Is the American Dream of homeownership gone forever?

Following all the gloom and doom about how real estate will never be the same, it’s easy to start to believe all the spin.  Several times over the last year I’ve asked myself, is real estate dead? Shall I abandon a 20+ year career, can I really advise Clients to buy real estate?

I still believe!

According to an article at the New York Times, “A Dream House For All”, it is a matter of how you define the American Dream.

Depressing, yes — but the end of a dream? Not exactly. I have never quite understood what the American dream really means when it comes to housing. For some people, it means having a solid and fairly safe long-term investment that is coupled with the satisfaction of owning the house they live in. That dream is still alive.

Others, however, think the American dream is owning property that appreciates by 30 percent a year, making a house into a vehicle for paying bills. But those kinds of dreams have become nightmares for the millions of foreclosed property owners who have found themselves sliding toward bankruptcy.

But for people with a more realistic version of the American dream, buying a house now can make a lot of sense. Think of it as an investment. The return or yield on that investment comes in two forms. First, it provides what is called “net imputed rent from owner-occupied housing.” You live in the house and so it provides you with a real flow of valuable services. This part of the yield is counted as part of national income by the Commerce Department. It is the equivalent of about a 6 percent return on your investment after maintenance and repair, and it is constant over time in real terms. Consider it this way: when Enron went belly up, shareholders ended up with nothing, but when the housing market drops, homeowners still have a house. And this benefit is tax-free.

Right now the smart money is in the market realizing the opportunities of soft asking prices and record low interest rates.  Everyone else is speculating on the bottom, a double dip, or a crash.  As I have written time and again, no one has that answer and only the future holds the truth.

This financial crisis has made us all too aware that we live in a Catch-22 world: the performance of the housing market drives the economy, and the performance of the economy drives the housing market. But housing has perhaps never been a better bargain, and sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we’ll even start building again. The American dream is not dead — it’s just taking a well-deserved rest.

What makes this post most compelling to me is it was written by Karl E. Case.  He is a professor emeritus of economics at Wellesley and co-creator of Standard & Poor’s Case-Shiller housing index.

Stay tuned as I am going to discuss the death of the real estate brokerage.

Photo courtesy of Flickr.

FHA Loan Requirements: Effective October 4th – Higher Annual & Lower Up Front Premiums.

It’s official, after a HUD letter on September 1st to Lenders that the FHA loan requirements are changing.

The first is an increase in the annual mortgage insurance premium (MIP).  If you want to know more about FHA loan requirements watch a video by Mark Robertson of Samuel Scott Financial.

Mark Robertson had the following to say about the FHA loan requirements:

HUD is changing the way the standard mortgage insurance works. Today on a 30 year fixed FHA mortgage, they charge two different types of mortgage insurance premiums (MIP). An upfront MIP often referred to as a “funding fee” of 2.25% of the loan amount, and a monthly mortgage insurance of .55% of the loan amount. The FHA loan requirements will lower the up front MIP to 1% of the total loan amount, and raise the monthly premium to .85%.

Before we talk about the change in FHA’s new mortgage insurance policy, lets take a minute to review what a loan would look like under the current mortgage insurance requirements.

The up front premium is almost ALWAYS financed into the loan. For example, lets take a base loan amount of $100,000. The upfront mortgage insurance premium is $2,250 or 2.5% of the $100,000 loan amount. That fee is added to the loan amount to make the total loan amount of $102,250. At a 4.5% interest rate on this loan of $100,000, the difference in monthly payment is only about $12/month more by financing this “up front mortgage insurance”. In addition to this up front mortgage insurance premium, there is also a monthly mortgage insurance of .55% of the loan amount. In our example of the $100,000 loan amount, this would add an additional $45.83 per month ($100,000*.55%=$550/year).

So, under the current FHA loan requirements policy if we took out a $100,000 FHA 30 year loan at 4.5%, our loan amount would be raised by the up front MIP of 2.25% to $102,250. This would make our principal and interest payment $518/mo. We would then add our monthly insurance premium of 45.83/mo for a total principal, interest and mortgage insurance payment of $564/mo. (Normally you would also need to pay taxes and homeowners insurance obviously, but for our example I am purposely leaving those out to simplify this exercise).

Now lets take a look at how this same loan would look under the new FHA loan requirements. Our base loan amount of $100,000 would be increased by the up front mortgage insurance premium of 1%, thus our new loan amount would be $101,000. It is important to note that building this $1,000 into the loan spreads that fee out over the life of the loan (30 Years), and the difference in payment each month from adding this fee to our loan in this example is only about $5/mo. Our principal and interest payment at 4.5% is $512/mo, which is about $6 lower than what our payment would be under FHA’s current mortgage insurance policy. We still have to add the monthly fee which is going from .55% to .85%. This is going to add an additional $70.83/mo ($100,000*.85%=850/year), which is $25 higher per month than it is currently. So, our new total principal, interest, and mortgage insurance payment is $583/mo. This is about $19 higher than what a buyers payment would be under FHA’s loan requirements.

Lets talk about what this means for potential buyers. Those who qualify for a home under FHA’s current mortgage insurance policy, may qualify for significantly less under the new policy. It’s important to move swiftly if a buyer is trying to maximize the purchase price of a home and take advantage of leveraging these historic low rates. There are many borrowers who are closing on homes right now, who would not be able to buy those same homes after the changes take place. In order to get FHA financing under the current Mortgage Insurance Requirements, the FHA case number has to be issued prior to October 4th, 2010, when the new policy goes into place.

If you want to reach Mark here is a link to his website – not only does he know FHA loan requirements but he is an expert at all types of financing.

Photo courtesy of Flickr

San Diego Condo sales in 92101 for August 22nd to August 28th, 2010 – 20 Sales

Search includes 92101 zip code for Downtown San Diego condo attached units reported closed sales by Sandicor Multiple Listing Service (MLS) for downtown San Diego real estate.  You can visit our Downtown San Diego Closed weekly report here or active market statistics here.

Average San Diego condo list price was $297,276 and average  sold for all sales was $287,910 with an average of $340.92 per square foot. Average days on the market was 76.  San Diego condos sold for an average of 98% of the listing price.

Here are the updated active market statistics for downtown San Diego for condos.

90-day stats for Condo properties in SAN DIEGO, CA92101 as of August 27, 2010
Median List Price:	$447,327	Average List Price:	$627,704
Total Inventory:	628	Price per Square Foot:	$416
Average Home Size:	1,092	Median Lot Size:	n/a
Average # Beds:	1.80	Average # Baths:	1.74
Homes Absorbed:	32	Newly Listed:	30
Days on Market:	156	Average Age:	8

Downtown San Diego Condos For Sale – 5 Newest

Showing properties 1 - 5 of 500+. See more 92101 zip code real estate.
(all data current as of 9/4/2010)

1. $315,000 : 575 6th, Unit 211, San Diego
   
   1 beds, 1 full bath

   Size: 788 sq ft

   Lot size: n/a

   Year built: 2007

   Parking spots: 1

   Days on market: 2
2. $490,000 : 300 Beech, Unit 1308, San Diego
   
   2 beds, 2 full baths

   Size: 1,132 sq ft

   Lot size: n/a

   Year built: 2004

   Parking spots: 2

   Days on market: 2
3. $290,000 : 1650 8th, Unit 109, San Diego
   
   2 beds, 2 full baths

   Size: 952 sq ft

   Lot size: n/a

   Year built: 1980

   Parking spots: 1

   Days on market: 3
4. $330,000 : 850 Beech, Unit 416, San Diego
   
   2 beds, 2 full baths

   Size: 1,070 sq ft

   Lot size: n/a

   Year built: 2003

   Parking spots: 1

   Days on market: 3
5. $625,000 : 750 State, Unit 402, San Diego
   
   2 beds, 2 full baths

   Size: 1,613 sq ft

   Lot size: n/a

   Year built: 1985

   Parking spots: 2

   Days on market: 3

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Now the legal stuff:  Not all San Diego condos are reported to Sandicor MLS, and sales may not be reported on a timely basis by the listing agent.

Here is a link for our mobile friends.

Free title insurance quotes with the CLTA Title Wizard®

A few days ago I posted an article regarding Corinthian Title and some shady backroom deals.  Today I am offering a tool to bring everything out into the light of day for agents and consumers.

Twenty years ago when I started in real estate the direction of title insurance was mostly controlled by listing or selling agents with favorite title representatives.  Not much has changed with agents arguing over favorite title representatives.

Now consumers and agents have a tool to easily compare rates.

While most real estate agents refer business to those companies that provide excellent customer service, kick backs, special favors, and treatment were not unusual.  This was clearly evidenced by the Corinthian settlement.

For those of you that don’t know what title insurance is here is a brief description.  This article is being written for San Diego real estate.  Customs changes from County to County and between Northern and Southern California.

Title insurance is a policy that protects buyers and lenders and makes sure the seller has the right to sell a particular property.  Title insurance protects home owners from losses that could result from disputes over ownership of a property’s title.   Items covered under title insurance include fraud, liens against the property, and errors missed during a title search.

First there are two types of title insurance, an owner’s title insurance normally paid by the seller, and a lender’s title insurance normally paid by the buyer.

Owner’s title insurance guarantees that the buyer has the right to the property. It also covers the cost of any legal fees that arise if you have to defend your claim. The cost is based on the price of the property. It is issued for a one-time fee usually due when you are closing or settling the transaction. Insurance benefits are paid only to the name that is on the policy. Coverage lasts as long as you hold title to the property.

Lender’s title insurance protects the bank or other lending institution that issues your mortgage from any losses resulting from disputes over who owns the property. A policy covers the amount of the loan and the cost is based on the amount of that loan. Most lenders require this coverage, which ends when the mortgage is paid.

More information can be found at the California Department of Insurance website.

While the internet is a powerful tool don’t loose site over local service and the ability to get the job done.  While saving $50.00 on a title insurance policy might sound good, sometimes your piece of mind and level of service is worth a few extra dollars.

This is where your real estate agent can come in to give you recommendations based on past experiences with title insurance companies. Being in the business day to day we know which companies really provide excellent service results and have the resources and experienced title officers.  This becomes particularly important when dealing with complicated title insurance issues.

It pays to shop around for title insurance since rates vary.  Keep in mind that short term rates may be available if your property has been resold within the last 5 years.  Other discounts include senior, first time buyer, government employees, teachers, and if the residence is owner occupied.

Get started today with your free quote from CLTA Title Wizard®.

Vantage Pointe returns buyers deposits for 2nd time.

The 679 unit Vantage Pointe announced yesterday they would be returning buyers deposits to those interested in purchasing a unit.  Read the full article over at SignOnSanDiego.

The Vantage Pointe developer failed to meet the Fannie Mae or Freddie Mac or FHA requirements crucial to financing purchasers.  Vantage Pointe had defaulted on their 210 million construction loan earlier this year and now intends to offer the units for rent.

In my mind this has removed 679 units from the downtown real estate inventory.   That in a market where quality units under $500,000 are hard to find.  The lack of any potential high rise projects in planning is probably a good thing for downtown real estate in the near future.  Of course at some pointe Vantage Pointe might be back, but it will be a hard road.

“We were very disappointed in the fact that we were unable to get the sales we were hoping for, and we think it’s a great building, but unfortunately it’s a sign of the market and there’s nothing we can do about it,” said Klapstein. “We did the best we could, we had the best marketing team and had a great product at a great price.”

While downtown’s condo market suffered during the housing bust, as most neighborhoods have, Vantage Pointe faced unique hardships that were difficult to overcome, most notably its gargantuan size that would have made it difficult to sell out even in a brisk real estate market. Its location at Ninth Avenue and B Street on the fringe of downtown’s central core also made it a harder sell for some buyers.

“Urban projects are tough and with this number of units, they’re tough to pull off unless you have smoking market conditions,” observed Peter Dennehy, vice president at John Burns Real Estate Consulting. “And the units were not particularly impressive as far as basic design and features. It really works better as a rental, and trying to do rental and sales in the same building doesn’t work because buyers really don’t want to be in a building with renters.”

You may review my original video on Vantage Pointe here or information on the default here.

Photo courtesy of Flickr.

San Diego, CA – Corinthian Title Company Agrees to resolve enforcement issue with State Department of Insurance.

According to  SanDiego6.com, Corinthian Title has made an agreement with the State Department of Insurance and Commissioner Steve Poizner to resolve an enforcement issue.

Corinthian Title Co. Inc. was accused of failing to file escrow rates between October 2008 and November 2009, despite the fact that it solicited and provided escrow services during that time, Poizner said.

The company also allegedly failed to comply with its underwriter’s filed rates, resulting in overcharges and undercharges, and gave discounts on lender title insurance policies in residential refinance transactions that didn’t meet qualification criteria for those discounts, resulting in undercharges that could be considered illegal rebates to induce the referral of business, according to the DOI.

The settlement with Corinthian includes a $100,000 monetary penalty, plus a $10,000 reimbursement of legal fees and costs to the Department of Insurance, Poizner said.

It is hard to believe that in 2010 we still see these illegal rebates and cozy affiliated companies, at the detriment of the consumer.  Just another sad scheme like the Property ID kickback with Prudential California and other major brokers.

Only one reason a real estate company, broker, or agent should ever refer a settlement service – based on their belief it’s in the best interest of the Client and that the company will provide excellent and competitive services.

Companies, agents, and Brokers should be ashamed for these illegal activities.

“I refuse to allow title companies to break the law through illegal rebating or through overcharging consumers,” Poizner said. “It is mandatory that companies file their schedule of rates prior to charging those rates and the rates they file with the department are the rates they are required to charge consumers — no more and no less.”

Good job Steve Poizner.  Full press release here.

San Diego Condo sales in 92101 for August 15th to August 21st, 2010 – 19

Search includes 92101 zip code for Downtown San Diego condo attached units reported closed sales by Sandicor Multiple Listing Service (MLS) for downtown San Diego real estate.  You can visit our Downtown San Diego Closed weekly report here or active market statistics here.

Average San Diego condo list price was $414,231 and average  sold for all sales was $400,357 with an average of $367.70 per square foot. Average days on the market was 88.  San Diego condos sold for an average of 97% of the listing price.

Here are the updated active market statistics for downtown San Diego for condos.

90-day stats for Condo properties in SAN DIEGO, CA92101 as of August 27, 2010
Median List Price:	$447,327	Average List Price:	$627,704
Total Inventory:	628	Price per Square Foot:	$416
Average Home Size:	1,092	Median Lot Size:	n/a
Average # Beds:	1.80	Average # Baths:	1.74
Homes Absorbed:	32	Newly Listed:	30
Days on Market:	156	Average Age:	8

Downtown San Diego Condos For Sale – 5 Newest

Showing properties 1 - 5 of 500+. See more 92101 zip code real estate.
(all data current as of 9/4/2010)

1. $315,000 : 575 6th, Unit 211, San Diego
   
   1 beds, 1 full bath

   Size: 788 sq ft

   Lot size: n/a

   Year built: 2007

   Parking spots: 1

   Days on market: 2
2. $490,000 : 300 Beech, Unit 1308, San Diego
   
   2 beds, 2 full baths

   Size: 1,132 sq ft

   Lot size: n/a

   Year built: 2004

   Parking spots: 2

   Days on market: 2
3. $290,000 : 1650 8th, Unit 109, San Diego
   
   2 beds, 2 full baths

   Size: 952 sq ft

   Lot size: n/a

   Year built: 1980

   Parking spots: 1

   Days on market: 3
4. $330,000 : 850 Beech, Unit 416, San Diego
   
   2 beds, 2 full baths

   Size: 1,070 sq ft

   Lot size: n/a

   Year built: 2003

   Parking spots: 1

   Days on market: 3
5. $625,000 : 750 State, Unit 402, San Diego
   
   2 beds, 2 full baths

   Size: 1,613 sq ft

   Lot size: n/a

   Year built: 1985

   Parking spots: 2

   Days on market: 3

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Now the legal stuff:  Not all San Diego condos are reported to Sandicor MLS, and sales may not be reported on a timely basis by the listing agent.

As the real estate market shifts ask yourself do I need 5,000 square feet?

One of the things that I love about living downtown is space is a premium

The normal sized condo is a 2 bedroom, 2 bathroom, 1200 to 1300 square foot of living space.  Clients that are coming from traditional style homes tend to learn about down sizing, or as I prefer to call it “right sizing.”

Europe long ago learned to be much more space and energy efficient.  I came across this very interesting video of a company called Resource Furniture offering Italian dual purpose furniture.  We also have a local resource in San Diego called Space San Diego.

www.youtube.com/watch?v=dAa6bOWB8qY

Everyone talks a great game in having the best of technology.

A look behind the curtain usually reveals antiquated practices, fax machines, paper copiers, and boxes of documents.

Like the comic above, the realty of the solution is quite different from the one bragged about!