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Francis Rolland's Blog

By Francis Rolland | Agent in Los Altos, CA
  • All cash buyers... some perspective

    Posted Under: Home Buying in Los Altos, Financing in Los Altos, Investment Properties in Los Altos  |  June 12, 2014 9:29 AM  |  125 views  |  2 comments

    All cash buyers... some perspective


    It is quite well known that a lot of residential purchases in the US are now made without a loan, all cash.
    But what is the real story, in fact? 

    Overall, all-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, according to a new report from RealtyTrac, a company that collects and analyzes housing data.   Several factors are at play here, including the fact that institutional investors, more numerous, have bought up many homes with cash, and that many average buyers have remained constrained by unusually tight lending standards.

    A few facts, from the January article of “PlanetMoney” (shared in a blog from NPR):
    • All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from a revised 38.1 percent in November, and up from 18.0 percent in December 2012.
    • States where all-cash sales accounted for more than 50 percent of all residential sales in December included Florida (62.5 percent), Wisconsin (59.8 percent), Alabama (55.7 percent), South Carolina (51.3 percent), and Georgia (51.3 percent).  - so, it's not only California... 
    • For all of 2013, 29.1 percent of U.S. residential sales were all-cash purchases, but the percentage
      trended substantially higher in the second half of the year. The 29.1 percent in 2013 was up from 19.4 percent in 2012 and 20.6 percent in 2011.
    • Institutional investor purchases accounted for 7.9 percent of all U.S. residential sales in December, up from 7.2 percent the previous month and up from 7.8 percent in December 2012.
    • For all of 2013, institutional investor purchases accounted for 7.3 percent of all U.S. residential property purchases, up from 5.8 percent in 2012 and 5.1 percent in 2011.
    • Thanks for reading!

      Francis
      Silicon Valley real estate
      Local market: Smart graphs 
  • moving in with parents - more common for the middle-aged

    Posted Under: Quality of Life in Palo Alto, Market Conditions in Palo Alto, Financing in Palo Alto  |  June 12, 2014 9:25 AM  |  105 views  |  1 comment

    Moving in with parents - more common for the middle-aged.


    Due to the effects of the sluggish economy, older people are quietly moving in with their parents at twice the rate of their younger counterparts. The number of Californians aged 50 to 64 who live in their parents' homes swelled 67.6 percent to about 194,000, according to the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development.
    Readthe article from the LA times   From Walter Hamilton (April 2014).


    Thanks for reading - Do you like my blogs? Share them!
    Francis

    Silicon Valley real estate
    Smart local statistics
  • 5 advantages to owning a home

    Posted Under: Home Buying in Mountain View, Financing in Mountain View, Investment Properties in Mountain View  |  May 15, 2014 1:06 PM  |  244 views  |  No comments
    Five advantages to owning a home...
    To piggy-back on my last blog, I thought this blog post from Redfin  from April 21, 2014 was interesting.  It says it very well.

    Five advantages to owning a home:
    Your home is your castle, but there are also many financial advantages of owning a home. Here are five ways that owning can be better than renting.
    1. As a Hedge Against Inflation
    Your rent will go up on a regular basis, while your payment on a 30-year fixed mortgage will always remain the same.
    Let’s say your monthly rent is $1,800. Assuming inflation (your rent increase) is 3 percent, in five years your monthly rent will be $2,026. By then, you will have paid about $115,000 of your landlord’s mortgage.
    2. To Build Your Personal Wealth
    Stop paying your landlord’s mortgage. When you own your home, your mortgage amount is going down and your property value is going up.
    No other investment, asset or debt is as misunderstood as a home. A home can be a wonderful and lucrative investment, but like any investment, it needs to be regularly reviewed, maintained and, when appropriate, sold. Even if your home is paid off, you still pay costs for repairs and upkeep, taxes and insurance. But like any investment, if you own it long term, take care of it and sell when the market is right, you stand to make a great gain.
    3. Tax Savings (Federal and State)
    Under Section 163 of the IRS code, interest on loans used to acquire, construct or improve real estate is deductible on up to a $1,000,000 mortgage.
    Interest on loans tied to real estate for any reason is deductible on up to a $100,000 mortgage. For example, interest on the first $100,000 of a home equity line of credit (HELOC) is tax deductible.
    Let’s say you make $100,000 per year and rent a home for $1,800 per month. You would have to pay taxes on your entire income of $100,000 when you are renting that home. If you purchase a home with a monthly payment of $1,800, you only have to pay taxes on $78,400 of your annual income because the interest you paid on your mortgage can be used as a tax deduction.
    4. Asset Diversification
    Unlike with a 401(k) or IRA, when you invest in a home you can live in it while the investment grows.
    Owning a home over an extended period of time is usually more lucrative than renting. With good planning and execution, you can learn to minimize the cost of homeownership and maximize the ability to create real wealth. Many small business owners have a home office and can use the home office as a tax deduction while they are earning income. Other homeowners will rent out a bedroom and use the rent to pay down their mortgage and gain equity faster.
    5. Forced Savings
    Monthly mortgage payments lower your mortgage, essentially creating a forced savings account.
    In five years with a $1,800 monthly mortgage payment, you will have paid $29,331 of the principal on your mortgage. That would be money in your pocket if you choose to sell. For this example we use a $345,000 mortgage loan amount at a 4.75 percent interest rate, 4.881 percent APR and use a standard amortization table to come up with the principal pay down.
    To: view the original article.  
    Thank you for reading!  Francis
    Silicon Valley real estate specialist
    Detailed, local trends etc...
    Current mortgage rates
    A place worth noting: Our Brother's Home in MountainView
  • Some advice to home buyers

    Posted Under: Market Conditions in Palo Alto, Home Buying in Palo Alto, Financing in Palo Alto  |  May 15, 2014 12:58 PM  |  214 views  |  No comments
    Some advice to home buyers. 

     
    There is plenty of advice around, available to new homebuyers, - no shortage of good words, must-do's, encouragements, explanations and training, etc...  I do not mean to be comprehensive in this blog, but I just wanted to say a few things coming to mind, in light of what is going on out there: the current local market, fast-going environment, competitive to the extreme, sometimes ruthless.


    Taking a bit of perspective, I just wanted to throw some ideas out there and remind of some basic main ideas:

    • Home buying doesn’t begin with home searching; it begins with a mortgage pre-approval.  Often, first-time home buyers fear getting pre-approved because they’re
      afraid the lender may tell them they do not qualify for a mortgage or they qualify for a loan smaller than expected.  However, by getting preapproved, buyers will make a financial decision rather than an emotion one.  Also, knowing that they can qualify for a certain loan (depending on the terms of the loan), they will feel more confident in their endeavor, as they will be sure of what they can really buy (in $), as they are looking at homes.
    • Home buyers need to think of a house as a long-term commitment.  If a buyer may have to switch jobs in a year or two and may have to move for the job, they should think twice about buying a house.  Ideally, buyers should picture themselves living in the house for five to seven years.
    • Should a buyer have to move after a few years, following the above train of thoughts, they may want to think in terms of an investment for the long term: a "retirement account" - they could rent out the property.  Just saying it is a possibility for people thinking "long term".  (see this article from the LA Times)
    • Some first-time buyers make the mistake of spending all of their savings on the down
      payment and closing costs, and sometimes borrow on their 401K.  However, it is not good to be left with no savings at all for home repairs and other unexpected expenses.  It could make more sense to get in the market with a smaller property, i.e. a condominium/townhouse, and move up 3 to 5 years later.
     
    • Should there be a lot of competition for the chosen house, give it your very best. 1/ there will be no regrets should it not pan out, 2/ chances are that in a year or two, you will not remember exactly the price you paid, 3/ there is a cost in searching for too long a time, both psychological and monetary; or I should say there is "savings" in just getting it done earlier rather than later: interest rates can go up, prices can go up, and moving into your new home is much better than looking for it week after week.
     
    As always, thank you so much for reading, and if you like what you read, let your friends know!
     
    Francis
    Silicon Valley real estate specialist
    Detailed, local trends etc...
    Current mortgage rates
  • Refinancers to save more than $21 Billion in interest

    Posted Under: Market Conditions in Mountain View, Financing in Mountain View, Home Ownership in Mountain View  |  May 15, 2014 12:51 PM  |  268 views  |  No comments
    Refinancers to Save More than $21 Billion in Interest
    Refinancers to Save More than $21 Billion in Interest
    Borrowers who refinanced in 2013 will save on net approximately $21 billion in interest over the next 12 months, according to Freddie Mac’s fourth quarter 2013 quarterly refinance analysis.

    Of borrowers who refinanced during the fourth quarter of 2013, 39 percent shortened their loan term, up 2 percent from the previous quarter and the highest since 1992. Borrowers who kept the same term as the loan that they had paid off represented 56 percent, and only 5 percent chose to lengthen their loan term.

    The net dollars of home equity converted to cash as part of a refinance remained low compared with historical

    volumes. In the fourth quarter, an estimated $6.5 billion in net home equity was cashed out during a refinance of conventional prime-credit home mortgages. The peak in cash-out refinance volume was $84 billion during the second quarter of 2006. Adjusted for inflation, annual cash-out volumes during 2010 through 2013 have been the smallest since 1997.

    The average interest rate reduction in the fourth quarter was about 1.5 percentage points -- a savings of about 25 percent.  More info on
    this page of the Freddie Mac website.

    On another note, about 2 in 5 borrowers shorten their loan terms when they refinanced last year, and over 95% of refinancing borrowers chose a fixed-rate loan.

    Thanks for reading; if you like it, let your friends know!
    Francis

    Silicon Valley real estate specialist
    Detailed, local trends etc...
    Current mortgage rates
  • Negative Equity in the US

    Posted Under: Market Conditions in Mountain View, Financing in Mountain View, Home Ownership in Mountain View  |  January 19, 2014 11:48 AM  |  417 views  |  No comments
    Negative Equity in the US
    CoreLogic, a California based research firm, reported that as of the 3rd quarter of 2013, the number of properties with a mortgage in the US is about 42,6 million.  About 6.4 million – or 13% – still have a negative equity. 
     
    CoreLogic indicates that, of those 42.6 million properties with positive equity, 10 million have less than 20% equity, leaving them in a situation where it’s still hard to refinance due to underwriting constraints.
     
    "Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion," said Mark Fleming, chief economist for CoreLogic. "Negative equity will decline even further in the coming quarters as the housing market continues to improve."
     
    The state of Nevada had the highest percentage of mortgage properties in negative equity at 32.2%, followed by Florida (28.8%), Arizona (22.5%), Ohio (18%) and Georgia (17.8%).
    HousingWire.com article by Kerri Ann Panchuk

     PS: let’s remember that many transactions are cash: According to this very nice RealtyTrac study, all-cash purchases nationwide accounted for 40 percent of all sales of residential property in July.

     
    Thanks for reading, and may you have an excellent Holiday Season!

    Francis Rolland
    Silicon Valley real estate specialist
    Detailed, local trends etc...
    Current mortgage rates

    non-profit organization worth noting: Partners for New Generations.
  • Student-Loan Debt Keeps Buyers Out of the Market

    Posted Under: Home Buying in Mountain View, Financing in Mountain View, Home Ownership in Mountain View  |  September 25, 2013 9:59 PM  |  507 views  |  No comments
    Student-Loan Debt Keeps Buyers Out of the Market

     As we hear that Congress struggles with the "student loans" question, it is good to put it in perspective with a few facts. I thought the article below was kind of important to keep in mind.

     
    The impact of student-loan debt on the nation's housing market has real estate analysts worried due to the importance of first-time buyers to the health of the market. Questions linger about whether the housing recovery will be limited as deeply indebted college graduates struggle to stabilize their finances, which means young, first-time purchasers are not entering into homeownership at traditional rates.
    • According to the NATIONAL ASSOCIATION OF REALTORS®, first-time buyers comprised just 28 percent of purchases in the resale market during May. For comparison, typically these buyers make up 40 percent of purchases. The lower rate is not surprising when one considers the statistic that college graduates on average carry $21,402 in student loan debt, and troublingly, only 39 percent are in a capacity to repay. Clearly, many college graduates have no choice but to postpone the purchase of a home due to heavy debts from student loans.
    • The homeownership rate for those individuals who are still paying off student loans is 36 percent lower than among their peers who have no student debt, according to research from the One Wisconsin Institute.
    • Student-loan debt will remain a long-term issue because the average payoff time is 21 years, ranging from 17 years for those who attended college but did not get a degree to 23 years for those with graduate degrees.
    • The country’s total outstanding student debt has surpassed $1.1 trillion. For recent graduates, the debt load averages just under $27,000, but an estimated 13 percent of outstanding balances range from $54,000 to $100,000.
    Read the full story on the Los Angeles Times article from Kenneth R. Harney, 6/28/13.
    Do you have any thoughts on the subject? Feel free to chime in!

    Francis

    Silicon Valley real estate
    Local market: Smart graphs
    Current mortgage rates
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