Wishes for a Wonderful 2008

This year has been an uneven one in world news, and a generally depressing one for the real estate market. I think that we are all ready to see it end. I know that we're all hoping for changes to FHA requirements and lender compromises on the millions of loans about to adjust in 2008. At least there is now a recently passed Mortgage Forgiveness Debt Relief Act, which eliminates taxes due on the money lost in personal residence sales.
And while thoughts of world peace and clean air dance like sugarplums in our dreams, we can move our thoughts closer to home (and reality) and imagine the Sunnyvale Downtown Development near completion next year...finally a downtown that we can be proud of!
I would like to wish all of my readers a Happy and Healthy New Year!

Real Estate, Taxes, and the New Year

Mike Luckovich published a clever, and all too true, cartoon in the Atlanta Journal-Constitution. It showed Father Time 2007 standing in the doorway of a house with a "Price Reduced" sign out front, explaining to the New Year Baby that he can't leave until his "blankety-blank" house sells.
I read in the SJ Mercury today that the California State Legislature is looking at ways to plug the $14 billion dollar budget deficit without cutting spending. The first place they look is always the $50 billion in tax loopholes. A possible victim might be the various property ownership deductions, but what terrible timing this would be, with the economy so impacted by the subprime situation. If Legislative Analyst Elizabeth Hill has her way, homeowners would no longer be able to deduct mortgage interest off their state personal income taxes...a saving to the state of around $5 million...but what a disincentive that would be to new homeowners in an already hurting housing market!

Would You Believe...More Websites?

A reader asked about websites specific to real estate. Here are just a few.
The obvious ones for buyers or homeowners looking for current listings are Realtor.com, for national information, and MLSlistings.com, for up-to-date local listings from our Multiple Listing Service. And don't forget ColdwellBanker.com...It has wonderful online videos on buying, selling and home remodeling.
A great way to access such information as property tax assessments, deeds, parcel maps, property detail reports, and even comparable sales is Public Records Online Directory...access to public records is free, but the site charges a small fee for property detail reports. There's even a foreclosure search by zip code for the intrepid investor. http://publicrecords.netronline.com
The U.S. Census Bureau site is another great resource. It offers hundreds of ways to slice and dice data on population, income age and other factors that can affect home buying. The American Community Survey in the site is a new annual study on how communities change...and it's free.

...Between a Rock and a Hard Place

An old client of mine is being transferred to Seattle by his company. Unfortunately, the cute one-bedroom condo he bought several years ago is in North San Jose, and in a price range ($300,000) that has been most impacted by the subprime squeeze on the first time homebuyers and investors who would be potential buyers for his home.
Unlike our "Oasis" of more expensive Peninsula homes, the value of his place has declined nearly ten percent in the past year.
In a way, he is lucky. Most of his work involves travel and working at home, so he's not being pressured to move for a while. That's particularly good, because Seattle, with its healthy economy, was listed in the New York Times as one of the few areas, along with Portland and Charlotte, where prices are increasing.
We just extended his condo listing for another six months.

More Interesting Websites

I had a comment from Dasha on yesterday's post, mentioning that many of the Bay Area's residents don't walk much, and that a more appropriate site is Drivescore, which has a similar setup to Walkspot, but it shows a map of establishments in your neighborhood and calculates a Drive Score based on the number of places within a convenient driving distance.
Two other sites that might prove useful were sent to me by a Washington Mutual lender I know.
Optout will help improve your credit scores in as little as 30-45 days free with very simple steps. Very few people realize that under the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Companies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance that are not initiated by you. This website will help you to stop them.
The other link, Implode, is a list of all lenders that are in risk of closing their doors. If you have a pre approval you may want to be sure they are not on this list and/or ask them how this affects your pre approval. Most to the companies are wholesale brokers and not direct lenders.

Something for Christmas

Happy Holidays to all my readers.
As a little gift for the season, here are two useful sites you might want to bookmark.
Walk Score - Walk Score helps people find walkable places to live. They calculate the walkability of an address by locating nearby stores, restaurants, schools, parks, and more.
Crime Reports - Type in an address and you'll get the latest crime reports in the area. Any person can sign up to receive free crime reporting and community policing email alerts from local law enforcement. You can choose the type, frequency and geography for reports and alerts you wish to receive based on their geocoded address.
Best of all...these are free!

We're Number Three!

Admittedly, it would be even better to say we're number one, but it's still nice to know that San Jose (and I include all of Santa Clara County in my thinking) is considered the third healthiest city in the country. I picked up an issue of Self magazine in Dallas to read on the plane, because I had finished my book. In their feature on the top 100 metro areas, San Jose came in behind only San Francisco and Suffolk-Nassau counties in New York.
In the category breakdowns, we came out number one in Healthiest Eaters...locally grown produce and our huge Whole Foods markets, meatless items on menus, and 18% fewer fast food outlets than the national average, all helped us to best the runners-up, San Francisco and Orange County.
Unfortunately, we didn't do as well in the Best Environment or Cleanest Air categories, but we placed number two in Least Smoky (fewest smokers) after Salt Lake City.

Back in California Again!

I flew in from Florida last night, and braved the crowds at the San Jose airport... all the travelers who were leaving for the Holidays. It's a pleasure to have a broadband connection again, and leave the dial-up behind.
Waiting for me were a collection of Mercury News articles, most of which were more optimistic about the real estate market than the West Palm Beach paper had been. One of the best was entitled, "People no longer fleeing Silicon Valley," by Mike Swift.
Florida is recording a 20% population loss, so it's nice to read that the great flight from Silicon Valley is over.
75,000 more people migrated out of Santa Clara County for other parts of the United States than moved in from 2001 to 2005. But in the past year, that outflow ground to a near halt. Meanwhile, the rate of foreign immigration to the South Bay surpassed Los Angeles County this year, and Santa Clara County had its largest percentage growth since 1997. More than 40 percent of Santa Clara County's population growth came from foreign immigration.
Immigrants "are a large percentage of our buyers," said Craig LeMessurier, a spokesman for KB Homes, the largest home-builder in Santa Clara County. Santa Clara County has joined San Francisco as "one of the gateways into the country for many, many people, and certainly a gateway into California,"

Saving Borrowers from Scams

Freddie Mac recently did a study which revealed that one in four delinquent borrowers searches the Internet first, before contacting a bank or lender to find out how to avoid losing their home. These searches can send them right into the hands of a scammer with the sole mission of stealing any equity they have in that home. Although home values have fallen in many areas of the country, many of these financially strapped homeowners still have some equity remaining.
Brad German, public relations director for Freddie Mac, says "When you have an increasing population of delinquent and frightened borrowers, it's like a dinner bell for scam artists."
His company, one of the nation's largest investors in residential mortgages, has produced a two-minute video, posted on popular Internet site YouTube, hoping to help prevent troubled borrowers from losing their homes, or at least preserving their equity. Check it out at youtube.com/avoidfraud.

Well, at Least It's a Start...

You can't please all of the people all of the time. The Feds are proposing controls that will crack down on shady lending practices, those that have lured in the subprime borrowers and left the country on the brink of a recession.
Loan originators are saying that the new rules are too stringent. Mortgage industry representatives are especially upset by the restrictions on prepayment penalties, where borrowers are punished for paying off loans early, and by tighter controls on judging a borrower's ability to afford the loan payments.
Consumer groups see this move by the members of the Federal Reserve as "too little, too late," because it does nothing to help people left holding the bag now.
I guess we'll just have to watch and wait for the next developments.

Michigan's Even Worse

Some time ago, I wrote a post about my son and his wife in Kalamazoo, Michigan, and the difficulties they were having with their rental property. Today, I read that Michigan and Ohio rank numbers one and two on Fannie Mae's list of states with the largest credit losses through September. Loans written off with no hope of recovery were $185 million for Michigan, and $101 million for Ohio. In contrast, California saw $30 million, and Florida, $21 million. Michigan also had the nation's highest unemployment rate, 7.7 percent. The national average is 4.7 percent.
The mortgage problems here in Florida, and back home in California were fueled primarily by a speculative bubble, lenders who were too lenient, and borrowers who made bad decisions. In the Midwest, where five of the seven leading states in loan losses are located, the economy is a major factor.
Housing is a lagging indicator of economic decline, and there were 340,000 jobs lost in Michigan since 2001.

A Quiet Holiday at The Mall

I don't know what's happening back in the Bay Area, but it's a lot easier to find a parking spot in Florida malls this year,when my sister and I go shopping. The real estate situation has affected more than the stock market. Holiday shoppers are staying away in droves. Gone are the days when homeowners could "pull a little equity" out of their rapidly appreciating houses and hit the malls to buy Christmas gifts. With Florida, Nevada (especially Las Vegas) and California posting the nation's highest foreclosure rates for the past several months, retailers are starting to see repercussions.
Many stores are curtailing inventory levels and starting earlier sales and promotions,and discount stores will probably benefit from the "trade down" effect,as cash-strapped consumers start bargain hunting. The local Costco here in Lake Worth was mobbed.

A Self Fulfilling Prophecy

It's a lot easier to be optimistic about the real estate market when I am back in our Sunnyvale-Cupertino "oasis." Here in Florida, we are surrounded by foreclosure signs.My niece and her husband have arranged for a "deed in lieu" with their lender on a condo rental they own. In that arrangement, the bank takes back the property for the outstanding loan amount, and they avoid the stigma of foreclosure.
Today's Bloomberg News predicts that the crash of 2007 will only get worse in 2008,according to everyone from Fannie Mae to Lehman Brothers Holdings.
Even our own Jim Gillespie, CEO of Coldwell Banker, admits that "it's not going to turn really strong next year." Median home prices in the U.S. declined in 2007...the first time since the depression, according to the National Association of Realtors. It's anyone's guess whether Treasury Secretary Paulson's plan to slow foreclosures will slow the trend and help enough of the 1 million mortgage holders who are expected to default in 2008.

Caring For Elderly Relatives

Florida seems to be "the land of the retirees," judging by the people that I've seen here while shopping and eating out with my sister. It reminded me about an interesting new website, Caring.com.
It provides guidance, information, and an online community for those serving as caregivers for aging people suffering illnesses and disabilities. Content includes articles and checklists on health, housing, finance, and products and services.
One of the site's articles concerns creative gadgets that help the elderly continue living in their homes. Among them are a watch that monitors a person's movement and heart rate and sends e-mail or instant messages to caregivers if it senses an emergency, and a similar monitor that sends an alert when someone falls. The story is timely, especially in light of the fact that a study commissioned by Clarity and the EAR Foundation, "Aging In Place in America," found Seniors fear moving into a nursing home and losing their independence more than death.

The Grass is Always Greener...

This morning's headlines in the Palm Beach Post read "Foreclosures triple across region." A year ago Palm Beach County had 542 notices of foreclosure sent to local homeowners. This November, there were 1671 sent out, a 208% increase. That means one foreclosure for every 371 households. Neighboring St.Lucie County is even worse, with a 239% increase. Prices in these counties have been dropping precipitously in recent months, but owners have mostly tried to hold on to boom-time prices, hoping for a turnaround...or at least for things to stabilize.
RealtyTrac, back in California, hasn't released national figures for November yet, but in October, Florida saw one foreclosure for every 273 homeowners,as opposed to one in 555 households, nationwide.
During my annual visit to Florida last winter, my sister and her husband took me to an Open House at a new housing development around a private lake. There was a festive atmosphere, with refreshments and a large crowd of potential buyers looking at the beautifully staged homes. Many of them were already sold. Now they tell me that most are sitting empty, and the others have lost value.
California's looking pretty good.

Are My Moving Expenses Deductible?

I had an email today from a client who had moved this year and asked whether her moving expenses were deductible. Luckily, I had recently downloaded an article from Moving Advocates, sent by the National Association of Realtors.
As 2007 wraps up, many of us are getting our records in order to prepare for tax day, April 15, 2008. If you've also made a move this year, you are probably wondering if there are any allowable tax deductions.
The IRS does allow tax deductions for moves which were made to accommodate a job in a new location. There are, however, two tests which must be met in order to qualify for deductions.
Test 1: Distance Test
To qualify for a deduction, your new principal workplace must be at least 50 miles farther from your previous home than your old workplace was from that same home. In other words, if the commute to your old workplace was 3 miles, your commute from your previous home to your new workplace must be at least 53 miles. If you did not have a job before moving, then your new job must be at least 50 miles from the previous home.
Test 2: Time Test
In addition, you must work full time in the general area of your new workplace for at least 39 weeks during the 12 months right after you move. There are exceptions to the time test and other rules apply if you are self-employed. Check with your tax advisor or check out Form 3903 on the IRS website for details.
If you have passed both the distance and time tests you may be able to deduct:
Costs for packing, crating and movement of your household goods
Up to 30 days of storage and insurance for household goods
Transportation and lodging expenses (not meals)
You may not deduct expenses that have already been reimbursed by your employer and you may not deduct sightseeing or house hunting trips.
Make sure that you are getting the tax deductions that are allowed, but speak with a tax advisor to see which deductions may apply to your specific situation.

Surrounded by Palm Trees

After a day of travel, I'm safely settled at my sister's house in Lake Worth, Florida. When the flights, and the layover in Dallas seemed to drag on, I reminded myself of the early settlers crossing the country in covered wagons,and stopped my silent complaining. Today I had to spend time on the phone with AOL (in India, of course...the world is truly flat) reinstating a dial-up account, so I could have access on this "classic" Compaq computer.
Even on vacation mode, I feel reconnected when the Internet is at my fingertips.
Real estate here is a different scenario than at home in California. Houses on my sister's pleasant suburban street run from $220,000 to $300,000, and many have pools and oversized lots (by our standards.) The condo market is overbuilt, and foreclosures are rampant.

Writing on Vacation

My next posts will be written in Sunny (I hope) Florida, where I'll be visiting my sister and her family for the next couple of weeks. I will continue to keep in contact with my clients and potential clients, now that my that my trusty Treo is restored. I always have an associate on hand to make "house calls."
Writing this blog might be an interesting challenge, though. My sister, Louise, has a very old computer that runs on a slow, dial up network. I'll also be covering email for Bonnie in my office, who's having hip surgery. They say that patience is a virtue, and this will be a test of mine, but I will be in vacation mode where everything should be slower, and in the tropics...American style. What's a little wait for the computer?
See you at the "Early Bird".

Is Your Home a Piggy Bank?

Today's business section of the Mercury News had an interesting article about homeowners who have been borrowing for years against their equity, essentially using up any appreciation (which in our area has been considerable) by continual refinancing. Lenders encouraged this practice with their constant phone calling during the real estate boom years.
Friends who own a nice home in the West side of Sunnyvale are perfect examples. Every time we would go to visit, they'd tell us about yet another wonderful no-cost loan they had obtained, at even lower interest than the last. And, of course, the amount borrowed was always more than the last time. Plan to add dual pane windows?...borrow on the house. Plan a big family vacation?...borrow on the house. Sons headed off to college?...borrow even more from the house. Fortunately their property has retained its value, so their loan doesn't exceed its worth.
Many other property owners are not so lucky, according to the Federal Reserve, which tracks these things. Nationwide, homeowners drained nearly $500 billion out of their homes in 2004 through home equity loans or cash-out refinances, according to the Feds, and more and more homeowners now owe more than they own.

All My Eggs in One Basket?

You know that old expression, but I never fully appreciated it until last night. I was at my dance club, and a member asked me during a break to do a loan calculation for him...his daughter was refinancing. This isn't something I can do off the top of my head, so I went to get my trusty Treo Smartphone, which has a calculator function. I had just finished when someone asked me to dance, so I left it on the chair. At home, two hours later, I went to place it on the charger, and realized that I had never picked it up when I left the hall, and by then, it was too late to go back...everything would be locked up. Fortunately, all the club members are an honest crowd, but I was still concerned about who had it, and how (and when) it would be returned. All my phone numbers are on the phone, and most business calls come in that way. At least, all my client information and schedule are backed up on my office PC. My contact information was on the case, and the club president called first thing this morning, so there was a happy ending. I felt naked without the phone... an indictment of the age we live in?

California Realtor Numbers Decreasing

I just received two bills in my office mailbox today, one for my Realtor Association dues, and the second for a "Desk Fee," that includes Errors and Omissions Insurance...the total was nearly $4500. It's not a surprise then, that the state real estate commissioner just announced that the number of new license applicants has decreased. Right now, there are 547,311 licensees, which means that one out of every 53 people is a real estate agent!
A few months ago, there were 1,000 applicants a week. That number has dropped to 35 to 40. The reason? When the market weakens, the expenses to do business don't change, and only the good, serious agents will survive the downturn.
A positive result is that many of the "bad actors", will leave real estate, according to Commissioner Jeff Davi. As the number of licensees has gone up over the last ten years, regulatory cases have also increased. He expects that the department will have more than 11,000 violations to handle by the end of their 2007-2008 fiscal year.

A British Take on the Subprime Situation

Maybe you've had enough of "gloom and doom" articles, like the one by Paul Krugman that just appeared in The New York TImes, titled: Recession Risk Rises as Subprime Mortgage Crisis Dries up Credit. In that one, he quotes Bill Gross of bond manager Pimco as saying, "What we are witnessing is essentially the breakdown of our modern day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August."
Perhaps the Feds should have spent eight minutes watching this segment of The Last Laugh, in which British humorists The Long Johns try to explain the subprime fiasco. It is a classic!

A Smug Renter Speaks

A client called to see if I had read the article in this Saturday's Mercury News real estate section, entitled "Those Who Rent Instead of Own Are Looking Smarter These Days," and asked what I thought of it.
My uncle and aunt in New York City enjoyed many years in their rent-controlled apartment, but as I now watch tiny co-ops in that City selling for over a million dollars, I wonder just how wise they were. Actually, there have been a few times over the years when I have recommended that potential clients remain renters. If someone expected a transfer within a year or two, the expenses of purchase and sale would usually eat up any gain in equity, even in a rising market, and in a slow market, there was a chance of losing money.
Over the years, I've watched tentative investors, waiting and watching for our local prices to fall, only to realize that they were "priced out" of our market.
There are other factors besides the loss of considerable equity. Renters face pet restrictions, unexpected raises in rent, and eviction when the property owner decides to sell or move back himself.
One renter quoted in the article said that she didn't have to stress out about the subprime problems, or whether "it's a sellers' market or a buyers' market". I see this as similar to someone so concerned with the volatility of the stock market that their long term investments are sitting under the mattress.

Troubled Bridges Over Sunnyvale

Apologies, Simon and Garfunkle.
Who knew that there were 99 bridges in Sunnyvale? I've lived here for forty years and only noticed a few...mostly over Central Expressway and 280...I'll have to start paying attention.
Anyway, Caltrans inspected 11 of Sunnyvale's bridges in 2006 and found three of them, 27 percent, need repairs because they are unsafe or heading that way. The city drafted a memo in September 2007 to address residents' concerns after the deadly August collapse of an interstate bridge into the Mississippi River in Minneapolis, but only released it recently.
Two of the Sunnyvale bridges are "structurally deficient," which was the same rating as the Minneapolis bridge, but the city said no bridges are dangerous enough to close.
"Although reported as structurally deficient, or functionally obsolete, this does not necessarily mean they are unsafe for use," the memo said. Rather, "renovation or corrective work is necessary" to prevent them from becoming a hazard.
One bridge, Mathilda Avenue over Caltrain and Evelyn Avenue, has been deemed "functionally obsolete." Built in 1965, it lacks sidewalks, the clearance underneath is slim and the ramp from southbound Mathilda Avenue onto westbound Evelyn Avenue is too narrow. The city is designing a $29 million renovation, with $25.5 million from federal funds and the rest from city gas taxes.
Two other bridges, the Fair Oaks Avenue bridge over Caltrain and the Old Mountain View-Alviso Road bridge over Calabazas Creek, have been tagged "structurally deficient," because of deterioration and rust. The Old Mountain View-Alviso Road bridge, built in 1964, will likely be replaced.
Construction on the two bridges is to begin in 2009 and 2010, respectively, and will cost nearly $12 million, with $11 million in federal highway funds and the rest from the city's gas tax allotment. Four others need $975,000 in repairs to roadways and guardrails--all to come from gasoline taxes.

Time to Breath?

I was listening to Bob Brinker's Money Show as I drove home from an appointment on Saturday. High on his list of discussion topics was a plan that could save struggling homeowners from foreclosure by freezing interest rates before they reset sharply higher. More than 2 million subprime borrowers are facing higher mortgage costs and possible foreclosure in the next two years, and Treasury Secretary Henry Paulson is expected to announce details of the plan as soon as Wednesday.
Regulators and the mortgage industry are focused on restructuring 30-year subprime loans. These carry fixed interest rates for up to three years but then reset at higher rates, hitting borrowers with sharply higher costs.
During the five-year housing boom that ended in 2005, these adjustable-rate loans were widely available to subprime borrowers, whose spotty credit histories left them with limited loan options. While the loans offer initial low, "teaser" interest rates, they reset at rates much higher than those offered to prime borrowers with strong credit records.
Obviously, these loans are now held by "borderline borrowers", who are least likely to be able to handle the sharp increases and are most likely to lose their homes.
Right now, 15% of loans are in delinquency and that number is climbing. Brinker said that 100,000 loans are expected to reset every month for the next two years.
Treasury's plan would effectively extend the fixed-rate period for stressed borrowers, shielding them from a payment spike that could push them into foreclosure. Industry representatives and regulators are still thrashing out details of who would qualify for the interest rate amnesty and how long to extend the fixed-rate period of the loans, but lenders want to limit mortgage relief to borrowers who have a proven record of making payments under the initial rates.