San Luis Obispo, CA

Is it time to buy a rental here in the San Luis Obispo real estate market? Large numbers of investor are betting on it. I just had a great client that wants to by a triplex or 4 plex. Her idea is to live in one, and then rent out the others. She explained to me that with rent going up at 4.7% annually eventually the increase in rent would pay here mortgage. She wasn't afraid of dealing with tenants. She looked forward to it. She saw buying a home as an investment. At first when I thought about what she had said I couldn't imagine doing it. But then I realized how much money I would have made if I had done this 24 years ago when I bought my first house. By now I could be living in a 200 unit apartment building that was paid off! It really makes you think about her idea.

Top of the morning to all! I have included the mortgage rate update for the San Luis Obispo real estate market. To see homes for sale here, please check out my web site at- www.myslohomefinder.com

Bob Franklin, my favorite loan officer, at Wells Fargo Home Mortgage in the beautiful city of Pismo Beach, California, "Where the surf is always up! And people are always friendly", gives us the following update of the current loan rates and what's up with the week ahead-

The Week Ahead: Domestic Data, Possible Greek Bailout Approval

Greek parliament voted to approve the austerity measures requisite for the country's bailout funds. But in and of itself, the passing of austerity doesn't guarantee the release of Greece's next aid tranche.
Today: No Significant Scheduled Economic Data
Tues.: Retail sales, forecast .7, prior .1
Wed.: NY Fed manufacturing, forecast 15, prior 13.48
Thurs.: Producer prices, forecast 0.4, prior -0.1, Initial Jobless Claims, forecast 365, prior 358
Fri.: Consumer Prices, forecast 0.3, prior 0.0

Dow is trading at 12,841.95 +40.72 and the 10 yr bond is at 1.97% from 1.99% Friday, . Currently mortgages are worse from Friday

Conv.- 3.875%
FHA. - 3.75%

Make it a Great Week!!



Bob Franklin

Mortgage Consultant
NMLSR ID 248760

Wells Fargo Home Mortgage | 575 Price St, Suite 105 | Pismo Beach, CA 93449
MAC E2396-011
Tel (805) 550-3395 | Fax (877) 609-0926

Bob.Franklin@wellsfargo.com

www.wfhm.com/Bob-Franklin

I am a full time real estate agent for clients for the San Luis Obispo real estate market. As many of my loyal readers know, I have been a market timer in several markets, first the stock market and later in the housing market. You can play the "bubble markets" to your advantage by selling or shorting at the top. I recall a conversation with a wealthy investor and real estate developer friend in 2005. He informed me that he went to a real estate financial adviser who specialized in projections of what the future would be so his clients could plan real estate developments. The developer said the adviser prognosticated that he should stop building and finish all his projects by January 2006. The adviser wisely advised the developer to sell everything, including land, by January 2006! At the time I asked my developer friend if he was going to follow his advise. My friend replied, "No I don't believe it! Besides what else can I do?". I told my friend I agreed with his advisor, and I was going to follow his advise. My friend started a couple new housing developments which went bust.

A client asked me the question that if this is the bottom of the housing market will we see a sharp increase if prices in the near future. I responded that in my opinion based on my observations of the past the housing market usually goes into a bottoming process at the bottom. If you look at a graph of past housing booms and busts this "plateau period" can be anywhere from 9-12 months. This time the plateau period may be longer because of the high number of jobless! But jobs will be back and bent up demand for housing is there. I see it at my web site www.myslohomefinder.com We have seen a 50% increase in buyer interest for housing. Besides we live in a beautiful place here, and San Luis Obispo real estate is always in demand. Then you see a gradual increase in prices for the first 2 year period, which eventually leads to increases above the rate of inflation. I compare the move to a "wave motion".

The bellow chart shows the time period from the decrease in housing development to the upturn in prices. The average time period is 5 years. It you add 5 years to the date of real estate slow down in residential investments in 2006-2007 you come up with this year 2012. (Thank you to calculatedriskblog.com for this great chart).

As a full time realtor here in San Luis Obispo County, I have been following the real estate trends here for over 30 years both as an investor and as a real estate agent. I refer to myself as a "full time" realtor; however, in reality I work 7 days a week marketing my listings and finding homes for both families and investors. I am starting to see a trend in our local San Luis Obispo real estate market that I haven't seen for years. We are having trouble finding houses in the moderate to low price range. See the graph below to see the national inventory trend. Recently I placed an offer for a duplex in Paso Robles for over the asking price only to find out we had 7 competing offers, with one beating us out by $6,000. I have another client looking for a sub $175,000 property in Paso Robles. I have phoned the listing agent on several properties only to get the same answer either the property is pending or they have received so many offers that they aren't taking any more!

That is how fast the market can change from a buyers market to a sellers market! The exception to this is in the high end market. In this market homes are sitting on the market for months. With no more stated income or ARM mortgage products out there, you have to have a big income just to get a loan! I am really surpised that we aren't seeing more foreign buyers entering this part of the market. But there is hope for these high end homes and I call it the "trickle up theory". The "trickle up theory" is when the lower end starts to sell the lower end home owners sell their property to move up to moderate priced homes. Then, the moderate sellers move up to the higher end homes. At the same time there are investors, or as I call them the smart money, see the money to be made, and they buy to rent of fix up to flip. Yes, I am seeing those house flippers back in the market. They buy those sub-standard homes and fix them up so they can pass FHA standards, and place $30,000 to $80,000 in their pocket. With this profit they go out and find another to repeat the process! You can visit my web sit at www.myslohomefinder.com to follow this trend. I have a link to an excellent article below-

http://www.calculatedriskblog.com/2012/02/existing-home-inventory-declines-21.html

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