Question:“My Realtor recommended that I start looking at properties and then after we have seen some various options, we would speak with a lender about financing. Is this the industry standard? And do you recommend the same-thing? In other words, at what point in the buying process should I speak with a lender about financing?”

Answer: These are great questions, and the most important questions I have been asked yet. 

Is this the industry standard? First off, there is no industry standard for when you should speak to a lender, but there is a common sense standard:)  which I will get into in a minute.

Do you recommend the same-thing?No I don’t! Now the common sense factor comes in to play.  How can you start looking at buying something if you don’t know how you will pay for it? if you can afford it? and what the best way to pay for it is?

At what point in the buying process should I speak with a lender?  My recommendation, is that you speak (and by speak, I mean have a consultation) with a lender 6 MONTHS ahead of the time you plan to start LOOKING at properties to purchase or plan on making your move.  6 months seems like a long time out, but it is necessary if you want to make sure you get the best possible interest rate and the lowest mortgage payment.  I have yet to have a client who wants to have a higher mortgage payment than they have to.

Getting your finances in order, to me, is the single most important part of the buying process and planning and preparation is the key to getting your finances in line.  If you have credit issues that need to be cleared up, whether they are from your own doing, from a mistake that was made by a company or from someone who stole your identity, it could very easily take that long to clear-up. 

Since your mortgage interest rate has a direct correlation to your credit scores (FICO scores), then the better your credit scores are the better your interest rate will be.  By speaking with the right lender 6 months ahead and allowing them to look at your credit, they can make sure you are in the best position possible and help you to work on your credit if necessary.

There is another reason to speak with a lender 6 months out. It is called mortgage planning.  I recommend making sure you have mapped out the proper loan program for your needs.  Speaking with a lender about your goals are important to make sure you choose the best loan for your needs.  How long are you going to hold the property? Do you need down payment assistance that you need to apply for?  What type of property are you going to purchase? What are your future plans? etc. 

The right lender will be able to save you thousands of dollars by making sure you choose the right program for your needs.  By looking at your goals 6 months ahead of time, the lender can make sure you will be able to qualify for that program.  Are there unique requirements or any changes that you need to make now to get you to qualify for that specific loan program when the time comes for you to purchase?

Want to make sure you save the most amount of money and don’t spend more each month than you absolutely have to?  This is the number one way, ahead of buying a home for an undervalued price.

I can put you in contact with great lenders that help with just these very situations. Call me and I can give you their phone #.

Here we go with another month of market stats to look at.  The Oahu market is very interesting at the present time.  With home prices falling around the country, it is amazing to see how well Oahu has held up.  We continue to see the same trend that has gone on since the begining of the year with the number of sales continuing to decrease, while the median sales prices hold firm.  I will also highlight a few items separate of the stats in this article that may be of interest to you.

….May housing statistics…… showed the continuing downward trend for sales on O`ahu. Dana Chandler, President the Board, said, “We continue to have a decline in buying demand for residential properties in the O`ahu housing market, but the median prices have been holding up remarkably well. The inventory of homes and condominiums available for sales has been rising and while this could lead to weaker prices, it hasn’t occurred yet. This continues to be a stable environment for both buyers and sellers.”

Here are several articles that relate to May’s stats:
Harvey Shapiro’s Summary
Housing Prices Stable But Sales Plummet (Honolulu Advertiser)
Home Prices Steady As Sales Drop (Honolulu Star Bulletin)

** The newspapers describe this month compared to the same month last year.  I will cover the year to date numbers from this year to last (Jan. 1, 2008 - May 31, 2008 vs Jan. 1 2007 - May 31, 2007) Looking at year to date numbers gives a much more accurate account of the market. 

View the Stats at May’s Market Stats.   You can also view all previous months stats and quarterly stats at THE Resource Center.

On page 3 of 20 we see the year to date sales info.  For SFH’s the number of property sales is down 24.5%, while the median sales price, year to date is $630,000, down .8% from the same time last year.  For condos, the number of sales is down 25.8%, while the median condo price is up 2.5% to $330,000.

On page 4 of 20 the graph shows the trend in the number of sales as we continue our trending decline in the number of sales.

The graph on page 6 of 20 shows the leveling or flattening out trend of sales prices.

On page 6 of 20 we see the median number of Days-On-Market (DOM) for both SFH’s and condos.  Both increased but are still at good levels, as SFH’s stay on the market for an average of 52 days before going into escrow and condos stay on the market an average of 41 days before going into escrow.

On page 14 of 20 we see that inventory increased for both SFH’s and condos.

On page 18 of 20 we see the months of inventory remaining for both SFH’s and condos. This means, if we didn’t bring any more properties on the market, how many months would it take to sell the existing properties for sale.  A balanced market is 6-7 months worth of inventory.  For SFH’s we have 8 months of inventory and for condos there is 7.1 months of inventory remaining.

On page 19 of 20 we see the months of invetory remaining breakdown based on area of the island, type of property, and price range.  The $1.0 million plus property price range, there is 17.5 months of inventory.  The next highest is 7.1 months of inventory for the $700-999,000 price range.  The North Shore and Windward Oahu top the charts for SFH’s months of inventory remaining.

In other news:

As seen on the Today Show, Honolulu was voted the Top City In The US To Raise A Family.

Have you ever wondered if investing in Oahu real estate is actually a better investment than other options?  I compared the historical info of buying a home on Oahu as an investment and compared it to two other investment options.  Check out the results.

Have you wondered when the housing troubles on the mainland will end?  The end may be in sight.

Talk about a creative way of selling your home.  Have you ever thought about raffling your home off?  Well….it is being done now!

It appears that the Fed’s rate cuts may be over for a while.  In fact, it has been rumored that the Fed may raise rates to combat the concern of inflation.  If inflation continues, long term mortgage rates may worsen.

current Fed interest rate policy “well positioned to promote moderate growth and price stability over time.” That language signals the central bank, increasingly worried about inflation, is done cutting rates for now. Bernanke noted that slower U.S. growth, and previous interest rate cuts, have reduced the value of the dollar against other currencies, increasing the potential for inflation.

That equity line of credit you have? You may want to try and lock that rate if you can.  If the Fed raises rates, it will effect the interest rates on shorter term loans, such as credit cards and equity lines.

This article I just read is a prime example of why you should choose your Realtor carefully.  On Oahu, 79% or Realtors did 4 or fewer transactions in 2007.  60% did 2 or fewer. 

That isn’t exactly classified as “Experienced” status.  I don’t know how much expert advice they could offer, especially in a complicated transaction.

Why do I say this?  Now, more than ever, many Realtors aren’t in the business full-time, meaning you may be getting part-time advice.  You are making a huge investment, make sure you choose the right help. 

Last year, the number of Realtors fell 1.5%, to 1.3 million. That number doesn’t reflect the likely thousands of part-timers who maintain ties to the business but earn a living from other jobs… Those in business two years or less earned just $10,000. The drop in membership, the association says, comes almost exclusively from newcomers to the profession.

On real estate-related Web sites such as ActiveRain.com, the chatter now is about brokers who can’t be reached because they are working other jobs, a particular problem now because deals require much more back-and-forth negotiation to close. Ardell DellaLoggia, a broker in Seattle, says she has one agent she’s playing phone tag with who obviously has another job. “He calls me and says he can’t talk now because he’s in a real estate class, but that’s a coverup,” she says. “When a broker is really in class, he mentions the name of the class.

My advice, if you don’t have an agent yet, ask them for testimonials, or references.  Interview them. 

By the way…..Kahala Associates is an agent-owned company, so not only are we full-time Realtors, but we are all owners!

 95% of buyers start the buying process by looking for homes during Open Houses just to see what is on the market before they do research on the buying process. Once that process starts they usually never look back until they have found the property they want to buy.

The problem is, they have skipped many important steps that could have saved them time, money and a lot of headaches. This will likely be the biggest investment you ever make, so taking the time to make sure you do it right the first time can save you time and money. (I have highlighted the most important first step)

Realize that whether the market is fast or slow, “dream” category homes are always hot properties as soon as the for-sale is planted in the yard. When you find THAT home, make your offer fast. Timing is everything. For an undesirable or over-priced home, you might have the luxury of viewing it several times–even dragging your relatives to see it before you actually made an offer. But who wants an ugly or over-priced home!?

1. Want a FREE way to make your offer more attractive to a homeseller, get that home for less, and more importantly make sure you can afford it? Unless you’re paying all cash, make sure you’re financially “Pre-Approved” by a lender and prepared to document this fact to a seller.

Specifically, you’ll need a “pre-approval letter” from a lender. I can arrange this for you-just call me…or email me.

If you are “Pre-Approved” it says a few things.  1. You are serious enough about buying a home because you have taken the necessary time to give your personal information to a lender to have it verified.

2. By giving a “Pre-Approval” letter, the lender is basically saying that they will give you a loan for up to the amount the put on the letter, so long as the property conforms to the loan guidelines.

3. It also says, you already have an idea that you can afford the property, you have a good idea of what your monthly payment will be, and you aren’t going to back-out due to the monthly payment.

If you were a seller, who would you choose to work with? Someone who has their finances in order, is willing to document it, and show you they are ready to make things work, or someone who submits an offer but hasn’t even spoken to a lender yet?

If a seller needs to sell quickly, then price may not be the main reason for accepting your offer!

Simply put, a short-sale is when the homeowner sells their home for less than the mortgage amount they owe on the home.

With a short sale, the homeowner must negotiate with the lender to get approval to sell the property for less than the owner owes.  This can be difficult.  The lender is not going to just give away money.  If the seller can bring the difference between the amount owed and the amount the property will sell for, in cash at closing then the lender will probably be ok with it, since they will get their money back. 

If this isn’t the case, then the lender may either require the seller to pay back the difference over time, or the lender will releave the seller of any debt obligation (not very likely). 

So, the property ends up on the market for sale.  Any contract brought forth on the property will have to have all parties involved agreement on the contract.  This means if there is a first and second mortgage, then the Seller, Lender #1 and Lender #2 all have to agree to the contract.  When there is a first and second mortgage, it WILL take a long time, as the two lenders negotiate over the amount each will get. 

The process to buy a short-sale property is and isn’t different than a normal transaction.  It isn’t different because you preview the property, and right up an offer to buy the property, much the same as you would any other property.

 It is different because you have several different entities that make a decision to accept the contract or not, and it can take a LONG time to get a response.  Heaven forbid you get into escrow and find out something unexpected and ask for a credit or a price reduction. Then it could be another 30 days before you hear back on that issue.

I was just asked the Question: “How long does it take banks to respond to an offer on one of their foreclosures/short-sales?”

The best answer, just came to me from my Countrywide rep, which also explains their process:

A Short Sale Support Team is now available to handle all the inquiries and status calls from our borrowers, their agents or our employees. This team is already handling thousands of short sale requests.Each potential short sale is reviewed on a case-by-case basis. Customers with accounts whose payments are completely up-to-date and current will not be considered unless there is an eminent hardship. The approval of a specific short sale can only be discussed among the homeowner, seller or their agent and our Short Sale Support Team, and the decision can take as much as 30 days from the date the Team receives the purchase contract and preliminary HUD 1. The decisioning time varies based on the ability to obtain access to the property for an appraisal and on the financial situation of a particular customer.  

All time-lines noted herein may vary based on the volume of short sale activity, thoroughness of packages and the particulars of the specific transactions.  They are meant to be utilized as guidelines and as a means to set appropriate and approximate expectations.Short Sale Process

Despite the loss of nearly 2,100 jobs when Aloha and ATA airlines abruptly shut down, Hawai’i’s unemployment rate rose just slightly to 3.3 percent in April, according to the state Department of Labor and Industrial Relations.Although April’s jobless rate was lower than anticipated, the labor department cautioned that the full impact of the airlines’ layoffs may not be felt for another few months.

With home prices in hard hit areas around the country dropping, affordability has improved dramatically. 

As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB).

That’s up from 44% during the first three months of 2007 with home prices the most affordable they’ve been since the three month period that ended June 30, 2004.

This is one sign of getting close to the bottom of the cycle.

Another is when you see the hardest hit areas in the country begin to increase in the number of sales.  San Diego, one of the hardest hit, is anticipated by some to be one of the first areas out of the down cycle.

Hawaii hasn’t seen a drop in the median home or condo price, and we may be seeing the first signs of the bottom in the national housing outlook. That isn’t to say prices won’t continue to fall, but an increase in the number of sales is one of the first signs of reaching the bottom. Check out the mixed reports.

Just like when housing prices increased by 20-30% in one year before it all ended, we see the opposite occurring now. 

In Stockton, Calif., the average price of a single-family home fell 35% to $230,800 in the first quarter of 2008 from $357,800 in the first quarter of 2006. Over the same two-year period, Stockton has gone from being 71% over-valued to 4.3% over-valued.

Are we close to the end? Any thoughts?

As seen on the Today Show, Best Life Magazine has voted Honolulu the #1 city in the U.S. to raise a family.  Check out the video on the Today Show website .

You can also read the article at the Honolulu Advertiser.

They want to raise their children somewhere safe, where they can attend good schools with favorable student-teacher ratios, above-average test scores and respectable budgets. Plenty of museums, parks and pediatricians also contribute to a good quality of life, whereas multihour commutes, expensive houses and divorcing friends and neighbors do not. Best Life editors used these categories and data from the U.S. Census Bureau, the National Center for Education Statistics, the FBI, the American Association of Museums, the National Center for Health Statistics and the American Bar Association to evaluate 257 cities. Here are the best — and worst — places to raise a family.

The ban on smoking in your own condo unit may be coming.  The latest newsletter I received from Hawaii Community Associations had an article that states that this is on the very near horizon. Read Prohibiting Smoking In Condo Units.  There are several article posts from a local Condo Association Attorney Richard Ekimoto on this very issue that is interesting to read.  What do you think?  Are you for or against it?