BORROWER BEWARE!
Copy for Real Estate Guide Column for 2-24-06 (436 words)REAL ESTATE PATTERNSBy Ken DuVall BORROWER BEWARE!The promise of easy money comes in an official looking envelope marked, “Important Financial Information Enclosed. Need $2.5 mil @ 1% to 2% to buy or refinance a home? No problem.” Wrong! “Borrowers put no money down and pay just interest only. Good credit not a requirement! Bankruptcy, judgments, charge-offs or tax liens are OK with us!” these lenders say. The offers come from a new army of loan brokers now estimated at 250,000 nationwide, many on the Internet operating outside the reach of banking regulators. In fact, they’ve become the principal source of home lending in the country. The proliferation of these unscrupulous loan brokers offering “junk mortgages” has multiplied along with the housing boom. They are successful because borrowers fail to read the fine print explaining what a bad deal these loans are. The sleight of hand is in the adjustable low interest rate that can be increased in as little as 30 days. Homeowners who may be “saving” $300 a month on their payment are actually falling behind by that amount. Their monthly payments could zoom by 50% as their “teaser” rates expire. The loan balance continues to accumulate at an alarming rate. There’s $1 TRILLION in these sub-prime loans out there already. California lenders sent out 15,000 default notices in just the last few months, a 19% increase over the third quarter of 2005. The pigeons are coming home to roost.The brokers who offer such mortgages often have no licenses or training. They are essentially young salespeople who have no downside to the risky loans they peddle. In fact, the riskier the mortgages, the bigger their commissions. They push the largest loans with the lowest rates, which can explode. Some of these loans have abusive terms, such as no rate caps, permitting the lender to increase monthly payments any time. It has become routine for them to approve loans for 100% of the home’s value and up to 60% of a borrower’s income to make the payments. What do these poor people do then for food and car payments? Some of these unprincipled lenders are even making loans to people who have just emerged from bankruptcy! That’s insanity.The extraordinarily easy terms are being dictated by private and international investors, reflecting their insatiable appetite for risky but high yield debt. It’s said that money always goes to the highest bidder. Today’s loan brokers have eliminated the old rules and are in the business of matching borrowers and investors willing to take increased risks. As always, there’s no free lunch. My advice: deal with a local lender you know and can trust. Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.
Momentum
Copy for Real Estate Guide Column for 2-17-06 (445 words)REAL ESTATE PATTERNSBy Ken DuVall MOMENTUMI talked about ship condos last week. This week it’s about the direction of the current housing market as compared to large ocean liners making course corrections. It takes several miles for them to either stop or change direction once underway. Momentum. The housing market is no different. It takes time for the driving factors to materialize in the level of sales. What we’re seeing is a slowing effect due to loan rates, and available inventory, both up. But pending sales are rising as I write. We anticipate more Fed funds rate increases over the next few months. But there’s never going to be enough houses to go around, period. Supply and demand alone determines value. LIFESTYLES OF THE RICH AND FAMOUSIn the $1 million-plus price range, California sales have surged to a new peak for the 4th year in a row, totaling 48,666 homes sold last year, a 47% increase over 2004. There were 310 sales in the over $5 mil category, 327 in the $4 to $5 mil range, 990 in the $3 mil range, and 3937 around $2 mil. The most expensive sale was a 13,636 SF, 6 BR 12 BA La Jolla house on 6 acres that went for $23.5 mil. Topping the for sale list is “The Donald’s” $125 mil Palm Beach, FL 6 acre 15 BR humble abode, the most expensive home ever offered. You can also get a “shack” in Belvedere, Bel Air, Beverly Hills or Malibu for around $65 mil. THE LITTLE PIG’S HOUSE!Straw bale construction is gaining popularity due to rising energy and building material costs around the country. As many as 600 are being built in California alone. Straw bales are recyclable, organic and eco-friendly. They also have insulation ratings 3 times higher than conventional walls, and are fire resistant. After stucco and drywall, you can’t tell the difference. Though the straw costs maybe 15% more, homeowners benefit from lower heating and construction costs too as they go up faster. We’ve already done a couple here in Chico. WHAT’S MY BEST OFFER?That’s what clients ask me when they’re selling. When any product first hits the market, that’s when it gets the most attention from the largest number of people in the shortest period of time. A buyer is likely to make your best possible offer right then. As always, timing is everything in every way to everyone at all times. Bottom line: your first offer is 99% of the time your best offer. Those initial offerors have done their homework and are ready to rock and roll, as opposed to the tire kickers that may not be quite ready for prime time.Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.
Tapering & Simmering
Copy for Real Estate Guide Column for 2-10-06 (452 words)REAL ESTATE PATTERNSBy Ken DuVall TAPERING & SIMMERING, BUT…By now you probably are aware that 2005 nationwide was the strongest year ever for housing. Over 7 million homes sold last year. As they say in show biz, it’ll be a tough act to follow. National home price appreciation was an astonishing 12.7% last year. The national median price hit a record $237,300. This year’s appreciation is estimated at between 6 and 7%. This cooling down period is just what the doctor ordered because it will slow speculative buying and the growth in risky loan products. By the way, “flippers” that bought and sold homes for a quick profit now face severe IRS scrutiny as to being classified as dealers, liable for taxation at ordinary income rates, vs. the lower capital gains tax. Housing inventory will rise to historically normal levels after years of shortage. But 2006 will be no slouch. This year we’ll see a better balance between supply and demand and between buyers and sellers, slower but stable appreciation, and less speculation, all good influences. The experts are now forecasting housing sales will “only” be the 2nd best year ever. The market isn’t stalling. It’s simply winding down to a sustainable expansion. California, as always, will fare far better than the country as a whole. Chico will remain as one of the State’s hot spots as people continue to head for our easy off-ramp from the fast lane seeking the good life. ALTERNATIVESYou could opt for one of the new ultimate high-rise condos under construction in Vegas for a mere $10 mil! Or… what if condos could float? My long time readers will remember when I wrote about developers fabricating old airliner fuselages into luxury homes built on top of huge central cement towers with an elevator up to the “home”. Well, check out this latest craze: luxury ocean cruise liners are being converted and newly built for lavish ship-based residential projects catering to folks that relish life at sea, and have money to burn. These real property transactions involve ownership of “a tin box in the midst of a ship that goes to sea.” INCREDIBLE!Sure to stir up new waves, they include meals and travel to world-class exotic ports, Paris, London, Rio, etc. Amenities on these “floating private residential communities” include among other items night clubs, on-board helicopter, swimming pools, casinos, bars, a golf simulator, jogging tracks, and full-sized tennis courts. The crew outnumbers the average 200 owners. You can get a 4 BR penthouse for a paltry $10 mil plus $6500 a month “home owner’s fees” covering medical care and utilities. Good ol’ American entrepreneurial know-how and ingenuity strikes again! What’s next? “Space, the Final Frontier!” Captain Kirk, where are you when we need you?!Ken owns Ken DuVall & Associates, Realtors at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.
