Can Bad Real Estate News be Good?

I guess that happyrenews.com isn't the only place where you can read positive bits generated from the R.E. bubble's bursting. Newsweek Magazine has also pointed out an unexpected benefit: more housing for the homeless. Maybe the foreclosure crisis pushes more families into shelters, but statistics are showing that chronic homelessness is shrinking, now that social service agencies can afford to buy
foreclosed and vacant properties. Historically, economic downturns are good for the homeless, and booms are bad, because prosperity seems to trickle up, not down.

Relative Offer...Is the Market Changing?

We've been reading about relative bargains in the local real estate market, but this week I heard about a "relative offer" being presented on a Cupertino home.
Just to review what these are: A relative offer, something we haven't seen in a couple of years, is an offer on a property that attempts to win out in a multiple offer situation. The contract is written without a specific purchase price. The buyer agrees to top any other verified offer by a certain amount, and often names a maximum price. In the wild markets we saw in years past, these became commonplace, but it's been a long time...

Good Real Estate News

Our manager, Nina, brought up the subject of an "all good news" site at our Tuesday office meeting. I had previously read about HappyREnews.com in a Money Magazine feature article. While I tend to view this website as the Internet version of an ostrich with its head in the sand, in a way, it's nice to read good news for a change.
For instance, the fact that Las Vegas homes are expected to lose another 18% in value next year is nowhere to be found. Instead, the site points out that the number of homes sold there each month has increased since December.
Real estate in a state of denial? Maybe. But as the head of IMS, the publisher, says, "There's nothing wrong with looking on the bright side."

Bay Area makes the List Again!

The AARP Magazine just came out with its "Healthiest Hometowns" list, and we've made a good showing again. The Bay Area, which extends from the Napa Valley to the Silicon Valley in their statistics...through San Francisco, Oakland and San Jose, came out as #9 on the list. They say that it is a great area to be healthy after age 50, and that its residents are the least likely in the country to be overweight, (average BMI is 25.98)and the least likely to smoke.
They also mentioned our world-famous medical centers and the fact that it is densely populated, but still has neighborhoods that encourage foot, bicycle and public transportation.

Real Estate News on the Car Radio

As I was driving back from and appointment with my client in North San Jose, I turned on the radio, and in a break from convention coverage, there was a news report saying that the real estate market was picking up, and that buyers were finally getting the message that there were good buys in depressed markets. It was interesting commentary to hear, since we are still in a very mixed market locally. The high-end properties close to jobs are selling well, and inventory is quite low, but the market further out, in most of San Jose and in the East Bay remains stagnant. Because investors are being kept out of the market by lenders requiring all cash, or large down payments, a turnaround could be another two years in coming.

Sunnyvale State of the City Event

This year's Sunnyvale State of the City celebration will offer community members their first chance to view the Town Center redevelopment project up close, since the celebration will be held atop a new parking garage in the project.
In addition to Mayor Spitaleri's State of the City address, and presentation of community awards by Sunnyvale City Councilmembers, the State of the City celebration will also feature displays explaining the exciting redevelopment project, and City planners will be on hand to answer questions. This is the first time the public has been permitted inside the construction fence to see old Town Center mall becoming a new, more traditional downtown. Music, a barbecue lunch and displays from many City departments will round out the celebration.
This year's celebration will be held on top of the new parking garage just west of Macy's inside the redevelopment project. Those arriving by car should enter on McKinley Avenue from Mathilda Avenue and follow the direction signs. Pedestrians should enter the project by proceeding south on Taaffe Street from Washington Avenue and following the signs.
The celebration is on Saturday September 13, 2008 from 11:00am - 2:00pm
For more information, call the Communications Division at (408) 730-7535, or visit StateOfTheCity on the Web.

Sunnyvale Downtown Update

If you're like me, you've been driving by the construction site on Mathilda Avenue, and wondering what's going on, and when they'll be finished.
Connie Verceles, Business Development Manager for the city, and Laura Simpson, the Housing Officer came to our Realtors' meeting on Thursday morning and filled us in on "the latest." First of all, expect Target in Sunnyvale to close in November. They plan to tear down the existing structure, and build a larger one-story Target in its place.
The Town and Country Village has been mostly demolished, except for locations where the tenants hold long term leases. This will eventually be turned into another area of attractive apartments and shops.
When will the Downtown be ready? Current estimate is November of 2009.

Not All Banks Fell Into the Subprime Trap

I've been writing for a while about the losses felt by banks and investment firms caused by the rampant subprime lending practices of the last few years, so it was a pleasure to read about at least one bank that managed to avoid joining the crowd.
Despite the fact that their loan originations have increased 50% since 2007, Hudson City (NJ) Bancorp has reported second-quarter profits up 53.3 percent. Only 328 of their nearly 80,000 loans were nonperforming in the second quarter. Hudson City banks
the old fashioned way. It takes deposits and gives mortgages to borrowers who intend to live in their properties...no subprime, no securitization...and it services them itself. It also required at least a 20% down payment, and the average loan that they carry has a 39% down payment. Unusual in this day and age? Overly conservative? Maybe, but their stock is up 50 percent in the last year, and not many banks can claim that.

Liar Loans are the Next Wave

A new wave of foreclosures is coming, and these may last for the next two years, as mortgages that were approved without asset or income verification go into default.
These so-called "liar loans" are often called Ninja Loans, short for "no income, no job, and no assets." They are seen most often in the states worst hit by the subprime mess: Florida, Nevada, Arizona, and here in California. The situation is going to be even worse for these borrowers, not only due to dropping housing prices, but because of lenders who are now requiring full documentation of income and assets.
Half of the losses registered by Fannie Mae and Freddie Mac in the three month period between April and June of this year (about $3.1 billion) were in these liar loans, which are also called Alt-A loans, because they are given to less than A-credit/prime borrowers.
When you consider that the loan broker who arranged these questionable loans, with their higher interest rates and fees, could net commissions that were four or five times higher than a fixed-rate loan, you can see why they were so popular in the industry during the boom.

Not an Easy Market for Realtors

Inman News just wrote about a recent bankruptcy filed by national franchiser Help-U-Sell, after a group of regional operators filed an involuntary petition for bankruptcy.
It is not the first time the Help-U-Sell franchise company, Realty Information Systems Inc., has been involved in a bankruptcy proceeding. The company went through the same process during the last major downturn in the housing market in the mid-1990s, and emerged during the latest up-cycle as one of the fastest-growing real estate franchises before this latest plunge. It's pretty obvious that these flat-fee service companies are able to thrive in a strong market, when marketing costs are low, and properties sell quickly. When longer service and advertising expense are needed, this concept doesn't work.
A combination of an inflexible management team and a slow market seems to be the cause of their difficulties, and this time they may not bounce back.

Why is San Jose Housing more Expensive than San Francisco's?

Despite all the recent turmoil in the real estate market, the valley remains the most expensive in the country. But the question remains: why is the median price in the San Jose metro area higher($755,000)than the San Francisco area's $636,000?
The answer is in how statistics are figured. While the San Francisco area includes the very high priced counties of Marin and San Mateo, it also has the counterbalancing lower prices in Alameda and Contra Costa counties. On the other hand, San Jose includes all of Santa Clara and San Benito counties. Mystery solved!

This Week in Real Estate

There are a lot of things challenging our market right now: traditional August slowdown, vacationing clients (and Realtors) as they soak up the last of the summer heat before school begins and, in our market, limited quality inventory to generate buyer interest.
But though the media won’t begin reporting on this for another six to eight weeks, we are starting to see signs of a turnaround in the market. Open houses are well-attended. Buyers are finally coming off the fence and making offers. Princeton Capital, our in-house lender, is reporting an increased number of pre-approvals and mortgage applications. We’re really starting to see a surge of activity in several of our markets. Some markets are seeing the surge based on REOs while others are simply seeing it thanks to the old law of supply and demand—limited inventory = increased buyer demand.
Many Agents, based on buyer feedback at open houses, are expecting that the Fall will provide us with a pretty healthy upswing. A lot of buyers—especially first time home buyers—are finally starting to come to the realization that this is one of the best buyer’s markets of our generation and they’d like to take advantage of it. Some are even hoping to do so before the year’s end and we may expect to see a healthier Fall than in recent years which will certainly be a welcome breath of fresh air for all of us. Obviously only time will tell, but based on what I am hearing in the marketplace, I am definitely hearing the buyer buzz and it is exciting.

It's My Birthday!

...and I have so much to be grateful for...friends, family, and good health. But I just read a Newsweek article that makes me appreciate something else: the fact that I sell Real Estate in the Northern area of Santa Clara County, California, where good schools, great weather and a comparatively healthy economy have kept property values strong.
The article talks about agents in Southern California who are losing their own homes to foreclosure, and others who are moonlighting in other jobs. One Los Angeles office even set up a food pantry with pasta and canned goods so struggling agents wouldn't go hungry. In the Florida market, things are so bad that offices are downsizing, and in some sections, sales are one home or less a year per agent, and about a third of these are foreclosures, which are often handled without a Realtor.

What About This New Homebuyer Tax Credit?

People have been asking me about the new credit for first time buyers included in the Housing Rescue Bill. For qualifying home purchases after April 11, 2008 and before July 1, 2009, the Act provides eligible first-time homebuyers a refundable (Yes, it has to be paid back!) tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). The credit phases out for individual taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of the purchase. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no ownership interest in a principal residence during the 3 year period before the purchase of the home to which the credit applies.

Private Money Lending

Private money loans, often called "hard money" are big business lately. Until the big banks got in the act, these were the real estate market's source for subprime mortgages. Individuals or groups have long been willing to take a chance on borrowers with poor credit or unusual financing needs in exchange for a high rate on investment. Now even these lenders are becoming more discriminating, because the properties securing these loans often have declining equity. A good appraiser is essential.
A "hard money" loan broker that I know is so overwhelmed with choices that he has begun to refuse small loans that pay limited fees. He is trying to juggle more than two dozen loans at a time for his investors.
Realtors depend on these high interest, short term loans to help homeowners who want to buy a new house before they've sold their old one...a "bridge" loan.
There is some risk involved, but where else can an investor see a 6-10% return on his money lately? Certainly not in a bank!

The Legislature Got Something Right!

The California Association of Realtors has strongly opposed AB 2204 (De La Torre), which would require county lawyers to review every deed and other related documents, like CC&Rs, and remove obsolete, illegal and unenforceable restrictions from historic title record in connection with a transfer of property. County recorders would have to charge as much as $1,000 per transaction and the bill would not protect anyone from discrimination.
Existing law already invalidates any provision in a deed of real property that restricts the right of a person to lease, rent, sell, or occupy the property based on race, color, religion, sex, marital status, national origin, ancestry, familial status, disability, source of income, or sexual orientation.
After more than 1000 REALTORS® called their Senators to oppose the bill, and after reflecting on the enormous cost of imposing these new requirements, the committee decided to to take no action for the time being. C.A.R. learned Friday afternoon that the committee will only meet once more before the end of the month and it is not likely they will vote on the bill. If AB 2204 is not brought up, it will "die."
This is great news for REALTORS® and their clients!

Talk to Your Accountant

The new housing bill includes a tax code change that can affect owners of second homes and rental properties. If you bought the property before January 1 of 2009, there is no problem. You can still move into the alternate residence and stay there for two out of five years preceding a sale and use the $250,000/$500,000 residential property exclusion on gain.
Under the new law, this loophole will partially close on newly purchased investments. (Any previously owned rental and vacation properties are grandfathered in.) This is when it's time to consult your tax accountant. Sellers in future years will have to divide property use into qualified and non-qualified usage, and prorate the amount subject to capital gain exclusion. It's estimated that the government will raise about $1.4 billion in the next decade by making this change.

Real Estate and Development in Cupertino

Kelly Kline, the Economic Development Manager for the City of Cupertino, filled in our Realtors' group on the many new projects in the city. Apple is expanding, and has leased an office building at De Anza and Mariani, among other properties. There are also many mixed use and retail projects in the works...one of the largest being Sand Hill Properties' 17.4 acre site at Stevens Creek and Tantau.
Residential projects are also near completion, but these are mostly condos or apartments for lease.
The residential real estate market in Cupertino, Sunnyvale and Santa Clara continues to outperform the rest of the county, and inventory in these cities is very low compared to the summer season in other years, with a high percentage of pending sales.

Granite Countertops and Radon

Chris Shupp of Holmes & Watson Real Estate Inspection answered some of our questions about the recent newspaper articles about the possible dangers of radon emitted from the very popular granite countertops.
Granites often contain trace amounts of material that can produce measurable amounts of radon gas. However, the key word is "measurable". As an illustration, imagine turning on a burner on your stovetop. The burner emits heat, but has little to no effect on the overall temperature of your house. Similarly, if your countertop emits a small amount of radon, it will generally be insignificant when diluted with the quantity of air in your entire home. You are hundreds of times more likely to be at risk for radon emanating from the soil beneath your home. The US EPA states it simply in the Consumer's Guide to Radon Reduction:
"In a small number of homes, the building materials (e.g., granite and certain concrete products) can give off radon, although building materials rarely cause radon problems by themselves. In the United States, radon gas in soils is the principal source of elevated radon levels in homes."
Chris recommended airing out the house a couple of times a week as a sensible precaution, but concerned homeowners can also buy inexpensive test kits at their local hardware store.

Bank Owned Property

One of the agents in my office sold an REO (bank owned) townhouse a few weeks ago. The offer was ideal, and the bank which had foreclosed on the place should have been overjoyed...full price, all cash, no contingencies, and a one week close. Despite the perfect contract, it took the bank several days to respond.
Then came all the hassle...masses of extra paperwork sent by way of a Southern California escrow company, unanswered phone calls, lost documents, a disappearing file, and an escrow officer who quit in the middle of it all.
After delaying the close for several weeks, the escrow company is still sending out papers for the buyer to sign, and the agents haven't been paid, even though the title transferred last week. How much more efficient it would have been to use a local escrow company here in Cupertino, where both the listing and selling agents are located.
This scenario is typical, unfortunately. The banks are overloaded with foreclosed properties, and they dump all the escrows on a few companies that are much too busy and inexperienced to be efficient. It's no wonder that so few of them close.

More on Walking and Home Buying

Walkability is the goal of the CDC’s ‘Healthy Places’ initiative.
The recent rise in gas prices and concerns about climate change have helped focus attention on the subject, but it is still too soon to know if the attention will lead to change.
The CDC’s ‘Healthy Places’ web site makes it clear that the challenge is daunting, as it calls for substantive changes with regard to future growth.
“Today, typical suburban homes sit in cul-de-sac subdivisions that empty out onto high volume roads,” it reads. “Zoning laws encourage the separation of residential areas from schools and shopping malls by long and often dangerous travel distances. Elementary school bicycle racks stand empty as parents fear for their children’s safety on narrow or traffic-laden roads. (And) pedestrians take risks as they cross dangerous intersections in communities where safe crosswalks are all but nonexistent."

Can Your Neighborhood Make You Fat?

New research suggests that it might for those who live in neighborhoods designed more for cars than foot traffic.
In general, newer neighborhoods offered fewer opportunities for walking.
Neighborhoods built before 1950 tended to have sidewalks and other characteristics that made them more accessible to pedestrians, including being more densely populated and having restaurants and other businesses nearby, lead researcher Ken R. Smith, PhD, told WebMD.
In a study appearing in the American Journal of Preventive Medicine, people who lived in the most walkable neighborhoods weighed an average of 8 pounds less than people who lived in the least walkable areas.
“We aren’t saying the move from older to newer neighborhoods is the cause of the obesity epidemic, but it may be a factor,” Smith said.
In an effort to test the theory, Smith and colleagues calculated the body mass index (BMI) of 453,927 residents of Salt Lake County, Utah, using height and weight data from their driver’s license applications. Adults between the ages of 25 and 64 were included in the analysis. The researchers also reviewed census data that included information about the neighborhoods where the residents lived.
In general, the research suggested that the more walkable a neighborhood was, the less likely its residents were to become overweight or obese. Smith says the growing emphasis on designing pedestrian-friendly places for people to live, work, and play could have a large, positive impact on health in the future.
He cites a recent report from the Brookings Institution predicting that by the year 2030 half the buildings in the United States will have been built since 2000, which
represents a huge opportunity to think about how we are building our communities and to make them better places, both from a health and an environmental standpoint.

Divorce and the Housing Market

An article in this week's issue of Newsweek reminded me of another problem brought on by the economy. Hard times can certainly impact marriages, but now they are even making divorce more difficult. Many couples can't unload their houses for enough cash to pay off their mortgages and lines of credit, and job losses make the situation worse.
If couples try to hang on to the house until the real estate market improves, they are bound together financially long after they choose to be. Also, if one of the two stops paying on the mortgage, it can cause future housing and credit problems for the other, especially now, when lenders are using higher qualifying standards. It is better to transfer the property to one spouse, if that person can qualify for a mortgage on his or her own. If neither can qualify, and more is owed on the house than they can sell it for, it's time to contact the lender about a short sale.

A Sad Farewell to Financial Title

Financial Title Co., a title and escrow service provider with 57 offices in 10 California counties, closed its doors Wednesday much the way sister company Alliance Title did in December -- abruptly, and with little warning to employees, clients or regulators. The Department of Insurance has employees in place at each Financial Title office to oversee the transfer of files to underwriter First American Corp. All the escrow money is intact, and there will be no financial losses for customers, although some may see their closings delayed.
But for me, it is the end of an era. More than twenty years ago, when the last of the title companies in Sunnyvale closed, we followed Allison to Cupertino, where she was the manager at Financial and my escrow officer for many years. We have an in-house Title Company at Coldwell Banker in Cupertino that I use now, but I have many memories of Alison and the gang at Financial "going the extra mile" for me and my clients. They will be missed.