What's Happening in Napa Valley in August & Hotel Deals

If you are going to be in Napa Valley or are interested in staying even just for a night or so here are some highlights of Wine Tasting, Festivals, & More:

How to Increase Your Equity Over the Next 5 Years

Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.

Here are the results from the Q2 2019 Survey:

  • Home values will appreciate by 4.1% in 2019

  • The average annual appreciation will be 3.2% over the next 5 years

  • The cumulative appreciation will be 16.8% by 2023

  • Even experts representing the most “bearish” quartile of the survey project a cumulative appreciation of over 6.7% by 2023

What does this mean for you?

A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.

Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:

20190730-MEM.png

Based on gains in home equity, their family wealth could increase by $42,000 over that five-year period.

Bottom Line

If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset.

Now's the Time To Move-Up and Upgrade Your Current Home

Homes priced at the top 25% of the price range for a particular area of the country are considered "premium homes." In today’s real estate market, there are deals to be had at the higher end! This is great news for homeowners wanting to upgrade from their current house.

Much of the demand for housing over the past couple of years has come from first-time buyers looking for their starter home. Many of the more expensive homes listed for sale have not seen as much interest.

According to ILHM’s Luxury Reportthis mismatch in demand and inventory of luxury and premium homes has created a Buyer’s Market. For the purpose of the report, a luxury home was defined as one that costs $1 million or more.

“A Buyer’s Market indicates that buyers have greater control over the price point. This market type is demonstrated by a substantial number of homes on the market and few sales, suggesting demand for residential properties is slow for that market and/or price point.”

The authors of the report were quick to point out that current conditions at the higher end of the market are no cause for concern.

“While luxury homes may take longer to sell than in previous years, the slower pace, increased inventory levels and larger differences between list and sold prices, represent a normalization of the market, not a downturn.”

Luxury can mean different things to different people. To one person, luxury is a secluded home with plenty of property and privacy. To another, it could be a penthouse at the center of a bustling city. Knowing what characteristics mean luxury to you will help your agent find you the home of your dreams.

Bottom Line

If you are debating upgrading your current house to a premium or luxury home, now is the time!

New Apartments in Napa

Rents at emerging 282-unit complex start at $2,384. These apartments are just north of another housing project, 49-unit Stoddard West apartments for low-income families sponsored by the Gasser Foundation. Read the full article here or below:

The leasing center for The Braydon, Napa’s new, amenity-rich apartment complex, opened just more than a week ago, and the first residents have already signed leases, moved in and are calling the complex west of Soscol Avenue’s Auto Row home.

Residents can choose from one-, two- or three-bedroom units from 752 to 1,311 square feet. Lease rates for one bedroom, one bath unit start at $2,384 per month, two bedroom leases start at $2,810, and the three bedroom leases start at $3,253.

According to Zumper, a rental website, the average market-rate rent for a two-bedroom apartment in Napa during May was $2,240.

About 20 of the 282 planned units are done, said Easther Liu, national vice president of marketing for Fairfield Residential.

Fairfield Residential is developing the 7.37-acre housing site, which uses a new mailing address of 791 Vista Tulocay Lane. It is located on the west side of Soscol Avenue, just north of Tulocay Creek, with views of the Napa River.

A website for The Braydon shows photos of the sample apartments and the complex, which will also include a co-working space, gated dog park, pool, courtyard with outdoor dining space and cabanas, fitness center and “social lounge with full kitchen and multiple seating nooks.”

Once completed, a total of nine buildings will contain the almost 300 apartment homes at The Braydon. A leasing center, located next to a roundabout at the middle of the complex, is now open and staffed.

Inside the complex, the size and scope of the project — one of Napa’s largest apartment developments — is apparent. Chain link fencing wraps around the extensive construction project, which stretches both north and south of the leasing center and the first completed apartment building. The square footage of the apartment housing totals 278,256 square feet.

Napa’s Gasser Foundation originally launched the development, which was formerly known as Vista Tulocay Apartments.

The Gasser Foundation agreed to sell the then-Vista Tulocay site to BLT Enterprises for $9 million in 2002, but the sale did not close until 2013 because of flood control and entitlement delays.

Fairfield Residential bought the project from BLT Enterprises in February 2017 for an estimated $34.25 million.

The apartments are just north of another housing project, the 49-unit Stoddard West apartments for low-income families sponsored by the Gasser Foundation.

Stoddard West previously announced rents will be in the $475-to-$1,300 per month range, depending on the tenants and the number of rooms in the apartment.

Stoddard West, a partnership between Gasser and Burbank Housing of Sonoma County, closed its application list after receiving more than 500 applicants.

Liu declined to provide the number of applications Fairfield has received for the Braydon units.

The "Fastest Growing Trend" in the Housing Industry

Speaking of Rentals…Don’t forget about the rental on the Silverado Trail between Pratt Ave and Deer Park Rd. A private residence with 2 bedrooms with en-suite full bathrooms, open concept 1,728 sq ft home, 200 sq ft private deck with sweeping views of the valley and vineyards, less than 5 min from downtown St. Helena, walking distance to Meadowood. Message me if you know of anyone interested. Click here for more information.

An article from CBS indicates that builders are now investing in homes to then update them and rent them out as rentals seem to be on the rise. Take a look further at the atricle here or below.

KEY POINTS

  • Demand for single-family rental homes is surging, and homebuilders are now stepping in, redesigning and re-imagining the sector — and becoming landlords themselves.

  • “We basically took an apartment and went horizontal instead of vertical,” says Mark Wolf, founder and CEO of AHV Communities.

  • “Our business is booming right now with build-to-rent feasibility work,” says consultant John Burns.

Demand for single-family rental homes is surging, and homebuilders are now stepping in, redesigning and reimagining the sector — and becoming landlords themselves.

While builders have always sold some of their new homes to investors as rentals, the strong demand has some moving into the space exclusively.

AHV Communities, partnering with Bristol Group, is putting up 250 new detached homes in fast-growing San Antonio. Pradera is a gated community with three- and four-bedroom homes, renting from about $1,800 to $2,300 per month. The community includes luxury amenities, like a pool, fitness center, community kitchen and party space, as well as a dog park and dog-washing station.

“We basically took an apartment and went horizontal instead of vertical,” AHV founder and CEO Mark Wolf said. “About 93% of the apartment stock consists of studios, one and two bedrooms, very few three bedrooms. We saw a growing need coming out of the downturn, to provide three- and four-bedroom homes to the renter society.”

Wolf, who has experience in the multifamily apartment market, saw a need for more single-family homes after the housing crash, and he says that demand has not fallen off. While the homeownership rate has risen from its historic low in 2016, it is now starting to slip again.

“We think there’s a major shift in the demographics. Empty nesters are done taking care of their homes. They want to downsize, they want portability, mobility in the lease. The millennial household formation, they’re not really dialed into taking care of a home, they want to go out and do the same thing that the boomers are doing, which is enjoy life, not work hard for their house,” said Wolf.

Last year, about 43,000 single-family homes were built for rent, the largest number in nearly 40 years according to National Association of Home Builders analysis of U.S. Census data. The built-for-rent share of housing starts is also rising, nearly double its recent historical average (from 1992-2012).

Millennials Taylor Walters and Paree Dilkes want to get out of their rental apartment and into a larger single-family home.

“So we’ve been looking online for months now, whether to buy or whether to rent, and this is definitely up our alley,” Walters said as the two toured the amenities at Pradera. They are not married and have no children, but they do have a big dog.

“That’s really the biggest thing. It’s very inconvenient to have to take him out every time he needs to go. Having a yard would be awesome, just let him out, and also a little bit more space. We have a pretty good-sized apartment right now, but just kind of the feeling of being in a house,” said Dilkes.

Renting used to come with a social stigma, since homeownership was touted as the American Dream. The average annual household income of tenants in Pradera, however, is over $100,000, meaning many of them can afford to buy a home but simply choose not to.

Walters and Dilkes considered buying, but didn’t like the way the math worked out.

“I’ve done research, read different articles on millennials buying houses, and I think the biggest thing is the hidden costs that we might incur,” said Walters.

Stephanie Dixon and her husband recently sold their San Antonio home and moved into the rental community. Their children are in college or graduated, and they wanted an easier lifestyle.

“If the water heater breaks, you know, I don’t have to replace it. I just call them. I mean, even the air filters, they came and changed my air filters yesterday. I don’t have to worry about all that, that’s extra expense,” said Dixon.

Builders are struggling right now to put up the entry-level homes that are most in demand. The high costs of land, labor, materials and regulation make low-priced homes more difficult to profit from. That partly explains the shift toward rental properties and communities.

“Our business is booming right now with build-to-rent feasibility work,” said John Burns, founder and CEO of John Burns Real Estate Consulting. “We are discussing new projects with clients almost daily. The market has become so hot that we are already having conversations about when we will conclude the market is overbuilt.”

Burns says equity money is flowing in fast, and learning quickly that they need to partner with an experienced builder. That is why homebuilders Lennar and Toll Brothers have recently started building homes specifically to sell to investors as rentals.

“Most publicly traded builders are talking about building it for others rather than taking the risk themselves, while private builders are looking at taking more risk,” Burns said.

Wolf sees the build-for-rent market as less risky, especially in the short term.

“We believe in the long-term cash flow game. So if you hold these properties for 10-plus years, or even seven-plus years, the residual cash flow is worth more than the sale one time,” said Wolf.

AHV is building another rent-only community, in New Braunfels, Texas, in partnership with American Homes 4 Rent, a single-family rental REIT. The single-family REIT space grew out of the foreclosure crisis and has now consolidated to a few big players. They own several thousand homes, but they are spread out across communities, so management is more complicated and more expensive.

“They see the, I think, the benefit and the beauty of this model to complement what they already have,” said Wolf.

Home Prices Up 5.05% Across the Country

Some Highlights:

  • The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.

  • In the report, home prices are compared both regionally and by state.

  • Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

Home Prices Up.jpg


Gary's Wine & Marketplace coming to St. Helena

Wine retailer Gary Fisch signed a lease Monday to open Gary’s Wine & Marketplace at the former Dean & DeLuca space in south St. Helena.

Fisch envisions a store “in the image of what Dean & DeLuca was in its early days,” except with more wine in the mix.

“Same concept, different name,” Fisch said.

The store, opening as soon as early September, will be the fifth under the Gary’s Wine & Marketplace brand. The other four are in New Jersey, two owned by Fisch and two owned by his wife, Liz.

Fisch is frequently one of the top bidders at the Napa Valley Vintners’ annual Premiere Napa Valley, which he’s been attending for more than 20 years.

“Spending more time in Napa Valley has been a dream of mine forever,” Fisch said. “This opportunity is allowing me to do it without retiring.”

Like Dean & DeLuca in its heyday, the new store will offer coffee and breakfast items, salads and sandwiches for lunch, charcuterie, cheese, olive oil, fresh-based bread, and light catering.

Fisch said it will offer “significantly more wine” than Dean & DeLuca ever did, focused on Napa Valley wine but also stocking a “hand-selected group of non-Napa wines” from regions like Burgundy, Alsace and the Loire Valley.

Advertisement (1 of 1): 0:10

“When you walk in, you’ll know you’re in the best wine shop in the Napa Valley,” Fisch said.

He also wants to offer a “concierge service” where customers can taste wine and arrange to visit particular wineries.

He called Dean & DeLuca an “iconic brand,” and he was sad to see it decline. When he visited St. Helena in May, the store was a shadow of its former self.

It didn’t close until early July, but by late May Fisch had already reached an agreement in principle with the family of the late Leslie Rudd to take over the space. The Rudd family continues to own the property even after Rudd sold the Dean & DeLuca brand in 2014 to Pace Development, a luxury real estate development company based in Thailand.

Fisch hopes to open in early September, as soon as the liquor license is in effect. On Tuesday, workers were starting cosmetic improvements inside the building.

When Fisch first visited the Napa Valley in 1979 as a sales rep for a New Jersey wholesaler, his first stop was at Louis M. Martini Winery.

“Forty years later we’re opening a store literally across the street,” he said. “For me it’s super-exciting.”

Article from Napa Valley Register

Mid-Year Housing Market Update: Three Things to Know Today

Shifting trends and industry-leading research are pointing toward some valuable projections about the status of the housing market for the rest of the year.

If you’re thinking of buying or selling, or if you just want to know what experts are saying is on the horizon, here are the top three things to put on your radar as we head into the coming months:

  1. Home prices are appreciating at a more normal rate: Home prices have been appreciating for about ten years now. Experts at the Home Price Expectation Survey, Mortgage Bankers Association, Freddie Mac, and Fannie Mae are forecasting continued growth throughout the next year, although it should be leveling-off to normal appreciation (3.6%), as we move into 2020.

  2. Interest rates are low: Over the past 30 years, the average mortgage rate in the United States has been 8.27%, and rates even peaked as high as 18% in the 1980s. Today, at 3.81%, the rate is considerably lower than the historical 30-year average. Although experts predict it may climb into the low 4% range in the near future, that’s still remarkably lower than our running average, suggesting a great time to get more for your money over the life of your loan.

  3. An impending recession does not mean there will be a housing crash: Although expert research studies such as those found in the Duke Survey of American CFOs and the National Association of Business Economics, are pointing toward a recession beginning within the next 18 months, a potential recession isn’t expected to be driven by the housing industry. That means we likely won’t experience a devastating housing crash like the country felt in 2008. Expert financial analyst Morgan Housel tweeted:

“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.”

In fact, during 3 of the 5 last U.S. recessions, housing prices actually appreciated:

Home-Price-Change.jpg

Bottom Line

With prices appreciating and low interest rates available, it’s a perfect time to buy or sell a home. Reach out to a local real estate professional to see how you can take the next step in the exciting journey of homeownership.

Article from Keeping Current Matters

Mortgage Rates Hold Steady Despite Bond Market Weakness

Mortgage rates side-stepped today, bringing an end to a gentle but consistent move lower over the past 5 business days.  During that time the average conventional 30yr fixed rates for top tier scenarios fell about an eighth of a percentage point (0.125%).  While that only translates to about $7 per month for every $100k financed, it's a pretty decent move historically speaking.  Today's bond market momentum suggests the move could be in jeopardy. 

Bonds are the most direct source of inspiration for mortgage rates, and indeed, for rates in general.  The 10yr Treasury yield tends to track mortgage rates exceptionally well, and it was roughly 0.03% higher today.  The average lender, on the other hand, didn't change mortgage rates at all.  This has to do with the separate set of bonds specifically tied to mortgages: the aptly-named Mortgage-Backed Securities (MBS).  These held steadier today for a variety of reasons.  Simply put, Treasuries had a certain set of concerns not shared by MBS.  

All of the above having been said, if Treasuries lose enough ground, mortgages will eventually be forced to follow due to the structure of the bond market.  Lenders didn't see quite enough weakness for that to happen today, but they'll be starting the day with itchy trigger fingers when it comes to bumping rates up tomorrow.

Today's Most Prevalent Rates

  • 30YR FIXED - 3.875%

  • FHA/VA - 3.625%

  • 15 YEAR FIXED - 3.5-3.625%

  • 5 YEAR ARMS - 3.375-3.75% depending on the lender


Ongoing Lock/Float Considerations
 

  • Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general.

  • The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.

  • Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.

  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

Article by Matthew Graham, Chief Operating Officer, Mortgage News Daily / MBS Live

8 Real Estate Investing Mistakes to Avoid

With the stock market volatility real estate investing is becoming more popular. Here are 8 mistakes to avoid in order to make your real estate portfolio successful.

Buying Without Researching: Rushing into real estate without understanding what you’re getting can lead to bad results, says Kyle Whipple, a financial advisor and registered investment at advisor at C. Curtis Financial Group in Plymouth, Michigan. “Just because real estate is doing well doesn’t mean it will turn out to be a good investment for you.” Stock investors are often told to “buy low, sell high” and that same rule can be put to use for property investments. “You want to make sure that you’re getting a good deal and not purchasing an overpriced piece of real estate which will lower your long-term returns,” Whipple says.

Developing a Tunnel Vision: Real estate adds a new dimension to a portfolio, in terms of balancing against the risk and volatility associated with stocks. Kaufman says a common mistake is being too narrow about property focus. “Many individuals fail to diversify their real estate holdings,” he says, investing only in one local geographic area or property type. “This all-eggs-in-one-basket approach drastically increases downside risk, but investors do this because they are more comfortable investing in markets they’re familiar with.” Casting the net wider to incorporate crowdfunded investments or real estate investment trusts, known as REITs, can offer exposure to a broader group of properties and increase diversification.

Going It Alone: Owning a commercial or residential rental property can be both time- and capital-intensive. Trying to handle it all solo can require a level of focus and commitment that may not be realistic for every investor. A simple way to avoid that mistake is building a team from day one, says Kevin Ortner, president and CEO of Renters Warehouse in Minneapolis. That may involve investing with a partner or working with a broader group of individuals that includes an experienced real estate agent, an attorney who’s well-versed in property law, professional contractors and a property management company. Having support can make investing in real estate a smoother experience, with less room for error.

Relying on Bad Advice: When seeking out help in making decisions regarding property investments it’s important to go to the right sources. “Making an investment in real estate, especially for first-time investors, can be daunting and nerve-wracking,” says Rowena Dasgupta, an agent at Warburg Realty in New York. “Often, people ask friends and family for their opinion more for reassurance than for legitimate guidance.” What they should be doing instead, Dasgupta says, is seeking counsel from real estate professionals or an investor with a lengthy track record of buying and selling properties. These individuals have the knowledge and experience to provide more reliable advice.

Assuming It’s Easy: Just like stocks, mutual funds, bonds or other investments, real estate requires a certain amount of know-how to navigate. Terrell Gates, founder and CEO of Virtus Real Estate Capital, says both large and small real estate investors can make the mistake of thinking that investing in property is easier than it is. This can be exacerbated in bull markets when real estate is going strong because people tend to forget about previous downturns. “Unfortunately, to be consistently successful in real estate over the long haul requires more skill than luck,” Gates says.

Chasing Bargains: Ortner says another common pitfall among real estate investors is only looking for a deal when buying a property. “If you’re going to make long-term real estate investments, you don’t need to buy at a major discount,” Ortner says. “You just need to do deals that make sense, because, over time, you’re going to be building equity.” He says many investors limit the properties they can buy because they’re hoping to land a major discount with value, which isn’t a realistic target in the current market environment. By maintaining a long-term outlook, investors can avoid the bargain hunter mentality and focus instead on growing their property portfolio.

Not Having an Exit Strategy: Real estate can be a good buy-and-hold option but failing to develop an exit strategy can be damaging. Whipple has seen this scenario play out firsthand, with investors selling a highly appreciated piece of property without a plan in place for what to do with the funds. “They feel they are done with the real estate game and want out,” he says. “Unfortunately, they end up getting hit with a lot of taxes.” Having an end-play for real estate investments from day one can help avoid costly situations when it’s time to sell.

Overlooking the Bigger Picture: The worst mistake with real estate investing may simply be not considering how to utilize it within a broader portfolio. “Many investors make mistakes when they don’t understand how real estate fits into their overall strategy that includes diversification, long-term appreciation, liquidity needs and cash flow,” says Brent Weiss, co-founder and chief evangelist of Facet Wealth. Having a financial plan that incorporates real estate begins with understanding investment goals, risk tolerance and time horizon. These are things a financial advisor can help with. “Once investors understand what strategy will support their plan, they can determine the right mix of asset classes to create success,” Weiss says.

Article from USNews

U.S. Inflation Rate, 1969 to 2019

With the 50th anniversary of the Moon Landing I was curious about how things have changed monetarily since 1969. I located some interesting information that I wanted to share.

According to the Bureau of Labor Statistics consumer price index, today's prices in 2019 are 597.94% higher than average prices throughout 1969. The dollar experienced an average inflation rate of 3.96% per year during this period, meaning the real value of a dollar decreased.

In other words, $100 in 1969 is equivalent in purchasing power to about $697.94 in 2019, a difference of $597.94 over 50 years.

The 1969 inflation rate was 5.46%. The current inflation rate (2018 to 2019) is now 1.65%1. If this number holds, $100 today will be equivalent in buying power to $101.65 next year. The current inflation rate page gives more detail on the latest official inflation rates.

USD Inflation since 1913Annual Rate, U.S. Bureau of Labor Statistics CPI

USD Inflation since 1913

Annual Rate, U.S. Bureau of Labor Statistics CPI

This chart shows calculation of buying power equivalence, often referred to as "the value of a dollar" over time for $100 in 1969 (price index tracking began in 1635).

This chart shows calculation of buying power equivalence, often referred to as "the value of a dollar" over time for $100 in 1969 (price index tracking began in 1635).

Inflation by City

Inflation can vary widely by city, even within the United States. Here's how some cities fared in 1969 to 2019 (figures shown are purchasing power equivalents of $100):

San Francisco, California experienced the highest rate of inflation during the 50 years between 1969 and 2019 (4.30%).

Detroit, Michigan experienced the lowest rate of inflation during the 50 years between 1969 and 2019 (3.74%).

Inflation by Country

Inflation can also vary widely by country. For comparison, in the UK £100.00 in 1969 would be equivalent to £1,632.35 in 2019, an absolute change of £1,532.35 and a cumulative change of 1,532.35%.

In Canada, CA$100.00 in 1969 would be equivalent to CA$663.68 in 2019, an absolute change of CA$563.68 and a cumulative change of 563.68%.

Compare these numbers to the US's overall absolute change of $597.94 and total percent change of 597.94%.

Inflation by Spending Category

CPI is the weighted combination of many categories of spending that are tracked by the government. This chart shows the average rate of inflation for select CPI categories between 1969 and 2019.

Comparison to S&P 500 Index

The average inflation rate of 3.96% has a compounding effect between 1969 and 2019. As noted above, this yearly inflation rate compounds to produce an overall price difference of 597.94% over 50 years.

To help put this inflation into perspective, if we had invested $100 in the S&P 500 index in 1969, our investment would be nominally worth approximately $12,498.44 in 2019. This is a return on investment of 12,398.44%, with an absolute return of $12,398.44.

These numbers are not inflation adjusted, so they are considered nominal. In order to evaluate the real return on our investment, we must calculate the return with inflation taken into account.

The compounding effect of inflation would account for 85.67% of returns ($10,622.00) during this period. This means the inflation-adjusted real return of our $100 investment is $1,776.44.

Investment in S&P 500 Index, 1969-2019Original AmountFinal AmountChangeNominal$100$12,498.4412,398.44%Real
Inflation Adjusted$100$1,776.441,776.44%

News headlines from 1969

Politics and news often influence economic performance. Here's what was happening at the time:

  • Golda Meir becomes first female Prime Minister of Israel.

  • Colonel Muammar Gaddafi deposes King Idris during the Libyan revolution.

  • Millions protest against the war on Vietnam Moratorium Day.

Data Source & Citation

Raw data for these calculations comes from the Bureau of Labor Statistics' Consumer Price Index (CPI), established in 1913. Inflation data from 1665 to 1912 is sourced from a historical study conducted by political science professor Robert Sahr at Oregon State University.

You may use the following MLA citation for this page: “1969 dollars in 2019 | Inflation Calculator.” U.S. Official Inflation Data, Alioth Finance, 20 Jul. 2019, https://www.officialdata.org/us/inflation/1969.

Special thanks to QuickChart for providing downloadable chart images.

in2013dollars.com is a reference website maintained by the Official Data Foundation.

» Read more about inflation and investment.

The Cost of Waiting: Interest Rates Edition

Some Highlights:

  • Interest rates are projected to increase steadily heading into 2020.

  • The higher your interest rate, the more money you will end up paying for your home and the higher your monthly payment will be.

  • Rates are still low right now – don’t wait until they hit 5% to start searching for your dream home!

Interest Rates.jpg

Our Town St. Helena nears construction start on affordable housing project

DAVID STONEBERG editor@sthelenastar.com

Eight Upvalley families started a journey of home construction Saturday that will end in 18-20 months when all of the townhomes on Brenkle Court in St. Helena are finished.

The Brenkle Court subdivision at 684 McCorkle Ave. is sponsored by Our Town St. Helena, a local nonprofit affordable housing advocacy group.

The families spent Saturday clearing weeds, cutting down shrubs and getting the land ready for a concrete subcontractor to form and pour the two slabs needed for the single-family common-wall townhomes. Each of the homes will be two-story with three bedrooms and 1 1/2 baths. On Monday, there was a large pile of brush behind the chain-link fence, on which hung several colorful and whimsical paintings.

The hard work begins in six weeks, as each family has pledged to build 65 percent of all of the homes, spending 35 hours a week on construction. That’s in addition to their regular jobs, which means working nights and weekends for the next 18 to 20 months.

Site supervisor Adam DeLeon will be on the job five days a week, directing the families. Retired contractor Larry Vermeulen is OTSH construction supervisor. “We thought we were going to start in December or January,” Vermeulen said, noting that the site development work, including curbs, gutters, street, grading and underground utilities were all done in October or November.

Longer than expected

Vermeulen said it took longer than expected to work with the USDA Rural Development, which is providing a technical grant to OTSH and low-income mortgages to each of the families. Three years ago, OTSH started out with 43 families who were interested in building and owning one of the townhomes. That list got narrowed down to 12 or 15 families who could qualify.

OTSH board member John Sales said qualifications are difficult, since families have to make the payments, estimated at $1,800 a month, although they can’t make too much or they won’t qualify for the USDA mortgages, which are 35 or 38 years. “We ended up with eight families and when we got to the point of signing purchase agreements, two of the families dropped out, so we had to go back, pull some more applications and go through the qualification process again,” Sales said.

Six of the families are qualified as low income, which is $66,375 for a family of four and two are very low income, which is 50%, or $44,250, of the HUD median income. “They can’t make more than that, but they have to make enough to manage these mortgage payments,” Vermeulen said.

The units are protected to be affordable housing for 55 years. “It’s affordable housing in this county by any definition,” he added, since a median home sales price last year was $1 million and the lowest sold was $600,000 and that was a condominium. The value of each of the eight townhomes will be $412,000 when finished.

It has taken a tremendous amount of work to get to this point. After the City of St. Helena bought the property and sold it to OTSH for $1, with the express purpose of building affordable housing, OTSH hired consultant Howard Siegel, who had been with Napa County for a number of years. The Gasser Foundation help pay for Siegel.

“We have to give Howard a lot of credit, because he walked us through some of the deepest ditches we could have walked through, subdividing the property, coming up with subdivision maps and satisfying the state,” Sales said. The process of going back and forth with the state for eight or nine months was “horrible,” Sales said.

The families

An additional challenge was that OTSH had to get all the families’ mortgages done at the same time, since the eight units are common-wall townhouses, that is single-family homes with common walls and a courtyard.

The families are cellar workers, vineyard workers, and hotel and restaurant employees. “They are the service people who keep our little town going, that keep our wine industry going,” Vermeulen said. “Some of them have been at the wineries for many years, they are the assistant cellar masters, for example, but they don’t earn enough money to buy a home in St. Helena.”

Erica Roetman Sklar, who serves on OTSH’s advisory council, added, “I think this is an important point, these families will have the benefit of home ownership in St. Helena,” and when the homes are finished, they will be moving out of their subsidized rental housing, whether it’s at Hunt’s Grove or Stonebridge. “That opens up a new opportunity for another family,” she said.

Building a team

In the past few months, Vermeulen worked with the families, training them on basic construction: how to measure, mark, cut and assemble, how to read a tape measure, for example. Also there have been videos, lectures and tool safety talks, especially with power tools. “To practice our skills we built sawhorses in the parking lot at Grace Episcopal Church in December,” Vermeulen said.

“We got all the families together, so I’ve got 20 odd sawhorses waiting to get over to the job site. It’s been about team building, too, it isn’t just about the skills, it’s about working together,” he added.

Families will have to put in 35 hours a week, which is difficult for a family of two on just the weekends, “so we’ve impressed on them that they need to twist the arms of their relatives and friends,” Vermeulen said. “They can bring volunteers that count against that 35 hours. We’ll keep track of it, to keep it equitable.”

After the group starts building and learns to work together, Vermeulen said he will be looking for volunteers from the community at large. “We haven’t pushed that very hard, because we’re not ready for it. I want to see how the families work first, I need to get them working as a unit, then we’ll add another 50 people. If we start day one with 100 people, it will be chaos.”

The construction is expected to take between 18 and 20 months. OTSH will hire subcontractors for concrete, electrical, plumbing, roofing and drywall, although that could change. “We may end up doing more labor to meet our budget,” he said, since the budget was established before the wildfires of 2018 hit, driving up the cost of materials.

In the end, they may need to do the roofing and the drywall. “It’s a lot more efficient to have a professional crew come in and bust out the drywall. We’ll know in a year, whether we have to do it and we’ll get a better picture in a few months,” Vermeulen said.

Additional financial support was received from the City of St. Helena, who donated the land and waived development fees and the county of Napa. Rural Community Assistance Corporation is providing technical support and financing.

What a Difference a Year Makes for Sellers

Over the last few years, many sellers have been hesitant to put their houses on the market because they feared not being able to find another home to buy.

We’ve reported on inventory shortages in the past, and it’s been a constant concern for potential buyers throughout recent years. New research shows the inventory concern is starting to decrease among potential buyers.

According to First American, the two leading obstacles to homeownership that buyers feel today are Affordability and Limited Inventory. This means the feeling that homes are less affordable has risen, while the fear of limited inventory has decreased, delivering a wealth of good news for sellers.

2 obstacles to ownership.jpg

At the same time, over the past 12 months, we’ve seen a steady month-over-month increase in the number of homes coming to market for purchase. In the past, the lack of listings and available inventory slowed down the real estate market. This recent increase in current inventory has many buyers and sellers now thinking it is time to make their move – and rightfully so! For the last two months, we’ve seen over 4 months of inventory become available for sale, a promising number that’s been slowly increasing this year and creating more buying opportunities.

Inventory For Sale.jpg

To further support the idea of an improving real estate market, Sam Khater, the Chief Economist at Freddie Mac says,

“…In the near-term, we expect the housing market to continue to improve from both a sales and price perspective.” 

Many experts, like Sam, believe the second half of 2019 will drive a stronger market than we saw at the beginning of the year. This is great news for homeowners who have put off getting their houses on the market and are now ready to make a move.

Bottom Line

What a difference we’ve seen over the course of this year! If you’re thinking of selling, now is the time as inventory is on the rise.

Should I Refinance My Home?

With the recent lower interest rates, many homeowners are wondering if they should refinance.

To decide if refinancing is the best option for your family, start by asking yourself these questions:

Why do you want to refinance?

There are many reasons to refinance, but here are three of the most common ones:

  1. Lower your interest rate and payment – This is the most popular reason. If you have a 5% interest rate or higher, it might be worth seeing if you can take advantage of the current lower interest rates, hovering below 4%, to reduce your monthly payment and overall cost of the loan.

  2. Shorten the term of your loan – If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner.

  3. Cash-out refinance – With home prices increasing, you might have enough equity to cash out and invest in something else, like your children’s education, a vacation home, or a new business.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and Lenders Network explains:

“If you were to refinance that loan into a new loan, total closing costs will run between 2%-4% of the loan amount.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually pay charging a slightly higher interest rate so they can make the money back.”

If you’re comfortable with the costs of refinancing, then ask yourself one more question:

Is it worth it?

To answer this one, we’ll use an example. Let’s assume you have a $200,000 home loan. A 4% refinance cost will be $10,000. If you want to lower your interest rate from 6% to 4%,  then refinancing is going to save you $244 per month. To break even ($10,000/$244), you need to continue owning your home for over 40 months.

Now that you know how the math shakes out, think about how much longer you’d like to own your current home. If you plan to stay for more than 3 years, then maybe it is advantageous for you to refinance.

If, however, your current home does not fulfill your present needs, you might want to consider using your potential refinance costs for a down payment on a new move-up home. You will still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home of your dreams.

Bottom Line

There are many opportunities for growth in the current real estate market. To find out what’s right for your family, contact me and I’d be happy to help.

Coming Soon! Beautiful Rental Off Silverado Trail

Beautiful covered, private deck with vineyard views on the east side of the valley. Ensuite 2 bedroom, 2 bath, unfurnished custom built home on a quiet, private estate. Walkable to CIA and a 5 minute drive to downtown St. Helena. Located in the desirable St. Helena School district. One story with hardwood floors, open kitchen concept with built-in gas range and oven, refrigerator, dishwasher, garbage disposal, large great room w/gas wood burning fireplace. Handicap accessible bathroom w/shower in Master suite, new carpet, central air A/C and heat, freshly painted inside and out. Drive right into attached garage w/electric garage door and walk right into your mud room with full washer/dryer. Owner/Manager on-site.

Available August 1, 2019. One Year lease: $4,500.00/month [not including gas, power and cable/internet], Includes: landscaping, water and garbage.

Click here for more information.

Compass Concierge! Easily increase your property's market value with home improvement services!

Exclusive to Compass, our Concierge program will prepare your home for the market. From deep-cleaning to cosmetic improvements, we'll work with you to assess every opportunity to elevate your home's value.

Compass will cover all upfront costs, collecting payment for the services rendered at the time of the property's closing. By investing in your home's potential, we aim to provide a swifter, more profitable sale.

Services include:
Staging

Deep-cleaning

Cosmetic renovations

Decluttering

Landscaping

Painting

Pest control

Custom closets

And More

Curious to learn more? 

Contact me to discuss how Compass Concierge could help you.

Festival Napa Valley Events This Week

Festival Napa Valley is committed to enriching the vitality of the community through innovative performances and inspiring education programs. Some things you should know about Festival Napa Valley

  • 1) They donate 6,000 tickets every year to seniors, veterans and families.

  • 2) 1,600 students attend Free Concert for Kids.

  • More than 200 artists from around the world perform every year at Festival Napa Valley.

  • 1,400 students attend Arts for All summer camps launched and funded by Festival Napa Valley

  • 95 College & Conservatory Musicians study and perform at Festival Napa Valley’s tuition-free summer music academy.

  • $1,000,000 is invested in Napa County public school arts education programs

For the events calendar click here.

Highest Mortgage Rates in More Than 3 Weeks

Mortgage rates moved decisively higher this week as the underlying bond market finally began shifting gears.  After the Fed meeting in June, rates moved to the lowest levels in more than 2 years and had been holding in a narrow range since then.  The risks of a breakout were set to increase as the market digested several key events.  One of the most important of those events was this week's congressional testimony by Fed Chair Powell.  

Interestingly enough, Powell's testimony actually helped rates at first.  In the 2nd part of the testimony yesterday, there wasn't much of a market reaction.  Instead, it was stronger economic data and poorly received Treasury auction that pummeled the bond market.  As bonds weaken, rates rise. 

Not all lenders fully adjusted their rate sheets to reflect yesterday's market movement.  That means many lenders offered even higher rates on Friday despite the fact that the underlying bond market actually improved somewhat.  That leaves today's rates at the highest levels since before the Fed meeting on June 19th.


Loan Originator Perspective

Bond markets recovered a good portion of yesterday's pronounced losses, but we're far from out of the danger zone here.  Market sentiment has gone from bond-friendly to (at least) bond-neutral.  It's going to take a LOT to spur rates lower, and not much motivation for them to rise.  I'm locking loans closing within 45 days. -Ted Rood, Senior Originator


Today's Most Prevalent Rates

  • 30YR FIXED - 4.00%

  • FHA/VA - 3.625%

  • 15 YEAR FIXED - 3.5-3.625%

  • 5 YEAR ARMS - 3.375-3.75% depending on the lender

    Ongoing Lock/Float Considerations 

  • Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general

  • The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.

  • Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.

  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

Mortgage News Daily

4 Tips to Sell Your Home Faster

Since June of last year, we have seen an increase in the inventory of homes for sale month per month. Every spring and summer, the inventory increases because people want to sell their home. For those with children, they may want to be in their new home for the beginning of the school year.

If you are one of those sellers, you may find these 4 tips helpful in getting your home sold more quickly.

1. Make buyers feel at home

Declutter your home! Pack away all personal items like pictures, awards, and sentimental belongings. Make them feel like they belong in this house! According to the Profile of Home Staging by the National Association of Realtors,

“83% of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home.”

Not only will your house spend less time on the market, but the same report mentioned that,

“One-quarter of buyers’ agents said that staging a home increased the dollar value offered between 1 – 5%, compared to other similar homes on the market that were not staged.”

2. Keep it organized

Since you took the time to declutter, keep it organized! Before the buyers show up, pick up toys, make the bed, and put away clean dishes. It is also a good idea to put out some cookies fresh from the oven or a scented candle. Buyers will remember the smell of your home! According to the same report, the kitchen is one of the most important rooms to stage in order to attract more buyers.

3. Give buyers full access

One of the top four elements when selling your home is access! If your home is available anytime, that opens up more opportunity to find a buyer right away. Some buyers, especially those relocating, don’t have much time available. If they cannot get into the house, they will move on to the next one.

4. Price it right

As we mentioned at the beginning, more inventory coming into the market guarantees there will be some competition. You want to make sure your home is noticed. The key to selling your house in 2019 is ensuring it is Priced to Sell Immediately (PTSI). That way, your home will be seen by the greatest amount of buyers and will sell at a great price before more competition comes to market!

Bottom Line

If you want to sell your house in the least amount of time at the best price with as little hassle as possible, a local real estate professional is a useful guide. Call me today to find out what you need to do to sell your home more quickly.