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.