The 31-year secular decline in mortgage interest rates may finally be reaching its capitulation. Rates were scraping off their all-time lows at the end of April, hitting 3.35 percent or so on May 1, 2013, but rose sharply that month, hitting 3.9 percent by June 1.

So what does that mean? It means that all else being equal, the payment on a 30-year, $250,000 mortgage increased from $1101.78 per month to $1179.17.

That’s a modest difference – less than a cable bill, really. But it’s enough to lock out marginal buyers skirting with the 42 percent debt-to-income ratio limits to qualify for a mortgage, or knock them down the price curve a notch or two. It was also enough to spark a 15 percent drop in loan applications, reflecting a fall in refinance activity.

At the same time, we’re getting some data points that indicate that the pullback isn’t just in the refi world: Redfin is reporting a significant drop off in both home tours requested through their agents and the number of customers signing offers over the last month or two.

What’s going on? Some folks are pointing to some hints that the Federal Reserve is going to stop playing “sugar daddy” to big lenders. For the last two years, the Fed has been bailing out big mortgage lenders – including Fannie and Freddie – by buying up their questionable loan portfolios. In return, the Fed credits their accounts (effectively with cash, though the mechanics are electronic), which gives them money to lend back out.

In the long run, all things being equal, a massive expansion of the money supply in this fashion by the Federal Reserve is inflationary. And high inflation expectations force lenders to increase interest rates to compensate.

But cutting back on the money supply also leads to higher interest rates: It forces borrowers to bid against one another for the right to use someone else’s money. As word of the impending pullback in quantitative easing percolates through the market, this is the phenomenon we’re finally seeing – translated into the long-anticipated increase in interest rates.

The Fed cannot keep up the frenetic monetary expansion forever. The Federal Reserve is already indicating that it plans to start rolling back its third quarter asset purchases starting around December. But looking at the very sluggish economic growth numbers and weak employment, the Fed had announced its intent to keep interest rates low until at least 2015.

The uptick in mortgage rates – and a concurrent uptick in the 10-year treasury – has some segments of the investment world spooked that that’s not going to happen. The Federal Reserve is trying to assure the markets that it’s still plotting an accommodative monetary policy, even into 2014.

It’s a delicate balance for the chairman to take. And with trillions of dollars hanging on every word the man utters, rhetoric counts.

Ed Pinto, a real estate and mortgage industry gadfly and a former Fannie Mae vice president recently stated in a “Fox & Friends” appearance: “The Fed’s goal is to drive down interest rates – for what purpose? To drive up asset prices, including home prices. … We’re at the lowest interest rates in 100 years, and eventually they have to go up.”

What happens then? According to Pinto, if interest rates rise to 6 percent – still pretty cheap by historical standards, income has to rise by a third, or house prices have to fall by a quarter.

Ara Hovnanian, CEO of a homebuilder called Hovnanian Enterprises, isn’t as worried as Pinto. Pointing to a metric called the Annual Composite Affordability index, which measures how readily a family with the median income can afford to buy a median-priced home, Hovnanian thinks there’s still quite a bit of headroom. “If mortgage rates went up 270 basis points [or 2.7 percentage points], affordability would fall to about 138,” Hovnanian told a Wall Street Journal correspondent, “one of the highest affordability rates of all time.”

Who’s right? Buy smart and it shouldn’t matter much. If you’re bullish, and you’re correct, you’ll be fine. If you’re bearish and real estate is what you do best, or if you just don’t know what the future holds (always a safe bet!), then you should be reading The Flippin’ Insider for market-neutral real estate strategies. The people who will get clobbered in any correction – even small ones – are the ones who get overconfident in their ability to predict the next movement of the weathervane, and the ones who underestimate risk. The combination of an increase in interest rates and the possibility of a hot-money sell-off will likely limit upside in real estate prices for a while, however.

Jenelle Isaacson, owner of Living Room Realty in Portland, Ore., has obviously spent time examining her life. She knows who she is, she knows what is important to her, and she has taken the time to determine her values, goals and the culture she chooses to entrench herself in. Sure, she’s a real estate broker. But she’s a broker with an unwavering commitment to Portland’s urban neighborhoods and the people who live there, to her business and to her agents.

Her conversations about herself typically revolve around the world at large, rather than Jenelle Isaacson. She is concerned about sustainability, social and environmental performance, and accountability. Values are important to her, and she sees the world as a place where everyone is interconnected.

Just a Singer in a Rock ‘n’ Roll Band

A one-time professional musician – she played guitar and sang in a band in various venues around Portland – Isaacson remains close to her roots. In fact, those roots spread, disrupting the pavement of her former life and reaching for a new one, in real estate.

The story is a simple one, really. When she was frustrated trying to find a place for her band to practice a friend suggested she buy a house. So, with a whopping $14-an-hour salary, Isaacson bought a house in Eugene, Ore., complete with a basement for the band.

“After I bought my house, we’d play shows at night, and I’d be sitting at the bar after the show and I’d hear people say, ‘I can’t find anywhere to live.’ So I’d tell them I just bought a house. I was so jazzed on it and I’d say, ‘Let me tell you how to do it.’”

Isaacson’s stepmom, a real estate agent, recognized that she was blessed with a massive sphere of influence. She urged Isaacson to get her real estate license, which she did in 2002, maintaining her nightclub gigs to make ends meet. “I just kept talking to people about what I was doing. All of a sudden I was getting clients,” she explained.

Although she started with a small brokerage outside of Portland, Isaacson was soon receiving calls from recruiters for some of the major brokerages in the city. She settled on the Hasson Company within one year of getting her license.

“Mike Hasson is still a friend and a mentor. It was an amazing experience,” Isaacson recalls. “But it got to a point where I felt a disconnect between our branding and the direction the company was going. A lot of my clients are gay and lesbians, single women, artists and musicians, and the Hassan Company represented families, the picket fence, the more traditional clients,” she continued. “I didn’t really see my clients represented as part of my brand there.”

While she was happy with the Hasson Company, helping change some of their non-green policies as a member of the company’s green team, that feeling of being disconnected never really left her. She felt in her gut that the dominant culture of Portland wasn’t the Hassan Company’s family of four with the white picket fence, but instead the artists, “the free-spirited and very alternative-living people who didn’t feel represented in the real estate industry,” she said.

Unfortunate Timing or Blessing in Disguise?

With her ideals and values intact and her mission firmly cemented in her mind, Isaacson decided to open her own brokerage.

“When I opened Living Room Realty, I had just given birth to my second baby, I also had a 17-month old, and then the real estate market started crashing,” she recalled.

“Am I insane?” she recalls thinking. “I might be totally bonkers.”

Something interesting came from all that chaos, however. “Things slowed down enough so that I could get the business together in the way that I needed to in order to get it built,” Isaacson explained. “I was able to get my foundation in place. Other agents resonated with the message of what I was doing at Living Room Realty – with our branding. I just dropped the chord at the right time and ended up picking up a lot of agents as the market recovered,” she concluded.

Creating a Workplace and Brand

Living Room Realty has come a long way since February of 2009. Isaacson has hired a principal broker to oversee her 47 full-time brokers, in two offices. Those offices reflect the eclectic personalities of her agents as well as her clients. The offices are modern, open and airy, with what she refers to as a “bullpen environment.”

With no private offices or even cubbies, “none of our agents have their own workspace or privacy at all, so we’re forced to be with each other all the time and kind of work with each other,” Isaacson explained. “We’re also totally paperless, so we manage all our transactions with a paperless transaction management system so we can be desk-less – we don’t have to store files and paperwork. You have a laptop and you plop down on one of the couches or one of the big work tables and work alongside everyone else.”

The focus of the business is always on the Living Room’s brand. “I don’t get why agents do their own branding. If you are going to affiliate yourself with a company, then the power of the brand is that it’s working for you even when you’re not working,” she claimed.

“But companies need to look at why their agents are individually branding,” Isaacson adds. “It could be that their brand isn’t relevant to their agents’ businesses. That’s what caused me to start my own business.”

Nurturing Relationships vs. Lead Generation

Isaacson, like most agents, prefers nurturing past relationships to obtain personal referrals, rather than performing lead generation. “It’s the way that I’ve always worked. It’s inexpensive, it’s rewarding and people in my office are really community-minded, so it comes natural for them to build and deepen and enrich their community and to depend on [that community] to send them business,” Isaacson said. To that end, she finds interesting ways to promote those relationships and create new ones.

One example includes her fascination with local stories about a woman who was throwing dinner parties in unusual places. “She was doing them in junk shops or out on farms. I went to one of her dinners, which was actually in a curiosity shop,” she recalled. “It was so cool and a really fun idea. You get this really memorable experience and a fantastic meal, and the caterer is there to tell you about it, and you get to know everyone that’s at the table.”

The experience stuck with her, so when she had a listing that was languishing on the market she employed the dinner lady. “It was a fantastic house for entertaining. When the sun goes down, the lights go up in the city and it’s just beautiful,” she explained. “So we invited people that we thought might be interested in the house, and others that might know someone that might be interested, and had a catered dinner party.” It was a hit, and the house sold.

She took another listing – a mid-century home – and turned it into a living museum for a month. “It was fully curated with art, objects, furniture and landscape design. A lot of people came through and said it was one of the best art shows they’d ever seen in Portland.” That house sold almost instantly.

While these events are fabulous lead generators, they’re also dynamite ways to sell a listing. “It’s selling the lifestyle. That’s at the core of Living Room. People see these houses and they forget there are lives inside of them.” Isaacson said.

An Influential Woman

Isaacson is a recipient of the Portland Business Journal’s 2013 Women of Influence Award. “It was such an honor … I was recognized for the growth of the business and also our commitment to sustainability.” In fact, the City of Portland recognized the gang at Living Room Realty with a silver certification of sustainability.

Isaacson also uses her influence to nurture young women by sitting on the board of directors for the Rock ‘n’ Roll Camp for Girls. “It’s an organization that encourages self-esteem and self- empowerment through music,” she explained. “Portland’s was the first Rock ‘n’ Roll Camp for Girls, and now there are hundreds of them all over the world,” she said.

Agent Stereotypes

I asked Isaacson if there are any misconceptions about real estate agents that bother her. “The real estate agent in movies and TV,” she answered. “He is always such a bad guy – always some kind of desperate schmuck,” she laughs.

“Those aren’t the people that I know. The people that I know that sell real estate are highly educated and they have a lot of other options, but they do real estate because it’s independent and they have autonomy and can make a ton of money,” she continues.

“The Realtors® that I know are just such hardworking, creative, independent people. They are the most interesting, coolest people I’ve ever met in my life.”

Centerpieces can be simple, ornate, rustic, seasonal or even romantic in design, but they all share some things in common: They are always a strong focal point to any room, and they help establish the theme to their surroundings. Fortunately, creating an exceptional centerpiece doesn’t have to be expensive or complicated. Here are some DIY centerpiece ideas to enhance your home.

Table Centerpieces

This is a fantastic time of year for DIY centerpieces. With all things in bloom, it’s the perfect time for using what’s free and at your disposal. Fresh varieties of wild flowers are readily available, adding a splash of color and beautiful aromas to any room. Vases of varying colors, shapes and sizes further add the detail you desire. You can keep things simple with a single vase, or create a cluster in a variety of shapes and sizes to add height to your centerpiece. Don’t be afraid to think outside the box. For example, try using season-appropriate items such as watering cans or even decorative water pitchers instead of traditional vases. Baskets can also work well, and even pieces of wood can be used creatively. Don’t be afraid to experiment or incorporate found objects and natural elements from your garden.

Kitchen Islands and Countertops

Because these are dedicated workspaces, it’s best to keep centerpieces simple. Large glass or metal decorative bowls add a nice touch while maintaining the kitchen theme. They can remain empty for a more minimalistic approach or can be filled with items such as fresh or beaded fruits to warm up the space. Remember to also change your fruits to match the seasons. Citrus and berries add great spring and summer color to your kitchen, while apples, pears or decorative squash help warm up your centerpiece in the cooler months.

Living Room Centerpieces

Living room centerpieces are typically placed on a coffee table or end table. This is the space we “live in,” so adding “life” to the space is a fantastic idea. You can never go wrong with live plants, which help create a calming and warm atmosphere. Just pay attention to light and space requirements as you create your centerpiece. You can even make your own terrariums using varieties of jars in varying sizes, such as glass cloche bell jars. Terrarium kits are readily available in stores and online. Varying sizes of hurricane vases also add a nice touch to any living room centerpiece. They are beautiful when filled with candles, decorative stones, plants or a variety of all the above.

DIY Throughout the Year

Don’t forget to change these centerpieces often to welcome in the new season or holiday. Keep it simple by using items that are readily available to you. Large, glass vases of all sorts can be filled with mini pumpkins and squashes, pinecones, Christmas bulbs or even decorative eggs. Have fun selecting flowers and seasonal objects for your design.

Trying to decide how to honor the special father in your life for Father’s Day? Why not skip buying another accessory for the barbecue or gadget to improve his golf swing, and give the gift of organization instead? Use my 10-step process to create an organized workbench that’s sure to inspire greatness:

1. Dedicate Time. Look at your schedule and determine when you will work on the project, be it on your own, with your dad, or perhaps with your kids or other siblings. If you are focusing on a workbench area, plan for around four to eight hours of work, or a bit more if there is a lot of stuff to sort through and organize.

2. Gather Supplies. Have garbage bags, cardboard boxes or empty bins or containers on hand for sorting. Sticky notes, a marker, label-maker and a tape measure will also come in handy.

3. Establish a Staging Area. Find a large open space where you can sort. Set up a folding table or use a surface that is high enough that you don’t have to stoop. Establish a spot for donations, trash and items that do not belong in the target space and need to be put away elsewhere.

4. Sort. Systematically go through the contents of your target area, sorting as you go. You may likely have some of the following categories: tools, hardware, electrical supplies, binding supplies (i.e. rope, bungee cords), and material scraps. You will also sort donation items, trash and anything that doesn’t belong in the target space.

5. Purge. Look at the contents of each sorted group and determine what stays and what goes. If the items are still usable, you may donate them to an organization that resells used items, or perhaps an organization that builds or restores homes for those in need, like Habitat for Humanity.

6. Group Like Items Together. Once you’ve paired down each broad category, you will want to group like items within each category. Since our target space is a workbench, you may want to group items by their function.

7. Examine Your Space. Here’s where you plan out where and how the groups of items from step six will be organized and stored. If a workbench and storage system is already in place, I find it helpful to quickly sketch out the space as a sort of storage map. You can then pencil in where each group of items will live within the space.  Another idea is to write each category from step six on a sticky note, and use these as moveable labels in planning out where each category will be stored.

If you don’t already have a workbench or storage capabilities, you will need to consider purchasing something. You will likely need a work surface with storage underneath, a hanging storage system above, or even just freestanding shelving next to it. If you need inspiration, I’ve listed some ideas in the “Shop” section below. Once you decide on your storage plan, you need to measure the space and any key items that you will be storing so you know what products will meet your needs. Don’t forget to count up how many containers or hooks you will need so you don’t have to go back to the store for more organizing product later. I like to take photos of the items I am storing and the space I am working with to refer back to when shopping for products.

8. Shop. Here’s where you make your plan from step seven a reality. Most major home improvement stores or organizing stores will have the supplies you need. Here are a few ideas for items you may want to consider:

• Panel systems are great for maximizing the vertical storage above a work surface. There are many options available, including pegboards, slat walls and grids with corresponding hooks, and baskets and shelves to store just about anything. Find a friendly salesperson, show him a photo of your target space, and he should be able to find a good option for you.

Picture via blog.wallcontrol.com

 

• Hardware organizers are great for keeping small pieces separated and organized. If you have room on top of the work surface, drawer systems are nice. If not, you can use parts boxes and store them on a shelf or in a cabinet near the workbench.

Picture via containerstore.com

 

• Work surfaces range in style from a basic wood surface with legs to whole custom cabinet systems. If you have a smaller project budget, a basic work surface with legs will do. For extra storage, you may want to place a rolling drawer system on the side or underneath.

Picture via lowes.com

9. Install Product. Put your purchases to use. This should be fairly quick since you already have everything sorted out, and you measured and counted before shopping. Don’t forget to label as well so dad knows where everything is to be put back after use.

10. Maintain. Maintenance will be from the man using the space as he puts tools and supplies back after using them. But, remember that his needs may change, new items may be purchased, or items may no longer be needed. Perhaps you would like to make organizing his workbench an annual Father’s Day gift or an activity that you two do together to help him keep it up.

Grab the kids or your siblings and make it a gift from the entire family! I’m sure having an organized workbench will be a surprise he will never forget and will be able to enjoy for years to come.

Warmly,

Laura Leist, CPO
Organizing with Laura

Be honest. As a real estate professional, a home that “needs work” makes your skin crawl and drops a pit in your stomach. These kinds of homes are a drag on your time and effort. They tend to frustrate the homebuyers you’re working with for so many reasons. Instead of showing this housing stock, you’d rather show new construction or homes that have been well cared for by the previous owners.

However, with the current housing market still full of foreclosed homes from the market crash, including houses that have stood vacant for more than a year, fixer-uppers are a prevalent obstacle in your home-selling journey. So, instead of piling your clients back into the car at $4+ per gallon of gas and shuttling off to the next home, consider a shift in your perception.

Don’t Dismiss Fixer Homes

What if a fixer-upper was truly a blank canvas? Homebuyers usually make changes as soon as they move in anyway. A house that needs repairs or renovations is a great blank slate for needed repairs, as well as desired updates.

Instead of ignoring a house with a missing furnace and broken windows, your sales skills could spin it so the buyer sees the opportunity to put in energy efficient windows and a new furnace, plus upgrade the bathroom, kitchen and carpets. All of this can be done with a mortgage loan option dating back to the 1970s and backed by the Federal Housing Administration.

Benefits of the FHA 203(k) Loan Program

FHA loans are a great option for many homebuyers, of course, with the 3.5 percent down payment and typically affordable mortgage insurance. But what happens when the home won’t pass an FHA inspection? Usually it’s time to pack up and move on. Instead, let’s look at the FHA 203(k) loan. This loan allows the buyer to roll the cost of needed repairs and many desired home improvements directly into the mortgage.

What does this mean for real estate agents? You can show a home where the buyer says, “I’d make an offer but,” and respond with an answer different than getting back in your car and driving to the next home. Instead, you can ask, “If you were able to make an offer, close and pay for a professional builder to fix that, would you make an offer?”

Many buyers would take a minute to at least consider this. They can close on the house, then get the work done before moving in. And it’s all done by a professional contractor. Buyers can have all kinds of updates, home improvements, repairs or renovations financed directly into the mortgage. And with today’s interest rates, it only adds about $6 a month to the house payment for every $1,000 in work they finance. So a $20,000 remodeling project would add about another $120 to their monthly house payment. Below is a list of possible repairs homebuyers can finance with the FHA 203(k) loan:

• Replacement windows.
• New furnace.
• Missing water heater.
• Flooring – carpet, tile, laminate.
• Kitchen remodel.
• Bathroom remodel.
• Room addition – Full 203(k).
• Basement waterproofing or finishing.
• Replacing a damaged sill plate.
• Septic system repair or replacement.
• Roof repair or replacement.
• Deck building or repair.
• Driveway repair – Full 203(k).
• Lead-based paint abatement.
• Disability access.

As you can see, all kinds of problems can be solved with this renovation loan option.

What are the Problems With the 203(k)?

If you’ve been in the real estate profession for any length of time, you’ve probably heard someone mention how awful and difficult the FHA 203(k) loan can be. While this is true of lenders that can’t handle the loan, finding the right lender that underwrites the loan, has specialty staff to handle things like contractor draws, and that services the loan once it’s closed will help make the 203(k) much easier to handle. The homebuyer will need some additional paperwork, but the down payment is still just 3.5 percent of the purchase price combined with the remodeling costs.

Selling More Than a Home

Instead of passing on every fixer-upper, real estate agents can now sell homes based on vision. The FHA 203(k) renovation loan can help buyers see the possibilities. From a really nice deck to a kitchen remodel or additional bedroom, this renovation mortgage option can turn a house into a home. Partner with a leading 203(k) lender and help your buyers get their dream home the first time around.

This guest post was written by Dan Moyle, the inbound marketing specialist for Michigan community mortgage broker AmeriFirst Home Mortgage. Dan loves to help homebuyers see the possibilities in the housing market. He also loves his blended family and motorcycles.

Citation: FHA 203k – http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou

Mortgage Rates Continue Moving Up

For the sixth straight week, mortgage rates inched upward with the rate on 30-year loans jumping to 3.98 percent and almost touching 4 percent.

The increases are a sign that the economy is improving, but could cause grief to many first-time buyers who are hoping for rates to keep falling.

Last week, the average rate on the long-term loan was 3.91 percent, according to mortgage giant Freddie Mac, who’s been tracking rates since the 1970s. That’s the highest since April last year.

Rates on the shorter-term 15-year-loans also increased to 3.10 percent from 3.03 percent. Despite the increases, rates are still hovering at historic low levels. The recent hikes are in anticipation of the Federal Reserve scaling back its bond purchases. But, if they continue, the momentum in the housing market’s recovery could slow down.

Banks Repossess More Homes as Prices Rise

USA Today reported that banks repossessed 11 percent more homes in May when compared to the previous month. Repossession is the very last step in the foreclosure process, which allows lenders to claim homes from owners who have failed to fulfill their loan obligations.

The increase in this penultimate step of repossession is a sign that lenders are slowly feeling confident about releasing inventory into the market and fetching a good price. Earlier, a barrage of foreclosures damaged the market by deflating prices and crowding inventory. But as the market turned a corner, aided by better employment numbers and low interest rates, inventories depleted and home prices began their upward climb.

“Given the shortage of inventory and rising home prices, banks have little motivation to hold back on any foreclosures,” Craig King, chief operating officer of Chase International brokerage, told the USA Today.

According to RealtyTrac, repossessions increased in 33 states. North Carolina led the nations with a 60 percent jump in repossessions in May. Oregon recorded a 57 percent jump, and Wisconsin and Illinois saw a 44 percent bump.

Foreclosure filings, the start of the long-drawn repossession process, were up 2 percent last month from a 75-month low.  Filings dropped 28 percent when compared to the year-ago period, but 14 states saw an increase in foreclosure starts when compared to last year. New Jersey saw an 82 percent jump in foreclosure starts when compared to last year, and Nevada had a 81 percent increase, according to RealtyTrac.

Sellers are in Business

A recent survey by mortgage giant Fannie Mae found that 40 percent of Americans believe now is a good time to sell a home, compared to 30 percent in April and 16 percent a year ago.

The response indicates a rise in confidence among homeowners, which could lead to more inventory in the market, thereby ensuring smaller price gains in the future.

“Sentiment toward selling a home appears to be catching up with the strengthening housing market,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a release.

The news couldn’t have come at a better time. Home prices in America skyrocketed 12.1 percent in April when compared to the year-ago period. Tight inventory levels and lack of supply triggered the price increase. If sellers release more homes for sale into the market, prices will cease to rise so sharply and keep homes more affordable for potential buyers.

The Oahu real estate market is, without question, one of the most unique and desirable markets in the United States. In no other U.S. market do you have the confluence of a year-round tropical climate, an international client base, substantial military spending to support the local economy, and an extremely limited supply of land that can be developed.

These factors not only put Hawaiian properties in high demand, but they cause our real estate market to behave unlike any other market in the continental U.S. Recently, we have seen a number of lead indicators – including inventory levels, buyer demand, and homes being bid up over their listing price – which lead me to believe that our market is poised to experience noticeable price increases in the near future.

Rapidly Falling Inventory

Starting in 2010, Oahu experienced rapidly falling levels of inventory. Today, the active listings for both condos and single-family homes are at the lowest levels that we have seen in decades. At the beginning of 2013, the average number of single-family homes on the market on Oahu was 762 – nearly 10 percent less than the average number of listings in the first quarter of 2004, which was 836.

This is significant because 2004 set the record for the highest home prices on Oahu. The fact that there is less inventory now than at the peak of the last market cycle tells us something about where our market could be headed.

Increased Buyer Demand

In addition to the low supply of available listings, we’re seeing more and more buyers enter the market. There are a number of reasons for this: Last year on Oahu, prices rose by over 8 percent for single-family homes and 5 percent for condos. The increasing prices have caused many would-be buyers to start making offers. Also, interest rates are still at the lowest levels we’ve seen in 30 years, and banks are becoming less stringent with their lending requirements than they have been for the last few years.

Bid Ups Leading to Record High Prices

The main result of these real estate market trends is that many properties are being bid up, resulting in sale prices higher than their listing price. In 2012, 22 percent of single-family listings sold for more than their list price – the same percentage as the homes that sold for more than their list price in 2004, when Oahu real estate prices hit record highs.

How to Buy a Home in Oahu

In short, as a result of limited listings, lots of buyers and increasing prices, our current market has become extremely competitive. New listings that are appropriately priced are going into escrow within a few days of being listed, and there is healthy competition among buyers. Unlike 2004, however, there are a lot of opportunities in our current market for both buyers and sellers.

For buyers, positioning is everything right now. Getting preapproved by a well-established local lender is the first step to positioning an offer that will get accepted. In many situations sellers are receiving numerous offers. If your offer is one of 10 that come in to the seller, and is the only one that does not include a preapproval letter, the likelihood of your offer being accepted is very slim.

Being preapproved will demonstrate to the seller how serious the buyer is, but it is also essential for buyers to align themselves with a full-time agent who is knowledgeable and well-informed regarding the local market conditions. A strong buyers’ agent can help the buyer to understand how much competition they are likely to come up against and can craft an offer that will be more attractive to the seller.

Some items that may be included in an offer to make it more attractive include unusually large deposits, escalation clauses, seller rent-backs, and shorter than normal home inspection and closing time frames. Buyer demand varies from neighborhood to neighborhood, so working with an agent who has a firm understanding of current market dynamics and is familiar with writing offers in competitive situations can be extremely valuable to a buyer.

One major benefit to current buyers is that, because the Oahu housing market has recovered much more quickly than many mainland markets, we have yet to see a major influx of mainland buyers, which we saw at the peak of our last market cycle.

Although buyer demand is already high, it will likely become even more competitive as mainland buyers and investors enter the market. In summary, here are the key points that buyers should follow to prepare themselves to purchase a home in today’s market:

• Get preapproved by a local, well-established lending institution.
• Find a knowledgeable, full-time real estate agent who understands current market dynamics.
• Get a feel for market “velocity” in your neighborhoods of interest so you can gauge how strong your offer will need to be.

How to Sell a Home in Oahu

For sellers, the key to winning in today’s market is resisting the temptation to overprice their listing. The chart below demonstrates the impact that overpricing a property has on the number of potential buyers that view the listing, which in turn impacts the amount of time that the home is on the market and the final price that the property sells for.  Pricing your home at or slightly below market value will maximize the number of buyers who view your property and increases the chances of your listing receiving multiple offers. Having multiple offers will likely lead to your home being sold above its listing price.

As a seller, the best possible place to be is in the middle of a bidding war between competing buyers. For that to happen, your initial list price should be attractive to the existing buyer base.

The first quarter of 2013 has been an extremely exciting time for the Oahu real estate market. Given the market statistics that we are seeing, it should only get more exciting moving forward.

This guest post was written by Michael Marks, a real estate agent and client services manager at Prudential Locations. He oversees a team of over 50 real estate agents on Oahu, Maui, and Kauai.

Let’s face it – just because a garden looks green doesn’t mean it really is “green” in terms of its ecological impact on the planet. There are a lot of gardeners who are quick to reach for a chemical solution to biological garden problems. One area where this is common is in the identification of garden pests and the application of pesticides. Nobody wants to see their roses covered with aphids or their trees covered with tent caterpillars. In order to fix the problem as quickly as possible, many gardeners forego eco-friendly gardening techniques and rush out to purchase pesticides.

However, when we rush to spray the landscape with pesticides, we fail to consider the other inhabitants of the garden and the ecological processes that might be going on there. Amongst the aphids, for example, did you happen to notice an army of ladybugs? Do you have birds in your garden? Is there a food source for them? What about bees? How do those pesticides affect pollinators like mason bees and honeybees?

Some of these garden inhabitants are doing more work in a day than you ever could. Who will do their work if you kill them? Do you want to inherit their jobs?

Aldo Leopold said, “The first rule of the tinkerer is to keep all the parts.”

This is a good rule for gardeners. The kind of gardening that results in perfect, aphid-free roses, a completely weed-free lawn, and not a bird or insect in sight represents the human desire to conquer and control nature, but it is NOT eco-friendly. Eco-friendly gardening is about working with nature. It’s about understanding how to enlist the help of beneficial insects and other organisms in your garden to do some of the work for you and keep your garden ecosystem in balance. Rather than reaching for the pesticide sprayer, enlist the help of predacious beneficial insects.

Common Beneficial Insects

Predacious beneficial insects are those that feed on others, and are a great help to gardeners. Common beneficial insects are ladybugs, lacewings, syrphid fly larvae, and ground beetles.

Ladybugs

Most people know a ladybug when they see one. They look so cute with their rounded red and black spotted bodies, but did you know the ladybug is a voracious predator? Each ladybug larvae can eat up to 25 aphids a day. Let them grow to maturity and that number increases to 60. It’s important to know what ladybug larvae look like so that when you see them on your plants you’re not tempted to kill them. The larvae are covered with lumps and spines and look a little bit like tiny alligators. The ladybug diet is not limited to aphids. They feed on other soft-bodied insects like scale insects, spider mites, and mealybugs as well.

Lacewings

Lacewings have a long, thin green body, about ½ inch long, and delicate transparent wings, but don’t let their appearance fool you. Lacewings may look delicate, but like ladybugs, they have a healthy appetite for aphids and other soft-bodied insects. As if they were straight out of a horror film, they grab their prey in their jaws and suck out the body juices.

Syrphid Fly Larvae

Syrphid flies, also called hover flies or flower flies, come in a variety of shapes and sizes, but they are typically about 3/8 inch in length and a metallic green color with several yellow bands on the abdomen. The larvae emerge in the spring and kill their prey much like lacewings. If you want to do a little garden forensics, look for black oily smears of excrement on plant foliage. This is a typical sign of syrphid fly feeding.

Ground Beetles

Ground beetles tend to be dark and shiny and can range from ¼ inch to 1 inch in length. They will typically hide under rocks and logs. They prey on caterpillars, cutworms, and housefly maggots. Some beetle species eat slugs and slug eggs, and the narrow head of one species is actually adapted to eat snails out of their shells. Escargot, anyone?

As you can see, there is a lot going on in your garden that perhaps you have been unaware of until now. The next time you see aphids on a plant, take time to look more closely. Chances are you will see lacewings, syrphid fly larvae, or ladybugs there too. Let them enjoy their buffet. You may find yourself fascinated by the intricate relationships among the organisms in your garden. Hopefully, this will inspire you to learn more, and you’ll become a truly eco-friendly gardener.

Home values aren’t the only thing at risk when a house in the neighborhood goes through foreclosure. When the neighbors move out, rats move in. If there are foreclosed or neglected properties in your neighborhood, here’s what you can do to prevent rats and other pests from being attracted to your home.

Why Rats are Attracted to Empty Homes

Rats like abandoned houses for three basic reasons: food, shelter and water. They think it’s quite nice to have a roof overhead, a dry place to sleep, and no humans around to bother them. Rats are also attracted to a water source, and this can be provided through leaky pipes, toilet bowls and standing water. Any garbage, other small critters, or foodstuffs left behind can be a source of food.

Rats From Foreclosed Properties Can Spread

So what do you do if you’re living next door to a foreclosed property? How can you prevent rats from being attracted to your home? First, know that you probably won’t see rats scurrying around your backyard. Rats burrow underground, creating a network of tunnels in which they can travel from one property to another without being detected.

Clean it Up! How to Protect Your Home From Rats

Garbage Cans

Don’t keep your garbage cans in your garage. Place them outside at a distance where rats won’t be tempted to venture into your home.

Ivy and Overgrown Shrubs

Wood shrubs that provide cover are perfect nesting areas for rats. English ivy in particular attracts rats. The vines become woody and the evergreen leaf cover provides shelter. Don’t let English ivy grow as a groundcover next to your house.

Piles of Wood

Piles of scrap wood and firewood should be stored away from the house. Rats, many species of spiders, and other insects (such as ants) are attracted to woodpiles. Like woody shrubs and vines, woodpiles can provide shelter. You don’t want rats getting too comfortable on your property.

Seal Up all Holes

Mice can squeeze through a hole the size of a dime. For rats, the diameter increases to the size of a quarter. Walk around the exterior of your home and check for any holes or cracks in the siding and around the foundation that are larger than the diameter of a pencil. Also check for any broken windows and doors and ripped screens. If you see any, seal them to prevent rats from getting into your home.

Keep Compost Away From the House

A compost bin is essential if you have a garden, but compost bins can provide food and shelter for rats if they are not properly maintained. Compost bins should not be place right next to the house, and food scraps should be buried. Never add meat or dairy scraps in your compost bin as these tend to attract rodents. If you can, avoid putting food waste in your compost bin at all. If you have a worm bin or chickens, it is better to let them decompose your food scraps for you.

Make sure your compost bin stays moist. A moist compost bin decomposes faster, and is less attractive to rats. When compost dries out, it becomes an easy place for rats to burrow and find shelter. Don’t welcome them. If your compost pile seems a little dry, simply hose it down.

Water

In addition to food and shelter, rodents need water. Direct any water away from your home. Don’t allow water to pool anywhere near your home. Use rain gutters, downspouts, and French drains to direct water away from your home.

Remember, rats are looking for food, shelter, and water. If you make these elements difficult to find on your property, you can make your home less attractive to rats. Preventing rats from entering your house in the first place is a lot easier than trying to get rid of them once they’ve taken up residence in your home.

Don’t look now, but the long-anticipated secular rise in interest rates may be upon us. A close look at mortgage rates shows a decided uptick as we head into the summer months. That means good news for savers, but bad news for borrowers – and a significant headwind ahead for home prices.

Yes, rates are still at the sub-4 percent level. That is, absurdly low by historical standards. But rates are now at the highest point they’ve been for over a year.

Why is this happening? I blame an improving economy. Yes, it’s improving in fits and starts, and growth is sluggish indeed. (Adjust for a massive decline in the labor participation rate since 2007 and our unemployment rate is over 11 percent.) But the Federal Reserve has kept the pedal to the floorboard, flooding the market with liquidity for years now – and people are tired of expecting the worst.

Housing finally began to emerge from a deflationary spiral that once threatened to take the whole economy with it. Consumer spending picked up a bit (fueled in part by improving balance sheets thanks to bankruptcies and foreclosures!) and part of that spending went back into housing. The classic definition of inflation is too much money chasing too few goods – and so inflation pressures must eventually overcome deflationary pressures.

Well, who gets clobbered most by inflation? People who lend over long periods of time. Over the years, inflation eats away at the value of the loan, and causes them to get repaid with dollars worth significantly less than they were worth when they were lent out. The longer the term of the loan, the more damage inflation will do. And mortgage lenders lend longer than most. So when the credit markets detect a whiff of inflation, they must do something to compensate themselves for inflation risk. And so we see an increase in newly originated mortgage rates.

This is good news, actually. It portends a transition to a growing economy rather than a contracting one. But increasing interest rates will throw a wet blanket on housing prices for a while.

This is where flipping has an advantage over the buy-and-hold investor hoping for price appreciation. Flipping is, at its core, a market-neutral strategy. The hard-core flipper is not much concerned with whether home prices are rising or falling, because he doesn’t plan on holding any particular property long enough for changes in the market to take much effect.

But …

The quick increase in mortgage rates over the last few weeks has been enough to make a significant dent in what borrowers could qualify for – within the 60 to 90 day holding period that is typical for flippers. Mortgage rates bounced off their November 2012 all time low on May 1, at 3.35 percent, before rising to 3.91 percent as of Monday, June 10. Anyone who bought in April, looking to sell in June, ran into a nasty surprise because, while mortgage interest rates increased, increasing mortgage payments, the front-end and back-end ratios that underwriters use to determine what sized-loans people can qualify for, didn’t change at all.

So What’s a Flipper to Do?

Tighten the loop. In a rising interest rate environment, the flipper must work much faster because time is working against him, not for him. When mortgage rates rise, the amount of money people can spend on a house will fall over time. Which means you will either have to give up something on price, or be pickier with buyers. But that means a longer sales cycle, and even more time for higher mortgage rates to drag prices downward.

How can you tighten your loop? Here are some ideas:

• Avoid big projects. Big projects take a long time. Keep your renovations and improvements simple and straightforward. Avoid anything that requires you to lift floorboards, get involved in foundations or anything that could lead to discovering bigger problems that will take time and money to fix. Keep it simple.

• Concentrate on finding motivated sellers. Flippers make money when you buy, not when you sell. Concentrate on finding homes you can buy for less than the current market value. When rates are rising, you need the cushion.

• Route your business through proven partners who can execute quickly and efficiently. You don’t want to be relying on a sluggish contractor to get around to your business. Hopefully you have established a solid relationship with one already so that they’ll do your work first before working on someone else’s project. Insurers, title companies, real estate agents, attorneys, mortgage brokers and their upstream partners should all be seasoned pros with organized and efficient back offices and enough experience to sniff out problems before they cause a delay in closing a deal. This is true both on the front end and the back end of the deal – execution is important, whether you are buying or selling.

• Put a time limit under any deal to sell a house “pending financing.” But if you’re dealing with people with solid credit, it shouldn’t take them three Moon-orbits to qualify for a loan. Set a reasonable limit on it – say, two weeks.  These days, there are enough people prequalified or preapproved.

• Get some earnest money up front. This gives you some operating capital to play with while the buyer works on getting the financing done. It also separates serious buyers from tire-kickers. Don’t extend the time period before closing without getting something up front or some other concession in exchange.

To coin a baseball analogy, working in a market with a downward pressure on home prices as strong as increasing interest rates is like batting when you’re behind in the count. You don’t swing for the fences when you’re 0-2. Instead, you choke up on the bat, and concentrate on getting wood on the ball. You go for the solid single, not the extra base hit.