News

Please don’t ever expect to find an endorsement of any politician on this blog. I strive to limit myself solely to mockery.

That being said, I am a big fan of town hall meetings and, with a 5 year old and a baby on the way, I am extremely interested in the future of education in Sacramento. Mayoral candidate Kevin Johnson (I think he was also a professional athlete once… table tennis?), and California’s top educator, Superintendent of Public Instruction Jack O’Connell, will be holding town hall meetings, the first of which was held earlier tonight in Oak Park.  There will be more (8/29 – North Sacramento; 9/3 – East Sacramento; 9/9 – Land Park; 9/18 – Natomas; 9/26 – Elmhurst/Tahoe Park; 10/8 – The Pocket; 10/28 – Meadowview). It should be a good opportunity to have your voice heard, whatever your political beliefs (as well, I am sure, a commercial for the candidate).

Again, this is not an endorsement and if you know of any similar events that Johnson’s opponent, Heather Fargo, is holding, please let me know and I will make sure to post it. And if any of you go (or went earlier this evening), please leave a comment.

With all the doom and gloom in the reporting on the current real estate market, don’t you think it is time for some good news? Well, I do.

And, oddly enough, it is the same as all that bad news we have been hearing. You know, about real estate prices tumbling in California. For people who have not been able to enter the real estate market for close to a decade, there is now a remarkable opportunity. In just one year, according to the San Francisco Chronicle, the number of Californians who can afford to buy a home has doubled:

The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors.

The trade group defines a starter home as one priced at 85 percent of an area’s median, which works out to $329,120 for the state. The minimum income needed to purchase such a property is $62,870, down from $101,440 a year ago (assuming an adjustable-rate mortgage starting at 5.69 percent and a 10 percent down payment).

Well, it may not be the news you were looking for. But if you are one of those who has been frustrated in the past half a dozen years or so about being priced out of the market, your time may have come.

The Sacramento County Water Agency has requested that those of us it serves (about 60,000 of us located between Rancho Cordova and Elk Grove) immediately cut our water usage due to reduced reserves and reduced water flow from the American River as a result of the current drought.  Folsom Lake (from which we get 10% of our water) will be depleted by nearly 25%.  The agency is requesting that we cut our usage by at least 10%.

There are a number of ways that we can conserve water usage in our homes.  

Water Saving Techniques (Inside):

1. Never put water down the drain when there may be another use for it such as watering a plant or garden, or cleaning.
2. Verify that your home is leak-free, because many homes have hidden water leaks. Read your water meter before and after a two-hour period when no water is being used. If the meter does not read exactly the same, there is a leak.
3. Repair dripping faucets by replacing washers. If your faucet is dripping at the rate of one drop per second, you can expect to waste 2,700 gallons per year which will add to the cost of water and sewer utilities, or strain your septic system.
4. Check for toilet tank leaks by adding food coloring to the tank. If the toilet is leaking, color will appear within 30 minutes. Check the toilet for worn out, corroded or bent parts. Most replacement parts are inexpensive, readily available and easily installed. (Flush as soon as test is done, since food coloring may stain tank.)
5. Avoid flushing the toilet unnecessarily. Dispose of tissues, insects and other such waste in the trash rather than the toilet.
6. Take shorter showers. Replace you showerhead with an ultra-low-flow version. Some units are available that allow you to cut off the flow without adjusting the water temperature knobs.
7. Use the minimum amount of water needed for a bath by closing the drain first and filling the tub only 1/3 full. Stopper tub before turning water. The initial burst of cold water can be warmed by adding hot water later.
8. Don’t let water run while shaving or washing your face. Brush your teeth first while waiting for water to get hot, then wash or shave after filling the basin.
9. Retrofit all wasteful household faucets by installing aerators with flow restrictors.
10. Operate automatic dishwashers and clothes washers only when they are fully loaded or properly set the water level for the size of load you are using.
11. When washing dishes by hand, fill one sink or basin with soapy water. Quickly rinse under a slow-moving stream from the faucet.
12. Store drinking water in the refrigerator rather than letting the tap run every time you want a cool glass of water.
13. Do not use running water to thaw meat or other frozen foods. Defrost food overnight in the refrigerator or by using the defrost setting on your microwave.
14. Kitchen sink disposals require lots of water to operate properly. Start a compost pile as an alternate method of disposing food waste instead of using a garbage disposal. Garbage disposals also can add 50% to the volume of solids in a septic tank which can lead to malfunctions and maintenance problems.
15. Consider installing an instant water heater on your kitchen sink so you don’t have to let the water run while it heats up. This will reduce heating costs for your household.
16. . Insulate your water pipes. You’ll get hot water faster plus avoid wasting water while it heats up.
17. Never install a water-to-air heat pump or air-conditioning system. Air-to-air models are just as efficient and do not waste water.
18. Install water softening systems only when necessary. Save water and salt by running the minimum amount of regenerations necessary to maintain water softness. Turn softeners off while on vacation.
19. Check your pump. If you have a well at your home, listen to see if the pump kicks on and off while the water is not in use. If it does, you have a leak.
20. When adjusting water temperatures, instead of turning water flow up, try turning it down. If the water is too hot or cold, turn the offender down rather than increasing water flow to balance the temperatures.
21. If the toilet flush handle frequently sticks in the flush position, letting water run constantly, replace or adjust it.

Water Saving Techniques (Outside):

1. Don’t over water your lawn. As a general rule, lawns only need watering every 5 to 7 days in the summer and every 10 to 14 days in the winter. A hearty rain eliminates the need for watering for as long as two weeks. Plant it smart, Xeriscape. Xeriscape landscaping is a great way to design, install and maintain both your plantings and irrigation system that will save you time, money and water. For your free copy of “Plant it Smart,” an easy-to-use guide to Xeriscape landscaping, contact your Water Management District.
2. Water lawns during the early morning hours when temperatures and wind speed are the lowest. This reduces losses from evaporation.
3. Don’t water your street, driveway or sidewalk. Position your sprinklers so that your water lands on the lawn and shrubs … not the paved areas.
4. Install sprinklers that are the most water-efficient for each use. Micro and drip irrigation and soaker hoses are examples of water-efficient methods of irrigation.
5. Regularly check sprinkler systems and timing devices to be sure they are operating properly. It is now the law that “anyone who purchases and installs an automatic lawn sprinkler system MUST install a rain sensor device or switch which will override the irrigation cycle of the sprinkler system when adequate rainfall has occurred.” To retrofit your existing system, contact an irrigation professional for more information.
6. Raise the lawn mower blade to at least three inches. A lawn cut higher encourages grass roots to grow deeper, shades the root system and holds soil moisture better than a closely-clipped lawn.
7. Avoid over fertilizing your lawn. The application of fertilizers increases the need for water. Apply fertilizers which contain slow-release, water-insoluble forms of nitrogen.
8. Mulch to retain moisture in the soil. Mulching also helps to control weeds that compete with pants for water.
9. Plant native and/or drought-tolerant grasses, ground covers, shrubs and trees. Once established, they do not need to be watered as frequently and they usually will survive a dry period without any watering. Group plans together based on similar water needs.
10. Do not hose down your driveway or sidewalk. Use a broom to clean leaves and other debris from these areas. Using a hose to clean a driveway can waste hundreds of gallons of water.
11. Outfit your hose with a shut-off nozzle which can be adjusted down to fine spray so that water flows only as needed. When finished, “Turn it Off” at the faucet instead of at the nozzle to avoid leaks.
12. Use hose washers between spigots and water hoses to eliminate leaks.
13. Do not leave sprinklers or hoses unattended. Your garden hoses can pour out 600 gallons or more in only a few hours, so don’t leave the sprinkler running all day. Use a kitchen timer to remind yourself to turn it off.
14. Check all hoses, connectors and spigots regularly.
15. Consider using a commercial car wash that recycles water. If you wash your own car, park on the grass to do so.
16. Avoid the installation of ornamental water features (such as fountains) unless the water is recycled. Locate where there are mineral losses due to evaporation and wind drift.
17. If you have a swimming pool, consider a new water-saving pool filter. A single back flushing with a traditional filter uses from l80 to 250 gallons or more of water.

General Water Saving Techniques:

1. Create an awareness of the need for water conservation among your children. Avoid the purchase of recreational water toys which require a constant stream of water.
2. Be aware of and follow all water conservation and water shortage rules and restrictions which may be in effect in your area.
3. Encourage your employer to promote water conservation at the workplace. Suggest that water conservation be put in the employee orientation manual and training program.
4. Patronize businesses which practice and promote water conservation.
5. Report all significant water losses (broken pipes, open hydrants, errant sprinklers, abandoned free-flowing wells, etc.) to the property owner, local authorities or your Water Management District.
6. Encourage your school system and local government to help develop and promote a water conservation ethic among children and adults.
7. Support projects that will lead to an increased use of reclaimed waste water for irrigation and other uses.
8. Support efforts and programs to create a concern for water conservation among tourists and visitors to our state. Make sure your visitors understand the need for, and benefits of, water conservation.
9. Encourage your friends and neighbors to be part of a water conscious community. Promote water conservation in community newsletters, on bulletin boards and by example.
10. Conserve water because it is the right thing to do. Don’t waste water just because someone else is footing the bill such as when you are staying at a hotel.
11. Try to do one thing each day that will result in a savings of water. Don’t worry if the savings is minimal. Every drop counts. And every person can make a difference. So tell your friends, neighbors and co-workers to “Turn it Off” and “Keep it Off”.

Techniques come via American Water Savers.

The Sacramento Bee has a must-read article, by Jim Wasserman, about the current state of Sacramento County’s real estate market and the June sales figures.

 

Anything might happen. But this is starting to look real.

For the third straight month, capital-area home sales climbed above figures for the same time last year, a welcome indicator in a region searching for the bottom of its long housing slump. But median prices continued to slide.

 

From the Sacramento Bee:

Buyers are back.

Months of plummeting prices and droves of discounted, bank-owned properties turned April into one of the Sacramento region’s best months for home sales in nearly a year, DataQuick Information Systems reported Monday.

Three counties – Sacramento, Sutter and Yuba – broke out of an entrenched sales slump, posting more home purchases than in April 2007.

It was the first time sales had broken the 3,000 barrier since June 2007 in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties combined, according to La Jolla-based DataQuick. Overall, 3,163 homes closed escrow.

April also produced the first year-over-year sales gains in Sacramento County in 37 months.

The numbers confirm what many in the real estate industry have been saying in recent weeks: There’s been a spate of buying. And, sellers are getting multiple offers for discounted properties, especially those owned by banks due to foreclosure.

What’s driving the buying spree? Prices, primarily, which have dropped as much as one-third in the past year and are still falling as banks aggressively price thousands of bank repos.

It’s also become easier to get financing, especially for those with good credit.

Who are the buyers? They are “entry-level (buyers), investors and some ‘normal’ buyers who have been fence sitters,” said Randy Dunham, a Gold River-based real estate agent with ReMax Gold. “Everybody’s trying to pick the bottom.”

Price is motivating many who had held back.

“There are people with a lot of money who didn’t buy houses two and three years ago,” said Carlos Kozlowski, a Sacramento-based Coldwell Banker real estate agent. “Now prices are back to 2003 and 2004 levels. (It’s) irresistible.”

Meanwhile, for-sale inventory in El Dorado, Placer, Sacramento and Yolo counties fell for an eighth straight month as buyers gobbled up bank foreclosures and would-be sellers continued to wait for prices to improve.

Even so, with 12,000-plus “For Sale” signs in the region, the market hasn’t yet reached bottom, said ReMax’s Dunham.

At month’s end there were 12,606 homes for sale in El Dorado, Placer, Sacramento and Yolo counties, according to Sacramento-based researcher TrendGraphix. The peak in August 2007 was 16,262.

While falling prices have made happy hunting for buyers, it’s grueling for sellers who have to compete with discounted bank repos.

“It was a terrible market,” said Sacramentan Roy Amerine, who closed escrow in April on his Campus Commons residence, which had been on the market since January.

“We started at about $360,000 or $380,000, and made several drops of either $10,000 or $20,000,” he said, before selling for $310,000. “I was relieved, finally, to sell the property. It was just real stressful.”

In Sacramento County, sales of new and existing homes totaled 1,961 in April, the highest since September 2006, according to DataQuick.

The tally was 26.3 percent higher than April 2007 – the first time year-over-year sales had gained since March 2005, DataQuick reported. Yuba County posted a 23.3 percent year-over-year gain, its first in several years. Sutter County posted a 1.1 percent gain, its first in almost a year.

Elsewhere, sales were slower. Yolo County’s tally of new and existing home sales was down about 1.1 percent from the period last year – after mostly double-digit monthly declines since the region’s housing boom began losing steam in late 2005.

Sales in Placer County remained 8.5 percent below April 2007, according to DataQuick.

Median sales prices – where half the homes sell for more and half for less – are down year over year in the eight counties, ranging from 6.2 percent in Nevada County to Sacramento County’s 32.1 percent. Sacramento’s median sales price in April fell to $232,000 – 40 percent off its August 2005 high of $387,000.

The Sacramento Association of Realtors reported that a third of all sales in April in the county and the city of West Sacramento were for homes priced below $200,000.

“Borrowers are more cautious about what they can afford,” said Michele Dillingham, a senior loan consultant at Sacramento-based Vitek Mortgage. “A lot of people are buying at below what they would qualify for. They saw what happened (with foreclosures) and don’t want it to happen to them.”

Placer County’s median price in April was $352,000 – roughly equal to the median back in October 2003, according to DataQuick. Prices for new and existing homes combined in Placer County are down nearly 22 percent from a year ago and down about one-third from an August 2005 high of $525,000.

Only about 3 percent of sales in the suburban county were for homes below $200,000, according to the Placer County Association of Realtors.

CNN notes that the market has changed and that there are 5 new rules that all prospective home-buyers should know:

(Money Magazine) — There’s no telling how long the housing crisis will drag on. Here’s what you need to know before you start shopping in a rocky market.

Face it: The house you buy today will more than likely be worth less next year. That could get you thinking about trying to time the bottom. Resist. It’s harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.

Pace yourself, find the perfect place and drive a hard bargain: Ignore the seller’s asking price and bid 10% below what comparable homes are selling for. If the seller balks, move on. Remember that if you’re trading up, your home could sit. So sell before you buy.

Homes are plentiful and will remain so, but financing will be getting more expensive. True, the Federal Reserve has slashed interest rates, but fixed mortgages don’t directly follow the Fed. They reflect the bond market’s expectations about inflation, which remains a concern. The 30-year, now at 6.1%, will likely reach mid-6% by December and 7% in 2009, says Celia Chen of Moody’s Economy.com.

That means there could be a penalty for waiting to buy even if prices fall more. Today a $250,000 loan would set you back $1,500 a month. At 7%, a $1,500 payment gets you only a $225,000 mortgage. As for variable-rate loans, the spread between conforming ARMs and fixed loans is too narrow to do you much good.

Mortgages in amounts greater than $417,000 - the limit for buying by federally sponsored mortgage agencies - usually run a fifth of a percentage point above conventional products. But investors are shunning jumbos, which now average 7.2% and are unlikely to drop much this year, according to HSH Associates.

Certain jumbo borrowers could get relief, however. A new law allows Freddie Mac and Fannie Mae to buy loans as large as $729,750 in 71 high-priced areas. So far “jumbo conforming” loans average 6.6%. The program has gotten off to a slow start; you’ll need to shop around. And unless Congress acts, this bargain will disappear at year-end.

By now you’ve heard from somebody who knows somebody who got a great deal on a foreclosed property. But when you buy a house, you’re also buying into a neighborhood. And foreclosures tend to be bunched in areas where residents and speculators alike took out exotic mortgages to get into homes they subsequently found they couldn’t afford. That’s not a recipe for stability. Prices and quality of life could both decline further.

Similarly, avoid developments that popped up in the past few years. They too likely have a lot of owners with risky loans and little equity, says Mike Larson of Weiss Research. Instead, go for areas with highly rated schools. They generally fare better during downturns, and that pattern is holding today, according to a recent study by real estate site Trulia.com.

The real estate game has a built-in conflict of interest, since the listing agent and your agent both get paid by the seller. And these days more sellers are offering extra cash to buyer’s agents.

So make sure you’re not being steered to a house that’s better for your agent than for you. Agree up front on his commission (typically 3%) and that any extra payments will go to you, says Jon Boyd, past president of a buyer’s agent trade group.

The FOMC cut key rates by 75 basis points at their policy meeting today.  The fed funds rate now stands at 2.25%, its lowest rate since December 2004.  The discount rate was also cut by the same amount to 2.50%.  Under financial market turmoil and economic contraction, the Fed has abandoned a gradualist approach to monetary policy, cutting the fed funds rate by 300 basis points over the last six months, sometimes 50 or 75 basis points at a time and once between meetings. The aggressive rate movements have caused some divisiveness on the board, with two committee members dissenting today’s decision.  Nevertheless, the policy statement cites a weaker economic outlook with softer consumer spending and job growth, tighter credit and housing downturn as reasons for the large, simulative cuts.  The Fed also warned that inflation expectations have risen, making the task of reviving economic growth without sparking inflationary pressures a tricky endeavor.  The committee noted however that they expect inflation to ease under slower economic growth.  The Fed will maintain its easing bias for now and has room to cut further as is deemed necessary to promote moderate growth over time and price stability.

Federal Open Market Committee Policy Statement

Release Date: March 18, 2008

For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.  Recent information indicates that the outlook for economic activity has weakened further.  Growth in consumer spending has slowed and labor markets have softened.  Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.   Inflation has been elevated and some indicators of inflation expectations have risen.  The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.  Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully. Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity.  However, downside risks to growth remain.  The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were:  Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pinalto; Gary  H. Stern; and Kevin M. Warsh.  Voting against were Richard W. Fisher and Charles I. Plosser, who pursued less aggressive at this time.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2.5 percent.  In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York and San Francisco.

There’s some good news on the horizon for homeowners in cities like San Diego, Washington D.C. and Sacramento, Calif., where the real estate boom and bust has left those markets reeling from the effects of overbuilding, bad loans and foreclosures.

It’s a provision of the recently signed Economic Stimulus Act of 2008 that is designed to boost sales in cities where high home prices have historically prevented government-sponsored enterprise (GSE) lenders Fannie Mae (nyse: FNM) and Freddie Mac (nyse: FRE) from securitizing mortgages, a process effectively akin to insurance that lowers risk for both lenders and borrowers.

In Depth: Economic Stimulus’ Biggest Real Estate Winners

The provision calls for increasing GSE loan limits to 125% of a city’s median home price. Previously, all housing markets were subject to a $417,000 limit. The adjusted limit is capped at $729,750. The hope is that in raising the limit, more local residents will secure mortgages and buying activity will rise.

Before this took effect, in cities like San Francisco or New York, where the median home price is above $417,000, Freddie and Fannie couldn’t securitize homes at the median level. Without securitization in a tight credit market, home sales volume drops.

But now, loans originating between July 1, 2007 and Dec. 31, 2008, will see a temporary boost in the amount Fannie and Freddie can securitize. (Existing loans issued in the second half of 2007 can be refinanced under these new terms).

For some cities, that’s a monumental shift. Using median home prices that included condos, foreclosures and new construction, Radar Logic, a New York-based real estate research firm, calculated which markets’ housing stock would be most affected by new loan limits.

In Los Angeles, for example, a new loan limit of $700,000, or 125% of the current median price, would suddenly place 32% of homes in that metro under Freddie and Fannie’s umbrella, according to Radar Logic. In San Diego, another hard-hit market, the new loan limits open up 18% of the market to Fannie and Freddie securitization.

What do you think of the government’s plan? Weigh in. Add your thoughts in the Reader Comments section below.

In affected markets, this program helps in two ways. First, it makes home buying easier by making credit less risky for banks. Fannie and Freddie are backed by the federal government; the lower risk makes lenders more likely to offer credit because lenders know they’ll still recoup costs in the case of a default.

It also reduces consumer interest rates. Loans above Fannie and Freddie’s limit are known as “jumbo” loans, and because they aren’t backed by the government, these riskier loans carry higher interest rates. Under the limit increase in the stimulus package, loans that are recategorized from jumbos to conforming loans (54% in San Jose, 44% in San Francisco, 17% in New York) will carry lower interest rates. For potential buyers, this makes home buying more affordable, and for many current mortgage holders, it makes refinancing to a lower rate possible.

Taken together, these benefits should make credit less risky for lenders and cheaper for home buyers, which could help boost transaction volume and lead to price recoveries.

At least that’s what the government is banking on.