Wednesday, August 23, 2006

Appearances Are Everything

Hello everyone...A big thank you to Max for allowing me to be part of this wonderful blog. A little about myself: I've been a real estate broker for about 10 years. I've qualified for the Master's Club twice during that time and feel I have a pretty good grasp on the market for Sacramento County. However, I certainly don't share the same beliefs as the majority of my colleagues when it comes to the current situation of the real estate market. I like statistics and feel they are a good indicator of where things are headed. One of my favorite sayings is "Statistics don't lie, people lie" which about sums up most of the biased reporting we've been reading lately from some real estate bigwigs supposedly in the know. As Max indicated, I'll be submitting posts based on experiences I've had with clients, realtors, builders and any other folks I can think of that will provide some insight on the market conditions. Also, as a realtor, I have access to current MLS data, so I will certainly be running some numbers that give a good overview of any trends that I'm noticing. If there are any lists/stats that you as a reader would like to see, just post a comment or e-mail me at agentbubble [at] gmail [dot] com and I'll see what I can do.

Now, on to my first little tidbit, more of an anecdotal finding, but still interesting (at least I hope).

My wife called me the other day and told me her friend of many years was considering selling her house because she and her husband could not afford the payments any longer. The house is your standard tract home in a decent Sacramento neighborhood. It's 3,045 sq. feet, 5br/3ba. The owners paid $372,000 for it in July of 2003. They took out loans in the amount of $300,000 and $56,000 initially. The put a pool in during March of 2004 and refinanced the second from $56,000 to $119,000 (hey, pools are expensive!). They refinanced the second again in August of 2004 at $147,000. They're now into the house about $450,000. The good news is that the house will probably sell for around $600-625K based on the comps I ran.

I just got a call earlier that these folks made a call to a lender friend of theirs (I'm questioning the word friend though) and the lender suggested an interest only loan which would allow them to save a few bucks a month and still make their house payment. The sellers agreed that was a good idea and felt that in a couple years they would be able to refinance again into a fixed rate. When my wife asked her why she just didn't sell it now, take a profit, and go rent for a while, her friend replied "we'll be able to save $250 a month and put it back on the house as principle during the next 2 years, and we really don't want to be renters."

Nothing surprises me anymore. I have plenty of stories just like this and will continue to share them with you from time to time. I'm currently working on an interview with a builder/contractor/flipper that I know who has agreed to answer some questions on his view of the market. Based on our conversations to date, I think you'll be surprised at his take on the market.


Anonymous said...

Agent Bubble, what a great name. I look forward to reading your posts and gaining more insight into this upside down real estate world. Max's posts helped me decide to cancel a home purchase contract for $840,000 in Dec. 2005, because the market factors felt so unsettled. The stats Max and the other local blogs were posting helped convince me. That home is still for sale and has been reduced in price by 22%. That means I would have lost $184,000 in equity over 9 months, not to mention the monthly payments would choke a horse. People really need to think about what is a comfortable value for them before they proceed with any home purchase in this declining market.

AgentBubble said...

Hey jr,

We sold our house in May and were in contract for a $740K house in El Dorado Hills before I pulled out of the contract. I lost my $5K deposit, but like you, I now have no doubts it was the right thing to do. Even with as much as we were putting down, the thought of a $4000 mortgage just didn't sit right. Two things really bothered me: 1) My previous tax basis for my house was $280K, so yearly property taxes were only around $300 a month. Taxes on the new house would be over $8,000 a year! 2) We would have had to get a 30 year loan. I've always done 15 year loans in the past, and seeing the amortization schedule on the 30 really ticked me off :-)

Anyway, thanks for your post, and if there's anything you'd like to see me take a look at, just let me know.

Anonymous said...

We are lucky to have you onboard with Max.

There are a bunch of dummies on an unnamed local website who for the longest time denied that the market was cratering.

Well the $hi@ is hitting the fan and they keep saying oh that poster is just being negative. To them I say get real fools, the market is headed south and the blood is going to flow.