Sunil Sethi
Real Estate & Mortgage Loan Team

December 2005 Newsletter

              www.SunilSethi.com

Dear Friend,

Year end is a time to celebrate the holidays with family and friends; it is also a time to do some long term financial planning.

I’m especially concerned about those of you, who aren’t planning for the time when your interest only ARM will convert to a floating interest rate. When your fixed period is over you will have to contend with having a higher interest rate and also paying back principle (also referred to as amortization). Granted your income will also have increased, it’s best to do some calculations to determine affordability when your rates go to float.

Most likely when you go to float you’ll refinance your loan balance to another interest only ARM, to avoid paying back principle. However you should estimate where interest rates may be in 3-5 years, look at historical trading ranges for your loan’s index to determine your worst case situation (remember most ARMs have a built-in 5% life time cap from the start rate, so if your start rate was 4.5% your rate can’t go more than 9.5%) Also the typical margin on a 5 Yr Treasury ARM will be 2.75%. Today the 12 month Treasury index is at 3.326%.

If you estimate that your index increases by 2% in 3 years. Then your interest rate would be (index + margin = 5.326 + 2.75) 8.076% when it goes to float. So for example a $500,000 mortgage with a payment of $1875 at 4.5% today would go to $3,650 when you go to float in 3 years.

Unless your income also doubles in the next 3 years, you will find the mortgage to be burdensome. To alleviate this higher mortgage payment, you should considering paying down some of your loans and look for new sources of income. Call me if you’d like to look at different scenarios.

Best regards,

Sunil Sethi Real Estate  & Mortgage Loan Team

Real Estate – A Slow and Cold December

We’re having a slow December. We’re seeing fewer buyer’s, and most seller’s are reluctant to drop their price. The result being longer days on the market. 30 days on the market is now the norm.

If you plan on buying this is the right time, since there’s little competition. If you have to sell, then price it right. If you wait till Feb, your buyer’s will have experienced two more rate hikes, which will further hurt their affordability.

Are you wondering what your home is worth based on the most recent sales?  Give me a call for a free evaluation.

Interesting Fact
Did you know that average house values in the US doubled in value since 2000, which equates to a 9% compounded annual rate of return.

Interest Rate Watch – Continue to climb

Because of strong GDP, employment growth, inflation growth, rates worsened by about .125% this month. Across the board, from consumer confidence to manufacturing to GDP to jobs; the economy appears to be clicking along at a good, strong pace. The Fed is expected to continue raising rates for at least 3 more times now. The next meeting/rate increase will be on Dec. 13 followed by another increase on January 31, 2006. Expect the prime rate to be at 7.75% by the 3^rd move which will be on March 28, 2006 (after Bernake becomes the Chairman of the Federal Reserve Board).

A few notes of special interest: Monday’s Existing Home Sales came in a touch weaker than anticipated, with inventory levels rising to a 4.9 month average turn time on a national level. But then Tuesday’s New Home Sales report was red hot, showing much higher levels than expected.

And after all the fanfare...Friday’s important Jobs Report number came in basically in-line with estimates, showing 215,000 new job creations with 210,000 expected. Another bit of strong news indicated by this report is that it appears the economy has weathered the effects of Hurricanes Katrina and Rita, with job growth numbers back to pre-Hurricane levels.

3 Month Chart of FNMA Bond Prices

source: Sue Woodward/MMG.

Action Point: If you still have floating interest rate 2^nd mortgage, consider moving it to a fixed interest rate 2^nd mortgage. You should be able to get a rate that is the same or better than the floating rate you currently have.

Other Noteworthy News:

New Conforming Loan Limit is now $417,000.

Property Taxes

You should have received the tax bill for the 2005-2006 fiscal tax year by now. The first payment is due Nov. 1 and late if not received by Dec. 10.

If you bought your home this last month, it’s possible the county hasn’t updated their records and sent the bill in the previous owner’s name. This doesn’t take you off the hook.

If you don’t receive it in the mail, get it online at http://www.sunilsethi.com/property_taxes.htm. For those of you, who purchased your home and haven’t received your supplemental bill, call the assessor’s office on when you can expect it or check for it online at http://www.sunilsethi.com/property_taxes.htm.

Small Claims Court Limit now $7,500

Starting January 1, 2006, the maximum monetary claim an individual person may bring into small claims court has been increased from $5,000 to $7,500. Legal entities other than natural persons (e.g., corporations, partnerships, or governmental entities) do not qualify for this jurisdictional increase. Source: Assembly Bill 1459 and Senate Bill 422.

Property Taxes for Domestic Partners  

Beginning on the lien date for the 2006-07 fiscal year, any transfer between registered domestic partners will not trigger property tax reassessment. As a result, registered domestic partners will be treated the same as spouses under California property tax laws. Source: Senate Bill 565.

Real Estate Investment Club – National Wealth Builders

Please let me know if you plan to attend so I can look for you. All meetings start at 6:00PM. These are both educational and networking events.   

Calendar of Events

Is the Paint on your home peeling

If your home’s exterior paint is looking weathered it may be time to repaint before the wood gets damaged. I just had the exterior of my home painted. The firm I hired pressure washed, though it is preferred to hand wash to remove all dirt (it’s comparable to washing a car with a hose vs. by hand). For more tips on what to do before painting, read this article http://www.askthebuilder.com/591_House_Painting_Tips.shtml. Also if you are looking for some recommendations for painters, I know a few painters I can recommend to you. 

Google Short Message Service (SMS) instead of dialing 411

Hate paying 411 to get the phone number or address, try Google SMS. It’s a free web service accessed by text messaging. You can try by entering a search term or simply selecting one of the sample search terms they have provided here. Your results will display in the phone image as they would on your own mobile phone or device.

View a complete guide of how to use Google SMS or learn more by reading the FAQ.

New Federal Tax Credit for Energy Efficient Home Improvements

Tax Credits for Homeowners:

There are different levels of credit depending on the type of improvement made, but the maximum amount of homeowner credit for all improvements combined cannot exceed $500 during the two year period of the tax credit. This tax credit applies to improvements made from January 1, 2006 through December 31, 2007. For more info go to http://energystar.gov/index.cfm?c=products.pr_tax_credits

Tankless Water Heater

I’m planning on replacing my water heater next year with a tankless model. I’m leaning toward the Bosch Aqua Star model 250SX because it’s the only one I’ve found that can support two showers at the same time. Since tankless models only heat the water on demand, no energy is wasted keeping the water heated all day long.

If you have any advice to share from installing or using a tankless water heater system please contact me.

New Online Mapping services

Yahoo Maps Beta for charting the best route through multiple destinations. For now you have to manually drag address to determine the optimal best route. I know I find it a time saver when I have to visit multiple properties.

Google Earth Beta – If you liked Google’s satellite views. You’ll enjoy the 3D ariel views you get from Google earth. This is an application which you have to install to use. It’s a great geography teaching tool for kids as well.

Sunil’s Favorite Indian Restaurant in Bay Area

Vic’s Chat House in Berkeley

724 Allston Way
 Berkeley, CA 94710-2230
 (510) 644-4412

When I went to Berkeley in the mid-80’s I discovered Vic’s Chat. Back then I viewed it as authentic Indian food presented in an untidy environment. It was a cheap, for about $3.50 you’d get a masala dosa or channa bhatura. In the last 2 months I’ve rediscovered the place, having visited it twice for lunch. Both times I ordered their fish specials. Once I had their Goan sea bass curry and the second time I had their sea bass kabobs. Both were prepared perfectly. The seasoning was just right, and the fish was fresh and perfectly cooked. Most items are priced around $5, and served with 1 or 2 side dishes. Vic’s is still located in a warehouse, but they’ve taken over more space over the years, so seating is easier, and orders are ready quick. And though there’s always a line, it moves very quickly.  

Improve your placement on Google’s web searches

Are you interested in having your website rank higher on search engines like Google. Than let’s cross link each. Add me to your website with the words “Fremont’s Favorite Real Estate and Mortgage Broker”. Send me your website address and words you want to describe it, so I can link to you.

If you found this month’s newsletter informative, please forward it to your friends.

100% of my business is from word of mouth. No doubt, from time to time you will come across quality people such as yourself who would appreciate the services I offer.  As these people come to mind, would you kindly give me a call or send me a note with their name and number?  I always appreciate your confidence in me, and I will happily take great care of them.

Sunil Sethi, Realtor, Broker-Owner, MBA, CPA
Voted 2005 Best of the Tri-Cities – Mortgage Broker

UCLA Anderson School of Business ’98 – MBA

London Business School ’97  Finance & Strategy
US F ’88 Accounting

UC Berkeley ’88  Economics