still making a profit on their sales.  The correction appears to be ending, however, and there is no time like the present to get great deals and financing that is still available at low rates.

     NAR is forecasting that the real estate market will stabilize in the second quarter and rise throughout the second half of the year.  According to NAR, the median home price for existing homes declined just 1.7 percent in 2007 (although admittedly some markets experienced more or less than that). 

     In Sacramento County, the median home price in September 1997 was $119,000.  It climbed to $140,000 in 1999 and $154,000 in 2000.  In September 2001 there was another rise to $180,000, but in the next four years prices rocketed to $385,000!  This corrected to $307,000 by September 2007, but those who have owned their homes for 5-10 years have still made an incredible profit.  For the most part, it is only those who bought at the market's peak in 2005 who are actually experiencing a loss, and even then only if they must sell now or if they obtained a loan that put their equity at risk.

     Leslie-Appleton Young, Chief Economist for the California Association of Realtors (CAR), expects the worst of the California foreclosures to hit during the first part of this year, as most of the sub-prime rates will have adjusted, placing more homeowners in a position of straining to make the higher monthly payments.  However, with reduced interest rates, increases in conforming loan limits included in the new economic stimulus package and Congress working on other plans to help those in danger of foreclosure, many of the anticipated foreclosures may be averted. 

     Most lenders are also more willing than ever right now to work with borrowers.  They would rather not foreclose if they can avoid it, but they must also protect the liquidity of their institutions, so it is important to start investigating your options before you get into desperate a situation. If you do not feel that your current lender is willing to work with you, meet with another lender to see if refinancing is a better option.  Do not wait until you are in foreclosure to ask for assistance.  You would be surprised what help is available if you will just ask.

     And keep in mind that if you are a seller who is disappointed in the price at which your current home must be listed, you will likely be moving into another home which will also be priced lower than it would have been a couple of years ago, and your interest rate on the new home will likely be lower than you are now paying, so you are not actually suffering the loss that you may perceive.

     Since the housing slowdown began in the second half of 2005, the economy has added some 4 million net new jobs, wages have grown by 8 percent and interest rates have lowered.  Things are getting better in many other parts of the economy and the housing market is heading back to normal.  Buy now, before the next boom cycle, and you will be one of those investors who profits most from your real estate.  Sell now if you are thinking of moving, and you can take advantage of a great opportunity as well.  Consult with your Realtor as to how to present your home to get the highest price and how to purchase your new home at the lowest price.  Speak with a reputable lender to learn your best financing options.  And ignore the doomsayers!

Susan Neal is a broker with Century 21 Noel David Realty in Fair Oaks.  She can be reached at (916) 705-8951 or www.SusanNealFineProperties.com.  This article is not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

Last Sunday I had 17 parties tour my open house.  Some of them are potential buyers of that property, some needed more bedrooms or a lower-priced home, and I will be working with all of them.  Of course there were a couple of lookie-loos - people who just look at open houses for a hobby and have no intention of buying anything, but that's okay too.  They might know someone who's looking.

I've heard all the naysayers advising against open houses, but I have had good luck with them and anyone who is turning down any marketing technique right now will have only themselves to blame if they are not getting any action.

Of course, much of the success is in listing your open house on Craigs List or some similar popular site, making sure the house is clean, uncluttered, and bright and inviting.  The agent should be engaged with the guests, but not pushy.  Laugh and chat a bit about the house, point out any features that are especially nice, and ask if they are looking for something in this area, this size, this price range, etc while you chat.  If you are friendly and can offer them something, they will usually be warm and outgoing with you.  It's an old saying, but very true, that people like to business with people they like.

I have attended open houses where an agent pounced on me and made me nearly want to escape from them.  I have been to others where the agent never spoke to me.  There is a lot of room between, and that is where you make friends and find people who will want to buy from you.  If you are the listing agent, you can be the factor that tips them to your listing instead of another.  It is all in the presentation.

If you get their name, address, phone number and email address, you can follow up and keep in touch (not always with just sales calls, but maybe info on local events - pumpkin patches at this time of year for example) and although they may keep looking, they may come back to you if you are the one they have befriended.

What has been your experience?

This is a good one for those of us working in this market. 200 years later, it's still valid!

"...the hill has not yet lifted its face to heaven that perseverance will not gain the summit of at last."

-- Charles Dickens (1812-1870) English Novelist

I had an interesting conversation with a seller whose home I held open.  Her home has been listed for some time and she has reduced the price but has had no offers and is getting concerned.  She was close to tears today, lamenting that if she can't get enough proceeds from the sale of her house, she won't be able to buy a home in the neighborhood to which she wants to move.

I explained the fallacy in that reasoning, and it is something that most people don't think about.  If the market were on fire and her house would sell for a high price, then the house she wants to buy would also be more expensive. With prices down a bit now, her house will likely sell for less than she had hoped, but the house she wants will also be less expensive to buy.  The ratios between the two are probably close to the same - just in a different bracket.

If you look at it that way, the seller who plans to buy another home isn't really losing anything with the market down, and unless her income dropped dramatically, she will find it easier to qualify for her new purchase because with interest rates and prices both low her payments will take a lower percentage of her income (and her buyers will also find it easier to qualify for a conventional loan on her house.

It's all good.  Attitude is everything!  We can conquer this market - it's all in how you perceive it and how you present it. 

I belong to the Sacramento Association of Realtors, and in addition to our regional meeting, we have local meetings covering specific parts of our county.  Each meeting is followed by a caravan of new listings in that area. 

I participate in 2 caravans a week in different areas, and for one of them we have a great feedback system.  We all pile into several cars, usually 3-4 people per car, and do a real caravan to each home.  After everyone has toured a home, we all gather in the kitchen and fill out feedback forms and leave them with the listing agent for that property.  We cover issues like problem areas of the house and yard, neighborhood, price, and recommendations for marketing it.  Then we all go on to the next house and do the same.

The listing agent then has in writing all of the comments of the other agents, and can go over them with his/her client to discuss what they can do to get a better price and faster sale.  I love this system, as it is tremendously helpful.

For the other caravan, some people go in carloads and others individually, not in a true caravan.  We run into each other now and then in some of the homes, but to get feedback, the listing agents have to call or email everyone whose card was left at the home and solicit feedback individually.  The problem with that is that the listing agents will call a week or so later,after we've toured 35-50 homes in two areas, and we can't remember which house it was that had the bad carpet or the evidence of leaks or whatever.

Does your local organization or office use one of these methods or something else to get feedback?

"Perseverance is a great element of success. If you only knock long
enough at the gate, you are sure to wake up somebody."

-- Longfellow

There's no denying that the market is different now than it was a couple of years ago, but homes are still selling, and some agents are still making a pretty good living.  Why them and not everyone?  They keep at it, all the time.  And they have added more aggressive marketing practices - both in marketing their properties and in marketing themselves. 

I hear some agents complaining that they aren't getting any calls these days, while I hear others excitedly discussing how busy they are.  What are they doing right?  Knocking at the gate!  In fact some are knocking on doors, like in the old days, sending out cards, spending hours on the phone (calling prospects and former clients - not waiting for the phone to ring).  Some things work better than others and different things work better for different people.  But let's get to work and make things happen.  We can turn the market around, despite what the negative media says.

Are you with me?

Today I had to give two fellow realtors some harsh feedback on their listings. After the Orangevale Realtors meeting on Tuesday, we toured 10 homes, after which some of the listing agents requested feedback. Most of the homes were very nice and well staged so that they showed very nicely. Unfortunately there were a couple of homes that looked nice inside, but I won't be showing either of them to any of my buyers.  Fortunately, both of those listing agents were very professional and appreciated my honesty.  It also supported their advice to their sellers.

One was obviously the home of smokers. And it didn't just smell bad -- it was the strongest smelling home I had ever been in. It made my eyes water and I could only stay inside for a short time before I had to get some air. Others in our caravan agreed, and some of them wouldn't even stay long enough to see the whole house.  The listing agent says she has warned her sellers about it, but they apparently still smoke inside, so they might not be all that motivated to sell.

The other home looked lovely inside, but it was clear looking around the exterior that there are some structural issues that someone had made a half-hearted effort to address, but some of what they had done just called attention to the problems. I wouldn't show this home unless a whole-house inspection indicated that the problems were only cosmetic or if they were professionally corrected.

I like it better when I can give glowing feedback, but honesty is what the listing agents want and need, so that is what a try to give. I wish sellers could understand how important it is to make their house irresistible to buyers instead of thinking they can force buyers to accept their house with all its defects without taking them into consideration in the pricing. A defective or unattractive home simply will not sell unless it is practically given away. And that seller is often the one who will blame their agent when it isn't sold right away. Sigh!

This is an article I published in the Sacramento Union newspaper on September 14: 

Real Estate Remains a Strong Investment

By Susan Neal, Sacramento Union Real Estate Writer

Real Estate Broker and Realtor

Opportunities to make big, quick profits in residential real estate tend to come and go in cycles. When a local market is hot, families may find it possible to buy a house at an attractive price, fix it up, and watch its value rise in just a few years.

When the same local market is at the low end of the appreciation cycle, reaping a profit on the family home can take a good deal more time but the reward can be just as satisfying if price and location and carefully considered.

Even in uncertain economic times like these, history shows that real estate is one of the soundest investments a family can make. During the Great Depression of the 1930s when the stock market plummeted as much as 89 percent, housing prices dropped only 39 percent. According to most of the research on housing trends, prices continually stay at the same level as, and most often appreciate faster than, the rate of inflation. Housing prices actually rose an average of 10 percent during the recessions of the mid-1970's and early 1980s.

CENTURY 21 statisticians report that the rate of home appreciation since 1990 has been around five percent nationally, with inflation hovering around four percent. Homeowners, obviously, are still staying ahead in the real estate game on average.

And, with mortgage interest rates the lowest they've been in two decades, real estate today is a more attractive investment than it's been in years.

First-time buyers are the big winners in this environment. Drawing up a budget can help you and your family decide on what you can afford. Once you've determined a price and picked your desired community, shop around to find the best house you can buy for your money. This strategy can help you realize greater appreciation two or three years down the road.

This is also a good time to purchase a second or vacation home. A bargain cabin in the woods today might bring an excellent return when housing prices move upward. Affordable second-home prices also allow you to purchase a vacation home that can serve as a stepping-stone to a larger retreat in the future.

But appreciation isn't the only advantage to buying a home. The federal government thinks home ownership is so important to the future of our country that it allows mortgage interest to remain the last substantial tax shelter for families. Owners can also take deductions on their property taxes. And, the profit on the sale of your home remains tax free as long as you buy a house for a greater or equal price.

So before you decide that this is not a good time to invest in residential property, re-examine the financial benefits of owning your own home and put them to work for you.

 I read an interesting article on August 31st that paints a more realistically positive picture of the market than and pure doom-and-gloomers.  Note that it was published before the fed lowered the rates last week. 

According to the article in the Baltimore Sun, borrowing costs on home loans dipped to a three-month low that week, providing much-needed relief to home buyers who are facing a tight lending climate.

Freddie Mac reported a drop in the 30-year fixed rate to 6.45 percent from 6.52 percent a week earlier, while interest on 15-year fixed loans slipped to 6.12 percent from 6.18 percent.

Adjustable-rate mortgages, however, moved in the opposite direction. The five-year ARM settled at 6.35 percent for the week, up a notch from 6.34 percent the previous week; and interest on one-year ARMs averaged 5.84 percent compared to 5.6 percent.

Looked at in this regard, and with the additional interest rate help by the fed since then, we should be advising our buyers that this is definitely the right time to buy -- especially since prices are still down and will likely be moving slowly up again soon.