A word from Jim Turner and Warren Buffet

While looking for ideas for writing a spooky article for this month’s newsletter I thought I had found something really scary: The Dow Jones Industrial Average. Eeeek! So I stared into the face of this terror, and got into the spooky spirit of this all-hallowed-holiday and started writing a bone chilling article about the end of the economy. Chaos in the streets, martial law, dogs and cats sleeping together! But then a real party-pooper came along and canceled all of the festivities of fright and started turning on the lights. It was Warren Buffet.

It turns out that this wet blanket was cautious about the market when everyone else was
having a celebration. His entire personal portfolio was in Treasury Bonds, not in the stock market at all! Now that everyone is scared out of their wits in the stock market what does he do? He calmly walks in and starts converting almost all of those Treasuries to stocks! Doesn’t he know that the stock market just dropped 36% from its all time high of a year ago? Oh…wait a minute.

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," said Buffett. "And most certainly, fear is now widespread, gripping even seasoned investors."

I suppose he must have seen how disappointed he had made the partygoers who were dressed up as stockbrokers and financial analysts. He then threw them a bone by saying: "In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary." But before the DJ could start playing “The Monster Mash” he sobered up the crowd again by saying: "Fears regarding the long-term prosperity of the nation's many sound companies make no sense. Most major companies will be setting new profit records 5, 10 and 20 years from now."

This article isn’t scary at all! Especially when it comes to real estate! Everyone needs a place to live, so that even when times are tough housing always doubles in value (or more) every decade. That’s including the busts that occur almost every decade like clockwork. Even when I find an article that is really trying to be scary like: “Housing starts hit record low”, I can’t even get a little chill. Even the dimmest economics student knows from their “Supply and Demand 101” class that when you decrease inventory, but increase population, you have a housing shortage. So when the current overstock of inventory has sold, normal demand and reduced supply will drive prices up. This is still good news for the homeowner and real estate investor.

Perhaps I never really got scared on Halloween anyway. Now that I think of it, I come to the party for the fun outfits, the silly games and for the people. I hope I haven’t let you down this year. For those of you who really need the fear and the terror to really enjoy the holiday there’s
always CNN.

Spooky

Forwarded to me by a friend

Prices down, but activity up

An article in the Seattle Times detailed statistics released by the Northwest Multiple Listing Service for the month of September. While the median price in King County slid by 7.8% compared to September of 2007, it is an improvement over August's numbers, and the number of pending sales is up 15% from a year earlier. These are small, early indications that the market may be beginning to bottom out.

With the recent financial news, the market will continue to change of course. Rates are still very good and could possibly improve with the recent drop in the Federal Funds rate (though the past year's rate drops have had little effect on mortgage rates). Home prices are also back to levels seen in March of 2006. If you are interested in buying a house (and of course have the ability), the buyer's market may be peaking.

Foreclosure

Here is a good description of foreclosure and pre-foreclosure options detailed on the blog of one of the agents in our office. Hopefully you will never need to go through any of this, but with so many people going through this around the country, it can't hurt to know the related terms/options available.

Home Foreclosure Options Explained

Foreclosure occurs when the homeowner falls behind in monthly mortgage payments and defaults on the loan. The lender repossesses or sells the home in order to satisfy the debt. Typical options you can pursue to avoid a home foreclosure are set out below. Your solution will depend on your financial status, the mortgage's default status, the type of loan you have and the various laws that apply.

List of options.

Comic relief

Click to enlarge.

Don't wait on the sidelines

The real estate and lending market is pretty uncertain these days. The Puget Sound area has fared better than most around the country, but we are feeling our own pain.

It is understandable to feel hesitant, but this is actually a great time to be a buyer. There is a surplus of homes on the market, and buyers are enjoying their first real buyer's market in some years.

However, though rates are still historically low (low 6% range), many buyers are being kept out of the market due to tighter restrictions from lenders. As I mentioned previously, 100% financing is pretty much gone outside of VA finacing. Higher credit score and lower debt ratio requirements are keeping other buyers out as well.

Do you know where you stand? Are you staying out of the market for fear that you can't qualify? Or are you staying out of the market because you are waiting for prices to hit bottom?

Don't wait on the sidelines. Find out if, and for how much, you can qualify. Even if you know you can qualify, you should get pre-approved as soon as you are in the market for a house. The pre-approval process can take some time, and you want to be ready to nab that perfect home at a great price. If you wait to start the loan process until you think prices have "hit bottom", you could be weeks away from acting on it. In the meantime interest rates continue to change and have been on the rise in the last couple of weeks.

As always, I want you to be the strongest buyer possible. Contact me today to see if you can qualify. After some questions and some quick calculations, we can tell where you stand. If you are ready to enter the home buying market, it will only cost $19 for a credit report and a little time to gather your documentation. By being pre-approved now, you are ready to act when that perfect home comes along.

While you're waiting for prices to drop, you're losing buying power

Many buyers are sitting on the sidelines waiting for home prices to drop or bottom out. While they've been watching prices, interest rates have gone up half a point in the last three weeks.

For example, three weeks ago a principal and interest payment of $2,000 would have qualified you for a $342,000 home at 5.75%. At today's rate of 6.25%, that same $2,000 principal and interest payment now qualifies you for only $325,000.

You've lost $17,000 in purchase power and it is unlikely that the home's price has dropped by 5% in that same three weeks. In the last year home prices in King County dropped .2%, and in Snohomish County prices actually increased by 2.4%.

As an Integrated Agent at The Real Estate Group, I am both a Real Estate Agent and a Loan Officer. While I can save you some money during the real estate negotiation, it is likely I can save you even more when I help you obtain financing. I will search for the best loan program to maximize your buying power, and I will keep an eye on rates each day and do my best to lock you in at the lowest rate available.

Home buyers are in their strongest negotiating position in the last 5-10 years. Don't wait any longer. You can't afford to.

What 80% of buyers find out the hard way

That their loan officer sabotaged their home purchase.

In speaking with a number of Escrow Officers, they estimate that about 80% of people signing their loan documents when buying their home are surprised to see that the rates and fees are higher than they were told. They try to reach their loan officer on the phone, but no one answers. Do they sign for the loan with worse terms, or do they risk losing the house?

Law requires that, if requested by the borrower, the closing statement figures must be given one business day in advance. Without this review, clients see the final figures for the first time at the closing table when they sign their papers. Victims of these bait-and-switch tactics are put on the spot and usually sign the papers with these higher terms in place.

There are several advantages of using an Integrated Agent from The Real Estate Group when purchasing your home. Integrated Agents are both real estate agents as well as mortgage loan officers. Your Integrated Agent will have all the important figures at hand throughout your transaction, so you will always have up-to-date figures available to you. Also, typically a real-estate agent will be with you when you sign your papers, but rarely/never your loan officer. As we are one in the same, you will have both at your signing to explain every figure and answer any questions.

An Integrated Agent from The Real Estate Group is your strongest ally in buying or selling your next home. Please call me or drop me an e-mail if you are interested in learning about the best way to buy a home.

Sellers looking for any kind of help

Sellers and their agents have been turning to St. Joseph for help in selling their homes. The Catholic saint is believed to help with home related matters. You can purchase a “real-estate kit” online for about $5, and it consists of a 3-inch statue of the saint, a prayer and burying instructions. Apparently burying the saint upside down near the for-sale sign, front or back door will help you sell your home more quickly.

Some Catholic leaders think burying St. Joseph is not terribly respectful. They also say that faith and devotion are necessary, otherwise it is simply superstition. I would also hope that the sellers’ agents are doing everything in their power to help sell the home, and not simply relying on faith.

Mayor bans the phrase "I don't know"

The mayor of a Siberian town has banned 25 phrases including "I don't know", "I can't" and "It's not my job". People using these phrases will be on their way to unemployment.

I embrace this mentality. In past jobs when I was supervising projects and people, when people contacted me with a problem, I expected them to have thought of some possible solutions before they contacted me. They were deeper in the project than I was and would have a better understanding of the problem. They often came up with good solutions, and could then check in with me for my opinion on which course was best. It certainly simplified my job and as the article states "To say 'I don't know' is the same as admitting your helplessness."

As an Integrated Agent, any time I normally would answer 'I don't know', I replace it with "I will find out". I try to have as much knowledge as possible, but I am certainly not all-knowing. I am your advocate and it is my responsibility to provide you with the best information possible. And you definitely won't hear "It's not my job". That is just another dead-end answer. I will contact the responsible party and find out what is going on. As always, I want you to be the strongest, most well-informed buyer out there.

How walkable is your new neighborhood

I have added a Walk Score tile onto my website. The Walk Score tile allows you to enter in an address and compute the walkability of the surrounding neighborhood.

The formula computes the score by seeing how close the home is to grocery stores, restaurants, coffee shops, etc. You can use this tool to compare different homes and neighborhoods you are considering. Check it out!

A long walk to the bathroom

The city of Bothell has a population of about 31,000 residents, and it covers roughly 12 square miles. The odd thing about Bothell is that roughly half of the land area is in King County, the other half in Snohomish County.

A new condominium complex adds to this confusion. The county line splits the complex so that thirteen of the buildings are in Snohomish County and three in King County. Worse yet there is one building that actually straddles the line. This means that a home’s bedroom might be in a different county than the bathroom. I imagine the permit process for this building was a nightmare.

I wonder if they will get a property assessment from each county. Will the King County half be worth more than the Snohomish County half?

McMansions Under Fire for Environmental Waste

Representative John Dingell, a Democrat from Michigan is drafting a “carbon tax” bill that will remove the mortgage interest deduction for homes over 3,000 square feet. Rep. Dingell is chairman of the House Energy and Commerce Committee. He realizes the proposal will be controversial, but he feels in order to address issues of climate change, we must address issues of consumption. Many of these larger homes have two story entry areas, vaulted ceilings, extra bedrooms and walk-in closets. All these additional space require more energy to heat and cool.

Critics point out that square footage may not be the best measure. Some newer houses are “built green”, and include energy efficient appliances, windows and heating systems. Also measurement of square footage often varies significantly, so it may be tough to police. Finally, the mortgage interest deduction is one of the biggest tax deductions for most Americans, and Capitol Hill will face quite a battle trying to take away this sacred deduction.

Houses are growing as families are shrinking

Nationally the average household has shrunk slightly since 1990, to 2.6 people. However in the same period, the average new house grew 400 square feet to 2,434. One in five American homes had at least 4 bedrooms in 2005. That is up from one in six in 1990. Locally 20.7% of homes in Washington have at least four bedrooms, up from 18.3% in 1990. Houses are growing in size as families shrink, even though cost of materials, labor and energy to heat and power the homes rise.

Some communities are fighting back, though their motivations are not likely ecological. In the Seattle/Bellevue area it has been a popular practice to tear down an 1100 square foot rambler and replace it with a 4,000 square foot home that bulges up to the property line. These “McMansions” as they are called overpower their neighbors and do not fit in with the neighborhood. Neighbors are fighting back and trying to get their cities to regulate the tear-down/rebuild practice.

Seattle is considering:
· Shrinking the height limit from three stories to two.
· The house can occupy only 35% of the lot. Currently it is 35% or 1,750 sq. ft., whichever is greater. This means a 1,750 house can be built even if the lot is under 5,000 sq. ft.
· Replacing multiple houses with one large one would also be prohibited.

Bellevue is considering:
· Requiring a certain percentage of trees on the lot to be preserved, possibly up to 15%.
· Measuring the height of the home by grade before construction begins. Some developers have changed the grades of lots dramatically to get around regulations.
· Requiring weekly removal of debris, distributing guidelines to developers, posting of informational signs before construction, and cleanup of abandoned work sites.

The cities are weighing the regulations against concerns over property rights and effects the regulations will have on home builders. Of course the larger homes often mean higher tax revenue for the cities, so I am sure that is a major factor in their decision.