The intended purpose of the proposed $700 billion bailout that failed to pass yesterday was to increase liquidity.  The feds hope was that with this increased liquidity, the banks would be able to lend out more money.  Since the bailout has not been approved, it seems lenders are even more inclined not to underwrite more loans.  Market uncertainty that spans internationally is certainly not helping matters any.  The massive withdrawals we are seeing from additional US banks is just an indicator of the state of the economy and can be a good predictor of which bank is likely to be the next to fail.

More and More Difficult to Obtain a Loan

It is getting tougher and tougher to qualify for a loan — for example, the lender will now have to qualify the borrower for both the current house payment and the new house payment if the buyer has less than 30% equity in their current home.  There are also new rules to protect banks from fraud, such as sending a 4506T form to the IRS upon submission of the loan to verify that the tax returns that were given to them are the same tax returns that the IRS received. The debt to income ratio also is strictly adhered to with no exceptions.  The buyers these days must have the ability to repay the loan by having the following:

• a secure job
• cash for a down payment
• great credit scores
• money for reserves.

I.e., back to the basics.

Stellar Credit is More Important Than Ever

Another way Fannie and Freddie are making up for lost money is by charging extra points for less than perfect credit scores.  For example, if two buyers with identical financial qualifications with the exception of their credit score apply for a loan – one has 740 FICO, the other has 680 FICO  – the one with the lower score will pay 1.75 Points more for the same rate than the buyer with the higher score.   So, FICO scores are more important now than ever—right or wrong, this is how people’s credit worthiness is judged and the basis upon which one’s rate is determined.

One thing is for sure—there is more to come and it will be a wild ride, so hang on!   For help muddling through this mess, give me a call (619-850-3600) or visit my Website.  If you do have great credit, this is an excellent time to buy!

A scary issue was just brought to my attention.  It’s something everyone needs to be aware of if they are selling or buying a home.  This is yet another aspect to the fallout from the housing crisis…

Vacant Property, courtesy of Matt McGee

Vacant Properties Are an Exclusion to Standard Policy

First, I heard a rumor that the typical insurance policy carried by roughly 85% of homeowners on their home, referred to as the HO-3 policy, has a number of exclusions, including “Vandalism and malicious mischief if the building has been vacant for more than 30 days”.  I checked this out on several websites and confirmed its validity.

Insurance Companies Will Cancel the Policy on a Vacant Home

To get more information and verify specifics with someone I trust, I called one of my favorite sources for homeowners insurance in the coastal North San Diego area, Rancho Santa Fe Insurance.  Despite being located in and named after one of the wealthiest communities in the nation, RSF Insurance provides policies for all kinds of properties at very competitive rates.  I spoke with Laura who explained to me that if an insurer finds out a property is vacant, they will immediately cancel the policy.  It goes far beyond simple exclusion!  Apparently and understandably, it is considered too risky.  So many things can go wrong, from an unnoticed broken pipe, to the vandalism I spoke of above. 

Between a Rock and a Hard Place, and up S___’s Creek without a Paddle!

As if the situation isn’t dire enough when a property is in foreclosure or being sold in a short sale, it may lose its insurance and end up completely worthless!

The seventh annual Taste of Del Mar and Art Stroll is coming to Del Mar Village in just a couple of weeks, on October 4th!  This event hosts a wide array of activities and is totally worth visiting, even if you have to drive a distance to get here.  This is one of Del Mar’s finest moments where we get to show off what a phenomenal place this village is and all it has to offer.

Tease Your Palette with Culinary Creations

This is my favorite part!  For $40, one can sample an enormous array of delicacies from our finest restaurants as well as taste a number of fine wines and ales from our local breweries.  Come prepared to take notes so you’ll remember which restaurants you want to return to, and come hungry!

Feast Your Eyes with Creative Crafts

You can get all your Christmas shopping done early at this amazing art festival.  With over 70 local artists converging to show and sell their artwork, you’ll be amazed how quickly you can find gifts for everyone on your list!  But if you just want to stroll and feast your eyes on all the beautiful handiwork, go right ahead. This part is free!

A Wide Array of Kids Activities

The DMVA offers a variety of free kids interactive arts activities from noon to 4 pm enabling the younger crowd a chance to dabble in hands on creative crafts as well as some lively children’s entertainment.  The interactive stations include the Rad Hatter (fun hat making), a polynesian craft table, a Polynesian dance concert, puppet show, drumming sessions, and much more.  The kids really enjoy it.

Pet Stroll

The event also offers a free Pet Stroll from 10 am to 5 pm.  Your furry friends are not only welcome, but will be treated to special pet goodies at several participating locations throughout the village.

Come one, come all!  Everyone in the family will have a great day!

Time and time again when I pull a credit report, I find that there are errors on the report that impact my clients’ score or their debt to income.  I always recommend that a client carefully go through their credit report to make sure it is accurate.  Your credit score will make a huge impact both on your rate and on whether or not in today’s strict lending environment you will be able to qualify for a home loan, so this is very serious!

Typical Errors

1. people with common names, for example a Robert Smith Sr. debts will appear on the Robert Smith Jr.s report.

2. credit fraud on the report where there is a stolen identity involved.

3. there are late payments on a car or mortgage reporting that are inaccurate.

Tips For Improving Your Score 

1. Always start off contacting the creditor that is reporting the error on your report. Their information will be towards the back pages of the credit report.

2. Contact all three bureaus, Transunion, Equifax, and Experian as soon as possible.

3. Always document who you speak with and have supporting paperwork available to make sure you can repudiate the inaccuracies on the report. 

Consumers Beware

There are many people who claim that they can repair your credit when in reality they take your money and do nothing, so only go that route if the credit specialist comes highly recommended by your mortgage broker and you have no choice and need their help.

In today’s lending environment, always strive to have the best credit score you can!  If you have any questions or would like more information about how you can improve your score, give me a call (619-665-3988) or visit my website.

Any statistician will tell you how easy it is to manipulate numbers.  As a former scientist, I can attest to the fact that one can present data (i.e. results from one’s research) to support either side of an argument.  Tell me what you want to demonstrate, and I’ll find a way to present the numbers to back up that claim.

Housing Stats in the Media

These days, we are being inundated by reports in the media about the housing crisis.  One hears about

• the increasing numbers of foreclosures, REO’s and shortsales
• the decreasing total numbers of sales, or “units”
• the decreasing home values in various markets

I’m no statistician, but my background in the sciences has made me hyper-aware of how misleading numbers can be.  Here are some of cautionary thoughts.

The Importance of Normalizing

When referring to numbers increasing or decreasing, I always wonder how careful the reports were in normalizing the numbers.  In other words, if 10 houses went into foreclosure in a given market A, while only one did in 2005, one has to know whether are still the same total number of homes in market A.  One foreclosure out of 500 homes vs 10 foreclosures out of 1000 homes is not a 10 fold increase, but a five fold one.

The Difference between Average and Median Sold Price

Some seem to use the terms interchangeably.  Some suspect there’s a difference but don’t know what it is.  The median sold price means the middle value in a set of prices arranged in increasing order, i.e. the middle price in a batch of home prices, where half are higher than this number, and half are lower.  To calculate the average, all sold prices are added together into a sum, and the sum is then divided by the number of houses that sold.  Which is more relevant?  The median, because it tends to neutralize aberrant homes that fall way off the curve.  For example, if 4 tract homes sold for $490k, 495k, 505k, and 510k, and one unusual custom home in that neighborhood sold for $750k, the average sales price would be $550k, while the median would be $505k, which is much more representative of the values in the neighborhood.

Generalizing from Changes in Median Price

Even when using the more representative median, I am often blown away by the assumptions people make when looking at shifting trends in home prices.  If the median price in a given neighborhood went from $800k in 2005 to $600k in 2008, it does not necessarily mean that prices declined by $25%.  A different explanation could be that in 2005, the largest floorplan was selling the most frequently, while now, the smallest floorplan is the most popular seller.  The same is true when we hear stats of a whole city or community, like Del Mar Real Estate.  Though the median home price may look like it has gone down, perhaps this decline is simply a reflection of the fact that more of the lower end, entry level Del Mar homes are selling now, the tear downs and fixers.  The real question is whether the price a specific given home would have sold for in 2003 is different from what it would sell for in today’s market.

The Bottom Line

I am not trying to argue that home values have not declined here in Del Mar, but simply to say that we need to take these stats with a grain of salt.  As I mentioned, the numbers can be presented in such a way as to support any agenda.  For the media, negative stories sell!  That’s a pretty powerful agenda…

It seems everyone wants to get in on the action!  Everyone’s heard about the economic and housing crisis, the sinking home prices, and they all want to cash in by finding a steal of a deal.  Fortunately for my partner and me, the coastal North San Diego County real estate market where we do most of our business is not suffering as much as other areas.  Newer tracks that were built and sold at the peak of the market from 2003 -2005, that offered insane incentives such as highly risky loan products, are suffering the most.  More established communities and those with timeless appeal like Del Mar and Cardiff-by-the-Sea are faring far better.

One Buyer Chooses to Venture into Heavy REO Territory

After living in Carmel Valley for the last several years, one set of clients, a growing family with two young children, decided they needed a bigger home.  By surfing various internet real estate sites, they discovered that Chula Vista, an area with many newer tracks located in southern San Diego County, had been hit particularly hard by the housing downturn and offered a great opportunity  to find a big house at discounted prices.  That’s where we came in…

Sifting Through the Housing Rubble

When they asked for our help, we admittedly were wary.  REO’s and short sales are notorious for being hard to purchase.  It can take weeks or even months to get a response to one’s offer, and that’s just the beginning.  They may not even close.  But our clients were determined.  So, we sifted through pages of available listings until we came up with 6 that matched their criteria and seemed worth seeing.  After visiting them, our clients designated their first, second and third choices, and we were ready to write offers.  That’s when we began to discover yet a few more reasons why REOs are so challenging:

• many of these listings already had multiple offers on the table, one as many as 25!
• many of these homes had been so neglected by their owners, they were in horrible condition!
• some had even been stripped of every removable part like fixtures, doorknobs and switches!

Writing Multiple Offers

Unlike the San Diego Coastal real estate market, specifically, the Del Mar real estate market, concurrently writing offers on multiple properties is a normal practice and is not considered unethical in areas with many REO listings for sale.  We’ve always felt that this practice flies in the face of the covenant of “good faith and fair dealing” because there is generally no intent for a buyer to ever buy more than one house at a time. But, we did what we had to do.  So many of these listings already had multiple offers pending, chances were slim of any of our offers getting accepted.  Long story short, after an intensely steep learning curve, we successfully submitted a few offers and eventually got one accepted…. 

And The Waiting Game Begins…

(stay tuned for part 2)

Who ever heard of bird mites?  Who knew something as adorable and charming as a family of birds nesting in the Christmas wreath hanging on one’s front door could lead to the worst Edgar Allen Poe – like nightmare?

One Client’s Personal Story – a Chilling Account of Her Battle with Bird Mites

Even here, in Carmel Valley, a quiet upscale community sometimes referred to as Eastern Del Mar where the average home price is close to $1,000,000, those sweet innocent little nesters may be wreaking havoc on your home, your sanctuary!  I recently spoke to a client who told me her harrowing tale about the initial mystery, the ensuing detective work, and the ongoing battle to eradicate her beautiful home from a horrible infestation.

The Mysterious Itching – How it All Began

It all started one day last June when my client began getting mysterious bites on her arms and legs.  She doesn’t have pets, so she didn’t suspect fleas.  A visit to a dermatologist and 2 biopsies brought no answers.  When her precious baby girl started getting bitten as well, she started to think maybe indeed it was fleas, and the only possible source was a bird’s nest in a wreath on their front door which had recently been abandoned by the baby chicks.  They removed the wreath immediately and had someone out to treat for fleas.

Identifying the Culprit – Microscopic Bird Mites

It was only when by chance she picked up a white envelope on a credenza by the front door that she saw the offending bugger: tiny little black dots crawling all over the envelope.  After some diligent research on the Internet, she discovered the identity of those creatures: Bird Mites!

What’s a Bird Mite??

Bird mites are microscopic bugs that live on and around birds.  They are parasites, meaning they feed on living organisms; the female mite needs blood to reproduce. While their preferred host is birds, they are also attracted to mammals, including us unsuspecting humans.  They are aggressive and will often bite us when their original food source has gone, as when the young birds leave the nest. Because they reproduce so quickly, they can quickly multiply into thousands.  And, once a home is heavily infested, the mites are excruciatingly difficult to fully eradicate.  As my client knows all too well…

The Seemingly Endless Process of Eliminating Bird Mites

After confirming the mite’s identity by sending a sample to Vector Control, my client’s real battle began.  It turns out that one needs to fumigate the house with 10 times the concentration of poisonous Vicane gas used for termites, but even that doesn’t kill the eggs.  One needs to do a succession of tenting in order to kill subsequent batches of hatched mites and, eventually, hopefully, one succeeds in killing them all.  My clients have now tented three times.  They have washed their sheets, towels and every article of clothing countless times, vacuumed and shampooed the carpet multiple times as well, and moved out of their home for weeks.  And they still get occasional bites!  But, thanks to the powers that be, the frequency is definitely diminishing.  It seems they’ve finally gained the upper hand.

Helpful Hints

1. Never allow a bird to build a nest and roost on or near your home.
2. If one does, remove it immediately, before the baby chicks leave the nest forcing the mites to search for a new host -  YOU!
3. If your home does get infested, reduce the humidity as much as possible, as the mites can’t survive in low humidity.
4. Call county a Pest Control agency for support and further advice.

The oldest use of the term “Real Estate” that has been preserved in historical records was in 1666. In other words, real estate has been around for a very long time. And, it is not going away! It will be around until the end of time. What a comfort that is! With the slump happening everywhere, including here in San Diego County, it is reassuring to know that even if when things get really bad, there will always be people wanting to buy and sell homes.  Homeownership is indeed the American Dream.

Real Estate may be down, but it will come back up!

Real Estate is a legal term, according to Wikipedia, that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location. The word “fixed” is the keyword here, meaning unmovable. Real Estate is here to stay!

Real Estate’s Royal Roots

Wikipedia also states that the word Real is possibly derived from “royal”. For hundreds of years the Royal family and/or King owned the land, and the peasants paid rent or property taxes to be on the Royal’s land. Today, just like hundreds of years in the past, we pay property taxes, or rent to be on the government’s land or the Royal Estate. Isn’t it great to know that even though we do have to pay property taxes our homes are owned by us and not a king or government or royal family!

A Great Time to Invest!

Well, there’s a little bit about the history of real estate.  Fortunately, it has a great future as well.  Particularly in Del Mar and other areas in northern San Diego County, where we’ve seen record appreciation during every up-cycle.  Make your own future and invest in “Royal” estate.  There have been few opportunities as golden!

If you are looking for a home or selling real estate in the Del Mar, Solana Beach, Carmel Valley California areas, give us a call or browse our site.  We can help!

A sweeping housing measure signed into law last week by President Bush is a boon for all current or aspiring homeowners, promising to provide increased access for first-time buyers to mortgage financing, particularly in high-priced areas such as here in California; tax credits for first-time buyers; and much-needed stabilization of the nation’s turbulent financial markets.

“This federal housing package represents a significant move in the right direction for California homeowners,” said California Association of Realtors (C.A.R.) President William E. Brown. “The measure will not only help thousands of borrowers facing financial trouble stay in their homes, but pave the way for thousands more to achieve the dream of becoming first-time homeowners, and help move otherwise skeptical buyers off the fence.”

Known as the Housing and Economic Recovery Act of 2008, this broad legislation will assist an estimated 400,000 homeowners currently facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a more affordable Federal Housing Administration (FHA)-backed loan. This particular feature of the bill aims to stem the rising tide of foreclosures that have been contributing to the downward spiral of home values across the state and creating more stringent lending rules that have made it impossible for many potential buyers even with good credit to purchase a home.

The bill also will permanently increase government backed loan limits in high-cost areas—something C.A.R. has been pushing for its members for some time. The bill permanently increases the conforming loan limit to $625,500. A former measure, The Economic Stimulus Act of 2008, signed in February, raised the conforming loan limit in high-cost areas to $729,750 from $417,000. However, this change was temporary set to expire Dec. 31.

Although a permanent loan limit at $729,750 would have been preferable, the new, permanent loan limit of $625,500 will open the door for many California homeowners hoping to refinance their loans into safe, affordable loan products, and allow first-time home buyers to get back into the market, up and down the state.

“With more buyers able to enter the market, and greater access to affordable loan products that won’t have home buyers struggling six months down the road to make their payments, we can expect to see more buyers coming back into the market,” Brown said. “Increased access to mortgage capital is a key provision of this measure and will significantly improve the options for these first-time buyers here in our state, where home prices remain among the highest in the nation.”

The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective upon the expiration of the former measure’s economic stimulus limits on December 31, 2008.

Another key feature of the bill is a tax credit for first-time home buyers, who may now receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.  While this sounds nice, it is almost irrelevant here in California where virtually all homes will qualify for only the $7500 maximum.

Steps for lowering the cost of buying a home are critical in a market where the affordability rate, i.e. the percentage of households in California that can afford to buy an entry-level home, although showing some strength in the recent months, remains at 44 percent.

The legislation also allows for the Treasury Department to create a federal backstop program to ensure the financial well-being of Government Sponsored Enterprises (GSE), specifically, Fannie Mae and Freddie Mac, the nation’s two largest mortgage lenders.

“By providing the GSE with a solid regulator, and giving the Treasury the authority to step in and ensure the financial well being of the GSE, this new legislation should restore investor confidence in Fannie and Freddie, allowing them to continue to create programs that make the home-buying process an affordable and viable one for all,” Brown said.

It remains to be seen how much these measures will stem the bleeding and turn the tide on this financial and housing crisis, but they certainly are a welcome step in the right direction.

Is your dream home etched in your mind? Are you just waiting for the perfect time to bring it to reality? Now is the time! The market is slow at this time, which makes it a buyer’s market. With the interest rates low and many homes available, there is no better time than the present especially if you are looking for a home in the Del Mar, Solana Beach, Carmel Valley California areas.

Make a list of what you want your dream home to look and feel like. Involve the whole family in this project. After all, you want them to be happy too. Once you have this list, you have the advantage to take your time and look for that perfect home for you and your family. Then, when you start looking, keep in mind that there you may have to do compromising.  You may not find everything on your list, so prioritize the features and define for yourself what are you “must haves”.  You also may end up finding that as you begin to actually look at homes, your “must have” list may shift.  Your priorities may adjust.  That’s ok, just be sure to keep your real estate agent abreast of your thinking!

Use your senses: once you walk into a home you can feel the personality of that home. Here are some thoughts that should be going through your head:

• Does it fit my family’s personality and more importantly, our lifestyle?
• Does the neighborhood feel right, and does it seem like the right environment for my family?
• Can I see us enjoying many, many years of happiness in this home?

Another great idea would be to let us help you find your dream home. We have been inside many homes in the Del Mar, Solana Beach, Carmel Valley California area and will be able to help you narrow your search down until we find the perfect home for you and your family.

So head on over to our website at DreamHomesByTheBeach.com and let us help you find your “Dream Home”!