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Freddie and Frannie Buyout

I spoke to Bobbi Clemens yesterday to see if she could boil down what the buyout of the big Fs means for consumers. She wrote back something that I think will help you understand it too. Or maybe not! But, I've tried to link to terms you may not know in order to help better define what's going on.

Mortgage Bonds are soaring higher on yesterday's announcement that Fannie Mae and Freddie Mac will come under control of the government.  This announcement came as the government felt both these institutions will no longer be able to meet their mission statement which is to provide liquidity, stability and affordability in the housing markets.

Fannie Mae and Freddie Mac both have issued many Bonds which over time mature, and Fannie and Freddie need to pay back the principal on the maturing Bonds.  The way they raise capital to pay these maturing Bonds is to issue new Bonds.  This happens every month.  And as long as Fannie and Freddie can sell new Bonds this system works well.  But the problems in the mortgage industry have reduced investor appetite to purchase these Bonds...and that's where the trouble begins.  Without the ability to sell new Bonds, Fannie and Freddie are less able to meet the capital requirements to pay off the maturing Bonds.  And that's the big fear.  If Fannie and Freddie were to default and become insolvent, it would throw the beleaguered mortgage and housing markets even deeper into the abyss.

Additionally, the recent lack of appetite for Fannie Mae and Freddie Mac Bonds caused the two mortgage giants to have to do something to make their Bonds more attractive...so they offered their Bonds at higher yields to gain more investor interest.  However, since they couldn't go back and raise rates on loans that had already been closed, it sucked even more profits out of Fannie and Freddie, reducing capital even further, and exacerbating the problem.

That's why the Treasury has stepped in and said that they will back the payments on these Bonds.  This action has given investors a lot of confidence to step in and now buy Mortgage Bonds.  Think about it.  For a higher rate of return, investors can now buy Mortgage Bonds with the same guarantee as lower yielding Treasury Bonds.  This is causing a nice rally in pricing this morning leading to attractive rates.

Goldman Report May 5th - 11th

Every week we get a great company update from our CEO, Avram Goldman. He's been in the business for several decades and has seen the ups and downs. I thought I would start sharing his weekly report with you. The stats he writes of are strickly Pacific Union sales, but as we are consistantly either the number 1 or number 2 top sales office in San Francisco I think they provide a solid snapshot of the market. Weekly reporting of this may get a little out of hand and I may have to reduce it down to bi-weekly, but we'll see how it goes. Enjoy!

Life is like a see-saw and so is our real estate market. The first few days of May were down and then the week before Mother’s Day was back solidly. The strongest open sale week since the beginning of last July.  Even open house activity, in spite of the holiday, was brisk in most areas.

Multiple offer action remains in the plus twenty percent range (22% this reporting period---with 80% of the accepted offers going over full listing price).  Yes, there were some other worldly transactions like the 21 offers on a SF Inner Richmond 4bedr./1.5 ba. home listed at $1.049 mil. that went over 25% beyond list price and the Berkeley 3 bedr./1ba home priced at $785K that went significantly over with 7 offers. They are the exceptions, but given the current state of the market pretty remarkable.

Still the majority of sales are not in that category. Clearly 80% of transactions have a single offer. Negociation is the key to success in the current environment.  Negotiations are many times long and arduous. Buyers and sellers have to manage their expectations.  Given the volume of negative media exposure buyers have the mindset that sellers should be giving their homes away, while sellers still long for the days of bring me the gold. For the most part homes are not worth what they were in 2005, but neither are they worth what they were in 1999.  I do believe sellers are being more realistic about current values and buyers are beginning to realize that this may be the best time to strike a deal.

The operative word is patience. If each party is willing to continue to communicate we are finding that the chance of a sale is greatly increased.  Many sales are now taking weeks to put together.  Negotiations can extend through the escrow period due to issues that arise out of inspections. Again issues can be resolved if cooler minds prevail.

Although consumer confidence has taken a beating and fuel and food costs keep rising, there is a glimmer of positive news leaking out of the media. A Wall Street Journal article from May 14th showing that the recession is not a sure thing. In fact, Jay Bryson of Wachovia said just a few months ago we were on the edge of the abyss---now there are a several figures that would indicate that the economy could skirt a recession. Wachovia projected a 90% chance of recession just a month ago. Now they have it pegged at 45%. In a recent WSJ survey of economists showed a 60% chance of recession compared to a month ago at 90%.  We are not out of the woods. We could still be in for a protracted period of sluggish growth. However, like I noted last week, the tremors have lessened and it is time to focus on recovery.

This story coupled with the latest figures on unemployment in the Bay Area could bode well for sales in the third and fourth quarters.  For those of you who missed the new figures the SF Metro area that includes SF, Marin and San Mateo counties added 700 jobs in April and unemployment fell to 4.2% down from 4.4%.  The San Jose Metro area added 1100 jobs fell to 5.2% down from 5.5%.  Although the Oakland Metro area lost 1500 jobs, unemployment numbers still fell to 5.3% from 5.5%.  The Bay Area has been more resilient than the rest of the state which stayed steady at 6.2% in April.

This may explain why we are still seeing strong numbers of buyers in the market place because of the strong employment numbers. Buyers are still slow to move until they see more consistent positive signs of recovery. These signs will come in time as indicated by the article that is attached. In the meantime buyers have a unique opportunity to negotiate exceptional values. 

Speaking of see saws how about The Moody Blues singing about see saws. This should take you back a few years---how about 1968.  Enjoy!

http://youtube.com/watch?v=Yo2DQBlVcJ0&feature=related

Thank you Single Women!

The Queen of Your Own Castle seminar in May had a great turnout and I think (and hope!) those who attended left with a good idea of what they need to do next in order to buy real estate in the Bay Area. I thought it was fun but too short. So the next one will be two hours with a break in between so we're not cramming everything in under an hour and a half.

I wanted to follow up with one section of the seminar: Active Buyers. Like many books out there on Best Practices of Successful Businesses I covered Characteristics of Successful Buyers. Anyone starting out in real estate should have the following characteristics and if you don't, please use this list a to-do list. Aspiring to be a successful ACTIVE buyer will make buying a home in the Bay Area a tangible goal instead of a dream.

ACTIVE BUYER CHARACTERISTICS

1.  You met with a mortgage broker who has evaluated your financial standing.
2.  You know exactly how much you can afford
3.  You know exactly how much you could put down
4.  You know about how much your interest rate will be
5.  You have an agent, preferably me! ;)
6.  You’ve outlined a few neighborhoods of interest
7.  You are on an automatic email alert that tells you when a property matching your criteria comes on the market through MLS
8.  You sometimes join your agent on Tuesday Broker Tours
9.  You know who Andy Sirkin is now
10. You understand the concept of a TIC

After you've crossed off everything on this list you move into what I call the Seasoned Buyer. In two weeks I'll post the Successful Characteristics of Seasoned Buyers so you have plenty of time to work on your Active buyer status.

Again, thank you for attending my real estate seminar for single women and stay tuned for the next event date!

Freddie Mac to Buy High Cost Jumbos to Stimulate Mortgage Sales

This just in from Freddie Mac:

Freddie Mac has agreed to purchase billions of dollars of new conforming jumbo mortgages with original loan amounts up to $729,750 from Wells Fargo Home Mortgage, Chase, CitiMortgage and WaMu. Freddie Mac conforming jumbo mortgages can be used to finance properties in hundreds of high cost markets designated in the Economic Stimulus Act of 2008 President Bush signed on February 13.

Today's announcement marks the first large-scale effort to jump-start the stalled jumbo mortgage market under the Economic Stimulus Act, which temporarily raised Freddie Mac's conforming loan limit from $417,000 to as much as $729,750 through December 31, 2008. Freddie Mac's purchase of conforming jumbo mortgages is restricted to 224 high cost markets where median home prices exceed Freddie Mac's $417,000 loan limit.

As a result, qualified borrowers can now apply for an array of fixed-rate or adjustable rate conforming jumbo mortgages that will be less expensive than non-conforming jumbo loans in high cost markets. Borrowers can use Freddie Mac conforming jumbo mortgages to finance up to 90% of a property's value.
Because Freddie Mac is buying the new conforming jumbo mortgages for its portfolio, Wells Fargo, Chase, CitiMortgage and WaMu will have instant liquidity and can offer a stable jumbo market rate to qualified borrowers. By working with Wells Fargo, Chase, CitiMortgage, WaMu and other national lenders, Freddie Mac expects to finance between $10 and $15 billion in new jumbo mortgages in 2008. More info here.

Yeah! Until now, the rates for these new loans have been ridiculously high.  So this means that rates for our new Conforming Jumbo loans will FINALLY be coming down. And remember, these new loans are officially over December 2008.

Free Real Estate Seminar for Single Women!

I'm so happy to announce that my favorite mortgage broker Bobbi Clemens and I have teamed up to create a really great series of seminars called Queen of Your Own Castle for single women looking to buy their very own home.

Hey Single Women! Our goal is to help you feel more informed and confident so that buying without a partner doesn't feel scary, overwhelming or impossible. My hope is that you leave the seminar with a plan to either get you started or off the fence. No matter where you are in the process, I promise you will leave this seminar with a to-do list tailored to your specific needs, resources and inspiration to make this very smart dream of homeownership come true.

You can do this! (And it will be fun.)

Queen of Your Own Castle
Real Estate Seminars for Single Women

Wednesday, May 14th
6:30 - 8:00pm

Opera Plaza HOA Room
601 Van Ness Ave, Mezzanine Level
San Francisco, CA

Email nikki.gunn@pacunion.com or call 415-518-7543 to RSVP. Limited space is available so sign up quick!

What? She's Carless: Update

Gosh, this is proving to be more difficult than I imagined. Not in getting the membership (that's easy and the whole process takes all of about 5 minutes), but in satisfying my company's requirements. All agents, that is if you are with a reputable firm, are required to carry a certain amount of insurance and inclusion of the broker as an additional insured.

After some research, City Car Share has the best insurance plan, covering way above the state minimums in collision, under/uninsured motorist and medical payments. Liability per occurrence is $300,000 for Zip vs. $1,000,000 for CCS. So, hands down, I'm going with City Car Share. But, as it turns out the latter of my requirements is causing the most headache.

In the very small chance, after an accident, one of my clients sues PacUnion instead of the insurance company, CCS or me, as an additional insured on my policy, PacUnion would be covered by my insurance first. When I had a car, my personal auto insurance allowed me to add Pacific Union as an additional insured without additional cost and it was a very simple thing to do. This reduces our Errors and Omissions Insurance too. (Hence the real reason for the requirement I'm sure.) But, I don't have my own policy with City Car Share. It is an umbrella policy on which I am an additional driver. Neither Zip or City Car Share will allow a non-driver, Pacific Union, on the policy as an additional insured. Get that so far?

But, here's the kicker. If I still had a car and had regular auto insurance, I could use CCS without a problem because my previous insurance covers "rental cars" the category CCS and Zip fall into. And that's what Zip Car kept telling me over and over. Zip Car manager: "We have lots of real estate agents using Zip Car and no one has asked to put their broker on as an additional insured. You are the only one with the problem." The point is, I don't want to have a car period. Let alone pay for $250/month in storage just so I can have a car to get around this issue. "I'm sure the "other" agents have cars and use Zip as a rental car alternative," I said back to her to which she responded, "I think you are making this much harder on yourself." Isn't that the truth. (For the record, CCS doesn't allow it either, but they weren't quite so mean). All I want to do is be a successful real estate agent working in a dense city without a car.

So as we speak, I'm working with my company to waive the additional insured requirement, because as I see it, $1,000,000 is much more coverage than their requirement ($300,000) and therefore should reduce the risk by $700,000. That's a huge chunk of money.

I do have to say that PacUnion is being very accommodating with my *crazy* idea to go the ultimate green--no car at all. I'm more like chartreuse at this point. They are even considering a CCS business account now, which is very exciting. So, hopefully this decision will break precedent and I can brag about how progressive the company is to all of my friends and clients.

Keep your fingers crossed.

How to enjoy your experience at the permit office

Eric and I are installing new windows in our apartment to be more energy efficient, but mainly to reduce the siren/traffic noise. They are old, thin aluminum frame windows from the 60s. So, I'm very excited to start the process! My HOA provided me with a detailed procedure handbook that I just finished reading and man is it extensive. If you are thinking about replacing your windows let me know and I'll send you a copy. But, there is one section on obtaining permits that I wish I had read before doing our big remodel last year. Please read this before heading to the Building Department! And if you have other suggestions, please share!

1.  Fill out the application form in advance if you can. On the application you need to fill your apartment's lot number, construction cost, contractor's information including license number and U-valve (factor) for the glass.

2.  Head to the building department first thing in the morning.

3.  Allow a half a day to obtain the permit (in case the department is busy)

4.  Bring something to read or listen to when waiting.

5.  Sit whenever you can.

6.  Ask the other people waiting if you are unsure whether to get a number or call someone, as every counter seems to have a different system.

7.  Stay alert when your number is approaching. Some people try to jump the queue. When your number is called attract the counter person by jumping up, waving your arm and yelling out "here" or someone else may jump ahead of you.

8.  Discuss your permit application with the ground floor Public Information counter if you have questions or are unsure where to go next.

9. A smile instead of an insult or bad face helps to get results!

Flickr Find

after breakfast, originally uploaded by gee, nicole.

(This is a repost, because the other one from February is broken)

I love using Flickr's Explore tab to look at photos I might never find through my contacts and their maze of tags. I found Nicole Gee's photostream in the Interstingness section and immediately added her to my contact list. Everyday, I look forward to her next still life photo. Often afterwards I think, gosh, I really want a muffin right now!

Sears Roebuck "Modern Homes"

I just received this article in my Realtor newsletter and wanted to share it with you. I don't know about you, but I loved looking through my grandfather's old Sears Catelog---epecially the house plans, there were so many choices! Living in Texas surrounded by craftsman and ranch houses I would have to say the Victorian styles were my favorite with their excessive decoration and beautiful turrets. I guess that's why I love San Francisco so much--ha, I never put the two together. Anyhow, enjoy!

Building by Numbers

By Mary Beth Klatt, Architecture Coach

Beyond the nostalgia of understanding how your parents and grandparents grew up, a new generation of home owners are drawn to the turn-of-the-century catalog homes.

Pick your dream house from a catalog and have it shipped to you piece-by-piece. That was the idea behind these once popular ready-to-assemble homes sold through mail order by the department store Sears in the early 1900s. And home owners today are rediscovering the charm of Sears kit homes.

Sears got into the building business in 1895, when it sold precut lumber to far-flung farmers. It started selling more than 40 house patterns in 1908.

By the 1920s, plans and supplies for any one of 90 Sears Modern Home designs advertised in the department store’s thick catalog could be ordered, giving Americans everywhere from rural towns to big cities an unprecedented opportunity to build a unique home. All purchases, along with a 75-page instruction booklet, arrived on a freight-train boxcar, with each piece of lumber marked to make construction quick and easy.

“A large percentage was built by the home owner; it was very much a do-it-yourself project,” says Chapa. “Today, they might subcontract it out.”

For more than 40 years, Sears sold about 370 house plans for $1 (making their profits on the supplies). They sold about 70,000 houses during that time, according to historian Rose Thornton, author of “Finding the Houses That Sears Built.” Exact figures are difficult to obtain since the department store later discarded its sales records.

The History and Appeal

For all of its trappings of romance and nostalgia, the Sears kit house embodies the American Dream of owning a home unlike any other residence on the block or even in town. Who wouldn’t want to own a Sears kit house, which had a reputation of being well-built and well-designed?

To be one of the first in your community to build a Skywater, Bonita, or Vallonia model in the 1920s and ’30s would be akin to assembling a Martha Stewart-brand home now. The completed construction would make your home the talk of the neighborhood and demonstrate that you owned the latest and greatest design and technology.

Unlike Stewart, Sears “sold everything from bungalows to neo-Tudors, from the very simple to mini-mansions,” says Jim Chapa, who is writing a field guide to Sears houses with Rebecca Hunter.

Our nation’s extensive railroad system brought Sears’ mail-order plans and materials to almost every state but Hawaii and Alaska. However, they tended to be clustered in the Midwest and Northeast, where it was least expensive to ship from a Sears mill.

“Those who bought Sears kit houses were not wealthy; they were working-class people,” says Hunter, who wrote “Putting Sears Homes on the Map.” The largest known collection of Sears kit homes — 152 — is in Carlinville, Ill. Standard Oil Co. had the dwellings built for its employees.

Sears also sold mortgages, which turned out to be a bad move during the Great Depression when home owners by the thousands defaulted on their loans. While Sears got out of the lending business, it never really recovered its losses and eventually stopped selling architectural house plans in 1940.

The Resurgence of Kit Homes

More than six decades later, interest in Sears kit homes continues to grow as home owners rediscover the solid homes that their parents and grandparents grew up in.

“They’re not worth more unless there’s an educated buyer who puts a premium on a Sears house,” Chapa says.

Who might like a Sears house? Historic-preservation buffs and anyone who appreciates a well-designed building made with quality materials.

“They think it’s the coolest thing,” says Hunter, who regularly fields calls from real estate professionals about homes they believe to be built from Sears plans. “People are very conscious of how well-designed and built these are.”

   

How to Identify One

While it’s difficult to identify a true Sears kit home, it’s not impossible. Here’s what to look for:

• Start on the outside. See if it matches a house in one of the early Sears catalogues or Thornton’s book. Reproduction catalogues also can be found online.
• Measure the exterior, document the window layout and the roofline, and see if all those measurements correspond to what’s in the catalogue. Take into account that the original plan may have been altered and any subsequent additions.
• Check the rafters in the basement, crawl space, or attic. If these timbers come from a Sears kit, they will have a distinctive stamp. Cary, Ill., practitioner John Trandel recently sold an A-frame house that he suspected was a Sears model, judging from the floor plan and the position of the kitchen. Yet the house had an uncharacteristic stone facade. Trandel found a beam inside with the Sears stamp. He mentioned the find to the seller, who was surprised. He later learned the home was built in 1925; the stone facing was added in 1930. It’s important to note that not all Sears homes were built with wood supplied by the company.
• Seek shipping labels. These can be found on the back of millwork and moldings, Thornton says. A Sears label will have the address 925 Homan Ave., Chicago — the company’s headquarters in the early 20th century.
• Search for home mortgages and building permits. These sometimes can be found in local government records with the architect “Sears Roebuck” written on it.

Shipping to the west was very expensive, so I doubt there are many Sears homes in the Bay Area. And it seems that only 5,000 Sears homes have been identified. So, if you can spot any of these telltale signs of a Sears kit home, you are one of the few 75,000 living in a part of American architecture history. Here is a link with more examples of a few Sears homes standing today.