Guest Author:

                                       Bob Chiodo

                                       Equity Home Mortgage, LLC

                                       bobchiodo@equityhome.com

* Rates

• 30 year conforming 6.125
• 30 year jumbo 6.625
• 7 yr ARM jumbo 5.75
• OR VA 5.375

I apologize for another late Oregon Financing Update, but I just returned from a two-week vacation in Italy with my son.  A high school graduation and college send off gift for him (and me).  Time sure flies by.  Wasn’t it just yesterday when he entered school?  I’ll talk a little more about the trip in future updates, but we had a great time.

I am almost caught up on my emails and all of the analyst reports that I receive.  Looks like over the last two weeks the market’s volatility remained intact.  Interest rates benefited from the drop in stock prices.  The analysts call these “safe haven” moves.  When stock prices are dropping, traders sell stocks and buy bonds with the proceeds thus helping to drop the rates.  One report suggested that if the stock market recovers, interest rates would jump by a 1/4 of a percent.  Personally, I don’t think another 1/4 or even 1/2 of a percent increase in rates will hurt our market.  From a historical perspective, rates would still be quite low.  There are signs that the housing market is strengthening and that the bottom might have passed.  There are some very good buys in real estate today and we are starting to see some savvy buyers and investors enter the market.  We still have a ways to go though to work through the inventory levels and foreclosures.

The Fed met last week and didn’t change the rates - that’s what the market anticipated.  All are curious as to when they will start increasing the rates.  There’s a lot of opinion as to whether they should increase rates or not.  Increasing rates will help strengthen the dollar and help to ease the price pressure on oil and commodities, yet it could hurt employment and our business, in particular.  This topic can be a very confusing and complex issue.  Since I don’t have any input with Mr. Bernanke, we’ll just wait to see what he and the Fed does.

I hope everyone has a great and safe 4th of July.  I’ll tell you this, you can a great appreciation for our country (especially the Pacific Northwest) when you spend some time outside of it.

*Rates quoted are for the use of Realtors and others in the real estate/financial service industries.  They are not meant to be a quote for an individual situation.  Rates change daily and those above are only listed to assist market participants by keeping them informed for current interest rates.  Quotes are usually shown for a 30-day lock period and a 1% origination or discount fee.

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

Home ownership is an “American Dream”.  Yet, in many countries still today, there are citizens who are not allowed to own their own home. 

Who were these people that gave us our freedom and the liberties we enjoy today?  We learned as school children that Thomas Jefferson drafted the Declaration of Independence, Benjamin Franklin provided its sound reasoning, and John Hancock from Massachusetts penned the largest signature.

But, who were the other 53 guys?  Many were small business owners like you and me.  Among them were 24 lawyers, 13 farmers, 8 merchants, four physicians and four ministers.  They were ordinary people willing to take an extraordinary risk.  They were British subjects who dared separate themselves from their government.  They knew they could be executed as traitors.  But, they prized freedom and liberty and; therefore, put their names to one of the most rebellious documents of any age. 

What happened to them?  Jefferson and John Adams, we know, became President.  But many of the others didn’t live to see their new nation born.  Twelve had their homes burned by the British; five were captured as traitors and tortured before they died, and nine died from wounds or hardships of the Revolutionary War.  Carter Braxton of Virginia was a wealthy planter and merchant.  His ships and his fortune were sunk by the British Navy.  He sold his home and properties to pay his debts and died in poverty.

One incident strikes at the heart of the American Dream.  At the Battle of Yorktown, Thomas Nelson, Jr. discovered that British General Cornwallis had taken over the Nelson home for his headquarters.  An order was given to George Washington to fire on it.  The home was destroyed and Nelson lost everything and died bankrupt.

Despit their different backgrounds, the 56 signers had one thing very much in common.  Historians say that none of them, even those who endured torture, publicly recanted their actions or waivered in their commitment.  Their actions gave us a free and independent nation and the right to own, use and transfer real property - the “American Dream”.

Reprinted in part from the National Association of Realtors.®

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

When I first started selling real estate in 1975 here in Portland, Oregon, I wound up selling lots of acreage out in the country along with building lots in the city.  In selling lots, I would not only find the lots to be built on for my buyers but I would search and find the builder that matched them, helped them pick out floor plans and worked with them during the building construction process until the day the house was completed and they could move in.  My new construction background is quite extensive and I have even drawn blueprints, done partitioning of land, lot-line adjustments, and subdividing of property.  My former husband and I used to build new homes as well.  This experience then extended into representing builders and I have had subdivisions listed where I helped pick the plans and then did what we call “list backs” for the builders with the new homes already built.  At one point I even conducted a new construction class for seniors at one of our local high schools  - Sunset High School - as a representative of our Board of Realtors®, Make America Better Committee.  Those were “the good old days” as they say in the early years of my career.   My first love was and still is vacant land, acreage and new construction.  I used to love searching for that perfect piece for the developer or buyers and could “see” the property developed and built on.

After that, the larger builders and big national builders came in and bought up all the developable land.  The homeowner that wanted to build their one “dream” house and the small builders got lost in the shuffle and no longer had the same opportunities.  It was buying a new home in one of those new subdivisions from the national builder or large local builders and that was pretty much it.  Land use laws came along and were adopted.  They prohibited where building could occur in Oregon and what could or couldn’t be built.

Which brings us to today - 33 years later.  Lately, I have seen a change yet again.  There are now “lots” to be had for the homebuyer’s dream home and for the small builder.  Not only are there lots and acreage available but land that can be subdivided.  There are even platted parcels all ready to be built on that other developers or builders have abandoned.

Now, most of the big national builders have left our area.  Frankly, I haven’t seen this many vacant lots or developable properties for sale in a very long time.  There are builders and developers that would love to “unload” some of their bare ground.

• In searching the MLS for area 147 (Lake Oswego), I found 56 vacant lots and some acreage priced from $179,000-$2,500,000 for .56 acre. 
• ML 148 (SW Portland) had 107 vacant lots or acreage from $79,900 up to $1,690,000 for 2.31 acres; and,
• ML 151 (Tigard) had 58 lots or acreage starting from $89,900 to $998,000 for 1.46 acres. 

This information doesn’t include parcels that can be subdivided or split into more lots with older or tear-down houses on them, as most of those are mainly listed under our residential section and I didn’t search those.  However, I have seen many of those listed as well.  The stats above represent vacant lots or acreage only.

Without a doubt our real estate activity has picked up.  Almost every Realtor® I have spoken to within the last 3 weeks has said they too have noticed increased activity, as I have.  It will be interesting to see what the Q2 stats and June monthly report will be.  You’ll be seeing that information in a post here soon.

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

Condos and Issues Part 2

There was a fire in downtown Lake Oswego’s First Addition in May where the owner, unfortunately, died.  It reminded me of some more things people need to think about when purchasing a condo and what to look for in the CC&R’s and By-Laws of a condominium project.  One question I feel buyers should ask is:  What do the CC&Rs or By-Laws say about the eventuality of a fire?  What amount of fire coverage are owners and the HOA required to have?  Ask for a copy of the HOA Fire Insurance Policy.

For example, in the First Addition Rowhouse, the condo rules state that the owner needs to carry an insurance policy that would replace the interior of the unit in its previous structural condition and that the HOA is required to also carry an insurance policy covering exterior replacement with an inflationary clause.  It has no time-line for rebuilding the structure, however. 

There is a condo I know of that burned in Tigard.  It took years to rebuild.  In the meantime, resale values of each condo were affected and the remaining owners weren’t able to sell.  No one wanted to buy in a project where there was a burned-out unit.  The delay happened because the owners of the burned unit filed a lawsuit against the fire insurance company and it took 3 years to settle.

In another example I know of, there was a dollar amount of coverage that had to be maintained by the HOA, but the By-Laws hadn’t been updated in 20 years and there was no clause to cover inflation nor was there a rebuilding deadline.  At what point did the HOA plan to increase their fire insurance coverage? Keep in mind that you might want to sell your condo, perhaps the neighbors condo burned, you are now sitting and waiting for that to be rebuilt so that you can sell yours.  It would be a good idea if you asked what the time-frame is that a unit must be rebuilt. 

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

Some of you may have already read the article by Inman News (CLICK HERE to read it) about a lawsuit that has been filed against a blogger.  In my blogging journey, I have been trying to be very careful with what I say, whom I quote, whose pictures I use, etc.

However, I have noticed that some Realtors® who write blogs don’t identify themselves as being a Realtor®.  One of the things my manager told me right away was to make sure my name, contact information and company name appeared somewhere to identify that I am real estate agent.  I’ve seen many blogs where even I can’t figure out if they are a real estate agent or not.  Just this week I read our NAR (National Association of Realtors®) magazine that said the same advertising rules for Realtors® using print media also apply on-line. 

The other thing I’ve been careful of and have read about in all my blogging books, is not to use photos that are copyrighted.  It’s not ok to just copy photos off the Internet without checking whether they are copyrighted and it’s not ok to use other people’s material as your own because of copyright rules and on-line courtesy.  If you’re going to use someone’s story, provide a link and an email address back to their original post.  If you’re going to quote someone it’s ok to quote them in part but identify where the quote actually came from and, if possible, post their email address as well.  In fact, the other evening when Donny Deutsch was interviewing Bill Gates on The Big Idea TV show, Donny asked Bill Gates how we can obtain information ”accountability” for what is being said and who is saying it on the Internet.  The show was a re-run but aired on the day Bill Gates stepped down from his post at Microsoft®.  Donny Deutsch was in favor of “controlling” the information whereas Bill Gates wasn’t (interesting).

Now, back to this particular lawsuit. My concern is that we won’t be able to say what we really want to say and that we will be censored.  However, my personal commitment to my blog is that I will not defame another person’s character nor speak ill of another real estate agent or company (or anyone else for that matter).  Further, I’ve tried to temper my criticisms.  There’s lots I know about other companies and other agents, but our National Association of Realtors’® ethics dictate that I not say anything nor would I want to.  You won’t find any of that here!

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

The other day I looked out my window and my dwarf rhodies were covered with bees.  I got to thinking about all the news stories I’ve heard or read where it’s been reported there’s a decline of honeybees.  They certainly have found me (maybe it’s because I don’t use any chemicals in my yard!)  However, I know it’s a serious problem and it will affect us all from the top of the food chain on down. We rely on honey bees to pollinate and they are responsible for 1/3 of our food supply.  When they’re in trouble, we’re all in trouble.

Häagen-Dazs® has created a new flavor-Vanilla Honey Bee-to help provide monies to protect the bees and do research on pollination.  They have a great interactive website where you can create your own “honey bee” to your likeness or someone else’s (this is the one I created to look like someone but it isn’t me!) and it gives food facts about bees.  CLICK HERE to view.  They’re asking for all of our help to make sure they survive and to buy this flavor ice cream.

It’s summer & hot here in Portland, Oregon, so let’s do our part and eat Vanilla Honey Bee Häagen-Dazs® ice cream!  Get your kids involved on the website as well…they will enjoy it.

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

Recently I held a listing of mine open that’s in my own neighborhood in Lake Oswego.  Lots of the neighbors came by to visit. Every one of them said they want to stay in their homes as they age.

“The only thing that comes to us without effort is old age”. - Gloria Pitzer

Unfortunately, all the houses are 2-story homes. No master bedrooms on the main floor and; for the most part, no full bath on the main either. We all love our area, its location and driving proximity to amenities. Some of the neighbors have started remodeling their dining rooms to make master bedroom suites and eliminating living rooms entirely making the floor plan look more like a great room concept.

For years, I have been whining to home builders to build homes for us “baby boomers”. OK I admit it, I am a “boomer”! Boomers are the largest segment of the population - 70+ million of us, and builders have not accommodated our needs. In recent years, builders have built homes with master bedrooms on the main floor, but the sq. ft. of these homes is more house than seniors need or want.

This evening I read a report about Canadian baby boomers. Same problem. It said that Canadian cities aren’t ready to meet the “challenges” of their aging population either, that 25% of their citizens will be seniors by the year 2036, and the Canadian seniors prefer to “age in place” as well. The article also said our cities and towns need to become more “senior” friendly. I couldn’t agree more!

(For more local and national real estate-check out my monthly real estate newsletter-Jung’s Journal-at my website www.bettyjung.com).

You are probably assuming all buyers are submitting what we call “low ball offers”.  Well, not in all cases.  However, I have received offers from buyers on my listings recently at $65,000 less than list price, and $54,000 less than list  price.  A month ago I received one at $114,500 less than the asking price.  You’d think that these offers wouldn’t be accepted by the sellers; and, you are correct they weren’t accepted.  However, in 99% of the cases mentioned above, all parties did eventually come to an agreement on a final sales price.  Both the buyers’ agents and myself worked on these transactions quite a bit and all sides did come to an agreement. 

First of all, buyers I think for the most part are assuming that “all” sellers are either anxious or desperate to sell.  That wasn’t the case in the examples shown above.  Buyers seem to ignore what the asking price is, come in and think they can just “steal ” the house.  Those same buyers don’t perhaps understand that the houses are already listed at bargain prices and are good investments for the neighborhoods at their current asking prices.  Many of the homes for sale have already been discounted 5,10, or 15% lower than the market and what other homes are listed at or have sold for and have had multiple price reductions.

When I am representing the seller, as a seller’s agent, my advice to the seller has always been (and still is in this market), don’t be offended when a low offer comes in and I always recommend a counter-offer.  I recently read a really good example.  When you get gas and come to a 4-way stop that has gas stations on every corner, which gas station will you buy from?  Of course, the one that has the cheapest gas is where you will go. I understand buyers are looking for bargains and I can’t blame them.  However, buyers shouldn’t assume that all sellers are desperate and the home they are making an offer on could already be a great value at its current asking price. 

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

GUEST AUTHOR:  Bob Chiodo

                                    Equity Home Mortgage, LLC

                                    bobchiodo@equityhome.com

Many counties offer the American Dream Downpayment Initiative (ADDI).  This is a program that will “give” the buyer money that can be used for down payment and costs.  These amounts vary by county and come with the typical income restrictions and education requirements.  The “gift” is usually in the form of a second mortgage that doesn’t require any payments.  You pay the loan off when the property is sold - without any interest charges.  Sometimes, the loan will be completely cancelled under the right conditions.  These types of programs are great but do require that the potential home buyer takes the time to research them and make sure the requirements are fulfilled.

To wrap up the decision on first-time programs, we should cover a little about normal conventional loans.  These are called conforming, convention, Fannie Mae and/or Freddie Mac.  These are your typical standard mortgage products.  Althought these require some form of mortgage insurance and have been greatly restricted due to the market changes, they are definitely viable products to assist first timers.  To be competitive, these products will require good credit scores and 3% down.  Like the FHA loans described above, the down payment can be in the form of a gift.  You might be surprised that - with good credit and a decent financial profile - these programs can be aggressive in the debt-to-income requirements.

So, now what do you do?  Obviously there are a lot of good financial products out there to assist buyers in today’s market.  And, yes, the information can be overwhelming.  The best place to start is to sit down with an experienced mortgage professional - someone who will take the time to educate you on the loan process and the various loan programs.  Being educated on the other basic financial aspects on buying a home is also important.

(For more local and national real estate news, click on my monthly newsletter - JUNG’S JOURNAL - on my website www.bettyjung.com).

Guest Author:  Bob Chiodo

                                Equity Home Mortgage, LLC

                                bobchiodo@equitygome.com

*Rates:

• 30 yr conforming: 6.25%               
•  30 yr jumbo: 6.625%       (to $600k)
•  7/1 jumbo: 5.875%         
•  OR Vet: 5.50%
•  State Bond FHA: 5.75%

This installment of comparing Good Faith Estimates strays from its main theme but covers a topic that all borrowers need to understand. Look at the below loan quotes and decide which is better (let’s assume that the garbage fees are similar).

6.00 with 1 point;  6.125  with 0.50 points;  6.25 with 0.00 points.

As you will recall from my first installment in this series, since .125% in rate equals .50% in points, all three of these quotes are pretty much the same. So which one is best?

The answer isn’t a simple one because it depends on a number of factors. You can over-analyze this too and, believe me, I have done that. Let’s first look at a what I call a cash-on-cash comparison.  Assume the loan amount is $200000. The first option has a payment (fully amortized) of $1199.10 with a point cost of $2000 (1%). The 2nd option is $1215.22 w/cost of $1000, the 3rd is $1231.43 with zero points. The difference between each option is $16 per month for every $1000. Take that $1000 divided by $16 and it takes 62 months to break even. That’s a little over five years. This is a very simple analysis. So I always ask client what would you rather have - a payment of $32 more per and $2000 in the bank or vice versa. The problems with this analysis: the lower the rate the more that goes to principle at the beginning of the loan. The first option has about $199 going to principle, the 3rd option has $189. That can impact the breakeven point.

Tax deductions play another role. The first year deduction will be much better with the first option on purchase loans (assuming you deduct all of the points up front - on refi’s you usually amortize the points) but in subsequent years the deduction will be lower (since the rate is lower). Opportunity cost of the money paid up front can come into play. If you spend the $2000 on the points, it’s gone. If you kept it you can earn some interest on it. More importantly, if you kept it and needed it later to spend and didn’t have other funds you might need to resort to using a credit card - which obviously has a much higher rate. That is one main reason why we tell our clients that we want to see them keep money in reserves after buying a home. I’d rather see a client take the higher rate and payment and keep the $2000 in the bank if that was all they had.

On a purchase loan, having the seller pay costs can impact this decision. It might make sense to use the seller’s money to buy the lower rate. Obviously, the borrower’s monthly budget needs to be taken into consideration. Can they handle the higher payment. Normally it’s not that big of an issue but what if the buyer is buying at the very top of his or her limit?

As I said before, you can over analyze this - and I pretty much did with all of the info above. I tell clients if they get confused then take the middle ground - the .50% point option. That’s easy. But, if they are only going to keep the loan for a short time period (less than a couple of years) then the zero option is always best.  As always, send me a note if you have any questions.

*Rates quoted are for the use of Realtors and others in the real estate/financial service industries. They are not meant to be a quote for an individual situation. Rates change daily and those above are only listed to assist market participants by keeping them informed of current interest rates.  Quotes are usually shown for a 30 day lock period and a 1% origination or discount fee.