from Barbara Hendrickson

In these dark days after the election and more recently the devastating Oakland fire, stay close to those you love and reach out to love those you never thought of loving. Today is the first day of the rest of our lives, and we all need to take that seriously and cherish that we are here. 

That said, I have joined with my colleague Rudy Gonzales to bring you even more of what I have been offering you all of these years because I believe that “Two Heads Are Better Than One” and it is much more fun and more productive to work with a really bright and energetic partner. I hope that you will get to meet him soon. 
I am here.

 

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The Oakland fire of December 2, 2016


 

We here at Red Oak are grieving with the community of Oakland, California over the massive warehouse fire that took the lives of many young people in the artistic community. All contributions to ROOF, the Red Oak Opportunity Foundation, through December 12th will be matched by Red Oak Realty up to $5,000 and go to support the communities, first responders and families affected by the fire.

Please consider donating by credit card or Paypal at www.redoak-roof.org.
Thank you.


 

We May Live In INTEREST-ing Times

CHANGE AHEAD?

You might recognize the spin on the allegedly ancient Chinese curse “may you live in interesting times."  It’s neither Chinese, nor ancient, and it’s not necessarily a curse, either. But change will be coming in many ways, interest rates included.

Rate predictions are easy to find, but are they reliable? At the very least, 2016 should have taught us that our best predictions are ultimately trumped by reality. We will know soon enough, but let’s work with the overall expectation of rising rates next year offered by Fannie Mae. What are the possible effects a rise will have on housing: buying, selling, and owning?

  • BUYERS: Buyers face the most immediate risk. The increased price of money raises the cost of buying and owning. A rising threshold of affordability will shut out some buyers entirely.

    • Save more. Higher down payments qualify for the best rates.

    • Improve your credit score. A high FICO correlates with better loans.

    • Consider buying sooner rather than later. Waiting can be costly.

    • Cautiously consider adjustable rate mortgages (ARMs).

  • SELLERS: Decreased affordability translates to fewer buyers.

    • Be prepared for the possibility that you might not get the price you want.

    • Consider negotiation tools used in past inflationary times:

      • Offering partial seller financing in the form of a second mortgage.

      • Assisting with closing costs to help the buyer bring more cash to the table.

      • Paying loan points that lower the buyer’s loan rate to make the price more affordable.

  • OWNERS: Do you currently have an ARM?

    • Do you know when and how it will adjust?

    • Have you explored the possibility of refinancing to a fixed-rate or longer-range ARM?

In making your decision, keep in mind that mortgage interest rates are still near their historic lows. Here is a chart showing average rates year over year. 

AVERAGE INTEREST RATE FOR 30-YEAR FIXED RATE MORTGAGES

Whether you fold it into your holiday shopping, or make it a resolution for the New Year, consider reviewing your housing plans for the future. Let’s get together soon to discuss your options in what will certainly be an interesting year.

 


Recent Transactions

Market Update: 2016

2016 was a significant year for Red Oak Realty. In a market notorious for lack of inventory and diminishing home sales, our brokerage saw a year-over-year gain of 15% in total units sold using data that runs through October 2016. The East Bay market in comparison dropped 6% in total units sold, increasing competition and overall demand for local housing. Total sales volume also saw a very slight decrease of 1%, where Red Oak sales volume again saw a year-over-year increase of 25% in sales volume. 

With the election behind us, and an over half-percentage point increase in interest rates in the weeks since, we may see a continued spike in desire to purchase before rates increase further. At the same time, lower priced inventory may see less competition as buyers more vulnerable to increased rates may find themselves pulled from the market. Though we normally see a bit of slowing down, we expect demand to remain even through the winter months. 
[click to enlarge]
 

Mortgage Update: Adjustable Rate Mortgage Primer

They say that ignorance is bliss, but when it comes to mortgages, what you don’t know can hurt you. With rising interest rates, many borrowers will be offered an Adjustable Rate Mortgage (ARM) in order to keep mortgage payments more affordable. An ARM may be the right approach to being able to purchase a home, but as history has shown us Adjustable Rate Mortgage can create financial hardship for consumers who do not fully understand the risk.

Reasons to  consider an ARM?

  • On average, buyers live in their homes for 9 years. Why pay a higher interest rate for a 30 year fixed mortgage if you will only own the home for 9 years? Consider a 10/1 ARM, that has a fixed rate for the first 10 years of the mortgage.
  • You want to purchase a home now,  and have just started your career. Once you’ve gained more experience, your income will increase to be able to cover increased mortgage payments once your rate adjusts.
  • You are comfortable with risk: You should consider both your ability to sleep at night with the potential for change and your financial profile’s ability to handle unexpected expenses.  Take a look at the “worst case” payment and when that could occur.
  • You expect to be able to pay extra towards your mortgage over the years. Fixed rate mortgages are also fixed payment mortgages. Even if you pay extra, you are required to make the same payment amount each and every month until your balance is fully paid off. Adjustable rate mortgage payments are recalculated when the rate adjusts meaning that if you are able to substantially pay down your mortgage, your required payments will reflect the lower balance and can decrease.

Key ARM Vocabulary:

Loan Term:  This is the LENGTH of the mortgage, not the period of time that the interest rate is fixed. Typically 30 years. A 30 year mortgage is not necessarily a 30 year FIXED mortgage.

PRODUCT: “Fixed Rate” indicates that the interest rate is fixed for the life of the loan. ARMS will be described as  5/1, 7/1, or 10/1 and less frequently 5/6, 7/6, or 10/6. This indicates the number of years that the interest rate is fixed (5 years, 7 years or 10 years) and how frequently the rate will adjust after that fixed rate period. A “1” indicates one year. A “6” indicates every 6 MONTHS. The new Consumer Disclosures implemented in October of 2015 very clearly identify if the interest rate can change or not.

Index: The economic index that will be used to calculate rate adjustments. Typical indices used are LIBOR, Prime, and Constant Maturity Treasury – most can be found in the WSJ or online.

Margin: Typically 2.25 or 2.5. This is set for each mortgage product and is added to the index to calculate the new interest rate when it is scheduled to adjust.

Prior to the housing crisis, Margins were frequently tied to lender compensation, especially with “Option ARMS” which had very low start rates and the possibility of negative amortization. The higher the margin, the higher the yield spread premium paid out to the Loan Officer. Because this is not calculated into the start rate it was not apparent to the borrower until the first rate adjustment and the rate increased dramatically. With new lender compensation regulations in place, this practice is no longer allowed.

However, an ARM with a margin of 3 should be considered more risky than an ARM with a more typical margin of 2.5.

Rate Caps: nterest rate increases are limited by  rate caps established on a product by product basis. These caps are expressed as “initial” “periodic” and “life of the loan”. A typical ARM rate caps would appear as “2/2/5” which is translated to an initial rate cap of 2%, meaning the first rate adjustment maximum is 2%. If your start rate was 4.5%, the maximum rate would be 6.5%. Each rate adjustment after the initial adjustment would also be limited to a 2% increase, so the maximum rate on the 2nd adjustment is 8.5%, up to a maximum life of the loan increase of 5%, so the maximum interest rate would be 9.5%.

It is important to remember that adjustments can also result in a lower payment if the underlying index drops (typical in poor economic times). New payments are calculated based on the new interest rate, the remaining loan balance and the remaining loan term.

Want more information? Click here for the Federal Reserve Consumer Handbook on Adjustable Rate Mortgages

For assistance and up front discussion about mortgages: Melissa Milton  510. 542.2061 / mmilton@commercemtg.com;  Julia Demeter 510.520.9700 / jdemeter@commercemtg.com

Commerce Home Mortgage

 


Restaurant Review: Blind Tiger


BLIND TIGER
 

Located in a cavernous underground space beneath a Korean barbecue joint in Oakland’s Koreatown-Northgate neighborhood, Blind Tiger is part-speakeasy, part-Asian-inspired tapas restaurant. The sprawling menu is divided by “raw,” “cold,” and “hot,” with helpful icons denoting vegan/vegetarian, gluten-free, spicy, and “magical” dishes. About that last one, our server said they keep a wizard in the kitchen, and he may not have been too far off. The rock cod ceviche was a refreshing mix of bright, citrusy flavors and succulent fish. Spicy Thai pork skewers were similarly tender and flavorful, and the mixed baby greens with fuyu persimmon was surprisingly good. If the food doesn’t grab your attention, the movies projecting on the wall might. (The Exorcist was playing on a recent night.) With festive lanterns, picnic tables, and a giant metal tiger head presiding over the bar, Blind Tiger is a great place for large, boisterous groups or for that occasion when you need to impress a date.

Blind Tiger – 2600B Telegraph Avenue, Oakland – Open everyday 5pm-2am (happy hour from 5-7pm, dinner from 5-11pm, late-night food menu from 11pm-1am)



BARBARA HENDRICKSON
Realtor — CalBRE #00780582
510.708.3800