Market Condition Report – August 2007

MARKET CONDITION REPORT INLAND EMPIRE – WEST END August 2007

THIS YEAR LAST YEAR

Year to Date Sales

This Year	Last Year	Change	% Change
3,217	4,917	-1,700	-34.6%

The market is remaining rather constant relative to last year varying by a few percentage points either way. Last report was -35.3 %. This is generally in line with other areas surveyed. There are markets performing at a lower level than Inland Empire-West (Victor Valley -51%), but there is also Santa Barbara at +6%. This implies the current market condition varies according to area and price class. Note from the History of Median Sales Price the market peaked in terms of price in the late spring-early summer of 2006. MARKET QUICK LOOK

Indicator	Comment – Current Position and Movement	Buyer	Seller	Neutral
DEMAND	Increasing moderately-slower for CONDO. No trend.		-	-
SUPPLY	Rising slowly-near peak.		-	-
PERCENT SELLING (Market Efficiency)	Increased 2 points-too small to be meaningful. No trend.		-	-
DAYS ON MARKET	Steady.	-	-
MONTHS SUPPLY	Declining slowly-movement favorable to seller. No trend.		-	-
60 DAY ABSORB (Market Speed)	Very small positive movement. Not meaningful.		-	-
PRICES	List, Ask, Close Price-off moderately. Negative trend.		-	-
FUTURE PRICE INDICATOR	Expect declines to limit of $450K for SFR and $329K for CONDO.		-	-

In terms of current position the market is clearly favorable to the buyer. In terms of movement the market is moving toward the seller. However, this movement is very slight and tentative. No clear trends are evident except a tendency to declining prices (see graph History of Median Sales Price).

MCR TIP The 60 DAY ABSORB RATE measures market speed. Another way to think about the ABSORB RATE is the rate that listings are converted to closings in a 60 day period. The higher the ABSORB RATE, the quicker this conversion is occurring and the more the market is moving toward the seller. The opposite is true.

WORDS OF WISDOM Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes (Peter Drucker).

Click here to view Market Condition Report.

Credit Crisis Cripples The Market

Just last week, American Home Mortgage and its wholesale counterpart, American Brokers Conduit, became the latest casualties of the credit crisis. Last year, this company closed over $58 billion in home loans. Despite being, by all accounts, a well-run business, market conditions forced them to file for bankruptcy, leaving nearly $800 million in loans unable to close. Tens of thousands of borrowers have now been left without financing as a result of companies like this going under. Clearly, with over 100 national lenders having now closed shop in the last eight months, this is no longer simply a subprime lending issue. The credit market is experiencing unprecedented turmoil that, according to Mike Perry, CEO of Indymac Bancorp, is “broader and more serious than past disruptions.”

What does this mean for to the real estate market?

• Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national inventories, means now is not the time to hold out for the “best” price possible.

• Buyers with credit issues or who have difficulty providing required documentation can no longer sit on the fence. If market conditions change, buyers who qualify for a loan today may not qualify a few weeks from now for the same exact loan. Just this week, many lenders have stopped offering no-Doc loans, and some lenders have even pulled back on all forms of stated loans. As market conditions continue to change, a buyer’s pre-approval status can disappear even more quickly, delaying or spoiling the deal.

• Subprime and Alt-A refi candidates, especially those with ARMs scheduled to reset over the next 12 months, need to act now – even those with a pre-payment penalty. ARMs borrowers struggling with monthly payments now might be shocked to know that monthly payments can double in some cases once an ARM resets.

What does this mean to you?

As educated Real Estate and Mortgage professionals, we feel it’s our responsibility to educate and inform you. Please feel free to utilize our experience and resources to help navigate through these turbulent times. Don’t leave your future in the hands of random mortgage providers. We’re local, accountable, and you can trust us to discuss this or any other strategies to survive in today’s challenging market. Don’t hesitate to call us. We’re happy to speak with you.

Selling 3 Times Is Not The Charm

Oh my gosh, it fell out of escrow a second time! Back on the market for the third time? As if once wasn’t enough?

That’s the reality you’re hearing from a lot of sellers as this market cools off and the buyer’s lenders scrutinize the property values on the homes they are trying to buy with a giant magnifying glass.

Why three times, you ask? Take a look at this very real scenario . . .

A seller lists his home for sale higher than his agent recommends. The first time around the buyer and seller agreed upon a price. Of course it was more than the buyer wanted to pay and less than the seller wanted to accept, but a deal no less.

Read more>>

Four Questions a FSBO Should Ask A Buyer

Decided to try selling For Sale By Owner (FSBO)? It looks like you and I will be in the same business during that process . . . The business of selling homes.

Let me share these four important questions that you should ask any buyer before you let them in to see your For Sale by Owner house.

1. Are you Pre-Qualified?

2. How much are you Pre-Qualified for?

3. Who Pre-Qualified you?

4. May I contact the person that pre-qualified you?

If they are not willing to answer these questions, then they are not serious buyers and there is no need to waste your time showing them your home that they most likely can’t even afford. There may be reasons why they are contacting a For Sale by Owner. A real estate professional might have pre-qualified them and found out any number of reasons why not to work with that buyer. (Poor credit, not motivated, unrealistic…)

I’m sure you already have a busy life and going For Sale By Owner is a pretty awesome, time consuming responsibility. There’s no need to make it more difficult than it has to be.

Let me know if I can help.

Are We On The Rebound?

While the housing market continues to decline, there is a broad consensus among economists that a rebound will occur in 2008.

According to the ECONOMIC FOCUS, Volume 11, Issue 24 for the week of June 22nd, inorder for a rebound in 2008 the housing market must first bottom out. So, simple logic dictates that if we are a few months away from the rebound then we must be even fewer months away from the bottom.

“I still think we’re not at the bottom in terms of housing construction,” says Mark Vitner, a senior economist at Wachovia Corp. “Sales have to bottom out first. …We haven’t seen that yet. And then construction starts will probably bottom out nine months after that.”

If this holds true, a decline in new home construction should indicate that we are months closer to a bottoming out moving us closer to a recovery. Further, if there is a nine month lag in construction starts and if the industry will start its recovery in 2008 then simple math would place the bottom sometime prior to 2nd Quarter 08.

• May’s numbers were mixed, but in line with expectations, and reflected weakness in the South and West, offsetting construction gains in the Northeast and Midwest. The positive message is that numbers are mixed and not down across the board.
• Construction of single-family homes dropped 3.3 percent in May while apartment construction rose by 3.1 percent, another mixed signal. Historically, a hot housing market draws buyers from the rental rolls and causes a decline in apartment starts. This reversal indicates market corrections at the beginning of the manufacturing process, and as new home inventories shrink, demand will build in the coming months.
• Finally, interest rates remain flat. The Fed has held their rates steady for nearly a year with no indication of sharp rises in the near future. The last thing the Fed wants to do is take the remaining breath out of housing with higher mortgage rates.

Perhaps the soothsayers are correct and we are nearing the bottom and a recovery in the housing market is near.

Flip This vs. Flip That

The Prey: Uninformed everyday people trying to get rich quick.

The Bait: Infomercials and Reality Shows showing huge profits too good to be true.

The Catch: It’s easy for a flip to become a very expensive flop.

Stop letting these vultures prey on you with promises of riches. PAY ATTENTION & PASS THIS ON: REAL ESTATE INVESTING IS NOT AS EASY AS THEY MAKE IT LOOK! AS A MATTER OF FACT, MOST OF WHAT YOU SEE IS NOT EVEN REALLY WHAT IT IS!

Every where you look, someone is trying to sell a bill of goods to you about how easy it is to find a property, fix it up and get rich quick. Two popular shows come to mind. A&E’s, Flip This House program really dug into problems with contractors, negotiating prices, and time crunches. TLC’s Flip That House follows the transformation of a different house, each with its own “flipper/host” with step-by-step renovation from the initial purchase to plans for giving it the necessary “facelift” to re-sell.

Flip This was a one hour show vs. Flip That being 30 minutes — the differences between the two programs are very subtle. At the end of each of the shows episode the results of the house-flipping exercise is revealed, along with a new sales price to re-sell showing a huge profit.

These shows romanticize the act of rehabbing properties and selling them for profit. The reality of this reality is that it’s not as easy as they make it sound, even for a seasoned investor. What they don’t show is how easy a flip can become a flop!

On an episode of A&E’s popular reality series Flip This House, Sam Leccima, a self proclaimed successful Atlanta real estate investor sits in front of a run-down house and calls buying and selling real estate his passion.

Flip This House depicted him buying, refurbishing and reselling several Atlanta-area homes for profits of $77,000 and more. But Leccima, who is currently under investigation by the Georgia Secretary of State’s office for securities fraud, is nothing more than the latest scam artist caught preying on victims with promises of easy riches. His real estate license was revoked by the Georgia Real Estate Commission in 2005, citing that Leccima “does not bear a good reputation for honesty, trustworthiness, integrity, and competence.”

It appears Leccima’s true passion was a series of elaborate hoaxes and scams that included faking the home renovations shown on the cable TV show and claiming to have sold houses he never even owned.

His friends and family were presented as potential homebuyers and “SOLD” signs were slapped in front of unsold houses. The home repairs – the lynchpin of the show – were actually temporary patch jobs designed to look good on camera. One scammed Investor attended what was billed as a wrap party at one of Leccima’s homes. But when A&E Television Networks aired the party on Flip This House, it was presented as an open house at where a buyer expressed interest in buying the property. Sound familiar? How many times have we seen this on shows!

While not acknowledging his televised renovations were staged, Leccima didn’t deny it. Even though Leccima suggested that A&E and Departure Films, the production company that makes the show, knew exactly what he was doing, they got busy denying any knowledge of wrongdoing. The cable network pulled reruns of Leccima episodes off the air and wiped his mentions from its Web site when they learned of the claims against him. “We are dismayed to learn of these allegations,” read a statement issued by the network. “A&E Television Networks is not a party to any of the transactions shown in Flip This House and has not received any formal complaints about the properties or sales.”

“Ask anybody who works in television how a reality show is made and you’ll find that ours was a very typical approach,” Leccima said in a telephone interview.

Atlanta FOX 5 has this footage.

Value Range Marketing – How it Works

The summer season is the time when more homeowners list their property for sale and more homebuyers purchase than any other time in the year. As these homeowners prepare their home to sell in the coming months, one question will rise above the rest: where should our home be priced?
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That’s where value range marketing comes in! Instead of listing the home at a fixed price, the seller allows the buyers to see the range that they would be willing to sell into. This would allow people to see the home who might normally miss it because it would otherwise be out of their price range. For example: A value range property that is priced between $500,000-$550,000 will show up in a search of a buyer who searches between $475,000-$520,000. If a the seller prices their home at a fixed price at $535,000, the property would not come up in the buyers search. As more buyers view and preview the value range properties, the added attention will generate more exposure to that property in comparison to comparable fixed priced listings.
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It is likely you have seen a home using the value range price strategy. The technique calls for a property to be sold using a low and a high price, while the seller entertains offers between the range. The process encourages open negotiations with a seller who will come down in price and a buyer who will go up. In order to create the range, instead of including your appliances and other extras with the sale you can sell them elsewhere which would enable you to lower the overall price of the property.
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The additional exposure has the potential to generate more offers and since competing buyers legally cannot know the price of competing offers, the presence of an offer, even a low one, may act as the catalyst in achieving a price above the prevailing rate. The Seller benefits by generating offers he may not have received due to the limitations of fixed pricing.

Department of Real Estate Is Raising The Bar For California Real Estate Licensees

May 30, 2007 ·

California presently has 1 licensed real estate agent for every 50 residents. Most of these agents are so poorly trained in providing adequate service for their customers that serious legal problems have increased dramatically in California real estate transactions.

Under the old rules, the only pre-requisite for a licensee to take the State’s Real Estate exam was to complete 1 college-level course of Real Estate Principles. They then qualified to take the State’s real estate exam -as many times as it took to pass it. The entire process could take as little as 3 months if they scheduled and passed their State exam the first time out. The licensee would then receive a conditional license that required them to take two additional classes within 18 months to qualify for a 4-year license.

“There has been quite an influx of new agents into the marketplace over the past several years which has eroded the quality of service, the level of services and the professionalism in the industry,” said Alex Creel, chief lobbyist for California Association of Realtors, which sponsored the legislation.

To address this growing problem, Governor Arnold Schwarzenegger has signed into law a new measure AB 2429, which requires prospective licensees to complete 3 Department of Real Estate mandated courses before they can qualify to take the State’s Real Estate license examination. The measure, which is highly supported by the real estate industry, takes effect October 2007.

I, for one, applaud the Governor’s move to require much more education for California licensees. This has been a controversial topic among professional, experienced Realtors for some time as we have seen the influx of new inexperienced real estate agents in the marketplace. Agents so inexperienced and proud to confess that it took them 10-13 attempts at passing the State exam and feeling such a sense of pride and accomplishment that that was all it took to now be entrusted with the most valuable financial resource that the average person has. As selling real estate becomes more litigious, the need for on going training becomes more apparent to the professionals that take this business seriously.