Monday, November 30, 2015

8 More reasons why we're absolutely not looking at another real estate crash

It may seem like just yesterday that we were in the midst of the dark days of the real estate market with little reason for hope, but things are looking downright rosy now. While it’s true that these cycles usually go through 7-10 year trends, we’re here to tell you with 100% certainty that we’re not looking at another real estate crash like in the mid 2000s.

In part one of this blog we spelled out the first five reasons why we’re absolutely not looking at another impending real estate crash.

Here are reasons five through seven:

6. The Millenials are coming as first time buyers
The demographics of homebuyers will change dramatically in the next years and decade, but it’s not just the Baby Boomer selling, retiring, downsizing, and facing new needs that will change the face of real estate. In fact, there are about 80 million Millenials – those aged 18-34 who will make a significant impact on housing. So far, they have been reluctant to buy, perhaps jaded by what happened to their parents during the Great Recession and, more likely, saddled with unprecedented levels of student loan debt. But as time goes on, their jobs will stabilize, incomes increase, and the black hole of rent payments will swing them to home ownership en masse.

7. Housing affordability is solid – and a realistic goal
Not only are interest rates still hovering at very enviable levels, but also banks are lending money again. The strength of loans sponsored by the Federal Housing Administration still allow borrowers to put far less than 20 percent down for a home. Additionally, the FHA reduced its annual mortgage insurance premiums by up to $900 per year, a smart chess move that will most likely spur first time and younger buyers. The National Association of Realtors predicts the dropping of FHA premiums alone will increase sales by up to 5.6 million homes and lure 140,00 new buyers into the market – a diversification that points to cash, not crash.

8. New-home construction remains low
We’ve come a long way, baby, but the levels of single-family new home starts still remain 60 percent below where they stood at the peak of the market in 2006. Those numbers aren’t just anomalies – our current new home inventory is also about 25% less than the average for the last 15 years. Add to that the fact that the supply of existing home sales is lower than it was in 2000 despite a 14 percent increase in population and you have a heavy indication of demand without over-supply.

9. Our banking system is recapitalized, re-regulated, and reloaded
The circus of bank affairs before the mortgage meltdown and financial crash fired most of it clowns and started over. These days, banks are on a much tighter leash, no longer allowed to rapidly grow their balance sheets and make risky bets with borrowed money. A key indicator of the new and improved of the banking system is the fact that credit losses are running at generational lows and U.S. banks are enjoying unprecedented liquidity. If the banking industry hasn’t learned their lesson then the people watching them has, and we won’t see reckless and wanton abuse of the system that facilitated the house of cards collapse again.

10. Savings down, debt up
At the peak of the real estate bubble, the American personal savings rate fell to an all-time low of 1.9%. Those numbers were equally as bleak after the bubble burst and into the financial crisis in the late-2000s. But now, our savings rate has more than doubled to a rate of 4.8%.

While this is still small potatoes compared to the average national savings rates in through past decades and then 10% financial advisors suggest, more personal savings means more money for down payments, mortgage instead of rent, and paying down debt – all key elements of home ownership.

11. Stocks may be in for a bumpy ride
The stock market and real estate market are usually like two trains running on opposite tracks – when one is speeding ahead full throttle, the other is chugging along in the opposite direction. Right now, there are signs of some volatility and over valuation in the stock market, with near record-high corporate profit margins and a slow down in earnings growth something to keep our eye on, as well as the threat of trouble in foreign markets like Europe and China sending shock waves through stocks.  In fact, the S&P 500 has now retraced about 17 percent of its gain since the Great Recession trough of March 2009. All of that is good news for bonds, mortgage rates, and the real estate market – a train that looks to keep its momentum and not be derailed.

12. Our economy has stabilized
Overall, we don’t have much to indicate any sort of crash or volatility to come. The economy is growing at 2 to 2.5 percent per year, jobs numbers are up, debt is down, fuel and energy costs are low, housing affordability is up, and interest rates are still low, with the Fed expected to start a gradual increase of rates to temper inflation. Like we said, there will always be ebbs and flows to the real estate market just like any market or our overall economy, but looking ahead they appear to be gentle hills, not sharp cliffs.  

Bonus: How sound is our real estate market in Sacramento?

Certainly the economic and market factors we just outlined still apply in Sacramento, with some even more pronounced. Right now, the Sacramento region has one of the lowest new construction rates in the country, which is putting huge upwards pressure on rents. Homes have risen in value over the last five years but are still within realistic ranges compared to other areas and options in California. Furthermore, the new down town arena project is likely to boost the economy in coming years – or at least invigorate it enough where a real estate crash is highly unlikely.

Thursday, November 26, 2015

Don’t Look Down – the 10 Tallest Buildings in the World.

1. Location: Burj Khalifa
Location: Dubai, United Arab Emirates
Height: 2,717 feet
Completion Date: 2010

Like a needle pointing into the stratosphere, the tallest building in the world reaches an astounding 77 feet higher than half a mile! To put that in perspective, it’s the equivalent of 7.5 football fields standing on top of each other.

The designer, Adrian Smith, planned its construction with a revolutionary A tripedal design with sharp edges that cut into the wind, an aerodynamic marvel needed to reduce the strong wind turbulence at that altitude. The Burj Khalifa stands a decided 700 feet above its closest competitor. Having the tallest building in the world is definitely a proud and well-earned accomplishment.

"It's a recognition that they want to project their image out into the global scene," says Daniel Safarik of the Council on Tall Buildings and Urban Habitat (CTBUH). "One easy way physically to do that, in a relative sense, is with a skyscraper."

But Adrian Smith isn’t resting on his laurels, already at work constructing the Kingdom Tower in Saudia Arabia that will stand 3,281 feet high, set to open in 2017.

2. Makkah Royal Clock Tower Hotel
Location: Mecca, Saudi Arabia
Height: 1,972 feet
Completion Date: 2012

The Makkah Royal Clock Tower Hotel was constructed to replicate Big Ben, but sits far from London, England. In fact, the Makkah is in Mecca, Saudia Arabia, the second most holy place in the Islamic religion and home to millions of Muslims who travel there every year.  Instead of the sleek, aerodynamic needle-like architecture of the Burj Khalifah, the Makkah Royal Clock Tower is built on a wide foundation with multiple block construction.

3. One World Trade Center
Location: New York City, United States
Height: 1,776 feet
Completion Date: 2014

The first U.S. building on the list of tallest in the world, the spire of One World Trade Center reaches the exact height of 1,776 feet above the ground, a tribute to the year of our independence. There is controversy, however, as critics say the height of the building – and not an antenna, spire, or other uninhabitable space – should be calculated for the height. Only counting the building, One WTC still reaches 1,300 feet – not as tall as the Willis Tower in Chicago. But no matter which side of the debate you lean, One WTC is a marvel of modern design.

4. Taipei 101
Location: Taipei, Taiwan
Height: 1,667 feet
Completion Date: 2004

The construction of Taipei 101 is definitely noticeable – and vastly different than any other of the world’s tallest buildings. The designer planned it with the same rooflines as pagodas (temples), with eight segments of eight floors each, as eight is a significant number for good luck (representing infinity or abundance) in Chinese and Asian cultures.

5. Shanghai World Financial Center
Location: Shanghai, China
Height: 1,614 feet
Completion Date: 2008

The Shanghai World Financial Center is unique because of its open rectangular empty space “carved” into the middle of the top of the building, exposing open sky. While there is no doubt it’s quite an architectural feat, the building is also the butt of jokes that say it looks like a giant bottle opener. Unfortunately, that joke is perpetuated in the building, itself, which sells actual bottle opener replicas in the gift shop.
6. International Commerce Centre
Location: Hong Kong, China
Height: 1,588 feet
Completion Date: 2010

International Commerce Center is a mixed-use office and hotel building that was opened in 2010 and doing very well commercially, despite the fact that it’s a good bit away from Hong Kong’s downtown. However, the ICC isn’t as popular as it probably could be, as some say the design looks like a giant tin can robot, and plans to make it the tallest building in the world were thwarted by a local ordinance that mandated construction of any structure couldn’t be higher than the nearby mountains.

7. Petronas Towers 1 and 2
Location: Kuala Lumpur, Malaysia
Height: 1,483 feet, each
Completion Date: 1998

The world’s tallest building for a period in the late 1990s, the Petronas Towers in Malaysia is truly an iconic project with its two-story sky bridge that connects the parallel flowers all the way up on the 41st and 42nd floors. Not only does it serve a structural purpose by anchoring the tall buildings midway up but it sets an idyllic view of the future of mega structures, as tall buildings are expected to be connected with walkways and bridges in the clouds in future decades.

8. Zifeng Tower
Location: Nanjing, China
Height: 1,476 feet
Completion Date: 2010

The Zifeng Tower was built by the same Adrian Smith, along with Gordon Gill Architecture, that built the world’s tallest building, the Burj Khalifa. This Chinese structure was designed to mimic the look of a dragon wrapping around the building.

9. Willis Tower
Location: Chicago, United States
Height: 1,451 feet
Completion Date: 1974

Finally, another U.S. building is on the list with the Willis Tower, formerly known as the Sears Tower. It has gigantic block-like bottom flower for a very rectangular, industrial look that typified construction in the 1970s. The Willis Tower is on the losing side of the debate of whether it or World Trade Center One is the tallest in America, since the spire on WTC One counts toward the height but the radio towers on top of the Willis do not.

10. The Kingkey
Location: Shenzhen, China
Height: 1,449 feet
Completion Date: 2011

The Kingkey, called the KK100, is a major player in the Shenzhen, a major manufacturing metropolis just north of Hong Kong. The building is known for its signature transparent glass upper section that is home to an impressive mall.

Other notables:

12. Trump International Hotel & Tower
Location: Chicago, United States
Height: 1,389 feet
Completion Date: 2009

21. Empire State Building
Location: New York City, United States
Height: 1,250 feet
Completion Date: 1931, and then known as the world’s tallest building for the next 40 years

Sunday, November 22, 2015

12 Reasons we’re absolutely not looking at another real estate crash.

Believe it or not, but the United States is rapidly approaching the 10-year anniversary of the 2006-2007 housing bubble that shook the foundations of the mortgage and real estate industry and let off rippled that led to the Great Recession. It may seem like just yesterday that we were in the midst of those dark days when there was little reason for hope or solace, but things are looking downright rosy now.

But a few financial analysts and media are crying wolf about the possibility of another impending crash in the real estate market. While it’s true that these cycles usually go through 7-10 year trends, remember that ups and downs in real estate values, interest rates, and the economy are completely normal, and it took a Titanic-like confluence of events for the last crash to occur. In large part, we’ve learned our lesson – and so have the banks, government regulators, and financial institutions that were asleep at the wheel – so we’re here to tell you with 100% certainty that we’re not looking at another real estate crash like in the mid 2000s.

Here are the first five reasons why we’re absolutely not looking at another real estate crash:

1. We’re back to responsible loans
Precipitating the mortgage meltdown and subsequent financial crash of the mid 2000s, a record number of homeowners opted for risky alternative loan products offered by the banks, hedging their bets against ever-rising equity. But the with interest-only, short-term ARMs, option ARMS, and subprime loans mostly out of the market these days, American homeowners are again opting for stable, safe, and conservative 30 or 15-year fixed low interest loans. The abundance of loan products that allowed people to easily access money from their equity has also tightened. Add it all up and we have millions of homeowners who are in position to succeed with their loans – not fail.

2. We have equity again
On the tail end of the Recession, interest rates were at historic lows, which in theory should have allowed the majority of homeowners to refinance into low fixed rate loans, saving them on their monthly payments and stabilizing their investments. But there was one important ingredient necessary for them to qualify for refinances: equity. But thanks to steady appreciation in most markets over the last five years, our average equity levels are about at Pre-Recession levels once again. When people have equity in their homes they have many more options - like refinancing, selling, etc. – and are far less likely to walk away, which means we won’t see the same flood of foreclosures and distressed sales again.

3. The Fed interest rate is low
The Fed has kept the rate tied to prime stable for a long time in order to spur the economy, but it’s everyone knows it’s just a matter of time (and Fed meetings) until they do start raising rates. That means mortgage rates will probably go up, too, but that’s actually a good thing for the economy in the long run, as it will signal we’ve reached a period of normalization and economic growth, and inflation fears will be contained. Look for interest rates to creep up gradually over the next year or eighteen months – but stay favorable.

4. Homeownership is near an all time low
Homeownership levels hit their highest point every at the end of 2004 at 69.2%. At the time, it was lauded as a great indicator of prosperity, but it turns out, that number was artificially inflated by a buying frenzy, no money down loans, subprime loan products, and risky loans that allowed buyers to get their keys – but often without a plan or stable finances. Homeownership rates have now dipped to 63.4%, which is the lowest since the mid 1960s. That means we don’t have an imbalance of homeowners compared to supply, and increased demand will probably even out those numbers over time near the U.S. 50-year average at 65.3%. More first time buyers - including a huge influx of Millenials who will be looking to buy in the coming years - means steady pressure on demand - and stabilization.

5. Foreclosures are way down
Foreclosures have fallen dramatically in the U.S. over the past five years, to only 1 in every 1,147 homes. In fact, a total of only 133,811 U.S. properties started the foreclosure process in the third quarter, down 14% from a year ago to the lowest level since 2005. That means the number of loans in foreclosures is 2.1 percent - the lowest level since 2007, according to the Mortgage Bankers Association. While there are a surprisingly high number of bank repossessions that are taking place, those numbers are padded by homeowners who lost their homes during the crash and the bank now finally taking them back – not due to the current real estate climate. The same is true of states with high repossession rates like Nevada, Florida, and California, which are feeling the affects of the bank’s glacier pace of processing zombie foreclosures – not because of new ones.

Look for part 2 of this blog, where we map out the next 7 reasons why we are absolutely not looking at another real estate crash. And email or contact The Alfano Group if you ever have questions or need help! 

Wednesday, November 18, 2015

10 Things home buyers and sellers should know about TRID.

If you’re buying or selling a home these days, you should be aware of TRID – a new sets of rules that are aimed at protecting homebuyers and adding more transparency to the lending process. In fact, T.R.I.D. (or TRID) stands for the TILA-RESPA Integrated Disclosure rule, and was enacted by the Consumer Finance Protection Bureau for all transactions after October 1, 2015 as part of the Dodd-Frank Wall Street Reform Act. 

While TRID endeavors to make mortgage lending more transparent and easier to understand, protecting consumers from rushed decisions, overly aggressive sales tactics, confusion and outright fraud, the addition of new procedures and a change in loan documents is often extending loan closings slightly. With informed, organized, and diligent buyers and sellers (as well as their Realtors), there usually isn’t a need to extend escrow or slow the closing.

Here are 10 things you should know about TRID:

1. TRID effectively amends the existing procedures for how loans are set up and fees disclosed to borrowers.

2. The biggest benefit of TRID to borrowers is the change in forms that allows them now to easily see the relevant details of their loan in one place. It used to be that the title company was responsible for forms like the Closing Disclosure, or HUD-1, but now the lender will be assigned that task.

3. But probably the most significant change brought on by TRID is that this new Closing Disclosure must be delivered to consumers three days prior to the loan’s closing. That’s designed to give homeowners a chance to thoroughly go over the document and all of the details of the loan.

4. So when it comes to signing at the closing table, instead of feeling rushed, overwhelmed, and sometimes even pressured to sign (and how could a person not feel those things with the enormity of mortgage and then real estate paperwork one has to sign in order to close on a house), they’ll now have all of the information they need well before the closing. That way they can ask questions, lobby for corrections, or just familiarize themselves with the documents they will be signing, long before they sit at the closing table with pen in hand.

5. This also grants all professional parties involved: title and escrow professionals, mortgage lenders, Realtors, etc. an opportunity to present mistake-free and well-reviewed documents.

6. Another big change that’s brought on with TRID is that its Closing Disclosure form must be provided to the consumer at least three business days before loan closing. The calendar used to calculate TRID’s 3-day period uses Monday–Saturday but excludes most major holidays.

7. Any important changes to the terms of the loan (like a prepayment penalty added, the loan product changes, the APR shifts because of fees, etc.) has to be reported in the Closing Disclosure, and could potentially create a new three business day waiting period as a way to protect consumers. 

8. Additionally, the format in which the client is provided and acknowledges receipt could further delay the closing. For instance, if the CD has to be mailed, there is a required additional 3 days period to pass a presumption of delivery by the postal service. 

9. The new Loan Estimate form basically combines the Good Faith Estimate (GFE) and the Truth in Lending Disclosure into one shorter form. That makes it easier for the consumer to check the key features of the loan as well as costs and risks right in the start of the mortgage process. Lenders have to provide a Loan Estimate form within three business days of applying for a loan, starting with the time they provide their name, income, Social Security number, property address, value estimate, and the mortgage loan amount they wish.

10. As you can see, TRID takes some of the burden from title companies and places it with lenders, who are now responsible for extra, time-sensitive document preparation. In the long run, we expect it to help both the industry as a whole and those who are taking out mortgage loans.

TRID will surely deliver huge benefits to consumers, but the cost of that increased security, clarity, and ease is that the loan process will take a little longer. That may have an impact on real estate transaction timelines, so real estate agents, sellers, and buyers all need to adjust their expectations, communicate effectively, and work as a team to close home buying transactions in a smooth and timely manner.

Sunday, November 15, 2015

100 Amazing Facts About Wine! (1-25)

Do you love wine? Chances are good that you do like a good glass of red or white at least every once and a while, as there are 893 million gallons of wine consumed in the U.S. every year, making us the largest wine consumer in the world. With some of the finest grapes and vineyards anywhere right in our own backyard in Northern California, it’s time we celebrate 100 amazing facts about wine. In this blog, we’ll cover facts 1-25, so stay tuned for the rest!

1.  There are certain things you should look for on every label of wine: the producer (the winery), the variety, the region and grape, the vintage year, and the alcohol content.

2.  It’s best to consume light wines, which usually have an alcohol content of 11-12%, within three days of opening the bottle. Stronger, darker wines can be drunk within 10 days of opening the bottle.

3.  Each wine has a specific recommended storing temperature. Darker red wines should be stored at 55 degrees Fahrenheit, lighter reds at 50 degrees Fahrenheit. White and sparkling wines should be stored around 45 degrees. Never should a wine be stored at room temperature (65 degrees or above) or in a standard fridge (40 degrees or below).

4.  Recommended serving temperature is different, with reds optimally served at 62-68 degrees and white wines between 49-55 degrees.

5.  For that reason, the household kitchen is usually the worst possible place to store wine. Cooking makes it too warm in there to safely store wine, and the kitchen refrigerator is way too cold to store chilled wines.

6.  “Aroma” is the smell of a young wine, while “bouquet” is the term to describe the smell of a more mature wine.

7.  Red wine becomes that color because the fermentation process brings out that color from the grape skins. However, white wins are not fermented with the skins, so they remain colorless or without red.

8.  The oldest bottle of wine ever discovered is almost 1,700 years old, dating back to 325 A.D. It was unearthed from a Roman sarcophagus in Speyer, Germany and is not on display at that town’s museum.

9.  California leads the U.S. in wine consumption, followed by New York and then Florida.

10.  The largest producers of wine in the world are France, Italy, Spain, and then California by itself – not bad considering Cali is only a single state!

11.  Grapes for wine production take up the most acres planted of any crop across the entire world. 

12.  The phenomenon of climate change around the globe is expected to alter the conditions of sunlight, soil, temperature, seasons, and moisture, etc., therefore dramatically changing the consistency of grapes and wine production in established regions, That means one day, we might not have wine made in Napa Valley or California, but Mexico or Canada may be hotbeds for wine production!  

13.  While it is common perception that the more a wine matures, the better it gets, that’s not always the case. In fact, the majority of wines produced are meant to be consumed within a couple years and won’t get any better with age. Only a small number are ok to drink after a decade.

14.  It’s been scientifically proven that wine has a stronger effect on women than it does on men, since women have less of a certain enzyme in the lining of their stomach that metabolizes alcohol.

15.  Growing one ton of grapes produces about 60 cases of wine, or 720 bottles. That means each bottle of wine contains the remnants of 2.8 pounds of grapes.

16.  The quality of grapes grown – and the wine they’ll produce – depends on many factors, like the type of soil, climate, moisture, the degree of the land’s slope, and exposure to sunlight. In combination, this is called the “terroir” of a vineyard, and it’s what makes each vineyard unique.

17.  The wine industry depends heavily on restaurant sales, as 55% of all bottles of wine sold are in restaurants, cafes, bars, and the like.

18.  New scientific and medical research has found that moderate wine consumption on a regular basis can reduce the risk of heart disease, Alzheimer’s disease, stroke, and gum disease.

19.  Red wine has a lot more antioxidant properties than white wines and contains resveratrol, both important for health benefits. (So drink red wine for your health!)

20.  European wines are named for the region where their grapes were grown and they were produced (like Bordeaux). However, non-European wines – including American wines  - are named after the varietal of grape they use, like Pinot Noir or Merlot, not the region they came from.

21.  For that reason, the word “champagne” is the name for a province in France, which means, “open country.

22.  Thanks to the Protected Designation of Origin (PDO) law, the European Union declared no sparkling wine can use the label “champagne” if it was produced outside of that region in France.

23.  Speaking of champagne, its invention is often mistakenly attributed to Dom Pierre Perignon, a Benedictine monk who lived from 1638 to 1715. In fact, Perignon did not invent champagne, though he did develop and popularize the sparkling wine, so much so that his namesake still lives on. Upon drinking champagne for the first time, history documents that the monk declared, “I am drinking stars.”

24.  A typical of dry red or white wine holds about 110 calories, though richer reds or sweeter wines contain more.

25.  The psychological term for an irrational fear or hatred of wines is “Oenophobia.”