Archive for June, 2009
Implementation of California Septic Regulations May Be Delayed
INDUSTRY NEWS, REAL ESTATE LEGISLATION, SHASTA COUNTY
Public outcry across California is likely to cause the postponement of statewide septic regulations currently scheduled to go into effect in 2010. Scoping sessions held by the State Water Quality Resource Board in various towns and cities across California saw huge turnouts of angry citizens prompting state officials to consider scrapping the regulations and starting over.
The revised regulations may include a matrix table that would adjust the requirements for septic tank inspections and well testing based on parcel size, soil type and whether the property is served by a private well or public water supply. This matrix was proposed early on in the process of formulating the regulations but was later dropped in favor of the current regulations that require septic pumping and well testing every 5 years for all properties.
In the event the regulations are not revised in accordance with the public input, a bill is in the wings that, if passed, would allow local enviornmental health officers to grant local exceptions to the regulations. Currently, local health departments have the authority to approve installation and repairs of septic systems on a case-by-case basis. The new regulations would strip county health authorities of their powers to grant local exceptions.
Major revisions to the EIR would trigger another round of public input sessions that will delay the implementation of regulations for a year or more. A bill proposed earlier this year that would have eliminated the regulations failed due to political reasons.
For more information regarding the proposed regulations, search my website for previous posts that contain more details concerning these new regulations.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
California Foreclosure Moratorium Begins
As of June 15, a 90-day moratorium on foreclosures in California took effect allowing some homeowners more time to ask their lender for a loan modification. Lenders that already have a comprehensive loan modification program in place, as defined by the California Foreclosure Prevention Act, are exempt from the time extension.
The law applies to owner-occupied residential properties encumbered with a first deed of trust recorded between January 1, 2003 and January 1, 2008. In essence, the existing 90-day period, during which a borrower can reinstate the loan by making up back payments and penalties, has been extended another 90 days. The goal is to allow more time for the borrower to negotiate a loan modification.
Thus far, loan modifications offered by lenders have failed miserably. Two key elements have been largely missing in past efforts:
- Principal reduction-regardless of other tweaks made to loan terms such as lower interest rates or lengthening loan repayment periods, borrowers are reluctant to agree to a loan modification unless the loan balance is reduced to reflect current market value. It is a rare occasion when a lender agrees to forgive a portion of the loan principal balance.
- Lenders are not taking the time necessary to fully and correctly analyze a borrowers ability to make future monthly mortgage payments if a loan is modified.
This effort to slow the foreclosure process is likely to extend the recovery period for the housing sector of the California economy. If lenders were required to write down the loan balance, this delay could have a positive impact allowing some homeowners to keep their homes. Furthermore, the California marketplace thus far has an insatiable demand for bank repo’s in the lower price brackets. Delaying the foreclosure process may reduce the supply of affordable homes for first-time buyers and investors alike. This problem will be compounded if current ultra-low mortgage interest rates head upward in the months ahead. Mounting federal deficits are expected to cause a significant interest rate spike in coming years, according to some housing economists.
The moratorium will stay in effect until January 1, 2011 unless extended or deleted by statute.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Whiskeytown Lake Trashed By Thoughtless Boaters
REDDING RECREATION, SHASTA COUNTY
Sadly, some boaters at Whiskeytown think it’s OK to trash the beach after taking a break on shore from their favorite water activities. My wife and I have noticed more and more trash on beaches around Whiskeytown that can only be accessed by boat. The reasons people do this escape me, but I have a couple theories.
Years ago, before Whiskeytown charged visitors daily use fees, it 
was common to see trash cans placed at popular coves, islands and beach spots around the lake. Apparently, budget cuts have eliminated this service since I have not seen trash cans at these spots for several years. Perhaps park users see this as their opportunity to leave behind whatever trash would have been deposited in these missing receptacles.
Stricter laws regarding drinking and possession of alcohol may also be another factor. Underage drinkers can use the law as an excuse not to pack out their trash. Apparently, the penalties for getting caught with an open container outweigh the environmental impact of littering. However, it does not 
explain why drinkers of legal age leave their bottles and cans behind to greet the next visitor.
I would like to see some of the money collected for park usage applied to cleaning up the park and reinstating the placement of trash cans at popular beach spots. Not only does this trash spoil this pristine man-made lake, it sends a message to the next generation that trashing our planet is acceptable behavior. A sad commentary, in my opinion, on our stewardship of our small planet.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Redding Home Inventory Declines, Pending Sales Increase
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
As we approach mid-year 2009, the local real estate market is moving along steadily. Today, the number of active home listings is 1544, down from 1552 last week. There were 1495 active listings in early January and 1886 last year at this time. Pending home sales increased to 494 today, up from 257 in early January and 397 a year ago.
Distress sales, pre-foreclosure and foreclosed homes, represent nearly half of the closed escrows year to date. 763 homes have closed escrow as reported by the Shasta MLS since the beginning of the year. Of these, 294 were REO’s (bank repo’s) and 73 were short sales. These distress sale properties combined represent 48% of the closed sales, which is comparable to the last quarter of 2008.
Only 108 of the homes listed for sale are pegged as REO’s. 222 are listed as short sales-the loan(s) against the property exceed the asking price. Many of these homes will be foreclosed upon in the coming months unless the owners negotiate a loan modification, have a short sale approved or surrender the property to the lender using a deed in lieu of foreclosure.
Homes priced under $300,000 dominate the sales activity today. More than 80% of the pending home sales fall in this price bracket. In general, the higher the price, the less likely the owner will find a buyer. Investors and first-time buyers are actively looking and buying property-taking advantage of low prices and interest rates.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE SALES EXPERIENCE
Move Up Buyers Stymied By Slump In Housing Prices
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
One key point made by Joel Singer, executive vice president of the California Association of Realtors, in last week’s mid-year economic forecast is the impact declining home prices may have on those wishing to move up to a larger home. Basically, the rapid and steep decline in home prices has wiped out home equity needed to sell then buy another home.
Mortgage interest rates are near historic lows, which has not gone unnoticed by those desiring a larger abode. Then reality sets in. Homeowners who contact their favorite Realtor for an opinion of value are finding their homes are not worth what they had hoped-making a move infeasible. Those that purchased in 2002-2003 may be ready to move up, but their home’s value has dropped back to about what they paid for it. Unless they tendered a large downpayment, they may not have enough equity to cover their mortgage payoff and selling costs with enough left over to make the downpayment and pay closing costs for the replacement home.
In Redding, this may explain why homes priced over $300,000 are moving slowly. The vast majority of sales activity is occurring in the $100,000-$250,000 price bracket. The sales activity drops off a cliff when you look at the $500,000+ segment of the market during the last 3 quarters.
The primary cause for declining prices has been the fallout from the first wave of foreclosures. Median prices in Redding have fallen from a peak of $300,000 in mid-2007 to about $180,000 today. This represents a 40% decline which could easily wipe out any downpayment and appreciation on the plus side of a homes’ balance sheet.
If it makes you feel any better, Monterey and the High Desert areas of California both saw a nearly 70% decline in their median home prices during this same market correction time frame.
Joel hopes banks will not waste any time listing their foreclosed homes for sale. The market seems to have an insatiable demand for distressed properties made even more attractive with ultra-low mortgage interest rates.
Joel’s longer term concerns center on the impact of mounting federal deficits on mortgage interest rates 3-4 years from now. It’s possible we will will look back at this time period as the golden opportunity to buy a home at an affordable price combined with a cheap interest rate-a rare occurrence in my 25 years of listing and selling real estate!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Comptroller Warns Of New Reverse Mortgage Product
HOME LOANS, INDUSTRY NEWS, TIPS FOR SENIORS
One top bank regulator, John, Dugan, wants consumers to be aware of a new reverse mortgage loan product that bears similar characteristics to subprime loans that “fueled the housing boom and bust.” These reverse mortgages fall into a different class referred to as “proprietary products.”
The concern is the fact these complicated loans are targeted to seniors 62 years of age or older. Dugan heads up the federal Office of the Comptroller. He feels regulators need to develop new standards that will protect the growing US population of elderly homeowners.
During an address to the American Bankers Association, he remarked “While reverse mortgages can provide rea
l benefits, they also have some of the same characteristics as the riskiest subprime mortgages-and that should set off alarm bells.”
No information was provided to explain how this new proprietary product differs from the reverse mortgages offered in recent decades. Fannie Mae currently accounts for 90% of the secondary market for reverse mortgages. This government sponsored enterprise (GSE) purchases mortgages from lenders that originate the loans. Bank of America and Wells Fargo are big providers of reverse mortgages, according to a recent article published by CNNMoney.com.
Seniors considering a reverse mortgage should ask lots of questions to determine if the loan they are seeking is the standard loan product offered in years past or the new proprietary type which is the target of this warning. Typically, senior borrowers considering a reverse mortgage are required to be counseled extensively before making a decision to secure this type of loan.
Usage of a reverse mortgage should be considered a loan of last resort. If you plan to live out your life in your home and don’t need the equity for other purposes, a reverse mortgage may be a viable option. I would recommend seniors contact at least two providers of reverse mortgages to compare and contrast the loan terms and costs. Be prepared for the hefty upfront loan fees typical of reverse mortgages, usually in the $10,000-$15,000 range.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
HVCC Wreaking Havoc On Home Loan Process
INDUSTRY NEWS, TIPS FOR BUYERS
The Home Valuation Code of Conduct (HVCC) created by agreement between the Federal Housing Finance Authority and Fannie Mae, Freddie Mac and the New York State Attorney General, was designed to cut off communication between the home appraiser and anyone with a vested interest in the approval of a home loan. The New York State Attorney General
rules are not the law of the land, but since most lenders wish to sell their loans to the secondary market, these rules stipulated by Fannie Mae and Freddie Mac insure most lenders will abide by them.
This “firewall” between home loan processors and the appraiser were designed to prevent loan staff from picking an appraiser and from having any communication with the appraiser regarding the homes valuation. For decades, lenders routinely assign appraisal tasks to their favorite appraisal firms and discussed value and property condition issues that might affect whether or not the borrower’s loan was approved.
The rules also prohibit “value checks“-where the lender asks an appraiser to pull comps to determine if a certain value can be ascertained before the actual appraisal is ordered. Lenders routinely call however many appraisers necessary until one agrees to deliver an appraisal with the requested value.
Another rule prohibits the loan officer or real estate agents from paying for an appraisal on behalf of a client. Again, the concern is a hand selected appraiser may over value a property to make the deal work for the lender and/or agent.
Lenders will be required to provide, free of charge, a copy of the appraisal at least three days prior to closing the loan. Currently, borrowers may receive a copy after making a written request of the lender.
This Code Of Conduct essentially breaks down the relationship-driven process prevalent in the real estate industry where a buyer knows a real estate agent who knows a lender who knows an appraiser. These new rules make these relationships taboo.
Industry insiders acknowledged there was a problem that needed to be fixed. Existing laws failed to protect homeowners and buyers from fraudulent, inflated home values. Appraisers were also put under pressure by loan officers to attain a certain value conclusion.
Since the rules kicked in on May 1, appraisers receive some of their appraisal assignments through appraisal management companies, some of which are subsidiaries of large lending institutions. These management companies charge a fee for the referral meaning either appraisers are paid less than requested or the cost of the appraisal is increased and the added cost is passed on to the borrower. Some appraisers are saying these rules have increased the cost of appraisals to borrowers by $100.
The rules also slow the loan process down which could cost the borrower additional money. Many buyers elect to lock-in their interest rate at the time of applying for the loan. Fees for loan locks are priced according to how long the lock period will be. The longer the period the higher the fee.
Another potential problemis having an appraiser assigned an appraisal in an area they are unfamiliar with. It is not unusual for an appraiser to drive more than 100 miles to visit a property they have been assigned to appraise. The appraiser may not know that certain neighborhoods command higher values- leading to a valuation that is too low.
Time will tell how these new rules will impact the real estate industry. One thing seems clear at this point-borrowers can expect to pay more to obtain a home loan!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
California Real Estate Market Update
My last post highlighted some of the points made by California Association of Realtors executive Joel Singer at last week’s trade association conference. Besides sharing his thoughts on the cause of the financial and housing markets collapse, he gave some statistics that shed light on the current state of the California housing market:
- 82% of sales in California are for homes priced below $500,000
- At the height of the boom, buyers were buying homes priced up to 10x their annual income
- Units sold are up, but dollar volume is down 53% due to price contractions
- Unsold inventory averages 4.6 months for all price ranges
- Unsold inventory for homes over $1,000,000 - 17.2 month supply
- Unsold inventory for homes priced below $300,000 - 2.5 month supply
- Distress sales are lowest in Marin County- 1 in 3
- Distress sales are highest in Solano County- 4 out of 5
- 22% of homes sold today at a net loss
- 94% of home buyers are fluent with web and utilize internet for house hunting
- 9 out of 10 home sellers utilize the services of a real estate agent
Some other interesting points about where the housing market is headed:
- The soaring popularity of the FHA loan program will cause the program to go in the red next year-a first! The Mortgage Insurance Premium (MIP) has, to this point, offset any expense to the government (taxpayers!) to administer the insurance program. FHA loans were barely used during the bubble period 2003-2007.
- Second wave of foreclosures on horizon due to rising unemployment
- The market bottom is still forming for high end homes
Financially induced economic downturn has resulted in a rapid, unprecedented decline in housing prices statewide. In the past, when home prices rose rapidly in California, they were sticky coming down. The unparalleled breakdown in our financial systems has resulted in rapid price deflation.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Redding Housing Prices Holding Steady
The average cost per square foot for a home in Redding remains stuck at $136 for the April/May time period according to a local appraiser that studies the market daily. The first quarter 2009 saw the average at this same price point. Does this mean we have hit bottom?
Perhaps! The buzz on the street from my peers is things are picking up. Many of us working day to day in real estate sales have noticed some changes. More phone calls, more buyers asking to see homes for sale, more sellers asking for price evaluations and more buyers bidding to purchase homes of interest.
Last week, I was in Sacramento and spoke with agents from all over the state. Aside from those agents working in resort areas or mountain communities, most have stated business is up after a quiet winter sales period. Some report bidding wars on bank owned properties.
I recently witnessed a bidding war on a home I listed that was not a distress sale. The winning bidder paid several thousand over the listed price. The home appraised with no difficulty despite the buyer using a no downpayment loan. The sale closed successfully.
The most active segment of the market is for homes priced under $250,000. Firt-time buyers and investors dominate the Redding marketplace. The number of pending home sales is up by more than 200 to 481 from January’s level and the number of home listings is stable at about 1550. Distress sales represent nearly half of the units sold year-to-date.
It appears the bottom is forming for the low-end of our market but don’t expect the high-end prices to bottom out for at least another year or so. Interest rates spiked nearly 1% last week due to inflation concerns. It is hoped the Fed will take action to push rates lower so the recovery can continue.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Real Estate Head Says U.S. Economy In Uncharted Territory
Joel Singer, Executive Vice President of the California Association of Realtors, addressed hundreds of Realtors at a luncheon during the Legislative Days real estate conference held in Sacramento this past week. He spoke about the current state of the housing crisis and where we might be headed. He also took a look back in time to touch on what happened to bring the world financial markets to their knees.
Today’s real estate market is experiencing the sharpest downturn since the Great Depression. He cited cultural and behavioral changes that distinguish this market decline from others in recent decades. The breakdown of financial markets is unparalleled in U.S. history. What happened?
The mortgage market implosion was due in part to Wall Street involvement:
- Inexorable demand for product-housing
- Leverage-zero down, even for high credit risks
- Fractionalization/Securitization-creative Wall Street investment packaging (derivatives)
- Products of mass destruction-Variable interest loans were time bombs
- Faulty incentives-Loan officers were rewarded for pushing risky loans
- Upfront profits were emphasized over long-term loan viability
Main Street consumers made matters worse:
- Elected to borrow money using unsuitable loans-interest only, Option ARM’s, Etc
- No skin in the game-no downpayment loans, even for those with poor credit
- Financial illiteracy-borrowers claimed they didn’t understand loan terms
- Affordability realities-runaway demand spiked home prices upward due to inventory shortages
Wall Street replenished lender’s capital by buying up mortgages and repackaging them for investors. Borrowers accepted risky loan terms even when they qualified for stable fixed-rate loans. These risky loans, that straddled borrowers with payments that jumped considerably after a short period of time, were designed to reward the investor with higher returns and the loan officer with higher commissions. The worse the loan was for the borrower, the more the loan officer was financially rewarded.
Joel stated that Lehman Brothers was capitalizing their cash to the tune of 640 to 1. The U.S. economy became reliant on the housing industry as a major component of the overall economy. This had not been the case up to this point in our country’s history.
He believes we are seeing the tail of the first wave of foreclosures. Now that the voluntary moratorium on foreclosures has expired, another wave of foreclosures could hit the market later this year- just as the market slows for the holidays. He hopes lenders will quickly list and sell REO’s, which are currently in high demand.
I will be reporting additional economic information in posts to follow, stay tuned!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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