Foreclosure and Real Estate Blogs

This morning I woke up at my usual 4:30 A.M. , laid there for a bit and thought about the whole early rising thing.  I don’t always get up at that time, but my neighbors help make sure that I’m at least awake.  There are 6 houses in our little grouping of homes, 2 are retirees, 2 are self-employed, 1 is a bus driver and 1 is a Realtor.

The retirement crowd always seems to be getting up at that time, lights are going on but they aren’t making too much noise.  1 of the self-employed often leaves at that time so I can hear his car start, the bus driver is always up, but he doesn’t leave till a little later in the morning.  The Realtor is the only one who never seems to be up before 6:30 or so.

The biggest plus of getting up fairly early in the morning is the vast amount of things you can get done, assuming of course that you aren’t going to be using power tools to accomplish your tasks.  Nothing seems to piss off neighbors more than firing up a circular saw at 5:00 in the morning.

Using a computer, I can put in 8 hours of work by 2:00 P.M. and still have a significant amount of daylight left for anything else I may want to do.  I used the do the same thing working construction in my early twenties, we’d start at 6:00 and close the day out at 3:30 or 4:00.

So what do you give up when you go to bed earlier so you can rise earlier?  Television?  Reading?  Socializing?
Books don’t care when you read them, digital recorders provide television when you want it, so really the only thing that might be affected is getting together with friends.  It seems that most of our friends also follow a similar pattern of early rising, so that doesn’t affect us much, your mileage may vary.

I believe it was Benjamin Franklin who coined the phrase about early rising and although I didn’t really plan my early rising, I do sometimes feel wiser. 

Fed Chairman Ben Bernanke testified in Feb., 2006 that:

“For example, a number of indicators point to a slowing in the housing market. Some cooling of the housing market is to be expected, and would not be inconsistent with continued solid growth of overall economic activity.
However, given the substantial gains in house prices and the high levels of home construction activity over the past several years, prices and construction could decelerate more rapidly than currently seems likely.
Slower growth in home equity in turn might lead households to boost their saving and trim their spending relative to current income by more than is now anticipated.”

That was a reasonable prediction. The “cooling of the housing market” part has pretty much happened in all the hot markets, but I haven’t seen much regarding the “households to boost their saving and trim their spending relative to current income” part.  What does that mean to me?  A predicted drop in consumer spending which will most likely lead to a rise in the unemployment rate.  It’s fairly obvious that unemployment will rise in construction, lending and real estate related industries, but when consumer spending declines, there isn’t as much demand for those goods and services that fly off the shelf during the “happy happy” times.

So here’s a prediction for how the real estate markets are going to move.  Gradual decline through 2010 for any area that has seen double digit valuation gains.  Why?  The crappy loans given to anyone breathing don’t finish the majority of their resets until 2010.  After 2010?  Probably more decline.  Housing prices move inversely to unemployment rates.  When unemployment is really low, housing prices tend to move up.  When unemployment goes up, housing prices tend to move downward.

I don’t know that there’s ever been a housing induced recession, but it looks like we’re going to get to experience one.  The good news, of course, is that those people who do not live in wildly inflated real estate markets probably won’t see too much of a decline.  Interesting times, indeed.

Everyone’s aware of the issues with California’s housing markets, today’s question is whether current prices make sense given a more realistic loan underwriting requirement. Conventional loan underwriting requires a home loan payment, including property tax and hazard insurance, to be less than 33% of a borrower’s pre-tax income. That’s not cast in stone, but it’s a good number for determining housing affordability.

Let’s take a house listed for sale at $600,000. Yes, some areas will be lower priced, some will be higher priced, adjust the numbers to reflect your local area.
$600,000 Purchase Price
-$60,000 Down Payment (10% down based on the $600,000 purchase price)
$540,000 Loan Amount

What will the payments look like?
$3,413 Principal and Interest ($540,000 loan @ 6.5% for 30 years)
$ 625 Property Tax ( 1.25% of $600,000/12 ) - might be significantly higher
$ 250 Hazard Insurance - Probably a bit on the high side, this will vary
Total Monthly Payment - $4,288 - Does not include the possibility/probability of PMI or Association dues

What income is required to purchase this home affordably?
$12,994 a month, or $155,928 a year.

2006 California median income for a 4 person family was $74,801. Half of the families were making more than that number, half were making less. Census Median Income
Now, we can use the argument that some California counties are affluent, and some California counties are more rural and less affluent. That’s reasonable. Orange County had a 2004 median household income of $58,605. Marin County had a 2004 median household income of $67,731.  Maybe there are more affluent counties?

There’s also the argument that only people earning significantly more than the median average were buying homes over the past few years.  It sounds reasonable, but if the qualifying threshold is roughly three times the median income, the buyer pool becomes really, really small.  The most likely answer to why prices reached levels unaffordable for many lies with the Option Arm loans with qualifying based on teaser rates or stated income.

It allowed many people to purchase homes, but will it allow them to keep those homes?

Msnbc has an article about Increasing Your Home’s Value.
Since some parts of the U.S. are now having problems retaining property value, I thought this might be a good/interesting article that people might find helpful.
Tip 1: Maintenance Pays Off-big time
I can’t argue with that concept, a well maintained house will always outsell the falling apart POS down the street. That is, of course, assuming that the prices are reasonable aligned between the two properties.
Tip 2: Keep up with the Joneses.
The concept is to keep your property, and it’s improvements, in line with the area. Buyer expectations in a given area will pretty much match the improvements in an area. The provided example of granite countertops is accurate, in an area where granite is common, you probably shouldn’t install canary yellow Formica on your counters.
Tip 3: Size does matter.
“Creating living space within the confines of the existing structure”? I can see the conversion of a basement into a family room, but adding a bedroom in an attic? I suppose it might work, but I can’t see that kind of add-on helping value much. Maybe if I was living some kind of horror movie life and had some scuttling relative that needed to be locked in the attic.
Tip 4: Some rooms are better than others.
So the feeling is bedrooms and bathrooms are important because they indicate how many people can comfortably live in a house. Well, IMHO, two bedroom one bath homes are kind of obsolete unless the buyer is looking for a “cottage” type home. Three bedroom two bath homes are fairly common in many areas, four and five bedroom homes are kind of standard in a lot of new construction. Is a five bedroom home worth a lot more if it’s in an area of three bedroom homes? NO. It’s worth something more, but overbuilt properties usually won’t recover the cost incurred in the overbuild.
Tip 5: It’s all about balance.
Now the writer talks about improvements and making sure you’ll be able to recover your expenditure.

Overall, it’s not a bad article, but it probably should have stopped at Tip #2. Improving a home’s value inexpensively can be done by making sure everything is functional and maintained first, then upgrading portions of the house as time and money allows. Bathrooms, kitchens and flooring can be expensive upgrades, plan and save for those upgrades. You can start with:
Interior Paint- Fix all the holes in walls, take your time, get good coverage and clean edges
Electrical Outlets and Switches - Uniform and new throughout the house
Doors and Hardware - Change out all interior doors and hardware, think lever sets instead of knobs
Lighting - If the house has ceiling mounted lights, change them out.
Window Coverings - Personal choice, think neutral colors so room colors can be changed later on
These improvements can be done fairly inexpensively and will give your home a “fresh” appearance which can help your state of mind while waiting to proceed with the more expensive improvements.