Archive for November, 2008

Wishing you and your loved ones a wonderful Thanksgiving.

~ From all of us at The Valerie Fitzgerald Group

With mortgage meltdowns, plummeting home prices and soaring foreclosure rates constantly in the news, it’s no wonder people are wary of the housing market these days. But contrary to popular belief, things are not as dismal as they seem, according to Lawrence Yun, chief economist of the National Association of Realtors. Yun debunks 10 commonly held beliefs about the current housing market (RISMEDIA, Oct. 29, 2008)

1. Peak-to-trough home price declines to date have been about 20%.Wrong. Measurements of home price declines can be skewed depending on which homes in which markets are being measured. For instance, the Case-Shiller Index, which indicates that home prices are down 20%, is heavily skewed towards homes with subprime loans and other distressed home sales. These troubled homes have experienced a steeper decline than home prices in general, says Yun, adding that both government data based on loans backed by Fannie Mae and Freddie Mac and data from the National Association of Realtors suggest much more modest price declines.

2. The much smaller number of new homes now under construction indicates the dismal outlook for the housing market. Wrong. The inventory of homes on the market is very high, so the last thing we need now is more new homes being built. Home builders have cut back sharply on production, which will help lower inventories and stabilize prices. The builders have done exactly what market forces are dictating under current conditions, Yun says.

3. Even when the housing market recovers, home price growth will be only 4 to 6% per year – much less than historical average returns for the stock market. Most buyers put less than 20% of their own money into a home purchase; this borrowing power can translate to a greater rate of return. This is how Yun explains it: Home price appreciation historically has been about 1 to 2 percentage points higher than consumer price inflation, which translates into about 4 to 6% per year. But this growth rate cannot be viewed as a rate of return like the stock market. The reason is that most people do not buy a home for all cash, instead making a cash down payment and borrowing the rest. The leverage this borrowing creates can magnify returns – and losses. If price growth returns to historic norm, the price growth of 4% can easily turn into 20 to 30% rate of return if the home buyer makes a down payment of 10 or 20%.

4. Impending baby boomer retirements and moves to small homes will cause a glut of homes on the market. Wrong. The first edge of the baby boomers has reached 60 years of age and the massive bulk of that generation will soon go into retirement, but far from trading down, many of these older homeowners are keeping their homes or moving to ones of comparable size. And even if more boomers do sell their larger homes in the years ahead, Yun points out, the rapidly growing U.S. population should absorb the inventory of existing homes on the market.

5. The federal government takeover of secondary mortgage companies Fannie Mae and Freddie Mac is a bailout that will cost taxpayers bundles. Too soon to tell, says Yun. It’s conceivable that taxpayers may have to cover some losses. It’s also possible that the takeover will result in no loss of taxpayer dollars. Even if taxpayer funds are used, the bailout would be preferable to the global economic problems that would’ve occurred if Fannie and Freddie had gone belly up.

6. The Federal Reserve controls mortgage rates. Wrong. Yun explains: The Fed’s activities influence mortgage rates but don’t directly control them. What the Fed sets is a very short-term interest rate called the Federal Funds Rate. Mortgage rates are determined by global savings as well as credit spreads and inflationary pressures. Over the past two years, the Fed has raised the Fed Funds Rate to 5.5%, and then cut it to around 2%. All the while, the 30-year mortgage rate has averaged 6 to 6.5%.

7. It’s the wrong time to buy. Wrong. All real estate is local. For those who are financially and mentally ready to buy, there has never been a better time to be a buyer in many markets. An abundant selection of homes and historically low interest rates give buyers an edge over sellers. The recently passed $7,500 federal tax credit for first-time home buyers creates an added incentive. For someone with a long-time horizon, Yun says, there is very little worry about home values since homes have historically provided a solid foundation for wealth accumulation.

8. It’s the right time for everyone to buy. No. All real estate is local, and everyone is unique. Someone who is not emotionally or financially ready should not be forced or induced to join the rank of homeowners, even when a market presents good buying opportunities. Potential homeowners clearly need to understand that the decision to move up to ownership requires sacrifices, like saving up for down payment and elevating their credit scores. Homeowners who lose their home to foreclosure serve no one’s interest, Yun adds.

9. It’s a terrible time to sell. Wrong. In markets where home sales are picking up, a seller can easily get an offer if the property is priced correctly. Also, Yun says, for those looking to trade up, selling low on an existing home is more than offset by buying the new move-up home at a lower price. When the market recovers, home price appreciation on the traded-up home will bring bigger bang for the buck.

10. With the advent of the Internet, more and more homes are being sold by owners (FSBOs), and real estate practitioners are becoming obsolete. Nope. According to Yun, the share of home sellers who choose to go it alone when selling their home has actually decreased from about 20% in the late 1980s to about 12% today. Even after these sellers successfully complete a transaction, only 4 in 10 say they would sell their next home without the assistance of a real estate professional.

Valerie wins…LA Business Journal – Excellence in Marketing!!!

Valerie Fitzgerald is the 2008 recipient of the Los Angeles Business Journal’s Real Estate Award – Excellence in Marketing. Announced at an exclusive awards event November 19th, then in the November 24th issue of the LA Business Journal, the award celebrates a local agent who demonstrates best business practices and resiliency in the face of a challenging market.

Driven by a nomination process of peers and a panel of well-recognized judges, the Residential Real Estate Awards recognized winners in a series of categories including Excellence in Marketing. Valerie’s strategies and reach, on and off-line, are a testament to her ongoing effort to market and promote her business.

It’s an honor to be recognized by peers, and to take home this prestigious award.

This is Car Heaven! Check out World Debuts, North American Debuts, and Concept cars….amazing! Here are some video highlights, but if you really want a treat – read about the sneak preview night.

Show dates are Friday, November 21 – Sunday, November 30 at the Los Angeles Convention Center. Click here for show hours and ticket information.

With our beautiful fall weather, now is the perfect time to discover the architectual gems of historic Los Angeles with a walking tour hosted by the Los Angeles Conservancy. Visit the Conservancy’s website for tours, holiday events, and a wealth of information on Greater Los Angeles’ architectural heritage.

Feel free to call me (310.433.2890) or email me with any questions.