Simply put: If the price of gas hasn’t made you sit up and cry out, what will happen when home values drop another 25%, many thousands more are laid off, gasoline rises to $6 or more a gallon and even a full loaf of bread, a pound of rice, a dozen eggs and a gallon of milk, an ordinary cup of coffee and simple over the counter aspirin will be too expensive for the majority to retain as a normal household or lifestyle staple staple. An exaggeration? Do nothing, and just wait and see. Maybe this is an oversimplification, but it may come sadly true – much faster than you can imagine. So what are you sitting there reading this for? Speak Up and Speak Out. Get hold of your local city, county, State and National area representatives – and make your needs, wants and expectations abundantly clear, and do it today. It is part of the rights and privileges of citizenry. You need look no further than the Desert Sun for the names of and how to reach your representatives.
Barry Noble Appraiser/Broker Palm Springs www.mypropertyisworth.com
Since my last post 4/23/08 I have appraised a number of local properties in the Coachella Valley and note the downward trend for Current Market Values continues, but is now more noticeable in the previously less affected of our more famous cities in the Coachella Valley. An example, a residence that sold in the mid six hundred thousands range late last year, selling in the low three hundred thousands and others in similar short sale or post foreclosure status.
At least the banks involved are being sensible and letting the properties find their Current Market Value, given the high volume of available properties for sale. Still, there remain hundreds of properties listed way over their now, dramatically lower Current Market Values, as sellers do not or will not believe what is happening in the marketplace, and are holding out for values they saw as prevalent in early 2007.
Typically the Real Estate Market is cyclical. Unfortunately both home owners and real estate agents get blinded in a Market upswing, and some don't believe what goes up will come down. This is not altogether negative, because what goes down - typically does rise again, and if it keeps to past models, the values go higher than the last high point, each time the up cycle reaches its next upswing peak. If you are sitting in your primary or second home, with a relatively low fixed rate mortgage - there is nothing to worry about. It should be pointed out, the greater majority of home owners are unaffected by the market down turn. The majority of home owners are living in homes with low or no mortgages, without the need or desire to move on. However, I cannot stress enough - if you are one of those home owners paying a short term, teaser low rate with and Adjustable rate just around the corner (within the next 12+ months), you had better be negotiating a fixed rate with your current mortgage bank or another lender. Values continue to drop, and will for quite some time, many homes purchased within the last 3 years are already worth less than their current mortgages owed, and the ability to refinence homes may become harder and harder. If you can sit tight and weather the storm, you should be A-Ok. If you believe you will be in trouble with rising adjustable rates on mortgage payments, act now. You may need to short sell or discuss other options including anything from just asking the lender to drop the mortgage (it has been done rather than their taking back the property) or deeding the property back to the lender in lieu of foreclosure.
This isn't a short term problem, The last notable down cycle started after values were so inflated in 1989, and declined sharply in 1990 and 1991, and continued down to, and stabilized in, the period 1995-1996. Even the professionals have been caught up in this current mess. There are a number of loan and RE agents trying to sell their homes or in short sales and even some in foreclosure.
Add to the misery, the gasoline prices going through the roof, food prices and everything associated with gasoline delivery costs, rising sharply, and many of the investment homes and apartment buildings, purchased over the past 5 years, as they go into foreclosure, renters are finding themselves out of their homes and facing rising rental rates elsewhere. I watched in horror just today, one sad example of life today, on the TV news, a cluster of some dozen women living together in their respective cars in a parking lot at night, for security, with all their possessions and pets in tow, using what public facilities they could find to wash and such. Many had day jobs or were semi-retired but couldn't afford to rent an apartment. Wow, this is America in 2008, or have we reverted to the thirties?
In a change of thought, however, this is a near perfect market for some. Perfect? Canadians and Brits are amazed with their super rates of exchange against the dollar, and when they also see the values of homes dropping sharply here, in the perfect resort area in America, they are buying up the short sales and foreclosures for what seems to them, pennies on the dollar. A number are cash sales.
Investment purchasing will be a hot potato in about 9 to 12+ months from now. (I may expand that out a few months later. There are many factors to consider still). It all depends on what happens after the election, whether or not we have any natural disasters and how deep and long is the current recession. But what do I know, I predicted this to all who would listen nearly three years ago and was told to bide my tongue (a polite way of saying what people really said to me). I would just like to be able to help people cope and if there is anything this RE appraiser and Broker can do? You can email me and check out my blog. By the way, I appreciate your comments, both positive and negative.
Face it. This cyclical downward trend has just started in California. Just as California is the last of the States to rise in value in a typical cyclical Residential Real estate upswing, so is California the last to be affected when the Market turns back down.
No, the Market is not going to “correct” during the Summer off-season here in the Valley and start rising again in the Fall. No, this is not going to be a short downswing. As California follows the Market Cycles that start their up or down swings on the East Coast and spread across the country to the West, so does Southern California follow San Francisco and Seattle’s several months behind Northern California.
This Market Cycle is typical, has been evolving over the decades and is fairly predictable. It just can be a moderate cycle up or down, or a real bear, and this one is an angry bear. The mortgage debacle is but one of the side problems that has us in and heading further into a harsh recession, and the foreclosures, as frightening as they sound now, are moderate to what they most probably will be over the next 12 months. There are so many people heading into teaser fixed rates change-over to fast rising adjustables, and they are not doing something about it NOW. They think the Market will turn back up in a few months and all will be well before their adjustables kick in. WRONG.
The Real estate Profession is a hard one to predict with truth and honesty – no one wants to hear the truth, or a common sense predictions. Most Real Estate agents live on hope that the Market will for ever rise and the bad-mouthing I get for these predictions or advice is unbelievable.
Again, I can’t stress it enough. If you have bought a home in the Coachella Valley within the past 5 years, are still on or just changing from a reasonable “teaser” fixed rate to an adjustable rate, and you have been “just able” to cover the fixed rate mortgage - contact your lender NOW. The fast and sharp rise in mortgage rates will put you behind the eight ball before you will be able to say “What Happened?”
If you have a low fixed rate, plan to live in your home for at least another five years, then sit back and relax. You’ll notice your home value may drop dramatically over the next 12 to 18 months – but in your position, who cares? You don’t need to be looking for a refinance cash out mortgage in this negative Market, just sit tight, and when the next Market Cyclical upswing happens, and it will, the values will recover – and typically will rise higher than the previous Cycle upswing peak (late 2006).
If you purchased in the past 3 years – there is a good chance your value has already dropped below its purchase price – and thus you are being taxed on a higher value than it is worth. You can call me if you want a drive by appraisal and accurate comparison study to submit to the County to appeal your home value, and hopefully secure a lower value on which to base future property taxes. Remember this is not retroactive, so the sooner you do it the faster there might be a lowering of your property taxes. You can also contact me for listing value, Broker and Appraisal consulting. If you are sitting on the Market month after month with a listing price well over the local current market value, you are wasting both your time and that of your agent. If you don’t have a knowledgeable Broker in this type of Market, you are just plain wasting time. Barry Noble, Palm Springs. barry@FastAppraisalValue.com www.FastAppraisalValue.com
OK back to the Current Mortgage Crisis
If you purchased a residence anywhere in the Coachella Valley, Palm Springs to Thermal within the past 2 years, it has most probably dropped significantly in value. The Residential Real Estate Market typically evolves in an up and down cycle of values, and we reached the high point of the current Cycle in the second quarter of 2007 and now are heading down, fueled also by the debacle of teaser mortgage rates followed by the frightening, rising adjustable rates and the resultant plethora of Foreclosures.
If you purchased your home using a reasonable fixed rate mortgage, everything is fine. The good thing about Residential Real Estate Market Cycles is the fact they have so far ALWAYS turned back up, and they typically ALWAYS rise to higher values than the former upswing. You just have to sit it out. For the next rise, then sell when it is half to three quarters of the way up the Rise. I help clients understand the Market Cycles and know when to buy or sell, and have been 18 years in this Market area.
If you bought your house with a fixed, short term, Teaser Rate, and have since refinanced to a fixed rate. You are also OK.
If you are still in the Teaser Rate period and haven’t yet refinanced, and are hoping the Market will turn around and start back up, say, this Summer – you are in a dream world and should get off the proverbial tomorrow, and contact your lender or another reliable lender, to refinance to a fixed rate.
The little that has been done to try to “fix” the problems in the residential real estate market is too little, too late and insignificant in the massive mess that has been created in the mortgage industry.
To get back to the loss in value on most houses purchased within the last 2 to 3 years. As an Appraiser, may I recommend you contact an appraiser to provide a professional opinion of the estimated Current Market Value of the property? Then, you may petition Riverside County to reduce the assessed value of your property, for tax purposes. It is typically around the amount you last paid for the property, If you paid in late 2006, say, $495,000 and it now appraises at $380,000 that may be a significant cut in property taxes. In some areas that value may have dropped as low as $200,000. Wow! Then the tax assessment adjustment would really help you save money. The sooner you file for an adjustment, the better, as it is not retroactive. You may obtain the form from the County, on line, and file a Petition to reduce the Assess Value for Tax Purposes, with appropriate proof of the reduction. Using an Appraiser, you can be assured of comparable more recent sales that are the closest in comparison to your property, allowing for all available points of assessed value depreciation. If the decline in property values continues, in a year, you may wish to again petition for a lowering of the assessed value. It is predicted residential values may continue declining well into 2009 and perhaps longer. The number of foreclosures is rising each month and there are hundreds of thousands of properties facing potential foreclosure over the next 18 months. If I can help, e-mail or contact me through my website. www.FastAppraisalValue.com
If you are an investor and are looking for properties to take over and resell, NOW is not the time. If you, however, want to buy properties in foreclosure or in a short-sale situation, to spruce up and rent for 12 to 24 months, now may be the right time in some areas, but not all. Example, Hemet, Coachella, Thermal and Indio are starting to be bargain areas for newer construction tracts – but the value decline has not, by any means, reached the bottom of the cycle. Hemet has 2-3 year old 2 story houses that were previously sold in the $395,000-495,000 ranges now listing as foreclosure sales starting in the $169,000-189,000 range – but multiple offers are pushing up the accepted values in the $200,000-225,000 range. That area hasn’t reached bottom yet. Expect similar sales offers in Indio, Coachella and Thermal for new construction.
Whatever your situation – take a close look at where you stand with your mortgage(s). Most people are comfortable with low to moderate mortgages, with good fixed rates and are not threatened. Those who are already in trouble or may about to be facing problems – the time to act and find out what to do, is NOW. Waiting only makes it worse.
Barry Noble RE Appraiser and Broker
It is not the first time I have commented on the up and coming water shortage in many areas of California, Nevada and other Western States - but someone, sometime has to address it with less than a cursory reference. It will not be long before there will be water wars among the States, threatened already by Las Vegas recently, as the Colorado River becomes so depleted and so over used and abused, multiple cities and counties are soon to be really hurting. Overbuilding and expansion of city populations in areas that have already been flagged for future problems, continue and it is as if the local governments have blinders on, in their efforts to get more tax revenue. The Desert Resort area of Coachella Valley (Palm Springs and all its sister cities) have relied on the aquifer under the valley floor, and as it depletes at an alarming rate and the water level drops dangerously low, there seem no interest in what might occur within a decade. Las Vegas is so overbuilt, now that we are in a real estate market downturn, the number of foreclosures will soon be a pandemic in that area. When the market stabilizes, if this overbuilding starts again, it will be a precursor to a calamity.
In the Coachella Valley, there should be a moratorium on golf course construction, conversion of current courses to recycled water and no summer reseeding and upkeep for the many courses in private clubs where there are less than 5% of the residents in residence, during the hottest summer months. No future residence building should allow any grass landscaping, with the availability of seemingly lush desert desertscapes to replace water guzzling lawns. Current lawn owners should be convinced to take out the lawns and replace them with desertscapes. Pools should be required to have pool covers in the summer months. Pool refilling should be restricted to once a year. Homes and businesses that have leaking irrigations systems that leave floods of water running for blocks, down local gutters should be cited and required to stop the waste overflow. Its not time to shrug this off - it is time to act and act very soon. City councils are put on notice.
If you have a reasonable fixed rate home mortgage and you are worried about value - Don't !
If you have a strange adjustable rate program or interest only with an up and coming adjustable rate mortgage - then it is time to do something about it NOW !
The Market is cyclical. It has been cyclical for decades and will remain cyclical. The values always end up rising higher than the last high value market - so in most markets, if you have a normal, sustainable mortgage program and it is fixed, you can just sit back and not worry if your (say) $450,000 residence drops to $320,000 or lower, sit back and enjoy the home, do little fix ups and upgrading, and be patient. Wait for the next upturn in the market cycle - it will come and again there will be an influx of new real estate agents to try to get you to sell, and lenders trying to get you to use your equity to buy the latest Hummer or sailboat, send your mother in law off on a world cruise or add a pool to the back yard.
This is going to be a severe downturn - but the majority of home owners who didn't buy homes already out of range of their moderate pocketbooks and income - with crazy interest only or strange adjustable rates - and those who didn't take the bait and refi up to their absolute limit of equity - they will survive with flying colors if they just relax, sit back and ride out the mortgage storm.
There will not be help for those who jumped on the home buying band wagon without adequate income to sustain the purchases. They need to move on and get their acts together for a later foray into home ownership, when their income is better. It doesn't help to just dump the houses and walk away from the mortgages. It should be done with some thought, help from the lenders and a plan to make the glitch on their credit less severe, so future plans may one day include home ownership again.
Most lenders do not want to take back your houses - so contact them long before it is "too late" and the trustee sale is next week. It is amazing how much most lenders will do to try to help you keep your house, if there really is a way you can, within reason. It won't hurt to ask - so contact your mortgage holder now - not when it is too late.
If you are wanting to sell your home in today's Market - don't waste your time or that of an agent by putting it on the Market for what it might have been worth a year ago. You have to accept the down-turn in the market and market-values, and only those homes priced just below the then current market will have an inkling of a chance to sell in 2008. If you are an investor and got caught up in rehabbing a house in the top of the market curve, get it rented out for 12 to 18 months minimum, and recoup at least the mortgage payments - or sell at a loss and learn from the mistake, for the next cycle.
Appraisals throughout the Coachella Valley from palm Springs to Thermal and some high desert cities. Help and advice - am here to answer reasonable questions. Barry Noble barry@FastAppraisalValue.com State Of CA licensed Appraiser and Broker.
After a short but seemingly long and painful 5 weeks, and sporting a new "bionic" knee - I am back !
I won't complain or elaborate on the medical screw up a year ago, that caused me to need the new knee - just suffice to say, the new doctor who made good on the other's poor work, was terrific, the hospital stay was unbelievably short but of top quality care and treatment, and I am back at my keyboard and raring to go. Now I know what it would feel like to give birth through one's knee cap.
All I had been predicting for over two years now has come to pass - the foreclosures continue to add up and the worst is not yet at hand - but this too is cyclical - just made worse by lending practices gone sadly awry and the mistaken belief that real estate values will always just rise, rise, rise.
Now we just have to work towards making lemonade out of the myriads of lemons falling around town and I will be making some humble suggestions over the next few weeks.
Meantime, If you currently have a comfortable "teaser " rate still, on the loan to purchase your home -executed in the past 1 to 5 years, and it is about to revert to an adjustable - if you haven't already contacted your lender to negotiate a fixed rate - you are playing with fire. For those who already see their mortgage owed as higher than the Current Market Value of comparable houses around - this is not necessarily the end of the road - and a time to dump the property and run. The key word for home values is CYCLICAL. What goes up comes down, but what comes down, usually goes up higher than the last high point, on the next cycle up. Contact me if you want to discuss it, find out what your home's Current Market Value is now or get another opinion before you make any big moves or mistakes.
Barry Noble
760 992 9523
barry@fastappraisalvalue.com
The Desert Sun’s article of 12/05/07 with the huge headline "Home sales jump 16.4% in October" is so frighteningly misleading in its message to local home owners in the Coachella Valley.
We are just starting what might have been a normal Market down cycle had it not been for the sub-prime debacle - and most agents have been begging their home seller clients to drop their asking prices as the market values decline. Now, headlines like this will be waved around by the people wanting to sell their homes - asking to raise or keep their asking prices above what is the current market for their particular properties. The median price is oh so false a benchmark for market values, when the market is in a general decline and the one market that has been least effected by the sub-prime market is the very high-end, million to multi-million dollar home sales. You mentioned that in passing, but if median home prices are to be used, it would be far more revealing if there were, say four levels - very high end, moderately high, median value and low value properties. This would best compare comparable properties sold in a given month with the same quality, value and location - say a year before.
I am a Realtor, (Independent Broker) and primarily, a Residential Appraiser - and I understand the need for Realtors to promote sales, but to not advise Sellers on how to handle a notably declining Market and tout this as looking like maybe a market turn around, is so wrong. Yes we are seasonal, yes September in any given year is slower than October, but our season looks to be dramatically slower than any in the past 5 years, for 2008, 2009 and maybe 2010. We are in a market decline mirroring 1990 through 1995, only possibly worse due to the number of foreclosures across the State and Nation.
Many of our Coachella Valley wide second home owners are noticing problems with their primary home markets as market values dramatically decline in major metro and other cities. Many investors more recently buying homes to fix up and re-sell are in trouble having bought at the high point of a normal market cycle. Second or retirement home buyers will be few are far between as their primary home equities dry up. Major developments across the valley (just look at Escena in Palm Springs, for example) are closing down or postponing indefinitely or canceling additional phases, and infrastructures and amenity facilities are seemingly being abandoned or postponed, again, indefinitely, just as builders did in 1990-1992, and some are having "escape" sales of their remaining built-out models - selling off the last of the current phase homes at notably lower prices than people paid for the same models, just 6 to 8 months ago - leaving those home buyers up the creek with homes worth far less than they paid for them and already negative equity. There may be a rise in "Baby Boomer" buying, but possibly not enough to greatly temper the rate of value decline. This is normal in a declining market, and the secret there is to grit your teeth and hold on to the homes - pay the mortgages (if not on a teaser rate about to convert to adjustable) until the next rise - where homes typically rise 20 to 45% more than their last high points. Unfortunately, that type of market might not be on the horizon for four to five years or so. (As in 1990 to 1996, there followed a stabilization and then market value rise). For those who have teaser rates that might adjust to a much higher adjustable rate within the next 1 to 2 years - I recommend they contact their lenders NOW. Don't wait until market values have declined over 12 to 24 months and selling would mean sales +- 20-30% under what may be the then current mortgage owed.
No, this is not all doom and gloom. It is a plea to the home sellers and buyers to get with it, understand what is happening, be willing to work with the current situation and not be foolish and stick their heads in the sand, with sellers thinking to “hold on the higher asking prices, for a fast rise in values within months”. In my opinion It just isn’t going to happen – and I have been predicting this sub-prime debacle for going on 24 months now – to mostly deaf ears.
This is also a call for real estate professionals to remember that statement of ethics – and help the home sellers and buyers by being up front on Market Cycles, made worse in this case by predatory loans, and foolish people who bought homes they really new they couldn’t afford – and jumped on the bad wagon of fly-by-night mortgage promises. There are some good buys out there – those who understand the market – really need to sell and are willing to put their homes on the market at what its CURRENT MARKET VALUE is.
For help and/or further discussion
Barry Noble, RE Appraiser and Broker
760-992-9523
barry@PalmSpringsCA.net
www.FastAppraisalValue.com
Reality isn’t pleasant for many Home Owners. It is even harder for some who bought within the past 18 months, believing they were joining a wave of ever rising property values. In actuality, they were getting into the Market as it was reaching its Current Market Cycle high zenith, and it was already showing signs of slowing, ready to head down for the normal Cyclical Downturn.
It further hurts to realize this downturn is being made more uncomfortable, fueled by the rising number of foreclosures from unhealthy loans and those strange programs that allowed (basically) unqualified buyers to sign on for homes way out of their financial means. Start-out, “teaser” short term fixed rates that were hard to keep up, but in many instances bearable with dual salaries. The promises were bandied about of 2, 3 or 5 years of “low” rates or interest only payments, before the adjustable rates were to kick in, seeming plenty of time for the homes to increase – even maybe “double in value” some lenders and RE agents promised. Believing they’d be able to sell the homes before the conversion to adjustable rates, and make amazing profits, home buyers for the most part were not aware or didn’t want to think about “years’ down the road”, when they first purchased the homes.
There remain, if reports are correct, some 2,000,000 mortgage loans out there with teaser rates, or interest only rates or other strange limited monthly loan payments – ready to convert in the next 18 months. Many of those will have to sell or lose the homes. The Market Values are already dropping – what will local Market Values be in 8, 12, 18 or 24 months from now? With a glut of properties for sale, the “normal Downturn of the Current Market Cycle portends to be more severe than that of 1990-1995, and the early 1980’s.
Some Lenders are working on plans to assist home owners convert to fixed loans, if they will be qualified to pay the higher rate – and if you are in that group – NOW is the time to be talking to your lender, and not necessarily the one that put you in the problem mortgage in the first place. There are some very decent lenders and loan brokers out there, ready to help, but they won’t be able to point you in the right direction, if you wait until AFTER you’re in trouble.
If you are currently trying to sell your home, don’t look around to neighbors who’ve been on the market for months at high asking prices, and copy them. The time is NOW to get a real handle on the Current Market Value of your home, then put it out at a competitive price against what it will be in 3 months – because values are dropping. Today’s current Market may be several percent less in three months in many of the local markets. Today’s Sellers in Escrow now are for the most part in escrow up to 6% or more, below what their original listing prices were.
If you really need to sell – a listing appraisal may be your best advice – with an opinion of where the Market will be in the coming months. If you are enjoying an interest only or low interest teaser rate and low payments – but the fixed will convert to an adjustable in the next 18 months – get some good advice now – don’t wait until it is too late. I’d be pleased to help in both ways – help you realize the current Market Value, and see where your neighborhood is going, with Market Values, or refer you to a lender I trust to give you the best advice for refinancing – if that is feasible for you, but whatever you do, who ever you consult – don’t stick your head in the desert sand and hope this will all go away or change overnight. It is Cyclical and the Values Cycle is declining, inventories of available properties, in most value ranges, are rising and more and more foreclosures are forecast. One major new homes builder has just declared the Market is not going to adjust for the better until at least 2010, and many developers are closing off sales at major reductions and not completing final phases of their tracts, ready to hunker down until (probably 2010 +) . There is a good side to this. If you have a good fixed rate mortgage, are not planning to move any time soon, the Market TYPICALLY bottoms out then rises again, and in all probaility - the next rise should take you significantly higher than the last high-value point, back in the third quarter of 2006. Something to look forward to. Barry@PalmSpringsCA.net And check out and sign on to my on-going Market and appraisal value blog, for timely comments at www.fastappraisalvalue.com
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