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Real Estate Blogging - One Year Down
2007-09-11 19:12:00
6,000 average unique monthly visitors...380 Technorati links...262 article posts...Hundreds of phone calls...Fifty new blogs...Dozens of Utah real estate mortgage leads...One mortgage meltdown...One most hated brouhaha...One USA Today interview...One closed loan...One year of blogging about Salt Lake real estate...Happy 1st Birthday!
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Bridge Loans
2007-09-10 20:26:00
Surprisingly, a bridge loan is not financing for a structure to convey vehicles or people, it is a short term loan used in real estate and business. For the purposes of this article we'll be talking about residential real estate.With the markets across the country changing, there are many people placed in the difficult position of being under contract for a new house, while their existing home takes time to sell. Whether the new contract is for an existing dwelling or a new home yet to be constructed, buyers without liquid assets may be counting on the equity from their home to fund the new purchase. These funds may be needed for the down payment, closing costs, reserve requirements or even to make the payments on the properties until the old one sells.In a real estate environment where homes were selling in days...even hours, the extra time now needed to sell can become a burden. A bridge loan can help soothe the transition and buy time for eager sellers stuck between two home...
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Utah Home Builders Feeling Some Pain
2007-09-07 14:07:00
The credit crunch and waning consumer interest in real estate is putting increased financial pressure on Utah 's local home builders.I don't normally publish anything I can't back up with evidence, but my source in this instance is very reliable.I was told on September 6, that several Utah home builders in the small to medium range are seeking bankruptcy protection.This same source also mentioned a particular builder has abruptly laid off half of its staff. All areas of employment were affected with positions eliminated in secretarial, marketing, customer service/warranty, construction supervisors and sales.Whether this bold cost cutting move will save the company has yet to be seen. While consumer sentiment has something to do with the cash flow crunch of this particular builder, delays in construction and other major company infrastructure investments have also been a drag on the balance sheet.Even with Utah's relatively good market, consumer sentiment and the elimination of ...
More About: Home , Builders , Pain , Feeling

100 Percent Financing Still Available
2007-09-06 14:37:00
I've spent a lot of time this week discussing some of the culprits of the mortgage crisis. 100 percent financing is certainly one of them...under certain conditions. Situations where 100% financing is risky include investment properties, especially in combination with stated income.However, 100% financing in itself isn't always a bad idea and can often be a way for first time home buyers to get their first home. With that in mind, it's important to remember there are still low down and no down payment mortgages available, even in this tighter lending landscape.FHA loans immediately come to my mind when thinking about low down loan programs. With only 3% down, FHA offers 15 and 30 year fixed loans with low rates. 3/1 and 1/1 adjustable rate mortgages are also available. The 2/1 buy down is available for affordability, but the borrower must qualify income wise for the higher rate that will come after those first two years. FHA loans are also assumable should the owner decide...
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Exotic Mortgage Loan Programs - Square Pegs for Round Holes
2007-09-05 17:06:00
This is a continuation of a stream of consciousness from yesterday's post about the cause(s) of the current credit crunch. I was inspired by a riveting article I found on CNBC last night, but more about that in a moment.One of the culprits for the credit crunch has been the loose loan programs many lenders had over the past few years. Low documentation, no documentation, stated wages, stated wage earner and interest only loans were all available and often times used as affordability tools, not their intended purpose of providing alternative documentation to secure a loan. In other words, mortgage brokers were using an arsenal of loan products to make sure every borrower they came across could qualify for a loan. They were trying to shove a square peg into a round hole. Instead of examining a borrowers personal situation and finding the best product for their needs, these brokers were simply pushing the loan and rate that paid them the most, even if they had to lie to sell the d...
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Is This Mortgage Crisis a Blip...or Something Worse?
2007-09-04 17:53:00
I've stumbled across a number of different articles in the past week each philosophizing about the causes of the subprime mortgage fallout. Each article blamed one or two specific causes. Fix that problem the reasoning ensues and things will return to normal.USA Today for instance blames mortgage brokers. They're right, to a certain extent, but that alone didn't cause what we're experiencing.Compounding the stress is that some lenders and lawmakers blame the crisis on aggressive brokers who they say pushed mortgages that customers didn't understand or couldn't afford. Brokers can earn higher commissions by steering borrowers to loans with higher interest rates."Who made this mess? The short-term folks," John Robbins, who chairs the Mort gage Bankers Association, said in a May speech.The L.A. Times blames lenders and flippers. In an editorial story today Peter Viles writes about the bubble bloggers opposed to government bailouts -Many or most of them saw this crisis coming years...
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Real Estate Question - Should I Buy a Home Now?
2007-09-02 19:47:00
From time to time, I get emails from readers with questions about real estate and mortgages. Sometimes they're very specific to an individual situation, while others are more generic and suitable to be answered more publicly. I received one such message the other day.How's it going? I am a casual reader of your blog - particularly for your opinions on US housing - I enjoy what you have to say - thanks.Do you know where should I look to get information on the directional trend of my local housing market? I am looking to purchase my first home in downtown Jersey City, NJ - across the water from NYC. My gut is telling me to wait - overall market data is pointing to a continued slowdown. The brokers/realtor's want me to believe that the JC market is unwavering - I think it's crap, because the worst has yet to be seen. Is there a place on the internet that might have the information I'm looking for?There are a lot of places to find bits and pieces of real estate information. One sou...
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Mortgage Loan Programs Changing...Some Disappearing
2007-08-31 16:48:00
Some belt tightening is going on in the mortgage lending world. Every day I receive daily rates from up to six different lenders. Some are general lenders with conforming, FHA and subprime programs. Some are subprime only, while others are FHA only.First of all, my list has dropped down to two or three lenders. The others have simply disappeared. Secondly, I periodically get program changes. One I received yesterday afternoon was of particular interest -Due to changing market conditions we are experiencing guideline changes to several of our Alt-A products.The changes will be effective for all loans locked after 4:00 p.m. on Friday, 8/31/07 (tomorrow). The programs being affected by the guideline changes are: 6067, 6070, 6128, 6142, 6143, 6144, 6083 and the 6146. The 6136 and 6086 will no longer be offered.If you have loans in process under these programs that have not been locked, you will want to lock the loans before 4:00 p.m. Friday. If the locks occur after 4:00 p.m. t...
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Has Utah's Real Estate Market Wilted?
2007-08-30 16:56:00
On August 16th, the Deseret News published a story called Real Estate Still Looks Rosy in Utah, Experts Say, that didn't really back up the optimistic title.Utah's housing market remains one of the strongest in the nation, Wright said, but it has shown "definite signs of weakness" in the past six months. Single family building permits, for example, have decreased 20 percent since January 2006.The biggest threat to Utah's market, analysts agree, is affordability. Despite Utah's strong performing economy, house prices in the state are increasing at least twice as fast as incomes and have, so far, shown no signs of dropping amid decreased sales.Challenges and advantages to Utah's real estate market continued throughout the article with a conclusion that pointed far from "rosiness."An article yesterday from the Realty Times pointed out this contradiction and showed some of the real challenges this market could be facing in the near future. (Thanks to those who sent this to me.)Uta...
More About: Real Estate , Real Estate Market , Market

Salt Lake Commercial Real Estate - In With The New
2007-08-29 16:13:00
Last week I shared how the last of the old Crossroads Mall complex, a huge office tower, was imploded to make way for a new downtown center that will take years to complete and provide an abundance of commercial construction jobs.Today it was announced that only two blocks away, construction has begun for a new office tower at 222 S. Main St. The anchor leaseholder is a law firm occupying the top three floors. This project has been in the works for a while, but slow market conditions at the beginning of the decade put everything on hold.When Hamilton Partners first announced in 1999 it wanted to build the 425,000-square-foot structure building on Main Street between 200 and 300 South, Bingham estimated it could be completed by 2002.But that wasn't to be. Office vacancies in the area began to rise dramatically in the early 2000s, and Hamilton couldn't find a major tenant to commit to the project. Construction remained on hold until market conditions improved.Those conditions impr...
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Utah's Subprime Exposure - Meltdown?
2007-08-28 16:15:00
CNNMoney is reporting subprime loan exposure by State this morning. The interactive map shows all the subprime adjustable rate mortgage loans that were originated in 2005 and now set to adjust, presumably up, in 2008.Adjustable rate mortgages are usually fixed for 2-3 years before they adjust to a financial index, plus a spread, to determine the new rate. That rate may stay fixed for as long as a year or as short as a month before adjusting again. The vast majority of home owners with these types of loans either sell or refinance before the rate goes up. The worry now is home owners won't be able to do either based on current market conditions.What CNN's map shows is most states have subprime exposure between 18% to 30%. Utah's is at 25%, but the most populous areas are well below that. Florida has the highest exposure as a State with 30%.So how many of these loans are actually defaulting?A recent look at subprime lender Novastar showed their default rate jumped from 2% to ...
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Deer Valley Real Estate - It's All About Location
2007-08-27 17:55:00
I had the opportunity Saturday afternoon to attend the Park City Jazz Festival in Deer Valley. Deer Valley isn't a place I get to very much as I'm not a skier, but in the summer it is the host to a number of musical events.The other reason I don't get up there too much is its rather exclusive. In fact, Deer Valley is home to some of the highest priced real estate in Utah and the U.S.Why? Location of course. You can see in the top photo the actual valley and where this photo was taken is the bottom of the ski runs in the winter time. Behind the stage is the main ski lodge.Deer Valley CondosBordering the right and left side of the ski run are a number of luxury condos and ski cabins. The units pictured start at $2 million dollars.Deer Valley CabinsThese spacious luxury cabins start in the mid $2 million range and go up. The fringe benefit of owning such property is the access to the events held at the lodge. The music Saturday was unbelievable and India Arie closed the show. Prime ...
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Reflections On A Year Of Real Estate Blogging
2007-08-25 17:08:00
It's been nearly a year since I started the Salt Lake Real Estate blog. In that time, a lot of lessons have been presented and learned from. Readers of this site know I covered the story of failed real estate investor Casey Serin from the very beginning, until its tragic, yet mundane end. I supported him for too long publicly and tried to help him for too long privately. Many lessons were learned, especially don't pick fights on the Internet with anonymous people when they know who you are.I've also had the opportunity to comment on the changing real estate and mortgage market both across the nation and here in Salt Lake City. This has been a very hot button on the blogosphere and a number of anti-real estate blogs have surfaced or grown in readership over the year. As the market got worse and worse, their negative rhetoric began to take on a prophetic meaning. Now we're at a point where the mainstream media is covering the burst housing bubble on a daily basis and safegua...
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Mortgage Bailout Won't Look Like You Think It Will
2007-08-23 22:58:00
Now that major lenders, especially in the subprime space, have declared bankruptcy or shuttered operations, more and more people are calling for a bailout of American homeowners with adjustable rate mortgages or payment option ARMs with negative amortization.How likely is this to happen on a wholesale basis? Nobody knows for sure, but I have a few ideas and already we're seeing them come into play.1. It's about to get political -With the 2008 Presidential race heating up, candidates and the sitting President, are turning to housing as a pain point. Senator Chris Dodd is lobbying the Federal Reserve to do all it can including raising the amount of loans Fannie Mae and Freddie Mac, the government sponsored enterprises that manage the bulk of home mortgages, can hold at this time of decreased liquidity. I won't be surprised to see "conforming" loan limits increase from the $417,000 they're currently at, especially in the face of Jumbo loans (those above the conforming limit) being ...
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Salt Lake Real Estate Investors Doing Even Better
2007-08-23 04:01:00
Real estate investors in Salt Lake must be the envy of the country. First of all, appreciation remains in the double digits for Salt Lake and much of Northern Utah real estate. In fact, Salt Lake led the nation in appreciation during the second quarter.Now a recent report shows rents are rapidly rising as less borrowers qualify to purchase homes and more people fearful of a real estate decline wait on the sidelines.The Salt Lake Tribune reported today -Rental rates in Salt Lake County have risen by a hefty 6.7 percent over the past year - the highest rate in more than a decade - to an average rent of $697, a new report shows. The higher rents stem from a dwindling supply of available units, according to the Greater Salt Lake Multi-Family Report, published by Apartment Realty Advisors-EquiMark. Apartment vacancies in Salt Lake County have fallen from a high of 10.9 percent in 2002 to 4.1 percent - the lowest point since 1996, the report said.This phenomenon is not unique to...
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How Serious Is This Mortgage Crisis?
2007-08-21 18:56:00
If you read the mainstream media headlines lately, you'd think the American money supply and credit lines for mortgages have all but dried up. Headlines even claim that borrowers with good credit and down payments will feel the effects.It's true the foundation of the risk mitigation that has driven mortgages for the past five or so years is at risk. However, this risk is based mainly on speculation at this point - speculation that all subprime mortgages are going bust.The Washington Post ran a great story Sunday with the worst case scenario of this credit crunch. The conclusion?The credit system is losing its, well, credibility. People no longer trust the triple-A ratings that many complex debt securities carry. The risk models used by rating agencies, hedge funds and banks have also come under suspicion. The effects of subprime losses are being felt in unexpected places, including supposedly impregnable money market funds. Hedge funds and other highly leveraged investment vehi...
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Don't Take No For An Answer On Your Mortgage
2007-08-20 21:10:00
With the recent credit crunch for real estate and changing lending standards being enforced some people are finding it harder to get mortgages from the places they used to.Sunday's Salt Lake Tribune recounts the story of one such borrower.Max Johns of Salt Lake City should not be having a problem qualifying for a mortgage.His financial house is in order, and his credit score is well above the minimum most home-loan providers have had in place for years.But Johns, a construction contractor, is having problems qualifying for a home loan. He's one of a growing number of Utahns caught up in one of the biggest, swiftest, nastiest shakeouts the mortgage- lending industry has ever seen - one that's suddenly making it more difficult for many to buy or refinance a home because of heightened requirements.Sitting in a bank office a couple of weeks ago, Johns was told that although he probably would have qualified several months ago for a real estate loan, he no longer does. "My credit score...
More About: Answer , Mortgage , Mort

Last Remnant of Old Crossroads Crumbles to Rubble
2007-08-20 20:38:00
The Salt Lake City skyline has permanently changed. Early Saturday morning, the Key Bank tower (pictured on right) was imploded. This planned demolition was one of the last steps before new construction can begin on the new City Creek Center.City Creek Center is a billion dollar mixed use project that will revitalize the old heart of downtown Salt Lake which has currently been replaced by the Gateway Center...another major mixed use development that has been highly successful.See a video of the implosion here.
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Should I Buy Real Estate Now?
2007-08-19 16:06:00
I've had the question of real estate purchase timing posed to me in several emails I've received as well as in comments throughout this site and on other real estate blogs. "Is now a good time to buy real estate?"The short answer is, "it depends." I'm not going to leave with a short answer. People are either optimistic or pessimistic about their personal financial life and they are the same way about more macro economic topics like housing and jobs. Each month, surveys are conducted to measure consumer sentiment to try and get a reading on the likelihood people will purchase in the near future.The topic of real estate is a pretty split camp. There are rational and compelling reasons to be optimistic or pessimistic about housing and it doesn't really matter what part of the country you live in.Five reasons to be pessimistic about real estate1. House prices are falling in parts of the country. Why buy in a declining market?2. Cost of ownership on a monthly basis is higher ...
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What Do The Big Money Players Think of Subprime?
2007-08-18 20:19:00
CNNMoney has an interesting profile of opinions of the current real estate and mortgage markets by some of the wealthiest and powerful people in America. I highly recommend you read each one of the profiles before you solidify your stance on the future of America's economy.Here are a few highlights from the piece:Warren BuffetMany institutions that publicly report precise market values for their holdings or CDOs and CMOs are in truth reporting fiction. They are marking to model rather than marking to market. The recent meltdown in much of the debt market, moreover, has transformed this process into marking to myth.They should simply sell 5% of all the large positions they hold. That kind of sale would establish a true value, though one still higher, no doubt, than would be realized for 100% of an oversized and illiquid holding.Wilbur RossNow that we have identified the cause of the disease, how severe and how contagious is it? The present $200 billion of delinquencies will grow to...
More About: Players , Subprime , Prime , Layer

Federal Reserve Accepts Signs of Economic Slowdown - Cuts Discount Rate
2007-08-17 16:18:00
In a dramatic, yet hoped for move, the Federal Reserve Board cut its discount rate by half a percent. The discount rate is the cost of money for banks and lending institutions that borrow directly from the Fed. The new rate is 5.75%.The discount rate is different from the overnight lending rate which impacts short term mortgage rates, auto loans, credit cards and savings account rates. The Fed left the overnight lending rate steady in its last meeting August 7th.Since that meeting the Fed has had to inject billions of dollars into the money supply to keep the overnight lending rate at 5.25%. This has been a result of banks across the country hoarding cash and diminishing the money supply. In Europe the same thing has happened with the European Central Bank injecting hundreds of billions of euros into the system.This current activity is a direct result of fears concerning the subprime mortgage market. Buyers of collateralized loans, bundled together for trade on Wall Street as mortga...
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Subprime Loans Still Available
2007-08-16 23:46:00
Subprime, subprime, subprime. That seems to be all we're hearing about in the financial news lately. Does this mean that people with less than stellar credit can't get a home loan any more? Far from it actually. While it's true the 100%, no income, no asset, sub 600 scores of the past few years are gone, probably forever, borrowers with bad credit can still get a loan.An extreme example is in an email I received a little while ago. This particular lender will loan to people with a credit score as low as 440, with bank statement income, 60% debt ratio and a rate in the mid 9% range. What's the catch? They'll only loan 70% of the value of the home and only for a refinance. That's the extreme.Other lenders will loan 90% for purchases and refinances with credit scores down to 520. Where subprime has really tightened up is in the stated income or no income type loans. They simply don't exist any more.So don't fret if you have bad credit and want to buy a home or need to...
More About: Loans , Subprime , Prime , Rime , Prim

Salt Lake Real Estate Number One!
2007-08-15 21:24:00
This year has quickly passed us by and with the release of 2nd quarter house values today, I thought I'd revisit some of the predictions I made in January about the Utah real estate market.Back then, a CNN article predicted that in the West, Albuquerque would be the highest city with appreciation. Year to date, it's Salt Lake City.The CNN and Moody's article was very conservative, showing a high single digit appreciation rate in Salt Lake. I was a little more optimistic with a low double digit increase of 10-12%. Current numbers year to date show appreciation in Salt Lake in the low 20% range. In the second quarter, Salt Lake led the nation in both single family homes and condos with 21.9% appreciation.What gives? Housing bears and commenters on this site have stated over and over that Salt Lake is no different than the rest of the country and soon we would be seeing a housing decline of proportions similar to the rest of the country. They've been saying this for a year no...
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Park City Real Estate
2007-08-14 01:30:00
Park City has to be one of the most amazing resort towns in the West. Like the rest of the West, this little resort town famous for it's high altitude, skiing, legacy Olympic venues and the Sundance Film Festival has grown exponentially over the past decade.Every year I like to come up for the Park City Arts Festival which closes off Main street for a weekend each August. Normally I pay attention to the art and food. This year, I focused on real estate.The amount of construction, both commercial and residential is quite astounding. The two houses at the base of the mountain in the photo are newly built complete with heated driveway systems being installed.As you may imagine, real estate here is not cheap. I looked at a decent sized condo in Kimball Junction last year that was priced at $500k for about 1700 s.f. Houses like these overlooking Main St. Park City are much more.The bird's eye view of new Park City homes. Towards the top of Main street and heading on the road to Guardsm...
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Credit Crunch? - Tips for Mortgage Qualification
2007-08-11 02:44:00
One can hardly go a day without hearing about additional fallout from the subprime mortgage market that is now affecting prime loans for residences as well as, commercial and business credit.The recent reaction by the Central bank of the European Union and the Federal Reserve of the United States even scare economic bulls like me.In the case of Europe, an additional $130 billion was made available to the banking system and quickly gobbled up by banks to hold. After the FOMC meeting on Wednesday, the Fed pumped $24 billion in currency that was just as quickly consumed by nervous banks.Meanwhile, fear of money drying up is causing Wall Street to move into speculative overdrive. The Dow has lost almost 800 points in the last three weeks. What is a prospective homebuyer to do in a volatile market like we're in now? First of all, those borrowers with good credit and a down payment can look forward to very attractive rates. All this bad news for stocks is good news for interest rates...
More About: Credit , Tips , Mortgage , Crunch , Qualification

Lower Mortgage Rates Fuel Pent Up Housing Demand
2007-08-08 16:07:00
Despite greater pressure from the economic community and current economic trends, the Fed continued to hold short term interest rates at their current level, 5.25%.The Fed is really in a tight spot right now because so much market movement is simply tied to speculation of what the Fed will do in the future. If the Fed begins to lower rates, that is an admission the economy is doing poorly and could spark huge stock sell-offs and further tightening of credit.On the other hand, raising rates would signify inflation is a bigger concern than the struggling housing market and would also decrease the amount of buyers who could qualify for a home. Either move could set off an economic snowball that would be bad for everyone. Right now the safe move and smart move is to do nothing at all. Financial analysts don't just speculate on the action taken by the FOMC, they place a lot of stock in the accompanying statement. Yesterday's statement really hit the spot for the markets. Prior Fed...
More About: Fuel , Mortgage , Housing , Lower , Rates

The Economic News You're Not Hearing
2007-08-07 04:08:00
The subprime meltdown, high energy prices and higher food costs have been dominating economic news lately. It was easier to dismiss when other indicators like the stock market and employment were doing well. Since last week when the Dow shed over 600 points, the negative news is starting to gain more traction.While there are problems out there, the catalyst to a 1970's style economic catastrophe, is interest rates. Do you know what they're doing? They're going down significantly. The benchmark 10 year bond market which is most closely tied to long term mortgage rates has shed over 30 basis points since last week. Like a golf score, the lower the bond rate, the better it is for borrowers. For investors, a lower yield equals lower returns.Short term interest rates are bound by the overnight lending rate set by the Federal Reserve Board. The Fed meets tomorrow to decide this rate. After 17 straight rate increases to fend off inflation, the Fed has held the rate steady since last Aug...
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Early Signs of Salt Lake Housing Market Slowing Down
2007-07-31 23:15:00
With the build-up of the housing downturn across the country and nearly constant media attention towards the situation, second quarter home sales in Salt Lake were a critical barometer on how our local market is doing.While the overall numbers were good, there are some signs of a slowdown, not a crash, coming to Utah. Any sign of a slowdown was not reflected in selling prices for homes. Salt Lake County saw a 15.5% increase in the median price while Utah County saw a 20% increase. Every County in Northern Utah saw price increases with Tooele County leading the way with 25.7%.Where the slowdown is beginning to show itself is in the time it takes to sell a house and the number of homes being sold. It's taking longer to sell and the number being sold is less than last year. The Salt Lake Tribune reported last Saturday -In Salt Lake County, 3,490 homes changed hands in the April-May-June time period, down a substantial 19 percent from the same three months last year. Utah County sales ...
More About: Market , Signs , Housing , Early

Bad Credit, No Down Payment?
2007-07-27 05:38:00
As we've seen over the past few months, the real estate lending landscape is changing. However, it's not as bad as recent headlines would lead you to believe.Without a good credit score, 640 or above, the days of 100% financing with stated income are temporarily gone. Why do I say temporarily? Because lending goes in cycles...a vicious cycle.Here's what I'm talking about. The major lenders are mostly publicly traded. Think Countrywide, WaMu, Wells Fargo and more. Right now they're feeling a squeeze on their profits due to higher than normal losses and payment defaults.Management is saying let's tighten up lending requirements so we don't have so many losses. A few quarters from now, these companies will have higher percentage profits, but lower volume. Their gross profit will likely be lower and their sales volume will be significantly less. This too will place downward pressure on their stocks.Management will then say, "Why aren't we increasing volume from last yea...
More About: Credit , Payment

Interest Rate Trends
2007-06-30 06:22:00
It's interesting how much mortgage interest rates dominate discussion in the mainstream media. One would think based on media coverage that rates are what dictate home prices and housing demand.However, the latest numbers show that mortgage interest rates are actually lower now than they were last year.The rate on a 15-year loan averaged 6.34 percent, down from 6.37 percent a week ago. A year ago, the 15-year rate averaged 6.43 percent.Five-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 6.30 percent this week, down from 6.31 percent last week. A year ago, the 5-year ARM averaged 6.39 percent.One-year Treasury-indexed ARMs averaged 5.65 percent this week, down from 5.66 percent last week. At this time last year, they averaged 5.82 percent.Interest rates fluctuate and resemble a roller coaster in terms of adjustments. When I started in the mortgage business in 2003, the benchmark 10 year bond yield was 3.98. As of Friday, June 29 the 10 year bond was at 5.02%. Over...
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