THE LAFAYETTE REPORT: February 2009

Well, I told you so...

In October, 2008, and again in January, 2009, we urged buyers to BUY NOW.  The recommendation was made based on a number of key economic factors, including:

• Historically Low Interest Rates
• Excess Inventory - Favorable Pricing 
• Federal First-Time Home Buyer Tax Credit ($7,500)

Well, I have some good and bad news for you...

• Good News:  Interest Rates are Still at Historic Lows.
• Bad News:  Loan Products Continue to Change.  Credit Standards are Tightening.  Loan Delivery Costs are Rising.  Interest Rates have Moved Up.

Loan products are still readily available and interest rates are still at historic lows.  However, credit and underwriting standards have tightened.  For more information on this trend, read the 2008 Office of the Comptroller of Currency's 2008 Survey of Underwriting Practices. 

Underwriting Trends for Residential Real Estate 2008

• Eased Credit Standards - 0%
• Credit Standards Unchanged - 44%
• Tightened Credit Standards - 56%

The changes to credit and underwriting standards has resulted in the disappearance of interest only, stated income, 100% financing and other high risk loan products.  However, the disappearance of these types of loan products is just a part of the picture.  Other changes include increased loan-to-value requirements, tougher appraisal standards, changes in pricing of loans for high risk borrowers and properties, increased documentation requirements, etc.

FannieMae is still the largest purchaser of loans in the United States and forms the back bone of the secondary market.  On April 1, 2009, the costs charged to lenders for delivering loans to FannieMae will increase.  As the lender delivery costs increase, lenders will pass these charges on to consumers and there will be a rise in interest rates as well as the use of points.  For more information on the changes, read Fannie Mae's Announcement No. 08-24 issued October 2, 2008.  Here is an example of how the new guidelines impact the pricing of loans:

Loan Scenario:  30-YR FRM IO, Purchase, Condominium, Credit Score = 690, LTV = 80%

• Loan Delivered Before April, 2009:  Delivery Cost - 1.250%
• Loan Delivered In or After April, 2009:  Delivery Costs - 3.250%

The costs of the loan delivery to FannieMae has a direct impact on the interest rate that you will obtain on the loan for your new home.  As these delivery charges are implemented, the interest rate on your loan will likely increase.  Also, since these delivery charges are based on the type of property, down payment, credit score, etc., it is another reason that you can't and shouldn't rely on interest rates quoted over the telephone without a loan application or broad statistical interest rates published on the internet or your local paper.  Often, these interest rates represent the best possible rates - and not all borrowers can or will get these rates.

Interest rates are slowly rising.  On January 15, 2009, the national average interest rate on a 30-year fixed loan was 4.92%  On February 26, 2009, the national average increased to 5.32%.  Although these rates are still good compared to historic rates, the delay in purchasing changed your monthly loan payment on a $200,000 loan from $1,063 to $1,113 and just cost you an additional $18,000 over the life of the loan.

In addition, interest rates may rise or may fall in the future - but the real question is:  "Are you willing to risk the certainty of great, historically low interest rates now to possibly get a better rate in the future?"  Contrary to popular believe, interest rates will likely rise in the future.  Some economists and real estate professionals predict that interest rates will rise to 6.25% by the end of 2009.  Under this scenario, the monthly loan payment would increase to $1,232 and would cost you an additional $42,840 over the life of the loan (compared to a loan originated in January, 2009). 

The landscape for residential lending for the purchase of new homes is constantly changing.  Although we try to stay current on the trends and issues in the mortgage industry that impact the purchase of a new home, we rely heavily on our preferred lenders to assist our purchasers with the selection of the appropriate loan product to meet their needs and requirements.  For homes in St. Louis, Missouri, we highly recommend:

• Jim Quist/New Castle Home Loans - 1.888.570.RATE - New Castle Website - Apply Now
• Michael Gratz/Pulaski Bank - 1.866.885.0220 - Pulaski Website - Apply Now

Interested in City Living in Lafayette Square, Soulard, Washington Avenue Loft District, or the Other Historic Neighborhood of the City of St. Louis?  Need a trusted advisor to explain the loan process to you?  Need some tools such as loan calculators, guides to selecting loan products, and other tips to guide you through the lending process?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.  Or, visit our website's finance page.

Admittedly, I did not understand or realize the power of the micro blogging site Twitter.  Although other real estate professionals have raved about the contacts, referrals, etc. that they have obtained from Twitter, I simply did not see its use or potential.  However, a recent news story and my own experience showed me a glimpse of the power of Twitter:

• In this week's edition of BusinessWeek (March 2, 2009), there is a short sidebar article entitled "A Social Networker's Story:  Zappos CEO and UPS Step In."  The story describes how Tara Hunt, a marketing executive with Intuit, initially contacted UPS regarding the tracking of a delivery package and received a generic response from the customer service representative explaining that packages sometimes aren't delivered until 9 p.m. during the Christmas season.  Not satisfied with the response, Ms. Hunt summoned the power of Twitter and posted a message on Twitter (known as a "tweet") describing how she wanted to walk her dog and was waiting on UPS to deliver a package.  The tweet was heard by the CEO of Zappos who was having dinner with UPS's President for the Western Region, who then mentioned the tweet to the UPS exec.  The Zappos CEO replied to the tweet "someone will call."  The UPS exec contacted the operations manager who then was able to schedule a pre-set delivery time.  The UPS driver arrived not only with the package - but also flowers, chocolates, and dog toys.  It was an excellent example of customer service.  But, the question remains, did it pay off?  You bet.  Ms. Hunt now goes out of her way to use UPS and even purchased a pair of shoes from Zappos.

• Similar to the story above, I posted a story to my blog on ActiveRain.com about a hijacked listing on Trulia.com.  It explained my frustration with Trulia.com regarding one of our listings appearing on their site with with links directing prospects to our competitors for information on the property.  The blog post was sent to Twitter via ActiveRain.  Similar to Ms. Hunt, I had contacted customer service only to receive a generic reply indicating that a work order was being opened.  However, Rudy of ActiveRain and Trulia fame saw the post on Twitter, read the blog post on ActiveRain, and rolled up his sleeves and dove right in.  The issue was resolved in 24 hours.  Again, it was an excellent example of customer service.  Although I didn't get flowers, chocolates or dog toys like Ms. Hunt, I did get great customer service.  Similar to Ms. Hunt, I am a satisfied customer and will go out of my way to encourage our agents to use Trulia for their listings.

So here is what I learned from the article and my own personal experience:

• Customers hate automated replies or generic responses.
• Customers can accept mistakes and problems if they know what is going on with their problem or complaint and receive timely updates.
• Whether blogging or tweeting, remember that others are or may be listening (including friends, family, employers, competitors, etc.).
• If you are a company, you may just want to listen in on Twitter to see what your customers are saying about your company and the service it provides.
• A satisfied customer is more likely to be a source of repeat business and referrals.

Interested in City Living?  Interested in learning how technology can help you buy or sell your home in St. Louis?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.

In the current economic times, home owners are increasingly looking for home repair and improvement projects that increase energy efficiency of their homes in the hope that these repairs will reduce their short and long term energy costs.  In addition to the energy cost savings, there are a number of state and local program that provide financial assistance or other incentives to make these "green" repairs and improvements more affordable. 

Here are a few of the programs available to residents of the City of St. Louis:

• State Tax Deduction for Energy Efficiency Repairs:  Tax Deduction for Home Energy Efficiency Improvements  (100% of improvements up to $1,000 per return or $2,000 cumulatively)
• Utility Loan Program:  Laclede Gas - Loan Programs for Energy Efficiency (insulation financing up to $2,000 at 3% interest rate / financing for the purchase of energy efficient gas appliances up to $10,000 with 5% downpayment)
• Utility Rebate Program:  AmerenUE - Natural Gas Equipment Rebates (cost of programmable thermostat up to 50% of costs with a maximum of $25 / natural gas furnance (residential) up to maximum of $200)

If you aren't a resident of the City of St. Louis, visit the Database for State Incentives for Renewables and Efficiency to view some of the state and local incentives in your area for "green" repairs and improvements.  The site offers a brief description of each program as well as the contact information for the program's sponsor.

Interested in City Living?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.

GreenandSave.com's slogan is simple and direct - "Saving Your Money and the Planet One Household at a Time."  If you ever wondered whether a certain "green" repair or improvement was worth it, then this is the website is for you.  It has calculations on the cost and potential savings for a variety of repairs and improvements.  The site allows you to search on individual green repairs or improvements as well as certain grouped green repair and improvement projects like:

• The Green Tune Up:  Tracks the cost and saving achieved by installing such items as programmable thermostats, standby power reduction devices, compact fluorescent lighting, hot water heater blanket, shower heads, seal duct leaks, energy efficient dishwasher, and water efficient toilets.  (Cost $1,320 / Annual Savings $1,136 / Recapture Time 1.2 Years / 10 Year Savings $11,360 / ROI 96.5%)

• The Green Remodel:  Tracks the cost and savings acheived from more extensive remodeling projects such as solar path lights, windows, skylights, insulated walls, insulated basement walls, insulated ducts, solar powered attic fans, replacement of light fixtures, on-demand water heater and much more.  (Cost $15,814 / Annual Savings $4,348 / Recapture Time 4.5 Years / 10 Year Savings $43,480 / ROI 26.8%)

Although the costs and savings will vary based on a variety of factors including size of home, age of home, construction and style of home, etc., the site does offer extensive information on green homes and products which are adaptable or suitable for homes in Lafayette Square and the other historic neighborhoods of the City of St. Louis.

Interested in City Living?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.

If you are new to a city or neighborhood or if you just became aware of the need or benefits of recycling, then you may want to take a look at the website - Earth911.  Earth911 is a clearinghouse for information on recycling.  Here are some of the features of the site:

• Search Engine:  Search the Earth911 database for recycling centers and services across the country.
• Information Clearinghouse:  Review articles, new items, and tips on a host of recycling issues.  The site uses categories to group information by the type of material from garden material to construction materials to paper and much more.
• Newsletter:  Subscribe to weekly newsletter governing recycling news and tips.

If you are a resident of Lafayette Square or Soulard, here are a few of the recycling sites in the neighborhood or other specialty programs that may be of interest to you:

CITY RECYCLING CENTERS (PAPER/PLASTIC/ALUMINUM/GLASS)

• City of Saint Louis Recycling Drop-off Site - Firehouse #1:  2910 South Jefferson (63118) - 0.9 mi. Municipal Location - (314) 353-8877
• City of Saint Louis Recycling Drop-off Site - Firehouse #35:  5450 Arsenal (63139) - 3.4 mi. Municipal Location - (314) 353-8877
• City of Saint Louis Recycling Drop-Off Site - Firehouse #7:  2600 LaSalle Street (at Jefferson Avenue) (63104)
• St. Louis Public Schools - Lafayette Elementary:  815 Ann Avenue (at 7th Boulevard) (63104)
• Ritenour Early Childhood Center Drop-off:  9330 Stansbury (63134) - 1.8 mi. Location - (314) 493-6245

CITY TRASH TRANSFER (BULK ITEMS)

• City of Saint Louis South Transfer Station:  4100 South First Street (63118) - 2 mi. Municipal Location - (314) 353-8877

HOUSEHOLD ITEMS

• Salvation Army Thrift Store:  2823 Cherokee (63118) - 1.4 mi. Location - (314) 771-2684
• Salvation Army Thrift Store:  3949 Forest Park Avenue (63108) - 2.1 mi. Location - (314) 535-0057
• Goodwill Industries:  4140 Forest Park Avenue (63108) - 2.3 mi. Location - (314) 371-1296

CONSTRUCTION MATERIALS

• Habitat for Humanity ReStore:  3763 Forest Park Avenue (63108) - 1.9 mi. Location - (314) 531-4155

SPECIALTY PROGRAMS

• Crazy Crayons' National Crayon Recycling Program:  LAF Lines, Ltd., 721 Village Road, Pelican Lake, WI 54463 - (800) 561-0922
• Educational Assistance Limited:  P.O. Box 3021, Glen Ellyn, IL 60138 - (630) 690-0010
• Nike Reuse-A-Shoe Program:  26755 SW 95th Ave, Wilsonville, OR 97070 - (800) 344-6453

At PREA Signature Realty, we subscribe to "recycling" and "reuse" -particularly of our historic buildings.  If you are committed to the revitalization of St. Louis and are interested in historic preservation, we invite you to view our listings at the Georgian (former City Hospital No. 1), The Abbey on the Park (former Lafayette Presbyterian Church), and Eden Lofts (former Eden Publishing House).  For more information on these properties, visit our website:  www.PREASignatureRealty.com. 

To schedule a tour of any of these properties, please contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.