Property Values in California 2013, 2014, 2015

My property value predictions for CA; Prices will largely stagnate in population centers and drop in suburban and rural areas.
My reasoning:
1. CA just elected a Democrat Super Majority to our state assemby. Prop 13 is now in danger.
2. Several large businesses, most notably Boeing have announce lay-offs and plant closures in this state.
3. Business owners continue to emigrate from Ca.
4. Continuing amounts of real estate shadow inventory that will not be absorbed by the CA economy because of private sector job loss. There are probably two rounds coming with 3-4Million homes, and 5-6M homes and job losses may aggravate these numbers.

5. Failure to develop energy sources faster than we are closing them down and aging power distribution infrastructure.
6. Recent taxes on lumber and passage of proposition 30 allowing increased sales taxes will retard new construction of housing.
7. Also, in the near future septic tanks will no longer be allowed on properties less than 2.5 acres and on older homes, you'll be forced to hook to sewer. Might want to check into that before buying an REO.

If you can buy and reduce your housing outlay, interest rates make sense to do so, especially if you buy a solar-electric (photovoltaic) system at the time of purchase to hedge against rising electricity costs.
After Sandy,  and the gas shortages and rationing, I would seriously recommend buying an electric golf cart in case of a disaster, especially if you have solar panels. Especially if it has the standard plug for electric vehicles.


I can imagine a mini-bubble scenario if more government money is pumped into the economy, but we don't seem to have the population pressure on housing to drive prices up, though a speculative frenzy at these lower prices, or investors hedging against inflation may cause those investors to scoop up housing at today's low interest rates (3% ish)

I would like to read what any of you think on this, and your reasoning why.

My Response to Christopher Matthews in Time Business

The following link is what I'm responding to. A post in LinkedIn seemed to think this article was optimistic. After reading it, I didn't find it so, but I notice a lot of agents on LinkedIn are talking the market up, maybe because they believe it to be true, but, I suspect, mostly to make a commission. So this is the link:
http://business.time.com/2012/04/27/has-the-housing-market-finally-hit-bottom/

Here are two of my responses that I posted on LinkedIn:
 #1

 In coastal areas this may be true. California's San Diego, Orange County, and San Jose only have about 30 days of inventory. This may well have to do with the employment bases in those areas, though. 
SD County and OC are pro-business conservative strong holds in the CA political landscape. San Jose has made the most of high-tech government subsidies, and is left-leaning. But the three areas have steady jobs and ocean accessibility. 
Outlying areas are still seeing drops in the housing market. We're also seeing a double-dip (or are soon likely to) in the foreclosure rates--or should I say a double-spike? There is going to be another round of foreclosures as investors and homeowners who can't find work after 2 years finally let their houses go back to the banks. 
Why? If you've been watching, CA tax revenue dropped 16%. The job providers in CA are still leaving and Gov. Brown is still trying to get Californians to vote themselves a tax increase this year. So, expect more people to give up on CA. This will probably help some other state, though. 
You can also add in factors such as "self-deportation" of illegal immigrants and also of some of our legal immigrants who've decided to go home. Keeping in mind that many adults are living with extended family, and the country's population growth is driven primarily by immigration, you don't have heavy demand for housing, except for already crowded markets.

 #2
 When the market got overheated in 2005, I decided to go work as a building inspector in 2006 until 2008. I couldn't justify selling homes I felt were overpriced, but thought I'd see a 30% correction. Little did I know that in the Inland Empire it would be 50-70% or I would have gotten out of the rental market entirely. 
After being an inspector for the first half of 2008 I watched panicked contractors unloading their inventory, and Frontier Homes declare bankruptcy. I am currently VP of the local chapter of the International Code Council, and 90% of the contractors I knew have left not only the area, but California. I listened to Mexican-Americans and guys that I suspected were here illegally talk about leaving CA to go back to family farms in Mexico. (FWIW I speak pretty good Spanish, and was the only Spanish speaking inspector at the city for over a year). 
There are bright spots in the economy, but this has more to do with government favoritism of certain industries. Low income housing (or affordable housing) requires local governments to provide a certain amount of housing. This helps developers at the cost of small-time investors. Also FHA rules allowing only 4 loans has hurt small investors. I know several that would like to invest but can't, unless they spend money incorporating and jumping through other hoops. 
Many of these investors, maxed their credit cards to keep things afloat or took hard-money loans because they couldn't get any other financing. Their hopes of the economy recovering has been dashed, and they are realizing that it's time to short sale, deed-in-lieu, or BK this year. Next year you will see more bargain homes outside of the coastal areas. 
Additional areas for profit include rentals, if you are just getting into them. The FHA 4 loan rule benefits corporations and the IRS (is that a surprise to anyone?) There is a lot of rental buying in the High Desert, mostly with section 8 renters. But, I can't deny there is money to be made in this arena. I think it's a big crap shoot myself, but know people that swear by Section 8. File this under making money through affordable housing and government subsidies, in my book, however. 
There was a recent article about new home owners finding themselves underwater shortly after purchase on Reuters on April 26, 2012 (date preserved for future searches:http://www.reuters.com/article/2012/04/26/us-usa-housing-negative-idUSBRE83P12E20120426) If the agents for these new owners did the right thing for them, they may have bought for construction cost or less. In which case their is still an upside. If we get inflation, the houses may be worth more and the low mortgage rates are beneficial, as long as their is employment to pay the mortgage. 
I'm not saying don't buy. But, inasmuch as we disclose to our clients, we have a fiduciary responsibility to let them know what we can. I try to work with investors that understand the risks 
One other area to look at that comes to mind is having your buyer buy solar during the purchase process. It adds to value of the home, and costs around the same on a monthly basis as the electricity it generates. This helps keep housing from going underwater and is justifiable with FHA energy efficiency mortgages. This also prepares your client for CEC building code changes coming in 2016 and 2020. 
My company PFAES consulting can help with this process.

Please email me at savingyoursol@gmail.com or reply to this blog if you have any questions. 

More rearranging the home office and submitting a commercial offer

So today consisted of running over to a clients place of business and having him sign an offer on a restaurant going into foreclosure across town.

The lender plans on foreclosing on Thursday, so my client made what he thinks is a high offer, though I doubt the lender will be happy with it. I've been saying we're heading for a commercial crash, and mentioned the stagnant commercial market, so I'm hoping for a counter offer, at best. If we don't get anything, we'll just wait and see if it comes up again at a better price. I'd like to be more hopeful, but I think a lot of lenders are too optimistic about the commercial market, or too stubborn to take a small loss now, in order to take a bigger loss later. Maybe the lender is hoping to make another loan on the property in order to foreclose a second time.
The location is on outer Hwy 18, so a little hard to get to for travellers, but it is close to the post office. We could use a place for a good cup of drive-thru coffee over there.

I also spoke with a businessman and his wife (businesscouple ?) about the value of the building they were leasing with an option to buy. Hopefully I'm making friends. Their building is old and needs a lot of work to bring it up to current codes, as is the attached SFR, but their credit isn't the best, so maybe they can work something out with the owner. IMO, the owner wants way too much.

Still working on the home office. Had to get some round cable staples for the power cords. Just about have things set up in an acceptable manner. Older places never have enough electrical receptacles. When I get my dream house built, it's going to have lots of places to plug the stuff in...if I don't go all mad scientist and power the place with a Tesla coil.

Tomorrow is time to meet an inspector and potential renters.

New Computers and technology stuff

So, I'm still getting settled in after the move in February. There's much arranging and rearranging of the home office space. My boss, is even talking of expanding, and possibly opening an office in the High Desert.

In the midst of all this, I've gotten a new computer. I'm setting it up to run Linux Mint. My subscription to WinForms is about to expire, so I'm moving over to a membership with Firsttuesday.us which has great articles and real estate forms for about one quarter the WinForms price.

So there have been quite a few late nights messing with technology. My PDA wouldn't sync, so I reset it and lost some contact info. Everything seemed fine, but now it's temperamental again. I set up a digital picture frame for my grandma. Now I'll need to use my old computer parts to build something for her to scan in the old family photos, and type up some memoirs.

So, I still need to get the network printer to work with Linux, though I have a friend who'll help me "when he gets the time". LOL, we're all so busy these days.

Meanwhile, I'm helping a couple friends with their rentals, and have gotten all my California rentals filled. It's now time to get some of the back rent owed with the help of income tax returns. When I had empty rentals and no qualified applicants, half rent was better than no rent. Now it's time to get people caught up, catching up, or packing up.

Basically the last half of March, was a lot of property preparation, and some pre-summer maintenance.

There have been several articles out there on more price drops in the future, and I'm submitting an offer on a commercial property tomorrow.

I went to the International Code Council meeting in Victorville last Wednesday. The discussion hinged on home health care facilities. I was torn between it and the Mojave Water Agency meeting on gray water use, but a friend attended that. Unfortunately, she hasn't been feeling well, and left early.

I'll be going to Las Vegas this weekend for a professional leadership seminar. I'll also get to see some friends. After that, I'll come home for a few days, then I'm off to Colorado Springs to tidy up a house up there for sale.

Coming Inflation may make now a good time to buy. Times are strange.

I just wrote an article on my political blog about currency devaluation and inflation. I don't want to cut and past the whole thing here. But, buying real estate has always been a hedge against inflation. I still stand by the prediction that housing prices will, in general, drop. However, they could drop in value, and still increase in price if we get a currency devaluation or rampant inflation.

Furthermore, properties can be bought in the Inland Empire for less than the cost of construction. So, there are bargains and lots of them out in the market. I do believe that more foreclosures and REO's and short sales are on their way. We are going  to have deals for quite some time.

Even More Reasons Real Estate May Drop

I've been mentioning for months that real estate, in most cases is going to drop. In special cases like beach front property, and areas where development is limited or not allowed, this won't be true, or as true.

Here are some links and reasons:
3 reasons home prices are heading lower


http://money.cnn.com/2009/12/31/real_estate/home_price_drop/index.htm

Housing Inventory Still Dramatically Oversupplied — Before You Add In The Foreclosures

http://newobservations.net/2009/12/27/housing-inventory-still-dramatically-oversupplied/


Resets Projected to Cause Mortgage Crisis in 2010

http://www.dsnews.com/articles/index/loan-resets-projected-to-cause-mortgage-crisis-in-2010-2009-12-11http://www.dsnews.com/articles/index/loan-resets-projected-to-cause-mortgage-crisis-in-2010-2009-12-11

Q3 2009 U.S. Foreclosure Heat Map
http://www.foreclosurepulse.com/blogs/mainblog/archive/2009/10/27/q3-2009-u-s-foreclosure-heat-map.aspx

A nationwide forecast for real estate is below. If you look to the left side, you can click on your state

http://www.housingpredictor.com/better.html

More predictions for a double dip in the California real estate market.

I was reading an article based on an LA Times article that reports that certain areas of CA real estate market are recovering.

As I've mentioned before, housing near the ocean, and in other specialty locations will rise. The article confirms this by saying San Diego, Los Angeles and San Francisco have had the highest recovery rates, and have increased for 5 months running. All of these cities have ports and beaches. All of the locations are pretty much built up, so there's nowhere to build. In SF's case, there are laws preventing construction. There are certain areas of SD county that can be built, but new building codes put in place after the fires of 2005.

Low density areas are still having problems. When prices in the big city start to drop, people (especially commuters)  in the outlying areas migrate inwards, leaving a high vacancy rate in places like the Inland Empire and farming communities like El Centro.

The downward trend in these markets certainly hampers the ability of these local governments to garner a money from property taxes as the foreclosed properties sell for less money and must be assessed on a lower valuation. This leaves these areas on a downward spiral until investors start returning.

Some investors can buy cheaply and charge lower rents, bringing rental values down further. For rental properties, valuation is based on rent rolls, so if landlords and property managers lower their rates to compete with new owners, then they can apply for lower assessments from the county. This can lead to even less services, and perhaps result in blighted areas, barring some sort of intervention/assistance from higher levels of government.

My experience as an investor and as a building inspector has shown me one thing about government intervention in the housing market. It is tied up in low-income projects. While the goal of assisting low income people may seem on the surface noble, the unintended consequences are dire, generally resulting in generational economic suffering. One of the principals of success is "How do you learn to be successful (or insert whatever adjective you like) people if you aren't surrounding yourself with successful people?" People in public housing learn to be people in public housing. (For a good start in mimetic theory, check out this link)I've also heard anecdotal evidence of prejudice against poor white people by administrators of color in low-income communities, but that's another story.

As long as there is a shortage of rentals, property prices will stabilize. So we are seeing prices stabilizing and rising (though probably temporarily) in the coastal areas. And we are seeing prices stabilize in other areas, but if you see lots of "move-in specials" in the local papers and online classifieds, be prepared to see prices drop in those areas, especially after the federal subsidies (tax credits) expire.

In fact, the $8000 tax credit was causing all sorts of pressure to buy at the end of last year. The new $6500 tax credit has put some wind in the sails of the CA housing market, and will allow people in outlying areas to move closer to the big cities, or upsize their dwelling in the suburbs. After it expires, if there is a commercial downturn, and people lose their income, we are going to see more foreclosures in the residential sector.

Then prices will come down again, unless there is further intervention by the federal government, but with all the red ink they are bleeding, that may not happen, though inflation may cause the property values to rise in any case. That raises the question, how do we cope with rising prices if the economy is stagnating or in a recession/depression? Keep in mind, all the federal stimulus of FDR extended the Depression into the Great Depression. (Read this article for a thorough treatment)

Obviously, we have to pay the piper at some point. The government will have to either raise taxes (further punishing owners and producers) or cut services or some combination of the two. I have yet to see any government program save money, so I don't buy into any statements of that nature, as no government program has come in under budget in anyone's memory that I know. The politicians have a vested interest in providing services in exchange for votes, so I'm not optimistic that we will see any action on that part.

Just some of my thoughts about what's coming down the road.

Update for the last 3 weeks

Things certainly seem to be slowing down a bit in the rental market, which is typical for December. One of the vacancies was filled, and I have a firm commitment to rent one of the others around the 15th of this month. Three others remain vacant despite move-in incentives.

The first Wednesday of the month, I dropped off a sailor Christmas tree ornament retired Navy friend of mine in Long Beach. I went by and saw my grandma's new shower and bathroom in Reseda. Had a good conversation with a friend of mine in Santa Clarita. Then I attended the High Desert International Code Council meeting in Victorville. That was quite the trip around southern California.

Most of this time has been spent looking for clients, work, and working on the rentals or interviewing potential renters. Note to people looking to rent: treat it like a job interview, don't show up late without calling and don't look like a complete vagrant. Just saying.

I took a two day road trip to Boise, Idaho. I visited some friends up there, while my buddy took care of business. That was Monday and Tuesday the 7th and 8th.

Now I don't feel so well. I'm downing juice, Airborne ® , vitamin C, and drinking lots of herbal tea. Yesterday I made a hot toddy with some very harsh single malt scotch. Phew!

Over the last couple weeks, while waiting for a negotiator for a short sale, I've been looking at a lot of the regulations coming down the line from the EPA and other government agencies, and how they're going to affect the housing market or, at least, the value of some homes. There are a lot of changes slated, and there's not much chance of avoiding them, as the various agencies and bureaucrats make law by passing regulations, without any voter oversight.

This has led me to question the value of property ownership in general. There are definitely those who should own property, but it is not everyone, and not every property. Older properties are going to need extensive energy efficiency upgrades in order to be sold. With the proposed healthcare reform, the IRS will be enforcing compliance, which means that if for any reason you do not wish to participate, your assets will be liened by the IRS, this includes your bank or your property.

All of these things have really caused me to question the value of owning "things" and property ownership in particular. I would and do put a premium value on any arable land with a water supply. You can't go wrong with a property that is able to grow it's own food, and with possible cap and trade legislation and the fact that the north central valley of California was denied irrigation water this year (to save the delta smelt), you can bet food and energy costs are going to go up. If you can ship your food to yourself from your own property, then you can save on both fronts.

What all of this leads me up to is this: I've tried to compartmentalize my blogs and separate out the various aspects of my life, but property ownership is by it's very nature political, as property is always subject to the vagaries of politics and legislation. Over the last several administrations, property rights have declined, and the current attitudes seem to be contemptuous of property rights on several levels. So I am going to start a political blog in addition to the other ones I have.

Thanks for reading this rant, I hope it was somewhat clear. If not please ask questions, as they help me clarify my thinking and positions.

James

November Begins

It's been a busy beginning of the month. Escrow closed for one client. I dropped off an earnest money deposit for another. I had the normal collection of rent. I'm cleaning up after renters and listing stuff for rent and for sale. I also installed did some repair work.

A couple things I had to do were plumbing. I capped a 1/2" copper pipe that was used for a swamp cooler. It had a saddle (or vampire) tap, and the tap was leaking, so I removed it. The mineral content in the water had caused a very large hole to form under the tap, so I cut off the pipe with a hacksaw, cleaned up the edges and slipped on a 1/2" Sharkbite® fitting. The fitting went on in less than 10 seconds. I can solder, but this is so much faster. They can even be removed with a plastic tool. They are available at Home Depot. Lowe's has a similar product, I think it's called Gatorbite®. They cost around $5 instead of $2 but save so much time, and are way cheaper than calling a plumber. 

I also replaced a low boy toilet with a standard height toilet. The copper piping is surface mounted on the brick wall. The 't' fitting had to be moved 4" to the left to allow the tank to clear the angle stop (my fault), and so I cut the pipe and used 2 of the 1/2" couplings to do this. Once again, saved a bunch of time. This particular run of pipe has caused me some problems soldering before.

I hope to have more updates later. Last month was crazy busy, and this month has a lot of catch up to do.

Even More Renter Drama (or lack thereof)

I have been trying to get in contact with a tenant who was to pay me around the 15th. After several unsuccessful attempts, I asked the neighbor if he'd seen her and he replied, in short, that he thought she had moved out.
I went to the unit. The lights were on, so I called to the house several times with no answer. The tenants across the way were looking through their door and I inquired if they had seen my tenants. The volunteered that they'd helped my tenants move. I checked the gas meter and it was off, and the garage door was unlocked.
I opened the garage door. I looked at all the trash on the floor. At least they left the ladders they borrowed from me, and the paint they were going to use for the trim (that I had provided). I took some pictures, but they didn't upload like I wanted them to. The doors were all locked. I am not one of those landlords who carries keys to all the apartments, and I don't have them master keyed (though maybe I should reconsider that), so I loaded my ladders up and talked to the tenants from across the way.
They, M and J for now, said that my tenant mentioned that she owed money and was moving out. I don't know why she hasn't contacted me. I'm easy to get in touch with, by mail or phone. Someone's got to be able to lend you a phone.
Anyway, it's been quite the month for tenants leaving. One moved out due to moving into a senior park. Another left due to threat of eviction. This one just up and left--I only wish they'd just told me to come and pick up the keys. Another of my tenants is buying a house and I'm the agent and we're hoping to close this week, or early next.

How to use a power sewer snake.

I figure you're reading this because you want to know how to use a rooter. If you're afraid of things that typically go down the toilet or have a sensitive sense of smell, don't read anymore.
One of the things you might find yourself doing as a landlord (and maybe as a homeowner) is snaking out your sewer drain. It might be because of roots, papertowels, kid's toys, tennis balls, rags, feminine hygiene products--ok you get the picture. I've found all of the preceding items. Pity me.
Both Home Depot, Lowe's, and Harbor Freight Tools carry plumbing snakes. I bought the one by Ridgid for around $400. Harbor Freight's runs around $250-300, but doesn't look as sturdy or as safe, as it has an open cage design as opposed to the plastic shell that surrounds both the Ridgid at HD or the model that Lowe's carries. Also, buy the PVC gloves that are nearby.
In any case, it generally costs around $200+ for a drain cleaning service to come out and snake the main line. I've heard that Mike Diamond charges $99 for any drain, so that would be a good deal, depending on when his guys are available. Most inexpensive rooter services take at least 8 hours to get to your job, in my experience. So if you've ever had a rooter guy out 2-4 times, you could've bought the tool.
Now that I've blabbed your ears off (eyes off as you're probably reading this) I guess I should stick with the HOW TO in the title:
1. Take off the cap to the cleanout (you might want to be wearing those gloves, eye protection, and shoes you don't care about--I wore my Tevas today, but I knew I could just wash off my feet.)
2. Let water flow out while you go plug in your snake and determine where the best place to put the machine is--that's why you take off the cap BEFORE you bring your snake over.
3. If you haven't put on the PVC gloves yet, now's the time.
4. Place the snake 2-3 feet from the cleanout.
5. Put one of the attachments on the tip--I use the root cutter for most jobs. It's U-shaped. The spade bit is also good, but as this is on a rental I want to see if my tenant is to blame, because then I charge them for my time. There is also a corkscrew/spring attachment, but I don't like this one.
6. Start feeding the metal spring down the clean out by hand. Don't use the motor yet. When you have pushed the spring as far as you can by hand, stop pushing.
7. Adjust the spring so that there's a little slack, but not too much as the spring can form a loop and catch your hands, fingers, or just smack you. The spring can also catch skin, cloth, or your gloves in the grooves, so treat the machine with respect. Then step on the foot switch and hold the spring loosely while the motor turns the snake. Do this for about 15 seconds to one minute. After some practice you'll be able to notice differences in the sound of the motor.
****Safety Warning**** If the snake loops up, you take your foot off the switch. Then put the machine in reverse. Tap the foot switch to unwind the snake.
8. Repeat steps 6 and 7 until the water has drained out of the pipe or you've reach the end of the snake.
9. Put the snake in reverse, but don't push the switch unless you need to.
10. Start pulling the snake back and load it back into the drum.
****Warning**** The snake is a spring that can fling the effluent on you and the end has a tend to whip if you pull it out too quickly. Anything stuck on the end of your snake might get flung at you. Use your imagination.
11. I like to run a hose down the drain AFTER it's been unblocked.

If you're on a septic system and the clog won't come out, your septic tank may be full.
Hope this helps. If you're afraid to do this yourself, my buddy or I will do it for a couple hundred dollars if you're in the High Desert. :-)

Fannie Mae Homepath Financing Hazards

This post is meant to be more informational than alarmist.

Many of the REO (repo) properties out there need some work. Fannie Mae has a site where they list some of their REOs for sale. The homes need varying degrees of work. Fannie Mae offers loan which have additional money for repairs. The difficulty comes from the way the loans are put together.

Here's the short version of where we are: Client makes an offer, we wait, we get a counter offer with an addendum by the bank, which we sign and send back. That's when things become a little different.

We got a verbal 'conditional acceptance' from the listing agent. So we are not in escrow, but now have to get estimates for any needed repairs. So now my client has to hire the various inspectors and see what is needed. Then we can get estimates.

The septic inspection turned up that we need a new seepage pit ($2000). The home inspection turned up a new roof, dryer venting, and some small electrical work. So now it becomes a little harder, because my client has to get estimates on all this from licensed general contractors. Here is where we start having problems.

A lot of contractors have left the High Desert area of California (and probably other areas as well--Our legislature is not friendly to business and the boom is over), so there are fewer contractors to choose from. The contractors out there, understandably, are reluctant to give estimates on houses that my client doesn't own. Then there is the fact that some who say they will come out and give an estimate never show up.

So now my client is looking at switching the type of Homepath loan he can get (the standard one gives up to $7000 for costs--this house just needed more) and use a credit card for repairs. He's doing this to get the $8000 first time buyer tax credit, which expires November 30, 2009.

Just a word to the wise.

Get a Home Inspector

Here's a link to an article encouraging buyer's to get a home inspector lined up before the end of the year to capitalize on the $8000 tax credit. Unless you're a construction professional, with experience in the field, I can't emphasize enough, how important it is to get an inspection. I was a building inspector, and I found a bunch of things wrong with a property that my client and I have a conditional acceptance on, but the inspector pointed out that the dryer was being improperly vented to the attic.

One more reason to use me when buying REO's

I spent the last couple years as a building inspector. I know a lot of the contractors who are local. I know which ones tend to get things right the first time. I am also familiar with a lot of the pricing structures.
I just arranged for the septic, home, and termite inspections for my client. I got some of the lowest prices, and because I tend to repeat with the same people I got small discounts for my client. Many of the REO's are going to need work, and Fannie Mae and the FHA 203K loans require licensed contractors to do the work.
Contact me if you're in the market for an REO.

Parts is Parts

Sometimes the upgrades on a house make it worthwhile. This is especially true when the housing market is down.
When the price per square foot is down, you're going to get more bang for your buck on a repo. I just saw a house with a $60K upgraded kitchen and a $5K in flooring, and another couple thousand in crown molding, sell for $50K more than a similar house down the street that had been a rental. I'm a handy guy, but kitchen remodels are notoriously laborious. They take a lot of time and usually a lot of money.  The house was basically on sale with a $17,000 discount. The other house also had rental grade lighting and bathroom fixtures. The difference in the houses had everything to do with how much the house was cared for and loved by the owners.
The difference in price, works out to about $300/month with today's interest rates. Sure, not everyone can afford the difference, and some people don't want the extra debt. When the market recovers, the house will be worth that much more, and be that much more attractive to a buyer.
There is money to be made when the parts are worth more than the whole. This is similar in concept to the corporate pirates of the 1980's did, and what salvage yards do on a regular basis. Find something where the pieces are worth more than the whole. Obviously, you're not going to split up the house. But, if you have similar house, with dissimilar prices, it might be worthwhile to estimate how much the upgrades would cost if you plan to make them in the future.

Subsidized housing.

Over the last week, the subject of where prices for housing is going came up a lot. It was coupled with the increase in vacancies that I've seen in the rental market, both residential, and commercial.
Along with the conversations, I mentioned that the rental market is really competitive at the moment, and someone asked if I ever looked into subsidized housing, sometimes known as Section 8. I have looked into it, and decided not to get involved for several reasons. I'm going to tell you why.
Over the years, I had an opportunity to pick up some older duplexes in a low-income neighborhood. The units had few tenants, and some of the vacant units were emptied of the easily removable contents--doors, toilets, cabinet knobs, faucets, and compression plumbing under the sinks.
I started by renovating and renting the empty units. During this time, money was short, and I was working part-time and temp jobs during the day, and the units at night, and doing a variety of paperwork early in the morning. It wasn't unusual for me to be up at 5am and not in bed until somewhere between midnight and 2am. I would often get a nap at lunchtime, but I was doing a lot of 16 hour work days, 6 days a week, with a 'short' 8 to 12 hours on Sunday.
During this time I got a lot of people wandering by to ask when the unit would be ready. I had several ask me if I took Section 8. I was fairly new to the business, and told them I hadn't looked into it. When asked, I told them the rents were about $650 and nearly all of them told me that Section 8 would pay me $850 and that we could "split the difference" or something to that effect. That sort of dishonesty helped put me off. Well, I guess they were honest with me, but not with Section 8. I have an abiding antipathy to liars. However, I would give them an application if they wanted.
I  also was questioned as to why I was making the places 'so nice' by applicants. I replied, "If it looks like a sty, only pigs will want to live here." Those people never brought back the application I gave them. In the words of Dave Ramsey, broke is a condition, poor is an attitude.
Emotionally (I know I shouldn't get emotional about property--that's fodder for another article) I am a bit attached to these properties that I've spent so much time renovating. I've spent a lot of time and money, and literally blood, sweat and tears on these units. All of the landlords who do their own work that I've talked to, feel pretty much the same. All of them that have had Section 8 renters have had problems with damage to the units. The overall conclusion is that the extra money is eaten up in the repairs.
As it happens, the local paper had a trio of staff writers cover the subject. In my opinion, the comments section will give you better insight than the article itself.
Though Section 8 pays higher than average rates, there is a flipside with subsidized housing (brought up by one of the above commentators) in that it devalues real estate in the area. The people building subsidized housing  are able to charge rents that are lower than market rates (affordable). This brings down the rents of neighboring units, especially, or maybe because of, the added units cause a surplus of housing. This drives the rental housing prices down. So the government causes taxpayers to  subsidize a few large construction companies that are in competition with them.
The purpose of the subsidized low-income housing is to deflate housing prices. This unfortunately for investors, also deflates the value of their property. So it's likely, that in the near future, as bailout money gets used for subsidized housing, it will accelerate the decrease in your investment's value. Your property will become worth less faster. This is going to be especially true in larger cities.
If you drive around neighborhoods or down the freeway, you're likely to see a lot of commercial property vacancies. There are more coming. As rents go down, commercial properties are worth less. Unfortunately for small business owners, there is a lot of uncertainty as to what new taxes are in store for them and what existing taxes are going to be raised. That economic uncertainty is going to contribute to unemployment. So there are going to be less Americans compteting for housing in California.
All this makes me think housing hasn't bottomed out yet. This is especially true in outlying areas and suburbs. Though, prices are still at lows that I haven't seen since the 90's, and you can pick up housing for less than it costs to build, and less than it would cost to rent. It still might be good to buy, knowing that your purchase will lose value over the next few years, then increase after positive changes in the economy.

End of the month, and bank holidays

Just a friendly word of advice to anyone reading this. I've said this before, but it bears repeating. If you haven't heard about an offer by Friday afternoon, you're not going to. You're not likely to hear on Monday either--the asset managers are dealing with the pile of paperwork on their desk that the listing agent has forwarded to them, after it piled up on his or her desk over the weekend.
If you haven't heard about your offer and it's within three business days of the end of the month, you're not likely to get an answer. Everyone is trying to close the deal before the end of the month to avoid recalculating property taxes for the escrow impound account.
While your offer is really important to your agent, the other people in the transaction chain, might have different priorities, at least at these particular times. I, and any agent getting paid on a commission (almost all of us) will definitely let you know if there has been a counter-offer, rejection, or acceptance. It's in our financial interest to do so.
It's August 29, and Saturday, enjoy your weekend.

Useful Information--Credit Bureau Contact Info

You're entitled to one free credit report per year from each credit bureau. Your credit score will determine the kind of loan you can get, and heavily influence the interest rate you pay. The higher the score the better. Hope this is helpful.

Equifax Corporation

PO Box 7402741

Atlanta GA 30374-0241

1800-685-1111

Trans Union Corporation

2 Baldwin Place

PO Box 1000

Chester, PA 19022

1 800 888 4213

Experian Corporation

PO Box 2002

Allen TX 75013-0036

1-888-397-3742

During Escrow

This is basic to anyone who is in escrow for a house and is getting a loan (which is the majority of home buyers). Don't buy any more things on credit. You could negatively affect your credit score and disqualify yourself for the loan you're working on, and have to start over...if you can.
The reason not to charge anything is that lenders typically run your credit before closing escrow to make sure you can still make all of your payment obligations. If you make large purchases during this time(the time from the acceptance of your offer to the funding of the loan), you will change your debt to income ratio and change the loan program you're eligible for. If you have marginal credit you may disqualify yourself completely, especially in today's more stringent credit market.

Lender Requirements

REO’s Shortsales and Prequalification requirements

With the number of REO's (Real Estate Owned by the bank) and short sale houses on the market today, it streamlines the purchasing process if buyers have a prequalification letter from their lender. Most banks are demanding that the prequalification letter be sent in with the offer, and some require that potential buyers cross-prequalify with specific lenders (at times demanding FICO scores and proof of funds) before they'll accept an offer. With this in mind I give you a list of the 11 most common things you'll need to take to your loan officer/mortgage broker:
1. Current pay check stubs covering the past 30 (or 60) days.
2. Name address and phone number for your employers covering the last 2 years.
3. Copy of the last 2 months bank statements for all open accounts.
4. Copy of driver's license an dsocial security cards--all borrowers
5. W-2's and Federal tax return for last 2 years.
6. Mortgage statements and/or rental agreements.
7. Complete copies of divorces and final judgement.
8. Self-employment records
9. Complete copies of bankruptcy and discharge.
10. Initial award letter for social security, pension, or other income.
11. Name, address and phone number for landlord for last 2 years.