Last year at this time, 1582 homes sold and closed. This represents a 16% increase in sales activity. Two factors contributed to the increase in my opinion-higher affordability due to lower home prices and historically low interest rates. Currently, home buyers with good credit can secure a 30-year mortgage at or below 4% and the 15-year rate is close to 3.3%! Low interest rates increase affordability and buying power for first-time buyers and investors are finding buying rental homes pencil out better than expected.

Inventory of available homes has been tight in 2011 with only 1159 active home listings available today. Last year in early October 1537 homes were listed for sale, 25% more than today. Pending home sales are higher despite the skimpier supply with 485 homes in escrow today compared to 421 a year ago.

Bank owned properties (REO’s) and short sales (distress sales) account for more than 60% of sales activity. Of the 485 pending home sales, 150 are bank owned and 150 are short sales. There are 186 active listings which are REO’s and 214 short sale listings.

Home prices continue to decrease, dropping 7.5% thus far in 2011. Last year home prices dropped 11%, which was the steepest decline since the housing bubble burst in 2007.  Overall, prices are down 45.6% from the peak in 2006, The avearage sales price today of $176,299 is similar to 2002, when the average price was $174,023.

Home prices appear to have stabilized for the low end of the market for the typical Redding home (defined as a home between 1500-2000 sq ft). In the first quarter of 2011, the typical home sold at $106.15/sq ft, $107.31/sq ft in the second quarter and $108.83/sq ft for the quarter that just ended.

Of the 221 homes that sold in September 2011, 195 were priced under $300,000. No homes priced over $550,000 sold in September. Nearly 100 of th0se sales were priced at or below $150,000.

The raw numbers indicate we have two distinct markets in the Redding/Shasta County area: the very active low-end market below $200,000 and the sluggish mid-to upper-end market! If banks are holding off listing homes which would appeal to first-time buyers and investors, they should reconsider. Many, well-qualified buyers are ready, willing and able, just waiting for affordable properties in good condition to be placed on the market.

Contact me if you have any real estate questions.

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

530-941-7492 or 530-224-6767

bradgreps@yahoo.com

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN DOWNTOWN REDDING

NEARLY 30 YEARS LOCAL REAL ESTATE EXPERIENCE

The study found:

• The negative impact on one’s credit score depends on the starting score
• Regardless of the action taken, all three strategies result in about the same credit ding
• Declaring bankruptcy has the largest negative impact on anyone’s credit score
• Expect to wait 7-10 years for your credit score to fully recover from preforeclosure levels
• Short sales completed with a deficiency to the lender will result in 30-35 additional point drop compared to a short sale where there is no deficiency

Variables that determine how large of a drop one can expect include whether the borrower:

• was 30 days or 90 days late on payments
• Had a higher or lower credit score before foreclosure avoidance startegy implemented
• whether there was or was not a deficiency loss on a short sale
• whether foreclosure or bankruptcy events occurred

FICO does not divulge details about the formula used to generate credit scores. The actual credit score impact depends on many other factors so it is possible for more or less damage depending on individual credit profiles.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

NEARLY 30 YEARS LOCAL REAL ESTATE EXPERIENCE

CORNER OF COURT AND PLACER IN DOWNTOWN REDDING

Hawaii came in second in the credit score ratings at 751. States in the northeast did well while the lowest credit scores were found in the Southeast region. Mississippi had the lowest average credit score at 695.

I suspect Redding/Shasta County avearge may be lower than California as a whole. The collapse in real estate prices locally in conjunction with double-digit unemployment and conversations with local lenders lead me to believe  the average here is significantly lower.

Today, many homeowners with good jobs and credit are wrestling with the idea of strategic defaults on loans for their primary homes, second homes and investment properties. A strategic default is defined as a borrower who elects to walk away from their property because the mortgage is underwater, not because of any financial hardship.

As one mortgage industry expert points out in the article, Californians have managed to weather the wave of foreclosures and precipitous price drops without serious damage to their credit ratings. Let’s hope this trend continues!

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

NEARLY 30 YEARS LOCAL REAL ESTATE SALES EXPERIENCE

• Borrowers with credit scores of 500-579 must make a 10% downpayment and the downpayment cannot be a gift or provided by a downpayment assistance program such as those offered by Redding and Shasta County.
• Borrowers with credit scores between 580 and 599 must tender a 5% downpayment under the same conditions as above.
• Borrowers with credit scores of 600 or better can make a downpayment as low as 3.5% and gift funds are acceptable.

In all cases, Wells Fargo is limiting closing cost credits to the borrower from the property seller to 3%. In the past, seller contributions up to 6% were allowed.

An FHA loan is a government insured loan. The loans are processed and funded by FHA approved lenders. If the borrower defaults on the loan, the government steps in, makes the lender whole, then resells the property after foreclosure.

Historically, this program has not cost taxpayers a dime. However, the decline in home prices, the struggling economy and the marked increase usage of the FHA loan program has resulted in red ink. HUD, which oversees this loan program, recently modified the mortgage insurance requirements to increase revenues to cover losses. Today, borrowers can expect to pay more in upfront fees and monthly payments of mortgage insurance premiums to keep FHA solvent.

For additional details, contact Mike Whitman at Wells Fargo in Redding at 226-2646.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESIONALS

CORNER OF COURT AND PLACER IN REDDING

NEARLY 30 YEARS LOCAL REAL ESTATE SALES EXPERIENCE

Some of this can be attributed to dozens of last year’s pending listing inventory expiring on the last day of 2010. Many real estate agents schedule listings to expire the last day of the year. Once these agents realize their listings had expired, they reinstated the listings causing a spike in the pending listing count. This explains about half the spike. The other half is likely due to the upward bump of interest rates that occurred in December. Rates increased about 1/2 % from their historic low point reached in November. Buyers waiting on the fence jumped in when rates started inching upward.

The number of active listings has not changed significantly since the beginning of the year. Today there are 1251 active listings comapred to 1242 on January 3,2011. Likewise, the number of bank owned properties listed for sale is about the same as January 3- 255 vs. 253 today. Short sale listings are also static- 211 then vs. 205 today. The pace of home closings is steady at about 35 homes/week  or 159 year-to-date.

Personally, I have noticed an upsurge in activity. The calls I receive on ads, signs, Internet postings and from past clients plus agent referrals are all up from a year ago.  2011 is starting off much brighter than 2010! I have to believe it is not just the beautiful spring-like weather but renewed optimism amongst those wishing to buy and sell.  This may be the pent up demand beginning to unleash itself-just in time to absorb the much-talked-about surge of bank owned “shadow inventory” expected in the months ahead.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

NEARLY 30 YEARS LOCAL SALES EXPERIENCE

A recent article in THE NEW YORK TIMES claims homeowners who decide to stop making payments on a property they no longer wish to keep could be denied a new mortgage for 7-10 years. Not only will their credit be damaged for a lengthy period of time, they could put themselves in a situation where the lender is suing them for the amount of money owed or  lost (termed a deficiency) by the bank. Laws allowing a lender to pursue an owner for a loan loss vary from state to state.

In so-called “recourse”states, the lender may go after the home owner’s assets including their primary residence. Maine, New Jersey and Hawaii are examples of recourse states.

In “non-recourse”states, a lender must look only to the value of the subject property to satisfy the outstanding mortgage balance if they take the property through foreclosure, deed-in-lieu of foreclosure or agree to a short sale. However, these laws may only protect the homeowner if the loans were used to purchase the property as the borrower’s primary residence. Refinance, Home Equity Lines of Credit or loans on second homes and investment properties may not have this protection from pursuit for deficiency losses by the lender(s). Florida, Connecticut and Arizona fall into this category.

California, along with Idaho and New York, fall into a third category referred to as “single-action” states which allows the lender to foreclose on the owner or file a civil lawsuit for the full loan amount. I have heard this referred to as judicial or non-judicial foreclosure.  Most foreclosures in California are non-judicial and can be accomplished in 4-6 months from start to finish. However, if the lender believes the seller has substantial assets or has intentionally damaged the security through vandalism or stripping the property of fixtures, they may pursue a judicial foreclosure which allows a judge to award a deficiency judgement.

Anyone considering a strategic default should consult with an attorney to discuss potential consequences legally and financially before stopping payments to their lender(s). Since every home owner’s financial situation is unique, consulting with a qualified expert is critical to determine the best course of action to unload an unwanted property.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 27 YEARS LOCAL REAL ESTATE EXPERIENCE

The two primary changes involve the upfront fee collected from the borrower (being reduced) and the mortgage insurance premium (MIP) tacked on to the payment (being increased).  The MIP is going up from 0.5-0.55% to 0.85-0.9% depending on the size of the downpayment. The upfront insurance premium is dropping from 2.25% to 1%. This fee is either paid in one lump sum at closing or rolled into the loan and paid over the life of the loan.

On the surface this does not sound too bad but in the real world this will cost the borrower dearly over the long run. Here’s an example provided by FHA and detailed in a recent article in THE NEW YORK TIMES. A borrower puts 3.5% downpayment on a purchase price of $154,000 (the median home price today) and finances the upfront mortgage insurance fee into the loan. The mortgage payment, including principal, interest, taxes, homeowner’s insurance and both mortgage insurance premiums goes up from $1,205/month to $1,238/month. The increase includes the drop of the upfront MIP from $3,344 to $1,486 but the monthly increase in the MIP from $68 to $111.

All FHA loans require mortgage insurance while conventional loans have a sliding scale for insurance rates if the borrower tenders less than 20% downpayment. The FHA MIP can be eliminated after 5 years if the loan-to-value ratio drops below 78%. This can be accomplished by paying down the principal, appreciation of the property value, or a combination of the two.

FHA has for the first time set a minimum credit score threshold of 500. Those with credit scores between 500 and 580 must tender a 10% downpayment. However, practically speaking, most lenders will require higher credit scores to assure they can get the loans insured by FHA. The financial meltdown has created a vast new realm of buyers that heretofore would have never considered an FHA loan due to the hefty mortgage insurance premiums. Company executives, teachers, and people with six-figure incomes are now applying for FHA loans!

The desire to leverage real estate purchases with a minimal  downpayment is alive and well, despite the added cost for the opportunity to do so.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE

First, the buyer will have the privilege of paying property taxeson the personal property rolled into the purchase price. Let’s say the seller agreed to throw in the $10,000 ski boat in lieu of a reduced price to appease the buyer. The buyer could have taken $10,000 off the price of the home but got a boat instead. Assuming the buyer is not securing a mortgage to make the purchase, the buyer will pay property taxes forever on the value of the boat because it was rolled into the purchase price. Once the buyer gets title to the boat, the assessor will levy a personal property tax on the boat, so the buyer pays taxes twice on that one boat. Adding furniture, appliances, hot tub, plasma TV’s or anything else considered personal property can cause the same problem for the home buyer.

Secondly, if the buyer is getting a loan, the buyer gets the additional privilege of paying interest on the boat purchase since it was rolled into the price of the real estate. If the lender finds out personal property was included in the sale, the appraiser may put a value on the personal property and make a deduction from the appraisal in that amount, potentially jeopardizing the loan.

Thirdly, the seller and real estate agents have a potential headache if the buyer discovers a major problem with the personal property item included in the purchase. If the boat takes on water or the compressor on the fridge fails, the seller or I get an angry call from the buyer.

Bottom line-keep personal property out of a real property purchase to keep the taxable value to a minimum, prevent unwanted interest expenses and warranty issues from arising. I’ve never had a buyer or seller disagree with this explanation as to why mixing the two types of property is a bad idea. 

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS LOCAL SALES EXPERIENCE

Redding City Hall

The average Redding home is a three bedroom , 2 bath home with about 1750 square feet. One local apprasier has tracked the value of the typical Redding home for the past couple years and his last report indicates the average cost per square foot took a big hit in October. The last quarter of 2009 and the first two quarters of 2010 showed signs of price stabilization. Then, the average cost per square foot for the typical home hovered around $127/square foot.

The same statistic for October showed a slip to $111/square foot, or a 13% drop. The descent started in the summer months after the federal tax credit expired. Coincidentally, the number of bank owned properties listed for sale on the Shasta MLS spiked during the spring and summer months. Beginning in May of this year, when 160 REO’s (Real Estate Owned or bank repo’s) were listed for sale, the number of REO’s steadily climbed to today’s level of 263 active listings out of 1445 total home listings. That represents a 39% increase of REO’s listed for sale in a 5 month time period.

David Benda reports monthly on the number of Notice’s of Default (NOD’s) filed in the Shasta County Recorder’s office. For October, that number of NOD’s, the first step in the foreclosure process, exceded 400. This is my crystal ball to what the future holds. Until the tide of foreclosure filings subsides, prices will continue to fall.  Sellers need to take this information into consideration when pricing or negotiating a sale of their real estate.

The bad news for sellers is good news for buyers. Affordability has never been greater during the past several decades than today due to prices about half what they were at the peak and interest rates that have not been this low since 1951. Some financial experts believe fed actions to flood the market with $600 billion in securities will backfire and long term interest rates will rise, not fall. If that is true, now may be the time to make a move.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS OF LOCAL REAL ESTATE EXPERIENCE 

In the past, lenders use a general-risk FICO scores to predict the likelihood a loan will be repaid. The new FICO 8 score assesses additional data in a consumers credit file in an effort to specifically predict mortgage repayment risk. As usual, FICO will not provide details as to how or what information  is used in their new credit scoring technique in order to prevent consumers from manipulating their finances to achieve a higher score.

FICO indicates the score will have the same 300-850 range. Additional codes will be developed as per the Fair Credit Reporting Act so lenders understand the reasons for the score and can explain the scores to credit applicants. The new scoring system is available to all three major US credit reporting agencies-Trans Union, Equifax and Experian. FICO claims the new score has demonstrated up to 15% higher predictive ability than the general-risk FICO score.

Since the housing bubble burst, minimum credit score thresholds to lock in the lowest interest rate and terms for mortgage loans has risen. Fannie Mae and Freddie Mac set the ground rules for lenders by setting minimum underwriting standards for loans they will purchase. If lenders fail to keep pace with their belt-tightening, the lender may be unable to sell their loans to the secondary market which in turns limits their ability to make additional loans. Today, borrowers in general must have a credit score of 720 or higher to qualify for the lowest rate and best loan terms. That’s nearly 80 points higher than the scores required just three years ago.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEAQRS LOCAL REAL ESTATE EXPERIENCE