Let’s talk recession & affordability.

• Conference Board
• Economic/Business Research Organization
• 90-year old organization
• Consumer Confidence Index
• Leading Economic Indicators
• Their prediction: Continue to signal weak economic growth ahead but not a recession
• National Bureau of Economic Research
• Leading non-profit, private, economic research organization
• Predicts when recession occurs and ends
• Their prediction: 50% odds a recession will occur
• Mortgage Bankers Association
• National association representing the real estate finance industry
• Advocate for their members and promote fair and ethical lending practices
• Their prediction: Economic growth will continue to slow through the 1st half of 2008 and pick up in the 2nd half of 2008

I was talking to Mike Tacconi, former President of the California Mortgage Brokers Association, the other day and he told me that inflation is a concern – gold is up 15% so far this year and silver is at a 27 year high. Mike also has an interesing chart on his site about the effectiveness of economic stimulus packages.

At today’s Realtor’s Marketing Association meeting, Mike said that given the confluence of market forces, this is exceptionally favorable time for home buyers.

Affordability is, and always will be, the primary real estate issue. When affordability drops too low or too fast, a market correction has to occur – the number of home sales decreases and selling prices will ultimately drop.
The more dramatic the run-up in home appreciation, the steeper the decline in sales and prices will be at some point.

Affordability Index:  Measures whether or not a typical family could qualify for a mortgage loan on a typical home.

General Interpretation:

• Value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home
• Above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20% down payment

Interpretation (2007):

• 112% – Means a family earning the median family income has 112% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.
• 22% of income: The monthly mortgage payment is 22% of the median family income

3 factors that impact affordability:

• Income
• Home Price
• Cost of money: Interest Rates

The comparison of the median household income to the amount necessary to buy a median-priced home  (Standard affordability = 100%)

• 2004 – 124% (20% of income)
• 2005 – 112% (22% of income)
• 2006 – 106% (24% of income)
• 2007 – 112% (22% of income)

Affordability Is Always Felt Locally

• When the market shifts locally it usually shifts in a dramatic and rapid manner
• Local areas that have the greatest and fastest appreciation will typically deal with the most dramatic down shifts
• Affordability must be tracked in each metro and micro market – that is where sellers and buyers have to deal with the issues

Housing Opportunity Index – The share of homes sold in that area that would have been affordable to a family earning the local median income based on standard mortgage underwriting criteria. 

Two major components:

• Median Income
• Housing cost

Assumption: A family can afford to spend 28 percent of its gross income on housing.

• 30-year fixed rate mortgage
• 10% down payment
• Estimated property taxes
• Estimated property insurance

2007 Real Estate 2008

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
• Part 6

Click Here to Get In-Depth Local Real Estate Market Data - Updated Weekly

I was down at the Radisson in Dublin this evening to attend a business mixer. There was enoough food to feed the TriValley.

I took a break to allow Gavin George to give me a few minutes of massage. Gavin and Brittany Miller had their massage chair set up and were helping people to work out the kinks and let go of the past. They were representing Spa Bella at the Dublin Radisson.

I spoke with Gavin lfor a few minutes about Internet Marketing and Promotion, my field of expertise. Gavin just yestereday put up a page on MySpace. I hope to be able to mentor him some on how to create a solid online presence for his busines future.

I also spent a few minutes talking to Mary Beth Phillips, the new Executive Director of DPIE – Dublin Partners In Education. I told Mary about our resident guest author, Joseph Natividad, and my interest in working with young adults to help them establish themselves in a positive way on the Internet for future business. Mary and I will be meeting to discuss this more in the future. Here’s a pic of Mary Beth and another attendee.

Our Pleasanton BNI Group had a booth. I saw about 8 of our members their before I left for a 45 minute commute back to Walnut Creek. (Is it always the one’s that don’t think it will ever happen to them, that cause all the accidents these days as they swap lanes faster than a Southern California swinger, or is it just me thinkiing it’s so?)

BNI is the landmark nationwide networking group founded by Ivan Misner. If you Google BNI  Pleasanton, you will see that I do know a little bit about Internet Marketing. I love working with small businesses – email me if you would like to explore the posibilities for your business.

The National Association of Realtors (NAR) 2007 Predictions

• Sales
• Predicted = 6.4 million
• Actual = 5.65 million
• Predicted Growth = -1.2%
• Actual Growth = -12.8%
• Variance = 11.5%
• Volume
• Predicted = $1.7 trillion
• Actual = $1.5 trillion
• Predicted Growth = 0.3%
• Actual Growth = -13.5%
• Variance = 13.8%
• Price
• Predicted = $225,229
• Actual = $218,900
• Predicted Growth = 1.5%
• Actual Growth = -1.4%
• Variance = 2.9%

In 2007 NAR was -

• Too optimistic when they think the market is going down
• Too pessimistic when they think the market is going up

NAR’s 2008 Prediction

• Sales will increase by 0.7% to 5.69 million transactions
• Up from 5.65 million in 2007
• Down from 6.5 million in 2006
• Prices to hold even in 2008
• Unchanged from $218,900 in 2007
• Down from $221,900 in 2006

 These predictions are based on existing homes. Remember 2007:

• Too optimistic when they think the market is going down.
• Too pessimistic when they think the market is going up.

2007 Real Estate 2008

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5
• Part 6

Click Here to Get In-Depth Local Real Estate Market Data - Updated Weekly

There have been a few burglaries around San Ramon lately… the last one on Kittery by
Pine Valley Drive.

The guy suspected is of unknown ethnicity, stocky, and carries a clipboard to look as though he is a contractor as he scopes out the neighborhood. 

He’s taken only carry-able items such as jewelry, electronics, and other lighter items easy to carry and has come in opened or unlocked doors, usually from the backyard. So far he has not been violent, but we wanted to make sure to pass this info on to others.

This info is from the Alameda County Sheriff’s office from deputies that live in this area and I don’t believe it has been released to the public, but please pass this on to others, especially other parents whose kids might be coming home alone after school.

If anyone happens to see a suspicious person fitting the general description of the person above, please call  the San Ramon Police Department 925-973-2779 to report it (non-emergency) .

Take care and stay safe.

Some people still don’t know that typing in ALL CAPS means you are SHOUTING at someone.

Not only that, BUT IT IS ACTUALLY HARDER TO READ A LARGE BLOCK OF TEXT THAT IS ALL CAPS AND THERE IS A LOSS OF EMPHASIS ON EVERYTHING WHICH IS PROBABLY NOT WHAT SOMEONE USING ALL CAPS IS TRYING TO ACHIEVE.

Maxine knows and she is prepared to use all caps as need be.