This guy’s opinions are usually suspect, but he’s got it right here – though he stops short of fingering the Tan Man specifically – from theWaPo:
It wasn’t that Fannie and Freddie made a prescient strategic decision to stay clear of the housing frenzy. They couldn’t have participated even if they had wanted to. The two agencies had committed various accounting irregularities earlier in the decade, and their regulator forced them to rein in their growth.
Moreover, Fannie and Freddie couldn’t compete with rapaciously expanding private lenders. Securitization was in full swing, enabling private lenders to offer low rates and increasingly aggressive terms to borrowers. In 2006, almost half the loans made by private lenders required no down payment and no documentation. Fannie and Freddie simply couldn’t play in that league, even though Congress had given them aggressive lending targets to help boost homeownership among lower-income and minority households.
Fannie and Freddie did play a significant part in the financial panic. As financial conditions began to weaken in 2007 and the private mortgage industry pulled back, the agencies partially filled the void. This was their chance to get back in the game. The memory of their accounting scandals had faded, and policymakers hoped the agencies could keep the housing market from unraveling. Fannie’s and Freddie’s originations of sketchy loans actually peaked near $160 billion in 2008, the year regulators placed them into conservatorship. The two agencies had jumped back into the housing market at precisely the wrong time.
The government’s takeover of Fannie and Freddie arguably ignited the global financial panic. The Treasury Department’s decision to wipe out shareholders of Lehman Brothers and Bear Stearns, two of the largest financial institutions on the planet, sent a shock wave through markets as it became apparent that no institution was safe any longer. Investors ran for the door, sending Lehman Brothers into bankruptcy one week later; a string of failures at other venerable institutions followed.
Despite Fannie and Freddie’s role in the panic, it is wrong to blame them for creating it; that distinction belongs rightly to the private mortgage market. Understanding this is critical to creating a stable, efficient mortgage finance system for the future. While Fannie and Freddie themselves deserve to pass from the scene, given their numerous past missteps, it is equally clear that the government needs to remain an important player in housing finance, providing consistent regulatory oversight and a backstop in case the private market collapses again.
Mark Zandi is chief economist at Moody’s Analytics, a subsidiary of Moody’s Corp. He is the author of “Financial Shock,” an book about the financial crisis. His column will appear regularly.
Just because a listing looks like a deal on paper doesn’t mean a thing these days.
Buyers want value. They want extras. They want to feel good.
They want a manageable floor plan that flows, a house that’s ready to move-in with a decent yard where they can watch the kids grow up. Schools, culdesac, three-car, south-facing, one-story, newer, older, character….the list goes on and on.
The great news: If that’s what you are selling, you’ll get top dollar.
The not-so-great news: If that’s not what you are selling, you really need to work on your price.
The November 2011 Case-Shiller Index was released today.
Here is the San Diego seasonally-adjusted CSI, compared to two other indicators:
No. of SD Detached Sales
SD Case-Shiller SA
It looks encouraging to me. Both of the markers on pricing are acceptable, rates are at all-time lows, and the leading indicator, number of sales, is on the rise.
But the negative soundbites will discourage consumer confidence, thwarting any euphoria building among homebuyers – who, as a result, will be reluctant to pay more than the comps. Sellers who can live with a reasonable price will have no trouble finding a buyer during the next few months.
Rich T. noted that in the past there hasn’t been a significant relationship between rates and pricing:
There’s actually very little correlation between interest rates and home valuations, and if anything, homes have tended to get more expensive in rising rate environments (due to rising rates typically being accompanied by rising wages, as well as other external factors). However, I think that a sufficiently steep and abrupt rate rise could really hurt home prices.
But recall that I am more concerned with minimizing monthly payments than the purchase price. If rates rose enough to really impact prices, it’s likely that those higher rates would have affected monthly payments even more. So for a long-term, heavily leveraged purchase, the threat of rising rates is a reason to act sooner rather than later.
tj & the bear agrees, saying that this time it is different:
J6P now has no useful equity, which means any purchase has to be financed in it’s entirety. That puts pricing directly tied to income via the payment, which in turn is determined by rates. IMHO any significant rise in rates will have just as dramatic an effect pushing prices downward as the original drop in rates did in pushing prices skyward.
The FedGov has thwarted previous bear campaigns with the various can-kicking devices in support of big banking, would they let interest rates get away from them?
Last week the Fed stated that they plan to keep rates low through the end of 2014.
If something went crazy and mortgage rates did start rising, they would have to go up more than 1% to alarm home buyers. Purchases of homes at an effective rate of 50% off with inflation will still be attractive.
But let’s imagine that rates did hit 5% or higher – what would sellers do?
Let’s examine who is selling today. Short sales and REO listings only comprise 10% of today’s NSDCC detached inventory for sale. The rest are probably split between long-termers with substantial equity and those looking to get out with enough for a steak dinner.
If prices went down, those with little or no equity would just stop making payments – then it would be up to the TBTF banks to decide whether they want to cause a foreclosure tsunami, or let the defaulters ride for free as long as they mow the lawn. You can guess which path they’ll take.
The long-termers with substantial equity? One more notch down and forget it – they aren’t going to give them away!
The initial scramble to buy something – anything – once rates went up would be exciting, but short-lived. Fear/greed would overcome buyers who have been very patient, and they’d gladly get back on the fence in anticipation of plummeting prices.
Consider who the sellers would be – only those that need their equity to keep breathing. The FedGovBigBank troika will take care of the rest.
If mortgage rates start rising, it’ll likely cause fewer and fewer sales. There is probably enough organic demand who will keep buying with cash or big down payments to have pricing look statistically flat or lower. But if there are few houses to buy, who cares.
A summary of his comparison of home prices vs. local incomes, and prices vs. rents:
Well, you can’t — some people say, “Oh, it should be three times income or something.” It doesn’t really work that way because I’m just taking a per capita income like — well, I’ll tell you. I’ll answer the question.
The typical ratio has been about eight times per capita income.
The ratio is eight for what it’s worth, but it’s really not really worth anything, except to compare it to what it’s been in the past. So, right now — yeah now we’re much below — we’re about 7.3 or something like that and it was maybe 8.1 with historical — we’re roughly 10% below the historical price/income ratio.
We’re about 4% below the historical price-to-rent ratio. So, we’re in undervalue historically, not dramatically so, but we’re there, which is now, we just kind of might want to buy houses.
Rich also mentioned that he bought a house recently! He goes into detail about it here:
If this outlook is correct, as I believe it is, then today’s ultra-low rates make this an ideal time to take out a chunky 30-year fixed mortgage, and to sit back and let inflation hew away at the real value of the mortgage and the monthly payments over the years to come.
So, the missus and I went out looking for homes. We only found one in our price range, a single family house in Bay Park, that we thought was awesome enough to be a long-term home. So we made an offer, got a loan with as low a down payment as we could get away with, and have now re-joined the ranks of the titular Landed Poor.
I sat out an inflation-adjusted home price decline of almost 50%, and now I’m buying at a time when prices are cheaper than normal and monthly payments at 45% below their historical median. That’s close enough for me.
This first listed for $999,000, but after there were no takers for two weeks they lowered the price to $879,000. It dropped them down into the next level of buyers, and boom – six days later they opened escrow:
In his video on Thursday, broker Jim Abbott made an impassioned argument against third-party advertisers. But it tip-toes around the role of real estate salespeople in general.
Do consumers want less from their agent?
In Colorado, agents can do less – they can be ‘transactional brokers’ as defined here, from wiki:
After 1994 (with changes in 2003), Colorado created the option of having no agency nor fiduciary relationship between brokers and sellers or buyers. Having no more than a facilitator relationship, transaction brokers assists buyers, sellers, or both during the transaction without representing the interests of either party who may then be regarded as customers.
In California, we don’t have ‘transactional brokers’ like they define them in Colorado, but there are “limited service” agents, and single or dual agency where buyers and sellers don’t have separate agents representing each party (like the traditional agency). It can get murky.
Here is a court case that highlights one of the pitfalls:
In 2004, Hall Realty signed a transaction broker’s agreement to list and sell the Lake Forest Resort, a 12-unit RV park in Colorado owned by Daniel W. Weddel, which comprised six cabins, a home, a grocery store and an office area.
Hall Realty advertised the resort as a “turn-key business opportunity”; at the time, it was actually operating as an RV park. In 2005, Gilbert Barfield purchased the property.
In 2007, the Colorado Department of Public Health and Environment informed Barfield that the water supply system was improper for the property to operate as a 12-unit RV park. Around the same time, the CDPHE and the county reportedly notified Barfield that the sewage system did not have proper permits for the property to operate as it had been.
Additionally, according to court documents, the county informed Barfield that the property did not have the proper operating permits and ordered him to cease business operations.
Barfield filed suit against Hall Realty, alleging negligent misrepresentation (that Hall Realty was unreasonably negligent in determining the accuracy of its advertisement of the property as a “turn-key business opportunity”), fraudulent misrepresentation (on grounds that Hall Realty either knew the “turn-key” representation was false or was utterly indifferent as to its accuracy), and fraudulent concealment (arguing that Hall Realty either knew or was utterly indifferent to the fact that the seller had never obtained the proper permits, and failed to disclose this fact).
At trial, Hall Realty filed a motion for summary judgment, arguing that its role in the transaction was that of a transaction broker under Colorado Revised Statutes 2009 relating to brokerage relationships in real estate transactions.
As a transaction broker, rather than a fiduciary, Hall argued, its “duty ended by describing the opportunity as it appeared to be when listed: an (ongoing) ‘turn-key’ business opportunity,” and it had no duty to investigate or verify anything beyond that.
The trial court agreed and dismissed Barfield’s case.
Barfield appealed, and the Colorado Court of Appeals affirmed the trial court’s ruling. First, the Court of Appeals rejected Barfield’s argument that Hall Realty’s description of the resort as a ‘turn-key’ business opportunity — without investigating further — constituted negligent and fraudulent misrepresentation.
To prove fraud, Barfield would have had to show that Hall Realty either knew that its representations in the property advertisements were false, or was aware that it didn’t know whether the representations were true or false. Photographs submitted by Hall Realty to the trial court clearly showed that the resort was in active operation at the time of the listing.
Accordingly, ruled the Court of Appeals, “the evidence demonstrates that Hall Realty had no reason to believe that the resort was anything but an ongoing, operational RV park,” rejecting the fraud claim.
Further, the court rejected Barfield’s argument that Hall violated its duties as a transaction broker by failing to discover the permit issues with the property. On the contrary, found the Court of Appeals, state law expressly states that a transaction broker is not a fiduciary of the parties in the transaction, like a traditional real estate broker would be.
Additionally, a transaction broker, under the same act, is required to “disclose any adverse material facts actually known by the broker,” but “is under no duty to conduct an independent inspection of the property for the benefit of the buyer … and has no duty to independently verify the accuracy or completeness of statements made by the seller.”
Taken in conjunction, the court explained, the facts that the property was actually in active operations as a 12-unit RV park at the time of the listing, plus the act’s “clear directive that a transaction broker has no duty to investigate,” preclude Barfield from showing that Hall Realty’s misrepresentations were either negligent or fraudulent. As a result, the trial court’s ruling was affirmed and Barfield’s case was dismissed.
For those considering a move to the San Diego area, make sure to take in some of the PGA golf coverage at Torrey Pines and see some of the spectacular weather we’ve been having – today it was 80 degrees!
P.S. The house next door – which you see a glimpse of in this video – has been on the default list for 2+ years.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!