The Real Folsom Blog

What's Happening in CA Real Estate

Folsom is part of California so it's worth taking a look at real estate market trends around our state. Here's a rundown on the latest real estate news from the California Association of Realtors:

• Housing affordability improves a bit. The percentage of households that could afford to buy an entry-level home in California stood at 24 percent in the second-quarter of 07--up one percentage point from the same time last year.
• July home sales fall 22.7%. When compared with the same period last year, home sales decreased 22.7% in July with a silver lining for home sellers: the median price of an existing home actually increased 3.2%.
• Housing starts fall 22%. Builders continue of hold off on production and concentrate on moving existing inventories--explaining the 22% drop from July 2006 to July 2007 in total housing starts.

Fast facts

The median California home price was $594,260 in June 07.

Highest median home price was in Santa Barbara So. Coast: $1,375,000.

Lowest median home prices was in High Desert: $306,310.

Make it a great day!

Beware of Foreclosure Rescue Scams

CNNMoney.com had an informative article recently on how scammers are coming out of the woodwork and taking advantage of homeowners who are struggling to keep up with their mortgage payments (posted Aug. 24). As foreclosure rates are rising, it appears the number of rescue scams is also increasing. The most common form of foreclosure rescue scam, according to the CNNMoney.com article is one where the scammer takes an up-front fee to solve the victim's foreclosure problems--and then does nothing. Another common scam is "equity stripping." In this situation, the scammer promises to save your home by taking title, renting the home back to you and then selling it back sometime later. What actually happens is the scammer strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments. According to the article, there is a handful of legitimate companies out there that do try to help but you should never trust anyone who has contacted you unsolicited. The best advice to the homeowner struggling with mortgage payments is to call your lender immediately and try to work out a plan [see my Aug. 14 blog entry for more help on this]. In the end, it's the proverbial "buyer beware".

Folsom Real Estate by the Numbers Aug 27

I like starting the week by taking stock of where we are real estate-wise in Folsom. So here are the weekly stats (the data was collected from MetroList, our local multiple listing service).

Total number of Folsom single family homes currently on the market: 399 (up about 7 homes since last week).

The least expensive home is listed at $289,950 (up a few thousand from last week).

The highest price home is at $1,579,500.

The median price: $499,500 (down about $500 from last week).

The average price: $577,223 (down about 2.5K).

Average days on the market: 64.

Homes currently pending sales: 60.

Make it a great week!

Common Mortgage Mistakes Part 6

Here's part 6 of guest blogger, and certified mortgage planner, Barbara Van Duyn's 7-part series on the more common mortgage mistakes. If you have any questions for her you can reach her at Barbara@VanDuynGroup.com.

When it comes to processing fees, closing costs, escrow fees and the like, all loans have them. The amount you pay and how you pay them will vary depending on who you do business with.

Processing Fees. I've heard it, you can't miss it. Mortgage companies advertising they will pay all of your closing costs and there will be no up front fees for you to pay. No matter what they advertise, no one does a loan for free. If you're not paying any fees up front then you are paying them somewhere else such as in a higher interest rate. The most damaging of all could be additional processing fees (this may have a separate or different name). What's worse is the fact that because the lender is hiding it as fees rather than points, they rob you of the tax deduction. So ask a lot of questions and if you feel you're not getting full disclosure, find a mortgage professional who doesn't have anything to hide.

Thanks, Barbara!

Everyone, Have a great Folsom weekend and don't forget our own Folsom Farmer's market on Sunday mornings from 8-noon in the 900 block of Sutter Street. 

Where We Rate on Real Estate Transaction Costs

None of us likes to part with our money--especially when a large chunk goes at once such as in a real estate transaction. But now comes news from the Organization of Economic Co-operation and Development--one of the world's largest source of comparable statistics, and economic and social data--that real estate transaction costs in the United States are on the lower end of transaction costs in the world. According to the "Global Property Guide" report, real estate transaction costs (as a percentage of property value) represent 9.07 percent of property values. Those costs include registration fees, real estate agent fees, legal fees, and transfer taxes. In the U.S., the bulk of the transaction costs are comprised of agent fees followed by sales and transfer costs, and finally legal and registration fees. Here's a sampling of some costs around the world.

On the high end, we have:

• Korea--22.08%
• Belgium--17.88%
• Italy--17%
• France--16.30%
• Mexico--12.82%
• Germany--11.45%

On the low end, we have:

• Denmark--2.05%
• Iceland--2.41%
• United Kingdom--5.03%
• Australia--5.92%
• Canada--6.97%
• Japan--8.51%

A curiosity was highlighted in the report--the fact that French legal origin countries, on average, have significantly higher transaction costs (about 14% of property value) when compared with countries with German legal systems (11.9%), or Socialist (7.4%), English (6.5%), or Scandinavian (5.2%). Any lawyers or political scientists out there have any ideas on this one???

Surviving the mortgage meltdown

Even for those of us who are "in the business" or at least in a business next to the business, so to speak, the whole mortgage meltdown (and news coverage of said meltdown) has been to say the least mildly confusing. Guest blogger Barbara Van Duyn, a certified mortgage planner with First Priority Financial here in Folsom, sends the following advice. If you need any more info or have questions you can reach Barbara at Barbara@VanDuynGroup.com.

During the past several months lenders have tightened their qualifying guidelines and discontinued riskier loan programs. Most homeowners who qualified for non-conforming loans under past guidelines will not qualify in the future. As far as conforming loans go, there has been no material increase in the rate of default or foreclosure associated with them. Because of this, investors have the same risk vs. reward so these loans are not affected by this current storm.

1. If you are a buyer using a non-conforming loan product including Jumbos, I recommend that you keep financing contingencies in your purchase agreement until the market settles down.
2. If you have an Adjustable Rate mortgage that it scheduled to reset within the next 2 years, why don’t we take a few minutes to review your options and find a solution for you while there is time?
3. If you have an Adjustable Rate mortgage NOT scheduled to reset for 3 years or more, DON’T PANIC. You have time on your side and things will calm down. Don’t make a premature financing change that will cost you unnecessary expense.
4. Even if you are not in the market for a home loan of any type, make sure that your credit standing is as solid as possible and meets the higher standards.

Sound and clear-headed advice from Barbara...

Finally, here is some food for thought from Irving Berlin:

"The toughest thing about success is that you've got to keep on being a success. Talent is only a starting point in business. You've got to keep working that talent."

The American Dream in Folsom

The American Dream of owning a home can be particularly challenging in a sought-after community like Folsom. The very factors that make Folsom so appealing--its great stores, restaurants, recreation venues, nice homes, historic old town, location near Folsom Lake, etc., etc., etc.--are part of what drives up the cost of homes here. Anyone planning to buy a home in Folsom should first devote some time to getting their finances in order to make sure they get the most house they can. Doing so can result in lower mortgage payments and therefore the ability to buy more home. This is especially true for first-time home buyers. The National Association of Realtors offers these eight steps to getting your finances in order:

1. Develop a family budget. Instead of budgeting what you'd like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc.
2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt--car loans, student loans, revolving balances on credit cards--down to between 8 percent and 10 percent of your total income.
3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You'll probably see some great ways to save.
4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.
5. Save for your downpayment. Although it's possible to get a mortgage with only 5 percent down--or even less in some cases--you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.
6. Create a house fund. Don't just plan on saving whatever's left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.
7. Keep your job. While you don't need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.
8. Establish a good credit history. Get a credit card and make payments by due date. Do the same for all your other bills. Pay off the entire balance promptly.

Make it a great day!

More Folsom by the Numbers

This Monday definitely got the better of me this week. "Updating the blog" has been on the agenda since 8 a.m. and here it is dinner time and I'm just getting to it. But at least I made it! So here goes, let's start the week by taking stock of where the Folsom real estate market is. The data was collected from MetroList, our local multiple listing service.

Total number of Folsom single family homes currently on the market: 392 (up about 20 homes since last week).

The least expensive home is listed at $285,000 (down about 20K from last week).

The highest price home is at $1,690,000 (yep, same one still on the market).

The median price: $500,000 (down about 12.5K from last week).

The average price: $579,786 (down about 15K).

Average days on the market: 63.

Homes currently pending sales: 63. (It's interesting to look at the average price: $519,970 and median price: $450,000 of these pending Folsom homes. If you look above, both numbers are lower than the average and median for homes still for sale. In other words, homes priced more competitively, got offers. Food for thought...

And, finally, a quote for thought for the week:

"Call it a clan, call it a network, call it a tribe, call it a family. Whatever you call it, whoever you are, you need one." -- Jane Howard

Common Mortgage Mistakes Part 5

Here's part 5 of guest blogger, and certified mortgage planner, Barbara Van Duyn's 7-part series on the more common mortgage mistakes. If you have any questions for her you can reach her at Barbara@VanDuynGroup.com.

You’ve probably heard the term “deferred interest” or “negative amortization” because in the past 6 years this type of loan financing was very popular and in a healthy real estate market it served a purpose. Today is a different story. With real estate values declining, this loan option has all but disappeared. The reason for talking about it is… many folks still have this type of mortgage and it’s a Time Bomb waiting to explode. If you have not refinanced out of this loan product, you are facing a “recast” in the coming months. So take this opportunity to understand what you can expect and then seek help from a certified mortgage professional to discuss your options. Good Luck!

Negative Amortization or Option Arm Loans. Negative amortization is when the loan balance increases rather than decreases because the minimum monthly payment is less than the actual interest rate being charged. An example might be where the borrower makes a payment based on a low 1.5% pay rate but the actual interest rate being charged is 7%. The difference between what is being charged and the amount paid is added to the loan balance.  An Option ARM is the most sophisticated mortgage strategy and not suitable for the average borrower. Unfortunately, most loan originators who sell these loans pitch the low monthly payment and don’t properly educate the borrower of the down side risk. If you’re considering an Option ARM loan, let’s see how well you know what you’re in for. Let’s begin with a little test:

1. I know what the fully indexed or effective rate is?
2. I understand why my pay rate increases 7.5% every year until the recast point.
3. I know how negative amortization will affect my loan?
4. I know when my loan will recast?

So how did you do?  These questions are basic to understanding an Option Arm. The most common mistake a borrower makes is thinking the start rate is the interest rate. Another problem is understanding what “recast” is and how soon it can occur. When deferred interest causes the loan balance to increase by 10% to 25% of the original loan amount, the loan will recast. Recast will result in your minimum monthly payment increasing by as much as 80% to 120%. For some borrowers, recast has occurred as soon as month 33 or 2.75 years into the loan. These loans are also associated with Pre-Payment Penalties that can last up to 3 years. You may also be unable to refinance the loan because deferred interest has increased your loan balance and there isn’t sufficient appreciation. If your mortgage person hasn’t explained the risk vs. reward to you, don’t walk…. RUN way and find a mortgage professional who is capable of educating you completely and has your best interest in mind.

Plenty of New Businesses Coming to Folsom

In my humble opinion, one of Folsom's better selling points for home buyers and even home sellers looking to move up is the number of great businesses we have in Folsom. It's real quality of life when you can quickly run to an REI or Target after dinner and make it a quick errand and still get home in time for a movie. And it looks like life will only get better. As I was cruising the City of Folsom web site I found a list of new businesses that are at least in the planning stages of coming to Folsom in the next few years. According to the city, a new IHOP is going in at 2525 Iron Point Road and scheduled to open this fall. And sometime in 2008, we may have a new Ethan Allen home furnishings store, Hampton Inn, and In and Out Burger (all at Iron Point Road, E. Bidwell & Placerville road, just west of Costco). In 2009, we may have a Holiday Inn & Suites at Cavitt Drive across from Costco and a Stay Bridge Suites and the same location, and, of course, the biggie--all the stores slated to open in the 50-acre regional mall "Palladio" on the lot bordered by E. Bidwell, Iron Point Road and Broadstone Parkway. (I'll tell you more about that one at a later date.). And, finally, looks like Circuit City is interested in putting a store in at Serpa Court, Iron Point Road, and US 50, just east of Costco. If this keeps up we may never need to leave Folsom for anything....