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Friday, January 19, 2007

HouseMath 2.0 - Lending Woes - News

I've received a few e-mails over the past holiday season, some asking if I disappeared. Yes, I read this and many other Blogs every week. I'm not hibernating. So here's what's up:

When people decide it's time to buy in the market this is a cool tool to use.

May I introduce the HouseMath 2.0 website. Last week, I e-mailed Kerill Sheynkman, the wizard behind this tool, if I could get his permission to blog about it. Some may have already seen the introduction to this over at Zillow Blog, but for those who haven't seen it I would encourage you to spend a few minutes to familiarize yourself with this great resource.

When you hit the "Analzye " button, your presumptions come to life. Please don't make fun of the $315,000 sales price for a home in Seattle that I used, it's for illustration only.

Below is a screenshot of financial analysis tools such as creating your reports in .PDF format.

HouseMath 2.0
HouseMath 2.0
Interestingly, Kerill Shenkyman resides in New York and has previous working relationship ties to Glenn Kelman over at RedFin. Small world. 2007 is going to be a great year in the innovation of real estate tools and Web 2.0 blog arena.

Lenders are scrutinizing loans

One of the perks of being in real estate is that I enjoy discussing issues with the people who are actually conducting business. It encompasses a large sphere: from builders, to Ardell and loan officers.

A lot of discussion is taking place about lending right now and the struggles of the sub-prime market. Seems like the tune out there is changing quite a bit. Inman News has a lot on the plate this morning (check it out quickly before the articles go subscription).

From Inman News:

Bernice Ross on "The demise of the housing ATM"
Bradley Inman on "The subprime tsunami"
Mortgage Lenders Network being shut down (evidently failing to fund on 1,409 loans across the country)

I spoke with a couple loan officers early this week and the responses were that lenders were scrutinizing transactions more. For example, one broker mentioned that an underwriter actually dropped the value of an appraisal from x amount to x amount and required that interior photos be taken along with obtaining two new comp's (comparable homes). In another example, funding conditions came back with more hoops to jump through in terms of actually verifying borrower deposits and funds to close.

Stuff

Before I forget, check out ShackPrices new mapping tools. Packed with innovative features. I had the pleasure of briefly meeting Galen Ward, the wizard behind this great tool at a function a few weeks ago. I look forward to them rolling out some new features that are coming soon.

- S-Crow

17 comments:

Grivetti said...

Pretty cool escrow...

I pulled down the Seattle house tab and ran my own numbers if I were to buy a home in town with the amount of downpayment I have available...

Assuming the 4.5% home appreciation rate and the rental increases of 4% a year... If I sold in 10 yrs, I'd be taking an investment hit of $1,110/month (ouch!).

The 8% on investment is about what I'm getting now in my IRA, so I kept that steady, and I'm paying roughly 1K in rent/month.

Additionally, this also assumes I have a limiteless pool of cash from which to play parallel universe. Coughing up $2880/month is unfeasible...

Looks like I'm better off renting

biliruben said...

Very cool.

A few problems:

Capital gains on a primary residence is zilch up until 500K, and most likely the limit will likely be somewhere 2 mil in 30 years, if you are planning to sit in your house for that long. I think there's some tax shelter provision if you immediately buy another house too, no?

You should therefore be allowed to tweak capital gains assumptions depending on whether it's a primary residence or CGs from some other investment.

You should build in maintenance costs. I would guess at least 1% annually, though obviously this would fluctuate between 0 and maybe 10%. You need to update in order for your home not to depreciate signficantly.

It would be great to build in a rough guess of rent of a particular priced house for a particular area.

That way it could just spit out that you are making a $500/mo error in purely financial decision making, or whatever.

I seem to recall something where some averages were computed from CL listings.

Great step in the right direction, however.

S Crow said...

Yes, there were some things that one has to be aware of in doing the "what if" scenarios on HouseMath.

It is in Beta and it is slighly clunky in terms of navigation and layout, but the meat behind it is phenominal and helpful, which is why I posted it.

Kirill said...

I am the guy who wrote the HouseMath site and really appreciate the comments and feedback. True, as with any other product, there are still things to be desired, but I'm pretty pleased with the feedback thus far.

it would be extremely helpful if people started posting suggestions for the site on the blog for the site. That way I have a centralized place where I can address them one by one. The blog (just up today):
HouseMath Blog
Also, I am actively working on the financial wiki which will explain all the math in detail and solicit feedback (it's just a bit of a pain to document code :).
Anyway thanks, and hope you enjoy and find it useful

Kirill said...

One other thing... the blog links to
http://beta.housemath.us
but the site I'd like people to use is http://www.housemath.us.
The beta site was there for doing previews and automatically redirects to the main site, but I might be needing that beta soon to try out some new things and would not want to disrupt the main site. So, please link/visit www.housemath.us, and I'll let you know when there's something new and cool on beta.housemath.us.

-Kirill Sheynkman

FinanceGuru said...

Sorry I have not posted in awhile. Been extremely busy at work since the beginning of the year as I got a promotion (doing NPV calculations in the Commercial Real Estate Dept for Cingular) along with a 20% pay raise (up to 28% with additional bonuses), woo hoo. Also going to be working more OT since they are behind schedule.

For the purpose of putting rental rates into HouseMath Blog: The Seattle Rental market has been extremely strong over the past year from 2Q05 to 2Q06 the AVG Rent is $905, which is a 9.3% Rent increase in the past year (4th highest % increase in the nation). Also the Occupancy Rate in Seattle is 96.7% (or only 3.3% of appts unrented). That sounds like a tight housing market (low supply) to me! Having rents increase at such a dramatic rate are starting to bridge the gap of affordability (every little bit helps) between Renting and Owning. Nationwide Seattle has the 20th highest rents in the nation and at this rate we should be 17th most expensive rental rate by 2Q07.

http://realestate.msn.com/Rentals/Article.aspx?cp-documentid=797670

OK guys don’t gloat over this too much: Recently I found out that I had a 6 month introductory period on my mortgage loan (which my broker did not tell me about) which reset and my payments jumped by 45%. So by working more and the raise should offset the increase in payments, so it shouldn’t be too bad.

uptown said...

Rent increases??

I've lived in QA (the uptown name is for the mail box) for 3 years and no rent increase. Plus they dropped the rents before I moved in, due to the dotcom bust.

As for availability, go look at Craigslist - plenty of great choices. I can rent a small house on QA for less than I was paying in Belltown during the dotcom era.

The Tim said...

Kirill,

I have updated the links in S Crow's post.


Uptown,

The thing about these rent surveys that the news loves to quote is that they only survey large apartment buildings. Condo complexes with a large number of units rented out? Not counted. SFH rentals? Not counted. 4-plexes? Not counted. Pretty much everything on Craigslist? Not counted.

So I'd take those numbers with a grain of salt.


FinanceGuru,

I find it quite amusing that you think increasing rents is a positive step toward "bridging the gap of affordability." What a backward point of view.

wreckingbull said...

OK guys don’t gloat over this too much: Recently I found out that I had a 6 month introductory period on my mortgage loan (which my broker did not tell me about) which reset and my payments jumped by 45%. So by working more and the raise should offset the increase in payments, so it shouldn’t be too bad.

You are joking, right 'guru?

matthew said...

My rent went up at my apartment complex by almost 200 bucks... So you know what I did? I moved into a condo that some guy was renting out...

Yes people rent out their condos! I know its a shocker to some people that think that everyone living in a condo complex is an owner, but people living next to you may be renters and you don't even know it!

GASP!

CRichard said...

Boy am I getting a raw deal. Not only have I been unable to enjoy paying a rent increase in over 4 years, but I am losing out on the opportunity of diverting my yearly pay raises and bonuses to to my voodoo mortgage lender instead of my savings. Renting sucks!

I guess I'll have to switch to a different finance guru.

biliruben said...

We really need to move up to a bigger house soon (3 humans, 4 cats and a dog), but no way in heck I am going to buy for at least a couple more years.

This looks pretty sweet, however. Maybe I'll sell and pour some of the profits into living the good life for a couple years:

$2995/mo for more house than I could ever afford in my lifetime

Maybe I'll low-ball 'em down to 2500.

Or the alternative would be to buy some POS rambler in Ballard and "own" for about the same monthy payment. Hmmmm....

The owners just bought, however. It would suck to get tossed due to foreclosure.

rentalbliss said...

Or this one:

http://seattle.craigslist.org/est/apa/264973109.html

It was for sale for months, and looks like they dumped a butload in upgrades into it. They are about $800 more rent than others in the neighborhood.

FinanceGuru said...

wreckingbull - Of course Im joking, I would never do something as stupid as a teaser rate...just wanted to throw that in there to see what type of response I would get. Glad you have a sense of humor, lol.

As for Rental rates in Seattle, it is an avg rent, so it indicates that overall the cost of renting is increasing at the 4th fastest rate in the nation. As The Tim mentioned it is a backwards way of looking at affordability, yet it shows that with a 3.3% vacancy rate there is a low supply of housing in the city (than the equilibrium). The 9.3% avg increase in rent indicates increasing demand to live in Seattle. Once rents increase the vacancy rate should gradually increase. This is how the increase in jobs in Seattle will gradually cause rental rates to increase, thus causing (a very very small) number of people to buy due to the increased cost of renting...yet increases the affordability index by 0.2 or something like that.

Grivetti said...

The Seattle Rental market has been extremely strong over the past year from 2Q05 to 2Q06 the AVG Rent is $905, which is a 9.3% Rent increase in the past year (4th highest % increase in the nation).

Not to drop-kick the above comment, but the temporary phenomena of 'sky-rocketing' rents is an echo-phenomena created by the dead-cat bounce seen in other tumbling housing markets across the country...

Buyers Scarce, Many Condos Are for Rent

I know, "but Seattle's different!" blah, blah, blah, ... but I beg to differ.

synthetik said...

I'm sure there are less "apartmenty" type apartments available due to the massive amount of condo conversions (which always signal the end of a housing boom, btw).

I spent the last 3 weeks or so checking around for an apartment and had no problems finding the perfect place. In almost every case we were able to get better terms or negotiate a lower rent.

2007 will be a banner year for rentals. The market will be awash with flipper condos and homes which will rent for below market value.

The apartment we finally chose is $1000 less than what we're paying now downtown. It's in Capitol Hill, 950sq feet 1bd w/den (for my office) w/ great view of downtown. Covered parking, etc... I'm excited because now we have a groc. store and lots of cheap eats (mmm... Pho 9000!)

SeattleMoose said...

Cool....agree that no cap gain tax <500K.

Robert Cote stated (on Ben's Blog) that in the future the RE agent will be extinct and that you will be able to purchase RE via a "kiosk".

The point being that with modern technology (internet dBases/tools) and the repetitive nature of the process involved in buying a house (steps/forms/calculations) it lends itself very well to computerization and a "do it yourself" activity.

The future looks dim for the RE industry as it implemented today.....