Yes, the Market is Down 7% AND Up 1%

Hooray - an article from the Post that is SO useful in interpreting the doomsday real estate stats--and also the overly optimistic ones--that we read about. It dives into detail on the methodology of two housing reports released two days apart: one from OFHEO that claims a 1.2% price increase for the year, and another from S&P claiming a 7% drop.

The headlines might as well read: Lies, Damn Lies, and Statistics. The moral of the story being that anyone who understands anything about data can twist it to say just about anything they want (as an ex-consultant, I know this applies to other fields, not just real estate!)

The article is very insightful and points out that neither stat is completely representative. As usual, the truth probably lies somewhere in between. The author hits the nail on the head in the last paragraph:

Don't overreact when you see big drops -- or jumps -- in these indexes. They are measuring different things, and no national index gets down to the nitty-gritty: what's happening to property values in your Zip code, micromarket or neighborhood.

All the more reason to talk to a Realtor when you're thinking about buying or selling--what you read is only part of the story!

FAQ: ARM Loans

A very informative article about shopping for ARM loans (more popular given the recent jump in both jumbo and second trust rates).

The bottom line is to show around for rates, and know which questions to ask.


- Determine the initial interest rate and how long you will get it
- Ask if it’s a negative amortization loan
- Determine what the rate increase will be and how often it ‘resets’
- Determine what the annual and lifetime ‘caps’ are and how quickly you might reach them – this gives you the worst case scenario on your rates. Make sure you understand what the payment is at those rates.
- Know what the index (LIBOR, T-bill, etc) and spread is
- Know whether your loan is a balloon, and what term the balloon is, or based on a 30 year amortization

The author wisely points out to be wary of internet lenders. I’ve seen cases of this myself—even if the rate does turn out to be as low as they claim, keep a careful eye on the fees they charge but are buried somewhere in the Good Faith Estimate (GFE), and often not in the “Lender Fee” section where you’d expect.

Speaking of fees, that’s the only I’d add to this list—always ask what the fees are, and what they’re for. Always ask about things like: administrative fee, underwriting fee, processing fee, application fee, document fee, and warehousing fee. Don’t get me wrong—a lender needs to make money too, but these are the fees you should be comparing, and negotiating. And also understand the origination fee and any discount fees, especially as it relates to the interest rate you’re being charged. Two lenders might both be quoting 7%, but one of them is charging you a “point” (equal to one percent of the loan value and listed as a “discount point” on the GFE) to get it!

As always, you can contact me with any questions, or to look over your GFE with you. I can’t negotiate it for you, but I can tell you which things I’ve seen before and which things I haven’t. I routinely do this with my clients.

And of course, the way to avoid many issues is to work with a reputable lender in the first place!

It's All About the Timing

The Express article is finally out. Read my thoughts on the spring market, and also the great experience of my client, Ellen Krouss, here.