What Good is a Home Warranty Anyway?

RISMEDIA, September 5, 2006—Buying a home warranty policy during a real estate transaction provides many benefits to the buyer, seller, and to the real estate professional as well. What are these benefits and what good is a home warranty anyway?

What exactly is a home warranty? Home warranties are one-year or 13 Month policies that cover a home’s major mechanical systems and appliances. The mechanical systems often include the plumbing, heating/furnace, electrical, water heater, and cooling systems.
Major appliances may include the washer and dryer, refrigerator, and built-in microwave.

Oftentimes, there are optional items to purchase that are not covered under the base contracts. These items can include the pool and spa, septic tank, or roof leak repair. Real estate professionals should instruct their clients to read over the home warranty contract thoroughly to understand what is and what is not covered. See article, “Home Warranty Companies are Not all the Same! Research, Compare, and Ask the Right Questions.”

When a covered item breaks due to normal wear and tear, the policy holder makes a claim with the warranty company and a service vendor comes to the home to diagnose the problem. If the item is covered, it is either repaired or replaced. The policy holder is required to pay a service call fee to the vendor at the time of service.

Having a warranty on the buyer’s new home definitely helps their pocketbooks at a time when they probably need it the most – after the close on their new home. Repairing or replacing items in a home is the last thing a new buyer needs.

What good is a home warranty to the seller? Sellers are moving out of the house, so why would a warranty benefit them? Some home warranty companies, such as HWA, offer Free Seller’s Coverage. During the period that a home is listed, HWA ensures that covered appliances and mechanical systems are repaired or replaced for a low “per visit” service call fee. HWA covers the listing period up to 180 days and if more time is needed, it can be extended for another 180 days. The home will typically sell faster when there is a home warranty attached to it because it gives the buyer piece of mind when deciding to purchase the home. The warranty will also decrease the post-sale liability to the seller. The seller will not have to deal with the problems and expenses that may occur after the home has been closed.

Fed Takes Break from Hikes

From RISMedia

The Federal Reserve Board yesterday left short-term interest rates unchanged at 5.25 percent.

The Fed says the lull after 17 consecutive increases was because of the softening housing market, high energy prices, and previous rates increases.

Home buyers "who are looking at longer-term fixed-rate products are going to get a pretty good deal," says Doug Duncan, chief economist of the Mortgage Bankers Association. Duncan believes rates on fixed-rate mortgages aren't likely to move much higher unless the Fed decides to boost rates again to stem inflationary pressures.

Yesterday, rates stood at 6.66 percent, nearly one-third of a percentage point below their recent peak of nearly 7 percent, according to financial publisher HSH Associates.

The pause also will slow the pace at which rate increases are being passed on to borrowers with adjustable-rate mortgages, though some borrowers could see their rates continue to rise if their payments are tied to an index such as the 12-month Moving Treasury Average, which reflects rate moves on a lagging basis.

Source: The Wall Street Journal, Jeff D. Opdyke, Jennifer Saranow and Ruth Simon (08/09/2006)

PENDING HOME SALES INDICATE TRANSITIONING MARKET

From CAR Newsline - Wednesday, August 02, 2006

For the second consecutive month, pending home sales have risen on a month-to-month basis, a sign the housing market is beginning to level out, according to a recent report from NAR. In June, the Pending Home Sales Index (PHSI), which gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed, increased 0.4 percent to 113.9 from the reading one month earlier and edged down 9.6 percent from June 2005. An index of 100 or more generally indicates a high level of home sales activity.

"Once again, we have various housing indicators moving in different directions, which itself is an indicator of a market in transition," said NAR Chief Economist David Lereah. "The housing market is striving for balance -- a process that will take several months. A quieting in the movement of indicators should restore confidence to home buyers who've been on the sidelines, waiting for the right time to get into the market, and now is the best time we've seen since the 1990s in terms of housing choices and flexible terms."

The PHSI declined across the nation in June compared with the readings a year ago. On a regional basis, the PHSI was highest in the South, where it edged down 4.8 percent to 130.7. In the West, the index fell 14.2 percent to 110.1. The PHSI also declined in the Midwest and Northeast regions, falling to 103.3 and 99.4, respectively.

And you thought the Sonoma Coast was expensive....

Here's a place for $135M - and it's not even close to the waterfront!

But I think the best part is that the quoted expert hyphenated her name - with the same name...

Click here to see Laurie Moore-Moore's comments on the luxury property.

The once-hyper market is experiencing a soft landing near historical norms

The media continues to buffer their harsh outlook on the housing market, as indicated by a few of the articles below and those to come.

Check out this article which states the NAR (National Association of Realtors) expects a slower years in terms of sales, minor fluctuations in prices, and stabilization near or below present levels.

Activity is certainly increasing here on the Coast and while we generally follow the trend, it appears that we may be recovering more quickly than those areas that continued to see sales growth well after we took a hit. Most of the sub-million dollar properties have already seen reductions and it seems to be a good opportunity for those who waited.

CALIFORNIA HOUSING STARTS REFLECT NORMALIZING MARKET

New home construction in California declined during May 2006, falling 21.2 percent when compared with the construction pace recorded one year earlier, the California Building Industry Association (CBIA) recently reported. Despite the decline, housing starts continue to edge up on a month-to-month basis, suggesting builders are on track to produce 170,000 to 180,000 new housing units in California during 2006, the fourth-highest number of starts in the past 17 years.

Based on the number of building permits issued, 15,263 new housing units were started throughout the state in May, with single-family units accounting for 75.8 percent of the starts. While single-family production is expected to remain strong in most of Southern California, starts are anticipated to trend downward in San Diego, the San Joaquin Valley, the Sacramento region, and the Bay Area, according to the report.

Click here for the complete story

10 years...

Over the past few months, I've been hearing more and more people mention Zillow.com when discussing current home prices and trends. I was on the website again today, and while most of the data for our area is incomplete or entirely inaccurate (DO NOT rely on Zillow.com for specific home values on the Coast), I did find some interesting historical data showing how well real estate has treated us here in California - and Bodega Bay in particular. I haven't confirmed the data but the general numbers add up.

Here's what was shown over the past 10 years (percent growth):
ZIP 94923: 306.0% (15.0% annualized)
Bodega Bay: 301.2% (14.9% annualized)
Sonoma County: 240.6% (13.0% annualized)
California: 269.8% (14.0% annualized)
United States: 108.5% (7.6% annualized)