Should I Buy A Home Now?

The Zillow Home Value Index fell 26% since its peak in June 2006. That’s a greater decline than seen in the Depression-era years of 1928 to 1933.

According to Zillow.com, "November marked the 53rd consecutive month of home value declines, with the Zillow Home Value Index (ZHVI) falling 0.8% from October to November, and falling 5.1% year-over-year.”

But the news isn’t all bad. If you’ve gathered around the office water cooler to catch up with colleagues, maybe you’ve noticed a bit of optimism blossoming. it’s not just a feeling, it’s real. According to Zillow Research, the economy is improving. The improvement is expected to gradually increase "household formation and consumer confidence”. But the housing market may still face greater declines due to "excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated unemployment,” reported Zillow.com.

However, if you’ve been watching, waiting, and wondering, when to buy ... . Now’s the time to take note. While no one has a crystal ball to predict what will happen with the housing market, some experts are reporting that an uptrend will occur later this year. They’re basing their beliefs on the job market (some predictions indicate it will improve half-way through this year), and "Homebuilder exchange traded funds are above their 200-day moving averages,” according to ETFTrends.com

If all these things have you confused, a simple way to look at real estate is to understand your specific needs, wants, and long-term goals. Do you need a place to live? Are you planning to stay in your home for at least a couple of years? (Most buyers live in their home on average seven years). Does owning your home matter? Have you saved money for a downpayment?

Answering these questions will help point you in the right direction. Assuming that buying a home is the best scenario for you, how can you rest easy that you’re getting the best price? Ah, the $64-million question. You can’t.

Timing the market is like trying to win the lottery. There is no absolute way to know when it’s the bottom of the real estate market. That’s why you must know your specific needs, wants, and long-term goals.

If your needs include a home to live in for a lengthy period of time, then homeownership will likely rank higher on your priority list. If building credit, potential of appreciation–yes, there is still appreciation–especially when you buy a sensibly priced home in a good location. However, the appreciation may be slower and not shoot up into the double digits that we saw in some areas.

Consider this, with high inventory, sellers are motivated. You can scoop up a home at a perfect price and you can minimize your potential for low appreciation. If you choose a home that is in the lower-tier of prices (and still within your target price), your home will be less vulnerable in down markets and better situated in up markets because the higher-priced homes help elevate your home’s value.

Homeownership has many benefits including tax deductions, the opportunity to make your own creative changes to your home, and the potential for income if you later rent it out.


Written by Phoebe Chongchua
February 4, 2011

Thinking about Buying or Selling?
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Good Looking Hood

One of the advantages of a homeowner association is to keep the hood looking good by enforcing architectural and design standards. These appearance standards are designed to protect the HOA members' property values. The theory is that if all homes follow the same basic theme, the average home buyer will be willing to pay more.

Non-HOA subdivisions have appearance standards too, but only a civil lawsuit can stop someone determined to violate them. Since most neighbors hate confrontation, appearance standards usually go by the wayside opening the door to the things like RVs parked along side the house, tarped "classic" cars and eye wincing paint colors. Thus, the need for appearance standards and the enforcement thereof.

The governing documents usually outline the appearance standards when they are very strict but often say little when they're not. They may define the standards but not the enforcement method. leaving the Board in an awkward position when confronted with multiple appearance "challenges". This is a great topic for the Resolution Process. Resolutions are board policies that deal with complex issues like collection of money, pets, parking and appearance standards. Resolutions provide a framework to deal with them effectively. By the way, resolutions cannot amend or change the meaning of the governing documents, only expand on the authority. Amending the governing documents requires an appropriate vote of the homeowners.

After your Appearance Standards Resolution is drafted, ask your attorney to review it for compliance with statute and your governing documents. Then, allow the other owners to participate in the outcome. Once drafted, it should be circulated to all the owners for a 30 day review and comment period. The approval process shouldn't be rushed. Change is difficult for some.

A good way to broach the subject with the membership is to send out a newsletter discussing the reason why: to preserve property values. Consistent appearance standards are in everyone's best interests. Describe how, for example, junk vehicles, unkempt lawns, collapsing fences and weathered or outlandish paint colors drag property values down for everyone without naming names (Mrs. Lavendar Chartreuse, you know who you are). Encourage attendance to a special meeting to discuss the Appearance Standards Resolution.

After the new Appearance Standard Resolution is cussed, discussed, amended and approved, it's time to start enforcement. Select the closest equivalent you have to Henry Kissinger and a Mafia Hitman. If you have none of these, after appropriate written notifications, make good use of your attorney to turn up the heat. Never be guilty of selective enforcement. Treat everyone the same.

Appearances do count and it's up to the board to watch dog what happens in the community. Don't wake up one day and ask "Where am I and why am I in this handbasket?" Protect your HOA appearances by keeping the hood looking good.

For more innovative homeowner association management strategies, seeRegenesis.net.


Written by Richard Thompson
January 26, 2011

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Buyers Advice: Housing Affordability

You may be asking yourself, "Is now a good time to buy?" It's a very important question. As a buyer, you're concerned with getting the best deal possible. Will you be buying at the top of the market? Or will you purchase when the market is in favor of you, the buyer?

According to the National Association of Home Builders (NAHB) and their Home Builders/Wells Fargo Housing Opportunity Index (HOI), affordability is high for the 5th consecutive quarter.

How is affordability calculated? In general terms, if housing costs don't exceed 30 percent of the monthly household income, then it meets the standards. Anything more than 35 percent is too high.

"Today’s report is very encouraging because it indicates that homeownership continues its more than year-long trend of remaining within reach of more households than it has for almost two decades," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "With interest rates still hovering at low levels, companies starting to hire new employees and the economy beginning to rebound, this should encourage more home buyers to enter the market and help further stabilize housing and the economy."

The HOI indicates that 72.2 percent of all new and existing homes sold in the first quarter of this year were affordable to families earning the national median income of $63,800.

Some of the best markets for affordability is:

• Syracuse, New York

• Dayton, Ohio

• Grand Rapids-Wyoming, Michigan

• Indianapolis, Indiana

• Youngstown, Ohio, and

• Bay City, Michigan

Of course, affordability, like most aspects of the housing market, is a local issue. The local economy has a direct effect on home prices, market favor (buyers or sellers), and the like.

Take for example, New York-White Plains-Wayne, New York-New Jersey. The NAHB says this region continued to lead the nation in poor affordability. Less than 21 percent of all homes sold in the 1st quarter 2010 were affordable.

Other markets where affordability is low:

• San Francisco, California

• Honolulu, Hawaii

• Santa Ana-Anaheim-Irvine, California, and

• Los Angeles-Long Beach-Redwood City, California

Be sure to talk to your local REALTOR® about where your local market fits into the affordability equation.


Written by Carla L. Davis

Thinking about Buying or Selling?
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Successfully Navigating The Changing World of Mortgages

The world of mortgages is changing. To paraphrase the old Joni Mitchell song, most consumers will not know what they’ve got until it’s gone.

• They won’t realize that by the time a mortgage is paid off, borrowers have paid two or three times the original amount borrowed—the mortgage principal—to buy real estate they originally bargained hard for to cut costs.

• They won’t understand what they could have done to increase their real estate holdings and improve their profits until the legal and tax advantages that support investment and individual creativity disappear.

The real estate and banking sectors are set up to facilitate their deal making and profit taking with a measure of consumer protection added to keep things from becoming noticeably one sided. Too many buyers and sellers further stack the deck against themselves by not digging deeper than fads, marketing, and salesmanship. Most real estate buyers and sellers invest more time learning about their latest mobile device and its apps than exploring ownership and financial strategies for buying residential and recreational property.

Therefore, they may not miss what they did not understand, and would have appreciated, in the first place. Have you heard about a great government program or a tax advantage only when the media lament its end? How do you make sure you are taking advantage of all the options open to you to reduce the cost of the money you borrow to purchase real estate—your mortgage?

Real estate buyers and owners who want to achieve more for less should start this new year by learning what the latest round of mortgage resets mean to their specific real estate goals and opportunities. We always advocate going to the source, so dive into the detail announced by the Federal Ministry of Finance January 17, 2011: http://www.fin.gc.ca/n11/11-003-eng.asp

Here are a few perspectives to start you off.

Just remember, that what is relevant to you and your specific situation may not be on this list, hence the value of going to source:

Motives and motivation: The title, “The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market,” has an election ring to it. Either the federal government is positive there won’t be more negatives ahead for housing, so it wants to appear to have created the soft landing, or it is bailing out before problems hit, so it can point fingers at others while patting itself on the back. What’s your opinion?

Reduce amortization: Cutting the maximum amortization period down 5 years to 30 years is not the across-the-board measure it has been presented as. This restriction applies only to new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. The 35-year amortization may be available for mortgages outside these restrictions for borrowers that lenders feel suit this repayment method. The amortization period is the number of years, at a specific payment amount, that it will take to pay the mortgage principal and interest to zero.

• Buyers’ advantage: The longer the amortization period the smaller the monthly payment of principal and interest, and the greater the mortgage principal a buyer will qualify to borrow. Buyers could opt for the longest amortization possible—which used to be 40 years, then 35 and now 30—and then, down the road, decrease the amortization period on renewal to cut total interest costs.

• Owners’ advantage: The shorter the amortization period, the lower the total amount of interest paid on a mortgage. The common 25-year period provides a hefty profit for lenders. Pop your original mortgage principal into a mortgage calculator, and see how much you have paid for this borrowed money in the first 10 years. Compare this with how much is left to pay on the mortgage. Shorten the amortization period as much as possible when you renew. Even one year can make a difference in the total interest paid.

• Equity building: The government reports the latest restrictions will “allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire”. Home equity management is an ongoing topic in this column, but if these changes represent the government’s best shot at facilitating equity building, they need input from consumers on what would really aid in accumulating value and repaying mortgage debt.

Taking taxpayers off the hook for lenders: The government backs mortgages arranged to buy real estate, so if the borrower defaults and can’t make payments, the government (that’s taxpayers) cover losses for lenders (that’s largely the big banks). Those same lenders promote refinancing for a range of home improvement and lifestyle uses, the government is letting it be known that this lender-promoted debt should not be as risk-free for lenders as arranging the original mortgage. Lender reactions to the government taking taxpayers off the hook for mortgage default or lack of repayment may not be pleasant for homeowners.

• Restricting access to equity: By lowering the maximum amount Canadians can borrow when refinancing their mortgages the government says it’s promoting savings. The drop from 90 per cent to 85 may not seem significant until you want that 5 per cent in your pocket. This change means the only way to access that 15 per cent is to sell. When so many want to stay in their own homes as they age, does this move seem in synch with consumers goals?

• Withdrawing government insurance on lines of credit: Lenders who issue lines of credit secured by real estate, including home equity lines of credit, will no longer have government insurance to cover them against losses. The government believes its move will ensure that risks associated with consumer-debt products used to borrow funds unrelated to real estate purchases are managed by the financial institutions and not borne by taxpayers. Will lenders demand a premium for their additional risk?

  Note: The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

Government intervention: The government’s paternalistic approach with this “for their own good” set of financial rewrites opens the door to many considerations. Do you want the government deciding what’s best for you and your real estate, or would you prefer to deal with lenders who set standards and criteria for lending on a case-by-case basis? What may not be prudent for one borrower may be calculated risk for another.

The Honourable Jim Flaherty, Minister of Finance, was said to make “prudent adjustments to the rules” to “support hard-working Canadian families saving through home ownership”. Does their definition of “saving” properly describe your intentions in owning real estate?

If you need help understanding finance and planning for your future, is the government your preferred source and resource? Maybe the wrong level of government and the wrong ministry are involved. Wouldn’t it be more practical to teach money management and real estate investment in public school, so we all become our own experts?


Written by PJ Wade
January 25, 2011

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How Much Home Can I Afford?

Home prices skyrocketed in the early 2000's, with things really heating up between 2005 and 2007. According to the New York Times, HUD conducted a survey in 2007, finding that home values had risen 16 percent in just those two years. The housing bubble burst in the Spring of 2007 and markets tanked.

Now house values are resetting, with some areas still experiencing declines. In high boom areas, such as Florida, Arizona, and California, homes are having to correct from staggering rises of 20, 30 and even 40 percent in home values. This means values rose, and millions of homeowners bought at the top of the market, now finding themselves upside down in their loans.

Despite the crisis, there are still buyers on the market. But many are wary to make a mistake of buying a home they can't pay for. How much home can you really afford? Home affordability, in general, is dependant on a range of factors. These include:

Employment status: Do you have a stable job and income? Lenders will want to know if they can rely on you to make monthly payments for many years to come. With an unemployment rate near 10 percent, it's no wonder a record number of homes are currently in foreclosure. Another way lenders assess your risk is by examining your credit score.

Credit Score: Over your adult life you have been building up a credit score. Every card and loan you have opened has figured into a 3 digit number from 300 - 850. The higher your number, the less "risk" you are perceived to be, and thus, the more likely you'll be extended higher sums of credit for a lower rate. Car loans, student loans, home loans, credit cards, and personal loans. How faithfully you've repaid them, and how many of them you have open, dictates your score.

Number of Dependants: Do you have children or aging parents for whom you are financially responsible? If so, consider medical bills, schools tuition, and daycare when calculating a reasonable budget.

Desired Location: A 2,000 square foot home in rural Nebraska costs dramatically less than the same 2,000 square foot home in the heart of New York City. Prices even range widely by suburb and neighborhood.

Savings: You will need money for a downpayment. Financial Expert Suze Orman recommends you put at least 20 percent down. That means on a $200,000 house, for example, you should have $40,000 in cash to put down. You will also need additional cash for closing costs, as well as repairs and maintenance that are inevitable with homeownership.

Emergency Fund: Do you have a separate savings account worth 8 months of bills? You must have an emergency fund. Just ask the 15 million unemployed. Things do and will happen. If you don't have this fund, you can't afford a house. You may be able to "borrow" money for a house ... but in reality you really can't afford one.

Interest Rates: Interest rates are at historical lows. At this writing, the 30-year fixed rate mortgage is 4.74 percent. To put this in perspective, rates in the 1980's were anywhere from 13 to 18 percent. This means big savings if you are in the position to buy.

Monthly Payments: If you have ever bought a car, one of the first things a salesman will ask you is, "Where do you want your monthly payment to be?" It's all about rates and downpayments with lenders. Yes, it is important that your monthly mortgage payment is no more than 1/3 of your monthly income, but don't be coaxed into buying a home you can't really afford just because the monthly payments are appealing (hello, subprime mortgage crisis).

Now, all that said, this next idea may seem a bit radical for some of you. There is a movement among some Americans to not only reduce their debt, but to get completely out from under it. This translates implicitly into the home buying process.

We have become a nation increasingly driven by the bigger and better. Need we say more than "McMansions." It is a culture of debt, where even the national government owes $14 trillion. And no, not every country has national debt. The United States, though, leads the way.

So, what if you could buy a much smaller house, or a house in a much less prominent neighborhood, and avoid a mortgage payment altogether?

The idea is nearly unheard of in this country. But it could be one that will begin to gain ground as many families struggle to makes ends meet, and even more families learn the hard lesson about home affordability. The truth of the matter is this. If you are paying a mortgage, you do not own your home. It doesn't matter if you've paid on a loan for 1 year or 29, if you default, the home is property of the bank.

"But what about Joe Smith, who works in the same office and makes $150,000 a year. He just bought that $500,000 house. I should have that same standard of living." This is what is partially responsible for the bubble we saw in the last decade. Keeping up with the Jones.

Consider for a moment what it is in your life that is really important. No doubt you will quickly pull to mind your family and closest friends. You may think about a full refrigerator, a safe city, and a clean bill of health. These are things found in small homes, the same as large.

Success is not measured by the size of house you own. So, if you are in the market to become a homeowner, be sure to consider what it could mean to buy truly within your means. Does it mean saving for a few more years and then buying a fixer upper? Does it mean the smaller house in the less prestigious neighborhood is in your budget?

In recent years, "What can I afford?" has turned into "How much monthly payment can I afford?" or "How much credit am I approved for?" These do not equate with affordability. Perhaps it is time to think long and hard about what kind of home is appropriate for you and your family. You may find that travertine and granite can be forgone for a nice kitchen table and family meals.


Written by Carla Hill
January 26, 2011

Thinking about Buying or Selling?
Call Alvin's Team Today! 877-651-7810
Or visit our website: www.LivingLakeTahoe.com

Kitchens That Sizzle Heat Up Buyer Interest

Most people know that location is, of course, vital in influencing a buyer's decision to make an offer. Sellers also understand that kitchens and bathrooms are high on the list of areas to check out first. But what exactly makes a kitchen sizzle?

Designer, Susan Serra who specializes in kitchens, told Realtor Mag, that kitchens are being used for more purposes these days. They're no longer enclosed by walls. In fact, the more open the kitchen is to other parts of the house, the greater chances it's liked.

Kitchen walls started coming down a few decades ago. The lack of separation in the rooms in the home leads to great rooms and an easier ability to connect with family members in common spaces.

Growing trends in kitchen architecture include softer lighting, larger windows, and–here's a surprise–fewer cabinets. That doesn't mean that you can get away with very little storage space, instead it means you have to be creative.

If you're selling your home and these popular trends aren't part of your home's blueprint, not to worry... you can make your kitchen sizzle with a few simple changes.

Create a gathering space. If you have a large kitchen, consider installing or placing a portable island in it. These are very popular for a number of reasons. They're handy, useful for extra storage space, and they often become a central gathering spot at parties, especially when there's food on them. Add a few bar stools and you've got a comfy and welcoming place for guests to relax while dinner is being prepared.

Turn down the lights. Not literally, rather use lighting that's less harsh. Overhead lighting is excellent but, to create a mood, you can place accent lights in tucked-away areas that will still allow the light to shine in the kitchen. Maybe an adjoining hallway, for instance, could have a small lamp on a table or sconces on the walls.

Make room. Even though some architects are taking away the cabinets, buyers still are attracted to plenty of storage space. That means sellers who don't have it, must creatively devise it. By staging your home with stand-alone cabinet furniture and displaying some kitchen items in them, you give buyers an idea of how to use the space.

You'd be surprised at how many buyers enter a home and may not have any idea about how to use a particular area/space in a house. Taking the time to show them how you've used it can help them understand how it will suit their needs, or, at the very least, spark their own ideas about using the space.

Make it comfy. Think about what makes you want to stay and visit at a friend's home. Good food and company, of course! But also, comfortable seating. Even though your furniture likely won't be sold with the house, the convenient chairs you have in your kitchen will influence the buyer's overall reaction to your kitchen and house. If the chairs are too large, don't match the design and decor, and are uncomfortable looking, they'll give the buyer a feeling of something being “just not quite right”.

Comfortable chairs–even a love seat, upholstered bench or wing chair–can be very inviting. They sort of beckon buyers to take a seat, stay for a while... and if there's a plate of cookies and a cup of fresh brewed coffee, well now, the buyer just might have time to really begin to feel at home. And that, after all, is precisely what every seller wants every buyer to feel in their listed home.


Written by Phoebe Chongchua
January 14, 2011

Thinking about Buying or Selling?
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Controlling Your Income

Being able to control the income is really where agents get into trouble. Too many agents’ pay comes irregularly. A Champion Agent’s income comes consistently. It enables them to control it better, save more, and invest more to create wealth. It is not what you make, it’s what you keep. I have met too many agents who make $300,000, $500,000, even a million dollars a year and are broke. Part of their problem is their expenses. The other part is in their personal and business system of controlling the income. I will share with you a simple plan to help you control your income and become wealthy.

Your business checking account is merely a holding tank. Don’t keep large amounts of money in there. When a commission check is received, put it all in the business checking account. Set up a business savings account and deposit 10% of your gross commission in there. That is your rainy day fund, dividend fund, and source for the future. You can build up a lot of funds through this method. At the same time, set up a tax savings account. Deposit 20% of every check to the tax savings account. This method guarantees you have the funds available when quarterlies are due.

Create one last account for your investments savings account and deposit 10% in that account. This account can be built up to fund your retirement accounts, 401K, simple IRA, whatever vehicle you use. I am a firm believer that as a business owner we need to take advantage of these tax free investment opportunities. You can save the money to buy property. The more you can segment or even hide money from yourself, the greater the chance you can avoid wants becoming needs. When the money comes in bunches, wants can easily become needs.

If you are unable to put 10% in each of these savings accounts, start with 5%, 2% or even 1%. It’s the habit that we are trying to establish. The habit will lead you to wealth.

Collect a significant monthly personal compensation out of the business in salary and dividend that you can segment or hide your money again. You want to pay yourself enough to cover your personal expenses while at the same time, saving and investing in your future as well. I have used the 70/10/10/10 way of managing my money for years. It’s a simple approach, I don’t have to budget extensively and it works. The seventy percent is what my family gets to live on. Joan and I can spend it any way we would like. There are usually long discussions about that in our home. We give 10% of our income to charity. For us, it’s our tithe to our church that equates to that 10%. The blessings have been awesome since we make that commitment to bring in the whole tithe years ago.

We save 10% in a general savings account for emergencies, property taxes, family fun, and large purchases like a new car. I am not a believer in debt, whether car or credit card. My view is the only debt I will accept is appreciating asset debt like real estate or possibly business debt. Because we have been doing that so many years, we rarely pull money out of savings for anything. It’s just another area to create wealth. We then save 10% for investment. This can be real estate investment or after tax investment of stocks bonds, CD’s or any other source we choose. I am not professing that I have created the perfect system, but it works for me and works for thousands of other people I have taught it to, both inside and outside of real estate.

When I started this system well over fifteen years ago, I was not able to do 70/10/10/10. I had too much month at the end of my money due to debt and lack of income. I wanted to do 70/10/10/10, but couldn’t, so I started with 95/1/2/2. That quickly became 90/3/3/4. Within twenty-four months, I was able to do 70/10/10/10, and my life has never been the same.

The real skill of a Champion is to control the resources and money they have to create the quality of life they desire. We all need to live within our own means to make sure our future is secure. I believe that you won’t be blessed with more unless you wisely use what you have now. People who acquire wealth learned to control small amounts well before they acquired large amounts. Control what you have now and more will be granted to you.


Written by Dirk Zeller
January 21, 2011

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Call Alvin's Team Today! 877-651-7810
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