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The Party Might Just Be Ending for Low Interest Rates

It’s safe to say that mortgage interest rates have been at historic lows since the summer of ’09, mostly around and sometimes even under 5%.  Currently, they’ve been floating around the 5 & 1/8% range.

Part of the reason for these low rates has been because the Fed has been on a buying binge of Mortgage Backed Securities (MBS).  The Fed has been buying $1.25 trillion in mortgage-backed securities in its effort to prop up the economy but has said it will end those purchases March 31.

As I speak fairly regularly with seasoned, well-informed, and intelligent mortgage lenders and brokers, one thing they all seem to agree on is that the expectation is that, after March 31st,  rates will head upwards, and will likely be in the 6% range.

Still pretty low, historically – but, a significant impact to the buying power of home buyers out there.

Just think about it, if you’re looking at a loan amount of say $700,000, this means that a 1% increase in interest rate translates to paying $450 MORE per month on the same loan.  Or looked at another way, a 1% increase in rate just reduced the sale price you can afford by about $80,000.

Quoting some highlights from a recent WSJ article:

What happens when it (the Fed) stops buying hundreds of billions of dollars in financial assets?

In its monetary-policy statement, the Fed said it would “gradually slow the pace of these purchases in order to promote a smooth transition in markets.” Suddenly cutting to zero, presumably, could prove too much of a jolt.

But even a gradual pullback could have big repercussions. Zero interest rates and Fed purchases — financed by printing money — have played a massive role in reviving stocks and bonds and rekindling the economy.

Mortgage rates will likely move up, as private-market buyers will charge more than the Fed for bearing the risks of holding government-backed mortgage securities. Now, the Federal Reserve has said they would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness

In its best corporate-speak, the Fed said they will “evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.”  That is, if markets play along. Investors are already balking at the heavy use of printing presses. Just look at the sliding dollar.

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5 Signs Your Home is Overpriced

05_bert As a follow on to yesterday’s post on overpriced listings, I came across this very well written Forbes article, which, if you’re selling your home, you should definitely soak it up (and yes, I did “borrow” their picture for yesterday’s post as well.)

Here are the five tell-tale signs:

  1. Your home is priced well above neighboring properties.  The first thing brokers do before they recommend a price to a seller, is they look at the sales prices of the last three sales of comparable-sized homes in your neighborhood.  You can conduct your own research to determine a reasonable price before you hear estimates from brokers.  Do a quick search online to see what neighborhood homes are selling for, and there are some tools that can help determine a roundabout value of your home based on your zip code and other factors.
  2. After a couple months, you still haven’t received an offer. Don’t panic just yet. This isn’t true for all homes, (it’s not uncommon for high-end homes, for example to stay on the market for years) but there should be a flurry of showings and interest in the first 4 to 6 weeks the home is on the market if it’s priced properly.  Although one assumes that overeager buyers are indicative that the price is low, realtors say competitive bids are more likely indicative of a reasonably priced home.
  3. You spoke to several realtors before you hired the one who recommended the highest price for your home.  Realtors seldom want to take a property that is overpriced, simply for the fact that the chances of selling it are slim, and that means their chances of making a commission are greatly reduced. Common sense is that you should speak with several realtors before choosing one to represent you, but if you consistently hear a ballpark price that seems low to you, the price may be right. Realtors are (or should be) intimately familiar with most real estate activities in their market, and they should have the best idea of how a home should be priced.
  4. There aren’t any scheduled showings.  Immediately after the home hits the market, there should be at least a few appointments for showings.  If there aren’t, it might indicated that local brokers think the home is overpriced and therefore aren’t showing it to their clients. Realtors suggest that after a month, if there is very limited interest in the home, it’s not too late to reduce the price, but it’s important to act quick in order to sustain some interest.
  5. The home is priced for expensive, unique amenities that may not hold broad appeal. Your family may have enjoyed endless hours of fun in your indoor badminton court, but not everyone loves badminton as much as your family does.  The more customized the home’s amenities, the less likely the buyeris to see their value in the sales price.

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Open Letter to the Overpriced Listing

Overpriced homes

I like the format of the “open letter” — props to Dave over at New Media Chatter, I’m copping your “style”

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Dear Seller of Overpriced Home for Sale:

It would be a perfect world if you get the exact price (or more) you’re asking for your home. This however, is not a perfect world.

Look, we are NOT in the 2006 market. Or the 2005 market. Or the 2004 market. This is 2008/2009, and things are wildly different than when your neighbor sold their house. Have you been reading the news or not? Sorry, but you need to get over it and move on.

Today’s market (as in all markets) – and especially the pricing strategy – is simply about SUPPLY and DEMAND.

Let’s say your house is listed for $1.5M, and it’s been on the market for 90 days at that price.  Guess what? The only person who thinks it’s worth $1.5M is you. Know why? Here’s an abstract way to look at it:

 

 

So what will you do?

If you don’t want to take less than your listing price, you may be in for a long, long wait. 

If I was your agent, I’d first ask you: “do you want me to tell you what you WANT to hear, or what you NEED to hear?”

If it’s the latter, then I’d say you’re not motivated enough right now, and the best thing you can do is take your home off the market — listings that do not sell usually need price reductions to get them to a marketable range.  Take it off the market for a while, lest it grow stale (which it probably already is at that price), and reassess in a few months. 

If you were motivated enough (read: you absotively NEED to sell), then I’d tell you to price your home correctly and competitively so that you won’t be “chasing the market”

The best way to get your home sold, is  to understand what your “demand” looks like, and PRICE  it so that the demand (the buyers) flock to it.

Supply and demand. Understand it and embrace it, or be stuck with a home that no one wants to see.

  • Say there are 5 homes in your immediate area that are all listed for $1.5M (= the SUPPLY)

  • Now say there are 10 buyers in the market right now who can actually afford a $1.5M home if they can find the “right” house (= the DEMAND)
  • But, if not one of those buyers paid a second glance to your home at that price, then NOBODY thinks they should pay $1.5M for it . Guess what? The DEMAND now equals ZERO.
  • It’s a lonely dance floor when no one wants to dance with you.

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The Mt. Carmel Holiday Home Tour is BACK!

  It’s that time of year! On Saturday, December 13th, from 11am to 3pm, visit four beautiful Mount Carmel area homes splendidly decorated for the holidays.  Even if you can’t make the Tour, come shop the expanded Gift Boutique at the school (301 Grand St.).   The boutique is open to the public from 10am to 5pm.

Any questions? Contact Jennifer Munsey at 650-365-1334, or jmunsey4@msn.com, or Leslie Pedrin at 650-365-9115, or lmpedrin@aol.com. Please note that this event has been planned with adults in mind (sorry, kiddies!). Strollers won’t be allowed in the homes, and we ask that you do not bring young children.

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Snow is Coming to Redwood City?

snow-in-rc

Well, ok, so it’s not falling out of the sky, but it’s snow nonetheless!

Must be that time of year for RC’s annual Hometown Holidays

Each year on the first Saturday of December, Redwood City’s Downtown Business group throws a party in celebration of the Holiday Season! We have a parade, entertainment, SNOW, Santa Claus, and a grand finale with a FIREWORKS show and late night Holiday Movie!

Many events will be happening during Hometown Holidays — Tamale Tasting, Ballet, Holiday Tree Contests and more!

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New Podcast — Carole Rodoni Returns To the Gory Details

Eh_podcast_graphic 

This month’s episode: She’s back! For the third time on the Gory Details Podcast, my special guest is the dynamic Carole Rodoni,  a highly regarded speaker, author and advisor in Bay Area real estate. Formerly president of Fox and Carskadon Realtors, COO of Cornish & Carey Real Estate, President & COO of Alain Pinel Realtors, Carole is now president of her own consulting firm, Bamboo Consulting.

 

 

The economy’s effect on real estate — the new President’s effect on real estate — advice to buyers and sellers — local vs. nationwide statistics….Carole’s got it all!

 

 

Take a listen, because the November edition of “The Gory Details Podcast” is now available! 

 (1) iTunes users, get it right here
(2) Or get it at http://edgory.podshow.com
(3) And, always available at http://www.edgory.com

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Recent Sales in Mt. Carmel – Q3 and Beyond

Price it right, and it will sell.

A simple, but extremely critical notion to think of when selling ANY house these days.

The reason I mention this is because there actually were a few homes that recently sold in Mt. Carmel for OVER ASKING price.  Yes, you read that right.  Pricing is THE most important factor these days, and for some of the homes that reduced their list price, and ended up getting sold for over that price, that was a lesson well learned.

Here, in no particular order, are some recent sales in Mt. Carmel:

204 Hillview – listed for $749K; sold for $760K

195 Opal – listed for $998K; sold for $950K

355 King – listed for $799,450; sold for $850,000

202 Harrison – listed for $989,000; sold for $985,000

445 Iris – listed for $699,950; sold for $717,000

2621 Hopkins – listed for $725,000; sold for $752,250

370 Hillview – listed for $635,900; sold for $591,000

258 Elwood – listed for $499,900; sold for $555,000

273 Iris – listed for $1,038,000; sold for $1,034,000

472 Hudson – listed for $799,000; sold for $660,000

1438 Brewster – listed for $899,000; sold for $875,000

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