New Permits Fall

Studies from around the state show the areas that are most overbuilt with new construction are the hardest hit areas for price declines and slow sales. Local builders have been adjusting by trimming their inventory, cutting prices and offering incentives. Housing prices will not firm up for builders or existing home sellers until the excess inventory of new homes has been reduced to sustainable levels.

Regional builders pulled 41 percent fewer new building permits for single-family homes during last month than they did in June of 2006. It is an attempt to get inventory levels down and wait for the market to improve. In June of 2005 builders were busy pulling 1,500 permits for the month. Builders in Sacramento, Placer and El Dorado County took out 611 permits during the month for single-family homes and 205 for new apartments or condominiums. Last year area builders built 12,000 new homes. This year the number will be under 10,000.

What's your number?

Since Noah started counting animals 2 by 2, mankind has been assigning numerical rankings to everything. Is the world more orderly if we all have an assigned ranking? Do you know your number?

My number was yelled out each month while attending private high school. Our commandant would call the entire student body into Sherman Hall and read everyone’s report card ranking from top to bottom. Everyone knew where they and everyone else placed in academic achievement. From the podium Col. Jones would yell out ”NUMBER ONE WITH A 4.0 MONTHLY AVERAGE… EVERETT, NUMBER TWO WITH A 3.95 AVERAGE. JENKINS, ..NUMBER THREE WITH A 3.90 AVERAGE SCOTT” and on it went until every student’s name and academic rankings echoed from those hollowed walls.

Money magazine likes to publish lists and the rankings of things. The June addition released its annual ranking of the 100 “Best Places to Live.” The top three cities I have never visited like Middleton Wis., Hanover, N.H. and Louisville, Colo. But I have spent some time in the number 74, Granite Bay, and number 76, El Dorado Hills. The Sacramento Bee published the results with the headline “Capital cities rank near bottom.” While the Auburn Journal ran the headline “Granite Bay earns spot in Top 100 list” The Journal’s article goes on to read “Granite Bay is in the top three-quarters of the vaunted rankings. I can appreciate being in the top three quarters.

Consumer Confidence Up

Lost in the plethora of bad news about the stock market, housing market and financial markets was a back page article in the major Sacramento newspaper on consumer confidence. Despite lower consumer spending and slower job growth people are feeling pretty good about the economy.

The Consumer Confidence Index reached a six-year high in July after falling off in June, a rebound economists view as a sign of gathering economic momentum focused away from the slowdown in the housing market and on job growth, according to The Conference Board.The Consumer Confidence Index climbed to a 112.6 in July, up from 105.3 in June. "An improvement in business conditions and the job market has lifted consumers' spirits in July," said Lynn Franco, director of The Conference Board Consumer Research Center. "Looking ahead, consumers are more upbeat about short-term economic prospects, mainly the result of a decline in the number of pessimists, not an increase in the number of optimists. This rebound in confidence suggests economic activity may gather a little momentum in the coming months."Lets hope the more positive attitude continues. Help to get the word out.

The No Word

I have been saying no to a lot of clients recently. No is a word that I have disliked since childhood and I don’t like saying the “no” word to friends and clients today. I believe no was the first word that I came to understand as a child. The word was always followed by “YOU CAN’T DO THAT!” and “I AM NOT GOING TO TELL YOU AGAIN!” Growing up, teachers and coaches reinforced my distaste for the “no” word. While pointing her ruler in my direction my fourth grade teacher, Mrs. Bishop, would say ”No, that is not correct Kenneth, “i” comes before “e” except after “c” and from Coach Gray…. “NOOOOOO… YOU IDIOT, YOU RUN TO YOUR LEFT NOT YOUR RIGHT!”

Yes is a word with unlimited possibilities. Yes is more fun and exciting. It moves us forward. In sales, life evolves around people saying yes. Yes is a word that you want to give and receive from customers. When clients say yes, things happen so why have I been saying no to so many clients recently?

Angela called to tell me the good news that she and Bob were getting married in the fall. Since Bob had a larger home than the small two-bedroom I helped Angie buy five years ago, she thought she should sell her place and move into his. After a quick check on property values in the neighborhood, I told Angie she would do better renting the property than selling at this time. Her low interest rate mortgage and property tax base would allow her a small positive cash flow and some tax breaks for the next two years until the market absorbs the excess inventory. Her profit from a sale two years hence would still be tax exempt. If Bob would have proposed two years ago my advice would have been different.

Darren called to tell me he was thinking about selling his house in Folsom and buying another in El Dorado Hills. His family was larger with the arrival of the twins and he wanted a 3-car garage. I was visualizing saying yes to a nice listing in Folsom and a sale in El Dorado Hills but the reality was different. Although Darren’s house had appreciated substantially over the last few years, so had everything else. Darren’s salary had increased 15 percent since 2003 while the price of homes in El Dorado Hills had increased 50 percent. Despite sufficient equity in Darren’s existing home for a downpayment, the family’s income wasn’t sufficient to qualify for a new loan at higher interest rates and property taxes. My advice was to stay-put until Kimberly went back to work.

Jerry called to get my advice about refinancing his existing mortgage. Jerry and Paige used to own their house free and clear but mortgaged it a year ago to help their kids in a jam. Despite their perfect credit, some lender had stuck them in a high interest subprime loan. I ran the numbers and although a new loan would save them $400 a month, it would take 5 years to recapture their refinancing and prepayment penalty fees. There was also an equity issue since the value on his home had declined since the last appraisal. Sorry Jerry, you and the misses are stuck until your equity increases or interest rates decline.

Jim wanted to buy a foreclosed home in Reno could I help? No, my license is only good for California. Beverly wanted to sell her home in Cameron Park. Sorry Bev, your home isn’t worth what you paid for it back in 2005. Charles called to say that he wanted to buy a bank repo as an investment using a 100 percent stated income loan. Sorry Charlie, lenders are now requiring down payments on investment properties. Tim called to say he wanted to refinance his interest only loan so it would amortize itself. Sorry Tim, it isn’t worth the cost, increasing your monthly payment to include the principal reduction will have the same effect.

Saying no to clients doesn’t open any escrows or pay the rent. A yes response is easier and financially rewarding. We all want folks to say yes when we ask for something. Saying no is tougher. Too many lenders in the past few years were saying yes to borrowers when they should have been saying no. If more of us in the real estate and lending business had done a better job of saying no to clients in the past, we might be saying yes more often today.

Click a mouse to buy a house

Working from my home office in rural El Dorado County has a few advantages made possible by technology. My commuting time is about 10-seconds, starting from the breakfast table to my office desktop computer. There, I start each day writing a daily real estate and financial broadcast that’s mailed simultaneously to over 300 individual subscribers across northern California. By eight o’clock I have responded to all my mail, reviewed digital photos or taken virtual tours of all the new listings in areas of interest and downloaded and sorted the daily interest rates of a dozen different lenders. Last week within 45 minutes, I drafted a counter offer, had it signed by my clients in Roseville, delivered it to the listing agent in Cameron Park, whom had it signed by her clients in Texas who delivered it to the title company in Placerville who then completed the title/escrow information and delivered receipted copies to all parties.

Drafting a real estate contract has come a long way since I first started writing the one-page document back in the 1970’s. After getting the buyers signature I would drive the single page contract over to the listing agent’s office and then both of us would drive to the seller’s home to present the offer. Once signed, we hand-delivered the contract to the lender and the title company. If a client resided out of town, mailings could take longer.

Fax machines speeded up the document signing process in the 1980’s but by then, the one-page purchase agreement had expanded to four, then six (now 8+) and the additional documents and related disclosures made faxing cumbersome. Missing and unreadable pages were common and although every real estate office had a fax machine not every client did. The new generation of scanners and faxes became available in the late 1990’s improving the digital process but the resolution after multiple faxing was still poor.

E-mailing attachments is common. Agents have been using standardized real estate contract drafting software for years and more recently Internet based real estate forms and contract management. Internet based software allows an agent to e-mail a contract to a client, which they can print, sign and fax or mail back. The disadvantage has been in getting a legible and legally signed contract. Not any more.

Now agents and their clients have the availability and speed of the Internet while signing contracts and documents with a click of a mouse. Electronic signatures have been legally compliant since Congress authorized them for commerce seven years ago. It hasn’t been until the last two years that consumer friendly technology has evolved allowing real estate and loan documents to be prepared and signed electronically and then e-mailed any place in the world.

Electronic or E-signature products have gained legitimacy as they have withstood legal challenges. The service is secure and consumer friendly. Clients can sign or initial any contracts or disclosures easier than they can order an ink-jet cartridge on-line. I happen to use an Internet-based service called DocuSign but there are similar companies all quickly gaining in popularity. DocuSign allows agents to post documents on a secure Web site and then send their clients to the site to sign the documents electronically. Clients use a computer mouse to click on a signature line that has already been flagged with computerized yellow sticky notes. A cursive-style imprint of their name then appears on the line. Users can even select their favorite font and lettering.

If a client has some questions about the documents, they can call their agent and both can review the form on-line. Since the form is located on a secure Web site, an agent does not need to be at the office to receive or access the document.

Sometimes speed is important in a real estate transaction where “first in time is first in line” but e-signing has other advantages. Both the agent and client have a permanent digital file of the complete transaction including all disclosures, title reports, escrow instructions and loan documents available on their computer. After the transaction is complete, all the real estate and loan papers can be transferred and stored on a CD. Collecting an E-signature is more environmentally friendly than driving and less invasive for the clients who can review and sign an e-mailed document at their convenience without scheduling a face-to-face appointment.

A few lenders are now using E-signatures for their home equity loans. I have found clients more receptive to the electronic signature process than some agents but soon electronic signing will be as commonplace as e-mail.