Valley Real Estate Update

Filter or Bottled Water? There are lots of options

ray@akwoods.com (Ray Wood) — Wed, 10 Mar 2010 21:02:00 GMT

I ran across this videom all about wayter filters. They seem to be playing an larger role in the Green Movement.

Buying?... Selling?... Now is the Time!

ray@akwoods.com (Ray Wood) — Tue, 23 Feb 2010 05:01:00 GMT

When it comes to figuring out when to buy or sell, the bursting housing bubble and the ensuing financial crisis has presented some real challenges to most of us. And, like they say, “timing is everything.” Recently however, we have some real indicators that the time to buy, or to sell, is now.

For sellers… if you purchased your home before ‘04 or ‘05, and you haven't withdrawn equity from it, you're probably in a pretty flexible position. You've had time to pay off some principal and the current price drop probably hasn't eroded all of your equity.

Prices in our market probably won't go up for at least 24 months. That is especially true if your home is in the over-$300,000 price range. And… many feel that the larger, more expensive homes will be flat or declining for five years. We have a huge supply of these homes in our market and few buyers. To sell a $300,000+ home, you will need aggressive pricing, have it in above-average condition and execute an effective marketing campaign.

If you want to sell a home in the under-$250,000 range you are in a little better shape, but you'd best get it on the market as soon as possible. And to sell quickly it will need to be competitively priced and in good shape. Homes in poorer condition are often passed up and bring less when they finally do sell. As always, good marketing will make a difference.

For buyers... The Feds are offering a tax rebate for first-time buyers as well as those who have already owned a home. The credit is $6,500 for repeat buyers and $8,000 for first-time home buyers. To qualify a buyer must have a binding purchase contract in place by April 30, 2010 and must close the deal by June 30.

Since the financial crisis Fannie Mae and Freddie Mac have supplied virtually all of the money for residential mortgages. This spring the Feds will cease buying up mortgage-backed securities from Fannie and Freddie. This will likely increase rates.

This month President Obama will announce restructuring plans for Fannie & Freddie. It will be a very controversial process. Concern over the Federal deficit will likely drive the solution to more privatization which will also tend to push rates higher for residential mortgages.

Unemployment in the lower 48 is encouraging people to relocate to our state. But unemployment is also responsible for many foreclosures outside. That drives the prices down which puts many people moving up here upside-down in their mortgages making it difficult or impossible for them to sell their old home and buy a new one here.

That’s why many experts feel the current housing crisis won’t be fixed until the unemployment problem turns around.

Also...owners with a job that owe more than their homes are worth are a growing concern. It seems that more and more of them are acting like Wall Street bankers. They are walking away from negative-equity mortgages that, if paid as agreed, would take them years to break even.

As a buyer... you currently have a lot of homes to choose from with a tax credit to help and low mortgage rates in your favor.

As a seller... if you want to sell within the next two years, it probably won’t get any better than it is right now. If interest rates go up or the recovery takes longer than expected, it could get worse.

A Mortgage Fairy Tale

ray@akwoods.com (Ray Wood) — Sun, 14 Feb 2010 02:57:00 GMT

Based on a True Story

It all started in August 2005 when Fred Smith got a loan from his local mortgage company to refinance his house and pay off some high-interest credit card bills.

However, Fred’s lender didn’t keep that mortgage. They sold it to a large bank that buys lots of mortgages. That bank then sold it to an even larger bank. And that bank’s name was Goldman Sachs.

The guys at Goldman Sachs took Fred’s mortgage and mixed it in with lots of other mortgages in a big pot. This pot was called a “Collateralized Debt Obligation.” Some of the mortgages in it were good, some not so good and others were so bad they smelled terrible. It was a “derivative.”

Then, to hide the smell, the guys at Goldman Sachs bought a magic wand called a “Credit Default Swap” from AIG and waved it over the pot. It covered up the bad smell! Then they sold the pot to the people on Main Street for $100 million!

Besides covering up the pot’s terrible smell, the Credit Default Swap would be worth $100 million if the pot’s contents spoiled and started smelling bad again.

So the guys at Goldman Sachs, suspecting the pot that they had sold to the people on Main Street would probably go bad, called AIG and bought eight more Credit Default Swaps.

Then in the fall of 2008 the pot started to stink really bad, like a “toxic derivative” and the Credit Default Swaps became worth $100 million each. The guys at Goldman Sachs went back to AIG to cash them in.

AIG didn’t have the $800 million but it was OK because they got it from the taxpayers and gave it to the guys at Goldman Sachs. The guys at Goldman Sachs were happy and they got a raise.

Wanna Save Money on Gasoline? Find a Pumper!

ray@akwoods.com (Ray Wood) — Mon, 01 Feb 2010 17:57:00 GMT

In the last couple of months I've noticed that the price of gasoline sometimes varies by as much as 35 cents a gallon from one station to the next.

Normally the price a station charges is based on the wholesale price of it's last delivery. If the wholesale price drops, then the station will normally lower their price at the pump to reflect the decrease. Conversely, if the wholesale price increases, they will bump the retail price up.

Some stations sell more gas than others. They are known in the trade as "pumpers." They may receive deliveries more than once in a day. Other stations may only receive deliveries once a week or so.

So when you see a wide range of prices check out the "pumpers." If they are high then go to the lower-volume stations to buy your gas. They may not bump up the price for a few days after the pumpers react to the increase.

On falling prices check out the pumpers. They'll have the best prices!

Tracking the Typical Wasilla Home

ray@akwoods.com (Ray Wood) — Sat, 23 Jan 2010 21:24:14 GMT

Every January I sit down and try to figure out what happened in the Real Estate market for the previous year. I like to think that this information helps me prepare for the coming year.

This year, rather than working with all of the homes that were sold, I decided to focus my research on a specific size and type of home. So what better choice than the “Typical Valley Home?” A 3-bedroom, 2-bath home with a 2-car garage is pretty typical for our area.

So I took sales information for of all the “Typical” homes sold for each calendar year from 2004 through 2009. I tallied the number sold each year and averaged the sales price, list price, the age of the home and how many days it took to sell.

The graph on the left shows how the market has changed from 2005 through 2009. Seventy of these “typical” homes sold in 2005 at an average sales price of $203,827. In 2007 ninety-five of these homes were sold. By then the average sales price had increased to $221,266.

Then in 2008 the number of sales dropped back to the 2005 level. Interestingly, the price did not. It increased to $222,245. It kind of “overshot” the market.

In 2009 the number of sales didn’t change much but the price fell like a rock. The financial crisis had a lot to do with the drop in price, but almost as many homes were sold in 2009 as in 2008.

The tax credit for first-time home buyers had a significant positive impact in the last part of 2009. Local Realtors® that I spoke with attributed 10% to 30% of the last half of the year’s sales activity to the FTHB plan.

We have a new home buyer incentive program for 2010. It includes people that have previously owned homes as well as first-time buyers. Income limitations have also been raised which should allow even more people to qualify.

It’s reasonable to think that the Federal tax credit program combined with some of the State’s energy incentive plans will get us off to a good 1st quarter this year. I think it will, especially for the Typical 3-BR, 2-BA, 2-car garage home we’ve discussed here.

The big question is... what will happen when the Buyer incentives go away? Will the normal demand be enough to prevent prices from falling still more?

The current program is due to go away April 30th. Historically that’s about the time our market perks up. We’ll see...

Questions? Comments? Call or click we love to talk Real Estate!

Buy Up, Fix Up and Cash In

ray@akwoods.com (Ray Wood) — Sat, 23 Jan 2010 21:07:00 GMT

There are some pretty attractive incentives out there right now if you want to buy a home or update the energy efficiency of the one you already own.

The Feds have extended and modified the American Recovery and Assistance Act of 2009. That piece of legislation brought us the First-Time Home-Buyer Program last year that gave a $7,500 tax credit to lots of folks buying their first home.

For this year they have lowered some of the income limits and raised the amount of the credit for first-time buyers. The credit is now $8,000 and if you have owned a home and don’t qualify as a first-timer, you can get a $6,500 tax credit.

You also get a reimbursement for money you spend updating your home’s energy systems. Furnaces, water heaters, lighting and most energy consuming appliances qualify. For information on all of the Federal programs go to www.irs.gov/recovery.
The Alaska Housing Financing Corporation also has several programs to put cash in your pocket. If you buy a new 5-star plus home you can get a $7,500 rebate from AHFC.

The State also has the AHFC Energy Rebate Program with which you can get as much $10,000 for energy improve-ments for your existing home. Go to the AHFC site at www.ahfc.state.ak.us for more information.

Like the TV announcer says “This is a limited time offer.” So if you want to take advantage of any of these deals you need to act quickly!

Appraisal Rules May Change Again

ray@akwoods.com (Ray Wood) — Mon, 26 Oct 2009 05:30:00 GMT

House of Representatives lawmakers working on finance reform have approved an amendment to proposed consumer protection legislation that will retire the current appraisal rules that went into effect last May. The old law, known as the Home Valuation Code of Conduct (HVCC) will be phased out if this new bill is passed.

HVCC was intended to establish an "arms length" relationship between lenders and appraisers. But as lenders started using middlemen, known as appraisal management firms, to select appraisers the quality of appraisals suffered. National appraisal management firms, not familiar with local markets, often selected ill-qualified appraisers who produced low quality and inaccurate appraisals. As a result home purchase deals fell apart when the bad appraisals came in.

This amendment will redefine the rules to protect the integrity of appraisals. It should provide appraiser selection methods and rules to achieve more accurate appraisals. There are provisions to allow communication of sellers, buyers and brokers with appraisers.

There are also provisions dealing with compensation for appraisal services. Many appraisers have been forced to accept lower fees when appraisal management firms are involved with the current HVCC rules. And... unlike the old HVCC, this law will apply to all loans. HVCC applied only to HUD loans like Fannie Mae & Freddie Mac gauranteed mortgages.

Questions? Comments? click or call... we love to talk real estate!

Mortgage Rules Have Changed

ray@akwoods.com (Ray Wood) — Mon, 19 Oct 2009 19:30:00 GMT

If you plan on applying for a mortgage in the near future you need to know the new rules. They have changed this year.

One of the big changes has to do with your FICO score. If you have a FICO score of 760 or better you are in great shape. If your score is 620 or below you will have a difficult time getting a loan.

The first thing to do is find out what your scores are. Notice I said scores? That’s because there are three primary credit reporting bureaus: Equifax, Experian and TransUnion.

The reason you want this information before you apply for a loan is that they are notorious for having errors. So find out if you need to correct bad information with them ahead of time.

A good way to go about getting the info is to use a web site created and sponsored by them. It’s web address is AnnualCreditReport.com. At this site you can get one copy of all three reports free each year. You may notice a difference between them. Each will have your FICO score. Go over each one to check for mistakes.

Here’s how to help your FICO score.
Don’t cancel any credit cards. Try and pay balances down. They look for high limits and low balances.
Get rid of inaccurate information on your report. Bills that have been paid off but are shown unpaid are common.
Don’t incur any more debt while you are considering a new loan. Consider paying off as much debt as you can.

Questions? Comments? Call or click we love to talk Real Estate!

Links for more help and advice:
Clark Howard
Definition of FICO score

Do You Need Help With Your Mortgage?

ray@akwoods.com (Ray Wood) — Mon, 19 Oct 2009 19:25:00 GMT

If you are having difficulty making your home mortgage payments you might be a candidate for loan modification. The process of loan modification is not well understood by most homeowners. Here are some facts that may help you:

Almost any loan can qualify for modification, not just FHA. You can modify any type of loan whether it's a jumbo, fixed-rate, adjustable-rate, FHA, HELOC, etc. If you have a second mortgage you can modify it alone, both the first and second or both.

You don't have to be behind in your payments to qualify for loan modification. While you do have to prove hardship, you don't have to be delinquent in your mortgage payments. Your bank will probably require a hardship letter from you. Here's a link to some samples of hardship letters. The most important thing is that you want to stay in your home and pay your mortgage.

Remember the debt to payment ratio your lender talked about when you first qualified for your loan? If your income has dropped since then, or if you have accumulated more debt, it may now be out of the guidelines of your bank. If loan modification can bring it back in line with that debt-to-payment ratio then you have a good chance of qualifying for modification.

How it works. Most modification plans result in applying a lower interest rate to your loan. If lowering the interest rate results a payment that works for you, and the lender is agreeable, that's it. Here's an on-line calculator to help you determine if your situation is right for loan modification.

A note of caution. There are lots loan modification of scams out there. The best place to start the process is with your lender. If that doesn't work contact an attorney.

Questions? Comments? Call or click we love to talk Real Estate!

It's Amazing What You Can Learn From a Carton of Salt

ray@akwoods.com (Ray Wood) — Mon, 21 Sep 2009 07:16:00 GMT

I love things that put hard-to-understand concepts in practical perspective. Here's one I ran across while waiting for my wife at the hair dresser the other day. It's about our own galaxy, the Milky Way. Scientists think that there are between 200 and 400 billion stars in the Milky Way.

To get a sense of what that means you can compare it to the grains of salt in that familiar blue and white round carton of Morton's salt. You know the one I'm talking about with that little metal pour spout that flips up. Well it turns out that there are about 15 million grains of salt in one of those cartons.

So if you go out and buy 26,000 of those cartons of salt you will have as many grains of salt as there are stars in the Milky Way galaxy.

And if you wanted to make a two-dimensional model of the Milky Way you'd lay out all those grains of salt on a large piece of black cloth so that each one was seven miles from it's nearest neighbor.

But I don't advise you try this at home. The piece of black cloth would have to be twenty-five times larger than the earth!

That's how big the Milky way is...

Real Estate Secrets - How Agents Are Paid

ray@akwoods.com (Ray Wood) — Thu, 17 Sep 2009 07:14:00 GMT

Have you ever wondered just what happens to that big real estate commission the seller pays to sell a house? Ever wonder how the Buyer’s agent gets paid? I think lots of folks have. So I thought I’d write an article explaining where all of that money goes.

The first thing you need to know is that the broker, not the agent, gets the commission. Each company has just one broker. I'm an associate broker at Prudential Jack White-Vista Real Estate but the company has just one broker for three office locations with over 100 sales associates and associate brokers. You as a seller will normally be dealing with an agent that is a sales associate or an associate broker. That person must operate under the supervision and direction of the broker of the company they work with.

Most brokers in our market charge a percentage of the sales price as a fee for their services. This fee can range from as little as 1% to over 10%. In our market a typical broker’s fee for an existing house is 6%. That’s $12,000 for a $200,000 house. Let’s run with that example and follow the money in a typical Valley transaction.

In most cases the listing broker will offer part of their commission as an incentive to the selling broker. Most will split the commission 50/50. In the Valley RE/MAX, Keller Williams and some independents are starting to keep more than 50% of the broker’s commission. Lately we’re seeing 2.5% of a 6% broker’s commission offered to the selling broker by these companies.

On a 50/50 split a typical transaction looks like this:
Listing agent... the broker has an agreement with your agent that determines how much the agent is paid. 60% of the broker’s fee is a common amount to pay. Another arrangement is to have a fixed monthly fee called a "desk fee."
The agent is an independent contractor in most cases and must then pay their expenses out of this amount. Agent expenses usually include advertising, automobile costs, gasoline, MLS & Realtor® dues, office supplies, signs, computers, insurance, etc.
So the listing agent gets around $3,600 and might pay $600 in expenses. That leaves $3,000 before taxes that your listing agent makes on your $200,000 house.

Selling agent... the selling agent will have a commission split or a desk-fee arrangement with the selling broker and expenses similar to the listing agent. So we can assume the selling agent also ends up with $3,000 before taxes. Their broker gets the rest.

Although there are exceptions and broker-agent agreements vary, almost all of the real estate agents in our market are paid this way. Some agents have "teams" with licensed people working for them called "buyer’s agents." They work sort of like a proxy for that agent and typically receive 50% of the selling agent’s commission. In this case the buyer's agent is working for the selling agent. By the way if the agent they work for also has the listing, then that buyer’s agent can’t represent you as a buyer.

So how does all this affect you?

As a seller you might want to make sure your agent is earning their commission. Ask them about their marketing plan for your house. Most people will learn about your home from the Internet or from another agent. Ask how they are presenting your property on the Internet. And.. ask if is it easy for other agents to show & get information? Are competing homes offering higher commissions?

As a buyer you can use your own agent to represent you at no cost. If you use the seller’s agent they earn twice the commission, you save nothing, and there’s no one in your corner negotiating and advocating for you.

High-End Valley Homes Slow to Sell

ray@akwoods.com (Ray Wood) — Mon, 14 Sep 2009 17:54:00 GMT

Real estate, like any other business that involves selling a product, is affected by “supply and demand.”
And if you’ve been trying to sell a high-end home in our market you have a painful first-hand knowledge of it’s implications. We have too many high-end listings in our local market.

The red vertical bars in the chart above show the homes sold since January of this year. The green bars show how many homes are currently for sale. The chart is divided into under-$200,00, $200-300K, $300-400K and over-$400K price ranges.
In the over-$400,000 range, just 22 homes have sold so far this year. The green bar shows 95 active in that bracket. That means we have a 34-month supply of homes in that range.
In the under-$200,000 range 218 have been sold this year. 127 are on the market. That’s just a 4.7 month supply!

Find Yourself in Australia for $911

ray@akwoods.com (Ray Wood) — Mon, 24 Aug 2009 19:37:00 GMT

Want to get away from the winter doldrums this year? (This is not and ad or a promotion)

For 911 bucks and a little ingenuity you can be in Sydney, Melbourne, Cairns or the Gold Coast of Australia this winter! Here's how:

1. Get an Alaska Airlines Visa Signature card, spend $750 on it. It can be for utility bills, groceries or anything. You'll get a 25,000 mile credit on your Alaska Airlines frequent flier account. Or if you already have 25,000 mile in your AK FP account, skip this step.
2. For 25,000 miles you can get a round trip ticket to San Francisco or Los Angeles. Go to the Alaska Airlines frequent flier rewards page and check availability of 12.5K mile each way seats for your trip.
3. Go to Air New Zealand's web site and look for the "Special Deals" button link. There you can check out availability of the cheap seats to Australia. Make a note of the cheapest dates for the round trip. Right now the cheapest seats are $911 round trip.
4. Go back to the Alaska Airlines site and make reservations for your Anchorage to SFO or LAX flights.
5. Go back to the Air New Zealand site and make your Australia ticket purchases.

Notes: You usually have a 24-hour period to change your Alaska Airlines tickets without penalty. It's possible to have availability change while you're in the middle of booking your flights. If that happens, you can go back to the Alaska Airlines site and change them. Or... you may be able to do a 24-hour reservation on either system without commuting to purchase the tickets. Then, when all looks good, push the button on purchase. The folks at both airlines give good help over the phone as well.

Hints: International baggage rules are different from US domestic flights. Check sizes and weights before you leave home. The carry-on limitation is 7 kg which is about 15.5 lbs. Don't for get your passport.

GDDAY!

The Valley's Market Mix is Changing

ray@akwoods.com (Ray Wood) — Thu, 20 Aug 2009 05:19:00 GMT

    I just compared our sales last month to those of one year ago. I came up with some interesting results.
Last year’s July sales and this July’s look very similar until you break down the different age categories and the prices of each of those categories.
    We had 96 homes sell in July 2008. Twenty-eight were new homes with an average price of $278,345. Thirty-five of them were existing homes less than ten years old with an average price of $239,540. In the over-ten-year bracket twenty-seven were sold at an average price of $213,733.
    In July 2009 we had twenty-nine new homes sell at an average price of $224,971. There were thirty-six in the under-ten group which averaged $248,996. And the over-ten-year-old bracket saw forty-one sales averaging $194,751.
    It appears that the new homes are coming down in price. But that’s because builders are producing smaller, less expensive homes than they did last year and the year before. By the same token, existing homes under ten years old seem to be increasing in price. But they’re really not. Existing homes under 10 years old are taking over the large-home market from the new construction group.
    Why are existing homes in the over-10-years bracket falling in price? It’s because there weren’t that many large homes built in the 80’s and 90’s.
    If you need a larger home, it’s a great time to buy one. We have an over-supply of high-end homes and prices are low.

Sales Up - Prices Down for July

ray@akwoods.com (Ray Wood) — Mon, 17 Aug 2009 04:19:00 GMT

I just downloaded and graphed the July sales volume and prices for the Valley core area. It's a classic example of supply and demand. As prices go down, sales volume goes up.

Homes priced between $180,000 and $225,000 continue strong because of the First-Time Homebuyer program. The new construction market made a bit of a rebound with 29 sales, the best month so far this year. In the first six months of 2009 we averaged just a little over eleven per month.

Overall we had a total of 106 sales in the core area. That's the most in any one month this year so far!

New Appraisal Guidelines Are Causing Problems.

ray@akwoods.com (Ray Wood) — Mon, 10 Aug 2009 16:00:00 GMT

In December of 2008 Freddie Mac and Fannie Mae, the biggest source of mortgage funds in the US, passed strict rules for appraisals. It's called the "Home Valuation Code of Conduct."

One of the causes of the sub-prime mortgage crisis was the cozy relationship that lenders, agent and appraisers had. In some cases appraisers were inflating home values to appease sellers, lenders, buyers and real estate agents.

To prevent this from occurring Fannie and Freddie enacted these new rules. The took effect May 1st of this year. As in many cases, the well-intentioned rules have caused unintended consequences. They are clogging up the progress of the housing crisis recovery.

Extra cost... many lenders have decided to use third party providers that choose the appraiser for the bank. This costs more money because there's a middleman involved. And... the middleman charges the bank more for the appraisal and often demands a discount from the chosen appraiser. And... some of the third-party companies are owned by banks. Guess who the bank chooses to provide appraisal services?

Low appraisals... these new appraisal services, some have nationwide coverage, are not as good at determining appraiser expertise in local markets. As a result they may choose appraisers to do work in an area they don't know well. To avoid the risk of being accused of inflating values the appraiser will often err on the side of caution and provide a low value on the appraisal. This has resulted in deals falling through and delays in closing.

On July 10th of this year Freddie Mac came out with a bulletin meant to clarify the new rules and announce some changes. Maybe it will help.

Questions? Comments? Call, click or drop us an email. We love to talk Real Estate!

How Loan Modification Works

ray@akwoods.com (Ray Wood) — Sun, 09 Aug 2009 16:49:00 GMT

Jobs and Real Estate

ray@akwoods.com (Ray Wood) — Mon, 27 Jul 2009 16:59:00 GMT

Some folks are saying we are nearing the end of the long real estate slump in the lower 48.

Here is an interesting chart that shows the homes for sale and the local jobless numbers in 28 major markets in the US. It's an interesting correlation because most folks need a job in order to buy a house.

The chart also shows the current percentage of home loans that have overdue payments in each area.

Mat-Su Ranks #9 in Top Job Markets

ray@akwoods.com (Ray Wood) — Thu, 16 Jul 2009 19:29:00 GMT

CNN has just published a list of the best places to find a good job. The Mat-Su Borough and Wasilla ranked #9 on that list.

The article spoke of the new prison, a ski resort and our growth expectations. Is the Valley a good place to be? YOU BETCHA!

See CNN's article at http://tinyurl.com/matsujobs

Valley Sales Trend Down

ray@akwoods.com (Ray Wood) — Sun, 12 Jul 2009 08:52:00 GMT

Here's a chart of the past 37 months of home sales in the Core Area of the Mat-Su Borough. It includes real estate in Wasilla, Palmer, Meadow Lakes and Settler's Bay. As you can see the trend over the last three years has been down. At our peak in November 2005 we have dropped from around 160 sales a month to 88 in June.

Here's another chart showing the price trends. Our prices haven't taken the drop that we've seen in the lower 48 but Wasilla Real Estate prices are starting to show some weakening from the excess inventory. Compare June 2009 to June 2008 to see what I mean. We had a median price of $220,000 in 2009 compared to $224,000 in June 2008 and $225,000 in June 2007. Also, the new construction prices show a $10,000 drop and the volumes are way down on the chart above.

The next few months will tell us if we are going to finally see a real drop in prices or remain fairly insulated from what the rest of the country has seen over the last year or so. Stay tuned as things unfold!