Tax Assessments and Falling Values

The Wall Street Journal recently reported that all over the country, officials are trying to close budget gaps by raising property taxes, despite declining real estate values. An example they gave was Memphis, Tennessee, where property tax rates were raised 17%. But here in California, thanks to Proposition 13, taxes can only be increased by 2% a year, and then only if the housing market supports that increase. As Larry Stone, Santa Clara Property Assessor, explained to our Realtors group a few weeks ago, the counties which have been hardest hit, like Sacramento County, are reviewing values and automatically lowering property valuations, rather than waiting for homeowners to file appeals. Assessors will mail notices of revised property values this spring. If you think that your assessed value is too high, you can file a formal appeal...no need to hire one of the services that offers to do this for you...It's a simple process.

REO's VS Short Sales

The Mercury News this morning featured a front page article about the difficulty buyers are having when they try to buy one of the many REO's in the Valley. (REO stands for Real Estate Owned. These are properties that have been taken back by lenders in foreclosure proceedings.) The problems arise from the eagerness of the banks to unload these properties as soon as possible. They have been pricing them at very appealing levels, and potential buyers are bringing in full price offers in order to get them. Multiple offers are common, too.
As I have mentioned before, short sales, when a lender agrees to forgive part of the amount owed on the property, are difficult and can take months to arrange. Often, before these can be arranged, the place is foreclosed upon, and the property becomes an REO.

Who are First Time Homebuyers?

This beautiful springtime weather has been attracting buyers to our open houses every weekend. But who are these people?
The National Association of Realtors just came out with the results of a 2007 survey of the top 7 characteristics of first time home buyers.
They purchase almost 40 percent of all residential real estate.
They have been the leading edge of home sales since 1995.
51% are married; 25% are single females; 11% are unmarried couples.
Over 50 percent are between ages 25-34.
Household Income - 38% make between $45,000 - $75,000.
Race: 76% White/Caucasian - 10% African-American - 8% Hispanic - 6% Asian.
75% first time home buyers lived in an apartment prior to buying 1st home.
Looking at these statistics, you can see that California differs from the national norm. Demographically, our new buyers are primarily Asian and East Indian families, and even with the help of special first time buyer loan programs, income would have to be at least twice the national figures in order for buyers to qualify for home prices in this area.

Do It Yourself

As usual, Money Magazine had a few good tips for homeowners. This month they had places to find reliable and clear instructions for do-it-yourselfers, two books and a website.
The first book is called Home Improvement 1-2-3 from The Home Depot. It takes you step by step through the simplest weekend projects to the most complex, with photos and beginner-level instructions. If you're planning to replace a light fixture or tile a backsplash, this is your source.
The second is called Renovation, by Michael W. Litchfield. It takes on bigger projects, like sealing leaky roofs and finishing basements, and includes tips on diagnosing problems and picking materials.
By all means, check out the website. ThisOldHouse.Com is designed by the craftsmen from the long-running TV show on PBS, and the site is full of topnotch buyer's guides, design advice, planning tips and easy to follow directions.

It Pays to Do Your Homework

Two times in two days! Yesterday, I was doing a presentation at my Sunnyvale Chamber of Commerce STAR (networking) Group, and one of the questions that came up was "What is a short sale?" Today I had an exercise class, and one of the members asked, mid-workout, if it was possible for her stepson to do a short sale on his San Jose condo, and what the tax consequences were for that versus "walking away." It really pays to attend seminars, office meetings, and online webinars...and to write this daily blog. As long as I've been in the industry, (and it will be 36 years this summer) there have always been new laws, requirements, loan changes, and market situations to deal with...and a good Realtor, like a Boy Scout, is always prepared.

Fremont Union H.S. District Still Needs Help

This morning's speaker at our Realtors' breakfast was Polly Bove, the Fremont Union High School District Superintendent. We in the real estate industry are well aware that good schools drive our market. The fact that all five schools in the district are Distinguished Schools is what keeps property values strong in our area. One of the reasons that the schools do so well is that staff and teachers put the students first. The teachers took a rollback in salary in 2003, rather than cut programs.
What I didn't realize is that the bulk of the district's students live in Sunnyvale, and that the district controls the nonresidents who try to attend these schools by "bed checks"...to the tune of $3 million in savings a year. Their methods range from checking county ownership records to watching the students leave for school in the morning. Funds are still tight, and ball fields, driveways and lunchroom kitchens are all neglected for lack of money. Watch for a bond measure on the November ballot.

Smoke Alarms Aren't Enough

I received an email recently from Mr Handyman, one of my favorite sources, reminding us that carbon monoxide alarms save lives. Here are the basics:
Carbon Monoxide (CO) is a colorless, odorless, and tasteless toxic gas. It is not to be confused with Carbon Dioxide (CO2), which is believed to be the principal agent causing global warming. The presence of CO in the air you breathe reduces your blood's capacity to carry oxygen.
CO poisoning occurs when it is present in high concentrations. Symptoms are headaches, nausea, dizziness, burning eyes, confusion, and drowsiness. In higher concentrations, people lose consciousness, experience brain damage, and die.
The average CO background level in our homes is .5 ppm (parts per million) to 5 ppm. Chimney fire exhaust contains 5,000 ppm. If the air you breathe contains 6,400 ppm, you will die in less than 20 minutes.
CO is produced because of incomplete combustion of fuels like propane, heating oil, coal, charcoal, natural gas, wood or gasoline. Easy precautions are; 1) Don't run you car in the garage with the door closed. 2) Don't run a gas generator in the garage with the door closed. 3) Leave gas BB Q's outside. 4) Don't use kerosene or propane heaters inside. 5) If your fireplace is back drafting smoke into the house, open all the windows. However, even gas burning furnaces, water heaters, fireplace inserts and oven/ranges can produce CO if they're malfunctioning.
In the US, 113,000 people are treated for CO poisoning each year. That's an average of once every five minutes. Fortunately only about 2,000 people a year die from this (that's still more than 5 a day) and of them only 80 die from malfunctioning home appliances.
CO alarms are fairly cheap ($25 to $110) but be sure that they adhere to the UL standard. Some plug in, and others run on batteries.
Install your CO alarm(s) near where you sleep, as that is when you are least likely to notice the symptoms. CO is only slightly lighter than air, so it won't necessarily rise. Put your alarms in areas of good air flow or on the wall at nostril height. Keep them high enough so small children and pets don't trash them.
But most importantly, get them. I don't want you to be a statistic in a future article.

Earthquake Preparedness Month

April is National Earthquake Preparedness Month. If you want to see if you know what to do when (not if!) we have the next "big one," go on to the link below and take the short test, then forward on to everyone you know. I did pretty well, but still learned a couple of things from taking it. Earthquake preparedness is always something we can learn more about -- especially for those of us living in California!
quake2

Even Busy Realtors Need to Get Away

I spent the long weekend at the California State Square Dance Convention in Sacramento. Beautiful weather,(thanks to the recent cold snap) wonderful people from all over the state and adjoining states, and lots of dancing. It was a change for me to meet all kinds of new friends, and have the subject of real estate never come up.
I did see many "for sale" signs whenever we happened to drive through any residential neighborhood. Property values have gone down considerably in the Sacramento area.
Coming back to the Bay area, we drove past Tracy and some other hard-hit communities, where people had been willing to face a long, miserable commute in order to buy a larger and newer home. Now they are faced with the double whammy of a declining real estate market and escalating gas prices. Ouch!
There's no place like home.

Making Your Home More Secure

Everyone can take steps to make a home more secure. Bear in mind that any home can be broken into. The various measures you take makes it take longer, which in turn gives you more time to call the police. First, you want your home to be a less desirable target, and second you want to make your home harder to get into.
Some people think even if you don't have a dog, you should put a large water dish just inside a side gate, but there are better ideas.
Install exterior lighting with motion sensor switches.
Install them at the corners of the house so they shine down both sides. When you're away, set the motion sensors to off, and set timer switches so the lights come on after sunset and stay on for about two hours. Of course have someone else get your mail and newspapers while you're away or their presence will ruin the effect.
Metal exterior doors are harder to break into than wood exterior doors. Solid wood exterior doors are harder to break into than those with "solid cores”.
Make sure you have good deadbolts.
The distance the bolt travels into the door frame is called the "throw". The standard throw is 1 inch, but throws of 1 1/8" are commonly available and some have throws as much as 2 ½ inches. The longer the throw, the more it protrudes into the door frame. Make sure your window locks work, and use them. If you don't mind drilling holes in your window frames, you can create "stops" so a window can be opened only so far. You could open it 4" for air, but no one from the outside could force it to open later. For sliding glass doors, get rods to put behind them. Cut broomsticks will do, but metal rods are better.
You can also get battery operated door and window alarms. They work similar to the wired ones but need no wires. Of course you need to remember to change the batteries every once in a while. Make sure you get loud ones.
Check your phones.
Unless you absolutely have no choice, if you have to call 911 do it from a landline, not a cell phone. From a landline they immediately know exactly where you are. I've had people tell me when they called from a cell phone they were immediately put on hold and kept there for several minutes. Additionally, make sure you have a "regular" non powered phone in your main living space (the kitchen is generally the center of activity in most homes). If your phone plugs into the wall in any way (or has a base station that does), it will not work during a power outage. Old fashioned phones with only a phone wire connection (and no electrical connection) work without power.

Mortgage Rates Moving Up...but No Recession

A Wells Fargo loan agent spoke at our Realtor's meeting this morning, and said that rates jumped three times yesterday. Drops in the bond market negatively impacted interest rates, and lenders are nervous.
But Brian Peart, owner of Nexus Financial Group, Inc and Commercial Capital Ltd, one of the 50 experts surveyed by Bankrate.com every week on the direction of mortgage rates, says the stock market has bottomed and that over the next few months the market will begin to adjust to the fact that a recession will not happen. He said that the current market is a fear-based, media fed over-reaction.
"In the overall market", Brian said, "A full recession is priced in and though numbers will come in bad, they will not come in as bad as expected. I think we will see a negative first quarter GDP but not as deep as the fears and the second quarter will be up and all recession talk will have ended. By then, the smart money will have been made. EVERYONE I talk to on main street America is doing OK. Boomers still have retirement money to put to work, we are doing a ton of refinances in Florida - not everyone is upside down on their mortgage. I talk to businesses and most of them are not feeling this huge doom and gloom that the media keeps parading. I believe the intra day low we saw of roughly 11,600 on the Dow on Monday, March 17 will prove to be the 52-week low and we will keep forging higher from there in fits and starts over the next month or two handling negative numbers like rising foreclosures but still managing to climb higher overall and at some point, probably in May, the idea will begin to grab hold that maybe we are pulling out of this. At that point stocks will probably rally strong through the Summer and into the Fall. The market will have to adjust at some point to no recession."

Don't Just Walk Away

Today, I talked to an old client who owns a condo in a rapidly declining market. Fortunately, he still has quite a bit of equity in the place, but he has an adjustable loan that resets at the end of summer. I advised him to refinance now, while fixed rates are low and before values fall any lower.
One fate he doesn't face is that of many homeowners who have little or no equity and are walking away from their loans, especially in certain areas of California, Florida and Nevada.
What these people don't realize is that their credit can be wrecked for at least five to seven years. They are also exempt from the Federal legislation enacted to protect borrowers from taxes on the principal debt forgiven by a lender (short sales)A number of web sites are out there promising to repair your credit quickly, or teach borrowers how to bail out of a mortgage without any hassle...If it sounds too good to be true, it probably is.

It's Spring in Silicon Valley!

...at least our version of spring, with temperatures in the 80's over the weekend and the 60's today. But the trees are green, and new flowers appear every day. My winter woolens are headed for the dry cleaners.
Here's checklist of household chores for spring:

Inside:
Check furnace air filters each month during the heating season. Clean or replace as necessary.
Inspect fireplace, wood stove and chimneys. Have each clean and serviced as needed.
When heating season is complete, shut down and clean furnace humidifier. Close the furnace humidifier damper on units with central air conditioning.
Check air conditioning system and clean or replace air filters. Have system serviced as need (recommend every 2 to 3 years).
Check and clean dehumidifier as necessary.
Where possible, turn off furnace and fireplace pilot lights.

Outside:
Examine foundation walls for cracks, leaks or signs of moisture. Repair as required.
Check paint on outside walls and fence. Repair and paint as necessary.
Check level of any exterior steps or decks which may have moved due to settling. Check and clean out gutters and downspouts. Repair loose joints and ensure secure attachment to your home. Clear any obstructions and make sure water flows away from your foundation.
Remove any debris from drainage ditches and culverts.
Prune and fertilize landscaping as necessary...and plant spring flowers.
See you at the nursery!

An Interesting Legal Case about Real Estate

Remember when I predicted that buyers in depreciating areas would show up in court, suing the Realtors?
This case involved a couple who bought a home in a coastal Carlsbad community in 2005for $1.2 million. They regretted their purchase when they discovered that two other homes sold for about $150,000 less than theirs. They sued their real estate agent for negligent misrepresentation and breach of fiduciary duty. Their lawsuit grabbed national attention, given the recent downturn in the real estate market.
After only two hours of deliberation yesterday, the jury unanimously vindicated a buyer's agent accused by his clients of failing to disclose that two other homes in the neighborhood sold for less than what they paid. As a trial court case, this decision in Ummel v. Little is binding on the parties to the case, but has no binding authority for other cases. Moreover, the buyers may file an appeal.
At the trial, the agent's attorney argued that there were valid reasons these two other properties sold for less. One home, for example, had a lap pool which was unappealing to many buyers, and the sellers wanted to rent back the home for two years.
There are so many variables in a real estate sale: condition of the houses, upgrades (or lack of them) and terms, such as the long rent-back that the sellers wanted in this "comparable" sale. I don't know of any buyers who would grant a two year possession after close of escrow without a major concession in price. For one thing, a lender would treat it as an investment purchase and jack up the interest rate.
We usually provide a buyer all the information about neighborhood sales, along with the details, and let them make the decision.

A Further Update on Sunnyvale's Downtown

As the weather improves, there seems to be more activity behind the barricades in the downtown development area. When talk turns to the new downtown, I've noticed an increased skepticism lately. With $400 million at stake, and a scheduled (at least partial) opening in 2009, it's nice to see some progress beyond the foundations of parking garages...by the way, the interiors of both garages are well on their way, with stairways and mechanical, electrical and plumbing systems all being installed.
This week, slabs for the residential units above retail space are being poured. These will be located along Washington and McKinley Avenues and Taaffe Street. Washington is also being made wider on the south side, in the section east of Mathilda Avenue. Concrete slabs will be poured next week for the two office buildings next to Mathilda.
And the most exciting new development of all, at least to us shoppers, the foundation excavation for retail buildings on the south side of Macy's is scheduled to begin this week!

Year of the Rat Real Estate Predictions

Bay area I-ching Master Y.C. Sun spoke at our Realtors' meeting this morning. He is a computer scientist and a third generation geomancer. In an interesting presentation, he advised us to be frugal and prepare for a possible global recession after the Beijing Olympics. Domestically. he expects the real estate market to bottom out in third quarter 2009.
He predicted that the stock market would go up in 2008, as it has in the past seven Rat Years, which come at 12 year intervals. He recommended investment in heath care and agriculture, as well as in the telecom, technology and service sectors. Hopeful predictions are a drop in oil prices and a rebound of the U.S. dollar.
There were too many predictions for this blog to share, but his strongest advice was to make smart moves this year, as next year...The Year of the OX...may be a tough year to plow through.

Lighten Up!

I just read some useful pointers from the Move Advocate. Whether you are thinking of moving, or just want to simplify your life...edit your possessions.
Creating a simpler and less chaotic lifestyle, even without the prospect of moving, can be rewarding but requires some discipline. Here are general rules to help you.
1. If you haven’t used something in three months, box it up.
2. If you haven’t used something in a year, sell it or give it away!
3. Storage is also an option.
All of the full-service van line companies that The Move Advocate works with have their own storage facilities. Before opting for storage solutions, however, calculate the cost of storage and balance that with the value of what you will be storing. Unless the items have significant financial or emotional value, it might make more sense to sell or give them away.
Make Charity Donations
Don’t forget that any items donated to qualified charitable organizations are tax deductible. Any items donated to charity must be in “good or better” condition. This rule was put in place to keep people from claiming deductions for items that should have been thrown in the garbage! If you donate your items to charity ask for a receipt, keep a record of what you have donated, and assign “fair market value” to the items. It is not a bad idea to get out your digital camera and snap a few photos for your records.
"Lighten up" to stage your home for greater profit and quicker sale.
“Lighten up” to decrease the cost of your shipment to your new home.
“Lighten up” because it’s time for spring cleaning and it’s tax time!
Lightening the load is a financial win-win and many who’ve practiced the discipline of editing their possessions have found a freedom from chaos that is emotionally and spiritually freeing.

An Open House Opportunity

Opportunity comes in all shapes and sizes. This one is a two day weekend you don’t
want to miss.
On May 17 and 18, Coldwell Banker will be hosting a Northern California-wide
Open House Weekend in which we will attract potential buyers to a large percentage of our listings currently available for sale.
The purpose of this exciting event is to showcase our impressive inventory of homes for sale and remind buyers of why now is such a keen opportunity to purchase a home.
This Open House Weekend is exclusive to Coldwell Banker and is a prime
opportunity for you to position your property to hundreds of potential buyers.
We will be marketing this event to thousands of Northern California home buyers through direct mail, advertising, online exposure and our powerful network of more than 4,300 Sales Associates.
If you are considering selling your home, now may be just the moment you’ve been
waiting for.

Pet Photos to Benefit Sunnyvale's Canine Unit

In an earlier post, I mentioned that SILVAR, our Association of Realtors, will be supporting Sunnyvale Public Safety, and its Canine unit, by providing a bullet proof vest for one of their dogs. I've just heard about another fundraiser for the division. Pet photo sessions will be held on Saturday April 26th from 10am-5pm and on Sunday April 27th from 11am-4pm. All proceeds benefit the Sunnyvale Police Canine Unit. What you get: A 15 minute photo session with prominent pet photographer Peg Jackson and one 5"x7" portrait of your pet(s).The price is only $55 per session (not per animal). Multiple pets can be in the photos.
Portrait sessions will be held at Murphy Avenue Pet Clinic at 101 Hendy Ave., on the corner of Murphy and Hendy in Sunnyvale. Please call 733-7387 to reserve your pet's appointment. Limited spaces are available so call early! Please follow the link below to review the beautiful photos from past years:
Pet Portraits

Homebuyers' Wish List

When I meet with new buyers for the first time, we generally sit down together and take the time to see if we will be comfortable working together. Sometimes they have brought along a list of questions, but often I have to draw out what they are looking for in a home...and an agent. The next step is for them to meet with a trusted lender, if they haven't done this already, to see if their needs are realistic, based on their income and credit scores.
Before we start to look, I always ask my clients to create a "wish list" and find it extremely helpful.
There are usually three parts to these lists.
The first part consists of requirements. Absolute necessities, in location, amenities, size, etc.
The second level are those items that they would really like to have, but could do without if everything else were wonderful, or could be added later.
Third tier...'blue sky." They would love to have these luxuries, but maybe they're out of the buyers' price range.
I find that knowing what buyers want and their "being picky" is a help, rather than a hindrance in our finding just the right home.

Home Improvements...Crown Molding

This was once offered only as a feature in beautiful new homes and custom properties, but it can give a finished look and update a tract home. Molding around doors, windows and ceilings adds a soft appeal to any room. Like a picture frame around a portrait, this decorative trim can turn a room from plain to outstanding.
The molding comes in a variety of sizes, and can also be combined to add width and elegance and to give a more dramatic effect.
Be careful with color. White is most often used to separate the walls from the ceiling. Subtle use of coordinating colors can be effective, but in a home I recently sold, the seller decorated a room using various tones of green in the top and bottom molding, chair rail, and wall and ceiling colors...too much of a good thing.

Mini-Markets in Local Real Estate

Just received these comments from Doug Tobin, another local Realtor. I will add my opinions in parentheses.

Sunnyvale, Cupertino, Los Altos and Palo Alto are doing fairly well. (Better than "fairly". We are still seeing multiple offers in those areas, even though inventory is beginning to grow.)
South San Jose (down the 87 corridor and down Santa Teresa) is fairly weak.
Alum Rock Area/East San Jose is getting pummeled.(I strongly agree. A one bedroom condo owned by a client has gone down from $325,000 to $270,000, or less.)
Milpitas is not doing well.
Santa Clara, Willow Glen, Rose Garden, Almaden Valley and Campbell are chugging/limping along. (...with some exceptions in the best school districts.)
Los Gatos and Saratoga are flat…
Morgan Hill/Gilroy has a lot of inventory…great time to buy (if you're willing to hold your purchase for a while.)
Lots and lots of short sales and bank-owned deals in the weaker areas…almost none in the stronger areas. (Be prepared for a longer escrow period.)
The big banks are making the market worse than it needs to be because their short sale system is atrocious.
The Big REITs and Pension Funds, are absorbing some product, which is good.
Lots and lots of savvy investors started entering the market about 1 month ago.
The water-cooler mood has started to change (for the better) about 1 month ago.
If I had to guess, I would say Sunnyvale is the strongest market in the county. (Don't forget Cupertino!)
Quality is selling…buyers are in no mood for flawed product. (Fix up, pack up, and Stage.)
Los Altos and Los Altos Hills is selling most of the high-end product…3 mil plus. (Saratoga, too!)

Ignore the Headlines

Dan Kadlec, in his Right on Your Money column in Time Magazine this week, makes a good argument for buyers who are fence-sitting in depreciating areas to buy their first homes now, rather than waiting. He says, "Let's say that you are emotionally ready to be a homeowner. You have good credit, plan to stay put for at least five years, and have been waiting for the perfect entry point. It's time to get serious---before an inevitable rise in interest rates wipes out your advantage."
Jim Svinth, chief economist at Lending Tree, agrees that "The thing that will make home prices stop falling is the very same thing that will push mortgage interest rates higher." So anything you gain by a further drop in prices may be offset by rising financing costs.
They gave an example of a typical home...certainly atypical in our area...selling for $218,000. With 20% down, and a 30 year mortgage at 5.5%. Monthly principal and interest would come to $994.31. If the same house sells for only $197,010 (down 10%) in a year, but inflation is a threat and the Feds jack up rates. The interest could be 6.5% by then, and the payment is $994,94...you'd have saved nothing by waiting, and missed out on living in your own home for a year.
Multiply these figures by 4 or 5, and they're just as applicable to our area.
If you want to read the full article go to Time Magazine.com.