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Sebastopol Home Ownership: a Bedrock of the American Dream

by Randy Mack and Heidi Faulkner

 

You’d think that the whole notion of the American Dream is vague enough that it would be immune from challenge, and for the most part, that’s still true enough. Not so for its principal emblem, which most Sebastopol residents would agree is owning your own home. Being free to work hard to reach that goal—no matter who you are or how humble your origins—has long been the leading sign that the Dream is alive and kicking.

Even so, lately it’s been getting hard to ignore some media discussions that seem to challenge homeownership’s legitimacy as a pillar of that whole American Dream notion. Simply put, the suggestion is that the financial benefits to be had from owning your own home are no longer valid—or at least, that they are growing less valid. 

There’s no arguing that there are many situations where renting makes more financial sense than does buying. Most of them are related to the expected duration of residence. As The New York Times observes, “Buying tends to be better the longer you stay” if only because the upfront costs are spread out over many years. In one of its Upshot commentaries, the Times presents a calculator which adds up “Initial,” “Recurring,” and “Opportunity Costs” for various rent and buy situations in order to show at what monthly rental dollar amount “renting is better.” 

Sorry, Times. Your calculator may accurately display the tradeoffs in dollar costs—but it overlooks one factor that can ultimately prove to be the most significant. It’s the real-life factor that is built in whenever Sebastopol families decide to graduate from renting to buying. It begins to take form with the first dollar saved for a down payment and continues until the last mortgage check clears the bank. 

You can call it “enforced savings”—but whatever its name, in addition to the emotional benefits of owning your home, a measurable infusion of financial independence is the usual outcome. For example, when the Federal Reserve last reported “Changes in U.S. Family Finances” during the years from 2010-2013, it found that although median incomes fell 5%, “the median net worth of homeowners increased 4%, whereas that of renters or other non-homeowners did not change.

If the American Dream is one of self-reliance and independence, then owning your Sebastopol home isn’t likely to disappear as its leading goal anytime soon. It’s one of the greatest parts of our job to help clients turn that distant dream into today’s reality. It’s a process that starts with a simple call to our office!

Is There Really a Best Time to Buy a House in Sebastopol?

by Randy Mack and Heidi Faulkner

Many of us who call Sebastopol home find that the beginning of the new year serves as a useful benchmark. This is when it’s easiest to collect the bygone year’s household bills and receipts and stash them in the drawer, box, or envelopes marked “2016” to be revisited at tax time. Once all the holiday ornaments are safely stored for next year, it’s time to embark on the coming year with a refreshed outlook and energy.

When you go looking for fresh insights that will be relevant to Sebastopol real estate buyers and sellers, some of that New Year’s enthusiasm can come in handy. Particularly when you come across news items with headlines like “The Best Time to Buy a House” or “The Best Time to Sell a House.” It’s not that the topics aren’t interesting, but since we know darned well that there’s no such thing as a single “best time” to buy a house, it takes a little extra energy to read further. The best time to buy a house in Sebastopol depends on the area, neighborhood, on the current market activity which varies from year to year—and on the qualities of the property itself.

Nevertheless, coming across the Business Insider piece headlined, “New research reveals the single best day of the year to buy a house,” it was simply too tempting to pass up. The best single day! This was nonsense, of course, but with fresh 2017 energy to spare, it had to be checked out! Here’s what was revealed:

This analysis resulted from some past research dusted off from RealtyTrac’s review of more than 32,000,000 home and condo sales from across the nation. It had taken 15 years to collect all that data, but when they put it all into the proper columns and added and divided in the way statisticians do, they came up with the final answer:

The best day to buy a house is October 8.

Now, since it’s going to be a long time until the next October 8 (it will fall on a Sunday), some secondary news might be of more immediate interest to Sebastopol readers. The best month to buy may be October, but the second best month to buy a house is February! So wouldn’t it follow that January is a good time to start looking?

The way RealtyTrac defined the “best” time to buy was by comparing the sale price with the fair market value. For buyers, the best day was the one with the biggest average discount. October 8 was that day.  

Now, the practical use for this information here in Sebastopol is very limited for a couple of reasons. First off, they really meant “best day to close” a sale—leaving open the more tactical consideration, which would probably be the best day to make an offer. Then, too, the residential market and resulting sales results over the past 15 years have been so varied and sometimes so wildly atypical that generalizing from them could yield almost any answer. Also, this was a nationwide survey—so even just the way weather here in Sebastopol differs from the national average would certainly affect the results.

But the ideas written about did have some practical value. They highlight the notion that for buyers, the late fall and winter months might be a pretty good time to buy a house in Sebastopol even when there are comparatively fewer properties on the market.

It’s true that today there are some great buys to be had—which makes it a great time to give us a call! 

For Sebastopol Mortgage Rate Quotes, ‘Published’ vs. ‘Promised’

by Randy Mack and Heidi Faulkner


Whenever you’re in the planning stages for your next Sonoma County real estate venture, the best available mortgage rate is a number you look for. Whether you are thinking of a purchase of a new area home or simply refinancing your existing property, that rate determines how much you will pay each month.

You would think that getting a good idea of what that number is should be pretty easy. Certainly, you would be encouraged by what you find on the web. That number—the mortgage rate—is available online almost everywhere you turn. It’s in TV ads. It’s on the radio. It’s almost looking for you


But as everyone soon learns, those numbers aren’t exactly the ones that you need. What appears in the ads and pop-ups isn’t necessarily that number (if by “that number” you mean the mortgage rate you will wind up paying). 

This whole topic was addressed this last weekend by USA Today in an article that did a good job of explaining why the actual mortgage rate that most applicants will be offered is not readily available. The rates in the ads are called the “published” rates. Unlike many other kinds of consumer advertisements, in mortgage financial parlance, a “published” rate isn’t the same as a “promised” rate. As this month’s survey by Freddie Mac specified, the mortgage rate average of 3.45% was on average only available to customers who chose to pay an additional fee—in this case, .5 point of the loan amount. For a $275,000 loan, that would cost the borrower $1,375 up front to get the “published” mortgage loan rate.

That isn’t the only wrinkle. As USA Today put it, “Lenders also publish rates that have very specific prerequisites.” The rate may only apply to applicants with specific credit scores. The rate might call for a minimum loan-to-value percentage, too—or only be available in specific areas (which may or may not include our area).

This might sound like a deliberate bait-and-switch tactic by the lenders, but when you get to the reasons for all the razzmatazz, it’s actually necessary. Our Sonoma County mortgage lenders are able to keep rates competitively low by only lending to borrowers who have a very good chance of repaying the loan. Those whose histories indicate that they pose a higher risk of not being able to keep up their monthly payments have to expect that they will be quoted a higher interest rate. The last time mortgage lenders stopped doing a good job of those risk calculations, it triggered what we now call “the great recession”—and just about everyone paid a price for that.

So it may be inconvenient, but in order to really find out what your true interest rate will be for a specific real estate transaction, you have to go through the motions of applying for it. In this age of readily available instant information, that can seem like a run-around—but it’s necessary. We're here to make this and every other aspect of your Sonoma County real estate doings as easy as possible. Call us!

Latest Remodeling Spending Projections: More Reliable

by Randy Mack and Heidi Faulkner

Sometimes the experts who project trends in residential housing and real estate find that they have to correct their predictions. Once the final statistics are in, if they consistently reveal errors as wide of the mark as 50%, it’s just embarrassing. Such was recently the case with Harvard’s LIRA remodeling project—and for those of us who represent buyers and sellers in the Sonoma County home market, the resulting revisions were meaningful.

Harvard’s Joint Center for Housing Studies’ statistical barometer for home improvement activity is known as “LIRA”—its Leading Indicator of Remodeling Activity. And as their research analyst Abbe Will wrote recently, it had become evident that “the quality and reliability of the LIRA’s benchmark data series declined markedly.”

When your benchmarks are no longer meaningful, there is only one thing to do: it’s called “re-benchmarking.” In this case, it caused JCHS to overhaul the very activities that it was attempting to measure. Instead of just projecting home improvement spending alone, the new “re-benchmarked” LIRA is broader. It adds maintenance and repair spending to remodeling activity.


What do the new findings augur for Sonoma County’s home market prospects? First good news: it looks as if the new projections should be much more reliable. And the graphs reveal a strong surge in national remodeling spending—not only for the remainder of this year, but for well into 2017. When remodeling spending is strong, real estate values (and prices) rise, too. For homeowners, the addition of the right kind of improvements is one way to bump up the value prospective buyers see a property.

One feature that our area’s luxury homes share is a well-planned, open kitchen. Where that is precluded by structural elements, one work-around is the addition of new appliances with a contemporary look. Stainless steel ovens and refrigerators have a way of creating a “luxury home feeling”—even when the spaces they occupy are relatively modest.

Another feature that signals opulence is at least one luxury bathroom. Spa-style baths can go far in that direction—and the resulting photography can add major eye-appeal to a listing. More modest improvements like changing out faucets for brushed nickel or other metal finishes (not gold, please!) can make outsized differences. Add fluffy new towels, and perhaps a scented candle—and the formerly so-so bathroom can become a mind-changer.

With LIRA’s home improvement activity projected to strengthen more than 8% this year—and promising further acceleration into next (to nearly $325 billion!)—it demonstrates the faith that consumers across the nation have in the growing value of their home investments. If you are evaluating the merits of various possible improvements for your home, we hope you won’t hesitate to give us a call. We would be glad to offer some incisive feedback on the preferences we have discovered with today’s Sonoma County buyers!       

Penny-wise and Pound-wise: Why People Use a Buyer’s Agent

by Randy Mack and Heidi Faulkner

A mega-proportion of serious Sebastopol house hunters ultimately decide it makes the most sense to team up with a real estate professional to get the job done. Sebastopol buyers may begin the process of finding and buying their next home on their own, checking through the online listings or driving target neighborhoods to check out the “For Sale” signs—but the NAR® reports that 9 out of 10 of U.S. buyers will eventually use a real estate agent in their search process.

The most obvious motivation for that is because the buyer’s agent’s fee is paid from the seller’s proceeds. That alone could explain a 90% level of popularity. When you can benefit from a professional’s services at no cost to yourself, Sebastopol house hunters would have to think long and hard to come up with what the downside could possibly be. To run down the arguments that could explain how 10% might decide to pass up the buyer’s agent service, we looked for the most common arguments against the grain.

Here are the Top Four, presented in no particular order. (Since we definitely do have a dog in this fight, we’ve also included some counterarguments):

  1. Distrust. Something for nothing? A free lunch? Common sense teaches the same lesson, always and forever: THERE’S NO SUCH THING AS A FREE LUNCH! (Counter: the service is not free: the seller pays).
  2. Independent Spirit. Some people know that they work and think better when they take sole responsibility. They may have been misled by “experts” too many times—may regret not relying upon their own instincts. After all, Americans are mavericks by nature: they are at their best using their own native ingenuity to solve problems. (Counter: a substantial portion of the process of purchasing a home in Sebastopol requires mastering technical legal and timing requirements. Although a buyer can take the time to learn about all of them, since their buyer’s agent has already handled them successfully many times, it’s wasted effort. IOW, this is a wheel that doesn’t need to be reinvented).
  3. Commitment. If asked to okay an agreement that spells out the ground rules for working with a buyer’s agent, it’s as if a commitment is being forced prematurely. After all, who knows for certain that the right Sebastopol house at the right price is even out there? It just feels like putting the cart before the horse. (Counter: this is never a commitment to buy—just an agreement for how the search and commission will be handled if a suitable home is found and purchased. The buyer can make sure the arrangement can be severed without penalty if the service is not satisfactory).
  4. Motivation. Since a buyer’s agent will profit from any sale—they’ll try to sell me anything. (Counter: Every buyer’s agent is legally and ethically duty-bound to represent their client’s interests—plus, since their entire career is utterly dependent on their reputation, their interests align).

Whenever we represent any buyer, our motivation is 100% that of helping them reach their desired outcome. Reaching that goal—finding the right Sebastopol home, then negotiating and closing at the right price—is the way we keep the phone ringing. See for yourself by giving us a call!

 

Mortgage Interest Rates & Sebastopol Real Estate: It’s All Connected

by Randy Mack and Heidi Faulkner

One way or another, it’s all connected.

Last week ended with what some observers justifiably called a “shocking” development—one that could impact Sebastopol’s home buyers and sellers measurably—at least in the short run. It came with the release of the employment statistics from the Department of Labor. They weren’t good numbers. But the surprisingly weak report might be good news for some home buyers, since it could well affect affordability. As I said, it’s all connected.

“Affordability” is the index that seeks to summarize in a single number whether or not a typical family would qualify for a mortgage under current economic conditions. When a homeowner in Sebastopol is looking at the state of the market, it’s not a bad indicator for explaining why sales might be rising or falling. Even though the nation’s residential prices have been rising steadily, the Affordability Index has remained better than the historical average. You’d think that when something is more expensive, it would be less affordable—but the contradiction is explainable when mortgage interest rates are taken into account.

All across the U.S., very low mortgage interest rates have been more than compensating for higher home price tags. Interest rates near or below the 4% mark tend to make monthly home loan payments eminently affordable. That happy situation can’t last forever, of course; so it’s why anyone with stake in Sebastopol real estate has reason to watch for changes in mortgage interest rates. If you are thinking of buying a home in Sebastopol, low mortgage interest rates are a strong motivator to get going. If you are thinking of selling, legions of motivated buyers are what you’d hope for.

Adding more fuel to the fire had been the growing likelihood that those mortgage interest rates will soon begin to rise—this month, as a matter of fact. Until last Friday, the Federal Reserve governors had been unusually forthright in statements that they were likely raise lending rates at next week’s meeting. The experts didn’t disagree.

Then came Friday’s jobs report, which blew those expectations, if not into the weeds, at least onto the sidewalk. MarketWatch was typical. “Weak job numbers…have essentially taken a June rate increase off the table.” They called the chances for such a move in July “also significantly reduced.” Only hours earlier, the same site had headlined, “Investors are now ready to accept the Fed’s interest-rate hike.”

Fortune was equally firm, headlining, “Don’t expect the Fed to Raise Interest Rates This Month.” An earlier article had described financial markets that were raising bets on a June increase following release of Fed deliberations.

Does this new twist make Sebastopol real estate market more or less attractive? The poor labor report might give some pause about the U.S. economy as a whole, but our area’s continuing low mortgage interest rates certainly counterbalance those concerns. Then there is always the outside chance that the experts are, again, wrong—and the Fed will raise the Funds rate, anyway.

This is a realm in which few things are certain. One is that, as previously mentioned, it’s all connected. Second, there’s at least one sure way to take advantage of the best Sebastopol real estate market has to offer—calling us!

 

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Randy Mack and Heidi Faulkner
Artisan Sotheby's International Realty
7775 Healdsburg Ave.
Sebastopol CA 95472
(707) 696-6272
(707) 480-4098
Fax: (707) 824-0587