The real estate blog.

It’s interesting how different a story can sound based on the use of one word. “Commission” sounds like payment for expertise, but “kickback” sounds dirty.

Consider a recent article by CNN about the changes mortgage brokers are having to make because of the industry downturn. The article claims -

Instead, brokers pocketed kickbacks from banks in return for selling borrowers unnecessarily costly loans.

I’m not here to defend the practices of some unscrupulous mortgage brokers over the past few years. As a profession it is going away. I think it is unfair for the media to paint the entire industry as using kickbacks. It’s not true. It is a commission, a fee for service. If the media is going to call yield spread a kickback, they should also call service release
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Ever notice any super human creature have some weakness that with the proper knowledge applied can defeat it? Superman had kryptonite, Dracula has the wooden spike, werewolves a silver bullet.

It appears 100% financing is the kryptonite of Utah’s housing market as well as the other remaining strong markets like those in the Pacific Northwest and North Carolina.

Utah’s average home price fell 1.2 percent in the first quarter to $272,503 from the same period last year, a new report shows.

The Utah Association of Realtors on Friday released home-sale data for the first quarter.

While some counties showed big gains, others showed losses. Salt Lake County showed minuscule appreciation after a sales slowdown of almost 50%.

The slowdown began last summer
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First quarter numbers show the country is not technically in a recession, though parts of the country sure feel like it.

The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.

The country’s economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the definition of a recession, which is a contraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if slightly.

The Fed just announced its rate decision affecting short term rates and took the key overnight
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Know thyself and you’ll know what kind of home to buy.__________________________________
Granted, in real estate sales we do everything for a buck. If you don’t believe me, ask your friendly neighbourhood Realtor (but ask him politely). So, in the spirit that uniquely characterizes the lives of charming professionals such as myself, the real estate community routinely goes back in time throughout the annals of the history of mankind in an effort to discover new elements of the human psyche, which can help achieve exactly this goal: doing everything for a buck.
This time around someone (the competition, but I am not going to reveal who since I do not particularly care to be sued for libel) has dug up the word of none other than Heraclitus of Ephesus, who said: “Know Thyself”. Not only did he say that, he also carved it into stone literally by having it inscribed in the forecourt of the Temple of Apollo at Delphi.
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One of the most confusing part of the home buying process for new homeowners is the concept of seller paid closing costs or seller concessions. Seller paid closing costs allow for less out of pocket expense for the home buyer, but are rarely truly seller paid. Seller paid costs are actually buyer borrowed. Regardless, there is still a great benefit to having them.

Let’s examine real quickly how they work. Assuming an asking price of $100,000 with the buyer using an FHA loan that has a maximum of 6% in seller paid closing costs, a buyer could offer $106,000 with $6,000 towards closing costs. The seller is going to net out at the same amount, so they usually don’t care and it helps the buyer close easier. The buyer could also offer the asking $100k with $6,000 going towards closing costs netting the seller $94,000. Considering the way the real estate market is, that could easily be accepted or there may be further negotiation.
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In 2006 the world’s oil rigs pumped out crude at a rate of nearly 85.5 million bbl. a day. They haven’t come close since, even as prices have risen to USD 115 per barrel and are forecasted to reach USD 150 per barrel twelve months from today (source: www.oil-price.net ). All of which raises a question of potentially epochal significance: is it all downhill from here?

It’s not as if nobody predicted this. Survivalists, despisers of capitalism, a few billionaire investors and a lot of respectable geologists have long cited the middle to the end of this decade as the likely turning point. Governments and the oil industry have typically dismissed such talk as premature. There have been temporary drops in oil production before, after all. In most official scenarios,
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In desperate economic times, everyone wants to know when it’s going to end. I’ve said before we won’t know bottom until long after it’s passed. Several national articles this week have suggested we’re bottoming now, but many in the real estate business have been calling bottom for quite some time.

While there is still quite some individual pain ahead, perhaps we’ve approached or reached bottom now? The experts write:

Oil hit another record high but has since pulled back. The dollar has finally started to show some signs of life. And for the most part, corporate earnings were - as Larry David would say - pretty pretty good.

Long term interest rates have risen sharply in the last two weeks with the 10 year bond gaining over 40 bps in that time frame. Stocks have
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The numbers are in for Northern Utah real estate and they’re not pretty. Though prices have remained essentially flat, the number of transactions has decreased significantly. Much of that has to do with the tightening of mortgage loan standards.

In Salt Lake County home prices rose less than 1%, but sales activity dropped 42.2%. Davis County also saw flat prices while activity dropped 26.6%. Tooele County saw prices drop 6.3% with a sizable drop in activity. Utah County saw declines on both fronts.

The Salt Lake Realtor Board President said -

Jillinda Bowers, president of the Salt Lake Board of Realtors, said she remains bullish about the market despite the drop in sales and softening of prices.

“People shouldn’t be fearful. You have motivated sellers, and interest rates are low. It’s a great time to buy.”
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Over the past two weeks I’ve had the opportunity to speak with dozens of potential home buyers around the country. Here are some of the key trends/takeaways I’ve noticed.

1. People in formerly bubble markets - California & Florida specifically - are excited at the prospect of more affordable housing. The question of prices dropping further is not a consideration, affordable monthly payments are.

2. Most people are unaware of the changes in the credit markets. Some are still looking for stated income, pick-a-payment and subprime loans.

3. It’s no longer a matter of how much a borrower can qualify for, it’s if they can qualify at all. I’m having to turn down loans that could have been approved as little as three months ago because of low credit scores. As far as minimum thresholds go, 620 is the new minimum for a decent rate and 580 is the new minimum to get any type of loan.
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I’m just getting back into my regular routine and was checking around the web on all the stories I missed this week while on an Internet free blogcation. One of the stories that hit me was titled Inflation Is Everybody’s Problem.

It’s true because inflation impacts consumption. Whether you’re rich or poor, you have to eat, get shelter and transport yourself. With inflation hitting all three of these aspects of life, everybody feels the pain. The housing bubble was partially a form of housing inflation and increases in food a fuel prices over the past several years is hurting a lot of people, particularly those on fixed incomes.

While I was in New York this week, I stepped into the tail end of a panhandling transaction. I was lining up to buy a Nathan’s hot dog in Coney
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