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Sunil
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Neighborhoods UG
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September 2006 Newsletter It's time to Vote for The
Argus' Best of
2006. Please take a moment to cast your Vote for Me.
here are the topics in this month's issue 2._Why_I_hate_Option_Arms_or_Pick-A-Pay_Loans 3. Interests Improved because Fed Thinks the Inflation is slowing down 4. Income Taxes - 3rd Quarter Estimated Taxes Due Sept. 15 5. Property Tax Valuation Notice should have arrived 6. Increase your home's worth by 50% by increasing your school's performance. ---------------------------------------------------------------------------------------- Homes have been selling at a slower pace, primarily because the buyers left in the market are ones who've been too scared, too busy, or weren't making enough money before to buy anything for the last 5 years, however now that their kids are becoming of school age they're forced to either buy into a good school neighborhood or pay for private education. Since private education costs $1000-$2000/child (private education for 2 kids + rent ($2000)=$4,000/mth, whereas buying a home for $800,000 with zero down will cost about $5300/mth. However after taxes assuming 33% net marginal tax bracket for Federal and California, makes the after tax monthly cost only $3550*, making it easier for these parents to rational the purchase even at today's higher prices. The question I get asked the most is how much prices will drop. Traditionally prices don't drop unless people start losing their jobs. Yes we have a lot of inventory and it's clearing slowly because seller's are not panicking. Most of them do not have to sell, so they keep pretty firm on the pricing. If you are looking for a bargain, only bid on properties where you know they have to sell quickly (reasons for a quick sale include: divorce, death in family, they've already purchase the other home, they've lost their job, they are about to be foreclosed on). Having said that, if the economy starts to tank and unemployment starts to rise, prices could fall from 5-15%. The areas that would be hardest hit, would be: outlying communities (Stockton, Modesto, Tracy, ...) and areas with no particular appeal (run down neighborhood, poor access to shopping & commuting, high crime, and lousy school.) Latest Housing Stats: Apple Appraisal Statistic s Page Bay East Stats Page 2. Why I hate Option Arms or Pick-A-Pay Loans I've never originated an Option ARM or Pick-A-Pay Loan, nor recommend one to anyone. I couldn't understand why someone would want to have a loan that allows them to fix a minimum payment, but not fix the interest rate, I couldn't understand them because when I looked at the alternatives, I could get a fixed rate ARM for about the same rate as the Option ARM's start rate, and I couldn't understand why anyone would want the Option to have Negative Amortization and finally I didn't like that these program often had a 3 year prepayment penalty. The only people for whom the Option Arm would make sense, is a short term investor, who is trying to minimize monthly cash outlays. These speculators are trying to maximize their real estate leverage by minimizing their monthly payment through the use of negative amortization, and have a short term holding horizon so they are not bothered by going negative amortization or facing higher interest rates, over their planned short holding period. My guess is 95% of the people in OPTION ARMS would not have gotten one, if they truly understood the product and were aware of the better options at the time. These folks are now facing interest rates between 7-8%. I'm helping these people refinance out of their Options ARMs into fixed rates that last week were at 6.625%. People refer your friends to me who are in these programs. Remember: FRIENDS DON'T LET FRIENDS BUY OPTIONS ARMS 3. Interests Improved because Fed Thinks the Inflation is slowing down At the last Fed meeting the Fed Governors decided not to raise the Federal Funds rate, because they felt that inflation was in check. The latest GDP growth figures affirm their analysis that the economy is slowing down. Rates have eased from their recent high. I would expect a small expansion of the spread between the short term and long term rates. The Fed's next meeting is on Sept. 20. It's uncertain as to whether another rate hike may occur, because their is data so far is mixed. Check out the economic calendar. 4. Income Taxes - 3rd Quarter Estimated Taxes Due Sept. 15 Your 3rd Quarter installment of Federal and California income taxes is due on September 15. 5. Property Tax Valuation Notice should have arrived Your 1st installment of property taxes is due on Nov. 1 and late Dec. 10. You should have received your assessed value for 2006-2007 by now. If not get the info online at here * 1st mortgage at 6.375% and 2nd mortgage at 8.5%. Property taxes at 1.25% and home insurance at $950/yr. Your situation will depend on your personal finances. Always consult with your CPA to see what the benefits of home ownership are for you. 6. Increase your home's worth by 50% by increasing your school's performance. The homes associated with Fremont's Mission San Jose High sell for about 50% more than homes associated with the other high schools in Fremont. Increase a school's score means learning about getting parents, teachers and students to adopt best practices. The neighborhoods that would be best suited to accomplish this feat would be ones that are already online. Learn more about this topic on my blog.
Remember: FRIENDS DON'T LET FRIENDS BUY OPTIONS ARMS
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What's Happening in Fremont, Newark and Union City About Fremont Cities served: Fremont, Newark, Union City, Hayward, Castro Valley, San Francisco, Oakland, Pleasanton, Diamond Bar, Temecula, San Diego, Los Angles, La Jolla, Sacramento, Fullerton, Brisbane, Menlo Park, San Jose, Sunnyvale, Milpitas, Sherman Oaks, Tracy, Livermore, Dublin, Pomona, Walnut Creek, Berkeley, San Leandro, Milbrae, Petaluma, Ontario, Marin, Manhattan Beach, San Mateo, San Ramon, Fremont, Newark, Union City. Fremont based, Realtor,
Mortgage Broker, MBA, CPA (c) 2003-2006 all rights reserved, Sunil Sethi. |
