Wine Country And Horses

Everyone is unsettled these days and no surprise.  There are a few questions or comments that I am hearing repeatedly from clients and friends.  The first is the question above.

With a cataclysmic world-wide banking crisis occurring over the last few weeks, I guess that is a logical question to ask.  Can I still get a home loan today?

Well, home sales are still occurring, especially at the entry-level as indicated in previous posts.  Jumbo loans are dicier and the larger jumbo loan limits expire at the end of December so we perhaps that is a cause of the flurry of real estate sales activity in our county in the mid-price ranges of $500,000 to $1 million.

While rules have tightened to sometime excruciatingly comical levels (some of the stories I have heard could fill another post or two) the flow of mortgage funds  has continued.  Kenneth Harney, in the San Francisco Chronicle on Sunday October 19th, gives a good overview of our current state of home lending.

 

Credit squeeze, credit freeze, credit system seizures: Everybody knows how severe and painful the global financial breakdown has been – with banks unwilling to lend even to other banks.

But what about mortgages and real estate? Can you still get a home loan with less than a 20 or 30 percent down payment? Or with a credit score below 720?

Absolutely. It would be a big stretch to label housing the sunny side of the market at the moment, but there’s a lot more light there than in most other financial sectors. Consider these facts:

– There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized – at least for the time being.

More than 90 percent of new loans now are being made through the Federal Housing Administration insurance program, plus Fannie Mae and Freddie Mac. FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservator-ship.

All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury.

Ginnie Mae, which is FHA’s pipeline to the bond market, recorded an all-time high of $29 billion in new mortgage-backed securities issued in August.

– Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance.

FHA’s credit standards are generous and forgiving – the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.

– Despite the global financial system’s quakes, mortgage rates remain low by historical standards. Mortgage giant Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.46 percent, and 15-year mortgages are at 6.14 percent.

– Maximum loans through FHA, Fannie and Freddie in high-cost local markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.

– Home prices – pushed by foreclosures and short sales – have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases – pointing to higher closed sales in the coming two to three months – were in California, Florida, Nevada and the Washington, D.C., metropolitan area.

Housing and mortgage leaders say consumer worries about the stock market have obscured positive developments under way in real estate, where pricing pain and downsizing have been facts of the life for the past two and a half years.

The market for single-family homes under $400,000 is so strong in Sonoma County that it makes the overall sales rate in the county qualify as a sellers market, with only 4.5 months supply of inventory based at the current sales rate.  Last September there were 14 months of inventory available county wide.

The fact is that the banks who have foreclosed here are the dominant seller in the county with over 40% of the sales.  Since last fall they figured out they needed to slash prices in order to get them moving, and the strategy has been successful.  One lender, Otto Kobler of Maximum Mortgage in Santa Rosa has told me that we are halfway through digesting the major wave of adjusting loans from 2005 which began hitting the market as REO’s last September.

Since March, open escrows month by month have exceeded the sales volumes of the last two years and they continue to climb.  Real estate investors and first time buyers are snatching up homes at prices not seen since 2002 in some cases.    Condominiums are selling fast with median prices under $200,000.  The number of newly ratified contracts (open escrows) is increasing rapidly as the number of new listings county wide slows.

These overall market trends are very misleading however as sales volumes and inventories at higher price points are in very different territory.  The action is at the low end and sellers of more expensive properties are seeing definite declines in volume.  The market needs to digest the inventory at the lower end to acheive some stability.  There are some amazing bargains out there for first time buyers and investors.

Ok it must be getting close to dinner, but I promised pictures of Sunday night’s home made pizza made entirely with veggies from my Sonoma county wine country garden.  Harvesting the garden right now is nearly a second full time job after realtor.  Had a very casual dinner Sunday night with good friends.  Here is the before picture (before it was devoured.).  Yummm.  Three kinds of cherry tomatoes, garlic, onions, orange bells, poblano, beefsteak tomatoes, pine nuts (not from the garden) basil and some fresh mozzarella.  Maybe I will figure out a tie-in to real estate blogging AFTER dinner.  Bon appetit!

Just opened up our weekly office sales update and was curious to see how sales activity was affected last week given the horrendous economic news.  Had all business activity ground to a halt?  Yes some folks are deciding to sit on the sidelines for a month or two or six.  But what did I find for our office as a whole?  I  found a very normal to high level of activity for the week.  (I should mention that Coldwell Banker Santa Rosa has over 100 active agents and our sales totals are generally about double of the second ranked Sonoma County real estate office. )

30 New Listings  (19 are bank-owned or REO properties-only 4 are priced over $500K)

29 New Sales (open escrows)  29 Brave souls who dared to put pen to paper last week and not run for the hills.  On the sub-500 price range, about half appeared to be first time buyers and the rest investors.    We normally run somewhere between 20 and 30 sales per week so this is a typical number.  19 of these are bank-owned properties.

22 Closed Sales of the closed sales, 14 were bank-owned properties.

The biggest trend difference we see is not the numbers of transactions but the price points and this is a consistent phenomenon since early 2008.

Of the new listings, only 4 were priced over $500,000.  Of the closed sales, only 3 were priced over $500,000 and two of those 3 were priced over $1,000,000.   By far the lion’s share of our business right now is the entry level priced bank-owned properties.  I should mention that our office is home to James Madison, who has approximately 50% market share for REO properties in Sonoma County and some inventory in some of the surrounding counties as well.

 

You decide–these photos were taken by good friend Robin Satterlee this morning in the Saitone Vineyard, Russian River Valley Appellation, Sonoma County, California.   The fog was very thick and burned off by noon, but it made for some beautiful contrast in the photos.  Sometimes Photoshop isn’t necessary, just a good photographer and a good eye.

For a Flickr slide show click here.

Most Sonoma county realtors could spend a good four or five mornings per week touring new listings in Sonoma County. Some folks call them caravans. It would take at least 2 weeks of doing so to hit all the new listings on tour because of dueling chapter schedules and a large county.

What a Sonoma County Realtor could do every weekday morning

Monday  Generally quiet but groups such as Marketing Masters and Homescopes meet on Mondays, plus there are some office meetings.

Tuesday The main Santa Rosa Chapter meeting of NORBAR (the North Bay Association of Realtors).  As many as 100 to 150 realtors attend a breakfast meeting, educational session and swap information on upcoming listings, buyers needs, rental requests and market updates.  Property tour ensues for Santa Rosa.  One week is East side, one week the west side. Mike Kelly cracks the whip so you’d better stick to business!

Wednesday The Sebastopol, Russian River and Petaluma chapters of NORBAR have their breakfast meetings –see above for the agenda.  Sebastopol, Russian River and Petaluma property tours.

Thursday  The Healdsburg chapter of NORBAR, The Cotati-Rohnert Park chapter and many of the large brokerage offices such as all the Coldwell Banker offices (separately), CPS and Prudential have their own sales meetings, marketing sessions and broker tours.   Our Santa Rosa office (over 100 agents) meeting and tour covers the East side of SONOMA county one week and the West side the next.  That means we could be looking at properties from Cloverdale and Healdsburg down to Petaluma on the same morning (theoretically!).  This is why FOOD at broker open houses is so important, and water on hot days.  Got to fuel the troops!

Friday  Friday morning is the weekly meeting of the Windsor Chapter of NORBAR and the Windsor tour.  Cloverdale is in their somewhere as well.
That means the average Sonoma County Realtor could spend 16-20 hours per week at breakfast meetings, marketing sessions and on property tour and still not cover the whole county.  How do you use your time?   How much time every week do you tour and network with other realtors?  What is the main benefit of attending these meetings?

(Next post an update on some interesting new listings on the market in Santa Rosa, from a lovely view home on 2 acres to 2 Rincon Valley bargains and and Junior College duplex.)