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Hi Everyone,

Here are a couple of good articles from the Wall Street Journal.

The first provides a few strong statements about the improving marketplace.  The second illustrates some of the challenges with the new appraisal system and might help you gain insight as well as motivating you to write your representative so that the someone from New York stops dictating how business is done in California!

Cheers!

PEOPLE STARTING TO INVEST IN REAL ESTATE AGAIN

Wall Street Journal

Recently over dinner, a friend of mine startled me by saying he and his wife were looking to buy a lake cabin. I figured that in this time of economic uncertainty, people would still be stuffing their mattresses with hard, cold cash. But buying real estate? That seemed particularly surprising.

The more I’ve talked to people, though, the more I get a sense that things have started to change. While the economy remains in rough shape and the jobless rate continues to rise, the frantic desire to save and build cash reserves has ebbed. Those fortunate people who have weathered the storm are emerging from their fetal crouch and starting to think more about taking some investment risks.

What I find especially interesting is where most of my risk-taking friends are headed. It isn’t the stock market; in fact, the only folks I know who have waded back into the stock market are the gunslinger types who never really left it.

Instead, they seem to be heading for real estate. At first I found this puzzling, given the brutal battering real estate has taken. But that’s the point: An increasing number of my friends see this as the perfect opportunity to find something at a bargain-basement price.

And so, among my friends: A New York executive and his wife are looking for a summer place in New England; a small-business owner in Minnesota is thinking about acquiring some rental property; a New Jersey technology consultant is considering buying a small apartment in New York, perhaps with some other friends.

The Case for Real Estate

The people doing this are employed, feel confident that they’re not going to lose their jobs, and believe that while housing prices may fall a bit more the bottom is not too far away. Moreover, financing remains relatively cheap and, according to one lawyer I know in house-hunting mode, banks aren’t as tight with mortgage lending as headlines indicate.

As I wrote a couple of months ago, it’s always dangerous to hypothesize a global trend based on the all-too-limited view from your own backyard. But it’s also sometimes an insightful way to get a jump on what’s coming. And for me, what’s most intriguing is that, for now, most of this risk talk is prospective. There’s no sense of rushing, no desire to “stretch” too far in making a purchase. It’s like these people are permitting themselves to dream a little bit and get closer to pulling the trigger. But they want to be doubly sure before making a move.

What’s more, all of these people have a similar, cautious, mind-set. They don’t believe real estate will rebound or make a great investment. But they also don’t think real estate will lose a lot of value. Instead, they are focused on real estate as something they can use: a solid place to live or play that should also be, at worst, an OK investment.

Not all investments are the same. You can’t live in a stock certificate or gaze wistfully at a bond (at least most of us can’t). In what is still a time of tumult, there’s something deep inside us that finds the solidity of a home soothing. I think that explains why people moving out on the risk scale are focused more on real estate than on stocks or bonds.

The Personal Hunt

My wife and I recently considered buying some property, too. We don’t own our home, and we’ve thought about one day returning to the Midwest. On a recent trip to Minnesota, we looked at several properties, including an old farmstead on the outskirts of St. Paul.

Examining the farmstead, it became clear why people who have ridden through this economic storm in decent shape are thinking more about real estate. It had been on the market more than a year, the price had fallen more than 60% and the seller would only take offers that didn’t require the sale of another home before closing.

Ultimately, we decided not to purchase the house, but we continue to hunt because we believe bargains can be had. We also think those bargains aren’t going away anytime soon, which is a thought shared by many and a big reason that real-estate sales remain sluggish.

Even as my friends, as well as my wife and I, consider making real-estate purchases, I am quickly reminded of how real-estate fixations got out of control earlier this decade.

An entrepreneur I barely know recently confessed how he owned seven homes, all of them rented, all of them underwater. He figures he’ll do all he can to hang on until prices rebound. His credit cards are groaning and his business is struggling. He provides a stark reminder that investing in property can go off the rails as quickly as anything else.

That is probably why the current real-estate chatter I hear sounds very different from the speculative boom of the recent past. While buying a second home or even considering some rental property entails risk, I don’t hear the kind of zero-down fervor familiar just a couple years ago. Instead, it’s about buying something that you can touch, feel and see—and imagine holding onto for a long time.

CHALLENGES WITH APPRAISERS IN THE NEW ENVIRONMENT

Wall Street Journal

After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.

Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments. Their wanderings are raising questions about whether they know enough about the neighborhoods to accurately assess the value of homes—which has implications for both home buyers and owners.

Bob Blake, a flight-test engineer who lives in Palm Beach Gardens, Fla., was shocked when an appraiser who traveled 44 miles from Port St. Lucie, Fla., valued his home at $228,000 in late May. Mr. Blake’s mortgage broker, Skip McDonough, protested to the appraisal-management company, Nations Valuation Services Inc., that the appraiser had failed to look at comparable homes. Eventually, Nations sent another appraiser, who valued the home at $295,000. The dispute delayed Mr. Blake’s refinancing by more than six weeks.

A spokesman for Nations Valuation declined to discuss the details of the appraisals but said, “We feel we handled it properly.”

Appraisals are supposed to shield home buyers from paying too much and lenders from overestimating the value of collateral. If appraisals come in too high, buyers may overpay, making defaults more likely. If they are too low, it becomes hard to sell or refinance homes. Many real-estate agents and

In June, Evie Salazar traveled about 75 miles from her office in Corona, Calif., to do an appraisal in Cathedral City, Calif. Usually, Ms. Salazar says, she tries to work within about 40 miles of her home, but business was slow at the time she accepted that job. “You do what you’ve got to do at times to feed the family and pay the bills,” she says.

Ms. Salazar, an appraiser for the past 12 years, says she researched the Cathedral City market carefully and did a good job. But many real estate agents and mortgage brokers charge that some wandering appraisers are coming up with dubious estimates. Too many appraisers are getting assignments in places where they “just don’t know the nuances,” says Rick Turley, who oversees the San Francisco Bay area for the Coldwell Banker real-estate-brokerage chain.

The debate over appraisals is inflamed by a natural tension: Real-estate agents and mortgage brokers, who need to complete transactions to collect their fees, are unhappy when an appraiser nixes the sale price. But it also suggests that there may be unintended consequences to an attempt by New York Attorney General Andrew Cuomo to reform the appraisal business.

Using the threat of litigation, Mr. Cuomo last year prodded the government-backed mortgage investors Fannie Mae and Freddie Mac into adopting a new code of conduct for appraisers. Since those two companies provide funding for the bulk of U.S. home mortgages, the code, which took effect May 1, has become the national standard for most home loans.

The code bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. One result is that more lenders have outsourced the selection to appraisal-management companies, or AMCs, which take a sizable cut of the appraisal fee, often 40% or more. The AMCs pay appraisers as little as $175 to $200 per assignment, compared with the $350 or more that many get when they work directly for a lender.

“Many appraisers are struggling to survive on the fees paid by the AMCs,” says Bill Garber, a spokesman for the Appraisal Institute, a trade group based in Chicago. Appraisers are being asked to work faster even as their fees are cut, and that conflicts with the goal of getting reliable appraisals, he says.

Squeezing Appraisers

Appraisal-management companies deny they are squeezing appraisers too hard. A spokesman for banking giant Wells Fargo & Co., which owns an AMC, says it “has invested substantial time and resources in the quality control of the valuation process to, among other things, ensure that individual appraisers have relevant knowledge of the markets and properties they review.” A spokeswoman for Mr. Cuomo says the new code is working well and helping protect appraisers from pressure to inflate estimates.

Appraisers are required to follow a set of national rules known as the Uniform Standards of Professional Appraisal Practice. Among other things, those rules require that “an appraiser preparing an appraisal in an unfamiliar location must spend sufficient time to understand the nuances of the local market.”

Yet some appraisers who travel long distances to find work may be hard-pressed to spend “sufficient time” in an unfamiliar market. LaRon Hall did an appraisal in early June on a home being sold in Palm Desert, Calif., about 86 miles from his office in Rancho Cucamonga, Calif. He says he needs to accept jobs within a broad swath of Southern California to earn a living. Under the new appraisal code, Mr. Hall says, “you’re getting less money and you’re having to do more. … It’s definitely a sticky situation.”

Mr. Hall appraised the three-bedroom home at $186,000, far above the $138,000 for which it sold in late June. Concerned about accuracy, the mortgage lender that financed the purchase rejected Mr. Hall’s appraisal and ordered one from another party before making the loan, according to a person involved in the transaction.

A spokesman for Equifax Inc., whose AMC unit ordered the appraisal in Palm Desert, says Mr. Hall has an excellent record on appraisals and that Equifax has a “rigorous quality-control process.”

Though consumers can’t choose their own appraiser—unless they’re paying cash for a home—they should request a copy of the appraisal and examine it to see whether it contains any errors in the description of the property and whether the nearby homes, or “comps,” used to gauge its value are truly comparable. If they aren’t, the consumer should present any evidence of flaws to the banks and insist that the appraisal be reviewed and redone if necessary.

Carol Kearns, herself a real- estate agent, complains that an appraisal done on her own Montvale, N.J., home in June was “an unprofessional guess.” The appraisal came in at $730,000, which was more than enough to qualify Ms. Kearns and her husband, Robert, to refinance their mortgage. But Ms. Kearns, upset at what she sees as sloppy work, maintains that the home is worth more than $900,000.

The appraiser was Uchenna Eboh, whose employer, Kobi Group, is about 46 miles away in Mendham, N.J. Ms. Kearns says Mr. Eboh didn’t seem to know her neighborhood and used dissimilar houses as “comps.” Among those, she says, were two on much smaller lots and one on a busy street corner.

‘Reasonable Proximity’

A colleague of Mr. Eboh says he couldn’t comment and referred questions about the appraisal to the AMC that ordered it, Lender Processing Services Inc.’s LSI unit. A spokeswoman for LPS says the appraisal “followed the processes required” by federal standards and LSI’s “more-stringent requirements.” She says LSI “only uses local, knowledgeable appraisers located within a reasonable proximity to the properties.”

Sometimes appraisers are called on to express opinions on the values of faraway homes without even seeing them. LandSafe, an appraisal unit of Bank of America Corp., in May assigned Jane Price, an appraiser in Dallas, to review another appraiser’s estimate of a home in Cathedral City, Calif. Ms. Price didn’t visit the neighborhood in question, but her review cited nearby homes she used to determine comparable value.

Ms. Price declined to comment. A spokeswoman for Bank of America says Ms. Price was asked to do only a “desktop review” of the original appraisal. “California is a state which has a lot of market information available, which allows a reviewer to gather credible data about a property even when they are not in the immediate area,” the spokeswoman adds.

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Hello,

I recently offered to find out the answers to the following questions that came up on the topic of Effectively pricing properties in this market.

The questions were:

Of all the properties that go on the market (through MLS),

what % go pending in the first week?

And,

Of those, what percentage of asking price did they sell for? 

So I got busy and decided to look at the whole ‘Honeymoon’ period for listings (1-21 days).

This is the period of highest interest and activity (showings, etc) – after 21 days if there have been no offers the showing dramatically decrease and interest wanes, until a price reduction but by then you are on the slippery slope of chasing the market down.

Here is what I found out about those all important first 21 days:

Area covered: Carpinteria to Goleta North

Types of listings: Home/estate./PUD/Condo:

Time period: 01/01/09 – 6/12/09

There were a total of 325 listing that closed between 1/1/09 and 6/12/09.

And, of those 325, 129 went pending within 21 days – here is the breakdown by weeks:

1-7 days = 53 (41%) highest amount

8-14 days = 47 (37%) lesser amount

15-21 days = 29 (22%) lowest amount

Regarding the 53 in the 1-7 day category:

12 sold for asking price exactly

15 sold for over asking price

26 sold for less than asking

The average price the 53 sold for was 97% of asking

*interestingly though, only one property priced at over $1m went out at over asking ($1,050,000 asking, sold for $1,060,000). The average price of the homes that sold for over asking price was $516,850.

The 47 in the 8-14 day category:

Sold for asking price = 12

Sold for over asking = 13

Sold for less than asking = 22

Average price the 47 sold for was 96% of asking

The 29 in the 15-21 day category:

Sold for asking = 1

Sold for over asking = 1

Sold for less than asking = 27

Average price the 29 sold for was 93% of asking

So, the effect of pricing the listing correctly is of huge value to the end result. To find that magic number that leaves Buyers saying, I want that property, and I want it now rather than, it is really nice, let me wait until they do a price reduction is a science, a matter of extensive market research and knowing the market and what is and is not selling. Here is where we Realtors really shine because it is our business to know these facts so that you pin point the right asking price that will bring in the best offers.

Going beyond the Honeymoon Period, Or: What sold? What didn’t? The ugly truth…

The number of listings as of 1/1/09 to 6/12/09 that are still:

Active, or were Canceled/Deleted/Expired/Withdrawn (i.e.: not sold, and not pending but had been available) = 862

Taking the 862 that are not sold vs. the 325 that did sell (in the 21 day period), means that only 27% on the inventory actually sold – or put another way:

73% of the inventory did not sell (yet) and are not pending (yet), or they gave up and withered on the vine. Which batch do you want your property to be in?

It would be a pleasure to answer any questions, and to update these results, to fine tune and customize them, and present my findings so that you will know that you will get the best results when you go on the market. Please call or email me anytime.

All the best, Ruscha Robbins

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“Amidst the drum beat of negative economic news Santa Barbara’s South County median price for single family homes fared comparatively well.”

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July Sales are up for the Santa Barbara Area Our area has been running about 64-107 sales a month so far this year and July came in at 99 sales we are a little slower than last year July with 132 sales.  Although sales are a bit slower our market is still very healthy.

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“I GUESS WE ALL LIKE TO BE RECOGNIZED NOT FOR ONE PIECE OF FIREWORKS, BUT FOR THE LEDGER OF OUR DAILY WORK.” Neil Armstrong. And while the summer’s fireworks started in full force on the July 4th holiday, they continued daily last week in the financial markets as Bonds and home loan rates ignited and began the week by improving sharply. This early-week rally was sparked by a speech made by Fed Chairman Ben Bernanke, who said that the Fed may continue to provide emergency loans to investment banks to help them overcome credit problems. This led to improvement in the Bond market because the markets saw this as a sign that the Fed is willing to take action to maintain stability and counter any turbulence or explosions that may occur.

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Because of the rash of media stories regarding the rampant number of foreclosures across the country, I am often approached by prospective buyers interested in purchasing bank owned properties along the South Coast.  The first thing that I tell everyone is that there are not many foreclosed properties in our area.  So far this year, through June 17th, there have only been 46 properties taken back by lenders from Carpinteria through Goleta.  This is in sharp contrast to North County where there have been 465 foreclosures during the same time period.

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Many Santa Barbara homeowners that want to upgrade their present home are putting a move on hold because of the soft housing market.  However, the current “buyer’s market” is actually the best time to trade your current home for a better one. Here’s why:

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We consider it our job to keep our clients informed. That’s why we compile a S.B. County Real Estate statistics report every quarter. It’s an easy-to-read report. We think you’ll find the results very interesting.

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“IT REQUIRES A GREAT DEAL OF BOLDNESS AND A GREAT DEAL OF CAUTION TO MAKE A GREAT FORTUNE.” ~ Ralph Waldo Emerson. And a great deal of caution was definitely important last week, as “earnings season” began on Wall Street. First quarter earnings for Stocks got off to a bit of a rough start, with disappointing news from aluminum company Alcoa - always the first in line to report.

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