Bay Area Real Estate Sales.com Newsletter

November 2004

 

In this Issue:

 

Shopping for a new house driving you crazy?

Marin & SF Home Sales Statistics

Confused about mortgages?

Home Sales Momentum to carry into 2005

Buyers' Home Feature Preferences Reflect Lifestyles

 

 

Is shopping for a new house driving you crazy?

By Liz McCarthy

 

Does this describe your typical Sunday?  You start your morning with a cup of coffee pouring over Sunday's listings of open houses.  You circle the ones you want to see, get out your map and then set out on a day of visiting houses. 

 

I've found that after viewing 4 or more homes, my clients find it difficult to keep houses' features separate.  Here are some suggestions in your search for a new home:

 

Build an open house kit.  Your kit should include a folder with pockets, pen, paper, home-shopping-checklist forms, paper clips or a stapler, and a digital camera.

 

Know your must-haves.  It's easy when you are viewing a house that has an amazing city view and a beautifully redone kitchen to forget that the house doesn't have a 2-gar garage, which was one of your must-haves.  If you have a printed list of what you are specifically looking for, you'll better be able to eliminate houses that don't match your must-have criteria.  Remember, you said they were must-haves for a reason.   You can use the form: Home Shopping Needs and Wants Checklist found on my website:  Home Shopping Needs & Wants Checklist

 

Be realistic. I've had clients that had unrealistic expectations of "finding their perfect dream house."  You may have to compromise on some of your wish-list items.  Be sure to prioritize must-have "needs" versus nice-to-have "wants."

 

Keep a written log of all the houses you visit.  You can use pre-printed Home Shopping Checklists like the ones found on my website:  Open House Checklist . On this page you'll find a link to download a copy of this form to print out, make copies of and bring to the houses you visit.  Take a few minutes to fill it out once you get back in your car.  Take special note of any features you loved or that you really disliked.  Staple/paperclip a copy of the house flyer to your checklist.  Once you are back home you'll be happy to have taken the extra time. 

 

Take pictures. Bring a digital camera with you and snap a few pictures of either features you love or that you don't like.   You can also use a video camera or a digital camera that takes videos to record yourself pointing out special features.   I've had clients form a mental picture of a feature inside a house (like a wall or windows) that didn't exist once they viewed the house a second time.   If you don't have a digital camera, I'd be more than happy to take pictures of houses we visit together and give you a CD to take home with you.

 

Be prepared to act quickly.  If you find a house that fits the majority of your criteria and fits all your must-haves, you need to be prepared to act quickly.  The majority of home-buyers tend to want the same features, which means it's likely that the house will be sold by the next weekend.  Have a pre-approval letter ready from your mortgage broker/banker.

 

Oh-no, there's going to be multiple-offers.  In multiple-offer situations its best to imagine that another buyer got the house for a price that you would have been willing to pay.  That should be your offering price!  Put your best offer out there initially when there are multiple offers so that you can start spending Sunday's enjoying your morning coffee in your new home and thinking of the poor souls who are still in the hunt for the perfect house!

 

December newsletter's article:  "Getting your house ready to put on the market"

 

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*Over 35% in contract is usually indicative of a sellers' market.

*Under 25% in contract is usually indicative of a buyers' market.

*Between 25% and 35% is usually indicative of a balanced market.

Charts represent information gathered from MLS statistics at a specific point in time.

 

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Confused about mortgages?

 

Liz McCarthy recently interviewed Sean Maley, Senior Loan Consultant from Union Trust Mortgage Services.

Sean, mortgage rates seem to have dropped a bit lately but then gone back up? Can you explain why this has happened?

They fluctuate daily with the market.  They are driven by the bond market.  For someone off the street, it is best to follow the stock market.  Typically, when the stock market is doing well, rates are up!

What is your opinion on mortgage rates for 2005?

They will probably go up .50 to .75 across the board by 4th quarter of 2005.

What does a buyer need to have in advance in order to put in an offer as it relates to a mortgage lender/broker.

They need to be pre-approved.  To be pre-approved, you must have a loan package completed, a credit report run by the mortgage broker and a complete package submitted to a bank by the mortgage broker. This loan package would also include your most recent, 1 month of current paystubs, last 2 months of your complete bank statements (all accounts), your last 2 years of W2's and sometimes we will even ask for your last 2 years of complete federal tax returns.

What is the difference between a Mortgage Broker and a Mortgage Banker?

A mortgage broker works with about 150 different banks from around the country.  We have brokerage capability.  This allows me to offer much more product.   A banker (or direct lender) is limited to their own product.  For example, they will only have one 5 year fixed product to choose from.  As a broker, I have access to many lenders who offer a 5 year fixed product which allows me to obtain the best priced 5 year fixed mortgage to the consumer!

Can you explain the differences between: Pre-Qualification, Pre-Approval and Verification of Funds?

A pre-qualification is done over the phone and gives the consumer a good idea of what they can afford.  Not much weight is given to a "pre-qual" since it is done over the phone.  A pre-approval carries much more weight.  A pre-approval which takes about 30 to 45 minutes means the client has actually filed out our application, a credit report has been run, funds for the down have been verified and an underwriter has seen the file.   Verified funds are those funds we have actually seen on bank statements from the client.  These bank statements must be from the most recent 2 month period.

What is the most common form of mortgages that buyers are currently getting and why?

5/1:  5 year fixed because historically, most people will sell or refinance every 5 years.  This is a 30 year loan, but for the first 5 years it is fixed.  After the 5 years is up, it typically rolls into a yearly adjustable.  You can either obtain a 5 year product that is amortized over 30 years so you can pay down principle AND interest OR obtain a 5 year that is interest only so your have a lower payment.

There are a larger number of loans out there to choose from these days.  Years ago, the consumer really only had the 30 year fixed loan to choose from.  I assess the consumer's needs and then match them up to the most suitable loan.  Just to give you an idea of loan options:  we have monthly adjustables, yearly adjustables, loans that are fixed for 1 year, 3 years, 5 years, 7 years and even 10 years.  We have fixed loans which amortize over 15, 20 and 30 years.  There are interest only loan and there are even loans up to 40 years!

Every borrower has different needs and no 2 borrowers are alike.  This is why it is so important to work with a mortgage broker like Sean who has numerous loan options to choose from.  Call Sean to find out about lock-in mortgage rates for Pacific Union clients and his Free-Approval program.  Sean can be reached at:  415-464-2868 email: smaley@utms.com.  Or visit Sean's website:  Sean Maley Website

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Home Sales Momentum to Carry Into 2005, NAR

ORLANDO, Fla. (November 5, 2004) - Expectations for home sales have continued to rise with strong records projected for this year and historically high home sales in 2005, according to a forecast released today by the National Association of Realtors® at NAR's annual REALTOR® Conference & Expo here.

Existing-home sales are projected to rise 7.3 percent this year to 6.55 million* compared with the previous record of 6.10 million in 2003; NAR expects 6.30 million in 2005, which would be the second highest on record. New-home sales will surpass the previous record of 1.09 million in 2003 with sales rising 7.7 percent this year to 1.17 million; a total of 1.07 million new-home sales are seen in 2005.

Housing starts are forecast at 1.93 million in 2004, up from 1.85 million last year; housing construction should come in at about 1.84 million units in 2005.

David Lereah, NAR's chief economist, said the strong forecast results from a steady decline in mortgage interest rates since June. "At the beginning of 2004, forecasters were calling for a gradual rise in mortgage interest rates, but we've experienced a pleasant surprise for the housing sector," Lereah said. "The 30-year fixed-rate mortgage is now hovering close to 5.7 percent, and even thought we're expecting rates to rise slowly they will stay in a historically low range and a strong momentum of home sales will carry over into 2005." In June, Freddie Mac reported the 30-year fixed-rate mortgage averaged 6.29 percent.

Lereah said the 30-year fixed-rate mortgage should stay under 6.0 percent for the rest of this year and then average only 6.5 percent in 2005. "That will help to limit the effect of rising home prices and maintain generally favorable housing affordability conditions in most of the country."

The national median existing-home price is expected to grow by 6.9 percent this year to $181,700, and the median new-home price is seen to increase 9.0 percent to $212,600. "We should see somewhat slower price appreciation in 2005, but as we enter the year with inventories remaining low, home prices will continue to rise a little faster than historic norms," Lereah said. The median existing-home price is projected to rise 5.3 percent in 2005, while the typical new home price will grow by 5.2 percent.

At the same time, inflation will remain tame, with fierce international competition and strong productivity growth keeping prices at bay. NAR forecasts the Consumer Price Index to rise by 2.5 percent this year and 2.1 percent in 2005, while the U.S. gross domestic product should grow 4.4 percent this year and 4.1 percent in 2005. The unemployment rate is expected to decline to 5.0 percent by the second half of 2005.

Inflation-adjusted disposable personal income is projected to increase 3.1 percent in 2004 and 4.2 percent next year, while the consumer confidence index should rise to 110 by the second half of 2005.

More detailed information about NAR's economic outlook, as well as other analysis of real estate industry statistics, can be found in the November issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

*Following availability of revisions by the U.S. Census Bureau to some statistical data, and feedback from the U.S. Federal Reserve Board, NAR will make benchmark revisions to both annual existing-home sales totals and monthly seasonally adjusted annual sales rates. Although the data will change, the overall characterization of the resale market in terms of historic comparisons and relative changes will be fairly consistent with previously reported data.

The changes will include addition of existing condominium and cooperative sales to the monthly series, with monthly revisions going back to 1999. Data prior to 1999 will not be directly comparable due to the benchmark break, but annual revisions will be made going back to 1981 when tracking of the condo market began. Monthly revisions for the single-family component will be made going back to 1989. The separate quarterly track of existing condo/co-op sales will be discontinued, although the new monthly data will show that segment's market share.

NAR's benchmark approach has been reviewed by the U.S. Federal Reserve Board and will be published in early 2005.

The National Association of Realtors® , "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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Buyers' Home Feature Preferences Reflect Lifestyles

(October 28, 2004) --   Younger buyers care more about closeness to schools, parks, and playgrounds, while older buyers are more interested in a bedroom on the main level and prefer single-story homes, according to a new survey on homebuyer preferences by the NATIONAL ASSOCIATION OF REALTORS®.

David Lereah, NAR's chief economist, says the 2004 NATIONAL ASSOCIATION OF REALTORS® Profile of Buyer's Home Feature Preferences is the first survey of its kind. "This is the most comprehensive look at buyer preferences ever produced and ranks findings in a variety of ways, including buyer age, first-time and repeat buyers, regions of the country, and locale," Lereah says.

Although most buyers choose homes located in suburbs or subdivisions, homes purchased by first-time buyers are more likely to be older and located in a central city, while repeat buyers are more likely to select a new home. Older buyers are more inclined to purchase in a small town.

There are some strong regional differences. Nearly 90 percent of buyers in the South rate central air conditioning as a very important feature, compared to only 37 percent in the Northeast. Buyers in the West are more likely to desire a patio or fencing, while buyers in the Northeast and Midwest are more interested in a finished basement.

Lereah says that REALTORS® understand the obstacles buyers face when choosing a home. "REALTORS® are the best resource to match personal preferences and means with homes that are available on the market," Lereah says. "Since the characteristics and features of homes vary as much as the people who buy them, the knowledge and skills a real estate professional brings to the table are critical in making a wise investment."

The survey shows that among buyers who purchased a home without a desired feature, many would have paid more for a home with that feature. For example, 66 percent would have paid a median of $825 extra for a home with a walk-in closet in the master bedroom.

Nearly three-quarters of recent homebuyers say that central air conditioning tops the list of most desirable features they want in a home, while half named a walk-in closet in the master bedroom as a preferred feature.

Ranked next in the preference list are a bedroom on the main level, named by 42 percent of buyers, and a patio or an oversized garage, each with 41 percent. Other desirable features include a cable or satellite TV-ready home (40 percent); fencing (37 percent); separate shower in the master bath (36 percent); a porch (34 percent); and an eat-in kitchen (32 percent).

Urban buyers are more likely to buy a home near public transportation that has hardwood floors and a finished basement. Rural buyers want an open lot with few trees and a single-story home, while suburban buyers favor sprinkler systems, eat-in kitchens, and homes less than 10 years old.

Half of the homes purchased were single-story, but buyers of custom-built homes have a stronger preference for homes with two or more levels. The median size among all types of homes was 1,727 square feet, ranging from 1,471 square feet for first-time buyers to 1,920 square feet for repeat buyers. Homes were larger in the South and smaller in the Northeast.

The median age of a home was 15 years. Typically, it had four bedrooms, two full baths and a fireplace. Not surprisingly, homes in the Northeast were older while homes in the South were newer.

The most desired rooms or spaces include garages, living rooms, extra bathrooms, and laundry rooms-all rated as "very important" by more than 70 percent of respondents. Three-fourths of buyers were satisfied with the home's age and number of bedrooms and bathrooms; more than six in 10 were satisfied with their home's size.

Half of all recent homebuyers report they repainted the interior of their home soon after moving in, while more than a third upgraded their landscaping. One out of five plan to repaint or wallpaper the interior, buy new window treatments, or update the landscaping within two years of purchase.

Twenty-two percent of first-time buyers plan to remodel their kitchen within two years compared with 11 percent of repeat buyers. Bathroom remodeling plans generated similar findings - 20 percent of first-time buyers and 14 percent of repeat buyers. The least likely remodeling projects include in-law suites, media rooms, exercise rooms, and attic renovations.

Fifty-seven percent of homes were located in a suburb or subdivision, 17 percent in an urban or central city area, 16 percent in a small town, 8 percent were rural and 2 percent in a resort or recreation area.

The 2004 National Association of Realtors® Profile of Buyer's Home Feature Preferences was based on a six-page questionnaire mailed to a national sample of 25,000 recent homebuyers who purchased their homes between mid-2003 and mid-2004. It generated 1,470 usable responses; the response rate was 5.9 percent. A copy of the report can be ordered by calling 800/874-6500. The cost is $50 for NAR members and $75 for non-members.

-NAR

 

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