Sacramento Real Estate Blog

An associate sent me this in my email and I think it’s important that every home buyer know these top ten no-nos when it comes to their credit during the home buying period. I had earlier shared that Fannie Mae has adopted a new loan initiative to ensure that only qualified borrowers receive mortgages, a post that may be worth reading again. And if you’re in the process of buying a home or in escrow, remember these top ten no-nos.

1. DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.

2. DON’T APPLY FOR NEW CREDIT OF ANY KIND. Including those “You have been pre-approved” credit card invitations that you receive in the mail or online. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from one to 20 points for one hard inquiry.

3. DON’T PAY OFF COLLECTIONS OR CHARGE OFFS during the loan process. Unless you can negotiate a delete letter, paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow – at closing.

4. DON’T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your scores down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at ALL times during the loan process. If you decide to pay down balances, do it across the board. Meaning, pay balances to bring your balance to limit ratio to the same level on each card (i.e. all to 30% of the limit, or all to 40% etc.)

5. DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in 4. If you want to save money on credit card interest rates, wait until after closing.

6. DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account, you will lose available credit, and it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you HAVE to close a credit card account, do it after closing.

7. DON’T PAY LATE. Stay current on existing accounts. Under the new FICO scoring model, one 30-day late can cost you anywhere from 50-100 points, and points lost for late pays take several months if not years to recover.

8. DON’T ALLOW ANY ACCOUNTS TO RUN PAST DUE — EVEN 1 DAY! Most cards offer a grace period, however, what they don’t tell you is that once the due date passes, that account will show a past due amount on your credit report. Past due balances can also drop scores by 50+ points.

9. DON’T DISPUTE ANYTHING ON YOUR CREDIT REPORT once the loan process has started. When you send a letter of dispute to the credit reporting agencies, a note is put onto your credit report, and when the underwriter notices items in dispute, in many instances, they will not process the loan until the note is removed and new credit scores are pulled. Why? Because in some instances, credit scoring software will not consider items in dispute in the credit score – giving false data to the lender.

10. DON’T LOSE CONTACT WITH YOUR MORTGAGE & REAL ESTATE PROFESSIONALS. If you have a question about whether or not you should take a specific action that you believe may affect your credit reports or scores during the loan process, your mortgage or real estate professional may be able to supply you with the resources you need to avoid making mistakes that could drop your credit scores or possibly, cause you to lose the loan.

It’s been a while since we took a look at our favorite real estate market – East Sacramento. The last time we took a look in the month of February the market was busy on its road to some sort of stability and recovery. I’m happy to report that it seems fairly stable and recovering still.

46 homes sold in this last month, an overall unit volume decline of 11.5% year over year. Foreclosure sales alone fell 62% for the same period while short sales and non-distressed property received buyer interest to rise 60% and 15.4% respectively year over year. 65.2% of all sales are now non-distressed up from just 50% of all sales last May.

Average price per square foot has risen to $232.13 – up 6.8% year over year from a low of $217.45. Average sales price has also gone up from $288,529 to $303,203. That’s a rise of 8.1% since last May. Median sales price has jumped 19% in the same period from $250,000 to $297,450.

Real estate inventory in East Sacramento is now at 4.6 months based on the last year of sales and 5.1 months based on the last six months of sales.

The Fair Oaks real estate market continues in its painfully slow steadying. 31 homes sold this month, an overall decline of 24% in unit volume from a year ago when 41 homes had sold that May. Foreclosures alone declined 50% year over year and even non-distressed sales didn’t get as many homebuyers as they did a year ago. Non-distressed home sales declined 10% for the same period. Short sales remained the same at 6 total sales – the same as last May.

Average price per square foot remained almost unchanged at $146.44 – a decline of 0.3% year over year. Average sales price rose by 4.1% year over year from $278,519 to rest at $289,848. Median sales price in the meanwhile fell from $285,000 last May to $274,000. That’s a drop of 3.9% for the same period.

Inventory in Fair Oaks is at 6.5 months based on the last year of sales and 6.8 months based on the last six months of sales. Foreclosure inventory is at 1.7 months no matter how you look at it and short sale inventory is at a year and a half.

Well, maybe. Or home sellers and banks are just waiting to see how aggressive (or passive!) home buyers will be this year. With the hottest months of the year arriving, both in real estate and in terms of the weather, listing prices have steadied. According to Trulia, 22% of homes on the market today in the United States as of June 1, 2010 have had at least once price reduction since they went on the market. This is a decrease from 23.6% of all homes that had a price reduction as of June 1, 2009. The average discount however continued to hold steady at 10% off the original listing price.

Cities in the Western United States experienced the largest decreases compared with the previous year with Las Vegas leading the way. Vegas had a 67% decrease. Yes, our very own Sacramento tops the secondary list there along with Oakland, San Jose, Los Angeles, San Francisco and San Diego with a price reduction of 24% or more.

Price reduction levels for luxury homes priced at $2 million of more held steady with 21% experiencing a price reduction and an average reduction of 14% off the listing price.

Real estate sales in the Arden-Arcade area have picked up since we last took in a look in February of this year but we have yet to see if this is because of the summer/spring bounce in sales or it is sustainable over the year. 88 homes sold in the month of May, an overall increase in sales by 22.2% year over year. Foreclosure sales on the other hand fell by 25%. Short sales jumped 260% (they went from 5 to 18) and non-distressed home sales increased 31.4% year over year. 1 out of 2 homes sold are now non-distressed.

Average price per square foot fell slightly by 6.1% year over year. It currently rests at $164.12 down from a high of $174.73. Average sales price followed the same trajectory to settle at $251,671 from a high of $268,815 last May. That’s a decline of 6.4% year over year. Meanwhile, median sales price gained a miniscule 1% from $179,000 to $180,750.

Overall inventory hovers around 6 to 7 months in the Arden-Arcade area, foreclosure inventory around 2 to 3 months.

As with all other cycles, this real estate cycle of excesses will end. So says – in paraphrase – David Crowe, chief economist of the National Association of Home Builders. The Los Angeles Times reported that it may seem odd to talk of shortages in this era of foreclosures and excess inventory, but the cycle will change someday and when the market returns to “normal” we may see more homebuyers and not enough homes. As a result, the multi-family category will be hit hardest, in other words, apartments may get harder to find. Also, since so many homeowners have had foreclosures or other credit/financing problems today, mortgages might get harder to acquire as well. He suggested that apartment builders need to “start now” if they want to be ready when the shortfall comes.

What interests me while watching this entire market go up and down and all around as it has lately is how what we call balance and “a good real estate market” always lasts such a short while. What exactly is a good real estate market? A seller’s market? A buyer’s market? I tend to believe it’s when most home buyers with good credit or decent credit qualify for a home purchase that they can afford and inventory in most areas is not more than 3 – 6 months. Such a balance though is going to be hard to find today with the foreclosures and short sales and also because as sellers and buyers we’ve gotten spoiled by easy credit and quick sales. Today the pendulum has swung to the other extreme where borrowers with good credit are still having a hard time closing escrows they worked so hard to put together.

We’re just going to have to wait and see where this market goes. As a real estate teacher once said, it may be a buyer’s market or a seller’s market but it’s almost always an interesting real estate market. Not a dull moment.

Some interesting changes year over year in the real estate landscape of Land Park – I’m glad I took a peek! 16 homes sold in the neighborhood liked by quite a few homebuyers. This number was 15.8% lower than it was a year ago in May. 3 of these sold homes were foreclosure sales, 2 were short sales and the rest 11 were non-distressed properties.

When dealing with such small numbers of sales, statistics can sometimes seem to jump very high and very low as we see with prices. Average price per square foot is now $274.63 up a whopping 29.8% year over year from a low of $211.64. Homebuyers for some reason also picked up homes 26.3% smaller than a year ago, a glaring difference that makes the average sales price (not based on price per square foot) a little inaccurate. It is now $378,125 down 4.3% year over year from $395,126. Median sales price is now $349,750 down 9.2% for the same period.

Land Park has an overall inventory of 6.2 months based on the last year of sales and 7 months based on the last six months of sales. Foreclosure inventory still hovers around 3 months, one of the largest in Sacramento county.

I received this “hot off the press” in my mailbox yesterday, so technically it is not breaking news, but I know so many homebuyers who are upset about delayed escrows and extended timelines lately in the real estate process that this is good news for those worried about waiting on banks. Read on!

The Senate has approved a plan to give homebuyers an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring. The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale. The proposal would only allow people who already have signed contracts to finish at the later date. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline.

Remember this only applies to home purchases already in escrow with a signed and executed contract from on or before April 30th, 2010.

Since we last looked at the El Dorado Hills real estate market in March, prices have dipped a little again. The price dip probably accounts for the increased unit volume of sales. 60 homes sold in the area, an overall year over year increase in real estate sales of 7.1%. Foreclosure sales dipped 31.6% for the same period whereas short sales increased by 33.3%. Non-distressed sales also gained ground by 25% for the same period. 58.3% of all homes sold are now non-distressed as compared with 50% last May.

Average sold price per square foot has risen 1.9% year over year from $158.65 to rest at $161.60 currently. On average however, homebuyers bought smaller houses – 6.2% smaller than last May, to be precise. Average sales price is currently at $506,593 which is a small-ish drop of 4.5% year over year from a high of $530,385. Median sales price now rests at $438,875, also a decline of 5.6% year over year.

Inventory in El Dorado Hills has remained steadily at 6.9 months.

There might be some hope for this real estate market after all, but it may not come soon. Foreclosure filings (for homes in some stage of the process) declined in May by 3% from April 2010 according to Realty Trac as reported by the Los Angeles Times. California accounts for 22% of these foreclosure filings from all over the country.

The article also reported that the pace of homes exiting foreclosure and being seized by banks hit a record high in May for the second consecutive month, which leads us to believe that the banks might be working through their backlog on the market and ready to put some more foreclosed homes on the market very soon. Anecdotally, many people have noticed that banks will either hold on to inventory after foreclosing or will delay foreclosure so as to avoid flooding the real estate market with inventory. We might begin to see some of that “shadow inventory” that has been referred to so often.

You may read the entire article here.

53 homes sold in the area of Carmichael this last month, an overall unit volume increase of 43.2% year over year. Of these, 14 were foreclosure sales, 8 were short sales and 31 were non-distressed homes. Non-distressed home sales have jumped 82.4% year over year, a statistical detail that would have been good news except for the short sale inventory that remains steady at 20+ months. 1 out of 2 homes sold are now non-distressed sales.

Average price per square foot is now $151.31 which is a 5% decline year over year from $159.33 last May. Home buyers asa result afforded themselves homes on average 10% larger than they did last May. Average sales price seems to have increased from $279,950 to $291,331 – a 4.1% increase but keep in mind that the average price per square foot gives a more accurate picture. Median sales price is fairly stable at $240,000. Last May it was $236,659.

Overall inventory in Carmichael is at 6.3 months. Foreclosure inventory is at 2.2 months and short sale inventory as previously mentioned is at 20.3 months.

As Elk Grove limps slowly – very slowly back to recovery – interest in bank owned homes gives way to short sales and owner occupied houses. 251 homes sold in Elk Grove in the month of May 2010. Of these, 108 were foreclosure sales, 75 were short sales and the rest 68 were non-distressed properties. Year over year, foreclosures fell 38% while short sales increased 38%. Non-distressed home sales also gained a decent 33.3% for the same period. 1 out of every 4 home sales is now non-distressed.

Average price per square foot is now $114.52 which is 2% higher than it was a year ago when it was at $112.32. Average sales price is almost the same this May as it was last May when it was $237,249. Today it is $236,753. Even the median sales price is hovering around the same mark as a year ago. It is is currently $230,000 down 2% from a year ago when it was $235,000.

Overall inventory in Elk Grove is around 4 months. Foreclosure inventory is around 1 month and short sale inventory is around 11 months.

With the number of foreclosures, short sales and other financial hardships affecting so many people in Sacramento and elsewhere in the country, the question often comes up: Will I ever be able to buy a home again? Will any bank ever give me a loan to finance a real estate purchase?

The short answer is: yes. The longer answer is: yes, but…

And here’s the “but…” part of it. Lenders will always ask for reasons why. One friend said it very matter-of-factly that you will always have to explain a foreclosure but because there are so many right now, the stigma, if you will, of a foreclosure on your record at this time might not affect you as much as it would have during a financially good time. This does not mean that you will not have to provide documentation that you did not strategically let the home foreclose but getting a home loan might not be as distant and impossible as it seems today.

In approximately two to five years after a foreclosure, the financial situation of the borrower could look considerably different to a lender. And you want to keep in mind that although your FICO scores have suffered as a result of the foreclosure, you might be able to show other factors as a good savings history, employment history and so on. Also, other bills paid on time will have a great impact. A larger down payment might also be necessary.

This is to say that if you have genuinely experienced a financial downturn in your life, all is still not lost. The dream of homeownership might still come true for you. It just might take a little longer than you hoped.

We have been relatively hopeful about Folsom throughout this real estate market decline and we continue to be even now. Folsom seemed to escape the worst of this decline and seems to be recovering better and faster than other places in Sacramento county.

May was a good month for the city of Folsom. 88 homes sold in the month of May in the area, as compared with 61 homes a year ago, an overall unit volume increase of 44.3% year over year. Perhaps the most significant difference was the increased short sale inventory of 144.4% year over year. Foreclosure sales remained almost the same and non-distressed property sales increased by 36.1% year over year. Good news overall.

Average price per square foot is now $171.21 down 3.5% year over year from a high of $177.33. Average sales price fell 7.7% for the same period from $373,817 to $344,866 currently. Median sales price remained almost the same as last May at $352,500.

Folsom’s inventory is at a very steady 5 months.

204 homes sold in the county of El Dorado last month, an overall unit volume increase of 37.8% year over year. Unlike Sacramento county where foreclosure sales have fallen in large numbers, El Dorado county seems to be on its own trajectory with foreclosure sales up by 8.3% and short sales up by a whopping 115% year over year. Non-distressed sales also increased 41.2% for the same period. Almost half of all sales are now non-distressed sales.

Average price per square foot is now $151.47 down 2.4% year over year from $155.12. Average sales price for a home in El Dorado county is now $346,881 which is also lower than it was a year ago when it was $380,004. Median sales price is now under the $300,000 mark, currently resting at $299,500 down 14.4% from $350,000 last May.

Real estate inventory for El Dorado county is now at 8.3 months based on the last year of sales and 8.5 months based on the last six months of sales. Foreclosure inventory is around 2 months and short sale inventory is around one year.

1761 homes sold this month in Sacramento county and unit volume is very close to last year’s sales in the month of May – in fact we’re down only by 5.5%. So if it wasn’t for the short sale inventory still lagging by about a year, I would be feeling pretty about the Sacramento real estate market.

In the various categories, 644 foreclosures sold this month, which is a drop of 43.7% year over year and 421 short sales also closed escrow which is a 56.5% increase for the same period. 696 non-distressed homes sold this month for an increase of 54.3% year over year. Almost 40% of all homes sold are now non-distressed sales over 25% last year at this time.

Average price per square foot is now $125.55, which is a 7.4% increase year over year from $116.86 last May. Average sale price rose to $207,162 from $191,938 last May. That is a 7.9% increase in prices year over year. Median price also increased year over year by 5.9% from $170,000 to rest at $180,000 this May.

Inventory in Sacramento county is at 4.5 months based on the last year of sales and 4.8 months based on the last six month of sales. Foreclosure inventory is at 1.5 months and short sale inventory is still relatively high at right around a year.