Foreign Buyers and U.S. Real Estate

Americans' love affair with real estate may be cooling, but thanks to falling home prices and the weak dollar, attention is heating up from another group of suitors: foreign investors.
According to a recent NY Times article, foreign buyers who have always looked at high-end properties in cosmopolitan Manhattan or South Beach Miami as investment opportunities are showing interest in a much larger range of properties — from $60,000 single-family homes in South Florida's inland neighborhoods to $1 million waterfront villas located just miles from the Canadian border in Washington State. Almost one in five, or 18%, Realtors surveyed by the National Association of Realtors last year said they sold homes to international clients between April 2006 and April 2007. More recent data isn't yet available, but it appears that those numbers continue to rise.
For many foreign buyers, property in the U.S. is downright cheap. Canadians now get an 80% discount on what they would have paid for a piece of the U.S. just three years ago, when one Canadian dollar was worth just 80 U.S. cents and properties in some areas were 50% more expensive. (One Canadian dollar is now worth roughly $1 in U.S. currency.) For European buyers, whose currency carries 25% more buying power in the U.S. than it did just three years ago, today's depressed property prices are equally attractive.
While Americans are discouraged by images of neighborhoods blighted by "For Sale" signs and taped-off properties, foreign buyers are much more optimistic, especially about the long-term health of the U.S. market. They view this as the bargain of a lifetime and are terribly excited about it.
Nevertheless, unsold inventory in some areas is so abundant that it cannot be absorbed, even with increased interest from our neighbors north of the border or overseas, but foreigners can at least bring to the U.S. market what it's been lacking most in the past months...a psychological vote of confidence.

Hard Times for Renters

I was talking to a friend the other night, and she complained that her 28 year old daughter, who has a good steady job and credit history, was still living at home because rentals are so hard to find.
I knew that the rental market was tight, but hadn't connected it to the rise in foreclosures, as much as to the difficulty that first time buyers are having in qualifying for a home loan. But this weekend's Mercury News had an article that described the problems that former homeowners are having in this market. If they have a foreclosure or short sale in their credit history, landlords and apartment managers assume that they will have other credit issues. The article cites a recent study that shows that these applicants have more than four times as many lines of credit that are three months or more delinquent. They also had three times more open credit accounts.
Whatever the reasons for all these applicants, my friend may have her daughter at home for quite a while.

More Heat on the way?

The weatherman says we're in for more unusually warm summer days, and we also have the smoky air to contend with. Insight Home Inspections suggests a variety of ways to keep your cool at home.
Ceiling fans circulate the air within the room which make the room feel cooler. They are very heavy - if you're installing one of these, please make sure that you install it with the mounting box that comes with the fan.
Whole house fans (sometimes called attic fans) are simple to maintain and inexpensive to run, compared to air conditioning. They push large amounts of air out of the home. To avoid pressure building up in the attic, there must be sufficient attic ventilation to allow equal amounts of air to leave.
Evaporative coolers pull outside air into its cabinet and through pads saturated with water which cools the air and distributes it through the home. These are more frequently used in areas where humidity is low. Keeping the system clean is very important.
Central air conditioning systems are very complex. They compress refrigerant gas into a liquid. A valve expands the liquid back into a gas which absorbs heat from a passing air stream. Finally a blower circulates the cool air throughout the home. Window air conditioners use the same process but does not go through ducting to different areas of the house.
...and then there's the Bay Area's favorite solution. Open your windows, and let cross ventilation do the job.

New on the Coldwell Banker Website

There are new advanced property search features coming to californiamoves.com!
Map, road, aerial and hybrid views...CaliforniaMoves.com now has them all! We are pleased to introduce the new online property search on CaliforniaMoves.com which allows online consumers to take full advantage of the latest in Internet search technology to capture the information they need for their home search. This is just one of the many new features of the website; watch for many more valuable tools to be unveiled when the redesign of CaliforniaMoves.com makes it debut in August!
New advanced property search features on CaliforniaMoves.com include:
Improved search functionality on the homepage that includes four ways for consumers to easily search for a home via:
o Map Search
o Quick Search
o Drop-down Menu
o Open House Search
Microsoft Virtual Earth Maps with the ability to plot multiple search results on large interactive maps
Bird’s Eye View option from the Listing Details Page which offers a stunning perspective from a 2,500 foot, 45 degree aerial property view (not yet available in
all cities)
Auto-correct features that compensate for misspelled towns or cities
Quicker information with reduced click-throughs
Larger thumbnail images in the search results
Improved saved searches for home seekers
Enhanced alert functionality that notifies consumers when a property fitting their search criteria comes on the market

Will Congress Pass Homeowner Bill?

With national housing prices down more than 15% from a year ago, and foreclosures now at 8000 a day, Congress is trying to rush through legislation that would rescue hundreds of thousands of property owners about to lose their homes, and change the mortgage structure to allow more affordable fixed rate loans. The bill is far from perfect. It would make the increased limit of Freddie Mac and Fannie Mae loan amounts permanent in expensive housing markets such as ours, but that limit would then be $625,000...not the $729,750 limit we have now. There is also the threat of a presidential veto hanging over whatever package they should pass.

How Fuel Prices Affect Your Move

It should be obvious.
Every American is being affected by the rise in fuel costs, not only for their own daily commute, but also indirectly as the cost of consumable goods and food rise to adjust for transportation expenses. Eggs and milk are way up over a year ago, and I am already dreading the cost of the cab ride to the airport for my annual family visit to Florida in December.
Members of the trucking and moving industries are feeling the pain of fuel increases most sharply. Many of them are finding their livelihoods threatened as they try to incorporate fuel increases into their daily operating costs. In an industry that already has very low profit margin, the cost of fuel is now one of the greatest operating expenses, second only to labor. The American Trucking Association has labeled the situation a “National Fuel Price Crisis.”
The cost of diesel fuel has risen 26% since the beginning of 2008, compared to an 18% increase in gasoline.
How does all of this information affect the shipment of household goods?
Unfortunately, it means that a move will cost more than it did a year ago. Van line providers use published government rates to determine a fuel surcharge. That surcharge is applied to state-to-state moves, and is reflected in your written estimate.

Red Flag for Home Buyers

I just had an email from Insight Home Services. They say that they are doing inspections for more buyers than sellers lately. They track who orders their inspections and over the last year it has been staying at about 50/50 - buyers and sellers. But over the last couple of months, buyers have jumped to about 65%.
We know that banks are not ordering inspections on their properties they now own. Why spend the money when they don't have any need for disclosures? My concern is that buyers of properties without full disclosures are not getting the opportunity to do their own inspections. There are stories of sellers insisting that there be no time allotted for inspections by the buyer. Then buyers won't know what they are getting into. If the seller couldn't make the house payment it is likely upkeep went by the wayside. Big red flag....especially if your purchase is a foreclosure, bank-owned property, or short sale. Insist on an inspection!

More Summer Projects

A friend just emailed. He's working on his yard, despite the heat..trying to kill off a couple of seemingly indestructable shrubs. This reminded me that homeowners should think about a couple of summer jobs needed in their yards.
If shrubs and other plants are not at least a foot away from the house, this is the time to trim them back. A footof space provides the minimum airflow that's needed to dry out wet siding when the autumn rains come, and to prevent paint damage and rot. This is also a good time to check your soil grading and make sure that it slopes away from the foundation. If it pools there, it can seep inside. The solution is to fill the area with fresh topsoil, which runs around $15-18 a cubic yard.
...and if you're still looking for things to do...unless your fences and decks are made of tropical hardwood like teak, they can probably use a coat of high quality wod preservative, such as Sikkens Cetol.
On the other hand, maybe some fresh squeezed lemonade and the porch swing would be better this afternoon.

Water Free Ways to Spruce Up Landscaping

Hundred degree weather today, and the fire departments are watching tinder-dry forests. It seems strange to be in a drought area when the Midwest is flooding. With our local reserves low, it's hard to balance curb appeal with water shortages, but it can be done.
Ground covers that look good all year are one good solution. Consider creeping thyme, and low-growing yarrow and sedums. For a nice textural zen look, think about pebbles, like pea gravel, decomposed granite, or colored rocks such as Arizona river rock. You can accent this with large boulders...but be careful. If you cover a yard completely with rocks, it can reflect too much heat, especially if the pebbles are white. Pave with hardscape, such as brick. Since brick is porous, water runs through it and into reserves, rather than running off.
Some plants require a little water to get established, but once they are matured they can remain dry. Remember to mulch to preserve water around plant roots.
For more tips, check out www.xeriscape.com.

Borregas Bike Bridges Scheduled for 2009

With the prices of gas heading sky high, north Sunnyvale tech workers are looking for less expensive ways to get to their jobs. Mathilda Avenue is pretty dangerous for bicyclists, especially now with all the construction going on downtown. About $8,4 million dollars (from a combination of state grants and traffic mitigation fees charged to developers) is being spent on two bridges, over Highways 101 and 237. Builders of these bicycle/pedestrian bridges anticipate a Spring 2009 opening, and they should provide a valuable alternative for workers in industry-heavy Moffett Park area who are coming from Central Sunnyvale and points south.

Online Crime Site for Sunnyvale

Are you as depressed from following the stock market online as I am? Here's another site to check out.
The Sunnyvale Department of Public Safety and eight other Santa Clara County law enforcement agencies are now sending their crime and incident information to a web service, CrimeReports.com. This flagship product of a company called Public Engines in Salt Lake City displays information on a Google map. It will tell you exactly where and when someone steals, robs or assaults someone in your neighborhood.
You enter your address and manipulate the map, sorting by crime, date and distance.
You can even sign up for email alerts about crimes near your home. This data is updated every 24 hours. Another source of information is crimestats.insunnyvale.com.

Your House Isn't an ATM Machine

More stories today of banks canceling HELOC (lines of credit) on people. Chase is the newest "villain." Maybe this will put an end to homeowners' using their houses as piggy banks. Economists seem to think that a change in housing prices has a 3.75 to 7 percent effect on consumer spending in either direction. So at the low end, you can expect around $135 billion less in consumer spending. In the past, people were using their homes as ATM machines with bedrooms attached. In 2006, Americans took out $350 billion from their homes in home-equity loans or second mortgages, and consumer debt is now $13.5 trillion. With tightening credit, that trend is nearing an end.

Explaining Those Interest Rates

The June 16 issue of Newsweek Magazine, in their "Inside Business" section, helped me to finally understand why our mortgage interest rates are not falling when the Feds have brought their rate down to 2%.
They explain that the financial system is supposed to work like a tube, transmitting interest rates. Banks borrow from the Federal Reserve and pass through lower costs to customers and the market at large. But today banks are acting more like dried sponges, absorbing the liquidity the Fed is providing in order to make up for losses and shore up their balance sheets, rather than releasing the cash into the economy. That certainly explains why 55% of commercial banks are tightening lending standards, up from 30% in January.
Rates on conforming 30-year mortgages have only fallen slightly since the Fed began cutting rates (from 6.4% last September to around 6.17 now) and jumbo loan rates haven't budged at all.

We Might Lose Those Higher Loan Limits

It seems as though there's always something going on in Washington that could hurt the already shaky housing market.
The National Association of Realtors® is in the midst of a critical call for action to shape the outcome of legislation affecting Fannie Mae, Freddie Mac, and FHA loan limits. As you might know, the current loan limit increases are temporary and are set to expire at the end of the year. NAR is telling Congress that they should make these limits permanent. The House of Representatives has already voted to do so but the Senate has reduced the maximum limit to $550,000 in its bill (and would reduce other limits proportionally as well).
Making the higher loan limits permanent will increase investor confidence and the availability of safe, fair and affordable mortgage credit for borrowers and help those wanting to refinance. Higher loan limits will also help stabilize mortgage markets and the economy as a whole.
This issue is not just important for those in areas with the highest limits, like our own $729,750. If the current Senate version prevails, all market areas currently above $417,000 for Fannie and Freddie and above $271,000 for FHA will be hurt.

Success in Sacramento

If you remember, I wrote a post about a bill that had squeaked by in the Assembly, and was headed to the State Senate. Yesterday, AB 2678 (Nunez) was amended to remove provisions that would have authorized the Energy Commission to mandate point of sale energy audits and retrofits for buildings, and restrict the commission from creating point of sale provisions for residences. The amendment clearly states that "for residential buildings, the energy efficiency improvements audits or improvements are not required as a condition of sale and do not unreasonably or unnecessarily affect the home purchasing process or the ability of individuals to rent housing."
This was the only item we discussed with Senators during our legislative day visits. Realtor opposition to this bill was based on the provision that has been removed, which would have forced energy audits and retrofits be completed to the home before the state would allow it to be sold. If the amended version is approved, it appears that this will be a major victory for Realtors across the state who spoke out in opposition to AB 2678. Political action can work!

Make That Tank of Gas Last!

Driving on tour is getting more and more expensive. One of the Realtors at this morning's meeting passed $100 when he filled up his tank. We plan to add more drivers to our tour group...maybe that will help. In our profession, carpooling isn't possible, except for tour, and we drive a lot.
With gas prices at record high levels, most of us are wondering how to maximize our fuel efficiency. Here are some ways to get more distance from your tank of gas!
1. Clean out your trunk. Moving more weight requires more gas.
2. Tighten your gas cap. Gas evaporates around loose or missing caps.
3. Make sure you have the right tire pressure. Check your manual for the recommended pressure for your vehicle.
4. Change your air filter if it is dirty.
5. Check to see that your spark plugs are clean and firing.
6. Keep clean oil in your vehicle.
7. Stop driving erratically! Rapid acceleration and excessive speed uses up more gas.

Home for the Summer?

With gas prices so high, many of us will be staying closer to home this summer. We might as well use some of this time to attack those long-delayed household projects. Not sure of what a summer to-do list contains? Here are a few more common hot weather tasks:
During summer, many homeowners power-wash, seal, refinish or paint exterior walls of their home as well as outdoor structures (decks, outbuildings). Summer is also a good time of year to patch concrete and asphalt, sidewalks, and cement or brick patios. This is also a good time to lubricate (or replace) doors, locks, sliding-glass doors, garage doors, and window casings—especially if humid heat makes them swell. Summer demands extra time spent cutting grass and pruning flowering shrubs and trees. This means sharpening garden tools, lubricating push mowers, and servicing electric or gas-powered motors may become a necessity in order for garden maintenance to take place.
If you're worn out just reading this list, it's time for lemonade and a good book. There's always tomorrow...

How to Find a Loan Officer You Can Trust

With the results of the subprime scandal so visible, there is a general distrust of most mortgage brokers by home buyers.
There is no directory of honest(or dishonest)loan providers. Checking the Better Business Bureau or the state licensing agency is usually a waste of time, because very few misdeeds are reported and predators change their names and locations.
But this problem is seen only by borrowers who have allowed themselves to be solicited, which is a big mistake. Select your loan provider, don't be selected. I like an example I read recently...If you were a wild mushroom fancier who lived in a woods full of mushrooms and one knocked on your door and said "eat me," you wouldn't because it might be poisonous. What the mushroom fancier does is choose from among those he knows are safe, ignoring the rest.
Get a referral from a trusted friend or your Realtor. We all have names of reliable and honest loan officers.

Why Are Short Sales So Hard?

Last week on house tour, I talked to another Coldwell Banker Realtor who has been specializing in "short sales." She has more than twenty of these listings, with sellers desperate to sell and avoid foreclosure, but only three are in escrow. Actually, her percentage is higher than most. A well-known specialist in these sales has over a hundred listings, and only a handful have closed.
Mortgage lenders say they are there to help homeowners who are having trouble making their monthly payments but who can’t sell their home for what it is worth in today’s market. Both homeowners and the banks themselves lose out when banks are unable to close these “short sale” transactions.
In a short sale, homesellers ask their lender to accept a buyer’s offer that is less than the amount needed to pay off the balance of the mortgage. Lenders who agree to a short sale also typically agree to forgive the remaining debt.
This can be a win-win for lenders and homeowners. The homeowner avoids foreclosure and banks avoid the cost of carrying the property through the lengthy foreclosure process, not to mention the hassles of selling an empty property in a market saturated with other foreclosures.
On average, lenders lose approximately 19 percent of a mortgage’s value with a short sale but lose an average of 40 percent on mortgages that proceed to foreclosure, according to one source.
The problem with short sales? Like other foreclosure mitigation efforts, the challenge is in determining which financial entity “owns” the loan and, thus, has the final say on a short sale offer. Banks also have been slow to ramp up internal processes needed to review and approve short sale packages. Delays and last-minute dickering often prolong or even derail transaction closings and creates frustration for potential homebuyers and their agents.

Footbridge over Mary Avenue

Many years ago, when I talked to buyers who were thinking of moving to South Mary Avenue, there was some concern that someday the dead end at Homestead Road would be opened up, and Mary would become an arterial, and a much busier street. This has long since been disproved.
More recently, there was all kinds of controversy about the potential northern extension of Mary Avenue over 101 and 237, with neighbors up in arms about the potential increase in traffic.
But no one is objecting to the steel suspension bridge that is currently in construction over Highway 280. This bridge, which will allow a shortcut for walkers and bikers crossing between Sunnyvale and Cupertino is being partially funded by the two cities, but primarily by the VTA. When it is completed next spring, students heading north to Homestead High, and south to DeAnza College will have easier and safer access.

Upside Down Cars

I'm familiar with negative amortization loans, which left homeowners owing more than they had originally borrowed. We're also seeing "upside down" mortgages, now that prices have gone down in many areas and people end up owing more than the depreciated value of their houses. More than 8.5 million homeowners have negative or no equity in their homes, more than 16% of those with a mortgage. Voila...short sales.
Yesterday, I heard a new expression, "upside down cars". Some of my Realtor friends are finding that their fancy, gas-guzzling autos and SUVs have lost much more value than they would have before gas prices accelerated. One agent has had her Jaguar on the market for over six months without a single bite.

Taxes on "Phantom" Income

Well, we spent the day with other California Realtors in Sacramento, and met with our local Assembly members Ruskin, Beall, and Maldonado, and State Senators Alquist, Simitian and Lieber. One of the hot issues we discussed with them is SB 1055, the upcoming bill that would eliminate the tax penalty on the "phantom" income created when a lender forgives some of the homeowner's mortgage and allows a "short" sale.
Our association supports the bill, but would like it to be amended to conform with the federal statute passed in 2007. This one excuses home sellers from income tax debt that is forgiven, and covers a period from January 1, 2007 through January 1, 2010. The state law would provide debt relief only for the years 2007 and 2008.
If California law doesn't conform with federal law, it creates a trap for any homeowner whose decisions are controlled by the more costly IRS savings.

Inventory is Down in Santa Clara County

It's too soon to know if this is good news for sellers...a couple of weeks is not necessarily a trend, but this could mean that buyers should start to move...especially if they get the word, as we did this morning, that interest rates are moving up. Usually the summer months signal an increase in homes for sale, but for the past two weeks inventory has moved down. This is particularly true in our more desirable areas of Sunnyvale, Cupertino, Los Altos, and of course, Palo Alto. Many agents and sellers took off for the Memorial Day weekend, and that may have had some impact on the statistics, so I'll take a "wait and see" attitude. I'll also talk to fellow Realtors from all over the state tomorrow when I'm up in Sacramento for Legislative Day. That should give me a better picture.

Point of Sale Energy Audit

On Wednesday, over a thousand Realtors will descend on Sacramento for our annual Legislative Day. A bus full of us from our local board of Realtors will join them.
This year, we have a specific pending bill to discuss with our State Senators. Last Wednesday, the Assembly passed AB 2678, which would authorize the State Energy Resources Conservation and Development Commission to establish a mandatory point of sale energy audit regulation for all residential and commercial buildings. It will now go to the State Senate for review and consideration.
Realtors have historically opposed point-of-sale retrofits. While they may be well intentioned, they are ineffective because they only apply to a small portion of the housing stock that changes hands every year, and they hurt housing affordability.
Waiting for point-of-sale to audit and retrofit homes simply takes too long. C.A.R.’s research data concludes only 22 percent of the homes built before 1980 (the homes most in need of retrofit) will change hands between now and 2020.
Home energy audits can cost up to $400+ per home. In addition, mandatory point-of-sale energy efficiency investments can add thousands of dollars to the price of a home. Every dollar counts when buying a home. California families are already finding it difficult to achieve and sustain home ownership. The point-of-sale mandates in AB 2678 will only make matters worse.
To really achieve the goals of California’s statewide and national energy and environmental policies and commitments, C.A.R. suggests AB 2678 be amended to reach all California homes through a comprehensive, phased in, statewide approach that does not burden home ownership at its most vulnerable point – when it sells!