The Changing in Retail Stores 2014

Nine retailers closing the most stores
Douglas A. McIntyre and Alexander E.M. Hess, 24/7 Wall St. 8:30 p.m. EDT March 12, 2014
AP Sears-Lands End

(Photo: Elise Amendola, AP)
SHARE 807 CONNECT 110 TWEET 43 COMMENTEMAILMORE

Brick-and-mortar retailers have been suffering from slow economic activity for years, as well as from increased competition from online retailers. The rise in store closings is a prominent sign of their struggles. Weakened companies cannot afford the real estate and personnel costs that go along with supporting hundreds of unprofitable locations. The clearest proof of the problem was RadioShack’s recent decision to close more than 1,000 stores.

RadioShack is hardly alone. During that last several years Gap has closed 20% of its locations. Even Macy’s, which has forecast strong earnings and is considered the most successful of the mid-market retailers, closed stores recently.

A number of factors can lead companies to close stores. One is mergers and acquisitions activity. As organizations join forces under a single umbrella, locations that once competed for sales can become redundant, leading to store closings. The most recent example of this is the marriage of Office Depot and OfficeMax, completed late last year. Management has made it plain that the merger would produce cost savings by consolidating jobs and closing stores.

The pressures businesses face from the growth of online retail is another factor that can contribute to store closings. In particular, the rise of Amazon.com, America’s largest e-commerce operation, has turned the entire retail industry on its head.

Bookseller Barnes & Noble was one of the first companies to be threatened by Amazon.com, which originally began its operations as an online bookstore. Online retailers, Amazon.com cheif among them, accounted for 44% of book sales in 2012 according to Bowker, a bookseller consultancy. Many of these sales came at Barnes & Noble’s expense, as the company’s own e-book business has languished.

Staples is a more recent example of a company pressured by Amazon.com. Following two years of sales declines, the office supply retailer announced that it will close 225 stores by 2015, 12% of it’s total store count.

Outside of those retailers undergoing mergers, or shrinking to limit costs and preserve their bottom lines, a number of retailers have had to shrink their store count in order to shift into new markets. Companies such as Abercrombie & Fitch and Aeropostale have are now competing with fast-fashion competitors such as H&M and Forever 21, which specialize in getting the latest trends from the runway to stores quickly and at low prices.

Companies close stores for different reasons. In the case of Sears Holdings, is likely to shutter a number of locations as part of a larger strategic overhaul to fund its transformation and make operations more efficient. Closing stores “frees up capital, reduces losses and de-risks our model,” the company said in an earnings presentation.

In contrast, J.C. Penney is only closing stores that noticeably underperformed. The company’s sales have fallen sharply since Ron Johnson, previously Apple’s retail chief, took over as CEO nearly three years ago, and continue to have fallen since he was ousted by the board last year. But the company continues to make major investments in its conventional brick-and-mortar operations, and has only announced the closing of 33 out of more than 1,000 stores.

To determine the retailers closing the most stores, 24/7 Wall St. reviewed large retailers that have publicly announced store closings for 2014, or are in the middle of a multi-year plan to trim locations. In addition, we also reviewed company earnings and SEC filings.

These are the retailers closing the most stores.

1. Abercrombie & Fitch

Abercrombie & Fitch first announced its plans to close 180 stores by 2015 more than two years ago. In its most recent quarterly report, the company said it had closed 10 stores by November of last year and would close another 40 stores by the end of its fiscal year. This total does not include the 20 stand-alone Gilly Hicks brand stores, which the company also plans to shutter this year. Abercrombie & Fitch’s stock has struggled, posting one of the largest declines in the S&P 500 during 2013. To improve performance, the retailer is planning to shift marketing for its Abercrombie & Fitch to older shoppers while transforming its Hollister stores to a fast-fashion approach in line with H&M and Zara. A succession plan for CEO Mike Jeffries is also in the works. Last year, shareholders from Engaged Capital publicly campaigned for Jefferies’ dismissal, citing the retailer’s failure to adapt to fast-fashion, and Jeffries’ statements about excluding customers that he thought were too heavy for the brand.

2. Barnes & Noble

Early last year, Barnes & Noble announced plans to shut a third of its stores over the next 10 years. As of this January, the company had already closed some 14 retail locations, dropping its store count to 663 from the 677 it had when the announcement was first made. Particularly painful for many book-lovers, the retailer chose to close its one-time flagship store in New York City this January. While cost-cutting has helped the company post profits, by some measures the company’s prognosis remains bleak. Book retail has increasingly shifted to online and e-books, dominated by Amazon.com. But while Amazon.com has noted strong sales of its Kindle e-reader, Barnes & Noble’s own e-reader, the Nook, has struggled. Revenue of the bookstore’s Nook division, which include hardware and digital sales, fell by more than 50% year-over-year, and the segment remains unprofitable.

3. Aeropostale

Aeropostale is the in the midst of closing 40 to 50 stores in 2014, and plans to shutter some 175 stores in total over the next few years. The teen clothing retailer’s net income dropped to $34.92 million in 2013 from $229.5 million in 2010, and its EBITDA fell to $157.89 million last year from $435.45 million in 2010. Pressure from competitors such as Gap and Abercrombie & Fitch, as well as declining mall sales, has driven the company’s share price from $32.08 in 2010 to $7 as of March 2014. Private equity firm Hirzel acquired 6% of Aeropostale in November 2013. Currently, the company is rumored to be in talks with Barclays Plc. because it is seeking either additional financing or to be acquired. Aeropostale’s fast-fashion shipment model, which it took up last year, has largely been unsuccessful.

4. J.C. Penney

After J.C. Penney’s sales began to steadily decline, the company tasked Ron Johnson, formerly retail head at Apple, with reinventing the retailer’s pricing strategy, only to see sales, earnings, and cash flow fall off a cliff. After years of avoiding closing stores, the company has recently said it would be shuttering several locations. At the start of 2014, J.C. Penney announced 33 store closings, to be completed by May, leading to the loss of about 2,000 jobs. Some investors and pundits believe the company has not been aggressive enough in cutting stores. As of November, the company had 1,095 department stores, down only slightly from past years. Not all news has been bad for the retailer, which reported surprisingly strong earnings in February. Additionally, Standard & Poor’s recently upgraded the retailer’s credit outlook, although it noted changes will still be necessary to improve its credit long-term.

5. Office Depot

Office Depot merged with rival OfficeMax in November. Since the merger, the company has been cutting jobs at its Boca Raton, Fla., headquarters. The next stage in integrating the two retailers, the company has stated, will be to cut store count. CEO Roland Smith admitted the company’s merger was difficult for many workers, telling the Orlando Sun-Sentinel that “it is difficult to focus on business when your personal future is uncertain.” The company had 1,912 retail stores at the end of its latest fiscal year, including 823 OfficeMax stores. Since the merger, the company has closed 15 of its Office Depot stores and seven OfficeMax locations.

6. RadioShack

During the Super Bowl, RadioShack attempted to poke fun at itself, running an ad touting its store remodelling that playfully referenced the store’s reputation as a throwback to the 1980s. But a reinvention alone may not save the electronics retailer — its previous attempt at rebranding itself as “The Shack” never caught on. The retailer recently announced it would close 1,100 out of its more-than 5,000 stores. The company has deemed these closings as critical to its cash-management and turnaround plans, which it hopes would help reverse recent poor results. Both the company’s top and bottom lines have declined considerably in recent years, and its operating cash flow is also down from years past. The fourth quarter of last year, which coincides with the holiday season, was especially troubling. Sales declined 19% at stores open at least a year because of lower foot traffic and weak performance in mobile sales.

7. Sears Holdings

Sears has been heading downhill since 2005, when Wall Street billionaire Edward Lampert merged Sears Roebuck & Co. with Kmart in a deal worth $11 billion. Since 2010, the company has closed roughly 300 stores. One of the few surges in the company’s share price came at the end of January, after it announced the closing of its flagship store in Chicago in April. Shedding its assets has been a major part of the company’s business for years. The company has not only dumped stores, but entire businesses, including Orchard Supplies Hardware Stores, Sears Hometown & Outlet Stores, Lands End, and a part of its stake in Sears Canada. Cowen analyst John Kernan recently noted that he expected Sears Holdings to close an additional 500 stores going-forward.

8. Staples

Staples recently announced plans to close 225 stores, or roughly 12% of its total count, by the end of 2015. The closures reflect both the company’s struggling sales totals, as well as its shift away from brick-and-mortar business to online retail. In its recent earnings release, the company said almost half of its sales come from online orders, and store closures reflect an opportunity to save money while improving the company’s bottom line. This is not the first time headwinds have lead the company to close stores. In 2012, Staples shut 60 stores, mostly in Europe, as part of its plans to cut costs. The company referred to its shift to online sales.

9. Toys “R” Us

A Toys “R” Us was taken private by a consortium of companies in 2005. Nearly a decade later, disagreements among the company’s ownership and a high debt burden have weighed down the retailer. In all, Toys “R” Us spent nearly three years trying to time an IPO, before backtracking last May. In early March of this year, industry sources told The Record’s NorthJersey.com that the company would soon close some 100 stores. Whether or not the company decides to close stores, major changes may be needed. Real estate giant Vornado, one of the three co-owners of Toys “R” Us, recently announced a more than $240 million writedown on its investment in the company. Among the reasons it gave were the company’s 2013 holiday sales results, “and our inability to forecast a recovery in the near term.” Toys “R” Us has struggled to keep up with online competition as well. A December report from Bloomberg indicated it was easier to find the holidays’ hottest toys on Amazon.com than through Toys “R” Us’ website.

24/7 Wall St. is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

2014 Direction

Friday, Janaury 31, 2014

Market Update: Risk On, Risk Off and QE or not QE

This week marked the end of the Bernanke era at the Federal Reserve. This is one for the history books and economists may debate for decades about the unprecedented actions taken by the Federal Reserve under Ben’s leadership. Was QE necessary or ultimately created such large asset bubbles and wealth redistribution to the 1%, that it failed, making matters worse. Janet Yellen’s job may prove to be equally challenging as the Great Unwind of monetary stimulus begins. I mentioned last week that the market had anticipated higher rates by the tune of 50bps during 2014 versus the close of 2103. This past week reminded everyone that predictions are rarely correct, with rates dropping another 8bps. The 10yr stands today at 2.66% and at one point during Tokyo trading was below 2.65%. A lot of action this week as rates continued to grind lower. US Economic data supported the Fed’s decision to continue the pace of tapering asset purchases by another $10B to $35B a month of Treasuries and $30B of MBS. S&P Case Shiller Home Price Index came in close to expectations but did show home prices were leveling off rather quickly in November. GDP, the best measure of the economy came in at 3.2% annualized for the 4th quarter, in line with expectations. Personal Consumption and Personal Spending were good figures, however Personal Income was flat. The economy continues to chug along despite no real job or income growth. That is concerning.

The big news this week that is likely to get continuous focus are the emerging markets. Emerging markets for all practical purposes, are tier 2 countries. There is no real standard definition but generally defined as the BRIC (Brazil, Russian, India and China) as well as MIKT (Mexico, Indonesia, South Korea and Turkey) but there are a dozen or so others. The currencies in these countries are becoming devalued relative to the dollar rather abruptly and some have taken drastic steps to protect the value of said currency. Turkey raise their short term interest rate from 4.5% to 10% in a single day. Hard to say at this point if that will stabilize the outflow of cash but it could cause a panic (which hasn’t happened yet). Imagine for a minute you are buying Russian made televisions for $100 and you have concern over the quality of the TV’s and ultimately how much you could sell them for. Now picture if the manufacturer decided to lower the price of the TV’s to $40 in one day. Would that inspire confidence for you to buy more or cause you to question the quality of the TV? That’s basically the dilemma investors in Turkish (and emerging markets to some degree) currency are faced with. I apologize to the people of Turkey for comparing their economy to Russian television manufacturing.

When you have the super-power United States reduce stimulus and dictate to the world that it intends to raise interest rates eventually, that echoes around the entire globe. Thanks to the low interest rates that monetary stimulus has provided, investors looking for higher yield have moved their money into thousands of different places. Call that the ‘Risk On’ trade. Investors are willing to take risk for higher return than what the lowly Treasury rates can provide. Well at some point there will be higher rates (who knows what higher actually is – TBD) and the greed for higher returns turns to fear of potential losses. If lower rates causes money to flow out, shouldn’t higher rates cause money to flow back in? And so the ‘Risk Off’ trade begins. Emerging markets are feeling it the worst. The stock market is beginning to feel it. The fear of economies standing on their own with higher interest rates should and will cause every investor to rebalance their risk position. Meanwhile interest rates in the US are pushing lower, even with the removal of stimulus. If you needed another reason why it’s great to be a citizen of this country, it’s that the ‘Risk Off’ trade typically involves the purchase of US Treasuries. The safest bet is almost always US Treasuries, one of the best parking spots on the planet. And that’s where we stand today, grinding lower in rates while emerging markets around the globe race to protect their currency. Keep an eye on those markets and it will be very interesting to see how the Federal Reserve responds. As of now they are sticking with their game plan but there will certainly be pressures to slow the taper if the troubles around the world continue.

Shifting back to home prices in the US; with the simultaneous rise of both interest rates and home prices, housing affordability has dropped a fair amount. But how much and historically where does it stand? Today housing affordability is still very strong as the graph below would indicate. The red line is for the Western US and blue is all states. As you can see affordability came down rather quickly in 2013 and has leveled off recently. A score of 100 means the average income can afford the average home price, higher than 100 indicates the average income can afford more than the average home price. While affordability has come down, it is historically very low. And as you would expect, affordability is lower in the western states where there typically is greater demand for housing.

 

Economic Data Release Calendar:

Monday 02/03

ISM Manufacturing and Construction Spending

Tuesday 02/04

Factory Orders

Wednesday 02/05

MBA Mortgage Applications and ADP Employment Change

Thursday 02/06

Trade Balance, Initial Jobless Claims and Bloomberg Consumer Comfort

Friday 02/07

NonFarm Payrolls and Unemployment Rate

 

Regards,

Jason Obradovich,
VP of Capital Markets, New American Funding

Housing Inventory

  • Rising mortgage rates will tame the enthusiasm of some home buyers. But the lack of choice when choosing a home will also hinder buying.
  • Inventory levels are already very low. Newly constructed home inventory is essentially at a 50-year low. Existing home inventory is hovering at a 13-year low.
  • Increases from housing starts will bring more inventory to the market. But the current production of little over a million is not sufficient. Another quick ramp up of around 40 to 50 percent is needed to adequately supply the market.
  • Another source of potential inventory is from homes where mortgages have not been paid or the home is already in the foreclosure process though not yet cleanly released from all the paperwork. How is this so-called shadow inventory trending?
  • The table below shows the shadow inventory situation for all 50 states. It shows the current as well as peak distressed conditions. The data is also overlaid with home price trends to help gage where shadow would be most useful. Naturally, fast price appreciating markets such as California and Nevada would like to have more inventory, but the shadows in these states have been greatly depleted. California’s shadow has been slashed by 71 percent while Nevada cut its future distressed homes by 59 percent.
  • At the other end, slow price appreciating states have no need for additional supply. Yet, states like New Jersey, New York, and Connecticut have barely dented their shadow and these distressed homes still loom over the market. These states have only reduced their shadow by around 10 percent from the peak condition. Take a look at your state’s condition after the jump.

2013 Financial Review

ANNUAL MARKET REVIEW 2013
Overview
Standoffs, sequestration, shutdown, and suspense in Washington supplied the wall of worry that equities markets are said to be so fond of climbing. And climb it they did. The Dow, S&P 500, and small-cap Russell 2000 explored record territory for much of the year. Investors spent most of 2013 toggling between rejoicing at the lack of bad economic news and worrying that good news would prompt the Federal Reserve to start cutting its support. However, the Fed delayed action, first to assess the economic impact of the sequester budget cuts imposed by 2012’s fiscal-cliff detour, and then to avoid aggravating concerns over the U.S. debt ceiling showdown and the 16-day government shutdown.
All the uncertainty rattled markets worldwide, particularly emerging markets, during the summer. However, headlines about potential sovereign default abroad became more scarce as the eurozone emerged from the longest recession in its history despite record 12% unemployment. Meanwhile, China announced plans for economic reforms designed to reduce state monopolies and open up the banking system. In the United States, regulators finally adopted the Volcker rule, which will limit Wall Street banks’ ability to speculate with their own money, and Janet Yellen prepared to replace Ben Bernanke as Fed chairman. Meanwhile, despite the confusion in Washington, solid corporate profits helped reassure investors.
By year’s end, the S&P 500 had nearly tripled since its March 2009 low. However, financial markets must now begin navigating unfamiliar terrain as the Fed begins to taper its support. With a fresh round of debt ceiling debates on the horizon, that wall of worry isn’t likely to shrink in 2014; the question is whether investors will be willing to climb it–and if they are, how far they might go.
The Markets
• Equities: The Dow industrials spent 52 days–one-fifth of the year’s 252 trading days–setting fresh all-time closing highs, while the S&P 500 had its best annual percentage gain since 1997.* However, neither came close to matching the spectacular performances of the Nasdaq and the Russell 2000. The Russell’s 37% increase gave the small caps their fourth best year ever, while the Nasdaq did even better. The Global Dow was hampered by the impact of anxiety about Federal Reserve tightening on the global economy, especially emerging markets. However, like the four domestic indices, it nevertheless managed to more than double its 2012 price gains.
• Bonds: Bond investors were haunted by two specters for much of the year: possible reductions in the Fed bond purchases that have helped support the bond market, and the potential for an unprecedented default on U.S. debt. Neither of those materialized in 2013, but the brinksmanship over the debt ceiling briefly sent short-term Treasury yields higher than those of the one-year note in October. The flight from bonds left the benchmark 10-year Treasury yield at roughly 3% by year’s end as prices fell.
• Oil: A resolution to a global standoff over Syria helped oil prices retreat from late-summer highs over $100 a barrel. However, despite increased U.S. production, oil prices ended the year up almost 6% from December 2012, at roughly $98 a barrel.
• Currencies: The U.S. dollar made a round trip during the year, ending 2013 at roughly the same value against a basket of six other major currencies as it began. Between January and July, the dollar gained more than 5% on anticipation of potential Fed action, only to see those gains vanish during the year’s second half as tapering failed to materialize.
• Gold: Gold lost much of its luster in 2013, falling from just under $1,700 an ounce in January to just over $1,200 by year’s end. Despite a few bounces along the way, especially in late summer, 2013’s 28% decline was fairly relentless. Low inflation reduced gold’s traditional value as a hedge against higher prices, and global economic recovery undercut the perceived need for safe havens as investors bet on a stronger U.S. dollar resulting from any Fed tapering.
The Economy
• Unemployment: The employment picture continued to improve slowly. The unemployment rate ended the year at 7%, its lowest level in more than five years and an improvement from last December’s 7.8%. According to the Bureau of Labor Statistics, the unemployment rate has now fallen 3 percentage points from its October 2009 high of 10%.
• GDP: U.S. economic growth accelerated throughout the year. The sluggish 1.1% expansion seen in the first quarter rose to 4.1% by Q3–the fastest economic expansion since Q4 2011. And though the Bureau of Economic Analysis said after-tax corporate profits were stronger in the second quarter than the third, they were still a dramatic 8.6% higher in Q3 than a year earlier.
• Federal Reserve: After keeping the world in suspense much of the year, the Fed finally announced it will begin gradually reducing bond purchases in January 2014. Members of the Fed’s monetary policy committee anticipate its target interest rate could remain at its current low level into 2015, even if unemployment falls to 6.5%, as long as inflation remains low.
• Inflation: Inflation remained well under historical averages, allowing the Fed to begin tapering its bond purchases. By December, the Bureau of Labor Statistics said consumer inflation had fallen to an annual rate of 1.2% from the previous December’s 1.8%, while wholesale prices gained a mere 0.7% over the same time–half the inflation rate of a year earlier. Despite heavy discounting and a shortened holiday shopping season, retail sales showed improvement over the course of the year, and consumer spending was up 2.6% from a year earlier.
• Housing: Despite being hampered by higher mortgage rates and low housing inventories, the housing market demonstrated resilience. The 13.6% year-over-year average price gain in the S&P/Case-Shiller 20-City Composite Index was the strongest since February 2006, putting home prices back at mid-2004 levels. New-home sales rebounded from a summer slump and by November were 16.6% ahead of the previous year, though the National Association of Realtors® said sales of existing homes showed signs of slowing by year’s end. Meanwhile, the Commerce Department said a 23% jump in housing starts in November put them almost 30% ahead of a year earlier.
• Manufacturing: By the end of the year, businesses seemed confident enough about the future to increase spending on equipment. The Commerce Department said even aside from the strong but volatile aircraft sector, durable goods orders showed signs of improvement in December, while monthly readings on the Institute for Supply Management’s manufacturing index rose every month in the second half of the year.

 

 
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. *Based on data from the “Stock Trader’s Almanac 2014.”
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

Refinance underwater Homes .. Coming programs

The government has announced that they will began allowing home owners whose properties  are underwater to refinance these loans regardless of the loan to value (LTV). This new program HARP 2 will began in March of 2012 for all loans that are currently owned by Fanniemae or Freddiemac.  One of the major reasons that home owners have not been able to take advantage of the low interest rates has been the lack of equity in their homes. This new upgrade to the Harp program removes that road block and will allow them to refinance regardless of the value of the home. This should help millions of families take advantage of the lower rates by dropping home payments and improving their cash flow. If you would like to obtain additional information please let me know and I can provide the sites and information that will allow you to see if you can take advantage of this new government program.

Short Sale Advise

I came across this Blog from an agent
in Georgia that has some good advise.
Posted on Trulia.

By Rhonda Duffy | Agent in Atlanta, GA

Warning Signs That You Need to do a Short Sale
Posted under: Home Buying, Home Selling, Foreclosure | November 15, 2011 10:25 AM | 6 views | No comments
ning Signs That You Need To Do A Short Sale

If you are experiencing a period of time where you can’t pay your mortgage payment or you are short but are sending in your payments, you may need to do a short sale. After a couple of months of non-payment or short pay, you will find that the penalties accumulate to a point of no return as expressed by many homeowners in your same situation.

Other signs include that you regret the purchase of the property and feel that the property will never be the same value that you paid for it. Some homeowners state that they feel the need to sell when their neighbors start doing short sales and they see foreclosures. Some neighborhoods have been 90% short sale and foreclosures leaving the few homeowners that don’t want to short sale or foreclose feeling no relief.

Some homeowners can forecast that they will have to short sale or foreclose when they loose their job, get a divorce or experience a loss of an immediate family member. Others have renters move out after months of non-payment and they just can’t recover. Some homeowners are not even behind in their mortgage payment when they decide to pursue a short sale and some banks are okay with that and appreciate that the anticipation will save the bank and the homeowner headaches and unnecessary costs.

The solution is to actively find a buyer for the property and present both the buyer and your situation to your lender. An active short sale agent that is a short sale expert can help you greatly when the goal is to remove the property and the debt from your name. The key to a short sale is to act quickly, precisely and keep your eye on the prize as you patiently wait for everything to fall into place.

For more information on short sales,
Please give me a call
John Hanson. 408-281-8383

Buying a Home with little down.

FHA loans are still the best solution to getting into a home with little down.

With loans in the Bay Area up to $650,000 thousand dollars and only 3.5% down one can still get into a home with a little over $20,000 out of pocket. (max loan of $650,000, much less if smaller loan)

Sellers can pay all closing costs to help keep costs low and one does not even need a termite clearance if all parties agree not to get one.

Many agents are reluctant to buyers to obtain an FHA loan fearing it might take to long. This not the case as any direct lender doing FHA loans can close them as fast as they do a conventional loan.

Having done FHA loans for many years I still find them to be one of the best loan programs available for buyers who do not have large down payments and the program is not just for first time buyers.

Enhanced by Zemanta

San Jose Property trends.. Aug. 2011

Santa Clara County, August 2011
The San Jose Team

Monthly Quarterly Yearly Property Analysis

County: Santa Clara

Property Types : Single Family
City: San Jose

Trends At a Glance Jul 2011 Previous Month Year-over Year
Median Price $615,000 $640,000 (-3.9%) $637,685 (-3.6%)
Average Price $793,801 $823,994 (-3.7%) $804,110 (-1.3%)
No. of Sales 809 1,099 (-26.4%) 1,004 (-19.4%)
Pending Properties 2,065 2,169 (-4.8%) 2,063 (+0.1%)
Active 2,405 2,381 (+1.0%) 2,899 (-17.0%)
Sale vs. List Price 99.2% 99.7% (-0.5%) 100.2% (-1.0%)
Days on Market 48 48 (-1.5%) 43 (+11.2%)

Should I Buy a Home Now?

It’s funny, back in 2006 and 2007 almost no one was asking that question. Instead, they were asking, “How much home can I buy?”

Wrong question at the wrong time.

Fast forward to today and buyers should be asking “how much home can I buy” and not “should I buy a home now.

Yes, I know, a real estate agent will always say yes when asked if it’s a good time to buy a home.

But, today’s market offers an unprecedented opportunity. Let me explain.

First, take mortgage rates, back during the peak of the bubble in 2007 30-year mortgage rates were in the low to mid 6% range. Today? Rates are in the low to mid 4% range, a drop of 33%.

Next, the median price for single-family, re-sale homes in Santa Clara County peaked at $868,500 in October 2007. It bottomed out at $445,000 in February 2009. Yes, you missed the bottom!

The median price has been in the high $500,000’s to the mid $600,000’s ever since.

O.K., so you’re afraid to buy because you don’t know where home prices are going. Well, no one has a crystal ball, and, as Wall Street is fond of saying, the past is no predictor of future results.

But, as Baron Rothschild is credited with saying, “Buy when there’s blood in the streets, even if the blood is your own.”

Now for the caveats, yes, there are caveats!

As always, the best homes, pristine move-in condition, in the best neighborhoods, i.e. schools, are selling first for the most money with multiple offers.

If the best neighborhood is your primary criterion, and the best homes are beyond your means, consider fixer homes or condos and townhomes.

If the best neighborhood is not a consideration, but a pristine home is, you will find less competition in other areas.

The market in Santa Clara County is very spotty with towns like Palo Alto, Sunnyvale Los Altos, Saratoga and Mountain View being exceptionally hot, primarily due to dot com and ipo millionaires: think Facebook and LinkedIn.

You will absolutely, positively need an in-depth neighborhood market analysis to buy or sell in this market.

DO NOT DEPEND UPON ZILLOW FOR THIS!!!

If I could get what Zillow says my home is worth, I’d sell it in a minute. According to my calculations, Zillow has over-valued my home by 36%, and that’s before selling costs!

P.S. The conforming loan limits are dropping from $729,750 to $625,000 for loans closing after September 30th. Some lenders have already stopped processing loans up to the $729,750 limit, and all lenders will likely stop on or around September 1 for new applications.

These statistics are generated using information from the MLSListings Inc. MLS, but have not been verified and are not guaranteed. MLSListings Inc. disclaims any responsibility for the accuracy and reliability of these statistics. This information should not be relied upon for real estate transaction decisions.

The data on this page is copyrighted by http://rereport.com. All rights are reserved.

Powered by Information Designs™
Copyright © 2011 Information Designs

Time to refianance.

Today, now, right now, pronto, may be the moment you have been waiting for if  if you have not taken advantage of the low interest rates this year.  Things are going to change again come fall and for many that may mean that they will not be able to take advantage of the historical low rates at all once they come into effect.

Proposed changes include lowering the loan amounts from the 729,000 range to 625,000.  In high cost areas this effect many of the loans currently on the books and they will not have the opportunity to refinance or purchase at todays great rates.

Changes to appraisals and underwriting guidelines will also change again making it harder and harder to obtain good financing. In addition more and more risk based pricing base on credit scores will take affect.

Bottom line if your even thinking about taking out a new loan this is the time to do it. Rates are at all time lows and options are still great.

If need a free consolation to see if the time is right for you please give me a call at 800-777-9811.  I have been helping clients in the mortgage business for over 30 years.

John Hanson

NMLS 252980

3.5% Toward your closing costs.

Did you know that for the next 4 months FNMA will pay your closing cost to buy one of their REO properties? In addition they will give you a 97% loan with no mortgage insurance and no appraisal.
FNMA wants to unload their inventory this summer and is going all out to help agents unload listing that meet FNMA guidelines for special financing.
For information on finding these properties you can go to homepath.com and look up any area you want to buy in for a list of homes available. If you need additional help just let me know and i will be glad to help!