Free Land and Cheep Homes"

One good reason to have a “friend in the foothills” who just happens to practice real estate and loans is to keep you informed when a really good real estate deal comes along. I read about one this morning over coffee and cookies.

For those looking for free stuff, I found a half-acre, level lot with all utilities ready for building. As a matter of fact, I found several where construction cost to build a 1,400 square foot 3-bedroom 2-bath home is under $100,000 including permits.

Several small towns (populations under 1,000) in the Great Plains states are attempting to repopulate themselves by giving away free land to families who are willing to build a home and live there. Towns like: Marquette, Kansas, Hendrum Minn., Chugwater, Wyo. Crosby, N.D. and Herndon, Nebraska are not only giving land away for free but cash bonuses if you have school age children to enroll in district schools.

So are folks from trendy California actually moving to small rural communities in the mid-west? Yep, and finding jobs or commuting to employment centers. More information on this mid-western relocation program can be found at www.kansafreeland.com, www.chugwater.com or www.cityofnewrichland.com. The towns welcome visitors. If you decide to take advantage of this free land offer and move to Plainville I will be able to help you with the sale of your existing California home.

Enjoy your weekend.

Rents to rise

If Californians did not enjoy high property appreciating rates there would be fewer and more expensive homes for rent. For the third year the rental market in the Capital Region has been stagnant. Rental rates have only risen about 10 percent since 2002. Landlords have been satisfied with accepting a negative cash flow (monthly rental income, minus monthly payment including property taxes and insurance, minus maintenance) for the high appreciation rates experience over the last few years. Tenants have benefited at landlords expense.

My friend George purchased a rental in 2003 for $325,000. After he put down 20 percent or $65,000, his monthly principal and interest payments were $1,612 he also has $338 monthly property taxes, $100 for insurance and $50 in maintenance for a total of $2,140 a month. George rented the place for $1,500 so he has a $640 negative each month. George called me yesterday about selling his rental. Why? Because, it was now worth $475,000 but the rent was still only $1,500 a month. He figured after selling expense, capital gain tax and reimbursement of his negative cash flow, he was still going to clear over $100,000 profit.

There are lots of landlords like George who are selling their rentals (that they have been feeding the past few years) and choosing to cash in on their investment. Absentee investors and flippers have been leaving the Capital Region for the past year in search of higher returns elsewhere. Consumer confidence and a hot economy is attracting capital out of housing and back into the stock market. Real estate investors who don’t expect high rates of property appreciation to continue are taking their profit now.

Fewer rentals in our region will drive rents higher. Tenants might do well to negotiate now for a longer-term lease or expect to see substantial rent increases. When real estate investors no longer have high appreciation rates, they begin to look for other positive reason to invest in real estate, like cash flow.

Statewide Sales Slow

The sales rate of existing single-family homes dropped 15.1 percent while the median price of an existing home in California increased 13 percent in March compared to March 2005, the California Association of Realtors reported this week. Condo sales dropped 23 percent from March 2005 to March 2006, while condo prices increased 8.7 percent from March 2005 to March 2006.
The median price of an existing, single-family detached home in California during March 2006 was $561,350, a 13 percent increase over the $496,890 median for March 2005, and the March 2006 median price increased 4.8 percent compared with February's revised $535,480 median price. The inventory of homes for sale fell from a 6.6 month supply in February to 4.8 months in March, said Leslie Appleton-Young, C.A.R. vice president and chief economist.
"Unsold inventory climbed significantly in the first two months of this year as listings increased and sales declined. Although the supply of homes for sale increased again in March, this was more than offset by a seasonal increase in sales, prompting a decrease in the unsold inventory index," she said in a statement. "We expect the supply of homes relative to sales to decline gradually over the next few months, although inventory levels will likely remain higher than those of the last two years."
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 89.8 percent or 369 of 411 cities and communities showed an increase in their respective median home prices from a year ago.
DataQuick statistics are based on county records data rather than MLS information. The DataQuick tables listing median home prices in California cities and counties are available online at http://www.car.org/index.php?id=MzYwNTQ=.
The association noted that some of the local variations in median home prices may be exaggerated due to compositional changes in housing demand.
§ Statewide, the 10 cities and communities with the highest median home prices in California during March 2006 were: Laguna Beach, $1,827,000; Burlingame, $1,720,000; Beverly Hills, $1,665,000; Los Altos, $1,626,000; Manhattan Beach, $1,625,000; Newport Beach, $1,520,000; Coronado, $1,463,750; Saratoga, $1,391,000; Los Gatos, $1,300,000; Calabasas, $1,259,500.
§ Statewide, the 10 cities and communities with the greatest median home price increases in March 2006 compared with the same period a year ago were: Reedley, 58.9 percent; Atwater, 52 percent; Twentynine Palms, 48.8 percent; Barstow, 45.7 percent; Beaumont, 45.6 percent; Taft, 44 percent; California City, 43.1 percent; Burlingame, 40.4 percent; Porterville, 40.3 percent; Highland, 36.8 percent.
§ Regionally, sales dropped 27.5 percent in the Orange County area from March 2005 to March 2006, 27.2 percent in the Sacramento area, 25.4 percent in the Monterey area, and 24 percent in the Central Valley area. Prices dropped in 11 of 20 regions from February to March, and year-over-year price appreciation in March was slowest in Northern Santa Barbara County area (1.6 percent), and highest in the High Desert region (23.6 percent).

Home Equity Loans

A lot of folks have home equity loans called Home Equity Lines of Credit or HELOC. They are easy to get. You can apply while waiting in the check-up line at your favorite grocery store and be approved by the time your grocery bags are loaded. Most of us don’t have a problem figuring out how to use an extra $20,000 or $30,000 from a HELOC. For most there is always more things to buy and do and bills to pay than money coming in each month.

Since 2002, 300,000 homeowners in the Capital Region have taken advantage of HELOC for a combined total of $22 billion according to La Jolla-based DataQuick Information Systems. In California, 1.2 million of us have a combined debt of $137 billion for our HELOC. HELOC are becoming like house pets. Everyone has one.

The attractiveness of home equity loans is wearing thin. HELOC interest rates are based upon the prime lending rate, which has been steadily increasing, and just like a new puppy, they require more feeding as they grow older. HELOC will be around long after the stuff that they paid for is forgotten.

The most popular use of HELOC loans is debt consolidation. Paying off the car or credit cards feels good and the interest rate on a HELOC is usually tax-deductible. The second most popular use of the loan is remodeling. The best use I have seen of using a HELOC was a client who returned to school to get her degree. Her earning capacity has now substantially increased and her additional earnings go toward paying off the loan. The most questionable use of a HELOC was a client who used his proceeds to purchased stock in a friend’s new company. He eventually lost his friend and his stock but he still has his HELOC.

Slower Regional Sales

Existing home sales in the Capital Region during the month of March, declined sharply from a year earlier. Home sales for the region totaled 2,500 but it was the slowest March since 1999 and down by 29 percent from last year according to DataQuick Information Systems.

While the number of monthly sales declined in all four counties the average price of a home remains above last year. Homes in El Dorado County sold for 13 percent more than they did in March of 2005. Placer County’s home prices were up 6 percent, Sacramento County up 8 percent and Yolo County up 8 percent.

The number of homes for sale continued to increase. In March of 2005 the region had 3,800 homes with a “For Sale” sign in their front yard. Last month the number of listings had swelled to 10,300.

Will the excess of housing inventory decline as we move into the traditional home buying season this summer? Will prices hold above last year’s level? If employment remains strong and interest rates stay under 7 percent, sales will pick up. Not to last year’s level. The 29 days of rain during March didn’t help. A lot of homes came on the market early over the last four months. I expect April will be the peak for new inventory and then we will see a decline in the rate of increase.

Many investors and flippers have been liquidating. It takes a few months for that inventory to work its way through the system. Sellers and agents are also becoming more realistic on their price expectations. April will be a pivotal month.

Slower Regional Sales

Existing home sales in the Capital Region during the month of March, declined sharply from a year earlier. Home sales for the region totaled 2,500 but it was the slowest March since 1999 and down by 29 percent from last year according to DataQuick Information Systems.

While the number of monthly sales declined in all four counties the average price of a home remains above last year. Homes in El Dorado County sold for 13 percent more than they did in March of 2005. Placer County’s home prices were up 6 percent, Sacramento County up 8 percent and Yolo County up 8 percent.

The number of homes for sale continued to increase. In March of 2005 the region had 3,800 homes with a “For Sale” sign in their front yard. Last month the number of listings had swelled to 10,300.

Will the excess of housing inventory decline as we move into the traditional home buying season this summer? Will prices hold above last year’s level? If employment remains strong and interest rates stay under 7 percent, sales will pick up. Not to last year’s level. The 29 days of rain during March didn’t help. A lot of homes came on the market early over the last four months. I expect April will be the peak for new inventory and then we will see a decline in the rate of increase.

Many investors and flippers have been liquidating. It takes a few months for that inventory to work its way through the system. Sellers and agents are also becoming more realistic on their price expectations. April will be a pivotal month.