Barry Noble's Blog

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