Bill McCord's Blog

The rumours and speculation surrounding this Bill are getting increasingly shrill and uninformed ranging from:

1. Extension of the credit is a done deal and will possibly even increase the amount to $15,000.

2. It will be changed to apply to deals that are in escrow before the current Nov 31st deadline and close within 60 days more.

3. It’s dead as of Nov 31st.

4. Etc, etc,etc.

The best site i’ve found for intelligent discussion of this is http://www.californiateachersandemployeeshomeloanprograms.com/update-8000-homebuyer-tax-credit-extension-october-2009/

Scott is a very diligent researcher and reporter on this and more generally 1st time buyer programs.

If you live in Silicon Valley and are thinking about buying your 1^st house this is probably the best ever time to do so. 

1. Santa Clara County has a new 1st time buyer program which gives a 30 year, $40,000, Down Payment Assistance loan at 2% interest, with no payments required for the 1st 4 years. After 5 years the interest rate becomes ZERO. The maximum total interest over the life of the loan can never exceed $3,200. THIS IS FANTASTIC. 

2. 90% of the Cities in Santa Clara County have one or more special 1^st First Time Buyer programs to help get a foot on the Home Ownership ladder. 

3. Federal Government and the State of California have several different 1^st Time Buyer programs. 

4. Many of these programs can be combined to provide affordable ways for the majority of people who at present believe they can’t afford to buy. 

5. The Santa Clara County Association of Realtors has a new program which will provide 6 monthly payments of up to $1,500 per month for a Home Buyer who loses their job. 

6. The IRS is giving an $8,000 Tax Credit to any 1st time Buyer who buys before Nov 31st this year. This is a CREDIT not an allowance. It means that even if total Fed Tax was $6,000, not only would that be wiped out but you would get an additional $2,000 rebate. That’s an $8,000 gift from Uncle Sam. 

In addition to all this Mortgage Interest Rates remain at historically low levels, while home prices have come down substantially from the peaks of 2007. 

There will never be a better time than this for that 1^st purchase.

It’s all about meeting new people and helping them realize their dreams.

From the 1st meeting to the close of escrow, maybe 3-6 months, you go through the equivalent of 20 years of getting to know people well, and developing the ability to work toward a common goal.

 Then you may do nothing more than exchange xmas cards and sending out occasional marketting info. However, if the result of your initial business experience was positive, you will be hearing from their friends and family.

 Then, about 5 years later you will be renewing close aquaintance helping them with their next move.

There is nothing more gratifying than that phone call regarding new business coming from a past client or a referral from them. That is a FUN call.

Many Buyers in my market area (Silicon Valley, CA) will research schools to decide where they want to buy. Unfortunately the Acronym Zoo makes it difficult to actually dig out the truly relevant information. In a small effort to help with this I’ve put together the following basic descriptions of each of the normal acronyms used.

APR (AccountabilityProgress Reporting) is the California State mandated system to measure current performance of schools.

API (Academic Performance Index) is the result of the measurement process and is a unique number for each school.

AYP (Adequate Yearly Progress ) and PI (Program Improvement) reports are the results of a Federally mandated program with a different focus.

API measures the performance and progress of a school based on statewide tests at grades 2 through 12. It produces a numerical rating between 200 and 1,000. Depending on the current rating, each school receives a target for improvement over the following year, expressed as a percentage. The higher the current score the lower the percentage increase required until at 800 the requirement is to maintain that score.

AYP is used to drive and monitor progress toward a common goal for all schools. This goal is that all schools must have 100% of students achieve proficiency in English-language arts, and mathematics by 2014.

To truly understand how to interpret these go to the California Dept of Education site. http://www.cde.ca.gov/ta/ac/ar/ This will give links to details for all these and related systems.

Despite the doom and gloom pouring out from the talking heads and empty suits of the mainstream media we here in Silicon Valley do not inhabit a wasteland of short sales and REO’s. Yes, we do have some in a few pockets of the Valley, but they are not having much affect on the big picture.

The Pending to Listing ratios for Santa Clara Valley continues to get more favourable each month. This is the most credible statistic available for tracking market trends and is currently better than it was 12 months ago. I have seen nothing in the Murky News, or heard it mentioned on the TV or Radio.

The truth is that the current problems are concentrated geographically and have not wiped out Real Estate values all over the State.

Have prices in Silicon Valley gone down. Yes in general, but only to the extent of correcting for a out of control boom.

Is now a good time to buy. Yes, in my part of the world.

NOTE: I’ll follow up shortly with info on some super 1st time buyer programs for the Counties and Cities of Silicon Valley.  These are NOT low income programs. More to follow.

An FHA mortgage has not typically been the first thing that came to mind when buying in the Silicon Valley area during the past 25 years or so.

Guess what; with the chaos in the Mortgage Banking industry FHA is now the best program in the market for anyone with less than a 20% down payment looking to buy up to the new conforming limit of $729,500.

With 30 year Fixed and Adjustable programs, as little as 3% down, and generous Seller credit provisions, this is definitely not your Grandfathers FHA Mortgage.

In addition the interest rates are typically better than those offered by the standard Banks, and qualifying parameters are stable and consistent. This can certainly not be said of the rest of the industry.

Does this sound like anyone you know?

1. I’m a smart person with good solid  job. I should own a house.

2. That idiot down the street makes less than I do, but he just bought a cool house. He’s a homeowner!

3. I wonder how much house I can afford?

4. I don’t know much about real estate. It sounds complicated, so I’ll talk to someone who does it for a living.

5. Realtors and mortgage brokers know what they’re talking about! (No conflict of interest there, right?) They tell me to spend as much as possible, because housing prices always go up. I don’t have to even research that; it’s so darn obvious!

6. I’ll take out the biggest mortgage the broker will give me. I’m not worried, because they wouldn’t loan me the money if they didn’t know I could afford it. They’re professionals after all.

7. Everybody else is doing the same thing, so I have to be as aggressive as possible. They’re not making any more land and there’s a shortage of housing (again, it’s so obvious!), so I have to get into a house now or the prices, which never go down, will rise out of reach.

8. I make $100,000 per year, which puts me way above average, some might consider me rich. The median price of a house in my area is $700,000. I don’t care if that’s seven-times my income (the rule of thumb is that your house should cost 3 to 4 times your annual income), I’m a rich guy so I should get an $850,000 house. I deserve it!

9. Cool! I just bought my house. It cost me $928,000. I had to bid aggressively because some other jerks were trying to get it and we really love this house. I got it with an interest only adjustable rate mortgage, because the rates on ARMs are one whole percentage point lower than a fixed-rate mortgage (yes, rates are currently at 40-year lows, but I needed that extra percentage point to make the monthly payment).

10. My interest rate doesn’t reset for 3 years anyway, and I’ll certainly be making more than I am now in five years, (even though on average, people are now making less than they were 5 years ago).

11. The interest-only part of the mortgage also ends in 3 years, so I’ll just refinance the mortgage. The broker told me that should be no problem. (Unless, of course, there’s a massive global credit crunch that causes the biggest tightening of credit since the 1970s, but that won’t happen).

12. I’m a smart person who owns a house. All is right with the world.

13. Honey, some guy has stuck a notice on our door.

The morale is:

WHAT YOU DON’T UNDERSTAND CAN AND WILL COST YOU.

GET EDUCATED.

The Annualized Percentage Rate APR is an economic measurement designed by politicians.

It was intended to provide the mortgage borrower with a simple way to compare the real costs of different mortgages. For example, is the low interest rate high points approach better than the High interest rate lower points? Unfortunately the way it was designed is badly flawed. It not only fails in this primary goal. it also allows the numbers to be manipulated in such a way that the borrower can take the low APR option but end up paying much more for the loan, and losing some tax benefits.

A detailed explanation of the problems with this legistlation would take another couple of pages, but if anyone is really interested drop me an e-mail and I’ll happily give you the gory details.

I’m seeing more and more qualified home buyers holding back from actually buying based on the continueing folk legend that Banks are restricting the release of REO properties to avoid a glut of inventory which would drive prices down. The story is that a huge surge of new REO’s are coming to market in the fall and that will be the time to be a Buyer.

I believe this is total nonsense as the Banks have no sensible reason tho do this, and a very strong financial reason to do the exact opposite.

It has always been my understanding that once an NOD (Step 1 in the actual foreclosure process) is recorded the Bank has an official “Non Performing Asset” which must be excluded from their FDIC required reserves, and must be replaced immediately from other assets. This inevitably reduces the amount available for new lending.

If this is so then the Banks are strongly motivated to get whatever they can, as quickly as they can, for any REO properties they hold. The money recieved can then go back into the “Funds Available for Lending Pool” from where it can be loaned out to create new mortgages i.e. “Performing Assetts”. This is how banks make profits.

Can anyone comment on my understanding of this and offer suggestions on how we can counter this market distorting perception.

Most successful Realtors know the truth of my Title (Paraphrased from ex Speaker of the House of Representatives Tip O’Neill “All politics is local”).

Unfortunately many of our clients get most of their information from the talking heads and empty suits of the mass media whose purpose is to sell advertising, with LITTLE or NO REGARD to TRUTH or CONTEXT.

They are therefore led to believe that any house can be bought for at least 20% less than a year ago, anywhere it happens to be located.

Here are a couple of facts that might be thrown into the running conversations about “How’s the market”

Over the past 10 years the average home price has INCREASED by 6.2% Nationwide.

Over the past 20 years the average home price INCREASE has been 4.7% Nationwide.

Source www.ofheo.gov

These are way below the numbers for Santa Clara County (Silicon Valley) where I live and work, and they are way above the numbers for Dallas Texas.

The Morale is “East San Jose is NOT Palo Alto. Sacramento County is NOT Santa Clara County, Southern California is NOT North California”. Florida statistics are not relevant to any other State.

ALL REAL ESTATE IS LOCAL