Monday, December 31, 2007

Redfin's new study: better ways to sell your home

Redfin's 7 sales tactics

Don't shoot too high: Homes priced right to begin with often to sell for more than those that have to come down from an unrealistic initial price.

Price for the Web: Prices just over a certain threshold, such as $350,000, will be excluded from Web searches capped at that amount, cutting potential views by as much as 7 percent.

List on Friday: A study showed listings appearing on Friday get an average of 7.7 percent more visitors in their first week than those hitting the market on Thursday, which is the worst day.

Stay engaged: Studies show engaged sellers tend to sell their homes faster and for more money than typical sellers.

Market online: Post listings to sites that do not get automatic feeds from multiple listing services. A study showed each Craigslist posting, for instance, generates 11.9 visits to a listing's Redfin page.

Don't move: A study found sellers of vacant homes are 9.5 percent more likely to cut their prices than occupied homes.

Wait until nearby foreclosures are off the market: A study found a foreclosure costs neighboring sellers an average of $5,000.

Thursday, December 27, 2007

Foriegn buyers

New York condos lure deal-seeking Europeans

By Christine Haughney

The sidewalks of New York are crammed this month with European tourists on shopping sprees, picking up gifts that cost far less in the United States than they do at home because of the weak dollar. But they are not just crowding into boutiques and department stores. Some are also shopping for condominiums.

"There's bargains to be had," said Kerry Miller, a public relations executive who with her husband, Marty, a disc jockey, was working through her Christmas gift list by buying sweaters at Abercrombie & Fitch and makeup at MAC, as well as touring 32 apartments. The Millers, from Malahide, Ireland, a suburb of Dublin, searched for a one-bedroom condo. They made an offer for $700,000 on one apartment in the meatpacking district and are waiting to hear back from the seller.

While natives remain wary about real estate and worry about bonuses and the economic climate, foreign tourists are keeping brokers busy with their eagerness to buy up New York apartments, which many see as investments.

"The exchange rate is like a gift from God for Europeans," said Danielle Grossenbacher, the broker for Coldwell Banker Hunt Kennedy who showed the Millers around. "Everybody is feeling they have an opportunity to purchase a piece of Manhattan."

These buyers are transforming a traditionally slow month for New York real estate brokers at a time when brokers nationwide are struggling to sell homes. This year, New York brokers are waking before dawn to talk by phone with European buyers about amenities and closing costs and working late advising foreign buyers in town on the best places to shop for gadgets and clothes.

The number of foreign buyers has doubled in the last two years, according to data from the research firm Radar Logic. In just the last 18 months, they have bought one-third of all new condos that were up for sale, said Jonathan Miller, an executive vice president at Radar Logic and its director of research.

"We'd have had difficulty absorbing the elevated level of new development coming on the market without foreign buyers," Miller said. "They are a key source of demand for new development."

Donna Olshan, a New York broker, said that in December she typically received calls only from a few Wall Street bankers who had gotten their bonus numbers. This month, she said, a record number of foreign buyers have called, sent e-mail messages and shown up at her office shopping for real estate.

"We're seeing a flurry of foreign activity from Britain, France and Italy, looking to spend their pounds and euros," Olshan said.

Foreign buyers are helping shield New York from the housing slowdown that has plagued the rest of the nation and are providing a ready market for thousands of newly built condominiums. They like condos for the amenities and flexible rules that allow renting the apartments as investments. That many units are in neighborhoods that are not traditionally residential like Midtown and the financial district does not seem to bother the shoppers. They like that those neighborhoods are well known.

Diane Ramirez, president of the real estate brokerage Halstead Property, said foreign buyers would make up about 20 percent of the firm's sales transactions in 2007 in terms of dollars spent compared with nearly 15 percent in 2005. Ramirez said that five years ago, there were no apartments for foreign buyers because the market was made up mainly of co-ops whose owners would not welcome them into their buildings.

Real estate brokers project that foreign buyers will continue their shopping sprees for condos and clothes through the new year with the expectation that the dollar will continue to weaken.

Jonathan Fletcher, who works in information technology, and Aine Marshall, a dentist, came to New York from London to buy a $1 million investment property. Fletcher, who is considering buying in the financial district, where he believes there is opportunity for appreciation, plans to put down his deposit money first and wait for the dollar to weaken more before paying for the entire apartment. Even if he does not buy an apartment, the savings from shopping in the United States covered the cost of the trip, he said. They spent a total of $8,000 on clothes, a camera and a $5,000 drum set that would have cost about double back home.

Foreign buyers often purchase quickly because they largely view these apartments as investments like a bond or a stock. Dorothy Somekh, a Halstead broker, said that in an afternoon a Belgian couple she represented bought a $1.7 million two-bedroom condo at the Sheffield in Midtown to rent out for about $7,500 a month. After the couple signed the contract, they headed to Abercrombie & Fitch to shop for clothes for their daughters.

"They're not really sophisticated investors," Somekh said. "But they thought, 'Where else can I put my money?'"

Recent auctions of art have brought out incredible prices.

For example -- Dec. 27 (Bloomberg) -- Sotheby's, the world's second-largest auction house, sold about 46 percent more art this year as U.S., Russian and Asian collectors bid up prices for contemporary artists such as Francis Bacon and Jeff Koons.

Sotheby's art auctions in 2007 totaled $5.33 billion, up from $3.66 billion a year earlier, according to preliminary figures on Sotheby's Web site. Contemporary art sales in New York in November more than doubled to $418.3 million, the Web site said.

Sotheby's and its larger competitor Christie's International are increasing their dependence on contemporary art after an 11- year quadrupling in values.

"The contemporary-art market is flooded with liquidity but it won't last forever,'' said New York art dealer Richard Feigen, whose clients include Paris's Louvre museum.

Saturday, December 22, 2007

Breakdown of our modern day banking system

The news of the coming torrent of housing foreclosures has been all over the newspapers for weeks if not months. I have to believe that the stock market has taken it all in -- and that this "coming disaster" has been fully discounted.

But there other and even bigger problems, and Bill Gross, he of the giant PIMCO funds, is warning about it. "What we are witnessing is essentially the breakdown of our modern day banking system, a complex of leveraged lending so hard to understand the Fed Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August." Later Gross adds, "As the commercial paper market shrinks by hundreds of billions a month, central bankers worldwide are facing a giant stress test of the modern-day shadow banking system. The publicized and photographed overnight 'runs' on Contrywide and the UK's Northern Rock in mid-august were nothing compared with what's taking place in the shadows of the real banking system. Credit contraction, with its inevitable companion of asset destruction, is spreading with the speed of an infectious bacterial disease. "How does one protect 'deposits' during a run that no one can see? To be blunt, what does this mean to your pocketbook? ... Home prices have been the obvious first hit, down 5% nationwide already, with perhaps another 10% to go over the next several years. Following in lock-step have been financial stocks followed in short order by consumer-based equities as jobs and disposable income falter."

Is that scary enough for you? Let me put it this way. Bill Gross is one of the smartest men in the business, he manages billions in assets and has access to the best information on the face of this green earth.. Gross is worried, not just about the subprime situation, more importantly he's worried about the whole US and world banking system!

But you know what -- I'm going on the premise that the stock market knows everything that Bill Gross is warning about. If the problems ahead are ominous and fated to tear the international banking system apart, the stock market must be aware of it.

A critical test -- So far I must report that the stock market doesn't give a damn about the coming disaster. Because if Bill Gross is right, then the stock market should be falling apart and plunging wildly below its November lows. THAT ISN'T HAPPENING!

From: DowTheory

Friday, December 14, 2007

1 million mortgage loans will default in 2008

For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008. Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year.

"We're only halfway through the housing shock,'' said Ethan Harris, Lehman, the fourth-biggest U.S. securities firm by market value. "It's just a matter of time before the weakness spreads to the rest of the economy.''

Comment -- Nasty, but the market obviously is well aware if all of the above. Please fix the following firmly in your mind. If the November lows hold (Dow 12743.44, Transports 4366.60) then all of the above has been fully discounted in the market's price structure. But if both of those lows are violated, we're in for some really tough times and almost surely we're heading into a first-class recession.
From: DowTheory

Wednesday, December 12, 2007

Today's SF Chronicle: 9% decline for 2008

Forecasting a 9 percent decline in average home prices on the statewide level in 2008. And he said an additional 15 to 20 percent drop in 2009 would not be out of the question.

"We disproportionately enjoyed much higher home price appreciation over the last several years with the uses of subprime and Alt-A loans," Adibi said. "This is going to come to haunt us."

In the last steep housing downturn, Adibi said, it took 54 months for San Francisco home prices to fall from peak to trough; in San Jose it was 60 months, and in Oakland it was 51 months. To get back to the previous peak price levels took another 3 years, roughly.

"I don't see anything that would suggest the current downtrend is going to level off soon," said Michael Carney, executive director of the Real Estate Research Council of Northern California. "In fact, I think we might be seeing a gathering of momentum in the downward direction. I think we're more toward the beginning of a process than toward the end of it."

The median asking price for a single-family house in San Mateo County, for instance, has fallen from $948,000 in November 2005 to $767,000 this November.

The average number of days on market, meanwhile, has jumped from 59 to 100 in the same period. Most distressing to Calhoun, who studies home prices and sales each month gleaned from MLS records, is the number of sales - only 517 in November in Santa Clara County - the lowest number for any month since 1998.

Saturday, December 08, 2007

PMI Insurance: 41 percent increase

Down the road, the mortgage insurance will go away," when there is sufficient equity in the home. " And then the mortgage payments will be less than having the piggyback payment."

To that end, borrowers who expect to be in a home for several years might want to consider mortgage insurance on a primary loan as opposed to taking out a piggyback loan.

"I tell my clients, mortgage insurance is not a forever thing," said Cryer.

In the first 10 months of the year, about 1.7 million new private mortgage insurance policies were issued, a 41 percent increase from the same period a year ago, according to the Mortgage Insurance Companies.

"The deductibility feature for both government and private mortgage insurance has made insured loans more attractive,". "It's a lot harder to get those more exotic loans given the nature of the market."

The deduction is more likely to help moderate-income borrowers save on their taxes when buying lower-priced homes, said Cryer, the mortgage broker.

Three out of four California homeowners and 88 percent of homeowners nationwide who have purchased mortgage insurance through Walnut Creek-based PMI Group Inc. meet the income criteria for taking the mortgage insurance deduction.

The Bay Area's higher housing prices can result in much higher premiums, along with the potential for higher tax savings.

"It will reduce your taxes," said Bruce at San Ramon-based Armanino McKenna, LLP. "There's no reason not to take it."

While there is clearly a tax advantage, Coblentz pointed out in today's stricter lending environment, borrowers who could afford a median-priced home are more likely to have higher incomes that would disqualify them for the tax break. "With real estate prices so high here in the Bay Area, this will not help a lot of potential home buyers. The (income) limit is too low," he said in an e-mail.

Tuesday, December 04, 2007

The world's "lending machines"are frozen

"The introduction of CDS (credit default swaps) coincided with a favorable economic climate for creditors and debtors. Since the nadir of the last credit cycle in 2002, creditors had a uniformly positive lending experience with virtually no defaults. The CDS market blossomed and the issuance of credit expanded, untethered by considerations of risk. From a modest infancy, the notional value of CDS today surpasses the amount of underlying cash bonds by an order of magnitude. CDS contracts now total $45.5 trillion of outstanding credit risk, growing at an amazing nine-fold in the last three years alone. Putting such a large number in some perspective, $45 trillion is almost five times the US national debt and more than three times US Gross National Product."

The US and the world is facing an almost unbelievable problem. Nobody knows what type or quality of risk they own. This has put a huge HALT to lending. Talk of another Fed rate cut this month sounds heartening. But a rate cut has nothing to do with solving the basic problem. The fact is that the US and the world's "lending machines"are frozen. The credit risk is now so huge that it's almost beyond comprehension.