I recently wrote a email to NAR, an organization that I am a part of. The email spoke out against bailouts that use tax payer dollars to subsidize and artificially support home prices. Although many colleagues have brought it to my attention that these types of blogs will not help me to get business, I also do not believe that not being honest is good business either. Howoever, I do know that keeping my opinions to myself may be! This is my real estate blog and this is my opinion. Plus very few actually read my blog anyways! Most of which are not my current clients anyways, plus if my current clients ask my opionion I will tell them regardless if it it costs me short term business. Nevertheless, I still believe that real estate is a great investment, in fact, to me it is still the best investment. However, it's only the best if done right. Moreover, bad policy is not good for anyone. My latest email to NAR is below.
I do not mean to bombard you with information, however, it is important that I clearly demonstrate my point.
Hence, I wanted to put together some facts to better demonstrate my position regarding home prices and affordability and why prices still need to come down in some areas. Moreover, why I believe that government subsidization in these areas will actually hurt affordability, the economy, and agents.
Moreover, that by giving people the ability to purchase past government policy made it irresponsible to purchase for a whole group of American’s that could not; and possibly still cannot responsibly afford a decent home in many areas of the country. Furthermore, by passing legislation and promoting policy that “stalls foreclosures” and artificially props up prices they are making another mistake.
For example, the zip code 92620 is a relatively average zip code in Irvine, CA.
· Between 2000 and 2006 the average home went up 260%
· During the same period the average income only went up 17%
· Although to date prices have fallen nearly 25% from the peak prices are still 93% higher than they were only 9 years ago while incomes have only increased 17%
· Is it really so bad if the people that bid up prices to begin with have to rent?
· Is it really so bad if the homes come back to market levels so that those that have been renting, paying their taxes, and savings can be rewarded and purchase a home for the right price?
Moreover, to demonstrate my contention regarding rental paridy I’m going to use real numbers. There is a home in my neighborhood currently for sale for $535,000
. The exact same floor plans rents on average for $2400. You can see using my preferred Rent versus Own calculator if a buyer is making a rational choice between renting this home and buying this home, he will choose to rent it. As the total cost over ownership is nearly $600 more per month than renting it. If the housing stimulus package is successful, home prices will stabilize at this level and instead of buying it at a price that would allow for a total cost of $2400 and allowing the buyer to have an extra $600 to spend to stimulate the economy it will get sunk into mortgage payments and go the bank.
The rent versus own calculator does not work on here, however you can access it your self and check for rental paridy at: http://www.irvinehousingblog.com/calculator/
Furthermore the home in this example is a relatively average 1700 square foot condo. Using the tempo (our MLS conduit) buyer’s qualification form for a conventional mortgage with 20% down, the average income family in Irvine earning $99,015 per year with 20% down only qualifies for a mortgage of $227,000. Do you know how many 3 bedroom homes sold in Irvine for less than $300,000 in 2008? Zero.
Buyer's Qualification Calculations for Conventional Mortgage:
The following data is for estimation purposes only and the accuracy of the figures is not guaranteed. The actual costs with respect to each transaction will vary depending on the circumstances.
Gross Monthly Income
$
8250.00
Appropriate Percent for Mortgage
28.00
Max PITI $ 2310.00
Appropriate Amt for Total Debt ( 36%)
$
2970.00
Total Monthly Long Term Debt
$
1000.00
Max PITI $ 1970.00
Maximum Mortgage
Maximum PITI (lower of above)
$
1970.00
Monthly Real Estate Taxes
$
557.29
Monthly Homeowner Ins
$
6.67
Monthly PMI
$
0.00
Monthly HOA
$
150.00
Estimated Max P&I
$
1256.04
Estimated Maximum Mortgage Amount
$
227132.31
Note: A Maximum Mortgage Amount that says "Unqualified" or a MaxPITI of 0.00 means that a calculation resulted in a negative number.
Mortgage for Desired Loan Amount
Desired Loan Amount
$
534980
Annual Interest Rate
5.25 %
Term of Loan
30 years
Monthly Payment for Desired Loan (P&I)
$
2954.18
Monthly Real Estate Taxes
$
557.29
Monthly Homeowner Ins
$
6.67
Monthly PMI
$
0.00
Monthly HOA
$
150.00
Estimated Monthly Payment for Desired Loan (PITI)
$
3668.14
Quite simply prices will quit falling when they are back in line with income and rents. Moreover, the housing market will stabilize and our country will begin to move forward. Policies that stall and prevent this simply delay the necessary but somewhat painful process in exchange for a desired quick fix and instant gratification. The best case scenario based upon current policy is hyperinflation which will erode the dollar and cause incomes and rents and to catch up to home prices. Moreover, it angers me that our policy makers have not learned from their mistakes. The current economic situation is due in large part to policy makers that thought it would be a good idea if everyone in America owned a home. As a result they put into motion a chain of events that led the sub-prime melt down, the great housing bubble, and possibly the next great depression.
On the surface the idea that everyone should own their home is a great idea, however, one does not have to look too far ahead to see that it is not a good idea to borrow money to people that cannot manage it, to allow someone to take a negative amortization loan, to borrow $500,000 to someone that cannot save $5000 to pay for closing costs. Now, our policy makers irrational thought that the only way out of the mess is to artificially keep prices high and reward those that made horrible decisions.
Do not get me wrong, as an agent there is no better feeling than helping someone to purchase their dream home. Beyond the fact that if this works it will simply drag this mess on indefinitely, if he is successful, many responsible, hardworking people, that by any standard should be able to purchase, will not be able to and will be left holding the bag. Worse yet, this group will end up subsidizing the people that the irrational policies support and NAR has stood up in favor of this.
NAR’s policy is to make the dream of homeownership possible; however, by supporting this type of legislation it is actually stripping the dream from the most deserving people. Moreover, it is unforgivable that NAR has failed to take note of past failures and is asking those that these policies have hurt the worst to pay for these mistakes through their tax dollars. NAR has essentially caused the dream of responsible homeownership to disappear for this group and NAR continues to beat them over the head as they fights for the preservation of the failed experiment of homeownership for all, well most, ummm well, at least those that have not earned it.
Thursday, February 26, 2009
Tuesday, February 24, 2009
Is Irvine a Buyers or a Sellers market?
If you say buyer's market, you are not alone, however, currently you are wrong. Moreover, until you have tried to buy a home in Irvine you will not understand how much of a seller's market it truly is! Don't take my word for it, the numbers speak for themselves. Let's take detached homes in Irvine between 2000 and 2800 square feet, with at least 4 bedrooms and 3 bathrooms, built since 1990, and listed since June 1, 2008.
•The average home in this range sold for $802,979
The average sales price was $344/square foot
•The average home sold for 96.83% of original asking price
•The average home sold for 98.43% of list price (price the property was listed price at the time the deal was reached)
•The average home sold in only 34 days, this includes any short sale listings that were listed since June 1st and closed escrow on or before February 22, 2009.
*a buyers market occurs when there is 6 months worth of inventory. Current inventory is misleading because there are a number of short sales on the market listed as active that have multiple offers but are waiting for bank or investor responses.
•The average home that was listed and sold in this time frame was on the market for only 34 days.
If those stats were not telling enough;
•16 out of the 52 homes, nearly 31% sold for at or above asking price.
•3 for exactly 100%
•7 for 100.01%-103.9%
•5 for 104%-109%
•The highest sold for 110% above original asking, in 12 days, at $408/square foot
Where are the screaming deals that should be out there in this housing meltdown? Of course, homes that back to major roads, need copious amounts of work, and have strange floor plans will sit on the market longer and sell for lower prices. If 2009 is anything like the end of 2008 in Irvine those looking for a smoking deal need to consider the following options.
•Cash on the court house steps, that is if Obama's housing plan is unable to prevent these foreclosures (Shevy Akason and Associates can assist you with this for a buyers premium)
•Study the best deals of the past and develop a strategy.
To buyers reading this article I have just showed you the worst deals in Irvine
In the last half of 2008 for the property types described above. Now where are the best deals? Ironically but not surprisingly 3/5 best deals were included in the numbers above and sold for over asking price.
•A total of 5 or 10% of the homes on this list sold for under $300/square foot.
•3 out of the 5 sold for over asking price
•105.36% of original asking
•103.95% of original asking
•102.5% of original asking
I am not implying that there are not going to be great opportunities for those that want to buy in 2009 because there are. Moreover, I am not implying that there is not strong downward pressure on home prices because there is. Nevertheless, the buyers that are ready and have a plan of attack will benefit.
What can the best deals of the past teach us to help us find the best deals in the future? Do find out read the rest of the report on my web site
•The average home in this range sold for $802,979
The average sales price was $344/square foot
•The average home sold for 96.83% of original asking price
•The average home sold for 98.43% of list price (price the property was listed price at the time the deal was reached)
•The average home sold in only 34 days, this includes any short sale listings that were listed since June 1st and closed escrow on or before February 22, 2009.
*a buyers market occurs when there is 6 months worth of inventory. Current inventory is misleading because there are a number of short sales on the market listed as active that have multiple offers but are waiting for bank or investor responses.
•The average home that was listed and sold in this time frame was on the market for only 34 days.
If those stats were not telling enough;
•16 out of the 52 homes, nearly 31% sold for at or above asking price.
•3 for exactly 100%
•7 for 100.01%-103.9%
•5 for 104%-109%
•The highest sold for 110% above original asking, in 12 days, at $408/square foot
Where are the screaming deals that should be out there in this housing meltdown? Of course, homes that back to major roads, need copious amounts of work, and have strange floor plans will sit on the market longer and sell for lower prices. If 2009 is anything like the end of 2008 in Irvine those looking for a smoking deal need to consider the following options.
•Cash on the court house steps, that is if Obama's housing plan is unable to prevent these foreclosures (Shevy Akason and Associates can assist you with this for a buyers premium)
•Study the best deals of the past and develop a strategy.
To buyers reading this article I have just showed you the worst deals in Irvine
In the last half of 2008 for the property types described above. Now where are the best deals? Ironically but not surprisingly 3/5 best deals were included in the numbers above and sold for over asking price.
•A total of 5 or 10% of the homes on this list sold for under $300/square foot.
•3 out of the 5 sold for over asking price
•105.36% of original asking
•103.95% of original asking
•102.5% of original asking
I am not implying that there are not going to be great opportunities for those that want to buy in 2009 because there are. Moreover, I am not implying that there is not strong downward pressure on home prices because there is. Nevertheless, the buyers that are ready and have a plan of attack will benefit.
What can the best deals of the past teach us to help us find the best deals in the future? Do find out read the rest of the report on my web site
The current housing debacle was predicted in 1999!
"From the perspective of many people, including me, this is another thrift industry growing up around us. If they fail, the government will have to step up and bail them out in the way it stepped up and bailed out the thrift industry." - Peter Wallison a resident fellow at the American Enterprise Institute, New York Times article by Steven A Holmes September 30, 1999
This quote comes from an article entitled "Fannie Mae Eases Credit to Aid Mortgage Lending" by Mr. Steven A. Homes that was published in the New York Times September 30, 1999. Mr. Holmes is currently a professor at NYU School of Law. Needless to say Mr. Holmes demonstrates tremendous foresight and leaves me wondering why our country does not elect more people like him to office. In the article he cites pressure from "the Clinton Administration to expand mortgage loans among low and moderate income people and (Fannie Mae) felt pressure from stock holders to maintain its phenomenal growth and profits."
Moreover, he quotes Peter Wallison from the American Enterprise Institute who correctly predicted the current bailouts, "From the perspective of many people, including me, this is another thrift industry growing up around us. If they fail, the government will have to step up and bail them out in the way it stepped up and bailed out the thrift industry."
I'm sure that many are impressed by the articles foresite and frustrated that his warnings fell on deaf ears. Mr. Holmes' predicts the center of today’s economic crisis 10 years, tens of thousands of sub prime loans, and millions or billions of tax dollars prior to the great housing bubble. I have emailed Mr. Holmes for permission to post the article in its entirety.
What does Mr. Holmes think about today’s current bailouts, the idea that tax payers should subsidize and create an artificial floor for home prices? In my opinion, any government subsidization beyond allowing those that can afford a 30 year fixed fully amortized loan at market rate to refinance is too much. First, most of the modifications will be back in foreclosure in less than twelve months. Second, subsidizing home prices with the thought that keeping prices high and stopping foreclosures will help the overall economy is short sighted. If the government successfully keeps home prices 10% higher through subsidization than the market otherwise would all future buyers will pay 10% more than they should and have that much less disposable income to spend on things besides housing.
Moreover, there is a whole generation of people that have overpaid for homes and if current housing stimulus policy is successful there may be a whole new group of people that will overpay for housing. When people over pay for housing they do not save enough for retirement, they do not have disposable income to spend and stimulate the economy, they may not have time to spend with their family, or the money to send their kids to college. Is using people’s tax dollars to subsidize and artificially inflate the price of housing a good idea?
I find this article particularly interesting because I wonder how many other people out there recognized that stated sub prime, interest only, and negative amortization loans were a bad idea and how did our best and brightest not? Moreover, I wonder if there are political science professors, economic experts, or others that share my opinion regarding government, subsidization to artificially inflate home prices? Foremost, I wonder if these voices will be hear and win out so that a larger crisis is not created.
I remember asking my wife many Sundays while reading the real estate section of the Orange County Register when the crazy over inflated prices will end. It was apparent that prices could not continue to rise at such unsustainable levels while people were barely able to afford payments using interest only and negative amortization loans. I often wondered how and why it was not apparent to others, particularly the banks giving the loans. One question I posed to people in the height of the crisis was what can banks do to go beyond the negative amortization loan? The bank pays you loan? Today I ask, when will they see that using people’s tax dollars to artificially inflate the price of the very homes those people have been saving to buy (at a reasonable price) is not a good idea.
While I was cautioning against over exuberance my warnings fell on deaf ears and in the back of my mind I wondered if maybe I was wrong. Fortunately, I trusted my beliefs and was able to avoid direct damage from the housing bubble, however, the collateral damage has been felt by all. Let’s hope that wiser voices prevail in regards to the current debates regarding housing bailouts. To this point, it seems that they are not.
I hope to hear from Mr. Steven A. Holmes soon.
_________________________________________________________________________
previous article published on my blog November, 2008
America is quickly becoming desensitized to its moral obligation and duty to repay debts. In fact, many American’s now feel that they are owed something regardless of their behavior and actions. This moral path could lead to an economic crisis far worse than anything we have seen.
In the movie Cinderella Man Russell Crowe plays James Braddock, a.k.a Cinderella man. This movie is a story about a poor ex-prizefighter during the great depression. Unable to pay his bills struggling to feed and clothe his family he is forced to go on public relief. Driven by love and honor James Braddock returns to the ring to become a legend and a symbol to many American’s during the time, proving that hard work and sacrifice, pay off when he defeats the heavyweight champion. In a memorable scene, James Braddock returns to the public assistance office to return the money he was lent when he was down and out.
This brings me to today's economic crisis, a majority of Americans did not lose their homes trying to feed, clothe, and keep their children warm. In fact, of the entire country 6% of homeowners are behind on their mortgage, most of them are losing their homes as a result of irresponsible behavior that has caused many others that did not participate in the irresponsible behavior to lose their jobs, 401k's, and retirements. As Larry Roberts author of The Great Housing Bubble puts it, a majority of American’s are losing their homes because they “were lured by the free money accumulating as appreciation and took out an additional $400,000 in home equity lines of credit and refinancing and lived the good life. This neighbor was driving around in new cars, taking vacations, buying expensive toys and pretending to be rich,” while others sacrificed, even spent less time with family and friends in order to pay down their mortgage and in hopes of a better future. Now, current legislation endorsed by John McCain, Arnold Schwarzenegger, and others seeks to use the tax dollars of the prudent to pay for the imprudent and worst of all the imprudent are beginning to feel entitled and even proud of the plunders. Furthermore, this legislation leads to others saying why not me and the potential for the number of bad loans to increase exponentially as the banks tell people that they need to quit paying their mortgage to qualify for the modification.
“When the thirteen colonies were still a part of England, Professor Alexander Tyler wrote about the fall of the Athenian republic over two thousand years previous to that time:A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.The average age of the world's great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.”1
1Alexander Tyler http://www.mcsm.org/democracy1.html In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. http://www.law.cornell.edu/uscode/17/107.shtml
This quote comes from an article entitled "Fannie Mae Eases Credit to Aid Mortgage Lending" by Mr. Steven A. Homes that was published in the New York Times September 30, 1999. Mr. Holmes is currently a professor at NYU School of Law. Needless to say Mr. Holmes demonstrates tremendous foresight and leaves me wondering why our country does not elect more people like him to office. In the article he cites pressure from "the Clinton Administration to expand mortgage loans among low and moderate income people and (Fannie Mae) felt pressure from stock holders to maintain its phenomenal growth and profits."
Moreover, he quotes Peter Wallison from the American Enterprise Institute who correctly predicted the current bailouts, "From the perspective of many people, including me, this is another thrift industry growing up around us. If they fail, the government will have to step up and bail them out in the way it stepped up and bailed out the thrift industry."
I'm sure that many are impressed by the articles foresite and frustrated that his warnings fell on deaf ears. Mr. Holmes' predicts the center of today’s economic crisis 10 years, tens of thousands of sub prime loans, and millions or billions of tax dollars prior to the great housing bubble. I have emailed Mr. Holmes for permission to post the article in its entirety.
What does Mr. Holmes think about today’s current bailouts, the idea that tax payers should subsidize and create an artificial floor for home prices? In my opinion, any government subsidization beyond allowing those that can afford a 30 year fixed fully amortized loan at market rate to refinance is too much. First, most of the modifications will be back in foreclosure in less than twelve months. Second, subsidizing home prices with the thought that keeping prices high and stopping foreclosures will help the overall economy is short sighted. If the government successfully keeps home prices 10% higher through subsidization than the market otherwise would all future buyers will pay 10% more than they should and have that much less disposable income to spend on things besides housing.
Moreover, there is a whole generation of people that have overpaid for homes and if current housing stimulus policy is successful there may be a whole new group of people that will overpay for housing. When people over pay for housing they do not save enough for retirement, they do not have disposable income to spend and stimulate the economy, they may not have time to spend with their family, or the money to send their kids to college. Is using people’s tax dollars to subsidize and artificially inflate the price of housing a good idea?
I find this article particularly interesting because I wonder how many other people out there recognized that stated sub prime, interest only, and negative amortization loans were a bad idea and how did our best and brightest not? Moreover, I wonder if there are political science professors, economic experts, or others that share my opinion regarding government, subsidization to artificially inflate home prices? Foremost, I wonder if these voices will be hear and win out so that a larger crisis is not created.
I remember asking my wife many Sundays while reading the real estate section of the Orange County Register when the crazy over inflated prices will end. It was apparent that prices could not continue to rise at such unsustainable levels while people were barely able to afford payments using interest only and negative amortization loans. I often wondered how and why it was not apparent to others, particularly the banks giving the loans. One question I posed to people in the height of the crisis was what can banks do to go beyond the negative amortization loan? The bank pays you loan? Today I ask, when will they see that using people’s tax dollars to artificially inflate the price of the very homes those people have been saving to buy (at a reasonable price) is not a good idea.
While I was cautioning against over exuberance my warnings fell on deaf ears and in the back of my mind I wondered if maybe I was wrong. Fortunately, I trusted my beliefs and was able to avoid direct damage from the housing bubble, however, the collateral damage has been felt by all. Let’s hope that wiser voices prevail in regards to the current debates regarding housing bailouts. To this point, it seems that they are not.
I hope to hear from Mr. Steven A. Holmes soon.
_________________________________________________________________________
previous article published on my blog November, 2008
America is quickly becoming desensitized to its moral obligation and duty to repay debts. In fact, many American’s now feel that they are owed something regardless of their behavior and actions. This moral path could lead to an economic crisis far worse than anything we have seen.
In the movie Cinderella Man Russell Crowe plays James Braddock, a.k.a Cinderella man. This movie is a story about a poor ex-prizefighter during the great depression. Unable to pay his bills struggling to feed and clothe his family he is forced to go on public relief. Driven by love and honor James Braddock returns to the ring to become a legend and a symbol to many American’s during the time, proving that hard work and sacrifice, pay off when he defeats the heavyweight champion. In a memorable scene, James Braddock returns to the public assistance office to return the money he was lent when he was down and out.
This brings me to today's economic crisis, a majority of Americans did not lose their homes trying to feed, clothe, and keep their children warm. In fact, of the entire country 6% of homeowners are behind on their mortgage, most of them are losing their homes as a result of irresponsible behavior that has caused many others that did not participate in the irresponsible behavior to lose their jobs, 401k's, and retirements. As Larry Roberts author of The Great Housing Bubble puts it, a majority of American’s are losing their homes because they “were lured by the free money accumulating as appreciation and took out an additional $400,000 in home equity lines of credit and refinancing and lived the good life. This neighbor was driving around in new cars, taking vacations, buying expensive toys and pretending to be rich,” while others sacrificed, even spent less time with family and friends in order to pay down their mortgage and in hopes of a better future. Now, current legislation endorsed by John McCain, Arnold Schwarzenegger, and others seeks to use the tax dollars of the prudent to pay for the imprudent and worst of all the imprudent are beginning to feel entitled and even proud of the plunders. Furthermore, this legislation leads to others saying why not me and the potential for the number of bad loans to increase exponentially as the banks tell people that they need to quit paying their mortgage to qualify for the modification.
“When the thirteen colonies were still a part of England, Professor Alexander Tyler wrote about the fall of the Athenian republic over two thousand years previous to that time:A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.The average age of the world's great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.”1
1Alexander Tyler http://www.mcsm.org/democracy1.html In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. http://www.law.cornell.edu/uscode/17/107.shtml
Thursday, February 19, 2009
Shevy Akason and Associates is proud to announce 22 Sierra Blanco is in Escrow! Under 1 week! Multiple bids
Shevy Akason and Associates takes pride in understanding the market, getting homes sold, and getting our clients top dollar in any market. We are proud to announce that we opened escrow on 2-19-09 in only 8 days on the market, with multiple offers! A one week marketing blitz, proper pricing, and great cooperation from the sellers keeping the home clean, clutter free, and allowing us to hold open houses and show it freely made this a quick sale!
The housing plan--- I still don't think we get it
Is the government's plan only looking one step ahead? Hoping for Hyper inflation? How do you feel about paying other people's mortgage?
Monday, February 16, 2009
Opportunity- HUDS 203K program offers many buyers a fantastic opportunity
Tired of looking at homes that need a bunch of repairs that you do not want to pay for? Tired of looking at newer construction with high HOA and high mello roos or homes that have been done nicely but not to your taste? This program allows home buyers to obtain permanent financing when purchasing a home that will cover certain rehab costs. This could be a huge benefit to many buyers out there that have been looking at beat up bank owned homes or homes with $10,000s of thousands of upgrades done to someone else's taste. Or buyers that are not buying because of lack of funding for necessary improvements and repairs without dipping into important reserves. This could be a great option for buyers considering puting 10% down but hate the thought of PMI!
This loan can be used to fund up to $35,000 in improvements and can be done as part of an FHA loan. Therefor, it limits out of pocket expenses to a 3.5% down payment as an FHA loan. This could be an important tool to allow buyers to purchase a fixer (hopefully priced under market), and gain sweat equity. Here is my recommendation on how to best utilize this program.
Example
Buy a fixer worth $500,000+ after repairs for $400,000 or less preferably ($396,000) so that with 3.5% down + $35,000 for rehab, your loan balance stays under $417,000 and request the seller pay 5% towards closing costs.
Take a loan for $415,915
Put $15,085 down
Put another $5000 towards repair out of your pocket
You are now in the property for $440,000
New appriased value= $500,000
Cash on cash return= 290%+ that's tough to beat!
Moreover you now have $74,085 equity nearly 15% (nearly $60,000 in sweat equity)
If you were previously planning on puting 10% down, if you put the other 5% down you will have put a total of 8.5% down and about 9.5% invested (including extra $5000 pitched in for rehab) and have 20% equity and no mortgage insurance (speak with your lender)!
for more information visit:
HUD information on 203K
This loan can be used to fund up to $35,000 in improvements and can be done as part of an FHA loan. Therefor, it limits out of pocket expenses to a 3.5% down payment as an FHA loan. This could be an important tool to allow buyers to purchase a fixer (hopefully priced under market), and gain sweat equity. Here is my recommendation on how to best utilize this program.
Example
Buy a fixer worth $500,000+ after repairs for $400,000 or less preferably ($396,000) so that with 3.5% down + $35,000 for rehab, your loan balance stays under $417,000 and request the seller pay 5% towards closing costs.
Take a loan for $415,915
Put $15,085 down
Put another $5000 towards repair out of your pocket
You are now in the property for $440,000
New appriased value= $500,000
Cash on cash return= 290%+ that's tough to beat!
Moreover you now have $74,085 equity nearly 15% (nearly $60,000 in sweat equity)
If you were previously planning on puting 10% down, if you put the other 5% down you will have put a total of 8.5% down and about 9.5% invested (including extra $5000 pitched in for rehab) and have 20% equity and no mortgage insurance (speak with your lender)!
for more information visit:
HUD information on 203K
Thursday, February 12, 2009
Shevy Akason and Associates proudly present 22 Sierra Blanco, Foothill Ranch
Do not miss this, relocation forces sale. Unbelievable views
22 Sierra Blanco
Foothill Ranch, CA 92610
Offered at US$599,000 to US$640,000
MLS Number S563452
Type: Residential
Year Built: 1993
Bedrooms: 4
Baths: 3
Living Area: 2043 Sq. ft.
Lot Size: 4695 Square Ft.
Property Highlights
Catalina Views
3 car garage
Master bedroom view deck
Low HOA
community Pool
Community spa
1st floor bedroom
Nice yard
Cul-de-sac street
Dual paned windows
Property Description
Relocation forced sale of this beautiful view home on a cul-de-sac! This is dream home and an equity seller. First floor bedroom and full bath, 3 car garage. This home offers unbelievable views perched high in the hills of Foothill Ranch overlooking the city lights below. Views include Catalina Island, all the way to Dana Point and the Irvine Spectrum along with beautiful mountains! Plus a spacious back yard, gorgeous view balcony off of the master. The back of the home faces west allowing for fantastic sunsets. In addition, the master bedroom, dining room, kitchen, and living room have fantastic westerly views. The huge windows make this home bright and highlight the large back yard and views. Dual paned windows throughout, double sinks in master bath and 2nd upstairs bathroom, plus association pool and spa! Walking distance to Whiting Ranch hiking and biking trails. If all this is not enough, low tax rate and low HOA.
Shevy Akason 949.769.1599 shevy.akason@evergreenrealty.net
Saturday, February 7, 2009
The Wall or the Wave
The Wall or the Wave
Will the wall that the government is building to keep our country from drowning in the wave of foreclosures be too big? I set out this morning to write an article about the 4% plan that I’ve been hearing about. However, I was conflicted, as a realtor I saw huge potential for what this could do to help my clients to purchase homes, nevertheless, I also knew that in Orange County this might go too far and cause government subsidized increases in Orange County home prices, similar to the ones that got us into this mess in the first place, if not property regulated.
First, I’ve seen the inventory drop steadily in Irvine since the extra 90 day waiting period/ foreclosure moratorium passed, I’ve also been waiting for the wave of product that’s been left off of the market (read more about the moratorium). Of course, for those looking to buy in the past three months less inventory means higher prices. Even though the moratorium simply delayed the inevitable, if you want to buy a place today, more inventory coming in three months does not help you. Nevertheless, more inventory is coming and lawmakers are scared. With today’s realistic financing terms and the ARM and Alt-A loans adjusting there may be more price declines. Although price declines should mean more affordable housing which is exactly what we need, the government is against price declines because declines mean more to our economy than simply better affordability.
As crazy as it sounds, the government will do everything that they can to prevent more affordable housing as a result of more reasonable prices. Hence, we will surely see some huge measures in the stimulus bill to subsidize housing. The question is which will be bigger; the wall that the government is building or the wave of foreclosures that is bearing down on California. If the 4% mortgage idea passes and it is not heavily restricted I argue that the wall may be much bigger in Orange County and we may even see price increases for the two years this program is in place. Those that will benefit this most will be those that buy with today’s financing terms and prices and refinance using the new government subsidized loans. In fact, if 4% rates or subsidies similar may pass I will encourage my clients to buy as soon as possible and never sell. Especially as I see properties coming up at rental parity pricing using 5.5% and 6% loans, it’s tough to beat 4% thirty year fixed, even if we’re not at the bottom. However, with this type of subsidization in place it will be hard to imagine price declines. Moreover, as we know housing is a great hedge against the potential inflation that this “stimulus” plan has the potential to create down the road.
I am against government subsidization of housing that artificially increase prices. However, I am also against a complete economic collapse of our country. As a result, I’m going to play devils advocate and here is the argument. If properly regulated a 2 year period of 4% 30 year fixed interest rates will stabilize the housing market. Forget about inflation, the government doesn’t seem to care right now. If properly regulated this plan could be effective. In order to be effective the following provisions would need to be added.
1) debt to income must be below 50%
2) No stated income
3) Minimum 10% down for purchase
4) Loan amounts to be capped at 4x average income for the zip code the home is in -20% (for purchases)
5) Looking for other ideas that will keep this from sending prices artificially high
In conclusion, it’s tough to say which will be bigger, the wall or the wave.
What do you think?
To read more about the foreclosure moratorium and a great article about the 4% plan click on these links: foreclosure moratirium 4% loan proposal
Will the wall that the government is building to keep our country from drowning in the wave of foreclosures be too big? I set out this morning to write an article about the 4% plan that I’ve been hearing about. However, I was conflicted, as a realtor I saw huge potential for what this could do to help my clients to purchase homes, nevertheless, I also knew that in Orange County this might go too far and cause government subsidized increases in Orange County home prices, similar to the ones that got us into this mess in the first place, if not property regulated.
First, I’ve seen the inventory drop steadily in Irvine since the extra 90 day waiting period/ foreclosure moratorium passed, I’ve also been waiting for the wave of product that’s been left off of the market (read more about the moratorium). Of course, for those looking to buy in the past three months less inventory means higher prices. Even though the moratorium simply delayed the inevitable, if you want to buy a place today, more inventory coming in three months does not help you. Nevertheless, more inventory is coming and lawmakers are scared. With today’s realistic financing terms and the ARM and Alt-A loans adjusting there may be more price declines. Although price declines should mean more affordable housing which is exactly what we need, the government is against price declines because declines mean more to our economy than simply better affordability.
As crazy as it sounds, the government will do everything that they can to prevent more affordable housing as a result of more reasonable prices. Hence, we will surely see some huge measures in the stimulus bill to subsidize housing. The question is which will be bigger; the wall that the government is building or the wave of foreclosures that is bearing down on California. If the 4% mortgage idea passes and it is not heavily restricted I argue that the wall may be much bigger in Orange County and we may even see price increases for the two years this program is in place. Those that will benefit this most will be those that buy with today’s financing terms and prices and refinance using the new government subsidized loans. In fact, if 4% rates or subsidies similar may pass I will encourage my clients to buy as soon as possible and never sell. Especially as I see properties coming up at rental parity pricing using 5.5% and 6% loans, it’s tough to beat 4% thirty year fixed, even if we’re not at the bottom. However, with this type of subsidization in place it will be hard to imagine price declines. Moreover, as we know housing is a great hedge against the potential inflation that this “stimulus” plan has the potential to create down the road.
I am against government subsidization of housing that artificially increase prices. However, I am also against a complete economic collapse of our country. As a result, I’m going to play devils advocate and here is the argument. If properly regulated a 2 year period of 4% 30 year fixed interest rates will stabilize the housing market. Forget about inflation, the government doesn’t seem to care right now. If properly regulated this plan could be effective. In order to be effective the following provisions would need to be added.
1) debt to income must be below 50%
2) No stated income
3) Minimum 10% down for purchase
4) Loan amounts to be capped at 4x average income for the zip code the home is in -20% (for purchases)
5) Looking for other ideas that will keep this from sending prices artificially high
In conclusion, it’s tough to say which will be bigger, the wall or the wave.
What do you think?
To read more about the foreclosure moratorium and a great article about the 4% plan click on these links: foreclosure moratirium 4% loan proposal
Friday, February 6, 2009
Income opportunity in Lake Forest
Visit my website to see the latest income opportunity in Lake Forest. It's in a fantastic community that includes a pool, spa, and tennis courts. It's bank owned and well priced at $339,000 but not well priced enough. Visit Lake Forest,3/3, bank owned to see what I would recommend. This could be a great income opportunity and a fun project!
Thursday, February 5, 2009
$80,000 below rental parity!
This home is a fantastic value. Click on link for full report.
http://findmylandmark.com/Costa-Mesa-3-4-luxury-home-Value-buyer-opportunity-n25931.html
http://findmylandmark.com/Costa-Mesa-3-4-luxury-home-Value-buyer-opportunity-n25931.html
Investor opportunities in Costa Mesa
I recently featured a property that just sold in Costa Mesa below rental parity. To see this information please visit the page dedicated to this property on my website at http://findmylandmark.com/Costa-Mesa-n25918.html .
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