JUST SOLD! Cute Turn of the Century Cottage

I just closed on this listing for a seller.  This property was a non-MLS transaction.  I listed the home for sale about 18 months ago but market conditions were adverse at the time.  So, my clients rented it for a while waiting the market out.

My client called me a month ago and asked me to contact a cash buyer we have worked with in the past.  When I presented the property, they showed interest and we negotiated a purchase price of $75,000.  Due diligence went quickly and we closed on schedule.

This home was 3 beds 1 bath and had been fully rehabilitated.  It is located at 2010 Monroe Blvd. in Ogden, Utah.

If you are looking to sell your home, CONTACT ME, and lets see how quickly we can find a buyer for you.

JUST SOLD! Bargain Cashflow Fourplex

I just sold this fourplex property located at 1053 Healy St. in Ogden, Utah.  The property was listed on November 9, 2012 for $239,900.  It went under contract on December 4th with another buyer.  After their inspections the property came back on the market.  I had been searching for an income property for my client and we had terminated negotiations on another property right before this property came back on the market.  When we saw it we pounced.  We offered full price and asked the seller to contribute 3% of the purchase price toward closing costs.  The sellers accepted our offer that day.

Then we started our due diligence.  We found about $2,500 in repair items.  However, since my client was purchasing this as an owner occupant, we didn't want to throw the underwriter off with a big laundry list of repairs and complicate the transaction any more than it needed to be.  The seller agreed to a simple price reduction on these items while we waited for the appraiser to determine if there were any FHA related repairs necessary.  We anticipated that there would be.

However, rather than finding repairs, the appraiser came back with a bombshell report stating the value as $225,000.  That was a shocker. However, since the sellers were eager to close the transaction, they accepted a significant price reduction and also compensated us an additional $1,000 for the repairs.

After clearing a series of unanticipated underwriting hurdles, we finally closed on the property at $224,000 with the seller paying $6,720 in closing costs.

Congratulations to my buyer!  This property will be a cash cow.  It is close to Weber State University and the rents will cover nearly all of the mortgage payment even with my client living in one of the units.

If you are in the market for an income property CONTACT ME and let's find a cash flow property that will enhance your portfolio.

SEQUESTRATION: Hardship for Weber and Davis Homeowners?

Home prices are directly correlated to median income.  The higher incomes are, the higher house prices will be for a given geographic location.  This phenomena explains how Ogden Victorian homes sell for $80 per square foot while the same home in Salt Lake City's avenues sell for $150 per square foot.  The homes are the same but the household income's of those living in them are different.

Birds of a feather flock together and there is usually a socio-economic self segregation that occurs in nieghborhoods.  In older neighborhoods, it is typically in smaller and more distinct areas, however we see in large suburban developments how homogeneity prevails and expansive communities can be created around a specific income profile.

These large suburban communities are about to be dealt a blow as household income is scheduled to take a very unfortunate turn downward.  The Federal government will enter what is termed "Sequestration", or a fancy term meaning budget cuts, on March 1st.  These cuts will impact Hill Air Force Base beginning April 1st.

So what do these cuts look like?  For starters, sequestration will affect 11,500 workers and will reduce their pay by about $7,000 per employee per year.  That is over $80M that will go missing from Weber and Davis County economies over the next year.  

So how does this affect house prices and the housing market in general?  Well, to get a sense of the impact let's take a look at communities that house the majority of HAFB employees.

The population of HAFB workers affected by this pay decrease is approximately 6.3% of the total population of the communities where they reside.  For ease of calculating, lets assume that everyone else's incomes are not impacted by this change. (Note: In reality, the loss of income will vector throughout the economy by decreasing consumption at local businesses and affect profitability and secondary employment as well.)  If 6.3% of the population receives an 8.5% decrease in pay, the average median income for these communities will decrease by just .54%.   That doesn't seem like a lot.  However, when house prices have otherwise been increasing, a .5% decrease means the difference between a recovering market and a soft buyer's market.

I expect that the price increases we have seen over the past year will slow and flatten in light of these new developments.  We likely won't see meaningful price increases over the next year in these communities. HAFB employees are likely to be found selling and downsizing or possibly even finding themselves in a short sale situation or foreclosure.  If the cuts are permanent, I would expect to see things pick up again in a couple years as the economy adjusts.  If they are not permanent, then we may see an economic surge and housing bounce once pay is reinstated again.

Either way, it is best to have a Professional at your side to aide you.  If you are in the real estate market or thinking of selling your home, CONTACT ME and we will put together a plan that meets your needs.      

Things To Do In Utah: Soldier Hollow Tube Slide and More...

The family and I took the weekend to get away and relax for the weekend.  Our destination was our family townhome in Midway, Utah.

When we arrived, we were surprised to be greeted by very little snow.  We brought our snowshoes with the intent to go for a walk in some nice powder on the mountain.  We scratched that delusion pretty quickly.

Our first fun activity was a trip to Soldier Hollow at Wasatch Mountain State Park.  We had reserved a time slot to spend at the tube slides.

Once you grab your tube, the facility has a tow line that takes you 300 yards up the hill.

There are six different tracks to choose from.  Here is video I took of one of them:


After our tubing adventure we headed to find some place we could snowshoe...

We found a north facing slope east of the Golf Course and started our hike.  It wasn't too long before we found a couple half-eaten baby deer.  Nothing makes a little girl's adventure more memorable that stumbling upon that scene.  After the horror show, we pressed on and blazed our own trail through the forest.

In all we quite an enjoyable time.

House Prices: 1890-Present

House prices tend to hold their real value over time.  However, there are peaks and troughs.  Here is an inflation adjusted look at housing prices in the U.S. since 1890.

Sticker prices continue to rise recently but inflation is increasing too which keeps "real" prices static.

EXIT: Uncle Sam Makes Escape Route From Mortgage Monopoly?

One of main supporters of the real estate market over the past several years has been Uncle Sam.  Through the Fannie Mae and Freddie Mac government enterprises, FHA loans have become the savior of mortgage lending.  The mortgage meltdown of 2008 left the finance market for homes in a ruinous state.  Government stepped in to pick up the slack and taxpayers have been shouldering the risk ever since.

This week one of my loan officers emailed me that FHA is increasing mortgage insurance fee.  The MI, as it is called, is a monthly fee paid in addition to the principal and interest for at least five years and can be terminated once the borrower gets to 20% equity on their home.The new change states that the fee will now be for the life of the loan.  That is a big change!

Some of these changes reflect the fact that FHA has not been as stringent in underwriting loans as it should have been and default rates are higher than they should be.  The longer payment of MI will help cover some of those losses.  But, this move does not happen in a vacuum.  As FHA loans become more expensive, it makes private lending more competitive.

Indeed, a news report from Housingwire seems to indicate movement on the private lending front:

  Mortgage real estate investment trust Cerberus Mortgage Capital filed for its IPO Friday, unveiling wide ranging plans to purchase residential mortgage-backed securites and mortgage servicing rights, according to the document at the Securities & Exchange Commission.
"We intend to pursue a broad range of investments in residential mortgage whole loans and other real estate-related assets, including securitized financial assets, mortgage servicing rights, excess mortgage servicing rights and residential housing for lease, which, together with RMBS, we refer to as our target assets," the filing states. 

New York-based Cerberus plans to raise $150 million in its IPO. 

"We expect to use borrowings as part of our strategy," the filing states. "We intend to purchase RMBS throughout the capital structure, including not only the highest rated AAA/Aaa securities but also securities rated below investment grade or unrated securities."

This is good news.  When private parties are willing to enter the market, it means that fundamentals make sense.  Although it will take a lot more than one company to put a big dent in the market, this is a move in the right direction and an indication that the mortgage market can and will right itself.
 

FOR SALE: East Bench Bargain Short Sale

I recently listed this home at 1545 26th Street in Ogden.  It is 3 Beds 1 Bath with a 1 car garage.  The home was constructed in 1916 in the Craftsman style and has a sizable 2300 SQFT floorplan with possible expansion in the basement.

We have priced this home aggressively as a short sale.  CONTACT ME for current pricing and to view the property.  The new buyer will need to plan on installing a new lateral sewer line.  It has failed and needs replacement.

COMING SOON: New Dee Elementary School

I attended a recent Ogden City council meeting to speak in favor of the proposed new Dee Elementary School project.  The School District has had Dee in line for replacement for several years and finally has the financial resources in place to start the project.  To maximize the school's positive impact in the neighborhood, it will be relocated to the eastern half of the 600 block between 21st and 22nd Streets.  I have highlighted that area here:

The school will utilize the Liberty Park area much like St. Joseph's Elementary has done for Monroe Park at 28th and Quincy Ave.  It is a win-win scenario for the city and the School District to make use of the city park in a synergistic way.  Land will be procured by the District this next year with construction following the year afterward.

The current school needs to be demolished.  It represents a weird period in school architecture experimentation.  As you can tell from the picture at the top, it yielded a building that looks like a prison.  The floorplan isn't any better.  It is one giant open space with no walls separating class"rooms".  The recent performance increases at the school are in spite of its design, not because of it.     

This will also make a huge impact in the quality of life in the neighborhood.  The old Dee School will be demolished to make room for historic style infill housing.

Here is video of the event with more details.  My comments are around 1:04:00: