Historically, prices go up

By Mary Southall, Marin Independent Journal, January 27, 2008

Some people who purchased homes in the past couple of years, today are wringing their hands because they think their home values have hit the skids with no hope of ever going up again.

But consider these facts from the Bay Area Real Estate Information Services (BAREIS) Web site:

Twenty years ago (1987) the average Marin home sold for $240,875. Ten years ago in 1997, the average Marin home sold for $443,135. We won't use the average 2007 price; some people argue that it was skewed upward because only the supremely wealthy were buying homes. So let's look at five years ago: In 2002 the average Marin home cost $782,829. The historical figures don't lie.

In the 10 years between 1987 and 1997, prices nearly doubled. Then in only five more years, prices nearly doubled again.

What else happened in those same years? In the three years between 1987 and 1990, prices went up a whopping 157 percent. Then between 1990 and 1992, prices leveled.

The same kind of trend is occurring now. We had a few years where prices staggered up, and now they are level. The BAREIS figures indicate the average price for a Marin home has fallen only twice since 1969.

Historically, prices in Marin go up.

A sensible outlook on the current mortgage market

Given all the recent press regarding the “mortgage crunch”, we at Madeline Schaider Real Estate would like to offer you our balanced view of what is happening to home mortgages and what you can expect in the near future. We interviewed our trusted mortgage brokers at All California Mortgage (ACM) in Larkspur, CA and would like to relay our conversations with them. Thanks to Lisa, Sheri, and Shayne at ACM.

The Reaction and Fallout

ACM believes the mortgage market has over-reacted to the decline in the sub-prime lending market. Sub-prime loans are high-risk, such as 100% financing to people with low credit scores. In all the chaos, many investors who purchase mortgage-backed securities have temporarily stopped buying several types of mortgages. In response, many lenders have either suspended certain loans or canceled some loan programs. Most have arbitrarily raised interest rates on jumbo mortgages (over $417,000 for a single family house). So far, conforming loans (under $417,000) have not been affected.

The Adjustment

ACM also believes that lenders will re-evaluate their lending guidelines over the next few months and will eventually reintroduce several of the loan products that are temporarily on hold. They will impose stricter guidelines but, in the long run, this will lead to better lending practices, protecting consumers, particularly those who were targeted for loans they really couldn’t afford. This should also lead to lower interest rates for jumbo loans.

NOTE: On August 19, 2007 the Federal Reserve Bank lowered the Discount Rate (the rate at which the Fed lends money directly to commercial banks, credit unions and savings, and large lenders) by 0.50%, from 6.25% down to 5.75%. This should lead to the mortgage credit market settling back down, and hopefully will reduce interest rates for 30-year fixed jumbo loans.

How to Avoid the Chaos

It is a good time to work with a mortgage broker rather than a bank or other direct lender. Here are some compelling reasons:

The good mortgage brokers (we can recommend some) have relationships with lenders that portfolio their loans (meaning, they do not package and sell their loans as mortgage-backed securities). They retain the loans, and their executives make the decision as to what products to offer, at what price, and to whom.
They have exclusive relationships with other lending institutions that offer creative financing at excellent prices, including Private Banking relationships. This allows them still offer loan programs that others are claiming no longer exist.
They have access to hundreds of loan products. As a result, they can often provide loans that are below market pricing and that you could not get elsewhere.

What To Do For Now

If you are planning on purchasing or refinancing while interest rates are in flux, we offer you the following advice:

Once you obtain a loan that you like, lock your loan rate. So far, locked loans appear to be honored by lenders.
Consider a short-term fixed loan, such as a 5-year fixed, instead of a traditional 30-year fixed loan. As of this date some 5-year fixed jumbo loans with certain portfolio lenders are almost 1.5- 2 percentage points below 30-year fixed rates. This may be possible even for stated income loans.
Improve your credit score. This will increase your chances to have more loan programs to pick from, especially during this transitional time. A good mortgage broker can be immensely valuable in helping you with your credit score.

Please let us know if you have any further questions or would like to have a referral for a good mortgage broker. We are here to provide support to you with any of your real estate needs. Marin continues to be a strong real estate market due to its geographic location, great schools, bucolic weather, and cultural amenities.

The News About Your Home’s Value in August 2007

The Marin housing market is healthy with steadily increasing values, despite the
decreased home values in other communities. Here are numbers from the Marin
MLS, comparing the first seven months of 2007 with the same period in 2006.

Single Family Home Sales

The number of SFH’s sold increased by 4% in 2007 and their value increased
6-7%. We are not seeing the 15+% increases in value of a few years ago, but Marin houses remain good long term investments.

Condo and Townhouse Sales

The number of condos and townhouses sold decreased by 14% in 2007. However, sale prices increased by 3-4%.

How Long Does It Take To Sell?

The number of days on the market is about the same as last year: about 40 days for single family houses and 50 days for condos and townhouses. In general, remodeled homes and reasonably-priced fixers in desirable neighborhoods sell quickly, with more than one offer. In this market, it is more important than ever to have your house in great condition before you sell it.

Buying Land and New Construction >Buying New or Buying Old

New homes typically have a higher sales price than comparable existing homes, and buyers are usually willing to spend more on a new home because of lower maintenance costs. Builders' warranties on new homes, when combined with a new roof, appliances, and major systems, usually make major repairs unnecessary and help to counter a slower initial rate of appreciation.

Census Bureau Housing Surveys suggests that operating costs are lowest for brand new homes and slightly higher for relatively new existing homes. Operating costs per square foot of living space are consistently higher for progressively older existing homes. Utility costs represent the largest factor in operating costs. Energy consumption per square foot depends on the size of the home, the insulation and quality of the windows, air leakage and the efficiency of the furnace.

New homes require fewer expenditures for routine maintenance. The cost of maintenance first increases with age, then declines, so you will generally spend less maintaining a home built before 1960 than for a home built between 1970 and 1975.

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Q	What architectural detail made its way into the design of many suburban homes built in the 1950s, 60s and 70s?
A	The picture window was a signature of the suburban American neighborhood.
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The Reaction and Fallout

The Adjustment

How to Avoid the Chaos

What To Do For Now

What the press reports about Marin real estate