Great article regarding mortgage rate speculation...

I found this on the Oakley Berkeley Journal, it was written by Vince Wirthman of 1st Western Mortgage in Berkeley you can contact him at 510-527-2840. Great content!

Alright, everybody take a breath and let’s talk about what REALLY is going on.
Business television and newspapers are abuzz this morning with talk of "four and a half percent mortgage rates". The talk stems from a leaked story that the U.S. Treasury MAY intervene in the mortgage market, IN AN ATTEMPT to lower rates by AS MUCH AS a full percentage point below their current levels. Wow. That’s pretty specific.
As cited by the more responsible journalists however, the story is 100% speculation. Naturally, that doesn't stop the press from covering it. And, of course, it creates a wild frenzy of excitement in the real estate and mortgage industry and for homeowners. My message to Realtors and homebuyers in escrow or house-hunting and to homeowners who are refinancing is simple, and I state this with the full knowledge that at first glance some will think this self-serving – do not make the mistake of thinking that this hub-bub about 4.50% rates is a done deal. Do not stop your transactions or house-hunting based on something that may just as easily not happen. Talk this over in detail with your Realtor and mortgage professional and determine, for YOUR specific situation, what is the best course of action. As is the case with all things speculative, it's important to remember to look at the facts and not be swept up by the media-sponsored frenzy. So what are the facts? Here’s what we know:
1. The Fed and the Treasury do not set mortgage rates – Mortgage-Backed Securities traders do, based on simple supply and demand. Look at the chart below. This is today’s chart of the price of mortgage-backed securities. Notice that nothing significant has happened today (last green bar to the right). Right now, the price of mortgage-backed securities is up only 12 basis points. Price going up means rates improving. 12 basis points is nothing, and won’t even get a lender’s attention. Note also that on Tuesday, Nov. 25th (tall green bar 6 bars to the left of today), when the Fed announced their plan to purchase $500 Bn of mortgage-backed securities, prices immediately shot up 156 basis points. That move gave us an immediate improvement in mortgage interest rates of .50%. and that was before the Fed spent even $1 on any mortgage-backed securities. That is because the market is forward-looking and prices-in known factors immediately. Today’s speculative rumor has given us nothing, so obviously traders and mortgage bond investors do not believe it. Mortgage rates have actually worsened in the last 3 days.
2. Treasury or Fed intervention doesn't guarantee low rates indefinitely. The fact that mortgage rates are up by a quarter-percent since last week proves it.
3. Zero details about the plan have been confirmed. Everything you've heard about 4.5 percent rates is a guess at this point.
In order to ground my conclusions for this email, I sought out everything I could find about this story and have included some excerpts below for your review. Note that the language in these reports is purposely vague and quite weak. Maybe this rumor ends up being partially true, maybe it doesn’t. There are many reasons why it could happen, and there are many reasons why it wouldn’t. If something does happen, rates COULD go lower SOMETIME in the future. If nothing happens, rates could be higher by the time we know nothing is happening. We will just have to see how things develop from here.
“The Treasury’s consideration of additional efforts to breathe life into the housing market was first reported on The Wall Street Journal’s Web site. People familiar with the Treasury’s plans said that Treasury officials had met with top executives at Fannie and Freddie last week but that neither had been notified that any steps were taken toward putting such a plan into effect. By one account, the new program would be available only to home buyers, not to people who simply want to refinance their existing loan at a lower rate.” via NYTimes.com
Mortgage News Daily - The Journal reported that the government would encourage banks to issue new mortgage loans at lower rates by offering to purchase securities backed by the loans at a price equivalent to the 4.5 percent rate, funding the program by issuing Treasury debt at 3 percent. The Treasury Department plan is only in the talking stage and may not be ready until after President Bush leaves office on January 20 at which point it would be necessary for President-elect Obama to sign off on it.
CNN Money - Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said. Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.
"It is clearly designed to bring buyers into the marketplace and soak the inventory of unsold homes," said Greg McBride, senior financial analyst at Bankrate.com. But others questioned whether rates would remain low and, even if they did, only a narrow slice of credit-worthy borrowers would benefit. Rates are already inching up, hitting 5.75% on Wednesday, said Keith Gumbinger, vice president of HSH Associates. Several government attempts to lower mortgage rates this year have failed to have a lasting effect.
Finally, super-low rates could keep private investors out of the mortgage-backed securities market, forcing the government to remain the primary buyer of such investments, Gumbinger said. "I can't imagine there will be a significantly active marketplace of people who want to buy at these low rates," he said. (That would not be an acceptable long-term situation, and the Treasury knows that.)
Thomas Vanderwell had this to say on his blog “Straight Talk About Mortgages:
“So far, the market has shown that they would rather earn less (frankly close to zero) and invest in US Treasuries than they would invest in mortgage backed securities. Given the history of Fannie and Freddie recently (how many billions did they lose in the 3rd quarter?) I’m not sure anyone can blame them. Can you?
So if investors are avoiding Mortgage backed securities like the plague, and there are trillion of dollars of them out there, will the interaction by the Fed make a difference? And if no difference is made, how will we get 4.5% mortgage rates? And if we do not get these 4.5% mortgage rates that homeowners will now expect, how in the world are we going to sell homes to people waiting for cheap mortgages?

Benchmark Sale!

117 Veranda ST is a big 3 unit on a double lot which we had listed for the better part of two years. It was becoming a running joke in the office as all of us had shown it several (if not dozens of) times, but couldn't quite get this one off the list of current inventory.

Congrats to Bill who finally did the unthinkable and closed the sale last week making the sellers (and us) very, very happy. So long 117 Veranda, and tell your friends... we can find the right buyer for ANY multi.

Top 3 Mistakes Landlords Make When Looking for New Renters

Over the next three weeks, we will review BIG mistakes made by rental property owners... three, in particular. Big mistake number one?

#1 Relying on newspaper classified ads when setting market rent rates.

Prospective tenants have many avenues by which they can compare rents besides the newspaper: Local property managers, Realtors, and Internet listings. Property owners renting their own units need to check these sources in addition to the newspaper.

Real estate agents can discuss current market rents broken down by areas.

In order to assess current market rent rates, owners should also check sites such as craigslist.com, yahoo.com, rentnet.com, as well as local property management websites.

The best thing you can do is to go out and see some other units personally! Be honest with the landlord and ask if you can tag along when he/she is showing their unit to other prospective tenants.

Utilizing these additional sources, you are better informed as to what the market rent for your units should be. Check in next week for #2 on the list of big mistakes made by landlords.

Foreclosure Stats

In Cumberland and York counties, the latest data indicates 4,954 properties with foreclosure filings (as of August 2008). That equates to 1 in every 2,477 housing units. That is roughly a 60% increase from a year prior and the numbers are expected to rise.
~information obtained from Realtytrac.com

Countdown to Election Day

The credit and financial markets are crashing around us so I'm here to infuse some sunlight into the bleak backdrop. With 26 days until the election, it's prudent to note that historically, activity in this business picks up after an election; especially at the end of an administration (regardless of who wins). Is the Presidential election going stymie the economic downward spiral??? Probably not. However, there is some sense of relief and settling-in that occurs once the next Commander-in-Chief is named. Although we have been plugging away with very little to complain about, it would be nice to see overall activity pick up... here's hoping!

Just Listed...

Beautiful Oakdale Neighborhood Arts & Crafts Style 2-Family consisting of 2+ BR Owner's unit and a 1 BR rental unit upstairs. Hardwood floors, moldings, glass doorknobs, charm galore! Could easily be converted back to a large single family as well. Call or write for more info.

N.A.R.'s Cheif Economist Addresses Portland Board of Realtors

Brit and I attended a meeting this morning which featured Lawrence Yun, Chief Economist for the National Association of Realtors, giving his forecast for both the national and local real estate markets.

Mr. Yun , armed with a succinct presentation of historical data and trends, outlined his thoughts on where we are, how we got here, and where we're headed. His sentiment throughout the talk was one of optimism, hence the title "Rebound: Sharp or Modest". His overall prediction was that 2009 will bring with it a sense of market stability and confidence.

Empirical data, sharp observations and deductions, and scrambled eggs made for a very stimulating morning. Call or write for more details on Mr. Yun's presentation... he was kind enough to make his slide show available to us.

What's next?

Pretty tumultuous past few days... Lehman Brothers goes under, Merrill Lynch gets absorbed, AIG gets bailed out, and to cap it all off? The Fed leaves rates alone.

After much speculation that it would cut rates, the Fed surprised most by, in what appears to be a plea to stay calm, leaves the federal funds rate at 2%. The Fed asserted that the rate is already low enough to spur economic growth. Despite investors disappointment, the market rallied late anyway.


While the Fed's rate has no direct impact on mortgage rates, when lowered it does pump money into the economy, heightening confidence and generally loosening the money clips of most mortgage investors.

On the bright side, lenders are seeing (for the first time in quite a while) a renewed influx of existing borrowers looking to refinance as rates have already dipped to enticing levels; perhaps the fed knows what its doing after all???

With the financial markets seemingly coming apart at the seams, many are burying their heads in the sand, fearing the worst and opting to horde cash rather than look for opportunities. This short sightedness is unfortunate given most investors do quite well in times of uncertainty, assuming they know where to look.

Bottom line: The environment is ripe to purchase. Inventories are still high and rates are coming down. Do not be scared that 130 year old institutions are closing their doors. Rather, capitalize on the opportunities that present themselves. Real Estate is as stable a vehicle as there is. Be smart... here are three important keys to real estate investment:
1. Manage your resources
2. Manage your expectations
3. GET IN!!

Activity Report

Last week, Sullivan Multi closed $520,000 in volume among 9 units. Six of those units were the Biddeford six unit I referenced a short time ago. The building needed work and the buyer was not actively looking prior to my contacting her on this particular property, but the opportunity proved too good to pass up. She will likely have the units renovated and fully rented before the snow flies. Nice Job! For more info on these latest transactions, call or write us here at the office.

New Listing

Now offering 85 Cumberland AVE for $385,000. A large 3 unit with updated electric and plumbing, replacement windows. Bonus attic room allows owner occupant the possibility of living for free on the cusp of one of the hippest, most desirable parts of the city! Call or write for more Info.

New Listing: 6 unit on High ST

Charming six unit on the Peninsula in very solid condition with positive cash flow based on actual numbers. Four units have been updated; four parking spaces. Offered for $465,900. Call or email for more details.

Pocket Listings

For those not familiar with the term, a pocket listing is a property with an owner who would like to sell, but is not formally listed and on the open market. The broker who knows about it (and likely has a written agreement with the seller) considers this a pocket listing... one which he or she has access to, but other brokers do not. For obvious reasons, this is highly advantages to the broker who has the relationship with the potential seller.

As a buyer, it is a benefit to work with a broker who has access to all of the inventory, beyond what is listed on the MLS. As a Seller, it can be a much less stressful process to sell by forgoing the usual rigors of dealing with tire-kickers and less-than-serious buyers.

Where am I going with this?? We have lots of pocket listings. We share them with our exclusive buyers. As a buyer, you should be working with us to ensure you are seeing ALL of the available inventory.

New Listing

Great 2 unit w/ large 2 car garage, parking & yard. Each unit is in fine condition with great hardwood floors. Top unit is townhouse style w/4 BR & 1.5 baths. Exterior needs a little TLC but don't let it fool you, this is a real charmer on the inside. Visist the web sit or call us for more info.

Know thy Self...

As a company, we started by just dealing with 2-4 units in Portland. That was it. We consolodated and focused our efforts on one very specific market. We grew and became very succesful as a result.

Over the years, we've expanded into larger commercial-sized buildings and into sub markets of Portland and even other cities. We've always been high on Portland due to the inherent value and long-term equity potential. What we run into, however, are investors who (like most investors) want the numbers to "work". While it is not always clear exactly what that means, it generally refers to cash flow... something that is particularly elusive in Portland.

The solution? Well, I just put a client under contract to purchase a 6-family building in Biddeford listed for $150,000. The building consists of six 2 bedroom units, needs cosmetic and some electrical updating. Not bad, huh?

What's the catch? The catch is, you now own a 6-unit in Biddeford! Regardless of how the numbers look on paper, you now own and need to manage a building in a market that is notoriously hard on owners. Not that there's anything wrong with that... but it is work. The client who is buying this building happens to be a pro and already owns and manages many units in that market. She's doing it right. She has consolidated and focused her efforts and resources to become successful in one particular market. It is labor and management intensive, but it can be done.

The moral of the story? In a real estate market where everyone is looking for a deal, know your strengths and limitations. Having a down payment and ability to finance does not make buying a big cheap building in any city a slam dunk. You've got to possess the ability to follow through and manage your investment to it's highest potential. School's out for now...

Parkside Two-Family

Large 2 unit on the peninsula, great layouts, period details, private outdoor patio spaces, deck. LOOKING FOR FINISHING TOUCHES. A great equity builder. Call or check the website for more info.

Bye, Bye, Manny

Nuff said.

Market Sentiment...

This is more our perception than anything else, as I've not compiled any statistics to back this up...

We're getting the sense as brokers that the overall attitude toward the market is shifting. Up until recently, potential buyers were adamantly opposed to pulling the trigger until they "saw the bottom".

Have we seen or at least reached said "bottom"?

There is something in the air now that's been noticeably absent in recent months: people are actually looking at and buying real estate. Savvy investors are capitalizing on opportunities and first-time owner occupants are moving in on 2,3, and 4 units. Hooray!

Lenders are still very tight-fisted and conservative, but there are some signs that even they are starting to come around. I've heard some very positive things with regard to both owner occupants AND investment programs. Let's get in the game people!!

Soggy Golf

I was pleased on Monday to represent Sullivan Multi in the annual Portland Board of Realtors golf tournament. It was a perfect day for golf up until around the 14th hole when the skies opened up and we got drenched. I'd love to say that the rain affected the scoring of our foursome, but sadly, I can't even convince myself that sunshine would've tipped the scale for us. Oh well, until next year!

West End Four-Family

Sullivan Multi just acquired this new listing. It is a classic west end four-unit with great potential for sweat equity. It's got off street parking, decks and location working for it already... all it needs now is someone to take it to the next level. Call or check the website for more details.

Activity Report

Last week, Sullivan Multi closed eight units among three buildings for a total volume of $935,000. Leave it to us to work so hard during the hottest days of the year so far! For details about the sales call us... one of the buildings was unlisted.

Safe and Happy Holiday Weekend!

The Sullivan Multi Team wishes you all a safe and happy Holiday weekend. We hope you get some much needed and well deserved R&R and come back next week with multis on the brain!

Maine Sunday Telegram article to appear July 6th

Chris wrote the following article for the Commercial Real Estate section of the Maine Sunday Telegram. In the article, I breifly outline the "short sale" process and what it entails. The column will run on Sunday July 6, 2008:

As a result of the current “mortgage crisis”, many folks who over-leveraged in order to purchase property in the last several years are finding themselves precariously close to losing their home or investment to foreclosure. In certain instances, a short sale is advantages to both the flailing property owner and a savvy investor.


A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, it is required that the lender approve the proposed sale.

This sounds like a no-brainer to an investor as in most cases the property is acquired for much less than what the appraised value was a short time ago. However, these transactions differ from conventional transactions in several ways.

First, expect the process to take 90 to 180 days (or more). There are often several tiers of approvals required, depending on the lender.

Second, understand that you are dealing with a seller who’s motivation to sell is limited only to avoiding foreclosure. They stand to gain nothing else; if that is not sufficiently important to them, their actions may seem irrational and counter-productive to getting the deal closed.

Thirdly, the property has likely been neglected and will probably need some amount of work in order to be brought up to par.

An investor’s ability to work through the obstacles is essential to securing a property through short sale. But a sound strategy, patience, and diligence will pay off with the addition of instant equity to your portfolio.

New hands at the helm of the GPHA

Congragulations to our very own Brit Vitalius who was recently elected President of the Greater Portland Housing Association. The GPHA exists to act as a resource for landlords to share information, educate the general public and advocate for the interests of landlords.

Under Brit's leadership, the group is looking to develop a website, offer email distribution of the newsletter and reassess the meeting format. for more information or to get involved with the GPHA, email Brit at
britvitalius@gphalandlords@yahoo.com

Who Wants Lunch?

After a six month hiatus, the Sullivan Multi Blog is back on track! Here is my commitment to our faithful (to-be?) devotees: New posts AT LEAST ONCE A WEEK. If we lapse, the first person to bring it our attention will recieve a double cheeseburger from Portland's landmark Vivian's (the best burgers ever!!!)on us. Stay tuned!

Segments of the Market Are Waking Up

The past few weeks have seen a resurgence of activity in the Portland multi market. We are seeing serious investors (many of whom have been dormant for years) start to think about buying again. Lagging behind: Owner occupants. Many first-time buyers are still hesitant to pull the trigger. It's a shame... rates are low and inventory is high. Perfect conditions for getting into your first multi!