Blessings to All

I know Spencer would join me in saying we are both very thankful for the blessings in our lives. We wish you peace, love and a lightness of heart this holiday season.

Kelley's Fundraiser a Success

No news is posted yet on the check on KK blog but I am bursting to write about it. The Fund Raiser for Kelley Kalafatich was last night and it was a huge success. My wife Sarah worked on the event along with many of Kelley's friends. The river and Coloma Lotus community came out in the hundreds to help raise funds and show support. Sarah came home last night after counting money well into the night. The dollar amount is not in yet but it was WELL above expectations. Thanks to everyone that was there and that gave money. I can't think of a better example of what makes this community such an awesome place to live.

Subprime Bailout

I struggled through a post that never made it to reality last week. I was trying to write about the Bush Adminstration's subpirme mortgage bail out. I studied lots, read lots of articles and was just having too much trouble writing about how the plan is too little too late. How it is not going to help consumers. Well here is an atricle in NY Times that does what I couldn't do.

Teaser Quote:

But won’t the borrowers gain, too? Not if the planners
can help it. Relief is restricted to borrowers whose mortgage debt is at least
97 percent of the house’s value — which means that in many, perhaps most, cases
those who get debt relief will be borrowers who owe more than their house is
worth. These people would be nearly as well off in financial terms if they
simply walked away.

There is the problem. The Bush Admin is puttinga band-aid on a gushing chest wound two hours after arriving at theaccident. Itis just too little too late and the plan gets in the way ofreal reform thatneeds to take place. My industry needs tough love rightnow. Not a quick fixthat promotes the status-quo.

Let's Talk

In our field, Spencer and I do a lot of talking, but more importantly we do a lot of listening. When I first became a Realtor in 1999 I felt I was a decent communicator but I found I had quite a bit to learn. The main point is active listening is different from listening. Having a dialog is not the same as two people performing monologues for each other. I know it's tough to be an active listener, we have so much to say and we're all so busy that often we don't truly hear the other person. We simply wait for them to stop talking so we can start.

I clipped an article from Realtor magazine several years ago. While the tips were written for agents interacting with clients they are universally applicable. I'd love to acknowledge the author but I don't have the full article so please don't sue me if you recognize your words and ideas here.

I'm going to share these in two posts. Here's the first half of the list:

-Talk with, not at others. This is the "simultaneous monologues" concept. Rather than waiting for the other person to stop talking so you can have your chance, listen, really listen, and reply to what was said.



-Avoid interrupting. In the course of my work I find I have the same conversations over and over with different sets of clients. The information/questions/concerns aren't new to me and it's tempting to chime in to keep things moving. As the author says, "doing so assumes too much and makes (clients) feel marginalized." Same goes for interpersonal relationships. Who hasn't had the experience where you realize someone is trying to get you to "skip to the end" because they've already determined how to respond. That doesn't make you feel as if you've been heard does it?



Value silence. This is a tough one. Want to see how hard? Practice tonight on your partner. Don't reply immediately, take a moment to consider what was said and reflect before you reply. This shows you are really listening and not simply waiting for your turn. Now, you can't do this after every sentence or your partner will smack you upside the head, but you get the idea. The person I know who is naturally the best at this is Eric Magneson, General Contractor with Magneson Hoyt Construction. After a conversation with Eric you come away feeling you've been heard. He is a Zen master at valuing silence. In a good way Eric, I'm not teasing you.



Paraphrase. Again, not something you do constantly or you really will get a smack in the head, but when appropriate, paraphrasing what the speaker said in the form of a question checks with the other party that you understand what they mean. I often say something like, "So what I hear you saying is X, is that right?" Sometimes I'm right on the money, other times I'm not.



So, that's it for now. I'll post the rest of the list in a day or two.



Note to self: do a quick post on "writing tics" soon. They're like "verbal tics" but much more insidious. I've deleted more than I care to admit from this post.

More good news for locals?

Before Spencer and I set out to do this blog I saved this article from the Sacramento Bee to share with my El Dorado County clients. I have the author's permission to link to it in our blog. Thank you Jim Wasserman. Check it out and be sure to maximize the graphic on the right once you open the link. Even though the article is from late October you'll see it is still good info and potentially good news if we run true to history.

Also, don't miss Spencer's post on risk based pricing. While not good news we promised to share the good, the bad and the ugly here.

If You Have An Arm

This is Spencer's area of expertise but I wanted to chime in about the current mortgage market. Spencer, please correct me if I'm wrong.

As most everyone knows, ARMs, or adjustable rate mortgages have reset or are about to reset for many borrowers. This means a higher mortgage payment which you may not be able to afford. One solution is to refinance your current loan. Do call Spencer about this as he may be able to get some of you into better loans. Contact him for the details.

Another possible solution is the temporary freezing of rate increases for ARMs currently in the works. Click here for the article in the Sacramento Bee and feel free to call Spencer or myself if you need more information.

Fannie Mae Moves to Risk Based Pricing

As of today I have received word from three lenders that Fannie Mae is moving to "Risk Based Pricing." They are stating that all Fannie Mae (FNMA) lenders will be doing the same. To the average consumer that might sound like no big deal. But let me assure you this is a very big deal for home buyers that are coming into the market right now as well as current homeowners that care about their home's value. Below I will explain why:


Under the new Fannie Mae guidelines, lenders will impose an extra cost on loans that are greater than 70% Loan to Value ratio and have credit scores are less than 680. That means that anyone with what I like to call B+ credit that is looking to buy a house with less than 30% down will find, in the very near future, that the rate they will pay is higher. Furthermore, as your credit score drops below 660 and 640 and 620 there are increasingly substantial hits to interest rates.


For those that don't know, Fannie Mae is a government created private agency that is the industry standard for how conforming loans are priced and underwritten. Freddie Mac (FHMC) is the other loan guarantor that will probably follow suit within days. In the years that I have been in the mortgage world 90-95% of the loans i have done have been FNMA/ FHMC loans. Up until this point a borrower that had a lower credit score (as long as it was greater than 620) could expect pay the same rate as one with an 800 credit score.


Analysis:
This development will have a significant impact on borrowers, and especially first time home buyers. There are two reason for this: Primarily, first time home buyers (FTHBS) tend to have lower credit scores than homeowners with a track record. This is because FTHBs have less track record of paying back major consumer debt than homeowners who have an established mortgage history. That typically leads to a lower credit score. Furthermore FTHBs almost always borrow greater than 70% of the home's value whereas move up buyers are usually bringing equity realized in their current home with them.


The damage to first time home buyers will not be the only fallout from this decision. The real estate market's recovery will be driven by buyers that, for now, are either sitting on the sidelines waiting, or that have been priced out of the market. See my post on affordability. With increased rates for many potential buyers, values will have to drop even farther to increase affordability. Essentially what that means is that Fannie Mae is forcing an even larger correction on the market than what we have already experienced.

If I can rant for a moment... I find this development especially hypocritical coming from Fannie Mae. In 2004 and 2005 as home values were increasing all over the country, FNMA made several changes to their lending guidelines that were designed to make homes more affordable. This included the advent of interest only loans and increasingly relaxed standards for stated income loans. While well intended to help borrowers qualify more easily for purchases, they had an unwanted effect of pushing home values to record levels. This is because sellers knew that buyers could qualify for larger and larger payments with these enhancements and maximized their gains accordingly. In late 2004 it started to become more apparent to me that the market was approaching the top. This is based solely on my observation that basic entry level houses were becoming unaffordable for average 1st time home buyers. As we know, values continued to grow for another 1-1.5 years to the point that almost no one could afford a home creating a value bubble. Then the market began to adjust. Of the Fannie Mae borrowers defaulting within the last 18 months I have to think that they vast majority of them were those that qualified for their homes based on those affordability enhancements. So in effect Fannie Mae contributed to the bubble and is now working like heck to slow the recovery.

As for what that means for borrowers in the future. It is more and more important to maintain excellent credit scores. If you need to find out more or want to check your credit scores contact me.

Affordability Index Increases

Starting this blog in the middle of the biggest real estate slump in a decade means that there is going to be a lot of bad news about housing. I don't want to be Pollyanna about the market but I am posting some good news for my first real informational post.

In the last few years we watched home buyers ability to buy a house slip away. This was especially rough on first time home buyers. It is one of the things that lead to the downturn in the Real Estate Market that we are experiencing now.

Now there is some good news for buyers in the Sacramento area. My guess is that news is going to keep getting better.
Source: Capital Public Radio
Spencer