About 45% of Americans usually make New Year’s resolutions, according to a survey from the University of Scranton. But the same survey shows that only 8% of us actually keep our resolutions. Perhaps this low success rate isn’t such a tragedy when our resolutions involve things like losing a little weight or learning a foreign language. But when we make financial resolutions — resolutions that, if achieved, could significantly help us in our pursuit of our important long-term goals — it’s clearly worthwhile to make every effort to follow through.
So, what sorts of financial resolutions might you consider? Here are a few possibilities:
• Boost your contributions to your retirement plans. Each year, try to put in a little more to your IRA and your 401(k) or other employer-sponsored retirement plans. These tax-advantaged accounts are good options for your retirement savings strategy.
• Reduce your debts. It’s not always easy to reduce your debts, but make it a goal to finish 2014 with a smaller debt load than you had going into the new year. The lower your monthly debt payments, the more money you’ll have to invest for retirement, college for your children (or grandchildren) and other important objectives.
• Build your emergency fund. Work on building an “emergency fund” containing six to 12 months’ worth of living expenses, with the money held in a liquid account that offers a high degree of preservation of principal. Without such a fund, you might be forced to dip into your long-term investments to pay for emergencies, such as a new furnace, a major car repair, and so on. You might not be able to finish creating your emergency fund in one year, but contribute as much as you can afford.
• Plan for your protection needs. If you don’t already have the proper amounts of life and disability insurance in place, put it on your “To Do” list for 2014. Also, if you haven’t taken steps to protect yourself from the considerable costs of long-term care, such as an extended nursing home stay, consult with your financial professional, who can suggest the appropriate protection or investment vehicles. You may never need such care, but that’s a chance you may not want to take — and the longer you wait, the more expensive your protection options may become.
• Don’t overreact to market volatility. Too many people head to the investment “sidelines” during market downturns. But if you’re not invested, then you miss any potential market gains— and the biggest gains are often realized at the early stages of the rally.
• Focus on the long term. You can probably check your investment balance online, which means you can do it every day, or even several times a day — but should you? If you’re following a strategy that’s appropriate for your needs, goals, risk tolerance and time horizon, you’re already doing what you should be doing in the long run. So there’s no need to stress yourself over the short-term movements that show up in your investment statements.
Do whatever you can to turn these New Year’s resolutions into realities. Your efforts could pay off well beyond 2014.
Ken Casper is a Financial Advisor with Edward Jones. If you would like to reach Ken to talk more about your specific situation you can visit him in his office in Benicia at 555 First St. Ste 104 or call him at 707-745-8133.
In 2011, years before the Admirals came to town, and with way less fanfare, Vallejo successfully lured another team in blue to settle down in town. The city attracted a fast-growing, multimillion-dollar housing company called Blu Homes, which set up their manufacturing operations on Mare Island to gain footing on the West Coast. One year after making that decision, Blu Homes achieved $40 million in bookings, representing a 400% single-year growth. But despite what these daunting figures might indicate, Blu Homes focuses on making nice homes more affordable to the average American.
Blu Homes was founded in 2008 by a well-balanced team—Bill Haney, an environmentalist, a venture capitalist named Maura McCarthy and an engineer from MIT named Dennis Michaud. The three of them were both looking for a cheaper, more environmentally friendly approach to home building during a time when the nation was going through a housing crisis involving millions of foreclosed-upon homes. At the same time, Haney, McCarthy and Michaud were trying to solve a marketplace mystery …
They all agreed that prefabricated homes (or prefabs: homes that are manufactured in advance, before being driven to a site and assembled) best fit the bill for what they were looking for.
“The idea came from a class that Bill Haney sponsored at the Rhode Island School of Design, and MIT [in 2007],” said Dana Smith, the Director of Public Relations at Blu Homes. “The class was looking at the future of housing, and how to make beautiful homes more accessible to more Americans. Through that research, they settled on prefabs.”
The problem? Despite having some international popularity, prefab homes weren’t endearing themselves to Americans and had never really been successful in the United States. So the Blu Homes team decided to take a different approach to building prefabs. For starters, they began designing their homes differently than other prefabs, which have a reputation of being smaller than your average home, or simply as being considered “cheap-looking.” Blu Homes houses, by contrast, have a modernized style of architecture, a more open feel to them and are generally more expensive-looking than they actually are.
“The steel framing we use allows for higher ceilings, more windows and a larger overall surface area,” Smith said. “So the space that you have feels so big and satisfying.”
The other thing they did to distance themselves from other prefabricated homes, Smith said, is to invent a new piece of folding technology which allows for quicker manufacturing and assembly, and helps them keep costs surprisingly low. For instance, their catalog shows one- to two-bedroom homes on sale for $145k, as well as a three-bedroom 1,000-plus sq. ft. house for 170-$185k, significantly lower than a non-prefab with similar dimensions would likely sell for, especially in California.
“This enables us to design and build all the homes out of one factory, and then we can load them onto a flat-bed truck and ship them anywhere in the US or Canada,” Smith said, adding they’ve recently added Hawaii to their delivery range.
Originally, Blu Homes ran all their operations from their headquarters in Waltham, Massachusetts, but realized that the best market for their houses was on the opposite coast. At first they were looking at Nevada, but California quickly started looking more attractive. And Vallejo, especially the site they’ve moved into on Mare Island, turned out to be such a great fit that Blu Homes closed their East Coast factory and now do 100% of their manufacturing out here.
“We’ve gotten tons of support from the city and the business community,” Smith said. “We have about 120 people working on our Vallejo factory, and they’re a terrific group of talented craftspeople. We’re excited to have that talent pool; that was a big selling point for us.”
Another reason for Blu Homes finding Northern California as a good fit is that this area has a lot of green initiatives, as well as folks who are passionately trying to help the environment. This fits in with Blu Homes’s overall business model, since they use a lot of recycled materials and take steps to reduce maintenance costs and electricity/water usage for their homeowners.
“We use recycled steel. We have an extremely tight envelope for insulation, so the energy efficiency for the homes is kind of off the charts,” Smith said. “The air quality of the homes is extremely high because of the circulation system we use, and the operating costs of the homes are really low.”
Because of that circulation, Blu Homes are generally warmer than average during winter and cooler than average homes during summer, which reduces the need for climate-control in the house, in turn lowering the likelihood of mold, dry rot, etc. Additionally, their homes are solar-ready, so if any homeowners want to take energy efficiency up another notch, it’s relatively easy for them to do so.
“It’s basically like living in an igloo-cooler,” Smith said. “It’s going to moderate the temperature really well. I was in one of our homes near the Mojave Desert, before the homeowners moved in. It was about 108 degrees outside, but it was actually really comfortable inside the house.”
In Northern California, we still have at least two weeklong heat waves each summer, when millions of people simultaneously turn on their AC units and electricity companies jack up the rates. Blu Homes keeps these kinds of things in mind and focuses on the long-term sustainability and maintenance of the home.
Currently, Blu Homes is using some of the $69 million in investments they acquired from 2008-2012 to make a series of display homes so that more people can attend open houses and get an idea of what Blu Homes has to offer. One of these will be in Mare Island, said Smith.
“If you are a person who wants to build a home yourself, but want it done in an extremely efficient way, Blu Homes can take care of every element of the process—from pouring the foundation to designing the structure, all the while lowering your maintenance costs,” Smith said. “Blu Homes can do all that for you.”
Blu Homes gives regular factory tours of their Mare Island manufacturing headquarters, which is located at 1245 Nimitz Dr. on Mare Island in Vallejo. If you’re interested in purchasing a Blu Home, or want to learn more about them, or even if you just want to check out some pretty cool videos of their design/building process, go to www.bluhomes.com
Nate Gartrell grew up in Benicia, studied journalism in college, and has written for a handful of media outlets since age 15. He aspires to visit all 30 Major League Baseball stadiums and to hit the trifecta at the horse track.
As we enter the dog days of summer here in Northern California, there’s a good chance you’ll notice more friends and family heading out to the local hardware store, trying to accumulate supplies for an upcoming home improvement project of some kind. After all, a recent nationwide study showed that American homeowners tend to invest in household upgrades during the summer, and now there are only a few more months to squeeze such projects in.
Ask a contractor and they’ll probably tell you that the demand for home improvement help is year-round. This is particularly true of California, a state with almost 14 million homeowners, where the need for improvement tends to arise.
So, for any Northern Californians out there planning home improvement projects in the near future (or for those of you who had a part of your house unexpectedly break), Local Happenings was able to get a chance to speak with an expert in home improvement from our neck of the woods. His name is Rick Harris of Harris Tile & Stone, a Vacaville-based family business that started in 1990 and focuses specifically on bathroom renovation.
“We’re a specialty company, full-service contractor with the average bath taking about one week,” Harris says.
Harris Tile & Stone has remodeled more than 1,500 bathrooms during their tenure in this area, and primarily serve El Dorado, Sacramento and Solano counties. Out of those 1,500+, Rick has designed a whopping 1,200 or more of them, each costing anywhere “from $8,000-$80,000,” he says. He also designs several bathrooms a year for special needs kids and adults with disabilities—“safe bathrooms,” as he calls them.
In addition to building up his business and being fully certified in multiple areas, Harris has taught economics courses in local universities and has given lectures on the tricks of his trade, like re-tiling and waterproofing. He was kind enough to give us a couple free tips on how homeowners can reduce the need for bathroom maintenance, decrease the likelihood of dry rot, and he explains how to save money on water bills.
First off, when he’s working with customers, Harris tends to lend a lot of consideration towards aesthetic value. Though he’s more than qualified to plan out bathrooms, he’s got a team of designers at Harris Tile & Stone to assist him, and he typically goes shopping with customers to help them pick out a theme. A good re-tiling can transform the character of a bathroom and Harris Tile’s website has a photo gallery with plenty of examples. But in the long run, as Harris says, the tile itself isn’t that important when it comes to the “health” of your bathroom.
“It’s all about the waterproofing under the tile,” Harris says. “That is the most important part of a bathroom. The rest is just design and taste.”
For this reason, Harris Tile uses a wedi tile waterproofing system, well known in the industry, as opposed to just sheetrock underneath the tiles. Many of the bathrooms he’s called in to remodel have dry rot problems, which can worsen in some homes when the residents aren’t aware of helpful dry rot prevention measures.
“You should dry down your shower when you’re through and leave the bathroom doors open so it naturally ventilates,” Harris says. “It’s kind of like, if you had a nice car, you wouldn’t leave it in your garage all wet after a carwash.”
Harris is also working to set up a YouTube account to correspond with his website, so he can do how-to videos for simple home improvement jobs, like grouting. This information will be free and available to the general public, not just their customers, and Harris says if anyone has a simple bathroom improvement question, feel free to call him and ask (his number is posted on Harris Tile’s website).
“We try to mentor people, even if we’re not working for them,” Harris says. “We can teach them to maintain their bathrooms and I think people appreciate that.”
When it comes to saving money on water bills, a popular summer activity in drought-ridden California, Harris has learned a trick or two over the years. One simple water saver he’s familiar with is to utilize a smaller valve/spigot system, which will actually reduce the water flow in a shower without negatively impacting shower pressure.
“We can get shower valves that are under two gallons a minute,” Harris says. “A lot of people say, ‘Well, I don’t want a dry shower, I want the water to hit me.’ Well, you don’t have to use a lot of water to get a high pressure. Water restrictors increase pressure—it’s like putting your thumb on a hose.”
Harris has plenty of other tricks and insider knowledge when it comes to home renovation and he invites anyone looking to tackle a remodeling job to give Harris Tile a shot. They offer free quotes and take no money down until the bathroom is complete. Harris says that since the beginning he’s told his customers that they don’t have to pay if they don’t like the result. And, more than 1,500 remodeled bathrooms later, not a single customer has yet to take him up on that offer.
“I’ve never had an unhappy customer,” Harris says.
Nate Gartrell grew up in Benicia, studied journalism in college, and has written for a handful of media outlets since age 15. He aspires to visit all 30 Major League Baseball stadiums and to hit the trifecta at the horse track.
They say Home is where the Hearth is (or something like that). And the hearth, in one form or another, has been the center of the household since Man’s earliest use of fire. A fire evokes a feeling of comfort and a seemingly unending fascination, as well as providing warmth.
In these digital days, there is indeed something soothing about watching a fire. But most of us count on soul-less and efficient contrivances for heat. And yet, sitting around the campfire is something that holds a fond place in most people’s memory; somehow speaking of a simpler time, watching flames and embers play.
The ‘ol wood burner has a long history in America, with the first known wood stove having been constructed of cast iron plates at a foundry in Lynn, Massachusetts in 1642. Even founding father and prolific inventor Benjamin Franklin is known for having developed his own cast iron stove in 1744. Having noted the inefficiency of the fireplaces of the time, which lost most of their generated heat up the chimney, Franklin was motivated to develop the Franklin Stove, a cast iron insert which moved the fire forward and used a baffle to extract more heat from combustion and radiate it into the room before venting the fumes out the chimney. Variations of Franklin’s invention are still used to this day.
The intervening years since Benjamin Franklin’s time have seen the rise of coal, oil, natural gas, propane and electric forms of heating, but the oil crisis of the 70’s spurred a renewed interest in wood burning stoves. And in the 80’s, stricter environmental regulation forced innovations that have resulted in the much more efficient designs we see today.
And there is no equal to cooking over a wood fire either with the smoke seasoning the food—the most basic of spices for flavoring a meal.
But of course, one might think that open fires and burning wood on a regular basis are largely a thing of the past, and that air quality concerns have placed the traditional fireplace on the list of simple pleasures headed that won’t be known to coming generations. Right? Actually, no, as I learned during a visit to the Buck Factory Outlet.
Guy Fasanaro and his wife Sharon have been in the stove and fireplace business since 1979. They sell and install wood, pellet and gas burning fireplaces and stoves as well as a wide selection of barbecue ranges from their factory showroom at 4860 East 2nd Street in Benicia, California. Almost all their fireplaces (they carry only one “decorative” model) are designed to be highly efficient and clean heating devices. “All our stoves are EPA certified,” explained proprietor Guy Fasanaro.
Modern wood and pellet fireplaces and stoves re-burn the gasses given off during the initial combustion, resulting in a significant decrease in the level of particulate emissions. They are also highly efficient in producing heat; “furnace rated” is the term applied to these efficient burners. “I’ve never had a customer come back to me who didn’t see a savings in their heating bill,” says Fasonaro, who continues to explain that the efficiency of a modern wood or pellet burner is, “comparable or better than a furnace,” The heat is radiated directly so there is not the loss one sees in central type heating as air travels through venting, or the considerably higher expense of electric heating. And while there are spare the air or “no burn” days as Guy calls them, the overall usefulness of a wood stove should not be underestimated, not to mention the beauty and enjoyment to be had.
The business, started by Guy’s father was originally an exclusive distributor for Buck Stoves of North Carolina (it gets cold up in there in the winter) and grew to an operation employing 45 workers with branches all over California. Today, in addition to Buck products, Fasonaro sells a wide range of brands including Hearth Stone from Vermont, a number of brands from Canada such as Napoleon, Regency, Montigo and others from chilly regions such as Minnesota and Norway. They also carry a full range of high-end barbecue grills and accessories. The current operation has five employees and is focused on personal attention and service rather than distribution. Fasonaro, who has held a contractor’s license since 1984, personally oversees every stove or fireplace installation. When I ask Sharon Fasonaro how many stoves or fireplaces they have at home she replies: two. “We live on twenty acres with lots of trees, so there’s lots of wood,” says Guy, with Sharon adding, “We do have an electric furnace, but we never use it.” Now that’s a testimonial!
Site evaluations for stove or fireplace installation are free at Buck, with Guy generally coming out to evaluate the site himself. Prices, including installation, run on average $2,700 to $44,00 for fireplace inserts, $2700 at the low end to $20,000 or more for a really big and extravagant fireplace and between $3,500 and $6,000 for a wood-burning stove. Not cheap, but not absurd at all considering the years of use one gets in addition to the potential for savings and a possible hedge against the instability of the fossil fuel market.
And while the Buck Factory Outlet provides a wide range of traditional wood, pellet and gas stoves and fireplaces, there are more modern-styled options available. One of the recent trends in gas-fired units is the use of a lot of glass, a linear flame layout and even mirrored fireplace inserts with colored glass bits rather than logs. My first reaction upon seeing one of these units was to announce, “Vegas baby, Vegas!” which the Fasonaros seemed to find mildly amusing. Oh, and all the gas units come with remote controls, which sort of seems like cheating, but then again, there is something to be said about convenience. Yup. Whether you’re a traditionalist or a hip and swingin’ groovemeister, there is probably a fireplace fit for your pad at Buck. I wonder what Ben Franklin would go for if he dropped in on us today—I bet he would like the ultra-modern stuff and the remote! We all know Ben was a bit of a wild swinger for his day, not to mention a nudist (naturist in the vernacular) who took daily naked “air baths” … I guess nudity is, after all, the mother of (fireplace) invention! Shocking! If you do visit the Buck Factory outlet, I suggest keeping your shirt on.
If you already have a stove or fireplace, Buck also has an extensive range of accessories such as fireplace tools, screens, andirons and nifty stove top humidifiers in the form of critters which you fill with water and put on the stove to add moisture to the air. The dragon model is neat because he puffs steam out of his nostrils! Repairs are also welcome.
If you do crave a little flame and heat in your life, drop in on Guy and Sharon Fasonaro. They are easy to talk to, no high pressure pitch and over 30 years of experience. Add to that the emphasis on personal service in a family run business, and it’s clearly an excellent choice. I’m pretty confident you won’t get burned!
The Buck Factory outlet is open Tuesday through Friday from 10-5 and Saturday 11-4. They can be reached by phone at (707) 745-5933 or visit online: www.calcomfort.com.
Marc Garman – is a videographer, writer and tinkerer who lives in Vallejo, CA and can’t get enough outdoor fun.
Property Management 101
The Advantages of Hiring a Property Manager
Landlords – Tired of midnight phone calls? Or let me guess, the recurring statement from your tenant that, “The check is in the mail?” Not sure what your legal obligations are regarding repair requests or what services you should be including?
Tenants – Are you frustrated with multiple maintenance requests being ignored? Unannounced visits from your landlord? Wish you could pay your rent 24 hours a day, 7 days a week?
The answer to all of the questions above is simple. A property manager is a convenient point of contact for owners and tenants alike to alleviate these common headaches and act as a catalyst to achieve win-win solutions.
Calling All LANDLORDS
Wish you had more time to focus on your life and less on your rental property? You would be amazed at the benefits you could reap by going through a professional property management company. Do you know the most common and significant mistake that self- managing landlords make is rushing to fill a vacancy with the first interested applicant? A professional property management company will provide the initial tenant screening which helps to lower tenant turnover and improve tenant quality. Krystle Property Management has and uses the tools to conduct comprehensive background checks as a part of the tenant screening process. Our application fee is charged to prospective tenants and includes credit, eviction and criminal background checks along with thorough rental and job references. First month’s rent and security deposit are due upon lease sign up which must be paid in guaranteed funds – NO EXCEPTIONS!
Another advantage of hiring a professional management company is the advertising and branding that a management company provides. Krystle Property Management’s extensive advertising campaign reaches out to thousands of potential renters in order to help keep vacancy rates at a minimum. Maintaining positive realtor and tenant relationships helps to generate referrals, creating an extensive network of qualified renters. Advertising through means of traditional print advertising as well as keeping up with the trends of communication for the Y-generation, by means of internet advertising and social media, help to connect with the greater public.
Property management companies should be knowledgeable on current market rents and whether the rental market is stagnant or fluctuating. Did you know that as of July 1, 2011, all single-family residences had to be fitted with carbon monoxide detectors whether tenant or owner occupied? Owners of multi-family leased rental dwellings, such as apartment buildings, have until January 1, 2013, to comply with the carbon monoxide law. Due to ever-changing laws (like these), as well as the increase of tenant-landlord lawsuits, not hiring a property manager could result in a devastating lawsuit. Consequently, it is of utmost importance to hire a property manager who stays current with applicable municipal, state, county and Federal Fair Housing laws and practices pertaining to real estate.
Good property managers provide tenants with a 24-hour emergency maintenance phone number. They also have a pool of vendors to choose from that also are on call 24/7. If self managing, it could be headache to receive a late night emergency phone call such as a break-in or fire. Would you know who to call or have the desire to drive to your rental property at 2 a.m. on a Sunday morning? Emergencies happen at all hours of the day. If you had a property manager, maintenance repairs often come at a reduced rate and the property managers would facilitate all maintenance and turn keys from beginning to end. Periodic inspections of your rental investment are done to ensure tenants are adhering to their lease agreement. During the inspections, Krystle Property Management personnel also check for any necessary repairs which protect your precious investment.
Is your tenant delinquent in rent and you’re not quite sure what to do? A good property manager has a routine protocol when dealing with delinquent tenants. They should include service of legal notices and arrange for evictions if necessary. Property managers represent you in most legal tenant-landlord conflicts, including court appearances, and facilitate you in avoiding legal encounters.
Say Goodbye to End of Year Tax Blues
How would you like your year-end statements conveniently packaged in one envelope, mailed to you, ready to hand over to your tax preparer? No need to search for receipts from January of last year. All debits and credits are accounted for on one convenient report along with a 1099-MISC and any other pertinent tax forms.
Accounting, bill pay, and rent collection are some daily tasks that should also be included in your management agreement. There is no longer a need for you to remember if you paid the sanitation bill or monthly HOA payment for your rental property; a property manager can do that for you! Krystle Property Management can also make your mortgage payment once the monthly rental income is received from the tenant.
Do you live out of state? At Krystle Property Management, all owners have the option to receive owner disbursements via direct deposit at no additional cost. Direct deposit offers many advantages including zero chance of the check getting lost in transit, receiving funds faster directly into your specified bank account, and one less trip to your bank for deposit! So save your gas, time and anticipation. Did you know that if you are not a resident of California with a leased rental property you must adhere to the California Franchise Tax Board non-resident withholding tax law?
What to Expect
There are many things to look for when choosing your Property Manager and it is important to thoroughly interview your prospective property management company. Do not be afraid to ask for references. You should look for clear communication, excellent people skills, an orientation toward customer service, clerical and managerial abilities, involvement in the community and flexibility. But remember, while you are interviewing them, they are also interviewing you!
Before deciding on which company to engage, it is important to understand what services are required since not all property managers provide the same level of support. Make sure there are no hidden costs and that your management fee is inclusive of all services. You should be prepared to give up some control, as good property managers need authority to act on your behalf on certain instances.
RENTERS: Check This Out
Have you ever had a maintenance issue with no response from your landlord? Busted pipe at 2 a.m.? Had a plumbing backup or a kitchen fire? Fully functioning property management companies have staff on call 24/7 to address maintenance emergencies. With most companies, maintenance requests can be emailed, faxed, phoned in, or done face to face during normal business hours. But keep in mind there is a difference between emergency maintenance that must be handled urgently versus cosmetic maintenance. Your property manager has the authority to ensure your home is habitable and free from safety hazards at all times. Professional management also has the experience and knowledge necessary to successfully handle noise, conflict and safety issues in order to enforce the right to quiet enjoyment.
Property managers can be much easier to get a hold of than renting from a private party that has other jobs and responsibilities to take care of. Especially, when working a fully departmentalized corporation such as Krystle Property Management. Prompt communication plus the ability to walk into an office to receive personal customer service are features of a professional management company.
Another benefit of working with a property manager is the variety of properties available. Many property management companies offer websites that include video streaming and detailed photos of the available properties. These features can save you time, gas and frustration should the property not meet your demands.
Often times, going through the rental process can be confusing or overwhelming, especially for first time renters. A property management company can guide you through the rental process from start to finish, leaving you more time to enjoy your new accommodations. There is no additional fee to renters for going through a property manager, their fee is already accounted for in the listed rent you see.
First Time Renter or Relocating? Don’t Fret!
Leasing agents have a wide range of knowledge on the local area and housing options available. Krystle Property Management has four full-time, licensed real estate agents and brokers who are accessible by phone and e-mail for your convenience.
Many renters relocate for school or work and are unable to visit the property or city they’re moving to. The online tools available allow renters to view virtual tours, apply securely online, pay their application fee, rent and security deposit as well as sign their lease without even having to leave their house! Private landlords aren’t capable of being able to meet these needs as well as professional management company can.
So whether you are a new landlord, an experienced investor or venturing into the rental market to find that perfect place to call home, just remember … Property Management doesn’t cost—it pays!
This article was written with the help of Elisa Brosius, Kathy Gillin, Julie Jackson and Renee McCrary
Krystle Property Management is a second generation, family ran and owned business with over 150 years of experience. They service Vallejo, Benicia & American Canyon.
Krystle Murphy is a business owner, but first and foremost a wife and a mother.
This article was written with the help of Elisa Brosius, Kathy Gillin, Julie Jackson and Renee McCrary
Lack of Inventory Pushing Home Prices Up
The real estate market is getting squeezed by a lack of inventory of homes for sale. A shortage of “move-in ready” homes and bidding wars over houses in good condition are leaving potential buyers scrambling to find a home to buy. Housing inventories have sunk, leaving home shoppers with fewer options. Bidding wars are back. Meanwhile, investors are snatching up bank-owned properties at bargains and new construction remains at historic lows.
Many buyers, who have been sitting on the fence, waiting for the right time to invest in a home, are feeling a greater urgency now to jump into the market, fueled by the low cost of borrowing money. It seems as though almost every week there is another record broken for home mortgage interest rates. This is creating enticement for prospective home buyers, driving them to get off the fence and generally increasing the sheer numbers of buyers who are in the market actively looking at and making offers on homes.
Mortgage applications for home purchases jumped 12.8 percent last week, reaching the highest volume since 2009, according to the Mortgage Bankers Association. Refinancing applications climbed 19.2 percent.
Meanwhile, the number of homes on the market continues to become a shrinking pool. Nationally, inventory of for-sale single-family homes, condos, townhomes, and co-ops dropped 20 percent in May compared to a year ago.
California metro areas are seeing some of the largest drops in inventories of for-sale homes. From May 2011 to May of this year, the following metro areas have posted some of the highest drops in the country. Those metros are:
1. Oakland: -56.60%
2. Fresno: -48.76%
3. San Jose: -40.80%
4. Stockton-Lodi: -39.25%
5. San Francisco: -38.90%
6. Sacramento: -35.92%
Nationally, the number of for-sale homes was 2.5 million, which marks the lowest number for an April since 2006, according to National Association of REALTORS®’ housing data.
In addition, professional investors bankrolled by private equity firms and hedge funds are pouncing on bank-owned homes, often turning them into rentals.
A lack of new construction also is constraining supply. In April the number of completed new single-family homes available for sale was at its lowest level since the Census Bureau began keeping track in 1973!
The inventory problem has been exacerbated by the plunge in home prices since the go-go years. Many people who bought at the top of the cycle are so deeply underwater, they can’t get the price they need to sell and are therefore not bothering to put their homes on the market, and instead, choosing to wait.
Sellers Feeling Stronger
The sharp drop in inventory along with rock-bottom interest rates have helped stabilize even some of the hardest-hit markets. While buyers are suddenly feeling a sense of urgency, sellers are feeling they can wait. Properties are selling faster with the number of days a home sits on the market before it sells decreasing.
This situation has also increased the number of offers on desirable homes. Depending on the price and area, some buyers are finding themselves in multiple offer situations in which there are more than 2 dozen other buyers! Many first time home buyers are frustrated because they’re writing a lot of offers, but never getting into a contract. When your chances of getting an offer accepted are 1 in 15, or worse, you’re going to be writing a lot of offers.
To exacerbate the situation even more for first time buyers, some of those competing offers can be all cash offers or offer high down payments of 50% or more. Many buyers, who feel they have worked so hard and saved to get their 20% down payment together, are finding that it’s not as impressive to sellers as it used to be. And FHA buyers – with a measly 3.5% down payment – are almost completely shut out from getting their offers accepted in this market, as sellers much of the time have too many other offers with much higher down payments.
Prices Rising
While inventories were on the decline, the national median list price was on the rise, inching up 3.17 percent in May compared to May 2011. Many homes are selling for above their asking price. Depending on the area and price point, some homes are selling for as much as 20% or more above the asking price.
Signs of recovery are evident in a growing number of markets that were once the epicenter of the housing crisis. These Bay Area markets have seen these increases in home prices over one year ago:
Oakland: 10.15 percent
San Jose: 5.20 percent
Sacramento: 4.50 percent
Loan Modifications & Short Sales
The U.S. Department of Justice (DOJ) and the California State Attorneys General have agreed to a global settlement with the largest mortgage servicers. Under the agreement, the mortgage servicers will:
•Implement a new modification program that offers principal reduction to qualified customers.
•Work to lower interest rates to provide reduced payments for eligible homeowners who are current on their payments but owe more than the current value of their homes.
If you’re a home owner, there may be an avenue out of your negative equity. Consider communicating with your mortgage servicer to see if you qualify for their new loan modification program.
There may be some relief for short sales, which have suffered from a lengthy process which is far from “short”. Fannie Mae and Freddie Mac have passed down some new rules for loans backed by them. There will now be strict timelines for the loan servicer to respond to an offer from a buyer. This will hopefully shorten the often lengthy time it takes to find out if a buyer’s offer will – or will not – be accepted by the lender behind a home owner attempting a short sale. It is the lender who ultimately makes the decision.
Signs of a Pending ‘Foreclosure Wave’?
Foreclosure filings — which include default notices, scheduled auctions and bank repossessions — soared 9 percent in May from the previous month. The pick-up in foreclosures for the month marked the first monthly increase since January and had some in the housing industry saying that the “foreclosure wave”, as predicted, has finally made landfall.
Following a $26 billion mortgage settlement in April between the nation’s five largest banks and state attorneys general, the industry had predicted that foreclosures would rise this summer. Bank repossessions soared seven percent in May. Foreclosure starts were also on the rise, jumping 12 percent from April and were 16 percent higher than they were compared to May of last year.
It’s still going to be a bumpy ride down to the bottom of this foreclosure cycle.
The number of short sales continues to grow. The higher percentage of foreclosure starts in May will likely end up as short sales or auction sales rather than bank repossessions. Disposing of distressed homes by a pre-foreclosure short sale can benefit lenders and servicers because pre-foreclosure homes sell at a higher average price point than bank-owned (REO) homes. The average price of a pre-foreclosure (Short Sale) home in the first quarter sold for more than $27,000 higher than the average price of a bank-owned (REO) home.
Pre-Qualification vs. Pre-Approval
As the housing market is warming up, with multiple offers becoming more commonplace, buyers who want an advantage in the bidding process will need more than a mortgage prequalification – they will need a preapproval. The differences between mortgage prequalification and preapproval are significant.
Prequalifying for a mortgage is based solely on what a borrower tells their loan officer or broker about his/her earnings, credit score and total assets, including what is available for a down payment.
By contrast, a preapproval requires a borrower to provide documentation of his/her income and assets. The lender typically pulls the borrower’s credit report and score, while the borrower gathers together almost everything else needed for the actual mortgage underwriting: W-2 wage statements; 1099s; recent pay stubs; bank statements; and statements from Individual Retirement Accounts and 401(k)s; and other assets that could show the borrower has the resources to buy and maintain a home.
With so many homes receiving multiple offers, a preapproval is more important in today’s marketplace for buyers who want to be successful. Getting a preapproval is the first step – even before looking at homes – in the buying process. Make sure you ask your loan agent for a preapproval, not just a prequalification.
Tomaj Trenda is a full-time REALTOR®, investor and educator with Better Homes Realty, specializing in the East Bay. He teaches workshops for Investors and First Time Buyers and Sellers. If you’d like an invitation to his next Workshop, to comment on this article, or if you have any questions about the real estate market in your area, contact him at: homes@tomajtrenda.com or call 925-284-9500 x234. Visit his website to see all homes for sale and other useful information at www.TomajTrenda.com. Better Homes Realty, 3701 Mt. Diablo Blvd., Lafayette, CA 94549
