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The Urban Land Institute’s 2010 “Housing In America: The Next Decade”

It is important for all of us to deal with reality in the midst of one of the biggest housing crisis in decades. You know I am looking for ways to make lemonade out of lemons in all aspects of my life.  So, I don’t know how I missed this very important report regarding the 2010 predictions outlined in Ronald Terwilliger’s research paper Housing in America: The Next Decade. The report was presented at the January 26, 2010 meeting of the Urban Land Institute Trustee meeting.  One of the key authors was Ronald Terwilliger – the chairperson of the Urban Land Institute.  There are many different aspects of the report you will want to read so take some time to do so.  Mr. Terwilliger writes about two major hurdles the 2010 housing market is experiencing in 2010.  Here is a brief review of both points.

1. PRICING: Mr. Terwillinger states the biggest obstacle to stabilizing home prices is the threat of a new wave of foreclosures. In 2008, more than 1.7 million homes were foreclosed or lost by short sale or deed in lieu. Another two million were lost last year and Moody’s Economy.com projects 2.4 million to be lost in 2010 and this may be a conservative estimate.  Every time prices decrease, more homeowners see themselves in the position of being ‘underwater’ on their mortgage.  Many studies have shown that once a homeowner reaches that point, they are more apt to ‘walk away’ from the home and the mortgage. This leads to more foreclosures, which leads to more price reductions, which leads to more people being ‘underwater’.  And the foreclosure cycle continues.

Mr. Terwilliger’s opinion is that the number of homes ‘underwater’ is the biggest hurdle of our housing crisis. There were 48.4 million homes that had a mortgage in 2005. Estimates of how many of these homes currently are ‘underwater’ vary from 12 to 16 million, over one in four.  Deutsche Bank Securities projects that 21 million U.S. households will be ‘underwater’ by the end of 2010 meaning that over 40% of mortgaged homes would be at risk.  This could double the mortgage defaults from 2009 if only one “underwater” homeowner in five decides to walk from their home and mortgage.  Prices are going to continue to fall this year in many of our micro-markets, especially in the $1 million to $2 million price points.

1. OUR BROKEN HOME MORTGAGE LENDING SYSTEM: Realistically, all funds supplied to the residential market today are the direct result of federal subsidies. All new mortgages today are being bought or reviewed by the federal government. Private investors have completely exited the market absent a federal guarantee. What was once considered the world’s most efficient housing finance system, attracting trillions of dollars of investment from around the world, is now shunned by all, both here and abroad.  And, remember that the Feds are exiting the mortgage markets on March 31, 2010.  Interest rates will need to go up in order to entice investors back into the home lending markets.  These factors are keys to the concern of when the housing recovery will actually take hold.  It does not appear it will be in 2010.

And, there are still opportunities for those who are paying attention to the continued trend down in pricing and the upward trend in home foreclosures.  Here are three key opportunities for Buyers and Sellers to consider.

• Buyers can purchase their dream home at rock bottom prices and get historically low interest rates.
• It is a great time for Sellers to move-up to the house they always wished for, again with very low interest rates.  They may not have this opportunity again for years.
• More than ever, families need professional and patient Realtors and mortgage brokers to help them manage through the very difficult maze of this housing crisis.  There are always opportunities and solutions during a crisis.  It is critical to be able to find them.

Contact me TODAY if I can be of any service to your real estate needs.  Until next time…your East Bay real estate detective remains on duty!

2010 East Bay Real Estate Update: Mortgage Interest Rates Rising In Q2, Q3, Q4!

The $64 Billion Dollar Question is, “When will the Federal Government stop purchasing Mortgage Backed Securities?”  You may ask why this is an important question.  Well,  the purchase of MBS by the Feds is the method in which they are guaranteeing mortgages so the lenders will continue to write them – assuring the lenders there is no risk to the home loan because it is risk-free.  From what I am noticing for the last twelve month trend of the Feds buying MBS, it may be just about over.  When it is over interest rates will begin rising in the very near future.

Did you know the Feds are scheduled to stop making MBS purchases by March 31, 2010? As you review the above chart you notice that the Feds are rationing out the remaining portion of the stimulus money as their purchase amounts are dwindling to what is expect to be a trickle within the next 60 days. For example, last week the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about three out of every four home mortgages the past twelve months. When such a large player in the market – the Feds, leaves, it is very likely that home prices may decline further because of it being more difficult to entice Buyers to borrow money because of the increased interest rates.

This information is critical because as the Fed has less money to purchase MSB through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will come to an end. And those who can take advantage of currently low home loan rates,  DO NOT WAIT, as these historically low rates will not last much longer.

Last week, Fed Chairman Ben Bernanke gave a speech that included a number of topics, with the most important topic being the switch of the Fed’s benchmark from the commonly watched and monitored Fed Funds Rate, to a new benchmark of “interest paid on excess reserves”.  Banks are required to keep money on reserve with the Fed and may, from time to time, have an excess in those reserves, which the Fed can pay interest on.  This is the first time in history that the Feds have allowed Banks to get interest on their excess reserve money.  This may motivate Banks to increase their excess reserve because of making a guaranteed interest return on that money.

Since the Fed Funds Rate is only a “target rate”,  banks can still lend money to other bank overnight at their own negotiated rate. Sometimes near the end of the trading day, banks have been lending their excess reserves out overnight for a rate that differs from the Fed Funds Rate, but is higher than interest on those reserves from The Fed.  This undermines the Fed’s ability to set a reliable benchmark “target rate”.

The Fed wants to fix this by using the amount of interest they pay as the new benchmark, since the Fed has total control of this rate, which should be right at or just under the Fed Funds Rate.  There key lesson regarding the information in the blog posting….it appears that the Fed is getting prepared to push interest rates higher. And when they do increase rates, the Fed does not want any obstacles that may undermine their plan.

Jim Walberg’s Conclusion? If you are planning on purchasing a home in the East Bay in 2010 it is time to take action TODAY!  Mortgage money is cheap!  Home prices are at record lows!  There are highly motivated Sellers waiting for the fair offer.  Contact me if you have any more questions regarding how to arrange the purchase of your next home.

2010 East Bay Real Estate Update: Smart Sellers Are On The Market NOW!

If you are a Buyer have you noticed that there are not many houses currently on the market in the East Bay?  Inventory is at one of it’s lowest levels in the last twelve months.  And, those houses that are on the market are not that spectacular.  What typically happens in the yearly real estate cycles is that January has one of the lowest months of inventory, AND there are many Buyers who want to buy homes.  In addition, there are several other factors that are highly motivating Buyers – buyer tax incentives until April 30^th, and the expectation of mortgage interest rates rising all the way through 2010.  The Buyers are absolutely correct regarding those buying factors!  SO…if I was a Seller,  knowing what I know about real estate trends and the 2010 market,  I would get my home ready for sale right NOW! The best prepared homes that are in turn key condition, and are priced at current market rates will get the highest prices that will be achieved in 2010!

An additional factor for home Buyers are the changes that will be announced tomorrow.  At some point the Buyers are going to slow down their thirst from cheap homes because it is getting more difficult to qualify for loans.  FHA home loans have created new ways to create revenue to the government agency.  Here are the latest changes for Buyers wanting an FHA home loan;

• The 3.5% down payment is still in effect.
• Mortgage insurance costs are increasing from 1.75% to 2.25%.
• Credit scores – FICO, will be at a minimum of 580.
• Seller concessions will be reduced from 6% to 3%.
• FHA will report lender performance ranking to assist Buyers in their selection of loans.

In addition, Sellers will be feeling the effects of the increase in Short Sales and bank foreclosures in the $1 million+ price range for 12 months or more.  The trend of $1 million+ slice of the market is upward and is projected to continue.  This will dramatically influence the appraisers who must sign their names to their value report to banks as to what a home is actually worth.

SO…if you are a Seller, get your home on the market as fast as you can.  As the year unfolds, I, Jim Walberg, predicts that the highest prices for closed escrows in the East Bay will be April and May.  That means that those closed escrows have to be opened in late February, March and early April.

Help Haiti NOW! Text 90999 And Message The Word HAITI!

The capital city of Haiti, Port-au-Prince, and surrounding communities are almost gone.  Last Tuesday, most of the structures were erased because of the 7.3-magnitude earthquake.  Tens of thousands have died and millions are fighting for their lives.  The human suffering is beyond anything we could imagine.  My friend, Gov. John deJongh, Jr., of the U.S. Virgin Islands said  “Eyewitness accounts of the quake indicate the worst catastrophic event in modern history.” The Hospitals, schools, the government buildings, stores and most buildings in the capital city and surrounding communities have collapsed.  There are no services available and the dead are being left where they lay as they await trucks and tractors to take them to mass graves that are being dug 24 hours a day.  It is unimaginable for me to think of how the poorest nation in the Caribbean can deal with such devastation, or how any of us would manage through this catastrophe if it ever hits the Bay Area again.   To help the world grasp the scope of the destruction, Google Earth has added a fresh layer of satellite imagery of Haiti taken Wednesday morning, allowing before-and-after comparisons of the landscape. It’s available for viewing on Google’s special crisis response page.

Our State Department has set up a method for each of us to do our part by texting the number 90999 and put in the message the word Haiti. That small act of compassion will immediately send $10 to the Red Cross – 100% of it will get to the Red Cross.  Please take a moment and do this NOW!  You will then get a text back from the Red Cross thanking you for your contribution.  Again, please do this NOW.  The monetary donations will be used to purchase emergency relief supplies and equipment that will be delivered to the local people and their economy.  As of today there has been close to $20 million raised with just $10 at a time from around the country.  (Your cell phone providers are waiving any text messaging fees so you can help today.)   The East Bay real estate community has also mobilized with the collection of funds, goods and services.  It has been very inspiring as to how our community has mobilized in actions that are serving this unimaginable disaster.

Every service imaginable is being addressed by the disaster-management teams that have been arriving from around the world.   Field hospitals have been set up in the middle of streets.  The airport is being managed by the U.S. Air Force air traffic controllers from a truck.  The airport is clogged with relief goods while attempting to get them to those in need through a maze of roads that have been destroyed.  All of the work is being done to deliver what is needed to the primary relief areas, where food, water, temporary shelter and emotional support is being provided in a war zone environment.

In addition, Catholic Charities, Catholic Relief Services, Red Cross, C.A.R.E. and Rotary International have all provided relief.  “Rotary is working on an efficient way for people to make donations, which we hope to unveil in the next 24 hours,” said Roger White, who is part of Rotary International’s District 7020 Haiti task force.  “We are looking to find out what the priority of needs is and looking at logistics,” said David Edgecombe, special assistant to the USVI governor for external affairs. “We want to avoid getting relief items and then have no way of getting them there without knowing the best routing. The needs are clearly great … it is going to take a little while for us to get the lines of communication open and accurate data as to how best to get goods to people in Haiti.” “The Red Cross is specifically telling those who want to help to send money at this time,” Edgecombe said.

Click on each of the following links for additional ways to be of help to this world crisis; Haiti Community Support;  American Red Cross of the Virgin Islands;  Catholic Charities of the Virgin Islands;  Rotary – St. Thomas;  C.A.R.E.-Haiti.   Please act now!

The Bay Area Team – East Bay Real Estate’s #1 Team!

(PRLEAP.COM)  Jim Walberg and Ann Marie Nugent,  owners of the Bay Area Team, were again honored as the Top Realtor Team for 2009 at the Keller Williams Realty – Danville Market Center from over 160 Realtors. They were also ranked #1 in the East Bay, and in the Top 10 in the entire Northern California and Hawaii Region.

When asked what contributed to their success, in the midst of such challenging economic times, Nugent-Walberg said, “The Keller Williams business systems, on-going education, networking with 77,000+ fellow Realtors within the company, and just plain hard work were the keys to the extraordinary results achieved for our clients in 2009.” In addition, they have created a global marketing network through their exclusive memberships in Who’s Who In Luxury Real Estate, and The International Real Estate Federation – FIABCI. Their award winning internet marketing strategies were also acknowledged by LuxuryRealEstate.com with the 2009 Global Networking Award selected from over 120,000 Realtor members.About Jim Walberg and Ann Marie Nugent

Jim Walberg has been a member of the East Bay business community since 1970. He and his wife, Ann Marie Nugent, are owners of The Bay Area Team at Keller Williams Realty in Danville, California. Walberg is one of the Keller Williams University regional trainers. He has been inducted into the Realtors Hall of Fame for the East Bay, and he and Nugent are ranked in the top escalon of Realtors nationally. They love sailing in the Caribbean, traveling the world, collecting fine wines, skiing, camping and reading. However, the most important part of their lives is their faith, their loving marriage, and their three children.

Contact Jim Walberg and Ann Marie Nugent any time at jim@jimwalberg.com , annmarie@annmarienugent.com, or at their website, www.TheBayAreaTeam.com. Feel free to stop by their North American headquarters at 760 Camino Ramon, Suite 200, Danville, California, or call them at +888.415.8326

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