Buying your first house doesn’t have to be scary

Note to young renters: It’s a very good time to start thinking about buying your first house.

Sure, the housing market is in the Dumpster, and houses are still expensive – up almost a third from their prices at the beginning of the decade, with some markets considerably higher than that. Throw in reports of killer mortgages and rampant foreclosures, and it may seem scary to take the leap. But over the long term, owning the home you live in is a great investment. It’s one that will bring you tax breaks, financial gains, perhaps a little yard, and considerable joy … if it’s done right.
Right now, there are several factors that are making the market more attractive to first-time homebuyers. The housing glut means that sellers are motivated and prices are falling. The latest stimulus bill out of Washington raised the limits on decent, low-down payment government-guaranteed mortgages. Parents who may be inclined to help their kids with a down payment don’t have any other great places to stash their money right now, with stocks and bonds both looking risky and unrewarding. And mortgage rates are low.
“If you’ve been thinking of buying a house in a year or two, you might want to change your timing and start looking now,” says Atlanta financial adviser David Hultstrom.
But first-timers are at a disadvantage: The whole house-hunting ritual can seem terrifying if you’ve never done it before. Here’s how to get started.
Take your time. There’s no need to feel rushed, suggests Walt Molony of the National Association of Realtors. Real estate prices may continue to trend downward slightly, or stabilize, or move up a bit. But nobody, not even the usually optimistic agents’ group, is predicting runaway prices. You’ve got many months to educate yourself about the process and study your market.

Check your credit score at myfico.com.

If you’re planning a house hunt, it makes sense to buy a full credit score report. The higher your score, the lower your interest rate on your mortgage, and that can mean hundreds of dollars a month in savings, for decades. A top score now can get you a 30-year fixed-rate loan under 6 percent that will cost you $1,775 a month to borrow $300,000. If your score is middling, that same loan can go for 7.192 and cost you $2,035 a month. A poor score can mean that you’ll only qualify for a 10.25 percent loan that will cost you $2,688 a month. If your score is less than optimal, you can improve it by paying down credit card balances and making sure you pay bills on time.

Prequalify for a mortgage.

Comparison shop online and call a reputable mortgage bank near you. Find out how much you can reasonably borrow, and what kind of rate you’ll get. If you’re serious about buying a home soon, you can go the distance and actually apply for the mortgage before you find the house. Then you’ll have a good idea of your price range.

Check out mortgages backed by the Federal Housing Authority.

These are solid 30-year fixed loans, not those crazy interest only, negative amortization, resetting variable loans that caused so much trouble. They only require a 3 percent down payment. Depending on the prices in your local market, you can borrow as much as $729,750 on one of these loans with FHA backing.

Work with a buyer’s agent who only represents you, not the seller.

Neophytes especially need someone who can help them analyze the local market, negotiate a good price and close the deal. You can find an agent through the National Association of Exclusive Buyer Agents (www.naeba.org).

Get something back from the seller, but don’t expect a complete steal.

Houses still cost a lot of money, but a motivated seller might give you help where you need it most: with cash. A motivated seller might agree to pay closing costs out of his profits, suggests Molony. That could give you the advantage of being able to come up with less cash to get into the house.

Think single-family house or duplex.

A duplex makes for a great starter home: You can live in half and rent out the other half. Single-family houses also do well in most markets over the long term. Condominiums and co-ops: not so much. While luxury condos in popular locations have sold well, they tend to not perform as well in resale as do single-family homes. And there are condo fees to contend with, too.

Don’t buy a home without getting a home inspection.

You wouldn’t be the first newbie to buy a house and then discover the leaky roof, wet basement, termite damage and antiquated electrical system. But why be that guy? Put an inspection in your contract. If the inspector finds big, bad problems, you can use them to negotiate a lower price or extricate yourself from a troubling deal.

Don’t overreach.

It’s not the time to get the biggest, baddest house you can find, says Hultstrom. There will be another time for upgrading down the road. This is the time to get into a starter home that you can afford to live in. And enjoy it while you wait for the market to heal.


LINDA STERN – COLUMNIST – Reuters

Why Now Is a Smart Time to Buy

Considering all of the negative press the housing market received in late 2007, it's more important than ever for buyers to separate fact from fiction when deciding on a time to buy a home. This report is intended to help home buyers assess the facts of the real estate market objectively.
About Inventory

FACT: The housing market is undergoing a natural cyclical correction. It's impossible to ignore the ongoing news surrounding the downturn of the housing cycle. The recent "housing boom," which lasted from 2001 to 2005, was caused by low interest rates and a rapid increase in property valuations, resulting in high numbers of renters opting to buy. Three factors caused this decade's housing boom to spiral upward:

1) A run-up in home-price valuations that spurred a high sense of urgency in home buying and selling.
2) Poor lending practices, which caused many home buyers to secure loans that they ultimately couldn't afford over the long term.
3) Speculative purchases of homes also increased, with buyers investing in real estate with the hope of a quick return on investment.

Like the dot-com bust, the housing market has begun to correct itself after a number of years of unwise purchasing, but unlike what the media would have us believe, a correction in the housing market doesn't equate to a crash. Unfortunately, the ongoing negative news about the troubled areas in the U.S. has caused a ripple effect, with home buyers and sellers on a national level exercising caution before making a decision. This has caused an overall slowdown in the marketplace.

The National Association of Realtors' chief economist, Lawrence Yun, projects that nationally, the "median existing-home price will drop about 1.7% this year. This is a small, minor adjustment after a strong run-up in housing prices."

True, the number of homes sold in 2007 will have dropped from the year before, but 2007 is still among the highest years on record, with numbers of sales for both 2007 and 2008 projected to be even higher than the levels seen in 2002.

However, with homes taking longer to sell, the number of homes on the market has grown. In markets like California and Arizona where homes are taking much longer to sell than the 11-month national average, this has caused a glut in the marketplace.

In the Pacific Northwest, where the inventory of homes on the market ranges from seven to 10.5 months as of November 2007, this equates to good news for buyers who have more homes at more price ranges from which to choose.

About Mortgages

FACT: Low mortgage rates give buyers more house for their dollar.

With the 30-year fixed rate hovering between 6-7%-a 45-year low-qualified buyers continue to have access to incredibly low interest rates. This means that although housing prices have risen, monthly mortgage payments remain reasonable for those who look at real estate as a long-term investment. For example, today if a buyer secured a 6.5% interest rate on a 30-year fixed loan for a $300,000 home (with no money down), the monthly mortgage payment would be $1,896.20. In 1991, the same monthly mortgage payment would have bought a house worth only $230,492 when mortgage rates were 9.25%. In 1982, when the 30-year fixed rate was 14.6%, the same payment would have bought a house worth only $151,657.

FACT: Heavy speculation and overbuilding result in an increase in foreclosures when prices go down.

The media has been focusing on the hardest-hit areas of the country that have seen a dramatic downturn in the market: California, Nevada, Florida and Arizona. Over the past five years, these markets have experienced an abundance of new housing, a rise in investment properties and a rise in prices that was high above the national average.

Now that home prices are starting to drop and stabilize, the areas that went through a building frenzy and experienced the largest price increases are suffering a heavy devaluation in home prices, which in turn has caused homeowners to foreclose on loans.

Those suffering the most in California, Nevada and Florida are far above the national average of foreclosure with one out of every 325, 152 and 282 homes in foreclosure, respectively. Washington, Oregon and Idaho are well below the national average of one in every 617 homes in foreclosures because fewer home buyers in the Pacific Northwest opted for subprime mortgages and because home values have continued to steadily appreciate.

Washington has seen one in 1,072 homes in foreclosure, and Oregon and Idaho have one in 1,275 and 893, respectively.

FACT: Subprime borrowers get a reality check.

Then there are the problems that are affecting subprime borrowers: those who are considered at a higher mortgage risk due to a past history of bankruptcy, delinquent loan payments and low credit scores. During the last number of years, some home buyers in the U.S. qualified only for these riskier subprime loans to fund the American dream.

But, again, unlike the media's portrayal, the reality is that subprime loans comprise only 9% of total loans nationwide and of those 9%, less than 11% of those subprime ARM and fixed borrowers have defaulted on their loans. The Pacific Northwest stands apart as its own micro-market, with more home buyers qualifying for prime loans. Homeowners in the Northwest have been able to successfully sell their homes for a profit or refinance to pay off their subprime loans.

Real Estate Cycles and Economics

FACT: Over the long-term, real estate has always appreciated in value.

The continuing appreciation of homes in the Northwest is not an anomaly. Real estate has always been one of the most solid investments in the U.S, because, after all, people always need a place to live. Real estate has less volatility than the stock market and over the historical long-term it remains a guaranteed return-on-investment. Take this example from NAR's Yun: If a buyer were to put down $10,000 for a down payment on a "typically priced home in the United States at a typical appreciation rate of 5%...(he/she) would see a return of $110,300 after 10 years. The same $10,000 invested in the stock market appreciating 10% annually will result in $23,600."

As history has shown, for those who choose to keep their home for six to 10 years (and not flip for a quick profit) real estate investments do pay off, and pay off well. In fact, what we're seeing now is a repeat of a housing cycle we've seen before. In the early 1980s and 1990s, some areas of the country experienced the worst downturn they had seen in the last 25 years, which were caused by localized economic weaknesses and loss of jobs while on a nationwide average, others, including the Pacific Northwest were barely affected at all. But even those areas that were hit the hardest in the past experienced a historic uptick in prices, and then a continuing long-term appreciation.

Five Topics to Discuss With Your Real Estate Agent When Buying a Home

Whether you're ready to settle into your first home or looking to buy your fifth; are moving cross-country or cross-town, it's smart to identify which attributes of a new home are most important to you. Be sure to sit down with your real estate agent and discuss your needs and wants for your new house. Here are five topics to think about when buying a home:

1) What You Can't Live Without
Our lifestyle choices are often reflected in the homes we buy. Are you a motorcycle fanatic? If so, a roomy garage would be important to you. Have a big family? You'll likely need to buy a home with at least four bedrooms. Perhaps you or your spouse is a gourmet cook. In that case, a well-designed kitchen could be a must for you. Before your real estate agent begins a home buying search for you, he or she will want to know which home attributes you can't live without.

2) Schools and Family Needs
The quality of school systems has long been of importance to home-buying families. If you have children or are thinking about having children in your new home, you'll want to discuss school information and statistics with your real estate agent. Not only is it important to consider the location of your home relative to area schools, but you'll also want to think about the quality and diversity of local school offerings. Your real estate agent can provide statistics and information about both public and private schools in all the neighborhoods in which you're considering buying a home.

3) Commuting
For many people, commuting from home to work and back is a necessary evil. A long commute can detract from a home-buyer's quality of life and the time he or she gets to spend at home. Commuting should be a critical factor in home selection, because in many communities, traffic backups are increasingly common. And today, this phenomenon applies to urban, suburban and even rural areas. If having little or no commute to work is important to you, convey this to your real estate agent.

4) Community Details
Whether you hope to live in a vibrant urban neighborhood, or a charming rural town, the demographics, details and community statistics of a particular area are almost as important a consideration when buying a home as the details of the house itself. Do you want to live in the thick of the action? Prefer to get away from it all? If a particular aspect of a community is important to you-like a defined downtown area, or a strong recreation component-be sure to tell your real estate agent so that he or she can gather community information and keep this consideration at the forefront of your home search.

5) Budget
Of course, the most rigid constraint of a home-buying search is typically the buyer's budget. Defining budget parameters quickly and early focuses a home search to a particular segment of the market. However, with the creative lending solutions available today, budget constraints are not as rigid as they once were or as many home-buyers assume them to be. Many innovative mortgage options are now available to both first-time and veteran home-buyers. Before beginning a home search, you should talk to both your real estate agent and your lender about your finance options and ultimately, your budget.

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Should We Ignore The Headlines?

From Time Magazine; February 2008

I recently came across this article that summarizes perfectly the current state of the real estate market here in South Orange County. And surprisingly...it has nothing to do with finding steals at 20-30% below market value, bottoming out prices or agents trying to trick their clients into buying when it's not right for them.

Famed Money Manager is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore The Headlines!

That's no easy thing. How do you tune out all the chatter and ink on recession, housing, subprime woes, the credit crunch, rogue traders, insolvent bond insurers, $100 oil and nukes in Iran? It's enough to make you sit on your thumbs and wait before making any big moves. But what, exactly, are you waiting for?

There has rarely been a moment in history when you couldn't scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, "in spite of all the great and minor calamities that have occurred ... all the thousands of reasons that the world might be coming to an end--owning stocks has continued to be twice as rewarding as owning bonds."

A top reason to not buy stocks, in Lynch's view, is if you don't already own a home--in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. Through a spokesman, Lynch reaffirmed these views to me--housing debacle and all.

When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger excel in the long run. As John D. Rockefeller famously said, "The way to make money is to buy when blood is running in the streets."

And the streets are stained crimson. Start with stocks. They have been pummeled this year. GDP braked sharply last quarter, and there has been plenty of panic about a recession. The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. But if you stick to your steady, diversified plan while everyone else is retreating, you will be happy years from now. For one thing, Fed rate cuts always lift the economy eventually, and the stock market typically starts responding just as headlines get gloomiest. Sure, the market could fall again before recovering. But the recession may be half over already--or we may avoid one altogether. You just never know.

As for housing, certainly some skepticism is in order. Formerly sizzling markets in Florida, Nevada, Arizona and California probably haven't seen the worst headlines just yet, though they may well be close. And "jumbo" mortgages, those more than $417,000, are likely to remain artificially high for a few more months while banks work through their credit issues.

But let's say you are emotionally ready to be a homeowner. You have good credit, plan to stay put for five years and have been waiting for the perfect entry point. It's time to get serious--before an inevitable rise in interest rates wipes out your advantage. "The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher," says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs.

Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Monthly principal and interest come to $994.31. Let's say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be.

It's more complicated if you must sell before you can buy. But that logjam won't persist forever--and if it appears you'll be trapped for a few years, try to refinance at today's lower rates. Risks always seem most acute when the headlines give you ulcers. But that's exactly when you should think long term--and get off your thumbs.

Determining the Appropriate Property Value

Things for Buyers to Consider when Determining the Appropriate Property Value and Offer Price

Determining the value of home can be sometimes a difficult task for a buyer. Just as there are many factors that can impact a home’s value, the details and potential success of your offer also rely on several pieces of information. If you are thinking about buying a home, you may want to consider the following tips to gain a better understanding of property values. By utilizing these recommendations and discussing the findings with your agent, you might be able to not only find the best house for your money, but also a home that surpasses all of your expectations.


1. Investigate Locally
When searching for a new home, many prospective homebuyers start by checking local listings. After the search is narrowed down to a few neighborhoods of interest, walking or driving through these areas can give you a better idea of overall neighborhood quality. As you narrow your search, it might help to attend a few open houses in the local market to gain an understanding of pricing trends and witness how much interest is being paid to the homes already for sale.

In the early stages of shopping for a home, it can also be helpful to have your agent perform a Comparative Market Analysis. This report will show you the past sales prices of homes in the area and allow you to contrast those statistics with the current homes for sale.


2. Get behind the numbers
After you have compared the list prices of the homes you are interested in with other homes that have sold in the area, there are a few assessments of value you may want to consider. The most telling estimate of a home’s value will be a professional inspection.

Another statistic that will provide you an estimated value of a home is the assessed tax value. However, as the assessed tax value sometimes doesn’t take into account the amenities of a home, upgrades to the property or the nuances of the housing market, this value can vary from a professional estimate. Work with your agent to compare the details of your appraisal and the assessed tax value, taking into account all of the home’s amenities and any issues of particular importance to your family – including such factors as the quality of the neighborhood, local schools and even how the home matches up to your long-term goals.


3. Think about the market
When trying to determine the value of a home for sale, it might also help to consider the status of the overall housing market. First, take into account national trends and determine whether it is a “buyer’s market” or a “seller’s market.” Next, compare the local housing market to the national trends, considering both the neighborhood of the home for sale and a broader geographical region incorporating the surrounding city or other nearby communities. It is quite possible that a particular area may not be affected by national market trends, creating for instance a small seller’s market within a broad buyer’s market, or vice versa.


4. Pay attention to the details
Besides looking at local and national housing trends, there are a few more issues that can affect the value of a home and the details of your offer. First, you and your agent should find out how long the home has been on the market. It is believed by many that if a home has been for sale more than 30 days, sellers are often more motivated to sell and are more receptive to lower-priced offers.

In addition to the time spent on the market, you and your agent should also try to find out if there are any additional factors that could motivate the seller for a quick sale. For instance, if the seller has already purchased another home or is relocating to another state, you may receive a better response to your offer sheet.

After taking all these factors into account, you and your agent should be able to determine both the market value of the home and the right amount to bid if making an offer. Furthermore, the more you take the information you’ve gathered into account, the better you will be able to prevent potentially overbidding – which, of course, costs the buyer more money – or underbidding – an error that could discourage a seller from further negotiations.
Lastly, try to remember that the process of ascribing value to a home is not an exact science. Each time a house is sold on the open market the sales price will represent careful negotiations between the buyer and seller, with all of the factors here taken into account by each party. Therefore, above all else, the right home should not only represent a good value when analyzing appraisals and various market factors, it should also be the best value for you and your family.

Restaurant 162'

Seafood aficionados are in for the feast of their lives when reserving a table for Ritz Carlton's Restaurant 162' Friday night seafood buffet. Strolling into Restaurant 162', you are transported into a panoramic stretch of the blue Pacific. The mesmerizing scene is viewable from every impeccably set table along the sprawling double tiered room as well as inside where appealing stations are bountifully laden with everything from sushi, sashimi, shellfish, bivalves and finfish to soups and salads to fresh fruits, berries and decadent desserts. It's a wise idea to traverse the terrain prior to making selections simply as not to miss any of these tantalizing taste sensations. Here, most emphatically, awaits Seafood Paradise.

Steamed mussels, among my favorite dining delights, proffer an unusual twist, bits of pineapple giving the plump bivalves a bit of sweetness against the slightly spicy broth. Obviously freshness prevails across the board, for chunky crab legs, huge shrimp, seasonal oysters, et al. Beyond made to order sushi, assorted salads with accompanying condiments and two steaming soups, come a trio of tantalizing entrees with appropriate accompaniments. Then superlatively, those decadent desserts. Do save room for such delicacies as chocolate éclairs, warm bread pudding and the yummy chocolate fountain for swirling strawberries, assorted fruits, house made marshmallow squares plus a crowning glory of delectable whipped cream for a luscious finale to this unforgettable dining extravaganza. Are you a wine, cheese & chocolate lover? Make sure that you visit Eno and take an ENO-Versity class.

Impact of FHA Loan Limits

National Association of Realtors® Calculates Impact of Increasing FHA Loan Limits
Increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home, according to NAR research.

An economic impact study conducted by NAR earlier this month estimated that increasing the conforming loan limits for Fannie Mae and Freddie Mac would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000.

Additionally, over 300,000 additional home sales could be generated, housing inventory would be reduced and home prices would be strengthened by 2 to 3 percentage points.

-- “NAR Hails Passage of Economic Stimulus Package to Help Jumpstart Housing Market,” Realtor.org, Feb. 8, 2008.

Federal Tax Credits for Energy Efficiency

FROM ENERGYSTAR...

Tax Credits for Consumers:

Home Improvements

The Home Improvements tax credit has expired. The credits were available for home improvements "placed in service" from January 1, 2006 through December 31, 2007. You have until April 15, 2008 to claim credit on your 2007 taxes for any qualified home improvements made to your primary residence during 2007. If you made any qualified home improvements in 2006, but did not claim them on your 2006 taxes, you will need to file an amended return. You can not claim credit on your 2007 taxes for improvements made in 2006.
Tax credits were available for insulation, replacement windows, water heaters, and certain high efficiency heating and cooling equipment. The maximum amount of homeowner credit for all improvements combined is $500 during the two year period of the tax credit.
If you are building a new home, you do not qualify for the tax credits for "eligible building envelope components" (windows, doors, insulation, roofs) or "qualified energy property" (HVAC & non-solar water heaters). However, the tax credit for photovoltaics, solar water heating, and fuel cells is available for homeowners building new homes.

Efficient Cars

Tax credits are available to buyers of hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models. These credits are available for vehicles placed in service starting January 1, 2006. For hybrid and diesel vehicles made by each manufacturer, the credit will be phased out over 15 months starting after that manufacturer has sold 60,000 eligible vehicles. For vehicles made by manufacturers that have not reached the end of the phase-out, the credits will end for vehicles placed in service after December 31, 2010.

Solar Energy Systems

Tax credits are available for qualified solar water heating and photovoltaic systems. The credits are available for systems "placed in service" from January 1, 2006 through December 31, 2008. The tax credit is for 30% of the cost of the system, up to $2,000. This credit is not limited to the $500 home improvement cap.

Tax Deductions for Commercial Buildings

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. The credits are available for systems "placed in service" from January 1, 2006 through December 31, 2008.


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2008 Wine Extraordiaire

This Sunday March 16,1008 the Orange County Wine Society will hold its annual Wine Extraordinaire! For more information follow the link below.

http://www.ocws.org/newsletters/extraordinaire.htm

"How is the Orange County Market?"

That is the standard question I am often asked when I meet someone new or when I talk to a friend, client, or past client. The truth is... Homes Are Selling!

I know that is a crazy concept to most of you due to the constant bashing we hear and read in the local media. Quite honestly, this couldn't be a better time to make a move. Whether you are a first-time buyer or an equity seller, you can not go wrong in this market. Give me a call and I'll break that thought down for you.

Call our market whatever you want (adjusting, bursting, correcting, etc.), blame it on whomever you feel must take responsibility (predetory lending, subprime meltdown, economic recession, etc). The fact remains that there is a reality to face here.

If you're looking for someone that tracks the local market, has the facts in black and white, and can provide a real-time blueprint of the market conditions and how you can benefit from it, call the ProMark Team of Coldwell Banker.

Dont forget to visit www.promarkteam.com

Mark Gundlach, Real Estate Consultant
949-768-2329/714-654-3750
promarkteam@gmail.com