Copy for Real Estate Guide Column for 10-8-10
REAL ESTATE PATTERNS
By Ken DuVall

ENOUGH WITH THE DOOM AND GLOOM

Sure, there's more pain to come in the housing market. But when Time Magazine starts declaring "Owning a home may no longer make economic sense," I’m not buying it. It’s grim, but we’re not dead and buried yet.

At the peak of the bubble 5 years ago, Time had a different take. "Home Sweet Home," declared its cover as it celebrated the boom and asked: "Will your house make your rich?" But now’s not the time to give up the ship. Here’s some reasons why it's always good to own a home.

You can get a good deal now. It’s clearly a buyer's market. Many buyers vanished as the tax credits expired. We're 4 years into the biggest housing bust in modern history. Prices have dropped about 30% from their peak. You'll never catch the bottom, believe me. And it really doesn't matter over the long haul.

Mortgages are the cheapest in 50 years. You can get a 30-year loan for around 4%. Two years ago they were over 6%. That drop slashes your monthly payment by 20%! We may never see these rates again in our lifetimes.

Beat the IRS! You can deduct the mortgage interest and real estate taxes from income. And you'll get a tax break on capital gains when you sell, more valuable the more you earn, and the bigger your mortgage. Many people will find that these tax breaks mean owning costs them a lot less than renting.

It also offers inflation protection. History tells us that housing has beaten inflation by a couple of percentage points annually. That's important, especially if you think long term, the next 30 or 40 years. Real estate is not a get rich quick scheme. On the contrary, it’s a get rich slow scheme!

It's a forced savings plan. If you rent for $2,000 month vs. owning for $2,400 a month, renting may make sense. But will you then save that $400 difference for your future? Most people won't. Realize that the part of your mortgage payment going to principal repayment isn't actually a cost. It’s building equity, the difference between what you owe and market value. As a forced monthly saving, it sure beats rent down the drain. My Dad told me, “Pay yourself first every month and you’ll be fine.”

Yes, there’s a glut of homes today, which can work for you. The National Association of Realtors puts the current inventory at around 4 million homes, below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More foreclosures keep coming onto the market as jobs are lost, and banks continue unloading their unsold properties. But for those fortunately still employed buyers, that means great choices and great prices.

Sooner or later, the market and supply and demand will meet again. Our population is forecast to grow by more than 100 million people over the next 40 years, meaning some 40 million new households needing homes. Eventually, this housing glut will work itself out. Keep the Faith and take advantage of the Great American Dream while the getting is still good! Timing is everything.

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.

Copy for Real Estate Guide Column for 9-24-10
REAL ESTATE PATTERNS
By Ken DuVall

MORTGAGE FRAUD ON THE RISE

New data shows that mortgage fraud- which got tougher to pull off after the collapse of the housing market- is returning in a big way.

The Wall Street Journal reports research firm CoreLogic examined 7 million home loans made by hundreds of lenders showing losses from mortgage fraud, ranging from falsified credit reports to identity theft, rose 17% last year after declining 57% in the previous 2 years. In 2009, $14 billion in U.S. home loans were originated using fraudulent application data. The actual losses won't be known for several years until the banks become forced to write off the bogus loans.

The FBI in June indicted a Phoenix man for mail and wire fraud among other crimes when he tried to steal a house from his landlord! Also in June, federal prosecutors in New Jersey charged 29 defendants—including 12 real-estate agents, 4 mortgage consultants, an appraiser, a bank employee and a mortgage broker—with wire fraud in a scheme involving 17 properties in the state showing losses of $5.5 million.

In one common con, scammers recruit "straw buyers" accomplices with good credit to apply for "no-doc" loans, which require no documentation or proof of income, to “buy” their house. Good credit was required because lenders do at least check a borrower's credit score, even if they didn't require pay stubs or bank statements.

When the bank funded loans, the schemers and the fake buyers would split the profits and walk away, leaving the house to fall into foreclosure and the banks stuck with the losses. No-doc loans are a thing of the past. Lenders now require borrowers to furnish proof of employment, tax forms, credit reports, bank statements, etc.

But fraudsters have adapted to those new restrictions. With banks less apt to lend to borrowers with shaky finances, criminals rely more on falsifying documents, recruiting loan officers and other bank insiders to work for them, and stealing identities to get loans.

According to one federal indictment unsealed in June, while a Mr. Buencamino was renting a Mr. Weaver's house in Phoenix, he intercepted mail for Mr. Weaver, obtaining his social security number. He then got a driver's license in Mr. Weaver's name!

With the help of a friend working as a loan officer at a local Compass Bank branch, Mr. Buencamino obtained a $245,000 cash-out mortgage on the property. A homeowner using a cash-out mortgage refinances the loan for more than the current mortgage and pockets the difference in cash. Mr. Buencamino, not surprisingly, couldn't be located.

Fraud continues to be a pervasive issue, growing and escalating in complexity. Application fraud—in which borrowers falsify their names, where they live, how much money they earn, their employment, their debt or their assets—remains high, accounts for 59% of all mortgage fraud.

One of the defendants in a New Jersey FBI dragnet, a mortgage consultant, paid accomplices $15,000 apiece to steal the identities of local residents earning $90,000 or more and who had good credit ratings. She then used those identities to obtain 2nd mortgages on a number of homes in the Newark area. But since good credit ratings are no longer enough to get a mortgage, the defendant also needed insiders actually employed by the lenders to pull off the caper.

When the going gets rough, the rough turn crooked. Watch your back, people. Guard your identity.

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.

Copy for Real Estate Guide Column for 9-17-10
REAL ESTATE PATTERNS
By Ken DuVall

TRIAL BY FIRE

As the economy sputters and home buyers view the market with uncertainty- July home sales sank 26% from July 2009- there’s a growing sense of fatigue with all the government intervention. Many economists and analysts are now urging a dose of shock therapy. One of them is quoted as saying, “Let the housing market crash!” Is he serious? It already has crashed! Get real. We just need to return to the basics now in these difficult times.

With home prices as low as they are, same experts argue buyers should be pouring in, which the government envisioned with the billions they’ve already spent. Since October ’08 we’ve not been in your garden-variety recession. We are in the aftermath of a true financial crisis, the nastiest, most protracted kind of recession in many years.

“Housing needs to go back to even more reasonable levels” says Professor of Real Estate Finance at George Mason University. “If they continue trying to stimulate the market, that’s the definition of insanity.” In a nut shell, nothing we’ve done so far has had a long term positive effect. The administration bet that a rising economy would solve the housing problem, and now they’re out of chips. DC insiders secretly admit they are deeply worried and don’t really know what more to do.

Last spring’s housing tax credits cost taxpayers some $30 billion, much of which went to people who would have bought anyway. If the credits were supposed to bridge over a rough patch, it ended with a glimpse of an abyss. With a huge current inventory, homes now take many months to sell, with even more foreclosures- the “shadow inventory”- lurking in the background as job layoffs continue.

Says housing analyst Ivy Zelman, “We’ve had enough artificial support and now need to let the free market do its thing.” I agree. Last week Shaun Donavan, U.S. Housing Secretary, said, “The administration would go everywhere we can to help the housing market”, while other officials backpedaled and distanced themselves from his views. With all the different opinions out there, what’s a person to think?

I don’t see where anything has radically changed in home buying and selling since 1963 when I got in the business. To be sure, prices are unstable and weak now. Loans are tough to come by. But there’s never been any change in defining the term “true value”.

You combine a motivated seller, a qualified buyer, a willing lender, along with a righteous appraisal, and voila! There’s your true market value. No one is going to pay more than market value for any commodity. Prices go up or prices go down based on the marketplace at any given point in time. That’s always been the deal.

Yet people are going to need a roof over their heads, right? Kids keep being born; people need bigger or smaller homes; they move, etc. Life and houses will go on forever. It’s still a simple matter of supply and demand and haggling over price. There never was a better time to buy than right now.

In all honesty, I’ve got to say I’ve never seen people and things so gloomy before either, so you’re not alone feeling that way. But this is America. We shall endure. It’s just a different ballgame today. It’s time to take a 7th inning stretch!

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.