A New Year Wish

The best thing that I can say about 2008 is that it's over.
We know that there is no magic wand that will instantly right all the wrongs done to the economy and to the real estate market, but let's hope that the new year will be the beginning of positive steps in that direction.
Wishing all of you a happy, healthy and prosperous 2009.

Should I Refinance Now?

Several of my clients have asked me if this is the right time to refinance their homes, now that interest rates are approaching an all time low.
Refinancing often requires fees for title insurance, a new appraisal, document processing, and a fee for the mortgage broker or lender. While it may appear the refinance is free, the costs often are added to the total loan amount or the borrower is charged a higher rate. Because there are fees typically associated with a refinance, many financial industry specialists recommend borrowers not refinance unless they plan to occupy the house for at least two years. Although there will be a reduction in the monthly payment, it can take a few years to break even on the refinance.
Remember, loan options are more limited today than a few years ago. Generally, the best rates are offered on traditional loans, such as 15-year and 30-year, fixed-rate mortgages, and loans for borrowers with at least 20 percent for a down payment for buyers or existing home equity for those seeking to refinance.
Some subprime loans made during the boom carry prepayment penalties–a fee or percentage the homeowner pays the lender in the event the mortgage is paid early, but lenders may waive prepayment penalties and allow the borrower to refinance with another lender if doing so prevents foreclosure.

When a Computer Dies...

I've just returned from a visit with my sister and her family in Florida. Last year when I stayed in the West Palm Beach area with them, I was able to access the web on their 10 year old Compaq and use dial-up to write about the state of Florida Real Estate on this blog. However, this was the year the poor old thing finally succumbed to hardening of the hard drive, or whatever virus old computers die of, and went dark for the last time.
On Christmas Eve, we went shopping for a shiny new HP desktop model, and I installed it for them. I just received my first email, informing me that they now have their high speed cable connection.
I'm pleased to be home and back on my DSL network.
Happy New Year to all my readers.

The Self-Employed Can't Get Mortgages

The government's recent moves to help the mortgage market have made it easier for many people with decent credit scores to get a loan. But for many self-employed people -- even those with perfect credit -- the mortgage freeze has yet to thaw.
We certainly expected to see a reversal of the loose lending practices that led to the current economic situation, but some economists say lending standards have become overly restrictive, helping push down home prices even further.
The volume of jumbo loans fell by more than 70%. "Underwriting criteria have swung from foolish ease to tighter than any in modern times," says Lou Barnes, a mortgage banker in Boulder, Colo.
The changes are increasingly frustrating a group of borrowers whom banks once coveted: affluent self-employed professionals such as doctors, lawyers, accountants and small-business owners.
An example:
Hubert Noguera, a 38-year-old medical-device engineer who also owns a small business, is one of them. He can't get approved for a loan, even though he has a strong 800 credit score and is prepared to make a 40% down payment on a house near San Francisco in the $800,000-to-$900,000 range. Mr. Noguera says he has assets worth three times the $500,000 loan he's requesting and is in the process of selling his share of a recently inherited residence in Saratoga, Calif., worth $1.1 million.
Banks have turned down the loan because the amount he's requesting appears high relative to the portion of his income that he can fully document -- and they won't consider his other income, says his mortgage broker, Connie Madrid.
The chief problem for self-employed people is that they don't have W-2 forms from an employer to document their full wages. For proof of income, they must rely solely on their income-tax returns. But income for the self-employed is often understated for tax purposes, in part because they tend to take large business-related deductions. Self-employed borrowers who don't take any big deductions won't likely face the same difficulty getting a loan.
In the past, most self-employed people took out "stated-income loans," which don't require borrowers to fully document their income. Such borrowers typically made substantial down payments, had strong credit profiles and paid a slight premium -- around 0.25 percentage point -- on their interest rates. Defaults were low.
That changed as the loans grew in popularity during the housing boom and expanded beyond their traditional market of affluent professionals. Stated-income loans eventually became disparaged as "liar's loans" because borrowers' incomes were frequently exaggerated. Many banks have eliminated stated-income loans entirely, and Freddie Mac -- which, with Fannie Mae, is one of two government-held buyers of mortgages -- will end its stated-income lending program designed for self-employed borrowers next month.

Some Positive Thoughts

The key to remember is that while there is a lot of bad news in the economic sector right now, housing does remain a critical component to an American’s livelihood.
Though many people think that things are all bad, regardless of the state of the economy, people will always need to buy and sell homes. Births, deaths, marriages, divorces, job relocations and other important life changes trigger the buying and selling of real property. These life changes don’t stop because the economy slows down. Real estate will continue to be bought and sold.
It is not simply an investment. Real estate is where we live and raise our families. If we were able to jump ahead 10 years from now, we'd be looking at this market as a thing of the past—a time when we all probably should have been buying a lot more real estate.

What are the Most Cost Effective Remodeling Projects?

Exterior remodeling projects return the most money as a percentage of cost, according to the 2008 Remodeling Cost vs. Value Report. On a national level, wood deck additions and all types of siding replacements -- upscale fiber cement, mid range vinyl, and upscale foam-backed vinyl -- returned more than 80 percent of project costs upon resale.
The 2008 Remodeling Cost vs. Value Report compares construction costs with resale values for 30 mid range and upscale remodeling projects comprising additions, remodels and replacements in 79 markets across the country.The report is produced by Hanley Wood, LLC in cooperation with "REALTOR®" magazine.
In addition to wood decks and siding, window replacements and kitchen remodels also returned a relatively high percentage of remodeling costs. A mid range bathroom remodel was estimated to return 74.4 percent on resale, comparable to a mid range attic-to-bedroom conversion, at 73.6 percent of costs recouped, and a mid range basement remodel, at 72.7 percent of costs recouped. As in last year's report, the least profitable remodeling projects in terms of resale value were home office remodels, sunroom additions, and back-up power generators, returning only 54.4 percent, 56.6 percent, and 57.1 percent, respectively, of project costs.

Does Helping Borrowers With Delinquent Loans Make a Difference?

New data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months.
"After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent," said U.S. Comptroller of the Currency John C. Dugan. A report scheduled to be published later this month will show continued increasing delinquencies and foreclosures in process for all first-lien mortgages held by the largest national banks and federally-regulated thrifts, Dugan said.
New foreclosures decreased by 2.6 percent from the second quarter, but these statistics are not a good sign.

A Couple of Thanksgiving Presents for the Housing Market

Finally, some good news for the mortgage industry. In a move to increase credit availability, the Federal Reserve and Federal Home Loan Banks announced that they would purchase up to $600 billion in Mortgage-Backed Securities, exciting news that sent interest rates for 30-year fixed-rate mortgages plummeting below 6.00% and near the lows for the year!
Also, Fannie Mae and Freddie Mac recently announced they will postpone foreclosure sales and evictions on occupied single-family residences that were scheduled to occur between Nov. 26, 2008 and Jan. 9, 2009. During this time, the companies will streamline their mortgage modification programs, scheduled to launch Dec. 15. Foreclosure attorneys and loan servicers will continue to contact borrowers who have defaulted on their mortgage loans owned or guaranteed by Fannie Mae or Freddie Mac, and continue to pursue workout options.

Happy Thanksgiving

What a year it has been. To say the least, it has been a roller coaster ride...and not just watching the stocks rise(and mostly)fall, or the vicissitudes of the presidential campaign.
The government continues to struggle with finding a solid, coherent way to help the housing sector. The administration is still working on the best way to deploy the remaining money in the $700 billion financial rescue plan passed last month. The debate among policy makers will continue until they choose a strategy that makes the most sense for the economic well-being of our country.
While we anxiously await their next step, all we can do is continue to move forward, continue to conduct business and stay motivated in this ever-changing business climate.
Wishing you and your family a cozy, memorable and fun filled time together as we begin a holiday season.

A Tale of Three Houses

No, it's not about the three little pigs and their homes made of straw, sticks and bricks. This one's the story of three Cupertino listings...and it's true. Three houses were listed in the same neighborhood at about the same time. One was on a busy street, and took a little longer to sell, but the other two were very comparable. The first was listed at $1,400,000, but the second came on at $1,070,000. The first one sat on the market, but the second had ten offers and sold considerably over the listed price. "If you price it right, they will come."
We are hearing that many sellers are in denial, and insist on last year's prices.
The reality is that prices are down 15%, even in the most desirable areas, and over 70% of local pending sales are "short sales" and bank owned properties in the lower price ranges.

Sunnyvale Downtown...Another Victim of the Economy

It looks as though difficulty in getting signed leases will be slowing the Sunnyvale Redevelopment Project. The grand opening, originally scheduled for late 2009 is now delayed until 2010. The city council voted last week to allow Sand Hill Property Co., the Town Center's developers, some leeway in delivering completed retail space to tenants. The most promising news is that the development company is funding the project out of pocket, and not using loans. It is also expanding its marketing and leasing teams to facilitate the opening, despite the slow economy. With a growing list of retailers closing multiple branches of their stores, a time cushion seems like a reasonable alternative.

Can New Borrowers Qualify?

Another dancer pulled me aside last night at my dance club's Thanksgiving party. He wanted to know if people are still able to get loans approved, now that lenders are controlled by strict guidelines in the wake of the subprime flooding. Our local market can be more difficult, as expensive properties (those that require loans higher than $729,000...soon to be back to $624,000) are requiring a 20% or more down payment.
But lenders are learning the ins and outs of FHA loans again, and these are being approved more quickly than when they first became "the only game in town" for borrowers with as little as 3% down. Our extensive inventory of well priced bank-owned properties are selling(and closing!)quickly. Sales in the Bay Area are up 38%. What that tells us is that many people feel like right now real estate, in relative terms, may not be a bad place to park their money. Compared to the volatility of the stock market, housing—if history is any indicator—is looking like a pretty good investment.

Prediction by a Feng Shui Master

We've heard predictions by renowned economists, now how about one from a master of Feng Shui? He's just as likely to be right in this time of volatile stock and real estate prices.
Y C Sun spoke to our Realtors' group this morning and delivered his predictions for the upcoming Year of the Ox.(February 4, 2009 to February 3, 2010.) This year's ox...the Earth Ox..is determined, consistent, diligent, organized, and responsible. But he can also suffer from irrational fears. Y C recommends hard work, with time out to "smell the roses." (Like Babe, the blue ox?) He advised us to keep a positive attitude and predicted a business turnaround by October, with a 37 month expansion to follow.

The Pros See The Glass as Half Empty...or Is it Half Full?

A Money Magazine writer asked ten well-respected economists and managers of money funds to give their forecasts for the economy and the stock market in 2009. The answers were all over the place, but the consensus was that they saw the optimum score on the economy as 3-5 out of a possible 10. (The glass was half empty.) Some of their predictions: The GDP will either remain flat for the year, or at least for the first half of 2009, the unemployment rate will peak at 8% by the end of the year. But they also guessed that the consumer price index would grow by 2.1% by year's end, and that the 30 year fixed rate mortgage rate might hit a low of 5%.
As for the stock market, predictions were more optimistic. The scores ranged from 5.5% to 9%. (The glass is half full.) They estimated a rise in the S&P 500 to anywhere from 1000 to nearly 1200, and for the Dow to hit 12,500 by the end of the year. One prediction was a gain of up to 30% from October's lows. They all see this as the time to buy equities.

Predicting the Future of Real Estate

I thought I’d share an interesting note released by NAR this week—projections for 2009. NAR Chief Economist Lawrence Yun “expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in the latter part of 2009 as the housing market begins a steady improvement.” This is a good sign for all of us and for buyers. If they are thinking about staying in a home even for just a few years, now may be the perfect time...possibly the best buyer’s market of our generation. At this week's Realtors' meeting, we'll have our annual predictions by a feng shui master. I wonder if he'll make the same forecast?

Sunnyvale has a New Blog

This week, the city of Sunnyvale has added a blog called CityLine, that will publish online twice a week, and help city leaders to communicate with residents. Before this, a quarterly report was the primary way that residents were kept posted with what was happening locally. The first issue includes an update on the Town Center redevelopment, and the Mary Avenue extension. I was on Murphy Avenue for lunch today, and had a perfect view of the progress that has been made. The new garage, west of Macy's, will open next week. And don't forget, Target will only be open through the Holiday season, then will close on January 3, so the new Target can be built...with a scheduled opening in November of 2009.

Can an Oasis Be Under Water?

If you've been reading this blog for a while, you know that I call our local market...Sunnyvale, Cupertino, Mountain View, Los Altos and Palo Alto...the real estate oasis, because these areas have been relatively untouched by the foreclosures and short sales that surround us. The tech market has kept out economy strong, and there were very few subprime loans in our local sales. All around us, properties went "underwater," with values reduced to less than the loans that secured them. Now a new report from Zillow shows that home values in these areas have slipped slightly in the third quarter...not a lot, only 1-2% compared to last year at this time...but the first crack in the dike that surrounds us. I don't expect large numbers of our homes to "go underwater," but as unemployment rises in the Valley, values could fall somewhat more, although nowhere near the double-digit range of our neighbors in San Jose.

Rescue Bill and Phantom Income

Headlines today described a provision added to the federal bailout bill that will rebate the huge sums that many Valley workers owed the IRS on "phantom income", never collected when they exercised certain types of stock options at the time the dot com bubble burst.
I thought of clients of mine who were caught in this trap. They were forced to sell their dream home and move into a rental when they discovered that they owed the government taxes on the amount that they could have collected at the time the options were exercised. This family had just remodeled the kitchen and enrolled their daughters in local schools when this provision of the alternate minimum tax hit them. To top it off, he lost his job...another bonus from the Internet bubble's bursting. I remember that the wife was near tears every time I saw them.
I hope that this windfall will create a college fund for the girls and partially make up for the misery they felt when they lost their home.

Appraisals...The New Problem

Kenneth Harney wrote about something Realtors have been seeing for some time in his latest column. As lenders shied away from anything that hinted at the "free and easy" attitude in the subprime loan fiasco, they also tightened their appraisal requirements. No longer could comparable sales from six months ago, or longer, be considered...appraisals now must be based on sales closed within 90 days. If there are none available, appraisers can use pending sales an even listed prices. In areas seeing a drop in prices in recent months, these comparables were often sold for less than the subject property.
If this happens, buyers and sellers will usually have to renegotiate the contract. Very few buyers are able or willing to make up the shortfall between the appraised valuation and the selling price. Unfortunately, sales often fall through if there is no middle ground. Just one more hassle in the already troubled real estate market.

Post Election Real Estate Updates

A few days have passed, and although it is too early to see any effects, we have a some hints on what the immediate future will bring.
Among the notable plans Presidebt-elect Obama has to help stimulate the economy (according to CNNMoney.com

Allow savers to temporarily tap into their retirement plans without early withdrawal penalties
Require financial institutions participating in bailout to put a 90-day moratorium on foreclosures for homeowners “acting in good faith
Allow troubled homeowners to refinance to a loan insured by FHA
Create a 10% tax credit for homeowners who do not itemize their taxes
Create a $10 billion fund to help victims of predatory loans
Authorize bankruptcy judges to reduce mortgage principal

Again, only time will tell, but the hope for something new and a better future for all of us is welcome news right now.

As for our local market.. though sales are still slow, the outlook seems to be brighter in Silicon Valley. Many agents are gearing up their business for the start of 2009. Buyers—though cautious—are out touring properties, visiting open houses and meeting with their Realtors. We seem to have a lot of buzz, though little of it has resulted in notable amounts of activity. Much of that inaction was due to the volatility in the stock market over the last several weeks and the lack of knowing who our next President would be. Now that one of the two is settled, we may see a return to stability and security in this region.

Minor Repairs Can Make a Major Difference

I was so impressed by Hank Bailey's simple, yet important, comments on real estate myths, that I will respond to his second myth: 'Minor repairs can wait until later. There are more important things to be done.'
He states: " Minor repairs make your house more marketable, allowing you to maximize your return (or minimize loss) on the sale. Most buyers are looking for homes that are ready for them to move into. If your home happens to attract a buyer who is willing to make repairs, he/she will begin asking for repair allowances that come out of your asking price. The amount of an allowance that you have to offer a buyer is usually more than what it would cost for you to make the repair (or hire someone to make the repair). Remember, buyers are comparing your home to other homes that are currently on the market. Your home should be inviting so that everyone who looks at it can see themselves living there."
Because this is such a necessary part of selling a home, I offer any sellers that I work with the use of a trusted and reasonable handyman, and a list of reliable workmen in every field, from electrical to minor hardwood repair. Then I make sure that the jobs are done properly and quickly.

The Right Price is a Magic Number

We saw quite a few homes on Realtors' tour today, but two stood out in my mind. They were in the same area of Sunnyvale, but one was priced higher by about $15,000. The lower priced home was larger, fully remodeled, and staged. The more expensive one was cluttered and needed work in the kitchen and bathrooms. Despite the listing agent's efforts in adding flowers to the yard, and bringing refreshments to the tour, there was no way to keep from comparing the two. In a slow market, condition is important, but price is everything. Hank Bailey recently wrote a post debunking the myth that you should always price your home high and negotiate down.
He said "Pricing too high can be as bad as pricing too low. If you list too high, you'll miss out on buyers looking in the price range where your home should be. Offers may not even come in, because buyers who are interested in your home are scared off by the price and won't even take the time to look at it. By the time you correct the price and list your home at its fair market value, you will have lost that window of opportunity when your home draws the most attention from the public and real estate agents; i.e. the first 30 days that it is on the market. A well-trained real estate agent who looks out for your best interests will consult with you on your home's fair market value and different pricing strategies for the current market."

Green Remodeling

This is the second article on remodeling safely, from the Mesothelioma Cancer Center.
While the remodeling of existing older buildings to make them more energy efficient is certainly a necessity, it doesn’t come without its hazards. Remember, older homes and commercial buildings probably contain all sorts of toxins, most notably asbestos. The miracle of the 20th century building industry, touted for its amazing heat- and fire-resistant properties, this hazardous mineral can be found in attics, wrapped around pipes and furnaces, and even in walls, floors, and ceilings, especially in buildings constructed prior to 1980.
Once the asbestos is addressed and then removed by a licensed professional and disposed of properly, green insulation options should be given serious consideration. The Department of Energy says heating and cooling accounts for 50-70 percent of the energy used in the average American home so finding sound and healthy insulation options are a necessity. Today, these options can save natural resources as well. Eco-friendly insulations are often made of recycled materials and include cellulose (old shredded newspapers treated for fire resistance), cotton fiber (usually made of recycled batted denim), and spray polyurethane foam.
Statistics show that the foam, for example, can cut energy costs by about 35 percent annually, according to studies done by manufacturers. The other projects claim similar figures. And because these are recycled materials, less waste is going to the nation’s already crowded landfills.
Formal listing of Insulation Alternatives
• Cotton fiber – This has become the favored insulation of many green builders or remodelers. Made of recycled batted material, such as denim, this fiber insulation is then treated with a chemical to make it fireproof. However, cotton fiber insulation is non-toxic and produces no off-gasses, making it a healthy choice.
• Cellulose – Who would have believed that someday we’d be insulating our homes with recycled newsprint? Well, that’s exactly what cellulose is and it’s become one of the most popular new green insulating materials. Chemically treated to reduce mold and promote heat and fire resistance, figures show that cellulose can reduce air conditioning and heating bills up to about 20 percent each year.
• Icynene – This water-based spray polyurethane foam keeps a home very tight, allowing little opportunity for things like mold to form. This healthy insulation also contains no polybrominated diphenyl ethers (PBDE), which are often found in spray foam insulation products. PBDEs can be quite toxic and are already banned in some states. Icynene also contains no hydrochlorofluorocarbons, which are believed to prompt global warming.

Remodel Safely: Protect yourself and the Environment while saving Money

There are many things to consider when remodeling or buying an older home. Homes built before 1980 could easily contain asbestos. Of course, even homes build after 1980 still may contain products that are worth taking note of. As technology and long-terms cost efficiency is constantly evolving, so too is our need for environmentally and health safe building materials. If you are interested in remodeling, saving money and improving your environmental standing in the world, then here is some information to get a project started in the right direction, provided by Asbestos.com.
If you’ve thought about remodeling a home that was built before 1980, you’ll probably be faced with a number of toxic materials during the process, not the least of which will be asbestos. Asbestos insulation was used in millions of homes during the housing boom of the 20th century and though it’s safe to be around when it’s enclosed or in good condition, damaged asbestos can be a real problem. In addition, removing asbestos in order to replace it with a healthy alternative can be a pain as well – it needs to be removed by a licensed professional – but the end result is well worth the time and expense.
Asbestos Removal:
Non regulated asbestos material can be legally performed by homeowners, regular contractors, or licensed asbestos abatement contractors as long as the National Emissions Standards for Hazardous Air Pollutants (NESHAP) are not violated.
The health risks involved in handling non regulated asbestos materials is small but the removal should be done in a manner that will minimize the release of fibers due to breakage. It is recommended, because breakage in inevitable, that one wears asbestos related safety equipment including a disposable work suit, gloves and must be medically able to wear a half mask respirator with High Efficiency Particulate Air (HEPA) filters, and adhere to the principles of wet removal and without visible emissions.
Removal in workplaces, schools and public facilities must be done by a licensed asbestos abatement contractor. The best way to dispose of asbestos is to bury it or use any way that will prevent it from becoming airborne. Service area landfills will often accept large amounts of asbestos provided it is properly contained or shipped in bulk.

Don't Let Tiny Closets Shut Out Buyers

Walk-in closets are a necessity for many of today’s home buyers, who have lots of stuff and need a place to store it. So if your house is lacks storage space, you have a big challenge to overcome in order to maximize buyer appeal.
Small storage areas are common in older homes and condominiums.
“We’re a consumer society, and we have more stuff than ever before,” says professional organizer Barry Izsak, owner of Arranging It All in Austin, Texas. “Twenty or thirty years ago, people didn’t have 15 pairs of black shoes.”
But even tiny closets and other storage problems are surmountable, and the hard work purging and organizing will gives sellers a head start on packing for the move — and will go a long way in winning over potential buyers. Izsak suggests telling sellers: “If a closet is packed to the gills, it’s only going to draw attention to how small it is. The smartest thing you can do is weed through what you have so the closets look ample, not overflowing.”
Sift through your belongings and clean out everything that’s not used regularly. “A rule of thumb is to have closets no more than two-thirds full,” says Terrylynn Fisher, a broker in Walnut Creek, and a trained staging expert, says prospective buyers should be able to look inside a closet and think: “I have more stuff than this. But there's extra room in the closet, so surely my things will fit.”
Bedroom closets, which can make or break a sale, need special attention when they’re on the small side. That means removing clothes, shoes, and bulky jackets that are out of season or worn only on formal occasions. But sometimes it’s not just clothes and shoes clogging up a closet. Purses, hats, and sports equipment also are commonly misplaced in bedroom closets — making the space seem smaller than it really is.

Purchases Using a Reverse Mortgage

Nancy Soule, a longtime local loan broker, spoke to our Realtors' meeting this week. I had realized that Seniors could obtain a reverse mortgage for funds needed in later life, but she brought up a new possibility: Using a reverse mortgage to buy a new home. If a retiree wants to buy a smaller home but would like to conserve some assets for emergencies, he or she can use a reverse mortgage for part of the cost.
Even though total monthly income may be from Social Security, qualifying for this loan is not a problem. Because there are no payments to make, a reverse mortgage has no income qualifications. Even if the borrower has less than stellar credit, this type of loan is possible...as long as any liens are paid off.

A Real Estate Bargain

I was up in the East Bay for a couple of days. A friend who is also a real estate broker had just made what I consider to be a terrific investment in the Concord area. This was a bank-owned property that was priced low for the market. He used a line of credit on his own home as the down payment and put a little cash into cosmetic repairs. Less than a week later, it was rented for an amount that gives him a $600-plus cash flow every month, after expenses. Unfortunately (or fortunately, since it's good that our property values haven't dropped to that degree) our prices in the South Bay area have not reached that level, but he claims that there are many other bargains to be had an hour north of us.

Watching the Mary Avenue Bridge Progress

We're getting closer to completion of the long-awaited Mary Avenue bicycle footbridge over Highway 280. The anchoring of two support towers that will support the bridge's main overpass has been completed.
A series of thick steel cables are now installed. These cables, which connect to the top of the towers and the bases of the bridge, allow the bridge to span the eight-lane highway with no supports added to the freeway.
The $10.2 million bridge will allow easy access across the highway for pedestrians and bicyclists. It is funded primarily by Valley Transportation Authority, with remaining funds coming from the cities of Cupertino and Sunnyvale.
The area at its bases will include about 12 acres of native landscaping, sound walls and bicycle trails. It has a tentative completion date for spring 2009.

A Retired Realtor?

Money Magazine says that about 40% of workers are forced into early retirement because of poor health and downsizing, but Realtors never seem to retire...in fact, many have already retired from another job, and are entering real estate sales as a second career.
My friend and associate Suzanne was the hit of the Housing Industry Foundation's fundraising party and auction last night. It was a costume event attended by local Realtors and Affiliates: title company reps, mortgage brokers and property inspectors. The costumes were attractive and original, but Suzanne won first prize.
She was dressed as a retired Realtor, complete with a shopping cart holding all her "worldly possessions" including an open house sign and a box of old escrow files.
Her outfit was classic "bag lady".
Unfortunately, with so many of us self employed and reliant on an industry that seems frozen in place, the humor was a little too close for comfort.

How New is the News?

It used to be enough to get Money Magazine every month, Newsweek each week, and a daily newspaper. Add to those sources the frequent email bulletins from the State and National Association of Realtors and local business seminars, and I could be current with all the real estate and economic news. Lately, I've been checking CNN and the Internet several times daily, and I still can't keep up to date with the frequent changes we're seeing.
My newest issue of Money went to press before the bailout was approved by Congress.
These printed issues remain a good place to read in-depth analysis...the "why" behind the news, but they lack the immediacy that we need to know what's happening now.

Do Nothing Day

Some frequent advice regarding investments seems to be: "Do nothing." My friend Lynn-Gross Cerf of Organization and MORE! carries this one step further in an email she sent.
Here is something rather FUN – Nov 3rd is Zero Tasking Day …… and wouldn't you know that it falls on the last day of Day Light Savings. On this day – well technically some time in the wee hours of the morning on Sunday 11/4 – we get an extra hour as the clocks “fall back”.
Have you ever given this day some extra thought? Most of the time we just look forward to this day and the extra hour that it brings as a chance to get a bunch more done or, at the very least, to sleep an extra hour. Why not try something FUN and different this year. Why not “spend” that hour doing nothing. Yes! You read that correctly. What would it be like to do nothing for a whole hour … heck, you might even discover something wonderful about yourself.
Give it a try …… see just what FUN doing nothing can be ……. It's only 60 minutes!

Sales Falling Through

This morning our office meeting was somewhat subdued. Several of our pending sales (including one that had 8 offers in Cupertino) have fallen through because of buyers who had investment losses or were concerned about company layoffs. Although a normal market has a 15% DFT (deal fell through) rate, the percentages seem much higher now.
Leslie Appleton Young, economist for the California Association of Realtors, recently announced that the state home values will lose 31% this year, and buyers are listening to these statistics, too...however, this percentage is heavily weighted by the low sales prices on bank-owned properties.
Some good advice from Warren Buffett:
"Be greedy when others are fearful, and be fearful when others are greedy."

Weekly Market Update

There are two types of buyers out there right now—those who see this as an opportune time and are acting on it, and those who have adopted the "wait and see" philosophy and are afraid to act. For the most part, our Silicon Valley offices are reporting that buyer interest has slowed with floor calls and open house activity decreasing. Last weekend, we had only 4 groups through my Sunnyvale townhouse listing. The market that seems to be faring the best is the entry level and continued success lies in the bank-owned arena where REO properties continue to generate multiple offers. With all of the drama on Wall Street, things have slowed quite a bit. An Agent in the Morgan Hill office just sold a home that was listed earlier this year for $1.1 million—the final purchase price was $750,000 (as a short sale).
There are two types of clients who are seeing success in today’s market:
Buyers who see real estate as a long-term investment and see this market as an opportunity and are acting on it.
Sellers who price their home correctly, stage it and are motivated.

A Look Back

I took a tour of my older posts today, and, out of curiosity, checked out what I had written a year ago...scary how quickly things can change. Despite the optimism in this blog, there were plenty of warnings in others that I wrote.

Friday, October 19, 2007
When "Spin" is a Sin

Here they go again! Big black headlines in the Merc this morning...20 Years After Black Monday, What if it Happened Today? and Home Sales Plummet 40% in the Bay Area. The implication is that stocks could drop by 22% as they did in the market collapse of 1987. So then what happens this morning? The Dow Jones, at an all-time high of nearly 14,000, drops almost 300 points. The NASDAC falls by 55.
Sue McAllister says in her article that "Wary buyers and a shaky mortgage market slammed the brakes on Bay Area home sales in September, which reached the lowest level of any September in the past two decades"...scary stuff, but true. It's the negative emphasis that I object to, especially since a chart on page two shows that although sales are down from last year, the median price in Santa Clara County is up 5.4% from last September. Also hidden in the second page is Richard Calhoun's comment that the market in Silicon Valley remains skewed, with our more expensive areas dramatically outperforming cheaper ones.
But so many people read just the headlines...

Some Common Sense

This was sent to me from Gabe Bodner, an excellent local lender:
We are clearly in the midst of a brutal bear market that began on October 9th of 2007. Since that time, Stocks have declined by a staggering 41% as measured by the S&P 500. Remember that a decline of 20% constitutes a bear market...and a 10% decline is a "correction". The last bear market which occurred between March 24th of 2000 and October 9th 2002, and saw a 49% drop. Overall, the average bear market lasts for 12.3 months, with the average decline being 32%.



The current bear market is right in line with the average historical time frames, and the extent of the decline is worse than previous bear market averages, but still slightly better than the bottom made in 2002. So the historical data might suggest that we could be nearing a bottom. Many people will say that it's different this time, and that we have never had a financial crisis like we are seeing. While that is true, it's always different, and it's always something. The last bear market was driven by fears of terrorism and fueled by a dot com/tech bubble...both of which had never been seen before either. As for the date October 9th, which was yesterday, it's interesting to note that October 9th of 2002 marked the end of the last bear market. And October 9th 2007 was the beginning of the present one. While it may just be coincidence, it will be interesting to see if our current low has some significance in stock market history.
One bright spot is that oil prices are plunging, falling from a high of $147 last July to current levels of around $75 today, at least making a trip to fill up at the gas station slightly more bearable.

California Offers Some Debt Relief

Federal law provides a tax exemption for debt forgiveness on a loan incurred for acquiring, constructing, or substantially improving a principal residence up to $2 million if the debt is discharged from 2007 through 2012.
The state has been slow to conform to the Fed. decision, but starting September 25, 2008, the federal income tax exemption for debt forgiven on a home loan now applies to state income taxes to a limited extent. Under the new California law, the maximum qualifying debt is only $800,000, not $2 million, and the maximum exclusion is $250,000. Moreover, the California law only applies to a debt discharged in 2007 or 2008. Not perfect...but better than nothing.

Wait and See

That seems to be the mantra of the week. Sellers are saying it, and buyers seem to be taking the same tack. They're waiting to see what happens with the bailout, with the election, with the mortgage industry, and with the housing market. They're watching the stock market move up and down, and wondering about their job security.
Meanwhile, people are less likely to go out and buy things, especially a long-term investment like a new home.
Those who are closer to making a purchase are waiting to see what impact the bailout might have on interest rates before they proceed with a purchase, and those who had planned to sell stock for a down payment are reluctant to sell in a declining market.
Economists and real estate pros agree that even with the bailout package, it will take the housing market some time to recover.

A Weekend off To Recover

After the last week, and the disastrous dip in the stock market, I needed some R&R.
Three days of square dancing at the Jubilee held at the Fairgrounds in San Jose gave me just the break I needed. There's nothing like music, exercise and the company of good friends to get your mind off your troubles.
Fortunately, two agents in my office were able to hold open house at my townhouse listing. Their reports were that traffic on both Saturday and Sunday was very slow.
I have a feeling that everyone is taking a "wait and see" position. Mortgage money is still very tight and despite today's welcome rise in the market, I expect that stocks will yo-yo for some time with every bit of good or bad economic news.
Maybe I'll have to do a lot of dancing.

Thoughts on the Economy from Coldwell Banker

This week, we're afraid to open our third quarter 401K statements as they arrived in the mail. Some of us are making countless calls to their financial advisers in hopes of a miracle or a quick fix to stop the decline. Still others are choosing to ignore it with the “ignorance is bliss” philosophy.
The bottom line is, we’re in this together. The problem that we have right now is that we as Americans collectively borrowed more than we could afford to pay and in turn, we created a system on Wall Street to support that culture. Now we’re paying for the errors of our ways.
This is a huge wake up call for all of us and should be a good opportunity to remind ourselves to be more fiscally responsible and much more conservative than we have been in the recent past.
One of the major issues affecting the real estate sector of our economy right now—keep in mind housing represents 20 percent of the GDP so it is an important part of our national economy—is the inability for consumers to get mortgage loans. We have a lot of interested buyers right now—many of whom see the opportunities available in today’s market—but unfortunately, only those with golden credit seem to be able to close the deals.
As an important aside, historically speaking, during times of economic crisis, consumers tend to invest their money in tangible assets, like real estate. We expect that this may be the case in the months ahead as consumers look to buy homes for all of the lifestyle reasons that prompt people to buy (i.e. marriage, births, divorce, deaths, retirement, etc.) but also with a consideration of the historic long-term appreciation that makes home ownership a valuable investment over time.
We certainly are in a time of uncertainty. But while so many of us sit glued to CNN and our investment portfolios, the housing market labors on. Because the beautiful thing about real estate is that it’s not just an investment—though it may be one of the most important investments a consumer will make in his/her lifetime. Your home is where you raise your family and plant your roots. It’s where you hang your hat and make memories to last a lifetime.

Autumn Yard Care Assures a Springtime Garden

WIN Home Inspectors had great suggestions for homeowners.
After a flurry of work managing yards and gardens during the summer growing season, many homeowners and home shoppers are ready to take a break from outdoor activities. Unfortunately, handling autumn lawn care tasks is necessary to assure that the lawn, trees, and plants are healthy come springtime. Fortunately, the fall to-do list is easy—and will vary somewhat by climate. But in general, here’s what clients can expect to find on their outdoor chore list:
Mow and kill weeds as usual.
Rake and manage leaves.
It may sound simple and obvious, but letting leaves pile up for too long, especially in a moist environment, can choke the grass beneath, leading to “dirt patches” where formerly living grass used to be. You need not run out and rake every day, but keep an eye on accumulating leaves and consider raking every three days or so. When raking, rake deeply rather than just skimming the surface to remove leave, which can help remove “thatch”—a dying layer between the soil and grass. As the season progresses, double-check that leaves aren’t clogging outdoor drains or gutters.
Water, but time watering carefully.
Water trees and shrubs in early fall (if you’re not getting normal rainfall), and water both evergreen and deciduous plants in early fall. However, once leaves begin falling wait until the plants are bare before giving them a major watering. The reason for this is to prevent the plants from launching new growths that won’t be hardy enough to withstand the coming winter.

Get Those Loans in Soon!

If you've been thinking of buying a home, refinancing, or are buying, but haven't locked in the rate yet because of market uncertainty...this is something you should know.
Sue Baker, our in-house lender, notified us this morning that the $729,000 conforming loans now available here in California must close by December 1, 2008. The law implies that the new maximum ($625,500) doesn't take effect until the new year, but this new time limit adds additional pressure on borrowers.

The Five Top Credit Mistakes

With the recent tightening of credit requirements by lenders, these pointers from Credit CRM might be helpful:

Credit Mistake #1: Closing Credit Cards Accounts
This is probably THE biggest credit mistake that consumers make. What you may find surprising is that closing credit card accounts can hurt your credit score almost as badly as missing a payment. Consumers make this mistake based on poor advice from a mortgage lender as a strategy for improving their credit scores.
In most cases, credit information will remain in your credit reports for seven years from the account's date of last activity, but you never want to get rid of old, positive information in your credit reports. This information actually helps your credit scores. So, what should you do with old credit cards that you don't use any longer? What you don't want to do is to let the account become inactive. Use the card every few months for low dollar purchases like dinner or a tank of gas....then pay the bill in full.
Credit Mistake #2: Missing Payments
This one's a no-brainer. Your FICO score evaluates previous late payments in three different layers: How severe, How recent, and How frequent
Credit Mistake #3: Settling Accounts
"Settling" is a term used in the consumer credit industry that means accepting less than the amount you owe on an account. A Short Sale, when the lender accepts less than the full amount due on a mortgage is an example of this. The only way to avoid the damage to your credit scores is to arrange a deal with the lender to report the account as 'paid in full' as opposed to 'settled'.
Credit Mistake #4: High Revolving Utilization on Your Credit Cards
Most consumers believe that making your payments on time is all it takes to have good credit and earn great credit scores. What they don't realize is that almost a third of your score is determined by how much you owe on your credit card accounts. In order to score the most possible points in this category, they advise keeping your revolving utilization at 10% or less.
Credit Mistake #5: Excessively Applying for Credit
Whenever you apply for credit your application gives the lender permission to access your credit reports. Statistics show that consumers who have more inquiries are higher credit risks than those with fewer inquiries. It is for this reason that the more inquiries you have, the more points you lose in the credit score calculation.
Only apply for credit when you absolutely need to, and avoid those in store offers of "10% off" in exchange for applying for a store credit card. This may sound like a great idea but the reality is that while you may save a few dollars on your purchase, those inquiries could end up costing you a lower credit score which could result in higher interest rates on auto or mortgage loans in the future.

The Problems With FHA

Ever since the mortgage industry stopped making loans for anyone with less than a 20%down payment and nearly perfect credit, "the only game in town" for first time buyers has been FHA. What we in the industry are seeing is a 45 to 60 day backup on processing as these loans are becoming more popular. And why not? 3% down, a fixed rate thirty year mortgage, with a current maximum loan amount of around $729,000...at least in California. Sounds pretty good.
Their loan volume has tripled in the last year alone, and now Congress wants to have them handle almost all the loans about to be foreclosed upon, refinancing these unaffordable loans.
The difficulty is that they have neither the funds nor the staff to handle this amount of new business, and these will both be slow in coming.
Right now, they are trying to insure 140,000 new loans every month, with a staff of under a thousand people nationally.
If this situation is not remedied soon, we may be reading about an FHA bailout next year.

The Bill Has Passed...or Have They Passed on the Bill to Us?

Second time was certainly a charm! With a vote of 263 to 171, the House passed the $700 billion Emergency Economic Stabilization Act of 2008 today. The Senate approved the same bill Wednesday night by a vote of 74-25. Soon after, the President signed the bill, officially passing the legislation.
I know the question we are all asking ourselves right now is how is this going to affect all of us. How will it affect our retirements? How will it affect the mortgage crisis? How will it affect our portfolios? The answers to these and other questions will only be answered over time but at least it's a step toward stabilizing our markets.
The government’s resolve to take action that is focused on fixing the credit crisis should add greater liquidity to the market and have a beneficial effect on homebuyers/sellers and the real estate industry as well. Keep in mind housing represents 20 percent of the GDP so it remains an important part of our national economy. Let’s watch as the details unfold over the next few weeks and we’ll wait to see whether the $700 billion in aid is our nation’s answer to prosperity.

One Man's Take on The Economic Crisis

Attached is an article written by Barry Habib of the Mortgage Market Guide
The Chinese have a proverb: “May you live in interesting times.” And we are living through interesting times indeed.

Whatever the political posturing regarding the current rescue plan, a plan needs to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market".
Each day lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.

Why is this so bad? Because as lenders mark down their assets, the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together, it isn't just A paper or B paper etc….it's everything. It’s got some A paper, B paper, C paper…and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this, the opportunistic “shorting” done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.
This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on. Once this is done it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

It's Time to Stop Pointing Fingers and Do Something

My son and his wife own a fledgling firm that tests saliva for drug use. It has been growing quickly...but so quickly that new testing machinery is needed. Their success comes at a time when money is frozen.
C.A.R. and NAR (the state and national associations of Realtors) strongly support Congress’s efforts to craft and quickly pass a recovery plan in order to calm the nation’s financial markets and make credit attainable again for families and businesses.
U.S. financial institutions have been unable to raise any capital because of illiquidity of suspect or poorly performing mortgage backed assets on their books. With no way to remove these assets, which may put the institution at risk, investors have refused to invest or extend new capital to financial institutions. The result has been a near collapse of the U.S. financial market and a spike in the cost of credit that makes it nearly impossible for even qualified people and businesses to obtain or expand a line of credit. Under these circumstances, Californians will find it very difficult to obtain home loans, student loans, and other financing for the foreseeable future.

Water leaks, Continued

Yesterday, I talked about emergency water leakage. Here are some pointers for the non-emergency kind, which are slower, and much less dramatic, but can waste enormous amounts of water over short periods of time.
Toilet running - The inside of the toilet needs to be adjusted or rebuilt. If you absolutely/positively want it fixed the first time, replace the entire guts of the toilet, and the supply line (the flex line from the valve to the toilet).
Leaking faucets - A dripping faucet can drip over 200 gallons a month. Faucets have cartridges (also called valve stems) that can be replaced. OSH carries a great selection of valve stems. If OSH doesn't carry your valve stem, Barron Park Plumbing Supply in Mountain View probably does. If your faucet is older, and a replacement valve stem is not available, you have no choice but to replace the entire faucet and both supply lines.
Leaking shower valve systems - We have seen a fair number of shower valve leaks where valve stems were no longer available. Unfortunately replacing the shower valve mechanism requires opening a wall. Since it is easier to open and patch sheetrock (compared to tile) you want to open the wall behind the shower to eliminate the need to remove and replace tiles. If you have to open the tile wall in the shower it's not the end of the world. It is possible to replace a shower valve by removing and replacing only 16 tiles. However, most people don't have matching tiles lying around in storage so this creates an aesthetics issue. When it is necessary to patch with different color tiles, many of our clients use sharply contrasting tiles so it looks intentional and less like a patch job. This sounds like major surgery but really isn't. This task can be completed in only 6 to 8 hours.
Leaking shower pan - If your shower pan is leaking, it is major surgery and is beyond the scope of this article. Symptoms are that the floor is soft and gives when you put weight on it, and/or you notice water damage on the walls in the room below the shower.

How to Handle Water Leaks

Early this morning I had a call from a neighbor who receives my monthly newsletter. He had discovered water leaking in his hallway and onto the living room carpeting. We have inside water heaters, so the first question I asked was if the leak was coming from that area. When he said it wasn't, my next question was if he knew where the shutoff valve was located. He didn't, so I had him call the emergency number for our homeowners' association to have someone turn off the water in his unit right away. I also gave him the names of two reliable plumbers.
Mr Handyman recently wrote a column on how to handle leaks:

The most important thing is to know where to shut off the water, and to know this before you have an emergency.
Where are your on/off valves?
Per "appliance" valves - Every water "appliance" (faucet, toilet, water line to fridge ice maker, etc) has an on/off valve typically behind toilets and under sinks). These are called right angle stops.
Main valves - Single family homes, duplexes, four-plexes, etc, have a main water on/off valve that is generally near the house and on the outside of the house. It may be located inside a closet of some sort that in turn is open to the outside. Many sprinkler systems have main on/off valves for each yard.
If you live in a condominium or townhouse complex, the water valves could be anywhere. The HOA should have a map showing the locations of what valves turn the water off to what units. Generally water service within the complex is the responsibility of the HOA, rather than specific residences and/or the city.
City owned valves - For every property, there is a city owned and operated water valve. For single family homes it's under a concrete lid in the lawn or sidewalk. For HOA's, it could be anywhere but since it shuts off water the entire complex, it's not the one to use. You should never try to use the city owned valve to turn water off as if it's seized and it breaks, the city may charge you to replace it. At the bottom of this email are numbers for water services for all the cities in Santa Clara County. If you need them to come, call them. They tend to respond very quickly to emergencies.
After years of being open, valves can seize. When you have an emergency there is a tendency to force seized valves. When you have a fountain in your home it's hard to resist this urge, but you're better off moving to the next valve upstream. It will probably get the water off quicker.
For the record, there is a product named Liquid Wrench which loosens seized plumbing connections, including seized valves, and it really works. It's amazing stuff. Just follow the instructions on the can.
If you have an emergency leak in your home, try valves in the following order:
1) Right angle stop to specific device.
2) Main valve for house.
3) Call the city.
Sunnyvale - 408-730-7510
Santa Clara - 408-615-2000
San Jose - 408-279-7900
Cupertino - 408-279-7900

Explaining the Economy

Yesterday, we had a small turnout at our Chamber of Commerce leads group, and two of the members, new arrivals from other countries, asked for our take on the current economic crisis. Ed, a bearded easy-going intellectual, and a retired Stanford professor, gave a clear and concise explanation of the steps that led up to the situation, and a list of the "players" in what has become a losing game for the country. When we reached the subject of the proposed bailout for the financial institutions, the clarity disappeared. It's always easier to analyze history than it is to come up with workable future solutions. We all agreed that something must be done...but the devil's in the details. Certainly an uncontrolled gift of more taxpayer money can't be the answer.

New Tips for Earthquake Safety

Most people saying that "the sky is falling" lately are talking about the economy, but a recent article reminded me that we are still in earthquake country. Studies have disproved our old standbys: duck and cover, and stand in a doorway.
These nine pointers from Doug Copp are worth remembering.

1) Everyone who simply "ducks and covers" WHEN BUILDINGS COLLAPSE is crushed to death -- Every time, without exception. People who get under objects, like desks or cars, are always crushed.

2) Cats, dogs and babies all naturally often curl up in the fetal position. You should too in an earthquake. It is a natural safety/survival instinct. You can survive in a smaller void. Get next to an object, next to a sofa, next to a large bulky object that will compress slightly but leave a void next to it.

3) Wooden buildings are the safest type of construction to be in during an earthquake. The reason is simple: the wood is flexible and moves with the force of the earthquake. If the wooden building does collapse, large survival voids are created. Also, the wooden building has less concentrated, crushing weight. Brick buildings will break into individual bricks. Bricks will cause many injuries but less squashed bodies than concrete slabs.

4) If you are in bed during the night and an earthquake occurs, simply roll off the bed. A safe void will exist around the bed. Hotels can achieve a much greater survival rate in earthquakes, simply by posting a sign on the back of the door of every room, telling occupants to lie down on the floor, next to the bottom of the bed during an earthquake.

5) If an earthquake happens while you are watching television and you cannot easily escape by getting out the door or window, then lie down and curl up in the fetal position next to a sofa, or large chair.

6) Everybody who gets under a doorway when buildings collapse is killed. How? If you stand under a doorway and the doorjamb falls forward or backward you will be crushed by the ceiling above. If the door jam falls sideways you will be cut in half by the doorway. In either case, you will be killed!

7) Never go to the stairs. The stairs have a different "moment of frequency" (they swing separately from the main part of the building). The stairs and remainder of the building continuously bump into each other until structural failure of the stairs takes place. The people who get on stairs before they fail are chopped up by the stair treads. They are horribly mutilated. Even if the building doesn't collapse, stay away from the stairs. The stairs are a likely part of the building to be damaged. Even if the stairs are not collapsed by the earthquake, they may collapse later when overloaded by screaming, fleeing people. They should always be checked for safety, even when the rest of the building is not damaged.

8) Get near the outer walls of buildings or outside of them if possible. It is much better to be near the outside of the building rather than the interior. The farther inside you are from the outside perimeter of the building the greater the probability that your escape route will be blocked.

9) People inside of their vehicles are crushed when the road above falls in an earthquake and crushes their vehicles; which is exactly what happened with the slabs between the decks of the Nimitz Freeway. The victims of the San Francisco earthquake all stayed inside of their vehicles. They were all killed. They could have easily survived by getting out and sitting or lying next to their vehicles, says the author. Everyone killed would have survived if they had been able to get out of their cars and sit or lie next to them. All the crushed cars had voids 3 feet high next to them, except for the cars that had columns fall directly across them.