27 July 2011


Story first appeared on WSJ.com.
Declining home prices are starting to slam California harder than the rest of the nation, in part due to a state law that sets a ceiling—but no floor—on property taxes.
The toll is evident here in Calaveras County, a largely rural area about 100 miles east of San Francisco. Over the past three years, it has seen among the biggest property-tax roll declines of any California county, with the total value of taxable properties down about 5% from last year—and 18% over the past three years—to $5.67 billion. Statewide, assessed values declined 1.8% last year from a year earlier, according to state data.
Calaveras's shrinking property taxes have resulted in cuts to the sheriff's department and public-health services, as well as an effort to cut 10% of the county's budget for the coming year. The tax drop also has pitted the county assessor, who has lowered taxes by re-evaluating home prices, against the head of the county board of supervisors, who said the reassessments have been too aggressive.
Calaveras's situation shines a spotlight on the unintended consequences of California's property-tax law. While many counties nationwide have offset property-tax declines by raising tax rates, a 1978 California law dubbed Proposition 13 prohibits that practice in the Golden State. The law caps property taxes at about 1% of a home's value and forbids major tax increases unless a home is sold or rebuilt, though it permits taxes to go down if a home's value drops.
As a result, while local governments in Washington, Maine, Hawaii and elsewhere recently raised property-tax rates to compensate for home-value declines, California doesn't have that option. It can take years for a California county to recover from a short-term decline in property-tax revenue, because tax revenue doesn't go up until home prices rise and many properties are sold.
Nationwide, property taxes make up about 45% of local-government revenue. They have become a pivotal source of funding for local governments as other revenue sources dried up.
President of the Center for Governmental Studies, a nonprofit and nonpartisan think tank in Los Angeles, said there were pros and cons with Prop 13. While the measure has succeeded in its goal of protecting senior citizens on fixed incomes from big tax increases due to rising real-estate values, he said, people didn't expect California property prices would drop for a long period, and therefore didn't foresee the problems in counties suffering from declining property values.
Counties across the state are now grappling with Prop 13's fallout. Central California's Stanislaus County saw its property-tax roll—the cumulative value of assessed properties—fall 4.7% this year and 21% over the past four years. It levied $447 million in property taxes last year, down 11.6% from two years earlier.
In San Diego County, property-tax levies in 2010 fell by more than $100 million to $3.96 billion—the first year-over-year decline in more than a decade.
In Calaveras, declining property values and property taxes have put Leslie Davis in the hot seat. Since being elected the county's tax assessor last year, she has been fielding calls from residents who said their taxes were too high because their homes were assessed at prebust values.
Under state law, assessors are supposed to re-evaluate homes to make sure they are being taxed at a fair rate. So Ms. Davis sent employees to re-evaluate home prices, which generally had gone down.
That caused consternation among other officials, who were struggling with state budget cuts and a county unemployment rate of more than 15%.
The county's board of supervisors, led by Mr. Tryon, said it will have to cut services such as sheriff patrols.
He has criticized Ms. Davis's reassessments, saying they are too aggressive. He added that all we live on in this county is basically property tax. He commented that assessors have a lot of discretion, and Ms. Davis has used hers in a way that's devastated the county.
Ms. Davis said she is just doing her job, because the law requires her to reassess.

26 July 2011


Story first appeared in USA TODAY.
Home sales slipped in June to the lowest in seven months as the U.S. housing market struggles to find traction.
Sales of existing homes, including single-family homes, condominiums and townhouses, dropped 0.8% in June from May and 8.8% below June last year, when sales were boosted by federal tax credits.
The results were worse than forecast, underscoring that a variety of factors are weighing on the market, including the recent deterioration in the pace of the U.S. economic recovery.
In June, 16% of Realtors said they had home sale contracts canceled, up from 4% in May. The reason for so many cancellations remains a mystery, says an economist. But he says that tight credit conditions and low appraisals — both of which can kill home sale deals — are prime culprits. Concerns about Washington's standoff over the federal debt ceiling may also be causing hesitation among some consumers and lenders.
Despite the slowdown in sales in June, the median price edged up to $184,300. That's up 0.8% from a year earlier. Median prices fell in the South and Midwest, but rose 3.1% year over year in the Northeast and 9.5% in the West.
Those increases may have more to do with the mix of homes selling than with any sustained rebound in prices, Newport says.
Median prices rise if higher-priced home sales make up more of the sales. That may be occurring if those buyers are locking in deals to get the best mortgage rates.
As of October, the size of loans that government-backed mortgage giants Freddie Mac and Fannie Mae can buy from lenders is expected to drop in many higher-priced regions. That may make bigger loans more expensive and harder to get.
The coming change is already affecting some sales contracts, the NAR says. Some lenders are enforcing the lower loan limits now, anticipating that deals may not close before Oct. 1, the association says.
Most U.S. economists expect home prices, down 30% from their 2006 peak, to continue to fall this year and perhaps next.


Story first appeared in USA TODAY.
Wells Fargo has issued a statement on its website indicating that it will reinforce oversight of mortgage lending practices and also move toward providing compensation to customers who were harmed by alleged mortgage abuses.
Chairman and CEO John Stumpf says in the statement that the alleged actions committed by a relatively small group of team members are not what they stand for at Wells Fargo. He added that fair and responsible lending practices have been at the core of their culture, and they will continue to guide them as they work closely with the Federal Reserve to provide restitution to customers who may have been harmed, and to reinforce their internal controls so they further reflect Wells Fargo's commitment to helping customers succeed financially.
Wells Fargo also points out in the statement that the agreement does not include an admission to committing the allegations, and indicates that before the agreement, it voluntarily provided restitution to about 600 customers in the form of cash refunds, reduced interest rates and other compensation.
Earlier Post:
To settle civil charges, Wells Fargo will pay an $85 million fine and compensate borrowers for allegedly falsifying loan documents and steering some borrowers to higher-interest subprime mortgages.
In its news release, the Federal Reserve says it is the largest consumer-enforcement fine the agency has imposed and the first formal enforcement action taken by a federal bank regulatory agency to address alleged steering of borrowers into high-cost, subprime loans.
Wells Fargo Financial, a former non-bank subsidiary, made subprime loans that primarily refinanced existing home mortgages in which borrowers received additional money from the loan proceeds in so-called cash-out refinancing loans, the Fed said.
Sales agents allegedly steered borrowers who were potentially eligible for prime interest rate loans into loans at higher, subprime interest rates, resulting in greater costs to borrowers. The Fed's order also addresses separate allegations that Wells Fargo Financial sales personnel falsified information about borrowers' incomes to make it appear that the borrowers qualified for loans when they would not have qualified based on their actual incomes.
The Fed says the tactics were linked to the company's incentive compensation and sales quota programs and the lack of adequate controls to manage the risks resulting from these programs.
In addition, 16 former Wells Fargo Financial sales personnel are barred from working in the banking industry.
The Fed is requiring the bank to improve oversight of its anti-fraud and compliance programs and incentive compensation and performance management policies for personnel who sell and underwrite home mortgage loans.
As usual in such settlements, the bank did not admit any wrongdoing.
Tuesday, Wells Fargo reported record second-quarter net income of $3.9 billion.
In another big mortgage-abuse announcement, the Federal Trade Commission said today that 450,177 homeowners who took out loans with Countrywide Financial Corp. will begin receiving their share of a $108 million settlement over claims the lender charged excessive fees to borrowers facing foreclosure, the Associated Press says. Checks will be mailed Thursday.
Bank of America Corp. acquired Countrywide in 2008.
AP writes that the FTC also accused Countrywide of making false claims to some borrowers about how much they owed on their mortgage or the status of their loan, and claimed the lender added fees and other charges to borrowers' mortgage accounts without notice.
The FTC says the refunds are going to borrowers whose loans were serviced by Countrywide between January 1, 2005, and July 1, 2008, and who were subject to the company's allegedly unlawful practices.

21 July 2011

Zillow Stock Soars

Investors set aside housing market doldrums and rushed to grab shares of real estate website Zillow on Wednesday, valuing the company at as much as $1.6 billion.
Zillow Inc., which has never made a profit, is yet another beneficiary of strong investor demand for the latest crop of Internet stocks. Many of the recent market debutantes provide social networking, online games or search. Zillow's shares tripled in their trading debut on the Nasdaq stock market. Zillow had set a price of $20 for its stock late Tuesday. The shares rose as high as $60 before settling back to close at to $35.77, valuing the Seattle-based company at about $950 million.
The weak housing market did not hurt Zillow's IPO. Figures released Wednesday show that Americans are buying homes at the weakest pace in 14 years.
Zillow's initial public offering follows filings by high-profile Internet companies ranging from daily deals site Groupon Inc., the professional networking service LinkedIn Corp., along with Zynga Inc. best known for the online game "FarmVille." Though these Internet-based companies are generating a lot of IPO euphoria, but the attention they receive on their initial day of trading has not guaranteed success. Pandora Inc., the online radio service, has seen it shares fluctuate wildly since going public on June 14. Pandora's shares are now trading at $17.60, 10 percent above their offer price.
Founded in 2004, Zillow provides online listings for more than 100 million homes that are either for sale or for rent. A feature called "Zestimate" helps estimate property values, so that people can see how much homes in their neighborhood or desired neighborhood- are worth.
The Zestimate has drawn criticism from homeowners across the country who suddenly had the value of their homes - as well as what they bought it for - easily accessible by anyone with an Internet connection. Zillow calculates the figure by taking available data, most of it public, and entering it into a formula that takes into account hundreds of such details as how many bathrooms or bedrooms a home has or where it is located. The site also offers personalized mortgage rates and housing advice. The company has never made a profit, though it grew its revenue 74 percent in 2010, to $30.5 million.
Zillow makes money from advertising, by real estate professionals as well as mortgage companies and brands such as phone or insurance companies. Spencer Rascoff, Zillow's 35-year-old CEO, said the volatile housing market has actually helped the company grow its ad revenue. That's because it accelerated companies' migration to online advertising from higher-priced offline ads in newspapers and elsewhere.
In the first quarter of this year, Zillow's loss narrowed to $826,000 from $2.8 million in the same period a year earlier and revenue doubled to $11.3 million. The company reported a loss of $6.8 million last year.
Though investors are betting on yet-unprofitable companies such as Zillow, experts say the current fever for Web stocks is hardly the bubble of the late 1990s and early 2000s. There are far fewer companies going public, and the ones that do have been around longer and have established business models. That wasn't always the case in the '90s. Back then, investors didn't even look at the companies they were snapping up, and only asked "how many shares can I get?". Investors are being more careful these days.
Whether the company's business model warrants the billion-dollar valuation is another question.
Including a private stock sale of 275,000 shares, Zillow raised $74.7 million in the IPO. That the company offered relatively few shares is another likely reason for its strong market debut.
Also on Wednesday, SkullCandy Inc., the maker of trendy headphones for iPhones and other gadgets, also went public. The company priced its shares at $20. Wednesday afternoon, the stock was trading slightly higher at $20.12 after earlier hitting $23.40.

12 July 2011


It's second nature for many consumers to research any big-ticket purchase online before they pony up their hard-earned money. So why should buying a house be any different?
Well, it's not. Online real estate listings have been common for years, but now an array of search tools and smartphone apps let buyers tap into a wealth of information on the fly.
Some brokers are using quick response codes — or QR codes — on their "For Sale" signs and flyers. QR codes are the small square versions of a bar code that look like ink blots and they're popping up more frequently in newspaper ads and other locations. Scan the code with a smartphone loaded with a QR app and it takes you directly to a website with photos, additional details and in some cases videos.
Real estate company Coldwell Banker has in the past two years encouraged agents to use video cameras to record home tours and clips of themselves offering advice.
The company has its own channel on YouTube and says it has about 70,000 videos posted. About 3 million views have been logged since the site was launched two years ago.
Videos are better than the traditional slide show because, for example, buyers can get a better sense of how the dining room flows into the living room. Video can also help provide context on where the home is in relationship to neighbors and show sights and sounds around the home. For example, the video of a beachfront home can show how close it is to the beach and demonstrate if the sound of the surf and seagulls can be heard from the deck.
Some agents have attached a camera to the dash or rearview mirror of their car and give viewers virtual tours and buying tips while driving around.
Video tours are expected to only grow in popularity as devices like the iPad make them much easier to watch and wireless providers offer higher speed connections.
Many other smartphone applications are available, too.
For example, Trulia.com has mobile apps for the iPhone and iPad and Android-powered phones. One enables users to see prices in a city or county using color-coded maps. It also shows neighborhood details including restaurant and grocery store locations.
Another Trulia app shows open houses and adds them to your calendar, has a QR code reader, and a voice search feature allowing the user to say the location and number of bedrooms and bathrooms to navigate to a home.
Zillow.com, offers free apps for the iPhone and Android smartphones with detailed home data including those for sale and rent, updated mortgage rates, and calculators.


The home next door is in foreclosure. The neighbors down the street just put their house up for sale at a ridiculous discount. And "For Sale" signs litter lawns all over town.
Welcome to the toughest selling conditions in years.
The bright side of selling a home in a down market is you get to seek your own bargain if you're going to buy after you're done. Closing a sale, however, can be teeth-grindingly slow if you don't do everything right — and maybe even if you do.
It's probably the worst time you could find to sell a house since the late '70s or early '80s.
Sales of previously occupied homes continue to sag after hitting a 13-year low last year.
Realtors sometimes are taken off guard at the perceived randomness of it all.
A house that's in a good location, fully updated and seems perfectly priced might sit on the market without a nibble.
One homeowner is leaving nothing to chance in selling her four-bedroom colonial in Norwalk, Conn. She has taken every action she could think of to get an offer for the house she and her ex-husband bought 17 years ago.
She researched and interviewed four brokers before hiring one, made a YouTube video showcasing the house, and created a hardcover book of comments and photos of the house in all four seasons to display for open house visitors. She used Facebook and word of mouth to advertise, and marketed on close to a dozen websites. And she priced her house competitively with the broker's guidance after studying the comps herself. The initial listing of $683,000 in late April was far less than the $850,000 she had sought in a failed attempt to sell near the height of the market in 2004.She even brought in a shaman to cleanse the house of any negative vibes, figuring it couldn't hurt. Lowering the price can be a home seller's most painful move. It was for this homeowner, who reluctantly dropped her asking price 5% to $649,230 after eight weeks.
If you really want to move your house in this kind of a market, you have to do everything. It's a lot of effort, but people shouldn't leave it all in the hands of their broker.
Unfortunately, all that work still doesn't guarantee a sale, particularly when many buyers feel little urgency to act and assume they will get a better deal by waiting.
Selling is really emotional for many because they have put a lot into their house.
The best tips for selling underscore how the market has changed:
Even if you're fully aware that prices have plummeted, it can come as a shock when a real estate agent advises you to slap a low-low price on your home.
The reality is that only 4% to 10% of homes on the market nationwide sell in a given month right now. A typical selling time for a home the last two years has been eight to 10 weeks. But that timeframe makes selling sound easier than it is, because it doesn't factor in all the homes that never sold, or were pulled off the market and later relisted. With that in mind, you need to ask for at least 1% less than competing homes.
Holding out for a higher price generally doesn't work well in this market, either. Among homes that took at least four months to sell, nearly half the owners accepted less than 90% of their asking price, many far less.
Days on the market can be a helpful statistic. Available through most multiple listing services, it shows the average time it takes to sell a home. The specific sales data can provide valuable insight. When reviewing comparable homes it will become clear which list prices led to fast sales and which were set too high and prolonged the sale.
But don't focus on the overall average for a specific location. This can be misleading because it accounts only for homes that sold. Also, homes that were pulled off the market and relisted start the clock back at zero.
Sellers often like to look at the ratio of list price to sales price. Your local ratio gives an idea of the latest price trend and indicates how much a typical seller came down from the list price.
Be wary of using that to justify refusing to lower your price, however. For example, homes sold across the country in April went for an average of 96% of their list price. But it, too, does not reflect all the homes that failed to sell that month — by far the majority.
You may not be able to compete with the price of homes in foreclosure, or with short sales — those in which a lender is allowing the seller to list for less than is owed on the mortgage. But you can outshine them when it comes to the condition and appearance of your house.
Staging is no longer optional. It's like a boot camp that the seller and listing agent go through together.It can be an intense period of planting flowers, painting and depersonalizing the house so buyers can envision themselves living there. Getting rid of clutter and rearranging rooms to highlight the best features also are essential.
What's new this year is that many sellers are willing to go beyond the basics of staging to make physical upgrades. They’ll do whatever it takes to look better than the house down the street now.
One homeowner this year hired a contractor to turn a three-bedroom, one-bathroom home into a four-bedroom, two-bath. The month-long, $15,000 renovation paid big dividends: The house sold for at least $50,000 more than it was expected to otherwise.
After learning a valuable lesson about today's persnickety buyer, one homeowner went the extra mile in renovating the kitchen of his house in N.Y. Recognizing that their '70s-era kitchen looked dated, he and his wife first spent $2,000 on stainless steel appliances before putting the three-bedroom home on the market in April for $399,000.
After 15 showings, he says, they realized that nobody could get past the fact that a project was waiting for them in the kitchen. So they pulled the house off the market for two weeks while he installed a new floor, ceiling, cabinets and granite countertops. Then they put it back on the market in late June at the same price. They hope to justify the additional $10,000 investment with a quick sale.
Sellers used to post photos of their homes online only sparingly to entice buyers to visit. No longer. With about 90% of buyers starting their search online, you can't just tease and hope.
That whole strategy is thrown out the window, because all listings are online and there are so many that you have to compete for people's attention.
Agents recommend putting lots of high-resolution photos and as much information as possible online, including citing upgrades and what you love about living in the home. If you don't show a photo of a key area — kitchen, bathrooms, backyard — prospective buyers may assume there's something wrong and move on.
It's important to remember that buyers are going mobile, too. The use of smartphones and apps to review listings has exploded.
Nearly 1.8 million homes are viewed daily on Zillow's apps alone, and the service says 30% of its weekend traffic and 20% overall come from mobile devices.
So, make sure your listing agent markets your home in as many places as possible — from AOL Real Estate to Zillow — with a special emphasis on sites that work well for mobile access.
The single biggest change in the real estate market since the recession is tighter financing. Banks once freely dispensed loans for 95% of a home's value, but a requirement of 20% down is becoming the new normal in many cases. And any perceived imperfection in a credit record can spell denial.
If you're about to accept an offer, make sure you inquire about the down payment and are informed about the buyer's financing status. Consider accepting an all-cash offer, even if it's not your highest. If your buyer is hitting a roadblock, consider talking with the lender to help structure a deal.
Don't be afraid to speak directly to the prospective buyers. If they say they're leery about committing to a home in this environment, you can help make the case. Be ready to show them any recent local statistics indicating that owning is better financially than renting, as is the case in many areas. And if you don't accept an initial offer, share information to encourage a counteroffer and be ready to bridge the gap to close the sale.
The fallback for many homeowners who can't sell is to rent the property. But it's a strategy that carries risk. With so many foreclosed and underwater houses on the market, there's at least a 50-50 chance that any given house will be worth less in a year than it is now.
Not only that, you may be planning to move out of town, so renting would entail being a long-distance landlord. Homeowners may need to take a deep breath and treat their house as a sunk cost — money that has been spent and cannot be recovered. The house today is worth what it's worth.
Accepting that advice may bring perspective and help you sell in the worst market in years.

07 July 2011


If you find a home on the market that has the right look, amenities and price, you're still only halfway there.
That's because a neighborhood is often as big a consideration as the house itself. Before you buy, you need to know if it's safe. Are the schools nearby any good? Are there parks, shopping centers or public transportation within walking distance?
Fortunately, there are more than a few websites that can help answer these questions and more.
What makes a neighborhood livable is entirely subjective. It depends on the lifestyle you're seeking. But, crime is one concern just about everyone shares.
As a test, a selected neighborhood in Los Angeles called Los Feliz, which is about 5 miles from downtown, was ran through PolicyMap.com, NeighborhoodScout.com, CriminalSearches.com and newcomer Trulia.com, which recently launched its Crime Maps feature.
Overall, Trulia's approach was the most compelling. The site's maps allow you to visualize where -and to what degree- crime may be happening, down to the street level. The service is free, unlike NeighborhoodScout, which requires a paid subscription to access neighborhood-level crime stats. Those plans run between $39.99 a month and six payments of $19.99 for a half-year subscription.
Trulia uses data from the FBI and local law enforcement agencies on reported crimes, such as burglaries, assaults, shootings and vandalism. It then illustrates the concentration of crimes per block over a 12-month period on a color-coded map. The site also shows any individual crimes that have been reported within a span of just over a week, although the incidents represented a snapshot that was more than a month old.
At present, Trulia only has crime maps for 50 U.S. counties, Los Angeles being one of them.
One drawback is that the site doesn't let you search by address or ZIP code, which means you have to know where to look on the map to find the neighborhood you're interested in. It's easy to see how this would be a hassle for anyone planning to move to an unfamiliar city.
The company says it plans to add a better search function, along with the ability to view the crime data across a wider time frame.
Trulia also lets users comment on the incidents of reported crime to add the perspective of residents in the area. The idea is for residents to provide context that might get lost in a trove of crime report figures. For example, in some neighborhoods, a concentration of alcohol-related arrests may be due to there being several night clubs on a given block, and not necessarily indicative of an area being unsafe.
The visual feel of Trulia's Crime Maps is likable. And seeing a square block area cast in crime-riddled red makes it easy enough to avoid.
Similarly sobering is CriminalSearches' Neighborhood Watch section, which lets users enter a ZIP code or address and whips up a street map dotted with locations for registered sex offenders. The site also provides details about the individuals, including their full name, last known address and what type of crime they committed.
The portal also collects data from traffic and other minor offenses, and warns not all of the people listed may actually be criminals.
Another factor that can make or break someone's view of a neighborhood is the strength of its schools
Several websites offer an assortment of school and neighborhood data. Their school profiles are generally assembled by mining public school and demographic data. As a result, details on private schools are harder to come by.

Five sites were tried: Zillow.com, GreatSchools.com, NeighborhoodScout, SchoolMatters.com and Education.com. Although they all hit on major data points, such as test scores and teacher-to-student ratios, Zillow was better at placing the school results in the context of a home buying decision.
Zillow lets users search a map for neighborhoods and shows where schools are located. The real estate site also lists school profiles from the National Center for Education Statistics and Education.com.
Users can find testing data, teacher information and a demographic overview of the school's student population.
GreatSchools was the best. It also provides details on spending per student, teacher experience and extracurricular programs.
The site grades schools on a five-star system derived, in part, by comparing scores on state standardized tests. And it features parent feedback and online forums, where visitors can pose questions and discuss their concerns.
Many look for neighborhoods where you can get to a restaurant, bar or the drugstore and supermarket without having to drive - what is known as the walkability factor.
It's easy to dial up the location of nearby restaurants on real estate and mapping websites, as well as many smartphone apps. But Walkscore.com takes a different approach, using an algorithm that promises to determine a property's overall walkability.
The site's formula discerns how close a home is to retail shops, public transportation and other conveniences. It then generates a walkability score between 0-100. The higher the score, the more likely the property is within a walking distance of neighborhood businesses.
Homes that score 70 or above represent a very walkable neighborhood. Many properties in dense urban metros, like Manhattan, score very high. The more walkable the particular neighborhood, the higher the score. For instance, the Upper West Side scores a perfect 100.
Los Feliz comes in at a respectable 78.
For those in need of a comprehensive, dossier-like report on a neighborhood, there's little you can't find on PolicyMap.
The site pulls together U.S. Census data, which is particularly useful in sizing up population traits such as age, ethnicity, education level and even voting patterns.
The site is free, but offers subscription plans for expanded information. Sign up for the week-long free trial and you can get a report on the neighborhood, or even state, surrounding a specific address.