October 13th, 2015 5:20 PM by Gregg Mower
I usually write on specific topics but this time I am going to have some fun with Real Estate and Real Estate Services. I am asked almost daily the same question “how’s the market doing”. I personally hate this question as it is not specific to all the things I do. I have to ask if they are referring to the Interest Rates, as I have been doing mortgages the better part of my 30-year career, or are they talking about the Real Estate market. Not a hot question, but since we are there I might as well elaborate. Interest Rates are hot right now. Interest rates are as low as I have seen them this year. What is not hot is the demand for the money. Ironically, the Federal Reserve (Not Hot) has kept the Fed Funds Rate or the Inter-Bank lending rate to right around 0 for the last seven years (Hot you would think) but during the same time lending laws have tightened, so tight that it makes it very tough for the average person to get a loan to purchase a home. So with hot interest rates we have a lackluster demand for the cheap money (Not Hot). As far as The Real Estate Market it is hot for price ranges up to $350,000 in the Greater Sacramento, Placer and Eldorado Counties. As for the San Francisco Bay Area that market is hot, in the Los Angeles Area that market is hot and not depending where you are at.
Not hot is the new Truth in lending RSPA Integrated Disclosures, or TRID rules that just went into effect October 3 2015. This is the Federal Government’s (Not Hot) way to help consumers to make the right decision on their home loan by giving them more time to think about what they are getting themselves into. That’s right the Government is telling the consumer that they are uneducated, ignorant, and that they should probably pay for an attorney to look over their loan documents before they sign (Not Hot unless you are an attorney, oh the law was written by attorneys for attorneys, double not hot). Although, the new TRID procedure is ominous at best, the “Good Faith Estimate” of fees and costs and the Truth in Lending statements have been combined into one form (Hot) that is more user friendly for consumers called the Loan Estimate Form. The Government actually consulted private industry (Hot) before imposing a form that had no relevance like the old Good Faith Estimate. With the onset of the new TRID procedures the consumer will have to wait longer at the end of the transaction (not hot). The new procedure will make lenders, after the loan has gone through underwriting, issue a new form called a Closing Disclosure before the lender can issue the closing documents for settlement (Not Hot). What this intended to do is give the consumer an additional “cooling off” period of 3-8 days depending on when the consumer receives the form. The way this works on a new purchase loan is that after the consumer has found a house, applied for a loan, received their initial disclosures, the appraisal has been completed, and the lender’s underwriter has reviewed and received all the conditions needed for an approval, the Closing Disclosure will be issued to the consumer. The Consumer will have to acknowledge that they have received the document or the wait time will be an automatic 8 days, once they acknowledge receipt of the form they will have 3 business days from midnight the day they receive the form to reject the loan or make any changes. If any changes are made there will be a new form issued and the same wait periods begin all over again (not hot). This has the potential to add up to 2 weeks to a purchase transaction (not hot). In a refinance transaction the procedure will be the same but there has always been a mandatory 3 day rescission period after the legal paperwork has been signed, making a refinance transaction take even longer on owner occupied loans (Not Hot).
What’s Hot is Real Estate Sales in the Greater Sacramento Area (where I write this from) for homes that comes on the market $350,000 or less. This seems to be the sweat spot for Real Estate sales in the area. Hottest markets seem to be Roseville, Elk Grove, Rocklin, Folsom, Eldorado Hills, Loomis, Penryn, Antelope. Average Prices are hot right around $314,000 for Sacramento County, $445,000 in Placer County, $435,000 for Eldorado County, and San Joaquin County comes in as the most affordable at $312,000. I don’t have the data for other parts of California at my fingertips, but with the average income for the State of California hovering right around $65,000 per household that would indicate that if you have an average household income with average bills you could afford a mortgage of about $318,000 (hot for northern California areas except the SF Bay Area). With California’s unemployment rate, as of April 2015, at 6.3% it is higher than the national average unemployment rate of 5.1% this could be an issue for housing in the future (Not Hot). From an economic point of view California is becoming a State that only the very richest companies can exist in due to the high corporate taxes, personal property taxes, excise taxes, and general higher costs of living. This could lead to a population of only highly skilled workers working for the high tech companies leaving manufacturing companies and labor intensive companies out of the loop in California thus leaving no room for the uneducated worker (Not Hot). California has long been a State with laws and taxes that have favored the lower class workers, now those very laws are actually hurting those workers that are predominantly unskilled labor as the State has forced the manufacturing, and unskilled labor employers out of the State by higher taxation and unhealthy laws and regulations (not hot).
Hot in lending and investing is private money notes. Hot for investors in Real Estate in that their qualification requirements fall basically into the equity in their property being financed. If you are an investor in Real Estate and buy and hold or buy and flip you can obtain money to leverage your activities fairly quickly and easily (Hot). If you are an investor in notes and Deeds of Trusts the market is hot in that you can receive yields from 6% to upwards of 13% with no hassles of being a landlord (Hot). Unfortunately, the laws have changed to be way to ominous for private investors to invest in Notes and Deed of Trusts on owner-occupied primary residences due to the Dodd-Frank act and California’s own set of laws (not hot). The stock market has been very volatile over the last several months so the increase in demand for investors to invest in these notes have increased significantly (Hot). However, with the increase in Real Estate prices investors that buy hold or flip have slowed down, so there is more money out there than there are investors to lend it to (not hot).
Finally, MAE Capital Real Estate and loan is hot as we follow the markets closely and we can offer all types of products for our clients. We can finance all kinds of properties from single family owner occupied properties (California only) to Commercial projects all over the country. MAE Capital Real Estate and Loan can list and sell your home in our local markets of Placer County, Sacramento County, Eldorado and Nevada Counties. We value our customers and work deals with our clients when we represent them in multiple transactions such as listing and selling their home qualifying them for their next home and finding them their next home. With our ability to represent clients from both the Real Estate and the Loan sides we can save our clients thousands of dollars in commissions that they would have otherwise had to pay (Hot). We look forward to working with you now and in the future (Hot).