Double-Dip Recession? It’s Why Some Buyers Are Still on the Sidelines…

Waiting out the Market.

Bottom of the market? Economic recovery? That’s not how a growing number of potential home buyers are assessing the current real estate market right now. Despite many indicators that have pointed toward a gradual recovery in 2010, there’s a contrary view that’s starting to gain some footing, and it’s making these buyers and real estate investors nervous: Double-Dip Recession.

What is a Double-Dip Recession?

Investopedia defines a double-dip recession as follows:

“When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession.”

While nobody is standing up and saying that we’re heading back into a recession, the news this past week certainly raised questions about the validity of our current “recovery”, as this article from CNBC discusses: Double-Dip Recession Fears Creep Back into the Market. For some home buyers, this specter is enough to keep them on the sidelines, even despite record-low interest rates. Here’s why… … Continue Reading

Looking for Open Houses in San Carlos? Just Remember “OH”…

Trouble Finding Open Houses in San Carlos?

For some strange reason, it has always been difficult to find a single website that lists all of the open houses in a particular community for the upcoming weekend.  Think of how useful that would be to get an up-to-the-minute list of what homes and condos are open this weekend in San Carlos!  Well, now you have it..  Introducing the Open House Link from the White Oaks Blog!  or, better known as the “White Oaks Blog OH.”

Just Remember the Letters “OH”…

I’ve always had the “Open House” icon on the right sidebar of the blog, which lists all of the open houses and condos in San Carlos.  But what if you’re not on the blog when you need that information?  What if you’re already in your car driving around looking for open houses?   Well, I have created a VERY easy to remember link that you can punch into any computer or smart phone:

http://WhiteOaksBlog.com/OH

This url is very cool because it’s a “live link“, meaning it’s updated continuously.    So as soon as an agent updates their listing on the MLS with new open house hours, they’re automatically captured here — without doing a thing.   This is especially useful because some agents forget to post the open house hours on the MLS until the last minute (I have been guilty of that boo-boo myself.)

Once you’re on the page, not only do you see what days and hours the home is scheduled to be open, but you also get all of the listing information on the home, just like you would if you were on the MLS — including pictures!

So check it out — all you have to remember is “WhiteOaksBlog.com” (which you already know because you’re here), and “OH” (for Open House), and you’ve got it!  Better yet, just bookmark it on your phone or computer now.  You’ll never have to hunt down a list of open houses in San Carlos again.

“Appraisal” doesn’t mean “Approval” anymore.

Contingencies

Contingencies are key checkpoints that are inserted into the Residential Purchase Contract to protect the buyer …or more specifically, the buyer’s deposit, in the event that something happens outside of the buyer’s control that prevents the sale from proceeding.  And that’s important, because customarily the good faith deposit that the buyer submits with the offer is usually 3% of the purchase price — that’s no small chunk of change on any home in San Carlos!

The most common contingencies that buyers invoke are usually Title, Property Condition, and Finance.   The information needed to remove Title and Property Inspection can be obtained in relatively short order — title reports are readily available, and property inspections are usually completed in a matter of days (if you have a good inspector.)

The Final Checkpoint

So that leaves us with the Finance Contingency.  Because it typically takes the lender longer to gather the information that they need to approve the loan to fund this purchase, the Finance Contingency is usually the last one to be removed, and consequently the last “safety net” for your hefty deposit check.  You’ll notice that a good buyer’s agent will always request a longer removal period for this contingency than all of the others.

So what is a Finance Contingency?  The PRDS Residential Purchase Contract defines it as:

“…this contract is made contingent on Buyer’s obtaining a loan commitment for the financing described in Paragraphs 1D and/or 1E, and shall have ___ days from Acceptance within which to remove or otherwise act on said contingency.  (Buyer agrees to verify all loan terms directly with Lender prior to removing this contingency.)”

The most important sentence in this entire contingency is the last one.   Here’s why…

It Ain’t Over ‘Til It’s Over..

When you are “pre-approved” for a loan, you do most of the work with the bank up front, prior to making an offer on a home.  Consequently, when you get a pre-approval letter from the bank and you’re ready to go shopping, there are only a few conditions attached this approval — the biggest of which is that the bank requires a satisfactory appraisal which justifies the purchase amount.  This is where things get tricky… … Continue Reading

San Carlos First-Time HomeBuyer’s Tip: Kick Off Your Shoes…

Shoes Off!

As you put together the list of open houses that you’re going to see this weekend, make sure you also plan on wearing shoes that are easy to slip in and out of.  Why?  Because with all of the rain we’re getting this week, you’ll likely be asked to remove your shoes before entering an open house to prevent tracking dirt and mud into the home.  That’s certainly understandable, since the owners probably went through considerable effort to make the home look its absolute best.

After about a dozen times of doing this (like we do on broker’s tour), you’ll probably start to resent the inconvenience, especially if you didn’t heed my advice above about the shoes.   But I’m going to convince you that when they ask you to remove your shoes, they’re actually doing you a favor — because it’s one of the smartest things you can do as a buyer.

The “Sock Tour.”

One recommendation that I make to my clients, once they become interested in a particular home, is to take another walk through the house — but this time in their socks.   I know it sounds a little strange, but you wouldn’t believe the things your feet will tell you about the condition of the floors, and possibly the foundation — things you may miss if you have your shoes on. … Continue Reading

Entry-Level Home Market Remains Hot in San Carlos..

Recession? Down Market? Those terms don’t seem to apply when it comes to the market for San Carlos homes below the $1M mark.   There seems to be an insatiable demand for homes in this price range, especially ones in “move-in” condition in the White Oaks and Howard Park neighborhoods.   Here’s a sample of some recent home sales in just that past month — click on the address for more info and property photos:

• 2056 Eucalyptus Avenue:  3BR/2BA.  Listed for $899,000, sold for $925,000 (+2.9%)  Sold in just 3 days with multiple offers
• 121 Sunnydale Avenue:  3BR/2BA.  Sold at the list price of $899,000 in just 3 days.
• 2043 Saint Francis Way:  3BR/2BA.  Listed at $899,000, sold for $935,000 (+4.0%)  Sold in just 13 days with multiple offers.
• 2064 Eucalyptus Avenue: 3BR/2BA.  Listed at $839,000, sold for $844,000 (+0.6%)  Sold in just 5 days.
• 2120 Belmont Avenue:  3BR/2BA.  Listed at $909,000, sold for $976,000 (+7.4%).  Sold in 8 days with multiple offers.

Why is this happening?

What’s causing this seemingly counter-intuitive buying spree?  In the midst of a recession, why are homes getting as many as 8 offers?   There’s an interesting mix of events in play right now that is keeping this segment of the market white hot. … Continue Reading

San Carlos First Time Buyers: Your First Mortgage Payments.

“Why am I paying so much interest?”

Ask anyone who has just purchased a home what their reaction was when they opened their first mortgage statement – chances are that’s exactly what they thought.  I know that was my first reaction.  It seemed like 3/4 of my monthly payment was going just to pay the interest!!  My second reaction was “Aha, the bank is screwing me over by getting ALL of their interest up front!”   That seemed to be logical conclusion, since most people re-finance within a few years of getting their first loan anyway.   Why shouldn’t the banks “front-load” their loans — just another devious scheme by the banks to get more money, right?

Wrong.

There’s a reason for this…

While it may seem at first blush that the banks are “front-loading” their loans with interest, it’s actually not the case.   Here’s why: When the payments on a typical amortized loan are calculated, they’re broken down into a pre-defined number of equal payments (key word being equal here) that are comprised of both principal and interest.  Since the banks are entitled to the interest due on the principal balance, the amount of interest will always be higher at the beginning of the loan period because the principal is higher.   As you pay down more of the principal, the interest amount drops — consequently, toward the end of your loan period, your payment is made up mostly of principal, not interest.

There’s a great explanation of this whole process on Jack Guttentag’s outstanding “The Mortgage Professor’s Website.”   Click here for the article:

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“First-Time Home Buyers” is a new category on the site that’s a resource for first-time home buyers in San Carlos, and for those who have general real estate questions.

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Why the New Tax Credit is Not a Big Deal for San Carlos…

I have written several times on this site about the impact (or otherwise) of the various programs initiated by the federal government in an attempt to get a pulse going again in the housing market.   In a nutshell, I believe the programs have had mixed results.

On one hand, extending the upper limit of conforming loans to a max of $729,750 in high-cost areas such as San Carlos was a brilliant idea, and it couldn’t have come at a better time.  Right on the heels of an unprecedented credit crisis in 2008, this new source of low-risk, low-cost funding was the single biggest factor in keeping the housing market afloat in San Carlos and in surrounding areas during that time.    Extending this initiative well into 2010 was the second most brilliant idea so far.

The other element to the government’s stimulus plan was the $8,000 first-time home buyer’s credit.    The idea behind this plan was to give first time buyer’s a credit on their federal income tax when they purchased a new home.  Not a bad idea, right?   But the first attempt at this plan didn’t yield much benefit for San Carlos home buyers, and now that the government has decided to change/extend this tax credit through 2010, there’s nothing that tells me the result will be any different.  Here’s why… … Continue Reading

First-Time Buyers: Why the winning offer isn’t necessarily the highest offer.

Cash is Still King.

It wasn’t too long ago that if you were competing with other offers to buy a home, the one with the highest offering price would usually win.  Assuming that all offers were roughly equal on conditions, the seller could safely opt for the highest price and not pay too much heed to how much the down payments were.   After all, money is money, regardless of whether it’s  loan or a down payment…right?   Well, that’s not necessarily the case anymore, and sellers are more and more favoring the offer with the highest down payment — even if it’s not the highest offering price.   Why?

It’s All About Risk.

You can thank the unstable economy and the new appraisal laws for throwing a new element of risk into the real estate transaction.  To better understand why, it’s important to first review what a “financing contingency” is, and how it’s impacted when you get a screwy appraisal.    When you get pre-approved by a bank to make an offer on a home, the bank will almost always include a clause in the pre-approval letter stating that “the loan approval is subject to a satisfactory appraisal,” or something similar.  Obviously, they’re not going to loan money on something that’s not worth the value.

So when the buyer fills out the Purchase Contract, they must state how much they intend to borrow from the bank and on what terms (rate, duration, etc.)   The financing contingency allows them to cancel the contract and recover their deposit IF they’re unable to obtain a commitment from the bank to fund that loan (within an agreed upon time frame.)    This last sentence is important, and it’s the crux of why a big down payment suddenly looks very favorable. … Continue Reading