When I help home buyers and investors evaluate property, I always talk about the interest rate that they are able to secure on their loan. I do this because, in some cases, the interest rate will be the deciding factor between making an offer and walking away. Les Christie, a writer for CNN Money, just recently posted an article titled Time to lock in your mortgage rate. It talks about the ability to lock in today’s rate for the next 30 to 60 days - which is a very compelling idea considering the current upward trend of interest rates. If you have a few minutes, I’d recommend you take a look at the article.

It seems like every other person I talk to lately asks questions about how close we are to the bottom of the real estate market … everybody wants to know whether they can expect another 6 months of price reductions or not. Well, depending on the person, I often prefer to show them how to better understand the factors that go into the answer so they can start to make their own conclusions. As a first step, you might want to read the Some Real Talk on Housing article on the Seeking Alpha website. They do a very nice job of highlighting the importance of housing vacancies on our market.
For those of you who are patient, stay tuned for future posts about how I try to evaluate the market.  For everybody else, please feel free to give me a call (925.817.8428) or send me an email (brian@sparrproperties.com).

Governor Schwarzenegger signed into law the first major bill designed to curb more foreclosures in California this past Tuesday. The bill is comprised of three main aspects:

1. Lenders are required to provide homeowners with more, and earlier, warnings that they are headed towards defaulting on their home loans.
2. Renters will now be given more time to find new living arrangements when they are evicted by a landlord who is losing the property to foreclosure.
3. Local governments will be authorized to force lenders to maintain vacant property after a foreclosure.

You can read more about the new law in the Los Angeles Times article titled California Senate passes mortgage default warning bill.

Aspects #1 and #3 of this bill have the potential to make immediate impacts on anyone looking to buy a home. By requiring lenders to provide homeowners with more warnings about potentially defaulting, the government is hoping that fewer homeowners will actually default. If this plays out accordingly, it means there will be fewer foreclosures and bank owned (REO) properties coming onto the market each month. This, in turn, means the available inventory of homes for sale will be reduced and the corresponding demand for each house will likely rise … read this as: house prices will go up! Aspect #3 is also likely to increase house prices. By forcing lenders to maintain vacant properties, there will be fewer neighborhoods negatively impacted by REO eye-sores - the property with boarded up windows and a yard full of overgrown weeds. Because of this, distressed neighborhoods won’t have their overall value degraded to the same extent as before … as we all know, nicer looking neighborhoods demand higher prices.

Great real estate deals are made and lost at the negotiation table.

With all of today’s technology, finding a house that you like is relatively simple - it just takes time. You can find homes for sale on my website. You can go to GreatSchools.net for school ratings. You can use Google’s Street View to help get an idea of what the neighborhood looks like. You can even get a feel for the floor plan and interior condition from virtual tours and multiple photos. With time and a little persistence, you can do the majority of your house hunting from the confines of your couch.

Technology can’t, however, do your negotiating for you. Therefore, if you wish to get the absolute best deal you possibly can while either buying or selling a home, you need to make sure your agent is skilled in writing and negotiating contracts. An article worth reading (or passing along to your agent/negotiator) was posted on the GigaOm Blog recently and is titled Harvard Negotiation Project: 5 Lasting Rules For Negotiating Anything. It’s not specific to real estate, but it’s principles definitely apply!

Sooner or later, every buyer I work with asks if the market still has room to drop. Unfortunately, what most don’t understand is that paying attention to housing prices is only part of the equation. What also needs to be taken into account is the interest rate at which a loan can be secured. For it is the combination of the purchase price and the interest rate that determines whether a buyer is getting a good deal or not.

To help understand this, consider the following scenarios:

1. Purchase a house today at $500k using a 6.0% 30-yr fixed loan
2. Purchase a house in 3 months at $475k using a 6.5% 30-yr fixed loan
3. Purchase a house in 6 months at $450k using a 7.0% 30-yr fixed loan

Which is the better deal?

Although saving $50,000 on the purchase price sounds very enticing, it actually has no impact on the mortgage payments! That’s right, in this scenario, waiting 6 months for the price reduction saved you a whopping $3.89 a month: