Welcome 2010 !

It's a new decade, and it seems strange to be moving into 2010. When I was young(er) making it to 2000 sounded like forever, and I never imagined that I would look and feel so good when this year came.
I'm so grateful for all the things that life has brought me. Good friends, a loving family who are doing well, and this life with work that I love and can still do.

Wishing you a Healthy and Happy New Year.

Bobbie

Check Out Your Neighborhood

A friend sent me a link to this site, and I thought that I'd share it with my readers. There are a few communities that do not subscribe, but most are on the list, and I found it much more comprehensive than Megan's List for researching neighborhood safety. It is also useful if you are thinking of moving...Check it out. Crimereports.com.

A Real Estate Christmas Gift

Santa isn't dead. Not much of a present for struggling homeowners, but better than nothing. Fannie Mae and Freddie Mac are suspending foreclosure evictions from Dec. 19, 2009 through Jan. 3, 2010. The temporary moratorium was created to help families over the holidays.
Fannie Mae is suspending all foreclosure evictions on owner-occupants and tenants living in foreclosed properties the company holds. Freddie Mac also will suspend all evictions involving foreclosed, occupied, single family, and 2-4 unit properties with Freddie Mac-owned mortgages.
In a similar move, Citigroup Inc. also announced it will suspend foreclosure sales and evictions for 30 days through Jan. 17, 2010 for loans it owns. Citigroup’s foreclosure moratorium; however, does not extend to loans it services on behalf of other investors.
Scrooge isn't knocking at their doors...yet.

Want to Feel Younger? Live in the West

I just have to look around the Sunnyvale Senior Center to see so-called "Senior Citizens" in the weight room, stretching in yoga class, or dancing with my Zumba instructor. Many of my Realtor friends over sixty (and into their 80's!) are selling homes full time.
The highest concentration of older adults in the United States who don't think of themselves as old. Fully 78% of adults ages 65 and older who live in the West say they don't feel old, compared with 67% of older adults who live in the rest of the country, according to a Pew Research Center Social & Demographic Trends survey.
Asked how old they feel, two-thirds of Westerners ages 65 and older say they feel younger than their chronological years, compared with 57% of older Americans in other regions. Among older Westerners, half say they feel 10 or more years younger than their actual age and one-in-five say they feel 20 or more years younger.
Older folks living in the West also feel healthier than older folks elsewhere. Among adults ages 65 and older, some 72% of those living in the West say they are in excellent or good health, compared with 63% of those living in other regions of the country.
This is mainly because older Westerners also get more exercise. Some 77% of Westerners ages 65 and older report they get some kind of physical exercise on a typical day, compared with 69% of those in the rest of the country.
For older Americans, being in excellent health, feeling very confident that they have enough money and assets to last through their retirement years and being highly satisfied with the number of friends they have are the strongest predictors of happiness.
But it is also clear that among older adults, feeling young is strongly correlated with overall happiness, so if you want to be among a lot of older folks who feel young and happy, the West looks like your best bet.

Nesting vs Flipping

In real estate, nesting is the new flipping. Many homeowners are deciding to stay put and invest in properties they already have. My sister and her husband had talked about moving to a newer home than the one they own in Lake Worth, Florida. Instead, they had the house painted, and added new carpeting and kitchen flooring.
A bigger share of the home construction dollar -- 20% more during the first three quarters of 2009 compared with the same period last year -- now goes to home improvements. If people like their houses, schools and neighborhoods, but just need more space, it might make sense to stay put and remodel.
An added incentive spurring remodeling is the $1,500 federal tax credit for home improvements that raise energy efficiency. Jobs involving replacement windows and doors, heating and air conditioning systems, new roofs and adding insulation all can qualify.
Nester-remodeling might be even stronger if home improvement loans were easier to come by. Perhaps because of that, more people are remodeling their homes in phases.
As I've mentioned in earlier posts, I have trusted referrals for all kinds of home repairs and remodeling if you need them.

Farewell, Sunny Florida

Tomorrow morning, I'm headed back to the Bay Area, and the weather reports indicate that I'd better have an umbrella handy. We've needed this rain so I don't mind, and besides, it's still pretty pleasant next to sections of the country with windchill factors way below zero.
Real estate news from the Sunshine State is not good. Florida has replaced California, ranking #2 nationally in the rate of foreclosures, with one in every 165 homes in danger of being bank owned. (Nevada still holds the dubious honor of being #1.) It has bucked the national trend which has recorded four months of foreclosure decreases. Statewide, Florida foreclosures have increased 8 percent in the past year. In Palm Beach County, where my sister lives, there has been a 26 percent increase in foreclosure filings compared to this time in 2008.
Loan modifications will help some homeowners, but in over half the cases it's a temporary fix...only delaying the inevitable.

FHA Rules That Will Help the Condo Market....

...back home in California, but even more so here in Florida.
South Florida's stalled condo market Should get a boost from new FHA guidelines that went into effect this week. Most banks here have shied away from condo lending because they considered the units high risk. Those that were still lending required 20 to 30 percent down, eliminating the average buyer.
The new guidelines extend the 'spot approval' process until February 1, allowing individual units to qualify rather than requiring an entire complex to earn approval.
They temporarily increase the number of units in a complex that can be financed with FHA loans from 30% to 50%.
They require 50 percent of the units to be owner occupied, but temporarily exclude vacant, bank owned or rented units to be be excluded from the calculation.
They will now allow for a condo board approval (right of first refusal) of the buyer, unless it violates the Fair Housing Act...a permanent change.
One new change is that FHA can bar approval of a complex if it has more than 15% of the units delinquent in association fees.

Busman's Holiday

As usual, I check out local real estate activity when I'm traveling. This weekend, I explored an extremely upscale neighborhood in North Palm beach called Old Point Cove. Built on 60 acres along the water, the spectacular views are of MacArthur State park, Lake Worth Lagoon and the ocean.
Association fees are not cheap, but they cover a lot. Everyone gets 24 hour security, and depending on the building, can cover landscaping, insurance, cable, water sewer and trash. The fees can range from $298 for three months to $5000 at the high end Lake Point Tower.There is no golf, but the boating is top notch...and yes, Tiger Woods docks his boat there.
Currently units are selling from $137,000 for a short sale to about $850,000. Of the 1153 condos in the development, 109 are listed for sale.
At the market's high point in 2005, the median price here was $461,000...with a high of $1,250,000. In 2009, the median was $260,000, with a high of $750,000.

Back in Florida

If you've been reading this blog for a while, you know that I visit my sister and her family every winter for a week or so. (summers here are impossible for this Northern California gal.) I am always curious about the local real estate market here.
Florida has been one of the earliest and hardest hit markets, because of both the general economic situation, and overbuilding, especially of condos in the beach areas.
I had been reading about 'packaged" purchases of large numbers of these properties by foreign investors, and I wondered if it was impacting local values.
My sister's attractive suburban single family home in Lake Worth (3 bedrooms, two baths, "Florida " room, and large lot with a pool) had reached a high of $400,000 three years ago, and is now worth about $175,000.
I'll be writing about local real estate for the next week...some contrast to the Bay area!

A Positive Take on the Local Real Estate Market

Rick Turley, our regional president of Coldwell Banker, recently wrote this promising prediction.
"2009 was a challenging year in real estate. The good news is that we started to see a positive turn in the housing market as the year wore on, thanks in part to the first-time home buyer stimulus and indications that the economy was starting to improve. So what will 2010 bring?
With the increases we are seeing in the S&P 500 (up 20.5% YTD) and the economic improvements we are seeing on a global scale, things seem to be moving in the right direction. This makes prospective home buyers feel more confident about their future and the home they may choose to buy. So much of our business is affected by consumer confidence.
But I would caution that we probably aren’t out of the woods as it relates to foreclosures. With unemployment figures still frighteningly high, there are still quite a few homeowners out there who are struggling with their payments. And now there is a great deal of evidence that it isn’t just in the entry level arena; it is also hitting the mid-level and luxury market, too.
The big question remains: When will the “shadow” inventory of already foreclosed homes begin to be released, now that the government has lifted the moratoriums on foreclosures. Once we start to move through those properties, we should begin to see a better, more solid grounding for the real estate market.
The fact is, we live in one of the most desirable regions in the world. Certainly we’ve taken our fair share of hits over the last three years, but our region’s desirability, economic vitality, culture, weather and overall market conditions make it a sought-after place to live. We generally have a much healthier economy in the Bay Area. In terms of a US housing recovery, predicted to be slow, long, and modest; ours will probably be more favorable than most. As we track Bay Area sales activity, we are seeing more encouraging signs.
Based on what we’re seeing, we’re estimating that we can expect sales to moderate to a more sustainable pace. We are already seeing a rise in housing prices in the entry level, and may see a modest rise in our mid-level price points, and most likely we’ll see further adjustments downward in the high end. But this new normal is much more sustainable and will provide a solid foundation to build upon. It makes me excited about the future and gives us all hope for a productive and healthy 2010."

Real Estate News to Be Thankful For

My very best to you as you prepare for time with family and friends to enjoy the Thanksgiving holiday. In our professional lives we have a lot to be thankful for, having endured some of the most critical and challenging economic times this year that we’ve ever seen. But there is some good news.
The number of first-time home buyers rose to 47 percent of all home sales during the past year, up from 41 percent last year, according to NAR’s 2009 Profile of Home Buyers and Sellers. The increase marked the highest on records dating back to 1981. The previous high was 44 percent in 1991.
These buyers are critical to housing and a general economic recovery because the market always heals from the bottom up – they absorb inventory, free existing owners to make a trade and stimulate related goods and services.
Happy Thanksgiving!

Questions Asked About the Extended Tax Credit

The Tax Credit has new income limits. If the Buyer’s Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

Tarp Interest for Unemployed Homeowners?

The Mercury News had an article this morning, saying that the new wave of foreclosures is beginning...previously qualified borrowers who are now unemployed.
The lack of aid to jobless homeowners has been identified as a big weakness in the administration's plan to tackle the mortgage crisis. A report by a congressional oversight panel said last month that the $50 billion program "was not designed to address foreclosures caused by unemployment," which are now the main cause of default. Many lawmakers have also complained about the slow pace of loan modifications that might have helped this situation.
Rep. Barney Frank said Monday that he is pushing a proposal to use some of the interest the government collects from the financial industry bailout to give loans to unemployed homeowners struggling to pay their mortgages.
Frank, chairman of the House Financial Services Committee, said,"These are people who are very responsible, very thoughtful. They got a home, it's above water, they've got equity, but they're unemployed, and you can't afford mortgage payments on unemployment."
The program would be funded using the interest banks pay on the $700 billion Wall Street bailout, known as TARP. It would provide $2 billion in TARP money for low-interest loans to homeowners who have lost their jobs but who have good prospects for being able to resume mortgage payments in the future. The emergency loans would be provided for up to 12 months with the possibility of extending them for another year.
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Another Bug in the Loan Process

Interest rates are great right now, and that's good news for home buyers, but lenders are making it harder for borrowers with less than perfect credit to qualify.
Now there's a new "bug" in the loan process.
Some consumers with exceptional credit reports and high FICO scores are being denied mortgages by Fannie Mae’s automated underwriting system because there is a notation in the credit report that the consumer has disputed an item.
Under the Fair Credit Reporting Act, consumers can dispute inaccurate information on any account in their credit files, but once a consumer disputes an item, a notation to this effect is made in the file. Until the notation is removed, most credit-scoring systems won't factor the disputed item into the consumer’s score.
However, with the recent surge in companies claiming to “clean up” blemishes on consumers’ credit reports, some lenders are finding that these credit companies are disputing accurate, but negative items, hoping the consumer will qualify for a loan before the dispute is resolved.
Applications that are denied through Fannie Mae’s automated underwriting system are sent back to the lender for manual underwriting. It is then up to the lender to determine and document whether this information is accurate and underwrite the borrower’s credit accordingly.

Best Home Improvements for Home Sellers

Nearly 1,000 real estate agents cast their votes on which do-it-yourself home improvement projects will help sellers get top dollar.
HomeGain.com's 2009 Top 12 Home Improvements Survey Results showed that cleaning and de-cluttering was the easiest and most cost-effective way to make your home more appealing to buyers. For as little as $100-$200, sellers could see as much as a 10 times increase in their sale price. These are all projects that you can do on your own or with a little help, so you won't see replacing your roof or adding a deck on this list.
Most of the recommended projects come in under $500, with an return on investment of at least 100 percent.
Even for some of the more expensive projects, like updating your kitchen for $1,500, you can replace the hardware and touch up the cabinets, just so that buyers don't see any glaring issues. New appliances are actually very cheap right now, and often come with free installation, so don't let an old fridge or dishwasher kill your deal.
The total return on investment for all 12 of these projects could total more than $20,000. For a median priced home, that's about a 10% increase in your sales price.
Check out the HomeGain HomeSaleMaximizer for customized recommendations in your ZIP code.

Another Reason to Take Off Your Shoes

Those of us in the real estate sales industry are accustomed to removing our shoes when we tour homes, and we supply shoe covers and "No Shoes, Please" signs for our listings. I always thought that we did this for only two reasons: to protect clean carpets from dirty footprints, or to respect the beliefs of the owners.
But the California Association of Realtors came out with third reason in their 'Green Tip of the Week'
"It’s flu season and you know you’re supposed to wash your hands, but don’t neglect your feet and your home’s indoor air quality. The germs on your shoes find their way into your home and carpets. According to one study, 27 percent of the bacteria in the home are the E. Coli virus. For a healthy home, leave your shoes at the door."

More Detail on the Extended and Amended Tax Credit Bill

Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The bill has kept the provision that home buyers do not have to repay the credit, provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order. The purchase price of the home is capped at $800,000.
Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the tax credit. According to California Association of Realtors' research, nearly 40 percent of first-time home buyers surveyed said they would not have purchased a home without the federal tax credit, and approximately 70 percent said the tax credit was "the most important" or a "very important" factor in their decision to buy a home.

The Story of the Townhouse Sale

Amazing in even our unusual market... By the 1:00pm time we had set for the presentations to begin, there were eleven offers written on my Sunset Oaks townhouse listing. Because I was also representing a buyer (with the seller's permission) I had asked my broker to sit in on the presentations, to ensure fairness and eliminate any hint of favoritism. I also had any emailed or faxed offers sent to her, so I would not see them before "the show began" The seller and her husband came to the office, and the agents arrived at 20 minute intervals, presented their offers and gave a brief bio of the buyers.
A couple of the offers were at or below list price (indicative of first timers in this market) but it soon became clear that the majority were well above that price. Toward the end, there was an offer that came in as-is, with no appraisal contingency, and only a 4 day loan contingency. Their price and terms were the best, and the agent cited their willingness to pay cash for any differential between the appraised price and their offering price. They also paid for an accelerated appraisal by their lender. My buyers were close enough to be #2, but this offer was clearly the best.
The appraiser actually called for an appointment the following day, and the assessed valuation came in quite high. The buyer quickly committed to pay the difference, and removed their contingency. A happy ending.
Today, I ran into a neighbor who had bought my nearby listing of the same model over a year ago. She was aware that prices had gone down close to 15% since their purchase, and she was very pleased to hear that values are headed back up.

THE HAPPIEST PLACE IN AMERICA? IT'S SUNNYVALE!

I was recently sent this article...not a real surprise. I love living here.
SUNNYVALE, Calif. – The City of Sunnyvale, long-known as the Heart of Silicon Valley, can now add a new accolade: The Happiest Place in America. And it must be true, because the Dr. Oz show will feature Julia Blom, owner of Sunnyvale's Country Gourmet restaurant, on the Monday, November 9 show, to talk about Sunnyvale.

The declaration of Sunnyvale as the Happiest Place in America is the result of a Gallup Poll conducted with the American Insurance Plans and Healthways. The ongoing survey began in January 2008, and polls 1,000 Americans per day over a 350-day period to create the Gallup-Healthways Well-Being Index. The survey ranks factors that help measure well-being in America's rural and urban communities. The poll studies not only the absence of infirmity and disease, but also a state of physical, mental and social well-being. The results of the poll were posted in March 2009.
According to Dr. Oz Show Publicity Executive Jenifer Rogers, Dr. Oz will spotlight Sunnyvale as the Happiest Place in America. Dr. Oz will include Blom and a woman from Hazard, Kentucky, ranked as the Unhappiest Place in America, in his show, and offer them an opportunity to switch places. The show will explore whether the physical location of where a person lives has an impact on that person's way of life. Researcher Sonja Lyubomirsky will help Dr. Oz reveal the five steps to happiness.
This episode of the Dr. Oz Show is scheduled to air at 9 a.m., Monday, November 9 on KTVU Channel 2, and at 8 p.m. on KICU Channel 36.

This should be interesting. I have eaten at her restaurant, which is right down the street from me, at the corner of Fremont and Mary Avenues,

Tax Credit Extension to Pass

After two weeks of delay, the Senate cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers. By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week.
The homebuyer tax credit, due to expire in 28 days, would be extended through April 30 of next year. First-time buyers who are in process of making a purchased would not need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline.
The tax credit has fired the housing market, driving existing home sales to the highest level in over two years. The National Association Realtors reported sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.
The legislation also includes provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department's Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.

Now We Have to Wait

The latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit...about 8% of all sales this year.
In the latest news, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers. While its passage remains uncertain, this plan would extend the existing credit for first-time homebuyers, while offering a new credit of up to $6,500 for some existing homeowners. The reduced credit would be available to homeowners who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to close. The measure still faces votes in the full Senate and the House, next week at the earliest. I'll keep you informed.

Electronic Signatures and Real Estate

As we were doing the paperwork on an offer the other day, my client asked me why we weren't using electronic signatures. The last couple of papers would have to be faxed or faxed to an email, and a straight email with an electronic signature sounded more logical to my engineer client.
The concept is simple: instead of physically signing documents, you sign a document electronically by typing your name, clicking with your mouse, or a variety of other methods. The question is whether the time has come to make the switch completely by using companies such as Docusign to remove pen and paper from the process entirely. In terms of ease of use, there’s no comparison.
In California, the Association of Realtors offers it members Winform Online, which lets us draft contracts right online. It’s integrated with Docusign, so you can create a contract and prep it for signing without printing anything at all. Clients are notified by email to sign, and you get an email as soon as they have. As an added bonus, they can’t accidentally miss any spots to sign, since the program highlights each area and checks for completion.
So what’s the downside? While for starters, it’s not free...but the cost is minor, considering the convenience. The biggest drawback is that not all brokerages and companies will accept electronic signatures. Also, according to the California Association of Realtors' website, and there are some documents where electronic signatures are not allowed.

One Warm Coat

...or sweater, or jacket. Still looking to help a charity in an easy way during the holidays? Keep the giving spirit going all year long. Please donate a “gently used” or new coat, jacket, or sweater (in any size) to keep the warm feeling of sharing alive! Take a minute to check your closet. . . .
The One Warm Coat drive is a national non-profit organization that assists in the distribution of coats to people in need. Our Realtor District will be giving your donations to a local center right here in our area.
You may take them directly to the SILVAR office during October through November 2009 or contact me for pick up. Your donations are greatly appreciated!
If you have questions, please call SILVAR (408 200-0100)

Will the New Loan Limits Hold?

So much is happening in real estate loan regulation...and not just the status $8000 credit, which does not have the support in congress that we had anticipated.
Interest rates have been rising in the past week, and this is a bad time for the new loan limits to be expiring. Unless the government extends the $729,000 limit again, we will revert back to a $625,500 limit on conforming loans that do not close by December 18 of this year. Last year, it took three months before the higher rates came back into effect.
A bit of good news: the HVCC (Home Valuation Code of Conduct) that has put a stranglehold on home appraisals, may be revoked soon.

Open House Madness

Are we headed back into a seller-driven market, or is it just the price point ($625,000), model (3 bedroom, 2 bath with around 1600 square feet), or location, (pleasant complex in west side Sunnyvale with Cupertino schools) that lured over a hundred groups to the weekend open houses at my Crescent Terrace listing?
This situation is not unique, though.
My office in Cupertino reports that things are hopping in other price ranges and areas. We had 27 offers on a home in Cupertino listed for $1,049,000. Needless to say, it went way over.
It will be interesting to see what happens when we look at offers on my listing Wednesday afternoon.

Are we an Oasis Again?

The Realtors' tour went well this morning. Everyone loved the townhouse and the staging and it looks as though several offers will be coming next week.
The newscasters may say that this is a down market, but no one has told the buyers around here. Inventory for the entire county is less than 3000, about 50% of homes on the market as a year ago. There are only 90 homes for sale in Sunnyvale, a city of nearly 150,000 people. This is a wonderful time to have a good listing for sale, but not great if you are representing a buyer.
This is difficult to understand.
The pressure is on the government to extend the first-time homebuyers' credit. Housing Secretary Donovan says that the end of the credit would not be "catastrophic" because of other actions the government is taking to support the flagging housing market. Interest rates are being kept low and the Federal Housing Administration is playing a more prominent role in lending to homebuyers.
He said there is clear evidence that the credit has had some positive benefits and that its expiration could have some negative implications for the housing market.
Whether or not the credit is extended, forecasters are expecting further price declines in many markets due to rising foreclosure and unemployment rates in 2010. Supporters of extending the credit believe it could help mute those price declines.

REO Buyer Can Now Select Escrow and Title Company

A new law called The Buyer's Choice Act prohibits an REO (bank-owned) lender selling residential property up to four units from requiring the buyer to purchase escrow services or title insurance from any particular company. This may not sound like a big deal, but we've seen many sales fall through because of bank-chosen escrow companies located in southern California (and even worse, somewhere across the country.) Customs vary from area to area, and these escrow and title companies don't understand how we do business locally. Generally, the buyers pay these fees anyway, and it's only fair that they should have the right to chose the company. Of course a buyer who has received written notice of the right to make an independent selection may agree to the REO lender's escrow or title recommendations. An REO lender that violates this law can be held liable for three times the charges the buyer incurred. This law expires on January 1, 2015

Another Result of Foreclosures

The Census Bureau's director recently said that foreclosures will make it tougher and more expensive to get an accurate census count in the U.S. next year as families move in with relatives or are left homeless. Director Robert Groves said he expects some of the census questionnaires mailed out in 2010 will land at empty homes in areas hard hit by the housing crisis. That means census workers will need to make more door-to-door visits to verify whether anyone lives at these addresses, and that costs more money. (The ten-year cost of the census has more than doubled to $14.7 billion from the last decennial period.) Despite the added costs, a census every ten years is mandated by the U.S. Constitution. Job losses have left more than 13 percent of American homeowners with a mortgage behind on their payments or in foreclosure, and worst trouble has been concentrated in California, Nevada, Arizona and Florida.
Groves said census workers will need to focus on reaching out to families that have doubled up with relatives until they can get back on their feet. He said many may believe their housing situations are only temporary, but they need to be counted wherever they are living next spring.

Short Sales and Credit

I've been working with a buyer lately in an area that includes many short sales.
These homeowners who have their homes sold in a short sale, where the lender agrees that the owner can sell the home for less than is owed on the mortgage, are advised to review their credit report as soon as possible for accuracy. If they have sold their home via a short sale, they should ensure that the account reflects a zero balance rather than the difference between the outstanding balance and the sales price. Also, consumers should not assume that a short sale carries no further obligations. Some lenders are filing deficiency judgments, while others are selling the debts to investors who then contact borrowers for repayment.
Staying current on credit card payments, applying for secured credit cards, and taking out and paying on small loans can all help to reestablish damaged credit.

We're Lucky Here

Despite headlines about foreclosures and bank owned properties, our Santa Clara Valley market has been relatively untouched by the drop in values when compared to Southern California and the Central Valley.
Last week, Realtors from all over the state were in San Jose for CAR (California Association of Realtors) meetings. Yes, we've seen a lowering of property values here, but agents are still selling houses, a large portion of which are neither bank-owned nor facing foreclosure. Because banks everywhere are slowly dribbling their inventory into the market, Realtors I met from other sections of the state complained that they had nothing to sell, and many of them were in rough shape financially.
They had a hard time believing that we are still seeing multiple offers.

It's All About Motivation

....especially when it comes to real estate sales.
I wrote an offer this past weekend for good clients. The house was a bit dated, but in a great neighborhood and it had an attractive yard. The property was in its second month on the market.We read and approved all the documentation, and brought in a very strong offer....30% down, fully preapproved, and as-is (despite the fact that there was fumigation and extensive chimney work needed). It turned out that we were the third offer that had come in at the same price...a "coincidence" that should have told the seller something. He had remained firm at his high listed price, and any counter offers he made have showed almost no flexibility. Why? The house that is listed at $1.5 million is costing him only $1600 a month, and he doesn't need the money, in fact, he closed on a new home worth several million without the need to sell this one. I guess that he can afford to stand on principal. Dian Hymer recently wrote an article in the SF Chronicla entitled, "Sellers can be too optimistic on home price." She described sellers who had refused a lower offer on a house that eventually came off the market. When they offered it for sale a year later, they ended up with more than $100,000 less than the earlier offer. She advised that sellers look at their houses with a buyer's eye (and an appraiser's), and that they be honest with themselves about the property's flaws. Wishful thinking doesn't work.

It Should Be a Busy Autumn

The Mercury news front page this morning featured an article about home loan interest rates, which are below 5% for the first time since last spring,(although jumbo loans are still slightly over 6%) Combine this news with the continually dropping inventory in Santa Clara County...3094 total this week, 3151 last week, and twice that a year ago...and you have the promise of a wild ride this fall.
We are already seeing quite a few multiple offers in the region, and not just on bank-owned properties. Pending sales are 475, but the percentage of transactions falling through is still high: 30-35%, mostly because of "short sales" and difficult appraisals.

California Association of Realtors Info

I spent the afternoon today at the C.A.R. tech show and meetings at the San Jose Convention Center, and came back with new information that will be helpful to me and my clients. A featured speaker today was Leslie Appleton Young. Her take on the market:
“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R Vice President and Chief Economist, Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000. The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government.”

Sales Update and Some Good News

With all the news about home sales improving throughout the country, it's important to point out that this may not be a sharp “V” recovery with a sudden jump in prices or units. In all probability what we will see is a long “L” shaped broad base recovery, where there will most likely be very small gains in overall price for quite some time. In our San Francisco Bay Area market, this is shown in what we have been seeing for several months: entry level prices going up, and high end prices coming down.
Our office reports that the low end is extremely competitive. There are lots of unescorted potential clients visiting open houses, and morale is good. Los Altos reports the market is picking up with the normal Fall home buying season....but the lower end still has the most activity.
Now the good news for buyers with less down payment...We now have Mortgage Insurance at Princeton Capital, our in house lender, to do 90% loans up to $729,750 and 95%, to $417,000.
This is huge, since standard MI will only go to 85% Loan to value other than FHA.

Loan Modifications May Lead to Redefault

I just learned in a recent email from my sister that my niece in Florida and her husband are benefiting from a mortgage modification on their home loan. He is self employed and she works part time, so they have been struggling with the high interest. They should be without pressure for at least 5 years...the payment is only $1,100 now with taxes and insurance, and they get to keep the home they both love.
Stories like this one show the positive side of this program, and lenders are ramping up efforts to avoid home foreclosures, but a report by bank regulators says more than half of borrowers who get help fall behind again.
More than 50 percent of homeowners with loans modified in the first half of last year have missed at least two months of payments a year later, but the results were better among those who saw their payments drop substantially.
About one in three borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again within a year. That compares with more than 60 percent for borrowers whose loan payments were left unchanged or increased.
The administration's effort got off to a slow start, but has picked up speed in recent months. As of last month, about 360,000 borrowers, or 12 percent of those eligible, have signed up for three-month trial modifications. They are supposed to be extended for five years if the homeowners make their payments on time. There is currently no data on redefaults within the plan.
Previously, most lenders have offered payment plans that allowed borrowers to catch up on missed payments. But those modifications often do not involve an interest rate reduction and result in a higher monthly payment. All that does is set the borrower up for failure.
By contrast, under the administration plan, loans may be sustainable for homeowners. Borrowers' interest rates can go as low as 2 percent for five years under the new plan. Bank regulators say they have pressed lenders to shift their focus to modifications that reduced borrowers' payments. They made up nearly 80 percent of new modifications in the April-June quarter, up from about half in the first three months of the year. Still, borrowers are continuing to fall behind as job losses mount. More than 11 percent of borrowers covered by the report had missed at least one payment as of June 30, up from 10 percent in April.
Lenders offered help to about 440,000 borrowers in the April-June period, but they started foreclosure on about 370,000 homes, unchanged from the January-March period.

More Threats to Housing Recovery

It's not only commercial builders, such as Peter Pau and his associates in the Downtown Sunnyvale Development, who are having trouble getting financing.
Nearly two-thirds of single-family home builders are reporting a severe lack of credit for housing production, threatening the fragile housing recovery before it has time to take hold, according to a new builder survey of financing conducted by the National Association of Home Builders (NAHB).
Developers are reporting a lack in credit availability and intensifying pressure on borrowers with outstanding loans. Lenders are cutting off loans for viable new housing projects and producing unnecessary foreclosures and losses on these loans. If the $8,000 first-time home buyer tax credits allowed to expire, these challenges threaten to halt any positive developments we have seen in the housing market in recent months.
In the latest NAHB survey of financing conditions, 63% of builders stated that the availability of credit for single-family construction loans worsened in the second quarter of 2009.
Builders reporting worsening credit conditions gave the following reasons: 80% said that lenders are lowering the allowable loan-to-value ratio, 76% reported that lenders are not making new loans, 75% stated that lenders are reducing the amount they are willing to lend and 62% said that lenders are requiring personal guarantees or collateral not related to the project. Two-thirds of respondents reported putting single-family construction projects on hold until the financing climate gets better.
While federal banking regulators continue to maintain that they are not instructing institutions to stop making loans or to indiscriminately liquidate outstanding loans, builders responding to the survey cited the top reason that lenders have given them for restricting the availability of new loans or for tightening the terms of outstanding loans is that “regulators are forcing lenders to do it.”

All the Good Stuff is Expiring

I've been writing about the importance of getting escrows closed before November 30th in order to take advantage of the $8000 first time homebuyers' credit. Today we were reminded that other programs impacting real estate will be expiring or phased out soon.
Most important for our area, the "agency jumbo" maximum will revert back to $650,500 from its present $729,750 at the end of the year if something isn't done.
We were also informed that the Fed's purchase of mortgage backed securities will be spread out until March of next year...but the amount that they are buying is limited. Once the planned amount is used up, interest rates on new home loans, now at a 40 year low, could easily go up to 6 percent again.
Realtors and other interested parties are working hard to influence the "powers that be" in Washington to extend these time limits. The health of the real estate market is vital to a market recovery.

Save That Shopping Until After Escrow Closes

More than 1.4 million home buyers have taken advantage of the $8000 first time buyers' credit, but with the deadline on the credit looming, plenty of buyers are under contract and looking to close before Nov. 30.
Excited to be moving into a new home, some of these first-timers are hitting the stores shopping for new furniture and appliances.
This is a big mistake....Wait until the close to start buying stuff.
The reason is that lenders are often running credit reports right up to the closing day, and they don't want to to see an increase in credit card debt or indications that debt could soon increase.
Even serious looking can be a problem. Checking out a new car or boat can show as an inquiry on a credit report and might raise red flags. This is especially important for buyers who've only met the lender’s minimum requirements.
While such measures have been used over the years, lenders are still dealing with the fallout from their previous lax lending standards, and are being especially particular these days. Even buyers with great credit scores face scrutiny.
We're also advising buyers not to move money between accounts or add more funding to checking. Emptying out an account could look like money’s being spent.

Murphy Avenue's a Mess

I met my son for lunch at Dish Dash the other day. I knew that there was construction happening in historic Marphy Avenue, and warned him that we might not be able to have sidewalk dining service, but tables were set outside, and we had a perfect view of the dug up street and workers in hardhats eating their lunches. Murphy Avenue businesses will remain open during all the renovation...utility updating is this week's project. The Farmers Market on Saturday mornings has been moved temporarily to Evelyn, near the train station, but several special events will still be held, including the pet parade on October 25th.
Local diners certainly aren't being deterred by the construction mess if the long line at Dish Dash is any indication!

The Feds Meet Again

...and no real surprises. As expected, they left rates where they were, even though economic activity has picked up following its severe downturn. The reasons they gave: conditions in financial markets have improved further, and activity in the housing sector has increased, household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Although economic activity is likely to remain weak for a while, the committee anticipates that "policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability." In normal English, this means that they will work to ease the economic situation during what promises to be a slow end to the recession.
The Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability, and plans to keep the target range for the federal funds rate at 0 to 1/4 percent for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Feds will also purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. It will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of next year.

More Progress on Our Habitat for Humanity Fundraiser

Our office continued with our commitment to this cause with another breakfast, followed by a raffle and auction. Items like an "Executive" parking space went for more than $300, and we raised another $20,000 this morning.
As real estate professionals, our work is about bringing people and homes together and building better, more sustainable communities. Our partnership with Habitat for Humanity allows us to do just that and is truly an extension of the work we do every day with our clients.
We'll literally be building hope this week during our huge, Northern California Blitz Build. More than 200 Agents, Managers, executives, staff and clients throughout our Northern California family are participating in this event!

How Does All This Affect Credit Scores?

Homeowners who find themselves struggling with mortgage payments and unsure how to handle the situation...short sale, foreclosure, or walk away...should consider the impact of each of these on their credit scores.
Some loan modifications, such as refinancing underwater mortgages may have little or no negative effect on credit scores, in fact, those that add late payments and penalties into the principal owed on the house can actually increase borrowers’ scores modestly.
Short sales, on the other hand, can trigger big declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, and have negative marks on their credit files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores, and bankruptcies stay on borrowers’ credit for 10 years.
But there is some good news. Homeowners facing financial stress can experience minimal declines to their scores if they contact their lender when they first discover that they may have trouble making their monthly payments....It's worth a try.

Home Equity Lines Cancelled

Last week, I was listening to KGO talk radio, and the guests were a local man and his lawyer. Jeff Schulken, who owns a home in Cupertino had his HELO abruptly canceled by Chase, even though he was well qualified to repay the loan...in fact, he had been paying more than the minimum every month..., and had plenty of equity in his home. The Schulkens are part of a growing number of homeowners in the Bay Area and around the country whose banks take away the financial safety net they counted on.
Now some of those homeowners are fighting back. The Schulkens have filed suit against JPMorgan Chase, charging that the bank unfairly terminated their home equity line of credit even though the couple provided documents showing that they could repay the money. In the early part of this decade, home equity lines of credit, or HELOCs, were a regular feature of Silicon Valley homeownership. Longtime owners sitting on a few hundred thousand dollars in equity could easily borrow against it to remodel, pay their children's college tuition or use as a rainy-day fund.
My bank made a special effort to offer me one when I paid off my mortgage a few years ago...How times have changed!

New School Scores are Out

Each year, every California school and district gets an Academic Performance Index (API) score ranging from 200 to 1,000 points, with 800 considered excellent because it reflects a high rate of proficiency on achievement tests taken the previous spring. Schools and districts with an API below 800 are also considered successful if they meet performance targets in the year to come. At this time each year, their target is set at 5 percent of the difference between their actual API and 800. (Results are reported in August.) Statewide rank (SR): To give an even clearer snapshot, schools are also ranked from a low of 1 to a high of 10. The "statewide" 1-10 ranking is derived from a school's API score when compared to every other API score in the state.
Similar schools rank (SSR): A second "similar schools" 1-10 ranking is derived from a school's API score when compared to 100 schools most similar to it demographically.
Check out your schools on the Great Schools site.

Finally, the Mortgage Relief Progaram is Growing...a Little

I wrote in an earlier post about the dismal bank response to the "Making Home Affordable" plan, which was launched with great fanfare in March. But now, as of last month, lenders had sent out more than 571,000 offers to reduce borrowers' monthly payments.
That's still only 19 percent of the nearly 3 million homeowners eligible for a loan modification under the plan, but it's an improvement from 15 percent at the end of July.
Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time. To increase pressure on the industry, lawmakers have threatened to revive a failed proposal to let bankruptcy judges rewrite the terms of a mortgage.
Consumer groups say that change is necessary, because getting a lender to do so voluntarily is still a bureaucratic nightmare. Mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.
But many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan.
We are still hearing horror stories in the Realtor community.
An agent in my office told me about a bank they are trying to work with on a sale due to close escrow at the end of the month. The house was also facing foreclosure on September 24, and the bank refused an extension for five days (even though it was the bank's own delay with documents that was holding up the close) and are proceeding with the foreclosure on the courthouse steps. Their final word to my colleague: "Have a nice day!"

Tired, But Happy

The Coldwell Banker offices are already four weeks into our Building Hope for Humanity fundraiser and have raised more than $15,000 for Habitat for Humanity!
But our work isn’t done yet; we still have four weeks left in our fundraiser to raise money so we can build hope for humanity in 2010!
Today we added more to the fund by preparing and serving a full breakfast to our Cupertino office. Lots of work...but lots of money raised, too.
We are also selling and purchasing raffle tickets, sponsoring an auction, and holding a tea party in November.
Our Coldwell Banker Blitz Build Week is almost here! Starting September 21, Coldwell Banker Managers, Agents, staff and executives from throughout our Northern California family will be participating in Habitat for Humanity builds throughout the 15 counties where we work. Together, we are truly making a difference for our neighbors, building stronger, more sustainable communities.

“Yes, the Housing Market has Rarely Looked Better.”

That was the headline in a September 2 Wall Street Journal article. This was a really interesting piece which looked at numbers from Standard & Poor’s and NAR. The following is an excerpt from the article:
“Last week, Standard & Poor's reported that its S&P/Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the three months ended June 30 over the three months ended May 31, with only hard-hit Detroit and Las Vegas experiencing declines. The week before that, the National Association of Realtors reported that sales volume of existing homes was up 7.2% in July from June.
In short, the data suggest that real-estate prices hit a bottom some time during the second quarter, and have now begun to rise. There's no way to be certain that this marks the end of the long, painful correction that followed the real-estate bubble, but clearly prices are no longer in free-fall. That means if you've been sitting on the fence, it's time to act.
Ordinarily I'd never try to time the real-estate market, but I can understand why buyers have been cautious. Few want to buy in down markets, just as stock buyers avoid bear markets. And for most people, of course, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, the prices aren't likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can't imagine a better time to buy than now.”
It's nice to hear someone from the media say that it’s a great time to buy.
For a local look at our past two weeks in real estate: Our Cupertino office reports that agents are working hard, but things seem a bit quieter. It is really tough holding some of these short sale and REO transactions together, and inventory in many areas is surprisingly low.

Is FHA in Trouble?

Will taxpayers have to bail out the FHA? Realtors and lenders have been relying on the FHA for the past year as the only source of financing for home buyers who have less than 20 percent down payments.
The Federal Housing Administration stepped up to guarantee low-down payment mortgages for riskier buyers after the mortgage market crashed. Now with many of them in default, the FHA’s losses have mounted, and it’s possible that its reserves will fall below the 2 percent level required by law. If that happens, taxpayers may have to bail out FHA.
Some housing analysts say that this will lead to even tighter restrictions on FHA mortgages, which could be disastrous for the housing market.
The 10 states with the most FHA-insured mortgages are: Texas, California, Florida, Georgia, Ohio, Illinois, Pennsylvania, Michigan, Virginia and North Carolina.

Time is Running Out

...to claim the $8,000 first-time homebuyers tax credit. It ends on Dec. 1.
Because it often takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range.
We are seeing fewer repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe....This can take as much as six months.
That means a first timer putting a bid on a short-sale might not get an answer from the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy of multiple bidders.
The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.
Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the newborn housing recovery could slump.
In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.
Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions. The effort has drawn strong industry support.

Get Out of the Kitchen

The California Association of Realtors comes out with a "Green Tip of the Week" in their emails to us. This one read...
'Keep in mind this summer that your oven and stove generate a lot of heat, which causes your air-conditioning to turn on more frequently. Consider cooking outside on the grill or cook in a microwave.'
Certainly, many back yard barbecues will take place this Labor Day weekend, and I must admit that because I live alone, my microwave gets more than its share of use.
But except for creating a side dish to bring to a Labor Day Potluck, I've vowed to save on stove use and help the economy by adding one more tip to the list for this week: Eat Out More!