Will the Incentive Money Last?

After only four days, the Cash for Clunkers Program, designed by the government to stimulate auto sales, has run out of money and is on hold. The California first time home buyers credit of $10,000 is also shut down for lack of funds, and with the new state budget in place, I'm sure that it won't be revived.
This leaves only the federal program that rewards first time home purchasers with an $8000 credit. I wonder how long this incentive for buyers will last, now that statistics are starting to show a resurgence of home sales? With more foreclosures on the horizon, the housing market still needs all the help it can get.

Most of the Indicators Look Good

We are starting to see more signs of a market turnaround from a variety of sources.
Home sales increased 20.1 percent in June in California compared with the same period a year ago, according to a C.A.R. report released Monday.
...and the U.S. housing market continues to show signs of stabilization with a drop in the number of Multiple Listing Service-listed homes for the twelfth consecutive month. The number of single family homes and condos listed for sale according to MLS data decreased in June 2009 from May by 2.1%, bringing the total number of active listings in 28 major U.S. markets to 696,858.
Also, the rate of home price declines improved for fourth consecutive month although still in negative territory. According to a report released yesterday by Standard & Poors, the 10-City and 20-City Composites declined 16.8 percent and 17.1 percent, respectively, in May compared with the same month last year, down from 18 percent and 18.1 percent, respectively, in April. After 16 consecutive months of record annual declines, beginning in October 2007 and ending in January 2009, the indices have now shown four consecutive months of improvement in annual returns, according to the report.
Good news all around for our market.

There's Always Someone Worse Off

A year or so ago, I was calling our Sunnyvale/Cupertino area "the Oasis," because it seemed immune to the drop in real estate prices. It's true that our paper losses have only amounted to around 15% from the peak, while other area prices have come down 30-40%, but even our market has suffered.
A friend sent me an article from Forbes today which showed that even 'underwater' homeowners can take heart in knowing that other neighborhoods in the same city are worse off.
In the mansion-filled Bel Air neighborhood of Los Angeles, where sales prices have declined 31% at the median to $1.5 million, home owners can be happy that they don't live in Glassell Park in East L.A. In that part of town, buyers counting on neighborhood improvement when they bought in the fringe area have seen median sale prices plummet 50% to $225,000 in the last year.
In San Diego. Sales prices may be down 25% in University Heights, but homeowners there can say, "Better here than Horton Plaza." In that downtown, marina neighborhood, median sale prices are off year-over-year by 56%, to $612,500.
Forbes looked at the 25 largest cities in America to determine which neighborhoods witnessed the biggest year-over-year price drops. A neighborhood had to be within the city limits, have at least 10 sales, and prices had to be above $150,000. Otherwise,the list would be a rundown of markets such as Briggs, Detroit, where prices over the last year are off 96% to a median price of $2,500.
In San Antonio, Dallas and Houston, no neighborhoods fit the bill. In Greenwich Village in New York, sale prices dropped 45% from May 2008 to May 2009...but the price-per-square foot in the Village has only dropped 4%. That means most sales are for less expensive properties. The Manhattan luxury market is still down 26%, sales are flat, and listings have ballooned to record highs.
Nationally, there are too many sales in markets that are affordable to first-time buyers, driven by foreclosures and short sales, and too few sales in expensive parts of town because of a lack of financing and the impression that prices are coming down.
As Forbes says, in neighborhoods rich and poor alike, it's going to be a long summer.

Hurry Up and Wait

New federal rules developed to protect applicants for home loans take effect July 30.
These require lenders to provide consumers with disclosures of the estimated mortgage costs within three business days of the loan application; prohibit lenders from collecting any fees prior to the consumer receiving the loan-cost disclosures; and prohibit "quickie" closings on loans.
Prior to this, many mortgage brokers and lenders collected fees covering appraisal, credit, and other charges at the time of application. The new rules eliminate this practice and prohibit lenders from collecting any fees until the consumer has received the truth-in-lending disclosures and an annual percentage rate (APR) calculation of the loan costs.
The new rules also require lenders to deliver a copy of the real estate appraisal to the home buyer three business days before the scheduled closing on the loan. Previously, federal regulations guaranteed that consumers could request and obtain a copy of the appraisal, but many home buyers were not aware of this right.
Additionally, the rules prohibit quickie closings on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or the disclosures are mailed. This provides applicants a week to think about the transaction and to decide whether it is right for them. Final truth-in-lending disclosures are due three business days before closing.
We've been notified that if costs should change by even a small amount, that could trigger a new seven-day waiting period, and that we should estimate longer close of escrow periods because of the new rules...just in case.

Anyone Have a Shoehorn?

How do you squeeze 40 real estate agents into an office that already has around 70?
No, this isn't a joke, and there's no trick answer. Our Cupertino office looks like a tornado full of boxes has hit, and more keep arriving. Amazing...the amount of files and papers that we collect. An old friend from the Sunnyvale office who was in the other Cupertino office (the one that closed this week) was in the process of a home move when they were notified of the office closure. Now she has a double move to manage.
But somehow we will sort it all out. The Realtors and staff, plus our IT guys and wonderful manager, will all cooperate to make this situation more workable and pleasant, and by Thursday, when we have our Welcome Barbecue Party, we'll be back to "normal" and selling houses.

Better News on the Housing Front

The U.S. housing market has started to recover from the most far-reaching crisis since the Great Depression. Sales of resale homes rose for the third month in a row in June, the National Association of Realtors reported. That hasn't happened since early 2004...during the boom.
We saw stocks jump on the news, with the Dow Jones average rising above 9,000 for the first time since early January.
Home sales rose 3.6 percent to a seasonally adjusted annual rate of 4.89 million last month, from a downwardly revised pace of 4.72 million in May. Sales were up in all four regions of the country.
It was the highest level of sales since last October and beat economists' expectations. In another encouraging sign, the share of foreclosures on the market is shrinking. About one out of three homes sold in June was foreclosure-related, down from nearly half earlier this year.
The number of homes up for sale dwindled to 3.8 million. That's a 9.4-month supply, and another important sign of a recovery. When the market balances at a 7-month supply, prices should begin to stabilize. That probably won't happen until next year because of a backlog of foreclosures that have yet to come on to the market.

The Good News and the Bad News

We were just informed this morning that the other Cupertino Coldwell Banker office (at the Oaks Shopping Center near Hwy 85) is closing this week. Three years ago, we heard the same news when they shut down our Sunnyvale office, which later became a successful fabric store.
To those of us moving from Sunnyvale, this always seemed like a strange move...losing our presence in Sunnyvale and having two large Cupertino offices. While we are delighted that we will be reunited with many of our fellow "refugees" from Sunnyvale, closing an office with around 70 agents is certainly a sign of the times and a reflection of declining sales and revenues.
The good news out of all this is that we will have an even stronger office, filled with top agents and run by the best manager in the valley.

Another Sign of the Times

One of my sons is an attorney, so I felt a little sympathy, but not much, when I read today that a large New York law firm is laying off several dozen real estate lawyers. The big corporate law firm doesn't anticipate that the real estate market will rebound any time soon, so it’s asking 34 lawyers to take the next year off....well actually, "a one year, unrestricted sabbatical,” during which the attorneys will receive a third of their current compensation and medical benefits.
With the market remaining slow, there isn't enough litigation to keep these lawyers billing clients...thus the "extended vacations."
Certainly nothing to cry over, but this is one more indication that a rebound in our real estate market may be slow in coming, especially in the commercial sector.

Don't Believe Everything You Read

A few days ago, I announced in a post that the $10,000 credit for California buyers of new homes had run out, and was not being extended, because of the economic mess in Sacramento. And yet there it was...two columns in this morning's real estate section of the Mercury News..."Homebuyer Tax Credits" in a Dollars and Sense article on the true cost of getting a home, telling people how to qualify and apply for this non-existent credit.
Part of the reason that this dated and incorrect news is being published is that the weekend real estate section is mostly "canned" news that originates from the various wire services. I've talked to some Merc columnists, and they said that this is a money-saving move. I know that the papers are struggling to survive, and facing strong competition from Internet and TV news coverage, but publishing dated and false information isn't the solution.

Increased Popularity of FHA Mortgages

A recent survey by Zillow.com found that more than one-third of buyers plan to make down payments of less than 10 percent, while nearly a fifth don't plan to make a down payment. Since loans insured by the Federal Housing Administration (FHA) only require a 3.5 percent down payment, these loans have risen in popularity among buyers. Last month, applications for government-insured mortgages rose to its highest level since November 1990, accounting for nearly 36 percent of all mortgage applications, according to the Mortgage Bankers Association. In 2005, the share of government-insured mortgages stood at less than 6 percent.
But we do seem to be turning a corner on sales of higher priced homes that need a larger down payment, reflecting the fact that jumbo loans are getting slightly easier to obtain.

End of California Homebuyer Credit

This morning at our Realtors' tour meeting, it was announced that the funding has run out for the $10,000 new home buyers' credits that the state was offering to purchasers of new homes. This is no real surprise. Given the condition of California's economy, I didn't really expect Sacramento to extend this offer. They could have handed out more IOUs, I suppose.
The federal government's $8000 home buyers' credit is still in existence, though. When they run out of money, they just print some more.

Drought and Reducing Water Use

My friend in Antioch has been notified that a reduction in water use is required this summer. Here in Santa Clara County, we are still in a voluntary reduction area, but with a dry summer ahead, we all want to do our part. All urban water users have been asked to reduce consumption by 20%.
Since half of all urban water usage is for landscaping, that is the easiest place to conserve. If you reduce your landscape watering by 2/5, you'll reduce your household water use by 2/10 (20%).
Here are some tips from Mr. Handyman:
1) If you water your garden for 10 minutes at a time, reduce it to 6. If you usually water every day, water 3 days out of 5, and if some plants start to die due to lack of water, replace them with plants that need less water.
2) I'm personally a fan of those really small low flow shower heads you can buy for $7 on amazon.com, because somehow the water flow feels strong, even though it's reduced. One important point to remember is that this shower head lasts about two years and then the water flow becomes uneven. I'm not sure why, but you will recoup that investment several times over in your water bill.
3) If you have an older "high flow" toilet, the brick in the tank trick helps.
4) A single slow leak of 10 drips per minute wastes about 500 gallons in a year. If you have any, anywhere, get them fixed.
Every little bit helps.

Google Joins the Real Estate Search Party

Up to now, the biggest players in the real estate search game have been Trulia and Zillow, with features not offered by company sites, mls listings.com, and Realtor.com. The two major players are seeing significant traffic growth.
Google announced today that they have rolled out vast improvements in the way that they display real estate searches in their index; they are now included by default in the Maps view.
They have also rolled out brand new real estate specific landing page at maps.google.com/realestate.
So, as of today, if you enter a search like San Jose real estate on Google Maps, you’ll see all your results on a map with a one-box that will take you to real estate listings. Previously, you had to specify “real estate” from the search options menu, but now it's easier to find available listings.
There are now lots of markers that will show not only the ten most relevant listings with pins on the map, but also show a small circle on every other listing in that area using the search results layer, so you can get a really good idea of the distribution of properties for sale. You can click on each marker and each small circle to get more detailed information about the property.
This feature means you can now conduct a real estate search around a specific neighborhood, or see at a glance all the properties close to a train station. You can also move the map to another area entirely to see listings there if you decide that another part of town is what you want.
Right now Google is only deploying these searches into its Maps results, so they are relatively confined. But this may only be the beginning.

Another Interesting Survey

Earlier this week Realtor.com released a survey of the key factors motivating buyers in today’s market. Even though it was a nationwide study, I thought I’d share the highlights:
Price declines and low interest rates are motivating millions of home buyers to shop for bargains in the most affordable housing market in 28 years, yet at the same time only one in ten of today’s home owners say they have delayed selling their home due to those same market conditions.
Affordability is clearly driving more than two thirds (65.2%) of potential buyers back into today’s housing market. Nearly one of five prospective buyers (19.6%) say foreclosure bargains in their communities would motivate them to purchase a home, the most important reason they’re interested in buying in the near future.
An additional 15.5 percent said they’re motivated to buy soon because they think prices are as low as they will go and another 15.5 percent said they were motivated to buy before interest rates rise. For 14.6 percent of first time home buyers, the Federal $8,000 tax credit is the impetus to purchase a new home in the future.
In the past year, the Housing Affordability Index maintained by the National Association of Realtors has increased 29 percent overall and 19 percent for first-time homebuyers, and is higher now than at any time in the 28 year history of the index.
"Value is clearly motivating potential home buyers, and today's new level of affordability is still an under-appreciated reality that needs to be explored," said REALTOR.com President, Errol Samuelson. "The variety and quality of homes currently within reach of the average American family is much greater than most people realize. Making credit available to responsible borrowers and building consumer confidence in the economy are now key factors in restoring vitality to the nation's housing market."

Locally, this week in real estate: Inventory is low with multiple offers in the lower price ranges, and improved activity in the higher priced markets.
Our office in Cupertino reports seeing 15 to 20 offers on the low-end homes. My friend's listing in Santa Clara (listed @ $550,000) had 17 offers and was bid up to over $600,000.

Interest Rates in the Last Month

I had an unhappy experience last week when buyers who were prequalified to buy a home just a month ago were denied a loan because of a rise in interest rates.
In the last month, we've seen rates go up a full percent and then come down a half percent.
The Feds aren't raising rates. What has happened is that Wall Street is concerned about the trillions of dollars being injected into the US economy via the Economic Stimulus Plan, believing that it will lead to inflation, even though they expected it to improve the economy.
About a month ago, many on Wall Street saw hints that we were going to recover from the recession later this year. As a result, the stock market rallied, and the bond market sold off at a record pace. Since mortgage bonds are the prime mover on mortgage rates, these rates shot up one percent in just three weeks.
Of course, Wall Street changes its view of the economic future at the drop of a hat, and in the last week or so, their theorists have decided that the recession is worse than they previously thought, and recovery won't take place this year. As a result, stocks sold off, bonds rallied, and this pushed mortgage interest rates a half percent lower. Meanwhile, home buyers suffer from this fluctuation, even though rates are still near a 38 year low.

“2009 Survey of California Home Buyers,”

I had an email today from a Sunnyvale reader, asking about the state of the local market. Just this week, the California Association of Realtors released its "2009 Survey of California Home Buyers." Although this information is statewide, it still shows some interesting trends:
Favorable home prices, record-low interest rates, and the belief that rates will rise in the near future were the primary motivators leading home buyers to purchase in 2009 compared with last year, according to C.A.R.’s survey. Sixty-eight percent of buyers said price decreases motivated them to buy a home, while 39 percent reported low interest rates helped them move to a better location. Twenty-three percent claimed the likelihood that rates will move up as the motivating factor.
“After back-to-back years of sharp declines, home sales in California rebounded in 2008 and early 2009,” said C.A.R. President James Liptak. “The increase reflected the combination of favorable prices, low mortgage rates, and home buyer tax credits, fueled primarily by sales of distressed properties that accounted for more than half of the state’s transactions. Housing affordability has improved dramatically in response to the decline in home prices along with historically low mortgage rates, creating a tremendous opportunity for home buyers in California.”
Forty-nine percent of all buyers purchased a home through a traditional market sale, while 38 percent purchased a REO/bank-owned property, according to the survey. Reflecting the difficulty in closing short sales -- properties selling for less than the loan amount -- only 13 percent of buyers purchased a short-sale property. Home buyers who purchased a REO or bank-owned property experienced the highest level of difficulty in obtaining financing, compared with a more traditional transaction. They rated the level of difficulty as 8.9 (on a scale of 1 to 10 with 10 representing the greatest level of difficulty in obtaining financing) compared with a 7.7 for home buyers with a traditional market sale and 7.6 for short-sale home buyers.

Sunnyvale Town Center Defaults Again

Just as we are entering our annual period of state budget fiascoes, we can add another default by the City Center developers to our already overflowing collection of economic problems.
Peter Pau of Sand Hill Property Company and his partners at RREEF have failed to meet the June 24 deadline for paying a $108 million dollar loan, and are not able to obtain the additional financing needed to complete the project. There's a bit of deja vu here. An earlier developer defaulted in 2003, and Pau and his partners acquired the property at the peak of the market.
They've run into a brick wall as far as financing is concerned, and now they want the city's help to get the project back on track. The Mercury News is quoting Peter Pau, the principal behind Sand Hill Property Company as wanting the city to essentially act as a co-signer to save the project. Sand Hill has several other projects in development, including Cupertino Main Street and Sunnyvale Town and Country. Meanwhile, the new Sunnyvale Target Store is on schedule to open in downtown this November.

No Teeth in Government Help for Homeowners Bills

We attended a legal seminar held by our company this morning. Interspersed in the two hours of interesting material were some rather disappointing statistics.
The "Helping Families Act of 2009" designed to keep homeowners from foreclosure has had only one documented success so far this year. This bill unfortunately includes only 'friendly suggestions' to lenders, with no real power behind them.
The California "Foreclosure Prevention Act" that began on June 15 of this year has so many limitations that it is only legislative smoke and mirrors.
And lastly, the bill that promised short sale guidelines to simplify the process and make homes more affordable is still not completed, even though it was promised for May 15 of this year.
Pretty shameful.

Real Estate Related Scams

As if there weren't enough scam artists around, we're starting to see more of them in affecting the real estate industry. I've had two warnings in my email, just in the last week.The first was for homeowners who are late in payments, doing a short sale, or a loan modifications.
This came from an agent in one of our local offices:
"I received a call from a client, who is doing a short sale, to say that a woman came to his house to request the money due to Bank of America. I called Bank of America and asked whether they would send a person to make a collection and they say NO!! I was told that the woman who came to my clients house was an impersonator and it was a SCAM!!"
The one below is a scam hitting Realtors. If you call the phone number, you're going to be charged a bunch of money on your cell phone bill. The agent who sent this went to the website listed and it's a gaming website. To: .......
Subject: property appointment
Hi there,

I am interested in viewing one of your properties, could you please call me on my foreign mobile +882 --- --- -- to set up a time. As I am travelling at the moment I am unable to pick up emails regularly so please call.

Kind regards,

L-- C-----
---------
Mobile: +882 --- --- --
Email: l...c.....@......com

Just a warning to us all to be extra vigilant.

Contrasts, Even in High-End Properties

This morning, I read a long article about the large number of foreclosures and short sales in the upscale development in the East Foothills of San Jose, called the Ranch at Silver Creek. These huge homes that sold for millions at the height of the real estate boom are now sitting neglected, with dying lawns and trees...their owners sometimes disappearing overnight. These are the same homeowners who used their dot com wealth to add tennis and basketball courts, fountains and plazas to their new homes.
On the same weekend, I waited, along with my clients, to hear if we were chosen as buyers on a well-maintained...but dated..Mountain View house priced at over $1,200,000. Despite our presenting a considerable overbid and a well written, as-is offer to the owners, we lost to another of the twelve buyers vying for the house. What a difference a few miles makes in this market!

More About those Tax Bills

What happens if you think you should have your assessment reduced, but the tax assessor disagrees? You can still file a formal appeal with the clerk of the board of supervisors up until September 15.Your chances are about 50/50 of being granted a reduction, anyway. Last year, only half of the 8000 taxpayer requests were granted.
Since your tax is about 1.2 percent of assessed value, a reduction of $170,000 would bring an average reduction of over $2000...worth fighting for, even if the savings may not continue into next year.